Mack Star’s Alleged Fraud Suit Over 4 Kaledonia Units Isn’t an NCLT Oppression Dispute, Bombay HC Remands Interim Plea for Fresh Hearing

Mack Star Marketing Private Limited (Mack Star), whose majority shareholder is Ocean Deity Investment Holdings Limited (ODIL), owned commercial units in the Kaledonia building.

In 2009, Mack Star executed a registered agreement for sale of four units to Vikram Homes.

The appellants alleged that the agreement was fraudulent: the signatory director lacked authority, the consideration was paid to HDIL rather than Mack Star, the property was substantially undervalued, and Vikram Homes was connected to the other defendants.

ODIL alleged that it discovered the agreement during a title search in 2017.

Mack Star and ODIL sued for cancellation of the agreement and 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 Sections 241 and 242 of the Companies Act, 2013, and that civil-court jurisdiction was barred by Section 430.

The plaintiffs appealed.

Sections 241 and 242 of the Companies Act, 2013 provide a remedy before the Tribunal for qualifying complaints that a company’s affairs are being conducted oppressively or prejudicially; Section 242 empowers the Tribunal to grant relief where the statutory conditions are met, including that winding up would unfairly prejudice the affected members.

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

Relying on Darshan Anilkumar Patel v. Pravinkumar Jinabhai Patel (SLP (C) D. No. 9209 of 2020), the Court reiterated that the validity of a sale deed—and whether it is invalid or vitiated by fraud—falls within the civil court’s jurisdiction; independent grievances under the Companies Act remain open to the appropriate remedy.

The Court held that the references to ODIL’s shareholding, Mack Star’s Articles of Association, the directors’ removal, and the internal inquiry provided context for the pleaded fraud; they did not, on the plaint as framed, make oppression or mismanagement the cause of action.

The central claim was that the sale agreement itself was fraudulent, supported by allegations of the signatory’s lack of authority, payment to HDIL rather than Mack Star, undervaluation, and a nexus between the purchaser and other defendants.

Those allegations were directed to the validity of the transaction and were triable issues for the Single Judge.

The Court therefore rejected the conclusion that the dispute fell within Sections 241 and 242 and was barred by Section 430, without deciding whether the fraud allegations were ultimately proved.

The Court set aside the order dismissing Interim Application No. 2505 of 2020 and remanded the application to the Single Judge for fresh consideration on all aspects, including appointment of a Court Receiver, uninfluenced by the appellate Court’s observations.

The Court made no final determination on the merits of the fraud allegations.