TaxTMI 
TaxTMI 
2021 (6) TMI 976
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....on Territory, TCP No. 49/2016 has been transferred to Kochi Bench of NCLT (hereinafter referred as 'Tribunal') and renumbered as TCP No. 68/ KOB/ 2019. 2. The above petition has been filed under Sections 397-398, 399, 402 and 403 of the Companies Act, 1956 (in short 'the Act') by the petitioner who had 40% of the shareholding of the Respondent No.1 Company and hence satisfies the condition prescribed under Section 399 of the Act for maintaining a petition under relevant provisions. 3. The Respondent Company, namely M/s. Bayone Infotech Private Limited, was incorporated on 14.08.2006 under the provisions of the Companies Act, 1956 as a Private Limited Company having its registered office at Edavanthala, Olavaipu, Poochakkal Ward No.1 House No.401, Alappuzha, Kerala-688526, with the main objects as reflected in the Memorandum of Association of the Company as under: - "To conceptualize design and develop computer software system and export and market the same in the overseas market in order to provide total solution to business and industrial houses in the area of software systems. Information strategies, data communications and data processing and effective utilization....
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....oner, Respondent No.2, Mr. Albert and Mr. Shaji to be the Directors of the Company and that the Respondent No.3 would cease to be a Director once the shares are transferred. With these assurances, Respondent Company came to be incorporated in 2006. From the date of Incorporation, Petitioner had been travelling to various client sites and providing necessary services to the clients. Hence, the affairs of the Respondent Company were solely looked after by the Respondent No.2. 7. The petitioner also stated that even after a year of the incorporation of the Respondent No.1 Company, the Respondent No.2 did not transfer the shares as originally promised. In the meantime, Mr. Shaji one of the four persons left the Company as he was paid out by the Company. 8. The petitioner further stated that after the exit of Mr. Shaji the Respondent No.2 had informed Mr. Albert and the petitioner that the shares would now be transferred in proportion to the amounts paid by the parties. However, when the issue of transfer cropped up, the Respondent No.2 refused to transfer and had insisted that he would pay out Mr. Albert to the extent he had contributed. The petitioner has paid a total sum of aro....
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.... However, the request of the petitioner fell on deaf ears. The Respondent No.2 was also keeping the petitioner in dark regarding the affairs of the Respondent Company. The petitioner was not informed of any of the meetings of the Respondent No.1 Company. Because the Respondents did not induct the petitioner into the Board they were also using his absence in furthering their oppressive acts in conducting the affairs of the Respondent Company. 12. It is further stated that as per the original understanding, the Respondent No.3 ought to have resigned from the Board of Directors and only the persons who had actual stake in the Company had to be made as the Directors. However, the Respondent No.3 continued to be a Director. In fact, the petitioner who has contributed over Rs. 4 Lakhs in the Respondent No.1 Company has not been made a Director only due to the highhandedness of the Respondent No.2. In fact, the Respondent No.2 using the status of the Respondent No.3 as the Director of the Respondent No.1 Company was carrying out various fraudulent activities for his sole benefit. In fact, the Respondent No.2 has named himself as the Managing Director of the Company and has entrusted up....
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....ner as a Director only because he wants to conduct the affairs of the Respondent No.1 Company as a family fiefdom. After failing to act as per the original understanding of shareholding and directorships, the Respondent No.2 is now failed to act as per the terms of the Memorandum of Understanding arrived at between the petitioner and him. Such an unjustifiable act by the Respondent Nos. 2 and 3 has caused not only losses to the petitioner but has put him in complete despair. The petitioner after having invested amounts into the Respondent No.1 Company is now made a non-entity by the 2nd Respondent. 17. The petitioner stated that, he has learnt from reliable sources that the Respondent now intends to increase the capital of the Company and thereby further dilute the shareholding of the petitioner. The 2nd Respondent has failed to act on any of his undertakings right from the beginning. Further the present acts of mismanagement unleashed by the respondents would only make the investments by the petitioner go down the drain. 18. The Petitioner filed an Application CA No. 69/2012 before the Company Law Board seeking Permission to implead (i) Claysys Technologies Pvt Ltd, Kerala a....
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....pondent who has been pursuing the agenda for converting the Respondent No.1 Company into a shell Company for the purpose of frustrating Memorandum of Understanding entered into between the Petitioner and Respondent No.2. 20. In view of formation of the additional 4th and 5th Respondents Company, the Respondent No.1 Company has become shell Company with no activities. The oppressive acts of Respondent No.2 to frustrate the Respondent No.1 Company of the petitioner. It is due to the mismanagement of the affairs of the Company by the Respondent No.2, the petitioner sought to exit himself from the Respondent No.1 Company. 21. The petitioner further submits that if the present affairs of the Respondent No.1 Company continues it would lead to a situation where it would be just and equitable for the Respondent No.1 Company to be wound-up. However, such winding-up would unfairly prejudice the petitioner herein. 22. For the aforesaid reasons, the Petitioner filed this Company Petition seeking the following reliefs: - a. Direct the Respondents to bring in parity in the shareholding of the 1st Respondent Company to the extent that the petitioner and the Respondent No.2 hold ....
