Navigating Jurisdictional Boundaries: A Legal Analysis of NCLT’s Authority and Civil Court’s Restrictions.

[By Pulkit Rajmohan Agarwal & Anaya Nandish Shah]

The authors are students of Gujarat National Law University, Gandhinagar.



Recently, in the case of Eastern India Motion Pictures Association & Ors. v. Milan Bhowmik & Anr., the division bench of the Calcutta High Court affirmed a peculiar ruling by the single judge bench, favouring two minority members of a company. The members approached the court challenging the election of the executive committee, which was allegedly conducted in violation of the articles of association and the election rules of the company. The said circumstance falls well within the realm of remedies stipulated under the Companies Act 2013 (the Act), one of them being oppression and mismanagement under Section 241 of the Act. However, the members opted for a recourse through the civil court, a forum that is expressly prohibited under Section 430 of the Act, thereby circumventing the jurisdiction of the National Company Law Tribunal (NCLT). 

This blog analyses the question of whether statutory provisions prescribing and prohibiting rules can be bypassed, and whether courts are free to adopt alternative approaches. In the light of Sections 241, 244, and 430 of the Act, it scrutinizes whether the bench appropriately affirmed the ruling of a single judge bench, and explores the scope for interpretation regarding the object, powers, and discretion of the NCLT. 

Legal Framework For Oppression And Mismanagement Cases 

Eligibility for O&M under the Companies Act. 

Section 241 of the Act pertains to applications alleging oppression and mismanagement. If minority shareholders can demonstrate to the tribunal either that: a) the company’s activities are being carried out in a manner prejudicial to its interests or those of its members, or contrary to the public interest; or b) there has been a material change and the company’s operations are being conducted in a manner detrimental to its interests. In furtherance, Section 244 of the Act talks about members who have a right to file a petition for oppression and mismanagement. According to the Section, in companies with share capital, a minimum of one hundred members or one-tenth of the total members, whichever is less, are eligible to submit an application. Conversely, for companies without share capital, as is the case herein, a minimum of one-fifth of the members is mandated. The object behind this restriction is to safeguard the company from frivolous petitions and ensures that only people holding requisite interest in the company can file petition. However, it is pertinent to note that the proviso to Section 244 explicitly mentions that these aforementioned conditions can be waived off upon an application to the NCLT. The underlying rationale is to protect the minority shareholders from dismissal of serious allegations of oppression and mismanagement solely on the grounds of insufficient shareholding.  

There have been a plethora of cases illustrating several grounds upon which NCLT has waived off the criterias mentioned under Section 244 of the Act. Some of them include principles of natural justice, when it is in the substantial interest of the company, or when there is a dilution in shareholding because of oppression, etc. Further, NCLAT in Cyrus Investments Pvt. Ltd. v. Tata Sons Ltd., laid down certain principles regarding grant of waiver, along with inclusion of exception circumstances as one of the grounds. On the lines of these principles, NCLAT in one of its orders pertaining to an application under Section 241 of the Act, granted such a waiver to two minority shareholders. 

Opting For Civil Remedy Over NCLT’s Jurisdiction  

In the present case, an application to declare the election of the committee and the subsequent meetings null and void fall within the purview of oppression and mismanagement, as enumerated under Section 241 of the Act.  

As per the mandate of the law, they failed to meet the eligibility requirement of at least 1/5th members. Hence, they should have approached NCLT with a waiver application under Section 244. Contrastingly, they resorted to civil court without initially exhausting the remedies mandated by the Act. The single judge of the High Court remarked “The argument made by the applicants relying on the proviso to Section 241(1)(b) that the plaintiffs are required to exhaust the remedies before NCLT before approaching this Court is not tenable.”, further in the context of waiver application the court opined “That apart and in any event a considerable period will elapse for NCLT to first decide whether to allow an applicant to maintain an application without requisite membership qualification.” Reaffirming the same, the division bench reiterated, “I would like to add that if the plaintiffs approached the tribunal for dispensing with the eligibility criteria, there was no guarantee that the tribunal would allow the application. In the event the tribunal rejected the application the plaintiffs would have to approach the civil court.” The Hon’ble High Court anticipated a probable denial by the NCLT for the waiver petition, along with the prospect of delay, and thus approved bypassing NCLT’s jurisdiction, thus deviating from the established framework. 

Evaluating the jurisdictions 

Section 430 of the Act restricts the jurisdiction of civil courts for matters designated to be adjudicated by the tribunals established under the Act. The Supreme Court, in context of Section 430 stated that jurisdiction of civil court is completely barred when powers have been explicitly conferred upon NCLT by a statute. Delhi High Court in the case of SAS Hospitality Ltd v. Surya Constructions Ltd. stated that the NCLT has sole jurisdiction over matters falling within the domain of Section 242 of the Act, which provides for the powers of tribunals in case of oppression & mismanagement.  

The present case pertains to the operation & mismanagement which is exclusively under NCLT’s jurisdiction. While acknowledging the NCLT as the appropriate forum for adjudication, the division bench noted the contingency in NCLT accepting application, with the possibility of rejection leading to significant time wastage. In light of this, it becomes pertinent to refer to a recent order passed by NCLT Kolkata bench, wherein in similar circumstances where a few members (4 out of 1850 members) of a company were granted waiver under Section 244. This judgement of the NCLT clearly portrays that if fit grounds are established, waiver under Section 244 would be granted. Nonetheless, given that the judgment, howsoever contrary, is rendered by a division bench of High Court, it would carry higher authority. 


The recent ruling of Calcutta High Court marked a distinct divergent approach from the established jurisdictional hierarchy, the ramifications of which can be far reaching. While the High Court acknowledged the NCLT’s jurisdiction to adjudicate the matter, it cited ‘time’ as a rationale for bypassing this jurisdiction. This judgment serves as a precedent and would be binding upon the lower courts. It provides a leeway to the shareholders to file proceedings against the company directly in civil court when the criteria under Section 244 is not met, ultimately makes the proviso under Section 244 of the Act providing for a waiver application redundant. Furthermore, it opens the door for potential abuse by minority shareholders, who may file frivolous petitions and multiple litigations with malicious intent to delay proceedings, thereby posing a significant threat to the company. Such a practice ultimately undermines the legislative intent behind the establishment of eligibility criteria and the jurisdiction of the NCLT itself. 

Furthermore, this ruling highlights the necessity to reassess the balance between expediency and adherence to statutory frameworks in corporate litigation. It urges a closer scrutiny of the ramifications that arise from diverging from established procedures, emphasizing the importance of upholding procedural integrity to maintain the efficacy and fairness of the legal system. 

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