TaxTMI 
TaxTMI 
2018 (4) TMI 683
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....rth and Ms. Surbhi Gupta, Advocates JUDGEMENT A.I.S. Cheema, J : This appeal has been filed by the Appellant - Power Finance Corporation Limited (a Government of India Undertaking) against the impugned Judgment & Order dated 15th June, 2017 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad (hereinafter referred to as 'NCLT') in C.P. No. 15/241-242/NCLT/AHM/2017. By the impugned judgement, the NCLT dismissed the Company Petition filed by the Appellant (hereinafter referred to as "Petitioner"), and accordingly disposed off IAs pending. Case of Petitioner 2. The Company Petition as filed before the NCLT and the case which was put up in short are as follows :- A. Respondent No. 1 Company (hereinafter referred to as "Company") was incorporated and was to deal in generating, developing etc. energy including electricity and other types of power like gas, coal etc. Its authorized Share capital is Rs. 2500 Crores and Paid-up capital is Rs. 565,379,0000/-. The Petitioner is a Government of India Enterprise under the Ministry of Power, New Delhi. It is holding 13,18,46,779 equity shares of Rs. 10/- each in the Respondent Company representing 23.32....
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....ns. The Impugned Order has referred to the suggestions as under : "Scenario - I Implementation by the present promoter 90 days' time allowed till 2nd August, 2015. Existing promoter will have to arrange additional equity of Rs. 600 crores as well as debt of Rs. 1100 crores at concessional rates to achieve the M.P. Power Management Company Limited stipulated tariff of Rs. 5.32 per unit. Scenario - II Government companies having majority equity project with management control project could be taken over by NHPC/NHDC and petitioner company would be amenable to infusing equity or additional debt as well as lowering of interest rate for existing debt and with commensurate support from lenders, tariff could be reduced to Rs. 5.32 per unit which is acceptable to M.P. Power Management Company Limited. Scenario - III Cancellation of PPA If the scenario I & II above do not fructify, the last option will be that M.P. Power Management Company Limited cancels the existing Power Purchase Agreement, Government of Madhya Pradesh and M.P. Power Management Company Limited would be burdened on account of Govt. MP counter guarantee deed of Rs. 400 crores issued to p....
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.... (iii) There was illegal transfer/adjustment of funds of Rs. 5.28 Crores to Respondent No. 8- M/s. Entegra Ltd. in 2010; (iv) There was mismanagement. Project Insurance lapsed in 2014; in 2010-11, Respondent No. 8 refused to convert the Optionally Fully Convertible Debentures (OFCD) into equity shares; (v) There was persistent default in payment of principal and interest amount for debentures to the extent of Rs. 400 Crores issued by the Respondent Company to MPPMC in 2013 and 2014; (vi) Respondent No. 10 when he ceased to be Company Secretary failed to hand over statutory records; (vii) Respondents failed to deposit T.D.S. deducted to Income Tax Authorities; (viii) Respondents failed to infuse equity. F. In sanction letter dated 2nd March, 2005 issued by the Petitioner for revaluation of loan, it was proposed that there should be nominee Director of the Petitioner in the Company and Articles of Association of Respondent No. 1 Company need to be modified. The Respondent Company availed credit facilities for the Project without raising any objection and after amendment to Articles of Association, Mr. G.S. Patra, Nominee Director....
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....Rural Electriciation Corporation (REC), Housing and Urban Development Corporation (HUDCO), Edelweiss Asset Reconstruction Company Limited (EARC), IFCI Limited, Dena Bank Ltd., and National Insurance Company Limited (NIC) have acquired the management control of the Respondent No. 1 Company w.e.f. 01-06-2016; (K) Declare that the Petitioners along with other and/or in combination with each other are not Holding Company or Associate Company or Joint Venture Company or Co-promoters of the Respondent No. 1 Company prior to 01-06-2016; (L) Direct the authorities of Ministry of Corporate Affairs not to launch any prosecution either under the Companies Act, 1956/2013 or any other law against the petitioner, nor its nominee director on the Board of Respondent No. 1 and/or other lenders/equity shareholders who are public financial institutions;" 3. Thus, Prayers A, C, D, J and K related to declaration while Prayer B claimed restoration of funds. The Prayer F related to claim of Petitioner for restoration of the statutory records. Rest of the prayers were mainly for seeking protection from various authorities. Case of Respondent No. 1 4. In NCLT, Respondent No. 1 Co....
