2021 (3) TMI 1126 - AT - Companies Law

Oppression and mismanagement - non-repayment of unsecured loan to the Appellant - utilisation of rights shares - HELD THAT - It is a fact that the Appellant has not filed any document regarding Tally Data and the statement etc. before the learned NCLT. In view of non-providing the documents before the learned NCLT, the learned NCLT had no opportunity to look into the documents and deal with the aspects. It appears that the Appellant for the first time filed these documents along with I.A. No. 237 of 2021 before the Tribunal. Since the Appellant alleging that the amounts have been credited into the Respondent No. 1 Company and later on withdrawn by the Respondents. Sitting in the Appellate Jurisdiction, we cannot decide the merits since the matter is sub judice and seized of by the learned NCLT. We are also of the view that the petition was filed under Sections 241 242 of the Companies Act, 2013 alleging certain acts of oppression and mismanagement into the affairs of the Company. Following the Principle of Natural Justice, we would afford an opportunity a liberty to the Appellant to address the issues before the learned NCLT with regard to the bank statement of the Respondent No. 1 Company for the reasons that the Appellant disputed the payments made by the other Directors. The Appellant may file these documents by way of Additional Documents before the learned NCLT after serving a copy of the same upon the Respondent well in advance. Matter remanded back to the learned NCLT who will decide the Company Petition on merits along with Additional Documents as may be filed by the Appellants. If the Appellant failed to file these documents before the leaned NCLT, learned NCLT may proceed with the records available with it.

Summary

Issues Involved:
1. Validity of the rights issue and its impact on the Appellant's shareholding.
2. Allegations of oppression and mismanagement by the Respondents.
3. Financial transactions and utilization of funds raised through the rights issue.
4. Compliance with statutory requirements and procedural fairness.

Detailed Analysis:

1. Validity of the Rights Issue and its Impact on the Appellant's Shareholding:

The Appellant, a Director and shareholder holding 30% of the equity shares, challenged the rights issue initiated by the Respondents, alleging it was a strategy to dilute his shareholding. The NCLT vacated the stay on the rights issue, noting that the rights issue for a genuine purpose and for the benefit of the Company is not illegal until proven otherwise. The Appellant had the opportunity to purchase additional shares but chose not to, leading to no prima facie ground to stay the rights issue. The Appellant's apprehension of shareholding dilution was acknowledged but not deemed sufficient to halt the rights issue.

2. Allegations of Oppression and Mismanagement by the Respondents:

The Appellant alleged oppression and mismanagement under Sections 241, 242, and 213 of the Companies Act, 2013. He claimed the Board's resolutions, including the decision not to repay the unsecured loan and the rights issue, were intended to curtail his rights. The Respondents countered that the Appellant's allegations were vague and aimed at settling personal scores. The NCLT found no single instance of oppression or mismanagement through the rights issue, as the Appellant had attended the meetings and had the opportunity to object and participate.

3. Financial Transactions and Utilization of Funds Raised Through the Rights Issue:

The Appellant contended that the funds raised through the rights issue were not utilized for the Company's benefit but were instead used to clear loans advanced by the Respondents. He presented bank statements and Tally data to support his claim. However, these documents were not filed before the NCLT initially, and thus the NCLT had no opportunity to examine them. The Appellate Tribunal acknowledged the need for these documents to be reviewed by the NCLT and remanded the matter back for consideration of the additional evidence.

4. Compliance with Statutory Requirements and Procedural Fairness:

The NCLT's decision to vacate the stay on the rights issue was based on the principle of natural justice, allowing the Appellant to present additional documents and arguments. The Tribunal directed that the shares offered to the Appellant through the rights issue should not be renounced or allotted to other shareholders until the NCLT disposes of the Company Petition. Furthermore, the Tribunal vacated its earlier order deferring the AGM, allowing the Company to proceed with statutory requirements.

Conclusion:

The matter was remanded back to the NCLT to decide on the merits, considering the additional documents to be filed by the Appellant. The Appellate Tribunal emphasized the importance of the Company's interest and procedural fairness, directing that the shares from the rights issue should not be renounced or allotted until the NCLT's final decision. The appeal was disposed of with no orders as to cost.