NCLAT Chennai: Transfer Of Shares Not An Act Of Oppression And Mismanagement | SEBI Is The Competent Forum To Decide Disputes Of Transfer Of Shares And Not NCLT
Sachika Vij
18 Oct 2023 5:00 PM IST
The National Company Law Appellate Tribunal (‘NCLAT’), Chennai Bench comprising of Justice M. Venugopal (Judicial Member) and Shreesha Merla (Technical Member) dismissed the appeal filed in Jitendra Virmani vs. MRO – Tek Reality Limited. Jitendra Virmani (Appellant) filed the appeal against the National Company Law Tribunal (‘NCLT’) Bangalore order dated...
The National Company Law Appellate Tribunal (‘NCLAT’), Chennai Bench comprising of Justice M. Venugopal (Judicial Member) and Shreesha Merla (Technical Member) dismissed the appeal filed in Jitendra Virmani vs. MRO – Tek Reality Limited. Jitendra Virmani (Appellant) filed the appeal against the National Company Law Tribunal (‘NCLT’) Bangalore order dated 27.11.2019.
The Appellate Tribunal held the Transfer of Shares is not an act of ‘oppression’ and ‘mismanagement’ against the shareholders of the Company and disputes relating to the Transfer of Shares fall within the ambit of the Securities Board of India (‘SEBI’) and not NCLT.
Background Facts:
Proceedings were initiated by the Appellant who is the Chairman and Founder of the Embassy Group against Mro-Tek Realty Limited (‘Company’) on the grounds of oppression and mismanagement challenging a real estate development undertaken by the Company.
Multiple proceedings were initiated by the Appellant before the Civil Courts in Bengaluru. The Appellant withdrew an oppression and mismanagement petition and initiated another proceeding for oppression and mismanagement against the Company, which was dismissed by the NCLT Bangalore. The said order of NCLT Bangalore dated 27.11.2019 is in appeal before the NCLAT Chennai.
Contentions of the Parties:
NCLAT Verdict:
The NCLAT held that the Transfer of Shares is not an act of ‘oppression’ and ‘mismanagement’ against the shareholders of the Company and disputes relating to the Transfer of Shares fall within the ambit of SEBI and not NCLT.
The Appellate Tribunal pointed out that the Transfer of shares by the promoters under the Share Purchase Agreement was as per Law and was followed by the mandatory, public offer as per SEBI Takeover Code and Regulations. Moreover, the share purchase was duly approved by the Securities Board of India (‘SEBI’).
The NCLAT also observed that SEBI is the competent forum to decide the controversies or disputes relating to the Transfer of shares and to decide the aspects of the purported breach of SEBI Regulations and should fall under SEBI’s jurisdiction and not the NCLT.
Case Title: Jitendra Virmani vs. MRO – Tek Reality Limited
Case No.: Company Appeal (AT) No.363/2019
Counsel for Appellant: Dr. U.K. Chaudhary, Senior Advocate Mr. Manisha Chaudhary, Advocate Mr. Mansumyer Singh, Advocate Mr. Manisha Sharma, Advocate Mr. Shravan Chandrashekhar, Advocate
Counsel for Respondent: Mr. P.H. Arvindh Pandian, Senior Advocate For Mr. Pawan Jhabakh, Advocate, For R1, R11, R13 & R15 Ms. Parina Lalla, Advocate, For R2 to R8 & R14
