Companies Act | NCLT Mumbai Dismisses Oppression-Mismanagement Petition For Being In The Nature Of Family Property Dispute

Section 241 of the Companies Act, 2013 empowers any member of a company to file an application before NCLT seeking its intervention, when the affairs of the company are conducted in a manner prejudicial to public interest or the company's interest; or in a manner prejudicial or oppressive to the member(s) of the company. Section 242 of the Companies Act, 2013 states the powers of NCLT in cases concerning oppression and mismanagement.

Background Facts

Late Mr. Bharat Khater and Ms. Urvashi Bharat Khater (“Petitioner”) incorporated Laxsons (India) Pvt. Ltd. (“Company”), which is engaged in the business of manufacturing, dealers, importer and exporter of electronic and electrical goods The Petitioner is the mother of Mr. Avinash Bharat Khatter, Ashwin Bharat Khatter (“Respondent No. 2”) and Ruchi Ashwin Khatter (“Respondent No. 3”). Further, Respondent No. 2 and 3 are directors of the Company.

Mr. Avinash had parted ways and he received his share in family wealth vide Deed of Family Settlement executed in 2015. The Petitioner alleges that soon after death of Mr. Bharat Khatter in 2016, Respondent No. 2 filed a petition for probate of will, wherein the will was a fabricated document. The probate petition was converted into a suit and is pending adjudication before the Bombay High Court.

The Petitioner further alleged that Respondent No. 2 fraudulently transferred the shares previously held by Mr. Bharat Thakker in his own name. The Petitioner was allegedly ousted from her matrimonial residence by Respondent No. 2 and 3.

In 2020, the Petitioner received a notice under Section 169 of the Companies Act, 2013 alongwith an agenda for Board Meeting of the Company, for her removal from Directorship of the Company.

The Petitioner filed a petition under Section 241-242 of the Companies Act, 2013 alleging oppression and mismanagement by Respondent No. 2 and 3 in the Company. The Petitioner prayed for a declaration that notice, agenda and resolution for her removal from Directorship be declared void. The Petitioner also prayed for declaring the transfer of shares to Respondent No. 2 as void and to restrain the Respondent No. 2 & 3 from alienating the assets of the Company.

The Respondent No. 2 argued that the petition has been filed on the behest of Mr. Avinash who has already taken his share in the family wealth. Further, the Petitioner vacated her matrimonial residence out of her own choice and had suppressed the fact that the Deed of Transfer of Shares carried her signature.

NCLT Verdict

The Bench noted that the Respondent No. 2 has placed on record evidence to show that the transfer of Mr. Bharat's shares was made with the consent of Petitioner. However, the Petitioner did not contend that her signatures on the transfer deed and endorsement on share certificate were obtained by Respondent No. 2 fraudulently. The Bench concluded that the allegation of oppression is an after-thought.

The Bench opined that the issue of whether the Petitioner has been ousted from her matrimonial residence, is not connected with the affairs of the Company.

On the issue of disposal of properties by the Respondent No. 2, it was observed that the disposal was done to pay off the debts of the Company. The Bench noted that the Petitioner has not contended that the sale proceeds were siphoned off or used for personal advantage by Respondent No. 2.

“There are counter allegations against each other by the parties impending the business of the Respondent Companies, which may be causing prejudice to its interest. The Petitioners have also suppressed the documents evidencing existence of her consent for transfer of deceased's shares in favor of Respondent No. 2. It is trite law that this Tribunal u/s 241 & 242 exercises an equitable jurisdiction. Accordingly, we have no hesitation to hold that these petitions, in nature of family dispute for share of properties owned by the Respondent Companies, is not maintainable and merits dismissal.”

It was noted that the Petitioner suppressed the documents wherein she had granted consent for transfer of her husband's shares in favour of Respondent No. 2.

The Bench dismissed the petition while holding that the petition was in the nature of family dispute for share of properties owned by the Company.

Case Title: Urvashi Bharat Khater v Laxsons (India) Private Limited & Others

Case No.: CP. 1017 OF 2020

Counsel For Applicant: Mr. Nausher Kohli a/w Mr. Akash Agarwal, Advocates i/b AMR Law.

Counsel for Respondent: Mr. Pulkit Sharma a/w Mr. Aman Kacheria and Ms. Sakshi Dube, Advocates

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