CHALASANI UDAYA SHANKAR AND OTHERSversusM/S. LEXUS TECHNOLOGIES PVT. LTD. AND OTHERS

                 [2024] 9 S.C.R. 235 : 2024 INSC 671

               Chalasani Udaya Shankar and others
                               v.
           M/s. Lexus Technologies Pvt. Ltd. and others
                  (Civil Appeal Nos. 5735-5736 of 2023)
                             09 September 2024
              [Sanjiv Khanna and Sanjay Kumar,* JJ.]

                           Issue for Consideration
       NCLT and NCLAT, if justified in dismissing the company petition
       by the appellant seeking rectification of the Register of Members
       of respondent No.1-Company by entering their names therein
       u/ss. 59 and 88 of the Companies Act, 2013, and to initiate
       action against respondent Nos. 2, 3 and 4, for oppression and
       mismanagement, and criminal proceedings u/ss. 447 and 448 of
       the 2013 Act, for committing fraud.

                                  Headnotes†
       Companies Act, 2013 – ss. 59 and 88 – Rectification of
       registrar of members – Allegations of fraudulent transfer
       of shares and mismanagement in the company – Company
       petition by the appellant seeking rectification of the Register
       of Members of respondent No.1-Company by entering their
       names therein u/ss. 59 and 88, and to initiate action against
       respondent Nos. 2-4, for oppression and mismanagement, as
       also criminal proceedings u/ss. 447 and 448 for committing
       fraud – Dismissed by the NCLT – Appeal thereagainst and IA
       also dismissed – Correctness:
       Held: National Company Law Tribunal exercising jurisdiction u/s.
       59 has to examine the factual issues to ascertain the substance of
       the issue before it – Expression ‘rectification’ connotes something
       that ought to have been done but, by error, was not done, or what
       ought not to have been done but was done, requiring correction –
       Phrase ‘sufficient cause’ in s. 59 is to be tested in relation to
       the statutory mandate thereof-anything done or omitted to be
       done in contravention of the Act of 2013 or the Rules framed
       thereunder – If, on facts, an open-and-shut case of fraud is made
       out in favour of the person seeking rectification, the NCLT would
       be entitled to exercise such power u/s. 59 – Proper verification of

* Author
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       the assertions made by the parties was a sine qua non – Acting
       President of the NCLT, by failing to carry out the said exercise,
       failed to discharge the mandate of law – Exercise of power u/s.
       59 is to be undertaken in right earnest by examining the material,
       evidence, and the facts on record – This was not done, rather, a
       narrow view was taken without calling upon respondent No. 2 to
       prove the veracity of the contrary story put forth by him, despite
       receiving monies from the appellants – Facts, material, and evidence
       had to be examined in the context of the underlying facts, which
       would have included the receipt of monies, the signatures on the
       transfer deeds, etc. – Questions of fact must be decided on the
       principle of preponderance of probabilities, giving due weight to
       the specific facts, as found, so as to draw the conclusion that a
       reasonable person, acquainted with the relevant field, would draw
       on the basis of the same facts – Interim order passed by the
       Member (Judicial) of the NCLT indicated, in clear terms, the issues
       that arose for consideration and the inquiry required to determine
       the same – However, the President of the NCLT ignored the said
       interim order, and chose to summarily dismiss the petition, without
       considering the material already placed on record and without
       further evidence being adduced – Also, the NCLAT did not even
       get the facts right – Judgment in Company Petition, in Company
       Appeal and I.A. set aside – Company Petition restored to the file
       of the NCLT, for consideration afresh on merits and in accordance
       with law, upon proper appreciation of evidence – Companies Act,
       1956 – s. 155 (s.111A thereafter) – National Company Law Tribunal
       Rules, 2016 – r. 70(5).

                                Case Law Cited
       Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers
       Pvt. Ltd. and others [1998] Supp. 1 SCR 413 : (1998) 7 SCC
       105; High Court of Judicature at Bombay through its Registrar v.
       Udaysingh and others [1997] 3 SCR 803 : (1997) 5 SCC 129; Jai
       Mahal Hotels Private Limited v. Devraj Singh and others [2015] 11
       SCR 323 : (2016) 1 SCC 423; Adesh Kaur v. Eicher Motors Limited
       and others [2018] 5 SCR 200 : (2018) 7 SCC 709; Dhulabhai v. State
       of Madhya Pradesh and another [1968] 3 SCR 662 – relied on.
       Standard Chartered Bank v. Andhra Bank Financial Services Limited
       [2006] Supp. 2 SCR 1 : (2006) 6 SCC 94; Shashi Prakash Khemka
       (Dead) through legal representatives and another v. NEPC MICON
       (Now NEPC India Limited) and others (2019) 18 SCC 569; IFB
[2024] 9 S.C.R.                                                           237

                Chalasani Udaya Shankar and others v.
              M/s. Lexus Technologies Pvt. Ltd. and other

     Agro Industries Limited v. SICGIL India Limited and others [2023]
     1 SCR 527 : (2023) 4 SCC 209; Smiti Golyan and others v. Nulon
     India Ltd. and others Company Appeal (AT) No. 222 of 2018,
     decided on 25.03.2019 – referred to.

                                List of Acts
     Companies Act, 2013; Companies Act, 1956; National Company
     Law Tribunal Rules, 2016.

                             List of Keywords
     Company petition; Rectification of the Register of Members;
     Oppression and mismanagement; Fraud; Fraudulent transfer of
     shares; Rectification; Sufficient cause; Jurisdiction of the civil
     court; Verification of the assertions made by parties; Principle of
     preponderance of probabilities; Interim order.

