2024 (9) TMI 1609 - Tri - Companies Law

Maintainability of the company petition under Section 399 of the Companies Act, 1956 - pre-condition envisaged under sub sections (1) and (3) of section 399 of the Companies Act, 1956 satisfied or not - amendments made to the Articles of Association and the declarations filed before Registrar of Companies, by the respondents were prejudicial to the interests of public, the 1st respondent company, and the petitioner or not - oppression and mismanagement. Whether the Petitioners have satisfied the condition precedent envisaged under subsections 1 3 of section 399 of the Companies Act, 1956? If the answer is no, whether the company petition is maintainable? - HELD THAT - Though there appears to be some controversy as to whether compliance of sub-section (a) of Section 399 which states that not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less or any members or members holding not less than one-tenth of the issued share capital of the company, is mandatory or directory, in so far as the essential test that determines the eligibility in terms of sub-section (a) of section 399 of the Companies Act, 1956 is concerned, there is no ambiguity. In the instant case, the petitioners even while contending that they have 1/10th share of the issued share capital of the Company at the time of filing the company petition, also on 20.03.2023 have filed the consent affidavits of 4 shareholders of the 1st respondent, namely, Mrs. Alka Sanghi, Aarthi Sanghi, Gaurav Sanghi and Aashish Sanghi, which were merely taken on record subject to the objection if any of the respondents but not under the liberty/direction dated 14/03/2023 of this Tribunal, as contented by the petitioners in their written submission - the purpose behind the consent affidavits is to overcome the pre-condition under Sub- clause (a) of Section 399. The language, in sub-section 3 of section 399, having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them , engaged by the Legislature, makes it abundantly clear that the written consent is a condition precedent for maintaining a petition under section 397 of the Companies Act 1956. An affidavit filed after lapse of 15 years, that too at the far end of the proceedings even accepting that filing of the consent letters is not mandatory does not satisfy the test and hence it is overwhelmingly clear that here is a case of non-filing of written consent as contemplated under Sub-section (3) of Section 399 of the Act, Hence, the sub-section (3) of Section 399 of the Act, remains unsatisfied. Whether amendments made to the Articles of Association and the declarations filed before Registrar of Companies, by the respondents were prejudicial to the interests of public, the 1st respondent company, and the petitioner, amounting to the acts of oppression and mismanagement? - HELD THAT - Merely by stating that only upon perusal of the annual return for the financial year ending 2007, the petitioners gained knowledge of the alleged illegal transfer of shares, especially when it is not the case of the petitioners that the Annual Reports of the 1st respondent were not uploaded in the MCA web site as required under the statute, the Petitioners cannot get over the bar of limitation, as once the returns are uploaded in the MCA web portal, which is in the public domain, the same constitutes notice to public especially to all the directors and members of the company. None of the allegations as made in the petition either survive the law of limitation or constitute the acts of oppression and mismanagement. Therefore, petition is thoroughly misconceived. Petition dismissed.

Issues Involved:

1. Maintainability of the company petition under Section 399 of the Companies Act, 1956.
2. Alleged acts of oppression and mismanagement by the respondents, including amendments to the Articles of Association and declarations filed before the Registrar of Companies.

Issue-wise Detailed Analysis:

1. Maintainability of the company petition under Section 399 of the Companies Act, 1956:

The Tribunal examined whether the petitioners satisfied the condition precedent under subsections (1) and (3) of Section 399 of the Companies Act, 1956. The petitioners claimed to hold 1/10th of the issued share capital of the company, but the respondents contested this, arguing that the petitioners did not meet the required threshold.

The Tribunal noted that the first petitioner sought to withdraw from the petition, leaving the second petitioner to pursue it alone. The second petitioner filed consent affidavits from four shareholders to meet the requirements of Section 399. However, the Tribunal observed that these affidavits were filed much later and did not meet the criteria of "consent in writing" as required by law. The Tribunal cited case law to emphasize that consent must be specific, indicating the particular relief sought and the grounds for it.

The Tribunal concluded that the petitioners did not satisfy the pre-condition under Section 399, as the necessary written consent was not obtained before filing the petition. Therefore, the company petition was deemed not maintainable.

2. Alleged acts of oppression and mismanagement by the respondents:

The Tribunal considered the petitioners' claims of oppression and mismanagement, including the alleged illegal amendments to the Articles of Association, manipulation of statutory records, and unauthorized transfer of shares.

The Tribunal highlighted the factual backdrop, noting that the first respondent company's business operations were closed within a year of filing the petition, making the company defunct. Additionally, the first petitioner sought transposition as a respondent, indicating a settlement among some parties. The Tribunal also noted the long passage of time and the death of the second respondent.

The petitioners alleged that board meetings and general meetings were held without proper notice and that Form 32 reflecting the appointments of respondents 2 to 9 was filed illegally. They also claimed that shares were transferred without proper documentation, amounting to oppression and mismanagement.

The Tribunal found that the petitioners failed to provide sufficient evidence to support their claims. The Tribunal emphasized that merely stating that the petitioners gained knowledge of alleged illegal acts upon reviewing annual returns was insufficient to overcome the bar of limitation. The Tribunal also noted that the petitioners did not present any records to substantiate their allegations.

Regarding the amendment to the Articles of Association, the Tribunal observed that the amendment had become infructuous due to the death of the second respondent. The Tribunal also found no merit in the allegation that the registered office was shifted without following legal procedures, as the current registered office was not at the deceased second respondent's residence.

The Tribunal concluded that the allegations of oppression and mismanagement were either time-barred or lacked merit. Therefore, the petition was deemed misconceived and was dismissed.

Conclusion:

The Tribunal dismissed the company petition, finding that the petitioners did not meet the pre-condition under Section 399 of the Companies Act, 1956, and that the allegations of oppression and mismanagement were either time-barred or lacked merit. The petition was dismissed without costs.

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