TaxTMI 
TaxTMI 
2017 (10) TMI 914
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....ny. It is not disputed by the respondents that the petitioner and his wife together hold 36.22% of the equity shares of the first respondent company. However, it is pleaded by the respondents that it is not described by the petitioner that himself and his wife are together filing this petition or he filed this petition as general power of attorney holder of his wife. No doubt it is not specifically mentioned in the cause title or in the body of the petition that this petition is filed by petitioner on behalf of his wife but it is stated in page 7 of the petition that himself and his wife together hold 32.66% of equity shares of the first respondent company and his wife has executed special power of attorney in his favour. Therefore, it is implied that this petition is filed by the petitioner on his behalf and on behalf of his wife as power of attorney holder. Therefore, contention of the learned PCS for the respondents that the petitioner is not eligible to file this application does not stand to reason. Hence, petitioner is eligible to file this petition. Hence petitioner is eligible to file this petition. 03. Admittedly the first respondent company was incorporated on 05.02.2011....
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....inary General Meeting for removing the petitioner from the Board of Directors of the first respondent company in the meeting scheduled to be held on 08.10.2015. Notice dated 29.08.2015 issued for the Extraordinary General Meeting was received by petitioner on 16.09.2015 and it was posted on 14.09.2015. 06. It is contended by the learned counsel for the petitioner that the removal of petitioner as Director of the first respondent company is illegal and without valid reasons, 07. It is also stated that the petitioner was not allowed to draw his monthly salary on the pretext of huge outstanding and loss in the process house business. Petitioner admitted that the respondents have decided to stop the process house activities and to sell the property of Rudraksh Synthetics P. Ltd. and Nagina Processors Pvt. Ltd. so that losses are curtailed. Production activities were stopped with effect from 01.02.2013 with an understanding to sell Rudraksh (process house) and Nagina (land on which the process house stands). 08. It is stated by the petitioner that because of the high price quoted by respondents No. 2 and 3, nobody came to purchase. Again respondents No. 2 and 3 started the process ho....
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....0. Respondents in reply pleaded that the petitioner was employed only as Printing Master in Rudraksh Synthetics P. Ltd. (process House). There is zero per cent investment by the petitioner in the first respondent company. Petitioner approached the respondents with folded hands for a job. Petitioner had no money to start business. Respondents No. 2 and 3 are successful people in textile and chemical fields. Respondents No. 2 and 3 chose to give a feeling of ownership to petitioner and his wife and they were given shares of the first respondent company. In fact, respondents landed funds to the petitioner and his wife and with those funds only the petitioner became member in the company. According to the respondents, Rs. 63.00 lacs were transferred from the accounts of respondents to petitioner and his wife and that money was invested by the petitioner in the first respondent company. Respondents denied that there was an understanding to give 50% of the shares in the first respondent company and Directorship as well as employment. Respondents made the petitioner as Director on 05.02.2011 with powers to sign cheques and operate bank accounts of the first respondent company in Allahabad....
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.... No. 2 and 3 and their family members siphoned funds of the first respondent company by falsifying the accounts. In the financial statement for the year ended 31.03.2014, out of total purchase of Rs. 1.5 crores, purchases from five related parties amount to Rs. 1.47 crores and it is clear example of siphoning of funds. Petitioner has stated that there is no evidence of convening of Board Meetings and Annual General Meetings and no such notice was given to the petitioner at any point of time. Respondents have not produced original accounts such as books and notices of General Meetings, minutes etc. Petitioner alleged that handing over the process house to Devi Processors without the knowledge of the petitioner is nothing but an illegal act. 14. Learned counsel appearing for the petitioner contended that although petitioner is a Director in the first respondent company till he was removed on 08.10.2015 he has not been served any notice of meeting of the Board of Directors except the notice in respect of the Board of Directors meeting convened on 29.08.2015 with the sole object of removing the petitioner as Director. It is also contended by the learned counsel appearing for the petit....
