9911796707
TMI Blog2019 (10) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be rarest of the rare cases, the Tribunal may even grant interim relief having the attributes of a final order but the Applicant in such cases will have to establish a strong prima facie case in addition to other legal considerations like an imminent legal injury of irreparable nature and balance of convenience lying in favour of the Applicant. Shockingly, the Tribunal made some observations regarding the validity of notices qua holding of Board Meeting and EoGM without knowing the respective stands of the parties which could be ascertained only after the pleadings were completed. In the given circumstances, observations of Tribunal though short of finding in regard to existence of a Prima facie case, much less a strong prima facie case, are unwarranted. It cannot be said that the Respondents had been able to demonstrate that they had raised a fair question which required probe. In absence of pleadings being complete, when the version of adversary is yet to come before the Tribunal, it cannot be said that the issue raised constituted a fair question. Viewed in this perspective, the impugned orders cannot be supported. The inescapable conclusion deducible from the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including termination of employees. Aggrieved of the slew of directions passed by the Tribunal in succession in terms of the impugned orders dated 9th August, 2018 and 29th August, 2019 while hearing of the Company Petition was underway, the Appellant has assailed the same through Company Appeal No. 323 of 2018 and 243 of 2019, separately. Since, both orders arise out of the same matter and have been passed before final disposal of the Company Petition which is still sub-judice, both appeals were heard together and same are being disposed of by a common judgment. 2. Learned counsel for the Appellant submitted that the Tribunal, though ignored to consider the merits of the case, but granted status quo ante in relation to the Directorship and shareholding of the Appellant Company as it existed prior to 30th July, 2018, which is in the nature of final relief. It is submitted that nothing is left for adjudicating in the petition which has been decided even without completing the pleadings. He further submits that allotment of shares were made to Respondent No. 1 and 2 as per the Co-founders Agreement dated 17th January, 2015 in contravention of provisions of Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appropriate directions by the Tribunal. 5. Section 241 of the Act dealing with grant of relief in cases of oppression and mismanagement provides that as regards oppression any member of a company, eligible in terms of Section 244 of the Act, may apply before the Tribunal for an order under Chapter XIV dealing with prevention of oppression and mismanagement. Such member s complaint must be in regard to the affairs of the Company that have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company. As regards mismanagement, the member has to demonstrate that any material change has taken place in the management or control of the company and because of such change it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members. Section 241(2) of the Act enables the Central Government also to apply to the Tribunal for an order under Chapter XIV of the Act, if in its opinion the affairs of the Company are being conducted in a manner prejudicial to public interest. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal across the ambit of Section 242 (4) postulates a situation where the affairs of the company have not been or are not being conducted in accordance with the provisions of law and the Articles of Association. For carving out a prima facie case, the member alleging oppression and mismanagement has to demonstrate that he has raised fair questions in the Company Petition which requires probe. Fairness of questions depends on the nature of allegations which, if proved, would entitle the member complaining of oppression and mismanagement to final relief in terms of provisions of Section 242. It is in the backdrop of this legal proposition that the issues raised in these appeals are required to be examined. 6. It was alleged before the Tribunal that the shareholdings of Respondents 1 and 2 herein as well as their representation in the Board of Directors have been completely effaced by manipulating documents by the Appellant. It was further alleged that the cancellation of shares as also the removal of Respondents 1 and 2 from Board of Directors was sought to be done behind the back of Respondents 1 and 2 all related to year 2015 vide Board Meeting dated 30th Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incomplete, made certain observations on the aspect of oppression and mismanagement on the basis of inferences which in the opinion of the Tribunal were available from facts which itself were disputed. It is queer that the Tribunal, while declining to enter the merits of the case, observed that each party tried to remove the other from the management of the Company. In making this observation the Tribunal appears to have been influenced by the notice circulated by the Respondents herein for holding of an EoGM for removal of Mrs. Priya Choudhary and Mr. Sahil Yadav, who admittedly were the first Promoter Directors and shareholders of the Appellant Company as also Appellant s action in removing the Respondents from Directorship besides cancelling the shares on the alleged ground of same having initially been allotted illegally and the consequential acts. Admittedly, the pleadings were incomplete and the parties were yet to lay the relevant material and evidence before the Tribunal in support of the stands they would respectively take in their pleadings. In these circumstances, the Tribunal could not reach a finding in regard to the issues raised in the Company Petition. In so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite observations of the Tribunal that parties were trying to dislodge each other by taking unilateral action allegedly not warranted under law which would be the subject of probe depending on fairness of the issue raised for consideration, whether the Tribunal was justified in passing the impugned orders of the nature that could be passed only after conclusion of inquiry within the ambit of Section 242 (1) of the Act and whether the Tribunal has pre-empted the final decision of the Company Petition by passing interim directions without applying its mind to the existence of a prima facie case. 8. The answer to this question is a big emphatic No . Interim directions can be passed for regulating the affairs of company but it has to be borne in mind that the provision engrafted in Section 242(4) of the Act can only be invoked during the pendency of the Company Petition alleging oppression or mismanagement and the action must be warranted keeping in view the interests of the Company. Section 242(4) is couched in a language which leaves little room for doubt that the oppression or mismanagement alleged in the Company Petition should have the impact of adversely affecting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from non-application of mind. It does not at all speak of the affairs of Company being conducted in a manner which would need some directions to regulate such conduct. It goes without saying that unless there is a finding in regard to existence of a prima facie case that the affairs of the Company are being conducted in a manner prejudicial to public interest or any member or members or the interest of the Company or oppressive to the Applicant, at least for the present, the Tribunal would not be acting within its province to slap interim directions in the nature of impugned order. While there can be no dispute with the proposition that the Tribunal is vested with very wide discretionary powers to pass interim directions for regulating the conduct of affairs of the Company, exercise of such power cannot be arbitrary or capricious. We are shocked to find that the impugned order dated 29th August, 2019 passed in an I.A. moved for preponement of the hearing in the Company Petition exceeded all limits of jurisdiction by passing further interim directions which were beyond the scope of aforestated I.A. Therefore, it cannot be said that the Respondents had been able to demonstrate that ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
