Case Law Details
Cherukuri Ramakrishna Vs Sandhya Hotel Private Limited (Telangana High Court)
The case Cherukuri Ramakrishna Vs Sandhya Hotel Private Limited revolves around a legal dispute concerning the transfer of shares and the proper forum for adjudicating such disputes. The Telangana High Court addressed an appeal against an order by the XI Additional Chief Judge, City Civil Court at Hyderabad, which directed the plaintiff to file the suit in a proper forum, based on an application by the defendants under Order VII Rule 11(a) and (d) read with Section 151 of the Code of Civil Procedure, 1908.
The central issue in the appeal was whether the National Company Law Tribunal (NCLT) or the City Civil Court had jurisdiction over the dispute regarding the transfer and title of shares. The defendants argued that Section 430 read with Sections 58 and 59 of the Companies Act, 2013, barred civil courts from entertaining the suit, asserting that the matter should be adjudicated by the NCLT/NCLAT. They also claimed that the dispute could not be referred to arbitration under Clause 8 of the Share Purchase Agreement (SPA) as the appellant was only one of several ‘Transferors’ in the SPA.
The factual background of the case involves the appellant, who owned shares in Sunbeam Hospitality Private Limited (now Sandhya Hospitality Private Limited), entering into agreements with the respondents to transfer these shares. The respondents paid a portion of the agreed consideration but failed to pay the remaining balance, which led the appellant to allege fraudulent transfer of shares and removal as a director without full payment. Consequently, the appellant sought a mandatory injunction and re-transfer of shares through a civil suit.
The High Court examined the applicability of Section 430 read with Sections 58 and 59 of the Companies Act, 2013, to the dispute. Section 430 prohibits civil courts from entertaining suits within the jurisdiction of the NCLT/NCLAT. Sections 58 and 59 address the refusal of companies to register the transfer of securities and the rectification of the register of members. The Court found that these provisions apply to disputes arising after the title to shares is established and do not cover the determination of the title itself, which falls within the jurisdiction of civil courts.
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