When Family Feuds Enter Boardrooms: Supreme Court Protects Shareholder Rights.

When Family Feuds Enter Boardrooms: Supreme Court Protects Shareholder Rights.

On 2nd September 2025, the Supreme Court of India delivered a significant judgment in Mrs. Shailja Krishna vs. Satori Global Limited & Ors. (Civil Appeal Nos. 6377–6378 of 2023), which will have far-reaching implications on the law relating to oppression and mismanagement, fraudulent share transfers, and the jurisdiction of the National Company Law Tribunal (NCLT).

Background of the Dispute

The appellant, Mrs. Shailja Krishna, was one of the original promoters and held over 98% shareholding in the company (then Sargam Exim Pvt. Ltd., later renamed Satori Global Ltd.). She alleged that her husband and in-laws, with whom she had a strained relationship, coerced her into signing blank documents and later used them to fabricate a gift deed and share transfer forms, unlawfully transferring her majority shareholding to her mother-in-law.

When her name was removed from the register of members and she was ousted as Director, she approached the Company Law Board (later NCLT) under Sections 397 and 398 of the Companies Act, 1956 alleging oppression and mismanagement.

• NCLT Allahabad (2018): Allowed her petition, declared the gift deed and share transfers null and void, and restored her as majority shareholder and Executive Director.
• NCLAT (2023): Reversed the NCLT’s order, holding that issues of fraud and coercion were beyond NCLT’s jurisdiction and could only be tried before a civil court.
• Supreme Court (2025): Set aside the NCLAT order and restored the NCLT’s judgment.

Key Findings of the Supreme Court

Maintainability of Petition under Sections 397 & 398

The Court reaffirmed that company petitions alleging oppression and mismanagement are maintainable even when issues of fraud and coercion are involved. The NCLT has wide powers to look into fraudulent transfers of shares, and minority shareholders (or ousted majority shareholders, as in this case) must not be left remediless.

Jurisdiction of NCLT to Examine Fraud

Relying on precedents such as Tata Consultancy Services Ltd. v. Cyrus Investments (2021) and Radharamanan v. Chandrasekara Raja (2008), the Court held that NCLT/CLB exercises quasi-judicial powers as an original authority. If allegations of fraud, coercion, or manipulation are central to the complaint of oppression, NCLT can adjudicate them.

Invalidity of the Gift Deed & Share Transfers

The Articles of Association (AoA) restricted share transfers by way of gift only to certain relatives (wife, husband, son, daughter, etc.). Transfer to a mother-in-law was not permitted. The share transfer forms were time-barred, tampered with, and suffered from overwriting of dates. The Court found the entire process tainted with mala fides and declared both the gift deed and share transfers invalid.

Illegality of Board Meetings

Board meetings held on 15.12.2010 and 17.12.2010, where the appellant’s resignation was allegedly accepted and new directors were inducted, were found illegal due to:

• Lack of notice to the appellant
• Absence of quorum, since the appellant (holding 98% shares) was not present
• No valid minutes or evidence of service of notice

Oppression & Mismanagement Established

The Court held that the company’s affairs were conducted in a manner harsh, wrongful, and prejudicial to the appellant. Serial acts of manipulation (fraudulent share transfers, fabricated meetings, ouster from management) amounted to classic oppression and mismanagement.

Final Directions

The Supreme Court set aside NCLAT’s order, restored the NCLT’s decision, reinstated Mrs. Shailja Krishna as the rightful majority shareholder and Executive Director, and declared the disputed share transfers null and void.

Importance of the Judgment

This ruling clarifies several crucial aspects of corporate law:

• NCLT’s Jurisdiction: The Tribunal is not a mere summary forum but has the power to adjudicate even complex issues of fraud and coercion if they are central to oppression/mismanagement.
• Protection of Shareholder Rights: Even when majority shareholders are forcibly reduced to minority through dubious transfers, relief is available under the Companies Act.
• Supremacy of Articles of Association: Any transfer of shares inconsistent with the AoA is invalid.
• Strict Scrutiny of Corporate Conduct: Board meetings and resolutions that bypass statutory requirements of notice and quorum will not be upheld.

Conclusion

The Supreme Court’s decision in Shailja Krishna vs. Satori Global Limited is a strong affirmation of shareholder rights and corporate probity. It sends a clear message that fraudulent manipulation of shareholding and management cannot be shielded behind technical arguments of jurisdiction.

For women shareholders, family-owned companies, and investors alike, this judgment ensures that the remedy of oppression and mismanagement remains a powerful safeguard against abuse of corporate structures.