                            Case Arising From
     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.5735-5736 of
     2023
     From the Judgment and Order dated 10.04.2023 of the National
     Company Law Appellate Tribunal, Chennai in CA(AT) (CH) No.44 of
     2021 and IA No.548 of 2021
                         Appearances for Parties
     Dhruv Mehta, Sr. Adv., P B A Srinivasan, V. Aravind, Keith Varghese,
     Ms. Srishti Bansal, Sumit Swami, Ms. Aanchal Pundir, Amit K. Nain,
     Advs. for the Appellants.
     Mrs. Aishwarya Bhati, A.S.G., Byrapaneni Suyodhan, Ms. Tatini Basu,
     Kumar Shashank, Ruchi Kohli, Navanjay Mahapatra, Shiv Mangal
     Sharma, Prasenjeet Mahapatra, Ms. BLN Shivani, Amrish Kumar,
     Advs. for the Respondents.
                Judgment / Order of the Supreme Court
                                Judgment
     Sanjay Kumar, J.
1.   Orders alike, dismissing their claims, having been passed by the
     original and appellate forums, Chalasani Udaya Shankar, Sripathi
     Sreevana Reddy and Yalamanchilli Manjusha are in appeal under
     Section 423 of the Companies Act, 2013 [for brevity, ‘the Act of 2013’].
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2.     The appellants had approached the National Company Law Tribunal,
       Hyderabad/Amaravati Bench [for brevity, ‘the NCLT’], by way of
       Company Petition No. 667/59 & 241/HDB/2018, seeking rectification
       of the Register of Members of M/s. Lexus Technologies Pvt. Ltd.,
       Vijayawada, Andhra Pradesh, respondent No.1, by entering their
       names therein under Sections 59 and 88 of the Act of 2013, and to
       initiate action against Mantena Narasa Raju, Appa Rao Mukkamala
       and Suresh Anne, respondent Nos. 2,3 and 4, for oppression and
       mismanagement, apart from criminal proceedings under Sections
       447 and 448 of the Act of 2013 for committing fraud.
3.     Their case, as set out in the Company Petition, was as follows: M/s.
       Lexus Technologies Pvt. Ltd. was incorporated under the provisions
       of the Companies Act, 1956, on 28.03.2000. Its authorized share
       capital was ₹1,50,00,000/-, divided into 15,00,000 equity shares of
       ₹10/- each. The issued, subscribed and paid-up capital of the company
       was ₹1,10,96,230/-, divided into 11,09,623 equity shares of ₹10 each.
       The company is in the business of software development and ancillary
       activities and it acquired land at Chinnakakani Village in Guntur District
       in January, 2002, for establishing its infrastructure. On 09.03.2004,
       Mantena Narasa Raju, respondent No.2, had entered into a share
       purchase agreement with one C. Suresh, shareholder of the company,
       and acquired 10,51,933 equity shares, representing 94.8% of the
       equity share capital of the company. Thereafter, Mantena Narasa
       Raju and Appa Rao Mukkamala, respondent Nos. 2 and 3, were
       appointed as Directors of the Company on 02.03.2004. Suresh Anne,
       respondent No.4, became a Director of the company on 30.09.2004.
       While so, on 18.04.2015, the appellants acquired the equity shares
       held by Mantena Narasa Raju, respondent No.2, i.e., 10,51,933
       equity shares, by executing Securities Transfer Deeds in Form No.
       SH-4. Chalasani Udaya Shankar, appellant No.1, acquired 3,51,933
       equity shares, representing 31.72% of the shareholding, while Sripathi
       Sreevana Reddy, appellant No.2, and Yalamanchilli Manjusha,
       appellant No.3, acquired 3,50,000 equity shares each, representing
       their 31.54% individual shareholding. Share certificates were issued
       to them, signed and authenticated by Appa Rao Mukkamala and
       Suresh Anne, respondent Nos. 3 and 4. The appellants claim to
       have paid consideration of ₹14,67,41,557/- to Mantena Narasa Raju,
       respondent No.2, towards the acquisition of their shares - Chalasani
       Udaya Shankar, appellant No.1, paid ₹4,90,91,557/- while Sripathi
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     Sreevana Reddy and Yalamanchilli Manjusha, appellant Nos.2 and
     3, each paid ₹4,88,25,000/- individually.
4.   It is the further case of the appellants that they shared a very
     congenial and cordial relationship with Mantena Narasa Raju, Appa
     Rao Mukkamala and Suresh Anne, respondent Nos.2, 3 and 4, and
     they left the complete managerial control with them despite being
     the majority shareholders. They claim that they had no suspicion
     whatsoever against the said persons, but due to their failure in
     conducting Annual General Meetings during the financial years
     2014-15, 2015-16 and 2016-17, the Registrar of Companies struck
     off the name of M/s. Lexus Technologies Pvt. Ltd. from the Register
     of Companies on 21.07.2017, in exercise of power under Section
     248 of the Act of 2013. The appellants claim that, it was only upon
     browsing the online portal, they came to know that the said persons
     had thereafter filed annual returns and financial statements for the
     years in question with false information, by erasing their shareholding
     from the records of the company. The appellants allege that the
     aforesaid persons committed various acts of oppression with the
     intention of grabbing the company property. They, accordingly, prayed
     for rectification of the Register of Members of the company, by entering
     their names, and to initiate appropriate action against respondent
     Nos. 2, 3 and 4. Allegations were also made against V. Vasudev
     Reddy, respondent No.5, the Chartered Accountant associated
     with the company, to the effect that he was a co-conspirator and
     action was sought against him. The appellants also sought various
     interim reliefs pending disposal of the Company Petition. In the first
     instance, the NCLT directed status quo to be maintained as regards
     the company’s assets and invited objections from the other side.
5.   The company, respondent No.1, filed a counter opposing the grant
     of interim reliefs. Therein, it contended that the appellants could not
     allege oppression and mismanagement as they were not members of
     the company and were, in fact, seeking rectification of the Register
     of Members in that regard. The transfer of shares, as claimed by the
     appellants, was denied and, in consequence, their locus to maintain
     the company petition was challenged. Issue of limitation was also
     raised as the appellants’ claim was that they had acquired the shares
     on 18.04.2015 but the company petition was filed only on 09.11.2018,
     i.e., after the lapse of over three years. The company alleged that
     it had received emails from respondent Nos. 3 and 4 stating that
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       the appellants had forged their signatures on the purported share
       certificates and the company asserted that the NCLT would have
       no jurisdiction to adjudicate such allegations of fraud and only the
       competent civil court could decide the same.
6.     A reply was also filed by Mantena Narasa Raju, respondent No.2,
       contesting the interim reliefs sought. While reiterating the contentions
       of the company in its counter, he disputed the appellants’ ownership
       of the shares. He asserted that he never sold any shares to the
       appellants and that they were complete strangers to him. He claimed
       that he had borrowed a sum of ₹5.66 crore from one L. Ramesh, his
       friend, who agreed to lend him the money through banking channels,
       by arranging for a total sum of ₹14.66 crore, out of which he would
       take back ₹9 crore and the balance ₹5.66 crore could be retained
       by respondent No.2. He further claimed that L. Ramesh arranged
       for his known persons to remit the amounts in his bank account and
       it was in this context that the appellants deposited the total sum of
       ₹14,66,39,400/- in his account. He further claimed that he returned
       the sum of ₹9 crore, as per the instructions of L. Ramesh, to one
       Swarna Bhaskar H. (₹7.5 crore) and to one Venkata Surya R (₹1.5
       crore), i.e., in all, ₹9 crore. He further claimed that L. Ramesh forcibly
       obtained his signatures on several documents, including white papers,
       letter heads, blank non-judicial stamp papers and green sheets,
       at that time. He alleged that those blank papers might have been
       handed over to the appellants by L. Ramesh and they fabricated the
       documents. He pointed out that the share transfer deeds put forth
       by the appellants projected a total consideration of ₹14,67,41,557/- ,
       but only the sum of ₹14,66,39,400/- had been remitted, leaving
