Can NCLT Declare A Registered Sale Deed Void? Kerala High Court Explains

The Kerala High Court has recently held that the National Company Law Tribunal (NCLT) cannot declare a registered sale deed void and not binding on a company merely because a dispute involves allegations of oppression and mismanagement.

“When the reliefs sought in the suits are considered alongside the scope of application under Sections 241 and 242 of the Companies Act 2013, it would be difficult to conclude that the National Company Law Tribunal has jurisdiction to declare a registered document void as against the company,” Justice Easwaran S ruled.

The court was hearing two petitions challenging the Commercial Court-II, Thrissur's decision to reject civil suits seeking a declaration that a 2014 sale of property was not binding on East India Chits Finance Limited and its shareholders.

The petitioners alleged that the property had been sold without the concurrence of the company's majority shareholders. They also claimed that a shareholders' meeting purportedly held on August 16, 2014, to approve the transaction had never been convened.

According to the petitioners, the transaction was therefore fraudulent. They also sought consequential relief to retain the property as an asset of the company.

The suits further referred to allegations that the company's chit funds had been misappropriated. The judgment records that complaints in this regard were registered as CC Nos. 1143 and 1032 of 2020 before the Magistrate's Court-I, Thrissur.

Those defending the sale disputed the allegations and argued that Section 430 of the Companies Act barred the civil suits because the dispute fell within the NCLT's jurisdiction. They contended that the question of whether the shareholders' meeting had been properly convened concerned alleged oppression and mismanagement. They also argued that the suits were barred by limitation.

The Commercial Court accepted the jurisdictional objection and held that the petitioners would have to approach the NCLT. The petitioners then challenged the decision before the High Court.

Examining Sections 241 and 242 of the Companies Act, which deal with oppression and mismanagement, the court observed that the NCLT's jurisdiction concerns disputes involving the company's management and the respective rights of its shareholders.

“On a conjoint reading of Sections 241 and 242 of the Companies Act, 2013, one can safely conclude that the National Company Law Tribunal has jurisdiction only when a dispute touches upon the management of the company and the respective rights of the shareholders,” the court observed.

The court noted that the NCLT, being a tribunal created by statute, could exercise only the powers conferred on it by law. It held that the specific declaration sought in the suits could not be brought within the tribunal's jurisdiction merely because the dispute involved the company's affairs.

The court also relied on its decision in Saju George v. Saji Varghese [2026 (5) KHC 188]. That case concerned the limits of the National Green Tribunal's powers and whether a claim for a declaratory right of easement could be brought before a civil court.

Applying the principle in that decision, the High Court held that the NCLT could not declare a registered sale deed void and not binding on the company under Sections 241 and 242 of the Companies Act. It found that the Commercial Court had erred in holding that the NCLT had jurisdiction to try the disputes.

The High Court did not decide whether the suits were barred by limitation. Since the Commercial Court had rejected them on jurisdictional grounds, the limitation issue had not been considered. The court left it open to those defending the sale to raise the objection before the Commercial Court at the appropriate stage.

The High Court set aside the Commercial Court's orders and restored both suits for trial before the Commercial Court-II, Thrissur. It directed the court to proceed in accordance with law, without being constrained by its observations in the judgment, subject to the exceptions stated.

For Petitioners: Advocates P.K Mohamed Jameel, K Sadanandan (Kunhupidukkal), Suharabi Kanneth and Smrithi Harris

For Respondents: Advocates G Sreekumar (Chelur), K.R Arun Krishnan, R Rajpradeep and and Thushara D.S, Sr G.P