Tribunal annuls illegal board restructurings and unauthorized land transfers after finding mismanagement and oppression by certain directors; appoints forensic auditor to audit company affairs post-September 2009
In a landmark decision dated December 18, 2025, the National Company Law Tribunal (NCLT), New Delhi Bench, adjudicated the protracted dispute involving Neel Padam Builders Pvt. Ltd., a prominent real estate company engaged in development and sale of residential properties in Mathura, Uttar Pradesh.
The petitioners, comprising majority shareholders holding approximately 82.9% equity, alleged that Respondent No. 2, Mr. Ashok Kumar Agrawal, along with several others, orchestrated a conspiracy to illegally dilute their shareholding, restructure the board of directors without proper authority, and wrongfully dispose of company assets, thereby causing oppression and mismanagement under Sections 397, 398, 402, and 408 of the Companies Act, 1956.
Key allegations included the unauthorized allotment of 4,85,000 and 5,00,000 equity shares to Respondent No. 2 and associated parties in late 2009, the invalid increase of the company’s authorized share capital, and the execution of multiple sale deeds transferring valuable company properties to relatives and associates of the Respondents without proper board approval or shareholder consent. The petitioners also highlighted that some share allotments were backed by circular movement of company funds, indicating sham transactions.
The Respondents contested these claims, asserting the legality of the share capital increase and share allotments, their valid directorships, and the bona fide nature of the property sales. They also accused the petitioners of forcibly removing company records and alleged that the petition was an abuse of process.
After extensive examination of pleadings, documentary evidence, and judicial precedents, the NCLT found merit in the petitioners’ claims. The Tribunal held that:
- The removal of Respondent No. 2 as a Director due to non-attendance of three consecutive Board meetings was valid by operation of Section 283(1)(g) of the Companies Act, 1956.
- The appointments of certain directors, including Respondent No. 7 (Mr. Narendra Singh), were invalid as no proper Board resolutions or statutory filings existed prior to late 2009, and the digital signatures used to file forms were misused.
- The Board meetings and Extraordinary General Meeting (EGM) convened on 21.11.2009 to increase authorized share capital and allot shares were not valid due to lack of proper notice and quorum, rendering subsequent share allotments void ab initio.
- The shareholding pattern of the company as of 17.09.2009 shall be restored, nullifying unauthorized allotments post that date.
- All sale deeds, lease deeds, agreements to sell, and other documents executed after 17.09.2009 by Respondents Nos. 2, 4, 9, and 23 without valid board authority were declared non-est, subject to exceptions for bona fide purchasers acting at arm’s length.
- Akhilesh Pandy & Co., Chartered Accountants, was appointed as a forensic auditor to audit the company’s transactions from 17.09.2009 onwards and submit a report within two months.
- Based on the forensic audit, the company’s valid Board of Directors shall decide on retention or refund of assets and funds transferred after the cutoff date, ensuring protection of company and shareholder interests.
The Tribunal further emphasized that the company must comply with all relevant statutory provisions within six months and implement necessary development works for genuine allottees within one year of receiving the forensic audit report. The decision underscored the importance of adherence to corporate governance norms and reinforced protections against oppression and mismanagement under the Companies Act.
The judgment also addressed the rights of bona fide purchasers, clarifying that transactions executed by unauthorized directors without proper authority can be set aside if proven to be detrimental to the company and its shareholders.
This ruling is significant for the real estate sector and corporate governance in India, highlighting the Tribunal’s commitment to ensure fair management and protect shareholder rights against malpractices in closely held companies.
Bottom Line:
Alleged illegal alteration of shareholding and board composition by unauthorized filings with Registrar of Companies amounts to oppression and mismanagement; share allotments and board appointments post cessation date declared void; forensic audit directed to examine illegal transfer of company assets.
Statutory provision(s): Sections 283(1)(g), 286, 297, 397, 398, 402, 408 of Companies Act, 1956; Sections 241 to 245, 420, 424(3) of Companies Act, 2013; Order I Rule 10 and Section 151 of Code of Civil Procedure, 1908
