2021 (6) TMI 161 - Tri - Companies Law

Oppression and mismanagement - refusal to access the company records on account of the fact that Prime Tower was still not operational owing to the outbreak of COVID-19 pandemic - obstructing the entry of the Company Secretary Mr. Rajnish Kumar and the HR Head Mr. Mazhar Hussain into the Company Prime Tower premises, who visited to get access on necessary documents - Sections 58, 59, 241, 242 and other applicable provisions of the Companies Act, 2013 - HELD THAT - It was well within the rights of the Respondent No. 4 to enter into the Premises and revoke the Agreement from November 2018, when the Respondent No. 1 failed to pay the service charges for the month of October 2018. Instead, the Respondent No. 4, in an unequitable show of good faith, allowed the Respondent No. 1 to continue to use the Premises even thereafter without any hindrance to it - It is evident from reading the Agreement that neither the Respondent No. 1 nor the Respondent No. 4 is provided with the right to claim any set-off. Further, the Respondent No. 4 has never accepted nor acquiesced to the Respondent No. 1's claims of set-off. It is trite law that those persons/entities who are not party to a contract, do not have any right to initiate action or claim benefits/performance of the contract. This is enshrined within the legal doctrine of privity of contract, which is respected, followed, and enforced by all the courts, tribunals, and other adjudicating authorities of similar power and stature in India - Merely because the Petitioner/Applicant is a majority shareholder in the Respondent No. 1, it is not entitled or authorised to file the captioned Application relating to contractual rights of the Respondent No. 1 and the Respondent No. 4. There is no shareholder right of the Petitioner/Applicant involved in relation of the use of the Premises by the Respondent No. 1 in contractual arrangement with the Respondent No. 1 - the dispute is in respect of the payment of rent, which the respondent no. 4 is claiming from respondent no. 1 company and which according to the applicant is set off against the outstanding dues, which is payable by the respondent no. 4 to the respondent no. 1. A defence of set off can be claimed by the defendant in a suit for the recovery of money and set off must be a certain sum but herein the case in hand, of course by filing the written submissions, the respondent claimed set off of the service charge but nowhere it is mentioned in the application that any suit for the recovery of money is pending in which the applicant has claimed set off. Of course, amount of claim is certain. Therefore, in our considered view the first condition is lacking. Hence defense of set off claim by the applicant is not liable to be accepted. Though the act of respondent no. 2 to 4 does not come within the purview of oppression, for the smooth functioning of the company, it is directed, in the meantime, both the parties should ensure that no hindrance is made by any of the parties or its officers and employees to ensure smooth functioning of the company - application disposed off.

Issues Involved:
1. Oppression and mismanagement by Respondent Nos. 2 to 12.
2. Payment of service charges and set-off claims.
3. Jurisdiction of NCLT to adjudicate contractual disputes.
4. Right of access to the corporate office.
5. Arbitration clause in the Service Facility Agreement.

Detailed Analysis:

1. Oppression and Mismanagement by Respondent Nos. 2 to 12:
The Petitioner, holding 92% of the equity share capital and 100% of the Compulsorily Convertible Preference shares in the Company, alleged that Respondent Nos. 2 to 8 obstructed the management of the Company. Instances included preventing nominee directors and employees from entering the corporate office and creating hindrances in day-to-day operations. Despite substantial investments, the Petitioner claimed oppression by Respondent Nos. 2 to 4, who controlled the ingress and egress at Prime Tower, the corporate office.

2. Payment of Service Charges and Set-off Claims:
The Company used the Prime Tower premises under a Service Facility Agreement dated 01.06.2016, requiring a monthly service charge of ?5,50,000, later increased to ?7,15,000. The Petitioner contended that the service charges were set off against amounts owed by Respondent No. 4 to the Company. However, Respondent No. 4 disputed the set-off, asserting that the law of set-off applies only in money suits and not before the Tribunal.

3. Jurisdiction of NCLT to Adjudicate Contractual Disputes:
The Tribunal noted that the dispute centered on the payment of rent, which falls under civil contractual disputes. The Service Facility Agreement contained an arbitration clause, already invoked by the Respondents. The Tribunal emphasized that the Petitioner, being a shareholder, lacked locus standi to raise issues related to the agreement between Respondent No. 1 and Respondent No. 4.

4. Right of Access to the Corporate Office:
The Petitioner alleged that Respondent Nos. 2 to 4 used their control over Prime Tower to obstruct access to the corporate office. Despite previous orders from NCLT and NCLAT ensuring no hindrance in the Company's operations, the Respondents continued to deny access. The Tribunal reiterated that Respondent Nos. 2 to 4 should not obstruct entry to the premises unless legal eviction procedures were followed.

5. Arbitration Clause in the Service Facility Agreement:
The Service Facility Agreement provided for arbitration in case of disputes. The Tribunal acknowledged the ongoing arbitration proceedings between Respondent No. 1 and Respondent No. 4. It highlighted that the Petitioner, not being a party to the agreement, could not invoke arbitration or claim set-off in this forum.

Conclusion:
The Tribunal concluded that the matter primarily involved contractual disputes over unpaid service charges, which should be resolved through arbitration. It directed both parties to ensure no hindrance to the Company's operations and allowed Respondent Nos. 2 to 4 to pursue legal recourse for breach of the Service Facility Agreement. The application was disposed of with these directions.

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