Introduction

This judgment addresses a recurring fault-line in Indian company law litigation: whether the National Company Law Tribunal (NCLT), when seized of a complaint under Sections 397–398 of the Companies Act, 1956 (now Sections 241–242 of the Companies Act, 2013), can decide allegations of fraud and coercion in share transfers and set aside instruments like gift deeds that are integral to the oppression/mismanagement narrative, or whether such questions must be relegated to a civil court under the Specific Relief Act, 1963. The Supreme Court answers this decisively in favour of the NCLT’s jurisdiction.

The case arises from a family-controlled company dispute concerning Sargam Exim Private Limited (later converted to Satori Global Limited), formed by Mrs. Shailja Krishna (appellant) and her husband, Mr. Ved Krishna (respondent no. 2). The appellant held an overwhelming majority (approximately 98%) of the company’s shares and was an Executive Director. In late 2010 and 2011, amidst marital discord, she allegedly resigned as director and executed a gift deed transferring her entire shareholding to her mother-in-law (respondent no. 4). She asserted these acts were procured by coercion and fraud, and that the board meetings and share transfers were conducted in violation of the Articles of Association (AoA) and the 1956 Act.

The NCLT (Allahabad Bench) allowed her petition under Sections 397–398, declared the gift deed and share transfer invalid, restored her as Executive Director and as shareholder of 39,500 shares, and set aside key board resolutions. The National Company Law Appellate Tribunal (NCLAT) reversed, holding the petition not maintainable and that allegations of fraud and coercion should be tried in a civil court under Sections 31/34 of the Specific Relief Act, 1963. The Supreme Court has now set aside the NCLAT’s decision and restored the NCLT’s order.

Key issues:

• Maintainability under Section 399 of the 1956 Act where the petitioner alleges fraudulent divestment of shares.
• Whether the NCLT has jurisdiction in a 397/398 petition to decide the validity of a gift deed/share transfer involving allegations of fraud and coercion.
• Whether the gift deed and share transfer complied with the AoA and Section 108 (1956 Act).
• Whether the board meetings (15.12.2010 and 17.12.2010) were validly convened and quorate.

Summary of the Judgment

• Maintainability upheld: The Supreme Court concurred with NCLT that the oppression/mismanagement petition was maintainable, rejecting a rigid application of Section 399 thresholds where the petitioner claims fraudulent divestment. A member alleging fraud remains entitled to seek protection under Sections 397–398.
• NCLT’s jurisdiction affirmed: The Court held that NCLT has wide, original, quasi-judicial powers in oppression/mismanagement proceedings to decide integral and incidental issues, including the validity of a gift deed/share transfer, even if fraud is alleged. The civil court’s jurisdiction under the Specific Relief Act is not exclusive where the determination is central to the 397/398 relief.
• Gift deed invalid: The gift to the mother-in-law violated Clause 16 of the AoA (which permits gifts only to a specified class of relatives and does not include mother-in-law). The Court also found the surrounding circumstances (including contemporaneous criminal complaints and inconsistencies) suspect.
• Share transfer invalid: The transfer deed suffered from date mismatches, overwriting, and lodgement beyond statutory validity under Section 108(1A). Without deciding the Registrar of Companies’ power to grant extension under Section 108(1D) (RoC not being a party), the Court invalidated the transfer on these independent grounds.
• Board meetings vitiated: The meetings of 15.12.2010 and 17.12.2010 were invalid for non-service of mandatory notice to the appellant and want of quorum under the AoA and Section 286 of the 1956 Act. The purported induction of an additional director (R5) and acceptance of the appellant’s resignation collapsed with these defects.
• Oppression and mismanagement established: The serial nature of the wrongful acts demonstrated a lack of probity and fair dealing, meeting established tests for oppression. The NCLT’s restorative orders were appropriate and are restored.
• Result: NCLAT’s judgment set aside; NCLT’s order restored. No costs.

