When disputes arise within a company between shareholders and the board of directors, the Companies Act, 2013 (“Act“) sets out various mechanisms for shareholders to assert their rights and address disagreements with the board. These include the statutory rights to requisition and, in certain circumstances, convene a general meeting without the board’s involvement. Where such mechanisms do not provide an effective solution, shareholders may also seek the intervention of the National Company Law Tribunal (“NCLT“). The question, however, is where the line falls between a shareholder’s recourse to the NCLT and an attempt to obtain by order what the shareholder could have obtained by exercising the rights the Act already confers.
In Pearl City Marine Products v Hiras K. & Ors, the National Company Law Appellate Tribunal, Chennai Bench (“NCLAT“), considered this question in the context of an application under Section 98 of the Act seeking directions for convening an extraordinary general meeting (“EGM“). The decision clarifies the circumstances in which the NCLT may intervene and the limits of invoking the NCLT’s jurisdiction when the Act provides shareholders with alternative mechanisms.
The Dispute
The dispute arose due to changes in the composition of the board of directors of Pearl City Marine Products Private Limited (“Company“). Following certain proven acts of misconduct, two directors were removed from the board by a resolution passed at an EGM held on November 10, 2025. The first respondent, who later became the requisitioning shareholder, was a party to the EGM and had supported the resolution removing the two directors. However, following a change in the first respondent’s alliance, a notice was issued under Section 100 of the Act for convening an EGM to reintroduce the two directors to the board. The board of the Company rejected the same by a majority vote. Thereafter, the first respondent approached the NCLT under Section 98 of the Act. The NCLT allowed the petition and directed that the meeting be convened. This order of the NCLT was challenged before the NCLAT.
Section 98 and Section 100
Section 98 and Section 100 of the Act provide distinct mechanisms for convening general meetings. Section 100 of the Act governs the mechanism for calling an EGM, under which the board may either call an EGM of its own initiative, or members holding not less than one-tenth of the voting paid-up share capital, or one-tenth of the voting power in a company not having a share capital, may requisition one. Under Section 100(4), if the board does not proceed to call a meeting for consideration of that matter within 21 (twenty-one) days or hold the meeting within 45 (forty-five) days, the requisitioning members may themselves call and hold the meeting within 3 (three) months from the date of requisition.
Section 98 of the Act, on the other hand, confers an exceptional power on the NCLT to direct convening a meeting. If, for any reason, it is impracticable to call, hold or conduct a meeting of the company in accordance with the Act or the company’s articles, the NCLT may either suo motu or on an application by a director or member entitled to vote, direct that the meeting be called or conducted in such manner as it considers appropriate. Therefore, the key distinction between Section 98 and Section 100 lies in the nature and threshold of the mechanisms created under each provision.
NCLAT’s Decision
A central argument presented by the appellants before the NCLAT was that the first respondent had failed to exercise the statutory mechanism under Section 100(4) before approaching the NCLT under Section 98 of the Act. Additionally, they argued that the respondents had not demonstrated any reason why it was impracticable to exercise their statutory right.
In determining whether rights under Section 98 could be exercised without exhausting the remedy under Section 100(4), the NCLAT considered the decision in Invesco Developing Markets Fund v. Zee Entertainment Enterprises Limited, wherein the Bombay High Court recognized that the rights under Section 100(4) are an additional right to call and hold an EGM despite an unwilling board. The NCLAT accordingly held that Section 100(4) and Section 98 operate as mutually exclusive provisions, and that invoking Section 98 does not depend on first exhausting the remedy under Section 100(4). This, however, would not mean that every refusal by the board to hold an EGM would justify the intervention of the NCLT. The NCLT’s jurisdiction under Section 98 is predicated on the threshold requirement that it has become impracticable to hold or conduct the meeting in the manner prescribed by the Act or the articles of the company.
In determining what constitutes “impracticability”, the NCLAT relied on the principles laid down by the Calcutta High Court in In re Ruttonjee & Co. Ltd., wherein the Court held that the power to direct the convening of a meeting is exceptional and must be exercised sparingly. The question of impracticability is to be assessed based on a practical and common-sense assessment of whether the meeting can be validly convened through ordinary statutory mechanisms. A disagreement between groups of shareholders and directors would not ordinarily cross this threshold.
Applying these principles, the NCLAT found that the requisitioning shareholder had failed to establish the necessary factual foundation for invoking Section 98 of the Act. The principal circumstance relied upon was the board’s rejection of the requisition by a majority, and the NCLAT ruled that this was not sufficient to demonstrate impracticability. The NCLAT therefore concluded that there was no basis to infer that the convening of an EGM had become impracticable and accordingly, the intervention of the NCLT under Section 98 was not justified. The NCLAT accordingly set aside the NCLT’s order directing that an EGM be convened.
Conclusion
The decision of the NCLAT strikes a careful balance between shareholders’ rights and the circumstances that would warrant the intervention of the NCLT. While the board cannot frustrate shareholder democracy merely by refusing to convene a validly requisitioned meeting, given the remedy set out under Section 100(4), the existence and availability of this remedy does not prevent a shareholder from independently seeking relief under Section 98. Additionally, the NCLAT emphasized that Section 98 should not become a convenient substitute for ordinary statutory machinery. For shareholders seeking NCLT intervention, this distinction may prove particularly important, as they would need to do more than demonstrate a disagreement with the board. The application must clearly set out the facts demonstrating why the meeting cannot be practically and validly convened without the intervention of the NCLT.
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