2020 (12) TMI 955 - Tri - Companies Law

Removal of Managing Director - Seeking waiver of the requirements for filing the company petition under section 241 read with section 242 of the Companies Act, 2013 - section 244 of the Companies Act, 2013 - HELD THAT - The applicant/the petitioner has made out a prima facie case by establishing that he has been holding the position of the managing director of the company and was authorized signatory before his removal by the respondents on May 14, 2019. Admittedly the applicant/ petitioner was removed by the respondents without following the due process of law, as he was not afforded an opportunity of being heard. Thus, it is a fit case for inference by this Tribunal, as the matter complained is more than a directorial complaint. Therefore, there requires an enquiry to be conducted into the acts of oppression and mismanagement alleged to have been committed by the respondents. The applicant/petitioner is holding 5,000 shares, i. e., 0.04 per cent. of the total issued share capital of the first respondent-company and not fulfilling the requirements of section 244(1) for filing the petition under section 241 read with section 242 of the Companies Act, 2013. Therefore, it is prayed by the applicant/petitioner to grant waiver of the requirements of section 244(1) for filing the petition under section 241 read with section 242 of the Companies Act, 2013 against the respondents. The proviso to sub-section (1) of section 244 provides that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241 (emphasis supplied). In the present case, the requirements of sub-clause (a) of sub-section (1) of section 244 were to be fulfilled (as the company is having a share capital), which the applicant/ petitioner is falling short of. However, the applicant being member of the first respondent-company is holding 5,000 shares, i. e., 0.04 per cent. of the total issued share capital and is eligible to seek waiver as prayed for. Thus, it is a fit case where the requirements laid down under section 244(1)(a) of the Act, 2013 need to be waived and allow the applicant/petitioner to file company petition under section 241 read with section 242 of the Act, 2013, as the company petition cannot be dismissed at the threshold because it requires a detailed enquiry into the matter complained of. Thus, the issue framed stands decided in favour of the applicant and against the respondents - in exercise of the powers conferred under proviso to section 244(1) of the Act, 2013, we waive all the requirements of section 244(1)(a) of the Act, 2013 and treat the company petition under Order 1, rule 8 of the Code of Civil Procedure, 1908 as a representative petition read with sections 241 and 242 of the Act, 2013.

Summary

Issues Involved:
1. Waiver of requirements under Section 244 of the Companies Act, 2013.
2. Validity of the removal of the applicant from the position of Managing Director.
3. Allegations of oppression and mismanagement.
4. Compliance with the Articles of Association and Joint Venture Agreement (JVA).

Issue-wise Analysis:

1. Waiver of Requirements under Section 244 of the Companies Act, 2013:
The applicant sought a waiver of the requirements for filing a company petition under Section 241 read with Section 242 of the Companies Act, 2013. The applicant, holding 5,000 shares (0.04% of the total issued share capital), did not meet the threshold requirements of Section 244(1). The Tribunal noted that the proviso to Section 244 allows for a liberal interpretation to advance justice and avoid patent injustice. The Tribunal decided to waive the requirements under Section 244(1)(a) to allow the applicant to file the petition, emphasizing the need for a detailed inquiry into the matter.

2. Validity of the Removal of the Applicant from the Position of Managing Director:
The applicant alleged his removal as Managing Director and authorized signatory was unlawful and violated the Articles of Association and the JVA. The Tribunal observed that the applicant had been managing the operations of the company and was recognized as Managing Director in various communications and documents. The removal was executed without following due process, including not serving a charge sheet or summary of allegations. The Tribunal found that the applicant had established a prima facie case of holding the position of Managing Director until his removal on May 14, 2019.

3. Allegations of Oppression and Mismanagement:
The applicant claimed that the actions of the respondents constituted oppression and mismanagement, particularly in the arbitrary removal from his position without due process. The Tribunal noted that the applicant's removal did not benefit the company or its shareholders and was not in the company's interest. The Tribunal found that the matter warranted an inquiry into the alleged acts of oppression and mismanagement.

4. Compliance with the Articles of Association and Joint Venture Agreement (JVA):
The applicant argued that his removal violated Article 52 of the Articles of Association and the terms of the JVA. Article 52 provided that the controlling shareholders had the right to appoint and remove the Managing Director, not the Board of Directors. The JVA specified that Mr. Anil Agarwal would manage the operations of the JVC (the first respondent company). The Tribunal noted that the JVA, although not part of the Articles of Association, bound the company to its terms. The Tribunal found that the applicant's removal was inconsistent with the provisions of the Articles of Association and the JVA.

Conclusion:
The Tribunal concluded that the applicant had made out a prima facie case for waiver of the requirements under Section 244(1) and allowed the petition to proceed. The Tribunal emphasized the need for a detailed inquiry into the allegations of oppression and mismanagement and the validity of the applicant's removal. The order directed the registry to number the company petition and list it for hearing on August 17, 2020. The Tribunal's observations were made without prejudice to the merits of the case.