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TMI Blog2024 (9) TMI 1426X X X X Extracts X X X X X X X X Extracts X X X X ..... determine whether the Petition falls within the purview of Sections 241 and 244. While the NCLAT in the Cyrus Investments [ 2017 (9) TMI 1500 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] case did hold that the merits of the case should not be considered at the waiver stage, but this does not preclude the NCLT from determining whether the Petition falls within the ambit of Sections 241 and 244. In the instant case, the waiver was refused based on the finding that the Petitioner has no prima facie case as the primary complaint in the petition relates to the directorship of the Petitioner, and hence the complaint is directorial. The important question is whether such a removal tantamounts to an oppressive or prejudicial conduct. The Hon ble Supreme Court in Tata Consultancy Services [ 2021 (3) TMI 1181 - SUPREME COURT ] has made it clear that mere removal/termination of the Director cannot be projected as something that would trigger the just and equitable Clause (2) to grant relief under Sections 241 and 242 of the Act. It is noted that the removal of the CEO / Executive Director at the AGM was not a motion by the management of the Company, but by another shareholder of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act. It is concluded that the NCLT acted within its jurisdiction and in accordance with the principles of law while denying the waiver under Section 244 of the Companies Act, 2013 - there are no infirmity in the orders of the NCLT - appeal dismissed. - [ Justice Yogesh Khanna ] Member ( Judicial ) And [ Arun Baroka ] Member ( Technical ) For the Appellants : Mr. U.K. Chaudhary, Mr. Manish Kaushik, Mr. Ajit Singh Sahee and Mr. Anubhav Gupta, Advocates For the Respondents : Mr. Chinmay P. Sharma, Sr. Advocate with Mr. Aditya Sandilya, Mr. Aamir Zafar Khan, Mr. Krishnajjoti Deka, Mr. Irfan Hasieb and Mr. Abhishek Yadav, Advocates for R-1 to 4 Mr. Subornadeep Bhattacharjee, Advocate JUDGMENT ( Hybrid Mode ) [ Per : Arun Baroka , Member ( Technical ) ] This is an appeal under Section 421 of the Companies Act, 2013 against Impugned Order dated 20.11.2023 passed in CA No.179/2023 in CP No. 99/CHD/HRY/2023 titled as Adesh Gupta Ors. Vs Liberty Shoes Limited Ors. by the Hon ble NCLT, Chandigarh Bench. Submissions of the Appellant 2. Appellant No. 1 was the Key Managerial Personnel, CEO Executive Director, and representative of promoter shareholders of Respondent No. 1/ M/s Liberty Shoe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emained Chairman till his death in 2003. Appellant No. 1 served as Executive Director on the Board of Liberty Shoes Limited w.e.f. 2004 till now. Between 2001-03, the founders of the Company Late Sh. DP Gupta (2001) and Late Sh. Raj Kumar Bansal (2002), Late Sh. PD Gupta (2003), died in quick succession. 5. In the year 2004, Appellant No. 1 was appointed as CEO of the Company in 2004. Appellant No. 1 and about 10 family members of the second generation of the founders took active roles in the company. The selection of Appellant No. 1 as CEO was on his merits and by vote. Since that date, Appellant No. 1 was appointed CEO by majority vote. Since becoming CEO of M/s Liberty Shoes Limited in the year 2004, Appellant No. 1 has been continuously making innovative, modern, and futuristic decisions. Thus, Appellant No. 1 is recognized as a dynamic leader and one of the most prominent business figures in the footwear and allied industry. Appellant No.1 even diversified into perfumes, exports, etc. The fame of Appellant No. 1 and the fortune of Liberty Group manifolded under the leadership of Appellant No. 1. Since 2004, Appellant No. 1 has had the largest role in managing the business. App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company is not performing well as compared to its peers, without analyzing the facts and circumstances behind such performance, (i) indulging in oppressive conduct with the staff to ensure that the diligent, professional, and domain expert staff is removed and sycophants of the Respondents are only retained, (j) indulging in breach of the license agreement and shortfall of license fee leading to termination of Trademark Licence Agreement dated 03.04.2013 with Liberty Footwear Co. 7. The wrongdoers of the Company were unable to give any cogent answers to the violations pointed out by Appellant No. 1 under his aforesaid various emails, communications, etc. written to the Board. Appellant No. 1 in his communications has always been corrective, suggestive, and in the best interest of the Company and was based on facts. Appellant No. 1, being in charge, had to comply with his legal obligations being Key Managerial Personnel to point out illegalities/violations that came to his notice, however, the tone and tenor of Appellant No. 1 in his communications were never to disparage or demean or defame anybody. The emails and communications of Appellant No. 1 were always addressed to the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the Respondents by way of defamatory and unauthorized communications declared that Appellant No. 1 was ousted from the position of CEO and Executive Director, while Appellant No.1 was not so ousted. The