Court Holds that Non-Impleadment of Transferees Violated Principles of Natural Justice; Impleadment Application Allowed for Effective Adjudication of Disputed Share Transfers
In a significant judgment delivered on October 15, 2026, the Kerala High Court set aside an order of the National Company Law Tribunal (NCLT), Kochi Bench, which had dismissed an application seeking to implead certain transferees of disputed shares in a company mismanagement petition. The writ petition was filed by Sandeep Chandrasenan and another, who were alleged transferees of shares in a company involved in a mismanagement dispute.
Background:
Respondents 1 to 3, shareholders in the 4th respondent company, had filed a company petition alleging mismanagement. The company, through its counter statement, claimed that the shares held by respondents 2 and 3 had been transferred to third parties. Subsequently, respondents 1 to 3 applied for production of original share transfer forms. The company complied, producing share transfer documents showing transfer of shares from the respondents to the petitioners herein.
The petitioners contended that the share transfer forms were fabricated and that they never executed such transfers. They sought impleadment in the company petition to defend their rights and to contest the alleged fraudulent transfers. However, the NCLT refused to allow their impleadment on grounds that no substantive relief was sought against them, there were no foundational pleadings challenging the transfers, no amendment to the petition was sought, and the impleadment application was belated.
Kerala High Court's Findings:
The Court, presided over by Justice Harisankar V. Menon, allowed the writ petition and set aside the NCLT order. Key points from the judgment include:
- 1. Jurisdiction under Article 226: While orders of the NCLT are appealable under Section 421 of the Companies Act, 2013, the High Court can exercise writ jurisdiction under Article 226 of the Constitution where there is a violation of principles of natural justice. The Court found such violation in the refusal to implead parties whose presence was essential for effective adjudication.
- 2. Necessity of Impleadment: The petitioners, although not against whom relief was sought, were proper parties since their presence was required to adjudicate preliminary objections concerning shareholding and maintainability of the petition. The Court relied on precedents such as Kasturi v. Iyyamperumal and Vidur Impex & Traders (P) Ltd. v. Tosh Apartments (P) Ltd., which held that a proper party is one whose presence enables complete and effective adjudication, even if no decree is sought against them.
- 3. Delay in Seeking Impleadment: The NCLT's finding of delay was unsustainable. The Court observed that the petitioners moved promptly after the production of share transfer documents, having actively pursued the matter through counter statements and applications for document production. There was no unexplained or inordinate delay.
- 4. Right of Petitioners to Challenge Order: The petitioners, having entered appearance and filed affidavits denying the authenticity of share transfer forms and alleging fraud, were directly affected parties entitled to challenge the NCLT order refusing impleadment.
- 5. Violation of Natural Justice: The respondents themselves had contended that no relief could be granted without hearing the transferees, underscoring the necessity of their impleadment. Refusal to implead amounted to denial of opportunity to be heard and violated natural justice.
Conclusion:
The Kerala High Court allowed the writ petition, set aside the NCLT order dated April 2, 2026, and directed the NCLT to allow the impleadment application. This decision reinforces the principle that where presence of parties is necessary for complete and fair adjudication, mere absence of substantive relief against them does not justify refusal of impleadment. It also highlights that writ jurisdiction can be exercised even in presence of alternate remedies when natural justice is at stake.
Bottom Line:
Companies Act, 2013 - Writ petition against NCLT order refusing impleadment - Though alternate remedy of appeal under Section 421 is available, High Court can exercise jurisdiction under Article 226 where refusal to implead amounts to violation of principles of natural justice - Transferees of disputed shares are proper parties for effective adjudication of objection regarding maintainability of company petition based on alleged transfer of shares - Impleadment cannot be refused merely because no direct relief is claimed against proposed parties or on ground of delay when application was moved promptly after production of share transfer documents.
Statutory provision(s): Article 226, Constitution of India; Section 421, Companies Act, 2013; Order I Rule 10, Civil Procedure Code, 1908
Sandeep Chandrasenan v. Usha Krishnakumar, (Kerala) : Law Finder Doc Id # 2998880
