Whether Civil Court is competent to determine disputed question of ownership of shares in family companies?

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Shubham Budhiraja[1]

A holds share in family companies and LLP and after his death, his son and family acquire ownership in these companies and properties. B, A’s wife, filed civil suit and made Companies and LLP as parties. Defendant objected the jurisdiction of civil court on ground of bar under Section 430 of Companies act, 2013. The Hon’ble Delhi High Court rejected the said objection and held that civil court has jurisdiction to determine title in shares in the company especially when corporate body is a family enterprise. The Jurisdiction of NCLT is summary in nature which cannot decide complicated questions of fact involving evidence and cross-examination.[2]    

 

(I)                 In Jai Mahal Hotels Pvt. Ltd. v. Devraj Singh and Ors., (2016) 1 SCC 423, It was held that there is a thin line in appreciating the scope of jurisdiction of the Company Court/Company Law Board. The jurisdiction is exclusive if the matter truly relates to rectification but if the issue is alien to rectification, such matter may not be within the exclusive jurisdiction of the Company Court/Company Law Board.

 

(II)               In Aruna Oswal v. Pankaj Oswal, (2020) 8 SCC 79, It was held that the decision in a civil suit would be binding between the parties on the question of right, title, or interest. It is the domain of a civil court to determine the right, title and interest in an estate in a suit for partition.

 

(III)             In Bakshi Faiz Ahmad v. Bakshi Farooq Ahmad, (2018) 211 Comp Cas 340, It was held that section 58 of the Companies Act, provides that rectification of register of members has to be decided by Tribunal and as per Section 430, the Civil Court has no jurisdiction. At the same time, it is also a trite law that Tribunal has a power only to decide the issue of rectification of register of members and has no power to decide the issue of title. It is apt to mention here that as per Section 111A of the Companies Act, 1956, the Company Law Board was empowered to decide the issue of title also. The word ‘title’ has not been included in Section 58 of the Companies Act, 2013. Even while considering Section 111A, it was held by the Supreme Court that a seriously disputed question of title cannot be decided by the Company Court or Company Law Board. This conclusion was arrived at by the Supreme Court by taking into consideration jurisdiction of the Company Law Board being summary in nature. The procedure in National Company Law Tribunal constituted under the Companies Act, 2013, is also summary in nature

 

 


[1] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], Budhirajalawchambers@gmail.com

[2] CS(OS) 589/2021, Delhi High Court Judgment dated 29/07/2022

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