2020 (9) TMI 847 - Tri - Companies Law

Oppression and mismanagement - sections 213 and 241 of the Companies Act, 2013 - petitioners contended that the second respondent and his family members are in the helm of affairs of the company and they mismanage the affairs of the company and also oppressed the other stake holders since incorporation - HELD THAT - It is a fact admitted that the respondent-company was incorporated under the provisions of section 25 of the Companies Act, 1956 and it is carrying on with several religious and charitable operations - It could be seen from the pleadings that the petitioners have made allegations such as oppression and mismanagement and fraudulent conduct of company business, misappropriation of ₹ 80 lakhs, embezzlement of ₹ 4 to 5 crores in Tsunami Relief Fund embezzlement of ₹ 4 crores by sale of property at Jubilee Hills diversion of donations of US 400,000 meant for Dalit Education Centres in India through hawala which is contrary to the FERA/FEMA and public trust acts/laws, diversion of embezzled funds into private investments in the name of the members of family, and charging exorbitant fees and accumulating funds in fixed deposits and the same allegations could be seen in the complaint dated September 29, 2016, sub-mitted by the first petitioner on which the FIR No. 22 of 2016 was came to be registered. It is a fact that the petitioners herein are the members of the company and since they satisfy the threshold limit of qualification for filing a petition under sections 213 and 241 of the Act, have filed the present petition. However, whereas the law requires them to show good reasons for seeking investigation supported by such evidence as may be necessary , they have relied only on the complaint filed in FIR No. 22 of 2016 which is already pending before the police authorities for investigation. At the time of filing the instant petition the petitioners have not filed any documents in support of their case and allegation/averments made in the company petition. Learned counsel for the respondents rightly pointed out that the petitioners have not filed any documents in support of invoking the provisions of sections 213 and 241 of the Act, 2013. In view of the already pending investigation in the affairs of the company and against other respondents by the investigation agencies, we are not inclined to pass any orders on the merits of the instant petition and accordingly the petition is dismissed.

Summary

Issues Involved:

1. Allegations of oppression and mismanagement under Sections 213 and 241 of the Companies Act, 2013.
2. Request for investigation into the affairs of the company.
3. Interim measures including suspension of the Board and freezing of assets.
4. Misappropriation of funds and financial irregularities.
5. Validity and sufficiency of evidence supporting the allegations.
6. Pending criminal investigations and their impact on the current petition.
7. Legal standing and authorization of the petitioners.

Issue-wise Analysis:

Allegations of Oppression and Mismanagement:
The petitioners alleged various acts of oppression and mismanagement by the second respondent and his family members, including misappropriation of funds, nepotism, and unauthorized removal of directors. They claimed that the second respondent had gained control of the organization, appointed family members to key positions, and engaged in financial irregularities. The respondents countered these allegations, stating that the company’s affairs were conducted in compliance with the Companies Act, 2013, and that the petitioners failed to provide necessary evidence.

Request for Investigation:
The petitioners sought an investigation under Section 213 of the Companies Act, 2013, into the affairs of the company. They argued that the second respondent's actions warranted an investigation. However, the tribunal noted that the petitioners did not provide sufficient evidence to support their claims, relying mainly on an existing FIR (No. 22 of 2016) which was already under investigation by the CID, Telangana State.

Interim Measures:
The petitioners requested interim measures including the suspension of the Board and freezing of the company’s assets. The tribunal found that without concrete evidence, granting such measures would be premature and could interfere with the ongoing criminal investigation.

Misappropriation of Funds:
The petitioners accused the second respondent of embezzling funds, including ?80 lakhs from Bible sales, ?4-5 crores from tsunami relief funds, and ?4 crores from the sale of property at Jubilee Hills. The respondents denied these allegations, stating that investigations by the Enforcement Directorate and police found no irregularities. The tribunal noted that these allegations were part of the ongoing investigation in FIR No. 22 of 2016.

Validity and Sufficiency of Evidence:
The tribunal emphasized that the petitioners failed to provide necessary documentary evidence to support their allegations. The petitioners’ reliance on the FIR and lack of additional evidence weakened their case. The tribunal found that the allegations in the petition mirrored those in the FIR, which was still under investigation.

Pending Criminal Investigations:
The tribunal highlighted that the ongoing investigation by the CID, Telangana State, into the same allegations made in the petition, was a significant factor. The Supreme Court had directed the authorities to expedite this investigation. The tribunal decided that ordering a separate investigation under Section 213 would duplicate efforts and potentially disrupt the ongoing criminal proceedings.

Legal Standing and Authorization of the Petitioners:
The respondents challenged the petitioners' standing, stating that the first petitioner did not hold any position in the company and had not been authorized by the other petitioners. The tribunal acknowledged that the petitioners met the threshold for filing under Sections 213 and 241 but reiterated the lack of supporting evidence.

Conclusion:
The tribunal dismissed the petition, citing the pending investigation by the CID, Telangana State, and the lack of concrete evidence provided by the petitioners. The tribunal found that intervening at this stage would duplicate investigative efforts and interfere with the ongoing criminal proceedings. The interim orders were vacated, and no costs were awarded.