2017 (8) TMI 83 - Tri - Companies Law

Transparency for sale of lease hold rights - oppression or mismanagement - Held that - The petitioners have not produced any corresponding sale deeds executed within the vicinity where the company property is situated to show that the property in the vicinity was sold at a higher value than the value at which company property was sold. Thus the petitioners have utterly failed to discharge the burden except merely contending that the company property should have been sold at higher price than the price at which it was sold. So in the absence of any proof from the side of the petitioners the Tribunal cannot conclude that there was an element of fraud involved and the property was not sold at a price at which it was expected to have been sold. The petitioners have utterly failed to establish any substantial ground to grant reliefs as prayed. On the other hand there is material from the side of respondents to establish that a decision was taken by the Board of Directors to sell the leasehold rights and that the same was also approved by the EGM and majority shareholders have given consent for the sale of leasehold rights and in the light of the above discussion petitioners are not entitled for any relief and further they utterly failed to establish any act of oppression or mismanagement on the part of respondents. Therefore the petition is liable to be dismissed.

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Validity of the sale of leasehold rights of the property.
3. Transparency and fairness in the sale process.
4. Adequacy of the sale price.
5. Maintainability of the petition after withdrawal of some petitioners.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The petitioners alleged acts of oppression and mismanagement by the respondents, specifically regarding the sale of the perpetual leasehold rights of a property without shareholder consent and proper valuation. They contended that the sale was conducted without a general meeting as required under Section 293(1)(a) of the Companies Act, 1956, and that the sale price was not backed by proper valuation, thus impairing their rights.

2. Validity of the Sale of Leasehold Rights of the Property:
The respondents argued that the sale was authorized by the shareholders, with 60% giving written consent. They contended that the property was not an undertaking of the company, thus not requiring compliance with Section 293(1)(a). The sale was approved in a Board resolution dated 25.01.2010 and an EGM held on 25.02.2010. The Tribunal found that the necessary approvals were obtained, and the petitioners failed to prove otherwise.

3. Transparency and Fairness in the Sale Process:
The petitioners claimed that the sale lacked transparency and was conducted for the respondents' selfish motives. They argued that the property should have been sold through sealed tenders after wide publicity. The Tribunal noted that public notices were issued, and the sale process was transparent, with no evidence of under-hand dealings. The respondents provided substantial evidence, including Board resolutions, EGM minutes, and public notices, to support the transparency of the sale.

4. Adequacy of the Sale Price:
Petitioners disputed the sale price, arguing it was below market value. They referenced valuation certificates indicating higher potential values. However, the Tribunal found that the property was sold at ?1250 per sq. ft., which was within the range provided by the registered valuers. The Tribunal emphasized that the valuation was conducted by government-approved valuers, and the sale price exceeded the valuations provided. The petitioners did not provide any contrary evidence to substantiate their claims.

5. Maintainability of the Petition after Withdrawal of Some Petitioners:
The respondents contended that the petition was not maintainable as the shareholding of the remaining petitioners was less than 5% of the total shareholding, below the required 10% threshold. The Tribunal referred to the Supreme Court decision in Bhagwati Developers (P.) Ltd. v. Peerless General Finance Investment Co. Ltd., which held that the maintainability of a petition is determined at the time of filing. Since the original petitioners met the 10% requirement, the petition remained maintainable despite subsequent withdrawals.

Conclusion:
The Tribunal dismissed the petition, concluding that the petitioners failed to establish any substantial grounds for oppression or mismanagement. The sale of the leasehold rights was conducted transparently and with proper approvals. The sale price was deemed fair and supported by registered valuers' valuations. The petitioners' arguments regarding the necessity of the sale and the adequacy of the sale price were not substantiated with sufficient evidence.

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