       a balance of ₹1,02,157/-. He also alleged that the format of the
       appellants’ share certificates was not that of the company and the
       folio numbers therein were different, indicating that they had been
       fabricated by the appellants.
7.     The appellants filed separate rejoinders to the replies filed by
       respondent Nos. 1 and 2. Therein, they reiterated their claims
       and asserted that their petition was within time. They denied the
       financial transactions allegedly arranged by L. Ramesh and the
       alleged fabrication of documents by them. They pointed out that the
       signature of respondent No.2 appeared in the share transfer forms
       at the correct place, manifesting that the same were not fabricated
       on signed blank papers. As regards the shortfall in the consideration,
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     they asserted that a portion of the stamp duty on the transfer was
     to be borne by respondent No.2 and it was accordingly adjusted,
     leading to the lesser sum of ₹14,66,39,465/- being paid.
8.   Thereupon, the NCLT, through the Member (Judicial), passed an
     interim order on 27.06.2019. Having considered the matter, the
     NCLT noted as follows: Respondent No.2 had addressed letter
     dated 29.12.2014 (Annexure A-1) to the Board of Directors of the
     company expressing his intention to sell his shareholding therein.
     A Board Meeting was held on 24.01.2015 to consider his request
     and it was found that there was no buyer within the existing
     shareholders who was willing to purchase the shares of respondent
     No. 2. This was stated to have been communicated to respondent
     No.2 leaving it open to him to make his own arrangement for sale
     of his shares to outsiders. It was in these circumstances that the
     appellants purchased the shares of respondent No.2. By e-mail dated
     20.04.2015 (Annexure A-4), respondent No.3 sought the approval
     of the other shareholders for sale of these shares in favour of the
     appellants. A meeting was held on 27.04.2015 in this regard and
     share certificates were also issued on the said date to the appellants.
     These share certificates were signed by respondent Nos. 3 and
     4 as Directors of the company. It was noted that respondent No.
     2 had contested this claim, by asserting that respondent Nos. 3
     and 4 were not even in India on the said date and that the share
     certificates were fabricated. Various discrepancies were pointed out
     by him in the said certificates, including absence of the signature of
     the company secretary. The NCLT, however, noted that respondent
     No.2 did not dispute the receipt of monies from the appellants.
     Further, the NCLT also noted that respondent No.2 did not dispute
     his signatures appearing in the share certificates and share transfer
     forms but his attempt was to explain the same, by claiming that
     L. Ramesh had obtained blank papers from him which had been
     misused. Noting the details of the financial transactions sought to
     be put forth by respondent No.2 in relation to the receipt of ₹14.66
     crore, the NCLT observed that this aspect needed to be probed
     as the undisputed fact remained that the said sum was remitted
     into the account of respondent No.2. The NCLT observed that it
     was necessary to go into the issue as to whether this amount was
     actually remitted at the instance of L. Ramesh as there was no
     evidence at that point of time in proof of the claims of respondent
     No.2 in that regard. The NCLT noted that it was a question to be
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       enquired into as to whether respondent No.2 has returned ₹5.66
       crore, which he claimed to have received as a loan, and this was
       a question to be thoroughly looked into during a full inquiry. The
       NCLT further noted that on the strength of these oral contentions, it
       was not possible to accept at that stage that the said monies were
       given to him only as a loan and not for the sale of his shares. His
       further claim that he had signed various blank papers, judicial stamp
       papers, letter heads, etc. also required to be examined at the time
       of final disposal of the matter. It was noted that respondent No.2
       was a doctor by profession. The NCLT went on to observe that
       Form SH-4 was a printed form, as were the share certificates, and
       it was not believable that the same could have been fabricated on
       signed blank papers. Dealing with the contention that respondent
       Nos. 3 and 4 were not even in the country on the date in question,
       the NCLT noted that none had appeared on their behalf and they
       had not chosen to file any counter in support of the stand taken by
       them. As on that date, per the NCLT, respondent No.2 relied upon
       the communication allegedly received by him from respondent
       Nos. 3 and 4, but the authenticity of the same still remained to be
       proved, as respondent Nos. 3 and 4 had not filed any affidavit. The
       NCLT also noted that there were conflicting materials produced by
       both sides and at that stage, it could not be decided whether the
       signatures in the share certificates did not belong to respondent
       Nos. 3 and 4 and the issue required to be thoroughly examined at
       the time of final hearing.
9.     Dealing with the issue of limitation, the NCLT observed that the
       case of the appellants was that they came to know of their names
       being excluded only after the company filed financial accounts
       and statements for the years 2014-15, 2015-16 and 2016-17,
       and the petition was filed within three years from the date of such
       knowledge. Opining that limitation was a mixed question of fact
       and law, the NCLT stated that it needed to be examined at the
       final hearing stage, after the parties filed all their documents. The
       NCLT also rejected the contention of the respondents that it had
       no jurisdiction to try the petition as it involved issues of fraud, etc.
       The NCLT, therefore, observed that an interim order restraining the
       company and respondent Nos. 2 to 4 from either disposing of or
       creating encumbrances over the assets of the company would not
       affect either of the parties, pending disposal of the main petition, and
       accordingly granted an interim order to that effect.
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                   Chalasani Udaya Shankar and others v.
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10. This being the tone and tenor of the NCLT’s interim order, the
    final order dated 21.08.2021 passed by the NCLT, dismissing the
    Company Petition, makes for an interesting reading. Be it noted that
    the interim order was passed by the Member (Judicial) of the NCLT
    and the final order came to be passed over two years later by its
    Acting President. Significantly, no reference whatsoever was made
    to the 46-page interim order in the body of the final order. It is as if
    the Acting President of the NCLT was completely oblivious of what
    had transpired in the matter earlier, though a passing reference was
    made by him to an interim order passed on 22.10.2019, impleading
    three more respondents in the Company Petition.
11. Respondent Nos. 1 and 2 again filed counters in the main Company
    Petition essentially replicating the stands taken by them in their
    earlier counters. The appellants also filed their rejoinder thereto
    along with several documents. Having referred to the facts, as set
    out in the Company Petition, the Acting President of the NCLT noted
    that separate counters had been filed by respondent Nos. 1 and 2,
    on the one hand, and by the newly impleaded respondent Nos. 8
    to 10, who claimed independent rights in the same shareholding.
    Respondent Nos. 3 and 4 had filed Memos adopting the counter filed
    by the company, respondent No.1. Perusal of the judgment dated
    21.08.2021 reflects that the Acting President of the NCLT extracted
    the gist of the pleadings of the parties and went on to reproduce the
    caselaw cited by them at great length. His actual findings commence
    from paragraph 9 at page 60 of his 67-page order. The points that
    fell for consideration were set out by him in paragraph 9.1, which
    reads as under:
           ‘(1) Whether the Petition filed is well within the time.
           (2)    Whether purported transfer of shares is in accordance
                  with the provisions of the Companies Act and in
