Shareholders Cannot Step Into Director's Shoes: Held NCLAT

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Chennai Bench while deciding IA Nos. 1293 and 1295 of 2024 in Company Appeal (AT) (CH) (Ins) No. 129/2024 vide order dated March 7, 2025 held that the shareholders cannot be substituted in place of the suspended director, as their right being the shareholders of the company is restrained by the investment made by them in the Corporate Debtor.

In the instant case, an appeal was filed by the suspended director of the Corporate Debtor challenging the impugned order dated July 20, 2023 passed by the National Company Law Tribunal (Adjudicating Authority), Bangalore Bench, admitting an application under Section 9 of the Code against the Corporate Debtor. NCLAT vide its order dated April 18, 2024 granted interim order on April 18, 2024.