2019 (5) TMI 1354 - Tri - Companies Law

Oppression and Mismanagement - Restraint from alienating, encumbering, transferring, selling, disposing, parting, or creating any third party interest right, title of any nature whatsoever upon the assets of M/s Guild Builders Pvt. Ltd. (Guild) including pledging of shares of Omaxe Ltd. (Omaxe) held by Guild - HELD THAT - The instances of oppression and mismanagement are given in para 7 thereof. It is stated that through a chain of unfair and inequitable acts, all grossly oppressive, the petitioner No.1 (representing interest of petitioners) has been systematically ousted by the respondent No.2 from the affairs of Guild and through it of Omaxe to gain control over the company and all its subsidiaries. It is further stated that Guild has failed to safeguard its interest as shareholders of Omaxe and that the primary source of income of Guild is dividend and Guild did not object to nonpayment of dividend to promoter shareholders (including Guild) in 2017. Oppressive and illegal actions while holding 15Annual General Meeting and failure to provide information sought by the shareholders were also stated to be made. Notice of the petition was directed to be issued by order dated 19.09.2018. The petitioners have contended that as a result of continuous and indiscriminate pledging of shares of Omaxe held by Guild coupled with failure of Guild to question the decision of declaration of dividend by Omaxe only to public shareholders has resulted in erosion of net worth and valuation of Guild and consequently loss to the petitioners and that any default in the loans by Omaxe and consequent invocation of pledge would result in irreparable loss to the petitioners, especially when the petitioners have no control in the management of Guild or Omaxe. As regards the pledging of shares of Omaxe, Guild has stated that during the period when the petitioner No.1 was Joint Managing Director, he never objected to the practice of pledging. As regards non declaration of dividend for the Financial Years 2017 and 2018, it is submitted that Omaxe has duly explained the rationale behind the non-declaration of dividend in its AGMs being due to the impact of GST, RERA on real estate sector and the consequent market crash and that Guild did not vote in the said resolution. We hold that a prima facie case for interim relief is made out in view of the petitioner s contention that the pledging of shares of Omaxe Ltd. held by Guild is resulting in erosion of net worth and valuation of Guild and consequent loss to the petitioners. Taking into consideration that the shareholding of the petitioners in Guild is 24.64%, we direct that Guild will not make any type of encumbrance whether by way of pledge/lien/Non Disposal Undertaking or otherwise of 1,48,59,726 shares of Omaxe held by Guild except on account of top-up required and/or margin calls. We further direct that in case further pledge of the shares is required in order to top-up and/or margin calls, Guild would file the statement to that effect before this Tribunal within one week of doing so with copy advance to the counsel opposite - The directions given by order dated 19.09.2018 that Guild shall not issue fresh equity shares are continued. The remaining prayers for interim relief are declined. Application disposed off.

Summary

Issues Involved:
1. Interim relief under Sections 241 and 242 of the Companies Act, 2013.
2. Restraining the respondent company from alienating, encumbering, transferring, selling, or disposing of assets.
3. Inspection of records by petitioners.
4. Allegations of oppression and mismanagement.
5. Pledging of shares and its implications.

Issue-wise Detailed Analysis:

1. Interim Relief under Sections 241 and 242 of the Companies Act, 2013:
The petitioners sought appropriate orders, relief, and directions under Sections 241 and 242 of the Companies Act, 2013. They requested interim relief to restrain the respondent company from alienating, encumbering, transferring, selling, or disposing of any assets, including the pledging of shares of Omaxe Ltd. held by Guild Builders Pvt. Ltd. (Guild).

2. Restraining the Respondent Company from Alienating, Encumbering, Transferring, Selling, or Disposing of Assets:
The petitioners argued that Guild had pledged 38,15,000 equity shares of Omaxe without informing them. They claimed that continuous and indiscriminate pledging of shares by Guild, coupled with the failure of Omaxe to question the declaration of dividends only to public shareholders, resulted in the erosion of Guild's net worth and valuation, causing irreparable loss to the petitioners. The Tribunal directed Guild to not encumber 1,48,59,726 shares of Omaxe except for top-up required and/or margin calls. Guild was also directed to file a statement before the Tribunal within one week of any further pledging.

3. Inspection of Records by Petitioners:
The petitioners sought inspection of Guild's records. The Tribunal directed respondent No.1 company to allow inspection of records and registers during business hours and to provide extracts as requested, in accordance with Section 171 of the Companies Act, 2013.

4. Allegations of Oppression and Mismanagement:
The petitioners alleged that they were systematically ousted from the affairs of Guild and Omaxe by respondent No.2, leading to oppression and mismanagement. They claimed that Guild failed to safeguard its interests as a shareholder of Omaxe and did not object to the non-payment of dividends to promoter shareholders. The Tribunal found that a prima facie case for interim relief was made out, considering the petitioners' contention that pledging of shares resulted in the erosion of Guild's net worth and valuation.

5. Pledging of Shares and Its Implications:
Guild argued that the pledging of shares was necessary for securing financial assistance for Omaxe and its subsidiaries. They claimed that the petitioners had never objected to this practice when petitioner No.1 was Joint Managing Director of Omaxe. The Tribunal noted that the petitioners' shareholding in Guild was 24.64% and directed Guild to not encumber 1,48,59,726 shares of Omaxe except for top-up required and/or margin calls. The Tribunal also continued the direction that Guild shall not issue fresh equity shares.

Conclusion:
The Tribunal granted partial interim relief by restraining Guild from encumbering 1,48,59,726 shares of Omaxe except for top-up required and/or margin calls. The remaining prayers for interim relief were declined. The inspection of records was allowed, and the allegations of oppression and mismanagement were acknowledged, leading to the granting of interim relief. The directions given in the order dated 19.09.2018 were continued, and the interim order was modified to the extent of the direction relating to the pledging of 1,48,59,726 shares only.