- Author – Adv. Mohit Khandelwal
- Co Author – Adv. Hitarth Dixit
With the rise in corporate litigation over forged share transfer documents and investor fraud, Indian courts are frequently confronted with the question: who has jurisdiction whether the Civil Courts or the National Company Law Tribunal? While Section 430 of the Companies Act, 2013 appears to bar civil court jurisdiction over company-related matters, this bar is not absolute. This article critically examines key judicial pronouncements that demarcate the jurisdiction of civil courts from the NCLT, especially in cases involving fraud, disputed title to shares, and fabricated agreements.
I. Introduction
The enactment of the Companies Act, 2013 introduced structural reforms in corporate governance and adjudication. The National Company Law Tribunal (NCLT) was established as a specialized forum to adjudicate disputes under the Act with National Company Law Appellate Tribunal (NCLAT) being its appellate authority. However, with the rise of disputes involving fraudulent share transfers, forged agreements, and title claims, the boundaries of jurisdiction between NCLT and civil courts have become increasingly contested.
Section 430 of the Companies Act bars civil court jurisdiction in matters over which NCLT/NCLAT are empowered. However, where the core of the dispute concerns fraud, forgery, and questions of title, several Hon’ble High Courts across the country and the Hon’ble Supreme Court have affirmed that civil courts retain jurisdiction.
II. Scope of Section 430: Not an Absolute Bar
Section 430 of the Companies Act, 2013 reads:
“430. No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal.”
Judicial interpretation has repeatedly emphasized that this ouster applies only to matters expressly conferred upon NCLT/NCLAT however, the bar over the jurisdiction of the civil court is not absolute. In Videocon Industries Ltd. v. Ram Raj Bahadur, 2022 SCC OnLine Del 4579, the Hon’ble Delhi High Court held:
“Every presumption should be made in favour of the jurisdiction of a civil court and the provisions of exclusion… must be strictly construed.”
This principle preserves the civil court’s competence to adjudicate civil rights unless expressly excluded. Thus, the Court reaffirmed the foundational principle of access to justice, that individuals have a right to approach civil courts unless there is a compelling statutory reason not to. The judgment serves as a guardrail against excessive reliance on ouster clauses in special statutes, ensuring that litigants are not deprived of recourse to civil courts arbitrarily.
III. Civil Court Jurisdiction in Fraud and Forgery Cases: Key Precedents
1.Ammonia Supplies Corporation v. Modern Plastic Containers, (1998) 7 SCC 105
The judgment of the Hon’ble Apex Court in Ammonia Supplies has firmly established that when disputes involve allegations of fraud or questions relating to title and ownership of shares, such matters fall outside the purview of summary proceedings before the Company Law Board (now NCLT). The Hon’ble Supreme Court held that only civil courts are competent to conduct the necessary full-fledged trials, involving detailed examination of evidence and adjudication of complex factual issues. This decision underscores the inherent limitations of tribunal proceedings and reinforces the civil court’s role as the appropriate forum for resolving contentious issues of title and fraudulent transactions.
The relevant portion of the judgment in Ammonia is as under:
“26. In case any claim is based on some seriously disputed civil rights or title, denial of any transaction or any other basic facts which may be the foundation to claim a right to be a member and if the court feels such claim does not constitute to be a rectification but instead seeking adjudication of basic pillar some such facts falling outside the rectification, its discretion to send a party to seek his relief before the civil court first for the adjudication of such facts, it cannot be said such right of the court to have been taken away merely on account of the deletion of the aforesaid proviso. Otherwise under the garb of rectification one may lay claim of many such contentious issues for adjudication not falling under it. Thus in other words, the court under it has discretion to find whether the dispute raised is really for rectification or is of such a nature that unless decided first it would not come within the purview of rectification.”
