2019 (4) TMI 486 - Tri - Companies Law

Oppression and mismanagement - no notice of any annual general meeting was given to the petitioner since the year 2002 and that the affairs of the company are being run in a fraudulent and oppressive manner - company is hiding the business transactions and has taken major decisions after the year 2002, including regularisation and change of designation of the directors - as contended that the petitioners maintained complete silence for more than 20 years in relation to the affairs of the company and suddenly woke up from their slumber in August, 2005 only with a view to grab the property of the company - Limitation Act, 1963 applicability - HELD THAT - Section 433 of the Act says that provisions of the Limitation Act, 1963, shall as far as may be, apply to the proceedings or appeals, before the Tribunal or the Appellate Tribunal, as the case may be. As decided in Esquire Electronics v. Netherlands India Communications Enterprises Ltd. 2016 (10) TMI 1107 - NATIONAL COMPANY LAW TRIBUNAL for the petitions based on such allegations, article 113 of the Schedule to the Limitation Act would apply and the period would be three years from the date when right to sue accrues. It was further held that section 5 of the Limitation Act with regard to condonation of delay would not apply to the proceedings before the Tribunal as it is the original court of jurisdiction and the petitions before it under sections 241 and 242 are in the nature of suits. The adjudication by the Tribunal would result into passing of a decree which is executable by virtue of sections 424 and 425. Tribunal rightly held that the decisions in the petition under sections 397 and 398 of the Act, are enforceable like decree and for all purposes, is suit within the meaning of Code of Civil Procedure. It was also affirmed that article 113 of the Limitation Act, providing a period of three years would be attracted. The petitioner has attached copy of notice of the extraordinary general meeting proposed to be held on June 30, 2009 annexure P10, for service to all the members of the company. The petitioner has simply alleged that he has not received any notice of the meeting after a period of 9 years when even the annual return or necessary Form was filed by the company in the same year with the portal of the Ministry of Corporate Affairs. In Part III of the petition, it is stated that the instant petition is not barred by limitation or laches as the effect of oppression and mismanagement and other fraudulent acts are of continuous nature and this is occurring on the day-to-day basis. The petitioner did not specify in this paragraph as to when he acquired the knowledge of the allotment of additional shares or increase in the capital. In the absence thereof, it can be safely deduced that the petitioner was well aware of the increase in the share capital decided by respondent No. 1-company soon after it was resolved in the year 2009 itself. The instant petition is found to be hopelessly time barred and therefore, deserved to be dismissed. In view of the aforesaid finding, we also reject the prayer made by the petitioner in the application filed under section 244 of the Companies Act, 2013 for waiver of the eligibility conditions in filing the petition under section 241 of the Act, having rendered infructuous.

Issues Involved:
1. Alleged acts of oppression and mismanagement.
2. Disputed resignation of the petitioner as director.
3. Challenge to the allotment of shares in 2009.
4. Alleged illegal increase in share capital.
5. Alleged alteration of articles of association without notice.
6. Limitation period for filing the petition.

Detailed Analysis:

1. Alleged Acts of Oppression and Mismanagement:
The petitioner, a shareholder holding 7.27% of the total paid-up share capital of the company, filed the petition under Section 241 of the Companies Act, 2013, alleging acts of oppression and mismanagement by the respondents. The company was incorporated on May 1, 1985, and the petitioner claimed that the company’s affairs were being conducted in a manner prejudicial to his interests.

2. Disputed Resignation of the Petitioner as Director:
The petitioner contended that Form 32, filed on April 3, 2002, falsely showed his resignation as a director on March 18, 2002. He denied ever tendering such resignation and filed a complaint with the Registrar of Companies on February 18, 2010. However, during the proceedings, the petitioner did not press this issue and confined his contention to the allotment of shares in 2009.

3. Challenge to the Allotment of Shares in 2009:
The petitioner argued that the company illegally allotted 6,000 additional equity shares on July 13, 2009, to respondent No. 2, without offering them proportionately to existing shareholders, thereby reducing his shareholding from 16% to 7.27%. He claimed this allotment was done without proper notice and in violation of the company’s fiduciary duties to its shareholders.

4. Alleged Illegal Increase in Share Capital:
The petitioner alleged that the company increased its authorized share capital from ?5,00,000 to ?11,00,000 on June 30, 2009, without notifying him. He claimed this increase and subsequent allotment of shares were fraudulent and aimed at gaining control over the company.

5. Alleged Alteration of Articles of Association Without Notice:
The petitioner contended that the respondents altered the articles of association in an extraordinary general meeting on March 31, 2009, without proper notice. The alterations included omitting the clause requiring three days' notice for general meetings and inserting a clause allowing monthly meetings without notice.

6. Limitation Period for Filing the Petition:
The tribunal focused on whether the petition challenging the 2009 allotment could be maintained in 2018. The petition was filed almost nine years after the disputed allotment. The tribunal noted that the annual returns, which included the details of the allotment, were filed in 2009 and were publicly accessible. The petitioner’s claim of not receiving notice of meetings was insufficient to establish a continuous cause of action.

The tribunal referred to Section 433 of the Companies Act, 2013, which applies the Limitation Act, 1963, to tribunal proceedings. It cited precedents affirming that the limitation period for such petitions is three years from the date the right to sue accrues. The tribunal concluded that the petition was time-barred, as the petitioner was aware of the allotment in 2009 but did not act within the limitation period.

Conclusion:
The tribunal dismissed the petition as hopelessly time-barred, rejecting the petitioner’s application for waiver of eligibility conditions under Section 244 of the Companies Act, 2013. The petition was dismissed in limine, and the order was communicated to all parties.

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