CHALASANI UDAYA SHANKAR AND OTHERS versus M/S. LEXUS TECHNOLOGIES PVT. LTD. AND OTHERS

Citation: [2024] 9 S.C.R. 235 · Decided: 09-09-2024 · Supreme Court of India · Bench: SANJIV KHANNA · Disposal: Case Allowed

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Judgment (excerpt)

[2024] 9 S.C.R. 235 : 2024 INSC 671
Chalasani Udaya Shankar and others  
v. 
M/s. Lexus Technologies Pvt. Ltd. and others
(Civil Appeal Nos. 5735-5736 of 2023)
09 September 2024
[Sanjiv Khanna and Sanjay Kumar,* JJ.]
Issue for Consideration
NCLT and NCLAT, if justified in dismissing the company petition 
by the appellant seeking rectification of the Register of Members 
of respondent No.1-Company by entering their names therein  
u/ss. 59 and 88 of the Companies Act, 2013, and to initiate 
action against respondent Nos. 2, 3 and 4, for oppression and 
mismanagement, and criminal proceedings u/ss. 447 and 448 of 
the 2013 Act, for committing fraud.
Headnotes†
Companies Act, 2013 – ss. 59 and 88 – Rectification of 
registrar of members – Allegations of fraudulent transfer 
of shares and mismanagement in the company – Company 
petition by the appellant seeking rectification of the Register 
of Members of respondent No.1-Company by entering their 
names therein u/ss. 59 and 88, and to initiate action against 
respondent Nos. 2-4, for oppression and mismanagement, as 
also criminal proceedings u/ss. 447 and 448 for committing 
fraud – Dismissed by the NCLT – Appeal thereagainst and IA 
also dismissed – Correctness:
Held: National Company Law Tribunal exercising jurisdiction u/s. 
59 has to examine the factual issues to ascertain the substance of 
the issue before it – Expression ‘rectification’ connotes something 
that ought to have been done but, by error, was not done, or what 
ought not to have been done but was done, requiring correction – 
Phrase ‘sufficient cause’ in s. 59 is to be tested in relation to 
the statutory mandate thereof-anything done or omitted to be 
done in contravention of the Act of 2013 or the Rules framed 
thereunder – If, on facts, an open-and-shut case of fraud is made 
out in favour of the person seeking rectification, the NCLT would 
be entitled to exercise such power u/s. 59 – Proper verification of 
* Author
236
[2024] 9 S.C.R.
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the assertions made by the parties was a sine qua non – Acting 
President of the NCLT, by failing to carry out the said exercise, 
failed to discharge the mandate of law – Exercise of power u/s. 
59 is to be undertaken in right earnest by examining the material, 
evidence, and the facts on record – This was not done, rather, a 
narrow view was taken without calling upon respondent No. 2 to 
prove the veracity of the contrary story put forth by him, despite 
receiving monies from the appellants – Facts, material, and evidence 
had to be examined in the context of the underlying facts, which 
would have included the receipt of monies, the signatures on the 
transfer deeds, etc. – Questions of fact must be decided on the 
principle of preponderance of probabilities, giving due weight to 
the specific facts, as found, so as to draw the conclusion that a 
reasonable person, acquainted with the relevant field, would draw 
on the basis of the same facts – Interim order passed by the 
Member (Judicial) of the NCLT indicated, in clear terms, the issues 
that arose for consideration and the inquiry required to determine 
the same – However, the President of the NCLT ignored the said 
interim order, and chose to summarily dismiss the petition, without 
considering the material already placed on record and without 
further evidence being adduced – Also, the NCLAT did not even 
get the facts right – Judgment in Company Petition, in Company 
Appeal and I.A. set aside – Company Petition restored to the file 
of the NCLT, for consideration afresh on merits and in accordance 
with law, upon proper appreciation of evidence – Companies Act, 
1956 – s. 155 (s.111A thereafter) – National Company Law Tribunal 
Rules, 2016 – r. 70(5).
Case Law Cited
Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers 
Pvt. Ltd. and others [1998] Supp. 1 SCR 413 : (1998) 7 SCC 
105; High Court of Judicature at Bombay through its Registrar v. 
Udaysingh and others [1997] 3 SCR 803 : (1997) 5 SCC 129; Jai 
Mahal Hotels Private Limited v. Devraj Singh and others [2015] 11 
SCR 323 : (2016) 1 SCC 423; Adesh Kaur v. Eicher Motors Limited 
and others [2018] 5 SCR 200 : (2018) 7 SCC 709; Dhulabhai v. State 
of Madhya Pradesh and another [1968] 3 SCR 662 – relied on.
Standard Chartered Bank v. Andhra Bank Financial Services Limited 
[2006] Supp. 2 SCR 1 : (2006) 6 SCC 94; Shashi Prakash Khemka 
(Dead) through legal representatives and another v. NEPC MICON 
(Now NEPC In

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