2022 (8) TMI 71 - Tri - Companies Law

Oppression and Mismanagement - allegation of oppression of rights of petitioner by respondents no. 2 and 3 relating to affairs of respondent no. 1 company though he is holding more than 35% shares - it is also alleged that respondent no. 2 is mismanaging the company's affairs - seeking to restrain respondents no. 2 and 3 from creating any third party interest in the property owned by respondent no. 1 company - section 241-242 of the Companies Act, 2013 - HELD THAT - It is not in dispute that the petitioner holds more than 35% of the shares. Respondent no. 2 is managing the day-to-day affairs of respondent no. 1 company. On 05.03.2021, respondent no. 2 on behalf of the company executed the agreement to sell of company's property viz. Final Plot No. 135/B in Survey No. 349/2 Paiki and 350/2 Paiki of the sim of Dariapur-Kazipur of Taluka Asarwa of Sub-District Ahmedabad-6 (Naroda) in favour of one M/s. J.K. Aai Ma Realty Pvt. Ltd. The petitioner wanted to stay execution, implementation, and operation of the sale agreement dated 05.03.2021 - Such injunction cannot be issued for the simple reason that the purchaser of the property is not a party here. If any such order is passed, it will greatly affect the proposed purchaser's right in the property although he had already paid a sum of Rs. 1,00,00,000/- to respondents no. 1 to 3. Now, because of the dispute between two brothers who are having an equal shareholding in respondent no. 1 company, the third party should not suffer. Moreover, the Civil Court has already seized with that dispute. Coming back to one material fact that although respondent no. 2 received a sum of Rs. 1,00,00,000/- on behalf of respondent no. 1 company but did not account for the cash component of Rs. 50,00,000/-. Hence, it is opined that respondent no. 2 appears to be mismanaging the affairs of the company. In such a situation, the company's other assets are required to be preserved till the disposal of this petition. Hence, respondents no. 1 to 3 are directed to maintain the status quo in respect of other assets of the company other than mentioned in the agreement dated 05.03.2021 till the disposal of the main company petition. Application disposed off.

Summary

Issues:
Allegations of oppression and mismanagement under sections 241-242 of the Companies Act, 2013; Interim relief sought to restrain alienation of company's property; Dispute over execution of sale agreement by respondent no. 2; Prima facie evidence of mismanagement by respondent no. 2.

Analysis:
The petitioner filed an original petition under sections 241-242 of the Companies Act, 2013, alleging oppression of rights by respondents no. 2 and 3 regarding the affairs of respondent no. 1 company, despite holding more than 35% shares. The petitioner also claimed interim relief to prevent disposal or alienation of the company's property, specifically targeting an agreement to sell. Respondent no. 2 contested the allegations, stating the petitioner's lack of involvement in the company's activities and accusing the petition of being an obstruction to the company's operations.

Upon hearing both parties, it was established that respondent no. 2 executed an agreement to sell the company's property to a third party, receiving a significant sum in cash and cheque. The petitioner argued that this action was detrimental to the company's interests and requested the Tribunal to restrain any further alienation of the property. Respondent no. 1's counsel contended that the petition was not maintainable, suggesting it was part of a family dispute and emphasizing respondent no. 2's long-standing management of the company.

The Tribunal noted the execution of the sale agreement and the pending Civil Suit against the purchaser. While the petitioner sought to halt the agreement's execution, the Tribunal declined, citing the absence of the purchaser as a party and the potential harm to their rights. However, due to the unaccounted cash component received by respondent no. 2 and indications of mismanagement, the Tribunal directed respondents no. 1 to 3 to maintain the status quo regarding the company's other assets until the main petition's resolution.

In conclusion, the Tribunal recognized the need to preserve the company's assets amidst allegations of mismanagement, highlighting the importance of maintaining the status quo pending further proceedings.