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2020 (10) TMI 827 - Tri - Companies LawTransfer of land and machinery of 1st Respondent Company - Section 241 of Companies Act, 2013 - HELD THAT - The waiver, extension, relaxation of conditions precedent to the Asset Transfer Agreement are at the instance of the purchaser i.e, Respondent No.2 herein and in case the purchaser agrees for the said waiver, the Agreement may be carried forward by the parties concerned. The Petitioners herein have not been able to establish in all their pleadings and oral arguments as to how their interest have been prejudiced with the said three transactions relating to transfer of land as mentioned in the prayer Clause (2) of their petition. The petitioners also have not been able to establish as to how the said transactions constitute an act of oppression as against them and what tangible loss was caused to the Company with the said transactions especially when they themselves had been party to the decision of Respondent No.1 Company in relation to the EGM held on 16.04.2016. In order for the petition under Section 241 of the Companies Act 2013 (previously under Section 397/298) to succeed against the majority shareholders, the Petitioners have to bring on record material, tangible and real damage to their proprietary interests due to misdeeds complained of and committed by majority shareholders/Management. The said non-extension of Long Stop Date has not been found to be so severe so as to warrant grant of reliefs as prayed by the Petitioners. Accordingly, we are of the considered view that the Petitioners have not been able to make out case of oppression and mismanagement fit for grant of the said reliefs i.e, against item Nos. 5.1 (a) to (d) herein above. The request for investigation of Respondent Nos 1 2 Companies as mentioned against item No. 5.1 (e) is also not acceded to as the Petitioners have failed to bring on record any material evidence in support of their demand for such a relief. In view of the above discussion, the said petition filed under Section 241 and u/s 213 of the Companies Act, 2013 deserves to be dismissed. Petition dismissed.
Issues Involved:
1. Whether the transfer of land and machinery of the 1st Respondent Company to the 2nd Respondent Company was valid. 2. Whether the non-extension of the Long Stop Date in the Asset Transfer Agreement (ATA) invalidates the transfer. 3. Whether the actions of the Respondents constitute oppression and mismanagement under Section 241 of the Companies Act, 2013. 4. Whether the Petitioners are entitled to the reliefs sought, including setting aside the transfer and ordering an investigation into the affairs of the Respondent Companies. Issue-wise Detailed Analysis: 1. Validity of the Transfer of Land and Machinery: The Petitioners sought to set aside the transfer of land and machinery from the 1st Respondent Company to the 2nd Respondent Company, alleging that the transfer was illegal due to the lapse of the Long Stop Date without extension. The Tribunal observed that the Extraordinary General Meeting (EGM) held on 16.04.2016 authorized Mr. Sanjeev Baba to negotiate and finalize the sale of assets, and the Asset Transfer Agreement (ATA) was executed with the consent of the members. The Tribunal noted that there was no requirement for the 1st Respondent Company to obtain further consent from its shareholders for the sale, as per Notification No. 464(E) dated 05.06.2015, which exempts private companies from the provisions of Section 180 of the Companies Act, 2013. 2. Non-extension of the Long Stop Date: The Petitioners argued that the non-extension of the Long Stop Date rendered the ATA void. The Tribunal referred to Clause 6.2.1 of the ATA, which allows for the extension of the Long Stop Date by mutual agreement in writing. The Tribunal found that the Respondent No.2 had waived the requirement for the fulfilment of conditions precedent and agreed to an implied extension of the Long Stop Date. The Tribunal held that the non-extension of the Long Stop Date was a mere technical lapse and did not invalidate the transfer. 3. Oppression and Mismanagement: The Petitioners alleged that the actions of the Respondents amounted to oppression and mismanagement under Section 241 of the Companies Act, 2013. The Tribunal noted that the Petitioners failed to demonstrate how their rights as shareholders were prejudiced or how the transactions caused tangible loss to the Company. The Tribunal referred to the Supreme Court's judgment in Shanti Prasad Jain vs. Kalinga Tubes Ltd., which requires continuous acts of oppression and tangible damage to proprietary interests for a claim under Section 241 to succeed. The Tribunal found that the Petitioners did not meet this burden of proof. 4. Entitlement to Reliefs Sought: The Petitioners sought several reliefs, including setting aside the transfer of assets, restraining the Respondents from creating third-party interests, and ordering an investigation into the affairs of the Respondent Companies. The Tribunal held that the Petitioners did not establish a case of oppression and mismanagement warranting such reliefs. The Tribunal also found no material evidence to support the demand for an investigation under Sections 210 and 213 of the Companies Act, 2013. Order: The Tribunal dismissed the petition, concluding that the Petitioners failed to make out a case of oppression and mismanagement. The Tribunal did not grant any of the reliefs sought by the Petitioners, including setting aside the transfer of assets and ordering an investigation. The petition was dismissed without any orders as to costs.
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