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....the matter. The other Respondents Nos. 3, 4, 6 to 9 disputed the claims made by the Petitioner. According to these Respondents, the shareholding claimed by the Petitioner and its supporters is based on illegal invocation of the pledged shares. They claimed that the shareholding of the Petitioner is zero. The Petitioner supported by other Public Sector Companies has filed this petition to scuttle the investigation taken up by ROC in the wrongdoings of the Petitioner with respect to the affairs of the Respondent Company. These Respondents claimed that the alleged acts of 'oppression and management' are in relation to the period when the Petitioner itself was in actual control of the affairs of the Respondent Company. The Petition has been filed belatedly and was not bonafide. These Respondents claimed that they had made complaints regarding illegal and wrongful manners in which the Petitioner was conducting the affairs of Respondent Company. According to them, in 2005, it is the Petitioner who took over control of the Respondent Company by appointing managing Committee of its own. They got the Articles of Association of the Respondent Company altered which amendments gave additional ....
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....Power to Ministry of Finance on 10th August, 2006 confirming transfer of absolute management control to the Petitioner. The Petitioner under extra constitutional authority had appointed "Maheshwar Committee" which acted as a Shadow Board of the Respondent Company. They had conflict of interests with Respondent Company but had zero accountability. They were responsible for diversion of Project funds from TRA Bank account which was under control of lenders. The ROC has already examined role played by this Shadow Board with regard to Respondent Company. 7. Respondent No. 4 further claimed before the NCLT that he was not involved with the affairs of the Respondent Company since 2005. Respondent No. 7 claimed that the Corporate Guarantee of Respondent No.7 as claimed by the Petitioner was not legal or subsisting. The High Court of Bombay had in Company Petition No. 511 of 2014, on 1st July, 2016 ordered winding-up of the Respondent Company but Respondent No.7 filed appeal against the said order and there is stay. Respondent No. 7 had on 5th April, 2007 asked the Petitioner to release Corporate Guarantee given by him to the lenders. Case of Respondent No. 10 8. It appears that R....
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....e Board Meeting also. 9. Respondent No. 10 claimed that there was extraordinary General Body Meeting dated 17th June, 2010 which resolved issue of shares at par in the event of failure to repay subordinate loan keeping in mind Clause 1.2 of Subordinate Loan Agreement. But on the very next day, on 18th June, 2010, the Petitioner issued letter amending the terms of Subordinate Loan Agreement to the detriment of the Respondent Company and to advantage of the Petitioner. By such amendment, the Petitioner ensured that the Petitioner would have right to debit the outstanding dues against the subordinate loan. 10. Respondent No. 10 claimed that he had not been paid salary for 30 months and by letter dated 26th May, 2015, he had pointed out deficiencies in functioning of the Company. Seeing the approach of the Petitioner, he tendered resignation on 26th August, 2015. The Board on 29th September, 2015 asked him to continue till alternative arrangement is made. Later on, on 17th December, 2015, the Board accepted his resignation with effect from 31st December, 2015 without any reference to settlement of dues and without naming any official to whom the charge of the functions and record....
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....(18) Whether petitioner is entitled for any reliefs in this petition?" 12. NCLT has then exhaustively discussed the rival cases put up by both sides and with reference to the above points recorded findings at Page 108 of the impugned judgment and order in paragraph 154 as under : Findings by NCLT "154. In view of the above discussion, the following are the findings arrived by this Tribunal (1) There is no valid invocation of pledge of shares and transfer of shares do not take place as per law. (2) Petitioner and his supporters are not entitled to agitate about the alleged acts of oppression and mismanagement that took place prior to 01-06-2016. (3) Effective control of management of the first respondent company was with PFC and other lenders. (4) This petition is barred by limitation and petitioner is disentitled for reliefs on grounds of delay and latches. (5) Failure to repay debts etc. and failure to infuse equity do not amount to acts of oppression and mismanagement. (6) Allegation of siphoning of funds is vague and there is no material to substantiate the same. (7) Parties are entitled for copies of ....
