2025 (5) TMI 269 - Tri - Companies Law

Oppression and mismanagement - Section 397 398 of the Companies Act 1956 - Illegal appointment of Respondents 2 3 as Directors - Misappropriation of amounts invested/ deposited by the petitioners and other investors - Non-convening of the General meetings - Irregular allotment of further shares - HELD THAT - The Respondents No. 5 has placed on record certain handwritten documents which were drawn on 23.08.1987 and 05.10.1987. These documents clearly evidence that the three groups had agreed to form a company with a paid-up capital of Rupees 60, 000/- owned equally by each group which thereafter came to be formed as Respondent No. 1 wherein Shri Y J Barrara and Shri N S Gandhi were agreed as First directors and the Petitioners was to take up the registration job. The Petitioner and N S Gandhi jointly were forming a group and each of them was to collect 4.5 lakhs to be utilised to acquire the land for development thereof. The facts stated in the petition are in corroboration with these noting duly signed by the Petitioner i.e. the Petitioner was part of NS group whose share was 1/3rd in the company s capital for all group members taken together. The Petitioner was allotted 60 shares of Rs. 1000 each and was liable to contribute Rs. 3, 00, 000/- to the company towards the land and another Rs. 1, 50, 000/- towards 50% of N B Avadh share which came in the ownership of the Petitioner. Accordingly the petitioner paid 4.50 lakhs rupees towards cost of land to the company as loan. The petitioner nominated some persons to hold his shares in the plot of land and such nominated person of each group were given loan by the company for acquisition of land in their name - It is relevant to note here that the Petitioner has not disowned these notes yet has questioned the relevance of these to the petition and has also asserted in his pleadings relying on these writings itself that the said writings records about the rights in respect of the lands proposed to be purchased shall not be saleable and transferable. The petitioner has suppressed the actual understanding amongst the parties and has tried to take advantage of demise of original directors i.e. his brother N. S. Gandhi and Mr. Y. J. Barara for challenging the sale of plots of land owned by various persons in their name or in name of their nominees. The Respondent Company was merely a facilitator in whole of exercise and the Petitioners have been paid to their own admission as evidenced from documents placed on record by the Respondent No. 5 the sale proceeds due from sale of their share of plots - The allegations are vague and are merely conjectures. The jurisdiction of this Tribunal under Section 241/242 of the Companies Act 2013 is an equitable jurisdiction. It was held in case of Jiwan Mehta v. Emmbros Metals P. Ltd. 2007 (11) TMI 716 - COMPANY LAW BOARD PRINCIPAL BENCH NEW DELHI that It is a settled proposition of law that the conduct of the parties is a very relevant factor to be considered in the equitable proceedings under Sections 397/398 of Companies Act 2013. Conclusion - The Petitioner had not come with clean hands and had failed to provide sufficient evidence to support his claims of oppression and mismanagement. Petition dismissed.

ISSUES PRESENTED and CONSIDERED

The Tribunal considered several core legal issues in the petition filed under Sections 397 and 398 of the Companies Act, 1956, by the Petitioner against Winterpark Developers Private Limited:

1. Whether the appointments of Respondents 2 and 3 as directors were illegal and constituted acts of oppression and mismanagement.

2. Whether there was misappropriation of funds invested by the Petitioner and other investors in the company.

3. Whether the issuance of additional shares and the conduct of company affairs were irregular and prejudicial to the interests of the Petitioner.

4. Whether the Petitioner was entitled to relief under Sections 397 and 398 of the Companies Act, 1956, based on the alleged acts of oppression and mismanagement.

ISSUE-WISE DETAILED ANALYSIS

1. Illegal Appointment of Directors

The Tribunal examined the legality of the appointments of Respondents 2 and 3 as directors. The Petitioner alleged that these appointments were made without proper authority and were void ab initio. The Tribunal found that the Petitioner had signed documents acknowledging the directorship of Respondents 2 and 3, which contradicted his claims of unawareness. Additionally, the Tribunal noted that the Petitioner was involved in the company's affairs and had participated in meetings where these appointments were discussed.

2. Misappropriation of Funds

The Petitioner claimed that funds invested in the company were misappropriated by the Respondents. The Tribunal reviewed evidence, including handwritten documents and minutes of meetings, which indicated that the Petitioner was aware of and involved in the transactions related to the company's land acquisitions. The Tribunal found that the Petitioner had received monetary benefits from these transactions and had not provided sufficient evidence of misappropriation.

3. Issuance of Additional Shares and Conduct of Company Affairs

The Petitioner alleged irregularities in the issuance of additional shares and the conduct of company affairs. The Tribunal found that the Petitioner was aware of the shareholding structure and had participated in decisions regarding the company's operations. The Tribunal noted that the Petitioner had not provided evidence of prejudice resulting from the issuance of additional shares.

4. Entitlement to Relief under Sections 397 and 398

The Tribunal considered whether the Petitioner was entitled to relief under Sections 397 and 398 of the Companies Act, 1956. The Tribunal emphasized the equitable nature of its jurisdiction and the requirement for the Petitioner to come with clean hands. The Tribunal found that the Petitioner had suppressed material facts and made false statements, which disqualified him from seeking equitable relief.

SIGNIFICANT HOLDINGS

The Tribunal made several significant holdings in its judgment:

1. The Tribunal held that the Petitioner was aware of and involved in the company's affairs, including the appointments of Respondents 2 and 3 as directors. The Petitioner had acknowledged these appointments in signed documents, undermining his claims of illegal appointments.

2. The Tribunal found that the Petitioner had received monetary benefits from the transactions related to the company's land acquisitions and had not provided evidence of misappropriation. The Petitioner was involved in the decision-making process and had participated in meetings where these transactions were discussed.

3. The Tribunal held that the Petitioner was aware of the shareholding structure and had participated in decisions regarding the company's operations. The Petitioner had not demonstrated prejudice resulting from the issuance of additional shares.

4. The Tribunal emphasized the equitable nature of its jurisdiction and the requirement for the Petitioner to come with clean hands. The Tribunal found that the Petitioner had suppressed material facts and made false statements, which disqualified him from seeking equitable relief. The Tribunal dismissed the petition on the grounds of suppression and misstatement.

The Tribunal concluded that the Petitioner had not come with clean hands and had failed to provide sufficient evidence to support his claims of oppression and mismanagement. Consequently, the petition was dismissed.

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