National Company Law Tribunal, Hyderabad Bench-II: In the present case, a company petition was filed under Sections 241 and 242, Companies Act, 2013 (Act) by Ashok Kumar Mandhani and 4 other family shareholders (petitioners) against MBG Commodities (P) Ltd. (Respondent 1) and 7 others, alleging oppression and mismanagement arising out of a disputed rights issue and share allotment that diluted the petitioners collective shareholding. The Bench of Rajeev Bhardwaj (Judicial Member) and Sanjay Puri (Technical Member), allowed the petition, holding that the extraordinary general meetings were void for want of valid notice and that an allotment effected through a procedurally defective process, resulting in the reduction of the petitioners from a majority to a minority constituted oppression. The impugned allotment of equity shares in favour of Respondents 5 and 6 amounted to oppression and was liable to be set aside.
Background
Respondent 1 was incorporated on 21 August 2012 through the conversion of an erstwhile partnership firm, M/s Maheshwari Brothers, established in 1982. Respondent 1 had always been a closely held entity, owned and managed by 3 branches of the family holding 34 per cent, 33 per cent and 33 per cent respectively at inception, with each branch represented on the Board.
Between 2014 and 2023, the composition of the Board changed through successive resignations and appointments. Following the resignation of Shri Amit Kumar Mandhani (Petitioner 4), the petitioners contended that neither Branch I nor Branch II retained any representation on the Board, and that the affairs of Respondent 1 thereafter came under the exclusive control of Respondents 2 to 4. The petitioners, holding 71.79 per cent of the paid-up share capital, alleged that they were denied access to statutory records, that financial statements were not filed for Financial Year (FY) 2020—2021 to 2023—2024, and that no valid annual general meeting was convened for FY 2023—2024.
The petitioners further alleged that an extraordinary general meeting purportedly held on 6 January 2025, without notice to them, authorised loans and guarantees aggregating ₹25.05 crores to related entities. Subsequently, upon inspection of Ministry of Corporate Affairs (MCA) records, they discovered that a further extraordinary general meeting had purportedly been held on 28 June 2025, pursuant to which 2,49,95,000 equity shares were allotted almost entirely to Respondents 5 and 6 (the wife and daughter of Respondent 2), increasing the paid-up share capital and diluting the petitioners shareholding from 71.79 per cent to 47.87 per cent, while Respondents 5 and 6 together acquired a controlling 52.12 per cent stake. The rights issue remained open for only 8 days, and the letters of offer were stated to have been dispatched merely 2 days before the issue opened. On the very first day of the issue, Respondent 5 subscribed not only to her pro-rata entitlement but also to the entire unsubscribed portion, remitting approximately ₹45.84 crores.
The respondents contended that the petitioners had voluntarily exited management and that the Company had suffered losses on account of diversion of business by Petitioner 4 to a competing entity. They further contended that Respondent 2 was inducted as Director in 2023 to meet lender requirements after providing personal guarantees and that the rights issue was undertaken for bona fide business purposes with due notice to all shareholders, which the petitioners chose not to avail.
Issues
1. Whether the actions of Respondents 2 to 6, including the impugned share allotment, amounted to oppression and mismanagement under Sections 241 and 242 of the Act.
2. Whether the extraordinary general meetings were validly convened, having regard to the requirement of notice under Section 101 of the Act.
3. Whether the rights issue and consequent allotment of shares complied with the requirements of Section 62 of the Act and the SEBI ICDR Regulations, 2018.
Analysis, Law, and Decision:
The Tribunal observed that the petitioners, collectively holding 47.87 per cent of the paid-up share capital, satisfied the threshold under Section 244(1) of the Act and were entitled to maintain the petition.
The Tribunal noted that, for the extraordinary general meeting on 6 January 2025, the respondents had failed to place on record any substantive material establishing that the notice dated 27 November 2024 had, in fact, been served upon the petitioners and that there was nothing to establish the requisite quorum. It was held that, since the resolutions matters concerned requiring approval by special resolution under Section 185(2) of the Act, the meeting could not be sustained in the absence of proof of valid notice and disclosure.
The Tribunal further noted that for the extraordinary general meeting on 28 June 2025, service of notice to members holding substantial shareholding was mandatory, that the burden lies on the Company to prove service where it was denied, and that mere postal receipts, without corroborative material, do not establish due service. The Tribunal observed that the notice relied upon by the pespondents, dated 10 June 2025 was delivered on 18—19 June 2025, that is, either on or a day before the opening of the issue. Thus, it held that, the extraordinary general meetings on 28 June 2025 was void under Section 101 of the Act for want of valid notice.
The Tribunal found that on the rights issue offer remained open for only 8 days, contrary to the minimum period prescribed under Section 62(1)(a) of the Act. It further noted that the letter of offer was dispatched 2 days before the issue opened, in breach of the 3-day minimum under Regulation 106I, SEBI (ICDR) Regulations, 2018.
The Tribunal observed that Respondent 5 had, on the very first day of the issue subscribed to the entire unsubscribed portion shares, which could lawfully become available after expiry of the offer period, by remitting approximately ₹45.84 crores on that very day.
The Tribunal held that reduction of a majority shareholder to a minority through a mala fide and procedurally defective allotment constitutes oppression. The Tribunal declared the impugned allotment of 2,49,95,000 equity shares in favour of Respondents 5 and 6 void and oppressive.
Accordingly, the Tribunal declared the extraordinary general meetings held on 6 January 2025 and 28 June 2025 void, set aside all resolutions passed therein, cancelled the impugned allotment, directed rectification of the Register of Members under Section 59 of the Act restoring the petitioners shareholding to 71.79 per cent, and directed the Registrar of Companies to invalidate/remove Form PAS-3 (SRN No. AB5236552) and Form MGT-14 (SRN No. AB2364408) from the MCA records within 4 weeks. The company petition was allowed and disposed of.
[Ashok Kumar Mandhani v. MBG Commodities (P) Ltd., C.P. (Companies Act) No. 32/241/HDB/2025, decided on 16-6-2026]
Advocates who appeared in this case:
For Petitioners: Vikram Pooserla, Senior Advocate, with Krishna Vennelakanti, Anand Raj and Siva Praneetha, Advocates
For Respondent 1 & 2: S. Ravi, Senior Advocate
For Respondent 3: Rohan Aloor, Advocate
For Respondent 4: Neha, Advocate
For Respondent 5 & 6: Chinmoy Pradip Sharma, Senior Advocate
