The Tribunal held that removal of a director and transfer of shares without proper documentation, including a resignation letter or share transfer deed, constitutes oppression and mismanagement under the Companies Act, 2013.

Per RADHAKRISHNA SREEPADA, Member (Technical)

1. This Company Petition is filed on 24.06.2024 by the Petitioner under Section 241-242 of the Companies Act, 2013 against Mit Apparels Private Limited and others (hereinafter referred as “Respondents”) inter-alia seeking the following reliefs:

(1) Declare that the acts of Respondent No.2 and 3 are oppressive and detrimental to the interests of Petitioner and her majority interest;

(2) Declare that the acts of Respondent No.2 and 3 amount to mismanagement of Respondent No.1 company and is prejudicial to the interests of the Company;

(3) To declare that the resignation filed for Ms. JAYASREE LAVANYA NOOKALA is illegal, null and void and to reinstate Petitioner as Director of the Company;

(4) To repay the loan amount lent by Petitioner to Respondent No.1 Company along with interest;

(5) All the Annual General Meetings held by the Respondent No.1 Company from the date of inception shall be declared as invalid and the Respondent No.1 Company be directed to conduct the said meetings for adoption of financial statements once again;

(6) Restrain Respondent No.2 and 3 from transferring amounts from the account of respondent No.1 Company to their personal bank accounts and that of their family members without formal intimation along with reasons to the petitioner;

(7) Direct Respondent No.2 and 3 to reimburse Respondent No.1 company for the illegal withdrawals/ expenses or other loss which has been caused to the company;

(8) Direct Respondent No.2 and 3, being the oppressors, to give a first option to the Petitioner to buy out shares of respondent No.2 and 3 and in the alternative, direct Respondent No.2 and 3 to buy out the shares of the Petitioner at a fair value to be determined by an independent valuer appointed by this Hon'ble Tribunal;

(9) Grant costs of the present proceedings only against Respondent No.2 and 3;

(10) Such other reliefs as the Bench may deem fit.

2. Facts of the case as submitted by the Petitioner

a. The Petitioner was the sole proprietor of M/s. Magic Imprint Technologies, established in 2016, and was carrying on business along with Respondent Nos. 2 and 3. Subsequently, Respondent No.1 Company was incorporated in November 2020 with the object of taking over the said proprietorship business, which, according to the Petitioner, was her original concept and initiative.

b. At the time of incorporation, the Petitioner had 60% shareholding (6000 equity shares) and was appointed as a director, while Respondent No.3 held the remaining 40% shares. The business of proprietorship concern was gradually transferred to Respondent No.1 Company in 2022 without any consideration being paid to her.

c. It is submitted that due to matrimonial disputes between the Petitioner and Respondent No.2, they began living separately from August 2020, briefly reconciled, and finally separated in August 2021. During this period, the Respondent Nos. 2 and 3 had acted in collusion to gain control over Respondent No.1 Company.

d. The Petitioner was illegally removed from the position of Director without her consent, without issuance of notice, and without following the procedure prescribed under the Companies Act, 2013. She contends that no resignation was tendered by her, nor was any special notice or meeting convened for her removal, thereby violating statutory provisions.

e. There are material inconsistencies in the statutory filings and records of the Company. While the Board’s Reports state that there was no change in directorship, the filings indicate that only two directors were participating in meetings, thereby suggesting suppression of the Petitioner’s position as Director.

f. The Petitioner also contends that despite being a majority shareholder, her name has been removed from the list of shareholders in statutory filings (MGT-7A), and her shares have been shown in the name of Respondent No.2 without any valid transfer, consideration, or execution of transfer deeds, in violation of the Articles of Associati