Court rules that National Company Law Tribunal's powers under Sections 241 and 242 of Companies Act, 2013 do not oust Civil Court jurisdiction in suits seeking declaration on sale deed validity
In a significant judgment delivered on October 13, 2026, the Kerala High Court clarified the scope of jurisdiction between Civil Courts and the National Company Law Tribunal (NCLT) under the Companies Act, 2013. The Court ruled that the jurisdiction of Civil Courts is not absolutely ousted by Section 430 of the Companies Act and that the NCLT's powers under Sections 241 and 242 are limited to matters of company management and shareholder disputes.
The case arose from two suits filed before the Commercial Court-II, Thrissur, by Sathish Kumar and others against Govindankutty and others, seeking a declaration that a registered sale deed (No. 2706 of 2014, SRO Cherpu) transferring company property was void and not binding on the plaintiffs and the company shareholders. The plaintiffs alleged that the sale was executed without the concurrence of the majority shareholders and was fraudulent, including misappropriation of company funds by the first defendant. The defendants contended that the suits were barred under Section 430 of the Companies Act, which restricts Civil Court jurisdiction in matters within the Tribunal's purview, and that the remedy was only before the NCLT.
The Commercial Court initially upheld the defendants' objection and dismissed the suits on maintainability grounds. However, upon challenge, the Kerala High Court examined the provisions in question. The Court highlighted that Sections 241 and 242 empower the NCLT to address cases of oppression, mismanagement, and disputes over company affairs, but do not confer jurisdiction to declare a registered sale deed as void. It emphasized that the NCLT is a statutory tribunal with limited jurisdiction strictly defined by the Act, and that declaratory reliefs concerning documents like sale deeds generally fall within the Civil Court's domain.
The Court further observed that the ouster of Civil Court jurisdiction must be explicit or clearly implied by statute, which was not the case here. Drawing on precedents, including a recent Kerala High Court decision in Saju George v. Saji Varghese, the Court ruled that where the relief sought is outside the statutory competence of the NCLT, the Civil Court retains jurisdiction.
Regarding the limitation plea raised by the defendants, the Court refrained from deciding on it at the interlocutory stage, noting that since the trial court had not addressed limitation, the defendants could raise the issue at trial.
Consequently, the Kerala High Court set aside the Commercial Court's orders rejecting the suits and restored the cases for trial before the Commercial Court-II, Thrissur. The Court directed the trial to proceed in accordance with law, free from any presumptions about jurisdiction or limitation at this stage.
This judgment reinforces the principle that while specialized tribunals like the NCLT handle specific company-related disputes, the Civil Courts continue to have jurisdiction over broader civil matters, including declaratory suits concerning the validity of documents affecting company property. It provides clarity on the demarcation of jurisdiction, ensuring that shareholders and parties aggrieved by property transactions can seek timely remedies in appropriate forums.
Bottom Line:
Companies Act, 2013 Section 430 does not absolutely bar Civil Court jurisdiction - National Company Law Tribunal has limited jurisdiction under Sections 241 and 242 in matters of oppression, mismanagement, management of company and shareholders' rights - Suit seeking declaration that registered sale deed is void/not binding on company is maintainable before Civil Court/Commercial Court - Question of limitation to be considered by trial court at appropriate stage.
Statutory provision(s): Companies Act, 2013 Sections 241, 242, 430; Code of Civil Procedure, 1908 Section 9; Constitution of India Article 227
Sathish Kumar v. Govindankutty, (Kerala) : Law Finder Doc Id # 2999269
