In a recent case, the Hyderabad bench of the National Company Law Tribunal ( NCLT ) held that company law tribunals have jurisdiction under Section 59 of the Companies Act, 2013 to refer seriously disputed questions towards civil court for a detailed investigation.
Mr. Gireesh Sanghi, the Petitioner and his family hold 4,87,499 equity shares constituting 48.76% of the total paid-up share capital of Sanghi Cements Limited, the Company. Mr. Ravi Sanghi, Respondent No.2 and his family hold 4,87,501 equity shares, also amounting to 48.76% of the shares.
While inspecting the records of the Company filed with the Registrar of Companies, the Petitioner discovered that Respondent No.2 had filed Form PAS-3, indicating that a Board Meeting allegedly held on 21.03.2014 had allotted 85,00,000 equity shares to Respondent No.2. This increased Respondent No.2’s shareholding to 94.61%, reducing the Petitioner’s shareholding to 5.13%.
The Petitioner, Director of the Company, argued that he never received notice of such Board Meeting and that without his consent, no Special Resolution could have been passed as required under Section 81 ( 1A ) of the Companies Act, 1956.
Additionally, no Board or General Body Meetings have been held since 2008. Therefore, he claimed that Respondent No.2 committed fraud to illegally increase his shareholding and to usurp valuable assets such as the land allotted by the state government for a factory and a limestone quarry license of about 1000 acres.
The Petitioner filed a petition under Section 59 of the Companies Act, 2013 to declare the allotment of 85,00,000 equity shares to Respondent No.2 as illegal and void and to direct the company to rectify the Register of Members, removing Respondent No.2’s name for the 85,00,000 shares, restoring the shareholding.
The NCLT bench observed that both the Civil Courts and the Tribunal have jurisdiction under the Companies Act. However, when serious disputes arise, the Tribunal should refer parties to a Civil Court for a more thorough investigation and adjudication.
It was noted that issues such as illegal transfer of shares, disputed family settlements, non-payment of consideration for shares, significant financial losses, and violation of status quo orders require a more detailed and deeper investigation.
The two-member bench of Justice Dr. Venkata Ramakrishna Badarinath Nandula ( Judicial Member ) and Shri Charan Singh ( Technical Member ) dismissed a petition filed under Section 59 of the Companies Act, 2013 and referred the matter to Civil Court for a detailed investigation.
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