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2017 (4) TMI 193
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.... Nos 2 and 3 be declared as void and not to give any effect. d. That the agreement dated 30.08.2014 be declared as barred by law and not enforceable one. e. The issuance of any shares by the respondent Nos. 1 to 5 be declared as void and or withdrawn and/or recalled and/or set aside f. A scheme be framed for management and administration of the respondent No.1 taking into consideration the following: i. The petitioner No.3 is a 99.99% stakeholder in the company ii. The respondent Nos. 2 and 3 cannot be trusted with management of the company iii. The respondent Nos 2 to 5 have not contributed to the benefit of the respondent No.1 iv. The Respondent Nos 2 to 5 are all dishonest disposition and cannot be trusted to be at the helm of affairs of any company; v. The respondent Nos. 2 to 5 have derived illegal benefit and profit from the respondent No.1 g. The alleged illegal invalid board meeting dated 19.09.2014 was allegedly called by the respondent Nos 2 and 3 be declared as void and not to give any effect to the said alleged board meeting and/or any alleged decision made therein. h. The documents if any filed by the responde....
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....company is owned by petitioner Nos. 1 and 3 at the ratio of 00.01% and 99.99% respectively._The petitioners proposed to sale the company (M/s Sashi Kumar Tea Company Pvt. Ltd.) and accordingly, an agreement was entered into between the petitioner No.3 and respondent No.4 for a total consideration of Rs. ll (Eleven) crores. 4. Out of aforesaid amount, an amount to the tune of Rs. 1,01,45,790/ (One crore one lakh forty- five thousand seven hundred and ninety) was to have adjusted towards the value of equity share whereas remaining Rs. 9,98,54,210/ (Nine crores ninety-eight lakhs fifty-four thousand two hundred and ten) only was to have utilised in liquidation of loans which company owed to the holding company. Accordingly, on 30.08.2014, a deed of agreement for sale of the company in favour of the respondent No.4 was executed between the petitioner No.3 and respondent No.4 5. The petitioners have claimed that the agreement in question contained reciprocal agreements and under such agreement, the respondent No.4 was to pay the price of the company in 5 (five) instalments. In compliance thereto, the respondent No.4 had paid an amount to the tune of Rs. l (one) crore on the date o....
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....ers from the Board of Directors of the company enormously illegal which becomes the testimony to the fact that the respondent Nos. 2 and 3 mismanaged the affairs of the company apart from causing huge oppression to the petitioners herein. 12. The further case of the petitioners was that the agreement dated 30.08.2014 itself is void and illegal since it does not satisfy the requirement of section 10 of the Contract Act, 1872 and in that connection, it has been stated that such a contract was entered into by the petitioners labouring under a mistake as to the facts which form the very substratum of the agreement in question. 13. That apart, the agreement dated 30.08.2014 is also not enforceable since such an agreement was made in total violation of Sections 13 and 16 of the Securities Contract (Regulation) Act, 1956 (in short 'the Regulation Act of 1956). Sections 13 and 16 of the Regulation Act of 1956 declare that any contract made in violation of those sections is void and illegal. 14. Since the agreement in question is found to be void for being entered into in violation of provisions incorporated in section 10 of the Contract Act and so also the provisions of Sectio....
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.... 20. It was also agreed upon between the parties that the respondent No. 4 would obtain loan from the Bank and same would be utilized for liquidating the loan which the company owed to the petitioner No. 3 and in order to facilitate the securing of such loan by the respondent No. 4, the petitioners would provide the respondent No.4 necessary papers pertaining to the company, vide clause Nos. 6 and 9 of the agreement dated 30.08.2014. 21. In pursuance to such understanding between the parties, the respondent No.4 had paid an amount to the tune of Rs. 3(three) crores in instalments and as agreed to by the parties, the respondent No.4 had requested the petitioner No.3 to give the papers pertaining to the company to the respondent No. 4 so that the later could secure the loan for liquidating the entire loan in the name of the company. But the petitioners did not deliver the relevant papers despite making requests on occasions more than one. 22. However, while trying to persuade the petitioner No.3 to deliver the respondent No. 4, the papers pertaining to company in order to secure loan from the Bank so as to liquidate all the outstanding dues in the name of the company, the resp....
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....her issuance of equity shares was made in violation of provisions of Section 62 of the Companies Act, it has been stated that the allotment of shares to respondent Nos. 4 and 5 on 26.09. 2014 was made in accordance of Section 62 of the Act of 2013 after the adoption of resolution to that effect on 13.09.2014 which was also done in accordance with the prescription of section 42 of the Companies Act. Therefore, there was no violation of provisions either of Section 42 or of Section 62 of the Companies Act. 29. The petitioners, therefore, cannot, now, take the plea that appointment of respondent Nos. 2 and 3 as the Directors of the company is void and illegal. Likewise, they, now, cannot take the plea that the issuance of further shares to the respondent No. 4 and 5 (who were admittedly not the shareholders of the company on the date of allotment of shares to them) through private placement is also void and illegal. 30. In regard to the claim that petitioner Nos. 1 and 2 were illegally removed from the Board of Directors of the company, it has been stated that the petitioner Nos. 1 and 2 were removed from Board of Directors since they could not conduct the business of the compan....
