LI Network
Published on: January 23, 2024 at 12:00 IST
In a recent decision, the National Company Law Tribunal (NCLT) bench in Hyderabad, consisting of Dr. N. Venkata Ramakrishna Badarinath (Judicial Member) and Shri Charan Singh (Technical Member), has determined that a company petition filed by a society registered under the Andhra Pradesh Societies Registration Act, 2001, seeking the rectification of the share register of a company’s members under Section 59 of the Companies Act, 2013, is not maintainable.
The NCLT held that the society does not qualify as a ‘person’ under Section 59, lacking a connection with the company that allocated the shares.
The NCLT observed that the phrase ‘person’ is not explicitly defined in Section 59 of the Companies Act. However, it pointed out that terms such as ‘other person’ and ‘any other person’ are mentioned in other provisions of the Companies Act 2013, indicating a clear link between the term ‘person’ and the company’s affairs.
The NCLT emphasized that a ‘person’ unrelated to the company’s affairs cannot fall under the category of ‘any other person’ as per Section 59.
Background:
The case involved Entrepreneur Associates and Hyderabad Hi-Tech Textile Park Pvt. Ltd. (Respondent No. 1), who entered into a Share Subscription Agreement (SSA) in 2006.
The Entrepreneur Associates were allotted shares, but share certificates were not delivered, and their names were not entered in the Register of Members. Subsequently, these investors formed the Hyderabad Hi-tech Textile Park Members Welfare Society (Society), registered under the Andhra Pradesh Societies Registration Act, 2001.
The Society filed a company petition under Section 59 of the Companies Act before the NCLT, seeking rectification of the register of members. The Society claimed intentional delays in delivering share certificates to its members and requested the Registrar of Companies to rectify the register.
NCLT Verdict:
The NCLT examined Section 59 of the Companies Act and noted that it allows a ‘person aggrieved,’ a ‘member’ of the company, or the ‘company’ itself to appeal for rectification of the register. However, the NCLT found that Sections 2(20) and 2(55) of the Companies Act expressly exclude societies from the categories of ‘Member’ and ‘Company’ for the purpose of Section 59.
The bench concluded that a society registered under the Societies Registration Act is not a juristic person similar to a company under the Companies Act. The NCLT held that the society lacks the necessary nexus with the company’s affairs and cannot be considered a ‘person aggrieved’ under Section 59.
Moreover, the NCLT highlighted that even if the Society could be deemed a ‘person aggrieved,’ it is limited by Rule 19 of the AP Societies Act, allowing legal proceedings only concerning the society’s property, rights, or claims.
Consequently, the NCLT ruled that the company petition filed by the Society for rectification of the share register is not maintainable.
Case Title: Hyderabad Hi-Tech Textiles Park Members Welfare Society v Hyderabad Hi-Tech Textile Park Pvt Ltd & 7 others