2018 (9) TMI 1837 - Tri - Companies Law

Oppression and mismanagement - main contention of the petitioner in the main company petition is that his shareholding of 25 per cent. had been reduced to nil due to the oppressive act of the respondents as well as other allegations against the respondents made in the main company petition - HELD THAT - There is no dispute that the petitioner continues to be director in the company and that during the time when the allotment to respondents Nos. 2 and 4 were made as well as at the time when the transfer is alleged to have taken place from petitioner to respondent No. 3 he had been a director of the first respondent-company. Necessarily in order to prima facie defeat the claim of the petitioner that he is not a member in the company, the respondents in order to convince this Tribunal, apart from merely stating in the reply that the petitioner is not a member, should have produced minutes of the board meeting wherein the allotment and/or transfer had taken place, the attendance register evidencing the attendance of petitioner in the said meetings as well as the share transfer form together with share certificate along with the reply which had been filed by the respondents. Non-production of required documents - HELD THAT - A statement is made that all the papers in relation to the first respondent-company including minute books and the Registrar of Companies documents have been lost and in the circumstances no record in relation to the first respondent-company is able to be produced. We are not very much convinced with this explanation given by respondent No. 3 for not providing evidence in relation to the share allotment and share transfer and that the above statement will not absolve respondent No. 3 from producing any shred of evidence in relation to the share transfer of the holding of the petitioner to himself as well as in relation to allotment of shares to respondents Nos. 2 and 4 which acts prima facie has made the petitioner to fall below the threshold limit of 10 per cent. as well as to make him as a non-member, if the acts of the respondents can be sustained of the first respondent-company. In the absence of any proof, the petitioner cannot be shut out under section 244 of the Companies Act, 2013 on mere statements of the respondents without any shred of evidence being produced to deny an opportunity to the petitioner to prosecute the main company petition - this application as filed by the applicant/petitioner stands allowed and in terms of proviso to section 244(1), this Tribunal waives the requirement as specified in clause (a) of sub-section (1) of section 244 of the Companies Act, 2013 and permits the petitioner to prosecute the main company petition.

Summary

Issues:
Alleged oppression and mismanagement leading to reduction of shareholding, waiver application under section 244 of the Companies Act, 2013.

Analysis:
1. The petitioner filed a company petition under section 241 of the Companies Act, 2013, claiming oppression and mismanagement by the respondents, resulting in the reduction of the petitioner's shareholding from 25% to nil. The petitioner sought waiver under section 244 to proceed with the petition. The company was incorporated with specific shareholdings for the petitioner, respondent No. 2, and respondent No. 3.

2. The petitioner alleged that without his knowledge, respondent No. 3 increased the shareholding of respondent No. 2 and issued shares to respondent No. 4, reducing the petitioner's shareholding to 0.33% and eventually to nil through illegal means. The petitioner sought relief to set aside these allotments based on fabrication and forgery, crucial for challenging the oppressive actions of the respondents.

3. Respondent No. 3 contended that the petitioner, having zero shareholding, cannot be considered a member under the Companies Act. The respondents relied on a judgment highlighting factors necessary for waiver consideration. They argued that the petitioner was aware of share transfers and that the application for waiver was not maintainable due to alternative remedies available under the Act.

4. The petitioner, in a rejoinder, emphasized that the share transfers were executed without proper documentation or consent, alleging misuse of family members' old age to manipulate share ownership. The lack of evidence presented by the respondents regarding board meeting minutes and approvals raised doubts about the legality of the share transfers.

5. The Tribunal considered the arguments and evidence presented by both parties. Not convinced by the respondents' explanation for the absence of crucial documents, the Tribunal found that the petitioner should not be denied the opportunity to prosecute the main company petition due to lack of evidence from the respondents. The Tribunal granted the waiver under section 244, allowing the petitioner to proceed with the main petition.

6. The Tribunal's decision to grant the waiver did not prejudice the respondents' ability to contest the share allotments and transfers challenged in the main petition. The respondents were directed to file a reply within six weeks, with the petitioner given an opportunity to respond within three weeks thereafter. The case was scheduled for further consideration on a specified date.