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....istrar of Companies, Kerala issued an incorporation certificate on 14.08.2006. As per the Articles of Association, the authorised share capital of the Respondent Company was divided into 10,000 shares of Rs. 10/- each of which the 9,999 equity shares were held by the Respondent No. 2 and the remaining 1 equity share was held by the Respondent No.3. Subsequently, the Petitioner joined the Respondent Company as an employee with a monthly salary. The Petitioner paid Rs. 4 lakhs to the Respondent No.2 as personal loan which was later repaid in April, 2009 by way of transfer of 4,000 equity shares of the Respondent No.1 Company. Petitioner has not produced any vouchers or slips to substantiate his claim that the money advanced by him was towards the investment in the Respondent Company. Similarly, Mr.Shaji who contributed an amount of Rs. 3,75,000/-requested to be paid back his contribution in full and the same was repaid to him along with an interest of 10% p.a. 25. It is further contended that petitioner is claiming 50% shareholding based on an email discussion between the Petitioner, Shaji, Albert and the Respondent No.2. However, such email conversations hold no value as the disc....
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....tions by poaching the customers and employees of the Respondent Company to gain an unlawful advantage for a Company namely Magnusvista Technologies Private Limited, owned by him. SUBMISSIONS OF RESPONDENT NO:4 28. In the reply, the 4th Respondent stated that he cannot be made liable to any sort of misappropriation on the grounds of having a few of its employees being ex-employees of the Respondent. If the petitioner is referring to ex- employees of the Respondent who have currently taken up employment with the Respondent No.4, the nature of the wrong doings in the 4th Respondent is not clear, as individuals who are employees of any Company in India have the absolute right to resign from their existing jobs, if any, and to take up employment with any employer they wish to work. It is further stated that there is no non-compete agreement between the Respondent and any of the ex-employees who have taken up employment with the Respondent No.4. It is to be noted that there are more than 112 employees working with the 4th Respondent. The Respondent No.4 which is a separate legal entity cannot be held responsible in any way for any actions past or present on the part of the Responde....
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....der or through any other business arrangement, to other companies around the world that he has a business relationship with, and that the and the companies he does business with, feel confident in having a business relationship with. The relationship that Fourth Respondent has with 5th Respondent, is that of a Supplier and a Customer, the 4th Respondent being a supplier of outsourced software development services to US Companies that sub-contract such software development work to 4th Respondent in India. The Petitioner cannot seek any relief against Fourth Respondent based on surmise without proper supporting evidence. The 4thRespondent has no business association with the 1st Respondent Company. There is nothing to show that the nature of any wrongdoing by 4th Respondent and the Petitioner has not provided any supporting materials to allow 4th Respondent to provide any objective response to any such relief. The 4th Respondent is not a party to the Memorandum of Understanding and there is no obligation cast on 4th Respondent to give effect the same. Respondent No.4 being an independent entity, cannot redress the alleged grievances of the Petitioner as against the First and 2nd Resp....
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.... all, it is required to decide whether the acts of Respondents as alleged by the Petitioner would indeed constitute an act of oppression, mismanagement or misappropriation in the company which will affect the public interests at large, calls for the intervention of this Tribunal? In order to arrive at a conclusion, this Tribunal considered the following allegations raised by the Petitioners. 34. According to the Petitioner at the initial stage the Petitioner, Respondent No.2, Mr. Shaji and Mr. Albert agreed to form the Respondent No.1 Company. Respondent No.2 had specifically informed everyone through a mail dated 06.06.2006 that all of them would be 25% shareholders. But the Respondents No.1 to 3 rebutted this contention this was only part of the preliminary discussions held by Petitioner Respondent No.2 and others. The Respondent No.2, on his own initiative and cost, promoted the Respondent Company and obtained an incorporation certificate on 14.08.2006 from the Registrar of Companies, Kerala. 35. According to the 'Articles of Association' [hereinafter referred to as 'AoA'] under the head 'BOARD OF DIRECTORS' it is stated that: - "18 The number of Directors of the ....
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....kely to result in financial loss or where action could be characterized as unfair and improper could be arise only when Company starts its operations. In the present case the 1st Respondent Company began its operation on 14.08.2006 after its incorporation and the e-mail referred to by the petitioner was sent on 06.06.2006. It is true that prior to the constitution of the Respondent Company there was an understanding between the parties. Unfortunately, it was not made a record after the establishment of the Company. Therefore, this Tribunal considers it as a preliminary discussion between the parties before the incorporation of the 1st Respondent Company. Hence, claiming oppression based on a previous understanding cannot be considered as an act amounts to oppression and mismanagement of the Company. 39. Further, Petitioner contends that Respondent intends to increase the capital of the Company to dilute the shareholding of the Petitioner. Petitioner also contends that he is a 40% shareholder in the Respondent No.1 Company and entered into a Memorandum of Understanding (MoU) with Respondent No.2 which is a private agreement to buy back the 15% shares of the Petitioner, but in the....
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....oner failed to provide specific allegations of such nature that could bring the affairs of the Respondent Company to a stage when existence be threatened due to financial crunch and winding up may become inevitable. 41. In Mohta Brothers Private Limited Versus Calcutta Landing and Shipping Company Limited reported in [1970 40 Comp Cas 119 Cal.] the Hon'ble High Court of Calcutta held as under: - "Vague and uncertain allegations of mismanagement and oppression, although they may constitute grounds for suspicion, do not entitle a petitioner to ask the court to embark upon an investigation into the affairs of the company, in the hope that in consequence of such investigation, something will turn up which will enable the court to grant relief to the petitioner. It is true that it may not always be possible for one or a group of shareholders to furnish particulars of acts of mismanagement, fraud, oppression, misappropriation or other improper acts, but such inability on the part of shareholders, who have no access to the books of the company, is by no means a ground for directing an investigation into the affairs of the company or for giving any other relief to a petitioner"....