9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 376 - AT - IBCOppression and mismanagement - Waiver of eligibility criteria under Section 244(1)(b) of the Companies Act 2013 - HELD THAT - The Ld. NCLT has recognised that there are differences between the members of the Respondent Club which was established with the principal objective to promote and encourage various sports and also carries good reputation and therefore it is in the public interest that these differences are addressed in right earnest. Further it is nobody s case that these allegations were made earlier in any proceedings and stand decided/concluded. Thus the requirements prescribed in sub clauses (i) (ii) and (iii) of para 151 of the judgment of Cyrus Investments Pvt. Ltd. Anr. 2017 (9) TMI 1500 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI are fulfilled. The only issue left is whether the Ld. NCLT was satisfied about the exceptional circumstances made out to grant waiver or not. The Ld. NCLT has noted the allegations of oppression and mismanagement and differences between the members and has noted the public interest involved in the Section 8 company promoting sports - The issue of waiver has been considered and allowed in various judgements. In Brookefiled Technologies Pvt. Ltd. Represented by Director Mr. Pawan Kumar Jain and Another v. Shylaja Iyer and Others 2020 (12) TMI 1176 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI this Tribunal had granted waiver holding that The First Respondent/Petitioner has 9% of the total share capital even after a shareholding was reduced from 45% by means of Rights Issue which is a subject matter of the main company petition. The Tribunal has exercised its discretion and opined that a meritorious litigation cannot be thrown at threshold without examining the merits of the case and further observed that the First Respondent/Petitioner had made out a prima facie case to entertain the main company petition for its final adjudication. It is noted that besides the company petition by 4 members 90 members of the Respondent/Club have raised various issues of mismanagement in their letter to Club Management dated 22.08.2023. The Ld. NCLT has noted the allegations of oppression and mismanagement in the petition before exercising its discretion to allow waiver. A decision on merits of the allegation was not warranted at this stage as Ld. NCLT will have to consider it while deciding the main petition under Section 241 read with Section 242 of the Companies Act 2013. Conclusion - In the conspectus of this case where petition under Section 241 read with Section 242 of Companies Act 2013 is filed by four members of the Section 8 company alleging acts of oppression and mismanagement and the issue of mismanagement is also raised by 90 other members in their signed letter to Club Management and considering the nature of activities of the company involving public interest and that similar allegations were not considered or decided earlier there are no reason to interfere in the discretion exercised by Ld. NCLT in allowing waiver under Section 244 of the Companies Act 2013. Appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include: 1. Whether the National Company Law Tribunal (NCLT) erred in granting a waiver of the eligibility criteria under Section 244(1)(b) of the Companies Act, 2013, allowing a petition under Sections 241 and 242 alleging oppression and mismanagement. 2. Whether the NCLT's decision to grant the waiver was justified given the number of petitioners relative to the total membership of the company. 3. Whether the NCLT's decision was procedurally flawed due to alleged lack of notice to certain respondents. 4. Whether the NCLT's decision was arbitrary or lacked sufficient reasoning, particularly in light of established precedents. ISSUE-WISE DETAILED ANALYSIS 1. Waiver of Eligibility Criteria under Section 244(1)(b) Relevant Legal Framework and Precedents Section 244(1)(b) of the Companies Act, 2013 requires that in the case of a company not having share capital, a petition can be filed by not less than one-fifth of the total number of members. However, the proviso allows the Tribunal to waive this requirement. The judgment in Cyrus Investments Pvt. Ltd. & Anr. v. Tata Sons Ltd. & Ors. established guidelines for granting such waivers, emphasizing that the decision must be reasoned and not arbitrary. Court's Interpretation and Reasoning The Tribunal noted that the petitioners were members of the company and that the application pertained to allegations of oppression and mismanagement. The Tribunal's decision to grant the waiver was influenced by the public interest due to the company's nature as a Section 8 company promoting sports. Key Evidence and Findings The petitioners alleged various acts of oppression and mismanagement, including wrongful convening of an AGM and embezzlement of funds. The Tribunal considered these allegations significant enough to warrant a waiver. Application of Law to Facts The Tribunal applied the principles from the Cyrus Investments judgment, finding that the petitioners made a prima facie case for oppression and mismanagement, thus justifying the waiver. Treatment of Competing Arguments The appellant argued that the waiver was unjustified due to the small percentage of petitioners and alleged procedural improprieties. The Tribunal found these arguments insufficient to overturn the waiver, emphasizing the public interest and the substantive nature of the allegations. 2. Procedural Fairness and Notice Relevant Legal Framework The principles of natural justice require that parties be given notice and an opportunity to be heard. The appellant contended that the lack of notice constituted a procedural flaw. Court's Interpretation and Reasoning The Tribunal noted that advance notice was provided to the respondents, and affidavits of service were filed, indicating compliance with procedural requirements. Key Evidence and Findings The Tribunal found that several respondents were present during the hearing, and no objections regarding lack of notice were raised at that time. Application of Law to Facts The Tribunal concluded that procedural fairness was maintained, as notice was given, and the absence of objections from respondents supported this conclusion. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning "The Tribunal is required to take into consideration the relevant facts and evidence, as pleaded in the application for waiver and (proposed) application under Section 241 and required to record reasons reflecting its satisfaction." Core Principles Established The judgment reaffirms that waivers under Section 244(1)(b) must be based on a reasoned decision considering the nature of the allegations and the public interest involved. It also emphasizes the importance of procedural fairness. Final Determinations on Each Issue The Tribunal upheld the NCLT's decision to grant the waiver, finding no procedural improprieties or arbitrary exercise of discretion. The appeal was dismissed, and the waiver was deemed justified based on the allegations and the public interest.
|
