Adv. Adithya Karthik K, BBA, MBA, LL.B., LL.M. (Corporate & Commercial Law), PGD IP Law
Transactions, Capital Markets & Regulatory
Published [date]. Last reviewed [date]. Law stated as at this date.
A minority shareholder who petitions the NCLT under section 241 and wins a buyout order still has to survive the arithmetic. On the assumptions below, an illustrative 15 per cent holder in a company with INR 180 crore of turnover ends up about INR 4.99 crore worse off than the same holder who negotiated an exit on day one, roughly 31 per cent of the pro rata value of the stake. The statute says the Tribunal should aim to dispose of a petition in three months. The gap between that aim and what a contested petition costs in time is where the 31 per cent goes.
Three things, none of them a rewrite of sections 241 and 242. On 4 September 2025 the Ministry of Corporate Affairs notified G.S.R. 603(E), the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules 2025, substituting rule 25(1A) and widening the classes that may merge under section 233 without reaching a tribunal at all: unlisted companies other than section 8 companies, if outstanding loans, debentures and deposits stay under the prescribed ceiling with no subsisting default certified by the auditor; a holding company with its subsidiary; and two subsidiaries of one holding company, in each case where the transferor is not listed.
The Supreme Court then decided two matters that shift how a petition is framed. In Shailja Krishna v. Satori Global Limited, 2025 INSC 1065, decided 2 September 2025, it held at paragraph 31 that the NCLT had "full jurisdiction" to decide whether a gift deed transferring 98 per cent of the shareholding was valid, that question being central to the oppression complaint. The NCLAT had sent the petitioner to the civil court; the Supreme Court restored the NCLT's order, set the transfer aside and reinstated the shareholding. Forgery, coercion and a transfer contrary to the articles are triable within the section 241 proceeding.
In Pannalal Bhansali v. Bharti Telecom Limited, 2026 INSC 213, decided 10 March 2026, the Court upheld a selective reduction of capital that took the minority out, at a price the NCLT had lifted from INR 163.25 to INR 196.80 per share. A discount for lack of marketability remains a legitimate input where there is no finding of oppression, and concurrent findings of the NCLT and NCLAT deserve deference unless perverse. That is a ceiling on what a valuation fight will yield.
Section 244(1)(a) admits a member of a company having share capital supported by one hundred members or one-tenth of the members, whichever is less, or holding one-tenth of the issued share capital, with all calls paid. Section 244(1)(b) requires one-fifth of the members where there is no share capital. The proviso lets the Tribunal waive those requirements.
Two 2025 NCLAT Chennai decisions tighten this. In Madras Race Club v. R.D. Ramasamy, 17 September 2025, only an existing member within section 2(55) may seek waiver. In Latha Balasubramanian v. IGP Engineers Private Limited, 18 August 2025, appointing a valuer by consent was held not to waive section 244(1)(a); settlement steps do not cure a standing defect. Pulling the other way, the NCLAT in Somangsu Biswas v. Calcutta Cricket & Football Club, 2 April 2025, upheld a waiver where the allegations had not been adjudicated before, and the NCLT Mumbai in Devaunshi Mehta v. Bhishma Realty Ltd., 30 July 2026, held that merits are not examined at the waiver stage and a holder need not gather others' support to reach the threshold.
This is where the shareholders' agreement matters and usually disappoints. A holder at 15 per cent is above the section 244 line and needs no waiver. But an affirmative vote, a board seat or a transfer restriction that lives only in the agreement and never reached the articles is not a right the company is bound by. That was settled in V.B. Rangaraj v. V.B. Gopalakrishnan, (1992) 1 SCC 160, and Shailja Krishna confirms the method: at paragraphs 43 to 45 the Court measured the transfer against Article 16. The agreement binds the signatories; the articles tell the Tribunal what the company was required to do.
Section 422(1) says every endeavour shall be made to dispose of a petition within three months of presentation, and section 422(2) permits the President to extend that by up to ninety days on recorded reasons. Six months is the statutory frame. A contested petition with a valuation reference does not finish there, and every extra month costs the petitioner the time value of a stake paying nothing.
