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IN THE HIGH COURT OF JUDICATURE AT MADRAS
RAJIV SHAKDHER, J.
R. Ramesh – Appellant
Versus
M/s. Devi Polymers Private Limited – Respondent
Com. Appeal No. 9 of 2015 and M.P. No. 1 of 2015
Decided On : 18-04-2017
The appellant, a member of a family-owned company, Devi Polymers Private Limited (DPPL), filed a petition under Sections 397, 398, 402, and 403 of the Companies Act, 1956 (1956 Act), alleging oppression and mismanagement by the respondents, who were the other members of the family and directors of DPPL. The appellant's main grievances were that he had been removed from the post of Executive Director of DPPL, that a parallel business, Devi Consultancy Service (DCS), had been set up without his knowledge or approval, and that certain patents had been registered in the names of his family members without being assigned to DPPL. The Company Law Board (CLB) dismissed the appellant's petition, holding that the appellant had failed to establish oppression or mismanagement. The appellant appealed to the High Court.
Fact of the Case:
The appellant, a member of a family-owned company, Devi Polymers Private Limited (DPPL), filed a petition under Sections 397, 398, 402, and 403 of the Companies Act, 1956 (1956 Act), alleging oppression and mismanagement by the respondents, who were the other members of the family and directors of DPPL. The appellant's main grievances were that he had been removed from the post of Executive Director of DPPL, that a parallel business, Devi Consultancy Service (DCS), had been set up without his knowledge or approval, and that certain patents had been registered in the names of his family members without being assigned to DPPL. The Company Law Board (CLB) dismissed the appellant's petition, holding that the appellant had failed to establish oppression or mismanagement. The appellant appealed to the High Court.
Finding of the Court:
The High Court allowed the appeal and set aside the order of the CLB. The Court held that the appellant had been oppressed by the respondents, as they had removed him from the post of Executive Director without any valid reason, had set up a parallel business without his knowledge or approval, and had registered patents in the names of their family members without assigning them to DPPL. The Court also held that the principle of quasi partnership applied to the case, as the company was a closely held family business. The Court directed the National Company Law Tribunal (NCLT) to value the appellant's shareholding interest in DPPL and provide him an exit route from the company.
Issues: 1. Whether the appellant had been oppressed by the respondents? 2. Whether the principle of quasi partnership applied to the case? 3. What relief should be granted to the appellant?
Ratio Decidendi: 1. The Court held that the appellant had been oppressed by the respondents, as they had removed him from the post of Executive Director without any valid reason, had set up a parallel business without his knowledge or approval, and had registered patents in the names of their family members without assigning them to DPPL. 2. The Court held that the principle of quasi partnership applied to the case, as the company was a closely held family business. 3. The Court directed the National Company Law Tribunal (NCLT) to value the appellant's shareholding interest in DPPL and provide him an exit route from the company.
Final Decision: The High Court allowed the appeal and set aside the order of the CLB. The Court held that the appellant had been oppressed by the respondents, as they had removed him from the post of Executive Director without any valid reason, had set up a parallel business without his knowledge or approval, and had registered patents in the names of their family members without assigning them to DPPL. The Court also held that the principle of quasi partnership applied to the case, as the company was a closely held family business. The Court directed the National Company Law Tribunal (NCLT) to value the appellant's shareholding interest in DPPL and provide him an exit route from the company.
RAJIV SHAKDHER, J.
Preface:
1. This is an appeal directed against the judgment and order dated 28.05.2015, passed by the Company Law Board, Chennai Bench, in C.P. No. 40 of 2009.
1.1. The appellant herein was the petitioner before the Company Law Board (hereafter referred to as "CLB").
2. By virtue of the said C.P. No. 40 of 2009, the appellant/the petitioner had sought the following reliefs, based on the assertions of oppression and mismanagement of the affairs of the respondent No. 1, i.e. Devi Polymers Private Limited (in short "DPPL"):
(i) With a view to regulate the affairs of the first respondent company, it is just and convenient that the respondents should be restrained from holding any meeting in particular Extra-Ordinary General Meeting on the lines contained in the notice dated 17.06.2009 either on 27.06.2009 or any other dates.
(ii) Permanent injunction restraining the respondents from interfering with the carrying on duties enjoined on the petitioner in relation of Unit "C" at NP 23 & 24 Developed Plot, Ekkattuthangal, Chennai 600 097 of the first respondent.
(iii) Permanent injunction restraining the respondents from disqualifying/removing the petitioner from the post of Executive Director of the first respondent company.
(iv) For costs and such other further reliefs that the Honourable Company Law Board deem fit and proper given the facts and circumstances of the case and thus render justice.
3. As is usual the case in such like actions, this petition was filed under Sections 397, 398, 402 and 403 of the Companies Act, 1956 (in short the "1956 Act"). The immediate instigation for instituting the action and seeking the aforementioned reliefs, was the clear possibility of the appellant being removed from the post of Executive Director of DPPL.
3.1. Coupled with the plea for grant of injunction, the assertion made was that the appellant would be prevented from managing the affairs of Unit C, which is one of the units of respondent No. 1, located at NP 23 & 24 Developed Plot, Ekkattuthangal, Chennai 600 097.
4. It may be pertinent to note that with the dismissal of the Company Petition by the CLB, the payment of remuneration and perquisites granted to the appellant was stopped, to be revived only upon an interim order dated 25.04.2016, being passed by this Court.
4.1. The reasoning provided in the order dated 25.04.2016, is suggestive of the fact that, since, the remuneration and perquisites of the appellant, had been paid without a direction of the Court between 2009 and 2015 and because, the disputes which arose for adjudication pertained to members of a family, the said dispensation qua remuneration and perquisites should continue, till the matter is examined by the Company Judge.
4.2. This order was passed by Hon'ble Mr. Justice V. Ramasubramanian (as he then was), upon the matter being, specially listed before him, pursuant to the orders of the Hon'ble Chief Justice, albeit, on account of change in portfolio and on posting of Judges at Madurai Bench.
4.3. It may also pertinent to note that while passing the said order, the learned Judge also took note of the judgment of the Supreme Court dated 19.04.2016, whereby, the appellant's Crl. Appeal No. 133 of 2016 was allowed and the judgment passed by a Single Judge of this Court was set aside. Notably, the learned Single Judge via his judgment had dismissed the appellant's petition under Section 482 of the Code of Criminal Procedure, 1973, (in short CrPC). However, the Supreme Court, as indicated above, while allowing the appeal, quashed the First Information Report (in short "FIR") lodged against the appellant, wherein, allegations of forgery, misappropriation of funds and breach of trust had been levelled qua him. These allegations were pivoted on the allegation that the appellant had set up a separate entity by the name of Devi Consultancy Service (in short "DCS") without the approval of the Board of Directors (in short "BOD") of DPPL.
4.4. The Supreme Court, however,
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