The Delhi High Court has ruled that company shares whose transfer is already challenged and pending adjudication before the National Company Law Tribunal (NCLT) cannot be incorporated into a civil partition suit. Dismissing a petition challenging a trial court order, Justice Ajay Digpaul held that until the legality of an alleged share transfer is determined in favor of a claimant and reaches finality before the specialized company tribunal, the civil court cannot bring such transferred shares within the fold of an estate partition.
Background of the Dispute
The controversy stems from an inter-se family dispute between the children of Late Sh. Krishan Chander Dhawan, who passed away intestate on June 17, 2010. Late Sh. K.C. Dhawan was the director and owner of Dhawan Electricals Pvt. Ltd., holding 85% (850 shares) of the company’s total 1,000 shares, alongside a sister concern named AK Electricals. His son, the petitioner Lokesh Dhawan, owned 10 shares and served as a director drawing a monthly salary of Rs. 50,000 until 2011, while the remaining shares were divided among other family members.
The respondents contended that on June 17, 2010, prior to his demise and in the presence of legal heirs, Late Sh. K.C. Dhawan transferred his entire 85% shareholding to respondent no. 1, Arun Dhawan. In April 2012, the petitioner instituted a civil partition suit seeking a decree of partition regarding scheduled immovable properties, along with consequential reliefs of possession and injunction. Around the same time, in August 2012, the petitioner initiated proceedings under Sections 397, 398, 402, and 403 of the Companies Act, 1956 before the Company Law Board (now NCLT), alleging that the shares were fraudulently transferred through a forged board meeting and seeking to declare the shareholding alterations illegal and void.
While the trial court framed four issues and directed evidence to be filed, the petitioner moved an application on March 20, 2014 under Order VI Rule 17 of the Code of Civil Procedure, 1908 (CPC). The amendment sought to incorporate averments regarding movable properties and insert a specific prayer for the partition of movable assets, including bank accounts, fixed deposits, jewellery, cash, and the shares of Dhawan Electricals Pvt. Ltd. The trial court dismissed this application on August 26, 2020, citing the petitioner’s knowledge of the share transfer as a director, the pendency of the dispute before the NCLT, and the impermissible alteration of the suit’s nature.
Arguments of the Parties
Challenging the trial court’s dismissal before the High Court, learned counsel for the petitioner argued that the trial court erred in presuming the petitioner had knowledge of the transfer, asserting that he was not present at the hospital on June 17, 2010. The petitioner maintained that he was provided a Minutes of Meeting dated August 16, 2010, reflecting that the shares would be equally divided into one-sixth shares among surviving heirs, giving him no reason to suspect otherwise until later. Relying on Rajesh Sharma v. Krishan Pal & Anr., BK Narayana Pillai v. Parmeswaran Pillai & Ors., and Baldev Singh & Ors. v. Manohar Singh & Anr., the petitioner argued that courts must liberally permit amendments to adjudicate the real dispute, that trial had not formally commenced since evidence had not been led, and that the trial court impermissibly evaluated the merits of the amendment. In response to jurisdictional objections, the petitioner relied on Aruna Oswal v. Pankaj Oswal & Ors. and Ammonia Supplies Corporation Private Limited v. Modern Plastic Containers Pvt. Ltd. to argue that the NCLT cannot decide questions of title and inheritance or seriously disputed questions of forgery.
Conversely, learned counsel for the contesting respondents highlighted the statutory bar under Section 430 of the Companies Act, relying on M/S Karyan Global LLP v. Vivek Kumar Mishra & Ors. to argue that the civil court is barred from adjudicating the validity of share transfers when the issue is already sub-judice before the NCLT. The respondents argued that the petitioner engaged in forum shopping and failed the mandatory test of due diligence under the proviso to Order VI Rule 17 CPC. It was submitted that a director drawing a salary until 2011 could not plausibly claim lack of knowledge until 2014, especially after having already filed a Company Law Board petition in August 2012. Furthermore, the respondents pointed out that because the shares were transferred prior to the father’s death, they did not form part of his estate at the time the partition suit was filed.
Analysis of the Court
Examining the statutory framework and judicial precedents, Justice Ajay Digpaul observed that the NCLT exercises wide quasi-judicial powers with the trappings of a court, as established in decisions such as Radharamanan v. Chandrashekhar Raja, Kamal Kumar Gupta v. Ruby General Hospital Ltd., and Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd.
The Court placed particular reliance on the Supreme Court ruling in Mrs. Shailja Krishna v. Satori Global Limited & Ors., reiterating:
“The aforesaid decisions confirm the view that the NCLT/CLB possess a wide jurisdiction to decide all such matters that are incidental and/or integral to the complaint alleging oppression and mismanagement. Such power is, however, subject to any other legislative enactment specifically debarring the NCLT/CLB from exercising its powers in this respect.”
“in the instant case, it is an admitted fact that the determination of whether the gift deed is valid or not is central to the decision herein, and therefore, the NCLT did have full jurisdiction to decide whether the gift deed is valid or not, or whether it is against the provisions of the 1956 Act and/or internal regulations of the company, including but not limited to the AoA and the Memorandum of Association.”
Applying this principle, Justice Digpaul distinguished the petitioner’s reliance on Aruna Oswal, noting that questions of title and inheritance arise only if the property forms part of the deceased’s estate:
The shares had already been transferred to respondent no. 1 prior to Late Sh. K.C. Dhawan’s death and were reflected as such in Registrar of Companies records. Consequently, they did not form part of his estate on the date partition was sought. The petitioner must first establish before the NCLT that the transfer was illegal; only upon such repudiation could the shares revert to the estate and become amenable to partition.
The Court also observed that the petitioner’s reliance on Ammonia Supplies was misplaced because that case was confined to summary rectification under Section 155 of the 1956 Act, whereas the powers under oppression and mismanagement are materially broader.
Turning to Order VI Rule 17 CPC, the Court referred to the Supreme Court’s guidelines in LIC v. Sanjeev Builders Pvt. Ltd. & Anr.:
“All amendments are to be allowed which are necessary for determining the real question in controversy provided it does not cause injustice or prejudice to the other side. This is mandatory, as is apparent from the use of the word ‘shall’, in the latter part of Order VI Rule 17 CPC.”
The Court held that introducing transferred shares whose legality remains pending before the NCLT into a partition suit would cause substantial prejudice to the respondents. Furthermore, the petitioner failed the test of due diligence. As a salaried director intimately engaged with the family company who filed an NCLT petition challenging the transfer in August 2012, his assertion of lacking knowledge until moving the amendment in 2014 was deemed highly improbable. The Court also highlighted that the petitioner failed to place on record the alleged Minutes of Meeting dated August 16, 2010.
Addressing the petitioner’s critique of the trial court’s approach, Justice Digpaul clarified that while courts should adopt a liberal stance at the amendment stage, such liberality cannot be construed as permitting an amendment contrary to law or allowing a mindless exercise of discretion.
Decision
Holding that the trial court committed no error in refusing the amendment to incorporate the disputed company shares into the partition suit, the High Court found no infirmity in the impugned order dated August 26, 2020.
Consequently, the High Court dismissed the petition along with pending applications.
Case Title: Lokesh Dhawan v. Arun Dhawan & Ors.
Case No.: CM(M) 673/2021 & CM APPL. 34697/2021
Bench: Justice Ajay Digpaul
Date: September 21, 2026
