NCLT Amaravati Dismisses Plea To Rectify Blue Ocean Minerals' Register Of Members, Finds No Valid Share Allotment

The National Company Law Tribunal's Amaravati Bench has dismissed a plea for rectification of the register of members after holding that the petitioners failed to establish valid allotment of shares and their status as shareholders.

A bench of Judicial Member Kishore Vemulapalli and Technical Member Umesh Kumar Shukla, while dismissing the petition by Velagapudi Vedavathi and others, who claimed to be shareholders of Blue Ocean Minerals Pvt. Ltd., observed:

“In light of the foregoing analysis, we are of the considered view that the Petitioners, not being holders of a validly issued share certificate, are not competent to invoke the jurisdiction of this Tribunal under Section 59 for rectification of the register of members."

The petition, filed on March 31, 2021, was brought by Velagapudi Vedavathi, Velagapudi Deepthi and Velagapudi Keerthi against Blue Ocean Minerals and its directors, alleging that shares were allotted to them in 2010 upon payment of consideration, but their names were not entered in the register of members and no share certificates were issued. They also challenged subsequent allotments made in 2014 and 2017.

The respondents contended that the alleged allotments were erroneous and stood cancelled and that the petitioners were never valid shareholders.

Upon examining the record, the tribunal found that although payments were made, the petitioners failed to establish a valid allotment and their status as shareholders in law. It held that in the absence of such proof, they could not seek rectification or invoke remedies for oppression and mismanagement. The tribunal said:

“Having held that the Petitioners have not established their status as shareholders of R-1 Company in terms of the settled legal position under Section 59, the question of their entitlement to file an application under Section 241 the CA, 2013 does not arise at this stage.”

Accordingly, the tribunal held that the petition under Section 59 of the Companies Act for rectification was not maintainable.

However, while clarifying that the petitioners are at liberty to pursue appropriate remedies before competent civil or other forums in accordance with law, the tribunal said:

“It may, however, be noted that the finding regarding non maintainability of the Section 59 claim does not prejudice the Petitioners' right to approach appropriate forums for their grievances. The Petitioners would therefore be at liberty to pursue their remedies before the appropriate civil or other forum in accordance with law.”