NCLAT upholds the order of NCLT wherein a case of oppression and mismanagement was made out against Appellants; says Appellants had defrauded the Petitioner by inducing him to invest in Company and failing to make him a majority shareholder.
In the present matter, the Appellants have appealed against the impugned order passed by the NCLT, Mumbai Bench which allowed the petition filed by Mr. Ramkrishna Narsingrao Mankari (‘Petitioner’) under Section 59, 241-242, 246,337 to 341 of the Companies Act, 2013 (‘Act’) against Tulijabhavani Cold Storage Private Limited (‘Company’) and the Appellants. Appellant challenged the impugned order on the ground that had been repaid the entire consideration amount paid by him for the purchase of shares and the petition was barred by limitation.
Petitioner submitted that it was induced to invest money in the Company wherein the Appellants were the directors and shareholders on the pretext that shares would be transferred but the same transfer was never affected. Petitioner submitted that it was never informed about the meetings of the Company and wasn’t appointed as the non-retiring director to manage the affairs of the Company as was promised by the Appellants. The Petitioner alleged that the Appellants engaged in oppression of the Petitioner and mismanagement of the Company. NCLT held that the Appellants were guilty of oppression and mismanagement, declared the board meetings held after 04 February, 2013 as void, directed rectification of balance sheet drawn as on 31st March, 2013, rectification of registration of members, besides directing the Appellants to execute share transfer forms in favour of the Petitioner and complete all legal formalities for transfer of share certificates in the name of the Petitioner and also directed appointment of Petitioner as Director besides other directions incidental thereto culminating in constitution of new Board of Directors.
NCLAT peruses the submissions and facts and finds that during hearing before NCLT, a mutual settlement was recorded by virtue whereof a payment of Rs.1.33 crores was to be made by Appellants to the Petitioner. NCLAT observes that the Appellants weren’t able to abide by the settlement as the initial two cheques that were delivered to the Petitioner with the understanding that the share transfer applications would be signed only after encashment of cheque bounced and the subsequent fresh cheques that were issued could not be encashed. NCLAT finds that the Petitioner was deceitfully entrapped and made to invest a huge amount of Rs.70 Lakhs with false promise of catapulting him to the status of majority equity shareholder with 51% stakes and a false belief induced to induct him as a non-retiring Director. NCLAT finds that while Appellants derived pecuniary advantage by effecting the transaction of transfer of shareholding of majority stakes in the Company in favour of the Petitioner, they jeopardized his legal rights and exposed his legitimate interests to peril by not giving effect to the transaction, despite approval by Board of Directors, by indulging in acts of omission and commission in regard to statutory compliances and holding of Annual General Meetings causing grave prejudice to Petitioner who was kept in dark about the true state of affairs. NCLAT further finds that the Appellants had suppressed the factum of transfer of shares to the Petitioner; thereby justifying NCLT’s finding that Appellants were conducting the affairs of the Company in a prejudicial manner.
NCLAT observes that Appellants failed to address the issue of limitation but proceeds to address the same in the present appeal since it concurs with the findings of NCLT regarding oppression by Appellants. NCLAT observes that in regard to matters falling within the purview of Section 241-242 of the Act, the Limitation Act, 1963 does not specifically provide for a period of limitation.
NCLAT holds that , “in terms of Article 137, which is applicable to matters for which no period of limitation is specifically provided, the period of limitation is three years from the date when the right to apply accrues. Unless there is a continuing cause of action, the right to apply will have to be construed as having accrued when the first violation of right occurs or is discovered. Successive violation of right will not give rise to a fresh cause of action.”
NCLAT observes that, “Appellants, in the compliances filed before the ROC had withheld the information that Petitioner was majority shareholder in the Company. NCLAT further observes that while each filing of statutory compliances suppressing the material facts in regard to majority shareholding of Petitioner with fraudulent intention on the part of Appellants would constitute a continuing cause of action, computation of period of limitation even from when the AGM was held would bring the Company Petition within the period of limitation in as much as the Company Petition was filed on 19th September, 2016 though knowledge cannot be imputed to Petitioner as he had no notice of the AGM and it was only on 2nd February, 2016 that he claims to have gained knowledge of the misconduct on the part of the Appellants. NCLAT states that since the submissions of Petitioner have not been rebutted, the Company Petition is not barred by limitation.”
NCLAT states that Appellants have indulged in unwarranted acts jeopardizing the legitimate interests of the Petitioner and caused him grave prejudice. NCLAT, finding no infirmity in the impugned order of NCLT dismisses the appeal and imposes a cost of INR 1 Lac on the Appellants.
NCLAT holds successive violation of right does not give rise to a fresh cause of action thus an appeal is not barred by limitation