2019 (1) TMI 870 - AT - Companies Law

Oppression and mismanagement - transmission of shares of shares - Held that - We are not satisfied with the version of learned counsel for the appellant that these shares were transferred as per arranged arrived at between 2nd appellant and 2nd respondent. No proof for such arrangement has been produced before this Tribunal. Further 2nd appellant has not produced the transfer forms by which these shares were transferred and further the appellants have stated in their reply before the NCLT that the shares were purchased as contemplated under law. Further there is no averment or documentary evidence to show that any consideration was paid by 2nd appellant for the shares in question. Therefore, we see no illegality in the impugned order passed by the NCLT on this issue. We also observe that the shares have been directly transmitted in the name of 4th appellant without adopting proper procedure. We are in agreement with the directions given by NCLT on this issue to enter the names of all the legal heirs of the deceased Thampi Krishna equally including 4th appellant. No notice was served to the Respondent or any other shareholders. Further the appellants have not placed the Notice or the Minutes of such a Meeting thereby confirming that no General Meeting took place. Learned counsel further stated that Form 32 filed by the Company does not have any Board Resolution, but merely the consent of 2nd appellant to act as the Managing Director. Further the Board Resolution filed with Form 23 was signed by 2nd appellant himself, thereby violating the provisions of Section 300 of Act,1956 which prohibits an interested director from participating or voting in a meeting in which he is interested. We have heard the parties on this issue. We observe that No notice was issued to Respondent and shareholders for General Meeting for approval of 2nd appellant as Chairman. Further no minutes have been placed of such a meeting. Therefore, there is no illegality on this issue in the impugned order. In view of the aforegoing discussions and observations the appeal is set aside. Interim order passed, if any, is vacated. The impugned order dated 18.4.2017 is upheld.

Summary

Issues Involved:
1. Illegal transfer of shares of 2nd respondent to 2nd appellant.
2. Illegal appointment of multiple directors.
3. Illegal removal of 1st and 2nd respondent from directorship.
4. Illegal transfer of shares of Thampi Krishna to his wife, Smt. Saira Thampi.
5. Company petition filed beyond the period of limitation.
6. Legality of the appointment of 2nd appellant to the post of Chairman.
7. Appropriateness of 1st respondent being made Chairman & Managing Director of 1st appellant.
8. Allegations of oppression and mismanagement.

Detailed Analysis:

1. Illegal Transfer of Shares:
The appellants argued that the transfer of shares from the 2nd respondent to the 2nd appellant was legitimate and followed an arrangement between them, despite the petition being filed beyond the limitation period. The tribunal found no evidence or transfer forms to support this claim and noted no consideration was paid, thus upholding the NCLT's decision that the share transfer was illegal.

2. Illegal Appointment of Directors:
The appellants contended that the appointments of several directors were lawful. However, the tribunal observed that no proper notice or Board Meeting minutes were provided for these appointments. Specifically, the appointment of the 3rd appellant was found to be backdated and without proper documentation, while the appointments of the 4th and 5th appellants were also deemed illegal due to lack of proper procedure and documentation.

3. Illegal Removal of 1st and 2nd Respondent from Directorship:
The tribunal noted that the removal of the 1st and 2nd respondents from the directorship was done without notice or a Board resolution. This action was deemed illegal and constituted oppression, as it violated their rights as directors and shareholders.

4. Illegal Transfer of Shares of Thampi Krishna:
The appellants claimed that the shares of Late Thampi Krishna were rightfully transferred to his wife, Smt. Saira Thampi. However, the tribunal agreed with the NCLT that the shares should have been transmitted to all legal heirs equally, as per the Hindu Succession Act, and found the transfer to Saira Thampi alone without proper documentation and Board resolution to be improper.

5. Company Petition Filed Beyond the Period of Limitation:
The appellants argued that the company petition was filed beyond the limitation period. However, the tribunal did not find this argument convincing enough to overturn the impugned order.

6. Legality of the Appointment of 2nd Appellant as Chairman:
The tribunal found that the appointment of the 2nd appellant as Chairman and Managing Director was done without proper notice to the respondents and shareholders, and without a General Meeting. This appointment was therefore deemed illegal.

7. Appropriateness of 1st Respondent Being Made Chairman & Managing Director:
The tribunal upheld the NCLT's decision to appoint the 1st respondent as Chairman and Managing Director, noting that the previous appointments of the 3rd to 5th appellants were illegal.

8. Allegations of Oppression and Mismanagement:
The tribunal found substantial evidence of oppression and mismanagement, including the illegal transfer of shares, improper removal of directors, and unauthorized appointments. The actions of the 2nd appellant and others led to significant mismanagement, including the company's account being declared as NPA and proceedings under the SARFAESI Act.

Conclusion:
The tribunal upheld the NCLT's order, removing the illegally appointed directors and reinstating the 1st and 2nd respondents as directors. It also directed the proper transmission of shares of Late Thampi Krishna to all legal heirs and rectification of the share register. The appeal was dismissed, and the interim order vacated, with no orders as to cost.