Shailaja Krishna v. Satori Global Ltd.: Reinforcing NCLT Jurisdiction in Corporate Fraud Disputes

In "Shailaja Krishna v. Satori Global Ltd. (2025)", the Supreme Court set aside the NCLAT's order, reinstating the NCLT's 2018 ruling that restored Shailaja Krishna as majority shareholder and director, finding her 2010 resignation and 98% share transfer via a fraudulent gift deed, procured through coercion and blank signatures, void ab initio under the Companies Act. The Court affirmed NCLT's plenary jurisdiction to investigate fraud in oppression and mismanagement petitions when intrinsic to the dispute, nullifying subsequent board actions. This ruling underscores robust safeguards against mala fide ousters in closely held companies, reinforcing Krishna's control.

Case summary is divided into 2 parts. Part A summarises the Judgement of Supreme Court of India and Part B summarises the Order of NCLAT. 

A.   SUPREME COURT OF INDIA

Case Brief: Mrs. Shailja Krishna v. Satori Global Limited & Ors.

Case Details:

• Citation: (2025) INSC 1065
• Court: Supreme Court of India (Civil Appellate Jurisdiction)
• Bench: Dipankar Datta, J. and K. Vinod Chandran, J.
• Date of Judgment: 2 September 2025
• Appeals From: Common judgment and order of the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, dated 2 June 2023, which set aside the judgment and order of the National Company Law Tribunal (NCLT), Allahabad Bench, dated 4 September 2018.
• Relevant Statutes: Companies Act, 1956 (Sections 397, 398, 399, 108, 111A, 193, 286, 402); Companies Act, 2013 (Section 242); Articles of Association of the Company; Specific Relief Act, 1963 (Sections 31, 34); Indian Penal Code, 1860 (Sections 406, 419, 420).

Factual Matrix

The first respondent, Satori Global Limited (formerly Sargam Exim Private Limited, incorporated on 13 April 2006), was a private limited company engaged principally in the trading of paper. The authorised share capital at incorporation stood at Rs. 2 crores, comprising 20,00,000 equity shares of Rs. 10 each, with an initial subscribed and paid-up capital of Rs. 3 lakhs, divided into 30,000 equity shares of Rs. 10 each.

The appellant, Mrs. Shailja Krishna, and her husband, the second respondent (Mr. Ved Krishna), were the original promoters. The appellant initially subscribed to 5,000 equity shares, while the second respondent subscribed to 25,000 shares. In December 2006, the second respondent transferred 24,500 shares to the appellant, elevating her shareholding to 29,500 shares, with the residual 500 shares transferred to the third respondent (Mr. Nirupam Mishra). Subsequently, an additional 10,000 shares were allotted to the appellant, resulting in her holding 39,500 shares by the conclusion of the financial year 2006-2007, constituting over 98% of the issued and paid-up share capital.

On 1 February 2007, the second respondent resigned from directorship, which was accepted, and the third respondent was inducted in his stead. The company effected a long-term investment in M/s Yash Papers Ltd. (now Pakka Limited) by acquiring 10 lakh equity shares of Rs. 10 each and 30 lakh equity warrants of Rs. 11 each.

On 15 December 2010, the fifth respondent was inducted as an additional director. On 17 December 2010, the appellant purportedly resigned from directorship, and a gift deed was executed at Faizabad, ostensibly transferring her entire shareholding to the fourth respondent (Mrs. Manjula Jhunjhunwala, her mother-in-law) out of love and affection. The share transfer was effected vide Share Transfer Form dated 1 October 2010, with validity allegedly extended to 12 November 2011.

Marital discord between the appellant and the second respondent emerged circa 2009-2010. The appellant lodged police complaints on 5 February 2011 and 25 March 2011, alleging coercion into executing blank documents. On or about 15 June 2011, the second respondent departed for the United States of America and initiated divorce proceedings against the appellant.

In the interim, a Board of Directors' meeting convened notice for an Extraordinary General Meeting (EoGM) on 20 June 2011, wherein the second respondent was re-appointed as director, and the company was converted to a public limited entity under the name Satori Global Limited. The appellant's third police complaint ensued, alongside communications to the Registrar of Companies (RoC) and the Ministry of Corporate Affairs (MoCA). On 18 November 2011, the share transfer forms were utilised to transfer her shares to the fourth respondent.