                  accordance with clauses of the Articles of Association.
           (3)    Whether the amount purportedly paid should be
                  treated as consideration to the shareholders of the
                  Company, by the Petitioners.
           (4)    Whether the share certificates purportedly issued to
                  the Petitioners are genuine.
           (5)    Whether any relief can be granted to the Petitioners
                  or whether the petition is maintainable.’
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12. On the issue of limitation in point No.1, the Acting President baldly
    summed up that filing of the petition by the appellants was an
    afterthought and, therefore, the question of limitation did not arise,
    as the petition was not filed within the limitation period of three
    years. This cryptic approach in para 9.2 was not in keeping with
    the observation of the Member (Judicial) of the NCLT in the interim
    order that limitation, being a mixed question of law and fact, required
    to be examined fully.
13. On point No.2, the Acting President rejected the case of the appellants,
    by way of brief para 9.3, completely ignoring the points set out by
    the Member (Judicial) in the interim order and the material placed
    on record, such as the share transfer forms, share certificates and
    emails/ correspondence, which supported the case of the appellants.
    His categorical finding that ‘not a single document existed between
    the parties to show that there was a transfer of shares and not a
    single document was filed to show that the existing shareholders
    were given an opportunity to buy the shares’ was clearly contrary
    to the material available on record, viz., the emails, transfer forms,
    share certificates, etc. No doubt, the genuineness of these documents
    required to be verified but without even venturing to do so, they could
    not have been dismissed thus.
14. As regards point No.3, the Acting President observed that there
    was no covering letter or correspondence to support the claim that
    the amount transferred into the account of respondent No.2 was for
    purchase of shares. He noted the discrepancy in the sale consideration
    amount to the extent of ₹1,02,157/- and the claim of respondent No.2
    that one L. Ramesh was also involved. He then went on to surmise
    that there were some other transactions between the parties and
    the company had been entangled in the dispute for reasons best
    known to the parties. On that basis, he strangely concluded that it
    could not be accepted that the monies transferred into the account
    of respondent No.2 were for purchase of shares. The version put
    forth by respondent No.2, as rightly pointed out in the interim order,
    required to be proved and could not have been taken to be the truth
    straightaway in this abrupt and self-serving manner.
15. As regards point No.4, the Acting President opined that the appearance
    of the share certificates was dubious and the numbers therein were
    also completely different. He held that, without going deep into the
    aspect, it could be concluded that the share certificates were not
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     genuine and were fabricated. Again, no evidence whatsoever was
     led or considered on the issue. Surprisingly so, as the appellants
     produced the original share certificates given to them along with their
     rejoinder and filed applications for production of the original record
     of shareholders of the company and their share certificates of 2004,
     Board Resolutions, Minutes of Meetings, etc.
16. On point No.5, the Acting President concluded that the appellants
    had failed to prove their case and had not bothered to realize their
    rights as shareholders, if at all they had considered themselves to be
    so. He observed that the very manner and conduct of the appellants
    indicated that the transaction which seems to have taken place
    between the parties was completely different, without involving the
    company, and for no reason, the company had been entangled in
    the dispute. The case of the appellants was held to be fraudulent in
    nature and devoid of fact and law. He, accordingly, dismissed the
    case with costs of ₹5,00,000/-.
17. Aggrieved by the dismissal of their petition, the appellants approached
    the National Company Law Appellate Tribunal, Chennai Bench
    (NCLAT), by way of Company Appeal (AT) (CH) No. 44 of 2021.
    They also filed I.A. No. 548 of 2021 therein for interim relief pending
    its disposal. However, the NCLAT dismissed their appeal and I.A. by
    judgment dated 10.04.2023. Speaking for the Bench, the Member
    (Technical) referred to the facts of the case; the contentions of the
    parties; the points for consideration set out by the NCLT and its
    findings thereon. Thereafter, the relevant provisions of the Act of
    2013 were extracted at length and again, reference was made to
    the contentions of both sides. Having done so, the NCLAT curiously
    concluded that L. Ramesh had remitted through his ‘known persons’
    the sum of ₹14,66,39,400/- into the bank account of respondent
    No. 2. The NCLAT then strangely observed as follows:
           ‘First of all, the money has not been transferred by the
           ‘Appellants’ in favour of the ‘Respondents’. Secondly, as
           admitted in the averments as well as recorded clearly in
           the ‘impugned order’ that, Mr. Lingamaneni Ramesh gave
           Rs. 14,67,41,557/- and took back Rs. 9 Crores from the
           ‘Respondents’ as such prima-facie this does not seem
           to be a clear transaction of payment of money towards
           acquisition of shares and consequently allotment of shares
           in favour of the ‘Appellants’ is also not established.’
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18. Significantly, the three persons named by the NCLAT in the table in
    the very same paragraph as the ‘known persons’ who paid the monies
    are none other than appellant Nos. 2 and 3 and Ms. Vahini Surya
    Chalasani, the joint-account holder of appellant No. 1. Therefore,
    the conclusion of the NCLAT that the money was not transferred by
    the appellants was factually incorrect. Further, the story put forth by
    respondent No. 2 as to his friend, L. Ramesh, playing a role in the
    transaction was taken to be the biblical truth by the NCLAT though
    it was very much in dispute and required to be proved, even as per
    the interim order passed by NCLT. As regards the issue of limitation,
    the NCLAT simply went by the date of purchase of the shares and
    the date of the institution of the Company Petition and concluded
    that the same was barred by limitation, without reference to the issue
    highlighted by the NCLT in its initial interim order that limitation, being
    a mixed question of law in fact, required further examination as to
    when the clock would start ticking. The further finding of the NCLAT
    that the appellants had not furnished any documentary proof of their
    claims was equally bereft of foundation as material had been produced
    by them, which was duly taken note of in the NCLT’s interim order,
    which led it to the opinion that further inquiry was needed on those
    aspects. To further compound the patent lack of application of mind
    on its part, the NCLAT observed that the appellants failed to produce
    their original share certificates pursuant to the NCLT’s order dated
    18.02.2021, overlooking the fact that the original share certificates
    and other documents were, in fact, filed by the appellants along with
    their rejoinder dated 22.03.2021. Concluding that the appellants had
    failed to cross the first hurdle of locus, the NCLAT held that they
    could not maintain the allegation of oppression and mismanagement
    which would be available only to a person who is a member of the
    company. The NCLAT accordingly dismissed the appeal and the I.A.
    as devoid of merit, leading to the filing of these appeals.
19. IA Nos. 171771 and 168458 of 2023 filed in one of these appeals by
    the appellants seeking permission to file additional documents are
    allowed and the said documents are taken on record. IA No. 72990
    of 2024 is also allowed at the sole risk and peril of the appellants,
    permitting deletion of the name of respondent No. 6 from the array
    of parties.
20. While ordering notice in these appeals on 01.09.2023, this Court
    raised certain questions, which the appellants were required to
    answer. The questions read as follows:
[2024] 9 S.C.R.                                                         247

