2021 (5) TMI 548 - Tri - Companies Law

Allegation of oppression and mismanagement - Removal from the post of director - Acquisition of Reversionary property - Waiver application under Section 244 of the Companies Act 2014 by minority shareholders - acquisition of Reversionary rights in the leased property by the Respondent Company - removal of director of the company without notice - HELD THAT - The Respondent No. 1 Company evidently states that 33 shareholders have been attending the meeting and thereby it resolved to acquire the revisionary rights in the leased property of the Company. The Petitioner and his late father were also part of the said acquisition process. No other objector/shareholder has come forward to object the acquisition of the said property post acquisition in the Year-2014. The shareholders and the board of directors in their collective wisdom have sort to acquire the leased property as there was an apprehension that the leased property will be taken over by unscrupulous builders. The Company and its Shareholders has passed a resolution to acquire such revisionary rights in the leased property of the Company. The Petitioner and his late father were actively involved in such acquisition. The minority cannot question the decision of the majority on frivolous grounds and it is necessary for corporate governance that Corporate Democracy of the shareholders to be protected and safeguarded qua the rights of one individual minority shareholder. The decision of the majority would prevail in the interest of the Company and its shareholders per se. Therefore, he cannot question such acquisition at this stage and he has questioned the conveyance deed by filing a suit in City Civil Court of Bombay. Further, the only act of oppression of removal of Petitioner as Director is untenable as the post of director remained vacant due to the absence of the Petitioner in several meetings. The Petitioner has sought to file several complaints, suits before ROC and filed criminal complaints with regard to the same allegations. The Petition is dismissed for want of any justified ground of oppression and mismanagement of the Company under Section 241 of Companies Act, 2013 and therefore, it is concluded that the Petitioner has failed to make out a case for grant of waiver under Section 244 of the Companies Act, 2013.

Summary

Issues Involved:
1. Acquisition of reversionary rights in the leased property by the Respondent Company.
2. Removal of the Petitioner from the position of Director without notice.

Detailed Analysis:

1. Acquisition of Reversionary Rights in the Leased Property:

The Petitioner, a shareholder of Respondent No. 1 Company, challenged the Board's decision to acquire ownership rights of the leased property, alleging a lack of due process and transparency. The property was originally leased for 999 years from Tehnima Farrokah Barucha. The Petitioner claimed that the Respondents created unrest among shareholders to justify purchasing proprietary rights from the lessors, allegedly for wrongful gains. The Petitioner was not served notice of meetings except for two, and the 82nd AGM was called with only five days' notice without mentioning the agenda of acquiring ownership rights. The Petitioner and other shareholders objected to the manner in which the affairs were conducted. The Respondents allegedly held unofficial board meetings, compelled the then President to resign, and executed a deed of conveyance of reversion without following due procedure, resulting in Anjumane Shiate Ali acquiring 51% ownership and Respondent No. 1 acquiring 49%.

Respondents' Defense:
The Respondents argued that the acquisition process was initiated during the tenure of the Petitioner's late father, who was actively involved. They asserted that the decision to acquire the property was made with the majority shareholders' consent and followed proper procedures. The Respondents claimed that the Petitioner and his father had participated in the process and that the Petitioner was now objecting to a decision he was initially part of. The Respondents also highlighted that the Petitioner had approached various forums, including the Bombay City Civil Court and the Company Registrar, with similar grievances, and these complaints were still pending.

Tribunal's Findings:
The Tribunal noted that the Petitioner's father had participated in the acquisition process and had even signed notices for meetings. The Tribunal emphasized the principle of corporate democracy, stating that the majority shareholders' decision should prevail. The Tribunal found no evidence of oppression or mismanagement and concluded that the Petitioner could not question the acquisition at this stage, especially since he had already filed a suit in the City Civil Court regarding the conveyance deed.

2. Removal of the Petitioner as Director:

The Petitioner alleged that he was removed from the position of Director without notice and in violation of Section 169 of the Companies Act, 2013. The Respondents contended that the Petitioner had not attended board meetings since August 2014 and was informed that his position would be vacated if he did not attend the meeting on 10.09.2014. Despite this, the Petitioner did not attend, and the Board resolved that his position had fallen vacant under Section 167 of the Companies Act, 2013.

Tribunal's Findings:
The Tribunal found that the Petitioner had indeed been informed about the consequences of not attending the meetings and that his removal was in accordance with the provisions of the Companies Act. The Tribunal concluded that the removal of the Petitioner as Director could not be considered an act of oppression.

Conclusion:

The Tribunal dismissed the Petition for lack of any justified ground of oppression and mismanagement under Section 241 of the Companies Act, 2013. The Petitioner failed to make out a case for the grant of waiver under Section 244 of the Companies Act, 2013. The decision of the majority shareholders to acquire the reversionary rights was upheld, and the Petitioner's removal as Director was deemed lawful.