2025 INSC 1065 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO S. 6377-6378 OF 2023

MRS. SHAILJA KRISHNA … APPELLANT

VS.

SATORI GLOBAL LIMITED & ORS. … RESPONDENTS

J U D G M E N T

DIPANKAR DATTA, J.

THE APPEALS

1. National Company Law Tribunal, Allahabad Bench

1

allowed a company petition

2

filed by Mrs. Shailaja Krishna

3

under Sections 397 & 398 of the Companies Act,

1956

4

by its judgment and order dated 04.09.2018. In appeals thereagainst

5

, the

National Company Appellate Tribunal, Principal Bench at New Delhi

6

vide its

common judgment and order dated 2

nd

June, 2023 set aside the said judgment

and order of the NCLT and allowed two sets of appeals of the respondents. These

civil appeals assail the said appellate judgment and order of the NCLAT.

1

NCLT

2

CP. IB No. 107/ND/2013

3

Appellant

4

1956 Act

5

Company Appeal (AT) No. 379/2018

6

NCLAT

2

BRIEF FACTS

2. The first respondent - “Satori Global Limited”

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- a private limited company was

earlier known as Sargam Exim Private Limited. The COMPANY, incorporated on

13.04.2006, primarily engaged in trading of paper. Sargam Exim Private Limited’s

transition to Satori Global Limited will unfold as we proceed to narrate the facts.

3. At the time of incorporation in 2006, the authorized share capital of the COMPANY

was Rs. 2 crores divided in to 20,00,000 equity shares of Rs. 10 each. The

subscribed and paid-up capital of the COMPANY initially was Rs. 3 lac divided into

30,000 equity shares of Rs. 10 each.

4. The Appellant and the second respondent – Mr. Ved Krishna – the Appellant’s

husband were the original promoters of the COMPANY. The Appellant initially

subscribed to 5,000 equity shares, while the second respondent subscribed to the

remaining 25,000 shares. In December 2006, the second respondent transferred

24,500 shares to the Appellant, thereby increasing her shareholding to 29,500

shares. The remaining 500 shares of the second respondent were transferred to

the third respondent-Mr. Nirupam Mishra.

5. Subsequently, an additional 10,000 shares were issued to the Appellant. By the

end of financial year 2006-2007, she held 39,500 shares of the COMPANY out of a

total of 40,000 equity shares of the issued and paid-up share capital, representing

more than 98% of the COMPANY’s shareholding.

6. On 01.02.2007, the second respondent resigned from the directorship of the

COMPANY. His resignation was accepted at the board meeting and the third

respondent was inducted as Director of the COMPANY in his place.

7

COMPANY

3

7. In the same year, the company made a long-term investment in M/s Yash Papers

Ltd. (now known as Pakka Limited) by acquiring 10 lakh equity shares of the said

company of Rs 10 each including 30 lakh equity warrants of Rs 11 each of which

Rs 1.10 per warrant was paid. The balance sheet for the year 2007 reflected a

holding of approximately 33,34,500 shares in M/s Yash Papers Ltd., representing

around 14% of its shareholding.

8. On 15.12.2010, the fifth respondent was inducted as an additional director in the

COMPANY. Subsequently, on 17.12.2010, the Appellant is stated to have resigned

from the COMPANY. Her resignation was accepted at a board meeting attended by

the third respondent and the fifth respondent.

9. On the same day, that is, on 17.12.2010, a gift deed was executed in Faizabad

through which the Appellant purportedly transferred her entire shareholding in

the COMPANY to the fourth respondent – Mrs. Manjula Jhunjhunwala – her mother-

in-law out of love and affection.

10. The Appellant’s entire shareholding was transferred to fourth

respondent vide Share Transfer Form dated 01.10.2010 and the validity of which

was allegedly extended up to 12.11.2011.

11. Around 2009-2010, the Appellant and the second respondent drifted apart

resulting in a strained marital relationship.

12. On 05.02.2011 and then again on 25.03.2011, the Appellant lodged police

complaints alleging that she had been coerced into signing some blank

documents. On or about 15.06.2011, the second respondent left India for the

USA, where he instituted divorce proceedings against the Appellant.

4

13. In the meantime, a meeting of the Board of Directors was convened wherein

notice was issued for an Extraordinary General Meeting (“EoGM”) to be held on

20.06.2011. The second respondent was re-appointed as Director of the COMPANY

and, at the said EoGM, the COMPANY was converted into a public limited company

under the name Satori Global Limited.

14. Appellant thereafter lodged her third police complaint on the same lines as the

first two. She also addressed communications to the Registrar of Companies

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and

the Ministry of Corporate Affairs

9

, informing them of the circumstances. On

18.11.2011, the alleged transfer forms were utilised to effect transfer of her

shares in favour of the fourth respondent.

15. Appellant also filed a petition under the Protection of Women from Domestic

Violence Act, 2006 against the second and the fourth respondent. Later that year,

she came to know that her name has been removed from the list of shareholders

and instead, the fourth respondent was shown to have acquired her

shareholdings. This led to filing of another complaint by the appellant, which

resulted in registration of FIR No. 105/2013 against the second to fifth

respondents under Sections 406, 419 and 420 of the Indian Penal Code, 1860

10

.