                   Chalasani Udaya Shankar and others v.
                 M/s. Lexus Technologies Pvt. Ltd. and other

           ‘1.    Why, after acquiring the shares, the appellants did
                  not come on the Board of Directors?
           2.     Why the appellants did not attend or call upon the
                  Directors to hold the Annual General Meeting(s)?
           3.     Why the appellants did not take steps as the annual
                  accounts were not audited and submitted to them
                  and with the Registrar of Companies.’
     The appellants were directed to file an affidavit dealing with the
     aforesaid aspects. Pursuant thereto, Affidavit of Compliance dated
     08.12.2023 was filed by the appellants. Therein, apropos the first query
     as to why the appellants did not come onto the Board of Directors
     after acquiring the shares, they stated that they had purchased
     the shares for investment purpose and hence, initially, they did
     not take interest in the affairs of the company. They further stated
     that they had long-standing business and personal relations with
     respondents 3 and 4, who were the Directors of the company, and in
     such circumstances, a fiduciary relationship existed between them.
     According to them, they did not come onto the Board of Directors
     due to these reasons and trusted that respondents 3 and 4 would
     continue to run the affairs of the company in accordance with law.
21. As regards the second query posed by this Court as to why they did
    not attend Annual General Meetings or call upon the Directors to hold
    such meetings, the appellants stated that the name of the company
    was struck off by the Registrar of Companies on 21.07.2017 owing
    to failure in filing of Annual Returns for the financial years 2014-15,
    2015-16 and 2016-17. It was only on coming to know of this that the
    appellants claim to have inquired with the Directors and were informed
    that the issue would be settled shortly. The Directors are stated to
    have informed them orally that there was a complaint filed against
    the Directors and the Auditor of the company in Machavaram Police
    Station at Vijayawada on 30.12.2013, by one of the shareholders,
    and the Directors promised that all issues would be settled and the
    Annual Returns would be updated with the Registrar of Companies
    along with the names of the investors. They further stated that they
    could not file a company petition when the name of the company
    was struck off from the rolls of the Registrar of Companies. They
    asserted that the name of the company was restored in August, 2017,
    but the company filed Annual Returns for the years 2014-15 to 2016-
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       17 only on 12.06.2018. It was after this event that the appellants
       claim to have found that their names were not in the shareholders’
       list and questioned the Directors about such non-inclusion. They
       further claim that the Directors assured them that after the police
       case was closed, the names of the appellants would be added but
       the appellants found out that even after the closure of the case on
       30.06.2018, their names were not shown as shareholders. It was in
       these circumstances that the company petition was filed before the
       NCLT. The appellants asserted that it was due to these reasons that
       they could not call for an Annual General Meeting, as they were not
       shown as shareholders of the company.
22. In response to the third query as to why they did not take steps
    when the annual accounts were not audited and submitted to them
    or with the Registrar of Companies, the appellants stated that, as
    they were informed that there was a police case against the Auditor
    of the company, they could not take any steps to get the accounts
    audited and submitted to them. They further stated that due to the
    fiduciary relationship between respondents 2 to 4 and the appellants,
    they never suspected that the respondents were not holding Annual
    General Meetings and were mis-managing the affairs of the company.
    Further, the Directors are stated to have promised that the issue
    would be settled and that the Annual Returns would be updated with
    the Registrar of Companies and that the investors’ names would be
    updated. However, despite such assurances by the Directors, the
    appellants deemed it prudent to inspect the records of the company
    by accessing its master data on the MCA portal in 2017 and were
    shocked to find that the affairs of the company were being run
    contrary to law, as a result of which the name of the company was
    struck off by the Registrar of Companies. The appellants also came
    to know that their shareholding was not reflected in the Register of
    Members and they accordingly filed a composite petition before the
    NCLT under Sections 59 and 241 of the Act of 2013.
23. Satisfactory answers having been furnished by the appellants as
    aforestated, it would be appropriate at this stage to take note of the
    statutory provisions and precedential law relating thereto. Originally,
    Section 155 of the Companies Act, 1956, dealt with rectification
    proceedings in connection with entry of names in the Register of
    Members of a company. Section 155 was omitted with effect from
    31.05.1991. Section 111 and Section 111-A were inserted in the
[2024] 9 S.C.R.                                                           249

