Fraud, Share Transfers, And Oppression: Sc Clarifies Nclt’s Jurisdiction Under Companies Act
Introduction
The Supreme Court recently clarified the jurisdiction of National Company Law Tribunal (‘NCLT’) under sections 397 and 398 of the Companies Act, 1956.[1] Through the case of Shailja Krishna v. Satori Global Ltd.,[2] the apex court held that NCLT has can adjudicate on matters related to frauds and coercion. The only necessary condition is that these issues should be central to oppression and mismanagement claims. Presently, these provisions are consolidated under section 242 of the Companies Act, 2013,[3] therefore the judgement essentially clarifies the powers of the tribunal under the mentioned section. The case majorly revolved around a gift deed that was allegedly signed by the appellant, transferring her shares to the defendants. However, it acts as a landmark ruling that increases shareholder protection and upholdes the indented role of NCLT to act as primary forum to resolve corporate disputes. This piece shall analyse the judgement on two aspects. Firstly, on the jurisdiction of NCLT, secondly on the implications of the decision.
Factual Background
Mrs. Shailja Krishna, the appellant along with her husband, Ved Krishna were the original promoters of Satori Global Limited (earlier Sargam Exim Pvt. Ltd.). The company was incorporated in 2006, and by 2007 Mrs. Krishna held over 98% of the shares of the company and later Mr. Ved Krishna resigned from the post of director. Subsequently in 2010, board meetings were allegedly held without a notice to her. During these same meetings she was shown to have resigned and gifted her entire shareholding to her mother in law, Mrs. Manjula Jhunjhunwala. Police complaints were lodged by Mrs. Krishna alleging coercion and forgery, stating she was made to sign blank papers. Following this, her husband re-entered the board and the company was converted into a public limited company. Furthermore, it was discovered that she was removed from the register of shareholders, leading to further complaints and criminal proceedings.
This case was originally brough before NCLT, which set aside the board resolutions, thereby restoring Mrs. Krishna’s position as an Executive Director. The tribunal also noted overwriting and manipulation in share transfer forms along with execution post expiry. National Company Law Appellate Tribunal (‘NCLAT’) however, set aside the decision of NCLT on grounds of maintainability. The NCLAT gave a restricted reading to sections 397 and 398 and held that NCLT was incompetent to decide on the matters of fraud, coercion and manipulation stating that the appropriate course of action available was to approach the civil court under Sections 31 and 34 of the Specific Relief Act, 1963[4] for the cancellation of the disputed gift deed. However on 2nd September 2025, the Hon’ble Supreme Court dismissed the order of NCLAT and clarified that NCLT had jurisdiction to decide cases of frauds under few circumstances.
Decoding The Scope of Jurisdiction
The central debate of the case revolved around maintainability of the case before NCLT. According to NCLAT, NCLT was barred from hearing the matter under section 399 of the 1956 Act which restricts applicability of sections 397 and 398 in certain cases.[5] However, if such restrictive interpretation is accepted, then shareholders will experience two major problems. Firstly, diluted remedies and secondly, strategic forum shopping by majority shareholders.[6] These tribunals were created with an aim to resolve corporate disputes faster with specialised remedy. If claims of oppression due to fraud were excluded, shareholders would be pushed for lengthy civil trials which would also overburden civil courts. Moreover, it would allow parties to raise allegations of fraud to take away jurisdiction from NCLT.
