NCLT Mumbai Orders 50% Shareholder To Exit Urja Niyojan At Nil Value Over Deadlock In Management

The Mumbai Bench of the National Company Law Tribunal (NCLT) on 3 June directed the exit of a 50% shareholder of Urja Niyojan Pvt Ltd at nil value, holding that a complete managerial deadlock and irretrievable breakdown of trust between equal shareholders had stalled the company's functioning.

Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar allowed an oppression and mismanagement petition filed by promoter and director Madhav Shridhar Dandavate against co-promoter and director Beena Sanjeev Kadekar, and ordered transfer of her entire shareholding in the company at nil value. The Bench held:

“In view of the aforesaid facts and circumstances, and in exercise of powers conferred under Section 242 of the Companies Act, 2013, this Tribunal considers it just, equitable and appropriate to direct that respondent no 2 shall transfer her entire shareholding in the respondent company at Nil value and execute the necessary form for registration of said transfer in the records of the company.”

The dispute arose between the two promoters, each holding 50% equity and occupying one board seat. Dandavate alleged that Kadekar and her late husband failed to infuse promised funds, withheld company receivables, caused freezing of the company's bank account, opened an alternate account in the company's name without authority, and obstructed statutory compliances and board functioning.

The Tribunal noted that the respondents did not participate in the proceedings despite repeated opportunities. It found that the opening of a separate bank account, instructions to freeze the company's primary account, retention of company funds, and continued absence from board meetings had resulted in a functional deadlock and were inconsistent with corporate probity.

It also noted that a registered valuer assessed the company's equity at zero due to negative net worth. On this basis, the Bench directed Kadekar to transfer her entire shareholding to the petitioner at nil value and to cease as director within 30 days. It further directed her to bear 50% of the costs required to regularise pending statutory filings. It observed:

“Further respondent no 2 shall cease to be the director of the respondent company on expiry of 30 days from the date of this order without any further requirement in case she fails to communicate her formal resignation to the respondent company within 30 days of the date of this order and file the same with the MCA. It is further made clear that petitioner shall be entitled to register the transfer of the shares standing in the name of respondent 2 in his or his nominees name on the expiry of 30 days from the date of this order in case respondent no 2 fails to execute necessary forms in relation to said transfer of shares within 30 days.”

The Tribunal held that Kadekar shall transfer her 50% shareholding in Urja Niyojan Pvt Ltd at nil value, cease to be a director within 30 days, and bear 50% of the composition costs for regularising past statutory non-filings. It also permitted the petitioner to pursue recovery of any loans, advances, or alleged misappropriated amounts from the company.

Accordingly, the NCLT allowed the petition.