Navigating Shareholder Rights: NCLAT Chennai Rules on the Impracticability Threshold for Convening EGMs Under Section 98

The delicate balance between corporate democracy and judicial intervention forms the bedrock of modern company law. A recurring dispute in corporate governance revolves around the rights of shareholders to convene an Extraordinary General Meeting (EGM) when the Board of Directors refuses to do so. The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, recently delivered a crucial judgment in the matter of Pearl City Marine Products Private Limited Vs Hiras K & Ors., providing profound clarity on the interplay between the statutory rights of shareholders and the exceptional powers of the Tribunal.

The appellate decision in Company Appeal (AT) (CH) No.76/2026 (IA Nos.1040 & 1041/2026), dated 17/08/2026, meticulously examined whether an aggrieved shareholder must exhaust their self-help remedies before approaching the Tribunal, and more importantly, what constitutes "impracticability" in corporate management.

The Factual Matrix of the Dispute

The controversy originated within the boardroom of M/s. Pearl City Marine Products Private Limited. The company's governance structure initially included a Board of Directors comprising the appellants (numbered 2 through 4) alongside the respondents (numbered 1 through 4).

The corporate harmony was disrupted leading up to an Extraordinary General Meeting held on 10.11.2025. During this meeting, a resolution was successfully passed to oust the third and fourth respondents from their directorial positions due to alleged misconduct. Notably, the first respondent actively supported and participated in this removal resolution.

However, internal alignments within the company subsequently shifted. The first respondent distanced himself from the appellants and initiated steps to reverse the previous boardroom changes. On 20.01.2026, the first respondent formally issued a requisition notice under Section 100 of the Companies Act, 2013, demanding the convening of an EGM to reinstate the recently removed third and fourth respondents as directors.

The Board of Directors deliberated on this requisition and, through a resolution dated 09.02.2026, rejected the demand by a 3:2 majority.

Following this rejection, a series of legal maneuvers ensued:

  1. The ousted directors (respondents 3 and 4) initially approached the National Company Law Tribunal (NCLT) by filing C.P. No.37/2026, invoking the oppression and mismanagement provisions under Section 241 and Section 242 of the Companies Act, 2013.
  2. Shortly thereafter, on 05.03.2026, the first respondent filed a separate petition (C.P. No.04/KOB/2026) before the NCLT, Kochi Bench, invoking Section 98 of the Companies Act, 2013, seeking the Tribunal's direct intervention to convene the requested EGM.
  3. Upon the filing of the Section 98 petition, the earlier petition under Section 241 and Section 242 was withdrawn by the third and fourth respondents.

The NCLT, Kochi Bench, initially ruled in favor of the first respondent via an order dated 22.06.2026, prompting three members of the company to escalate the matter to the NCLAT, Chennai. Adding to the chronological complexity, the appellants independently convened a Board meeting on 08.07.2026, resolving to call a general meeting to induct two new additional directors.

The dispute before the NCLAT hinged on the statutory interpretation of shareholder rights versus Tribunal authority.