2020 (8) TMI 652 - AT - Companies Law

Winding up order - non-maintenance of records of the company - HELD THAT - It has not been disputed that Respondent No.1- Mr. Asher E. Melamed had 51% shareholding and the Appellants had 49% of shareholding in the Respondent No.2 Company. The Respondent No.1- Mr. Asher E. Melamed was appointed as Director with effect from 14th March, 2000. He was removed from the Directorship in the year 2009 by deleting from the Ministry of Corporate Affairs records. Thereafter, the entire control of business of the Company was vested with the Appellants. Therefore, it is clear that there is no delay in preferring the Petition filed by the Respondent. The Respondent No.1- Mr. Asher E. Melamed (Petitioner) transferred 1 lakh US Doller through Deutsche Bank for the purchase of property of the Company to procure one premises to be utilized for business purposes. Further, when it was not so utilized, the same was given on rent. The profit and loss account for the accounting period of 31st March, 2009 to 31st March, 2012 shows that the business was running in a manner, which was prejudicial to the interest of the Company. The Tribunal noticed the Accounts Book results and the Financial position of the Company and observed that for the rest of the Accounting period, apart from the year 2009 to 2012, no Statutory Books of Accounts were maintained. It was also brought to the notice that no Register was maintained for recording the Meetings of the Members of the Board. The Tribunal came to definite conclusion that the 1st Respondent cannot be blamed for losses and for maintenance of the records etc., which the Appellant failed to do while holding the post of Director and was required to maintain the records - The dispute had reached at a stage of deadlock of business activity. The Company was non-functional, it had already given its premises on rent and it was the only income of the Company. Therefore, we find that the Tribunal came to a definite conclusion of oppression and mismanagement of the Company and oppression of the Member, i.e., the 1st Respondent- Mr. Asher E. Melamed. In the aforesaid circumstances, if the Tribunal has ordered for winding-up of the Company, no interference is called for - Appeal dismissed.

Summary

Issues:
1. Jurisdiction of the Tribunal to order winding-up under Section 241-242 of the Companies Act, 2013.
2. Delay and laches in the Company Petition.
3. Allegations of oppression and mismanagement against one of the shareholders.
4. Dispute regarding the management of the company and financial transactions between the shareholders.
5. Allegations of siphoning off funds and cheating by one of the shareholders.
6. Dispute over the distribution of profits and business decisions.
7. Lack of proper maintenance of statutory books of accounts and records by the shareholders.
8. Conclusion of oppression and mismanagement leading to the winding-up order.

Analysis:

1. The Tribunal's jurisdiction to order winding-up under Section 241-242 of the Companies Act, 2013 was challenged by the Appellants, arguing that the cause of action arose between 2000-2008, making the Company Petition subject to dismissal due to delay and laches. However, the Tribunal found that the dispute had reached a deadlock, justifying the winding-up order based on oppression and mismanagement.

2. The Appellants contended that the Respondent failed to establish a case of oppression against him, and thus, no relief should have been granted. On merit, they argued that they had been managing the company's affairs and bearing expenses, while the Respondent had limited involvement. The Tribunal noted the financial contributions and business arrangements between the parties.

3. Allegations of siphoning off funds and cheating were raised against the Respondent, including overinvoicing and charging excessive commissions beyond the agreed percentage. The Appellants highlighted instances of direct communication with suppliers, bypassing the company, leading to financial discrepancies and unjust enrichment of the Respondent.

4. Disputes over profit distribution, business decisions, and sudden cessation of orders by the Respondent were discussed. The Appellants claimed that the Respondent's actions deprived the company of business opportunities, leading to financial losses and the need to lease out office premises.

5. The Tribunal observed the lack of proper maintenance of statutory books and records, noting discrepancies in financial accounts and the absence of meeting registers. This lack of compliance was attributed to the Appellants, who were responsible for maintaining records during their directorship.

6. Based on the circumstances, the Tribunal concluded that oppression and mismanagement were evident, justifying the winding-up order to resolve the deadlock and financial issues within the company. The decision was upheld, dismissing the appeal without costs.

This detailed analysis covers the key issues raised in the legal judgment, providing a comprehensive overview of the arguments presented by the parties and the Tribunal's reasoning behind the final decision.