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TMI Blog2020 (12) TMI 1176X X X X Extracts X X X X X X X X Extracts X X X X ..... lies with the members of a company. No wonder fairness and probity rather than legality are the key factors to be taken into consideration by a Tribunal in case of oppression. What kind of oppression or prejudice or unfairness is caused in a given case will depend on the injury caused to an affected person by the concerned as visualised in section 241 of the Companies Act, 2013? - HELD THAT:- Undoubtedly, the burden is on the petitioner to prove oppression or mismanagement and the Tribunal is to consider the entire material on record and to arrive at a final conclusion. The Rights Issue can be examined by the Tribunal in a petition u/s 241 of the Companies Act, 2013. Also, that, in law the Tribunal is to ascertain when the right to sue / to file an application accrued to the petitioner. There is no impediment for the Tribunal to consider the preliminary objections raised by a party at a later stage of the main proceedings. If maintainability is a triable issue, the acceptance of a petition or rejection of the same has to be decided along with the issues raised, to be heard with the merits of the case in the considered opinion of this Tribunal. Time limit - HELD THAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and law, to be specifically averred in one s pleading before the competent fora. In fact, Res Judicata precludes a person from pleading the same thing in successive litigation. The burden to establish the plea of Res Judicata is on the person to raises such plea. No wonder, the doctrine of Res Judicata is rested on the principles of equity, good conscience and justice applies to all judicial proceedings equally before the Tribunals - In a petition under Section 241 of the Companies Act, 2013, the petitioner is to furnish (i) relevant materials (ii) to furnish the figures (iii) the allegations are to be proved. The power of a Tribunal under Section 241 of the Companies Act, 2013 is to put an end to oppression and mismanagement on the part of controlling shareholders to suppress mischief. An individual who approaches the Tribunal alleging oppression must come before it with utmost clean hands and in a bonafide manner. Waiver of requirements to file a petition under section 241 of Companies Act - HELD THAT:- The interest of an applicant in a company whether it is substantial or significant, the issues raised in the petition u/s 241 of the Companies Act, 2013 is the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led on mere baseless or frivolous grounds or on assumptions/presumptions, in order to abuse the judicial process. As stated supra, the main Company Petition is filed by the Petitioner by questioning various acts of oppression and mismanagement, which are found to be prima facie meritorious so as to consider those allegations at the time of final hearing of the Case, after waiving the requisite condition as sought for. A meritorious/disputed litigation cannot be thrown at threshold without looking into merits of litigation cannot be thrown at threshold without looking into merits of the case by the Tribunal/Court by depriving aggrieved party remediless. The contention of the Respondent that Civil Court has already decided the issues and thus the present Application and main Company Petition are not maintainable, are baseless on facts and on law, as detailed supra. Moreover, the Civil Court has decided only in respect of the alleged acceptance of resignation, and Civil Court do not have any jurisdiction to decide the acts of oppression and mismanagement of the Companies Act, 2013. 11. The above facts and circumstance of the case clearly established that the Applicant/Petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er made by the Appellant Company. Therefore, the impugned events are the result of First Respondent s own actions and hence, there is no allegation of oppression and mismanagement of the affairs of the Appellant Company made out by the First Respondent / Applicant / Petitioner in the petition. 5. The Learned Counsel for the Appellants comes out with a plea that the First Respondent / Petitioner had filed the application claiming waiver on the very same grounds that form the basis of the long standing civil dispute between the parties, which in turn presently had attained finality through a judgement of the civil court. 6. It is represented on behalf of the Appellants that there are no exceptional circumstances for waiver that are made out or even pleaded and the application suffers from this fatal infirmity. Added further, there is no scope for invoking a waiver enabling the First Respondent to proceed with the petition when she herself had refused to subscribe to the Rights Issue and that the civil court had already held that the Board meeting at which such Rights Offer was decided to be made was legally convened. 