TaxTMI 
TaxTMI 
2017 (12) TMI 1316
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.... (b) To injunct the 5th and 6th Respondent Company from dealing with the clients of the 1st Respondent Company. (c) To order investigation into the affairs of the 1st, 5th and 6th Respondent Companies. (d) To appoint an administrator to manage the 1st Respondent Company until the investigation is done and the shareholding parity is restored. (e) To rectify the Register of Members of the 1st Respondent Company and substitute the name of First Petitioner in the place of the Second Respondent in respect of 25,550 shares taken away by the second respondent by deceit and fraud. (f) To rectify the Register of Members of the 1st Respondent Company and substitute the name of the Second Petitioner in the place of 7th Respondent in respect of 37058 shares taken away by the Second Respondent and Respondent by deceit. (g) Direct the Respondents not to convert the 1st Respondent Company into a private limited Company. (h) Direct the Respondents not to allot any shares to the 5th or 6th Respondent Companies or any one claiming through or under them. 2. The Company petition was initially filed before the then Company Law Board, Chennai ....
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....and wife of the 1st Petitioner. (4) One Mr. N. Ayyappan Nayar (N. A. Nayar), along with Mr.R.Radhakrishnan had subscribed to the Memorandum and Articles of Association of the Company as First Directors of the Company. Later on, the 2nd Respondent and two more people, Mr.Sirish Kumar Sheroff and Mr.Rajendran joined the Company in the year 1979. The petitioner and the 2nd Respondent are brothers and the 3rd and 4th Respondent are the sons of the 2nd Respondent and Mr.N.A.Nayar is the brother in law of the Petitioner and 2nd Respondent. (5) The petitioner joined the Company in the year 1986 as Marketing Executive at the request of the 2nd Respondent and Mr.N.A.Nayar. On being satisfied with his performance in the Company, the petitioner was offered shares and also was appointed as the Director of the Company in the year 1996. (6) Since Mr.N.A.Nayar was not able to involve in the business actively due to his illness and old age, he decided to sell his entire shares in the Company to both the Petitioner and 2nd Respondent. Accordingly Mr.N.A.Nayar has decided to give 22% of his stake to the Petitioner and 8% to the 2nd Respondent in the year 2007. An agreement....
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....es by way of providing his land for construction of factory. And the nature of the business of the 5th Respondent Company is similar to that of 1st Respondent Company. Since, the Respondents cannot directly divert the business of the 1st Respondent Company to the new entity, the Respondents are slowly taking steps to destroy the Company and take away the goodwill, clients of the Company to the new entities. The Respondents have deleted important drawing and other technical details of fans and equipments from the computers of the 1st Respondent Company and they also destroyed its hard copies. It is very hard for the 1st Respondent Company to survive without the deleted drawings. All these drawings have been destroyed from the 1st Respondent Company by the respondents to halt the manufacturing activities of the R 1 Company so as to ensure its closure paving the way for developing Respondent 5 & 6 companies. (c) Apart from the above illegal acts, the Respondents have been verbally threatening all the employees to stop working and not to take up any fresh orders. Previously all the orders received by the Company were handled by the Petitioner for approval but the 2nd Responden....
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....execution of the share transfer and takeover: i. The 2nd respondent requested the petitioner to transfer 8% of his group share to the respondent group, pending negotiation, so as to save the respondent himself from the fraudulent and wrong revised filling he has done with share ratio of 58% and 42% for 2ndrespondent and petitioner respectively for 3 financial years (2007; 2008 & 2009), which as per original filling was with a ratio of 50% each for Respondent and petitioner group respectively and also was the figure as per record of the 1st respondent Company. ii. In the same meeting the 2nd respondent requested for appointment of his two sons 3rd & 4th Respondents as Directors of the Company since their employment as Sr. Engineer-Design and Purchase Officer was without any Board approval for several years of their joining in the year 2005. The very reason behind the 2nd respondent asking the petitioner for appointment of respondents 3 & 4 as directors was that respondent 3 who was acting as Sr. Engineer-Design was not a qualified engineer and he was cheating the organization with a forged certificate, of which the veracity on enquiring with the university by the p....
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....not settled as proposed and agreed by the both parties. So the issue has to come to a stage where only Board resolution dated 27.02.2007 and the subsequent Share transfer Agreement dated 08.04.2010 only authoritative documents so as to resolve the issue in question. So the petitioner has filed the present petition by seeking to set aside the transfer of 8% shares of the petitioners, i.e. transfer of 25,550 equity shares of the 1st petitioner made in favour of 2nd respondent, and transfer of 37058 shares of the 2nd petitioner made in favour of 7th respondent apart from other reliefs as stated supra. (15) It is alleged that the 2nd respondent had successfully diverted the business of the 1st respondent Company to the 5th & 6th Respondent Companies and committed breach of fiduciary duties. The 2nd respondent had siphoned off huge funds. (16) The conduct of reducing the petitioner from position of holder of equal number of shares to a minority by promising to buy him out and silencing him from blowing the whistle. Therefore the grounds are sufficient to order winding up of the Company but it would unfairly prejudice interest of petitioner, other shareholders and the C....
