Who filed the case?
The original petition before the NCLT was filed by Mukesh Jain, Sushil Jain and Sonu Jain, who were the original shareholders and directors of Vivid Solutions Pvt. Ltd. They alleged that the appellants had illegally removed their names as shareholders and transferred the company's only immovable property without following the legal procedure. After the NCLT decided the matter in favour of the respondents, Vivid Solutions Pvt. Ltd. and the new directors filed an appeal before the NCLAT.
Facts of the Case
Mukesh Jain, Sushil Jain and Sonu Jain owned 100% of the shares of Vivid Solutions Pvt. Ltd. In 2012, they entered into an MoU with the appellants to discuss the proposed sale of the company along with its property. The appellants claimed that they paid ₹3 crore and ₹1 lakh
towards the shares, after which the respondents resigned as directors and transferred the company to them. They also claimed that the company's property was transferred to another company, Ukay Metal Industries Pvt. Ltd. The respondents denied these claims. They argued that although an MoU was signed, the transaction was never completed because the mandatory legal formalities were not followed. No Share Transfer Deed (Form SH-4) was executed, the original share certificates remained with them, and no registered conveyance deed was executed for transferring the company's immovable property. They further alleged that the appellants later manipulated the ROC records and financial statements to falsely show. themselves as the owners of the company and its property.
Decision of the NCLAT
The NCLAT held that the appellants had failed to comply with the mandatory requirements of
Section 56 of the Companies Act, 2013 for transferring shares. Since there was no executed SH- 4, no endorsement on the original share certificates and no valid registration of the transfer, the respondents continued to remain the lawful shareholders of the company. The Tribunal also found that the company's property had never been legally transferred because there was no registered sale deed or payment of stamp duty as required under the Transfer of Property Act and the Registration Act.
The Tribunal further observed that the appellants had retrospectively revised ROC records and
financial statements only after disputes had arisen, indicating manipulation of statutory
records. Such conduct amounted to oppression and mismanagement, as the appellants
attempted to acquire control of the company and its only valuable asset without following the
law. Therefore, the NCLAT upheld the NCLT's order, declared the transfer of shares and
property illegal, restored the respondents as the 100% shareholders, and dismissed the appeal.
Learning Point
A transfer of shares is valid only if the procedure prescribed under Section 56 of the
Companies Act, 2013 is followed. Similarly, immovable property can be transferred only
through a registered conveyance deed. Mere book entries, revised ROC filings or an MoU
without completing the legal formalities do not create valid ownership.