2026 (1) TMI 531 - AT - Companies Law

NCLT power to rectify share register u/s59 despite pending civil suit over disputed share-transfer documents restored

The dominant issue was whether the NCLT could entertain a petition under s.59 of the Companies Act, 2013 for rectification of the register of members when ... Rectification of the register of shares - illegal share transfer - company petition was dismissed on the ground there are triable issues qua transfer of shares pending before the Ld. Trial Court and these are needed to be adjudicated first by such court, before a final decision on the rectification of register of the members can be arrived at by the Tribunal - dismissal also on the ground of time limitation - HELD THAT:- Admittedly the impugned order noted the original share certificates were produced by the appellant only on 10.11.2023 and similarly Respondent No.2 produced notice of AGM, annual returns, list of shareholders as annexed with the annual return for the financial year 2007-08 only on 23.08.2024. The Ld. NCLT also noted the appellant was not transparent in submitting purported evidence in his possession and thus declined to accede to the prayer of the appellant herein for rectification of the register of members on the ground of insufficient evidence brought on record but then also noted most of the issues relating to the authenticity of the documents placed before it were before the Ld. Trial Court and thus it had no jurisdiction till such related issues be adjudicated upon by the Ld. Trial Court and only thereafter, the final decision on rectification of register could be arrived at. In Gireesh Kumar Sanghi v. Sanghi Industries Ltd. & 19 Ors. [2023 (12) TMI 187 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI], the Hon’ble court held that 'once the legislature has created a complete bar of the jurisdiction of the Civil Court by enacting Section 430 in the Act as per which no civil court shall have the jurisdiction to entertain any suit or proceedings in respect of any matter which the Tribunal or Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no civil court has the jurisdiction to grant injunction in respect of any action taken or to be taken in pursuance of any power conferred by or under the act or any other law for the time being in force by the Tribunal or Appellate Tribunal, there is no shred of doubt that the jurisdiction to decide the rectificatory jurisdiction under Section 59 of the Act shall be available to be exercised even where there are contested facts and disputed question.' Thus considering Girish Kumar Sanghi, there are no doubt it is only the Ld. NCLT who also has the power to look into the disputes interse the parties qua rectification of register and the impugned order so far as it says such issues fall within the jurisdiction of Civil Court and cannot be looked into by the Ld. NCLT till the Ld. Trial Court takes a view in this regard, is wholly an incorrect approach - the imougned order is set aside on this ground alone - matter remanded to the Ld. NCLT requesting it to decide it on merits without waiting for judgement of any Civil Court per Section 430 of the Companies Act, 2013. Appeal disposed off by way of remand. Issues: (i) Whether the Tribunal (NCLT/NCLAT) has jurisdiction to decide applications for rectification of the register of members under Section 59 of the Companies Act, 2013 notwithstanding contested factual disputes and pending proceedings in civil courts; (ii) Whether the petitioner has established an 'open and shut' case of fraud justifying immediate rectification of the register of members.Issue (i): Whether the Tribunal has jurisdiction to decide rectification under Section 59 despite contested factual disputes and related matters pending before civil courts.Analysis: The statutory scheme, including Section 430 of the Companies Act, 2013, operates to exclude civil court jurisdiction where matters fall within the Tribunal's competence under the Act. Precedent and statutory bar mean the Tribunal/Appellate Tribunal are empowered to determine matters such as rectification of the register of members. Where parties place contested documentary and factual issues before the Tribunal, those issues are not automatically rendered non-justiciable by reason of parallel civil proceedings; the Tribunal must examine such disputes and decide the rectification claim on merits unless a clear bar under the Act applies.Conclusion: The Tribunal has jurisdiction to decide rectification under Section 59 and the impugned finding that such issues fall exclusively within civil court jurisdiction was set aside; the matter is remitted for the NCLT to determine on merits without waiting for civil court adjudication.Issue (ii): Whether the petitioner has made out an 'open and shut' case of fraud warranting deletion/rectification of entries in the register of members.Analysis: The record shows contested and piecemeal production of documents by both parties, late production of original share certificates by the petitioner, challenges to documentary authenticity, and competing forensic and evidentiary assertions. The Tribunal found that the petitioner did not incontrovertibly establish forgery or fraud on an 'open and shut' basis and that factual disputes about authenticity, admissions, promissory note, limitation and related issues required careful adjudication. Consequently, the appellate court directed that these contentions and documentary issues be examined by the NCLT on merits, including consideration of limitation and admissions.Conclusion: The petitioner has not established an 'open and shut' case of fraud on the record; the question of rectification requires full merits adjudication by the NCLT, including examination of authenticity, limitation and admissions.Final Conclusion: The Appellate Tribunal directed that the impugned order be set aside to the extent it declined jurisdiction, and remitted the petition to the NCLT for fresh adjudication on merits (including examination of documentary authenticity, promissory note, limitation and admissions) in accordance with the Companies Act, 2013 and applicable principles of evidence and procedure.Ratio Decidendi: Section 430 of the Companies Act, 2013 excludes civil court jurisdiction over matters which the Tribunal/Appellate Tribunal is empowered to determine under the Act, and therefore the Tribunal has jurisdiction to decide rectification of the register of members under Section 59 even where disputed facts and contested documentary issues exist; such disputes must be resolved by the Tribunal on merits rather than postponed to civil courts.