2017 (7) TMI 1254 - AT - Companies Law

Change of company status from public to private company - Oppression and mismanagement - Held that - Tribunal has noticed that the objectors are not in a position explain as to how the interest of the company would be prejudiced if the application of the company is allowed conversion from public company to private company. We find that the learned Counsel for the appellant has also failed to satisfy as to how the appellant/ objectors interest or the company s interest will suffer, if company is allowed for conversion of its status to private limited company. There is nothing on record to suggest that conversion would not be in the interest of company and it is in contravention any of the provisions of law or that the said application has been filed in violation of any provisions of the Companies Act, 2013. In absence of any deficiencies, the Tribunal being satisfied having regard to the facts and circumstances of the case allowed the application. From the arguments advanced on behalf of the 2nd objector/ appellant, we find that the 2 objector/ appellant intends to make out a case of oppression and mismanagement by the Directors and 1St. Respondent company, which cannot be noticed in a petition under Section 14(1)(b) of the Companies Act, 2013, though it is open to the shareholder(s) to move an appropriate application under Sections 241 and 242 of the Companies Act, 2013, if they qualify under Section 244 of Companies Act, 2013 and if there is an act of oppression and mismanagement on the part of any of the Director(s) or 1st Respondent Company.

Issues:
1. Appeal against the order passed by the National Company Law Tribunal allowing the conversion of a public company to a private company.
2. Locus standi of the appellant as a trust to raise objections.
3. Objections raised by the objectors regarding the conversion of the company.
4. Allegations of oppression and mismanagement by the directors and the company.

Analysis:

Issue 1:
The appeal was filed against the National Company Law Tribunal's order permitting the conversion of a public company to a private company. The appellant contended that the conversion was not in the company's interest and might contravene the Companies Act. The Tribunal considered all objections, including those of the appellant, and rejected them, finding no evidence that the conversion would be detrimental to the company or violate any laws. Therefore, the Tribunal allowed the application for conversion.

Issue 2:
The respondents challenged the locus standi of the appellant, a trust, to raise objections as it was not a shareholder of the company. The appellant claimed rights over the shares through a Will executed by a deceased individual. However, the issue of probate of the Will was pending in the High Court, and until a decision was made, the appellant's right over the shares remained uncertain.

Issue 3:
Various objectors, including the appellant, raised objections related to the conversion. The objections ranged from consolidation of shares not being in accordance with the law to concerns about minority shareholders being ousted. The Tribunal observed that the objectors failed to demonstrate how the company's interest would suffer from the conversion. The Tribunal found no evidence that the conversion would prejudice the company's interest and, therefore, allowed the conversion.

Issue 4:
Another appeal was filed by a shareholder of the company alleging oppression and mismanagement by the directors and the company. The Tribunal noted that such allegations could not be addressed under the petition for conversion but suggested that the shareholder could file a separate application under Sections 241 and 242 of the Companies Act if they met the criteria under Section 244.

In conclusion, the appeals were dismissed as the Tribunal found no merit in the objections raised, and no costs were awarded in the case.

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