The Supreme Court has held that a person can be treated as a “member” of a company—even without formal entry in the register of members—if the surrounding facts establish recognition of their proprietary interest.
The bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe emphasized that equitable considerations must prevail while adjudicating disputes relating to oppression and mismanagement under the Companies Act, 1956.
The judgment came in Dr. Bais Surgical and Medical Institute Pvt. Ltd. & Ors. v. Dhananjay Pande, where the Court dismissed appeals challenging the maintainability of company petitions filed by an investor whose name was not formally entered in the register of members.
The principal question before the Court was whether a person, whose name is not entered in the register of members, can still be treated as a “member” for the purpose of invoking remedies under Sections 397 and 398 of the Companies Act, 1956—provisions dealing with oppression and mismanagement.
The appellants contended that membership is strictly governed by Section 41 of the Act, which requires entry in the register of members. In the absence of such entry, the respondent lacked locus standi to maintain the petition.
The dispute arose after the respondent invested substantial funds in the appellant company, which operated a hospital. He was appointed Managing Director and claimed that shares were allotted to him against his investment. However, no share certificates were issued, and his name was never formally entered in the register of members.
Subsequently, disputes emerged, including allegations of oppressive conduct and dilution of shareholding. The respondent approached the Company Law Board under Sections 397 and 398, alleging mismanagement and denial of his rightful stake.
The Company Law Board and later the High Court treated him as a “member” based on factual circumstances and granted relief. These findings were challenged before the Supreme Court.
Upholding the decisions of the lower forums, the Supreme Court ruled that the concept of “member” cannot be confined to a narrow, technical interpretation based solely on Section 41.
The Court highlighted that section 2(27) provides a broader, inclusive definition of “member”. Section 41 prescribes procedural modes of acquiring membership but does not exhaustively define it. Proceedings under Sections 397 and 398 are equitable in nature and aimed at protecting minority shareholders.
The Court observed that adopting a rigid interpretation would defeat the remedial purpose of the statute.
The Court placed significant reliance on the conduct of the company and surrounding circumstances to determine the respondent’s status. These included appointment of the respondent as Managing Director, acceptance and utilization of his investment, correspondence referring to him as a “co-owner”, evidence of share allotment and participation in management, and rebranding of the hospital reflecting his business identity.
The Court held that these factors cumulatively established that the respondent was treated as a stakeholder and not merely a creditor.
The Court held that procedural lapses—such as failure to enter a name in the register—cannot be used by a company to defeat substantive rights.
The court noted that companies cannot take advantage of their own failure to comply with statutory obligations, especially when they have accepted and benefited from an investor’s contribution.
The Supreme Court concluded that the respondent was rightly treated as a “deemed member” and was entitled to invoke jurisdiction under Sections 397 and 398. The appeals were dismissed, and the amount deposited before the Court was directed to be released to the respondent along with accrued interest.
Case Details
Case Title: Dr. Bais Surgical And Medical Institute Pvt. Ltd. & Ors. Versus Dhananjay Pande
Citation: JURISHOUR-1096-SC-2026
Case No.: Civil Appeal No. 8973 Of 2010
Date: 04/05/2026
