Ex-Director Cannot Claim Oppression For Lapses During His Tenure: NCLT Ahmedabad

The National Company Law Tribunal (NCLT) at Ahmedabad has recently observed that a director who actively managed a company cannot allege oppression for irregularities that took place during his own tenure. A bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma, while examining allegations of siphoning of funds, falsification of accounts and mismanagement in DB Shapriya Construction Ltd., said “Having been an active participant in the management of the Company, the Petitioner cannot now attribute the alleged irregularities and managerial lapses to oppression by others. The plea of oppression cannot be maintained against a management of which the Petitioner was himself an integral and controlling part.”The petition was filed by Dhiren Pratapmal Bhandari, former director and chief executive officer of DB Shapriya Construction Ltd. He held one equity share, amounting to 0.001% shareholding. He approached the tribunal after he was removed as director on May 13, 2015, seeking reinstatement and alleging oppression and mismanagement. DB Shapriya Construction Ltd. was incorporated in April 2012 for engineering and construction work. It operated in Uttar Pradesh, Bihar and Rajasthan. Bhandari joined the company as chief executive officer and later became a promoter director. He managed the company's affairs until his exit in 2015. Bhandari alleged that additional directors siphoned Rs 3.2 crore by opening unauthorised bank accounts, purchased luxury properties for personal use, falsified records and removed him as director without due process. The other directors denied the allegations and said Bhandari had resigned by email on March 30, 2015. They argued that he was responsible for day-to-day management and statutory compliance and that any irregularities occurred while he was in control of the company. The tribunal noted that most allegations related to a period when Bhandari himself was managing the company. It also found that no documentary material was placed on record to support claims of siphoning or falsification. It also clarified that 'loss of confidence or pure deadlock' does not equate to oppression. For an act to be considered oppressive, it must involve at least an element of lack of probity or fair dealing regarding a member's proprietary rights, which the Tribunal found was absent in this case On the challenge to the appointment of additional directors, the tribunal observed that procedural irregularities by themselves would not constitute oppression or mismanagement “unless it is shown that the appointments were made with the intent to prejudice the rights of the Petitioner as a shareholder or to alter the balance of control in the Company to his detriment. In the present case, the Petitioner's shareholding being a single share, no such prejudice can be said to have been caused to his proprietary or participatory rights as a member.” Holding that the dispute reflected internal discord rather than oppression, the tribunal dismissed the petition. Case Title: Dhiren Pratapmal Bhandari v. DB Shapriya Construction Ltd. and Ors. Case Number: TP 119 of 2016 (New) CP No. 23 of 2015 (Old) For Applicant: Advocate Sudhir Mehta For Respondents: Advocate Kunjal Dalal for Shapriya Construction Click Here To Read/Download Order

Ex-Director Cannot Claim Oppression For Lapses During His Tenure: NCLT Ahmedabad

Shivangi Bhardwaj

Tags