7. The Learned Counsel for the Appellants projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue forming necessary ingredient in a Cause of Action was litigated and determined and in subsequent proceedings between the same parties involving a different Cause of Action to which the same issue is relevant one of the parties seeks to reopen the issue and the plea of Estoppel bars such relitigation. 11. The Learned Counsel for the Appellants submits that the First Respondent in her Appeal Memorandum before the Hon ble High Court of Karnataka had assailed the Civil Court s order by specifically urging the same contentions. 12. It is the categorical stand of the Appellants that the present C.P. No. 110/2019 was filed before the Tribunal on 04.04.2019, nearly three years from the date of removal of the First Respondent from the Board of Directors of the First Appellant / Company on 13.04.2016 and the Rights Issue notified to the First Respondent / Petitioner through letter dated 25.04.2016 and as such the Company Petition suffers from severe delay and latches and is liable to be dismissed in limine. 13. The Learned Counsel for the Appellants submits that the First Respondent / Petitioner having failed before the Civil Court had approached the Tribunal to esp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication under Section 241 forms opinion that the application does not relate to oppression and mismanagement of the company or its members and/or is frivolous, it will reject the application for waiver . Otherwise, the Tribunal will proceed to notice the other factors. (iii) Whether similar allegation of oppression and mismanagement , was earlier made by any other member and stand decided and concluded? 79 (iv) Whether there is an exceptional circumstance made out to grant waiver , so as to enable members to file application under Section 241 etc.? 15. The Learned Counsel for the Appellants relies on the decision of Hon ble Supreme Court in Sangramsingh P. Gaekwad and Others V. Shanta Devi P. Gaekwad (Dead) Through LRS and Others reported in (2005) 11 Supreme Court Cases at p. 314 at spl p. 361 wherein at paragraph 119 and 120 it is observed as under: - 119. It is interesting to note that respondent no. 1 in her rejoinder categorically stated that everybody received the circular letter and even Appellant I did not apply for the shares pursuant thereto but the same had not been replied to. 120. In the aforementioned situation, in our considered opinion, she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been but was not. Given that the further material which would have put an entirely different complexion on the point was at the earlier stage unknown to the party and could not by reasonable diligence have been discovered by him, it is hard to see why there should be a different result according to whether he decided not to take the point, thinking it hopeless, or argue it faintly without any real hope of success . 25. In Gulabchand Chhotalal Parikh v. State of Bombay (AIR 1965 Supreme Court page 1153) the Constitution Bench held that the principle of res judicata is also applicable to the subsequent suits where the same issues between the same parties had been decided in an earlier proceeding under Article 226 of the Constitution. 26. It is trite that the principle of res judicata is also applicable to the writ proceedings (See H.P. Road Transport Corpn. V. Balwant Singh- 1993 Supp (1) SCC 552). 27. In Bhanu Kumar Jain v. Archana Kumar(2005) 1 SCC 787 it was held: (SCC p. 796, paras 18-19) 18. It is now well settled that principles of res judicata apply in different stages of the same proceedings. (See Satyadhyan Ghosal v. Deorajin Debi(1960) 3 SCR 590: and P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of estoppel though these two doctrines differ in some essential particulars. Rule of res judicata prevents the parties to a judicial determination from litigating the same question over again even though the determination may even demonstratedly wrong. When the proceedings have attained finality, parties are bound by the judgement and are stopped from questioning it. They cannot litigate again on the same cause of action nor can they litigate any issue which was necessary for decision in the earlier litigation. These two aspects are cause of action estoppel and issue estoppel . These two terms are of common law origin. Again, once an issue has been finally determined, parties cannot subsequently in the same suit advance arguments or adduce further evidence directed to showing that the issue was wrongly determines. Their only remedy is to approach the higher forum if available. The determination of the issue between the parties gives rise to an issue estoppel. It operates in any subsequent proceedings in the same suit in which the issue has been determined. It also operates in subsequent suits between the same parties in which the same issue arises. Section 11 CPC contains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represented on behalf of the First Respondent that the Tribunal, in the impugned order had proceeded to observe that the Civil Courts have no jurisdiction over matters of oppression and mismanagement and that the First Respondent s civil suit in OS No. 3554 of 2016 was restricted only to the issue of challenging her removal from the Board of Directors of the First Appellant / Company. 