2017 (10) TMI 914 - Tri - Companies Law

Oppression and mismanagement - Held that - Tribunal is of the considered view that no act of oppression and mismanagement is established. However, the fact remain the petitioner invested huge amount of money in the first respondent company and in Nagina Processors Pvt. Ltd. From the facts and circumstances of the case there is no possibility of the petitioner actually participating in the affairs of the first respondent company by joining hands with the respondents. Therefore, even in the absence of proof of acts of oppression and mismanagement, in order to do substantial justice and on the principle of equity, this Tribunal is of the considered view that the petitioner must be allowed to have fair market value of the shares which he is holding in the first respondent company, if he is ready to walk out of the first respondent company. In absence of any material to hold that there were acts of oppression and mismanagement, petitioner is not entitled to ask relief of salary, appointment of Independent Directors and investigation of the affairs of the first respondent company. This Tribunal hereby direct respondents No. 2 and 3 to purchase the shares of the petitioner and his wife if they are willing to sell their shares for a fair market value fixed by an independent valuer appointed by this Tribunal. Petitioner and his wife if they are willing to sell their shares, they shall file an application before this Tribunal within two months from the date of this order for appointment of independent valuer to assess fair market value of the shares of the first respondent company as on the date of filing of petition. In case if the petitioner and his wife file such application, this Tribunal shall appoint independent valuer to determine the fair market value of shares of the first respondent company as on the date of filing of petition and further decide the mode and manner of transfer of shares.

Summary

Issues Involved:
1. Eligibility of the petitioner to file the petition.
2. Alleged promise to allot 50% shares to the petitioner.
3. Allotment of additional shares to respondents No. 2 and 3.
4. Removal of the petitioner as Director.
5. Alleged acts of oppression and mismanagement.
6. Handling over the process unit to third parties.
7. Reliefs sought by the petitioner.

Detailed Analysis:

1. Eligibility of the Petitioner to File the Petition:
The petitioner, a shareholder in the first respondent company, claimed eligibility to file the petition on behalf of himself and his wife, who together hold 32.66% of the paid-up share capital. The respondents contested this, arguing that the petition did not explicitly state it was filed on behalf of his wife. However, the tribunal found it implied that the petition was filed on behalf of both, as the wife had executed a special power of attorney in favor of the petitioner. Thus, the petitioner was deemed eligible to file the petition.

2. Alleged Promise to Allot 50% Shares to the Petitioner:
The petitioner claimed that respondents No. 2 and 3 promised him 50% of the shares, but he and his wife were only allotted 32.66%. The tribunal noted that there was no documentary evidence supporting the claim of an agreement to allot 50% shares. Therefore, the grievance regarding the non-allotment of 50% shares was unfounded.

3. Allotment of Additional Shares to Respondents No. 2 and 3:
The petitioner challenged the allotment of 5,00,000 shares each to respondents No. 2 and 3 in 2010 and 2011, claiming it was done without his knowledge. The tribunal found that the petitioner, being a Director until 2015, did not raise this issue timely. The belated challenge in 2015 was not sufficient to establish oppression.

4. Removal of the Petitioner as Director:
The petitioner argued that his removal as Director was illegal and without valid reasons. The tribunal found that the petitioner had stopped attending the company from May 2013 and joined another company. The reasons provided for his removal, including non-attendance and revealing trade secrets, were deemed sufficient. The tribunal upheld the removal, distinguishing it from cases where removal was without due process or valid reasons.

5. Alleged Acts of Oppression and Mismanagement:
The petitioner alleged various acts of oppression and mismanagement, including being denied access to accounts and not being served notices for meetings. The tribunal found no evidence of such acts. The petitioner’s inaction and delayed response to the alleged issues weakened his case. The tribunal concluded that no acts of oppression and mismanagement were established.

6. Handling Over the Process Unit to Third Parties:
The petitioner contended that handing over the process unit to Devi Processors was illegal. The tribunal recognized it as a business decision taken in the absence of the petitioner, who had left the company. It was not deemed an act of oppression as no prejudice or loss to the petitioner and his wife as shareholders was demonstrated.

7. Reliefs Sought by the Petitioner:
The petitioner sought various reliefs, including restraining the EGM, declaring the handing over of the process house illegal, and appointing relatives as Directors. The tribunal dismissed these reliefs due to the absence of proof of oppression and mismanagement. However, it acknowledged the petitioner’s investment and directed respondents No. 2 and 3 to purchase the petitioner’s and his wife’s shares at fair market value, to be determined by an independent valuer.

Conclusion:
The tribunal found no acts of oppression and mismanagement but acknowledged the petitioner’s investment. It directed the respondents to purchase the petitioner’s shares at fair market value if the petitioner and his wife wished to sell. The petition was disposed of with both parties bearing their own costs.