NCLT Chennai Approves Notion Press Settlement, Orders ₹3.75 Crore Payout For Share Cancellation

The Chennai Bench of the National Company Law Tribunal (NCLT) on 9 October approved a Memorandum of Compromise between C. Janarthanan and Notion Press Media Pvt. Ltd., directing the company to cancel his 3,999 equity shares and pay him Rs. 3.75 crore as part of the settlement of an oppression and mismanagement petition.

A Bench comprising Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramaniam also directed the company to cancel the shares and reduce its paid-up capital accordingly. They observed:

“A decision was also taken by the Investors / Shareholders that instead of any one shareholder getting the shareholding by purchasing the same from the Petitioner, it would be equitable to cancel the shares of the Petitioner and to pay off from the resources of the Company. This arrangement is consensual settlement of disputes forming the subject matter of the petition.”

Janarthanan, a second-generation book publisher, co-founded Notion Press with his school friend Naveen Valsakumar and Bhargava Adepalley in 2012. The founders incorporated the business as a company in 2013, initially holding equal shareholdings.

As the company faced challenges in its self-publishing business model, it sought external investment. Investors subscribed to compulsorily convertible preference shares (CCPS) under share subscription-cum-shareholders' agreements dated 24 August 2016. The parties amended Clause 11.1 of the agreement concerning exit options on 16 February 2022.

Subsequently, Janarthanan challenged board resolutions passed in March and April 2024, including resolutions converting CCPS into equity shares and amending the Articles of Association. He alleged that these decisions prejudiced his rights and diluted his shareholding from 33.33% to 21% without his proper consent.

He approached the Tribunal under Sections 213, 241 and 242 of the Companies Act, 2013, seeking to set aside the resolutions, prevent alterations to the Articles of Association and recover allegedly siphoned funds.

The respondents contested the petition's maintainability under Section 244, arguing that Janarthanan's shareholding fell below the prescribed 10% threshold. They also submitted that he had attended board meetings, received meeting notices and minutes, and raised no objections regarding his directorship. They maintained that he knew about the induction of investors and the terms of their investments.

Further, they argued that disputes concerning the investment terms and agreements with investors fell within the jurisdiction of the Arbitral Tribunal under the relevant agreements. They also contended that Janarthanan had instead initiated proceedings before the NCLT, jeopardising the company's interests and well-being.

During the proceedings, the parties explored an amicable settlement and executed a Memorandum of Compromise on 3 September 2026. Under its terms, Janarthanan agreed to surrender 3,999 equity shares with a face value of Rs. 10 each. The company agreed to extinguish and cancel those shares, reduce its paid-up capital accordingly and pay him Rs. 3.75 crore within seven days of the cancellation.

The respondents assured the Bench that the settlement would not adversely affect other stakeholders. They stated that the company's only creditors were banks holding hypothecation over its machinery and vehicles. They also clarified that the company would pay the settlement amount from its own resources rather than borrowed funds.

The settlement relied on a company valuation of Rs. 41.50 crore, which placed the value of each share at Rs. 8,773. The parties relied on this valuation to support the agreed payout for Janarthanan's shareholding.

The Tribunal examined Section 242 of the Companies Act, which empowers the Tribunal to order the purchase of shares by a company, consequential reduction of share capital and other just and equitable reliefs in oppression and mismanagement proceedings. It noted that all shareholders had signed the compromise, the valuation remained undisputed and the settlement would not prejudice creditors.

Accordingly. The NCLT approved the Memorandum of Compromise, directed the cancellation of Janarthanan's 3,999 equity shares, reduction of the company's paid-up capital and payment of Rs. 3.75 crore to him within seven days of the cancellation, and disposed of the main petition and connected applications.