Exclusive NCLT Jurisdiction Over Share Disputes Confirmed by Delhi High Court

The Delhi High Court held that jurisdiction to adjudicate the disputes regarding share allotment and board resolution vests with the National Company Law Tribunal (NCLT) under the Companies Act, 2013. The Court concluded that the Civil Court lacks jurisdiction, as the NCLT has exclusive authority to rectify share allotments and regulate company affairs. The Plaintiff's suit was rejected, with liberty to approach the NCLT, and pending applications were disposed of accordingly. The interim order was extended for four weeks for the Plaintiff to seek relief from the NCLT.

---

---

Issues Involved:
1. Jurisdiction of the Civil Court
2. Legality of Share Allotment
3. Validity of Board Resolution
4. Pending Proceedings before CLB/NCLT
5. Application of Section 59 and Section 62 of the Companies Act, 2013

Issue-wise Detailed Analysis:

1. Jurisdiction of the Civil Court:
The primary issue was whether the Delhi High Court had jurisdiction to entertain the suit filed by SAS Hospitality Pvt. Ltd. (Plaintiff) against the allotment of shares to Defendant Nos. 5 to 9. The Defendants argued that the jurisdiction lay with the National Company Law Tribunal (NCLT) as per Section 430 and Section 434(1)(c) of the Companies Act, 2013. The Court analyzed the scheme of the Companies Act, 2013, which vests the NCLT with extensive powers to manage and administer companies, including rectification of the register of members under Section 59 and regulation of the conduct of company affairs under Section 242. The Court concluded that the NCLT is empowered to determine the legality of share allotments and rectify the register of members, thus barring the jurisdiction of the Civil Court under Section 430 of the Companies Act, 2013.

2. Legality of Share Allotment:
The Plaintiff alleged that the shares were allotted to Defendant Nos. 5 to 9 in an illegal and clandestine manner on 5th October 2013, without proper compliance with the procedures prescribed under Section 62 of the Companies Act, 2013. The Court noted that any dispute regarding the issuance of share capital and its compliance with Section 62 falls within the jurisdiction of the NCLT. The NCLT can also determine if the register of members needs rectification due to such allotment and can pass orders to regulate the company's affairs.

3. Validity of Board Resolution:
The Defendants contended that the board resolution authorizing the filing of the suit was defective as no board meeting was conducted on the claimed date. The Court found that this issue could also be addressed by the NCLT, which has the authority to oversee and supervise the company's working and validate or invalidate board resolutions as part of its regulatory powers.

4. Pending Proceedings before CLB/NCLT:
The Plaintiff mentioned that one of the directors had approached the Company Law Board (CLB), and a status quo order was passed, with proceedings still pending. The Court noted that with the constitution of the NCLT, all such matters are transferred to it. The existence of pending proceedings before the CLB (now NCLT) further supports the view that the NCLT has exclusive jurisdiction over the dispute.

5. Application of Section 59 and Section 62 of the Companies Act, 2013:
The Court analyzed the interplay between Section 59 (rectification of register) and Section 62 (issuance of further share capital) of the Companies Act, 2013. It concluded that any non-compliance with Section 62, which affects the register of members, falls under the purview of the NCLT. The NCLT has the power to rectify the register and regulate the conduct of the company's affairs, making it the appropriate forum for such disputes.

Conclusion:
The Court held that the jurisdiction to adjudicate the disputes raised in the present case vests with the NCLT. The bar under Section 430 of the Companies Act, 2013, is absolute, and the Civil Court does not have jurisdiction to entertain the suit. The plaint was rejected with liberty for the Plaintiff to approach the NCLT. The interim order passed by the Court was extended for four weeks to allow the Plaintiff to seek appropriate relief from the NCLT. All pending applications were disposed of accordingly.

---