NCLT can exercise rectificatory jurisdiction under Section 59 even when contested facts and disputed questions exist

NCLAT Chennai held that rectificatory jurisdiction under Section 59 of the Companies Act can be exercised even where contested facts and disputed questions exist. The Tribunal distinguished SC precedents in Ammonia Supplies and IFB Agro, noting that while Section 59 jurisdiction is summary in nature, the complete bar on civil court jurisdiction under Section 430 empowers NCLT to decide rectification matters involving disputed facts. The Tribunal set aside the impugned order and allowed the appeal regarding rectification of the company's register of members.

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Issues Involved:
1. Maintainability of applications under Section 59 of the Companies Act, 2013.
2. Jurisdiction of the National Company Law Tribunal (NCLT) under Section 59 of the Companies Act, 2013.
3. Applicability of Section 430 of the Companies Act, 2013.

Summary:

Issue 1: Maintainability of Applications under Section 59 of the Companies Act, 2013

In the first appeal, the application under Section 59 of the Companies Act, 2013, sought relief to declare the transfer of 1,33,62,800 shares on 18.12.2014 as a violation of orders by the Hon'ble Company Law Board and to rectify the Register of Members of Respondent No. 1 Company. The second appeal sought similar reliefs, declaring the transfer of shares illegal and null and void. Both applications were dismissed by the NCLT as not maintainable due to the presence of contested facts and disputed questions.

Issue 2: Jurisdiction of the NCLT under Section 59 of the Companies Act, 2013

The Tribunal questioned whether the rectificatory jurisdiction under Section 59, which is summary in nature, can be exercised where there are contested facts and disputed questions. The Tribunal relied on the Supreme Court decisions in Ammonia Supplies Corporation P. Ltd. Vs. Modern Plastic Containers Pvt. Ltd. & Ors. and IFB Agro Industries Limited Vs. SICGIL India Limited & Ors., observing that the rectificatory jurisdiction is summary and not intended for cases with seriously contested facts and disputed questions. Consequently, the Tribunal concluded that such matters should be referred to a competent civil court.

Issue 3: Applicability of Section 430 of the Companies Act, 2013

The appellant argued that the jurisdiction of the Civil Court is barred under Section 430 of the Companies Act, 2013, which provides that no civil court shall have jurisdiction over matters that the Tribunal or Appellate Tribunal is empowered to determine. The appellant cited the Supreme Court's decision in Shashi Prakash Khemka Vs. NEPC Micon & Ors., which held that the jurisdiction of the Civil Court is completely barred under Section 430, and the power to decide rectification issues lies with the NCLT under Section 59 of the Act.

The Tribunal's reliance on Ammonia Supplies and IFB Agro was challenged, noting that these cases did not consider the implications of Section 430. The Tribunal's decision was found inconsistent with the Supreme Court's ruling in Shashi Prakash Khemka, which emphasized the exclusive jurisdiction of the NCLT under Section 59 post the enactment of Section 430.

Conclusion:

The appeals were allowed, and the impugned orders were set aside. The matter was remanded back to the Tribunal to be decided in accordance with the law, considering the exclusive jurisdiction conferred by Section 430 of the Companies Act, 2013. The parties were directed to appear before the Tribunal on 18th December, 2023.

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