NCLAT junks former Liberty Shoes CEO's plea seeking ease of norms to sue firm

Appellate tribunal NCLAT has dismissed the petition of Adesh Kumar Gupta, erstwhile CEO and Executive Director of Liberty Shoes, seeking an exemption from minimum shareholding norm to record a lawsuit of oppression and mismanagement against the company.

Gupta has 5.83 per cent shareholding successful Liberty Shoes.

He was removed arsenic an enforcement manager of Liberty Shoes connected September 30, 2023 and ceased to beryllium the main enforcement serviceman (CEO) of the company.

However, the institution informed the banal speech astir his removal from the committee connected November 21, a time aft the Chandigarh seat of the National Company Law Tribunal (NCLT), connected November 20 past year, dismissed his earlier plea.

Gupta past moved NCLAT and sought a waiver nether conception 244 of the Companies Act successful bid to record a petition nether Section 241, alleging oppression and mismanagement against him by the bulk promoter artifact connected the board.

As per norms, a plea alleging oppression and mismanagement nether Section 241 should beryllium backed by astatine slightest one-tenth of the full fig of the issued stock superior of the company.

The National Company Law Appellate Tribunal (NCLAT) successful its latest bid upheld the NCLT's determination and said Gupta's statement that this lawsuit presents exceptional circumstances meriting the assistance of a waiver is "not convincing".

Perusal of the materials connected grounds and the circumstances of the petition and the entreaty "do not bespeak immoderate exceptional circumstances" successful which specified a waiver could beryllium granted, the appellate tribunal noted.

"We reason that the NCLT acted wrong its jurisdiction and successful accordance with the principles of instrumentality portion denying the waiver nether Section 244 of the Companies Act, 2013," the NCLAT said.

The appellate tribunal besides rejected Gupta's contentions that waiver has been fixed earlier to 2 firms of precocious Cyrus Mistry successful a akin lawsuit against Tata Sons, and said they "do not sufficiently undermine the validity of the NCLT's decision".

"We bash not find immoderate infirmity successful the orders of the NCLT. The entreaty on with the IA is truthful dismissed, and the impugned bid dated November 20, 2023," said a two-member seat comprising Justices Yogesh Khanna and Arun Baroka successful its 61-page-long order.

NCLAT besides observed that the NCLT has powers to waive the request of minimum shareholding successful peculiar circumstances. Besides, the threshold for granting a waiver nether Section 244 is precocious and is intended to beryllium an objection alternatively than the rule.

"The Petition, arsenic highlighted successful the impugned order, revolves importantly astir the appellant's removal arsenic a manager and the related grievances. Section 241 is not intended to code specified idiosyncratic grievances, but is meant to support the interests of the institution and its shareholders against genuine acts of oppression and mismanagement," said NCLAT.

The NCLT was, therefore, close successful refusing the waiver based connected its appraisal that the petition does not substantiate a lawsuit of oppression and mismanagement arsenic envisaged nether the Companies Act, it said.

"We find that the appellant's allegations of oppression and mismanagement are intimately tied to idiosyncratic grievances regarding directorial disputes, which are not intended to beryllium addressed nether Section 241," it said.

Liberty Shoes was started by P D Gupta (father of Adesh Kumar Gupta) on with his member D P Gupta. Later, their nephew Raj Kumar Bansal was added to the business. Mother of Raj Kumar Bansal was sister of P D Gupta and D P Gupta.

Thus, determination are 3 promoter families successful Liberty Shoes which was incorporated successful 1986. In 1995, Liberty Shoes was listed connected the BSE. P D Gupta remained Chairman till his decease successful 2003.

In 2004, Adesh Kumar Gupta was appointed arsenic CEO of the company. He on with astir 10 household members of the 2nd procreation of the founders took progressive roles successful the company. However, disputes arose among shareholders and directors fundamentally betwixt PD Group, DP Group, and Bansal Group.