2017 (3) TMI 1863 - Tri - Companies Law

Oppression and mismanagement - removal of the Petitioner from the directorship - closely held family company in the guise of a partnership - HELD THAT - It is necessary to give opportunity to the Respondents for filing reply. On 15/03/2017 the meeting is schedule to be held for removal of the Petitioner from the directorship of the R-l Company. As per averment of the Petition R-l is a Gupta family company which is managed and controlled by bunch of Gupta family members and Petitioners holding in the company is 17.58% of the valid issued paid-up and subscribed share capital. It is closely held family company which runs in the guise of partnership. Petitioner has taken a legal ground that removal of director is a special business and Section 102 of the Companies Act 2013 provides that attachment of explanatory statement is required with issuing notice of EOGM for concerning special business. Removal of director is not defined in Section 2(1)(a). Therefore it comes under the special business and as per requirement of 102 of the Companies Act 2013 for such business explanatory statement is necessary to be issued. Notice which is at page 491 of the Company Petition does not contain the explanatory statement for issuing notice for removal of Mr. Amit Kumar Gupta from directorship. Prima facie case is made out on account of the alleged notice which does not contain explanatory statement. EOGM should not be stayed. In the interest of justice we do not want to stay the proceeding of EOGM but we make it clear that if any EOGM takes place then its resolution shall not be given effect without taking permission from the Tribunal - List the matter for hearing on 20/03/2017.

Summary

Issues Involved:
- Filing of Company Petition under Sections 241 and 242 of the Companies Act, 2013
- Allegations of oppression and mismanagement in a family business turned company
- Shareholding structure and control dynamics within the company
- Special notice for removal of a director and compliance with Companies Act provisions
- Request for interim relief to prevent illegal removal of the petitioner as director
- Examination of the legality of the special notice issued for the Extraordinary General Meeting (EOGM)
- Consideration of the need for an explanatory statement for special business like removal of a director
- Decision on whether to stay the EOGM proceedings

Detailed Analysis:

1. Filing of Company Petition under Sections 241 and 242:
The petition was filed under Sections 241 and 242 of the Companies Act, 2013, alleging oppression and mismanagement in a family business turned company. The petitioner held a significant share in the company and sought relief against the other shareholders who were accused of seeking exclusive control and treating the company as personal property.

2. Shareholding Structure and Control Dynamics:
The petitioner held 17.58% of the share capital, while other family members, particularly R-2 and R-3, held substantial shares. The petitioner raised concerns about the appointment of R-4 as a director and alleged that R-5, the Company Secretary, aided in wrongful acts. The petitioner claimed that the company, although incorporated as a partnership firm, was being controlled by a few family members.

3. Special Notice for Removal of Director:
The petition highlighted a special notice issued for the removal of the petitioner as a director. It was argued that the notice did not comply with the provisions of the Companies Act, 2013, specifically Sections 100, 102, 115, and 169. The petitioner contended that the notice lacked reasons for removal and did not adhere to corporate democracy principles.

4. Examination of the Legality of the Special Notice:
The Tribunal examined the legality of the special notice for the EOGM scheduled to remove the petitioner as a director. It was noted that the notice did not contain an explanatory statement as required by Section 102 of the Companies Act, 2013, for special business like the removal of a director. A prima facie case was found due to the absence of an explanatory statement in the notice.

5. Decision on Stay of EOGM Proceedings:
The Tribunal decided not to stay the EOGM proceedings but directed that any resolution passed at the meeting would not be enforced without permission from the Tribunal. Additionally, the resolution of the EOGM was to be submitted to the Tribunal promptly. The petitioner was instructed to serve the court order to the respondents and file an affidavit of service. Deadlines were set for filing replies and rejoinders, with the matter listed for a hearing on a specified date.

In conclusion, the Tribunal addressed the urgent nature of the matter, ensuring procedural fairness while allowing the EOGM to proceed under certain conditions to safeguard the interests of all parties involved.