2019 (8) TMI 1003 - AT - Companies Law

Time limitation - oppression and mismanagement - Respondents have neither appeared before this Appellate Tribunal in compliance to notices served upon them to contest the grounds urged for reversal of the impugned order nor appear to have produced any document before the Tribunal in support of their plea that whenever they acquired shares from other parties - whether the petition before the Tribunal was barred by limitation? - HELD THAT - While it cannot be disputed that the restrictions imposed upon Private Companies in regard to transfer of shares enjoins upon the Shareholder desirous of selling away his share to follow the procedure laid down in the Articles of Association of the Company, the issue of limitation affecting the very jurisdiction of the Tribunal has to be addressed irrespective of the fact that the same has been set up as a defense or not. It is well settled that a plea of limitation is a mixed question of law and fact. The case setup by the Appellants before the Tribunal clearly indicates that Appellant No. 1 had received a special notice on 23rd February, 2006 for his removal from Directorship of the Company to which he responded. Finally he was removed from Directorship of the Company and same was notified to ROC by filing Form No. 32. This instance, though not the solitary one, in itself knocks the bottom of the contention raised on behalf of Appellants that they were not aware of the alleged acts of oppression at the hands of Respondents. It would be absurd to entertain the plea that after removal of Appellant No. 1 from Directorship of the Company, the Appellants should be waiting for its long term effects to file a Company Petition alleging oppression and mismanagement. Even if cause of action is assumed to be continuing till 2009, though we don t hold so, the Company Petition filed by the Appellants is hit by limitation. The impugned order not shown to be erroneous, muchless perverse, does not warrant interference - appeal dismissed.

Summary

Issues:
Allegations of oppression and mismanagement, Barred by limitation, Compliance with Articles of Association, Continuing cause of action

Allegations of oppression and mismanagement:
The minority shareholders alleged acts of oppression and mismanagement against majority shareholders for taking unilateral decisions to gain control of the company. The petition was filed under Section 397 and 398 of the Companies Act, 1956. The respondents were accused of not following due procedure while acquiring shares, as per the Articles of Association.

Barred by limitation:
The main issue was whether the petition was barred by limitation. The Tribunal found that the petition, filed in 2014, was beyond the prescribed limitation period of three years from the alleged last act of oppression in 2009. The Appellants argued for a continuing cause of action, citing acts in 2011 and 2013, but the Tribunal held that the deprivation of rights began in 1996 and the petition was indeed time-barred.

Compliance with Articles of Association:
The respondents claimed that all legal formalities were completed in transferring shares and appointing directors. However, the Appellants argued that the transfers were done clandestinely to gain majority control, violating the Articles of Association. The Tribunal noted the lack of evidence from the respondents to support their compliance with the Articles.

Continuing cause of action:
The Appellants contended that the acts of oppression continued beyond 2009, indicating a continuing cause of action. However, the Tribunal found that the deprivation of rights started in 1996, culminating in 2009, and subsequent events were the effects of earlier malfeasance. The Tribunal rejected the argument for a continuing cause of action and held the petition as time-barred.

In conclusion, the Appellate Tribunal dismissed the appeal, upholding the Tribunal's decision that the petition was barred by limitation. The Tribunal found no legal infirmity in the impugned order and did not interfere with it. The respondents' failure to contest the appeal and produce supporting documents further weakened their case. The judgment emphasized the importance of adhering to procedural requirements and timely filing of petitions in cases of alleged oppression and mismanagement.