In a noteworthy administering on 9th September 2024, the Incomparable Court of India set aside the judgments of the National Company Law Tribunal (NCLT) and the National Company Law Re-appraising Tribunal (NCLAT) in a case including affirmations of extortion and fumble inside M/s. Lexus Advances Pvt. Ltd. The appellants, Chalasani Udaya Shankar, Sripathi Sreevana Reddy, and Yalamanchilli Manjusha, had offered against the expulsion of their claims beneath Areas 59 and 241 of the Companies Act, 2013, looking for correction of the company's Enroll of Individuals.
Case Background
The appellants, who obtained a lion's share of the offers in M/s. Lexus Innovations Pvt. Ltd., drawn nearer the NCLT, Hyderabad/Amaravati Seat, charging that the respondents, Mantena Narasa Raju, Appa Rao Mukkamala, and Suresh Anne, chiefs of the company, had committed extortion by deleting their shareholding from the company's records. The appellants had obtained 10,51,933 offers from Mantena Narasa Raju in 2015, but afterward found that their names were avoided from the company's shareholder list in yearly returns recorded by the company.
Supreme Court Observations
The Supreme Court, in its detailed judgment authored by Justice Sanjay Kumar, criticized both the NCLT and the NCLAT for their failure to properly examine the evidence presented by the appellants. The Court noted that the Acting President of the NCLT had dismissed the case without addressing the substantial material already on record. In particular, the Court highlighted the failure to consider the appellants’ original share certificates, share transfer forms, and other crucial documents.
The judgment states: “The documents that were referred to and attached to the Company Petition and the appellants’ rejoinder were glossed over or were completely ignored. Compounding the error of the Acting President of the NCLT, the NCLAT did not even get the facts right.”
Further, the NCLAT was criticized for accepting the respondents' version of events without any serious inquiry. The Court noted that the NCLAT wrongly concluded that the appellants had not transferred money towards the purchase of shares, overlooking the fact that the appellants had, in fact, paid ₹14,66,39,400 to respondent No. 2.
Conclusion and Directions
In its ruling, the Supreme Court set aside both the NCLT and NCLAT judgments and restored the company petition to the NCLT, Amaravati Bench, for fresh consideration. The Court directed that the case be given priority and disposed of expeditiously.
The Supreme Court concluded: “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.”
Click Here to: Download/View Related File
TAGS: Supreme Court NCLT NCLAT Companies Act 2013 fraud mismanagement shareholder rights corporate governance rectification of Register of Members oppression.
