Share Transfers During Liquidation Not Absolutely Barred, Subject To Tribunal Approval: NCLT Chennai

The National Company Law Tribunal (NCLT) at Chennai has permitted the transfer of shares held in a company undergoing liquidation, holding that such transfers are not absolutely barred and may be allowed with the Tribunal's approval.

“The very existence of Section 334 presupposes that transfers during liquidation are not absolutely barred, but are subject to scrutiny and validation by the Adjudicating Authority. The settled legal position, as consistently held in judicial precedents relied upon by the Applicant, is that such transfers may be permitted if they are bona fide, in good faith, and do not prejudice the interests of creditors or the company,” the tribunal observed

A coram of Judicial Member Jyoti Kumar Tripathi and Technical Member Ravichandran Ramasamy was hearing an application filed by Epic Concesiones Private Limited seeking permission to transfer its equity in Sical Iron Ore Terminals Ltd. which is undergoing liquidation.

Epic Concesiones holds 11% of the company's equity share capital.

Epic Concesiones told the tribunal that it is part of a group-level restructuring plan involving the setting up of an Infrastructure Investment Trust (InvIT). Under SEBI regulations, an InvIT can hold shares only in eligible investee companies. Since a company undergoing liquidation does not qualify, it said it could not continue holding shares in Sical Iron Ore Terminals.

To meet these regulatory requirements, Epic Concesiones entered into a share purchase agreement in June 2025 to transfer its entire stake. 

The shares were independently valued at nil, and the transaction was approved by the boards of both parties. Epic Concesiones then approached the tribunal seeking permission to proceed with the transfer, along with a waiver from dematerialisation requirements since the shares were held in physical form.

The liquidator, however, opposed the request, arguing that once liquidation begins, any share transfer is legally meaningless and cannot be recorded. It was also contended that Section 334 of the Companies Act does not apply to a company already in liquidation.

Rejecting these objections, the Tribunal held that Section 334 expressly empowers it to permit share transfers during liquidation.

It also observed that shares held by shareholders do not form part of the liquidation estate and therefore fall outside the liquidator's powers, making such shares transferable subject to the tribunal's approval.

“The Applicant, as a shareholder, continues to retain its proprietary interest in the shares until dissolution, and such interest is transferable, subject to approval of this Tribunal under Section 334,” the Bench said.

The tribunal further held that procedural objections relating to the maintenance of the register of members cannot override its statutory powers, noting that the liquidator is bound by its directions. It accordingly allowed Epic Concesiones' application and directed the liquidator to take the share transfer on record.

For Applicant: Advocate G Allwin Chelliah

For Respondent: Advocate Akhil Bhansali