2.IFB Agro Industries Ltd. v. SICGIL India Ltd., (2023) 4 SCC 209
Relying on the Ammonia Supplies, the Hon’ble Supreme Court, in IFB Agro, underscored the limited scope of rectificatory jurisdiction under Section 59 of the Companies Act, 2013. It held that proceedings under this provision are summary in nature and are intended to address simple and undisputed cases of wrongful entries in the register of members. The Court clarified that where the dispute involves allegations of fraud, fabrication of documents, or seriously contested questions of fact, the National Company Law Tribunal (NCLT) cannot adjudicate such issues under Section 59. Instead, the proper course would be to refer the parties to a civil court, which is equipped to conduct a full-fledged trial with pleadings, evidence, and cross-examination. This judgment is significant in drawing a clear jurisdictional boundary between the NCLT’s rectificatory powers and the broader adjudicatory role of civil courts, ensuring that complex civil disputes are not reduced to summary determinations before a tribunal not empowered to conduct such inquiries. It clarified that:
“The Tribunal should have directed the appellant to seek such a declaration before the appropriate forum (civil court).”
3. Shazia Rehman v. Anwar Elahi, CS(COMM) 245/2019 (Delhi HC)
In Shazia Rehman, the Hon’ble Delhi High Court made a critical distinction between corporate rights and individual rights to determine the appropriate forum for adjudication. The case involved allegations of fraudulent reduction in shareholding, which the Court held to be a dispute over individual rights and title to shares, rather than a matter pertaining strictly to corporate governance. It observed that the National Company Law Tribunal (NCLT) lacks jurisdiction to adjudicate disputed questions of title and allegations of fraud, particularly when they involve private civil wrongs between individuals. By clarifying that only corporate rights, those arising under the Companies Act in relation to company management or oppression/mismanagement fall within the NCLT’s domain, the Court reaffirmed that disputes involving fraudulent transfer or misappropriation of shares, which require a detailed trial and evidence, rightfully belong before civil courts. This distinction serves to preserve access to judicial remedies and ensures that tribunals are not burdened with disputes beyond their statutory mandate.
IV. SUMMARY OF NOTABLE HIGH COURTS JUDGMENTS
In Sita Chaudhary v. Virender Singh, 2022 SCC OnLine Del 2235, the Hon’ble Delhi High Court held that civil courts retain jurisdiction where share transfers are alleged to have been fraudulently obtained by exploiting an individual’s old age, infirmity, or mental vulnerability. Such matters involve serious and disputed questions of consent, coercion, and fraud, which require comprehensive adjudication and lie beyond the limited summary powers of the NCLT.
Similarly, in Morgan Securities v. BPL Ltd., 2023 SCC OnLine Del 119, the Hon’ble Court observed that the NCLT does not have jurisdiction to decide matters involving the cancellation of share certificates or void allotments resulting from fraudulent acts. These disputes often involve serious allegations of misrepresentation and contested title, requiring a full-fledged trial before a civil court equipped to assess evidence and adjudicate complex issues of fact and law.
The Telangana High Court, in Cherukuri Ramakrishna v. Sandhya Hotels Pvt. Ltd., C.C.C.A. No. 57/2023, reaffirmed that disputes arising out of the non-payment of share consideration and the enforcement of Share Purchase Agreements (SPAs) are contractual in nature and, therefore, fall within the jurisdiction of civil courts. Such disputes do not pertain to corporate governance or rights flowing directly from the Companies Act but relate instead to private obligations and breaches that require civil adjudication.
In Phool Chand Gupta v. Mukesh Jaiswal, 2023 SCC OnLine Cal 1812, the Hon’ble Calcutta High Court emphasized that allegations involving fraud, misuse of fiduciary duties, and misrepresentation constitute serious civil wrongs requiring a detailed trial. The Hon’ble Court held that such matters cannot be decided in a summary proceeding and must be tried before a civil court that has the procedural mechanism and jurisdictional competence to adjudicate such claims.
Likewise, in Hyderabad Pollution Controls Ltd. v. S. Radhakrishnan, 2024 SCC OnLine TS 2330, the Hon’ble Telangana High Court ruled that where disputes concern the title and ownership of shares, only civil courts are empowered to conduct the necessary inquiry. The Court made it clear that rectification of the register under Section 59 of the Companies Act is a consequential step that must follow, and not precede, a civil court’s declaration on ownership. Thus, any request for rectification before the NCLT must be preceded by a conclusive judicial determination of title by a competent civil court.
