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2018 (6) TMI 952 - AT - Companies LawOppression and mismanagement - whether Appellant and his wife were given the concerned Notices of the Meetings for holding? - % of share holding - Held that - Respondents 2 and 3 in both the Appeals and their group have transferred off all their shareholding to 3rd parties. When the Appellant was making grievances in the NCLT also and has claimed here also that he was kept out of the affairs of the Companies and he was making grievances that the properties of the Companies have been handed over to 3rd parties the Respondents merely showed admissions in pleadings with regard to Notices issued for the Board Meeting dated 29.08.2015 and EOGM dated 8th October 2015 with reference to Rudraksh but do not appear to have disclosed any other documents to support any of the other meetings on which they have now relied on to show that they have conducted the affairs of the Companies as per the Companies Act. It is clear case of oppression of the Appellant in both the matters. We find that NCLT wrongly and lightly ignored the grievances of the Appellant that the Respondents have handed over the properties of the Companies to 3rd parties Devi Processors by saying that it was a business decision. NCLT accepted that the decision should have been taken in Board Meeting and Notice should have been given to Petitioner but it was not done so but gave no weight to it saying that no loss was shown to Petitioner. We do not agree with such reasonings. When the only asset of the Nagina was the land and the only asset of Rudraksh was the factory/process house if the whole of these assets had been handed over to Devi Processors and Appellant who was holding 32.66% share (with his wife) in Rudraksh and was holding 12.06% shareholding in the Company of Nagina he had a right to know how these assets had been handed over by Respondents who were professing to say that they have been handed over only for running the business. Even if it was for only running the business as a majority shareholder he was entitled to know as to what was the decision Board Meeting or General Body Meeting Resolutions under which the substratum of the Company had been handed over. As the documents now show it was not a mere handover of running of the business but the business itself had been sold behind the back and without the knowledge of the Appellant group which is serious act of oppression. NCLT found that the Original Petitioner did not file any document to show that there is arrangements/understanding to give 50% of paid up share capital to Petitioner and his wife. NCLT found that Petitioner had made investments but did not prove that there was understanding to give 50% share capital to him and his wife. In 1st Petition also similar finding is there. We are not disturbing these findings. NCLT found that the grievance was raised only in September 2015 when petition was filed and Petitioner had been Director till 8th October 2015. NCLT thus did not disturb the said allotment. Considering the delay in raising the dispute on that count we are not disturbing this finding also. We direct the ROC not to accept such transfer of shareholdings from Respondents 2 and 3 and their group in both the Appeals as reflected in these Annual Returns and Financial Statements. We restore the shareholdings in both the Companies to the stage of filing of the petitions. On receipt of copy of this Judgement we direct NCLT to immediately appoint (even if parties do not appear as is being directed infra) an Administrator who will handle the affairs of these Companies. NCLT Ahmedabad is requested to immediately appoint an Independent Auditor/Audit Firm in both the Company Petitions to audit the accounts from the date of incorporation of the respective Companies. The Chartered Accountant/CA Firm shall file Audit Reports before the learned NCLT on date to be fixed by NCLT at the time of appointment. The NCLT may give further directions regarding fees to be paid to the Auditor/Audit Firm
Issues Involved:
1. Shareholding and Directorship Dispute 2. Allegations of Oppression and Mismanagement 3. Illegal Transfer of Shares and Assets 4. Non-compliance with Company Law and Articles of Association 5. Violation of Interim Orders Issue-wise Detailed Analysis: 1. Shareholding and Directorship Dispute: The Original Petitioner claimed a quasi-partnership understanding with Respondents, promising 50% shareholding and directorship in both M/s. Nagina Processors Pvt. Ltd. and M/s. Rudraksh Synthetics Pvt. Ltd. However, he was allotted only 12.06% shares in Nagina and 32.66% in Rudraksh, and was not made a director in Nagina. The NCLT found no documentary proof of the 50% shareholding promise and upheld the removal of the Petitioner as Director in Rudraksh, citing procedural compliance in his removal. 2. Allegations of Oppression and Mismanagement: The Petitioner alleged that the Respondents sidelined him from management decisions, failed to issue notices for meetings, and handed over the process house to third parties without his consent. The NCLT dismissed these claims, stating there was no material loss shown to the Petitioner. However, the Appellate Tribunal found that the Respondents' actions, including transferring business and assets without proper meetings and notices, constituted oppression and mismanagement. 3. Illegal Transfer of Shares and Assets: The Respondents transferred their shares to third parties, violating the Articles of Association which required offering shares to existing members first. The Appellate Tribunal found no evidence of compliance with these provisions and set aside the share transfers as illegal. The Respondents' actions during the litigation, including transferring assets and shares, were deemed contemptuous and oppressive. 4. Non-compliance with Company Law and Articles of Association: The Respondents failed to follow statutory procedures and the Articles of Association in transferring shares and assets. The Appellate Tribunal emphasized that the Articles required offering shares to existing members before transferring to outsiders, which the Respondents did not do. This non-compliance was a significant factor in the Tribunal's decision to set aside the transfers. 5. Violation of Interim Orders: The Respondents violated interim orders to maintain the status quo on shareholding and fixed assets by transferring shares and business during the litigation. The Appellate Tribunal found these actions in contempt of court and indicative of oppression and mismanagement. The Tribunal directed the ROC to disregard the illegal transfers and restored the shareholding to the status before the petitions were filed. Conclusion and Directions: The Appellate Tribunal directed the NCLT to appoint an Administrator and an Independent Auditor to audit the companies' accounts. The fair market value of shares was to be assessed, and parties were given the option to buy out the other group at a higher price. The Tribunal also imposed costs on the Respondents for their actions and directed immediate compliance with its judgment.
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