2017 (4) TMI 829 - Tri - Companies Law

Oppression and mismanagement - Disassociation from the activities concerning South Asian Human Rights Documentation Centre (SAHRDC) seeked by one of the founder trustee of a Trust - Held that - In relation to the transfer of 5001 equity shares of the petitioner by the respondents we hold that the said transfers are fraudulent and sham and declare it to be illegal and void and that the mere entry in the annual returns or share register of the transfer of shares in the absence of documentation and no consideration been passed is not binding on the petitioner and we hold that the 2nd respondent as well as the others to whom he is alleged to have transferred upon collusion subsequently are to be considered only as bare trustees on behalf of the petitioner and the 1st respondent company is hereby directed to rectify its register of members by registering the transfer of impugned shares in the name of the petitioner and deleting the name of the second respondent as well as to whom he had transferred the impugned shares subsequently within a period of 30 days from the receipt of the order. The 1st respondent company is further directed to return the letter of allotment as well as issue the necessary share certificates in the name of the petitioner for the 5001 equity shares held by the petitioner and in case of its non traceability issue duplicate share certificates upon the petitioner applying for the same within the prescribed statutory period as mandated under law without insistence of any further document. In relation to the reliefs for oppression and mismanagement as we have already held the acts of the respondents in depriving the petitioner of his shareholding amounts to oppression, we intend to mould the reliefs keeping in mind the facts and circumstances of the case as well as the interest of the company. The petitioner as is evident from Annexure A-5 of the petition even in the year 2003 had expressed his intent categorically to dissociate himself from the affairs of the 1st respondent company as well from other entities associated with SAHRDC Trust including IA-SAHRDC. Further serious allegations have been levelled against both its Indian and International arms and that the funds of the international trust are being laundered through the 1st respondent company and the same is siphoned off by the 4th respondent for his own personal benefit. Against such a back drop it may not be possible for the petitioner to work with the 4th respondent amicably in relation to the affairs of the company in view of their equal holding and the only way out seems to be to direct the respondents to purchase the shareholding of the petitioner at the face value of the shares. The initial petition C.P. No. 67 of 2007 was filed in the year 2007 and it will be in the interest of justice that the 50% shareholding of the petitioner i.e 5001 equity shares, is purchased by the respondents 2 to 4 either jointly or severally for valuable consideration as on 01.04.2007 at a fair value to be computed based on the financial statements of the 1st respondent company to be evaluated by an Independent Chartered Accountant - Mr. Alok Bajaj. The professional fee of the Independent Chartered Accountant appointed for the purpose of valuation shall be paid by respondents 2 to 4. The Chartered Accountant appointed for the purpose of valuation shall complete the exercise within a week from the date of receipt of the order and Respondents 2 to 4 either jointly or severally shall purchase the 5001 equity shares (i.e) 50% of the shareholding based on the fair value ascertained by the independent chartered accountant appointed vide this order, within a period of 4 weeks thereafter.

Issues Involved:
1. Transfer of shares and its legality.
2. Allegations of oppression and mismanagement.
3. Limitation, delay, and laches in filing the petition.
4. Validity of resignation from directorship.
5. Maintenance of records and evidence of share transfer.
6. Relief sought by the petitioner.

Detailed Analysis:

1. Transfer of Shares and Its Legality:
The petitioner contended that he never executed any instrument of transfer of his shares and only discovered the alleged illegal transfer upon inspecting the Annual Return for the year 2004-05. The respondents claimed that the petitioner voluntarily transferred his shares to the 2nd respondent for ?50,000 in cash. However, the tribunal found that the respondents failed to substantiate the transfer with necessary documents such as share transfer forms and share certificates. The tribunal held that the entries in the Annual Returns were not conclusive evidence of the share transfer and that the absence of proper documentation and consideration rendered the transfer void.

2. Allegations of Oppression and Mismanagement:
The petitioner sought relief under Sections 397 and 398 of the Companies Act, 1956, asserting that the transfer of his shares was illegal and that he was wrongfully deprived of his shareholding. The tribunal found that the actions of the respondents in depriving the petitioner of his shares amounted to oppression. Given the ongoing conflict and the petitioner's expressed desire to dissociate from the company, the tribunal directed the respondents to purchase the petitioner's shares at fair value.

3. Limitation, Delay, and Laches in Filing the Petition:
The respondents argued that the petition suffered from inordinate delay and was barred by limitation. The tribunal noted that in cases of fraudulent transactions, the date of knowledge becomes material. The petitioner claimed to have become aware of the share transfer only in November/December 2006 and filed the petition within three years of this date. The tribunal held that the petition was filed within the period of limitation and was maintainable.

4. Validity of Resignation from Directorship:
Both parties agreed that the petitioner had resigned from the Board of the 1st respondent company in 2003. The exact date of resignation was disputed, but the tribunal noted that the resignation was an accepted fact and that the petitioner was not privy to the board's activities post-resignation.

5. Maintenance of Records and Evidence of Share Transfer:
The respondents claimed that they were not required to maintain records beyond statutory requirements. The tribunal emphasized that the burden of proof for the share transfer lay with the respondents, who failed to produce the necessary documents. The tribunal cited legal precedents to support its decision that the lack of documentation invalidated the share transfer.

6. Relief Sought by the Petitioner:
The petitioner sought the restoration of his shares and rectification of the company's register of members. The tribunal declared the transfer of the petitioner's shares to the 2nd respondent as illegal and void. It directed the 1st respondent company to rectify its register and issue share certificates to the petitioner. Additionally, the tribunal ordered the respondents to purchase the petitioner's shares at a fair value determined by an independent Chartered Accountant.

Conclusion:
The tribunal found in favor of the petitioner, declaring the transfer of shares illegal and void due to lack of documentation and consideration. It directed the respondents to rectify the register of members and purchase the petitioner's shares at fair value, thereby addressing the issues of oppression and mismanagement. The petition was held to be within the limitation period, and the tribunal emphasized the importance of maintaining proper records and documentation in corporate governance.

← Previous Next →