2023 (6) TMI 104 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI

Oppression and Mismanagement - Transfer of Shares - allotment of shares - Forum Shopping - Removal of Appellants No. 2 and 6 from the Directors of the Company and to declare them as unfit to be appointed as Directors in any Company - whether the Company Petition was barred by Limitation? - HELD THAT:- Keeping in view that the Form 32 for removal of the Respondent as Director was filed only on 01/12/2005 and the Petition was filed in April 2008, apart from the fact that the removal is interlinked with the subsequent development and form a continuous act, this Tribunal is of the considered view that the Petition is not barred by limitation.

As regards the merits of the matter and the issues raised in this Appeal, this ‘Tribunal’ address to whether the Resolution dated 05/02/1996 allotting 420 shares to Mr. T.S. Rathnasabapathy by himself was in accordance with Law. There is no documentary evidence on record to establish that the ‘Notice’ of the Meeting stated to be sent to the Respondent are known to have been received. Even if the Notice of the Meeting was indeed dispatched and served, it is seen from the record that the requisite quorum as maintained under Law and as per the Articles of Association was not available for conduct of the 05/02/1996 Board Meeting, as the Petitioner/Respondent is holding 50% of the shares and is one of the two Directors. Annexure R-2 is the Notice issued by the ‘Registrar of Companies’ to the 1st Appellant Company on 09/12/1998, which is reproduced as hereunder for better understanding of the case.

It is clear that even as on 1998, there was no business conducted by the Company, and hence there was no need to infuse any additional Capital by allotting Shares specifically in the absence of any offer to the Petitioner/Respondent to subscribe to any Rights issue, as no Rights issue was ever offered. Keeping in view these aforenoted reasons, this Tribunal is of the considered view that the Resolution dated 05/02/1996 is null and void.

It is not in dispute that the only asset of the ‘Company’, is the immovable Property, that is the subject land in question, which the Appellant contends has been sold legally with the knowledge of the Petitioner/Respondent. The documentary evidence on record does not substantiate that the subject land was sold involving the Petitioner/Respondent. Admittedly, disputes were raised before the Hon’ble High Court of Karnataka in the Civil Court and in ‘Company Law Board’ and when the Company Petition is pending, the act of the Appellants No. 2 to 5, in selling the ‘Land’ without ‘Notice’ to the Petitioner/Respondent is held to be a unilateral sale, constituting an act of Oppression and Mismanagement meaning thereby that the affairs of the Company were mismanaged by the Appellants, as the only asset of the Company was this ‘Land’ - the subsequent act of the Appellants herein in selling the subject land, without informing the Respondent; in the ‘absence’ of a specific ‘Notice’ issued to the Petitioner/Respondent herein, as per the Provisions of Law; and increasing the ‘Share Capital’ in the ‘Board Meeting’, once again in the absence of the Petitioner/Respondent who is the only other Director; all fall within the ambit of the ‘definition’ of ‘Oppression and Mismanagement’, as defined under Sections 395 and 396 of the Companies Act, 1956.

This Tribunal is of the earnest view, that there is no illegality or infirmity in the Impugned Order dated 11/10/2018 and hence this Company Appeal fails and is accordingly dismissed.