2020 (5) TMI 292 - Tri - Companies Law

Tribunal validates share allotment, dismisses directorship claim under Companies Act.

Milind Madhav Dhume Versus AKP Ferrocast (P.) Ltd.

Milind Madhav Dhume Versus AKP Ferrocast (P.) Ltd. - TMI Issues Involved:1. Legality of the resolutions passed during the Board Meeting on 23rd January 2019.2. Legality and validity of the allotment of 1,89,000 equity shares to Respondent No.6.3. Validity of the Sale Deed dated 26th September 2018.4. Petitioners' entitlement to be appointed as Directors.Detailed Analysis:1. Legality of the Resolutions Passed During the Board Meeting on 23rd January 2019:The Tribunal examined whether the resolutions passed during the Board Meeting held on 23rd January 2019, authorizing the allotment of 1,89,000 equity shares to Respondent No.6, complied with the provisions of the Companies Act, 2013, and the Articles of Association of the Company. It was found that the Board of Directors had the authority under the Articles of Association to issue shares and that the allotment was made in consideration of the personal guarantee and security provided by Respondent No.6 for securing a loan from Axis Bank. The Tribunal noted that the Board of Directors had resolved to issue shares to Respondent No.6 as part of the guarantee commission due to her, which was previously agreed upon by the Company.2. Legality and Validity of the Allotment of 1,89,000 Equity Shares to Respondent No.6:The Tribunal upheld the allotment of 1,89,000 equity shares to Respondent No.6, stating that it was made in accordance with the terms agreed upon between the Company and Respondent No.6. The allotment was found to be a consequence of the security and personal guarantee provided by Respondent No.6, which enabled the Company to secure credit facilities from Axis Bank. The Tribunal noted that the Petitioners had not offered any security or personal guarantee at the relevant time and thus could not question the decisions taken by the Board of Directors before their involvement in the Company. Additionally, the Tribunal found that the allotment did not require a special resolution from the shareholders as it was part of an existing contractual obligation.3. Validity of the Sale Deed Dated 26th September 2018:The Tribunal determined that the issue of the Sale Deed dated 26th September 2018, which involved the transfer of 4 acres of land from the Company to AKP Foundries Pvt. Ltd., was already under litigation in a civil court (O.S. No. 119 of 2019). The Tribunal stated that the matter required a detailed examination of facts and evidence, which was beyond the scope of summary proceedings before the Tribunal. Consequently, the Tribunal deferred to the jurisdiction of the civil court to adjudicate on the validity of the Sale Deed.4. Petitioners' Entitlement to be Appointed as Directors:The Tribunal found that the Petitioners were not entitled to be appointed as Directors as a matter of right. It was noted that the Petitioners had not provided any security or personal guarantee for the loans obtained by the Company and had not participated in the management of the Company at the relevant time. The Tribunal also observed that there was no shareholders' agreement or written understanding guaranteeing the Petitioners' appointment as Directors. Furthermore, the Articles of Association did not require Directors to hold any shares in the Company. The Tribunal concluded that the Petitioners' demand for directorship lacked merit and was not supported by any legal or contractual obligation.Conclusion:The Tribunal dismissed the Company Petition, finding that the impugned allotment of shares to Respondent No.6 was legally valid and justified. The Tribunal also deferred the issue of the Sale Deed to the jurisdiction of the civil court and rejected the Petitioners' claim for directorship. The Petitioners failed to demonstrate that the affairs of the Company were being conducted in a manner prejudicial or oppressive to their interests or the interests of the Company.