September 3, 2025
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Gift of Shares is invalid if it is not in conformity with the AoA, especially if Clause 16 prohibits such transfers to specific individuals. The first respondent, “Satori Global Limited,” initially known as Sargam Exim Private Limited, was incorporated on 13.04.2006. It later converted to a public limited company, Satori Global Limited, on 20.06.2011.
Initial Shareholding The company’s authorised share capital was Rs. 2 crores (2,00,00,000 equity shares of Rs. 10 each), with a paid-up capital of Rs. 3 lacs (30,000 equity shares). The Appellant’s husband, Mr. Ved Krishna, was an original promoter. He initially subscribed to 5,000 shares, and the second respondent subscribed to 25,000 shares. Subsequently, the second respondent transferred 24,500 shares to the Appellant, bringing her shareholding to 29,500 shares. The remaining 500 shares were transferred to the third respondent, Mr. Nirupam Mishra.
Appellant’s Dominant Stake The Appellant, Mrs. Shailja Krishna, acquired an additional 10,000 shares from the second respondent, increasing her total shareholding to 39,500 shares, representing more than 98% of the company’s shareholding.
Resignation and Alleged Gift The second respondent resigned from directorship on 01.02.2007 but was later inducted as a Director. The Appellant resigned on 17.12.2010. On the same day, a gift deed was executed in Faizabad, purportedly transferring the Appellant’s entire shareholding to the fourth respondent, Mrs. Manjula Jhunjhunwala (Appellant’s mother-in-law). A Share Transfer Form, dated 01.10.2010, was also used for this transfer, with its validity extending up to 12.11.2011.
Legal Battles Emerge The Appellant lodged multiple police complaints, alleging coercion into signing blank documents and concerns regarding the share transfers. She also filed a petition under the Protection of Women from Domestic Violence Act, 2006, and an FIR for criminal breach of trust.
NCLT’s Initial Ruling The Appellant filed a company petition (107/ND/2013) before the Company Law Board (CLB), later transferred to the National Company Law Tribunal (NCLT). The NCLT, Allahabad Bench, by its judgment dated 04.09.2018, allowed the petition. It restored the Appellant as an Executive Director and lawful owner of 39,500 equity shares, declaring the share transfer dated 18.11.2011 null and void due to overwriting, manipulation, and execution after its validity had expired. The NCLT also found the RoC lacked power to extend validity.
NCLAT’s Reversal The Company and two respondents appealed to the National Company Appellate Tribunal (NCLAT). The NCLAT, Principal Bench at New Delhi, set aside the NCLT’s judgment on 02.06.2023, stating that the NCLT lacked jurisdiction to decide issues of fraud, manipulation, and coercion.
Laws Involved
The core of the legal debate revolved around the application and interpretation of various statutes and company regulations:
Companies Act, 1956:
Sections 397 & 398: Empower the Tribunal to address acts of oppression and mismanagement.
Section 108 (1D): Pertains to the validity of share transfer forms.
Section 111A: Deals with the rectification of the register of members.
Sections 286, 193: Relate to the conduct and validity of board meetings, including notice requirements.
Companies Act, 2013:
Section 242: Empowers the NCLT to look into acts of oppression and mismanagement, including cases involving fraudulent share transfers.
Section 155: Grants power to rectify the register of members.
Articles of Association (AoA):
Clause 16: Governs the transfer of shares, particularly by way of gift, and was central to the validity of the gift deed to the mother-in-law.
Clause 53: Stipulates the quorum required for board meetings.
Clauses 30 & 61: Mandate the giving of notice for company meetings.
General Legal Principles: Concepts of fiduciary duty, fraud, coercion, and the maintainability of company petitions were extensively discussed.
Reasoning
The Supreme Court examined the findings of the NCLAT and the arguments from both sides to determine the maintainability of the petition, the NCLT’s jurisdiction, and the existence of oppression and mismanagement.
Jurisdiction of NCLT: The Appellant contended that NCLAT erred in concluding NCLT lacked jurisdiction to decide issues of fraud and manipulation, arguing that Section 242 of the Companies Act, 2013, allows the NCLT to address these matters within the context of oppression and mismanagement, even if they involve fraudulent share transfers. The court noted that jurisdiction under Sections 397/398 of the 1956 Act is broad enough to remedy oppression and mismanagement, which may involve allegations of fraud.
Validity of the Gift Deed and Share Transfers:
The Appellant asserted the gift deed dated 17.12.2010 was invalid, primarily because it violated Clause 16 of the AoA, which restricted the transfer of shares by gift, and was procured through fraud and coercion.
The share transfer forms were also challenged as fraudulent, expired, and invalid, with allegations of overwriting and mismatch of dates.
The Court noted that a gift deed is invalid if it is not in conformity with the AoA, especially if Clause 16 prohibits such transfers to specific individuals (like a mother-in-law).
Validity of Board Meetings: The Appellant challenged the board meetings held on 15.12.2010 and 17.12.2010, arguing they were invalid due to:
Lack of proper notice to the Appellant and third respondent.
Absence of a proper quorum, as stipulated by Clause 53 of the AoA, rendering resolutions passed at these meetings invalid.
Violations of the AoA and the 1956 Act. These meetings were crucial as they reportedly accepted the Appellant’s resignation and approved other company actions.
Definition of Oppression and Mismanagement: The Court considered the broad legal concept of oppression, noting it refers to conduct that is “burdensome, harsh or wrongful,” not necessarily illegal, and often involves a departure from fair dealing or an abuse of power. The conduct must be prejudicial to the public interest or members.
Holding
The Supreme Court delivered a decisive judgment:
Oppression Confirmed The Court found that the actions of the Company collectively demonstrate clear oppression and mismanagement, and that “probity is lacking, which is prejudicial to the appellant” .
NCLAT’s Decision Overturned The Court concluded that the NCLAT’s interference with the NCLT’s judgment and order was “quite unnecessary” .
Appeals Allowed Consequently, the common appellate judgment and order of the NCLAT were set aside, and the civil appeals were allowed .
Mrs. Shailja Krishna Vs Satori Gobal Limited & Ors.
Supreme Court: 2025 INSC 1065: (DoJ 02-09-2025)
2025 INSC 1065 Download Supreme Court File
