2023 (2) TMI 17 - AT - Insolvency and Bankruptcy

Non-shareholder director's appeal dismissed for lack of standing under Companies Act.

Mr. Jithendra Parlapalli Versus M/s. Wirecard India Private Ltd., M/s. Wirecard Sales International, M/s. Wirecard AG, Mr. Jayesh Maniyur Pattathuvalapil, Ms. Susanne Steidl, Mr. Arne Philipp Matthias

The Tribunal dismissed the appeal, ruling that the Appellant, a non-shareholder director, lacked standing to file a petition under Sections 241 and 242 of ... Oppression and Mismanagement - grievance of the Petitioner / Appellant is that, the 1st Respondent / Company, had oppressed him greatly, when he was working with the said Company, as the Managing Director and used him only to meet their ends, through suspicious means - seeking to appoint an independent Auditor to conduct a Forensic Investigation of the Financial Assets of the 1st Respondent / Company and Suspicious Transactions, entered into by the 1st Respondent / Company - Section 241 and 242 of the Companies, Act, 2013 - HELD THAT:- It cannot be forgotten that a Directorial Complaint, cannot be a basis for filing a Petition, under Section 241 & 242 of the Companies Act, 2013, as complaints, in such a Petition, should relate to the Rights, in the status / capacity of a Member. In the instant case on hand, the Appellant had tacitly admitted that he is / was not a Shareholder of the 1st Respondent / Company (1st Defendant in Suit). When that be the fact situation, and as per Section 241 of the Companies Act, a Petition, can be preferred, only by the Member(s) of the Company, and all the more, the eligibility of the Member(s), who can sustain a Petition, under Section 241 of the Companies Act, 2013, is prescribed, and when the Appellant / Petitioner, has no Right to file a Petition, under Section 241 of the Companies Act, because of his ineligibility (not being a Shareholder / Member of the 1st Respondent / Company), then, in Law, he has no Locus whatsoever, to seek waiver of the requirement, in IA/644/2020 in CP/289/2020, enabling him, to Apply, under Section 241 of the Act. Viewed in that perspective and looking at from any angle, the IA No. 644/2020 in CP/289/2020, filed by the Petitioner / Appellant (before the National Company Law Tribunal, Division Bench – I, Chennai), seeking to Waive all the requirements, specified in Clauses (a) and (b) of Section 244 of the Companies Act, 2013, and resultantly, permitting him to prefer a Petition, as per Section 241 and 242 of the Companies Act, 2013, is per se, not Sustainable, in the eye of Law, as held by this Tribunal. Appeal dismissed. Issues Involved:1. Eligibility of the Appellant to file a petition under Sections 241 and 242 of the Companies Act, 2013.2. The alleged acts of oppression and mismanagement by the 1st Respondent Company.3. The Appellant's standing as a non-shareholder director to seek relief under the Companies Act.4. The Tribunal's decision to dismiss the waiver application filed by the Appellant.Detailed Analysis:1. Eligibility of the Appellant to file a petition under Sections 241 and 242 of the Companies Act, 2013:The Appellant was not a shareholder of the 1st Respondent Company but was a director. The Appellant's contention was based on the precedent set by the Madras High Court in Chiranjeevi Rathnam v. Ramesh, which allowed non-member directors to approach the National Company Law Tribunal (NCLT) under Section 242 of the Companies Act, 2013. However, the Tribunal emphasized that according to Section 2(55) of the Companies Act, 2013, a petition under Section 241 can only be maintained by members listed in the Register of Members. The Tribunal concluded that the Appellant, not being a member, lacked the eligibility to file such a petition.2. The alleged acts of oppression and mismanagement by the 1st Respondent Company:The Appellant alleged that the 1st Respondent Company engaged in suspicious transactions, tax evasion, and other illegal activities. Specific instances included contracts with M/s. Positive Moves (India) Consulting Pvt. Ltd. and M/s. InTandem Advisors LLP, and the 'Project ASLAN' involving Citibank N.A. The Appellant claimed that these activities were prejudicial to the public interest and sought an independent forensic investigation, access to company books, and notices to revenue authorities and the Registrar of Companies for further investigation.3. The Appellant's standing as a non-shareholder director to seek relief under the Companies Act:The Tribunal noted that the Appellant, despite being a director, did not qualify as a member under Section 2(55) of the Companies Act, 2013. The Tribunal highlighted that a directorial complaint cannot form the basis for a petition under Sections 241 and 242, which are meant for members. The Appellant's attempt to convert the petition into one under Section 213(2), which does not require membership qualifications, was rejected by the Tribunal. The Tribunal emphasized that the reliefs sought by the Appellant pertained to oppression and mismanagement, which require the petitioner to be a member.4. The Tribunal's decision to dismiss the waiver application filed by the Appellant:The Appellant's application for waiver of the requirements under Section 244 was dismissed by the Tribunal. The Tribunal reasoned that the Appellant's lack of membership in the company disqualified him from seeking such a waiver. The Tribunal also pointed out that the Appellant had already sought similar reliefs in other forums, including the Labour Commissioner and the City Civil Court, Chennai. The Tribunal found no legal errors in the NCLT's decision to dismiss the waiver application, thus affirming the dismissal.Conclusion:The Tribunal dismissed the appeal, concluding that the Appellant, not being a member of the 1st Respondent Company, lacked the legal standing to file a petition under Sections 241 and 242 of the Companies Act, 2013. The Tribunal upheld the NCLT's decision to dismiss the waiver application, finding it free from legal errors. Consequently, the appeal was dismissed with no costs.