2017 (6) TMI 499 - Tri - Companies Law

Oppression or mismanagement - Held that - Quarrels between two brothers who happens to be members of the first respondent company cannot be by any stretch of imagination be concluded as the acts of oppression and mismanagement under section 241 and 242 of the Companies Act, 2013. In view of the above discussion, in both the petitions, there are no acts of oppression or mismanagement. However, there appears to be a dispute between the petitioner and second respondent. There appears to be some difficulty in the functioning of the first respondent company because of the conduct and attitude of the petitioner in CP 15 of 2016. Fact remain that the petitioner also invested amount in the first respondent company. It is to be noted that petitioner was also removed from the employment of the first respondent company. Taking into consideration the overall facts and circumstances, it may not be possible for the petitioner in CP 15 of 2016 to continue as a member of the first respondent company. Therefore, petitioner in CP 15/16 if he is willing, he can sell his shares to other shareholders in the first respondent company for a fair value as on the date of filing of the petition CP 6/16 determined by mutual agreement or by an independent valuer appointed by the Tribunal. Respondents 2,3,5 & 8 shall purchase the shares of petitioner in CP 15/16 for a fair value fixed by mutual understanding or by an independent valuer appointed by the Tribunal. Therefore, petitioner and second respondent are directed to come to an understanding about the fair value of the shares of the first respondent company as on the date of filing of CP 6 of 2016 within two months from the date of this order.

Issues Involved:

1. Eligibility of the petitioner to file CP 15 of 2016.
2. Eligibility of the second respondent to file CP 6 of 2016.
3. Allegations of oppression and mismanagement by the petitioner.
4. Allegations of oppression and mismanagement by the second respondent.
5. Relief sought by the petitioner.

Detailed Analysis:

1. Eligibility of the Petitioner to File CP 15 of 2016:

The petitioner, holding 5% of the paid-up share capital of the first respondent company, is eligible to file CP 15 of 2016. As per the Companies Act, the petitioner qualifies as one of the five shareholders, thus making him eligible to initiate the petition.

2. Eligibility of the Second Respondent to File CP 6 of 2016:

The second respondent, holding 49.50% of the shareholding in the first respondent company, is also eligible to file CP 6 of 2016. Being one of the five members, the second respondent meets the requirements under sections 397 and 398 of the Companies Act, 1956.

3. Allegations of Oppression and Mismanagement by the Petitioner:

The petitioner alleged several acts of oppression and mismanagement, including unauthorized increase in share capital, illegal termination of employment, and siphoning of funds. However, the Tribunal found that the petitioner was not a member of the company at the time of the alleged increase in share capital and allotment of bonus shares on 25.08.2011, thus lacking the standing to challenge these actions.

Regarding the termination of employment, the Tribunal noted that employment issues do not fall within its jurisdiction unless linked to oppression or mismanagement of shareholder rights. The termination letter cited incompetence and absenteeism, which the Tribunal deemed sufficient grounds for termination outside the scope of its purview.

The petitioner’s claim of siphoning ?45.00 lacs from the company lacked substantial evidence. The Tribunal found no material to support the allegations and dismissed this claim.

4. Allegations of Oppression and Mismanagement by the Second Respondent:

The second respondent accused the petitioner of spreading false rumors and attempting to paralyze the company’s business. These allegations were considered more akin to public nuisance or criminal acts rather than acts of oppression and mismanagement under sections 241 and 242 of the Companies Act, 2013.

5. Relief Sought by the Petitioner:

The Tribunal concluded that there were no acts of oppression or mismanagement by either party. However, recognizing the ongoing disputes and the petitioner’s investment in the company, the Tribunal suggested that the petitioner might sell his shares to other shareholders at a fair value determined by mutual agreement or an independent valuer appointed by the Tribunal. The petitioner was given the option to file a petition for the appointment of an independent valuer if mutual agreement on the share value could not be reached.

Conclusion:

The Tribunal disposed of both petitions, CP 6 of 2016 and CP 15 of 2016, without any order as to costs. The parties were directed to determine the fair value of the petitioner’s shares within two months, failing which the petitioner could seek the Tribunal’s intervention for an independent valuation.

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