NCLAT Chennai: Mere Irregularity Not A Ground For Oppression And Mismanagement

The National Company Law Appellate Tribunal (‘NCLAT’), Chennai Bench comprising of Justice M. Venugopal (Judicial Member) and Shreesha Merla (Technical Member) dismissed the appeal filed in Jitendra Virmani vs. MRO – Tek Reality Limited. Jitendra Virmani (Appellant) filed the appeal against the National Company Law Tribunal (‘NCLT’) Bangalore order dated 27.11.2019. The Appellate Tribunal held that a mere irregularity or infirmity is not a ground for oppression and mismanagement and a single act is not oppression and a continuous course of oppressive conduct by the majority is required and necessary for oppression and mismanagement proceedings. Background Facts: Proceedings were initiated by the Appellant who is the Chairman and Founder of the Embassy Group against Mro-Tek Realty Limited (‘Company’) on the grounds of oppression and mismanagement challenging a real estate development undertaken by the Company. Multiple proceedings were initiated by the Appellant before the Civil Courts in Bengaluru. The Appellant withdrew an oppression and mismanagement petition and initiated another proceeding for oppression and mismanagement against the Company, which was dismissed by the NCLT Bangalore. The said order of NCLT Bangalore dated 27.11.2019 is in appeal before the NCLAT Chennai. NCLAT Verdict: The NCLAT held that a mere irregularity or infirmity is not a ground for oppression and mismanagement and a single act is not oppression and a continuous course of oppressive conduct by the majority is required and necessary for oppression and mismanagement proceedings. The NCLAT held that a Petition for oppression and management will not lie before a Tribunal due to a mere irregularity or infirmity or illegality on the part of the Company in its governance relating to its affairs, that will not be characterized as a harsh or burdensome one and in any event. Further, there is no straight jacket cast iron formula specified to define the term ‘oppression’ and ‘mismanagement’. The Tribunal also held that a single act may not be enough for the grant of relief of oppression and a continuous course of oppressive code of conduct on the part of the Majority Shareholder is necessary. Further, the ingredients of Section 242 of the Companies Act, 2013 have no application for the redressal of grievances of wrong acts of the management of a company. In conclusion, NCLAT held that a mere illegal or invalid act would not be termed as acts of oppression. Case Title: Jitendra Virmani vs. MRO – Tek Reality Limited Case No.: Company Appeal (AT) No.363/2019 Counsel for Appellant: Dr. U.K. Chaudhary, Senior Advocate Mr. Manisha Chaudhary, Advocate Mr. Mansumyer Singh, Advocate Mr. Manisha Sharma, Advocate Mr. Shravan Chandrashekhar, Advocate Counsel for Respondent: Mr. P.H. Arvindh Pandian, Senior Advocate For Mr. Pawan Jhabakh, Advocate, For R1, R11, R13 & R15 Ms. Parina Lalla, Advocate, For R2 to R8 & R14 Click Here To Read/Download Order

NCLAT Chennai: Mere Irregularity Not A Ground For Oppression And Mismanagement

Sachika Vij

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