Application for Reduction of Share Capital by Transferring Deceased Shares to Legal Heir Without CLB Authorization Was Dismissed | NCLT

Case Details: Ravinder Kumar Magoo v. AMA India Enterprises (P.) Ltd. - [2025] 172 taxmann.com 837 (NCLT-Chd.)

Judiciary and Counsel Details

• Harnam Singh Thakur, Judicial Member & Umesh Kumar Shukla, Technical Member
• G.S. Sarin, PCS for the Applicant.
• Ajay Garg & Mahesh Sharma, Advs. for the Respondent.

Facts of the Case

In the instant case, the original petitioner held shares in the applicant company and filed a petition under sections 397 and 398 of the Companies Act, 2013, against the applicant company, alleging oppression and mismanagement in the company.

The NCLT directed the applicant company to purchase shares held by the original petitioner at a determined value along with 9% interest per annum. Later, both the original petitioner and the company appealed to the NCLAT, which directed the company to purchase shares and lowered the interest rate.

In the meantime, the original petitioner passed away, and his legal heirs were substituted. R1, the son of the original petitioner, filed a probate suit based on a will executed by the original petitioner in favour of R1, which was granted in his favor, resulting in the transmission of shares to him.

The Applicant Company then agreed to a settlement with R1, where they would pay Rs. 4.27 crores to R1 for the reduction and cancellation of shares and payment would extinguish all disputes and claims against the company and its directors.

It was noted that since the CLB order did not provide for a reduction of share capital and did not find case of oppression and mismanagement, the NCLT could not order for reduction of share capital.

NCLT Held

The NCLT held that if the applicant Company wanted to have reduction of share capital, then notice to other shareholders, creditors, Central Government (RD/ RoC) and such other authorities, as may have been required keeping in view the facts and circumstances, should have been issued with a prayer to the CLB originally and not at this stage and, that too on basis of settlement agreement at behest of shareholder, who had been allowed to have exit route from the applicant company by his shareholding. Therefore, an application was to be dismissed.

List of Cases Reviewed

• Cosmo Steel Pvt. Ltd. v. Jairam Das Gupta [1978] 1 SCC 215 (para 13) followed.

List of Cases Referred to

• Cosmo Steel Pvt. Ltd. v. Jairam Das Gupta (1978) 1 SCC 215 (para 7).