Supreme- Court-NCLT-Has-Jurisdiction-to-Examine-Fraud-in-Oppression-and-Mismanagement-Cases
The Supreme Court of India, on September 2, 2025, clarified that the National Company Law Tribunal (NCLT) has the power to examine allegations of fraud and validity of documents in cases involving oppression and mismanagement under company law.
A bench comprising Justice Dipankar Datta and Justice K. Vinod Chandran ruled that when a majority shareholder is wrongfully reduced to the position of a minority by the company’s board through mala fide acts, such conduct amounts to oppression.
Background of the Case
The appellant, holding 98% of the company’s shares and serving as an Executive Director, was ousted from the company. The allegations involved:
- A fraudulent gift deed allegedly transferring her shares to her mother-in-law.
- Board resolutions approving her removal without proper notice or quorum.
- Records showing her resignation, which she never tendered.
The NCLT found these acts fraudulent and restored her shareholding and directorship. However, the NCLAT overturned this decision, stating that matters of fraud and validity of the gift deed were beyond the NCLT’s jurisdiction.
Supreme Court’s Ruling
Setting aside the NCLAT’s order, the Supreme Court restored the NCLT’s decision. The Court relied on its earlier judgment in Tata Consultancy Services Ltd. v. Cyrus Investments (2021), where it was held that tribunals must bring an end to complaints of oppression and mismanagement by providing effective solutions.
The Court observed:
- The NCLT and CLB have wide jurisdiction to decide matters integral to complaints of oppression and mismanagement.
- Such power is limited only if another law specifically restricts it.
- Determining the validity of the gift deed was central to the case, and therefore, within the NCLT’s powers.
The Court concluded that the appellant was indeed a victim of oppression and mismanagement because:
- The alleged gift deed and share transfer were invalid and fraudulent.
- The board meetings were conducted in a mala fide manner, violating statutory requirements under the Companies Act, 1956 and the company’s internal rules (AoA and MoA).
The Court further noted that the company’s actions “demonstrated clear oppression and mismanagement,” lacking in fairness and probity.
Accordingly, the appeal was allowed, and the NCLT’s order restoring the appellant’s rights was upheld.
Key Takeaway for Students
This judgment reinforces that the NCLT has the authority to decide on fraud-related issues when they are directly connected to oppression and mismanagement cases. It ensures that majority shareholders cannot be wrongfully sidelined by fraudulent tactics.
For law students, this case highlights the importance of:
- The scope of NCLT’s jurisdiction.
- The concept of oppression and mismanagement under company law.
- How fraud can be disguised to oust jurisdiction, and why courts discourage such attempts.
Also Read: Supreme Court Says No: Judicial Service Experience Won’t Count as Law Practice
