Authority: National Company Law Tribunal (NCLT), Ahmedabad Bench (Court-II)

Order Date: 07/07/2026

Case Overview

The petition was filed by Gopal Dhirajlal Vadalia and three other applicants (holding a collective 42.14% shareholding) against Prabhat Solvent Extraction Industries Pvt Ltd (R-1) and nine other respondents, primarily family members. The petition was filed under Sections 241 and 242 of the Companies Act, 2013, alleging acts of oppression and mismanagement by the respondents, particularly R-2 (Maheshkumar Dayalal Vadalia) and R-5 (Navinchandra Dayalal Vadalia).

The principal allegation concerned the ownership of 11 land parcels in Madhapar and Taraghadi. The applicants claimed these lands were purchased by the company (R-1) but were registered in the names of R-2, R-5, and their late father due to legal restrictions on companies holding agricultural land. They alleged an understanding that these individuals held the lands in a fiduciary capacity and were obligated to transfer them to the company. The applicants contended that R-2 and R-5 were now attempting to sell these lands and had engaged in unauthorized financial transactions, including offering company FDRs as security for personal loans and syphoning funds.

The respondents, particularly R-5 to R-8, denied all allegations. They argued the petition was a malafide family dispute disguised as a company law matter. R-5 claimed absolute ownership of the disputed lands (Madhapar 1-3, Taraghadi 1-6), asserting they were purchased with personal funds, sometimes routed through personal current accounts maintained with the company. He submitted that the company had even leased some lands from him, acknowledging his ownership. He further alleged that he was being oppressed and sidelined by the applicant group and R-2, citing his removal as a signing authority and attempts to oust him from the board.

The Registrar of Companies (ROC) filed a report confirming the company's shareholding and director details but reported no pending prosecutions. Respondent No. 9 also challenged the petition's maintainability, arguing it was essentially a suit for specific performance of a property contract, which fell under civil court jurisdiction and was barred by limitation.

The tribunal noted the deeply familial nature of the dispute and that the company had been defunct from its core manufacturing business since approximately 2005-06, sustaining itself only on rental income. It observed that the fundamental issue of land ownership could not be conclusively determined in a petition under Sections 241-242 and was a matter for civil courts.

Final Outcome

The NCLT partly allowed the petition. It held that the allegations of oppression and mismanagement were not made out. However, in the interest of the company and to break the deadlock, it issued specific directions:

1. The petition is partly allowed, but the primary reliefs regarding land transfer and findings of oppression are dismissed.

2. Two Independent Directors are appointed to the board: Mr. Mahesh Shah (Retired Director General of Corporate Affairs) and Mr. Devang Doctor. They are tasked with overseeing the resolution process.

3. The company, under the guidance of the Independent Directors, must initiate a process to regularize the status of the disputed lands. This involves either negotiating a buyout of the lands from R-5 at current market rates or formalizing a long-term lease agreement.

4. The Independent Directors are empowered to appoint a new CEO and a new statutory auditor if necessary.

5. If a settlement is not reached within three months, the Independent Directors may move an application for the liquidation or dissolution of the company.

6. The tribunal also directed the registry to send a copy of the order to the ROC and the Collector of Rajkot for information and necessary action regarding any potential violations of law related to the land or statutory filings.

7. All pending Interlocutory Applications (IAs) and Contempt Petitions in the matter were disposed of as infructuous.

Topics: NCLT Order, Family Dispute, Property Ownership