Oppression Plea Denied as Petitioner Falsely Signed as CMD, Lacked Clean Hands, and Was Involved in Mismanagement Acts

Case Details: M. Sai Sudhakar v. MSR Housing & Resorts (P.) Ltd. - [2024] 168 taxmann.com 607 (NCLT-Hyd.)

Judiciary and Counsel Details

• Dr. Venkata Ramakrishna Badarinath Nandula, Judicial Member & Charan Singh, Technical Member
• G. Sethu Rama Rao & Ms Sandhya Rani, Advs. for the Petitioner.
• L. Ravi Chandran, Sr. Counsel, Mayur Mundra & P. Anil Mukherjee, Advs. for the Respondent.

Facts of the Case

In the instant case, the petitioner and respondent no.2 were subscribers to the memorandum and the main promoters of the respondent company. The petitioner had resigned as a director due to his personal obligations, and since then, respondents no.2 and 3 have been looking after the company’s day-to-day affairs.

The petitioner filed an instant petition alleging that respondents no. 2 and 3 were misappropriating assets of the company for making wrongful gains and had executed a registered agreement of sale cum GPA in favour of third parties fraudulently.

The petitioner sought various reliefs, including restoration of the shareholding pattern of the company to its original status, removal of respondents no. 4 to 6 from the directorship of the company and restoration of the petitioner’s shareholding to its original status.

It was noted that the petitioner had signed agreements as Chairman/Managing Director of the company, whereas, as per the records, he was never appointed as Chairman/Managing Director of the company.

NCLT Held

The NCLT observed that this act of the petitioner was certainly against the interest of the company and respondents and prima facie showed that the petitioner had acted in a prejudicial manner against the interests of the company and respondents.

The NCLT, further observed that since the petitioner had not refuted signing those agreements, it could be inferred that the petitioner had not approached the Tribunal with clean hands and he himself was involved in acts of oppression and mismanagement.

The NCLT held that, since the petitioner had prior notice/knowledge of the holding of the EGM, though he might not have received proper notice as required as per the provisions of the Act, such procedural non-compliance could not be treated as acts of oppression and mismanagement.

The NCLT, further held that the acts of respondents, as alleged by the petitioner, were not prejudicial and oppressive in nature to the petitioner or respondent no.1/ company and, thus, could not be considered as acts of oppression and mismanagement in terms of sections 241 and 242 of the Companies Act, 2013. Thus, the instant petition was to be dismissed.

List of Cases Referred to

• Needle Industries (India) Pvt. Ltd. v. Needle Industries Newey (India) Holdings Ltd. & Ors., 1981 3 SCC 333 (para 59).