2022 (7) TMI 103 - Tri - Companies Law

Oppression and Mismanagement - seeking appointment of an Administrator to manage the day-to-day affairs of the 01st Respondent Company - creation of mortgage - Petitioners alleged that the 02nd Respondent Group itself is responsible for the present bad state of affairs of the 01st Respondent Company, while the 02nd Respondent's Group contends that the Petitioners are responsible for the same - Sections 241 and 242 of Companies Act - HELD THAT - In any event, it is not in dispute that there is no Board which can function and run the Company as on date. The only objection raised by the 02nd Respondent Group is that if an Administrator is appointed, the Petitioners who are responsible for the bad state of affairs of the Company and who are facing various proceedings and prosecutions will escape from their responsibility and liability. In our view, the contention of the 02nd Respondent's Group is unsustainable. On the other hand, when even according to them the Petitioners who are holding 50.23% shareholding and managing the affairs of the Company are responsible for bad state of affairs of the 01st Respondent Company, it is in the interest of the 02nd Respondent Group and also in the interest of the Company and all other stakeholders to keep the Petitioners away from the management of the 01st Respondent Company by appointing an independent Administrator to run the Company till the C.P. is disposed of. It is directed that Justice Shri Anand Byra Reddy, Retired Judge of the Hon'ble High Court of Karnataka, is hereby appointed as an Administrator of the 01st Respondent Company with immediate effect and shall hold office and will manage the affairs of the 01st Respondent Company until further orders of this Tribunal. Application disposed off.

Issues Involved:
1. Allegations of oppression and mismanagement under Sections 241 and 242 of the Companies Act, 2013.
2. Appointment of an Administrator to manage the affairs of the Respondent Company.
3. Validity of the Board of Directors and quorum requirements.
4. Interim reliefs and injunctions sought by the Petitioners.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The Petitioners, M/s. Waterwalk Apartments Pvt. Ltd. and another, filed a Company Petition against M/s. Buoyant Technology Constellations Pvt. Ltd. and others under Sections 241 and 242 of the Companies Act, 2013. They sought reliefs declaring the acts of the Xander Group as oppressive and amounting to mismanagement. The Petitioners alleged that the Xander Group, through their acts of omission and commission, had been oppressing the rights of the Petitioner No. 1 Company to gain wrongfully at the expense of the Respondent No. 1 Company.

2. Appointment of an Administrator:
The Petitioners requested the appointment of an Administrator to manage the day-to-day affairs of the Respondent No. 1 Company, citing that the company is now headless due to the resignation of the nominee Directors of the Xander Group. The Tribunal found merit in this request, noting that the company could not function without a valid Board of Directors. Consequently, Justice Shri Anand Byra Reddy, a retired judge, was appointed as the Administrator with immediate effect to manage the affairs of the company until further orders.

3. Validity of the Board of Directors and Quorum Requirements:
The Articles of Association of the Respondent No. 1 Company stipulated that the Board should comprise a minimum of four Directors, with specific provisions for the nomination of Directors by the Xander and Mantri Groups based on their shareholding. As the Xander Group's nominee Directors had resigned, the Board could not meet the quorum requirements, rendering it non-functional. This deadlock necessitated the appointment of an independent Administrator to ensure the company's operations could continue.

4. Interim Reliefs and Injunctions:
The Petitioners sought various interim reliefs, including the suspension of the nominees of the Respondent Nos. 2 to 5 from the Board and restraining them from interfering in the company's affairs. The Tribunal granted the interim relief of appointing an Administrator, emphasizing the need to keep the Petitioners away from the management of the company to ensure impartial administration until the disposal of the petition.

Orders Passed:
1. Justice Shri Anand Byra Reddy was appointed as the Administrator of the Respondent No. 1 Company with immediate effect, and the Board was suspended.
2. The Administrator was to be paid a monthly honorarium of Rs. 2 lakhs plus out-of-pocket and incidental expenses, to be borne by the company. If the company could not pay, the expenses would be equally shared by the Petitioners and the 2nd Respondent Group.
3. The Administrator could engage professionals for assistance with prior permission from the Tribunal, with fees borne by the company.
4. The Administrator was tasked with mediating between the Petitioners and the 2nd Respondent Group to resolve ongoing issues.
5. The Administrator was required to file independent monthly reports to the Tribunal, with the first report due within four weeks from the date of the order.

The case was listed for further hearing on 12.07.2022.

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