2019 (2) TMI 1046 - AT - Companies Law

Waiver application - Proviso to Sub-section (1) of Section 244 of the Companies Act, 2013 - Held that - In the present case we do not want to go into the merit of the claim and counter claim of the parties in view of the decision of this Appellate Tribunal in Cyrus Investment Pvt. Ltd. & Anr. Versus Tata Sons Ltd. & Ors., 2017 SCC OnLine NCLAT 261. In the said case this Appellate Tribunal held that while considering the application for waiver under Proviso to Sub-section (1) of Section 244 of the Companies Act, 2013, the Tribunal may look into the proposed petition under Section 241 and 242 but cannot take into consideration the merit of the said petition to decide the application for waiver. It is only in application where cases of exceptional circumstances is made out by one of the member having less than 10% of shareholding, the Tribunal may allow petition for waiver. All the shareholders have less than 10% of the total shareholding of the company. Their case being covered by this Appellate Tribunal s decision in Cyrus Investment Pvt. Ltd. & Anr. Versus Tata Sons Ltd. & Ors. 2018 (7) TMI 1397 - NATIONAL COMPANY LAW TRIBUNAL, MUMBAI , we are not inclined to interfere with the impugned order, where the Tribunal on factual matrix and evidence allowed application under Section 241-242 of the Companies Act. Appeal dismissed.

Summary

Issues:
- Appeal against order allowing waiver under Section 244 of the Companies Act, 2013
- Identification of exceptional circumstances for waiver
- Merit of the case and counterclaims
- Shareholding pattern affecting the right to file application under Section 241
- Factors considered for granting waiver

Analysis:
1. The appeal was filed against an order allowing waiver under Section 244 of the Companies Act, 2013. The Appellate Tribunal noted that the earlier order allowing the waiver was set aside due to lack of reasoning. The Tribunal reconsidered the matter and found that the Respondent had made out an exceptional case for waiver.

2. The Appellant contended that no exceptional case was established by the Respondent and argued that the Tribunal failed to identify specific exceptional circumstances. The Appellate Tribunal referenced a previous judgment to clarify that the Tribunal cannot deliberate on the merit of a proposed application under Sections 241 and 242 while deciding an application for waiver under Section 244.

3. The Appellate Tribunal emphasized that factors like a prima facie case, limitation, allegations related to other companies, arbitration, directorial complaints, conduct of applicants, and issues of acquiescence or estoppel should not be considered while deciding an application for waiver. These factors are deemed dependent on the merit of the case and should be addressed during the consideration of the petition under Sections 241 and 242.

4. The Tribunal outlined specific factors to be considered before granting waiver, including whether the applicants are members of the company, whether the application pertains to oppression and mismanagement, and whether exceptional circumstances exist for granting waiver. The Tribunal highlighted that the shareholding pattern can impact the right to file an application under Section 241, especially for minority shareholders.

5. Considering the shareholding pattern where all shareholders had less than 10% ownership, the Appellate Tribunal aligned with its previous decision and declined to interfere with the order allowing the application under Sections 241 and 242. The Tribunal clarified that issues related to potential oppressive behavior due to lack of dominant stake should be addressed during the discussion of merit in the petition.

6. Ultimately, the appeal was dismissed, and no costs were awarded. The judgment reaffirmed the principles governing the consideration of waiver applications under the Companies Act, emphasizing the importance of exceptional circumstances and the limitation on addressing merit-related issues during the waiver process.