16. Subsequently, the fourth respondent also filed an FIR against the appellant under

Section 406, IPC alleging breach of trust with regard to the family jewellery

belonging to the fourth respondent wherein she claimed that on 17.12.2010, the

appellant changed her bank locker from a joint locker that she held with the

second respondent to a locker singly held by her.

8

RoC

9

MoCA

10

IPC

5

17. Amidst these circumstances, the appellant filed a company petition

11

before the

Company Law Board, New Delhi

12

which was ultimately allowed with costs by the

NCLT, vide its judgment and order dated 04.09.2018. The Board resolutions dated

15.12.2010 and 17.12.2010 were set aside. NCLT restored the appellant as an

Executive Director of the COMPANY and declared her as the lawful owner of 39,500

equity shares, holding the share transfer dated 18.11.2011 in favour of the fourth

respondent null and void. The COMPANY was directed to reinstate the appellant as

Director, and the fourth respondent ordered to return the share certificates within

15 days. NCLT found overwriting and manipulation in the share transfer form, and

noted that it was executed after its validity had expired. RoC was found to be

lacking the power under Section 108(1-D) of the 1956 Act to extend its validity

in such circumstances. NCLT also found Form 7C to be incomplete and the

extension of validity by RoC doubtful, warranting inquiry by the MoCA.

18. Aggrieved thereby, two separate appeals were carried to the NCLAT – one by the

COMPANY and the fifth respondent

13

and the other by the fourth respondent

14

.

NCLAT, as noted at the beginning of this judgment, allowed the appeals and held

the company petition to be not maintainable.

IMPUGNED JUDGMENT

19. NCLAT set aside the judgment and order of the NCLT on the ground that it did not

have jurisdiction to decide issues of fraud, manipulation and coercion; more so,

in the exercise of its summary jurisdiction when examination of elaborate

11

Company Petition No 107/ND/2013

12

CLB

13

Company Appeal (AT) No. 379 of 2018

14

Company Appeal (AT) no. 395 of 2018

6

evidence is required. Hence, the appropriate course of action available to the

Appellant was to approach the civil court under Sections 31 and 34 of the Specific

Relief Act, 1963

15

for cancellation of the disputed gift deed.

ARGUMENTS

SUBMISSIONS OF THE APPELLANT

20. Learned senior Counsel for the Appellant, Mr. Dhruv Mehta advanced extensive

arguments in support of his contention that the impugned judgment and order of

the NCLAT is unsustainable in law and hence, liable to be set aside; and prayed

that the judgment and order of the NCLT be restored. A brief synopsis of his

argument is as follows:

a. The Companies Act, 2013, particularly Section 242 thereof, empowers the

NCLT to look into acts of oppression and mismanagement even when they

involve fraudulent transfer of shares.

b. NCLAT travelled beyond its jurisdiction by re-appreciating factual findings,

particularly on issues of fraud, coercion, and oppression, which squarely fell

within the province of the NCLT.

c. The bar under Section 399 of the 1956 Act which, inter alia, provides for

the requirement of 10% of the shareholding for a member to initiate an

action under this said section does not stand in the way, since the Appellant

was a member of the COMPANY at all material times and the impugned Gift

Deed being vitiated by fraud could not divest her of her membership. In

addition to this, Section 399 of the 1956 Act has consistently been

15

1963 Act

7

interpreted liberally, to ensure that minority shareholders are not rendered

remediless.

d. The affairs of the COMPANY were being conducted in a manner which was

oppressive to the Appellant and prejudicial to public interest. Appellant had

been excluded from participation in management and her name was

wrongly removed from the register of members, resulting in her ouster as

Director without following due process.

e. Gift Deed dated 17.12.2010 is invalid:

i. in view of Clause 16 read with Clause 2(c) of the Articles of

Association

16

. Clause 16 of AoA of the COMPANY allows the transfer of

shares of a member by way of a gift to a specific category of persons

only, namely, ‘Members, Wife, Husband, Son, Daughter-in-law, Son-

in-law, Father, Mother, Brother, Sister, Uncle, Nephew, Niece or

Cousin’. Clause 2(c) of the AoA lays down that the right to transfer

the shares of the COMPANY shall be and is restricted in a manner and

to the extent provided in the AoA. Hence, Clause 16 of AoA must be

read in the context of and along with clause 2(c) and cannot be read

in isolation. This way the transfer in favour of the mother-in-law by

way of ‘gift’ is not permitted under the AoA of the COMPANY.

ii. because it was obtained under fraud, coercion, and undue influence.

The second respondent had obtained the signatures of the Appellant

on blank papers and later forged it, as the Appellant was not in the

city of Faizabad on the relevant date.

