Companies Act, 2013 – ss. 59 and 88 – Rectification of registrar of members – Allegations of fraudulent transfer of shares and mismanagement in the company – Company petition by the appellant seeking rectification of the Register of Members of respondent No.1-Company by entering their names therein u/ss. 59 and 88, and to initiate action against respondent Nos. 2-4, for oppression and mismanagement, as also criminal proceedings u/ss. 447 and 448 for committing fraud – Dismissed by the NCLT – Appeal thereagainst and IA also dismissed – Correctness:
Held: National Company Law Tribunal exercising jurisdiction u/s.
59 has to examine the factual issues to ascertain the substance of the issue before it – Expression ‘rectification’ connotes something that ought to have been done but, by error, was not done, or what ought not to have been done but was done, requiring correction – Phrase ‘sufficient cause’ in s. 59 is to be tested in relation to the statutory mandate thereof-anything done or omitted to be done in contravention of the Act of 2013 or the Rules framed thereunder – If, on facts, an open-and-shut case of fraud is made out in favour of the person seeking rectification, the NCLT would be entitled to exercise such power u/s. 59 – Proper verification of the assertions made by the parties was a sine qua non – Acting President of the NCLT, by failing to carry out the said exercise, failed to discharge the mandate of law – Exercise of power u/s.
59 is to be undertaken in right earnest by examining the material, evidence, and the facts on record – This was not done, rather, a narrow view was taken without calling upon respondent No. 2 to prove the veracity of the contrary story put forth by him, despite receiving monies from the appellants – Facts, material, and evidence had to be examined in the context of the underlying facts, which would have included the receipt of monies, the signatures on the transfer deeds, etc. – Questions of fact must be decided on the principle of preponderance of probabilities, giving due weight to the specific facts, as found, so as to draw the conclusion that a reasonable person, acquainted with the relevant field, would draw on the basis of the same facts – Interim order passed by the Member (Judicial) of the NCLT indicated, in clear terms, the issues that arose for consideration and the inquiry required to determine the same – However, the President of the NCLT ignored the said interim order, and chose to summarily dismiss the petition, without considering the material already placed on record and without further evidence being adduced – Also, the NCLAT did not even get the facts right – Judgment in Company Petition, in Company Appeal and I.A. set aside – Company Petition restored to the file of the NCLT, for consideration afresh on merits and in accordance with law, upon proper appreciation of evidence – Companies Act, 1956 – s. 155 (s.111A thereafter) – National Company Law Tribunal Rules, 2016 – r. 70(5).
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.