[Umakanth Varottil is a Professor of Law at the National University of Singapore]
The “tribunalisation” of company law in India occurred several years ago with the establishment of the Company Law Board (CLB), which thereafter metamorphosed into the National Company Law Tribunal (NCLT) under the Companies Act, 2013. The benefits of such tribunalisation are well known, as are its challenges. Given that the NCLT’s jurisdiction is limited to certain specific matters under the corporate legislation and it does not possess the full powers of a civil court, the nature of its adjudication and enforcement domains often gets called into question. The Supreme Court addressed one such scenarios in Mrs. Shailja Krishna v. Satori Global Limited 2025 INSC 1065 (2 September 2025), wherein it concluded that the NCLT is not barred from considering allegations of fraud, manipulation and coercion in a claim for oppression and mismanagement under company law, in this case under sections 397 and 398 of the Companies Act, 1956.
Background to the Ruling
The case involved a closely-held company, Sargam Exim Private Limited (which later became Satori Global Limited), which was incorporated by a married couple, Mrs. Shailja Krishna and Mr. Ved Krishna, who were its promoters. Through a series of share issuances and transfers, Mrs. Shailja Krishna became the holder of 39,500 shares of Satori Global out of a total of 40,000 shareholders, which represented more than 98% of the company’s total shareholding. In that sense, Mrs. Krishna was the dominant shareholder of the company.
By way of a curious turn, two events are said to have occurred in the year 2010. First, Mrs. Shailja Krishna is said to have resigned as a director of Satori Global on 17 December 2010. Second, on the same day as her resignation, Mr. Shailja Krishna is said to have transferred her entire shareholding in Satori Global to her mother-in-law, Mrs. Manjula Jhunjhunwala by way of a gift deed “out of love and affection”. In the meanwhile, the relationship between Mrs. Shaija Krishna and her husband had become estranged that resulted in divorce proceedings having been initiated by Mr. Ved Krishna. Thereafter, Mrs. Shailja Krishna filed a series of police complaints alleging that the purported transfer of her shares in Satori Global to her mother-in-law were initiated through coercion on the ground that she was compelled to sign blank share transfer forms.
Among other legal actions, Mr. Shailja Krishna also filed an action for oppression and mismanagement before the NCLT, which restored her position as executive director of Satori Global and also declared her as the lawful owner of the 39,500 that she had purported to have gifted to her mother-in-law. Against the NCLT order, the company preferred an appeal before the National Company Law Appellate Tribunal (NCLAT), which allowed the appeal and set aside the NCLT judgment on the preliminary ground that the tribunal did not possess the jurisdiction to deal with the petition as it had to determine questions of fraud, manipulation and coercion. It is against the NCLAT’s ruling dismissing the petition for oppression and mismanagement that Mrs. Shailja Krishna has appealed before the Supreme Court. After considering the legal issues involved, the Court allowed the appeal and reinstated the order of the NCLT.
Legal Issues and their Determination
The Supreme Court was confronted with two legal and two factual questions. On the legal side, the questions related to whether (i) the petition of the nature described above was maintainable before the NCLT under sections 397 and 398 of the 1956 Act; and (ii) the tribunal had jurisdiction to decide whether the gift deed was valid or not. The factual questions surround whether (iii) the facts supported the NCLT’s finding that the gift deed is invalid; and (iv) Mrs. Shaija Krishna had been able to establish a case for oppression and mismanagement under the corporate statute. The Court answered all the questions in the affirmative.
The crux of the legal issue goes into the maintainability of a petition for oppression and mismanagement where the claim is premised on the invalidity of a gift deed on the ground of fraud, manipulation and coercion. Here, the Court chronicled the development of the law on oppression and mismanagement on the basis of various decisions it had rendered in the past. It rooted its finding on the fact that the Supreme Court has repeatedly recognised the wide nature of the NCLT’s jurisdiction under the Companies Act. It also relied extensively on the landmark decision in Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd. (2021), wherein the role of the NCLT in an oppression action is to “bring to an end the matters complained of”. This, the Court noted in the present case, “must not only avoid providing solutions that elongate the complaints, but mut also provide a solution to the problems.” (para 29). Accordingly, it also dealt with the second question above noting that since “the determination of whether the gift deed is valid or not is central to the decision herein”, the tribunal “does have full jurisdiction to decide” the issue by examining whether the gift deed is legal in terms of the companies’ legislation, the rules promulgated thereunder, and the internal regulations of the company such as its memorandum and articles of association.
On the factual questions, there Court analysed the threshold for “oppression” as determined by it over the last several decades through case law and concluded that “the circumstances surrounding the gift deed and the subsequent transfer of shares are seriously questionable and must be declared invalid and secondly, the board meetings have been conducted in a mala fide manner and against both the statutory requirements of the 1956 Act and the internal regulations of the company.” (para. 52) As a result, the affairs of the company were found to have been carried on in a manner prejudicial to the interests of Mrs. Shailja Krishna.
Analysing the Ruling and its Implications
The ruling emphasises that the fact that the NCLT may have to determine factual questions involving legal standards of fraud, manipulation and coercion cannot stand in the way of the tribunal assuming jurisdiction on claims involving oppression and mismanagement. It is a recognition that claims of oppression and mismanagement cannot be considered in isolation and often get enmeshed with matters of legal conduct of the parties. The determination of the validity of a document under law may have a direct impact on whether a claim for oppression and mismanagement stands established or not. In this case, the claim was sustained only because the NCLT found the gift deed to be invalid. Taking away the jurisdiction of the NCLT to determine the validity of the gift deed would certainly impinge upon its meaningful exercise of a statutorily conferred jurisdiction under the Companies Act (whether of the 1956 or 2013 incarnations).
While the outcome of the ruling is altogether understandable, the doctrinal path adopted by the Supreme Court leaves some doctrinal haziness hanging in the air. Most importantly, in considering the issues of maintainability and jurisdiction, the Court relies extensively on the fact that the Companies Act empowers the NCLT to issue an order “with a view to bringing to an end the matters complained of”. However, if one were to analyse the scheme of the oppression and mismanagement provision, now under sections 241 and 242 of the Companies Act, 2013, it can be broadly divided into two parts. The first relates to the substantive test (enshrined under section 241) of what constitutes oppression and mismanagement (although, for the sake of completeness it would be useful to point out that the 2013 Act added the element of “prejudice” to those of “oppression” and “mismanagement”). The second relates to the remedies that the NCLT can deploy once either oppression, prejudice or mismanagement is established. This latter aspect is delineated in section 242 where the language of “bringing matters to and” appears. In effect, in the present case under analysis, the Supreme Court had relied on the language of a remedies provision (section 242) to justify the NCLT’s exercise of powers of determination of whether there is oppression, prejudice or mismanagement on the grounds of fraud, manipulation or coercion (section 241).
Some may argue this is hair splitting and that, at the end of the day, sections 241 and 242 are part of a composite scheme of statutory provisions dealing with the NCLT’s jurisdiction as well as remedial powers for oppression, prejudice and mismanagement. This argument may work in some cases: here it arguably does. But it may not work in all situations. For instance, in the present case, using the justification of the language contained in section 242 of the Companies Act, 2023 Mrs. Shailja Krishna was reinstated as the owner of 39,500 shares and as a director of Satori Global. Here, she was (and perhaps) continues to be the dominant owner of the company. The Supreme Court order simply alters the power dynamics between the different shareholders and places Mrs. Shailja Krishna back in the driver’s seat. The same cannot be said in cases where the shareholding of the parties is more evenly distributed, wherein no shareholder (whether the claimants or respondents) in an oppression, prejudice or mismanagement action is a dominant shareholder. There, an order of the present type, i.e., reinstatement of shareholding and board position, may have the opposite effect of “bringing to an the end matters complained of” as it would only perpetuate the breakdown among parties whose differences have already become acute. Hence, in those cases, the NCLT may have to consider other solutions such as the sale of the shares of one litigating shareholder to another at a fair price that brings about a true resolution of the differences between the parties.
Finally, even though it is implicit in the Supreme Court’s ruling, it is useful to clarify that the determination by the NCLT on issues of fraud, manipulation and coercion are germane solely to the extent that they are relevant in its concomitant determination of whether that amounts to oppression, prejudice or mismanagement under the Companies Act, and for no other purpose. In that sense, while the NCLT is determining whether a gift deed is valid or not, that outcome is relevant only for matters that are within its own jurisdiction, while the broader issue of validity of such an arrangement, say under contract law, ought to continue to be within the purview of a civil court.
– Umakanth Varottil