2025 (12) TMI 1619 - AT - Companies Law

Family groups' equal shareholding settlement and demand drafts under Companies Act ss.241-242 replace contested oppression claims; appeal closed.

In an appeal arising from a petition under ss.241-242 of the Companies Act, 2013 alleging undue gains, perjury, tampering of records, and seeking ... Recovery of the undue gains that, were obtained by Respondent No.2 - perjury, tampering with records of the proceedings and submitting false documents - Prayer for the implementation of the equal shareholding pattern of the two families of the Petitioner and the Respondent - Section 241 & 242 of the Companies Act, 2013 - HELD THAT:- As a consequence of the settlement, which has been arrived at between the parties, the Appellants have placed before this Tribunal two Demand Drafts i.e. bearing DD No. 519009 dated 25.07.2025 for an amount of Rs.6,97,50,000/- and another Draft bearing DD No. 519010 dated 25.07.2025 for an amount of Rs.6,97,50,000/- drawn from ICICI Bank (08), Hyderabad. The same is taken on record and the Court Officer is directed to retain the photocopy of the same and to handover the Original to the Appellants’ Counsel for the time being after obtaining their endorsement of its receipt. The Appellants’ counsel, assures and undertakes that, immediately upon uploading of today’s order, he will, within 24 hours, hand over the said Demand Drafts to the Respondents’ counsel, who in turn assures to hand it over to the Respondents and obtain its receipt. Subject to the aforesaid Settlement and the Terms of the Settlement of which Para VII & Para XV, has already been extracted in this order, this Company Appeal and the impugned order which is under challenge would stand substituted by the Terms of the Settlement, which has been placed on record in the form of Memorandum of Settlement as on today. The appeal stands closed, in terms of the Memorandum of Settlement dated 28.07.2025, which has been arrived at between the parties. ISSUES PRESENTED AND CONSIDERED 1. Whether the appeal and the challenged order should be set aside and substituted by a Memorandum of Settlement executed between the disputing groups and placed before the Tribunal. 2. Whether, upon full payment of the settlement amount, the Tribunal should record and give effect to reduction and extinguishment of a specified block of shares in the company as part of the settlement, and correspondingly record the revised share capital/shareholding pattern. 3. What operational directions were required to implement the settlement, including custody and handover of the settlement demand drafts and completion steps linked to the settlement. ISSUE-WISE DETAILED ANALYSIS Issue 1: Substitution of the impugned order by settlement terms and closure of the appeal Legal framework (as discussed by the Tribunal): The Tribunal proceeded on the basis that the underlying dispute had been instituted under Sections 241 and 242 of the Companies Act, 2013, and recorded that the parties jointly sought setting aside of the impugned order on terms to be incorporated in the Tribunal's order. Interpretation and reasoning: After hearing arguments earlier and reserving orders on the stay application, the Tribunal noted that the parties subsequently executed a settlement memorandum, signed by all parties, with signatures verified by counsel. The Tribunal considered it appropriate to extract and incorporate key settlement clauses into its order to avoid future controversy, and treated the settlement as governing the resolution of the dispute. Conclusion: The Tribunal held that, subject to the settlement, the appeal would be closed and the impugned order would stand substituted by the settlement terms as recorded in the Tribunal's order. All pending interlocutory applications were also closed. Issue 2: Effectuation of share capital reduction/extinguishment and recording revised shareholding upon settlement payment Legal framework (as discussed by the Tribunal): The Tribunal relied on its powers under Section 242(2) of the Companies Act, 2013, as expressly reflected in the settlement term adopted by the parties, and recorded the settlement position that compliance with Section 66 was not required for giving effect to the reduction in the manner agreed. Interpretation and reasoning: The Tribunal accepted and recorded the settlement clause providing that upon full payment of the entire settlement amount (subject to TDS) the company's share capital to the extent of the specified shares held by one group 'stand reduced and extinguished without any further act or deed,' and that the reduction would take effect only upon full payment and not before. To ensure finality, the Tribunal also incorporated the agreed post-reduction share capital/shareholding structure into its order, treating it as part of the full and final settlement between the parties. Conclusion: The Tribunal conclusively recorded that the settlement would govern the revised shareholding pattern as agreed, and that the impugned order would stand replaced by these settlement arrangements, including reduction/extinguishment of the specified shares upon full payment and the resulting reduced share capital reflected in the settlement. Issue 3: Directions to implement settlement-handling of demand drafts and related steps Legal framework (as discussed by the Tribunal): The Tribunal issued implementation directions anchored in the settlement recorded as part of the order and in its authority to pass consequential directions to give effect to the resolution of the dispute. Interpretation and reasoning: The Tribunal noted that two demand drafts corresponding to the agreed payment amounts were produced and took them on record. It directed the Court Officer to retain photocopies and to return the originals to counsel temporarily upon endorsement, and recorded an undertaking by counsel to hand over the drafts to the opposite counsel within 24 hours of uploading the order, with a corresponding assurance that the recipients would obtain acknowledgments. The Tribunal treated these directions as necessary to facilitate the settlement's execution and to align the operative effect of reduction/extinguishment with the payment condition. Conclusion: The Tribunal issued operative directions for custody, documentation, and time-bound handover of the settlement instruments, thereby enabling implementation of the settlement terms that substituted the impugned order and formed the basis for closure of the appeal and applications.