Respondents did not allow Appellant No. 1 to work and function as CEO. This disrupted the functioning of the Respondent No. 1 Company. This is an instance of gross mismanagement and adversely affecting the functioning of Appellant No. 1 as the CEO of Respondent No. 1. Respondents are well aware that any malicious communication may have the effect of disrupting the business of the company to irreparable levels. Respondents Nos. 2 and 3 published and circulated the defamatory communications with bad intent. The defamatory communications were deliberately circulated widely to ensure maximum damage to Appellant No. 1. Respondents have not acted in the best interests of the Respondent No. 1 Company and, in fact, have time and again hindered the growth and functioning of the Respondent No. 1 Company. Even earlier on 09.11.2022, Respondent Nos. 2-3 had conspired to show that there was an agenda item for the removal of Appellant No. 1, however, that agenda item was never a part of the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts' extensive engagement in related party transactions, coupled with alignment with the people of the same interest within Respondent No. 1 Company constitutes a form of oppression and mismanagement. That there has been siphoning of monies and diversion of funds through related party transactions. Transactions with related parties like LFO Liberty Fashion Outfits (Raman Bansal), Anything Skool Limited (Vivek Bansal), Total Print Packing (Ayush Bansal), Core Innovative Designs LLP (wife of Anupam Bansal), etc. have led to financial embezzlements and siphoning of funds of hefty amounts. That the Respondents have not acted in the best interests of the Respondent No. 1 Company and in fact, have time and again hindered the growth and functioning of the Respondent No. 1 Company. 14. Appellant No. 1 was compelled to approach Hon'ble Delhi High Court, against Respondent Nos. 2 and 3 for their unlawful actions vide show cause notice dated 10.07.2023 and email dated 25.07.2023 (containing defamatory material against Appellant No. 1) and they were compelled to seek a post facto ratification (vide Board Resolution Dated 11.08.2023) to give a feeble defence to their unlawful actions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reap unlawful benefits from the same. The related party transactions are not done at arm s length basis rather the related party transactions are continually increasing and are being used as a tool to siphon off funds of the company. Further mindless expenses are being done in promotions, Bollywood fame brand ambassadors, etc. without the approval of the Board. Expenses of more than 35 crores were undertaken in such marketing activities without approval from the Board. That related party transaction of such high volumes is nothing but an instance of oppression and mismanagement. The trade receivables from related parties have grown significantly, all this is due to the oppression by the Respondents. That there has been siphoning of monies and diversion of funds through related party transactions. Transactions with related parties like LFO Liberty Fashion Outfits (Raman Bansal), Anything Skool Limited (Vivek Bansal), Total Print Packing (Ayush Bansal), Core Innovative Designs LLP (wife of Anupam Bansal), etc. have led to financial embezzlements and siphoning of funds of hefty amounts. As per the related party transaction policy of the Company, related party transactions are to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved in the interest of the Company and not for any mala-fide reasons. The performance of Appellant No. 1 has been excellent, it is only the efforts of Appellant No. 1 which have ensured the survival of the Company. It lacks specific grounds and is replete with vague statements, including an assertion that Appellant No. 1 was underperforming and that shareholder Sachin Gupta has lost confidence in him. Such nebulous claims and unsubstantiated allegations hold no validity. Mr. Sachin Gupta/Respondent No. 21 is not warranted in questioning the proficiency and integrity of a person whose tenure has led the Company to reach great heights, without whom its survival would have been difficult. This notice overlooks the distinct areas of expertise that define Appellant No. 1 and neglects to acknowledge the proficiency he brings to each skill set. The allegation that Appellant No. 1 was not performing well in his role as CEO is utterly false and baseless. Appellant No. 1 is responsible for B2B, B2G, exports, lifestyle (perfumes) business and that these businesses generate 80% of the revenue for Respondent No. 1 and consume 20% expenses. The retail, wholesale, showrooms, e-commerce, fashion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e going on. Appellants by cogent documentary evidence established that that the Respondents have indulged in various acts of oppression and mismanagement, namely: evident actions of oppression, mismanagement and illegalities being committed by the oppressive majority shareholders to the detriment of the public company (a) insider trading, (b) misappropriation of monies obtained from the banks (c) misappropriation of funds of the company in wasteful expenditures (d) artificial inflation of the share value for insider trading benefits, (e) siphoning