2024 (4) TMI 479 - AT - Companies Law

NCLT exceeded jurisdiction under Section 8 by determining share ownership instead of examining arbitration clause validity

Shajas Developers Pvt Ltd, Neelakantan Krishnan Iyer, Mangesh Pandurang Kadam Versus Moniveda Consultants LLP, Formerly known Gauri Rajeshwari Pvt Ltd, Rajat Jhunjhunwala, JLS Realty Private Ltd, Suketu V Shah, Mamta Digvijay Singh, Mohammed Shahid, Registrar of Companies, Regional Director

NCLAT held that NCLT exceeded jurisdiction under Section 8 of Arbitration and Conciliation Act by determining ownership of 4000 shares. Section 8 ... Rightful owners of 4000 shares or not - Exercise of jurisdiction under Section 8 of the Arbitration and Conciliation Act - HELD THAT:- Language of Section 8 of the Arbitration and Conciliation Act has inherent restrictions. The Section puts a bar on the courts not to go outside the contours of Section 8 and the Court can only exercise jurisdiction to see if there is a valid clause and whether the dispute is arbitrable. Thus to give a finding at this stage to the effect R1 and R2 are owners of 4000 shares, which in fact is the main relief claimed in the Company Petition, the Ld. NCLT certainly had travelled beyond its jurisdiction. There was no occasion for Ld. NCLT to delve into the issue of ownership of 4000 shares in an application under Section 8 (Supra) and the said question would arise only when the maintainability of the main case would be decided. Thus though the appellant forego their claim to challenge dismissal of its application under Section 8 of the Arbitration and Conciliation Act but the observations in the impugned order so far as it relate to the declaring of the ownership of 4000 shares was never warranted at this stage and is set aside. This issue needs to be decided by the Ld. Tribunal at an appropriate stage and this order be not construed as an expression/opinion on merits upon the ownership of shares which fact shall be now decided by the Ld. NCLT on facts and law. Appeal disposed off. Issues involved: The primary issue in this case is the ownership dispute over 4000 shares between the parties, leading to multiple litigations and appeals. The specific issue addressed in the judgment is whether the National Company Law Tribunal (NCLT) had the jurisdiction to determine ownership of shares in an application under Section 8 of the Arbitration and Conciliation Act, 1996.Details of the Judgment:Jurisdiction of NCLT under Section 8: The appeal was filed against an order by the NCLT, Mumbai, which dismissed a Company Application under Section 8 of the Arbitration and Conciliation Act, 1996. The NCLT had observed that the original petitioners allegedly held 4000 shares in the company, exceeding its jurisdiction under Section 8. The appellant argued that the NCLT had no power to grant reliefs sought in the main company petition under Section 8, as the court's role is limited to determining the validity of the arbitration agreement and the covered disputes.Dispute over Share Ownership: The application under Section 8 sought to refer the parties to arbitration based on a Securities Purchase Agreement (SPA). The respondent filed a Company Petition seeking a declaration as the rightful owner of 4000 shares in the company as per the SPA. The appellant contended that the respondent failed to fulfill obligations under the SPA, and no consideration was received. The share certificates produced did not show transfer to the respondent, and alleged documents were suppressed.Analysis and Decision: The Tribunal noted that the NCLT had overstepped its jurisdiction by determining ownership of 4000 shares in the Section 8 application. The court's role was limited to arbitration agreement validity, not ownership disputes. While the appellant did not challenge the dismissal of the Section 8 application, the observations on share ownership were unwarranted at that stage and set aside. The issue of ownership should be decided by the NCLT at the appropriate stage without expressing any opinion on the merits.Conclusion: The appeal was disposed of with the observation that the ownership issue should be decided by the NCLT later. The pending applications were also disposed of as part of the judgment. The Tribunal emphasized that the decision did not express any opinion on the ownership of shares, leaving it to be determined by the NCLT based on facts and law.