TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 1680
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....y disputes arising out of shareholders agreement with regard to shares shall be commercial disputes but in the present suit there is no shareholders agreement being entered into between the parties, hence it cannot be treated as a commercial suit. 3. It is submitted present suit relate to a family dispute between the family of defendant no.3- the father-in-law of plaintiff on the other hand and family of defendant no.1. It is submitted the plaint be rejected as the case pertain to rectification of register of members, hence only the NCLT shall have the jurisdiction and per Section 430 of Companies Act no civil suit is maintainable for rectification of the shares. Sections 59, 424 and 430 of the Companies Act are as under: "59. Rectification of register of members.-(1) If the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company, or the ....
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....esides or carries on business or personally works for gain. (4) All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code (45 of 1860), and the Tribunal and the Appellate Tribunal shall be deemed to be civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974). 430. Civil court not to have jurisdiction.- No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal." 4. It is the submission of the learned counsel for the defendant, the Plaintiff's shares were transferred in favour of defendant no.1 in the year 2011 and plaintiff never....
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....e company were annexed with the petition by Mr. Mohd Nowshah defendant No3 to support his allegations against the other directors of the company. In the said petition and the annexed documents, the shareholding of the Plaintiff was shown to have been reduced from 5002 to 547 thereby reducing the shareholding of the Plaintiff from 12.77 percent of the issued share capital to 1.39 of the issued share capital of the defendant No.2 Company. 18. That Mr. Mohd Nowshah defendant No.3 informed the Plaintiff thereupon that Mr. Anwar Elahi Defendant No.l had failed to abide with the understanding and execute the requisite documents with respect to the property bearing No.A-48, Mohan Cooperative Industrial Area, Badarpur, Mathura Road, New Delhi in favour of Mr. Mohd. Nowshah defendant No.3 and in case the Plaintiff claimed that she had not authorized any transfer of her shares in favour of Defendant No. 1 she should take whatever action needed for correction of the list of the shareholders of the Company and restoration of her shares in her name, in the records of the Company if the transfer was not authorized by her as the transfer of shares was an issue between the plaintiff and t....
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....on and mismanagement raises the issue of forgery or fabrication of any statutory records, then it shall be at liberty to move an appropriate application for forensic examination and the Bench hearing the matter may, for reasons to be recorded, either allow the application and send the disputed records for opinion of Central Forensic Science Laboratory at the cost of the party alleging fabrication of records, or dismiss such application. 70. Appeal under sections 58 and 59.- (1) to (4) xxxxxxx (5) On any petition under section 59, the Tribunal may- (a) decide any question relating to the title of any person who is a party to the petition to have his name entered in, or omitted from, the register; (b) generally decide any question which is necessary or expedient to decide in connection with the application for rectification." 6. In support of his submissions the learned counsel for defendant referred to Shashi Prakash Khemka vs. NEPC Micon, (2019) 18 SCC 569, wherein it was held: "6. It is not in dispute that were a dispute to arise today, the civil suit remedy would be completely barred and the power would be vested with the N....
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....sted with inherent powers and powers to punish for contempt. It is in this background that the court has to decide the issue of jurisdiction, which has been raised by the Defendant. 15. The bar contained in Section 430 of the 2013 Act is in respect of entertaining "any suit", or "any proceedings" which the NCLT is "empowered to determine". The NCLT in the present case would be empowered to determine that the allotment of shares in favour of the Defendant Nos.5 to 9 was not done in accordance with the procedure prescribed under Section 62 of the 2013 Act. The NCLT is also empowered to determine as to whether rectification of the register is required to be carried out owing to such allotment, or cancellation of allotment ordered, if any. The NCLT can also determine if in the interregnum, the Defendant Nos.5 to sought to exercise any voting rights. The NCLT would be empowered to pass any such orders as it thinks fit, for the smooth conduct of the affairs of the company, which would include an injunction order protecting the assets of the Defendant No.1 Company. The NCLT would also be empowered to oversee and supervise the working of the company, and also appoint such persons ....