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....rs on 08.04.2010. (6) It is further alleged that the 2nd respondent could get hold of declarations dated 27.02.2007 signed by Mr.N.A.Nayar and his family members and a few share certificates. Therefore he started making different claim contrary to said agreement by exchanging so many allegations between the petitioner and the 2nd respondent. It is further alleged that 25,550 shares of the petitioner and 37,058 shares of 2nd respondent were transferred on 09.10.2010 to maintain the status-quo ante. Accordingly they have also paid an amount of Rs. 6,26,080/- to the petitioner and his wife, in order to reimburse the amount paid to Mr.N.A.Nayar and his family. Therefore the 2nd respondent claims that the petitioner is holding only 34% of the total capital of the Company. (7) The Petitioner has filed two receipts dated 09.09.2010 as per Annexure R-5 (Page-60) of the counter, S.Radhakrishnan (Petitioner) has received Rs. 2,55,500/- by cash towards the cost of 25,550 numbers of the equity shares of Hyderabad Pollution Controls Ltd. and another receipt is also filed (Page 61) which states that V.Thara has received a sum of Rs. 3,70,580/- by cash towards the cost of 37,058....
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..... 6. An Additional counter dated 13.10.2016 is filed on behalf of Respondent Nos. 1 to 7 by inter alia stating that Mr. N.A. Nayar and his group are not made a party to the present company petition, even though, the petitioners are relied upon the alleged agreement of transfer of shares dated 08.04.2010. While agreeing that the said agreement is executed, has explained the circumstances, under which, the agreement was executed. It is further contended that the petitioners have transferred 8% of the shareholding to the respondents on 09.09.2010. They have also filed suit bearing OS No.896/2015 on the file of Hon'ble XV Additional District Judge, R.R.District at L.B.Nagar, U/s. 31 of the Specific Relief Act, seeking cancellation of the share certificate and its supporting void agreement dated 08.04.2010. 7. The petitioner has filed an additional rejoinder dated 02.03.2017, to the additional affidavit filed by Respondents No. 1 to 7. Following are the main contentions raised in the additional rejoinder: (1) The R1 Company and the 2nd respondent have filed a suit bearing O.S.No.605/2014 before Hon'ble II Additional District and Sessions Judge, R.R. District, L.B.Nagar by....
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....hers. ii. MANU/CL/0044/2015 - T.Raajasekar v. Sugavaneswara Spg. Mills (P.) Ltd. iii. MANU/SC/0192/1994 - S.P.Chengalvaraya Naidu v. Jagannath iv. MANU/CL/0083/2015 - JawaharPalaniappan v. Kumudam Publications (P.) Ltd. v. MANU/CL/0085/2014 - Unicom Skytech Ltd. v. KaizerFinvest (P.) Ltd. vi. MANU/CL/0070/2013- Rajiv Kant Laxman Vs. Bobby electronics Pvt. Ltd. 11. On perusal of the pleadings of both the parties, the following main issues apart from other minor issues, arise for consideration by the Tribunal- (1) Whether the CP is maintainable or not? (2) Whether the Board Resolution dated 27.02.2017 and the shareholding transfer agreement dated 08.04.2010 is properly executed or not, and whether they are binding on the parties or not: (3) Whether the respondents are justified to proceed further, while the CP is pending in which an interim order dated 18.05.2011 passed by the CLB by directing the respondent to maintain status-quo with regard to shareholding and share capital of the Company until further orders; (4) If so, what is the relief the petitioner is entitled for? 1....
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....ous of transferring the shares held by them and their associates/nominees as detailed in Annexure 1 to this Agreement and Parties No. 2 & 3 were desirous to buying the same and ACCORDINGLY IT IS AGREED AS UNDER: 1. Party No. 1 transferred 234800 (two lakhs thirty four thousand eight hundred only) shares held by them in Hyderabad Pollution Controls Limited in favour of Parties No. 2 & 3 as per details given in Annexure 1 to this Agreement. 2. Party No. 1 received full consideration from Party Nos. 2 & 3 towards transfer of shares as above and state that full consideration agreed on shares have been received by them and have signed the share transfer forms to be lodged with the Company for transfer of the shares in favour of Party No. 2 and Party No. 3 as per Annexure 1 attached. 3. After receiving full consideration thereof as agreed. Party No.1 agree that they have no further claim on Party Nos. 2 & 3 are the Company Hyderabad Pollution Controls Limited in respect of the transfer of shares as detailed in Annexure 1 of this Agreement. 4. This transfer agreement containing 2 pages along with Annexure 1 in two pages is duly signed by all the transfe....
