2013 (8) TMI 1053 - Board - Companies Law

Issues Involved:
1. Whether the R3-company is a quasi-partnership.
2. Allegations of oppression and mismanagement by the respondents.
3. Validity of the Board meeting dated 8th March 2012 and EOGM held on 30th March 2012.
4. Whether the termination of the petitioner as a director amounts to an oppressive act.
5. Allegations of mismanagement committed by the respondents.
6. Appropriate reliefs to be granted to the petitioner.

Summary:

1. Quasi-Partnership:
The petitioner claimed that the R3-company was run as a quasi-partnership. The court examined the facts, including the equal partnership in the initial business, the incorporation of the company, and the joint management. It concluded that the company was indeed in the guise of a partnership, thus applying the principles of quasi-partnership.

2. Allegations of Oppression:
The petitioner alleged several acts of oppression, including the transfer of 100 shares to R2 without consideration, non-payment of provident fund and dividends, and restrictions on accessing financial information. The court found that the transfer of shares after seven years could not be challenged and that the provident fund and dividends issues did not amount to oppression. However, the denial of financial information and the subsequent actions by the respondents were deemed oppressive.

3. Validity of Board Meeting and EOGM:
The petitioner challenged the validity of the Board meeting on 8th March 2012 and the EOGM on 30th March 2012. The court found that the petitioner had participated in the Board meeting and that the notice for the EOGM was properly served. Therefore, the meetings were held according to law, and the resolutions passed were valid.

4. Termination of Petitioner as Director:
The court examined whether the termination of the petitioner as a director was oppressive. It found that the removal was harsh, burdensome, and wrongful, especially considering the petitioner's significant shareholding and contributions to the company. The court held that the removal was an act of oppression and set aside the resolution removing the petitioner as a director.

5. Allegations of Mismanagement:
The petitioner alleged that the respondents were involved in mismanagement, including running a parallel business, acquiring properties with company funds, and filing bogus cases. The court found that the petitioner was denied access to financial information, creating a reasonable doubt about irregularities. Therefore, a case of mismanagement u/s 398 of the Act was established.

6. Reliefs Granted:
The court ordered the reinstatement of the petitioner as a director and directed the sale of his 24% shareholding to R1 and R2 at a fair value to be assessed by an independent valuer. The valuation process and the subsequent transfer of shares were detailed, ensuring that the petitioner would receive fair compensation.

Order:
1. The resolution dated 30th March 2012 removing the petitioner as a director is set aside, and the petitioner is reinstated.
2. The petitioner is directed to sell his 24% shareholding to R1 and R2 at a fair value assessed by an independent valuer.
3. The valuation process will be conducted by V.A. Bapat & Co. if the parties fail to agree on a valuer.
4. The respondents must deposit the valuation amount with the CLB, and the petitioner must transfer his shares upon receipt of the amount.
5. The expenses of the valuer will be borne equally by both parties.
6. Parties are left to bear their own costs, and any interim orders stand vacated.

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