                   Chalasani Udaya Shankar and others v.
                 M/s. Lexus Technologies Pvt. Ltd. and other

     Companies Act, 1956, with effect from 31.05.1991 and 20.09.1995
     respectively. These provisions corresponded to erstwhile Section
     155. Presently, Section 59 of the Act of 2013 and Rule 70(5) of the
     National Company Law Tribunal Rules, 2016, deal with rectification.
     Rule 70(5) is in pari materia with Section 111(7) of the Companies
     Act, 1956.
24. In Ammonia Supplies Corporation (P) Ltd. vs. Modern Plastic
    Containers Pvt. Ltd. and others,1 the short question for consideration
    was framed thus by this Court: ‘Whether in the proceedings under
    Section 155 of the Companies Act, 1956, the Court has exclusive
    jurisdiction in respect of all the matters raised therein or has only
    summary jurisdiction?’ It was observed that the very word ‘rectification’
    in Section 155 of the Companies Act, 1956, connotes something
    that ought to have been done but by error was not done or ought
    not to have been done but was done, requiring correction. It was
    held that the Court has discretion to find out whether the dispute
    raised is really for rectification or is of such a nature that, unless
    decided first, it would not come within the purview of rectification. It
    was further held that, if it is truly a case of rectification, all matters
    raised in that connection should be decided under Section 155, but if
    it finds adjudication of any matter not falling under it, the Court may
    direct a party to get his right adjudicated by a civil court. Noting that
    there was nothing in the Companies Act, 1956, expressly barring the
    jurisdiction of the civil court, it was observed that where the ‘Court’ as
    defined under the Act is exercising its powers under various sections,
    where it has been vested with exclusive jurisdiction, the jurisdiction
    of the civil court is impliedly barred. It was, therefore, held that to the
    extent the ‘Court’ has exclusive jurisdiction under Section 155, the
    jurisdiction of the civil court is impliedly barred. But for what is not
    covered as aforesaid, the civil court would have jurisdiction. Noting
    that the jurisdiction of the ‘Court’ under Section 155 is summary in
    nature, it was held that it would be appropriate for the ‘Court’ to see
    for itself whether any document alleged to be forged is said to be
    so, only to exclude the jurisdiction of the ‘Court’ or it is genuinely so.
    As the High Court, exercising jurisdiction under Section 155 of the
    Companies Act, 1956, had not examined the case in this light, this
    Court remanded the matter to the High Court for decision afresh.


1   [1998] Supp. 1 SCR 413 : (1998) 7 SCC 105
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       The observations in paragraph 26 of the judgment are of relevance
       in this regard and are extracted below:
             “26. The proviso gave discretion to the court to direct
             an issue of law to be tried, if raised. By this deletion,
             submission is that the Company Court now itself has to
             decide any question relating to the rectification of the
             Register including the law and not to send one to the civil
             court. There could be no doubt any question raised within
             the peripheral field of rectification, it is the court under
             Section 155 alone which would have exclusive jurisdiction.
             However, the question raised does not rest here. In case
             any claim is based on some seriously disputed civil rights
             or title, denial of any transaction or any other basic facts
             which may be the foundation to claim a right to be a member
             and if the court feels such claim does not constitute to be
             a rectification but instead seeking adjudication of basic
             pillar some such facts falling outside the rectification, its
             discretion to send a party to seek his relief before the
             civil court first for the adjudication of such facts, it cannot
             be said such right of the court to have been taken away
             merely on account of the deletion of the aforesaid proviso.
             Otherwise under the garb of rectification one may lay
             claim of many such contentious issues for adjudication
             not falling under it. Thus in other words, the court under it
             has discretion to find whether the dispute raised is really
             for rectification or is of such a nature that unless decided
             first it would not come within the purview of rectification.
             The word “rectification” itself connotes some error which
             has crept in requiring correction. Error would only mean
             everything as required under the law has been done yet
             by some mistake the name is either omitted or wrongly
             recorded in the Register of the company. ...”
25. In Standard Chartered Bank vs. Andhra Bank Financial Services
    Limited,2 a 3-Judge Bench of this Court affirmed the view taken in
    Ammonia Supplies Corporation (P) Ltd. (supra) that the jurisdiction
    exercised by a Company Court under Section 155 of the Companies


2   [2006] Supp. 2 SCR 1 : (2006) 6 SCC 94
[2024] 9 S.C.R.                                                            251

                   Chalasani Udaya Shankar and others v.
                 M/s. Lexus Technologies Pvt. Ltd. and other

