2017 (6) TMI 458 - Tri - Companies Law

Oppression and mismanagement - Whether the reduction in the shareholding of the Petitioners whereby they signed the share transfer forms and the subsequent resignation of the Petitioners from the Board of Director proves the existence of the understanding between the Respondents and the Petitioners, and whether the alleged acts of Respondents in the Petition constitute oppression against the Petitioners? - Held that - The claims that the Petitioners have made regarding the signatures, on the share transfer forms and the resignation letters being forged, merit scarce attention; as the claims have not been substantiated with any pieces of proof because the burden of proof relating to the proving or disproving the aforementioned signatures is on the party who claims forgery. Regarding the exclusion of oral evidence in presence of documentary evidence relating to the same, Section 91 of the Indian Evidence Act, 1872 contemplates evidence of terms of contracts, grants and other dispositions of property reduced to form of documents which lays down that when the terms of a contract, or of a grant, or of any other disposition of property, have been reduced to the form of a document, and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence shall be given in proof of the terms of such contract, grant or other disposition of property, or of such matter, except the document itself, or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions hereinbefore contained. Section 92 of the Indian Evidence Act, 1872 excludes evidence of any oral agreement or statement, when the terms of a contract, grant or disposition of property or any matter required by law to be in writing have been proved as per Section 91 of the Indian Evidence Act, 1872 for the purpose of contradicting, varying, adding to or subtracting from its terms. The principle lays down that when the terms of any such document have been proved by the primary or secondary evidence of the document, no evidence of any oral agreement or statement shall be admitted. In the present petition the Petitioners have themselves contended that consequently in terms of the arrangement and understanding, ₹ 25 Lakhs was refunded to the Petitioners by the Respondents. The role of the Petitioners in running the Company and their involvement in the day-to-day affairs of the Company is also lacking and without any significance. Therefore, it is concluded that there is no case of oppression against the Petitioners and the company petition deserves to be dismissed. Therefore, the issue no. 1 of whether the reduction in the shareholding of the Petitioners whereby they signed the share transfer forms and the subsequent resignation of the Petitioners from the Board of Directors, prove the existence of the understanding, is decided in affirmative in favour of the Respondents. Furthermore, the issue whether the alleged acts of Respondents in the present Petition constitute oppression against the Petitioners, is decided in negative. Therefore, the subsequent acts of the Petitioners thereby proved the existence of the understanding between the Respondents and the Petitioners and furthermore after careful consideration of the facts, contentions and arguments in the present case, the Tribunal is of the opinion that there is no proof of any acts of oppression committed against the Petitioners.

Summary

Issues Involved:
1. Reduction in Shareholding and Resignation: Whether the reduction in the shareholding of the Petitioners and their subsequent resignation from the Board of Directors prove the existence of an understanding between the Respondents and the Petitioners.
2. Acts of Oppression: Whether the alleged acts of Respondents in the Petition constitute oppression against the Petitioners.

Detailed Analysis:

1. Reduction in Shareholding and Resignation:
The Petitioners contended that they were ousted from the company through illegal and fraudulent activities by the Respondents, including the dilution of their shareholding from 52% and their removal as directors. They argued that the Respondents filed false returns with the ROC and clandestinely allotted further shares to themselves, reducing the Petitioners to a minority.

The Respondents, however, claimed that there was an understanding between the parties whereby the Petitioners would be removed from the company after the Respondents paid off their investment of ?13 Lakhs. The Respondents contended that the Petitioners had agreed to sign share transfer forms and resignation letters, which were to be effective upon payment.

The Tribunal found that the Petitioners' subsequent acts of resigning from Directorship and selling their shares through share transfer forms proved the existence of the understanding claimed by the Respondents. The Tribunal noted that the Petitioners' claims of forgery regarding the signatures on the share transfer forms and resignation letters were not substantiated with proof. The Tribunal referred to Sections 91 and 92 of the Indian Evidence Act, 1872, which exclude evidence of any oral agreement or statement when the terms of a contract have been reduced to the form of a document.

2. Acts of Oppression:
The Petitioners alleged that the Respondents committed acts of oppression by hijacking and assuming exclusive ownership and control of the company. They claimed that the Respondents increased their shareholding from 48% to 100% and eliminated the Petitioners' shareholding.

The Respondents denied these allegations and argued that the Petitioners ceased to hold any shares since 2006 and therefore had no right to apply under the provisions for oppression and mismanagement. The Respondents contended that they infused significant capital into the company and paid off the Petitioners' debts to UPFC.

The Tribunal concluded that there was no case of oppression against the Petitioners. It found that the Petitioners' role in the company was not significant and that their claims of having invested ?38 Lakhs were not substantiated with receipts or proof. The Tribunal determined that the reduction in shareholding and subsequent resignation of the Petitioners were in line with the understanding between the parties and did not constitute acts of oppression.

Conclusion:
The Tribunal dismissed the company petition with costs, concluding that there was no proof of any acts of oppression committed against the Petitioners. The issue of whether the reduction in shareholding and resignation proved the existence of an understanding was decided in favor of the Respondents, and the alleged acts of oppression were found to be unsubstantiated.