2015 (11) TMI 1702 - Board - Companies Law

Oppression and mismanagement - maintainability of appeal - Held that - Unless and until the qualification as prescribed under section 399 of the Act no member can file a petition before this Bench. In the present case the petitioner ceased to be a shareholder of the company and has no locus standi to file a petition invoking the jurisdiction of this Bench. Therefore the petition is not maintainable and liable to be dismissed in limine on this ground itself. The petitioner has not denied the transfer of shares to the 4th respondent nor disputed the signatures on the share transfer forms. However at para 6(viii) it is stated that he was merely coerced by the 4th respondent along with few other persons with a threat to his life and bodily harmed to transfer the shares held by him in the R1 Company to the 4th respondent. Further it is stated that he was coerced to sign a share transfer form which was first signed by the 2nd respondent as the 1st holder and the petitioner was forced to sign it as a 2nd holder. There is no record to show that what legal action the petitioner has taken if he was threatened to sign the share transfer form and transfer the shares to the 4th respondent. As per law the transfer of shares by the petitioner is legal and valid. Further the petitioner contends that he represented the company when the company filed a suit for specific performance against the defendant being OS No. 82 of 2006 before the Hon ble Court of Subordinate Judge Calicut. The R1 Company is the plaintiff in the suit however the petitioner represented the company in the capacity as managing director. The said stand cannot be a ground to contend that he continued to be a shareholder of She company or has any vested interest further the 4th respondent filed an affidavit dated 26.07.2011 before the Hon ble Sub-court in OS No. 82 of 2006 clarifying the position and stated that the petitioner had transferred his shares on 27.04.2011 itself and he ceases to be a director of the company and lost all association with the company. The petitioner ceases to be a shareholder of the company and has no locus standi to file a petition before this Bench

Summary

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Validity of share transfer and petitioner's locus standi.
3. Conduct and legality of board meetings and resolutions.
4. Petitioner's claim of coercion in signing share transfer forms.
5. Compliance with Section 399 of the Companies Act, 1956.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The petitioner alleged acts of oppression and mismanagement in the affairs of the company, specifically targeting the 2nd to 4th respondents. The petitioner claimed unauthorized and incorrect filings, fraudulent transfer of shares, and improper appointment of directors without his knowledge or consent. The petitioner contended that the actions of the respondents were aimed at sidelining him and usurping control of the company, including its valuable property.

2. Validity of Share Transfer and Petitioner's Locus Standi:
The respondents argued that the petitioner had transferred his entire shareholding (1000 shares) to the 4th respondent on 27.04.2011, thereby ceasing to be a member of the company. Consequently, the petitioner lacked the requisite qualification under Section 399 of the Companies Act, 1956, to file a petition for relief under Sections 397 or 398. The board of directors had duly noted and approved the share transfer, and the process complied with Section 108 of the Companies Act. The petitioner did not deny the transfer or his signatures on the transfer forms, although he claimed coercion.

3. Conduct and Legality of Board Meetings and Resolutions:
The petitioner challenged the legality of board meetings held on 25.09.2011 and 15.11.2011, arguing that they were not duly convened and lacked proper notice and quorum. The respondents countered that all meetings were conducted with proper quorum and in compliance with the company's Articles of Association. The petitioner's exclusion from the list of shareholders in the annual return for the financial year ended 31.03.2011 was cited as evidence of the completed share transfer.

4. Petitioner's Claim of Coercion in Signing Share Transfer Forms:
The petitioner alleged that he was coerced by the 4th respondent into signing the share transfer forms under threat to his life. However, there was no record of any legal action taken by the petitioner to substantiate this claim. The respondents argued that the petitioner's allegations were an afterthought and lacked credibility, especially given the absence of a police complaint or other immediate action.

5. Compliance with Section 399 of the Companies Act, 1956:
The core issue was whether the petitioner met the qualifications under Section 399 to file the petition. The court found that the petitioner had indeed transferred his shares and was no longer a shareholder. As per Section 399, only members holding a specified percentage of the share capital or a minimum number of members can file a petition under Sections 397 or 398. Since the petitioner no longer met these criteria, he lacked the locus standi to maintain the petition.

Judgment:
The court concluded that the petitioner ceased to be a shareholder of the company and, therefore, had no locus standi to file the petition. The petition was dismissed as not maintainable. The interim orders, if any, were vacated, and pending applications were disposed of. No orders as to costs were made.