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.... many actions including transfer of shares, removal of the 1st petitioner as director of the Company etc. Admittedly, when the CLB passed an order, the respondent Company is not supposed to take any action especially actions adversely affecting the interests of the petitioners. There is another order dated 27.09.2012 passed by the CLB in CA No. 153 of 12 by which the respondents, while permitting to conduct AGM to be held on 27.09.12, have restrained them from giving effect to resolutions passed in the AGM. Therefore, actions taken by the respondents, contrary to said interim orders are declared to be illegal, and they are non-est in the eye of law. 17. It is also relevant to mention here that while agreeing to the proposal made by the petitioner expressing his willingness to sell his and group shares for total consideration of Rs. 2.5 Crore or to sell the respondents share for agreeable consideration, the second respondent has denied any agreement to that extant except saying that his Auditor has the knowledge of the same. In anticipation of the acceptance of proposal of the petitioner by the second respondent, the petitioners have transferred their shares without actually rece....
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....pression and Mismanagement in the affairs of the Company, so as to prejudice the interest of the petitioner and his group, by misusing the judicial process. 21. As stated supra, the Agreement for transfer of Shares dated 08.04.2010 is declared to be legal and the same is binding on all the parties concerned including petitioners as well as second respondent. As mentioned supra both the parties got shares of Mr. Nayar, as per the said agreement. While accepting the shares of Nayar, the second respondent is raising frivolous grounds and filing several cases in order to harass the petitioners as the second respondent and his family members admittedly are at helm of affairs of R1 Company. As per the said agreement only, both the petitioner's group and Second respondent's group got equal share holding of 50% shares of the Company, and the subsequent transactions alleged to have been made by the respondents, as explained supra, are declared to be illegal and liable to be set aside. 22. It is also relevant to point out here that transferors namely N.A.Nayar & his group, have not disputed the agreement for transfer of his shares as per agreement dated 08.04.2010, and it is only the 2....
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....les of Association and in the Company law as stated supra. In the instant case, there are allegations that the Petitioners were removed contrary to law and Articles of Association of the Company without the permission of the Company. Even as per the contention of the 2nd Respondent, the Petitioners still admittedly holding 34% of the shares of the Respondent No.1 Company. Principles of natural justice demands that a party holding substantial shares in a Company should have their say in the affairs of a Company. Moreover, the R1 Company is a closely held Company and all members of a family should be associated with the affairs of Company so as to run its affairs in accordance with law. However, the Respondent No. 2 has miserably failed to discharge his duties as the first petitioner, is none other than his younger brother and also a Director/MD of the Company. 25. Articles 39 to 50 of R1 Company deals with the procedure for convening Board Meetings/ General meetings of the Company, passing a resolution, powers of Managing Director etc. As per Article 39, all meetings of the Board shall be called by the Chairman and he may call a meeting at any time and shall call a meeting upon r....
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....it is likely that the affairs of the company will be conducted as aforesaid, the [Company Law Board] may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit". Under section 402 of Companies Act, 1956, Company Law Board/this Tribunal empowers to pass following orders. And section 402 reads as under "Without prejudice to the generality of the powers of the [Company Law Board] under section 397 or 398, any order under either section may provide for - (a) The regulation of the conduct of the company's affairs in future. (b) The purchase of the shares or interests of any members of the company by other members thereof or by the company; (c) In the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) The termination, setting aside or modification of any agreement, howsoever arrived at, between the company on the one hand; and any of the following persons, on the other, namely:- (i) the managing director (ii) any other director xxxxx (v) the manager Upon such terms and conditi....
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....d public interest in general. Therefore, it would be just, proper and equitable to pass appropriate orders by the Tribunal to put an end to the oppressive actions and mis management of second respondent being committed through R1 Company 1 Company by exercising powers U/ss. 397, 398, 402 & 403 of the Companies Act, 1956/Read with Section 241/242 of Companies Act, 2013. 27. The Tribunal, however, cannot interfere in the day to day affairs of the Company. Since words of acts of Oppression and Mismanagement are not defined in the Act, they are to be inferred basing on facts of each case. Ultimately, it is for the management of a Company to manage its affairs, in accordance with its Memorandum and Articles of Association, however, subject to complying with extant provisions of Companies Act, 1956/2013. Therefore, the Tribunal is leaving all sundry issues to the Company to be decided by them, by directing the Company to conduct meetings of the Company to sort out their issues. Therefore, it is necessary to order the R1 Company to convene EGM at an early date so as to sort out their issues suitably. 28. In the result, the Company petition bearing C.P. No. 40 of 2011(TP NO.50/HDB/20....