ON OPPRESSION & MISMANAGEMENT, NCLT HYDERABAD HELD THAT ALLOTMENT IS OPPRESSIVE, PREJUDICIAL, AND LACKING BONA FIDE NECESSITY AND DECLARED THE RIGHTS ISSUE AND PAS‑3 FILING AS ILLEGAL ASHOK KUMAR MANDHANI & ORS. V. MBG COMMODITIES PVT. LTD. & ORS. | ORDER DATED 16 JUNE 2026

 ON OPPRESSION & MISMANAGEMENT, NCLT HYDERABAD HELD THAT ALLOTMENT IS OPPRESSIVE, PREJUDICIAL, AND LACKING BONA FIDE NECESSITY AND DECLARED THE RIGHTS ISSUE AND PAS‑3 FILING AS ILLEGAL

ASHOK KUMAR MANDHANI & ORS. V. MBG COMMODITIES PVT. LTD. & ORS. | ORDER DATED 16 JUNE 2026

ON OPPRESSION & MISMANAGEMENT, NCLT HYDERABAD HELD THAT ALLOTMENT IS OPPRESSIVE, PREJUDICIAL, AND LACKING BONA FIDE NECESSITY AND DECLARED THE RIGHTS ISSUE AND PAS‑3 FILING AS ILLEGAL

ASHOK KUMAR MANDHANI & ORS. V. MBG COMMODITIES PVT. LTD. & ORS. | ORDER DATED 16 JUNE 2026

FACTS OF THE CASE

On 16 June 2026, the NCLT Hyderabad Bench-II declared the rights issue and PAS‑3 filing by MBG Commodities Pvt. Ltd. illegal, holding that the allotment was oppressive, prejudicial, and lacking bona fide necessity.

The tribunal cancelled the ₹2.5 crore share allotment that diluted the petitioners’ majority stake.

OPPRESSION & MISMANAGEMENT

Petition was filed under Sections 241 & 242, Companies Act, 2013 (Oppression & Mismanagement)

BACKGROUND:

·       MBG Commodities Pvt. Ltd., a closely held family company.

·       Petitioners (Branches I & II of Mandhani family) held 71.79% shares.

·       Alleged exclusion from management and denial of statutory rights.

IMPUGNED ALLOTMENT:

·       EGM on 28 June 2025 approved rights issue of 2,49,95,000 shares.

·       Allotted exclusively to Respondents 5 & 6 (wife & daughter of Respondent 2).

·       Petitioners’ holding diluted from 71.79% → 47.87%; Respondents gained majority.

PETITIONERS’ CASE:

·       No notice of EGM or offer letter served.

·       Company had strong financials (net worth ₹255 Cr, cash ₹151 Cr, profit ₹26 Cr) → no genuine need for capital.

·       Allotment aimed at altering control, violating fiduciary duty of directors.

RESPONDENTS’ DEFENCE:

·       Petitioners resigned from Board, diverted business to competing entities.

·       Rights issue was bona fide, to meet PSU tender requirements.

·       Petitioners chose not to subscribe despite notice.

·       Financial distress justified capital infusion.

NCLT’S DECISION:

·       Found the allotment oppressive, prejudicial, and lacking bona fide necessity.

·       Declared the rights issue and PAS‑3 filing illegal.

·       Directed rectification of Register of Members, restoring Petitioners’ majority (71.79%).

·       Allowed the Company Petition; connected IAs rendered infructuous.

WHY IT MATTERS

·       Reinforces that share allotment powers are fiduciary and cannot be misused to alter voting control.

·       Protects majority shareholders in family‑run private companies from dilution through engineered rights issues.

·       Affirms NCLT’s role in safeguarding against oppression and mismanagement under Sections 241–242.

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