Bombay HC Sends Mack Star’s Interim Bid Over Allegedly Fraudulent Unit Sale Back for Fresh Hearing, Says NCLT Bar Does Not Apply to Suit

Mack Star Marketing Private Limited (Mack Star), whose majority shareholder is Ocean Deity Investment Holdings Limited (ODIL), sued to cancel a 2009 registered sale agreement under which Mack Star sold four units in its Kaledonia building to Vikram Homes.

The plaintiffs alleged that Mack Star’s director lacked authority to execute the agreement, that the consideration was paid to HDIL rather than Mack Star, and that the sale was undervalued and fraudulent.

They sought interim relief, including appointment of a Court Receiver.

The Single Judge dismissed the interim application, holding that the dispute concerned oppression and mismanagement within the jurisdiction of the National Company Law Tribunal (NCLT), and that civil-court jurisdiction was barred by Section 430 of the Companies Act, 2013.

The plaintiffs appealed.

Section 430 of the Companies Act, 2013 bars civil-court jurisdiction only in respect of matters that the NCLT or the Appellate Tribunal is empowered to determine under the Act.

Sections 241 and 242 provide relief for qualifying complaints that a company’s affairs are being conducted oppressively or prejudicially; the Tribunal’s powers include orders to bring the complained-of matters to an end.

The Court relied on Darshan Anilkumar Patel v. Pravinkumar Jinabhai Patel, which held that the validity of a sale deed falls within the civil court’s jurisdiction, while leaving independent Companies Act grievances to the appropriate forum.

It also referred to Anuragha Poultries & Breeders v. Padmavathi and M/s Crystal Dwellings Pvt. Ltd. v. Surat Singh Malhotra as supporting the civil court’s jurisdiction over such validity disputes.

The Court confined its review to whether the dispute was barred by Section 430, leaving the contested facts and merits of the interim application to the Single Judge.

It found that the references to Mack Star’s shareholding, articles, board changes and internal inquiry provided context for the alleged fraud; they did not make oppression or mismanagement the suit’s cause of action.

The substantive claim was that the sale agreement was unauthorized, undervalued and procured through collusion, including by paying consideration to HDIL rather than Mack Star.

Because the suit sought to challenge the validity of that agreement, the Court held that it was not, on the pleadings, a matter shown to fall within Sections 241–242.

The Court made no final determination on whether fraud occurred.

It set aside the order dismissing the interim application and remanded that application to the Single Judge for fresh consideration on all aspects, including appointment of a Court Receiver, uninfluenced by the appellate observations.

The appeal was allowed; the accompanying applications were disposed of.