Analysis

1. Precedents Cited and Their Influence

• Radharamanan v. Chandrasekara Raja, (2008) 6 SCC 750: Emphasized the wide remedial jurisdiction of the CLB (now NCLT) under Sections 397–398 to prevent chaos and mismanagement and to mould reliefs necessary to keep the company functioning. The Supreme Court relied on this to affirm that NCLT can decide integral issues (including title to shares and validity of instruments) within oppression/mismanagement proceedings.
• Kamal Kumar Dutta v. Ruby General Hospital Ltd., (2006) 7 SCC 613: Clarified that the CLB exercises original, quasi-judicial jurisdiction under Sections 397–398. The Court uses this to underscore that NCLT is not merely supervisory and can return primary factual findings, including on fraud, when integral to the relief.
• Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd., (2021) 9 SCC 449: Reiterated that in 241/242-type jurisdiction, the Tribunal’s objective is to bring to an end the matters complained of and provide solutions, not to exacerbate disputes. The present decision deploys this functional lens to hold that fragmenting the dispute between NCLT and civil courts would perpetuate harm, contrary to the statutory purpose.
• Scottish Co-operative Wholesale Society v. Meyer, (1958) 3 All ER 66; Elder v. Elder & Watson, (1952) SC 49; In re H.R. Harmer Ltd., [1959] 1 WLR 62: Classic English/Scottish authorities defining oppression in terms of lack of probity and unfair prejudice. They ground the Court’s approach to determine oppression based on conduct rather than narrow legality.
• Shanti Prasad Jain v. Kalinga Tubes Ltd., 1965 SCC OnLine SC 15: Endorsed case-by-case evaluation; no straitjacket definition of oppression. Applied to weigh the facts holistically here.
• Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., (1981) 3 SCC 333: A single illegal act may not suffice, but a series of illegalities can evince oppression. Here, the Court found a pattern: defective board meetings, dubious gift and transfer, and wrongful exclusion of a majority shareholder-director.
• Hind Overseas (P) Ltd. v. R.P. Jhunjhunwalla, (1976) 3 SCC 259: “Just and equitable” considerations are elastic and equitable; fitting for closely-held/family companies. The Court brings this to bear on the family-controlled context of Satori.
• Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan, (2005) 1 SCC 212: Directors’ actions in private companies are scrutinized closely to prevent misuse for personal gain; reduction of a majority holder to a minority by mala fide acts amounts to oppression. The appellant’s effective disenfranchisement aligns with this principle.
• Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad, (2005) 11 SCC 314: Surrounding suspicious circumstances can vitiate allotments; analogously applied to suspect share transfers here.
• V.S. Krishnan v. Westfort Hi-Tech Hospital Ltd., (2008) 3 SCC 363: Synthesizes oppression tests: harshness, mala fides, collateral purposes, lack of probity, and the wide discretionary relief under Section 402. The Court uses this matrix to label the conduct oppressive.
• V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 1 SCC 160: Restrictions on share transfers must be in the AoA; actions inconsistent with AoA cannot be enforced. The Court applies this to hold a gift to a mother-in-law impermissible under Clause 16 of the AoA.
• Sri Parmeshwari Prasad Gupta v. Union Of India, (1973) 2 SCC 543: Absence of notice vitiates board proceedings. Applied to invalidate the 15/17 December 2010 board meetings.

2. Legal Reasoning

a) Maintainability despite Section 399 threshold: The Court agrees with NCLT that a petitioner alleging fraudulent ouster remains entitled to seek relief under Sections 397–398. To hold otherwise would reward fraud and render minority protection hollow. The judgment reinforces the jurisprudential trend of reading Section 399 purposively and liberally where membership/title to shares is itself the subject of the alleged oppression.

b) NCLT’s jurisdiction over fraud and instrument validity: Anchored in Radharamanan, Kamal Kumar Dutta, and TCS v. Cyrus, the Court affirms that the NCLT’s 397/398 (now 241/242) jurisdiction is wide and original, enabling it to decide all integral and incidental issues necessary “to bring to an end the matters complained of.” This includes:

• Examining and invalidating a gift deed affecting shareholding if it violates AoA or is vitiated by fraud/coercion.
• Adjudicating on the validity of share transfer forms and compliance with statutory timelines under Section 108.
• Setting aside board actions that violate statutory or internal governance requirements.

