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2022 (4) TMI 312 - Tri - Companies LawOppression and Mismanagement of affairs of the Company - time limitation - quasi-partnership entity - entitlement of families to equal representation in the Board of Directors - appointment of an independent administrator(s) on the Board of Directors of the Company, either in addition to the equal representation of Petitioner No.1 s family and Respondent No.2 s family in the Board of the Company, or in suppression of the current Board of Directors of the Company - Section 164(2) of the Companies Act, 2013 - main submission of Respondent is that the Company Petition is barred by limitation - HELD THAT - The Bench notes that the decision of 29.12.2015 regarding appointment of Respondent No.3 as additional director of the Company was only regularised on 29.09.2016 in the AGM held on 29.09.2016 when he was appointed as a regular director of the Company therefore for the purposes of limitation the act of oppression should commence from 29.09.2016. Even if we assumes the oppression started from the time of the board meeting held on 29.12.2015 when Respondent No.3 was appointed as Additional Director, it really does not matter as there has been continuous act of oppression against the Petitioners commencing from 29.12.2015 which continued in the various board meeting and AGM s held on 03.03.2016, 23.06.2016, 29.09.2016, 24.01.2017, 18.07.2017 i.e. on several occasions between 2016 and 2018. The contention of the Respondent that for the purposes of limitation, it should be considered from the first act of oppression and not from subsequent several acts of oppression and mismanagement is ill founded and absurd. This Bench is of the view that every act of oppression and mismanagement can be agitated by the petitioner before the tribunal for the purposes of justice. However, in this case there is continuous oppression and mismanagement in the company commencing from 29.12.2015 and the petition is well within limitation. Application stands dismissed filed by Applicant (Respondent in the main Company Petition) regarding limitation of the main company petition. Filing of petition for collateral purposes and for causing obstruction and affairs of the company - HELD THAT - The other submission of the Respondent is that the Petitioners have filed the petition for collateral purposes and for causing obstruction and affairs of the company is devoid of any merits. It is evident that the petitioner being 50% shareholder of the Company and has no representation of the board of the Company and has not received any benefit from the company in form of remuneration or dividend while the Respondents are getting remuneration from the Company. Thus, this Bench has come to the conclusion that a. The Respondent No.2 is disturbing the return of quasi partnership of the company by appointment of his sons, Respondent Nos. 3 and 4, as director of the company. b. The Respondents were not conducting the board meetings in a fair manner. The Company all through 2016-18 has passed all major decisions through circular resolution which was subsequently being posted before the board for ex post facto approval as a fait accompli. c. The board meetings were held only for procedural formalities without following practice and norms of Corporate Governance. The Petitioner s side and the Respondent s side in line with their about 50% of the shareholding to have equal number of representations in the board of Directors of the Respondent No.1 Company - Keeping in view that the casting vote have been heavily misused by the Respondent s side, there will not be any casting vote available to either side and all decisions on the board will be taken only when representative of both side (petitioner and respondent) represented in equal numbaer on the board, agree to the Resolution before the Board. Petition allowed.
Issues Involved:
1. Allegations of oppression and mismanagement. 2. Quasi-partnership and equal representation on the Board. 3. Appointment of additional directors. 4. Disqualification of directors. 5. Financial mismanagement and non-payment of dividends. 6. Limitation period for filing the petition. 7. Conduct of Board meetings and Corporate Governance. Detailed Analysis: 1. Allegations of Oppression and Mismanagement: The Petitioners claimed that Respondent Nos. 2 to 4 were acting in a manner oppressive to their rights and prejudicial to their interests. They alleged that the Respondents were mismanaging the affairs of the Company, which led to the filing of the petition under Sections 241, 242, and 244 of the Companies Act, 2013. The Tribunal found that the actions of Respondent No. 2, including the appointment of his sons as directors and the exclusion of Petitioner No. 1 from decision-making, constituted oppression and mismanagement. 2. Quasi-Partnership and Equal Representation on the Board: The Company was initially run as a quasi-partnership between Petitioner No. 1 and Respondent No. 2, each holding 50% of the shareholding. The Petitioners argued that Respondent No. 2 disturbed this balance by appointing his sons as directors while opposing the appointment of Petitioner No. 1's sons. The Tribunal agreed that the balance of representation on the Board was disrupted, leading to an imbalance. 3. Appointment of Additional Directors: Respondent No. 2 appointed his son, Respondent No. 3, as an Additional Director on 29.12.2015, using his casting vote despite opposition from Petitioner No. 1. This appointment was later regularized in the AGM on 29.09.2016. The Tribunal noted that such appointments were made without maintaining the balance of representation on the Board, which was oppressive to the Petitioners. 4. Disqualification of Directors: Petitioner No. 1 and Respondent No. 2 were disqualified as directors due to non-filing of annual returns of an associate company, M/s Emerald Petrochemicals Pvt. Ltd. The Tribunal found that Respondent No. 2's deliberate failure to sign the annual accounts led to their disqualification, allowing his sons to take control of the Board, which was a mala fide action. 5. Financial Mismanagement and Non-Payment of Dividends: The Petitioners alleged that Respondent No. 2 stopped their remuneration from June 2016 and did not declare any dividends despite the Company making good profits. Instead, funds were infused into a loss-making subsidiary controlled by Respondents. The Tribunal agreed that this amounted to financial mismanagement and oppression. 6. Limitation Period for Filing the Petition: The Respondents argued that the petition was barred by limitation, as the first act of oppression occurred on 29.12.2015, and the petition was filed on 01.01.2019. The Tribunal held that the acts of oppression were continuous, with several instances between 2016 and 2018, making the petition within the limitation period. 7. Conduct of Board Meetings and Corporate Governance: The Tribunal found that the Respondents were not conducting Board meetings fairly. Critical decisions were made through circular resolutions without proper discussion, and the meetings were mere procedural formalities. This was against the principles of Corporate Governance and oppressive to the Petitioners. Judgment: The Tribunal directed: - Equal representation of Petitioner’s and Respondent’s sides on the Board of Directors. - No casting vote for either side; decisions to be taken with mutual agreement. - Joint operation of the Company’s bank accounts by representatives from both sides. - Implementation of these decisions within 15 days. The Tribunal dismissed the Misc. Application No. 976/2019 regarding the limitation and allowed Company Petition No. 12 of 2019, providing relief to the Petitioners.
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