2016 (12) TMI 1820 - Tri - Companies Law

Oppression and mismanagement - Disposal of immovable property of company - HELD THAT - The parties have acted in tandem till the passing of the Board resolution dated 30.07.2010 wherein the parties, namely petitioners 1and 2 and respondents 2 and 3 have made efforts to fortify the C F business carried at Jharkhand and Bihar probably from the clutches of liabilities which they were well aware was looming on the horizon, particularly after the storm on 29.05.2010 which it is claimed had inflicted severe damage to the manufacturing facilities and thereby crippled production of the 1st respondent company and which had also made them approach the bankers jointly as evident from the letter dated 15.06.2010 sent to SBI wherein the co-operation of the bank had been solicited claiming that the disputes amongst them have been resolved. Since the main thrust of the challenge of the petitioners seems to be in relation to and concerning the disposal of the immovable property of the company, as an instance oppression of course in addition to their to other instances as well of oppression and mismanagement, the above list of dates has been extracted from the pleadings of the parties for our convenience to understand the events in the correct perspective and as to how the transactions have been perpetrated - in the present case, as notice of EOGM seems to have deliberately been sent to an address where the petitioners were not residing to the knowledge of the respondents thereby clearly showing the intent of the respondents being in majority to exclude the petitioners. We are forced to come to a conclusion that the acts of the respondents in excluding the petitioners from the affairs of the company had been deliberate and willful and in the absence of notice or any evidence produced before us to sustain the plea of the participation of the petitioners or for that matter the petitioners were put on notice we are constrained to declare the Board Meeting held on 2.11.2010 and 10.12.2010 as well as the Extra-Ordinary General Meeting on 17.03.2011 were not held in accordance with law and as a consequence the agreement to sell is also required to be held as non-est in the eyes of law, however without prejudice to the rights of the third party, namely the 4th respondent from seeking appropriate remedy before the civil court as may be legally available to it. The meeting of the Board of Directors held on 02.11.2010 and the resolutions passed there at appointing two executive directors were bad in law and the same are declared null and void - Application disposed off.

Issues Involved:
1. Allegations of oppression and mismanagement under Sections 397, 398, and 402 of the Companies Act, 1956.
2. Unauthorized opening of a separate bank account and diversion of funds.
3. Removal and sale of company assets without proper authorization.
4. Validity of Board and Extra-Ordinary General Meetings (EOGM).
5. Validity of resolutions passed in Board and EOGM.
6. Legality of the agreement to sell the company's immovable property.
7. Compliance with statutory requirements for finalization and audit of accounts.
8. Change of registered office without proper authorization.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The petitioners, holding 10.91% of the company's equity, alleged oppression and mismanagement by respondents who held 36.20% of the equity. The petitioners claimed that respondents No. 2 and 3 mismanaged the company, leading to a recall notice under Section 13(2) of the SARFESI Act from SBI due to a loan default. The tribunal found a pattern of exclusion of the petitioners from the company's affairs, particularly in decisions related to the sale of the company's immovable property.

2. Unauthorized Opening of a Separate Bank Account and Diversion of Funds:
The petitioners alleged that respondents No. 2 and 3 opened a separate bank account with HDFC Bank without their knowledge and diverted ?1,50,92,145/- belonging to the company. The tribunal noted that this act was contrary to the understanding with SBI, which provided the credit facilities.

3. Removal and Sale of Company Assets Without Proper Authorization:
The petitioners accused respondents No. 2 and 3 of removing raw materials, stocks, and electronic equipment from the factory premises. The tribunal found that these actions were part of a broader pattern of mismanagement and asset stripping by the respondents.

4. Validity of Board and Extra-Ordinary General Meetings (EOGM):
The petitioners contended that they were not given proper notice of the Board meetings held on 02.11.2010 and 10.12.2010 and the EOGM on 17.03.2011. The tribunal found that the notices were sent to an address in Darjeeling, West Bengal, despite the petitioners residing at the registered office address. This deliberate act of sending notices to an incorrect address was seen as an attempt to exclude the petitioners from the meetings.

5. Validity of Resolutions Passed in Board and EOGM:
The resolutions passed in the Board meetings held on 02.11.2010 and 10.12.2010 and the EOGM on 17.03.2011 were declared null and void by the tribunal. The tribunal held that these meetings were not held in accordance with the law due to the lack of proper notice to the petitioners.

6. Legality of the Agreement to Sell the Company's Immovable Property:
The agreement to sell the company's property to M/s. Aero Industries for ?5.95 crores was declared non-est (not in existence) in the eyes of the law. The tribunal noted that the sale was conducted without proper authorization and excluded the petitioners from the decision-making process. However, the tribunal allowed the third-party purchaser, M/s. Aero Industries, to seek appropriate legal remedies.

7. Compliance with Statutory Requirements for Finalization and Audit of Accounts:
The tribunal directed the parties to finalize and audit the company's accounts for the year ended 31.03.2011 and subsequent years within eight weeks. The accounts for the year ended 31.03.2010 were to be used as the base for this purpose. The tribunal emphasized the need for compliance with the statutory requirements under the Companies Act, 1956, and the 2013 Act.

8. Change of Registered Office Without Proper Authorization:
The change of the registered office from "KU-160, Pitampura, Delhi-110034" to "A-4/18, First Floor, Shiv Mandir Mohalla, Main Rithala Road, Badli Village, Delhi-110042" was declared null and void by the tribunal. The change was made without proper authorization and was part of the broader pattern of exclusion of the petitioners from the company's affairs.

Conclusion:
The tribunal concluded that the acts of respondents No. 2 and 3 were deliberate and willful in excluding the petitioners from the company's affairs. The Board meetings held on 02.11.2010 and 10.12.2010, and the EOGM on 17.03.2011, were declared null and void. The agreement to sell the company's property was also declared non-est. The tribunal directed the parties to comply with statutory requirements for finalization and audit of accounts and declared the change of the registered office null and void. The petitioners were awarded costs of ?20,000/- to be realized from respondents No. 2 and 3.

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