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....ntions raised by defendants No.1 & 2 in this application is the plaintiff's remedy for restoration of her name in the records of the Defendant No. 2 with respect to 4556 shares, is available only under Section 59 of the Companies Act, 2013, read with Rule 70 of the National Company Law Tribunal Rules, 2016 and thus, the present suit is barred under Section 430 of the Companies Act, 2013. I am not inclined to adhere to such view. 13. The membership of share holder of a company has two kinds of rights viz. individual membership rights and the corporate membership rights. The individual members/shareholder of a company are entitled to sue in civil court in order to protect their individual rights. Individual membership/ownership rights are a rights of a member/shareholder to maintain himself (or herself) in full membership / ownership with all the rights and privileges appertaining thereto. The shareholding of the plaintiff in defendant No.2 Company was illegally and fraudulently transferred/reduced by Defendant No.1 from 5002 to 547 shares, bringing it down from 12.77% of the issued share capital to 1.39% of the issued share capital of the Company. As Transferred Shares, belonging....
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....6. In terms section 59 of the Companies Act, 2013, the learned NCLT is not empowered to decide and / or grant reliefs of the above nature, predominantly pertaining to individual rights, but only empowered to direct the company to rectify its register of members, if it finds merit in the case of the person aggrieved. Additionally, in terms section 59 of the Companies Act, 2013, aided by Rule 70 of the NCLT Rules, 2016, in a case where the provisions of Section 59 are applicable, the NCLT is only empowered to superficially examine the title of person aggrieved, in respect of the shares of which he / she is seeking rectification (based on the documents on record), but not to decide the complex question of a seriously disputed title or grant of declaratory / injunctive reliefs, again which predominantly pertain to individual rights of the Plaintiff. 17. Therefore, from the conspectus of the aforesaid, in case of individual rights of a member of a company, such as in the present case, there is no remedy under the Companies Act, 2013, the said right can be enforced in the civil court. In Naresh Dayal & Ors vs The Delhi Gymkhana Club Ltd . & Ors. 2021 SCC Online Del 91 the Court held I....
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....cation of the register of members would be a consequential and subsequent step. 21. Thus, in the present matter, the question relates to disputed title and fraudulent transfer of the Transferred Shares. Therefore, learned NCLT, being a summary jurisdiction, is not empowered to decide such questions and said questions can only be decided by a civil courts i.e. this Hon'ble Court. Accordingly, the jurisdiction of this Hon'ble Court is not barred. 22. In Sita Chaudhry vs Verinder Singh and Ors., 2022 SCC Online Del 2235 the Court held rectification of register would only be a subsequent step after the question of title and ownership of share is decided. The exclusive jurisdiction vested with the erstwhile Company Law Board/NCLT is only in respect of rectification of the register. However, the right, title and interest in shares can only be determined in a civil suit. In Bakshi Faiz Ahmad vs. Bakshi Farooq Ahmad and Anr., 2018 SCC OnLine J&K 249 the Court held qua applicability of provisions of Companies Act, 2013, the Tribunal has no power to decide the title of the shares in summary proceedings. The Tribunal has a power only to decide the issue of rectification of register of m....
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.... 2013 is also summary in nature. 23. I have also gone through the judgments relied upon by the learned counsel for defendants. In Shahi Prakash Khemka (supra) the observations of the Hon'ble Supreme Court were not in the context of disputed title to the shares. In the said case the dispute was not amongst the members in relation to title of shares or with regard to the individual rights of the members. However, the same was inter se the Company and its member / shareholder purely in relation to rectification of register of members. In fact, the observations of the Hon'ble Supreme Court of India the learned NCLT would have exclusive jurisdiction was only in the context of Section 59 of the Companies Act, 2013 whereas in the present matter, as, the Plaintiff is alleging the fraud on the part of the Defendant No. 1 and asserting her individual rights of title (and other rights and interest) qua the Transferred Shares, and not rectification of register of members. Therefore, the said judgment would not be applicable in the facts and circumstances of the present case 24. SAS Hospitality Pvt Ltd (supra) is also not applicable to the facts of the case as in this decision the challen....