The NCLAT's decision in Sanjit Instruments Pvt. Ltd. v. Arvind Jagannath Bagul (October 2026) has settled an important question of procedure: a direction to purchase shares under Section 242(2)(b) cannot be made through a reverse process that bypasses a prior finding of oppression and mismanagement under Section 241 and satisfaction of the Section 242(1) conditions.
The Factual Background
The NCLT had disposed of a Section 241 petition by directing the majority shareholders to purchase the petitioner's shares, based on a valuation that had been prepared several years earlier. The NCLT proceeded on the premise that a detailed finding of oppression was not essential where the circumstances warranted equitable relief and the parties had consented to valuation and buyout.
The NCLAT's Reasoning
The NCLAT rejected that approach. It held that Section 242(2) does not operate independently. Its application is linked to the opinion required under Section 242(1), which itself must rest on findings concerning the conduct alleged under Section 241. A buy-out order is a remedy for oppression; it cannot precede the finding that the oppression occurred.
The NCLAT also found that the valuation was outdated. The valuation report was dated June 2021 and assessed the shares as of March 2018, but the buy-out was ordered in 2025. The NCLAT remitted the matter to the NCLT for a fresh valuation and a fresh adjudication on merits.
The Practical Consequences
The decision has two consequences. First, a petitioner cannot short-circuit the merits by obtaining a consent buy-out order without a finding. The Tribunal must adjudicate the oppression allegations and record its findings. Second, the valuation must be current as of the date of the buy-out order, not as of an earlier date that no longer reflects the company's value.
The decision is a reminder that the Section 242 remedy is structured. The finding comes first; the remedy follows.
Call to Action
Anuj Desai & Associates advises petitioners and companies on the Section 242 buy-out process—from the pleading and proof of oppression to the valuation evidence and the timing of the buy-out order. If you are seeking or defending a buy-out, we can help you structure the record.
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