2024 (5) TMI 729 - AT - Companies Law

Company's attempt to retransfer shares after 12-year legal battle fails, execution order upheld

NCLAT Principal Bench dismissed appeal challenging execution order in oppression and mismanagement case. Company made illegal share transfer on 24.5.2010 ... Oppression and mismanagement - reduction in shareholding - illegal transfer and allotment of shares - subsequent fresh transfer whereby the Respondent No.1 Company retransferred the same exact number of shares to the Appellant No.2 Company under alleged separate Board Resolution - challenge to validity of the Board Resolution and fresh transfers made thereon. HELD THAT:- There was no dispute regarding the first transfer of shares dates 19th May, 2010. However, the second transfer dated 24.5.2010 was challenged and was adjudicated by the Tribunal as well as this Appellate Tribunal - The second transfer dated 24.5.2010 recorded in the register of members transferred the shares in favour of Appellant No.2 was set aside and further direction was given to the Appellant No.1 company to rectify the Register of Members so as to reflect 16,94,000 shares standing in the name of Respondent No.1 Company w.e.f. 19.5.2010 and second transfer dated 24.5.2010 shall stand ignored. The intent of this Appellate Tribunal was very clear to restore the status quo as was at the time of first transfer of shares on 19th May, 2010 and all subsequent actions of the Appellants was set aside. There are no sound logic of the Appellants to issue alleged fresh transfer dated 28.11.2017 to justify the action of transferring back 14,96,000 shares in the name of Appellant no.2. There are force in the logic of the respondents No.1 to 9 that despite 12 years legal battle and winning the legal battle before the Tribunal as well as this Appellate Tribunal, the Respondents No.1 to 9 are still being treated as minority shareholders - there are no error in the Execution Order of the Tribunal dated 03.06.2022. Appeal dismissed. Issues Involved:1. Compliance with Tribunal's Order dated 16.04.2019.2. Validity of subsequent fresh transfer dated 28.11.2017.3. Execution of Tribunal's Order despite pending appeal before Supreme Court.Compliance with Tribunal's Order dated 16.04.2019:The Appellants challenged the Impugned Order dated 3rd June 2022, alleging non-compliance with the Tribunal's Order dated 16.04.2019. They argued that they had already complied with the directions through Board Resolutions dated 24.11.2017 and 10.05.2019. The Appellants claimed that they transferred 14,96,000 shares to Respondent No.1 Company as per the Tribunal's Order dated 15.11.2017 and further rectified the register of members accordingly. However, the Tribunal found the Appellants in non-compliance, noting that the shares were still reflected in the name of Appellant No.2 Company as per Form MGT 7 filed on 21.11.2019.Validity of Subsequent Fresh Transfer dated 28.11.2017:The Appellants argued that the fresh transfer of 14,96,000 shares on 28.11.2017 was an independent transaction and not subject to the Tribunal's earlier proceedings. They contended that the fresh transfer was pursuant to Board Resolutions dated 27.11.2017 and 28.11.2017 and a share purchase agreement. The Tribunal, however, set aside all steps taken pursuant to its directions in para 161(ii) to (vi) of the Order dated 15.11.2017, which included the fresh transfer dated 28.11.2017. The Tribunal emphasized that any steps taken by the parties pending appeals were nullified by its earlier Order dated 16.04.2019.Execution of Tribunal's Order Despite Pending Appeal Before Supreme Court:The Appellants filed a Civil Appeal before the Supreme Court challenging the Tribunal's Order dated 16.04.2019 but did not obtain a stay. The Tribunal proceeded with the execution, stating that an appeal does not operate as a stay unless specifically ordered by the superior court. The Tribunal referenced Order 41 Rule 5 of CPC, reinforcing that execution should not be stayed merely because an appeal is pending.Conclusion:The Tribunal upheld the execution of its Order dated 16.04.2019, dismissing the appeal and reiterating that the fresh transfer dated 28.11.2017 was invalid. The Appellants were directed to comply with the Tribunal's earlier directives, including payment of costs with interest. The Tribunal emphasized that the status quo as of 19.05.2010 should be restored, nullifying all subsequent actions, including the fresh transfer.