TaxTMI 
TaxTMI 
2020 (8) TMI 611
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.... is a founder promoter, Director and a shareholder of the respondent No. 1 company holding 2,53,730 equity shares aggregating to 19.55%. The Appellant No. 2 is the wife of Appellant No. 1 who holds 30,000 shares in the same company aggregating 2.31% of the share capital of the company. The Respondent No. 2 to 7 are the other directors of the company which are close relatives. The Appellant No. 1 pointed out the bogus transactions and siphoning of funds taking place in the company is an act of Oppression and Mismanagement and filled a company petition in NCLT, Chennai which is dismissed and hence this appeal. 3. Appellant No. 1 submitted that the respondents had engaged in making bogus vouchers by booking bogus purchases of cotton and siphoning out money of the company in several ways including by showing as though cotton has come from the State of Gujrat and creating records as though cotton has been purchased at a higher price and also by showing and paying a higher transport charges. That there was a quarrel when the Appellant No. 1 caught that the Respondents were purchasing cotton from Andhra Pradesh but were showing as if it is purchased from Gujrat. 4. Appellant No. 1 also ....
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.... 1 also contended that presently the stake of the Respondent no. 2 to 7 is 77%, they are the six out of seven directors in Board, on an average representing 12.9% each. However, there are not less than 3 directors who hold 10% or less and still enjoy a directorship. In this situation a proportional representative is an appropriate remedy to operate as a check when the majority control showing tendencies to run the management of the affairs of the company according to their whims and fancies excluding the petitioners from the management though they are rightfully entitled for the same. The company being in the nature of partnership, a proportional representation should be introduced in the composition of Board of Directors of the Company. 12. Appellant No. 1 submitted that after pointing out all these oppressive acts of the Respondents before the Tribunal that no notice were received by the Appellants and during the pendency of the company petition in CP No. 17 of 2017, on 21st August 2017 the Appellant No. 1 received a notice and agenda for the Board Meeting scheduled to be held on 31st August 2017 to which he sent a letter on 25th August 2017 to the Board of Directors of the comp....
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....and waste of funds of the company. 18. It is also contended by the Appellant No. 1 that for the above stated reasons the affairs of the company are being conducted not only in a manner oppressive to the Appellant but also prejudicial to the interests of the Company and its shareholder. 19. Having aggrieved by the order of NCLT, Chennai Bench the Appellant prayed for the following relief: a) Allow the Appeal and set aside the impugned order dated 11th July 2019 passed in CP No. 17 of 2017 passed by the NCLT, Chennai in the matter of S.P. Velumani and another vs. Magnum Spinning Mills India Private Limited and others and allow the prayers in the Company Petition. b) To pass such other orders which as this Hon'ble Appellate Tribunal may deem fit and proper in the circumstances of the case and thus render justice. 20. The Respondent No. 1 filed its reply and stated that while the Appellant have claimed alleged irregularity in respect of certain payments, the Appellant was estopped from challenging the transection ex facie, as the relevant purchase documents have been pursued and passed for payment only by Appellant No. 1 and cheques also issued only by the Appellant No. 1. The....
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.... 27. It is also stated by the Respondent No. 1 Company that it is a practice of the company to send notice of meetings through emails. Appellant has habit of attending meetings and not signing the attendance register. CCTV footage and photograph of Appellant No. 1 attending several meetings are submitted. In fact, on the same date as the meeting was held, the Appellant No. 1 has signed vouchers at the registered office of the company. 28. It is further stated that notices for Board Meeting on 22-11-2018, 21-04-2018 and 19-08-2018 were sent by RPAD. In fact for the Board Meeting on 20-02-2019, notice was again sent by RPAD. The Appellant No. 1 casually asked for an adjournment of the meeting or in the alternative sought for leave of absence. The conduct of the Appellant stands further exposed thereby. 29. It is further submitted on behalf of the Respondent No. 1 Company that on the Accounts/Balance sheet for the year 31-03-2016, where specific contention is raised that this was not discussed at the Board, it is submitted that at the Board meeting on 22-08-2016, the Balance sheet was passed and notices for such meeting was issued. Even when the Annual report was sent by RPAD, the ....
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....e for a direction for the Appellant to exit the company at fair value to be determined by a valuer. 34. After having heard the averments made by the parties the NCLT, Chennai Bench dismissed the Company Petition stating that the acts complained of are not falling within the purview of Oppression and mismanagement. Being aggrieved by the said order of the NCLT the appellant has filed the present appeal. 35. The records of Appellant attending the meeting and the signatures put on the entry register shows that Appellant No. 1 was present at the registered office of respondent No. 1 Company, where the meeting was conducted. In that meeting the resolution was passed by the majority directors to regulate the procedure pertaining the signatories to the bank accounts of Respondent No. 1 Company, which is in no way oppressive as the decision relating to the Operation of bank account is within the domain of the Board of Directors. NCLT has rightly put its reliance on Judgement of NCLAT in Upper India Steel Manufacturing and Engineering Co. Ltd. & Ors. Vs. Gurlal Singh Grewal & Ors. where it was held that cheque signing power is solely a business decision and cannot be interfered. Further a....