Ambika Traders & Ors Vs Shree Basaveshwara Sugar Ltd. & Ors. (NCLT Bengaluru)
The National Company Law Tribunal (NCLT), Bengaluru Bench, rejected an application by shareholders holding approximately 22% of a company’s paid-up capital, seeking permission to represent it in proceedings challenging an arbitral award.
In Ambika Traders & Others vs. Shree Basaveshwar Sugars Limited & Others, CA No. 183/BB/2026 in CP No. 56/BB/2025, the Tribunal held that shareholder status and a pending oppression petition did not automatically confer authority to conduct litigation for the company.
Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada delivered the order on 9 October 2026, dismissing the application as not maintainable.
Minority Shareholders Seek Control of Award Challenge
Five applicants, including Ambika Traders and Kamala Agencies, sought relief under Sections 241–242 of the Companies Act, 2013 read with Rule 81 of the NCLT Rules, 2016.
They had already filed a company petition alleging oppression and mismanagement, which remained pending.
Through the separate application filed on 19 August 2026, they sought leave to represent the company in proceedings arising from an arbitral award dated 7 August 2023 and a subsequent court order.
Their request extended to the pending appeal before the Karnataka High Court and related proceedings before other forums.
Award Allegedly Creates ₹52.71 Crore Liability
According to the applicants, the award imposed approximately ₹52.71 crore liability, with 12% annual interest and ₹30 lakh costs, upon the company.
The underlying dispute arose from a shareholders’ agreement involving a director-shareholder and another individual.
The applicants maintained that the company was only a formal party and had no substantive obligation supporting the liability. They also alleged violation of Section 67(2) of the Companies Act.
These were the applicants’ allegations. The NCLT did not determine the correctness of the award or decide whether the alleged liability violated that provision.
Shareholders Had Filed High Court Appeal
The applicants submitted that the company’s management failed to challenge the award effectively.
After dismissal of proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, they alleged that the company had not pursued the proposed Section 37 appeal.
The shareholders therefore instituted COM AP No. 452/2025 before the Karnataka High Court, describing it as a derivative proceeding to protect the company.
They stated that the High Court, on 1 September 2025, stayed the award and related order insofar as they extended to the company.
However, the company allegedly remained absent and unrepresented.
Authority to Sign Pleadings Also Requested
The applicants sought permission for their authorised signatory to execute pleadings, vakalatnamas, affidavits, applications and other documents on the company’s behalf.
They requested that this authority continue until final adjudication of the award-related dispute.
They also sought to restrain the existing management from adopting a position prejudicial to the appeal without prior NCLT permission.
The application therefore went beyond allowing shareholders to advance their own submissions. It sought authority to speak for the company while limiting the existing management’s freedom to act in those proceedings.
Pending Oppression Petition Creates No Automatic Authority
The Tribunal noted that the applicants were not members of the board and had not established any authorisation from the company to represent it.
Their principal oppression and mismanagement petition was still awaiting adjudication.
At that stage, there was no finding that the company’s affairs warranted interference with management, or that the board had acted prejudicially to the company.
The NCLT held that merely owning shares did not create an automatic right to prosecute proceedings for the company. Nor did the pendency of a Sections 241–242 petition independently confer that authority.
Proposed Arrangement Would Displace Existing Board
The Tribunal considered that granting the requested permission would effectively supersede the board for the litigation concerned.
It would create a separate shareholder group with authority to represent the company, despite the absence of established grounds warranting that exceptional intervention.
The Bench found no statutory basis for the particular arrangement sought.
The applicants’ stated intention to protect company assets did not, in its view, supply the missing legal foundation. The Tribunal therefore declined to confer representative powers solely on the strength of the allegations in the pending proceedings.
Inherent Powers Cannot Supply Missing Statutory Relief
No written objections were filed in the application. Counsel for the company stated that objections had been filed in the appropriate execution proceedings and that instructions concerning this application were unavailable.
Nevertheless, the Tribunal independently examined maintainability.
It held that courts and tribunals must grant relief within the governing statute and cannot invoke inherent powers to create relief unsupported by it.
The absence of written opposition therefore did not entitle the applicants to the requested order.
Application Dismissed; Main Petition Remains Pending
The NCLT dismissed CA No. 183/BB/2026 and listed the main company petition for 2 December 2026.
The ruling did not decide the oppression allegations or overturn the High Court stay. It rejected the requested authority to represent the company on the circumstances and statutory basis presented, leaving the main dispute for adjudication.
FULL TEXT OF THE ORDER OF NCLT BENGALURU BENCH
1. This Company Application has been filed by Applicants on 19.08.2026 under Section 241 & 242 of the Companies Act, 2013 R/W Rule 81 of the NCLT Rules, 2016 seeking the following reliefs:
a) Grant leave to the Applicants to represent Respondent No.1 Company for the limited purpose of challenging the proceedings arising out of the Arbitral Award dated 07.08.2023 and Order dated 04.11.2024 passed by the Ld. LXXXV Addl. City Civil and Sessions Judge in Com A.P. No. 34 of 2024, including the pending appeal under Section 37 of the Arbitration and Conciliation Act, 1996 in COM AP No. 452 of 2025 before the Hon’ble High Court of Karnataka.
b) Grant leave to the Applicants to represent the Respondent No.1 Company before any other court or forum, in relation thereto.
c) Authorize the Applicants through their authorised signatory to sign necessary documents as representatives of the Respondent No. 1 Company including but not limited to pleadings, vakalatnamas, affidavits, applications, objections and all ancillary documents on behalf of the Company in relation to the said proceedings.
d) Direct that the permission granted shall continue until final adjudication in respect of the disposal of the Award dated 07.08.2023 and Order dated 04.11.2024 passed by the Ld. LXXXV Addl. City Civil and Sessions before any other court or forum, without prior leave of this Hon’ble Tribunal.
f) Pass such other order or orders as this Hon’ble Tribunal may deem fit and proper in the interest of justice and equity.
