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2022 (12) TMI 275 - AT - Companies LawOppression and Mismanagement - Minimum qualification of shares for invocation of petition filed under Section 241 of the Companies Act, 2013 - registration of shares by means of transfer in favour of the Respondents under Section 58(5) of the Companies Act, 2013 - power of Tribunal to order for cost to be paid to the Respondents - power of Tribunal to cause investigation into the affair of the company under the Companies Act, 2013 - power of Tribunal to recommend to Institute of Chartered Accountant to take suitable disciplinary action on 9th Respondent (Chartered Accountant Firm on alleged collusion with the Appellants to falsify the record of the company. Whether the Respondents possessed minimum 10% shares in order to invoke petition filed under Section 241 of the Companies Act, 2013? - HELD THAT - It has been brought out that the Joint Managing Director, Managing Director along with the 2nd Respondent handed over all the documents including Original Share Certificates along with Share Transfer Forms to the 9th Respondent (Chartered Accountants Firm of the company). However, no action was taken despite reminders being sent by the Respondents to the Appellants. It is noted that upon receiving a letter dated 26.04.2017 from the Respondents, the 9th Respondent i.e. Chartered Accountants Firm conveyed that the Managing Director of the company had collected back necessary documents from their office to take required action for transfer of shares - To settle the disputes after reconciliating meting among the shareholders, a Settlement Agreement was entered between the parties on 09.12.2017, wherein it was mentioned that the Appellants would transfer 4.5% shares of the company to the Respondents. The Settlement Agreement was recognized and approved by the board in its meeting on 12.12.2017. However, no such transfer was made. It is the case of the Appellants that non transfer of shares should be treated as inter se dispute and the Respondents herein should have approached appropriate Civil Court to enforce transfer of shares under Specific Relief Act, 1963. In this regard, this Appellate Tribunal observes that since the transfer of the shares were agreed upon between the parties which was approved in Board Resolution of the company and therefore the Tribunal had suitable power under Section 242 of the Companies Act, 2013 r/w Rule 11 of the National Company Law Tribunal, Rules 2016 - this Appellate Tribunal considered non transfer of shares in favour of the Respondents herein tantamount to the oppressions of the Respondents as per Section 242 r/w Section 58 of the Companies Act, 2013. Whether the Tribunal had the power to cause investigation into the affair of the company under the Companies Act, 2013? - Whether the Tribunal is empowered to recommend to Institute of Chartered Accountant to take suitable disciplinary action on 9th Respondent (Chartered Accountant Firm on alleged collusion with the Appellants to falsify the record of the company? - HELD THAT - There is no power with the Tribunal to directly order, an investigation of the Company s Affairs by an independent Person / Firm (Mr. K. Venkitachalam Aiyer Company as Chartered Accountants) - Similarly, no power exist with the Tribunal, to ask an Autonomous Professional Body (herein the Institute of Chartered Accountant of India) to take disciplinary action against its Member. The Tribunal ought to have taken into account the provision as contained in Section 213 of the Companies Act, 2013 and after following due process after hearing the company herein, the Tribunal, could have asked the Central Government, to appoint the Inspector, to investigate and take further action as per process laid down in the Companies Act, 2013 - This Appellate Tribunal, therefore comes to the conclusion that the Tribunal erred on the aforesaid accounts of investigation and asking Autonomous Body for taking disciplinary action against the Chartered Accounts Firm - This Appellate Tribunal, is of the considered opinion that there is no error, in the impugned order dated 21.04.2020, passed by the Tribunal, w.r.t its order contained in Para- 29 (i), (ii) (v). Appeal disposed off.
Issues Involved:
1. Whether the Respondents possessed the minimum 10% shares to invoke a petition under Section 241 of the Companies Act, 2013. 2. Whether the Tribunal could entertain the petition under Sections 241, 242 read with Section 247 of the Companies Act, 2013. 3. Whether the Tribunal erred in directing the Appellants to effect registration of shares by means of transfer in favor of the Respondents under Section 58(5) of the Companies Act, 2013. 4. Whether the Tribunal has the power to order costs to be paid to the Respondents. 5. Whether the Tribunal had the power to cause an investigation into the affairs of the company under the Companies Act, 2013. 6. Whether the Tribunal is empowered to recommend to the Institute of Chartered Accountants to take suitable disciplinary action against the 9th Respondent (Chartered Accountant Firm). Issue-wise Detailed Analysis: Issue (I) (a): Whether the Respondents possessed the minimum 10% shares to invoke a petition under Section 241 of the Companies Act, 2013. - The Appellants argued that the Respondents held only 7.5% of the shares, below the 10% threshold required under Section 241. The Respondents contended that their shareholding would have been 13.99% if the agreed-upon share transfers had been executed. The Appellate Tribunal noted that the Respondents had beneficial interest in the shares and, therefore, had the right to file the petition. The Tribunal could also waive the threshold requirement under Section 242(1)(b). Issue (I) (b): Whether the Tribunal could entertain such a petition under Sections 241, 242 read with Section 247 of the Companies Act, 2013. - The Tribunal found that the Respondents had the right to file the petition due to their beneficial interest in the shares, despite the non-transfer of shares by the Appellants. The Tribunal also had the power to waive the threshold requirement. Issue (I) (c): Whether the Tribunal erred in directing the Appellants to effect registration of shares by means of transfer in favor of the Respondents under Section 58(5) of the Companies Act, 2013. - The Appellate Tribunal observed that the transfer of shares was agreed upon and recorded in board resolutions. The Appellants' failure to execute the transfer was considered oppression under Section 242 read with Section 58. The Tribunal had the power to direct the transfer of shares. Issue (I) (d): Whether the Tribunal has the power to order costs to be paid to the Respondents. - The Tribunal has the authority under Section 242(2)(l) of the Companies Act, 2013, to impose costs. The Appellate Tribunal found no reason to interfere with the Tribunal's decision to award costs to the Respondents. Issue (II) (a): Whether the Tribunal had the power to cause an investigation into the affairs of the company under the Companies Act, 2013. - The Appellate Tribunal held that the Tribunal did not have the power to directly order an investigation by an independent person or firm. The Tribunal should have referred the matter to the Central Government for investigation under Section 213 of the Companies Act, 2013. Issue (II) (b): Whether the Tribunal is empowered to recommend to the Institute of Chartered Accountants to take suitable disciplinary action against the 9th Respondent (Chartered Accountant Firm). - The Tribunal lacked the authority to direct an autonomous professional body, such as the Institute of Chartered Accountants of India, to take disciplinary action against its member. The Tribunal should have followed the procedure under Section 213 of the Companies Act, 2013. Conclusion: - The Appellate Tribunal upheld the Tribunal's decision regarding the issues of shareholding threshold, oppression, and costs. However, it set aside the Tribunal's orders related to the investigation and disciplinary action against the Chartered Accountant Firm. The appeal was disposed of with these observations, and no costs were awarded.
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