Whether Shareholder can challenge the reduction of their shareholding in oppression-mismanagement petition even though they hold less than 10%?

-

  


 


Shubham Budhiraja[1]

 

A, B and C, shareholder has filed an Oppression Mismanagement petition against the Company. The Company filed an application raising an objection of maintainability for lack of 10% equity. The Company Court allowed the application and dismissed the petition. The Hon’ble Delhi High Court set aside the order and held that once it is accepted that the shareholder can also challenge the transfer of shareholding as being oppressive and as being intended only to defeat their rights to maintain the petition then an opportunity should have been granted to them to peruse the register of members and, if so advised, challenge the same in accordance with law. The Company Petition, on the averments made in the Petition itself, could not have been thrown out at the threshold without granting such opportunity to the petitioner. The test is whether, even if the facts pleaded by the Petitioner in his petition are assumed to be true, the Company Petition filed by him can be held to be not maintainable. This test is similar to the test applied by a Civil Court while dealing with the issue of rejection of the plaint under Order VII Rule 11CPC. The reduction of the percentage of shareholding of an existing member to a miniscule minority has been recognized as an act of oppression. If an allotment of shares, increase in the issued share capital, or increase in the number of members is done with the sole aim of gaining control over the management of the Board/Company and to defeat the legitimate right of other shareholders, the court can always set aside such an increase or allotment.[2]


[1] Advocate, Delhi High Court [LLB,ACS,BCOM(H)], Budhirajalawchambers@gmail.com

[2] CO.A(SB) 21/2016 & Co.Appl. No. 1343/2019, Delhi High Court, Judgment dated 29/07/2022

Comments

Post a Comment

Popular posts from this blog

REPUGANCY UNDER ARTICLE 254 & TEST OF VALIDATING LAW

-
Image
  Shubham Budhiraja [1] [1] Company Secretary, LLB Final Year,DU & Bcom (H) The land acquisition falls in concurrent list and parliament in year 2013 has introduced a new act which provides for rehabilitation, compensation and procedure on land acquisition of property. The State of T.N has made 3 different state laws w.r.t. land acquisition which was struck off by the High Court. Thereafter, state of TN in year 2019 enacted the same law but with president assent under Article 254 to avoid the repugnancy with 2013 act under Article 254. The appeal filed before apex court w.r.t. repugnancy of 2019 state law with 2013 central law & test of validating the struck off law. The Supreme Court observed as: VALIDATING A LAW WITH RETROSPECTIVE EFFECT Case Law Relevant Remarks National  Agricultural  Cooperative  Marketing  Federation  of India Ltd. & Anr. vs. Union o...
Read more

Whether a person can be appointed as an arbitrator if his daughter is married to the son of the eldest brother of one of the parties in the arbitration proceedings?

-
Image
    Shubham Budhiraja [1] Two brothers running a family business in the form of a company and dispute arise between them and both decide to resolve through arbitration. During course of arbitration proceedings, one of party filed Section 14(2) r/w Section 15 Petition filed challenging mandate of arbitrator as being terminated because son of arbitrator is married to daughter of eldest brother of one of party and thus should be disqualified under Section 12(5) being ‘close family relationship’. The Hon’ble Delhi High Court declined the relief and held that neither the Seventh Schedule of the A&C Act nor the IBA Guidelines define the expression ‘close family relationship’. The plain language of Entry no. 9 indicates that it is not the legislative intent to render a distant relative of the parties to be ineligible for being appointed as an arbitrator, if both the parties so agree. It is not sufficient that the arbitrator is related to any one of the parties; the relation...
Read more

Whether unstamped agreement to sell executed in the year 1988 can be relied upon in suit for possession?

-
Image
  Whether unstamped agreement to sell executed in the year 1988 can be relied upon in suit for possession?   Under what circumstances, photocopy of agreement to sell can be relied upon as secondary evidence?   Shubham Budhiraja [1]   A filed a suit for possession against B on basis of agreement to sell executed in the year 1989. During the hearing, A filed IA for reading photocopy of agreement to sell as secondary evidence because he is not able to find the original agreement to sell. The Trial Court allowed the IA but in review rejected that because agreement to sell was insufficiently stamped therefore bar of section 35 of stamp act applies. The High Court confirmed the order. The Hon’ble Supreme Court held that bar of Section 35 will not apply because amendment of 1990 wherein explanation was added to the stamp act was substantive in nature and therefore new obligation of stamping cannot be imposed on agreement of sell executed between A and B. [2] ...
Read more