The appellant invoked the Protection of Women from Domestic Violence Act, 2005, against the second and fourth respondents. Upon discovering her removal from the register of members, she filed a further complaint, culminating in FIR No. 105/2013 against the second to fifth respondents under Sections 406, 419, and 420 of the Indian Penal Code, 1860. Reciprocally, the fourth respondent registered FIR against the appellant under Section 406 thereof, alleging misappropriation of family jewellery.

Amidst these exigencies, the appellant instituted the company petition before the Company Law Board (transferred to NCLT), which was allowed with costs on 4 September 2018. The NCLT annulled the board resolutions of 15 and 17 December 2010, reinstated the appellant as Executive Director, affirmed her ownership of 39,500 equity shares, invalidated the share transfer of 18 November 2011, and directed reinstatement and return of share certificates. It discerned overwriting and manipulation in the share transfer form, executed post-expiry, and opined that the RoC lacked authority under Section 108(1-D) of the 1956 Act to extend validity in such circumstances, deeming Form 7C incomplete and warranting MoCA inquiry.

The respondents preferred appeals to the NCLAT, which allowed them on 2 June 2023, deeming the petition non-maintainable for want of jurisdiction over fraud, manipulation, and coercion in summary proceedings, recommending recourse to civil court under Sections 31 and 34 of the Specific Relief Act, 1963.

Issues for Determination

The Supreme Court delineated the following issues:

1. Maintainability of the company petition under Sections 397 and 398 of the Companies Act, 1956, vis-à-vis the 10% shareholding threshold under Section 399 and the appellant's purported divestiture via the gift deed.
2. Jurisdiction of the NCLT to adjudicate the validity of the gift deed, encompassing allegations of fraud, coercion, and manipulation.
3. Validity of the gift deed on merits, in light of the Articles of Association and evidentiary matrix.
4. Establishment of oppression and mismanagement under Sections 397 and 398.

Arguments Advanced

Submissions on Behalf of the Appellant (by Mr. Dhruv Mehta, Senior Counsel):

• The Companies Act, 2013 (Section 242) empowers the NCLT to scrutinise oppressive and mismanaged acts, including fraudulent share transfers.
• The NCLAT exceeded its appellate remit by re-appreciating factual findings on fraud and oppression, which pertained to the NCLT's domain.
• Section 399's bar is inapplicable, as the appellant retained membership, the gift deed being vitiated by fraud; moreover, the provision merits liberal construction to avert minority shareholder remedilessness.
• The company's affairs were conducted oppressively and prejudicially to public interest, excluding the appellant from management and unlawfully ousting her as director.
• The gift deed dated 17 December 2010 is invalid: (i) contravening Clause 16 read with Clause 2(c) of the Articles of Association, restricting gifts to enumerated relatives (excluding mother-in-law); (ii) procured by fraud, coercion, and undue influence, with signatures on blank papers forged, as the appellant was absent from Faizabad.
• Board meetings of 15 and 17 December 2010 are void: (i) violative of Articles of Association and the 1956 Act; (ii) lacking quorum under Clause 53 (requiring at least two directors, appellant absent); (iii) no notice served per Clauses 30 and 61 and Section 286; (iv) no minutes produced, infringing Section 193.
• Share transfer forms were fraudulently fabricated: (i) expired on 1 December 2010 per Section 108(1A); (ii) Form 20B of 2012 evinces transfer on 18 November 2011, beyond extended period, with overwritten dates; (iii) RoC extension under Section 108(1D) via undated Form 7C is invalid for inconsistencies; (iv) second respondent's attendance at AGM of 24 September 2011 is falsified, per his US affidavit.
• Conversion to public company via EoGM lacked notice to the appellant.

Submissions on Behalf of the Respondents (by Mr. P.S. Narasimha, Senior Counsel, et al.):

• The NCLT lacked jurisdiction over gift deed validity, necessitating civil suit for cancellation.
• The petition was non-maintainable absent 10% shareholding post-transfer.
• The gift deed and transfers were voluntary; allegations of fraud require elaborate evidence unsuitable for summary jurisdiction.
• Board meetings and conversions complied with law; appellant's resignation and gift were consensual.

Reasoning and Holdings of the Court

The Supreme Court, per Dipankar Datta, J. (concurring with K. Vinod Chandran, J.), allowed the appeals, setting aside the NCLAT's judgment and restoring the NCLT's order.

