2020 (9) TMI 523 - Tri - Companies Law

Oppression and Mismanagement - Waiver of the qualification requirement - section 244(1) of the Companies Act 2013 - case of applicant is that there are exceptional circumstance for granting waiver because all the board of directors have acted in connivance against the applicant, the applicant have no recourse in law if the waiver is not granted and there are just and equitable ground for grant of waiver. HELD THAT - The main issue raised in the petition is that the applicant has to get value for the brand created by his father s contribution to the company. It seems that another company is taking over the R1 company by purchase of shares from the shareholders at the rate of INR 532 per share. The respondents are selling their shares on their own volition, the shares of R1 are transferrable and if the applicant wants to sell the shares he can do so and if he is not willing to sell his shares at this rate, nobody is compelling to part with his shares. What he wants to get is, since respondents are selling the shares, he has to get some consideration for the so-called brand value created by his father for the company. This issue will not fall under the ambit of oppression and mismanagement. To create a scenario that there is oppression and mismanagement in R1, the applicant makes a general complaint that R1 company issued rights shares without issuing notice to him. The applicant has not even given the details of rights issue and bonus issue of shares. Hence, we hold that the petition is a frivolous one. This application for waiver is dismissed.

Summary

Issues Involved:
1. Waiver of the qualification requirement under Section 244(1) of the Companies Act, 2013.
2. Allegations of oppression and mismanagement under Section 241 of the Companies Act, 2013.
3. Validity of the applicant's claims regarding the issuance of rights and bonus shares without notice.
4. Consideration of exceptional circumstances for granting waiver.

Issue-Wise Detailed Analysis:

1. Waiver of the Qualification Requirement under Section 244(1) of the Companies Act, 2013:
The applicant sought a waiver of the qualification requirement set out in Section 244(1) to pursue a petition under Section 241, arguing exceptional circumstances. The Tribunal noted that the applicant holds only 85 shares, constituting 0.01% of the company’s share capital. The Tribunal applied the test laid down by the Hon’ble NCLAT in the case of *Cyrus Investments Pvt. Ltd. and Ors. vs. Tata Sons Ltd. and Ors.*, which mandates considering whether the applicant is a member of the company and whether the application pertains to oppression and mismanagement. The Tribunal found that the applicant is a member but failed to establish that the application pertains to oppression and mismanagement. Consequently, the waiver application was dismissed.

2. Allegations of Oppression and Mismanagement under Section 241 of the Companies Act, 2013:
The applicant alleged that the board of directors acted in connivance against him and that he had no legal recourse if the waiver was not granted. The Tribunal examined the allegations, including the claim that the applicant was not notified about the issuance of rights and bonus shares, and found them to be general and unsupported by specific details. The Tribunal concluded that the main issue raised by the applicant—seeking value for the brand created by his father—did not fall under the ambit of oppression and mismanagement, rendering the petition frivolous.

3. Validity of the Applicant’s Claims Regarding the Issuance of Rights and Bonus Shares Without Notice:
The applicant contended that he was not issued notices for the meetings concerning the issuance of rights and bonus shares. The respondents countered that all necessary notices and director’s reports were sent to shareholders and were available in the public domain. The Tribunal found the applicant’s claims unsubstantiated, noting that the applicant failed to provide details of the alleged rights and bonus issues. The Tribunal thus held that the applicant’s claims were unfounded.

4. Consideration of Exceptional Circumstances for Granting Waiver:
The Tribunal assessed whether there were exceptional circumstances warranting a waiver of the requirements under Section 244(1). The Tribunal referred to the criteria established by the Hon’ble NCLAT, which include whether the application pertains to oppression and mismanagement and whether there are exceptional circumstances. The Tribunal found no exceptional circumstances in the applicant’s case, as the main issue did not relate to oppression and mismanagement but rather to a personal grievance about the brand value created by the applicant’s father. Consequently, the Tribunal concluded that the applicant did not meet the criteria for granting a waiver.

Conclusion:
The Tribunal dismissed the application for waiver under Section 244(1) and, consequently, dismissed the company petition. The Tribunal found that the applicant failed to establish a prima facie case of oppression and mismanagement and did not demonstrate exceptional circumstances warranting a waiver. The Tribunal's decision was based on the lack of specific details supporting the applicant’s claims and the finding that the main issue raised did not fall within the ambit of oppression and mismanagement.