16

AoA

8

f. Board meetings dated 15.12.2010 and 17.12.2010 are invalid :

i. because they were conducted in clear violation of the AoA of the

COMPANY and the provisions of the 1956 Act.

ii. clause 53 of the AoA stipulates that every board meeting should have

a quorum of at least 2 members. However, in the present factual

milieu, on the date of the board meeting dated 15.12.2010 the

quorum was not complete as the Appellant never attended this

meeting. The COMPANY at that point of time had only two directors,

the Appellant and the third respondent.

iii. quorum was also not met in the meeting dated 17.12.2010 as

inclusion of the fifth respondent as a director via the board meeting

dated 15.12.2010 has no legal sanction.

iv. clauses 30 and 61 of the AoA mandate that the notice of a meeting

must be served on the members either personally or by sending a

registered post on the registered address. This position is also

supplemented by Section 286 of the 1956 Act. Even though the

Appellant was a director of the COMPANY throughout the duration of

these meetings, she never received any notices for the board

meetings held on both 15.12.2010 and 17.12.2010 , nor was any

proof of service of notices on her produced before the NCLT.

v. no minutes of the meeting have been produced regarding these

meetings, which violate Section 193 of the 1956 Act.

g. Share Transfer Forms were fraudulently prepared:

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i. share Transfer Form was issued on 01.10.2010 and was only valid for

2 months, i.e., till 01.12.2010 as per Section 108 (1A) of the 1956

Act, whereas share transfer form was allegedly signed by the

Appellant on 17.12.2010, when the form had already expired.

Moreover, the Appellant was not even there on the said date.

ii. form 20B of 2012 itself shows that the shares were transferred only

on 18.11.2011, whereas the Share Transfer Form stipulated that the

extended period for transfer was only up to 12.11.2011. Realizing

that the transfer on 18.11.2011 was beyond the permissible period,

the respondents tampered with and overwrote the Share Certificates,

altering the date from 18.11.2011 to 10.11.2011 solely to bring it

within the extended period, thereby fabricating the very basis of the

alleged transfer and rendering the transaction illegal, null and void

ab initio, and incapable of conferring any rights upon the

respondents.

iii. in any event, the extension granted by the RoC up to 12.11.2011

cannot cure or validate the Share Transfer Form, as the

execution/signature of the Appellant thereon had already expired

on 01.12.2010, thereby rendering the alleged transfer wholly illegal

and void.

iv. extension of validity of the Share Transfer Form under Section

108(1D) of the 1956 Act through Form No. 7C, is fraught with serious

inconsistencies and illegalities, inasmuch as the said Form does not

even bear a date, the particulars of payment are conspicuously

10

absent in Column No. 10, and the reason for seeking extension has

been vaguely stated as “misplaced”, which by no stretch of

interpretation can fall within the statutory purview of Section 108(1D)

that restricts extension only to “avoid hardship”.

v. further, the second respondent is shown to have attended and signed

the documents relating to the AGM dated 24.09.2011; however, this

is demonstrably false for the simple reason that as per the second

respondent’s own sworn affidavit filed before the District Court of

Idaho, USA, he had left India on or about 15.06.2011 and was

continuously residing in the USA until 31.10.2011, during which

period he had also initiated divorce proceedings there. Consequently,

he could not have been physically present in India or attended the

AGM on 24.09.2011, and the documents purporting to bear his

signature on that date are fabricated and unreliable.

vi. moreover, the Form is not even signed by the mother -in-law, who

was the transferee, but instead by some other person, thereby

rendering the entire process of extension invalid, non-est and

incapable of conferring any legal sanctity to the alleged transfer.

h. The COMPANY was purportedly converted from a Private Limited Company

into a Public Limited Company and its name was changed to Satori Global

Limited through an alleged Extraordinary General Meeting (EOGM).

However, no notice of such meeting was ever issued to or served upon the

Appellant. Through this EOGM, 5 (five) new shareholders were added to the

register and no notice was served on the Appellant.

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SUBMISSIONS OF THE RESPONDENT S

21. Mr. Niranjan Reddy, learned senior counsel representing the COMPANY sought to

defend the impugned judgment and order by submitting that:

a. NCLT fell into manifest error in proceeding to declare the Gift Deed invalid,

particularly when serious allegations of fraud, coercion, and forgery were

raised. Such questions involve adjudication of complex factual

controversies which necessarily require a full-fledged trial involving oral

evidence - examination of witnesses and cross-examination – a feature

wholly absent from proceedings before the NCLT under Section 155 of the

2013 Act, which grants it power only to rectify the register of members.

The only competent forum to adjudicate upon the validity of the Gift Deed

would be a civil court exercising jurisdiction under Sections 31 and 34 of

the 1963 Act.

b. Moreover, the Appellant had no locus standi to institute the company

petition under Sections 397 and 398 of the 1956 Act.

c. NCLT exceeded its jurisdiction:

i. first, regarding the finding that the RoC did not have power to extend

the validity of the Share Transfer Form, the transfer forms were

initially presented to the R oC on 01.10.2010 and executed

on 17.12.2010. Since the same were not submitted to the COMPANY

within the statutory two-month period, an application was made

under Section 108(1D) of the 1956 Act whereupon an extension was

duly granted up to 12.11.2011. The transfer deed was thereafter

submitted to the COMPANY on 10.11.2011, well within the extended

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time, thereby ensuring full compliance with the statutory framework.