Since NCLT has replaced the Company Law Board (‘CLB’), via “The Companies (Second Amendment) Act, 2002”, therefore, primary intent and powers of the tribunal can be examined by tracing precedence for CLB, as held in Shailja Krishna v. Satori Global Ltd.[7] The board had a qausi-judicial authority and also original jurisdiction under sections 397 and 398, as held in Kamal Kumar Dutta v Ruby General Hospital Ltd,[8] by the Supreme Court. Moreover, its jurisdiction extends to make any order to render justice, once mismanagement is established. In the case of Pearson Education Inc. v. Prentice Hall India(P) Ltd,[9] it was held that the board can even modify contractual relations and articles of association under this power. Not allowing board to decide on maters that arise “out of” oppression and mismanagement shall lead to “total chaos and mismanagement of the company”, defeating purpose of creation, as held in Radharamanan v. Chandrasekara Raja.[10]
On analysing the judgements, it can be understood that the functioning of CLB, and now NCLT has to be given a wide interpretation. Making a special reference to purpose and powers of the tribunal, it is understood that mismanagement and oppression is to be ended. In the case of Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd,[11] it was held by the Supreme Court that the tribunal must function to ensure that “mismanagement and oppression” and subsequent relief are not used as tools to harass the shareholders. Therefore, NCLT has a jurisdiction to decide on cases of fraud, if the claim is “incidental or integral to the claim of oppression and mismanagement”.[12]
Dissecting Implications Of The Decision
The judgement appears praiseworthy, however there exists doctrinal vagueness. Primarily, the court has used language of section 242 to justify operation under section 241 of the 2013 Act.[13] It appears doctrinally loose as 242 is a remedial provision, and 241 defined substantive tests for determination of fraud, misrepresentation or prejudice.[14] Moreover an emphasis is laid on the phrase of “with a view to bringing to an end the matters complained of”,[15] to expand the scope under section 241. However, the court has analysed the scheme of the statute to expand jurisdiction. Practically this decision will can have two implications. Firstly, reinstatement will be practicable when there exists a dominant shareholder, like in present case. Secondly, it may not be practicable if the shareholding is equally distributed.[16] Reinstatement under such circumstances may aggravate the conflict than resolving it. Therefore under these circumstances, remedies like buyout of one party’s share is more apt to “end the matters complained of”.[17] Additionally the scope of NCLT to decide on cases related to frauds are restricted. Only when fraud and coercion claims are “incidental or integral to oppression and mismanagement”,[18] NCLT has jurisdiction. Therefore, jurisdiction of civil courts is not replaced, and a balance is maintained as they will jurisdiction in all other cases.
Conclusion
The Supreme Court’s decision in Shailja Krishna v. Satori Global Ltd., clarifies and extends the jurisdiction of NCLT in matters of fraud when they are incidental or integral to the complaint of oppression or mismanagement. By ensuring jurisdiction under such circumstances, the court has strengthened shareholder protection along with upholding the original intent of creation of NCLT. While, some doctrinal vagueness persists in the sense that language of remedial provision under section 242 is used to justify expanded jurisdiction under substantive provision under section 241. Nonetheless, the Court has analysed the scheme of statute, to ensure protection of shareholders, and effective corporate governance.
Author:– Pragya Richa Tiwary, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing.
[1] Companies Act 1956, ss 387 & 398.
[2] Shailja Krishna v. Satori Global Ltd., 2025 SCC OnLine SC 1889.
[3] Companies Act 2013, s 242.
[4] Specific Relief Act 1963, ss 31 & 34.
[5] Companies Act 1956, ss 387-399.
[6] International Bar Association, “Forum shopping: a legal loophole or a strategic advantage? A glance at the Italian experience” (IBA, 28 June 2024)< https://www.ibanet.org/forum-shopping-Italian-experience > accessed 16 September 2025.
[7] supra note 2.
[8] Kamal Kumar Dutta v. Ruby General Hospital Ltd., (2006) 7 SCC 613.
[9] Pearson Education Inc. v. Prentice Hall India (P) Ltd., (2007) 136 Comp Cas 294.
[10] Radharamanan v. Chandrasekara Raja, (2008) 6 SCC 750.
[11] Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd., (2021) 9 SCC 449.
[12] supra note 2.
[13] Companies Act 2013, ss 241 & 242.
[14] supra note 4.
[15] supra note 2.
[16] Umakanth Varottil, “Supreme Court on the NCLT’s Jurisdiction on Matters of Fraud, Manipulation and Coercion” IndiaCorpLaw (7 September 2025) <https://indiacorplaw.in/2025/09/07/supreme-court-on-the-nclts-jurisdiction-on-matters-of-fraud-manipulation-and-coercion/> accessed 18 September 2025
[17] Companies Act 2013, s 242.
[18] supra note 2.
