2013 (6) TMI 860 - Board - Companies Law

Summary

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Validity and effect of resignations of directors.
3. Compliance with Memorandum of Understanding (MoU).
4. Procedural defaults and their implications.
5. Maintainability of the company petition.

Summary:

1. Allegations of Oppression and Mismanagement:
The petitioner alleged that the respondents oppressed the petitioner and mismanaged the affairs of the R-1-company by non-filing balance sheets and annual returns since 2004, not filing Form 32 for the appointment of three directors on 1st April 2008, making further allotments to dilute the petitioner's shareholding during the pendency of the petition, and stating the wrong address of the registered office. The petitioner infused Rs. 1,25,16,000 into the company and contended that R-2 and R-3 resigned as directors on 16th September 2008, but continued to act in their capacity, which was illegal.

2. Validity and Effect of Resignations of Directors:
The petitioner argued that R-2 and R-3's resignations were effective from 16th September 2008, and any acts done by them post-resignation were null and void. The court referred to precedents stating that acceptance of resignation is unnecessary if the resignation is tendered in writing and intended to take effect immediately. The court held that R-2 and R-3 were no longer directors from 16th September 2008, and all acts done by them post-resignation were ab initio void and invalid.

3. Compliance with Memorandum of Understanding (MoU):
The respondents contended that the petition was based on an MoU, which lapsed due to non-fulfillment of obligations by the petitioner. The petitioner argued that the MoU was acted upon by giving 50.57% shares and appointing three directors from the petitioner's group. The court noted that the respondents failed to show that the MoU had lapsed and held that the company was bound by the terms of the MoU that had been acted upon.

4. Procedural Defaults and Their Implications:
The respondents argued that non-filing of returns and forms with the Registrar of Companies (RoC) was a procedural defect that could be rectified. The court held that non-filing of statutory forms and returns, resulting in the denial of shareholders' rights, was an oppressive act and revealed mismanagement.

5. Maintainability of the Company Petition:
The respondents argued that the petition was not maintainable as no case for winding up was pleaded. The court held that the justification for winding up could be considered only after examining the merits of the case. The court found that the petitioner succeeded in making out a case for winding up but held that winding up would be unfairly prejudicial to the petitioner.

Conclusion:
The court directed the R-1-company to file Form 32 for the appointment of three directors from the petitioner's group and to hold a Board meeting to appoint two more directors from the respondents' group. The newly constituted Board was directed to consider changing the registered office of the company. The petition was disposed of with all interim orders vacated and no orders as to cost.