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....ty in the Project would have management control under Scenario-II and thereby consented to the dilution of their shareholding. By letter dated 12th January, 2017 (Pages 876 - 882 of Volume -V of the appeal), the Appellant-Petitioner had confirmed acquisition of 51% shares of Respondent No. 1 by the lenders including the Appellant-Petitioner and stated that the Appellant agreed to advance additional loan subject to the condition that the lenders/government companies will hold majority equity which was accepted and ratified by Respondent No.1 in Board Meeting held on 2nd February, 2017. Respondent No. 3 was present in that meeting and voted in favour of the Resolution which approved availing of additional loan, along with stipulated conditions. According to the learned counsel, Respondent No. 3 had thus acquiesced to the Appellant acquiring shares of Respondent Company and thus now cannot raise objections. (c) Learned NCLT committed error because there was no requirement of endorsement on the "Memo of Transfer" in the Share Certificate No. 47 as it was "new share certificate" issued to the Appellant-Petitioner on allotment of shares, pursuant to the conversion of subordinate....
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....ing. Nominee of the Appellant on the Board of Respondent Company cannot be held to be 'Interested Director'. The decision to convert subordinate loan into equity and transfer of shares was taken by the Board of Directors, including nominee Directors, collectively in the interest of Respondent Company as per Scenario-II and Respondent No. 3 had not raised any objection. (h) Learned counsel found fault with the judgement & order of NCLT where it found that the past and concluded acts could not be challenged in a petition under Section 241 of the Act as the new amended Section uses the words 'have been' in addition to 'are being carried on' within the scope of oppression and mismanagement. (i) The Petitioner has submitted that there was deed of pledge dated 30th November, 2006 executed in favour of the Appellant and Respondent No.8 had pledged shares held by it in the Respondent Company for the benefit of lenders. Respondent No. 8 had deposited the original share certificates with the Appellant along with the share transfer forms duly filled by Respondent No. 8. It was transaction in the nature of mortgage of shares. Power of Attorney was executed by Respondent No. 8....
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....d rights only on 1st June, 2016 and this was overlooked. 16. At the time of this appeal, the Appellant-Petitioner without seeking prior leave to file documents which had not been filed before the NCLT, filed the documents. The Respondents objected claiming that the NCLT had mentioned regarding certain documents not being filed which were material documents relating to the issues which had been raised before the NCLT and thus the documents could not be simply and quietly filed with this appeal. Learned counsel for the Appellant however claimed that the prayer for leave of this Tribunal is not necessary as there was no provision in National Company Law Appellate Tribunal Rules, 2016 (hereinafter referred to as 'NCLAT Rules') which bars filing of new documents. It is claimed that Respondents had in sur-rejoinder in NCLT filed documents and further opportunity was not given to the Petitioner in the NCLT and so they could directly file documents here. Thus, according to the learned counsel for the Appellant-Petitioner, the impugned judgement & order cannot be upheld and it should be held that the Respondents mismanaged the Company and also the Petitioner was entitled to reliefs as so....
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.... Petitioner claimed reliefs against various Government Authorities seeking that they should not take action against the Appellant-Petitioner. Those Authorities were not made party and thus the Petition suffered from non-joinder of the necessary parties. The reliefs claimed were not maintainable. The NCLT correctly held that failure to bring in equity cannot be equated to fraud or 'oppression and mismanagement'. These Respondents referred to various documents, which show that the Appellant was in actual control since 2005. The management vested with the Petitioner and there was no control of Respondent No. 3. The Respondent No. 1 Company was managed by the Petitioner through directions of the Maheshwar Committee consisting of senior officials of the Petitioner. The Directors appointed by the lenders were acting in the interest of the lenders and not the Company. Arguments of Respondent No. 3 18. For Respondent No. 3 also similar arguments have been made. According to this Respondent, the contention of the Appellant-Petitioner that the NCLT could not have gone into the question as to how the Appellant became shareholder has no substance because when the Respondents disputed the....
