2020 (6) TMI 799 - Tri - Companies Law

Oppression and mismanagement - Allegation of changing mode of account operation and committed fraud in submitting the application to the Bank - section 241 and 242 of the Companies Act, 2013 - HELD THAT - The delay in filing like application at the instances of the petitioner, being not explained properly, that a criminal complaint was already lodged and an FIR was allegedly registered in the alleged fraud, let the investigation may bring the real truth behind it. An overall circumstances brought out in the case in hand not sufficient enough to have a prima facie finding that the petitioner came with a clean hand claiming equitable relief. R3 also asserted that respondents are not at all thought of issuance of fresh shares and induction of further directors in order to reduce the shareholding of the petitioners into a minority. So the apprehension of the petitioners that if an order of injunction is not passed as prayed for there is every chance of resorting to issuance of fresh shares and induction of further directors in order to dilute the shareholdings and rights of the petitioners is devoid of any merit. When people feel scared and hopeless interrupting the business of R-1 under the effective management of R3, as he submitted, changing the mode of operation of the R1 bank account may work great hardship to the business operation of the R1 company. Accordingly, the balance of convenience also does not favour the petitioners. List the matter for further consideration after lifting the lockdown, preferably on 5th August, 2020.

Summary

Issues:
Application under sections 241 and 242 of the Companies Act, 2013 alleging oppressive conduct by respondents in managing affairs of R1 company during COVID-19 lockdown.

Analysis:
1. Urgency for Early Hearing:
- Application filed seeking early hearing through video conferencing due to COVID-19 lockdown disruption.
- Tribunal listed the matter promptly after finding the urgency satisfactory.

2. Allegations of Oppression and Prejudice:
- Petitioners allege illegal management of R1 company by respondents, including changing account operations and committing fraud.
- Petitioners apprehend issuance of fresh shares to dilute their rights, seek interim injunctions.

3. Board Meeting and Resolutions:
- Dispute over validity of board meeting and resolutions passed on 20/01/2020.
- Respondents claim proper notice served, minutes recorded with presence of petitioners.
- Tribunal finds extract of minutes provided by respondents credible in absence of contrary evidence.

4. Appointment of Additional Directors:
- Petitioners challenge appointment of additional directors without provision in Articles of Association.
- Respondents justify appointments due to alleged non-cooperation of petitioners and necessity for day-to-day operations.

5. Fraudulent Actions:
- Allegations of fraudulent signature collection for bank account operations.
- Tribunal finds petitioners' story unbelievable given their business acumen and circumstances presented by respondents.

6. Equitable Relief and Interim Injunction:
- Tribunal considers overall circumstances and lack of explanation for delay in filing application.
- Rejects petitioners' apprehensions of share dilution and grants no interim reliefs due to COVID-19 disruptions and balance of convenience.

7. Judicial Discretion and Future Proceedings:
- Tribunal acknowledges unprecedented disruptions caused by COVID-19 and Cyclone 'Amphan'.
- Directs respondents to file reply affidavit, schedules further consideration post-lockdown, emphasizing equity and business continuity.

8. Conclusion and Directions:
- Tribunal denies interim reliefs, directs parties to file necessary affidavits, and sets next hearing date post-lockdown.
- Registry instructed to circulate order copies to all parties and counsels promptly.