FEDERAL COURT OF AUSTRALIA
Patel v Agrawal, in the matter of Sankul Investments Pty Ltd [2024] FCA 997
ORDERS
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. Sankul Investments Pty Ltd be joined as the fourth defendant in the proceeding.
2. The interlocutory process filed 14 August 2024 be dismissed with costs in respect of the claims for relief in prayers 7 to 9 thereof.
3. The plaintiffs file an amended originating process by 4:00 pm on 23 August 2024.
4. The proceeding be referred to the National Operations Registrar for allocation to a Docket Judge.
5. The proceeding be listed for a case management hearing on a date and time to be advised to the parties.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Revised from transcript
YATES J:
1 This proceeding was commenced on 14 August 2024 by an originating process seeking relief under s 233 of the Corporations Act 2001 (Cth) (the Act) in respect of alleged oppressive conduct in respect of the affairs of the fourth defendant, Sankul Investments Pty Ltd (the company).
2 The first plaintiff, Snehalkumar Kirtibhai Patel (Mr Patel), is a director of the company. The first defendant, Anitabahen Dilipkumar Agrawal (Ms Agrawal), is the other director of the company. She and Mr Patel are the only directors.
3 Mr Patel is also a director of the second plaintiff, Kavyansh Investments Pty Ltd (Kavyansh Investments), which holds 40 per cent of the company’s issued shares. The second defendant, RNDA Pty Ltd (RNDA), holds 20 per cent of the company’s issued shares. The sole director of RNDA is Dilipkumar Agrawal, who is Ms Agrawal’s husband. The third defendant, SKA Group Proprietary Limited (SKA), holds the remaining 40 per cent of the company’s issued shares. The directors and equal shareholders of SKA are Krishnakumara Agrawal and Shashikumari Agrawal.
4 The company owns property at 3 Zissie Street, Schofields in New South Wales. The property is worth approximately $6 million. It is subject to a mortgage to the Commonwealth Bank of Australia for approximately $3 million. The property is used primarily as a childcare centre. There is also a three-bedroom apartment being rented out as residential premises. The company receives a rental income of approximately $33,000 per month for the property. It plays no role in running the childcare business.
5 The plaintiffs have filed an interlocutory process which has come before me as a matter of urgency in my capacity as the Commercial and Corporations Duty Judge in New South Wales. It concerns a general meeting of the company, scheduled to be held today, 16 August 2024, at 5:30 pm, which has been convened by Ms Agrawal, in her capacity as a director, pursuant to s 249C of the Act (the General Meeting).
6 The notice of the meeting contains an agenda noting two resolutions:
(1) That pursuant to, and in accordance with, s 203C of the Act and the company’s constitution, Ms Agrawal be removed as a director of the company with effect from the end of the meeting;
(2) That pursuant to, and in accordance with, s 203C of the Act and the company’s constitution, Mr Patel be removed as a director of the company with effect from the end of the meeting.
7 The notice of meeting also contains items of general business identified as:
(a) the company’s Australian Taxation Office (ATO) debt and a potential payment loan;
(b) debts owed by the company to third parties, including United Law;
(c) payments made to Unique Accounting;
(d) opportunities to raise capital, including sale of the property owned by the company; and
(e) potential appointment of an administrator.
8 The interlocutory process seeks an order that Ms Agrawal take all steps reasonably required to cancel the General Meeting. It also seeks an order that Ms Agrawal, RNDA and SKA be restrained from attending and holding any general meeting of the company for the purpose of passing the second resolution, or any other general business referred to in the notice of meeting.
9 The basis on which that relief is sought is, essentially, that the meeting has been called for the improper purpose of advancing the interests of Ms Agrawal, RNDA and SKA, and the interests of Krishnakumar Agrawal, to the detriment of the company and the plaintiffs. The plaintiffs contend that by calling and holding the meeting to pass the second resolution to remove Mr Patel as a director, and then undertaking the general business, as set out in the notice, Ms Agrawal has engaged, and is engaging, in conduct which is contrary to the interests of the members as a whole, and oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiffs within the meaning of s 232 of the Act.
10 One matter that featured in the evidence before me is the fact that the company has had dealings with another company called Mansa Sons Pty Ltd (in liquidation) (Mansa Sons). Krishnakumar Agrawal was a director of Mansa Sons. He is no longer the director, but Shashikumari Agrawal, his wife, is. Mansa Sons was placed into voluntary administration on 30 June 2023 and was subsequently placed into liquidation by a resolution of creditors passed at the second meeting of creditors on 4 August 2023.
11 The joint liquidators claim that the company is indebted to Mansa Sons for approximately $613,976. Mr Patel disputes the existence of that debt. He is concerned that if he is removed as a director, negotiations between the company and the liquidators of Mansa Sons will not be properly conducted. In particular, he is concerned about the possible involvement of Krishnakumar Agrawal in those negotiations. Mr Patel has also given evidence that he considers there to be no urgency for the members to meet to discuss the general business set out in the notice of meeting. As to the company’s ATO debt, he notes that there is a payment plan in existence. He has given evidence that he considers the company to be solvent and able to meet its debts as and when they fall due, and that there is no need for the appointment of an administrator.
12 The question of the company’s solvency is a matter that concerns Ms Agrawal. It is sufficient for me to say that she has different views to Mr Patel about the liabilities that the company might face in the future. Indeed, it is fair to say that the differences between Mr Patel and Ms Agrawal in relation to how the company should be managed are intractable.
13 The evidence before me is that if the General Meeting proceeds as planned, the voting will result in Mr Patel being removed as a director of the company, with Ms Agrawal remaining as its sole director, such that the management of the company will be in her hands.
14 I should add that a question has arisen as to whether the company has a constitution. I do not need to resolve that question definitively. The plaintiffs contend that the notice of meeting is defective in various technical respects having regard to the constitution, which they contend is in place, and, for that reason, the General Meeting has not been properly convened. It is sufficient for me to say that I do not regard any of those technical matters as warranting the interlocutory relief that is sought.
15 The principal question before me is whether the plaintiffs have established: (a) a prima facie case in the sense of a serious question to be tried of the threatened oppression which they allege; and (b) if so, whether the balance of convenience favours granting the relief that the plaintiffs seek.
16 I am not persuaded that a serious question of threatened oppression has been demonstrated.
17 The plaintiffs’ claim for relief in that regard is based on the fact that it would be oppressive to remove Mr Patel as a director of the company. The difficulty I see with the plaintiffs’ case is that Mr Patel has no entitlement to be a director of the company. Further, there is no shareholders agreement between the three shareholders which would entitle Kavyansh Investments to appoint any director. Absent those entitlements, it does not follow that Mr Patel’s removal as a director constitutes conduct that is oppressive. Moreover, if at the meeting Mr Patel is removed as a director, Kavyansh Investments will still be entitled to participate in the General Meeting on the matters of general business that might arise. Its entitlement to do so will continue, including voting on any other resolution that might validly be brought forward at that meeting.
18 Even if I am wrong on the question of whether there is a serious question to be tried, the plaintiffs’ case is not strong and the balance of convenience does not favour granting the relief that is sought. In my view, the balance of convenience favours the members of the company exercising their entitlements to vote as they see fit at the General Meeting.
19 For these reasons, the application for interlocutory injunctive relief is refused. Costs should follow the event.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates. |
Associate:
