2018 (2) TMI 1062 - Tri - Companies Law

Oppression and mismanagement - Company Petition maintainability - no proper GPA and not fulfilling requisite conditions prescribed under u/s. 241 of the Companies Act, 2013 - validity of sale deed - removal of second respondent from the office of Company - Held that - Company has proposed an Extraordinary General Meeting as early as 2nd July, 2015 with proposal to remove the second respondent from the office of Company on the ground that he was facing charges under section 138 of NI Act, in Court of law and misappropriated ₹ 2,20,000/- of Company funds . In addition, in the above transaction, the respondent Nos. 2, 3 & 7 are inter-related with each other As per section 184 of Companies Act, 2013 and Articles of Association of the Company, and principles of natural justice, it is paramount duty of the Company especially the respondents to convene a shareholders meeting and take a decision as per law about the said transaction. Admittedly, the respondents have not taken any such decision and vague contentions have been made stating that the impugned transactions are in accordance with law. So the impugned sale deed dated 3-11-2015 is liable to be set-aside for the above reasons and consequently, the subsequent sale deed dated 4th November, 2016 executed by Mrs. G.Saraswathi Devi (Respondent No. 7) in favour of Respondent No. 8 (Vara Boomi Homes) is also liable to be set-aside. The contention of the respondents that single act of execution impugned sale deeds contrary to law would not constitute acts oppression and mismanagement so as to take action u/ss. 241 & 242 of Companies Act, 2013 is not at all tenable and liable to be rejected. The contention of respondent that in the absence of clear allegations/contentions made by the petitioner in the petition, the petition itself is not maintainable is not all tenable and it is hereby rejected. The Tribunal is fully empowered to pass appropriate orders basing on the contentions/allegations made in the petition. At the same time, the Tribunal cannot interfere in the decisions/matters taken in its ordinary course of business. The allegations of respondents against the petitioner with regard to unsound mind, professional misconduct/imprisonment etc. are not all tenable and not relate to the issue in question. And these allegations are uncalled for. It is surprising to notice. It when the Company is facing serious allegations of acts of oppression and mismanagement in conducting the business in accordance with law, the respondents are resorting to personal allegations against the petitioner without substantiating the allegations made against them by the petitioner. The above circumstances amply justify the Tribunal to exercise the powers conferred on it u/s 242 of Companies Act, 2013 so as to put an end to the affairs of Company as complained of. The impugned sale deeds are hereby declared as illegal and they are liable to set aside.

Summary

Issues Involved:
1. Maintainability of the Company Petition.
2. Validity of the impugned transactions dated 3-11-2015 and 4-11-2016.
3. Reliefs entitled to the petitioner.

Issue-wise Detailed Analysis:

1. Maintainability of the Company Petition:
The Tribunal addressed the respondents' contention that the Power of Attorney (GPA) filed by the petitioner was defective. The Tribunal found that the petitioner had properly executed the GPA in accordance with US law and fulfilled the conditions prescribed under Indian law. Consequently, the Tribunal rejected the respondents' allegation and confirmed the maintainability of the petition under Section 241 of the Companies Act, 2013, as the petitioner held 9.3% of the total shareholding in the company.

2. Validity of the Impugned Transactions:
The Tribunal examined the transactions dated 3-11-2015 and 4-11-2016. It was established that the sale deed dated 3-11-2015 was executed by Respondent No. 2, who was not a Managing Director at that time and was disqualified under Section 164(2) r/w Section 167 of the Companies Act, 2013. The sale was made to Respondent No. 7, who is the mother-in-law of Respondent No. 3, without proper notice or approval from the shareholders, violating the Articles of Association (AOA) and the principles of natural justice. Consequently, the Tribunal found the sale deed dated 3-11-2015 and the subsequent sale deed dated 4-11-2016 to be invalid and set them aside.

3. Reliefs Entitled to the Petitioner:
The Tribunal concluded that the impugned sale deeds constituted acts of oppression and mismanagement under Sections 241 and 242 of the Companies Act, 2013. The Tribunal emphasized that major business transactions like selling company land should involve shareholder approval. The Tribunal rejected the respondents' argument that isolated acts of sale do not constitute oppression or mismanagement. It was determined that the sale deeds were prejudicial to the interests of the petitioner and the company. Therefore, the Tribunal set aside the impugned sale deeds and dismissed the remaining reliefs sought by the petitioner as lacking merit.

Conclusion:
The Company Petition was disposed of by setting aside the impugned sale deeds dated 3rd November 2015 and 4th November 2016. The remaining reliefs were rejected as having no merits. No order as to costs was made.