Shareholder disputes and NCLT cases for NRIs

Law

Companies Act 2013, sections 241 to 246

Forum

NCLT bench of the registered office state

Eligibility

10% shares or 1/10th members, or waiver

Appeal

NCLAT, then Supreme Court

Situations where the NCLT can help an NRI shareholder

The Tribunal looks at conduct, not just at isolated breaches of the rules. The question is whether the affairs of the company are being conducted in a manner prejudicial to the company, its members or the public interest, or oppressive to some members. The cases we see from NRI clients usually involve a family company or a closely held business where the shareholder abroad has been quietly sidelined. Typical complaints include:

• shares allotted to relatives at par value to reduce your stake, often at a meeting you were never told about;
• removal as a director, sometimes by a forged resignation letter or by treating you as having vacated office;
• transfer of company land or the main business to a related entity at an undervalue;
• refusal to share annual accounts, board minutes or the register of members;
• siphoning of funds through inflated salaries or loans to directors;
• a deadlock between two family groups that has stopped the company functioning.

The NCLT can make almost any order it thinks fit under section 242: setting aside allotments, restoring you as director, regulating the conduct of the company, ordering one group to buy out the other at a fair value, appointing an independent director or administrator, or setting aside transactions made in the months before the petition. Where the relationship has broken down completely, a fair-value exit is often the practical outcome.

Who can file, and the waiver route

Section 244 sets the threshold. In a company with share capital, the petition must be brought by at least 100 members or one tenth of the total members, whichever is less, or by members holding at least one tenth of the issued share capital, provided calls on those shares are paid. Shareholders can combine to cross the line. If you fall short, for example because you hold 6 per cent after a dilution you are challenging, the Tribunal can waive the requirement. Waiver is commonly granted where the dilution itself is the act complained of, since it would be unfair to let the wrongdoer defeat the petition by the very allotment in dispute.

A legal heir whose name is not yet on the register can face objections on standing. In those cases we usually combine the oppression petition with a rectification application under section 59, or first secure transmission of the shares, so that the heir's status is not left open to challenge. See our page on succession certificates if the shares came from a parent.

Common problems and the remedy that usually fits

Limitation matters. The Supreme Court has held that the Limitation Act applies to NCLT proceedings, and the three-year residuary period is usually counted from the act complained of. Where the oppression is continuing, the position is more favourable, but delay always weakens a case. If you have only just learnt of an allotment or a board change, act quickly.

Running an NCLT case while living abroad

NCLT benches sit in New Delhi, Chandigarh, Mumbai, Bengaluru, Chennai, Kolkata, Ahmedabad, Hyderabad, Jaipur, Kochi, Cuttack, Guwahati, Allahabad, Amaravati and Indore. The petition goes to the bench with jurisdiction over the state where the company has its registered office. The benches allow hybrid and video hearings, and in practice your advocate appears in person while you join by link if the bench wants to hear from you.

The petition must be verified by an affidavit. You can sign it before a notary where you live, with an apostille or consular attestation depending on your country, or at an Indian embassy or consulate. A vakalatnama or authorisation in favour of the advocate is signed the same way. Company records you hold, such as share certificates, emails about meetings and old balance sheets, can be scanned and sent; originals are only needed if the other side disputes them. If your evidence needs to be tested, the Tribunal can record it by video.

Two FEMA points come up. Shares held by an NRI on a repatriation basis were originally reported to the RBI through the authorised dealer bank, and any buy-out ordered by the Tribunal will need pricing and reporting compliance on Form FC-TRS when it is carried out. Shares held on a non-repatriation basis are treated like domestic investment. We check this at the start so the final order is one the bank can implement. Our page on repatriation of funds explains how buy-out money can be sent abroad.

Steps worth taking before filing

A good petition is built on documents from the Ministry of Corporate Affairs portal. We download the company master data, every form filed in recent years (allotments on PAS-3, director changes on DIR-12, annual returns on MGT-7 and financial statements on AOC-4) and compare them with what you were told. Discrepancies between the forms and the minutes often show where the oppression lies, and sometimes reveal signatures that need forensic examination.

We then usually send a formal legal notice asking for inspection of statutory registers and copies of minutes, which members are entitled to. A refusal strengthens the petition. Where assets are at risk, for example a pending sale of company land, the petition is filed with an urgent application for interim orders. Some disputes settle at this stage once the other side sees the MCA record laid out against them. If the company was set up with your money as an investor rather than a founder, read our page on legal advisory for NRI investors as well.

Timelines and costs

Oppression petitions are not quick. An interim order on an urgent application can come within weeks, but a final decision commonly takes one to three years depending on the bench, the complexity and how hard the other side fights. Appeals go to the National Company Law Appellate Tribunal under section 421 within 45 days of the order, and a further appeal on a question of law lies to the Supreme Court under section 423. Many cases end in a negotiated buy-out once valuations are on the table.

Our fees depend on the stage: a fixed fee for the MCA record review and notice, a fixed or staged fee for drafting and filing the petition, and an appearance fee for hearings. Valuers, forensic experts and Tribunal fees are charged at cost. We give a written estimate after reading your papers, and we tell you plainly if the facts do not support a petition.

Documents you need

Scans are enough to start. We will tell you which originals, if any, need to be couriered to India.

• Share certificates, allotment letters or demat statement
• Your passport and OCI card or foreign passport
• Company name and CIN, and any board or AGM notices you received
• Emails or messages about meetings, allotments or your removal
• Old balance sheets, annual returns or minutes in your possession
• Succession certificate, will or legal heir certificate if the shares were inherited
• Bank records of money you invested in the company
• Affidavit and vakalatnama signed abroad (we draft them)

How we handle it for you

1. Record review

   We pull every MCA filing and compare it with your documents to find the acts of oppression and the dates.

2. Notice and inspection

   A legal notice seeks inspection and copies; the reply, or silence, becomes evidence.

3. Petition and interim relief

   We draft the petition and affidavit for signing abroad and seek urgent orders if assets are at risk.

4. Hearings

   We appear before the bench; you join by video when the Tribunal needs you.

5. Order and exit

   We implement the order, including any buy-out, FEMA reporting and transfer of money to you.

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