Removal of directors does not inherently constitute oppression; evidence must demonstrate continuous oppressive conduct to succeed under the Companies Act.

ORDER

I. The Petitioners, Mr.Chekuri Sekhar and Mrs Chekuri Sujatha, (hereinafter referred as Petitioner No.1 and Petitioner No.2, respectively) who are Ex. Directors having11.25% and 20% shares, respectively in M/s Kinnera Cold Storage Private Limited (hereinafter called as Company), by filing the present petition have sought the intervention of this Authority to prevent oppression and mismanagement of the Company at the behest of its Directors and majority Share Holders i.e., Respondent No. 2 to 7.

II. Petitioner’s Case:

1. The Company/Respondent No.1 was incorporated on 20.05.1998 with primary objects for carrying business of cold storage units for preserving agricultural produce etc. in 1999 in Khammam town. After its establishment, the Company has been offering its cold storage facility to various farmers and traders in that region.

2. The Petitioner No.1, younger son of Mr. Chekuri Satyam Babu, was inducted as a member and director of the Company around the year 2009. It is claimed that since then he had spent considerable time and effort in building up the business of the Company, which had earned a lot of goodwill and reputation among the farmers and traders for the quality of service rendered by it. The existing demand for cold storage units around Khammam town was leveraged by the Petitioner No.1 in order to grow the business of the Company.

3. The Petitioner No.1 was responsible for day-to-day management of the cold storage facility. So, he did not have much time for managing the accounts of the company. Consequently, the Petitioners reposed their faith on Respondent No.2 and Mr. Chekuri Satyam Babu who are the brother and father of the Petitioner No.1, respectively. Taking advantage of this fact that the Petitioners had utmost faith in them, the Respondent No.2 and Mr. Chekuri Satyam Babu neither showed true accounts to the Petitioners nor they shared profits generated year after year by declaring dividends. The Respondent No. 2 used to frequently transfer the funds of the Company to the chit fund business being carried under the name and style of 'New Ushasri Chit Funds Private Limited', and the management of which company was in the hands of the Respondent No. 2.

4. The Petitioners made strong protest with Satyam Babu and Respondent No. 2 & 3, when they did not furnish the accounts and also failed to give an explanation with regard to the diverted funds. Upon such insistence and protest, Chekuri Satyam Babu decided to split the management of the three companies being run by the family at the time, i.e., the Respondent No.1/ Company, Ms. Ushasri Cotton and Ginning Mills Pvt. Ltd., and CSB New Ushasri Chit Funds Pvt. Ltd. The management of the Company was agreed to be given to the Petitioners, while the management of the other two companies would be managed by the other Respondents. In terms of the said understanding, the Petitioner No.1 was made Managing Director of the Company with effect from 01.05.2016 for a period of five years, after the resignation of Mr. Chekuri Satyam Babu on 12.04.2016 from the Board of Directors of the Company.

5. After appointment as the Managing Director of the Company, the Petitioner No.1 immediately verified the accounts of the company. On Such verification, it was found that there is a substantial difference between the actual turnover and what is being reflected in the books. When the Petitio