off massive sums of monies in related party transactions, (f) scheming and falsely portraying that Petitioner has been stripped off from the role of Executive Director/KMP in the presence of employees and vendors, without adhering to proper legal procedures all with the intent of tarnishing and defaming his reputation, (g) colluding with each other for sending the special notice for removal of Petitioner in about three successive but failed attempts under Section 169 Companies Act to remove him as CEO and Executive Director by imposing false allegations and then withdrawing them, (h) colluding with each other to remove the Petitioner as C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Mr. Anupam Bansal is responsible for siphoning off funds and usurping the role of CEO for the retail division. Mr. Anupam Bansal in connivance with Respondents indulged in insider trading to artificially inflate the share price for unlawful profits of his friends and family members. Shares worth several crores were purchased by the family and friends of Mr. Anupam Bansal at the same time interval and within the same time interval of about five months, the share prices almost tripled. Appellants established, by cogent evidence, that Appellant No. 1 red- flagged the issue of insider trading in board meetings when he observed that share prices in a short span had reached Rs. 375/- on 14.10.2022 from a mere Rs. 162 per share on 08.04.2022 and friends and family of Mr. Anupam Bansal invested heavily. To inflate the share price, the company gave dividends twice a year, which artificially inflated the share price. Appellants established by cogent evidence that owing to the constant breaches and defaults at the end of the Respondents, the Trademark License Agreement dated 03.04.2013 with Liberty Footwear Co. came to be terminated. The breaches and defaults at the end of the Respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reply. That further the said email contained a threatening message dissuading shareholders from opening the said link, as the message warned them of confidential documents and that the company shall not be responsible for opening the contents. Clearly with this threat, hardly voters would have opened the link. Thus, neither the representation was circulated nor did the Appellant No.1 get the opportunity to make representation. 25. Appellants claim that the skills of the Petitioner are recognized even in the annual report of 2023. On one hand, the notice u/s 169 alleges the non- performance of the Petitioner, on the other hand, the annual report acknowledges the skills and resource person in the Petitioner in every area required by the company. This established that the majority was attempting to prevent appropriate representation of the Appellants on the board and Appellant No. 1 was the only representative of the Appellants. 26. The Appellants placed reliance upon the judgment of Hon'ble NCLAT in the matter Manoj Bathla Ors. v. Vishwanath Bathla Ors. in Company Appeal (AT) No. 399 of 2018, wherein the Hon'ble NCLAT upheld the waiver on the grounds of oppression and misma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the finding that the Petitioner has no prima facie case as the primary complaint in the Petition relates to the directorship of the Petitioner and hence the complaint is directorial. Refusal of the waiver based on prima facie case or the merit of the averments in the Petition is contrary to the law settled by this Hon'ble Appellate Tribunal in Cyrus Investments Private Limited vs Tata Sons Limited and Ors. (2017 SCC OnLine NCLAT 261) where it is clearly stated that the Hon'ble Tribunal will not decide the issue of waiver based on a prima facie case or merits of the claim/complaint. Therefore, the issue relating to the directorial complaint could not have formed the basis for the refusal of waiver. For Grant of Waiver under Section 244 of the Companies Act, 2013, directorial complaint or prima facie case could not be looked into. Grant of Waiver under Section 244 of the Companies Act, 2013 cannot be dismissed on the presumption of dismissal of the Company Petition on merits. Adjudicating Authority under the Impugned Order dated 20.11.2023 erred in looking into the merits of the Company Petition No. 99/CHD/HRY/2023. 30. Hon'ble Appellate Tribunal in Cyrus Investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that this is one of the exceptional and compelling circumstances, which merit the application for 'waiver' subject to the question whether (proposed) application under Section 241 relates to 'oppression and mismanagement . 32. Even in the present case as per the shareholding pattern of the promoters of the Respondent No.1 Company (Liberty Shoes Limited), it is seen that it is only M/s Geofin Investments Private Limited meets the threshold for filing a Petition under Section 241 of the Companies Act, 2013. No other promoters have the requisite shareholding for preferring a Company Petition under Section 241 of the Companies Act, 2013. That this is one of the exceptional and compelling circumstances, which merited the grant of 'waiver'. 