These judicial pronouncements collectively affirm that where disputes transcend the statutory framework of corporate governance and involve deeply contested civil rights such as ownership, fraud, or breach of contract civil courts remain the appropriate and competent forum. This distinction is essential to maintain the balance between specialized tribunals’ efficiency and the fundamental right to a fair and comprehensive adjudication of civil wrongs.
V. Individual vs Corporate Membership Rights
Judicial interpretation has consistently affirmed a clear distinction between corporate rights and individual rights for the purpose of determining jurisdiction. Matters relating to corporate governance, such as allegations of oppression and mismanagement, are governed by Sections 241–242 of the Companies Act, 2013, and fall squarely within the exclusive jurisdiction of the National Company Law Tribunal (NCLT). In contrast, disputes involving individual rights including claims pertaining to ownership, title, or recovery of shares transferred through fraud or misrepresentation remain enforceable before civil courts, as they do not arise from the statutory framework of corporate management but from private civil wrongs. This jurisdictional divide was reaffirmed by the Hon’ble Delhi High Court in Naresh Dayal v. The Delhi Gymkhana Club Ltd., 2021 SCC OnLine Del 91, wherein the Hon’ble Court categorically held that individual members of a company are entitled to seek redress before civil courts to protect their personal rights, and that the NCLT cannot assume jurisdiction over causes of action beyond the scope of powers conferred under the Companies Act.
VI. Order 7 Rule 11 CPC and Jurisdictional Misuse
Courts have consistently cautioned against the premature dismissal of civil suits under Order 7 Rule 11 of the Code of Civil Procedure, 1908, particularly where the pleadings disclose serious and triable issues of fact and law.
The Hon’ble Supreme Court in Biswanath Banik v. Sulanga Bose, (2022) 7 SCC 731, reiterated that while considering an application under Order 7 Rule 11, the court must confiningly examine the plaint as a whole, taking all averments as true, without delving into the merits or conducting a mini-trial. It emphasized that disputed questions of fact cannot be decided at the threshold stage, and if the plaint discloses a cause of action that requires adjudication, the suit must be allowed to proceed to trial. Similarly, in Sopan Sukhdeo Sable v. Assistant Charity Commissioner, (2004) 3 SCC 137, the Hon’ble Court warned against dissecting or isolating portions of the pleadings to artificially construct a bar to jurisdiction. It held that a holistic reading of the plaint is essential, and any determination on jurisdiction must be deferred until the issues are framed and evidence is led.
These decisions collectively underscore that Order 7 Rule 11 is a narrow procedural tool, and its misuse to stifle legitimate civil claims especially where fraud, title disputes, or contractual breaches are involved undermines the litigant’s right to a fair trial and access to justice.
VII. CONCLUSION
The evolving jurisprudence surrounding the jurisdictional divide between civil courts and the NCLT reflects a principled balance between statutory specialization and the foundational right to judicial recourse. While the Companies Act, 2013, particularly Section 430 confers exclusive jurisdiction upon the NCLT for specific company law matters, courts have consistently clarified that this exclusion does not extend to disputes involving allegations of fraud, forged share transfers, coercion, or contested ownership of shares. Such issues implicate deeply personal civil rights and often require full-fledged trials with oral evidence and cross-examination, which fall squarely within the domain of civil courts. Through a series of well-reasoned judgments, both the Hon’ble Supreme Court and various Hon’ble High Courts have reiterated that the NCLT, being a summary forum with limited statutory powers, cannot be a substitute for civil adjudication in cases involving private civil wrongs or serious factual disputes. Upholding the jurisdiction of civil courts in such matters not only preserves access to justice but also safeguards against the misuse of specialized forums to shield wrongful acts under the guise of corporate disputes. Ultimately, the Indian judiciary has struck a cautious and measured approach preserving the integrity of the NCLT’s statutory mandate while ensuring that its jurisdiction is not overextended at the expense of litigants’ substantive civil rights.