20. Added further, it is the plea of the First Respondent that neither the Civil Suit in OS No. 3554 of 2016 nor the pending Appeal, RFA No. 394 of 2019, filed by the First Respondent as an Appellant prevents the Tribunal from adjudicating upon the First Respondent / Petitioner s application under Sections 241 and 242 of the Companies Act seeking reliefs from oppression and mismanagement. Therefore, it is the stand of the First Respondent that the IA No. 170 of 2020 filed in C.P. No. 110/BB/2019 filed before the National Company Law Tribunal, Bengaluru Bench, Bengaluru is neither a baseless nor a frivolous one and in fact, the First Respondent has no alternate remedy as it is only the National Company Law Tribunal in law, has the power to investigate and adjudicate in cases of oppression and misma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case as apparent from the plain reading of the (proposed) application and as some of them relate to oppression and mismanagement , qua 1st respondent company and its member(s), we are of the view that the appellants have made out a case for Waiver to enable them to apply under section 241. 22. The Learned Counsel for the First Respondent refers to the decision in Photon Infotech Pvt. Ltd. Others V. Medici Holdings Ltd. and Ors. reported in 2018 SCC online NCLAT 632 wherein at paragraph 16, 18 and 19 it is observed as under:- 16. Going through the application which was filed for waiver by the Respondent no.1 we find that the application pertains to oppression and mismanagement . We keep in view the pleadings of alleged oppression and mismanagement. There is no dispute that the original applicant/ respondent no.1 is member of the company. It cannot be said that the application is frivolous. It is not a case that similar allegations of oppression and mismanagement were earlier made and stood decided or concluded (please see Para 146 of the judgment in the matter of Cyrus Investments). It has already been held in Para 150 of the judgment in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first Respondent on 13.04.2016 after the board meeting. Later, the first Respondent and the first Appellant / Company exchanged several mails, where the first Respondent expressed without demur that her resignation was without coercion and was out of her own free will. 25. It is the version of the Appellants that to expand business, the second Appellant and other Directors of the first Appellant / Company made a decision to raise Further Capital from shareholders by making a Rights Issue and that the first Appellant / Company as per Section 62 of the Companies Act r/w Rule 13 of the Companies (Share Capital and Debenture) Rules, 2013 proposed a Rights Issue on 25.04.2016. Apart from that, the Letter of Offer was dispatched to all the shareholders, including the First Respondent / plaintiff, who received the same on 26.04.2016 but she unequivocally refused to subscribe to the additional shares. Indeed, the offer remained open for 18 days and that the first Respondent had not availed the opportunity to subscribe to the additional shares offered on rights basis. The Second Appellant had subscribed to the additional shares offered to him by the First Appellant / Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiff at paragraph 16 of the plaint in the aforesaid suit had proceeded to mention that she was seriously hurt by the scathing remarks and use of inappropriate language by the Second Respondent / Second Defendant against her and in a fit of anger, and as a knee jerk reaction, she wrote a letter of resignation in her hand, resigning from the post of Director of the First Appellant / Company etc. 30. Indeed, the First Respondent / plaintiff at paragraph 24 of the plaint had among other things observed that the Second Respondent / Second Defendant pushed her into deeper emotional turmoil because of the fraudulent steps taken by him and as a result of an emotional outburst she sent an e.mail on 13.04.2016 that she would like to part ways with the Second Respondent / Second Defendant. Moreover, she asserted that the e.mail was sent while she was in a state of shock and when she was undergoing emotional turmoil. 