Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2019 (10) TMI 287

..... es were yet to lay the relevant material and evidence before the Tribunal in support of the stands they would respectively take in their pleadings. In these circumstances, the Tribunal could not reach a finding in regard to the issues raised in the Company Petition. In so far as making out of a prima facie case for purposes of grant of interim relief in terms of provisions of Section 242(4) is concerned, the observations made by the Tribunal that the Respondents had been removed from the Board and their shareholding had been cancelled without due notice not in consonance with law are not based on application of mind. The proposition of law that there must be a prima facie case entitling the party seeking interim relief besides other considerations cannot be disputed. It is also indisputable that in appropriate cases, which can be stated to be rarest of the rare cases, the Tribunal may even grant interim relief having the attributes of a final order but the Applicant in such cases will have to establish a strong prima facie case in addition to other legal considerations like an imminent legal injury of irreparable nature and balance of convenience lying in favour of the Applicant. S .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... 2018 further staying the resolutions qua removal of Respondent Nos. 1 and 2 herein from the Directorship of the Appellant Company and the follow up action. Subsequently, during pendency of the Company Petition, I.A. No. 271/JPR/2019 preferred by the Respondents herein for preponing the date of hearing of the Company Petition from 1st October, 2019 to an early date came to be disposed of by the Tribunal on 29th August, 2019 preponing the hearing to 20th September, 2019. However, while advancing the date of hearing, the Tribunal passed further directions declaring the Board Meeting dated 12th August, 2019 as invalid, restoring the position of Company to its previous position and restraining the Appellant Company from taking any policy decisions including termination of employees. Aggrieved of the slew of directions passed by the Tribunal in succession in terms of the impugned orders dated 9th August, 2018 and 29th August, 2019 while hearing of the Company Petition was underway, the Appellant has assailed the same through Company Appeal No. 323 of 2018 and 243 of 2019, separately. Since, both orders arise out of the same matter and have been passed before final disposal of the Company .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... tore the status quo of the last non-contested status preceding the controversy. Lastly it is contended that the Tribunal has considered Board Meeting notice dated 27th July, 2018, letter dated 30th May, 2018 and EGM notice dated 19th July, 2018 for coming to a prima facie conclusion. It is further submitted that the impugned order is not in the nature of final relief as it restricts both the parties. 4. Heard learned counsel for the parties and perused the record. Before proceeding to examine the legality and correctness of the impugned orders, it would be appropriate to glance through the legal framework incorporating provisions with regard to prevention of oppression and mismanagement warranting passing of appropriate directions by the Tribunal. 5. Section 241 of the Act dealing with grant of relief in cases of oppression and mismanagement provides that as regards oppression any member of a company, eligible in terms of Section 244 of the Act, may apply before the Tribunal for an order under Chapter XIV dealing with prevention of oppression and mismanagement. Such member s complaint must be in regard to the affairs of the Company that have been or are being conducted in a manner .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ave been or are being conducted in a manner prejudicial or oppressive to him or any other member or prejudicial to the interests of the company must come up with specific allegations of oppression and mismanagement and demonstrate that the affairs of the company have been or are being run in a manner which jeopardizes his interests or interests of other members or the interests of the company. Passing of interim order necessarily correlates to regulating the conduct of company s affairs. It is therefore imperative that the member complaining of oppression or mismanagement makes out a prima facie case warranting grant of relief in the nature of an interim order. The making of an interim order by the Tribunal across the ambit of Section 242 (4) postulates a situation where the affairs of the company have not been or are not being conducted in accordance with the provisions of law and the Articles of Association. For carving out a prima facie case, the member alleging oppression and mismanagement has to demonstrate that he has raised fair questions in the Company Petition which requires probe. Fairness of questions depends on the nature of allegations which, if proved, would entitle t .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... he company. On the other hand, it is also prima facie evident from the facts that the respondents on its part has not only removed the petitioner from directorship without due and proper notice but has also sought to cancel the shares on the ground that the initial allotment itself is illegal and that the appointment of petitioners 1 and 2 amongst other are not proper and to this effect forms has also been filed concerned with Registrar of Companies, being form 12 dated 30.07.2018 relating back to 28.09.2015. 7. It is abundantly clear that the Tribunal, while declining to go into the merits of the case on account of pleadings being incomplete, made certain observations on the aspect of oppression and mismanagement on the basis of inferences which in the opinion of the Tribunal were available from facts which itself were disputed. It is queer that the Tribunal, while declining to enter the merits of the case, observed that each party tried to remove the other from the management of the Company. In making this observation the Tribunal appears to have been influenced by the notice circulated by the Respondents herein for holding of an EoGM for removal of Mrs. Priya Choudhary and Mr. S .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... s, the Tribunal proceeded to pass direction in the nature of status quo ante restoring the position in regard to Directorship and Shareholding of Appellant Company as it existed prior to 30th July, 2018. This has purportedly been done in the interest of the company as well as its shareholders . Consequent orders are as a follow up with further directions in terms of impugned order dated 29th August, 2019 in I. A. No. 271 which was only for preponing the date of hearing of Company Petition but was disposed of with a declaration regarding invalidity of Board Meeting dated 12th August, 2019. The question for consideration is that despite observations of the Tribunal that parties were trying to dislodge each other by taking unilateral action allegedly not warranted under law which would be the subject of probe depending on fairness of the issue raised for consideration, whether the Tribunal was justified in passing the impugned orders of the nature that could be passed only after conclusion of inquiry within the ambit of Section 242 (1) of the Act and whether the Tribunal has pre-empted the final decision of the Company Petition by passing interim directions without applying its mind t .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... could be ascertained only after the pleadings were completed. In the given circumstances, observations of Tribunal though short of finding in regard to existence of a Prima facie case, much less a strong prima facie case, are unwarranted. It is not in controversy that the Appellant had questioned the eligibility of Respondents in maintaining the Company Petition, which required to be dealt with in the first instance after the pleadings were completed. The Tribunal gave a short shrift to the matter by ignoring such objections and hastily proceeded to pass the impugned order dated 9th August, 2018 which ex-facie suffers from non-application of mind. It does not at all speak of the affairs of Company being conducted in a manner which would need some directions to regulate such conduct. It goes without saying that unless there is a finding in regard to existence of a prima facie case that the affairs of the Company are being conducted in a manner prejudicial to public interest or any member or members or the interest of the Company or oppressive to the Applicant, at least for the present, the Tribunal would not be acting within its province to slap interim directions in the nature of i .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||