National Company Law Appellate Tribunal, New Delhi: In the present case, a company appeal was filed challenging the impugned order passed under Section 59 of the Companies Act, 2013 (‘2013 Act’) by the NCLT, Hyderabad (‘Tribunal’), which rejected the application on ground of non-maintainability. The Bench comprising Sharad Kumar Sharma, J. (Judicial Member) and Jatindranath Swain (Technical Member) dismissed the appeal, stating that the findings of the Tribunal, did not suffer any apparent error warranting interference. The Appellate Tribunal stated that Section 59 was exclusively limited to the rectification of the register of members, but the relief sought by the appellant pertained to a direction for issuance of a valid share certificate, which did not fall within the scope of Section 59. Further, the appellant did not possess a valid share certificate, thus, was not competent to initiate proceedings under Section 59 for rectification of the register of members.
Background:
The appellant had initiated the proceedings under Section 59 of the 2013 Act seeking directions to Respondent 1, Biochemical & Synthetic Products (P) Ltd. to issue valid share certificates aggregating to 12.5% of the total equity shares of Respondent 1 company; to rectify the register of members by entering the appellant’s name as a member and shareholder; and to direct Respondent 2, Registrar of Companies, to take action against Respondent 1 company under Section 447 of the 2013 Act.
The respondent submitted that the appellant would have no locus to stand in the present proceedings owing to the implications of the arbitration proceedings and the orders passed therein. Moreover, an Arbitration Petition had already been instituted under Sections 11(5), 11(9), and 11(12)(a) of the Arbitration and Conciliation Act, 1996, wherein the cause of action and the relief sought were similar, particularly with respect to the issuance of a legally valid share certificate. The appellant had filed a memorandum expressing his intent to withdraw from the arbitration proceedings, and had voluntarily opted out to pursue other appropriate remedies, apprehending a potential conflict between an arbitral award and the proceedings he intended to initiate.
The Tribunal held that in the absence of any valid share certificate issued in favour of the appellant by Respondent 1, rectification of the register of members could not be undertaken. It was further held that no privity of contract between the appellant and Respondent 1 had been established by any evidence on record.
In the present case, the issue for consideration was whether the appellant was at all entitled to invoke Section 59 of the 2013 Act for rectification of the register of members, in light of the so-called share certificates which he claimed to hold in Respondent 1 company.
Analysis, Law, and Decision:
The Appellate Tribunal, upon perusal of the share certificate placed on record, held that it could not be said to be a validly executed share certificate, owing to its apparent anomalies. Thus, based on such a defective document, proceedings under Section 59 of the 2013 Act could not have been initiated.
The Appellate Tribunal observed that the bar under Section 430 of the 2013 Act was inapplicable, as the exclusion of civil court jurisdiction extends only to matters for which the 2013 Act provides a specific remedy or mechanism.
The Appellate Tribunal held that the relief sought under Section 59 of the 2013 Act pertained to issuance of a share certificate and not rectification of the register of members. Further noted that the first and foremost pre-condition for invoking Section 59 of the 2013 Act was that the appellant must already be a valid holder of a share certificate prior to invoking the provision. A direction for issuance of a share certificate squarely fell outside the scope and ambit of Section 59 of the 2013 Act.
The Appellate Tribunal, based on the correspondence, recorded that on the date of filing of application, the appellant did not possess a valid share certificate.
Further, the Appellate Tribunal held that Section 469 of the 2013 Act was an enabling provision constituting subordinate legislation and intending only to facilitate implementation of the 2013 Act. Also, Rule 70(5) of the NCLT Rules, 2016 could not come to the aid of the appellant, in view of the inherent restrictions imposed by Section 59 of the 2013 Act itself, which governed the principal substantive provisions relating to the rectification of the register of members.
It was further noted that the appellant had voluntarily withdrawn from the arbitration proceedings and instead chose to initiate proceedings under the 2013 Act before the Tribunal.
The Appellate Tribunal observed that the share certificate on the basis of which the appellant had raised his claim for invocation of Section 59 of the 2013 Act did not satisfy any of the conditions prescribed under Rule 8(2) of the Companies (Share Capital and Debentures) Rules, 2014, despite the appellant’s attempt to establish compliance. The appellant, who did not possess a valid share certificate, was not competent to initiate proceedings under Section 59 of the 2013 Act for rectification of the register of members.
Further, it was held that the possibility of rectifying share certificates or any shortcomings that may arise in the issuance of a valid share certificate was earlier made rectifiable in light of the provisions contained in Section 113 of the Companies Act, 1956, which dealt with the limitation of time for issuance of a valid share certificate, particularly the conditions set out under Section 113(3) of the Companies Act, 1956.
Thus, Section 59 of the 2013 Act was exclusively limited to the rectification of the register of members. The relief sought pertained to a direction for issuance of a valid share certificate, which did not fall within the scope of Section 59 of the 2013 Act. There was no anomaly in the findings recorded by the Tribunal. Since there was no privity of contract as employer and employee between the appellant and Respondent 1, and as the matter involved complex questions of fact requiring scrutiny of evidence before arriving at a conclusion, a proceeding under Section 59, which was summary in nature, could not be invoked. Hence, the rejection of the application by the impugned order, holding the proceeding under Section 59 of the 2013 Act to be not maintainable, did not suffer from any apparent error warranting interference. The company appeal was therefore dismissed, and all interlocutory applications stood closed.
[Mohan Ram Prasad Devineni v. Biochemical & Synthetic Products (P) Ltd., 2025 SCC OnLine NCLAT 2124, decided on 23-12-2025]
Advocates who appeared in this case:
For Appellant: R. Moneshaa, Advocate
For Respondents: P.H. Arvindh Pandian, Senior Advocate, Vishnu Kanth Mundada, Shadab Azhar, Arpit Kumar Mishra, Shravya Tirunahari, Advocates for Respondent 1
Buy Arbitration and Conciliation Act, 1996 HERE