The finding of the NCLT, to the contrary, is unsustainable.

ii. second, with respect to the finding on the validity of the Gift Deed,

the NCLAT has correctly held that the NCLT lacked jurisdiction to

adjudicate upon the same.

iii. even otherwise, assuming arguendo that the Gift Deed was not validly

executed and notarised, the NCLT erred in holding it forged without

following due process. The notary was never examined, no oral

evidence was recorded, and no opportunity of cross-examination was

afforded to the parties. In the absence thereof, NCLT could not have

returned findings on such disputed and complex issues.

iv. NCLT’s order dated 04.09.2018 reinstating the Appellant as Executive

Director and directing rectification of the register of members was

manifestly beyond jurisdiction. Rectification of register of members is

governed by Section 111A of the 1956 Act. Appellant, however, did

not invoke that provision, and in its absence, no relief as granted

could have been granted. NCLT’s direction, therefore, was without

jurisdiction, contrary to statute, and rightly interfered with by the

NCLAT.

d. Resignation letter submitted by the appellant on 17.12.2010 was valid and

effective. Under the 1956 Act, once a director submits a resignation, it takes

effect immediately without requiring acceptance by the Board or service of

acknowledgment upon the resigning director. The resignation was duly

recorded in Form 32 filed with the RoC on 30.12.2010, and the same

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became a matter of public record. Appellant ceased to draw salary from the

COMPANY after December 2010, unequivocally confirming her cessation of

office.

e. Appellant, despite being a law graduate, claimed to have signed certain

documents under threat and coercion but raised no immediate protest or

complaint. Indeed, she filed no police complaint for nearly three months

thereafter, citing the unconvincing excuse of being in Kolkata at the material

time. Even when a complaint was lodged belatedly on 05.02.2011, wherein

the police ultimately filed a closure report finding no offence being made

out, the said report was duly accepted by the competent Magistrate. In

addition to this, even the company petition before the CLB was filed after a

delay of two and half years without any valid explanation for the delay,

suggesting that it was an afterthought.

f. Notice of the meeting scheduled for 15.12.2010 was duly delivered at the

Appellant’s registered address and was received by her guard. Appellant,

being the sole Executive Director (alongside the third respondent) cannot

be heard to complain of non-receipt of notice.

g. AoA of the COMPANY contained no restriction on transfer of shares by way of

gift. Article 16 of the AoA clearly permitted transfers by gift to any

individual, including non-members.

22. Learned senior counsel for the fourth respondent, Mr. Gopal Sankarnarayanan,

adopted the arguments advanced on behalf of the COMPANY but specifically

stressed on the following points:

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a. Allegations relating to fraud, coercion, and manipulation could not be

adjudicated by the NCLT and squarely fell within the province of the civil

courts under the 1963 Act.

b. At the material time, the appellant did not fulfil the tests present in Section

399 of the 1956 Act and, therefore, she was disentitled to file the company

petition.

ISSUES

23. Having heard the parties and on consideration of the materials on record, the

following points arise for determination:

a. Whether the company petition, decided in favour of the Appellant by the

NCLT, was maintainable under Sections 397 and 398 of the 1956 Act?

b. Assuming that the company petition was maintainable, whether the NCLT

had jurisdiction to decide whether the gift deed is valid or not?

c. If the answer to the above question is in the affirmative, were the facts on

record and the law such so as to support the finding of the NCLT that the

gift deed is invalid?

d. Whether the Appellant was able to prove that she has been a victim of

mismanagement and oppression by the Directors of the COMPANY?

ANALYSIS

MAINTAINABILITY

24. Whether the company petition under Section 397 and 398 of the 1956 Act was

maintainable in view of the bar created by Section 399 thereof was a specific

issue before the NCLT. This issue was answered in favour of the Appellant by the

NCLT by assigning reasons. NCLAT did not hold the company petition to be not

15

maintainable; however, it proceeded to set aside the order of the NCLT on the

ground noticed above. Respondents have not questioned the omission of the

NCLAT to not dismiss the company petition on the ground of its non -

maintainability; on the contrary, they have supported the same. Without anything

more, this would have afforded good ground for us to answer this issue in favour

of the Appellant. However, we do not wish to rest our conclusion on this issue

merely on such a technicality.

25. We have perused the discussion of the NCLT while answering Issue No. II. Upon

threadbare examination of the case pleaded by the Appellant in the company

petition as well as the materials on record vis-à-vis the applicable law, the NCLT

held such petition maintainable. The findings returned by the NCLT and more

particularly having noticed the allegations of fraud and coercion as well as

fabrication of documents, which were proved to its satisfaction by the Appellant,

we record our concurrence with the reasons assigned and hold the company

petition to be maintainable.

DID THE NCLT HAVE JURISDICTION TO DECIDE WHETHER THE GIFT DEED IS VALID OR NOT ?

