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2021 (6) TMI 704 - Tri - Companies LawMaintainability of petition - illegal removal from the post of Managing Director, in an Extra Ordinary General Meeting - first and foremost contention of the Respondents is that the consent enclosed by the Petitioners is not a valid consent under Section 399 of the Companies Act, 1956 - HELD THAT - In the present case, the Respondent Company is having a share capital and therefore, either the shareholding requirement or the numerical requirement has to be fulfilled. Section 399(3) of the Act provides that in situations where a group of members chose to initiate an action under Sections 397 and 398 of the Act, any one member can maintain an application on behalf of and for the benefit of the other members, provided the consent in writing of the rest of the members has been obtained - the onus of proving that the shares have been indeed transferred by Respondent No.7 for valuable consideration is on the Petitioner. Prima facie, the Share Certificate on which they seek to rely, in the absence of other mandatory records to establish the transfer of 520 equity shares of the Respondent No.7 to the transferees who supports the original petitioner, is itself not conclusive about the actual date of transfer, as in Annual Returns, since both the dates are different no credence can be given to the document evidencing the share transfer as claimed by the Petitioner, which forces this Tribunal to draw an adverse inference against the consent holders Sl no.1 to 10 about the transfer of shares of the Respondent No.7 as claimed by them. Moreover, the Petitioner produced certain documents relating to the meetings conducted by the Respondent No.7 under the management of the Petitioner to sell the shares. Nowhere it is agreed or stated that these shares are sold to the consenting persons. No records have been produced by the Petitioner to prove that the consenting persons are the shareholders of the Respondent Company. Whether the Petition filed by the Petitioner along with the consent of rest of the shareholders qualify the requirement under Section 399 of the Companies Act, 1956? - HELD THAT - Regulation 18 does not itself contain the requirement for filing the consent letters. The requirement has been prescribed in Annexure III, which is referred to in Regulation 18. Serial No. 27 of Annexure III contains a list of several documents required to be annexed to petitions relating to the exercise of powers in connection with prevention of oppression or mismanagement under Sections 397, 398, 399(4), 400, 401, 402, 403, 404 and 405. The documents required to be annexed to such petition include where the petition is presented on behalf of members, the letter of consent given by them . These requirements can be said to be mandatory in the sense that non-compliance with any of them would ipso facto result in the dismissal of the petition - In the present case the Petitioner miserably failed to obtain the consent letters from each shareholder who supports the contentions in the Petition. When he filed this Petition the consent in writing of the other petitioners had to be filed at the time of filing the petition and in the absence of the same, the petition is to be dismissed for failure to comply with the requirements as per the Act. The Petitioner herein individually and jointly failed to maintain the petition as they do not conform to the qualifying standards in relation to the shares as prescribed under Section 399 of the Companies Act, 1956 on the date of filing of the Petition - Application disposed off.
Issues Involved:
1. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956. 2. Legality of the Extra Ordinary General Meeting (EGM) held on 06.02.2010. 3. Validity of the removal of the petitioner from the directorship. 4. Validity of the appointment of new directors and the filing of Form No. 32. 5. Compliance with Section 399 of the Companies Act, 1956 regarding the consent of shareholders. Detailed Analysis: 1. Allegations of Oppression and Mismanagement: The petitioner alleged oppression and mismanagement in the affairs of M/s. Mannam Centenary Textiles Limited, seeking multiple reliefs including the declaration that the acts of Respondent Nos. 2 to 5 were oppressive and prejudicial to the interests of the company and its members. The petitioner claimed that the removal from directorship and the subsequent appointments were illegal and void ab initio. 2. Legality of the EGM Held on 06.02.2010: The petitioner argued that the EGM held on 06.02.2010 was illegal as it was convened without following the due procedure under Section 169 of the Companies Act, 1956. It was alleged that the group of shareholders did not hold one-tenth of the paid-up capital and did not submit a proper requisition to the company. The petitioner further contended that no special notice was issued for his removal, and he was not heard in the meeting, violating Section 284 of the Companies Act. 3. Validity of the Removal from Directorship: The petitioner contested the validity of his removal from the directorship, arguing that the removal was not in accordance with the statutory provisions. The respondents countered by stating that the petitioner had stopped statutory compliances, leading to mismanagement, and that the removal was justified. They also cited the Supreme Court decision in Hanuman Prasad Bagri and Ors. V. Bagress Cereals Pvt. Ltd. and Ors., which stated that termination of directorship does not entitle one to seek winding up of the company on just and equitable grounds. 4. Validity of the Appointment of New Directors and Filing of Form No. 32: The petitioner challenged the appointment of new directors and the filing of Form No. 32, claiming these actions were illegal and void. The respondents argued that the appointments and filings were valid and necessary due to the mismanagement by the petitioner. They also alleged that the petitioner had filed false documents to falsify company records. 5. Compliance with Section 399 of the Companies Act, 1956: The respondents contended that the petition was not maintainable as it did not meet the requirements under Section 399 of the Companies Act, 1956. They argued that the consent obtained from 22 shareholders was not valid and that the petitioner did not hold the requisite shareholding to file the petition. The Tribunal examined the share transfer records and found discrepancies in the dates and documentation, leading to doubts about the validity of the share transfers claimed by the petitioner. Findings: The Tribunal found that the petitioner failed to prove the validity of the share transfers and the consent obtained from the shareholders. The Tribunal noted that the consent letters did not meet the requirements of Section 399(3) of the Companies Act, 1956, as they were not intelligent consents. The Tribunal also observed that the petitioner did not comply with the mandatory requirements for filing the petition, leading to its dismissal. Conclusion: The Tribunal dismissed the petition for failing to meet the qualifying standards under Section 399 of the Companies Act, 1956, and found that the petitioner did not provide valid consent letters from the shareholders. Consequently, the petition was not maintainable, and the Tribunal dismissed TCP/45/KOB/2019 with no order as to costs. The related IA No.151/KOB/2020 was also disposed of. Date of Judgment: Dated the 11th day of June, 2021.
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