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

When debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company

In SHITAL FIBERS LTD.  vs  INDIAN ACRYLICS LIMITED, as per the respondent, appellant had made a payment of Rs.61,83,218/­. However, there was an outstanding balance of Rs.8,92,723/­ as on 28.7.2008. Since despite repeated requests, balance amount was not paid, the respondent issued a statutory notice to the appellant. The same was duly responded to. As the payment was not made despite notice being duly served on the appellant, the respondent filed the aforesaid Company Petition seeking winding up of the present appellant for its inability to pay admitted debts. The learned Company Judge vide order dated 28.9.2015 admitted the Company Petition. However, while doing so, the learned Company Judge observed, that since the appellant was an on­going concern, an opportunity should be granted to it to settle the accounts with the respondent by 31.12.2015. Only in case of failure of the settlement, the citation was directed to be published. On appeal, the Division Bench of the High Cou...
Post a Comment
Read more

Abusing in-laws a ground for divorce: SC

Abusing in-laws and not allowing them to reside in the matrimonial home by a woman amounts to cruelty to her spouse, ground enough for grant of divorce, the Supreme Court has ruled while allowing an NRI's plea for legal separation from his wife. A bench of Justices Vikaramajit Sen and A M Sapre said such incidents could not be termed as "wear and tear" of family life as held by Madras High Court which had said that a couple must be prepared to face such situations in matrimonial relationship. The NRI had filed a divorce petition alleging that his wife was abusive to his family members and did not allow his parents and siblings to stay in his house when they visited the US. Referring to an incident, the husband told the court that his wife had once locked him and his sister out of the house and abused them saying they belonged to a 'prostitute family'. She refused to allow her sister-in-law to enter the house and even lodged a police complaint against her hu...
4 comments
Read more