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....iting 30 days' period mentioned in the notice and was bad in law. It is further submitted that the Power of Attorney attached with the pledge deed only contemplated transfer of shares pledged for the purpose of future sale and the Petitioner was placing wrong reliance on the same to justify the act of invoking the pledge. The requisite transfer of shares forms - 4 and 5 were also not submitted by the Appellant. It is argued that the conversion of the subordinate loan was illegal and a result of fraud. Subsequent to the grant of loan, Rs. 76 Crores were diverted to the Petitioner and Rs. 111 Crores were diverted to the other lenders which was completely against the interest of the Respondent Company. The High interest loan was used to pay-off, prior low interest loan. Thus, the Respondent wants the appeal to be dismissed. Arguments of Respondent No. 9 19. Respondent No. 9 also argued on the same lines as other Respondents. This Respondent has also referred to documents showing that the actual control was shifted from promoters to lenders since 2005. Counsel referred to amendments carried out in the Articles of Association which show as to how the control was diverted to the le....
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....an was appointed Chairman. It is mentioned in the resolution that "Mr. Narsimhan's name has been suggested for appointment as the Chairman by PFC" (i.e. Petitioner). B. With the Reply filed by the Respondents Nos. 3, 6, 8 and 9, they have annexed a copy of letter dated 2nd March, 2005 from the Petitioner sent to the Director of the Respondent. It is with reference to subject of -"The Revalidation of sanction ....... for achieving financial closure....". With reference to the subject, the Petitioner informed the Respondent Company that it was agreeable to revalidate the earlier sanction of Respondents' term loan and guarantee for Optionally Fully Convertible Debentures ('OFCD') to achieve financial closure under terms and conditions already conveyed and subject to following additional terms and conditions. The Petitioner then proceeded to lay down terms and conditions of which Terms 10, 11 and 20 read as under :- "10. PFC, in consultation with other lenders, will approve appointment of Chairman, Managing Director and Director (Finance) on the Board of SMHPCL." "11. Lender's nominee Directors shall be allowed to exercise full management control for the smoo....
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.... of Management Team Chairman explained that to comply with the sanction letter of PFC, it is necessary for the Board to delegate Operational Decision making and implementation powers related to construction of the Project to a Committee of the Board called 'Management Team' after discussions the following Resolution was passed : "RESOLVED THAT pursuant to clause 10, 11 of the Revalidation of sanction letter No. 03:02- SMHPCL:05 dated 02-03-2005 received from PFC a committee of the Board of Directors styled "Management Team" comprising of the Chairman, Vice Chairman, Managing Director, Director Finance, Nominated Director of PFC be and is hereby authorized to be formed with immediate effect". "FURTHER RESOLVED THAT the Management Team be vested with all powers needed for managing the day to day affairs of the Company other than those that are specifically required to be discharged by the Board of Directors or Shareholders as per the provisions of Memorandum & Articles of Association and requirements of Companies Act, 1956". Thus the Board lead by Chairperson installed by it, let a "Management Team" be made as per dictates of Petitioner for mana....
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....ctor of the Respondent Company, which was written with reference to disbursement to restart the work on the Project. It is mentioned :- "The proposal has been considered and keeping in view the need to restart the Project work immediately, Power Finance Corporation is in-principle agreeable to disburse Rs. 30 crore (under the existing loan agreement) for restart of the Project work in the following manner : a. Pending approval of construction budget, Rs. 10 crore disbursement on immediate basis. For the release of this initial disbursement, the Company shall, to the satisfaction of PFC * confirm that the working office at Indore has started functioning and also agree that MD and Dir (F) would now start functioning from Indore. * execute necessary documents with PFC * amend the Articles of Association by adopting suitable resolutions in the SMHPCL Board and EGM, to empower the Management Team of the lenders to exercise effective management control till the entire debt is serviced and repaid. b. Before any further disbursement by PFC, the Company shall, to the satisfaction of the major lenders: * submit the Construction B....
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....al/consent of majority of the lenders and PFC. *109. Subject to Article 105(c), the casual vacancies among the directors may be filled up by the Board as per section 262 of the Act. Provided further that such casual vacancies can be filled up only with the consent of PFC and majority of lenders." It is apparent that the Petitioner ensured that the compliance of the provisions of the Companies Act, 1956 (old Act) would be subject to what Petitioner will 'consent'. Petitioner thus confirmed its position in the Respondent No. 1 Company. H. The Petitioner wrote letter dated 24th April, 2006 to SBI Capital Markets Limited (Reply - Page 162) mentioning : "PFC on behalf of the Lenders took the initiative in mid 2004 to revive the project with a new management set in place by the Lenders. This includes the induction of entirely new management team, comprising Chairman, MD and D(F) identified by FIs. The Promoter was also asked to amend the Articles of the Company to facilitate effective management control by the FIs. With the changes carried out in November, 2005, the Board has been fully re-structured as follows :- * Chairman, MD and D(F) nominated b....
