2007 (10) TMI 682 - Board - Companies Law

Board rules in favor of petitioner citing oppression & mismanagement, sets aside share capital increase.

Sh. Amrik Singh Hayer Versus Hayar Estates Pvt. Ltd. and Ors. and Hayer and Hayer Estates Pvt. Ltd. and Ors.

Sh. Amrik Singh Hayer Versus Hayar Estates Pvt. Ltd. and Ors. and Hayer and Hayer Estates Pvt. Ltd. and Ors. - [2009] 147CompCas 761 (CLB) Issues Involved:1. Allegations of oppression and mismanagement in the affairs of the respondent companies.2. Validity and enforcement of the Memorandum of Understanding (MOU) dated November 9, 2005.3. Adherence to the schedule of payment as per the MOU.4. Validity of actions taken by the respondents, including transfer of shares, appointment of directors, and changes in the company's structure and management.5. Compliance with statutory provisions and Articles of Association.6. Petitioner's right to pre-emption and proper notice of meetings.Issue-Wise Detailed Analysis:1. Allegations of Oppression and Mismanagement:The petitioner alleged acts of oppression and mismanagement by the respondents in the affairs of the respondent companies. The petitioner contended that the respondents colluded to oust him from the companies and deprive the companies of their legitimate money. The petitioner argued that the respondents' actions, including hurriedly transferring assets and altering the company's structure without proper adherence to the MOU, were prejudicial to the interest of the companies and oppressive against him.2. Validity and Enforcement of the MOU:The MOU dated November 9, 2005, was a central issue in the case. The petitioner argued that the MOU was entered into for the transfer of the companies' land and building and that the terms of the MOU, including the schedule of payment, were not adhered to by the respondents. The respondents contended that the MOU was a simple share purchase agreement and that the petitioner had no grounds for grievance as the full consideration was offered to him. The Board found that the MOU was not merely a share transfer agreement but involved the transfer of the companies' land and building, and the respondents' actions were in violation of the MOU's terms.3. Adherence to the Schedule of Payment:The petitioner argued that the respondents did not adhere to the schedule of payment as per the MOU, and the full consideration amount was not paid within the stipulated time. The respondents contended that payments were made, but the petitioner refused to accept them. The Board found that the respondents failed to demonstrate that payments were made in accordance with the MOU, and the petitioner's contentions regarding non-adherence to the payment schedule remained uncontroverted.4. Validity of Actions Taken by the Respondents:The petitioner challenged various actions taken by the respondents, including the transfer of shares, appointment of new directors, change of the registered office, and alteration of the company's structure. The petitioner argued that these actions were taken without proper notice and in violation of statutory provisions and the Articles of Association. The Board found that the respondents' actions were oppressive and prejudicial to the interest of the companies and the petitioner. The Board set aside the increase in share capital and all allotments of shares made subsequent to the MOU, restoring the status quo ante.5. Compliance with Statutory Provisions and Articles of Association:The petitioner argued that the respondents violated statutory provisions and the Articles of Association, including the requirement for proper notice of meetings and the petitioner's right to pre-emption. The Board found that the respondents failed to provide proper notice of meetings and violated the petitioner's right to pre-emption. The actions taken in the alleged meetings were found to be illegal and invalid.6. Petitioner's Right to Pre-emption and Proper Notice of Meetings:The petitioner contended that his right to pre-emption was violated when shares were allotted to respondents without offering them to him first. The Board found that the petitioner's right to pre-emption was indeed violated, and the respondents failed to provide proper notice of meetings, making the actions taken in those meetings invalid.Conclusion:The Board found that the respondents' actions constituted oppression and mismanagement. The MOU was not adhered to, and the respondents' actions were prejudicial to the interest of the companies and the petitioner. The Board set aside the increase in share capital and all subsequent allotments of shares, restored the status quo ante, and upheld the petitioner's directorial complaints. The petitions were disposed of with directions to restore the status quo ante and no order as to costs.