The Court expressly rejects the NCLAT’s view that only a civil court under Sections 31/34 of the Specific Relief Act can cancel such instruments in this context.

C) AoA-based invalidity of gift: Clause 16 of the AoA restricted gifts to a specified class of relatives that did not include a mother-in-law. Read with Clause 2(c) (restriction on transfer rights to those provided in AoA), the gift deed was ultra vires the AoA and invalid. Rangaraj is cited to insist on strict conformity with AoA for transfer restrictions. The contemporaneous criminal allegations by the transferee (mother-in-law) about the very date of alleged execution reinforced the Court’s skepticism.

d) Share transfer defects under Section 108 (1956 Act): The transfer deed’s statutory validity window and lodgement requirements were not met. The Court highlighted:

• Execution and lodgement dates did not align with the two-month validity under Section 108(1A).
• Overwriting and date manipulation suggested an attempt to retrospectively fit within a purported extension.

e) Board meetings vitiated for want of notice and quorum: Clauses 30, 61 (AoA) and Section 286 (1956 Act) mandate notice to all directors; Clause 53 mandated a quorum of at least two validly appointed directors. The appellant, an existing director at the time, was not served notice; minutes were not produced; and the only other director’s presence could not satisfy quorum in her absence. The purported appointment of an additional director on 15.12.2010 (to cure quorum) failed because that meeting itself was invalid, rendering the subsequent meeting of 17.12.2010 also void. The Parmeshwari Prasad Gupta rule (no notice vitiates proceedings) applied squarely.

f) Oppression/mismanagement proved by a pattern: Applying Needle Industries and V.S. Krishnan, the Court viewed the sequence—defective board meetings, opaque and AoA-inconsistent gift transfer, manipulated share transfer dates, exclusion from management—as a concatenation of acts reflecting lack of probity and unfair prejudice. In family/closely-held contexts, such conduct is scrutinized more exactingly (Dale & Carrington; Hind Overseas).

g) Relief and remedial philosophy: In line with TCS v. Cyrus, the Court preferred a solution that restores corporate equilibrium: reinstating the appellant’s directorship and shareholding; invalidating tainted meetings and transfers; and thereby bringing the matters complained of to an end. By restoring NCLT’s order, the Court implicitly accepts that rectification of the register and restoration of directorship can be ordered within oppression/mismanagement proceedings without forcing the petitioner into a separate Section 111A route.

3. Impact and Prospective Significance

• Jurisdictional clarity: The decision consolidates NCLT’s power to adjudicate allegations of fraud, coercion, forgery, and validity of instruments (including gift deeds and share transfers) when these are integral to oppression/mismanagement disputes. It curtails forum-splitting and aligns with the goal of providing an effective, unitary remedy.
• Strict enforcement of AoA restrictions: Where the AoA prescribes specific classes for gift/transfer, departures are non-est. Private/family companies must draft AoA carefully and adhere strictly to them. Transferees outside enumerated classes cannot take under a “gift” provision.
• Board process rigor: Non-negotiable compliance with notice, quorum, and minutes is reinforced. Defects are not cured by subsequent steps taken at invalid meetings. Companies should document service and maintain minutes meticulously.
• Section 108 discipline: Date integrity in share transfer deeds/lodgement is critical. Overwriting or attempts to post facto align with extensions will not withstand scrutiny. Even where RoC extensions are in play, independent defects will invalidate transfers.
• Minority protection strengthened: Members alleging fraudulent ousters can invoke 397/398 (241/242) directly; Section 399 thresholds will not be mechanistically used to shut the door when membership is the very subject of the alleged oppression.
• Remedial breadth affirmed: NCLT may direct rectification of register, restoration of shareholding/directorship, and set aside board actions within oppression proceedings, avoiding multiplicity and delay.
• What remains open: The Court deliberately left undecided the precise contours of the RoC’s power to extend a transfer deed’s validity under Section 108(1D), because the RoC was not a party and other defects sufficed to decide the case. Future cases may address this directly.

