2017 (7) TMI 1092 - Tri - Companies Law

Acts of oppression and mismanagement - re-election of Mr. Vikram Bakshi as Managing Director - inter-se dispute of the Directors - cessation of Mr. Vikram Bakshi as a sole Managing Director is consequence of mala fide intention of Mc Donald India to pressurize the Petitioner to sell out his shareholding at a throwaway price - Held that - The finding which we have recorded in the preceding paras do not springs from inter-se dispute of the Directors but goes to the roots of proprietary rights of the petitioners as shareholders. According to clause 32 of the JV Agreement McDonald India has been given the option to purchase the shares of the petitioners at a price determined in accordance with para 26 if Mr. Vikram Bakshi suffers the termination of his relationship as a Managing Director of the JV Company. Therefore it is not a simple case of inter-se dispute between the Directors. The situation created by the non-voting by respondent Nos. 3 10 lacs. The cost shall be paid by McDonald India-Respondent No. 2 to the petitioners.

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Non-reappointment of Mr. Vikram Bakshi as Managing Director.
3. Validity of actions taken by nominee directors of McDonald India.
4. Interpretation of Joint Venture Agreement (JVA) and Articles of Association.
5. Legality of call option exercised by McDonald India.
6. Role and actions of the Company Secretary (Respondent No. 8).
7. Allegations of mala fide intentions by McDonald India.
8. Remedies and reliefs sought by the petitioners.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The petitioners, Mr. Vikram Bakshi and Bakshi Holdings Pvt. Ltd., alleged various acts of oppression and mismanagement by McDonald India and its nominee directors. They claimed that these actions were aimed at coercing them to sell their shares at a throwaway price. The Tribunal found that the non-voting in favor of Mr. Bakshi's re-election as Managing Director was based on extraneous considerations and was oppressive to the petitioners.

2. Non-reappointment of Mr. Vikram Bakshi as Managing Director:
The Tribunal examined the circumstances surrounding the non-reappointment of Mr. Bakshi as Managing Director. It was found that the decision taken by the nominee directors of McDonald India was pre-determined and not based on any substantial grounds. The Tribunal concluded that the non-reappointment was an act of oppression.

3. Validity of Actions Taken by Nominee Directors of McDonald India:
The Tribunal scrutinized the actions of the nominee directors, Mr. Robert Dale and Ms. Ayesel Melbye, who refused to vote for Mr. Bakshi's re-election. It was found that their actions were unauthorized and based on a note that was not approved by McDonald India. The Tribunal declared these actions illegal and unjust.

4. Interpretation of Joint Venture Agreement (JVA) and Articles of Association:
The Tribunal held that paragraph 7 of the JVA, which deals with the appointment and re-election of the Managing Director, was incorporated into the Articles of Association. This interpretation was based on the consistent practice and understanding of the parties over 17 years. The Tribunal rejected the respondents' argument that the JVA was not part of the Articles.

5. Legality of Call Option Exercised by McDonald India:
The Tribunal examined clauses 26 and 32 of the JVA, which allowed McDonald India to purchase the petitioners' shares if Mr. Bakshi ceased to be the Managing Director. It was found that the call option was exercised with mala fide intentions to oust the petitioners. The Tribunal declared the call option and all related actions illegal and unjust.

6. Role and Actions of the Company Secretary (Respondent No. 8):
Respondent No. 8, the Company Secretary, was accused of filing Form-32 without proper authorization. The Tribunal noted that the Disciplinary Board of The Institute of Company Secretaries of India had exonerated him from allegations of professional misconduct. However, the Tribunal declared the filing of Form-32 illegal as it was based on the unauthorized actions of the nominee directors.

7. Allegations of Mala Fide Intentions by McDonald India:
The Tribunal found that McDonald India's actions, including the non-reappointment of Mr. Bakshi and the exercise of the call option, were driven by mala fide intentions to take over Connaught Plaza at a low price. These actions were found to be oppressive and against the interests of the company and its employees.

8. Remedies and Reliefs Sought by the Petitioners:
The Tribunal granted several reliefs to the petitioners, including:
- Setting aside the proceedings of the Board meeting held on 06.08.2013.
- Declaring the uploading of Form-32 illegal and restoring Mr. Bakshi's status as Managing Director.
- Appointing Hon'ble Mr. Justice G.S. Singhvi as Administrator to oversee the affairs of Connaught Plaza.
- Restraining McDonald India from interfering with the company's operations.
- Awarding costs of ?10 lakhs to the petitioners.

Conclusion:
The Tribunal concluded that the actions of McDonald India and its nominee directors were oppressive and aimed at unfairly ousting the petitioners from Connaught Plaza. The Tribunal provided comprehensive reliefs to ensure the fair management of the company and protect the interests of the petitioners.

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