2016 (7) TMI 117 - Board - Companies Law

Oppression and mismanagement - maintainability of petition - Held that - Admittedly as per the documents filed by the petitioner the Company has 13 shareholders as on 30.09.2011 even without taking into the additional members of the Rl Company. From the documents it is evident that the Rl Company is having 14 shareholders as on the date of filing of the petition. Accordingly, the first criteria i.e. 1/10 of the shareholders to maintain a petition is not fill filled. Even the petitioner as per her own averments as made in the details of shareholding she is holding 32.808 shares constituting 6.63% of the paid up share capital of the company and hence the 2nd requirement i.e. 10% of the paid up capital is also not fulfilled. Accordingly, the petitioner failed to fulfill the required qualification as contemplated under Section 399 of the companies Act, 1956, to file a petition under Sections 397/398, the petition is not maintainable and liable to be dismissed. Hence, the CP is dismissed as not maintainable and accordingly the issue is answered against the petitioner It is evident from the letter dated 24.05.2013 that the petitioner has the knowledge of all the prior board meetings and it could be concluded that the said meetings are within the knowledge of the Petitioner and with her consent. Further the respondents have sent a notice dated 14.08.2013 to the petitioner informing her, the conduct of the board meeting to be held on 22.08.2013. One of the agenda item is to revise the remuneration payable to P1. The petitioner attended the board meeting on 22.08.2013 and in the said meeting the previous minutes of the board held on 26.06.2013 were confirmed. The remuneration of the petitioner was revised in this meeting. In view of the participation in the board by the petitioner, do not see any merit in the submissions made by the petitioner in this regard. Hence the board meeting held on 11.04.2013 is legal and valid. Hence the issue is answered against the petitioner. in the light of the undertaking given by the Company and its directors to the Company Law Board in C.P. No.36/2014, her continuation (and/or subsequent cessation) as a director shall be subject to further orders of the Company Law Board. It is recorded that the resolution were put to vote by show of hands and passed unanimously. In the said meeting the R5 was reappointed as director and R3 was appointed as whole time director for a period of three years. The general body also appointed M/s Brahmawa and Co. Chartered Accountants as statutory auditors of the Company. As per the additional documents filed by the respondents, it is seen that the Company held its 62 AGM on 08.12.2015, From the sequence of events it is an admitted fact that the company is in regular in conducting the AGMs and the same is in due compliance of Law. Accordingly the issue is answered against the petitioner. The petitioner failed in providing the ingredients to seek the reliefs under Section 307 and 398 further the petitioner miserably failed to establish any acts of oppression and mismanagement in the affairs of the company. In the present case there is not a single act of oppression and mismanagement made out by the petitioner. The Petition is miserably failed and liable to be dismissed.

Issues Involved:
1. Maintainability of the Petition under Section 399 of the Companies Act, 1956.
2. Legality and validity of the Board Meetings held on 09.04.2013, 10.04.2013, and 11.04.2013.
3. Legality of the transmission of 4,00,961 equity shares to the 2nd respondent.
4. Legality and validity of the AGM conducted on 18.12.2013.
5. Allegations of oppression and mismanagement by the respondents.
6. Family relationship within the company and compliance with requests for documents and inspection of books.

Detailed Analysis:

Issue 1: Maintainability of the Petition under Section 399 of the Companies Act, 1956
The petitioners filed the petition under Sections 397, 398, 402, 403, 404, and 406 of the Companies Act, 1956. The petitioner claimed to hold 32,808 shares constituting about 6.63% of the paid-up share capital of the company. However, the respondents contended that the petitioner holds only 28,143 shares constituting 5.68% of the paid-up share capital. The petitioner also included two trusts as petitioners, but the respondents argued that the petitioner had no authorization to file on behalf of these trusts. The Civil Court had restrained the petitioner from acting as trustee for these trusts. Consequently, the petitioner did not meet the threshold under Section 399, which requires holding at least 10% of the paid-up share capital or 1/10th of the total number of members. Therefore, the petition was dismissed as not maintainable.

Issue 2: Legality and Validity of the Board Meetings held on 09.04.2013, 10.04.2013, and 11.04.2013
The Board Meetings were convened to fill the casual vacancy caused by the demise of Dr. Vijay Kumar Datla. The resignation of the 5th respondent (R5) was withdrawn, and he continued as a director. The Board Meeting on 09.04.2013 appointed the 4th respondent (R4) to fill the casual vacancy. On 10.04.2013, the Board transmitted 4,00,961 shares to the 2nd respondent (R2) and appointed R2 and the 3rd respondent (R3) as additional directors. On 11.04.2013, R2 was appointed as Managing Director. The petitioner was aware of these meetings and had consented to them, as evidenced by her letter dated 15.04.2013. The meetings were held validly and in compliance with the Articles of Association and the Companies Act.

Issue 3: Legality of the Transmission of 4,00,961 Equity Shares to the 2nd Respondent
The transmission of shares was conducted in the Board Meeting on 10.04.2013 based on a Will dated 14.02.2005 executed by Dr. Vijay Kumar Datla. The petitioner contested this Will and claimed inheritance of the shares. However, the matter was already pending before the Civil Court in O.S. No. 184/2014. The Bench held that it could not decide on the disputed issue of inheritance and that the transmission was in compliance with Section 109 of the Companies Act.

Issue 4: Legality and Validity of the AGM Conducted on 18.12.2013
The 60th AGM was held on 18.12.2013, where resolutions were passed for the declaration of dividends, re-appointment of directors, and appointment of auditors. The petitioner's participation in the AGM and subsequent withdrawal of C.P. No. 1/2013, which challenged the AGM, indicated her acquiescence. The AGM was held legally and validly, and the resolutions passed were binding.

Issue 5: Allegations of Oppression and Mismanagement by the Respondents
The petitioner failed to provide evidence of continuous acts of oppression or mismanagement. The company was profitable, and the affairs were conducted in compliance with the law. The petitioner’s grievances were more directorial in nature, and no grounds were made for winding up the company. The petitioner also suppressed material facts, such as the letter dated 15.04.2013, which acknowledged the appointments made in the Board Meetings.

Issue 6: Family Relationship within the Company and Compliance with Requests for Documents and Inspection of Books
The company allowed the petitioner to inspect the books and records during business hours, demonstrating fairness. The disputes were primarily family-related, and the company’s interest was paramount. The petitioner’s suppression of facts and lack of evidence for her claims further weakened her case.

Conclusion:
The petition was dismissed as not maintainable under Section 399 of the Companies Act, 1956. The Board Meetings and AGM were held legally and validly. The petitioner failed to establish acts of oppression or mismanagement. The company acted fairly in allowing inspection of records. The petitioner's suppression of facts and failure to meet the statutory requirements led to the dismissal of the petition.

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