Legal Background:

• The appellants sought rectification of the Register of Members of Lexus Technologies Pvt. Ltd. under Sections 59 and 88 of the Companies Act, 2013. They alleged fraud, oppression, and mismanagement and requested action under Sections 447 and 448.
• The National Company Law Tribunal (NCLT) dismissed the case, as did the National Company Law Appellate Tribunal (NCLAT), which prompted an appeal to the Supreme Court.

Factual Dispute:

1. Share Purchase:
   The appellants claimed to have purchased 10,51,933 equity shares from respondent Mantena Narasa Raju, representing 94.8% of the company’s shareholding.

2. Allegations of Fraud:
   The appellants accused the respondents of erasing their shareholding and filing false annual returns. The respondents, on the other hand, denied the share sale, claiming the documents were forged.

3. Payment of Consideration:
   The appellants claimed they paid ₹14.67 crore for the shares, while the respondents argued that this sum was part of a loan arrangement, not a share purchase.

Tribunal Decisions:

• The NCLT and NCLAT dismissed the appellants' case, ruling in favor of the respondents' narrative, and found the petition to be time-barred.

Supreme Court Ruling:

• The Supreme Court found that the NCLT and NCLAT failed to fully examine the evidence and ignored critical aspects of the appellants’ claims.
• The court highlighted that the lower tribunals did not adequately investigate the financial transactions, share transfer deeds, and alleged fraud, dismissing the case prematurely.

Direction:

The Supreme Court restored the petition to the NCLT for fresh adjudication, urging it to properly verify the evidence and reach a conclusion based on the merits of the case.

Acts and Sections Discussed:

1. Section 59 – Rectification of Register of Members
2. Section 88 – Register of Members
3. Section 241 – Oppression and Mismanagement
4. Sections 447 and 448 – Fraud and False Statements

Ratio Decidendi:

The Supreme Court ruled that the NCLT and NCLAT erred in their premature dismissal of the case, failing to give due consideration to the evidence presented by the appellants. It emphasized that proper examination of documentary evidence and financial transactions was essential in determining whether the appellants were legitimate shareholders. The ruling reinforced the importance of a detailed factual inquiry when claims of fraud and mismanagement are raised in company disputes.

Subject:

Company law, share disputes, oppression, and mismanagement under the Companies Act, 2013.

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