Gopakumar Nair Vs Obo Bettermann India Private Limited (NCLAT Delhi)
Purchase of minority shares without compliance to Companies Act amounts to oppression and Mismanagement: NCLAT Delhi
Summary: The National Company Law Appellate Tribunal (NCLAT), Delhi, in the case of Gopakumar Nair Vs. Obo Bettermann India Private Limited, ruled that the forced purchase of a minority shareholder’s equity without proper compliance with the Companies Act amounts to oppression and mismanagement. The dispute involved a company where the original founders, who initially held 100% of the shares, were reduced to a 0.36% minority shareholding after a foreign partner, Obo Bettermann Holding GmbH, increased its stake. The majority shareholder then attempted to compulsorily acquire the minority shares, resorting to Section 236 of the Companies Act after “put and call” options failed. The NCLT had initially dismissed the petition, arguing that the founders were no longer shareholders and thus not eligible to file a petition under Section 241 of the Act. The NCLAT, however, reversed this decision, stating that the founders were indeed eligible to file the petition because they were challenging the very act that stripped them of their shareholding. The tribunal scrutinized the application of Section 236, which deals with the purchase of minority shares by a majority shareholder holding 90% or more. The NCLAT noted that the majority shareholder did not comply with the stringent requirements of Section 236, such as determining the share price based on a valuation by a registered valuer in accordance with prescribed rules. The tribunal held that since the act of acquiring the shares was itself under legal challenge, the NCLT could not simply accept the acquisition as valid without a full hearing on the merits of the case. By setting aside the NCLT’s dismissal, the NCLAT affirmed that the forcible acquisition of minority shares must strictly adhere to the legal framework to avoid being considered an act of oppression.
