2019 (11) TMI 189 - AT - Companies Law

Oppression and mismanagement - during the pendency of the company petition, the respondents filed Company Petition against the appellant and both the company petitions came to be disposed of by NCLT by the impugned order - HELD THAT - Record shows that the Respondents initiated action against the appellant to remove him as Director. The respondents have given various instances of misconduct to claim that the appellant indulged in anti-company activities. When the appellant stood on technicalities regarding time the respondents appear to have sent fresh notice dated 3.5.2014 and EOGM came to be held on 6.6.2014. Before this the appellant had filed the Company Petition on 15.5.2014. The NCLT looked into this aspect and did not find fault with the removal of the appellant from the post of Director. We do not find any reason to disagree with the NCLT. In fact, we have gone through the other finding also which have been recorded by the NCLT with regard to the various allegations made by the appellant and those allegations did not find favour with the NCLT. There is no substance in the appeal - appeal dismissed.

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Non-filing and errors in annual returns.
3. Transfer of registered office and fraudulent actions.
4. Misuse of company resources for personal benefits.
5. Loans given to related parties in violation of the Companies Act.
6. Removal of the appellant from the Board of Directors.

Issue-wise Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The appellant filed Company Petition No. 36/2014 alleging oppression and mismanagement by the respondents. The NCLT dismissed this petition, finding the allegations unsubstantiated. The appellant's claims included errors in annual returns, non-filing of returns, fraudulent transfer of the registered office, misuse of company resources, and improper loans to related parties. The NCLT found these claims to lack sufficient evidence and thus ruled against the appellant.

2. Non-Filing and Errors in Annual Returns:
The appellant alleged that annual returns until March 2011 contained various errors and that returns for the financial years 2011-12 and 2012-13 were not filed. The NCLT found no substantial evidence to support these claims. The respondents provided explanations and documents showing that the appellant had knowledge of the company's affairs and did not raise these issues until actions were taken against him.

3. Transfer of Registered Office and Fraudulent Actions:
The appellant claimed that the registered office was fraudulently transferred to Respondent No. 2's name and that rent was collected without Board Resolutions. The NCLT found that the appellant was aware of these transactions, as evidenced by his signatures on relevant documents, including balance sheets and affidavits. The tribunal concluded that these claims were stale and lacked merit.

4. Misuse of Company Resources for Personal Benefits:
The appellant alleged that Respondent No. 2 siphoned off funds for personal construction projects, including a bungalow in Kharghar and alterations to a property in Kochi. The respondents provided documents showing that the materials were for company projects and that the Kochi property was used for company purposes. The NCLT found the appellant's allegations unsubstantiated and noted that audits had not raised these issues.

5. Loans Given to Related Parties in Violation of the Companies Act:
The appellant claimed that a loan of ?24,10,000 was given to M/s. Unibuild Engineers, violating Section 185 of the Companies Act. The respondents demonstrated that the loan was returned with interest within three weeks. The NCLT found this instance insufficient to prove oppression or mismanagement.

6. Removal of the Appellant from the Board of Directors:
The appellant was removed from the Board of Directors following allegations of neglecting projects and engaging in anti-company activities. The NCLT found that the removal process was conducted appropriately, with sufficient notice and opportunity for the appellant to respond. The tribunal did not find any procedural faults in the appellant's removal and upheld the decision.

Conclusion:
The NCLT dismissed the appellant's claims of oppression and mismanagement, finding no substantial evidence to support the allegations. The tribunal upheld the respondents' actions, including the removal of the appellant from the Board of Directors. The appeal was rejected, and the appellant was ordered to pay costs to the respondents.

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