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2017 (5) TMI 1740 - Tri - Companies LawOppression and Mismanagement - appointment of Director - It is the case of the petitioner that he was away from the management and affairs of the 1st respondent company from 2012 of course according to the petitioner on account of non-cooperation from respondents. According to the respondents on 08.10.2013 in the meeting of Board of Directors of the 1st respondent company respondent 3 was appointed as Director. Whether appointment of respondent 3 as Director of the company as per resolution passed in the Board of Directors meeting held on 8th October 2013 is valid? HELD THAT - From the material available on record it is clear that petitioner himself stayed away from affairs of the company from 2012. Admittedly petitioner changed his residence which is recorded in the register of company - It is only on 20.10.2016 petitioner informed 1st respondent company about change of his address from 4A Anupam Bungalows New City Light Road Surat to B/202 Dreamworld Residency Canal Road Near G.D. Goenka School Surat. It is the duty of the petitioner to inform the change in his address and it is not for the company or other shareholders to find out the change in address of the petitioner. Therefore petitioner has no right to say that he was not served with notice. Without placing any material on record by merely filing form MGT-7 it cannot be concluded that petitioner attended five Board meetings. Therefore from the facts and the material available on record it appears that the petitioner was not involved in the management affairs of the company from 2012 to 2016. Considering the powers of this Tribunal under section 242(2) of the Companies Act 2013 in order to do substantial justice to the parties and smooth conducting of business and affairs of the company this Tribunal under section 242(2) of the Companies Act 2013 can pass an order even in absence of finding of oppression. Petitioner being one of the promoters of the company and being a technical person would certainly have rights and expectation which would submerge in corporate structure. Legitimate expectations of the petitioner in the business of the company shall also be safeguarded and at the same time the interest of the company and inputs given by the respondents shall also be taken into consideration. The appointment of respondent 3 as director is set aside. Allotment of shares as per resolution dated 26.12.2016 is set aside. Petitioner is not entitled for any other reliefs in this petition.
Issues Involved
1. Validity of appointment of Respondent 3 as Director. 2. Non-receipt of notices for Board Meetings and Shareholders Meetings. 3. Allegations of oppression and mismanagement. 4. Delay and latches on the part of the petitioner. 5. Allotment of right shares and financial decisions post-petition. Detailed Analysis 1. Validity of Appointment of Respondent 3 as Director: The petitioner alleged that the appointment of Respondent 3 as Director in the Board Meeting held on 8th October 2013 was invalid as he was not notified about the meeting. The Tribunal found that the resolution appointing Respondent 3 did not specify the presence or absence of the petitioner and no leave of absence was granted. The respondents failed to provide evidence that notice was served to the petitioner for the said meeting. Therefore, the Tribunal concluded that the appointment of Respondent 3 as Director was not valid. 2. Non-receipt of Notices for Board Meetings and Shareholders Meetings: The petitioner claimed he was not served notices for Board Meetings and Shareholders Meetings from 2012 to April 2016. The respondents argued that notices were sent by ordinary post to the address on record, and the petitioner frequently changed his address without informing the company. The Tribunal noted that it was the duty of the petitioner to inform the company of his address changes. However, the Tribunal also emphasized that the respondents had an extra duty to involve the petitioner in the management affairs due to the limited number of directors and shareholders. The Tribunal found that the petitioner was not involved in the company's management from 2012 to 2016. 3. Allegations of Oppression and Mismanagement: The petitioner alleged acts of oppression and mismanagement by Respondents 2 and 3, including keeping him in the dark about the company's affairs and fabricating records. The respondents countered with accusations against the petitioner, including siphoning funds and competing businesses. The Tribunal observed that the petitioner stayed away from the company's affairs voluntarily and did not take steps to convene meetings or ensure compliance with statutory obligations. The Tribunal found no substantial evidence of oppression or mismanagement that warranted equitable relief. 4. Delay and Latches on the Part of the Petitioner: The Tribunal noted that the petitioner remained inactive regarding the company's affairs for over four years and only started inquiring about the company in 2016. The Tribunal held that the petitioner's delay in raising issues and his failure to inform the company of his address changes disqualified him from seeking equitable relief, except for the invalid appointment of Respondent 3 as Director. 5. Allotment of Right Shares and Financial Decisions Post-Petition: The Tribunal scrutinized the respondents' decision to demand Rs. 14.54 lakhs from the petitioner to address a financial crunch and the subsequent issuance of right shares. The Tribunal found that the demand for Rs. 14.54 lakhs was unjustified, given the petitioner's detachment from the company. The issuance of right shares was done with undue haste and against the petitioner's interests. The Tribunal set aside the allotment of shares as per the resolution dated 26th December 2016. Conclusion: The Tribunal set aside the appointment of Respondent 3 as Director and the allotment of shares as per the resolution dated 26th December 2016. The petitioner was directed to sell his shares to Respondents 2 and 3 at a fair market value determined by an independent valuer. The petitioner was instructed to file an application for the appointment of an independent valuer within two months, with the company bearing the valuer's fees and expenses. No other reliefs were granted to the petitioner.
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