Person holding shares must disclose the beneficial owner : Non-declaration however is not an act of oppression and mismanagement

NCLAT Dismisses Appeal in Share Ownership Dispute: No Beneficial Ownership for Satyanarayan Gupta. Tribunal Upholds NCLT's Decision; Finds No Merit in Claims of Oppression and Mismanagement by Respondents

In a significant decision, the National Company Law Appellate Tribunal (NCLAT), Principal Bench New Delhi, has dismissed the appeal filed by Satyanarayan Gupta against Shivangan Realestate Pvt Ltd and others. The appeal was in response to the dismissal of a company petition by the National Company Law Tribunal (NCLT), Jaipur Bench, Rajasthan, which had rejected Gupta's claim of beneficial ownership of 5000 equity shares in the respondent company.

The appeal, presided over by Justice Yogesh Khanna, Member (Judicial), and Mr. Ajai Das Mehrotra, Member (Technical), centered around the appellant's assertion that he was the rightful beneficial owner of shares that had been transferred to Respondent No.3 in 2017. The appellant contended that this transfer was wrongful and sought rectification of the company's records to reflect his ownership, based on a Memorandum of Understanding (MoU) dated January 1, 2022.

The tribunal, however, found that the appellant had indeed transferred his shares in 2017, which was duly recorded in the company’s records. The MoU executed between the parties acknowledged loans provided to the appellant and the transfer of properties as security. It stipulated the re-transfer of shares and directorship upon repayment of loans, which the appellant had failed to fulfill.

The appellant also raised issues regarding a property dispute related to land at Chand Ji Ki Dhani, Jaipur, claiming misappropriation by the respondents. However, a related civil suit was dismissed due to non-joinder of necessary parties, specifically Respondent No.1 company, and this dismissal was not contested, thereby attaining finality.

A pivotal argument was the alleged non-declaration of beneficial ownership under Section 89(5) of the Companies Act, 2013, which mandates the declaration of beneficial ownership details by the person holding shares. The tribunal upheld the NCLT's interpretation that failure to declare does not constitute oppression or mismanagement but rather incurs a penalty under the Act.

In dismissing the appeal, the tribunal emphasized that the company petition was not maintainable as the appellant was neither a member nor a shareholder of the respondent company, and the MoU involved private parties with no direct relation to company affairs. Consequently, the appellant's requests for interim relief and rectification of records were denied.

This decision underscores the importance of adhering to statutory requirements concerning shareholding declarations and the limitations of MoU agreements when seeking redress through company petitions. The tribunal's judgment reaffirms the necessity for clear legal standing and fulfillment of obligations before claiming rights over company shares and properties.

Bottom Line:

Section 89(5) of the Companies Act, 2013 prescribes a duty on the person holding shares to declare details of the beneficial owner. Non-declaration of such details attracts penalty and cannot be considered as an act of oppression and mismanagement.

Statutory provision(s): Companies Act, 2013 Section 89(5), Companies Act, 2013 Section 421, Civil Procedure Code Order 7, Rule 11

Satyanarayan Gupta v. Shivangan Realestate Pvt Ltd, (NCLAT)(Principal Bench New Delhi) : Law Finder Doc id # 2798606