Mr. Shankar Sundaram vs M/s Amalgamations Limited & ors
TA (AT) No. 18/2021 Company Appeal (AT) No. 325/2019
Facts:
1.Appeal is filed against Order dated 18/09/2019 in TCP No. 1/2016 (CP No. 94/1999) and TCP No. 88/2016 (CP No. 20/2012) passed by the National Company Law Tribunal, Chennai Bench, by which common Order, the NCLT has dismissed both the Company Petitions, as devoid of merit.
Issue: Whether the appeal is liable to be allowed ?
Arguments:
Appellant:
1.Counsel submitted that equal rights were denied to equal inheritors, which is argued to be an act of oppression against the Appellant. It is submitted that Mr. Ananta Ramakrishnan was owning the entire 100 % shares in the first Respondent Company when he died intestate on 18/04/1964 and all his shares were devolved equally among his five legal heirs namely, his wife, his two sons and his two daughters, one of whom was the Appellant’s mother.
2.Counsel pointed out that out of the 21 profit making Companies, three companies constituted more than 97 % of the total profit of the Group namely, Simson and Company Limited, TAFE and TMTL. It is stated that after adding the 20 % shares of the Appellant’s grandmother, Mr. Sivasailam and Mr. Krishnamoorthy claimed majority power and control the affairs of the Company keeping the two sisters in the dark and appointing themselves to directorial positions in the subsidiary and fix their own remunerations for themselves, increasing the total remuneration and commission from Rs. 2,00,00,000/- in the year 1997-98 to Rs. 1830000000/- by 2012, which is around Rs. 16,00,00,000/- on an average.
3.Counsel submitted that Appellant was never given any position or remuneration / Commission exhibiting disparity and discrimination. It is the case of the Appellant that all appointments of Directors to the subsidiaries are made only by the Board of R1 Company which is dominated by the majority shareholders who have selfappointed themselves and fixed their own remuneration, excluding the Appellant, which is an act of disparity, discrimination and ‘oppression’.
4.Counsel for the Appellant submitted that the Appellant had abstained from voting on any Resolution in any Meeting of the 1st Respondent Company, subsequent to the filing of the Company Petition in the year 1999 and that when a few persons inherit all the shares equally in a Company, it is the legitimate expectation of every inheritor/Shareholder that the profits of the Company would get distributed equally among the Shareholders.
5.Counsel submitted that Simpson and Company, TAFE and TMTL bring in more than 95 % of the aggregate of profit after tax of the entire group, is being effectively controlled only by the majority as they have appropriated to themselves the 20 % share of their mother in addition to the 40 % which they have usurped.
Respondents:
1.Counsel submitted that remuneration fixed for the Directors is entirely justified considering the financial performance of these Companies and drew our attention to the summary of the financial position of the preceding three financial years. Counsel presented net profit figures of M/s Amalgamations Pvt. Ltd. contended that by no stretch of imagination can it be stated that the said Company is mismanaged. It is argued that the Appellant seeks a management role only in the larger profit-making subsidiaries as can be seen from their Prayer in both the Company Petitions.
2.Counsel submitted that AGMs were conducted periodically and they were all attended by the Appellant right from 1984 to 1999 and the Appellant had approved the ‘proposed’ dividend. There was no objection raised in any of those Meetings as per Documentary evidence on record regarding the quantum of dividend. Even on 30/09/1999, which is one month prior to the filing of Company Petition, the Appellant had attended the Meeting and approved the dividend proposed.
Decision: NCLAT dismissed the appeal.
Rationale:
1.NCLAT noted that first Company Petition was filed in the year 1998 and there is no dispute that the Appellant had approved the Resolutions till the year 1999. It held that Appellant been a part of these AGMs till 1999 and having approved the Consolidated Annual Accounts, we are of the considered view that the Appellant cannot, now at this stage, question the remuneration being paid and the dividends having been declared.
2.It held that The facts of the attendant case do not show that there is any ‘lack of probity’ or ‘fair dealing’ relating to the exercise of proprietary rights as a Shareholder to constitute oppression. Admittedly, the remuneration paid to the Directors of the Subsidiaries is within the limits prescribed under the Companies Act, 1956 and also the Companies Act, 2013. It is also significant to mention that none of the Shareholders of the respective Subsidiaries have complained with regard to the remuneration paid to the Directors of the respective Companies, neither have they challenged their appointment.
3.In the facts of the instant case, having regard to the fact that the lack of confidence of the Appellant is grounded on the personal conduct of the Directors rather than a lack of probity in the conduct of the Company’s affairs, we are of the considered opinion that the Appellant’s proprietary rights as a ‘Shareholder’ are not affected in any manner.
4.It held that the declaration of dividend is certainly not the source of the profit and any right to participate in the profit exists independently of any declaration by the Company. It is a settled proposition that a Shareholder cannot compel the Company by any process of Law to declare a dividend. Therefore, the contention of the Learned Senior Counsel for the Appellant that excess remuneration was eating into the profit of the Company thereby leading to a lower dividend, which he alleges is an act of Oppression, cannot be sustained.
Order Copy:
