2017 (12) TMI 1700 - Tri - Companies Law

Oppression and Mismanagement - it was alleged that the petitioner is interfering in the Company affairs along with his wife so as to cripple the Company - HELD THAT - The shareholding of the Petitioner was not at all affected but in order to set right the affairs of Company, which is at crucial stage, the petitioner was removed from the position Of MD and Director in accordance with law. As rightly pointed out by the respondents, when Company itself has not started its operations as per its object as mentioned in its memo and all funding of the Company is met through sources of family of second respondent, the question of oppression and mismanagement in the affairs of Company, even to examine, is too premature. The petitioner's interest is not too much adversely affected especially being a minority share holders and the mother is head of family. The petitioner is legally and morally bound by the decisions taken by the second respondent, who is mother Of petitioner and Chairperson also. The petitioner has also failed to establish any ingredients as prescribed under Sections 241 to 244 of Companies Act, 2013 so as to interfere in the affairs of the Company. However, the petitioner still holders of 13 % of Shares of the Company, is entitled for due notice for any ensuing meetings of the Company, and the Company should follow principles of natural justice, in conducting any future meetings/taking any decision(s). The petitioner failed to make out any case so as to interfere in the affairs of the Company - petition dismissed.

Summary

Issues Involved:
1. Validity of EGM dated 02.11.2016 appointing Respondent No. 3 as Director.
2. Validity of Circular Resolution dated 01.12.2016.
3. Validity of change of designation of the Petitioner from Managing Director to Director and his subsequent removal as Director.

Issue-wise Detailed Analysis:

1. Validity of EGM dated 02.11.2016 appointing Respondent No. 3 as Director:

The petitioner alleged that the EGM dated 02.11.2016, which appointed the 3rd Respondent as Director, was fabricated and that no such meeting took place. The petitioner claimed that the EGM notice was not issued, and the resolutions were uploaded fraudulently into the ROC/MCA web portal. The respondents countered this by stating that the meeting was held in compliance with the Companies Act, 2013, and the 3rd Respondent was validly appointed. The tribunal found that the petitioner was aware of the meeting and the decisions taken, and the appointment of the 3rd Respondent was in accordance with the law. Thus, the tribunal rejected the petitioner's allegations and upheld the validity of the EGM and the appointment of the 3rd Respondent as Director.

2. Validity of Circular Resolution dated 01.12.2016:

The petitioner challenged the circular resolution dated 01.12.2016, which purportedly approved the appointment of the 4th Respondent as an Additional Director. The petitioner argued that the notices were fabricated and that the 4th Respondent was not qualified to be appointed as a Director. The respondents contended that the appointment was made following due process, and the 4th Respondent had provided the necessary consent in Form DIR-2. The tribunal found that the circular resolution was validly passed, and the appointment of the 4th Respondent was in compliance with the Companies Act, 2013. The tribunal noted that the petitioner was aware of the resolution and had received notice of the same. Therefore, the tribunal upheld the validity of the circular resolution and the appointment of the 4th Respondent as Additional Director.

3. Validity of change of designation of the Petitioner from Managing Director to Director and his subsequent removal as Director:

The petitioner contended that the change of his designation from Managing Director to Director and his subsequent removal as Director were illegal and based on fabricated documents. The respondents argued that the petitioner was removed due to his interference in the company's affairs and misuse of funds. The tribunal observed that the company is a closely held family company, and the petitioner, holding only 13% of the shares, could not demand to continue as Managing Director or Director as a matter of right. The tribunal found that the change of designation and removal were done following the company's Articles of Association and the Companies Act, 2013. The tribunal noted that the petitioner was given due notice and his objections were considered. Consequently, the tribunal upheld the validity of the change of designation and the removal of the petitioner as Director.

Conclusion:

The tribunal dismissed the company petition, finding that the petitioner failed to establish any grounds for interference in the company's affairs. The tribunal held that the appointments of the 3rd and 4th Respondents as Directors were valid, the circular resolution dated 01.12.2016 was lawful, and the change of designation and removal of the petitioner were in accordance with the law. The tribunal emphasized that the petitioner, being a minority shareholder, must accept the majority decisions taken by the company.