26. This issue pertains to the central question in the current case. The gift deed has

been challenged on various grounds, but before we proceed to decide on the

merits, we would first decide whether the NCLT possesses jurisdiction to decide

this issue itself.

27. In Radharamanan v. Chandrasekara Raja

17

, this Court held that the CLB

would be denuded of the power to provide the diverse reliefs present in the 1956

Act if the Court does not give effect to the wide jurisdiction conferred on the CLB

17

(2008) 6 SCC 750

16

in matters concerning Sections 397 and 398 thereof. The instructive passages

read as follows:

23. Sections 397 and 398 of the Act empower the Company Law Board to remove

oppression and mismanagement. If the consequences of refusal to exercise

jurisdiction would lead to a total chaos or mismanagement of the company, would

still the Company Law Board be powerless to pass appropriate orders is the

question. If a literal interpretation to the provisions of Section 397 or 398 is taken

recourse to, may be that would be the consequence. But jurisdiction of the

Company Law Board having been couched in wide terms and as diverse reliefs can

be granted by it to keep the company functioning, is it not desirable to pass an

order which for all intent and purport would be beneficial to the company itself

and the majority of the members? A court of law can hardly satisfy all the litigants

before it. This, however, by itself would not mean that the Company Law Board

would refuse to exercise its jurisdiction, although the statute confers such a power

on it.

24. It is now a well-settled principle of law that the courts should lean in favour

of such construction of statute whereby its jurisdiction is retained enabling it to

mould the relief, subject of course, to the applicability of law in the fact situation

obtaining in each case.

25. In Pearson Education Inc. v. Prentice Hall India (P) Ltd. [(2007) 136 Comp

Cas 294 : (2006) 134 DLT 450] as regards the jurisdiction of the Company Law

Board and the High Court under Sections 397/398 and 402, a learned Single Judge

of the Delhi High Court held: (DLT p. 466, para 27)

‘27. … Jurisdiction of the CLB (and ultimately of this Court in appeal) under

Sections 397/398 and 402 is much wider and direction can be given even

contrary to the provisions of the articles of association. It has even right to

terminate, set aside or modify the contractual arrangement between the

company and any person [see Sections 402( d) and (e)]. Section 397

specifically provides that once the oppression is established, the Court may,

with a view to bringing to an end the matters complained of, make an order

as it thinks fit. Thus, the Court has ample power to pass such orders as it

thinks fit to render justice and such an order has to be reasonable. It is also

an accepted principle that ‘just and equitable’ provision in Section 402(g) is

an equitable supplement to the common law of the company to be found in

its memorandum and articles of association.’

(emphasis ours)

28. Speaking to the authority of the erstwhile CLB, this Court in Kamal Kumar Dutta

v. Ruby General Hospital Ltd.

18

held that the CLB while deciding petitions

under Sections 397 and 398 of the 1956 Act exercises quasi-judicial power and

as an original authority. The relevant paragraphs of the decision are reproduced

hereunder:

18

(2006) 7 SCC 613

17

23. ... There are no two opinions in the matter that when CLB exercised its power

under Sections 397 and 398 of the Act, it exercised its quasi-judicial power as

original authority. It may not be a court but it has all the trapping of a court.

Therefore, CLB while exercising its original jurisdiction under Sections 397 and

398 of the Act passed the order and against that order appeal lies to the learned

Single Judge of the High Court and thereafter no further appeal could be filed.

(emphasis ours)

29. In the landmark decision of Tata Consultancy Services Ltd. v. Cyrus

Investments (P) Ltd.

19

, this Court eruditely delineated the jurisdiction of the

Tribunal while passing orders on an application complaining of oppression and

mismanagement which is that the Tribunal ought to bring an end to the

complaints of oppression and mismanagement and must not only avoid providing

solutions that tend to elongate the complaints, but must also provide a solution

to the problems. The relevant passages from such judgment read as follows:

180. Therefore, despite the law relating to oppression and mismanagement

undergoing several changes, the object that a Tribunal should keep in mind while

passing an order in an application complaining of oppression and mismanagement,

has remained the same for decades. This object is that the Tribunal, by its order,

should bring to an end the matters complained of.

181. In other words the purpose of an order both under the English law and under

the Indian law, irrespective of whether the regime is one of “oppressive conduct”

or “unfairly prejudicial conduct” or a mere “prejudicial conduct”, is to bring to an

end the matters complained of by providing a solution. The object cannot be to

provide a remedy worse than the disease. The object should be to put an end to

the matters complained of and not to put an end to the company itself, forsaking

the interests of other stakeholders. It is relevant to point out that once upon a

time, the provisions for relief against oppression and mismanagement were

construed as weapons in the armoury of the shareholders, which when brandished

in terrorem, were more potent than when actually used to strike with. While such

a position is certainly not desirable, they cannot today be taken to the other

extreme where the tail can wag the dog.

182. The Tribunal should always keep in mind the purpose for which remedies are

made available under these provisions, before granting relief or issuing directions.

