2017 (12) TMI 1317 - AT - Companies Law

Oppression and mismanagement - Held that - The contradictions in the documents being relied on by Respondents are glaring as can be seen from the above. The act of Respondent No. 2 amounts to oppression of the Appellants and mismanagement of the affairs of the Company Respondent No. 1. She has tried to shut out the Appellants to bring in her family members Respondents No. 3 to 6. There is no substance in the arguments for the Learned Counsel for the Respondents expressing doubts on the original share Certificates held by the Appellants by claiming that they bore signatures of one or the other of the Appellants. The Respondents, and more particularly Respondent No. 2, has not come forward to show her shares in order to demonstrate as to signatures of whom it was bearing. Similarly, the arguments that NCLT cannot investigate into the title of shares also has no substance because the present matter is being considered not to decide the title of the shares but the question for consideration has been whether the Respondent No. 2 with the support of the other Respondents is unlawfully keeping the Appellants away from the Company claiming that they have transferred their shares leaving them high and dry although they are showing the original shares in hand for their claims. Such acts of oppression cannot be permitted. We find substance in the submissions of the learned counsel for the Appellants that their signatures were taken by Respondent No. 2 for the purpose of negotiating with the bank to arrive at one-time settlement of the company accounts and the same have been misused. Documents relied on by the respondents to claim that appellants resigned from the Board of Directors and transferred their shares are suspicious documents and unreliable. We find that there is no substance in the arguments being raised by the learned counsel for the respondents, in the facts and circumstances of this matter.It is declared that there has been no transfer of shares from the appellants to the Respondents Nos. 2 to 6 as is being claimed by these respondents.

Summary

Issues Involved:
1. Alleged wrongful transfer of shares.
2. Oppression and mismanagement by respondents.
3. Validity and compliance of share transfer forms under Section 108 of the Companies Act, 1956.
4. Limitation and delay in filing the company petition.
5. Legitimacy of resignation letters and annual returns.
6. Jurisdiction of NCLT to investigate title of shares.

Detailed Analysis:

1. Alleged wrongful transfer of shares:
The appellants claimed they were locked out of the company despite holding original shares. They contended that the respondents falsely claimed the shares were transferred in 2007. The respondents presented resignation letters and receipts of payment for the transfer of shares, which the appellants denied signing.

2. Oppression and mismanagement by respondents:
The appellants alleged that the respondents engaged in oppression and mismanagement, including fraudulent annual returns and unauthorized board meetings. They sought a declaration of their status as shareholders and the nullification of board meetings held after 13.03.2013.

3. Validity and compliance of share transfer forms under Section 108 of the Companies Act, 1956:
The appellants argued that the share transfer forms did not comply with Section 108 of the Companies Act, 1956, which mandates the submission of original share certificates with transfer forms. The forms presented by the respondents lacked necessary details such as the company's name, folio numbers, and share numbers, making them defective and incomplete.

4. Limitation and delay in filing the company petition:
The NCLT dismissed the petition on grounds of limitation, stating that the cause of action arose in 2005. However, the appellants argued that the limitation period should start from the date they discovered the fraud in 2014. The appellate tribunal agreed with the appellants, stating that the limitation is a continuous cause of action as they still hold the original shares.

5. Legitimacy of resignation letters and annual returns:
The appellants contested the legitimacy of resignation letters dated 28.03.2007 and claimed that the annual returns for subsequent years still listed them as directors. The tribunal found inconsistencies in the respondents' documents, including contradictory dates and incomplete forms, suggesting that the documents were suspicious and unreliable.

6. Jurisdiction of NCLT to investigate title of shares:
The respondents argued that NCLT lacked jurisdiction to investigate the title of shares under Sections 58 and 59 of the Companies Act, 2013. However, the tribunal clarified that the issue was not about determining the title but about addressing the oppression and mismanagement by the respondents.

Judgment:
The appellate tribunal allowed the appeal, quashing the NCLT's judgment. It declared that no transfer of shares from the appellants to the respondents occurred and quashed the forms submitted to the Registrar of Companies recording the appellants' resignations and share transfers. The respondents were restrained from obstructing the appellants from participating in the company's affairs and from interfering in the company's operations. No order as to costs was made.