33. Furthermore, the issue relating to waiver was not the subject matter of the Civil Appeal No. 440-441 of 2021 decided by the Hon'ble Supreme Court in the final judgment titled Tata Consultancy Services Limited vs. Cyrus Investments Private Limited was allowed based on the merits of the case and there was no issue relating to the grant of waiver as the order dated 21.9.2017 passed by the Hon'ble Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs could access the digital platform using their credentials, such as DP ID, Client ID, PAN No., Phone No., and Email ID. Shareholders wishing to join the 21st AGM through the InstaMeet platform could only speak if they had registered with the company at least seven days before the AGM, as outlined in Note No. 22 of the AGM Notice. Respondents state that by September 23, 2023, the company received requests from nine shareholders to speak. After receiving these requests, the company provided the list of speakers to the service provider, M/s Link Intime India Pvt. Ltd., who issued URLs and serial numbers to the nine shareholders. None of the Appellants submitted any request to the Company or Link In time. 38. The Appeal challenges an NCLT Order dismissing the Appellants' Application for a waiver under Section 244(1)(b) of the Companies Act, 2013. The Respondents argue that the Appellants lack valid grounds for such a waiver and that the Petition is an attempt to retaliate for the lawful removal of the Appellant as CEO/Executive Director. The Appellants collectively hold 5.83% of the company s shares, with the primary Appellant holding only 0.56%. The Respondents highlight that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents state that the Appellant did not comply with the procedure for participating in the AGM through video conferencing as required by MCA guidelines. Despite being informed of the process, no timely request was made by the Appellants to participate as speakers, and therefore, the company could not facilitate their participation. Respondents argue that the Appellant's failure to follow the process is not the fault of the company. The NCLT found no merit in the Appellants' claim that their right to representation was denied during the AGM. 44. The Appellant has relied upon Paragraph 145 of the Judgment of this Hon'ble Appellate Tribunal in the case of Cyrus Investments Pvt. Ltd. Anr. v. Tata Sons Ltd. (supra) to argue that the Hon'ble Tribunal while deciding an application seeking waiver cannot touch upon the merits of the case including evaluating that directorial complaint is the basis of the case. This argument is based upon a selective and self-serving reading and interpretation of Paragraph 145. Paragraph 145 cannot be read in isolation and has to be read in conjunction with Paragraphs 149 as well as 150 and more importantly Paragraph 151 of the Judgment. Thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to carry out a detailed analysis of the merits of the case but there cannot be a mechanical and 'hands-off approach' as sought to be argued by the Appellant as it would amount to failure on the part of the Tribunal to follow the mandate of the statutory provision as well as the law laid down by the Hon'ble Supreme Court and this Hon'ble Appellate Tribunal. 50. The Appellant's reliance on Section 166 to establish his inability to approach the Tribunal as a director with a case of oppression and mismanagement against the Company is mis- conceived for two reasons : (1) Section 166 (2) imposes a positive mandate and obligation upon a director of a company to promote the objects of the company for the benefit of its members as a whole and protect the interests of the company, its employees, and the shareholders. Section 166 (3) requires a director to exercise duties with due and reasonable care, skill, and diligence and exercise independent judgment. (ii) There is no bar under Section 166 precluding a director from approaching the Tribunal or any court. 51. In case the Appellant was serious about the allegations, it could have approached the Hon'ble Tribunal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t activities or diversion of funds, as alleged by the Appellants. They contend that the Appellants have failed to provide any evidence to support their claims. The allegations appear to be an attempt to deflect attention from Appellant No. 1's misconduct. 58. This timing of filing also demonstrates that the Company Petition was purely motivated by vendetta and the Appellant was non-serious and non- committed regarding the allegations of mismanagement. The communications relied upon by the Appellant as evidence for alleged mismanagement pertain to the period before May 2023. The Appellant did not approach the Tribunal anytime thereafter. 59. In conclusion, Respondents assert that the Appellants' appeal lacks merit and should be dismissed. The NCLT's decision to dismiss the petition was based on a thorough assessment of the facts and applicable law. Respondents respectfully request that this Hon'ble Tribunal uphold the NCLT's Order and dismiss the Appeal in its entirety. 60. In conclusion, the Respondents assert that the Appellants' appeal lacks merit and should be dismissed. The NCLT's decision to dismiss the petition was grounded in a thorough assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The following members of a company shall have the right to apply under section 241, namely: (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members: Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241. Explanation. For the purposes of this sub-section, where any share or shares are held by two or more persons jointly, they shall be counted only as one member. 