It is on the touchstone of the objective behind these provisions that the

correctness of the four reliefs granted by the Tribunal should be tested. If so done,

it will be clear that NCLAT could not have granted the reliefs of:

182.1. Reinstatement of CPM.

182.2. Restriction on the right to invoke Article 75.

182.3. Restraining RNT and the nominee Directors from taking decisions in

advance.

182.4. Setting aside the conversion of Tata Sons into a private company.

19

(2021) 9 SCC 449

18

(emphasis ours)

30. The aforesaid decisions confirm the view that the NCLT/CLB possess a wide

jurisdiction to decide all such matters that are incidental and/or integral to the

complaint alleging oppression and mismanagement. Such power is, however,

subject to any other legislative enactment specifically debarring the NCLT/CLB

from exercising its powers in this respect.

31. In the instant case, it is an admitted fact that the determination of whether the

gift deed is valid or not is central to the decision herein and, therefore, the NCLT

did have full jurisdiction to decide whether the gift deed is valid or not, or whether

it is against the provisions of the 1956 Act and/or internal regulations of the

COMPANY, including but not limited to the A oA and the Memorandum of

Association.

OPPRESSION AND MISMANAGEMENT

32. We will take the third and fourth issues together as they both relate to the

question of whether the appellant was a victim of oppression and

mismanagement.

33. Oppression and mismanagement have been d iscussed a number of times by this

Court in previous decisions. Oppression, in company law, can never have a

straitjacket definition and takes within its fold various forms and actions. The

dictionary meaning of the word oppression is any act exercised in a manner that

is burdensome, harsh and wrongful

20

.

20

A. Ramaiya, Guide to the Companies Act, 2013, vol. 3, at 4020 (18th ed. LexisNexis 2015).

19

34. The legal concept of oppression and mismanagement comes from the colonial

law. In Scottish Co-Operative Wholesale Society Ltd. Appellant v. Meyer

21

,

the House of Lords referring to the prior decision in Elder v. Elder and Watson

22

noted the primary element of what constitutes oppression – that is, a “lack of

probity and fair dealing in the affairs of a company to the prejudice of some

portion of its members”.

35. Following Meyer (supra), Jenkins, L.J speaking for the Court of Appeal in In re H.

R. Harmer Ltd.

23

, stated the word “oppressive” must be understood in its

ordinary sense and the question must be whether in that sense the conduct

complained of is oppressive to a member or members as such.

36. Hon’ble K.N. Wanchoo, J. (as his Lordship then was) speaking for a three judge

Bench of this Court in Shanti Prasad Jain v. Kalinga Tubes Ltd.

24

noted the

three prior decisions above from English and Scottish jurisprudence with approval

and noted that the law in this regard had not defined what oppression meant for

the purposes of Section 397 read with Section 402 of the 1956 Act and would,

therefore, involve a case-to-case examination of the facts to determine whether

oppression had occurred.

37. In Needle Industries (India) Ltd. v. Needle Industries Newey (India)

Holding Ltd.

25

, this Court had the occasion to observe that while an isolated act

may not amount to oppression and mismanagement, a series of actions one upon

21

(1958) 3 All ER 66 (HL)

22

(1952) Scottish Cases 49.

23

[1959] 1 WLR 62

24

1965 SCC OnLine SC 15

25

(1981) 3 SCC 333

20

the other can justifiably lead to such a conclusion. The erudite words of Hon’ble

Y.V. Chandrachud, CJI. speaking for the three-judge Bench are worth quoting:

49. …Neither the judgment of Bhagwati, J. nor the observations in Elder [1952 SC

49] are capable of the construction that every illegality is per se oppressive or that

the illegality of an action does not bear upon its oppressiveness. In Elder [1952

SC 49] a complaint was made that Elder had not received the notice of the Board

meeting. It was held that since it was not shown that any prejudice was occasioned

thereby or that Elder could have bought the shares had he been present, no

complaint of oppression could be entertained merely on the ground that the failure

to give notice of the Board meeting was an act of illegality. The true position is

that an isolated act, which is contrary to law, may not necessarily and by itself

support the inference that the law was violated with a mala fide intention or that

such violation was burdensome, harsh and wrongful. But a series of illegal acts

upon one another can, in the context, lead justifiably to the conclusion that they

are a part of the same transaction, of which the object is to cause or commit the

oppression of persons against whom those acts are directed. This may usefully be

illustrated by reference to a familiar jurisdiction in which a litigant asks for the

transfer of his case from one Judge to another. An isolated order passed by a

Judge which is contrary to law will not normally support the inference that he is

biased; but a series of wrong or illegal orders to the prejudice of a party are

generally accepted as supporting the inference of a reasonable apprehension that

the Judge is biased and that the party complaining of the orders will not get justice

at his hands.

…

52. It is clear from these various decisions that on a true construction of Section

397, an unwise, inefficient or careless conduct of a Director in the performance of

his duties cannot give rise to a claim for relief under that section. The person

complaining of oppression must show that he has been constrained to submit to

a conduct which lacks in probity, conduct which is unfair to him and which causes

prejudice to him in the exercise of his legal and proprietary rights as a shareholder.

