Skip to main content

NCLT: Tribunal can only look into oppression and not the legality/validity of the removal of a director

Citation : Thaniyulla Parambath Jahafar vs Relax Zone Tourism Private Limited, CP/24/KOB/2021

Date of Judgment/Order : 17th January, 2022

Court/Tribunal : The National Company Law Tribunal, Kochi Bench

Corum : Hon’ble Mr. Ashok Kumar Borah, Member (Judicial) & Hon’ble Mr. Shyam Babu Gautam, Member (Technical)

Background

The Petitioner is one of the directors of the Respondent No. 1 which was originally formed by 5 friends and basic features of the Respondent Company was that all the shareholders had equal shareholding and all the shareholders were participating in Management as directors.

The Petitioner was removed from the board as a director through an EGM and resolution which was passed by majority.

Petition was filed under Section 241-242 of the Companies Act 2013, against the removal claiming the removal to be be oppressive and prejudicial to the interests of the company.

Judgment

The NCLT while holding the removal of the Petitioner not an oppressive act, reiterated  the judgment of the Supreme Court in TATA Consultancy Services Limited Vs. Cyrus Investments Pvt. Ltd. and Ors. (Civil Appeal Nos. 440-441 of 2020), wherein interalia it has been observed that :-

1) An important aspect to be noticed is that in a petition under Section 241, the Tribunal cannot ask the question whether the removal of a Director was legally valid and/or justified or not. The question to be asked is whether such a removal tantamount to a conduct oppressive or prejudicial to some members. Even in cases where the Tribunal finds that the removal of a Director was not in accordance with law or was not justified on facts, the Tribunal cannot grant a relief under Section 242 unless the removal was oppressive or prejudicial.

2) There may be cases where the removal of a Director might have been carried out perfectly in accordance with law and yet may be part of a larger design to oppress or prejudice the interests of some members. It is only in such cases that theTribunal can grant a relief under Section 242.

3) A company, however small, however domestic, is a company and not a partnership or even a quasi-partnership.

Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Valuation Report of Jewellery once made is effective for Four Assessment Years

The division Bench of the Delhi High Court in Pr.Commissioner of Wealth Tax vs. Raghu Hari Dalmia held that a valuation report made by a registered valuer once adopted shall be in effect for four assessment years unless an event has occurred whereby the value is increased or decreased. The High Court made it clear that the event of “search” under Section 132 of the Income Tax Act, 1961 cannot compel the assessee to undertake a fresh valuation.
2 comments
Read more

Mere Agreement To Sell The Leased Property To Tenant Would Not Terminate Landlord-Tenant Relationship

In CIVIL APPEAL Nos. 1237­1238 OF 2019, Dr. H.K. Sharma vs Shri Ram Lal, the tenant had objected against the eviction suit filed by the landlord, claiming that the landlord-tenant relationship between them had ceased to exist by virtue of an agreement for sale entered between them and that he has already paid some money in advance based on the agreement. The tenant contented as the landlord-tenant relationship did not exist, the landlord cannot evict him. The matter went through various forums and finally landed before the Supreme Court in appeal. The Supreme Court referring to the judgment in Shah Mathuradas Maganlal & Co. vs. Nagappa Shankarappa Malage & Ors., held that in the instant case the lease agreement included no clauses on the fate of the tenancy. A fortiori, the parties did not intend to surrender the tenancy rights despite entering into an agreement of sale of the tenanted property. In other words, if the parties really intended to surrender their tenancy ...
2 comments
Read more