TMI Blog2022 (1) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... the management of the company and who, for any given reason, are unable to control the board. The remedy for shareholders oppression is also available to majority shareholders, the court would only exercise its powers to remedy, in instances where the majority shareholders are unable to rectify the oppression themselves. The shareholders must show that there exist some special circumstances rendering their majority shareholding powerless, against the oppressor. In the instant petition, petitioners themselves admitted that they are majority shareholders who stated that they are facing oppression and mismanagement from the Respondents. It is admitted fact that the major portion of the equity shares (2/3rd) are held by the 1st and 3rd petitioners and the 2nd Respondent holds only 1/3rd of the total shares - Therefore, the petitioners themselves are still the majority shareholders who are in control of or concerned with the management and operation of the company and have already exercised their voting powers for self-remedy i.e., by removing the Respondents from the board and appointing new Additional Directors. In no way the petitioners have been oppressed by the Respondent Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, distributors. manufacturers representative s Commission. franchisors. and or in any other capacity, and dealers in, and to buy render, marketable. Sell, Barter, exchange, pledge, charge, make advances on and otherwise deal in or with or turn to account by wholesale or retail goods. General merchandise and other commodities of all kinds and descriptions. 3. The authorized share capital of the company is ₹ 20,000,000/-( Rupees Two Crores only) divided into 2,00,000 (Two Lakhs) Equity shares of ₹ 100/- (Rupees Hundred only) each. 4. The company M/s. Lamcy Enterprises Private Limited was incorporated by three directors namely, Sulaiman Assanar Kunju, Jahufar Rawther Abdul, and Ansarudeen Haneefa with equal shares and equal rights. The promoter directors were successfully carrying on business till 21.01.2019. While so, the 2nd Respondent expressed his desire to purchase the entire equity shares held by the petitioners. Accordingly, an agreement for sale of shares was executed by them on 15.01.2019. Consequent to the agreement for the transfer of shares, the two directors i.e., Sulaiman Assanar Kunju, Jahufar Rawther Abdul were resigned from the Board of Directors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been filed by the 2nd petitioner who holds no shares in the 1st Respondent Company, hence, he has no locus standi to file this case. 10. It is further stated that 2nd respondent entered into the business of the 1st Respondent Company by the instigation from the 1st and 3rd petitioners as they have sufficient knowledge in the textile business. The 1st and 3rd petitioners expressed their desire to withdraw from the business because of their personal inconvenience and requested the 2nd respondent to purchase their shares which he had agreed to. 11. Respondent Nos. 2 3 admitted that they have entered into an Agreement for sale of Shares on 15.01.2019 with the 1st and 3rd Petitioners. It was agreed to purchase 66,667 shares from 1st Petitioner for ₹ 85,00,000 lakhs and 66,666 shares from 3rd petitioner for an amount of ₹ 81,00,000 lakhs and get ₹ 15,00,000/- being the deposits towards the building. Thus, Respondents had to pay ₹ 1 Crore to the 1st petitioner and ₹ 96,00,00/- to the 3rd petitioner. As per the agreement in Clause 12, 1st and 3rd petitioners are duty-bound in clearing the purchase amount and dues after the date of the agreement. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the resolutions passed at the meeting are not binding on them. The petitioners have fraudulently filed DIR-12 to appoint new directors as per the impugned EGM held 28.12.2019. The certifying professional (chartered accountant) misused the DSC of 3rd respondent even though 3rd respondent has not given any authorization to do so. Hence, the 2nd Respondent has filed a complaint before Registrar of Companies, Kochi. 14. The first respondent company is the lessee and 2nd Respondent is the lessor. Hence, they denied the contention of the petitioners. 15. It is also stated that the company s account has become NPA because the petitioners herein were not willing to renew the loan from the Federal Bank. The Respondents are not aware of the loan in the Federal Bank, as the account was operated by the 1st and 3rd petitioners during the 2014 period and it was their duty to clear off all the debts as Managing Directors of the Company. 16. Respondents concluded their arguments and stated that the oppression and mismanagement are done by the petitioners as they are the majority and they managed the company in a very prejudicial manner. They are purposefully not co-operating with the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties at length and considered the voluminous documents placed on record. We have also gone through the relevant case laws cited by both parties. 20. According to the 1st and 3rd petitioners they are the majority shareholders of the company. They entered into a Share Purchase Agreement on 15.01.2019 with Respondent No.2. But 2nd Respondent failed to fulfil their part. Hence, the agreement could not succeed. Respondents contention is that 1st and 3rd petitioners have defaulted in the Agreement. The Petitioners have not complied with Clauses 12 and 14 of the Agreement. Clause 12 and 14 of the Agreement is reproduced as under: - 12. The second and third parties shall fully co-operate with the first party in clearing the purchase amount and dues after the date of this agreement. At the same time it is made clear that the first party is at liberty to settle the payments due to the outsiders and purchasers on the absolute verification and examination of all the bills and documents. xxxxxxx 14. The 1st party is entitled to claim from the 2nd and the 3rd parties for any loss sustained on account of any incorrect, insufficient, deficient, fabricated details already su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the 2nd and 3rd Respondent being majority shareholder. Another allegation of the Respondent is that the DSC of the 3rd Respondent, who as per the EGM resolution was removed on 28.12.2019 was used while filing DIR12 before the Registrar of Companies, appointing Mr. Chandra Saju Mohan Mr. Mohanan Nair and Mr. Biju Jayapalan Nair into the company as additional directors of the company. 23. With regard to shareholder s oppression, the discussion would revolve around the oppression of a minority shareholder, by a majority shareholder. The Companies Act 2013 has taken various crucial steps to safeguard the interests of the minority rights of the shareholders in the company irrespective of the existence of oppression and mismanagement of the company affecting the rights of the minority shareholders. The core intention of the legislation is to safeguard the interests of the minority shareholders. Section 241 of the Act reads as under: - 241. (1) Any member of a company who complains that- (a) the affairs of the company have been or are being conducted in a manner prejudicial to the public interest or in a manner prejudicial or oppressive to him or any other member or mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the majority shareholders are unable to rectify the oppression themselves. The shareholders must show that there exist some special circumstances rendering their majority shareholding powerless, against the oppressor. 26. In the article Reverse Oppression and Shareholder s Commercial Unfairness Remedy (2015), the author explained that statutory remedies for oppression are merely residual in nature, to fill any gaps in which the shareholder is unable to remedy themselves. 27. In the instant petition, petitioners themselves admitted that they are majority shareholders who stated that they are facing oppression and mismanagement from the Respondents. It is admitted fact that the major portion of the equity shares (2/3rd) are held by the 1st and 3rd petitioners and the 2nd Respondent holds only 1/3rd of the total shares. Petitioners themselves stated that the Respondents have no authority to question the decision taken by the Petitioners on 28.12.2019 in the EGM, removing the 2nd and 3rd Respondents from the post of the Directorship, and the appointment of Mr. Chandra Saju Mohan Mohanan Nair, and Mr. Biju Jayapalan Nair into the company as Additional Directors of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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