1. Maintainability: The petition was maintainable. The appellant subsisted as a member, the gift deed being fraudulent and ineffectual in divesting membership. Section 399 warrants liberal interpretation to safeguard minority interests, as held in precedents like World Wide Agencies (P) Ltd. v. Margaret T. Desor (1990) 1 SCC 536.
2. Jurisdiction: The NCLT possesses expansive jurisdiction under Sections 397, 398, and 402 of the 1956 Act (analogous to Section 242 of the 2013 Act) to adjudicate incidental fraud allegations in oppression petitions, without relegation to civil courts. This aligns with Shanti Prasad Jain v. Kalinga Tubes Ltd. (1965) 2 SCR 720, emphasising comprehensive relief to terminate oppression. Quote: "The jurisdiction conferred on the Tribunal is wide enough to decide whether the gift deed is a sham and nominal document, which is brought into existence for the purpose of ousting a member of the company."
3. Gift Deed Validity: The deed and transfers are void ab initio: (i) infracting Clause 16 (restricting gifts to specified kin) read conjunctively with Clause 2(c); (ii) evidenced by fraud, including expired forms, overwriting (18.11.2011 altered to 10.11.2011), and inconsistencies in Form 7C. The Court declined to opine on RoC's extension powers absent its impleadment.
4. Oppression and Mismanagement: Substantiated by serial illegalities: invalid meetings sans quorum/notice/minutes; prejudicial ouster; fabricated documents. Such conduct is "burdensome, harsh and wrongful," per Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan (2005) 1 SCC 212, warranting relief.

Final Operative Order

The civil appeals are allowed. The NCLAT's judgment dated 2 June 2023 is set aside, and the NCLT's judgment dated 4 September 2018 is restored. The appellant is reinstated as Executive Director and owner of 39,500 shares; the share transfer to the fourth respondent is declared null and void; share certificates to be returned within 15 days. Parties to bear their own costs.

Case Laws Discussed

The judgment extensively relies on precedents to elucidate principles of oppression, mismanagement, jurisdictional scope, and maintainability under company law. The following cases were discussed:

1. Radharamanan v. Chandrasekara Raja, (2008) 6 SCC 750 (Para 27): Relied upon to affirm the wide jurisdiction of the NCLT/CLB under Sections 397 and 398 of the 1956 Act to address integral issues like fraud in oppression cases, stressing that limiting jurisdiction would undermine statutory intent.
2. Kamal Kumar Dutta v. Ruby General Hospital Ltd., (2006) 7 SCC 613 (Para 28): Cited to underscore the quasi-judicial nature of the NCLT's powers as an original authority in oppression petitions, supporting its competence to handle incidental fraud claims.
3. Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd., (2021) 9 SCC 449 (Para 29): Referenced to highlight the Tribunal's duty to resolve complaints effectively, balancing stakeholder interests without exacerbating disputes.
4. Scottish Co-Operative Wholesale Society Ltd. v. Meyer, (1958) 3 All ER 66 (HL) (Para 34): Invoked to define oppression as a lack of probity and fair dealing prejudicial to members, drawing from English jurisprudence to contextualize oppressive conduct.
5. Elder v. Elder and Watson, (1952) Scottish Cases 49 (Para 34): Discussed alongside Meyer to emphasize the core element of oppression as absence of probity in company affairs.
6. In re H. R. Harmer Ltd., [1959] 1 WLR 62 (Para 35): Used to interpret "oppressive" in its ordinary sense, focusing on conduct burdensome to members in their shareholder capacity.
7. Shanti Prasad Jain v. Kalinga Tubes Ltd., 1965 SCC OnLine SC 15 (Para 36): Applied to note that oppression lacks a rigid definition, requiring factual scrutiny under Sections 397 and 402, approving prior foreign precedents.
8. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., (1981) 3 SCC 333 (Para 37): Relied on to hold that a series of illegal acts, though isolated individually, can cumulatively constitute oppression if lacking fairness.
9. Hind Overseas (P) Ltd. v. Raghunath Prasad Jhunjhunwalla, (1976) 3 SCC 259 (Para 38): Cited for the flexible application of the "just and equitable" clause in family companies, allowing judicial discretion based on equities.
10. Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan, (2005) 1 SCC 212 (Para 39): Applied to characterize the respondents' conduct as burdensome, harsh, and wrongful, justifying relief for oppression and mismanagement.
11. World Wide Agencies (P) Ltd. v. Margaret T. Desor, (1990) 1 SCC 536 (Para 26): Invoked for liberal interpretation of Section 399's shareholding requirement, ensuring minority shareholders are not remediless due to fraudulent divestment.

