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Chalasani Udaya Shankar and Others vs M/s. Lexus Technologies Pvt. Ltd. and Others

Not available · 2024 INSC 671Decided 9 Sept 2024
Not available

Background

Three individuals claimed to have purchased a combined 94.8% shareholding in M/s. Lexus Technologies Pvt. Ltd. in 2015 from the company's then-majority shareholder, Mantena Narasa Raju, paying over Rs. 14.6 crore and receiving signed share certificates. They later discovered the company had been struck off the register for failure to hold AGMs, and that annual filings had been made erasing their shareholding. They approached the NCLT seeking rectification of the Register of Members and action against the respondents for oppression and fraud. Mantena Narasa Raju disputed the entire transaction, claiming the money was actually routed through an unrelated friend's loan arrangement and that his signatures on the transfer documents had been forcibly obtained on blank papers and misused. The NCLT dismissed the appellants' petition and the NCLAT upheld that dismissal, prompting the appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that the NCLT has jurisdiction under Section 59 of the Companies Act, 2013 to rectify the Register of Members even where allegations of fraud are involved, provided it examines the evidence properly: civil court jurisdiction is only excluded where the dispute genuinely falls within the Tribunal's domain, and disputed questions are to be decided on a preponderance of probabilities. The Court found that both the NCLT and the NCLAT had failed to seriously engage with the evidence: they ignored the fact that the appellants had indisputably paid over Rs. 14.6 crore to the respondent, glossed over the original share certificates produced and the statutory sufficiency of two directors' signatures under Section 46, and simply accepted the respondent's counter-narrative without proper scrutiny. Because neither forum discharged its duty to genuinely verify the competing claims, the Supreme Court set aside both the NCLT and NCLAT orders and remitted the case back to the NCLT for fresh consideration on merits, with a request for expedited disposal given the time already elapsed.

Lesson Learnt

A tribunal cannot dismiss a rectification claim by simply accepting one side's story at face value. Where there is documentary evidence like payment records and signed certificates, the adjudicating authority must actually weigh that evidence and reach a reasoned finding rather than glossing over it, and appellate courts will send a case back for a fresh, proper hearing if that basic exercise was skipped.

Official source (sci.gov.in)View Judgment (PDF)

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