In a significant development, the National Company Law Appellate Tribunal (NCLAT) in Chennai on Tuesday directed that the status quo be maintained regarding the controversial transfer of shares in Saraswati Power Limited, involving former Andhra Pradesh Chief Minister Y.S. Jagan Mohan Reddy, his wife Y.S. Bharathi Reddy, and his mother Y.S. Vijayamma. The tribunal ordered that 99.75% of the shares currently held in Vijayamma’s name remain unchanged until further notice, while also instructing both parties to refrain from making any additional transfers or alterations in ownership records.
Background: A Family and a Business Entangled
The case stems from a dispute over the transfer of shares belonging to Jagan, Bharathi Reddy, and Classic Realities to Vijayamma and Chagari Janardhan Reddy. Jagan and Bharathi had earlier filed a petition before the Hyderabad bench of the National Company Law Tribunal (NCLT), challenging the decision by the Saraswati Power board to transfer those shares and update the company register accordingly. On July 29, the NCLT ruled in favour of Jagan and his associates, cancelling the transfer and restoring the shares in their names. Following this ruling, Vijayamma and Saraswati Power Limited approached the NCLAT in Chennai, claiming that the earlier order was unlawful and seeking to stay its implementation.
Tribunal’s Hearing
The case was heard by a bench comprising Justice N. Seshasai (Judicial Member) and Jitendra Nath Swain (Technical Member). Senior advocates Aravind Pandian and M. Maharshi Vishwaraj appeared on behalf of the petitioners. They argued that the NCLT’s order should be stayed, maintaining that the share transfers to Vijayamma and Janardhan Reddy were made legally, based on valid documents. The counsel contended that Jagan and Bharathi had executed a gift deed on July 26, 2021, transferring their shares in Saraswati Power to Vijayamma out of affection. They also pointed out that after the transfer, both Jagan and Bharathi resigned from their directorships, indicating a complete separation from the company’s affairs.
Allegations and Counterclaims
According to Vijayamma’s counsel, the gift deed was duly accepted, making her the rightful owner of the shares. The board of directors, based on family agreements and correspondence, had approved the transfer on July 6, allocating 99.75% of the shares to Vijayamma and 0.25% to Janardhan Reddy.
However, Jagan and Bharathi’s counsel argued that the so-called gift deed was incomplete and invalid, alleging that the transfer was done without proper consent. They maintained that the move was legally unsound and that the board’s resolution lacked legitimacy. Vijayamma’s side countered by saying that the shares were lawfully transferred, all necessary documentation was in place, and any failure to recognize the transaction could amount to contempt of court.
Interim Relief and the Road Ahead
During the hearing, senior advocate P.S. Raman, representing Jagan and Bharathi, assured the tribunal that no contempt proceedings would be initiated until the NCLAT concluded its hearing. Taking note of this assurance, the tribunal recorded it officially. After hearing both sides, the NCLAT bench issued interim orders maintaining status quo on the disputed shares and instructed that neither side should transfer or modify shareholding details until further orders. The matter has now been adjourned to the last week of this month for further hearing.
