2017 (12) TMI 561 - AT - Companies Law

Oppression and mismanagement - illegal removal of appellants from their directorship from the 1st Respondent Company - Held that - In the light of the submissions made by the respondent that the payment has been made and the instrument for transfer of shares having been signed by the appellant, it is only a matter of time when the shares will be transferred from the appellant to the respondent and once the shares have been transferred and have been shown as transferred, the appellant shall not be a shareholder of the 1st respondent. As soon as the appellant is no more/longer a shareholder of the 1st respondent, or the appellant is not shareholder of the 1st respondent on the date of filing of the petition, no petition is maintainable under Section 397, 398 of the Companies Act, 1956 read with Sections 241 of the Companies Act, 2013. It is observed that the appeal of the appellant is not maintainable in as much as the appellants have not come to Hon ble Court with clean hands. The appellants have no right to file the appeal as the appellant was not holding any shares at the time of filing of appeal. The claim of the appellant is based on oral assertions, which is devoid of any force and is inadmissible in evidence

Summary

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Legality of the removal of appellants from directorship.
3. Validity of share transfer and resignation documents.
4. Maintainability of the company appeal.
5. Settlement process between the parties.

Issue-Wise Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The appellants alleged oppression and mismanagement by the respondents, claiming illegal removal from directorship and fraudulent transfer of their shares. The Tribunal concluded that there was no case of oppression against the petitioners, stating, "there is no proof of any acts of oppression committed against the petitioners."

2. Legality of the Removal of Appellants from Directorship:
The appellants contended that they never resigned from the directorship and that their signatures on resignation documents were forged. The Tribunal dismissed these claims, emphasizing that the burden of proof was on the appellants, who failed to provide evidence. The Tribunal referenced Sections 91 and 92 of the Indian Evidence Act, 1872, which exclude oral evidence when documentary evidence exists, stating, "no evidence of any oral agreement or statement shall be admitted."

3. Validity of Share Transfer and Resignation Documents:
The appellants argued that the share transfer forms were forged and that they never received consideration for their shares. The respondents provided evidence of payment through account payee cheques. The Tribunal found the respondents' evidence credible and noted that the appellants had encashed the cheques without objection. The Tribunal concluded that the appellants' subsequent actions, including signing share transfer forms and resignation letters, "prove the existence of the understanding that the respondents have claimed to have entered with the Petitioners at the inception."

4. Maintainability of the Company Appeal:
The respondents argued that the appellants were no longer shareholders and thus had no standing to file the appeal. The Tribunal agreed, stating, "the appellants have no right to file the appeal as the appellant was not holding any shares at the time of filing of appeal." The Tribunal also noted that the appellants' claims were based on oral assertions without documentary evidence.

5. Settlement Process Between the Parties:
During the appellate proceedings, both parties indicated that a settlement process was ongoing. However, the Tribunal ultimately decided the case on its merits after the parties failed to reach a settlement. The Tribunal observed that the respondents had paid the appellants' investment of ?13 lakhs through account payee cheques, which the appellants had encashed.

Conclusion:
The Tribunal dismissed the appeal, concluding that the appellants had not substantiated their claims of oppression, mismanagement, or forgery. The Tribunal emphasized the lack of documentary evidence to support the appellants' assertions and upheld the validity of the share transfer and resignation documents. The appeal was dismissed with no order as to cost.