     Act, 1956 (Section 111, thereafter), was somewhat summary in
     nature and that, if a seriously disputed question of title arose, the
     Company Court should relegate the parties to a suit, which was the
     more appropriate remedy for investigation and adjudication of such
     seriously disputed questions of title.
26. In Jai Mahal Hotels Private Limited vs. Devraj Singh and others,3
    this Court again held that issues which truly relate to ‘rectification’ of
    the Register fall within the summary jurisdiction of the Company Law
    Board and only complex questions of title fall outside its jurisdiction.
    It was observed that there is a thin line in appreciating the scope of
    jurisdiction of the Company Court and the jurisdiction is exclusive,
    if the matter truly relates to ‘rectification’, but if the issue is alien to
    ‘rectification’, such matter may not be within the exclusive jurisdiction
    of the Company Court.
27. In Adesh Kaur vs. Eicher Motors Limited and others,4 this Court
    found, on facts, that it was an open-and-shut case of fraud, in which
    the appellant who had applied for rectification had been the victim,
    and held that the appellate tribunal was not correct in relegating the
    appellant to the civil court on the ground that a criminal complaint
    and a SEBI investigation were pending and in holding that it was not
    proper for the National Company Law Tribunal to exercise power to
    rectify the Register under Section 59 of the Companies Act, 2013.
28. In Shashi Prakash Khemka (Dead) through legal representatives
    and another vs. NEPC MICON (Now NEPC India Limited) and
    others,5 this Court again had occasion to deal with exercise of power
    under Section 111-A of the Companies Act, 1956. The Company
    Law Board’s view had been reversed by the Madras High Court in
    appeal, whereby the appellants were relegated to the remedy of a
    civil suit in relation to the issue raised qua the transfer of shares.
    This Court took note of the earlier judgment in Ammonia Supplies
    Corporation (P) Ltd. (supra) but noted that Section 430 of the Act
    of 2013 barred the jurisdiction of the civil court and opined that the
    effect thereof is that, in matters in respect of which power has been
    conferred on the National Company Law Tribunal, the jurisdiction


3   [2015] 11 SCR 323 : (2016) 1 SCC 423
4   [2018] 5 SCR 200 : (2018) 7 SCC 709
5   (2019) 18 SCC 569
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       of the civil court is completely barred. This Court observed that it is
       not in dispute that, were a dispute to arise today, remedy of a civil
       suit would be completely barred and the power would vest with the
       National Company Law Tribunal under Section 59 of the Companies
       Act, 2013. Noting that the cause of action in that case had arisen
       at a stage prior to enactment of the Act of 2013, this Court was of
       the view that relegating the parties to a civil suit would not be the
       appropriate remedy, considering the manner in which Section 430
       of the Act of 2013 was widely worded.
29. Shashi Prakash Kemka (supra) was followed by the National
    Company Law Appellate Tribunal, New Delhi, in Smiti Golyan and
    others vs. Nulon India Ltd. and others6 whereby, the decision of
    the National Company Law Tribunal, Principal Bench, in relation to
    rectification proceedings was upheld without relegating the parties to
    the civil court. Civil Appeal No. 4639 of 2019 filed before this Court
    against Smiti Golyan (supra) was dismissed on 03.07.2019 and this
    Court observed that the findings recorded by the National Company
    Law Appellate Tribunal were absolutely proper and no ground was
    made out to interfere with the same.
30. Thereafter, in IFB Agro Industries Limited vs. SICGIL India
    Limited and others,7 this Court considered the appropriate forum
    for adjudication and determination of violations and consequential
    action thereon under the Securities and Exchange Board of India
    (Substantial Acquisition of Shares and Takeovers) Regulations,
    1997, and the Securities and Exchange Board of India (Prohibition
    of Insider Trading) Regulations, 1992. It was observed that the
    Securities and Exchange Board of India (SEBI) was conferred with
    regulatory jurisdiction, which included ex-ante powers to predict
    possible violations and take preventive measures. This Court held
    that the role of SEBI as a regulator could not be circumvented by
    applying for rectification under Section 111-A of the Act of 1956 and
    that, such an approach would be impermissible as scrutiny and
    examination of a transaction allegedly conducted in violation of the
    Regulations has to be processed through the rules and remedies
    provided in the Regulations themselves. This Court emphasized that
    when Constitutional Courts are called upon to interpret provisions


6   Company Appeal (AT) No. 222 of 2018, decided on 25.03.2019
7   [2023] 1 SCR 527 : (2023) 4 SCC 209
[2024] 9 S.C.R.                                                         253

                Chalasani Udaya Shankar and others v.
              M/s. Lexus Technologies Pvt. Ltd. and other