2) Where any members of a company are entitled to make an application under sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) restrictions on the transfer or allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; (f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e): Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned; (g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (h) removal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licence agreement and shortfall of license fee leading to termination of Trademark Licence Agreement dated 03.04.2013 with Liberty Footwear Co. 68. The Appellant also claims that he was to remain as the Director by rotation till March, 2024. But the AGM on 30.09.2023 had removed the Appellant as a Director. In the past also vide email dated 07.04.2022, Respondent No.11 wrote to the Appellant that certain shareholder had sent special notice under Section 169 of the Companies Act, 2013 dated 20.09.2023 and 21.09.2023, seeking the removal of Respondent Nos. 2 to 4 as Executive Directors of the Respondent No. 1 Company. On 25.07.2023, Respondent No.3 circulated a defamatory email stating that all powers of the Appellant have been taken away. The Appellant was compelled to approach Hon ble High Court of Delhi, which vide order dated 14.08.2023, restrained the Respondents from circulating the defamatory and unauthorized communications. The Appellant contends that extensive engagement in related party transactions and alignment with the people of the same interest within Respondent No.1 Company constitutes a form of oppression and mismanagement, and led to financial embezzlements and siph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Paying an advance of INR 185 lacs to SS Industries, Panipat in April-July 2021 for a supply of materials, which has never been received and the vendor has raised false invoices on the company under petitioner's instructions to defraud this amount from the company. vi. Refusal to sign Audited financial statements, other statutory documents, and Stock Statements for the last two years, in violation of his roles and responsibilities as the CEO and Executive Director of the company as mandatorily required under Section 134 of the Companies Act, 2013. vii. Paying INR 60-70 lacs to E Y hired by the Petitioner for restructuring the business of the company, without any prior approval of the Board. viii. Setting up a venture of perfume division in Liberty Shoes Ltd. and investing INR 10 crores of the Company's profit with minimal profit and siphoning off the investment in the process. ix. Unlawful transfer of an amount of INR 2,70,72,604/- to M/s Deepak Kumar Sons, M/s S.S. Industries, and M/s Mansarovar Industries at Panipat in violation of the resolution dated 16.06.2023. 72. On 08.09.2023, the Respondent No.1 Company circulated a notice dated 05.09.2023 for AGM along with a sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal s judgment in Cyrus Investments Private Limited Anr. vs. Tata Sons Limited Ors. (supra). In its support, it has specifically relied upon paras 149, 150, 151 and 152 which are extracted as follows : 149. The Tribunal is required to take into consideration the relevant facts and evidence, as pleaded in the application for waiver and (proposed) application under Section 241 and required to record reasons reflecting its satisfaction. 150. The Tribunal is not required to decide merit of (proposed) application under Section 241, but required to record grounds to suggest that the applicants have made out some exceptional case for waiver of all or of any of the requirements specified in clauses (a) and (b) of sub-section (1) of Section 244. Such opinion required to be formed on the basis of the (proposed) application under Section 241 and to form opinion whether allegation pertains to oppression and mismanagement of the company or its members. The merit cannot be decided till the Tribunal waives the requirement and enable the members to file application under Section 241. 151. Normally, the following factors are required to be noticed by the Tribunal before forming its opinion as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is frivolous, it will reject the application for 'waiver'. Otherwise, the Tribunal will proceed to notice the other factors; (c) Whether similar allegation of oppression and mismanagement', was earlier made by any other member and stand decided and concluded; and (d) Whether there is an exceptional circumstance made out to grant 'waiver', so as to enable members to file application under Section 241 etc. This exceptional circumstance could be the economic values of the shares, nature of the shareholding pattern etc. 75. We note that the above-mentioned judgment is not helpful for the Appellant's case. While dealing with an application for a waiver under Section 244, the NCLT is very much empowered to make a preliminary assessment to determine whether the Petition falls within the purview of Sections 241 and 244. While the NCLAT in the Cyrus Investments (supra) case did hold that the