2019 (7) TMI 1615 - Tri - Companies Law

Tribunal dismisses claims on company conduct, board resolutions; restrains removal of partners as directors

The Tribunal dismissed the petitioner's claims regarding regulation of the respondent-company's conduct, validity of board resolutions, and enforcement of ... Oppression and mismanagement - primary grievance of the petitioner appears to be that resolutions at board meetings were passed under the caption of 'any other agenda' and were not specifically provided in the agenda - removal of partners of the petitioner LLP as directors of the first respondent-company - HELD THAT:- Counsel for the petitioners unfortunately has not argued the case in spite of multiple opportunities given to them. Prima facie there seems to be no merit in the case. The petitioners have failed to make out a clear cut case of oppression and mismanagement. From a plain reading of the documents provided by both sides, the resolutions passed by the board of directors on April 16, 2014, July 22, 2014, December 30, 2014, April 23, 2015 and July 27, 2015 appear to be in compliance with the existing provisions of company law. The memorandum of understanding dated August 7, 2012 has been entered between the group companies of the petitioner and the respondent, and it is not exclusive to the parties in the present petition. The respondents are restrained from removing the partners of the petitioner LLP as directors of the first respondent-company and are directed to give them a patient hearing at the next annual general meeting of the first respondent-company. Other reliefs as sought for by the petitioner are not tenable in the facts and circumstances of this case and hence, could not be granted. The first respondent-company, its directors and managerial persons are directed to file for compounding of non-compliance with section 203 of the Companies Act, 2013 with the Registrar of Companies, Karnataka - it is made clear that in case the remedy provided by us hereinabove fails to absolve the dispute or resolve the issues existing between the parties, each of the parties shall have complete liberty to approach this Tribunal seeking for such directions as may be necessary. Petition disposed off. Issues Involved:1. Regulation of the conduct of the first respondent-company.2. Validity of resolutions passed by the board of directors.3. Compliance with the memorandum of understanding dated August 7, 2012.4. Execution and enforcement of the shareholders agreement.5. Removal of designated partners as directors.6. Allegations of oppression and mismanagement.7. Fiduciary duties and breach thereof.8. Compliance with Section 203 of the Companies Act, 2013.Analysis of Judgment:Regulation of the Conduct of the First Respondent-Company:The petitioner sought to regulate the future conduct of the first respondent-company and prevent any resolutions that would shift management powers from the designated partners to nominee directors. The Tribunal found no merit in the petitioner’s case and did not grant the relief sought. The resolutions passed by the board of directors on various dates were found to be in compliance with existing company law provisions.Validity of Resolutions Passed by the Board of Directors:The petitioner challenged multiple resolutions passed at board meetings on April 16, 2014, July 22, 2014, December 30, 2014, April 23, 2015, and July 27, 2015, as illegal and void. The Tribunal, after reviewing the documents, concluded that these resolutions were in compliance with the existing provisions of company law. The petitioner failed to make a clear case of oppression and mismanagement.Compliance with the Memorandum of Understanding Dated August 7, 2012:The petitioner sought strict compliance with the memorandum of understanding (MoU) dated August 7, 2012. The Tribunal noted that the MoU was not finalized and was only a draft. The Company Law Board, Chennai Bench, had previously observed that the MoU was not final. Therefore, the Tribunal did not enforce the MoU.Execution and Enforcement of the Shareholders Agreement:The petitioner requested the execution of the shareholders agreement and its incorporation into the articles of association. The Tribunal noted that the shareholders agreement was merely a draft and was never finalized. As such, the Tribunal could not compel the respondents to execute an agreement they did not wish to.Removal of Designated Partners as Directors:The petitioner sought to restrain the respondents from removing the designated partners as directors. The Tribunal restrained the respondents from removing the partners of the petitioner LLP as directors of the first respondent-company and directed them to give the partners a patient hearing at the next annual general meeting.Allegations of Oppression and Mismanagement:The petitioner alleged oppression and mismanagement by the respondents. The Tribunal found that the petitioners failed to make a clear case of oppression and mismanagement. The respondents' actions, including the passing of resolutions and changes in management, were found to be in compliance with company law.Fiduciary Duties and Breach Thereof:The respondents accused the petitioner's designated partners of breaching their fiduciary duties and acting in a manner detrimental to the first respondent-company. The Tribunal did not find sufficient evidence to support these allegations and noted that the petitioner’s actions were not in breach of fiduciary duties.Compliance with Section 203 of the Companies Act, 2013:The Tribunal directed the first respondent-company, its directors, and managerial persons to file for compounding of non-compliance with Section 203 of the Companies Act, 2013, with the Registrar of Companies, Karnataka.Conclusion:The Tribunal disposed of C. P. No. 74 of 2015 (T. P. No. 80 of 2016) with specific directions. The respondents were restrained from removing the partners of the petitioner LLP as directors and were directed to give them a hearing at the next annual general meeting. Other reliefs sought by the petitioner were not granted. The first respondent-company was directed to address non-compliance issues with Section 203 of the Companies Act, 2013. The Tribunal allowed the parties liberty to approach it again if the provided remedy failed to resolve the disputes. No order as to costs was made.