     affecting exercise of powers and jurisdiction by regulatory bodies, it
     is the duty of the Court to ensure that transactions falling within the
     province of the regulators are necessarily subjected to their scrutiny
     and regulation. It was pointed out that this would ensure that the
     regulatory body charged with the duty to protect the consumers
     has real-time control over the sector, thereby realizing the purpose
     of its constitution. It was, therefore, held that the purpose of these
     regulations could not be short-circuited by making an application to
     the Company Court under Section 111-A of the Act of 1956, on the
     ground that the provision bestowed jurisdiction parallel to the SEBI.
     It is in this context that this Court, in IFB Agro Industries Limited
     (supra), examined Sections 155 and 111-A of the Act of 1956 and
     Section 59 of the Act of 2013. The judgment heavily relied upon and
     extensively quoted from the earlier judgment in Ammonia Supplies
     Corporation (P) Ltd. (supra), which we have already referred to
     hereinabove and also quoted.
31. The judgment in Ammonia Supplies Corporation (P) Ltd. (supra),
    as noted, states that the provisions relating to rectification give
    discretion to the Company Court to examine whether, under the
    garb of rectification, one is laying claim for an adjudication of
    such contentions and issues which do not fall within the realm of
    ‘rectification’ and consequently, within the jurisdiction of the Company
    Court. However, if the Company Court finds that the dispute relates
    to the field of ‘rectification’ or its peripheral aspects, it will have
    exclusive jurisdiction to address the claim under Section 155 of the
    Act of 1965. When the Court is, however, of the opinion that the
    contentious issues that are raised before it for adjudication do not
    fall within that sphere and, in consequence, its jurisdiction under
    that provision, the power of rectification should not be exercised.
    Thus, if the application for rectification, in effect, includes projected
    claims which do not come within the purview of rectification and the
    Company Court feels that the civil court/regulatory body would be
    the more appropriate forum, jurisdiction under Section 155 of the
    Act of 1965 would not be exercised.
32. This would mean that the National Company Law Tribunal exercising
    jurisdiction under Section 59 of the Act of 2013 has to examine the
    factual issues to ascertain the substance of the issue before it after
    removing the cloak of the form of the application. The expression
    ‘rectification’, as already pointed out, connotes something that ought
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       to have been done but, by error, was not done, or what ought not
       to have been done but was done, requiring correction. The phrase
       ‘sufficient cause’ in Section 59 of the Act of 2013 is to be tested
       in relation to the statutory mandate thereof, i.e., anything done or
       omitted to be done in contravention of the Act of 2013 or the Rules
       framed thereunder.
33. Significantly, the earlier decision in Shashi Prakash Khemka (supra)
    had concluded that the jurisdiction of the civil court would be barred
    by referring to the provisions of Section 430 of the Act of 2013.
    Neither this provision nor this decision was noticed by this Court in
    IFB Agro Industries Limited (supra). However, it would be wrong
    to hold that, for the said reason, there is a conflict between these
    two decisions. The jurisdiction of the civil court or for that matter, any
    other forum, would be barred only when the subject matter of the
    dispute squarely falls within the domain and jurisdiction of the court/
    forum constituted under the provisions of the Act of 1956/Act of 2013.
    When and where the Act of 1956/Act of 2013 does not confer such
    exclusive jurisdiction on the court/forum constituted thereunder or the
    dispute falls outside the realm of that particular provision of the Act
    of 1956/Act of 2013, the jurisdiction of the civil court would not be
    completely barred (See Dhulabhai vs. State of Madhya Pradesh and
    another 8). Notably, the edict in Ammonia Supplies Corporation (P)
    Ltd. (supra) was also to this effect and it was followed and affirmed
    in the decisions that followed thereafter. In Adesh Kaur (supra), this
    Court observed that if, on facts, an open-and-shut case of fraud is
    made out and the person seeking rectification was the victim, the
    National Company Law Tribunal would be entitled to exercise such
    power under Section 59 of the Act of 2013. This Court rejected the
    contention that, as criminal proceedings had been initiated, there was
    a serious dispute and it was not correct for the National Company
    Law Tribunal to exercise power under Section 59 of the Act of 2013.
    The contention that the shares had been dematted and were in the
    name of another person and, therefore, the power of rectification
    should not have been exercised, was also rejected.
34. In the present case, proper verification of the assertions made by the
    parties was a sine qua non. The Acting President of the NCLT, by


8   [1968] 3 SCR 662
[2024] 9 S.C.R.                                                        255

                   Chalasani Udaya Shankar and others v.
                 M/s. Lexus Technologies Pvt. Ltd. and other

     failing to carry out the said exercise, failed to discharge the mandate
     of law. Exercise of power under Section 59 of the Act of 2013 is to
     be undertaken in right earnest by examining the material, evidence,
     and the facts on record. This has not been done. Rather, a narrow
     view was taken without calling upon respondent No. 2 to prove the
     veracity of the contrary story put forth by him, despite receiving
     monies from the appellants. The facts, material, and evidence had
     to be examined in the context of the underlying facts, which would
     have included the receipt of monies, the signatures on the transfer
     deeds, etc. Needless to state, questions of fact must be decided on
     the principle of preponderance of probabilities, giving due weight
     to the specific facts, as found, so as to draw the conclusion that a
     reasonable person, acquainted with the relevant field, would draw
     on the basis of the same facts. (See High Court of Judicature at
     Bombay through its Registrar vs. Udaysingh and others 9).
35. Neither the Acting President of the NCLT nor the NCLAT examined,
    with any seriousness, the issues raised before them to come to
    a cogent conclusion as to whether the disputes raised by the
    respondents were mere moonshine. Notably, in Ammonia Supplies
    Corporation (P) Ltd. (supra), this Court held to that effect in the
    context of Section 155 of the Companies Act, 1956. Thereafter, in
    Aadesh Kaur (supra) also, this Court affirmed that if, on facts, an
    open-and-shut case of fraud is made out in favour of the person
    seeking rectification, the National Company Law Tribunal would be
    entitled to exercise such power under Section 59 of the Act of 2013.
    Therefore, verification of this aspect was essential but the NCLT
    failed to discharge this mandate.
36. Another crucial fact that needs to be noted is that the interim order
    passed on 27.06.2019 by the Member (Judicial) of the NCLT had
    indicated, in clear terms, the issues that arose for consideration
    and the inquiry required to determine the same. However, ignoring
    the said interim order, the Acting President of the NCLT chose to
    summarily dismiss the petition, without considering the material
    already placed on record and without further evidence being
    adduced. The documents that were referred to and attached to the
    Company Petition and the appellants’ rejoinder were glossed over


9   [1997] 3 SCR 803 : (1997) 5 SCC 129
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       or were completely ignored. Compounding the error of the Acting
       President of the NCLT, the NCLAT did not even get the facts right.
       Production of the original share certificates by the appellants and
       their argument, relying on Section 46 of the Act of 2013, that the
       signatures thereon by two Directors was sufficient in the eye of law,
       was totally lost sight of by the NCLAT. Further, the NCLAT blindly
       accepted the story put forth by respondent No. 2 to such an extent
       that it totally overlooked the fact that it was the appellants who had
       paid ₹14,66,39,400/- to respondent No. 2. Neither the NCLT nor the
       NCLAT chose to labour over the actual issues for consideration by
       looking at the documentary evidence already placed on record or
       by calling for further evidence in that regard.
37. On the above analysis, these appeals deserve to be and are,
    accordingly, allowed. The judgment in Company Petition No. 667/59
    & 241/HDB/2018 and the judgment in Company Appeal (AT) (CH) No.
    44 of 2021 & I.A. No. 548 of 2021 are set aside. Company Petition
    No. 667/59 & 241/HDB/2018 is restored to the file of the National
    Company Law Tribunal, Amaravati Bench, for consideration afresh
    on merits and in accordance with law, upon proper appreciation of
    evidence. Given the passage of time since the institution of the petition,
    we would request the National Company Law Tribunal, Amaravati
    Bench, to give priority to the same and endeavour to dispose it of
    as expeditiously as possible.
       Pending I.A.s, if any, shall stand disposed of.
       Parties shall bear their own costs.

       Result of the case: Appeals allowed.



       †
           Headnotes prepared by: Nidhi Jain