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....when the Chairman is not there, the Directors present would choose "one of Directors nominated by lenders" to be the Chairman of the meeting. Thus Respondent No. 3, Vice-Chairman could not be Chairman even if the regular Chairman was unable to attend the Board Meeting. 22. The above are some of the documents which are on record. In fact, there appear to be much more and other documents also which show that clear, effective and actual control of Respondent Company has been taken over by representatives of the Petitioner and other lenders since 2005. Although the learned counsel for the Appellant-Petitioner is arguing that earlier Promoter Director-Respondent No. 3 was part of the Board, looking to the above documents, there is substance in the submissions of the learned counsel for the Respondents that presence of Respondent No. 3 was only titular and the Company was actually managed by the Petitioner and other lenders. With so many representatives of the Petitioner and lenders on the Board and Chairman itself of the choice of Petitioner, opposition of Respondent No. 3 on the Board of Directors was clearly of no consequence. It is undisputed that the Respondents who had earlier t....
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....etition or rejoinder had not chosen to specify as to the manner in which it had acquired the shareholding. The Petitioner had not even filed the share certificates of the Share Transfer Endorsement Forms along with petition. The copies of the share certificates with Transfer Endorsement only were filed along with the rejoinder which was filed on 17th April, 2017, which was four months after filing of the petition. It noted that the sheet attached to the share certificates styled as "Memorandum of Transfer of Shares" mentioned overleaf was blank without any endorsement. In the NCLT, the Pledge Deed dated 30th November, 2006 had not been filed (The same has now been filed in this appeal without prior leave in Volume-IV at Page 575). NCLT also found that the Petitioner had claimed in the petition that notice of invocation of pledge was issued on 19th May, 2016 but even this had not been filed in NCLT (But now it has been filed in the appeal without leave with Volume -V at Page 848). NCLT discussed that the Petitioner had claimed in the petition that with the notice invoking pledge reasonable notice of 30 days had been given before invoking the Share Pledge Deed. NCLT, however, found t....
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....ry to point out the fact and give reasons why they were not filed earlier and seek leave of the Appellate Tribunal. Under Section 424 of the New Act, the procedure laid down in the Code of Civil Procedure, 1908 is not applicable and the Tribunal is guided by principles of natural justice. Subject to other provisions of the Act, or of the Insolvency and Bankruptcy Code, 2016 and of any Rules made thereunder, this Tribunal has power to regulate its own procedure. This Tribunal has power to regulate its own procedure, as such, we find that in the Company Appeals (AT) to come up before us, the parties cannot be permitted to raise additional grounds which were not raised in the Tribunal below or file additional evidence/documents in appeal, which were not part of the record of the Tribunal below, unless an I.A. is filed for leave giving reasons as to why the new grounds were not raised earlier and/or why the said documents could not be filed when the matter was in the Tribunal below. We regulate the procedure of Company Appeals under the Companies Acts, that are to come up before us directing that parties shall not be entitled to raise additional grounds which were not raised in t....
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....ge Deed. Therefore, we, under the instructions of PFC, for and on behalf of such lenders, do hereby call upon and put the Borrower and the Pledgor on notice to transfer the Pledged Shares to the lenders mentioned in Annexure A in terms of the Share Pledge Deed read with Section 108 of the Companies Act 1956 and/Section 56 of the Companies Act, 2013 along with the Rule 11 of the Share Capital and Debentures Rules, 2014 within a period of 30 days of the receipt of this notice in the ratios provided in the Annexure B. For the purpose of adjustment of consideration payable towards transfer of Pledged Shares, a fair market value of the pledged share was determined in accordance with prevailing market practices and fair value of equity shares of the Company was determined as Nil. Notwithstanding the fair market value determined, each lender is willing to pay a token amount of Re.1 towards total consideration for shares to be transferred to each one of them. Photocopies of the duly signed Share Transfer Forms are annexed herewith. You are requested to call for the Board meeting for giving effect to this notice and depute an authorised officer for taking necessary steps to split the share ....
