Court rules shares transferred before deceased’s death cannot be included in partition suit pending NCLT adjudication; petitioner fails to prove due diligence in seeking amendment
In a significant judgment delivered on September 21, 2026, the Delhi High Court, presided over by Justice Ajay Digpaul, dismissed the application filed by petitioner Lokesh Dhawan seeking to amend his partition suit to include shares of the family company, Dhawan Electricals Pvt. Ltd., in the estate of the deceased, Late Krishan Chander Dhawan. The court upheld the order of the trial court, which had refused the amendment under Order VI Rule 17 of the Civil Procedure Code (CPC), 1908.
The dispute arose among the legal heirs of Late K.C. Dhawan, who owned 85% of the shares in Dhawan Electricals Pvt. Ltd. The petitioner, one of the sons and a director of the company, initially filed a suit for partition in 2012 seeking division of immovable properties belonging to the deceased. Subsequently, he filed a petition before the Company Law Board (now National Company Law Tribunal or NCLT) under Sections 397, 398, 402, and 403 of the Companies Act, 1956, challenging the validity of the transfer of shares said to have been made by the deceased to respondent no.1 prior to his death.
In 2014, the petitioner sought to amend the plaint in the partition suit to include movable properties such as shares, fixed deposits, bank accounts, and other assets. The amendment was based on the contention that the shares had been transferred fraudulently and that the petitioner was ousted from the company post the deceased's demise. However, the trial court dismissed the amendment application on the grounds that the shares had already been transferred before the deceased’s death, and their legality was under adjudication before the NCLT. Including these shares in the partition suit would prejudice the respondents and conflict with the ongoing proceedings.
The Delhi High Court concurred with the trial court’s reasoning. It emphasized that since the shares were transferred before the deceased’s death, they did not form part of the deceased’s estate and therefore could not be included in the partition suit until the NCLT decided on the legality of the transfer. The court highlighted that the NCLT possesses wide quasi-judicial powers to decide all issues incidental to complaints of oppression and mismanagement, including the legality of share transfers.
The petitioner argued that he was unaware of the transfer of shares at the time it happened and only came to know later, thereby fulfilling the due diligence requirement to seek amendment. However, the court rejected this claim, noting that the petitioner was a director drawing a salary till 2011 and was actively involved in the company’s affairs. The petitioner had himself initiated the CLB petition challenging the transfer in 2012, indicating awareness of the disputed transaction. The court held that the petitioner failed to show due diligence in raising the issue earlier and the amendment was belated.
Further, the court clarified that the liberal approach to allowing amendments under Order VI Rule 17 CPC does not permit amendments that are legally impermissible or would interfere with pending competent proceedings. The court also observed that the petitioner’s attempt to include shares already transferred and recorded in the Registrar of Companies in the partition suit would amount to impermissible forum shopping and cause prejudice.
In conclusion, the Delhi High Court dismissed the petition, affirming that the trial court’s refusal to allow the amendment was proper and in accordance with law. The judgment underscores the specialized jurisdiction of the NCLT in matters of company shareholding disputes and the limitations on civil courts in intervening in such issues pending before the tribunal.
Bottom Line:
Civil Procedure Code, 1908 - Order VI Rule 17 - Amendment of plaint in partition suit to include company shares allegedly transferred prior to death of deceased - Amendment rightly refused where legality of transfer of shares was already pending before NCLT/CLB in oppression and mismanagement proceedings - NCLT held competent to decide legality of transfer incidental to such proceedings - Plaintiff also failed to satisfy test of due diligence.
Statutory provision(s):
Civil Procedure Code, 1908 - Order VI Rule 17; Companies Act, 1956 - Sections 397, 398, 402, 403
Lokesh Dhawan v. Arun Dhawan, (Delhi) : Law Finder Doc Id # 2982689
