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2016 (12) TMI 1604 - Tri - Companies LawOppression and mismanagement - illegal & unlawful allotment of shares - EOGM was held without giving prior notice to the non applicant-petitioner - Dismissal of Company Petition on the ground of delay and laches - Held that - Even in the absence of application of the provisions of Limitation Act the petitioner cannot surmount the difficulty of delay and laches. It is well settled that when a member of a company files a petition under S. 397 and 398 read with S. 402(g) of the 1956 Act he is necessarily invoking equitable jurisdiction of this Tribunal. S. 402 of the Act expressly provides that the Tribunal is empowered to pass any order which it considers just and equitable. Similar provision has been made by S. 403 of the Act vesting the Tribunal with the power to pass any interim order as it deems just and equitable. Similar provisions have now been made in S. 242(2) of 2013 Act. Therefore from that point of view the petition is liable to be dismissed as barred by delay and laches. The allotment of share was made to the father of Respondent No. 3 Late Mr. Francis Wacziarg who is no more. It is not understood as to how the allotment could be effectively defended by his daughter who is impleaded as Respondent No. 3. The intervention of third party right is also a relevant factor for us to conclude that the petitioner had disentitled himself to claim any relief under the equitable jurisdiction particularly when the Tribunal has been assigned the role and status as that of the High Court (see the observation made in the case of Union of India v. R. Gandhi President Madras Bar Association (2010 (5) TMI 393 - SUPREME COURT OF INDIA). We are also not impressed with the submission that the decline in payment of dividend on 22.03.2013 furnished the petitioner knowledge of its reduced share capital and clothed it with a cause of action because in the year 2006 2009 and 2010 no dividend were paid. Again in the year 2012 the Respondent No. 1-company did not announce any dividend. If any foul play was to be apprehended then the petitioner should have set in motion the machinery of ventilating its grievances during those years. Moreover the petitioner is not a member of gullible public but is a private limited company which is ordinarily assisted by competent professionals like company secretaries and chartered accountants. Therefore it is not believable that they had no knowledge of various events taking place in the Respondent No. 1-company starting from the year 2007 to 2011. Therefore we are unable to persuade ourselves to accept aforesaid submissions for commencement of the period of limitation w.e.f 22.03.2013. Whether once mandatory provision of law is infringed then irrespective of question of delay the invalidity cannot be allowed to continue? - There is no rule of law that a void order challenged at any time without requirement of complying with the principles covering delay and laches and can thus be ignored. In other words a void and unlawful order does not attract any period of limitation. In the case of State of Punjab v. Gurdev Singh (1991 (8) TMI 328 - SUPREME COURT)it has been led out by Hon ble the Supreme Court that even void and illegal order have be challenged within the period of limitation. Therefore we are unable to persuade ourselves to accept the submissions made by Mr. Vasisht. Thus petition fails
Issues Involved:
1. Delay and laches in filing the petition. 2. Allegations of oppression and mismanagement. 3. Illegal and unlawful allotment of shares. 4. Drastic reduction in dividend payments. 5. Applicability of principles of delay and laches to the case. 6. Intervention of third-party rights. 7. Validity of the petition under Section 397 of the Companies Act, 1956. Detailed Analysis: 1. Delay and Laches in Filing the Petition: The primary issue addressed in the judgment is whether the petition should be dismissed due to delay and laches. The petition was filed on 04.03.2016, challenging resolutions and allotments made between 2006 and 2011. The Tribunal emphasized that law and equity favor those vigilant about their rights, not those who sleep over them. The Tribunal referenced multiple judgments, including *State of Madhya Pradesh v. Bhailal Bhai & Ors.* and *MTNL v. State of Maharashtra and Anr.*, to assert that unreasonable delay, even beyond the period prescribed by the Limitation Act, warrants dismissal. 2. Allegations of Oppression and Mismanagement: The petitioner alleged that the authorized share capital of the respondent company was increased multiple times between 2006 and 2011 without proper notice, reducing the petitioner's shareholding from 20.40% to 2.80%. The Tribunal noted that these allegations pertain to events that occurred several years before the filing of the petition, thus falling under the purview of delay and laches. 3. Illegal and Unlawful Allotment of Shares: The petitioner claimed that 35,200 shares were unlawfully allotted to Respondent No. 2 and 25,000 shares to the late Mr. Francis Wacziarg, further diluting the petitioner's shareholding. The Tribunal found that these allotments, made in 2008 and 2011, were challenged too late, and third-party rights had since intervened, making it inequitable to entertain the petition. 4. Drastic Reduction in Dividend Payments: The petitioner argued that a significant reduction in dividends in 2013 raised suspicions of foul play. However, the Tribunal highlighted that no dividends were paid in 2006, 2009, 2010, and 2012, suggesting that any suspicion should have arisen much earlier. The Tribunal dismissed the argument that the reduction in 2013 constituted a fresh cause of action. 5. Applicability of Principles of Delay and Laches to the Case: The Tribunal reiterated that the principles of delay and laches apply to equitable jurisdiction, such as petitions under Sections 397 and 398 of the Companies Act. The Tribunal emphasized that even void and illegal orders must be challenged within a reasonable period, referencing the judgment in *State of Punjab v. Gurdev Singh*. 6. Intervention of Third-Party Rights: The Tribunal noted that the allotment of shares to the late Mr. Francis Wacziarg, who is no longer alive, and the involvement of his daughter as Respondent No. 3, complicated the matter. The Tribunal found that third-party rights had intervened, making it unjust to unsettle settled issues after such a long delay. 7. Validity of the Petition under Section 397 of the Companies Act, 1956: The Tribunal concluded that the petition did not meet the criteria for hearing under Section 397 due to the significant delay and lack of reasonable explanation. The Tribunal dismissed the petition with costs, emphasizing that the petitioner, a private limited company assisted by professionals, should have been aware of the events and acted promptly. Conclusion: The Tribunal dismissed the petition on the grounds of delay and laches, emphasizing that the petitioner failed to act within a reasonable period despite being aware of the events. The judgment underscores the importance of timely action in legal proceedings and the applicability of principles of delay and laches to equitable jurisdiction. The petition was dismissed with costs of ?25,000 payable to the respondents.
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