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....p; xxx The Board noted that the share transfer forms had been executed by the pledger under the applicable provisions of Companies Act, 1956 and the rules made thereunder. The PFC nominee produced these original share transfer forms, original share certificates and the original communications of the pledger submitting the share transfer forms and share certificates in original to the pledgee. The Board further noted that with the Companies Act, 2013 having been notified the share transfer forms has undergone change, however provisions of section 56 of Companies Act, 2013 empowers the Board to approve the share transfers in cases where the instrument of transfer has been lost or instrument of transfer has not been delivered within the prescribed period." 30. Thus it was noticed that the share transfer forms had undergone change and Section 56 of the New Act was a matter of consideration. It was not a case of loss or that instrument of transfer had not been delivered within the prescribed period. Still, the Board of Directo....
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.... enforce the Pledge Deed as per desire of Petitioner. We have noted the argument of the learned counsel for the Appellant-Petitioner that only a director having more than two percent interest in some other body corporate could be treated as interested director while dealing with the present Company's affairs with other body corporate. Invoking jurisdiction of Section 241, what is needed to be shown is not only the legality of action but also the fairness of its application. In present set of facts when the Board of Directors consisting of Nominees of Lenders was taking decision in favour of lenders while invoking pledge of shares, a higher level of compliance without undue haste was warranted. The sole Director of Promoters was not there and his views conveyed were not recorded nor considered. Nothing more is required to hold that the Board of Directors (voting in favour) were all representing interests of the Lenders and were protecting interest of the Petitioner and other lenders. 33. Apart from the above, Section 176 of the Indian Contract Act is matter of consideration as it lays down procedure required to be followed by the Pawnee where Pawnor makes default. This Section is....
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....0,000 equity shares and start process for the same. By subsequent notice dated 27th May, 2016 (Volume -V at Page 862), the Petitioner mentioned that the notice was in continuation of the earlier notice of conversion and called upon Respondent No. 1 to issue 6,61,00,000 New equity shares of Rs. 10/- each against partial conversion of the total outstanding loan of Rs. 375 Crores. 36. Both these notices were discussed in the meeting by the Board of Directors of Respondent No. 1 on 1st June, 2016 (Volume -V at Page 865) and they were taken up as Item No. 134.10. The Board of Directors observed : "ITEM No. 134.10 : TO DELIBERATE ON NOTICE FOR CONVERSION OF LOAN INTO EQUITY The Board noted that the Company had received the letters dated 18th December 2015 and 27th May, 2016 for the Conversion of Power Finance Corporation's sub debt to the extent of Rs. 66.10 Crore into equity shares in terms of relevant provisions of the Sub-Ordinate Loan Agreement where under PFC has the right to convert its Sub-debt into equity shares in part or in full of the outstanding dues under the sub-ordinate loan into fully paid equity shares at par. By exercising its rights, PFC has called....
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....an. It shows the background of the transactions. Now if the resolution of the Board of Directors in item No.134.10 (supra) is seen, the Board of Directors appear to have relied on the EGM dated 17th June, 2010 which was annexed to the agenda to say that EGM had approved the conversion. (Copy of the EGM Resolution is at Annexure A-20 page - 907). Sub-Section 3 of Section 62 referred above in the proviso requires that the "terms of issue" of such loan containing such an option should have been approved "before" raising of loan by a special resolution passed by the Company in General Meeting. Benefit of Sub-Section 3 of Section 62 of the new Act (which was applicable at the time of conversion) cannot be taken for enforcing an Agreement of 2006 for which EGM Resolution was taken in 2010. 37. Apart from above, even this Resolution apparently suffers from what we have observed earlier that the Board of Directors which was constituted had all the participants representing the lenders passed the Resolution in favour of the lenders. To seek equity relief from N.C.L.T. fairness in action would also be required to be shown. 38. Looking to over-all facts of this matter for reasons mentio....
