2018 (6) TMI 950 - AT - Companies Law

Oppression and mismanagement - validity of BOM - Held that - As informed about the Meeting, the appellant No.1 cleverly chose to remain absent and the required quorum was present in the Meeting, Respondent No.2 was elected Chairman of the Board, R1 company and to give/change authority relating to execution of sale deed was validly given to Respondent No.2. Therefore, the appellant No.1 has no right to question about the resolution passed in the said Meeting. The appellant No.1 knowing fully well that his authority has been validly withdrawn still he continued to execute the sale deed. We observe from the record that the appellant No.1 has executed 12 sale deeds subsequent to Meeting dated 2.5.2013 and out of these 12 sale deed, he executed 7 sale deeds in his own name. Even if he has the authority to execute the sale deed and for executing sale in his own name/favour, he can only do after prior disclosure to all other Directors/Board of Directors as per Section 297 of the Companies Act, 2013. In this case his authority has been validly withdrawn by passing a valid resolution and he is continuing to execute sale deed, therefore, the conduct and behavior of the person is a relevant factor. The next point raised by the appellant is that the company petition was dismissed only due to FIR and the said FIR stands stayed by High Court in 2015. The point raised by the appellant is not acceptable. On going through the impugned order we observe that the company petition has dismissed on various points. The Tribunal has given his findings on each of the points raised by the appellants in the company petition. We observe from the record that proper notice was given to the directors for holding of Board Meeting on 2.5.2013 and the proof of despatch of the said notice has been placed at Page No.538 of the Appeal Paper Book. It appears that the appellant No.1 chose to remain absent in the Board Meeting held on 2.5.2013 as he was aware that proper procedure of law has been complied with and there is no tampering with the minutes of Respondent No.1 company. The appellant No.1 was very well aware of the Board Meeting held on 17.4.2017 and when he went to EOGM but left he got the opportunity but did not avail it before General Body. In view of above discussions, we are of the considered view that it is not a fit case to interfere in the impugned order dated 23rd November, 2017 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad.

Summary

Issues Involved:
1. Validity of Board Meeting and Resolution dated 2.5.2013.
2. Allegations of oppression and mismanagement.
3. Non-finalization and manipulation of financial accounts.
4. Denial of inspection of records.
5. Legality of Extraordinary General Meeting (EGM) on 20.5.2017.
6. Allegations of forgery and harassment.
7. Criminal proceedings against appellant No.1.

Detailed Analysis:

1. Validity of Board Meeting and Resolution dated 2.5.2013:
The appellant No.1 contested the validity of the Board Meeting held on 2.5.2013, alleging that the authority granted to him was withdrawn without proper notice and procedure. However, the Tribunal found that notice of the Board Meeting was duly sent to appellant No.1, evidenced by postal receipts dated 25.4.2013. The appellant No.1 chose to remain absent despite being aware of the agenda. The Tribunal concluded that the resolution passed in the meeting was valid, and the authority to execute conveyance deeds was rightly transferred to Respondent No.2.

2. Allegations of Oppression and Mismanagement:
The appellant alleged multiple acts of oppression and mismanagement, including falsification of minutes, non-compilation of financial statements, non-holding of annual general meetings, denial of inspection, and illegal appointments. The Tribunal dismissed these allegations, stating that the appellant failed to establish the acts of oppression and mismanagement. The Tribunal also noted that the appellant, being a director, did not raise concerns about non-finalization of accounts during his tenure.

3. Non-finalization and Manipulation of Financial Accounts:
The appellant argued that the financial accounts for FY 2012-13 to 2014-15 were manipulated and compiled only after the filing of the company petition. The Tribunal observed that the appellant, as a director, did not raise any issue about the non-finalization of accounts during his tenure. The Tribunal upheld that the non-finalization of accounts could not be treated as mismanagement, especially when there was non-cooperation from the management and disputes among directors.

4. Denial of Inspection of Records:
The appellant claimed denial of inspection of books of accounts and other records. The Tribunal noted that all company records were available online, and the appellant could have accessed them. The Tribunal dismissed this claim as a ground for mismanagement.

5. Legality of Extraordinary General Meeting (EGM) on 20.5.2017:
The appellant contested the legality of the EGM held on 20.5.2017, alleging that it was convened without a prior Board Meeting. The Tribunal found that a Board Meeting was held on 17.4.2017, where it was decided to call for the EGM. The appellant was aware of both the Board Meeting and the EGM, as he attended the EGM but chose to leave. The Tribunal concluded that the EGM was legally convened.

6. Allegations of Forgery and Harassment:
The appellant alleged forgery of his signatures and harassment by other directors. The Tribunal did not find sufficient evidence to support these claims. The appellant's conduct, including executing sale deeds in his own name after his authority was withdrawn, was also considered.

7. Criminal Proceedings Against Appellant No.1:
The appellant argued that the company petition was dismissed due to the lodging of an FIR against him, which was stayed by the High Court. The Tribunal clarified that the dismissal was based on multiple grounds, not solely on the FIR. The Tribunal found that the appellant had siphoned off funds and misappropriated company assets, which justified the criminal proceedings.

Conclusion:
The Tribunal dismissed the company petition, finding no merit in the allegations of oppression and mismanagement. The appeal was dismissed, and the impugned order dated 23.11.2017 was upheld. The Tribunal concluded that the appellant failed to establish the alleged acts, and his conduct was a relevant factor in the decision. No order as to costs was made.