B.  NCLAT

Case Summary: Satori Global Limited & Anr. vs. Shailja Krishna & Ors. [Company Appeal (AT) No. 379 of 2018] and Manjula Jhunjhunwala vs. Shailja Krishna & Ors. [Company Appeal (AT) No. 395 of 2018]

Facts

Satori Global Limited (the Company) was incorporated in 2006 as a private limited company under the Companies Act, 1956, with an authorized share capital of Rs. 2 crores and a paid-up capital of Rs. 3 lakhs. The original promoters and shareholders were Ms. Shailja Krishna (Petitioner/Respondent No. 1) and her husband, Mr. Ved Krishna (Respondent No. 2). Initially, Shailja subscribed to 5,000 equity shares, while Ved held 25,000 shares. Ved resigned as director on February 1, 2007, and Mr. Nirupam Mishra (Respondent No. 3) was inducted. By September 25, 2010 (as per Form 20B), Shailja held 39,500 equity shares (98% of the total 40,000 issued shares), and Nirupam held 500 shares.

Matrimonial disputes arose between Shailja and Ved in 2010. Shailja alleged that Ved obtained her signatures on blank papers under coercion and threat. On December 15, 2010, a board resolution appointed Mr. Ujjwal Agarwal (Appellant No. 2 in Appeal No. 379) as an independent director, which Shailja claimed she never consented to. On December 17, 2010, another resolution accepted her purported resignation as executive director, which she denied, stating she was in Kolkata from December 16, 2010, to February 1, 2011, and the resolution was fabricated.

Shailja further alleged that her 39,500 shares were arbitrarily transferred to her mother-in-law, Mrs. Manjula Jhunjhunwala (Appellant in Appeal No. 395 and Respondent No. 4), via a gift deed dated December 17, 2010, without consideration and in violation of Clause 16 of the Articles of Association (AoA), which restricted transfers to specific relatives (e.g., spouse, children, siblings, but not mother-in-law). The physical share certificates remained with the Company and Ved. The transfer was recorded on November 18, 2011, after the share transfer form (originally valid until December 1, 2010) was extended by the Registrar of Companies (RoC) to November 12, 2011. Shailja claimed the form was invalid due to overwriting, manipulation, and non-compliance with Section 108(1-D) of the Act.

On June 20, 2011, the Company converted to a public limited company via an Extraordinary General Meeting (EGM), and 50,000 shares were allotted to Stocknet International Limited (Respondent No. 5/Appellant in related proceedings). Shailja filed a police complaint on August 30, 2011, but no action was taken. As per shareholder lists signed by Ved and Ujjwal on September 24, 2011, and September 24, 2012, Shailja was still shown as holding 39,500 shares. She filed a petition before the NCLT (Allahabad Bench) under Sections 397 and 398 of the Companies Act, 1956, alleging oppression and mismanagement, seeking restoration as director and shareholder. The NCLT allowed the petition on September 4, 2018, setting aside the resolutions, declaring the share transfer null and void, and directing inquiries into RoC actions. The appellants challenged this before the NCLAT.

Issues Framed

The NCLT framed the following issues:

1. Whether the alleged acts of Respondents 2-4 (Ved Krishna, Ujjwal Agarwal, Nirupam Mishra) constitute 'oppression and mismanagement' under Sections 397 and 398 of the Companies Act, 1956?
2. Whether the Petitioner (Shailja) is ineligible to file the petition under Sections 397 and 398 due to the bar under Section 399 (requiring membership and minimum shareholding/membership threshold)?
3. Whether the transfer of 39,500 equity shares dated December 17, 2010, via gift deed to the mother-in-law (Manjula) is valid?
4. Whether the resignation letter dated December 17, 2010, from the post of Executive Director is valid?
5. Whether the board resolution dated December 17, 2010, accepting the resignation is valid?

The NCLAT primarily focused on the maintainability of the petition under Section 399, hinging on whether Shailja was a 'member' (shareholder) post the disputed gift deed, and whether the NCLT had jurisdiction to adjudicate the validity of the gift deed in summary proceedings.

