NCLT Lacks Jurisdiction to Void Gift-Based Share Transfer Since Validity of Gift Deed Needs Substantial Evidence | NCLAT

Case Details: Satori Global Ltd. v. Ms. Shailja Krishna - [2023] 154 taxmann.com 510 (NCLAT- New Delhi)

Judiciary and Counsel Details

• Anant Bijay Singh, Judicial Member
• Arun Kathpalia, Sr Adv., Ujjal Banerjee, Ms Aishwarya Mishra & Arnnav Tikku, Advs. for the Appellant.
• Bimal Bhabhda, Ms Yashika Sharma & Ankur Mittal, Advs. for the Respondent.

Facts of the Case

In the instant case, Respondent No. 1 and her husband, Respondent No. 2 were original shareholders of the appellant company. Later, Respondent No. 2 resigned from directorship and Respondent no. 3 took his place. As on 25-9-2010, Respondent no. 1 held more than 98% of shares by way of 39,500 equity shares and the remaining 500 were held by Respondent no. 3.

Respondent no. 1 filed an application before the Adjudicating Authority (NCLT) under sections 397 and 398 of the Companies Act, 1956 submitting that she was wrongfully removed from the board of directors and her entire shareholding was arbitrarily transferred to respondent no. 4, her mother in law, by means of a gift deed.

She further submitted that the gift deed did not contain appropriate stamp duty and her husband had obtained her signature on blank papers under threat or coercion. The NCLT declared the aforementioned transfer of equity shares relying upon an instrument of transfer allegedly by respondent no. 1 as null and void

The appellant company submitted that there was no finding in the impugned order that the gift deed was invalid whereas the respondent strongly refuted the gift deed on the ground that it was never executed by respondent no. 1 and that she was out of town as of that date.

The NCLAT observed that since the gift deed was valid or not required elaborate evidence and determination of the validity of legal documents, the NCLT had no jurisdiction to decide the validity or otherwise of the gift deed, more so when fraud and coercion were alleged.

NCLAT Held

The NCLAT held that cancellation of a gift deed was to be sought under section 31/34 of the Specific Relief Act, 1963 before the Civil Court and could not be done by the NCLT.

List of Cases Reviewed

• Order of NCLT-Allahabad in [C.P. IB No. 107/ND/2013], dated 4-9-2018 (para 17) set aside.

List of Cases Referred to

• Gulabraj Kalidas Naik v. Laxmidas Lallubhai Patel 1975 SCC Online Guj. 27 (para 6),
• CIT v. Ramaswamy 1983 SCC Online Mad. 111 (para 6),
• Killick Nixon Ltd. v. Bina Popatlal Kapadia [1983] 54 Comp. Cas 432 (Bom.) (para 6),
• Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers (P.) Ltd. [1998] 7 SCC 105 (para 6),
• Jai Mahal Hotels v. Raj Kumar Devraj [2015] 62 taxmann.com 241/132 SCL 627 (SC) (para 6),
• N. Ramji v. Ashwath Narayan Ramji [2017] 83 taxmann.com 146/142 SCL 565 (Mad.) (para 6),
• Naresh Chandra Sanyal v. Calcutta Stock Exchange Asson. Ltd. [1971] 1 SCC 50 (para 6),
• Sri Gopal Jalan Co. v. Calcutta Stock Exchange Association Ltd. [1964] 3 SCR 698 (para 6),
• V.B. Rangaraj v. V.B. Gopalakrishnan [1992] 1 SCC 160 (para 7),
• John Tinson & Co. (P.) Ltd. v. Sujeet Malhan [1997] 9 SCC 651 (para 7),
• Dale & Carrington Invt. (P.) Ltd. v. P.K. Prathapan [2005] 1 SCC 212 (para 7),
• Nirakar Das v. Durgapur Bio Garden (P.) Ltd. [2018] 211 Comp. Cas 61 (para 7),
• Parmeshwari Prasad Gupta v. Union of India [1973] 2 SCC 543 (para 7),
• K.D. Sharma v. Steel Authority of India Ltd. [2008] 12 SCC 481 (para 7),
• S.P. Chengalvaraya Naidu v. Jagannath [1994] 1 SCC 1 (para 7),
• A.V. Papayya Sastry v. Govt. of A.P. [2007] 4 SCC 221 (para 7),
• MCD v. State of Delhi [2005] 4 SCC 605 (para 7) and
• Dalip Singh v. State of Uttar Pradesh [2010] 2 SCC 114 (para 7).