2020 (10) TMI 116 - AT - Companies Law

Oppression and Mismanagement - illegal transfer of shares - grievance of the Appellant is that the Respondent have fictitiously used the transfer agreement dated 08.04.2010 to claim 50% stake in the company - HELD THAT - 2nd Appellant is resorting to various acts of Oppression and Mismanagement in the affairs of the company so as to prejudice the interest of the Respondent and his group. The agreement dated 08.04.2010 is declared to be legal and the same is binding on all the parties concerned. The contentions raised by the second Appellant against the said agreement of transfer of shares are liable to be rejected. As mentioned supra both the parties got shares of Mr. Nayar, as per the said agreement. Both the parties got 50% share holding of the company as given in the said agreement. The subsequent transactions alleged to have been made by the Appellant, as explained, are declared to be illegal and liable to be set aside - Moreover, the Respondent is stated to have been removed from the post of director. Appellant has failed to follow the process of law in the removal of the Respondent from the post of director of the Company. The affairs of the company are being conducted in a manner prejudicial to Respondents herein. The Appellant has raised several frivolous litigations by misusing process of law and has committed several acts of Oppression and Mismanagement. The Appellant has acted contrary to the interim orders passed by the CLB - the judgement of NCLT upheld - petition dismissed.

Summary

Issues:
1. Shareholding dispute between shareholders.
2. Validity of share transfer agreements.
3. Allegations of oppression and mismanagement.
4. Compliance with interim orders of CLB.

Shareholding Dispute:
The appeal was filed against an order by the National Company Law Tribunal (NCLT) dividing shares equally between two shareholders. The dispute arose from the transfer of shares by Mr. N.A. Nayar to both appellants and respondents. The appellants alleged that the respondent, with mala-fide intentions, stole and fabricated share transfer documents to claim a 50% stake in the company. The appellants argued that the NCLT ruling was improper as the authenticity of the share agreement was under challenge in a civil suit.

Validity of Share Transfer Agreements:
The appellants contended that the respondent transferred 8% shares to the petitioner, reducing the respondent's shareholding to 34%. However, the respondent argued that the appellants' claims were baseless and that the appellants' actions, including filing frivolous litigations, were prejudicial. The respondent also highlighted the appellants' failure to comply with the process of law in removing the respondent from the director's post.

Allegations of Oppression and Mismanagement:
The respondent accused the appellants of various acts of oppression and mismanagement, including failing to transfer the consideration amount for share transfer and not providing substantial evidence for the transfer of shares. The NCLT upheld the validity of the 2010 share transfer agreement, declaring it legal and binding on all parties. The NCLT found that the appellants' subsequent actions were illegal and set them aside.

Compliance with Interim Orders of CLB:
The CLB had issued interim orders directing the appellants to maintain the status quo regarding shareholding pattern and share capital. However, the appellants took actions, such as transferring shares and removing the respondent as a director, in violation of these orders. The NCLT deemed these actions illegal and upheld the interim orders, leading to the dismissal of the appeal.

In conclusion, the NCLT dismissed the appeal, citing the appellants' actions as prejudicial and in violation of the interim orders. The NCLT found in favor of the respondent, declaring the 2010 share transfer agreement as legal and binding, while rejecting the appellants' contentions.