2015 (10) TMI 2326 - Board - Companies Law

Oppression and mismanagement in affairs of Company It is case of Petitioner that Respondent has not conducted any business since year 2000 nor has been regular in filings with ROC 2nd Respondent filed various forms with ROC using digital signature of Petitioner which was not permitted and has taken advantage of CLS Scheme No approval of shareholders taken in doing such acts - Whether petitioners have any locus to file the present petition? - Whether petitioners have made out any case of oppression and mismanagement? - Whether the petitioners are entitled to seek reliefs as prayed in the petition? Held That - 1st Petitioner has known 2nd respondent as both were the Chairman and Managing Director of M/s. Twenty First Century Management Services Limited for quite long time - Petitioners kept silence over all the years even after knowing the activities of R1 for reason that they have already transferred their shares - It is a clear case of ulterior motive and as such petitioners have no locus standi - Issue answered against petitioners. Further,petitioners are no longer shareholders thus cannot question allotment of shares and as such at this belated time have no locus standi to question the same - Petition is an abuse of process of law as petitioners have exited the Company, there cannot be any acts of oppression against them and in so far as mismanagement is concerned, when there is no business activity in the company there cannot be any allegation of mismanagement in the affairs - It is not the case of petitioners that they have invested huge money as there is no documentary evidence to prove that petitioners have invested any money in the company. It is unequivocal that petitioners are not entitled to any reliefs as prayed - Person approaching Court with unclean hands is not entitled to seek equity - Petition is miserably failed and liable to be dismissed Decided in favour of Respondents.

Summary

Issues Involved:
1. Locus Standi of Petitioners
2. Allegations of Oppression and Mismanagement
3. Entitlement to Reliefs

Detailed Analysis:

Issue 1: Locus Standi of Petitioners

The petitioners, holding 100 shares each, and the 1st petitioner being a former director, alleged acts of oppression and mismanagement. The company was incorporated on 26.06.1995, and the respondents contended that the petitioners transferred their shares and resigned as directors in 1997-1998. The respondents argued that the petition is barred by limitation and that the petitioners have no locus standi as they ceased to be shareholders and directors long ago. The petitioners claimed a continuing cause of action, which the court found unsubstantiated as they maintained silence for over 15 years. The court concluded that the petitioners exited the company, and the petition was filed with ulterior motives. The petitioners failed to establish continuous acts of oppression or mismanagement, and thus, the issue was decided against them.

Issue 2: Allegations of Oppression and Mismanagement

The petitioners alleged illegal transfer and allotment of shares and the removal of the 1st petitioner as a director. The respondents countered that the shares were legally transferred and the petitioners had exited the company. The court noted that the petitioners did not raise any grievances for over 15 years and had no locus standi to question the share allotment. The court also found that the petitioners failed to establish any continuous acts of oppression or mismanagement. The company had no business activities, and the allegations were deemed to be made with mala fide intentions. The court referenced various judgments, including Shanti Prasad Jain v. Kalinga Tubes Ltd., to emphasize that continuous oppressive conduct must be proven, which the petitioners failed to do. Thus, the issue was decided against the petitioners.

Issue 3: Entitlement to Reliefs

The court held that the petitioners were not entitled to any reliefs as they did not come with clean hands and failed to establish any case of oppression or mismanagement. The petition was deemed to be filed with ulterior motives, primarily due to the appreciation in the value of the company's property. The court emphasized that equity requires one to come with clean hands, which the petitioners did not. Consequently, the petition was dismissed, and all interim orders were vacated.

Conclusion:

The petitioners lacked locus standi as they had exited the company long ago and failed to establish continuous acts of oppression or mismanagement. The petition was filed with ulterior motives, and the court dismissed it, denying all reliefs sought by the petitioners.