2021 (10) TMI 1088 - Tri - Companies Law

Transfer of shares - Oppression and mismanagement - restraint on Respondents from transfering /investment/assets - creation of further third-party rights on the shares held by the Petitioner in R11 and R12 - HELD THAT - In view of the narration of facts by the Petitioner and grounds of oppression and mismanagement namely systematic assets stripping of Respondent No.1, Petitioners being kept away affairs of Respondent No.1, affairs of Respondent No.1 being conducted as sole proprietorship, unjustified transfer of Respondent No.12 to Respondent No.2 and breach of doctrine of legitimate expectation, it can be said that no prima facie case has been made out by the Petitioner to grant any interim directions to restrain the transfer of assets already made or creating any third party rights. The proposed EGM which is being challenged was held on 15.01.2020, the entire issue of dispute between the parties is founded in the Share Purchase Agreement and are purely contractual nature. Upon perusal of the clauses of shareholder agreement it is clear that Anand Rathi Shareholders shall be in sole control of the company and committee formed thereunder shall be responsible for management, supervision, direction and control of the company including day to day management of the company - The Petitioner is a party to the said Agreement and has acquiesced to the rights conferred to both the parties under the SHA and now is estopped from claiming that the Anand Rathi group are conducting the affairs of Respondent No.1 which are oppressive and amounts to mismanagement of Respondent No. Company. This Bench therefore is of the considered opinion that no prejudice is caused to the rights of the Petitioner under said alleged transfer of shares of Respondent No.1 to Respondent No.11 or transfer of assets to Respondent No.2 from Respondent No.1, and is governed by the interse agreement namely the shareholder agreement/share purchase agreement both dated 10.08.2016. The rights of the shareholders qua the company in the Petition alleging the Oppression and mismanagement are squarely covered under the SHA/SPA dated 10.08.2016 and hence are bound by the terms and conditions thereof. The Anand Rathi Group being the majority shareholders and in control of the management of the company have acted in the best interest of the Company due to the notification of MCA and the Petitioners have waived their rights to object to the transfers being made by acquiescence - the prayer for interim relief is rejected. The prayer is rejected.

Summary

Issues Involved:
1. Interim order restraining the Respondents from transferring investments/assets.
2. Creation of third-party rights on shares held by the Petitioner.
3. Allegations of oppression and mismanagement.
4. Application of arbitration clause in the Shareholders Agreement (SHA).

Issue-wise Detailed Analysis:

1. Interim Order Restraining the Respondents from Transferring Investments/Assets:
The Petitioners sought an interim ex-parte order to restrain the Respondents from transferring any investments or assets of Respondent Nos. 1, 2, 11, and 12 to any third party. They argued that the transfer of Respondent No. 11 from Respondent No. 1 to Respondent No. 2 without informing them was prejudicial, as they did not hold shares in Respondent No. 2. The respondents countered that the transfer was in compliance with a Ministry of Corporate Affairs notification and was done with the knowledge and consent of all shareholders, including the Petitioners.

2. Creation of Third-Party Rights on Shares Held by the Petitioner:
The Petitioners also sought an interim order to prevent the creation of third-party rights on the shares held by them in Respondent Nos. 11 and 12. The Tribunal found that the Petitioners did not make a prima facie case for granting such an interim order. The Tribunal noted that the core issue revolved around the SHA and SPA, which were contractual in nature, and the Petitioners had acquiesced to the terms of these agreements.

3. Allegations of Oppression and Mismanagement:
The Petitioners alleged systematic asset stripping, being kept away from the affairs of Respondent No. 1, and unjustified transfers of Respondent No. 12 to Respondent No. 2. They claimed these actions were oppressive and amounted to mismanagement. The Tribunal found that the Anand Rathi group, as per the SHA, was entitled to manage and operate the business of the company, including making decisions about asset transfers. The Petitioners, being parties to the SHA, had acquiesced to these rights and were now estopped from claiming oppression and mismanagement.

4. Application of Arbitration Clause in the Shareholders Agreement (SHA):
The Respondents argued that the disputes were purely contractual and should be referred to arbitration as per the SHA. The Tribunal referred to Section 8 of the Arbitration and Conciliation Act, which mandates referring parties to arbitration if the matter is subject to an arbitration agreement. The Tribunal concluded that the disputes arose from the SHA, which contained an arbitration clause, and thus, the parties were bound to refer their disputes to arbitration.

Conclusion:
The Tribunal rejected the Petitioners' prayer for interim relief and directed the parties to refer the dispute under the SHA to arbitration. The application (CA 68 of 2021) seeking reference of disputes to arbitration was allowed. The Tribunal emphasized that the rights of the shareholders were covered under the SHA/SPA and that the Anand Rathi group had acted in the best interest of the company. The Registry was directed to communicate the order to both parties immediately.