2017 (1) TMI 462 - Tri - Companies Law

Director removal & share purchase relief granted under valid statutory provisions. Articles amendments upheld; no oppression found.

Ramachandran Damodaran Versus Yash High voltage Pvt. Ltd. and Ors.

The petitioner was removed as a director following statutory requirements, found valid by the tribunal. The removal was deemed justified, not oppressive. ... Oppression and mismanagement - removal of petitioner as director - Petition for winding up of the company - theft of intellectual property was levelled against the petitioner by the company - Held that:- the removal of Petitioner as director has been done duly following the procedure contemplated under the Act and Articles. - the material on record justifies the management of the company to come to a reasonable conclusion that it is in the interests of the company to remove the petitioner from management of the company. Further Petitioner did not choose to disclose his interest in other companies to Respondents at a right point of time. The crucial test whenever a director was removed from the board of the directors is, whether it has been done with an intention to keep the removed director away from the management of the company to have their own man in the management of the company or with a view that the presence of the removed director is detrimental to the interest of the company. The removal of petitioner as Director of the company does not stand to judicial review. Therefore, Respondent no. 2 giving cheque power to another Director in the place of petitioner by itself cannot be canvased as one of the ground in support of the plea of mismanagement. Increase in the share capital - Held that:- when the 2nd Respondent took decision to increase the share capital of the company which is within the knowledge of the Petitioner, it cannot be said that increase in the paid up share capital or allotment of shares to his group is an act of mismanagement unless and until it is shown that such course of things are detrimental to the interests of company and causes prejudice to the exercise of rights by the minority shareholders. One of the reliefs sought by the petitioner in this petition is to direct any of the parties either to sell or purchase the shares of other parties, after reducing the paid up capital increase in the year 2010 and by taking the share of the Petitioner as 20% of the paid up capital by bidding. In view of the above said findings and as per the admission of Respondent in the reply the shareholding of the petitioner on the date of filing of the petition was determined as 10.96% of the paid up capital of the Company. In the result petitioner is not entitled for any of the reliefs as prayed for by him in the petition. But the following directions are just and reasonable in the facts and circumstances of the case: Respondents 2 to 7 are directed to purchase the 10.96% shareholding of petitioner in the paid up share capital of the 1st Respondent company with their own funds, as per the value of equity share of 1st respondent company determined by the valuer appointed by this Tribunal, on the application filed by the petitioner, in case petitioner is willing to sell his share capital. This petition is disposed of accordingly with the terms and directions. Issues Involved:1. Validity of the removal of the petitioner as Director of the 1st respondent company.2. Whether the removal of the petitioner as Director amounts to oppression or mismanagement.3. Validity of the alteration of Articles of Association.4. Whether the alteration of Articles of Association giving management powers to R2 amounts to oppression or mismanagement.5. Whether the EOGM held on 1-07-2011 was held behind the petitioner's back and if so, whether it amounts to oppression or mismanagement.6. Whether the increase in share capital and allotment of 82,500 shares to M/s. Transpower Technologies Pvt. Ltd. took place behind the petitioner's back.7. Whether the allotment of 82,500 shares to M/s. Transpower Technologies Pvt. Ltd. owned by R2 and R4 jointly on 20-12-2010 amounts to oppression or mismanagement.8. Whether R2 got R4 and R6 resigned as Directors of R1 company on 9-2-2012 and 28-06-2010 respectively.9. Whether the petitioner was denied access to the properties, records, and registers of the company.Detailed Analysis:1. Validity of the Removal of the Petitioner as Director:The petitioner was removed as a director in the EOGM held on 13-06-2013. The relevant sections of the Companies Act, 1956, namely sections 190 and 284, were cited. The tribunal found that the removal process followed the statutory requirements, including special notice and the opportunity for the petitioner to make representations. The tribunal concluded that the removal was legally valid and procedural requirements were met.2. Whether the Removal Amounts to Oppression or Mismanagement:The tribunal examined whether the removal was done with an intention to exclude the petitioner from management or if it was in the company's interest. The reasons for removal included the petitioner's involvement in competing businesses and the filing of a criminal case against him for intellectual property theft. The tribunal concluded that the removal was justified and did not amount to oppression or mismanagement.3. Validity of the Alteration of Articles of Association:The Articles of Association were amended in the EOGM held on 1-07-2011, including the insertion of Article 51-A, which gave significant management powers to R2. The tribunal found that the petitioner attended the meeting where these amendments were discussed and did not object at that time. The tribunal held that the amendments were valid and within the shareholders' rights.4. Whether the Alteration Amounts to Oppression or Mismanagement:The tribunal noted that the amendments were made with the majority shareholders' consent and were within the legal framework. The tribunal concluded that the alterations did not amount to oppression or mismanagement.5. Whether the EOGM Held on 1-07-2011 was Behind the Petitioner's Back:The tribunal found evidence that the petitioner attended the board meeting on 20-06-2011 and the EOGM on 1-07-2011. The tribunal rejected the petitioner's claim that the meetings were held without his knowledge and concluded that there was no act of oppression or mismanagement.6. Increase in Share Capital and Allotment of 82,500 Shares:The tribunal examined the increase in share capital and the allotment of shares to M/s. Transpower Technologies Pvt. Ltd. The tribunal found that the petitioner was aware of and had signed the share certificates. The tribunal concluded that the increase in share capital and share allotment were done in the company's interest and did not amount to oppression or mismanagement.7. Allotment of 82,500 Shares to M/s. Transpower Technologies Pvt. Ltd.:The tribunal reiterated that the petitioner was aware of the share allotment and had signed the share certificates. The tribunal concluded that the allotment did not amount to oppression or mismanagement.8. Resignation of R4 and R6 as Directors:The tribunal found that the resignations of R4 and R6 were accepted in board meetings attended by the petitioner. The tribunal concluded that the petitioner could not claim oppression or mismanagement based on these resignations.9. Denial of Access to Properties, Records, and Registers:The tribunal found no evidence to support the petitioner's claim that he was denied access to company records. The tribunal concluded that there was no act of oppression or mismanagement in this regard.Relief Under Section 402 of the Act:The tribunal noted that even in the absence of a finding of oppression, it could grant relief under Section 402 to do substantial justice. The tribunal directed that the respondents purchase the petitioner's 10.96% shareholding at a value determined by a valuer appointed by the tribunal, if the petitioner is willing to sell.Conclusion:The petition was disposed of with the directions for the purchase of the petitioner's shares by the respondents. The tribunal found no acts of oppression or mismanagement by the respondents.