Case Laws Discussed

The judgment extensively discussed precedents on maintainability, summary jurisdiction, membership, share transfers, and forfeiture:

• Gulabrai Kalidas Naik & Ors. vs. Laxmidas Lallubhai Patel & Ors. (1975 SCC OnLine Guj 27): Emphasized that to invoke Sections 397/398, the complainant must be a 'member' with their name in the Register of Members. Disputed membership requires rectification under Section 155 (now 58/59), and complex title issues should be relegated to civil courts.
• CIT vs. Ramaswamy (1983 SCC OnLine Mad 111): Cited by appellants on questions of title and fraud not being adjudicable in summary jurisdiction.
• Killick Nixon Ltd. vs. Bina Popatlal Kapaida ((1983) 54 Comp Cas 432): On relegating fraud and legality issues to civil courts.
• Ammonia Supplies Corporation (P) Ltd. vs. Modern Plastic Containers Pvt. Ltd. ((1998) 7 SCC 105): Held that jurisdiction under Section 155 is summary; complex matters (e.g., disputed title) should be decided in a suit, not by the company court.
• Jai Mahal Hotels Pvt. Ltd. vs. Raj Kumar Devraj & Ors. ((2016) 1 SCC 423): Clarified the thin line in company court jurisdiction for rectification—exclusive for true rectification but not for alien issues like serious title disputes, which may be relegated to civil courts.
• N. Ramji vs. Ashwath Narayan Ramji (CRP (PD) No. 670/2017): On fraud and document validity requiring civil adjudication.
• Naresh Chandra Sanyal vs. Calcutta Stock Exchange Ltd. ((1971) 1 SCC 50): Forfeiture of shares does not reduce capital; valid if per Articles and not for non-payment of calls alone.
• Sri Gopal Jalan & Co. vs. Calcutta Stock Exchange Association Ltd. ((1964) 3 SCR 698): Re-issue of forfeited shares is a sale, not allotment, and does not reduce capital.
• V.B. Rangaraj vs. V.B. Gopalakrishnan & Ors. ((1992) 1 SCC 160): Articles of Association are binding; restrictions on share transfers must be followed.
• John Timson & Co. Pvt. Ltd. & Ors. vs. Sujeet Malhn (Mrs.) & Anr. ((1997) 9 SCC 651): On oppression affecting members qua members.
• Dale & Carrington Invt. (P) Ltd. & Anr. vs. P.K. Prathapan & Ors. ((2005) 1 SCC 212): On fiduciary duties and invalid share allotments.
• Nirakar Das & Ors. vs. Durgapur Bio Garden Pvt. Ltd. & Ors. ((2018) 211 Comp Cas 61): On maintainability thresholds.
• Shri Parmeshwari Prasad Gupta vs. The Union of India ((1973) 2 SCC 543): On board resolutions and procedural validity.
• K.D. Sharma vs. Steel Authority of India Ltd. & Ors. ((2008) 12 SCC 481): Fraud vitiates proceedings; false statements on oath.
• S.P. Chengalvaraya Naidu (Dead) By Lrs. vs. Jagannath (Dead) by Lrs. & Ors. ((1994) 1 SCC 1): Suppression of facts amounts to fraud on court.
• A.V. Papayya Sastry & Ors. vs. Govt. of A.P. & Ors. ((2007) 4 SCC 221): On fraud invalidating transactions.
• MCD vs. State of Delhi & Anr. ((2005) 4 SCC 605): On jurisdictional overreach.
• Dalip Singh vs. State of Uttar Pradesh & Ors. ((2010) 2 SCC 114): On fraud and misrepresentation.
• Public Passenger Service Ltd. vs. M.A. Khadar (AIR 1966 SC 489): Summary jurisdiction limits.

These cases were cited by parties to argue maintainability, fraud, jurisdiction, and share transfer validity, with NCLAT relying heavily on Ammonia Supplies, Jai Mahal Hotels, and Gulabrai Kalidas Naik to limit NCLT's summary powers.

Final Decision

The NCLAT allowed both appeals and set aside the NCLT's impugned order dated September 4, 2018, along with all consequential reliefs. It held that the petition under Sections 397/398 was not maintainable as Shailja did not satisfy the membership threshold under Section 399(1)(a) (requiring at least 10% issued share capital or 1/10th of members). The core issue—validity of the gift deed transferring her shares—was disputed, involving allegations of fraud, coercion, manipulation, forgery, and overwriting, which required elaborate evidence and could not be adjudicated in the NCLT's summary jurisdiction. Such complex questions of title and document validity must be resolved by a civil court under the Specific Relief Act, 1963 (Sections 31/34 for cancellation). The gift deed was not directly challenged, and without establishing its invalidity, Shailja was not a 'member'. The NCLAT did not delve into other issues (e.g., AoA violations, forfeiture reducing capital) due to lack of maintainability. No costs were awarded.

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