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....n the past and which came to an end in the past. Apart from this, in view of our earlier finding that since 2005 itself the petitioner has had Board of Directors constituted of its own selected Chairpersons and also its own nominee and nominees of other lenders, except one promoter, as well as the management of the Company itself has had been with Petitioner and other lenders, such Petitioner can clearly not be heard putting blames on others. Thus, the petition would require to be dismissed even on this count. AMENDED ARTICLES OF ASSOCIATION RESTRICTED RIGHTS OF PROMOTERS 42. We have already discussed some of the amendments which were brought about at the behest of the Petitioner and other lenders in the Articles of Association. We have kept in view Section 9 of the Companies Act, 1956 (old Act) and Section 6 of the New Act which give overriding effect to the provisions of these Acts (save as expressly provided in the Acts), notwithstanding "anything to the contrary" in Articles of Association of a company, or agreement executed by the Company. We have gone through the Articles of Association copy of which is filed by the Appellant (Volume VIII at Page 1270. Another copy is i....
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.... of the meeting / Chairman and majority of Directors appointed by the lenders. Although quoram was specified as of six directors, it was added that the meeting shall require attendance of Chairman and three nominee directors of the lenders. 43. Article 105(d) [Para 21 G - supra] which we have reproduced earlier appears to be in conflict with Section 255 of the Old Companies Act, 1956, which reads as under : "255. Appointment of directors and proportion of those who are to retire by rotation.- (1) Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two- thirds of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall- (a) be persons whose period of office is liable to determination by retirement of directors by rotation; and (b) save as otherwise expressly provided in this Act, be appointed by the company in general meeting. (2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and sub....
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....s as under : "14. PFC has suggested the putting of an additional condition that equity stake of the present equity holders should be brought down to less than 26%, so that functioning of the project could proceed without interference from them. The promoter has vehemently objected to the suggestion and stated that at least 26% would be reserved for the promoter, while the investor M/s. IIP would separately hold a percentage in proportion to its present shareholding. It is apprehended that the project may get stalled on this account, if there is lack of agreement on this issue between the promoters & other equity holders on one side and PFC, other lenders & NHPC on the other side. In view of the above, it was generally agreed that, while the present equity holders should become minority stakeholders, there should be no insistence to keep their equity holding below 26%." 46. Thus, the Government of Madhya Pradesh, who is really the owner of the land and allotted the Project, which was being put up, insisted that the equity of the shareholders should not be reduced below 26%. The Appellant-Petitioner, however, has gone ahead and equity stake of Respondent No. 8 in the Resp....
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....he Respondent No. 1 had taken up. No doubt, a person lending money may put conditions to protect its interest but there has to be a limit and it is unthinkable that the lenders took over the Company itself and committed acts attracting actions under the Companies Act and other Acts from which now protection was sought. The NCLT rightly held that the Petitioner had not approached the NCLT with bonafide intention. WHERE ARE THE STATUTORY RECORDS? 49. One of the disputes being raised by the present parties is with reference to statutory records required to be maintained under the Companies Act. The Petitioner and other lenders claimed that the records have not been handed over by Respondent No. 10 and the Respondents are claiming that the records are available at the same place in Mumbai, where they were maintained since before. We have referred to the case of Respondent No. 10 in Para 10 supra. Petitioner has not shown that while accepting resignation of Respondent No. 10, directions for handing over detail charge were given to him. Without this, blame is sought to be passed on. Though, both the parties are putting blame on each other, it can be seen that they have been produci....
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....ge of guard having proper instructions to ensure that while moving forward the project there is no breach of the Companies Act. 51. The Project appears to have made some progress but remains incomplete. The completion of the Project is necessary in the national interest. It will benefit the farmers in the State of Madhya Pradesh. The Project has been delayed endlessly. The voluminous records put up before us show facts are intertwined with various complications. The learned NCLT has not been able to find workable solution by way of orders/directions except to the extent of all stakeholders. The learned NCLT expressed opinion that all the stakeholders should evolve a scheme which should include promoters so as to help in speedy completion of Project. With such expectations, the NCLT dismissed the petition. We have also deliberated between us as to what is the way-out in the present scenario. The Registrar of Companies, it is stated, has already held inquiry and submitted report under Section 206 of the New Act to the Central Government. We hope and expect Central Government to take early decision and action. No doubt, the Respondents have filed a copy of the Report with Volume - ....