2021 (5) TMI 615 - Tri - Companies Law

Validity of AGM held - fit and proper persons to occupy the office of Directors of the Company or not - validity of appointment of Respondents 5 to 9 as additional Directors of the Company - HELD THAT - The Respondents have made available copies of various documents including relevant Minutes of the Annual General Meeting (AGM) conducted in respect of the Company. Since the Petitioners are alleging that they were not given due notices of the meetings, not furnished statements for the financial years in question etc., it is necessary to advert whether those allegations of Petitioners are borne out of record or not. The following facts establishes that the Petitioners were given adequate opportunity in participating in the affairs of Company, but they did not want to own any responsibility for the affairs of Company and thus quit from management. It is settled position of law that the affairs of a Company will be conducted through a duly constituted Board of Directors. As per law, minority shareholders have right to protect their interest from the majority shareholders. It appears from the above that all the major decisions regarding sale of equity, introduction of new directors etc. were taken in the above EGMs, following the due procedure. Also, in the present case, the Petitioners having enjoyed power of management of the Company with mere 25% shareholding of the Company, for a considerable period of time, and after voluntarily quitting from the management of the Company, have started raising frivolous issues during various AGMs and also filed the present Petition by abusing process of law. It is relevant to point out here that the Petitioners, immediately after filing the instant petition, wanted to withdraw the instant petition with a liberty to file a fresh petition due to various material defects committed, however the same was dismissed by this Tribunal as stated supra. This shows as to how the petitioners are so casual and abusing the process of law. The instant petition is filed with unclean hands with an intention to abuse and misuse the process of law and the same is contrary to the settled principle of law. The Petitioners failed to make out any case so as to interfere in the affairs of Company, as the principles of natural justice are duly followed by the Respondents in conducting AGMs in question and the Petitioners - Petition dismissed.

Summary

Issues Involved:
1. Scope of judicial review over allegations/counter allegations within the domain of the Board of Directors.
2. Whether the alleged acts constitute oppression and mismanagement under Sections 241, 213(a), and 213(b) of the Companies Act, 2013.
3. Whether the Petitioners approached the Tribunal with clean hands and bona fide grievances.
4. Justification for continually adding grievances and threatening litigation despite adverse orders.

Detailed Analysis:

1. Scope of Judicial Review:
The Tribunal examined the allegations and counter-allegations to determine if they fall within the domain of the Board of Directors' ordinary business activities. It was noted that many issues raised by the Petitioners, such as electricity consumption and criminal complaints, do not fall under the purview of oppression and mismanagement. The Tribunal emphasized that such matters are better addressed by statutory authorities and not through judicial review.

2. Alleged Acts of Oppression and Mismanagement:
The Petitioners alleged various acts of oppression and mismanagement, including:
- Illegal and void Annual General Meetings (AGMs).
- Mismanagement and siphoning off funds.
- Non-compliance with statutory requirements.
- Improper appointment of additional directors.
- Conversion of unsecured loans into equity without proper procedure.

The Tribunal found that:
- The Petitioner No. 1 voluntarily resigned from the management, and his claims of being pressured were unsupported by evidence.
- The Petitioner No. 1's allegations about criminal complaints and electricity consumption were baseless and did not constitute oppression.
- The AGMs were duly conducted, and the Petitioners had opportunities to participate.
- The conversion of unsecured loans into equity was in compliance with the directives of Andhra Bank and the Companies Act, 2013.
- The Petitioners' claims about suspicious transactions lacked prima facie evidence.

3. Petitioners' Bona Fides:
The Tribunal observed that the Petitioners, particularly Petitioner No. 1, had been involved in the management of the Company for a significant period and had voluntarily resigned. The Petitioners' actions, including filing multiple cases and seeking to withdraw the petition to file a fresh one, indicated an intention to misuse the process of law. The Tribunal noted that the Petitioners' conduct was not bona fide and aimed at disrupting the Company's operations.

4. Continual Addition of Grievances:
The Petitioners continually added grievances and filed multiple interim applications without amending the main petition. The Tribunal found this approach to be an abuse of the legal process. The Petitioners' failure to provide prima facie evidence for their allegations further weakened their case.

Conclusion:
The Tribunal dismissed the petition, stating that the Petitioners failed to make out a case for interference in the Company's affairs. The decisions taken in AGMs were in accordance with the law and binding on the Petitioners. The Tribunal also dismissed the interim applications as infructuous. The Petitioners were, however, allowed to receive the amount offered by the Respondents for unsecured loans and share purchase.

Order:
C.P No. 04/BB 2016 is dismissed. IA Nos. 186 of 2017, 29 of 2018, and 149 of 2019 are also dismissed as infructuous. The Petitioners may receive the amount offered by the Respondents for unsecured loans and share purchase. No order as to costs.