SC on NCLTs Juridiction in Fraud and Mismanagement Cases: Mrs. Shailja Krishna v. Satori Global Limited & Ors.

In Shailja Krishna v. Satori Global Limited, the Supreme Court of India held that the NCLT has the jurisdiction to decide allegations of fraud that are integral to oppression and mismanagement petitions under the Companies Act. By ruling so, the Supreme Court reversed the view of the National Company Law Appellate Tribunal (“NCLAT”) that such cases related to determination of fraud must go to civil courts. The case arose after Mrs. Shailaja Krishna, who held over 98 % of the shares in Satori Global Ltd., alleged that in 2010, her resignation as director was accepted without proper notice, and her shares were fraudulently transferred to her mother-in-law via a gift deed in board meetings held without quorum. She contended that these actions were fraudulently executed leading to oppression and mismanagement under Sections 397 and 398 of Companies Act, 1956. The NCLT originally agreed and restored her position, but the NCLAT overturned this stating that NCLT did not have the requisite jurisdiction to examine matters relating to fraud. The Supreme Court, however, reinstated the NCLT’s order, finding that the contested gift deed, share transfer and board actions were central to proving oppression and mismanagement and thus within the wide remedial powers of NCLT. 

(To get more insights on this judgement, please read our Article published here).

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