AI Drafter 
TaxTMI 
TaxTMI 
2017 (10) TMI 668
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.... and development division giving a strong impetus to Krishidhan brand. 3. Mr. Subhash Karwa passed away in an accident on 07.12.1995. In January, 1996 petitioner No. 3 who is son of late Mr. Subhash Karwa was inducted as partner in Rajendra Seeds. On 05.02.1996, partnership firm was dissolved and Krishidhan Seeds Limited was floated by petitioner No. 3, Petitioner No. 5 and respondents No. 2 to 5. Petitioner No. 3 and respondents No. 2 and 3 together and in consensus with each other were handling, managing and carrying on the affairs of Krishidhan Seeds Ltd. 4. Respondents No. 2 to 5 represent J.P. Karwa group, hereinafter referred to as 'JPK" group. Petitioners 1 to 7 represent S.P. Karwa group, hereinafter referred to as 'SPK" group. In Krishidhan Seeds Ltd. JPK group is having 60% share whereas SPK group is having 40% share. 5. It was mutually decided by both the groups i.e. JPK group and SPK group to float five other companies as 100% subsidiary of KSPL. They are ... (1) Rajendra Agri Products P. Ltd. hereinafter referred to as "RAPPL" (2) SFPL Crop Life Sciences Pvt. Ltd. hereinafter referred to as "SFPL" (3) Krishidhan Vegetable Seeds India....
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....and petitioner No. 5 represent SPK group along with their spouses, HUF and children. In the said MOU cut off date is taken as 30.11.2012. In the MOU it is stated that on 24.11.2012 an understanding was reached between the parties and they intend to divide all the properties and liabilities including HUFs, flagship company Krishidhan Seeds Private Limited, and business interest held in various companies, firms etc. 11. Plea of the petitioners on the MOU dated 13.02.2013 is that it has not been acted upon and the validity and enforceability of the MOU is pending before District Court, Pune. Another plea of the petitioners on the MOU is that it is only transition agreement which has not been given final effect pursuant to the MOU dated 13.2.2013. Another plea of the petitions on the MOU is that in view of the facts, the disputes were referred to Arbitration Tribunal and arbitration award has been passed. It is also stated by the petitioners that Company Law Board vide order dated 03.03.2014 rejected the contention that MOU dated 13.02.2013 till it is acted upon, rights of the petitioners is available under Sections 397 and 398 of the Companies Act being shareholders/members of the ....
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....of power of attorney by respondent No. 3 (k) Respondent No. 3 took various loans from several banks to the tune of Rs. 170.00 crores to make tranche payments to respondent No. 12. (I) As per power of attorney, respondent No. 3 is obliged to notify all the communications and notices in respect of tranche payments made to respondent No. 12, but petitioner No. 3 kept the petitioners in dark. (m) Respondent No. 3 encumbered all the assets of the first respondent company. Despite raising Rs. 170.00 crores respondent No. 3 has not been able to repay Rs. 165.00 crores to respondent No. 12. Still an amount of Rs. 35.00 crores is due to respondent No. 12. (n) Respondent No. 3 started disposing of assets of KSPL at throw away price which are far below the market price. (o) Petitioner No. 3 vide email dated 09.01.2013 requested respondent No. 3 to share the details of the sale proceeds, the multiple loans availed and the buyback of the shares but respondent No. 3 did not respond to the email dated 09.01.2013. 14. According to respondent No. 3 the family arrangement/MOU dated 13.02.2013 was entered into resolve several disputes among both the gro....
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....he first respondent company. Goods worth Rs. 75.00 crores got locked due to excess production of 25 lacs packets of Bt. Cotton. According to respondents No. 2 to 5 aforesaid actions of petitioner No. 1 resulted in exit of Summit Partners from KSPL. Regarding de-investment of Summit Partners, note was circulated to all the persons including petitioners No. 4 and 5 and all Directors of KSPL. Petitioners gave special power of attorney to respondent No. 3 and as per the Special Power of Attorney, Rs. 130.00 crores was paid to respondent No. 12 thereby reducing their share from 24.99% to 5.28%. Respondent No. 3, due to his efforts and management skills convinced Summit Partners to sell balance share of 5.28% for Rs. 2.40 crores as against Rs. 30.00 crores required to be paid for procuring 5.28% shares.' 19. It is the case of the respondents that petitioner No. 1 and others were aware of the affairs between Mariegold and KSPL. Personal guarantee of JPK group was given in the place of SPK group, especially in the case of State Bank of India. It is further stated that petitioners are naturally relying upon the affidavit of Summit Partners dated 24.02.2015 filed in CA No. 67 of 2015. ....
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....meeting urgently to decide the issue of disposal of property of KSPL 28. Petitioner No. 1 also issued another notice dated 23.09.2013 to KSPL and respondent No. 3 stating that management of KSPL has been hijacked by respondent No. 3 without giving any communication to petitioner No. 1. In the legal notice petitioner No. 1 requested respondent No. 3 to provide copies of all the minutes of meetings. Petitioners issued public notice dated 31.10.2013 in two vernacular newspapers "Dainik Sakal Akola" and "Deshonnati Akola" informing the public at large that the properties mentioned in the said notice could not be alienated without consent of the petitioners. 29. By letter dated 25th and 26th June, 2013 respondents No. 3 and 4 directed the Purchase Manager of KSPL to stop procurement of laboratory consumables required by petitioner Nos. 1 to 3 for projects. Respondent No. 3 issued office orders to the Administrative Department represented by respondent No. 10 and Human Resources Department represented by respondent No. 11 to stop processing any requisition received from the petitioners No. 1 to 3. 30. Respondent No. 3 started holding the salaries payable to biotechnology scienti....
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....ecessary in order to protect the subject matter of the petitioner. However, It is clarified that the aforesaid order will not be construed as if the respondent No. 12 is precluded from recovering its balance amount, if any, payable in terms of the SPA in the exercise of its rights available to it under the applicable laws. Similarly, any secured creditor is free to recover its dues if any, from the assets of the respondent No. 1 company in accordance with law." 40. In the said order, in para 13, Hon'ble Company Law Board observed as follows:- "I have considered the rival submissions. Admittedly, the answering respondents themselves have filed a suit for specific performance in relation to the agreement entered into between the parties through the alleged family settlement. However, the petitioners are still shareholders and their names still exist in the Register of Members. I, am therefore of the view, that mere entering into a family settlement unless it is acted upon in terms thereof, the rights of the petitioners available to them under section 397/398 of the Act, being shareholders/members of the company cannot be permitted to be defeated. I, therefore, hold that t....
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....d by the answering respondents in favour of the prospective purchaser(s). It is, however, clarified that, in respect of registered agreements for sale of plots of the said properties which the company has already entered into with the prospective buyer(s), this order will not be applicable. b. The learned observer cum facilitator is requested to ensure that the properties are sold at the best price, reasonable time may also be granted to the petitioners to match the offer and/or to bring a better buyer. However, on this ground, the petitioners will not be allowed to delay/derail the process of sale. c. The meetings for the purposes of sale of properties may be held at Aurangabad/ Jalana/Akola/Pune or any other place as the Hon'ble observer cum facilitator after consultation with the parties and the prospective purchaser(s) decides. d. Hon'ble Mr. Justice Lahoti will be entitled to Rs. 75,000/- per visit subject to maximum Rs. 1.5 lacs per month. In addition to, he shall also be entitled to travelling allowances to which he was entitled as a sitting judge of Hon'ble High Court. The expenses of the said learned observer cum facilitator shall be borne in equ....
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....Again the matter was carried to Hon'ble High Court of Madhya Pradesh by way of Misc. Company Appeal No. 3 of 2014. The said application was disposed of at the stage of admission itself permitting the appellants/original petitioners to make application before the Hon'ble Company Law Board. 46. Original petitioner filed Company Application No. 225 of 2014 to appoint administrator or to expand the role of the observer cum facilitator empowering him to not only supervise the sale but also disburse the sale proceeds to discharge the liabilities, after due forensic audit, in accordance with the award and to stay the sale of cotton portfolio and rights issue. 47. Original petitioners filed Company Application No. 226 of 2014 to modify the order dated 25.04.2014 and to appoint administrator and or special officer and or an independent committee of Management or such other body or person and to modify the order dated 25.04.2014 to the extent of permitting the sale of the properties after considering necessary audit and being satisfied of the necessity to sell the properties. 48. Respondents No. 2 to 5 filed Company Application No. 231 of 2014 challenging the maintainability of the ....