Complex Concepts Simplified

• Oppression and mismanagement: Conduct by those in control that is harsh, burdensome, wrongful, or lacking in probity to the prejudice of members. Not every illegality qualifies; a pattern of unfair acts typically does.
• CLB/NCLT/NCLAT: The erstwhile Company Law Board (CLB) is now the NCLT, a specialized tribunal with original jurisdiction in company law disputes, including oppression/mismanagement. Appeals lie to the NCLAT.
• Section 397–398 (1956 Act) / Section 241–242 (2013 Act): Statutory remedies for members alleging oppression/mismanagement, empowering the Tribunal to pass “such orders as it thinks fit” to bring the matters complained of to an end.
• Section 399 (1956 Act): Threshold for moving 397/398 (e.g., 10% shareholding). Courts interpret this purposively; where a member alleges fraudulent divestment, the remedy is not barred on a technical threshold.
• Articles of Association (AoA): Internal governance charter of a company. Restrictions on share transfers/gifts must be in the AoA to be enforceable. Actions contrary to the AoA are invalid.
• Section 108 (1956 Act): Prescribed form and time limits for execution and lodgement of share transfer deeds (two-month window). Overwriting, date manipulation, or lodging beyond validity renders transfers invalid.
• Specific Relief Act, 1963 (Sections 31/34): Civil court powers to cancel instruments or declare legal status. In oppression/mismanagement cases, NCLT can itself decide instrument validity if integral to the relief, without forcing a parallel civil action.
• Notice and quorum: Directors must receive notice of board meetings (Section 286; AoA). Quorum requires a minimum number of validly appointed directors (AoA). Non-compliance vitiates the meeting and all resolutions passed.
• Rectification of register: Correcting the company’s register of members to reflect the lawful shareholding position. The NCLT can direct rectification as part of oppression/mismanagement relief.

Practical Takeaways

• Draft AoA with precision on transfer/gift restrictions; follow them strictly. Gifts to relatives not listed in the AoA are invalid.
• Ensure board meeting compliance: timely notice to all directors, proof of service, maintenance of minutes, and valid quorum. These are not procedural niceties; they are substantive requirements.
• For share transfers, adhere strictly to Section 108 timelines and documentation. Avoid any overwriting or post-dating; keep an auditable trail of execution and lodgement.
• In oppression cases, marshal the sequence of events; a pattern of acts is often more persuasive than isolated defects.
• Do not assume that allegations of fraud automatically divest the NCLT of jurisdiction. If the fraud issue is integral to oppression relief, NCLT can and will adjudicate it.
• Where public authorities’ actions (e.g., RoC extensions) are to be challenged, ensure they are impleaded to enable definitive adjudication.

Conclusion

This judgment is a significant reaffirmation of the NCLT’s broad, solution-oriented jurisdiction in oppression/mismanagement cases. It clarifies that the Tribunal can decide allegations of fraud and invalidate instruments (gift deeds, share transfers) when these are central to the relief sought, obviating the need for parallel civil proceedings under the Specific Relief Act. It also underscores that Articles of Association are binding: transfer/gift restrictions are to be strictly enforced, and board processes—notice, quorum, minutes—are substantive guardrails, not optional formalities.

By restoring the NCLT’s order, the Supreme Court not only vindicated the appellant’s proprietary and managerial rights but also advanced the jurisprudence toward integrated, effective remedies in corporate oppression disputes. The decision will likely reduce forum fragmentation, strengthen minority protection, and raise process compliance standards in closely-held and family-run companies.

Key takeaway: When oppression is alleged, the NCLT can grasp the nettle—decide fraud, void tainted transfers, and restore the status quo ante—so as to “bring to an end the matters complained of.”