It may be mentioned that the Jenkins Committee on Company Law Reform had

suggested the substitution of the word “oppression” in Section 210 of the English

Act by the words “unfairly prejudicial” in order to make it clear that it is not

necessary to show that the act complained of is illegal or that it constitutes an

invasion of legal rights (see Gower's Company Law , 4th Edn., p. 668). But that

recommendation was not accepted and the English law remains the same as

in Meyer [1959 AC 324 : (1958) 3 All ER 66 (HL)] and in Re H.R. Harmer

Ltd. [1959 WLR 62 : (1958) 3 All ER 689 (CA)] as modified in Re Jermyn St.

Turkish Baths [(1971) 3 All ER 184 (CA)] . We have not adopted that modification

in India.

(emphasis ours)

38. In Hind Overseas (P) Ltd. v. Raghunath Prasad Jhunjhunwalla

26

, this Court

while dealing with oppression and mismanagement in a company formed by

26

(1976) 3 SCC 259

21

family members/close friends observed that the principle of “just and equitable”

clause baffles a precise definition. It must rest with the judicial discretion of the

court depending upon the facts and circumstances of each case. These are

necessarily equitable considerations and may, in a given case, be superimposed

on law. Whether it would be so done in a particular case cannot be put in the

straitjacket of an inflexible formula.

39. In Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan

27

, this Court ruled that

the acts of Directors in a private limited company are required to be tested on a

much finer scale in order to rule out any misuse of power for personal gains or

ulterior motives. The Court also succinctly observed that while a right to do an

act may be present to the Directors under Company Law, this right enjoins with

it the duty to act fairly and in the overall interest of the company. It was, thus,

held that if a member who holds the majority of shares in a company is reduced

to the position of minority shareholder in the company by an act of the company

or by its Board of Directors in a mala fide manner, the said act must ordinarily

be considered to be an act of oppression against the said member.

40. In the case of Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad

28

, this

Court while setting aside the allotment of shares noted that the surrounding

circumstances of the allotment are seriously suspect and do not satisfy the

required standards of proof to sustain the same.

41. A profitable reference may also be made to the decision of V.S. Krishnan v.

Westfort Hi-Tech Hospital Ltd.

29

wherein it was observed as follows:

27

(2005) 1 SCC 212

28

(2005) 11 SCC 314

29

(2008) 3 SCC 363

22

14. In a number of judgments, this Court considered in extenso the scope of

Sections 397 and 398. The following judgments could be usefully referred to:

…

From the above decisions, it is clear that oppression would be made out:

(a) Where the conduct is harsh, burdensome and wrong.

(b) Where the conduct is mala fide and is for a collateral purpose where although

the ultimate objective may be in the interest of the company, the immediate

purpose would result in an advantage for some shareholders vis-à-vis the others.

(c) The action is against probity and good conduct.

(d) The oppressive act complained of may be fully permissible under law but may

yet be oppressive and, therefore, the test as to whether an action is oppressive

or not is not based on whether it is legally permissible or not since even if legally

permissible, if the action is otherwise against probity, good conduct or is

burdensome, harsh or wrong or is mala fide or for a collateral purpose, it would

amount to oppression under Sections 397 and 398.

(e) Once conduct is found to be oppressive under Sections 397 and 398, the

discretionary power given to the Company Law Board under Section 402 to set

right, remedy or put an end to such oppression is very wide.

(f) As to what are facts which would give rise to or constitute oppression

is basically a question of fact and, therefore, whether an act is oppressive or not

is fundamentally/basically a question of fact.

42. Applying the tests laid down in the aforesaid authorities, we have come to the

conclusion that the Appellant was the victim of oppression and mismanagement

in the instant case for two reasons: first, that the circumstances surrounding the

gift deed and the subsequent transfer of shares are seriously questionable and

must be declared invalid and secondly, the board meetings have been conducted

in a mala fide manner and against both the statutory requirements of the 1956

Act and the internal regulations of the COMPANY. Both of these instances show that

the affairs of the COMPANY were being conducted in a manner prejudicially

affecting the Appellant.

GIFT DEED AND SHARE TRANSFER FORMS ARE INVALID

43. The gift deed is invalid first and foremost since it is against the AoA, specifically

clause 16. The clause does not allow a transfer to the mother -in-law and,

therefore, the gift deed cannot be called in aid to defeat the claims of the

Appellant in the COMPANY. Any action taken which is not permitted by the AoA

23

here cannot be sustained. One may usefully refer to V.B. Rangaraj vs V.B.

Gopalakrishnan & Ors.

30

for this proposition.

44. Further, as alluded to previously, the circumstances surrounding the gift deed are

questionable since the deed specifically mentions it being purportedly executed

by the Appellant to the fourth respondent out of “love and affection”. However,

what paints a divergent image is that the fourth respondent on 01.06.2013 lodged

an FIR alleging that the appellant purportedly committed acts constituting breach

of trust qua family jewellery on 17.12.2010, i.e., the very date that the Share

Transfer Form was purportedly signed by the Appellant.