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.... 2252 does not relate to the arbitration pending the application under Sections 397-398 of the Companies Act. 50. Hon'ble High Court of Madhya Pradesh in Misc. Company Appeal No. 46 of 2014 filed by the original petitioners against the order dated 05.09.2014 held that the prayers made in Company Appeal No. 225 of 2014 and 226 of 2014 were interim in nature and the impugned order of the Company Law Board is an interlocutory order, therefore, no interference is required. Hon'ble High Court of Madhya Pradesh dismissed Misc. Company Appeal No. 46 of 2014 with the aforesaid observation and further observing that liberty be given to the appellants to file fresh application before the Company Law Board. 51. Respondent No. 2 filed Company Application No. 67 of 2015 seeking appointment of independent valuer to ascertain the value of the shares of the first respondent company as on the date of filing of the petition and to pass order directing respondents No. 2 to 5 to buyout the shareholding of the petitioners at such a fair value decided by the independent valuer. 52. Company Law Board by its order dated 10.04.2015 passed in Company Petition No. 17 of 2014 directed the parties not....
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....16 This application is filed by original petitioners to appoint interim administrator of the first respondent company or in the alternative to appoint two independent Directors, to declare resolutions dated 05.01.2016, 13.03.2013 and 25.12.2015 as null and void for non-compliance of order dated 03.03.2014 and 25.04.2014 and to set aside the circular resolution dated 05.01.2016, 13.03.2013 and 25.12.2015. (5) CA No. 54 of 2016 renumbered as TP 62 E OF 2016 This application is filed by original petitioners to declare circular resolution dated 01.02.2016 is null and void, to restrain respondent Nos. 2 and 3 from passing any resolution in terms of section 113 of Companies Act, 2013, to restrain respondent Nos. 2 to 5 directly or indirectly subjudice matters in the agenda of any Board meeting of the first respondent company, to expand the role of observer cum facilitator by appointing him as independent Director, to restrain respondents from creating encumbrances on the assets of the first respondent company and to stay the resolution dated 01.02.2016. (6) IA No. 4 of 2016 This application is filed by original petitioners to declare resolutio....
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....assets (4) company's and branch bifurcation with future scope and (5) procedure to free group liabilities and implementation of award. The award also suggest the action required to be taken jointly by both the groups. Award is also based on the arrangements during transition. Annexure I of the award deals with the properties allotted to JPK group whereas Annexure II deals with the properties allotted to SPK group. Such award was challenged by respondents No. 2 and others before Learned District Judge, Pune under section 34 of the Arbitration and Conciliation Act, 1996 with a request to set aside the award. The award was questioned on the ground that it is opposed to law and public policy, it is one sided and on the ground that it also encompasses power to execute the award and the award is against public interest etc. etc. 59. It is pertinent to refer here regarding the order of Hon'ble High Court of Madhya Pradesh in Company Appeal No. 49 of 2014 in the order dated 14.01.2015 held as follows: - "13. Under Section 397-398 of the Companies Act, the Tribunal/CLB has power to grant relief in case of oppression and mismanagement of the affairs of the company. The distributi....
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.... has stated that the effect of the arbitration agreement would be seen at the time of final disposal of the petition. Even if the reason assigned by the CLB about entering into the alleged arbitration agreement during the trial of the case may not be sustainable, that would not affect the final conclusion arrived at by the CLB on account of the other reasons and specially the fact that the arbitration award has not attained finality and also considering the difference scope of two proceedings." 60. In view of the said order of Hon'ble High Court of Madhya Pradesh, this Tribunal has got powers to grant relief in case of oppression and mismanagement of the affairs of the first respondent company because distribution of assets in terms of award has not taken place. Hon'ble MP High Court observed that CLB/Tribunal has to consider the ratio in the judgments in Rakesh Malhotra v. Rajinder Kumar Malhotra and the order of Gujarat High Court in Sadbhav Infrastructure Project Limited viz. Company Law Board, while considering the effect of the Arbitral Award at the time of final disposal of the matter. Hon'ble High Court of MP also observed that the judgment in the matter of Sukanya Holdin....
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.... to oppression and mismanagement are referable to Arbitration or not. In Rakesh Malhotra (supra), Hon'ble Bombay High Court after referring various judgments of Hon'ble Supreme Court held as follows: - "As to whether the disputes in a petition properly brought under Sections 397 and 398 read with Section 402 of the Companies Act, 1956 can be referred to arbitration, the answer is no, subject to the caveat that I have noted regarding a mala fide, vexatious or oppressive petition and one that is merely 'dressing up' to avoid an arbitration clause." 66. In the judgment in Sadbhav Infrastructure Project Limited viz. Company Law Board reported in 2014 SCC online Guj 9159 it is held that judgment of Sukanya Holdings Pvt. Ltd. is not applicable to the facts of this case. In the judgment it is also held that in that case there is a mother agreement and there are other ancillary agreements to the mother agreement and it is a case of composite transaction between the same parties or the parties claiming through or under them falling under Section 45 of the Act the dictum stated in para 13 of the Sukanya Holdings P. Ltd. judgment is not applicable. In the judgment in Sukanya Holdi....
