2020 (8) TMI 580 - AT - Companies Law

Oppression and Mismanagement - reduction of share capital - the shareholding of the Appellants was diluted and reduced from 50% to 1% and subsequently, shareholding is brought down to 0.12% and 0.1% of the total paid up capital - time limitation - what is the crucial date when the Applicant is required to satisfy the requirements under Section 399 of the Companies Act, 1956, so as to make the requirement of having an aggregate of 1/10th of shares out of total shareholding of the Company, if the Applicant alleges oppression in bringing down his shareholding? HELD THAT - It is well settled that the question of oppression and mismanagement and maintainability is a mixed question of fact and law and when the Petition is filed alleging that the shareholding of the Applicant has been brought down below 1/10th of the total shareholding of a Company by oppression and mismanagement the Tribunal was required to decide the question of Maintainability at the time of final hearing of the Petition and the crucial date of cause of action is when the alleged shareholding of the Applicant has been brought down below 1/10th of the total shareholding of the Company. In this case the Appellants have alleged that on 11.12.2002 without any notice or board meeting. The Respondent No. 2 allotted shares to Respondent No. 3 and 4 and thereby shareholding of Late Mr. Bipin Chandra brought down from 50% to 1% and subsequently, by increasing paid up capital from time to time the shareholding of Mr. Bipin Chandra brought down 50% to 1% of the total paid up capital and 1/50th of the total membership. In the impugned order Learned Tribunal has considered the question of maintainability on the date of filing of the Petition which is not correct and question of maintainability in the case is a mixed question of fact and law. Therefore, it should have been decided at the time of final hearing of the Petition. It is interesting fact the Respondents have restricted its arguments on the question of limitation only. It means that the Respondents are not convinced or not in a position to justify the findings of the Tribunal in regard to maintainability of the Petition in view of Section 399 of the Companies Act, 1956. Time Limitation - HELD THAT - The Tribunal has not given any findings that the Petition is time barred. But dismissed the Petition on the ground of delay and laches. As the Tribunal has not embarked the issue of limitation, therefore, we restrained ourselves to express any opinion in regard to the arguments advanced by Learned Counsel for the Respondents on the question of limitation. However, we are of the view that as per the allegations in the Petition, it is apparent that in this Petition issue of limitation is a mixed question of fact and law. Therefore, it should have been decided at the time of final hearing i.e. when the Petition is decided on merit. Learned Tribunal without discussing evidence gave a finding that the Tribunal do not find any deficiency in allotting the shares to Respondent No. 8 to 50 - the impugned order is a nonspeaking order. The question of Oppression, and Mismanagement, Maintainability and Limitation in the present case are mixed question of law and fact. Therefore, the Tribunal was required to decide these questions at the time of final hearing of the Petition. The matter is remanded to Tribunal that after hearing both the parties, Petition be decided afresh on merit.

Summary

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Maintainability of the petition under Section 399 of the Companies Act, 1956.
3. Limitation period for filing the petition.
4. Previous adverse orders and their impact on the current petition.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The appellants, legal heirs of the founder shareholder, alleged that after the founder's illness and subsequent death, the affairs of the Target Company were managed solely by Kamal Kumar Bhageria. They claimed mismanagement and oppression, including unauthorized share allotments and dilution of their shareholding from 50% to 0.10%. Specific instances included:
- Unauthorized allotment of 9,800 shares on 11.12.2002.
- Appointment of Kamal Kumar Bhageria's wife as director on 10.02.2004.
- Removal of Mr. Bipin Chandra Shah's name from the shareholders' list on 30.09.2004.
- False statements regarding shareholding on 19.05.2006.
- Increase in authorized share capital and number of shareholders.
- Further share allotments on 15.03.2012.

2. Maintainability of the Petition under Section 399 of the Companies Act, 1956:
The Tribunal dismissed the petition based on the appellants not meeting the threshold of holding 1/10th of the paid-up equity share capital or 1/10th of the total number of members. The appellants argued that the eligibility should be considered on the date of the alleged oppression and mismanagement, not on the date of filing the petition. The Appellate Tribunal supported this view, citing previous judgments that the crucial date for determining eligibility should be when the alleged oppression and mismanagement occurred.

3. Limitation Period for Filing the Petition:
The respondents argued that the cause of action accrued in 2006 when the appellants first requested the transfer of shares, making the 2013 petition time-barred. The Tribunal did not explicitly rule on the limitation issue but dismissed the petition on grounds of delay and laches. The Appellate Tribunal noted that the limitation issue is a mixed question of law and fact and should be decided at the final hearing. The appellants contended that the right to sue accrued only on 08.05.2013, making the petition timely.

4. Previous Adverse Orders and Their Impact:
The respondents highlighted previous adverse orders, including a dismissed civil suit in 2007 and a Company Law Board petition in 2011. The appellants argued that the previous petition was dismissed with liberty to refile after obtaining a succession certificate, and the civil suit was dismissed for non-appearance, allowing for a fresh suit. The Appellate Tribunal emphasized that the Tribunal should have considered these arguments and provided specific findings.

Conclusion:
The Appellate Tribunal found the impugned order to be a non-speaking order, lacking detailed reasoning on key issues. It held that the questions of oppression, mismanagement, maintainability, and limitation are mixed questions of law and fact, requiring a final hearing on merits. The order was set aside, and the matter was remanded to the Tribunal for a fresh decision after hearing both parties. The parties were directed to appear before the Tribunal on 15.07.2020.