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2022 (12) TMI 52 - AT - Companies LawOppression and Mismanagement - oppression of minority shareholders - time was essence of the Assets Transfer Agreement (ATA) as specified Long Stop Date (LSD) or not - consent of the Appellants was necessary for any change in LSD - minority shareholder were oppressed by the majority shareholder - violation of rights of the Appellants in implementation of the SPSHA along with the Addendum to the SPSHA - implementation of the ATA was without consent of the minority shareholder - whether this tantamount to their oppression and detrimental to their rights? Whether, the time was essence of the Assets Transfer Agreement (ATA) as specified Long Stop Date (LSD) - Whether, the consent of the Appellants was necessary for any change in LSD? - HELD THAT - It has been brought out that the LSD could not have been extended or extensions of the LSD was detrimental to right of the Appellants in any way. This establishes that although time is a significant concept in such transaction but cannot be a condition which cannot be altered with mutual consent of the concerned parties - This Appellate Tribunal also do not consider above action of extension of the LSD especially without consent of the Appellants as act of oppression of minority shareholders (the Appellants) by the majority shareholders. Looking into all these aspects and implication of extension of the LSD impacting favourably all stakeholders, the implementation of the ATA and revival of the company, this Appellate Tribunal do not find any error in the impugned order. Whether, the Appellants as minority shareholder were oppressed by the majority shareholder in the present case? - HELD THAT - This Appellate Tribunal is not inclined to accept the arguments of the Appellants regarding their allegations of oppressions especially when the plant itself was shut down. There was no alternative except liquidation or revival of company through other modes including sale of assets to other entity who could revive the company. It is also not out of context to take into account that prima-facie payment of dues to stakeholders and bringing an additional investment of Rs. 66 crores by the 2nd Respondent as purchaser of the company as helped the company has well as all stakeholders including the Appellants. By no stretch of imagination these acts and deeds can be construed as oppression of the Appellants and therefore this Appellate Tribunal do not find any error in the impugned order on this account. Whether the rights of the Appellants have been violated in implementation of the SPSHA along with the Addendum to the SPSHA? - Whether the implementation of the ATA was without consent of the minority shareholder and whether this tantamount to their oppression and detrimental to their rights? - HELD THAT - It seems that all decisions were required to be taken with approval of Investors and the Chairman was supposed to be Director nominated by the Investors (the Appellants) and it has been noted from the averments that the Appellants were appointed as Director and CEO on 02.02.2014 assuming charge and control of the company. However, due to deteriorating financial health of the company causing heavy losses and incurring debts, the Appellants resigned from the BoD and CEO position on 02.01.2015. It is also observed that the ATA was signed on 24.06.2016 by 1st Respondent, 2nd Respondent and each of the shareholder of the seller whose name was listed out in Schedule 1 of the ATA. This ATA was signed subsequent to resolution passed in EGM held on 16.04.2016 wherein Mr. Sanjeev Baba director of the company to authorise to negotiate, to settle the terms and conditions, signing and executing the requisite the Sale Agreement, Sale Deeds and such other documents as may be found necessary - This Appellate Tribunal therefore do not find that the provisions of the SPSHA or the addendum to the SPSHA were breached. Similarly, it is also held that no prior consent of the Appellants was needed for any amendments (in the present case extension of the LSD). Looking to all these agreements, events as discussed earlier and proper legal documents signed this Appellate Tribunal do not find any error in the impugned order. Similarly, not taking consent of the Appellants cannot be construed as act of oppression by majority shareholders especially keeping in view that the sale of the assets of the company was for the benefits of all stakeholders including shareholders and the company itself. This Tribunal, is of the considered opinion that there is no error, in the impugned order dated 11.02.2020, passed by the Tribunal and the Instant Appeal, is devoid of merits. Consequently, the Appeal fails. Appeal dismissed.
Issues Involved:
1. Whether the time was the essence of the 'Assets Transfer Agreement' (ATA) as specified 'Long Stop Date' (LSD)? 2. Whether the consent of the 'Appellants' was necessary for any change in 'LSD'? 3. Whether the 'Appellants' as minority shareholders were oppressed by the majority shareholders? 4. Whether the rights of the 'Appellants' have been violated in the implementation of the 'SPSHA' along with the 'Addendum' to the 'SPSHA'? 5. Whether the implementation of the 'ATA' was without the consent of the minority shareholders and whether this amounts to their oppression and is detrimental to their rights? Detailed Analysis: Issue No. (I) (a) and (b): Whether the time was the essence of the 'Assets Transfer Agreement' (ATA) as specified 'Long Stop Date' (LSD)? Whether the consent of the 'Appellants' was necessary for any change in 'LSD'? The ATA specified that the 'Long Stop Date' (LSD) could be extended to a further date mutually agreed upon by the parties in writing. The 'Appellants' argued that their consent was necessary for any extension of the LSD. However, the 'Respondents' contended that in the EGM held on 16.04.2016, Mr. Sanjeev Baba was authorized to negotiate and settle the ATA, and there was no specific provision requiring the 'Appellants'' consent. The Tribunal found the 'Respondents'' reasoning logical, considering the entire series of events, including the signing of the SPSHA, the deteriorating financial conditions of the company, and the signing of the ATA to sell the assets of the 1st Respondent. The Tribunal concluded that the extension of the LSD without the 'Appellants'' consent was not an act of oppression and upheld the 'impugned order'. Issue No. (II): Whether the 'Appellants' as minority shareholders were oppressed by the majority shareholders in the present case? The 'Appellants' cited instances such as non-service of notice for the AGM, non-supply of audited financial statements, extension of the LSD without their consent, and breach of the SPSHA and Addendum. The Tribunal examined these allegations and found no concrete case of oppression. The Tribunal noted that the 'Appellants' were inducted on the board and later resigned due to deteriorating financial conditions. The Tribunal concluded that these acts did not constitute oppression, especially when the sale of assets was for the benefit of all stakeholders, including the 'Appellants'. The Tribunal found no error in the 'impugned order' on this account. Issue No. (III) (a) and (b): Whether the rights of the 'Appellants' have been violated in the implementation of the 'SPSHA' along with the 'Addendum' to the 'SPSHA'? Whether the implementation of the 'ATA' was without the consent of the minority shareholders and whether this amounts to their oppression and is detrimental to their rights? The Tribunal noted that the SPSHA and Addendum required the 'Appellants'' approval for decisions. However, after their resignation and the authorization given to Mr. Sanjeev Baba in the EGM held on 16.04.2016, the Tribunal found no violation of the SPSHA or Addendum. The Tribunal concluded that the implementation of the ATA without the 'Appellants'' consent was not an act of oppression, especially considering the sale of assets was for the benefit of all stakeholders. The Tribunal found no error in the 'impugned order' and dismissed the appeal. Conclusion: The Tribunal found no error in the 'impugned order' dated 11.02.2020 and concluded that the appeal was devoid of merits. Consequently, the appeal was dismissed, and the connected pending IAs were closed.
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