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.... is none other than the respondent No.4. 36. The learned counsel for the respondents further submits that in the case in hand the fraudulent misrepresentation vis-a-vis the agreement, caused by the petitioner No.3, relates to the contents of the agreement, and, not to the character of the document. In such a situation, in the case of Ningawwa v. Byrappa Siddappa Hirekarabnar [1968] 2 SCR 797, Hon'ble Apex Court held that when fraudulent representation relates to only contents of the document, such agreement is voidable at the instance of the aggrieved party. 37. The relevant part of the judgment is reproduced below: - "The legal position will be different if there is a fraudulent misrepresentation not merely as to the contents of documents but also as to its character. The authorities make a clear distinction between fraudulent representation as to the character of the document and fraudulent misrepresentation as to the contents thereof. With reference to the former, it has been held that the transaction is void, while in case of the latter, it is merely voidable". 38. Therefore, the respondents (who still want to perform their duty, if any, under the agreement) des....
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..... 1,00,00,000/- (Rupees one crore only) to the first party on dated 12.09.2014 forming part of sale consideration. 5. After the completion of the above three consecutive transactions, the first party undertakes to introduce two persons as per the desire of the second party as directors of Sashi Kumar Tea Co, Pvt Ltd. 6. The second party undertakes to pay a sum of Rs. 4,00,00,000/- (Rupees four crore only) to the first party on dated 19.09.2014 forming part of sale consideration on account of repayment of loan taken by Sashi Kumar Tea Co. Pvt Ltd from the first party by availing loan from banks. 7. The second party undertakes to pay a sum of Rs. 4,00,00,000/- (Rupees four crore only) to the first party on dated 26.09.2014 forming part of sale consideration on account of repayment of loan taken by the Sashi Kumar Tea Co. Pvt. Ltd. from the first party. 8. After consideration of above said all conditions (payment of 11 crore i.e. sate consideration) The first party undertakes to transfer all its shares of Sashi Kumar Tea Co. Pvt Ltd to the second party by way of signing and executing the share transfer deed and provide necessary support to get all the relevant documents re....
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....thin the time schedule, specified in the agreement (which is said to be condition precedent to require the petitioners to do their part of duty there under), the petitioners are no longer required to do their part of the duty under the agreement, are the matters which can be tried only by the court of civil jurisdiction. 42. Similarly, the contention of the respondents that the petitioners had intentionally misled the respondent No.4 to believe that the value of the shareholdings of the company and its liabilities was Rs. 11 (eleven) crores which is alleged to be far below the actual value of assets and liabilities of the company, and, thereby induced the respondent No.4 to enter into the agreement aforesaid making the agreement voidable at the instance of later are also the matters which can be tried by the Civil Court only. 43. Likewise, the claim of the respondents that the respondent No.4 had almost done its part of the duty under the agreement and still agreeable to do remaining part of its duty, if any, under the said agreement and therefore, the petitioners are duty-bound to do the needful to transfer the ownership over the company in question to the respondent No.4 et....
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....e, if on the facts the court finds that the position relating to jurisdiction should be examined and appropriate orders passed, I am of the view that there is no legal impediment to pass appropriate orders at any stage of the suit. The learned Munsiff therefore was within his powers to examine the question of jurisdiction even though at that belated stage, and even when there no specific objection was taken in the written statement". "Coming to the question of jurisdiction it is clear that the claims referred to in issue No.6 are not excepted by Schedule II. As such if the claim is not above Rs. 500/- as laid down in Section 16 of the Act suit for such claims can only be tried by the court of small causes. To hold otherwise would be to allow a party to evade the provisions of law as has been held in Maharaja Bahadur Singh's case referred to above. The learned Munsif was in error in thinking that since the Civil P. C. allows a joinder of causes of action under Order 2, Rule 3 the plaintiff at his option can join different causes of action and if the claim exceeds the jurisdiction of the Small Cause Court it may be tried by ordinary courts. The learned Munsif overlooks the pro....
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.... notification otherwise than [between members of a recognised stock exchange or recognised stock exchanges] in such [State or States or area] or through or with such member shall be illegal: [Provided that any contract entered into between members of two or more recognised stock exchanges in such State or States or area, shall- (i) be subject to such terms and conditions as may be stipulated by the respective stock exchanges with prior approval of Securities and Exchange Board of India; (ii) require prior permission from the respective stock exchanges if so stipulated by the stock exchanges with prior approval of Securities and Exchange Board of India.]" "16 Power to prohibit contracts in certain cases.-(l) If the Central Government is of opinion that it is necessary to prevent undesirable speculation in specified securities in any State or area, it may, by notification in the Official Gazette, declare that no person in the State or area specified in the notification shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of any security specified in the notification except to the extent and in the ma....