merits of the case should not be considered at the waiver stage, but this does not preclude the NCLT from determining whether the Petition falls within the ambit of Sections 241 and 244. We note that in the instant case, the waiver was refused based on the finding that the Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal complaint and that too for valid and justifiable reasons and hence NCLAT could not have laboured so much on the removal of CPM, for granting relief under Sections 241 and 242. XXX XXX XXX 163. It is significant that Sections 241 and 242 of the Companies Act, 2013 do not specifically confer the power of reinstatement, nor we would add that there is any scope for holding that such a power to reinstate can be implied or inferred from any of the powers specifically conferred. [ Emphasis supplied ] 77. Hon ble Supreme Court has noticed that mere termination of Directorship cannot be projected as something that would trigger the just and equitable clause for winding up or to grant relief under Sections 241 and 242. In a petition under Section 241, the Tribunal cannot ask whether the removal of a Director was legally valid and/or justified. The important question is whether such a removal tantamounts to an oppressive or prejudicial conduct. The Hon ble Supreme Court in the above matter has made it clear that mere removal/termination of the Director cannot be projected as something that would trigger the just and equitable Clause (2) to grant relief under Sections 241 and 242 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory documents, and Stock Statements for the last two years, in violation of his roles and responsibilities as the CEO and Executive Director of the company. vii. Paying INR 60-70 lacs to Ernst Young hired by the Petitioner, without any prior approval of the Board. viii. Setting up a venture of perfume division in Liberty Shoes Ltd. and investing INR 10 crores of the Company's profit and siphoning off the investment in the process. ix. Unlawful transfer of an amount of INR 2,70,72,604/- to M/s Deepak Kumar Sons, M/s S.S. Industries, and M/s Mansarovar Industries at Panipat in violation of the resolution dated 16.06.2023. 81. The Appellants on the other hand, have alleged various acts of oppression and mismanagement by the Respondent himself which were noted earlier. 82. Appellant No. 1 was one of the key management person at the helm of the affairs of the company and his pursuing allegations of oppression and mismanagement on the eve of his removal raises questions. If he was having any case of oppression and mismanagement at the hands of the contesting Respondents or other Directors, then he could have preferred such petition under Sections 241 and 242, much prior to his rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant of waiver was never challenged and therefore attained finality, and is now settled law. 86. Appellant has tried to rely upon Manoj Bathla Ors. v. Vishwanath Bathla Ors (supra) which may not be applicable in this case as the facts are distinguishable in this case. In that case, this Tribunal upheld the waiver granted on the grounds of oppression and mismanagement indulged in by the Respondents, even though the Petitioner was merely a 0.33% shareholder. It was noted that: When the status of Respondent No.1 being a shareholder with 25% shareholding Company Appeal (AT) No. 399 of 2018 at the time of incorporation of the Company and also being one of the founding Directors of the Company is admitted, it cannot be contended that he ceased to be a member upon reduction of his share capital and that too when the transfer of shareholding is alleged to be clandestine and product of fabrication and forgery. 87. Furthermore, this Tribunal in the case of Jithendra Parlapalli Vs. Jithendra Parlapalli and Ors (supra) had held that : It cannot be forgotten that a 'Directorial Complaint', cannot be a basis for filing a 'Petition', under Section 241 242 of the Companies Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exception rather than the rule. The NCLT s decision indicates that the Appellant has not demonstrated such exceptional circumstances that would justify bypassing the statutory requirement of a minimum shareholding for the filing of a petition under Section 241. 92. The Petition, as highlighted in the impugned order, revolves significantly around the Appellant s removal as a Director and the related grievances. Section 241 is not intended to address such personal grievances, but is meant to protect the interests of the company and its shareholders against genuine acts of oppression and mismanagement. The NCLT was, therefore, correct in refusing the waiver based on its assessment that the Petition does not substantiate a case of oppression and mismanagement as envisaged under the Companies Act. 93. NCLT s decision is grounded in the specific facts and circumstances of the case, particularly the nature of the complaints raised by the Appellant, which are predominantly directorial. NCLT's assessment that the Petition is primarily based on directorial complaints was not only proper but necessary to ensure that the provisions of the Companies Act are not misused. We find that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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