45. There is also considerable merit in the Appellant’s argument that the share

transfer forms are suspect. A bare perusal of the same discloses that (i) the share

transfer form was purportedly signed by the Appellant after the extended period

and such transfers cannot be upheld by this Court in good conscience and (ii)

there is clear overwriting and mismatch of dates on the share transfer form. We

have no hesitation to hold that the share transfer needs to be set aside on these

grounds.

46. At this stage, however, we do not find this to be an appropriate case to decide

whether the RoC had the power to extend and whether the extension in this case

is valid, especially considering that we have already decided that the share

transfer cannot be sustained. Moreover, the RoC not being impleaded as a party

in these appeals, we cannot and must not venture into determining whether the

actions of the RoC have been made as per the provisions of the respective

Companies Act and rules thereunder.

30

(1992) 1 SCC 160

24

BOARD MEETINGS WERE INVALIDLY CONDUCTED

47. With reference to the Board Meetings dated 15.12.2010 and 17.12.2010, we are

of the considered view that it suffers from fundamental illegality and cannot be

sustained in law. The same were undoubtedly conducted in violation of the AoA

and the 1956 Act, on two counts.

48. First, on the issue of notice, clauses 30 and 61 of the AoA read with Section 286

of the 1956 Act, unequivocally mandate that notice of every board meeting must

be served on all Directors. Specifically, clause 30 stipulates that “twenty-one

days’ notice specifying the place, day and hour of a General Meeting shall be

given to the members of the company”. Mr. Mehta contended that the Appellant,

who continued as a Director during the relevant period, was never served with

notice of either of the meetings dated 15.12.2010 or 17.12.2010. Moreover, such

notices and/or proof of service of such notices were never produced on record

before the NCLT. Not only that, the minutes of the meetings were also not

produced. Hence, the requirement of notice being mandatory, non-service thereof

renders the meetings invalid. Reliance placed by Mr. Mehta on Sri Parmeshwari

Prasad Gupta v. Union of Indi a

31

is relevant here as it was held that absence

of notice vitiates the entire proceedings of a board meeting.

49. Regarding the contention of Mr. Reddy that the notice was accepted by the

security guard, the same has been urged to be rejected. The notice accepted by

the guard was in respect of the Extra-Ordinary General Meeting (EOGM) which

was held on 20.06.2011. This is admittedly not the subject matter of dispute.

What we are concerned with are the meetings dated 15.12.2010 and 17.12.2010.

31

(1973) 2 SCC 543

25

50. At this stage, we wish to highlight the contradictory stances taken by the

respondents before the NCLT, the NCLAT and before us. Before the NCLT, the stance

taken by the COMPANY is that notice for the EOGM was taken by the guard, and

not for the meetings held on 15.02.2010 and 17.12.2010. The Appellant rightly

contested the same in her rejoinder before the NCLT. Before the NCLAT in the

appeal petition, the respondents do not even mention that a notice was sent and

the same was accepted by the guard. The only plea they t ook is that since the

Appellant resigned on 17.12.2010, no further notice was required to be sent to

her. Before us, in the reply filed to the civil appeal, the COMPANY has taken the

stand that the notice for the meeting dated 15.12.2010 was duly received by the

guard. This inconsistent stand, we are sure, is only an untoward error, lest our

observations be construed as casting imputations. That being said, no

documentary proof has been attached to show that the guard accepted any notice

for the meetings scheduled on 15.02.2010 or 17.02.2010. Therefore, the

requirement of notice was not complied with.

51. Secondly, on the issue of quorum, clause 53 of the AoA mandates that every

Board Meeting of the COMPANY must have a quorum of at least two validly

appointed Directors. It is an admitted fact that on 15.12.2010, the Appellant was

a Director holding 98% shareholding in the COMPANY and the only other Director

was the third respondent. Hence, in the absence of the Appellant, the meeting

did not have the requisite quorum.

52. Additionally, since the alleged induction of the fifth respondent as an Additional

Director in the meeting of 15.12.2010 was itself illegal, the fifth respondent could

not be deemed to be a validly appointed Director, and his presence in the

26

subsequent meeting dated 17.12.2010 could not have cured the defect of

quorum. Thus, both meetings were vitiated for want of proper quorum.

53. In light of the above, we find that the Board Meetings held on 15.12.2010 and

17.12.2010 were invalid on both counts and the resolutions purportedly passed

therein, including the acceptance of the Appellant’s alleged resignation, do not

warrant validation by us.

CONCLUSION

54. Collectively taken, all these actions of the COMPANY in serial fashion demonstrate

clear oppression and mismanagement in its affairs. Probity is lacking which is

prejudicial to the appellant.

55. Thus, interference by the NCLAT with the judgment and order of the NCLT, in our

opinion, was quite unnecessary. Hence, we set aside the common appellate

judgment and order of the NCLAT on the appeals of the respondents and restore

that of the NCLT.

56. These civil appeals are, accordingly, allowed. Parties shall, however, bear their

own costs.

………………………………J

(DIPANKAR DATTA)

………………………………J

(K. VINOD CHANDRAN)

New Delhi,

SEPTEMBER 02 , 2025.