Tribunal cancels illegal share allotment, stresses independent valuation.

The Tribunal found the allotment of 1,10,00,000 equity shares to the 2nd Respondent to be illegal and oppressive, directing their cancellation and rectification of the register. It emphasized the need for an independent valuation of shares before any future allotment, in compliance with statutory provisions. The request for appointing an Independent Auditor was declined. The case was disposed of with these directions.

---

---

Issues Involved:
1. Rectification of the register of members by canceling the allotment of equity shares.
2. Appointment of an Independent Auditor to audit the accounts.
3. Valuation of shares before further allotment of securities.

Issue-wise Detailed Analysis:

1. Rectification of the Register of Members by Canceling the Allotment of Equity Shares:
The petitioners argued that the allotment of 1,10,00,000 equity shares to the 2nd Respondent was illegal and an abuse of the directions issued by the NCLT Chennai Bench. They contended that the shares were issued at a face value of Rs. 10 each without proper valuation, resulting in the 2nd Respondent's shareholding increasing from nearly 4% to 52.86%. The respondents countered that the share allotment was done to settle the dues with Federal Bank as per the NCLT Chennai Bench's order and could not be questioned. The Tribunal noted that compliance with Section 62(1)(c) of the Companies Act, 2013, which requires a special resolution and a valuation report from a registered valuer, was not demonstrated. The Tribunal found the allotment to be illegal and oppressive to shareholders, directing the cancellation of the allotment and rectification of the register.

2. Appointment of an Independent Auditor to Audit the Accounts:
The petitioners requested the appointment of an independent auditor to audit the accounts of the 1st Respondent Company from 1st March 2017. The Tribunal declined this prayer, focusing instead on the rectification of the share allotment issue.

3. Valuation of Shares Before Further Allotment of Securities:
The petitioners argued that the value of each share should have been determined by a registered valuer in compliance with Rule 13(g) of the Companies (Share Capital and Debentures) Rules, 2014. The Tribunal agreed that the lack of proper valuation was a significant issue. It directed that before any further allotment of shares, an independent valuation must be conducted to ensure fairness and compliance with statutory provisions.

Findings:
The Tribunal concluded that the allotment of shares to the 2nd Respondent was not validly done due to non-compliance with Section 62(1)(c) of the Companies Act, 2013, and directed the cancellation of the 1,10,00,000 equity shares allotted to the 2nd Respondent. The Tribunal also emphasized the need for an independent valuation of shares before any future allotment. The request for appointing an Independent Auditor was declined.

Order:
The Tribunal disposed of CP/122/KOB/2019 with directions to cancel the allotment of 1,10,00,000 equity shares in favor of the 2nd Respondent and rectify the register accordingly. It also mandated an independent valuation of shares before any further allotment. The request to appoint an Independent Auditor was declined.

---