2019 (6) TMI 137 - AT - Companies Law

Tribunal grants waiver in Company Petition, emphasizes serious allegations, shareholder status upheld.

Mr. Manoj Bathla, Sarthak Madhur Publications Pvt. Ltd., Mr. Prakash Chand Bathla And Mrs. Krishna Kumari Versus Mr. Vishwanah Bathla And Registrar of Companies, New Delhi

The Tribunal granted the waiver to the Respondent for prosecuting a Company Petition alleging oppression and mismanagement under Section 244 of the ... Oppression and mismanagement - waiver of requirement specified in Section 244 of the Companies Act, 2013 - Scope of 'Member' - shareholding of Respondent No. 1 being zero percent - HELD THAT:- Admittedly, Respondent No. 1 was a shareholder of the Company since its incorporation. It is not the Appellant’s case that Respondent No.1 was holding shares below the threshold limit. Appellants have not also been able to demonstrate that the number of members of the Company exceeded 10. Admittedly, the parties belong to one family. Respondent No.1 and Appellant No.1 are brothers while Appellant No. 3 and 4 are their parents. It is not disputed by the Appellants that both brothers i.e. Respondent No.1 and Appellant No.1 held 25% shareholding each in the Company while their father Appellant No. 3 held 50% shareholding. Whether the shareholding of parents stated to have been increased between year 2009 to 2011, the substantial hike resulting in reduction of shareholding of Respondent No. 1 to 0.33% was an act of manipulation on the part of Appellant No.1 or had been done with the consent and approval of Respondent No.1 who too was the Director of the Company, is the core issue in the Company Petition, which, alongwith other contentions raised may or may not establish oppression as alleged by Respondent No.1 - In the absence of relevant record, being withheld and explanation for such withholding not being found plausible and convincing, Respondent No.1 cannot be held as having been divested of the status of a ‘member’ of the Company for limited purpose of waivement of the requirement as specified in Section 244(1)(a) of the Act. When the status of Respondent No.1 being a shareholder with 25% shareholding at the time of incorporation of the Company and also being one of the founding Directors of the Company is admitted, it cannot be contended that he ceased to be a “member” upon reduction of his share capital and that too when the transfer of shareholding is alleged to be clandestine and product of fabrication and forgery. Appeal dismissed. Issues:1. Waiver of requirement under Section 244 of the Companies Act, 2013 for prosecuting a Company Petition alleging oppression and mismanagement.2. Eligibility of a shareholder as a 'member' under Section 2(55) of the Act.3. Allegations of reduction of share capital, manipulation, and fabrication of documents.4. Grant of waiver for prosecuting the main Company Petition.Analysis:1. The Respondent filed a petition seeking waiver of the requirement under Section 244 of the Companies Act, 2013, to prosecute a Company Petition alleging oppression and mismanagement. The Tribunal granted the waiver as the Respondent's status as a shareholder was not disputed, and evidence regarding share allotment and transfer was not produced by the Appellants. The Appellants challenged this decision on the grounds that the Respondent did not qualify as a 'member' under Section 2(55) of the Act due to zero percent shareholding.2. The Appellants argued that the Tribunal erred in waiving the eligibility condition for the Respondent, who held zero percent shareholding in the company. They contended that the Respondent's petition did not relate to oppression and mismanagement but rather to the transfer of shareholding, which could be addressed under different sections of the Act. The Respondent denied these allegations, claiming that his shareholding was illegally reduced through forgery and fabrication of documents by the Appellants.3. The Respondent's case revolved around the reduction of his share capital from 25% to 0.33% due to alleged oppressive acts by the Appellants. The Respondent claimed that the share transfer was done without his knowledge and consent, resulting in a significant decrease in his shareholding. The Tribunal found the allegations of manipulation and fabrication to be substantial, warranting the grant of waiver to allow the Respondent to prosecute the main Company Petition effectively.4. The Tribunal emphasized that the refusal to grant waiver would be unjust given the serious allegations of oppression and manipulation against the Respondent. The Appellants failed to provide convincing explanations or evidence regarding the share transfer and allotment, leading the Tribunal to uphold the grant of waiver. The Tribunal concluded that the Respondent, as a founding shareholder and Director of the company, retained his status as a 'member' despite the reduction in share capital. Consequently, the appeal was dismissed, and no costs were awarded.By carefully considering the arguments and evidence presented, the Tribunal upheld the grant of waiver to the Respondent, allowing the prosecution of the main Company Petition alleging acts of oppression and mismanagement.