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....en acted upon. It is plea of the respondents that as per MOU, petitioners have no power to question about the management of KSPL Admittedly, the suit No. 238/14 is pending before the Civil Court. It is the plea of the petitioner that in view of the disputes referred to Arbitrator subsequent to filing of the Company Petition, there is no need to consider the MOU. It is the plea of the respondents, MOU shall also be taken into consideration. The Company Law Board by its order dated 25.04.2014 clearly held that, inspite of MOU the petition is maintainable and the said order is upheld. Company Law Board also decided about the eligibility aspect and consent aspect in favour of the petitioner in its order dated 25.04.2014 and those orders became final. This Tribunal is having jurisdiction to entertain the issues relating to the oppression and mismanagement inspite of MOU, inspite pendency of civil suit, till the arbitral award reached finality and implemented. Therefore, this Tribunal is of the considered view that this Tribunal is having jurisdiction to decide the issues of oppression and mismanagement qua the petitioners and the first respondent company. 70. Before exercising such j....
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....y suffice as observed by this Court in Ram Charan Das v. Girjanandini Devi." 73. In para 49 it is further held as follows: - "49. Further, in Krishna Beharilal v/v. Gulabchand this Court reiterated the approach of the courts to learn strongly in favour of family arrangements to bring about harmony in a family and do justice to its various members and avoid in anticipation future disputes which might ruin them all. This approach was again re-emphasised in S. Shanmugam Pillai v. K. Shanmugam Pillai where it was declared that this Court will be reluctant to disturb a family arrangement." 74. In the judgment of Satish Kumar (supra) and others it is held as follows: - "The award is not a mere waste paper but has some legal effect. It is final and binding on the parties and it cannot be said that it is a waste paper unless it is made a rule of the Court. The conferment of exclusive jurisdiction on a Court under the Act does not make an award any the less binding than it was under the provisions of the Second Schedule of the Code of civil procedure. The award is, in fact a final adjudication of a Court of the parties' own choice, and until impeached upon sufficient....
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....d right in the presence of Hon'ble Mr. Justice K.K. Lahoti several disputes were raised regarding the recording of the minutes of the meeting by audio video record and recording certain financial transactions and SPK group has gone to the extent of passing circular resolutions which is not contemplated in the order of the Company Law Board. 78. In the aforesaid factual situation and in view of the fact that Arbitral Award cannot be treated as waste paper till it is set aside and in view of the finding that this Tribunal has got jurisdiction to decide on the aspect of oppression and mismanagement and to pass necessary orders if acts of oppression and mismanagement are established and considering the impact of award this Tribunal is of the view that pending finalisation of the Arbitral Award there is no need to give a conclusive finding on the alleged acts of oppression and mismanagement and grant final reliefs. 79. However, considering long standing disputes between the petitioners and respondents No. 2 to 5, considering the non- implementation of MOU, considering the challenge made to the Arbitral award passed by the Arbitrator, considering the manner in which the proceedings....
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....ahoti shall, within one month, after appointment of two Independent Directors shall conduct meeting of the Board of Directors of the 1st respondent company following the provisions of the Companies Act, 2013 and Articles of Association of KSPL with the following agenda: - (a) Appointment of independent Chartered Accountant firm to assess the fair market value of the shares of the first respondent company as on the date of filing of Company Petition No. 17 of 2014 and to fix the remuneration of Chartered Accountants so appointed. (b) Appointment of Special Auditors team to audit accounts of the first respondent company for the financial years 2013-14 to 2016-17 and to fix remuneration of the Chartered Accountants. (iv) Agenda of all kinds of meeting of KSPL shall be approved by Interim Administrator before notice of meeting is given. (v) All meetings shall be conducted in accordance with interim orders in force and the directions given in this order, in the presence and as per the instructions of Interim Administrator. (vi) There shall not be any change in the shareholding pattern and Directors of the first respondent company until furthe....