2018 (1) TMI 8 - Tri - Companies Law

Oppression and mismanagement - Whether the Company petition is maintainable under section 397/398 of the Companies Act, 1956 in the light of allegation that the petitioner is not holding minimum 10 % shareholding of the Company, as prescribed under Company law? - Held that - The respondent Nos. 2 to 5 having ceased to be Directors of the Company and also divested their investment by way of shares in Company, they have no locus standi to interfere in the affairs of Company. Therefore, all the impugned transactions made by Respondent No. 2 to 4, and their family members interest with respect to the properties of the Company mentioned supra are declared to be illegal and they are liable to be set- aside. Since all the concerned parties, in whose favour the impugned sale deed were executed have already made a party to the present CP, there is no further notice required to be issued to them before setting aside the impugned sale deeds. When the respondent No. 5 ceased to be Director of the Company, he cannot file Form No. 32 on 09.02.2005 with Registrar of Company. Therefore, the same is liable to be seaside with directions to the Registrar of Companies (Respondent No. 9) not recognise the same. It is also relevant to point here as stated supra, the resignation of Respondent No. 5, transfer of shares in question etc are affirmed by way evidence given by the second respondent before a court of law in OS No.931 of 2006. The contention of the respondent the evidence given in a suit cannot be relied upon in other proceedings like in the present proceedings cannot be accepted.

Summary

Issues Involved:
1. Maintainability of the Company Petition under Section 397/398 of the Companies Act, 1956.
2. Validity of resignations and re-appointments of Respondent Nos. 2 to 5 as Directors.
3. Validity of Form 32 filed on 09-02-2005.
4. Validity of share transfers and property transactions executed by Respondent Nos. 2 to 5.
5. Reliefs entitled to the petitioner.

Issue-wise Detailed Analysis:

1. Maintainability of the Company Petition:
The petitioner holds 17,40,159 equity shares, which constitutes more than 10% of the total shareholding, thus meeting the requirement under Section 397/398 of the Companies Act, 1956. The contention that the share transfers to the petitioner were fraudulent was rejected as the share transfer forms were duly signed and executed by the respondents.

2. Validity of Resignations and Re-appointments:
The evidence presented, including resignation letters and Form 32 filings, confirmed that Respondent Nos. 2 to 5 had resigned as Directors. The re-appointment claims by Respondent Nos. 2 to 4 were unsupported by any valid documentation or adherence to the Articles of Association and Companies Act provisions. The Tribunal found these claims to be baseless and rejected them.

3. Validity of Form 32 Filed on 09-02-2005:
The Form 32 filed by Respondent No. 5 on 09-02-2005, indicating the re-appointment of Respondent Nos. 2 and 3 as Directors, was declared invalid. Respondent No. 5 had resigned on 18-12-2004, and thus, he had no authority to file such a form.

4. Validity of Share Transfers and Property Transactions:
The share transfers to the petitioner were found to be valid and duly executed. The property transactions executed by Respondent Nos. 2 to 5, including various sale deeds, were declared illegal and void ab initio as they were done without proper authorization from the Company. The Tribunal noted that these transactions were fraudulent and prejudicial to the interests of the Company and its shareholders.

5. Reliefs Entitled to the Petitioner:
The Tribunal granted the following reliefs:
- Declared that Respondent Nos. 2 to 4 ceased to be Directors from 09-04-2004 and Respondent No. 5 from 18-12-2004.
- Set aside the impugned property transactions and sale deeds executed by the respondents.
- Directed the Registrar of Companies to effect necessary changes in the records and not recognize the Form 32 filed on 09-02-2005.
- Dismissed CA No. 94 of 2017 as it lacked merit.

Conclusion:
The Tribunal concluded that the affairs of the Company were being mismanaged due to the unauthorized actions of Respondent Nos. 2 to 5. The reliefs granted aimed to restore proper management and protect the interests of the Company and its shareholders. The petition was allowed, and the impugned transactions were declared void.