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....oppressive or not is not based on whether it is legally permissible or not since even if legally permissible, if the action is otherwise against probity, good conduct or is burdensome, harsh or wrong or is mala fide or for a collateral purpose, it would amount to oppression under Sections 397 and 398. (5) Once conduct is found to be oppressive under Sections 397 and 398, the discretionary power given to the CLB under section 402 to set right, remedy or put an end to such oppression is very wide. (6) As to what are facts which would give rise to or constitute oppression is basically a question of fact and, therefore, whether an act is oppressive or not is fundamentally/ basically a question of fact. 17. The first and foremost grievance of the petitioner is that he was not allotted 50% shares in the paid-up capital of the first respondent company as agreed upon. Respondents denied any such agreement to give 50% of the paid-up capital to the petitioner. Admittedly, petitioner and his wife are having 32.66% of the paid-up share capital of the first respondent company. Petitioner did not file any document to show that there is arrangement/understanding or agreement to give 50% of t....
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....n the same. According to petitioner, he was attending the company till May 2013. Therefore, allotment of shares to respondents No. 2 and 3 that took place in the year 2010 and 2011 cannot be questioned by the petitioner in September, 2015, more so when petitioner happened to be Director till he was removed on 08.10.2015. It is only after notice to reminder petitioner as Director was issued, he raised the issue of further allotment of shares to respondents No. 2 and 3 in this petition. If the further allotment of shares affected the shareholding of the petitioner and his wife, they would have raised this issue immediately thereafter or at least when petitioner stopped coming to the company from May 2013. Therefore, the belated challenge made to the allotment of shares to respondents No. 2 and 3 disentitles the petitioner to obtain relief treating it as an act of oppression aimed to reduce shareholding of petitioner in the first respondent company. 21. It is stated by the respondents that, for the first time, he searched the website of Ministry of Corporate Affairs in September, 2015 and then only he came to know about the allotment of further shares to respondents No. 2 and 3 in 20....
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....rocessing secrets of the first respondent company. Therefore, argument of the learned counsel for the respondent that when the petitioner did not attend to the day-to-day affairs of the first respondent company from May 2013, there is no possibility of the petitioner revealing the trade secrets to the competitors, do not merit acceptance, especially in the light of the fact that the petitioner stopped coming to the first respondent company only from May 2013 and he joined another process house. Therefore, the reasons given in the notice dated 20.08.2015 for removal of the petitioner, are not whimsical or fanciful reasons and it has some basis. It is not as if that petitioner being Director of the first respondent company has not been served with notice of the meeting of the Board of Directors. Petitioner having received the notice for the Board Meeting dated 29.08.2015 also sent reply to the notice dated 20.08.2015 stating that he should not be removed as Director. Petitioner and his wife were served notice of EOGM dated 29.08.2015 on 16.09.2015. Therefore, it is not as if the petitioner was removed without giving notice or without giving sufficient opportunity to give explanation ....
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....he petitioner must be given directorship. In that case in the Annual General Meeting, Chairman conveyed to the members that petitioner who was absent expressed unwillingness for appointment as Director and hence reappointment of the petitioner as Director in that case was not considered. But it is the contention of the respondents that petitioner did not attend the Annual General Meeting and did not offer willingness for election to the post of Director. Finding those inconsistence in the version of the respondents it was observed that not re-electing the petitioner as Director is not justified. In view of the aforesaid facts and facts of those case, that decision is not applicable. 27. Learned counsel for petitioner relied on the decision of the Hon'ble Company Law Board, New Delhi Bench in Sudershan Singh Sethi v. Sakhi Resorts and Farmlands (P.) Ltd. and Ors. reported in [2015] 190 CompCas 349 (CLB). This decision is based on principle of legitimate expectancy depending on the shareholding of petitioner in that case. 28. In the case on hand, there is no written understanding between the petitioners and respondents that petitioner should be continued as Director. There is no ma....
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.... or loss has been caused to petitioner and his wife as shareholders. After petitioner left the 1st Respondent company and when Respondents failed to run the process house there is no other alternative left to Respondents No. 2 and 3 except to handover process house to some other person. 33. In view of the above discussions, this Tribunal is of the considered view that no act of oppression and mismanagement is established. However, the fact remain the petitioner invested huge amount of money in the first respondent company and in Nagina Processors Pvt. Ltd. From the facts and circumstances of the case there is no possibility of the petitioner actually participating in the affairs of the first respondent company by joining hands with the respondents. Therefore, even in the absence of proof of acts of oppression and mismanagement, in order to do substantial justice and on the principle of equity, this Tribunal is of the considered view that the petitioner must be allowed to have fair market value of the shares which he is holding in the first respondent company, if he is ready to walk out of the first respondent company. 34. In absence of any material to hold that there were acts of....