2022 (5) TMI 86 - Tri - Companies Law

Oppression and Mismanagement - Seeking to implead the petitioners as additional Respondents - seeking to permit the petitioners to file a counter affidavit - allegation is that the majority shareholding obtained by the 3rd respondent was by adopting illegal means and by misinterpreting the order of NCLT, Chennai Bench - HELD THAT - This application has been filed by two shareholders for their impleadment as additional respondents in Company Petition No. TCP/34/KOB/2019 which has been filed during 2019 and since the pleadings are complete, the matter is in the list for final hearing. At this belated stage, these applicants have come forward for their impleadment, that too in a petition filed under Section 241 242 of the Companies Act,2013. Such petitions are maintainable only when an eligible person files the same in terms of Section 244 of the Companies Act. Instead of filing a Company Petition (for which these applicants are not eligible), they are trying to intervene in this Company Petition. Considering this application on merit, on-going through the documents annexed and the arguments advanced by the learned Counsel for the parties, it is held that an application for impleading a party should carry all the relevant facts and circumstances, which show/prove that the person making such application for impleadment is a necessary/proper party. On the basis of the documents produced and submissions of the applicants, it is opined that the applicants have to establish how their rights as a shareholder will get affected by any order that may be passed by the Tribunal. The applicants failed to prove that they are necessary and proper parties as per Section 241 of the Companies Act, 2013, who is in the management of the affairs of the Company against whom any acts of oppression and mismanagement are complained of. Moreover, merely holding of shares cannot be regarded as a sufficient ground for allowing all the shareholders to join the litigation and for adjudication of the issues raised. In the present Company Petition, the applicants are not necessary parties and they cannot be impleaded as respondents. Their remedy is to file a Company Petition, to which also they are not eligible as they do not have the required percentage of shares in the company. This application is devoid of merit and accordingly the same is dismissed.

Summary

Issues:
1. Impleadment of petitioners as additional respondents in Company Petition.
2. Allegations of oppression and mismanagement by minority shareholders against majority shareholders.
3. Legality of share allotment and management decisions.
4. Challenge of impleadment based on previous Tribunal orders.
5. Eligibility and locus standi of applicants as necessary or proper parties.

Analysis:

Issue 1: Impleadment of petitioners
The petitioners sought to be impleaded as additional respondents in a Company Petition alleging oppression and mismanagement. They were shareholders of the company but not parties to the original petition. The Tribunal examined the relevance of their impleadment at a belated stage, emphasizing the need for a proper party to join the proceedings. The Tribunal emphasized that holding shares alone does not automatically warrant participation in the litigation, especially when the applicants failed to demonstrate how their rights as shareholders would be affected by the Tribunal's decision.

Issue 2: Allegations of oppression and mismanagement
The Company Petition alleged oppression and mismanagement by majority shareholders against minority shareholders and directors. Disputes arose regarding the conduct of the company, particularly concerning the resort managed by the company. The petitioners contended that majority shareholding obtained by the 3rd respondent was through illegal means, violating statutory provisions related to share allotment. The Tribunal previously canceled a significant share allotment to the 3rd respondent based on these allegations.

Issue 3: Legality of share allotment and management decisions
The petitioners challenged the legality of share allotment to the 3rd respondent, claiming it was done to defraud members and gain control over the company. They argued that the allotment violated Companies Act provisions requiring authorization by special resolution and valuation reports for share pricing. The Tribunal noted discrepancies in the allotment process and its potential mismanagement implications, emphasizing the need for adherence to legal procedures in such transactions.

Issue 4: Challenge of impleadment based on previous Tribunal orders
Respondents contested the impleadment based on a previous Tribunal order, arguing that the petitioners lacked the necessary standing to challenge the allotment and management decisions. They highlighted ongoing challenges to the previous order and questioned the relevance of the petitioners' claims in the current proceedings. The Tribunal considered the timing and relevance of the petitioners' application in light of the previous Tribunal orders and pending appeals.

Issue 5: Eligibility and locus standi of applicants
The Tribunal evaluated the eligibility and locus standi of the applicants as necessary or proper parties under the Companies Act. It emphasized the importance of demonstrating how the applicants' involvement was essential for a comprehensive decision on the pending issues. The Tribunal referenced legal precedents to underscore the significance of judicial discretion guided by law and the necessity of parties' nexus to the subject matter of the litigation. Ultimately, the Tribunal found the applicants lacked the necessary status to be impleaded as respondents in the Company Petition, dismissing their application for impleadment.

This detailed analysis of the judgment highlights the legal complexities surrounding impleadment, allegations of oppression and mismanagement, share allotment legality, challenges based on previous orders, and the criteria for party eligibility in Company Petition proceedings.