31. The First Respondent / plaintiff at paragraph 29 of the plaint in the above suit had stated that she is a lawful director of the First Defendant (the First Appellant Company) and she had not tendered a resignation from the post of Director, although she had written such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) that the affairs of the First Respondent / Company are being conducted by the Respondent Nos. 2,3 and 5 in a manner prejudicial to her and to the interests of the Respondent No. 1 Company itself; (ii) that the issuance of rights shares during 2016-17 by the First Respondent Company was illegal, set it aside and cancel the further shares so issued; (iii)To remove the First Respondent as the Managing Director of the Respondent No. 1 Company; (iv)To recover the undue gains made by the Respondent Nos. 2,3 and 5 during the period commencing from 01.04.2016 until the disposal of this petition and retain the same for the benefit of the Respondent No. 1 Company; (v) To Direct the valuation of the shares of the Respondent No. 1 Company and to provide for the purchase of the petitioner s entire shareholding by the Respondents or for the purchase of the Respondents entire shareholding by the Petitioner; (vi) In the alternative to Prayer (e), in the event of the Parties disagreeing with the valuation of the shares or in the event of the respective Parties being unable to or unwilling to purchase /sell the other s entire shareholding in the Respondent No. 1 Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Tribunal is to consider the entire material on record and to arrive at a final conclusion. The Rights Issue can be examined by the Tribunal in a petition u/s 241 of the Companies Act, 2013. Also, that, in law the Tribunal is to ascertain when the right to sue / to file an application accrued to the petitioner. There is no impediment for the Tribunal to consider the preliminary objections raised by a party at a later stage of the main proceedings. If maintainability is a triable issue, the acceptance of a petition or rejection of the same has to be decided along with the issues raised, to be heard with the merits of the case in the considered opinion of this Tribunal. No Time Limit 39. More importantly, although for filing a petition no time limit is specified under Section 241 of the Companies Act relating to oppression and mismanagement , the residuary Article 113 of the Limitation Act, 1963 concerning when the right to sue accrues is to be borne in mind. Jurisdiction of Civil Court 40. Section 430 of the Companies Act, 2013 speaks of Civil Court not to have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company or bonafide or otherwise can be ascertained from each and individual set of attendant facts of a given case. Agents 45. It is an axiomatic principle in law that the Directors of a Company are just Agents of the Company and they are quite competent to decide the Agency at his / her own end. In fact, Section 168 of the Companies Act, 2013 pertains to Resignation of director . Res Judicata 46. The aspect of Res Judicata is inhibition against the Court / Tribunal and it is certainly a mixed question of facts and law, to be specifically averred in one s pleading before the competent fora. In fact, Res Judicata precludes a person from pleading the same thing in successive litigation. The burden to establish the plea of Res Judicata is on the person to raises such plea. No wonder, the doctrine of Res Judicata is rested on the principles of equity, good conscience and justice applies to all judicial proceedings equally before the Tribunals. 47. Section 244 speaks of Right to Apply u/s 241 of the Companies Act, 2013. Section 244(1) be of the Companies Act, 2013 confers powers upon a Tribunal to waive all or any of the requirements specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er(First Respondent) to file petition under section 241 of the Companies Act, 2013 Issue of Estoppel, Res Judicata, Delay / Latches in its Reply/Response/Counter and to advance arguments on merits at the time of final hearing of main petition before the Tribunal and that the Tribunal is to pass orders on merits in a fair, just and dispassionate manner uninfluenced and unhindered with any of the observations made by this Tribunal in the present Appeal. Suffice it for this Tribunal to point out that a petition at the initial stage cannot be thrown out if the averments contained therein require detailed / elaborate / an in-depth examination / inquiry based on relevant materials / evidence, if any, to be let in by parties in a given case. Disposition 54. The First Respondent / Petitioner has 9% of the total share capital even after a shareholding was reduced from 45%, by means of Rights Issue which is a subject matter of the main company petition. The Tribunal, has exercised its discretion and opined that a meritorious litigation cannot be thrown at threshold without examining the merits of the case and further observed that the First Respondent / Petitioner had made out a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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