2020 (12) TMI 372 - Tri - Companies Law

Removal of Director - Seeking declaration that the Form 32 filed in 1992 as filed by the Respondent for the removal of Petitioner from the position of Director of Respondent Company is null and void - deeking declaration that transfer of shares from Petitioners to the Respondent Nos. 2 to 7 as illegal etc. - Sections 59 and 241 of Companies Act, 2013 - HELD THAT - It is relevant to extract Section 59 of the Act and connected rule 70 of NCLT Rules, 2016. Section 59(1) says that the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company, or the company may appeal in such form as may be prescribed, to the Tribunal, or to a competent court outside India, specified by the Central Government by notification, in respect of foreign members or debenture-holders residing outside India, for rectification of the register. Therefore, separate Application/Petition has to be filed by the Petitioner, if his shares in the Company is illegally removed from the Register of Company. And filing the instant Petition shows that the Petitioner is admittedly not a shareholder of the Company, as on date of filing the instant Petition - a Petition u/s. 241 of Act, cannot be filed by non-shareholder(s) of a Company. Therefore, if the Petitioner succeeds in the Petition filed u/s. 59 of Act, he can maintain petition u/s. 241 of Act to seek relief u/s. 242 of Act Moreover, mere removal of name of a shareholders in accordance with law, cannot be termed as 'acts of oppression and mismanagement. Therefore, the Petition itself is filed on mis-conceived notion. The Petitioner cannot plead ignorance about the affairs of Company till 2018 when he is alleged to have verified the MCA to know the affairs of Company. He is estopped from raising the disputes with regard to affairs of Company took place long time ago. Therefore, the Petition is also barred by laches and limitation and has not approached the Tribunal with any bona fide grounds and clean hands - the instant Company petition is not maintainable, barred by laches and limitation, lacks merits and came with unclean hands, it is frivolous and thus it is liable to be dismissed with costs. Petition dismissed.

Summary

Issues Involved:
1. Whether the Petition filed under Sections 59 and 241 of the Companies Act, 2013 is maintainable.
2. Whether the Petitioner is a shareholder of the Company as on the date of filing the Petition.
3. Whether the Petition has been filed with bona fide grounds and clean hands.
4. Whether the Petitioner has made out a prima facie case in support of the allegations made.

Issue-wise Detailed Analysis:

1. Maintainability of Petition under Sections 59 and 241:
The Tribunal noted that Sections 59 and 241 of the Companies Act, 2013, cannot be clubbed together in a single petition as they are to be invoked under different causes of action. Section 59 pertains to the rectification of the register of members, while Section 241 deals with oppression and mismanagement. The Tribunal emphasized that a separate application must be filed if the Petitioner's shares were allegedly removed illegally from the company's register. Consequently, the Petitioner's filing of a combined petition indicated that he was not a shareholder at the time of filing the petition, rendering the petition under Section 241 not maintainable by a non-shareholder.

2. Shareholder Status of Petitioner:
The Tribunal examined the shareholding status of the Petitioner and found that the Petitioner had resigned from the directorship in 1992 and transferred his shares in 2000-01. The resignation and transfer deeds were supported by board minutes and annual returns. As such, the Petitioner was not a shareholder at the time of filing the petition. The Tribunal referred to Section 244 of the Companies Act, 2013, which stipulates that only members of a company can apply under Section 241, and the Petitioner did not meet this criterion.

3. Bona Fide Grounds and Clean Hands:
The Tribunal scrutinized the Petitioner's claims and found that the Petitioner had not approached the Tribunal with bona fide grounds or clean hands. The Petitioner was aware of the company's affairs and the alleged fraudulent acts long before filing the petition. The Tribunal noted that the Petitioner had not attended board meetings or participated in the company's management since his resignation in 1992. The Tribunal concluded that the petition was barred by laches and limitation, as the Petitioner had waited over 26 years to raise these issues.

4. Prima Facie Case for Allegations:
The Tribunal evaluated the merits of the case and the allegations made by the Petitioner, including the illegal removal from directorship, fraudulent transfer of shares, and mismanagement of company funds. The Tribunal found that the Petitioner had not provided sufficient evidence to support these claims. The Tribunal also noted that the Petitioner's allegations were based on events that occurred decades ago, and the Petitioner had not demonstrated any recent acts of oppression or mismanagement.

Conclusion:
The Tribunal concluded that the petition was not maintainable, lacked merit, and was filed with unclean hands. The petition was dismissed with costs of ?25,000, to be deposited with the Ministry of Corporate Affairs within 30 days. The Tribunal also dismissed the related Interim Application No. 122 of 2020.