The High Court of Kerala has definitively clarified that civil courts retain jurisdiction to adjudicate property-related declaratory suits, even when those disputes intersect with company management issues. In a significant ruling that resolves a conflict of jurisdiction, the Court set aside orders by the Commercial Court-II, Thrissur, which had previously dismissed two suits on the grounds that they were barred under Section 430 of the Companies Act, 2013. The High Court affirmed that the National Company Law Tribunal (NCLT) does not possess exclusive authority over disputes involving the validity of registered sale deeds, particularly when the core issue is a request for a declaratory decree.

The litigation originated from two civil suits filed in 2023, concerning the sale of a specific property linked to East India Chits Finance Private Limited. The plaintiffs, who are shareholders, contended that a sale deed registered in 2014 was executed fraudulently and without the necessary concurrence of the majority shareholders. Their primary prayer was for the court to declare that the sale was not binding on the company and to ensure the property remained part of the company's asset pool. The defendants, including the company and various individuals, had successfully argued before the trial court that the matter was essentially an allegation of oppression and mismanagement, thereby triggering the bar under Section 430 of the Companies Act, which mandates that the NCLT alone is empowered to handle such disputes.

In the proceedings before the High Court, the petitioners argued that the NCLT’s jurisdiction is narrow, restricted to specific statutory powers under Sections 241 and 242 of the Act, and that it lacks the inherent power to declare a registered title document as void. Justice Easwaran S. accepted this reasoning, noting that the tribunal is a creature of statute and cannot exceed its specifically defined role to encroach upon the traditional domain of civil courts. The Court emphasized that when a suit focuses on property title and the validity of a document, the jurisdiction of the civil court is firmly anchored in Section 9 of the Code of Civil Procedure.

The judgment clarifies that merely because a dispute involves allegations of mismanagement within a company, it does not automatically move the entirety of the related litigation to the NCLT. As the court observed in its ruling: “On a conjoint reading of Sections 241 and 242 of the Companies Act, 2013, one can safely conclude that the National Company Law Tribunal has jurisdiction only when a dispute touches upon the management of the company and the respective rights of the shareholders.” By drawing this boundary, the High Court has prevented the ouster of civil court authority in cases that, while peripherally touching corporate affairs, require the adjudication of property rights and the declaration of legal status.

To support this interpretation, the Court relied on the principles established in its earlier decision in Saju George v. Saji Varghese , which examined the limitations of specialized tribunals in the context of civil rights. The High Court reiterated that judicial ouster must be explicit and cannot be assumed simply because of the nature of the parties involved. In this specific dispute, the Court found that asking for a declaration that a sale deed is void is a standard civil remedy that falls well within the functional capabilities and historical jurisdiction of the civil court system.

The Court further clarified that the trial court had acted on an erroneous assumption regarding the scope of its own power. “The power to grant declaratory decrees/reliefs is always with the Civil Court. When Section 9 of the Code of Civil Procedure is read, the Civil Court's jurisdiction is absolute unless it is expressly or impliedly ousted,” the judgment stated. This categorical finding provides a clearer framework for lower courts dealing with similar challenges, reminding them that they must strictly interpret the language of the Companies Act to ensure that specialized tribunals are not used as a venue to block legitimate civil actions concerning property.

While the respondents had also raised concerns regarding the limitation period of the suit, the High Court determined that this was not a matter for its intervention at this stage. Because the trial court had rejected the suits purely on the question of jurisdictional competency, it had not evaluated the merits of the limitation argument. Consequently, the High Court held that the defendants remain at liberty to raise the issue of limitation before the Commercial Court-II at an appropriate phase of the trial.

The High Court’s order effectively restores CS Nos. 31 and 37 of 2023 to the file of the Commercial Court-II, Thrissur. The lower court has been instructed to proceed with the trial of these matters in accordance with the law, without being hindered by the earlier, incorrect jurisdictional findings. This development marks a significant reprieve for the shareholders involved, as it ensures that their claims regarding the allegedly fraudulent property transaction can now be tested through the evidence-based process of a full civil trial, rather than being diverted to a tribunal that lacks the mandate to invalidate title instruments. The matter will now return to the Commercial Court, where the substantive factual disputes—such as the validity of the 2014 shareholders' meeting—will finally undergo judicial scrutiny on their merits.