NCLAT Upholds Dismissal of Share Restoration Claim, Holds MoU Based ₹11 Cr Loan Dispute not Maintainable [Read Order]

The Principal Bench of National Company Law Appellate Tribunal (NCLAT) at New Delhi, dismissed the appeal seeking restoration of 5,000 shares voluntarily transferred in 2017, holding the petition not maintainable as the appellant was neither a shareholder nor a member and found the dispute to be purely contractual, arising from aMemorandum of Understanding (MoU) linked to repayment of ₹11 crore loan. Thus, Non-compliance with Section 89(5) of the Companies Act, 2013 was held not to amount to oppression and mismanagement.

The Appeal was filed by the appellant, Satyanarayan Gupta under Section 421 of the Companies Act, 2013 against order dated 12.09.2025 passed by NCLT Jaipur which dismissed the company petition at the threshold stage.

Section 89(5) of the Companies Act, 2013, pertaining to Declaration in respect of beneficial interest in any share is as follows:

“(5) If any person fails, to make a declaration as required under sub-section (1) or sub-section (2) or subsection (3), without any reasonable cause, he shall be punishable with fine which may extend to fifty thousand rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues.”

The Appellant voluntarily transferred his 5,000 equity shares (50% shareholding) in Respondent No. 1 company to Respondent No. 3 in 2017. On 01.01.2022, an MoU was executed between the parties acknowledging that the appellant had borrowed funds from Respondents No. 2 and 3, with his loan liability computed at Rs 11 crores with interest.

The MoU stipulated that shares and directorship would be restored to the appellant upon full repayment, and he was to pay Rs 5 lakh monthly until final settlement, with an additional Rs 78 lakh. The appellant failed to make any payments towards the loan and filed a company petition seeking declaration as beneficial owner of the shares and rectification of company records.

The Counsel for the Appellant, Abhijeet Sinha, Gaurav Mitra, Naresh Kumar Sejwani, Aishwarya Hodi, submitted that the appellant was the beneficial owner of 5,000 equity shares (50% shareholding) in Respondent No. 1 company, which were wrongfully acquired by Respondent No. 3, as acknowledged in the MoU dated 01.01.2022. The appellant sought declaration of beneficial ownership and rectification of records under Section 89 of the Companies Act, 2013, alleging that Respondents No. 2 and 3 were misappropriating the disputed property worth Rs 50 crores at Chand Ji Ki Dhani, Jaipur, contrary to the MoU's equal sharing provision.

On the other hand, the Counsel for the Respondent, Krishanendu Datta, Tanuj Sud, Ajay Kumar, Stuti Vatsa, Vijayant Goel, Govind, argued that the company petition was not maintainable as the appellant is neither a member nor shareholder of Respondent No. 1 company. The petition sought to enforce a private MoU dated 01.01.2022, which did not concern the company's affairs and to which the company was not a party.

The Tribunal consisted of Judicial Member, Justice Yogesh Khanna and Technical Member, Ajai Das Mehrotra, heard and reviewed the matter.

The Tribunal, after considering the submissions made, upheld the NCLT's ruling that non-adherence to Section 89(5) of the Companies Act, 2013 cannot constitute oppression and mismanagement, as the section merely prescribed a duty to declare beneficial ownership with penalty for non-compliance.

Further, the Tribunal observed that while the appellant argued Respondents No. 2 and 3 should have made declarations under Section 89, the appellant himself sought to be declared the beneficial owner, which cast a similar duty upon him to make such declaration. Since the consequences for avoiding declaration were specified under the Act as penalties, such non-compliance cannot be treated as an act causing oppression and mismanagement.

Accordingly, the Tribunal after finding no merit in the appeal, dismissed it along with all pending applications.

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