2022 (6) TMI 1223 - Tri - Companies Law

Oppression and mismanagement - Seeking order and direct conduct of due election of the Board of Directors for managing the affairs of the 4th Respondent company - seeking appointment of a commissioner for conduct of such election - seeking direction that the management of the affairs of the 4th respondent company be entrusted to the Board of Directors so elected - HELD THAT - On 23.06.2017 Alexander Correya and Others filed a Petition against M/s. Bhagyodayam Company and Others (TCP/21/KOB/2019) under Section 241 and 242 of the Companies Act, 2013 alleging acts of oppression and mismanagement. Vide order dated 28.08.2018 the NCLT Chennai Bench passed an order superseding the Board of Directors appointing an Administrator and who took control of the 4th Respondent Company. Respondents 5 to 9 herein who are superseded Managing Director and Trustees preferred Company Appeal No. (AT) 338/2018, and Respondents 10 to 12 herein preferred Company Appeal No. (AT) 439/2018 before the Hon'ble NCLAT. The Hon'ble NCLAT, Delhi heard the appeals in detail on 23.07.2020, and vide order dated 23.07.2020 dismissed the appeals upholding the findings of the Hon'ble NCLAT, Chennai. On dismissal of the Appeals, Respondents 5 to 9 herein, preferred Civil Appeal 2999/2020 before the Hon'ble Supreme Court. The Hon ble Supreme Court of India heard the Appeal in detail on 19.11.2020 and rejected all the contentions raised by the Appellants therein and dismissed the Civil Appeal No. 2999/2020 vide judgment dated 19.11.2020. Since all the contentions raised by the Respondents/ superseded Managing Directors and Trustees before the NCLT Chennai Bench have been rejected by that Bench, which was appealed before Hon ble NCLAT and Hon ble Supreme Court and there also they failed, these Petitioners who are stated to be binamis of the suspended Managing Directors and Trustees cannot now come forward with an application for impleadment at this belated stage. Hence, the contention for an impleadment need not be considered. Whether an order as sought for by the Intervening Petitioners can be granted? - HELD THAT - The request of the interveners to conduct the Board meeting has not been specifically denied by the present Administrator. Instead, he is harping on the allegations raised by the former Administrator that the Auditor has not properly audited the accounts. Lame excuses to conduct the election cannot be accepted for not conducting the election. The Tribunal cannot be a moot spectator in the matter. In order to give an end to the issue involved and in the interest of justice, it is high time to order for conducting the election to the Board of Directors of the 4th Respondent Company in terms of the Articles of Association of the 4th respondent Company. It is not necessary to appoint a Commissioner for the conduct of such an election, as the administrator is competent to conduct the election. The Administrator is directed to conduct the election to the Board of Directors of the 4th respondent Company as early as possible, at any rate, within 45 days from the date of receipt of a copy of this order - petition disposed off.

Summary

Issues Involved:
1. Conducting the election of the Board of Directors for the 4th Respondent Company.
2. Impleading the applicants as party respondents in TCP/21/KOB/2019.
3. Management and functioning of the 4th Respondent Company by the Administrator.
4. Allegations of mismanagement and financial irregularities.

Detailed Analysis:

1. Conducting the election of the Board of Directors for the 4th Respondent Company:
The petitioners sought an order to conduct the election of the Board of Directors for the 4th Respondent Company, as per its Articles of Association, by appointing a Commissioner. The Tribunal observed that despite the Administrator being in charge for over three years, no steps had been taken to conduct the election. The Tribunal emphasized that "lame excuses to conduct the election cannot be accepted" and directed the Administrator to conduct the election within 45 days. The Tribunal stated, "It is not necessary to appoint a Commissioner for the conduct of such an election, as the administrator is competent to conduct the election."

2. Impleading the applicants as party respondents in TCP/21/KOB/2019:
The petitioners sought to be impleaded as party respondents in TCP/21/KOB/2019. The Tribunal rejected this request, noting that the petitioners were alleged to be "binamis of the suspended Managing Directors and Trustees" and had received significant sums of money illegally. The Tribunal concluded that "these Petitioners cannot now come forward with an application for impleadment at this belated stage" and dismissed IVNP/2/KOB/2022.

3. Management and functioning of the 4th Respondent Company by the Administrator:
The Tribunal noted that the Administrator had been managing the 4th Respondent Company since the Board of Directors was superseded. However, the Tribunal found that the Administrator had not convened any meetings or provided any information to the members of the company. The Tribunal highlighted that the Administrator's lack of action had brought the company's functioning to a "grinding halt." The Tribunal directed the Administrator to conduct the election and hand over charge to the newly elected Board of Directors.

4. Allegations of mismanagement and financial irregularities:
The Tribunal acknowledged the allegations of mismanagement and financial irregularities, including the siphoning off of crores of rupees by the superseded Managing Directors and Trustees. The Tribunal noted that the Administrator had taken steps to recover the misappropriated funds and properties. However, the Tribunal emphasized that these issues should not delay the conduct of the election. The Tribunal directed the Administrator to file fortnightly reports on the developments in the company.

Conclusion:
The Tribunal disposed of IVNP/1(KOB)/2022 by directing the Administrator to conduct the election to the Board of Directors within 45 days and dismissed IVNP/2(KOB)/2022, denying the impleadment of the petitioners. The Administrator was instructed to hand over charge to the newly elected Board and file regular reports on the company's progress.