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        Companies Law

        2023 (8) TMI 1680 - HC - Companies Law

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        Civil court jurisdiction survives where share disputes involve fraud, disputed title, and relief beyond simple rectification of the register. Civil court jurisdiction is not barred where the pleadings go beyond rectification of the register of members and raise disputed title, allegations of ...
                      Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.

                          Civil court jurisdiction survives where share disputes involve fraud, disputed title, and relief beyond simple rectification of the register.

                          Civil court jurisdiction is not barred where the pleadings go beyond rectification of the register of members and raise disputed title, allegations of fraudulent transfer, reduction of shareholding, and requests for declaratory and injunctive relief protecting individual shareholder rights. Section 59 of the Companies Act, 2013 was treated as confined to correction of entries in the register, while Section 430 does not exclude civil jurisdiction for controversies that the Tribunal is not empowered to determine. The plaint was therefore not liable to rejection on the basis of exclusive NCLT jurisdiction, and the civil suit was held maintainable.




                          Issues: Whether the plaint was liable to be rejected on the ground that the dispute related to rectification of the register of members and was exclusively triable by the National Company Law Tribunal, thereby barring the civil court's jurisdiction under the Companies Act, 2013.

                          Analysis: The pleadings disclosed that the plaintiff was not merely seeking rectification of the register, but was alleging fraudulent transfer and reduction of her shareholding, challenging the validity of the transfer itself, disputing title to the shares, and seeking declaratory and injunctive reliefs in respect of her individual rights. The scope of Section 59 of the Companies Act, 2013 was treated as confined to correction of the register and related reliefs against the company's entry or omission, while the Tribunal was not viewed as the proper forum to adjudicate complex disputed title, allegations of fraud, and independent proprietary rights between individual shareholders. The bar under Section 430 was held to operate only to the extent the Tribunal is empowered to determine the matter, and the civil court's jurisdiction was preserved where the controversy lay beyond simple rectification.

                          Conclusion: The application for rejection of the plaint was dismissed, and the civil suit was held to be maintainable.

                          Final Conclusion: The dispute was held to be one of fraudulent transfer and contested share title, not a mere rectification proceeding, so the civil court was not divested of jurisdiction.

                          Ratio Decidendi: Where the reliefs sought require adjudication of disputed title, allegations of fraud, and individual rights in shares, the remedy is not confined to rectification proceedings before the Tribunal and the civil court's jurisdiction is not barred by the Companies Act, 2013.


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                          ActsIncome Tax
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