2. Submissions made by the Applicant: The facts of the case as mentioned in the petition are as under:
a) The Applicants are shareholders of Respondent No.1 Company and collectively hold approximately 22% of its paid-up share capital. The Applicants have also filed a Company Petition under Sections 241 and 242 of the Companies Act, 2013 alleging mismanagement of the affairs of Respondent No.1 Company, which is pending before this Tribunal.
b) It is submitted that the present Application has been filed on account of the failure of Respondent No.1 Company and its Board of Directors to take necessary steps to challenge the Arbitral Award dated 07.08.2023 and the Order dated 04.11.2024 passed in COM A.P. No.34 of 2024, which, according to the Applicants, have incorrectly placed a liability upon Respondent No.1 Company.
c) It is submitted that, the Award has resulted in a liability of approximately Rs.52.71 Crores along with interest at 12% per annum and costs of Rs.30 Lakhs upon Respondent No.1 Company in relation to disputes arising under a Shareholders Agreement between Respondent No.6 and one Mr. Mallanagouda Patil. It is contended that Respondent No.1 Company was only a formal party to the said proceedings and that there was no liability or obligation upon the Company. 2013. The Applicants further allege that the present management, under the control of the Investor Group, has failed to effectively challenge the Award and protect the interests and assets of Respondent No.1 Company.
e) The Applicants further submit that, after dismissal of the proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 by order dated 04.11.2024, Respondent Nos.1 to 3 had represented before this Tribunal that they were in the process of preferring an appeal under Section 37 of the said Act. However, no such appeal was preferred by Respondent No.1 Company.
f) It is submitted that, in view of the continued liability against Respondent No.1 Company and the failure of its management to effectively challenge the Award, the Applicants, claiming to have a direct and substantial interest in protecting the rights and assets of the Company, instituted COM AP No.452/2025 before the Hon’ble High Court of Karnataka under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996, in their capacity as shareholders and in the nature of a derivative proceeding.
g) The Applicants submit that the Hon’ble High Court of Karnataka, by order dated 01.09.2025, stayed the operation of the Award and Order insofar as they extended to Respondent No.1 Company. However, Respondent No.1 Company continues to remain absent and unrepresented in the said proceedings, despite the proceedings directly concerning its rights, assets and liabilities. The Applicants further submit
h) It is further submitted that unless leave is granted by this Tribunal permitting the Applicants to represent Respondent No.1 Company before the Hon’ble High Court, the Company would continue to remain unrepresented in proceedings affecting its assets and liabilities. The Applicants contend that they have no other equally efficacious remedy and that denial of the reliefs sought would cause serious prejudice to the Applicants and the Company, whereas granting the reliefs would not cause prejudice to the Respondents.
3. No statement of objections were filed by the respondents in this Company Application objecting the Application. The ld Counsel appearing on behalf of the Respondent no 1 companym on advance notice, stated that objections have been filed before the appropriate forum in the Execution proceedings and he has not been given any instructions in relation to the present proceedings.
4. ANALYSIS:
a) We have considered the submissions made by the Applicants and perused the material on record.
b) The Applicants admittedly hold approximately 22% of the paid-up share capital of Respondent No.1 Company but are not members of the Board of Directors of the Company.
c) The grievance of the Applicants apparently arises from the alleged failure of the present management to take steps to challenge the Arbitral Award and the Order passed in the proceedings arising therefrom. The Applicants seek, on the basis of such allegations, leave to represent Respondent No.1 Company before the Hon’ble High Court of Karnataka. Tribunal. As on date, there is no finding by this Tribunal establishing that the affairs of Respondent No.1 Company are being conducted in a manner warranting interference with its management or that the present Board of Directors has acted in a manner prejudicial to the Interest of the Company.
e) Merely by virtue of being shareholders of Respondent No.1 Company, the Applicants cannot claim an automatic right or authority to represent the Company or to prosecute proceedings on its behalf before another forum. The Applicants are neither members of the Board nor shown to have been authorised by the Company to represent it in the proceedings before the Hon’ble High Court of Karnataka. The mere pendency of the proceedings under Sections 241 and 242 of the Companies Act, 2013 does not, by itself, confer such authority upon the Applicants.
f) We are also of the view that permitting the Applicants to represent Respondent No.1 Company in the proceedings before the Hon’ble High Court would amount to superceding the present board of Directors and creating a separate set of shareholders clothed with authority, even though a limited one, to represent the Company. The Company Act has no provision for resorting to such an action. What is not contemplated in the Provisions of the Act cannot be considered, However much the applicants contend that their intention is to protect interests of the Company, this relief they seek has no statutory provision for allowing their prayer.
g) In the absence of any adjudication establishing the allegations of oppression and mismanagement or otherwise demonstrating circumstances warranting such an exceptional interference with the the present Application cannot be granted.
h) The Tribunals and Courts are vested with the power to ensure proper implementation of the Statutes. They can give relief within the Statute. They cannot even under the Inherent powers grant any relief, if the Statute does not provide for such relief. They cannot innovate and create a statutory stalemate like the one sought in this application.
5. DECISION: From the above discussion, this tribunal is of the Considered opinion that this petition is not maintainable and consequently, the Petition numbered CA No. 183/ BB/ 2026 is Dismissed.
