2022 (11) TMI 509 - Tri - Companies Law

Oppression and mismanagement - siphoning off of funds - meetings of the Board of Directors or that of the shareholders of the company have been properly convened or not - HELD THAT - As on today, that is the fact is that the right issue has been published and additional shares are allotted to increase the share capital. We do not wish to reverse that. We make it clear that the pattern of share which might have changed in between the petitioner and the respondent inter-say shall be subject to outcome of main petition. In order to safeguard interest of all shareholders of the company, we direct the fixed asset of the company shall not be alienated or disposed of, but at the same time to keep the company to go on, the directors of the company may raise the loans against fixed assets as per the provisions of Section 180 of the Companies Act, 2013. Application disposed off.

Summary

Issues:
Application for interim relief against oppression and mismanagement in a company under sections 241-242 and 213 of the Companies Act, 2013.

Analysis:
The applicants, being majority shareholders of the company, alleged oppression and mismanagement by the respondents. They claimed that no proper meetings were held, financial statements were doctored, and funds were being siphoned off. The respondents were accused of not informing the applicants about meetings, siphoning funds through associate concerns, and undervaluing shares. The applicants also raised concerns about the issuance of shares at a discount, related party transactions, and a rights issue benefiting minority shareholders. They sought reliefs including staying the capital issue, restraining asset transfers, and preventing changes in shareholding.

In response, the respondents argued that business affairs were transparent, infusions were made when needed, and decisions were taken in the company's interest. They claimed that the rights issue was decided after discussions with the petitioners and all existing shareholders were given an opportunity to subscribe. The respondents accused the petitioners of obstructing the rights issue by demanding exorbitant rates for shares and not participating in the subscription process.

The Tribunal acknowledged that the rights issue had already been implemented, but it decided not to reverse it. The shareholding pattern was to be subject to the main petition's outcome. To safeguard all shareholders' interests, the Tribunal restrained asset alienation but allowed the directors to raise loans against fixed assets. The order directed that the fixed assets should not be disposed of until the main proceeding's disposal, and the share allotment through the rights issue was subject to the main petition's outcome on merits.

Therefore, the Tribunal disposed of the application for interim relief, allowing the company to continue as a going concern while safeguarding the interests of all parties involved.