2021 (11) TMI 799 - Tri - Companies Law

Transfer of the company property - appointment of an administrator, to direct respondent No. 1 not to increase its authorised share capital or allot any fresh shares - HELD THAT - The applicant herein was not a shareholder when the transaction in question took place. He got associated with respondent No. 1/company subsequently. Thus, the applicant does not have locus to question the transaction in question. The applicant is not able to establish a prima facie case or balance of convenience in his favour for grant of interim relief. However, no further alienation of assets of respondent No. 1/company shall be made from the date of this order in order to avoid multiplicity of proceedings. Application disposed off.

Summary

Issues:
Challenge to transfer of company property without authorization, appointment of administrator, conducting of affairs against shareholders' interest, restraint on increasing authorized share capital, convening EGM, direction on accounts, restraint on alienating land, assets, and properties.

Analysis:
The applicant challenged the transfer of company property without authorization, alleging fraudulent, arbitrary, and non-transparent conduct to the detriment of the petitioner and minority shareholders. The applicant sought the appointment of an administrator, direction against increasing authorized share capital, and allotting fresh shares, convening an Extraordinary General Meeting, conducting accounts and affairs of the company, and restraining alienation of land and assets. The applicant, a shareholder of the company, claimed the requisite shareholding under the Companies Act to maintain the petition.

The petitioner produced a Development Agreement-cum-GPA to support claims that property was sold without authorization by the Board of Directors. Respondents were accused of not taking action to restore the property despite being informed. Written submissions highlighted the sale of valuable property without consent, attachment of properties by the Police in 2002, and lack of authorization for property transfers.

Respondents raised various contentions, including the petition being time-barred, suppression of material facts, inadequate shareholding by the petitioner, collusion with other parties, protection under the Doctrine of Indoor Management, and the inability to set aside transactions due to the lapse of time. Respondents also questioned the petitioner's shareholding percentage and absence of certain respondents in the proceedings.

Further submissions from other respondents emphasized the lack of evidence regarding the non-deposit of sale proceeds, acts of mismanagement, the company's non-compliant status, inactivity since 2011, and potential hardship from any interim orders. After hearing arguments, the Tribunal concluded that the applicant lacked locus standi to question the transaction and failed to establish a prima facie case or balance of convenience for interim relief. However, the Tribunal ordered no further alienation of company assets to prevent multiple proceedings.

In conclusion, the Tribunal disposed of the application, clarifying that its observations were preliminary and would not influence the final order in the Company Petition. The decision highlighted the importance of establishing standing and a strong case for interim relief, while also considering the potential impact on company assets and proceedings.