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....ear ended 2014, it has come to our knowledge the said new 2 (Two) Directors removed us without due process of Law and without making any allegations against us. Moreover no Notice was given to us by Mr Santanu Dowrah and Mr Naren Chandra Medhi of the alleged Board meeting which was held only with the intention to remove us illegally and improperly. Moreover after inclusion of Mr Santanu Dowrah and Mr Naren Chandra Medhi on 13th Sep 2014, No Request was ever made from their part to call any Meeting. Therefore all the decisions taken on said meeting is totally void and nullity. The said facts of illegal removal has already been communicated the new Directors Mr Santanu Dowrah and Mr Naren Chandra Medhi but till date they are silent. We can produce the said letters as and when required. Therefore you are requested not to take any steps and received any documents from them as the valid documents of the company. Moreover it is important to place here that Mr Santanu Dowrah and Mr Naren Chandra Medhi issued equity shares on private placement without taking proper approval from the board and shareholders and without giving any intimation to us. The said activities clearly show....
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....f the Companies (Prospectus and Allotment of Securities) Rules, 2014 and under section 42 of Companies Act, 2013 and thereby approved the Board of Directors of the Company for making allotment 985, 421 Equity Shares to the following parties. SI. No. Name No of shares to be allotted M/s. Asomi Industries P(Ltd) 9,83,421 Mr. Mukul Talukdar Jointly with Sri Asomi Industries (P.) Ltd. 2,000 Total 9, 85,421 The Board then, after getting the approval by way of Special Resolution passed by the Members in the Extraordinary General Meeting held on 13.09.2014 made the allotment to the abovesaid parties under Private placement as prescribed under section 42 of the Companies Act, 2013. Further that since the records of the Company cannot be found after the new Directors came at the Registered Office of the Company; hence the copy of the Special Resolution cannot be affixed herewith". 57. The petitioners too filed affidavit-in-reply to the affidavits, filed by the respondents during the course of argument. Neither the rejoinder, filed by the petitioners nor the affidavit, filed by the petitioners in response to the affidav....
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....place. All these speak loud and clear that no violation of sections 42 and 62 of the Companies Act, 2013, had occurred in allotment of 9, 85, 421 Nos. of equity shares to the respondent Nos.4 & 5. 63. This brings us to the allegation that petitioner Nos.l & 2 were most illegally removed from the Board of Directors by the resolution adopted in the Board's Meeting held on 19.09.2014. I have found that in order to appreciate such allegation, one is required to go through the provisions of Section 169 of the Companies Act, 2013. For ready reference, same is reproduced below: "169. Removal of directors. - (1) A company may, by ordinary resolution remove a director, not being a Director appointed by the Tribunal under Section 24w, before the expiry of the period of his office after giving him a reasonable opportunity of being heard. Provided that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 163 to appoint not less than two- thirds of the total number of directors according to the principle of proportional representation. (2) A special notice shall be required of any resolution to remove a....
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....on. 65. In our instant case, unfortunately, there is nothing on record to show that any of the provisions so incorporated in Section 169 of the Companies Act, 2013 was followed before removing the petitioners from the Board of Directors of the Company which clearly shows that the petitioners were removed from the Board of Directors on 19.09.2014 in total violation of dictum, contained in Section 169 of the Companies Act, 2013. 66. Therefore, there cannot be any escape from the conclusion that petitioner Nos.l & 2 were removed from the post of directorship of the company violating the requirement of law. It may be stated here that the removal of the Director in violation of mandatory provisions of Section 169 of the Companies Act, 2013 has repeatedly been held to be an act of mismanagement and, therefore, petitioners are entitled to reliefs, claimed on this count. 67. It deserves a mention here that the respondents claim that when the petitioners proposed to sell the company to respondent No.4, the company was in a morbid condition since it was not in a position even to pay the dues to its employees, much less, the then managements, running same profitably which is why the ....
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....tions which they held prior to 19.09.2014. 73. It is worth noting here that in the petition, the petitioners have prayed for an enquiry to be conducted against the respondents allegedly for running the affairs of the company fraudulently. However, I do not find any material on record to uphold the allegation, mounted on this count and consequently, such allegation stands rejected. 74. Further, during the course of argument, the learned counsel for the respondents submits that the present proceeding is liable to be rejected since another suit, covering all the subject matters in the present proceeding, has also been initiated in the Civil Court of appropriate jurisdiction. It is a settled law, argues learned counsel for the respondents, two parallel proceedings cannot be initiated over the same subject matter. 75. I have considered such submissions and found that such submissions are without any merit. Our foregoing discussion has made it abundantly clear and same, therefore, needs no further restatement here. Suffice it to say that the certain matters, incorporated in the petition, cannot be tried by the Civil Court whereas certain other matters which I have alluded to her....