NCLAT Maintains Status Quo in Shareholding Dispute Involving YS Jagan Mohan Reddy
NCLAT Maintains Status Quo in Shareholding Dispute Involving YS Jagan Mohan Reddy
Introduction
Saraswati Power and Industries Pvt Ltd has moved the National Company Law Appellate Tribunal (NCLAT), Chennai, challenging a National Company Law Tribunal (NCLT) order that reinstated former Andhra Pradesh Chief Minister Y S Jagan Mohan Reddy, his wife Y S Bharathi, and Reddy's mother Y S Vijaya as shareholders in the company.
Factual Background
The dispute revolves around the transfer of shares held by Reddy and his wife to his estranged sister Y S Sharmila. Reddy had earlier agreed to gift the shares via a Memorandum of Understanding citing "love and affection." However, the NCLT observed that the transfer was never legally completed due to non-delivery of original share certificates.
Procedural Background
The NCLT Hyderabad bench had ruled in favour of Reddy, directing Saraswati Power to amend its Register of Members to reflect Jagan, Bharathi, and Vijaya as shareholders. Saraswati Power has contested this order before the NCLAT.
Issues
1. Validity of share transfer: Whether the transfer of shares to Y S Sharmila was validly completed.
2. Reinstatement of shareholders: Whether Reddy, Bharathi, and Vijaya can be reinstated as shareholders.
Contentions of the Parties
Reddy's Contentions: Reddy alleged that the transfer of shares was an "illegal transfer" and sought cancellation of the same.
Saraswati Power's Contentions: The company contested the NCLT order, arguing that the transfer was not validly completed.
Reasoning and Analysis
The bench of Justice N Seshasayee and Technical member Jatindranath Swain directed that status quo be maintained until the pleadings are complete in the matter. The tribunal observed that the transfer of shares was not consummated in law due to non-delivery of original share certificates.
Implications
The outcome of this case could have significant implications for the shareholding structure of Saraswati Power and Industries Pvt Ltd. The NCLAT's decision will determine the validity of the share transfer and the rights of the parties involved.
