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.

The Tribunal upheld the legality of the allotment of 1,89,000 equity shares to Respondent No.6, finding it compliant with the Companies Act, 2013, and the ... Oppression and mismanagement - Approval of Resolution Plan - allotment of equity shares to Respondent No.6 - whether the Resolutions passed during Board of Directors meeting of Respondent No. 1, held on 23rd January 2019, authorizing and allotting the impugned allotment of 1,89,000 shares to Respondent No. 6 is in accordance with law or not? - whether the impugned Sale Deed dated 26th September, 2018 is to be oppressive and seriously prejudicial to the interests of the Company? - Whether the Petitioners are entitled for their appointment as Directors. If so, what is the relief the Petitioners are entitled for? HELD THAT:- It is not the case of Petitioners that their original shareholdings have been reduced but by virtue of the impugned allotment of shares to the Respondent No. 6, their percentage of shares in the Company stand reduced - The impugned allotments of shares do not suffer any legal impediment and thus it should be upheld to be legal. The Petitioners in the absence of any Agreement cannot demand to appoint them as Directors of the Company, as matter of right, and this issue was already dealt with by the Company at appropriate levels. And there is no requirement of shares to hold to become Directors of the Company, as per Articles of Association Company. And other reliefs as asked for are devoid of merits. The Petitioners failed to make out case that the Affairs of Company being conducted in a manner prejudicial or oppressive to the Petitioners or to the Company so as to invoke jurisdiction of this Tribunal under the extant provisions of Companies Act 2013. As detailed supra, the affairs of Company is being successfully run by the stewardship of Respondent Nos.2 & 3 and earning adequate profits and distributing substantial dividends. Subsequent to the filing of main Company Petition, I.A.No.649 of 2019 filed by the Petitioners, under Rules 11 & 34 of the NCLT Rules, 2016, by inter alia seeking to permit them to implead the proposed Seventh Respondent Company i.e. M/s. AKP Foundries Private Limited in the present proceedings. Since, the Tribunal finds that the main Petition itself lacks merits, there would not serve any purpose to allow the impleading Application. The instant Company Petition lacks of merits and thus it is liable to be dismissed - petition dismissed. 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.