2019 (7) TMI 1468 - AT - Companies Law

Appellate Tribunal Grants Relief in Company Petition, Restores Shares

The Appellate Tribunal allowed the Company Petition, finding the Appellants eligible based on their membership in the company. It deemed the Respondents' ... Applicability and compliance or otherwise of Section 236 of the Companies Act, 2013 - fraudulent transfer of shareholding of petitioners - subsequent cancellation of shares - oppression of minority shareholders - HELD THAT:- Sub-Section (2) of Section 236 requires that there should be “valuation by a registered valuer in accordance with such rules as may be prescribed”. If Section 236 of the Act has to survive, it has to be insisted upon that the valuation must necessarily be by registered valuer and that too in accordance with the rules prescribed. The Legislature appears to have been conscious and careful while using these words because it has made a special Chapter relating to Registered Valuer - The Legislature has taken precautions to ensure that there should be valuers who shall be impartial, exercise due diligence and make valuation in accordance with the rules as may be prescribed. There are also penal provisions if the valuer contravenes the provisions with intention to defraud the company or its members. Clearly there can be no comparison between such valuers and the said “reputed Chartered Accountant” being relied on by the respondents. We are unable to uphold the findings of NCLT which has not at all either dealt with applicability of Section 236 or the manner in which respondents have tried to enforce the same and simply accepted whatever was claimed by the respondents in their application that they have already taken over the shares of original petitioners and so the petitioners are not shareholders and so they cannot maintain the petition - the petition was maintainable at the behest of original petitioners who were inter alia challenging the manner of take over of their shares and who constituted 2/3rd of the members of the company and were perfectly competent to maintain the company petition. The notices given by the respondents under Section 236 and their subsequent act of cancelling the shares of the original petitioners were illegal and stand set aside. Such acts of Respondent constituted oppression of minority shareholders-the petitioner - the Appellants could maintain the Company Petition under Section 241, 242 of the Act - application disposed off. Issues Involved:1. Maintainability of the Company Petition under Section 244 of the Companies Act, 2013.2. Applicability and compliance of Section 236 of the Companies Act, 2013.3. Allegations of oppression and mismanagement by the Respondents.4. Validity of the Share Subscription Agreement and Put and Call Option Agreement.5. Claims for compensation and benefits under the Separation Agreement.Detailed Analysis:1. Maintainability of the Company Petition:The Appellants filed a Company Petition under Sections 241 to 244, read with 246, 337 to 341 of the Companies Act, 2013, alleging oppression and mismanagement by the Respondents. The NCLT dismissed the petition, stating that the Appellants did not hold any shares in the Respondent No.1 Company and were thus ineligible to file the petition under Section 241. However, the Appellate Tribunal found that the Appellants were eligible to maintain the petition based on the number of members, as they constituted two-thirds of the company's members. The Tribunal held that the NCLT erred in dismissing the petition on maintainability grounds without adequately addressing the disputes raised by the Appellants regarding the forced transfer of their shares.2. Applicability and Compliance of Section 236 of the Companies Act, 2013:The Respondents invoked Section 236 to forcibly acquire the Appellants' shares, claiming compliance with the provisions. The Appellate Tribunal analyzed Section 236, which deals with the purchase of minority shareholding, and found that it did not apply to the present case. The Tribunal noted that Section 236 is part of Chapter XV, which deals with compromises, arrangements, and amalgamations, and must be read in that context. The Tribunal held that the Respondents could not invoke Section 236 as there was no event of amalgamation, share exchange, or conversion of securities. Additionally, the Tribunal found that the valuation of shares was not done by a registered valuer as required by Section 236(2), making the Respondents' actions illegal.3. Allegations of Oppression and Mismanagement:The Appellants alleged that the Respondents, in collusion with the Board of Directors, fraudulently transferred their shares at a throwaway price, causing serious acts of oppression and mismanagement. The Tribunal found that the Respondents' actions constituted oppression of the minority shareholders (the Appellants) and set aside the notices and acts of cancelling the shares. The Tribunal held that the Appellants' shareholding should be restored, and the Register of Members of Respondent No.1 should be corrected accordingly.4. Validity of the Share Subscription Agreement and Put and Call Option Agreement:The Appellants sought to declare the Share Subscription Agreement and Put and Call Option Agreement null and void. The Tribunal noted that these agreements were executed between the parties, and disputes arose regarding their enforcement. The Tribunal found that the Respondents' attempts to enforce the agreements and subsequently invoke Section 236 were improper and not in compliance with the law. The Tribunal held that the NCLT should have provided an opportunity for proper pleadings, evidence, and hearing to decide the validity of these agreements.5. Claims for Compensation and Benefits under the Separation Agreement:The Appellants claimed compensation and benefits under the Separation Agreement dated 7.6.2016, alleging non-compliance by the Respondents. The Tribunal noted that the Appellants raised disputes regarding the Separation Agreement and the compensation due under Section 202 of the Companies Act, 2013. The Tribunal found that these issues required proper pleadings, evidence, and hearing, which were not adequately addressed by the NCLT. The Tribunal remitted the matter back to the NCLT for a detailed examination of these issues.Conclusion:The Appellate Tribunal set aside the impugned order of the NCLT, holding that the Appellants could maintain the Company Petition and that the Respondents' invocation of Section 236 was illegal. The Tribunal restored the Appellants' shareholding and remitted the matter back to the NCLT to decide the other issues raised in the Company Petition, including the validity of the agreements and claims for compensation and benefits. The Tribunal emphasized the need for proper pleadings, evidence, and hearing to resolve these disputes.