Turnover (illustrative) INR 180.00 crore
EBITDA at 10 per cent INR 18.00 crore
Equity value at 6x EBITDA INR 108.00 crore
Minority stake 15 per cent
= Pro rata value of the stake INR 16.20 crore
LITIGATED ROUTE (assumptions)
Marketability discount, 20 per cent INR 12.96 crore
Professional cost to final order INR 1.10 crore
Registered valuer and accounting INR 0.15 crore
= Net proceeds at month 30 INR 11.71 crore
Discounted 2.5 years at 11 per cent divide by 1.2981
= Present value today INR 9.02 crore
NEGOTIATED ROUTE (assumptions)
Agreed at 12 per cent off pro rata INR 14.26 crore
Transaction and advisory cost INR 0.25 crore
= Present value today INR 14.01 crore
= Difference in favour of negotiation INR 4.99 crore
= As a share of pro rata value 30.8 per centAssumptions: an unlisted company; one 15 per cent holder clearing section 244(1)(a) without a waiver; thirty months to a final, unappealed order; no interim receiver or investigation; a marketability discount at the lower end of what tribunals have accepted; no dividend in the period. Shorten the horizon to eighteen months and the gap narrows to about INR 4.0 crore; add an NCLAT appeal and it widens past INR 6 crore. No figure here is a benchmark. Two of them drive the result, the horizon and the discount, and neither is in the petitioner's hands.
The ones attached to schemes, because they run whether or not anyone is watching. Under section 230(4), members and creditors vote within one month of receiving notice, and an objection may be raised only by a person holding not less than ten per cent of the shareholding or five per cent of the total outstanding debt. A promoter who assumes any disgruntled holder can object has read that backwards.
Under section 230(5), notice goes to the Central Government, the tax authorities, the Reserve Bank, SEBI, the Registrar, the exchanges, the Official Liquidator, the Competition Commission and the sectoral regulator, each with thirty days to make representations. Silence counts as no representation, and a regulator's representation has not been read as a veto where the regulator does not govern the transferor.
On the fast track, section 233(1)(a) gives the Registrar and the Official Liquidator thirty days to object, section 233(5) gives the Central Government sixty days to move the Tribunal on public interest grounds, and section 233(6) lets the Tribunal send the scheme into the full section 232 process. The filing is convertible, late, into the slower route. Two thresholds inside section 233 defeat more schemes than objections do: ninety per cent of the total number of shares, and nine-tenths in value of the creditors. One lender who will not sign is enough.
Manufacturing. Group structures carry term debt, and section 233 now turns on a borrowing ceiling. A unit that crosses it by drawing down a facility in the week before the notice loses the fast track and returns to sections 230 to 232, with the meetings, the registered valuer's report under section 230(2)(c)(v) and the tribunal timetable behind it. Drawdown dates are now drafting decisions.
Technology and services. Almost all the value sits in the cap table and the investor agreement, and much of that agreement never reaches the articles. Anti-dilution, reserved matters and drag rights, negotiated hard, are before the Tribunal evidence of expectation rather than obligations on the company.
Financial services. The section 230(5) regulator notice is the live risk. A scheme touching an NBFC, an insurer or an intermediary attracts a regulator with a thirty day representation right and, separately, licensing conditions on change of control that no tribunal sanction displaces. Those are two clocks, and the longer one governs.
The first is whether a marketability discount belongs in a section 242(2)(b) purchase order at all. Pannalal Bhansali was a section 66 reduction with no finding of oppression, and practitioners differ on whether its reasoning carries into a buyout ordered after a finding that the affairs were prejudicial. Our position is that it should not carry over in full: a discount justified by the minority's inability to sell rewards the conduct that made the stake unsaleable. The deference standard nonetheless means a petitioner should assume the discount will be argued and priced.
The second is the Corporate Laws (Amendment) Bill 2026, introduced in the Lok Sabha on 23 March 2026 and reported on by a Joint Parliamentary Committee on 3 August 2026. It is not law. Clause 69 would drop the section 233 members' threshold from ninety per cent of the total number of shares to seventy-five per cent of the value held, and the creditors' threshold from nine-tenths to three-fourths. If enacted in that form, the holdout lender problem largely goes away. Nothing in the Bill as introduced touches section 241 or 244, and a group planning a 2027 restructuring should model both sets of thresholds and assume neither.
A section 241 petition is a strong instrument for undoing a specific wrong, as Shailja Krishna shows, and a weak one for realising value from a stake, because the arithmetic above is structural rather than accidental. The time to fix an exit is when the articles are drafted, not when the relationship ends.
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Adv. Adithya Karthik K, BBA, MBA, LL.B., LL.M. (Corporate & Commercial Law), PGD IP Law
Transactions, Capital Markets & Regulatory
Published [date]. Last reviewed [date]. Law stated as at this date.
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