NCLAT allows oppression, mismanagement plea against office-bearers of film producers' body IMPPA

Appellate tribunal NCLAT has dismissed appeals by the Indian Motion Picture Producers Association (IMPPA) against an NCLT order that allowed minority members of the film producers' body to pursue an oppression and mismanagement case against its office-bearers.

The National Company Law Appellate Tribunal (NCLAT) held that the minority members had satisfied the threshold requirement under Section 244(1)(b) of the Companies Act, 2013 for waiver and found no infirmity in the NCLT's decision to allow the petition.

"If we analyse the finding recorded by NCLT, it did prove the fact to justify the exercise of its discretion to initiate the proceedings under Section 241 and 242 of the Companies Act, and while dealing with the specific pleading, NCLT had taken into consideration the apparent act of mismanagement and oppression which were apparently made out for grant of waiver," the NCLAT said.

With this, the NCLT will now hear the petition under Sections 241 and 242, which deal with oppression and mismanagement, on merits against IMPPA, the oldest and largest association of film producers in India, established in 1937.

A three-member bench of NCLAT also closed all pending interlocutory applications filed in this.

Sections 241 and 242 of the Companies Act deal give wide powers to the tribunal, which include removal of the managing director, manager or any of the directors of the company and recovery of undue gains.

Section 244(1)(b) of the Companies Act, 2013 requires that an oppression and mismanagement petition against a company without share capital be backed by at least one-fifth of its total members; however, NCLT can waive this requirement.

The dispute stemmed from allegations by certain members of IMPPA, a Section 8 company without share capital, regarding alleged misuse and diversion of funds, unapproved operational expenditure, irregularities in circulation of notices and minutes of executive committee meetings, non-compliance with provisions of the Articles of Association in maintenance of accounts, illegal appointment of two senior vice-presidents and unlawful suspension and expulsion of members.

The petitioners had approached the NCLT alleging oppression and mismanagement, and had also sought an investigation under Section 213. The petition was supported by consent letters from 209 members.

IMPPA challenged the maintainability of the said petition, contending that the waiver application was filed only after it raised objections and therefore the company petition could not be entertained.

It contended that IMPPA had around 26,000 members and at least 250 valid consents were required, while only 209 members had supported the petition. It also further alleged that a large number of consenting members were not eligible to vote, that the consent had not been informed and that several signatures were forged.

NCLAT rejected IMPPA's argument, observing that a voters' list circulated by IMPPA on April 1, 2022 for its own elections showed 977 eligible voting members, and that the association had not challenged the validity of that circular. On that basis, 209 consents satisfied the one-fifth requirement under Section 244(1)(b).