TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 732
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.... applicant "Medici holdings Limited & Ors.". By the impugned order NCLT has found that the original applicant has made out a case for waiver of clause (a) and (b) of section 244 to file petition under section 241 of the Companies Act, 2013 (new Act in short). Aggrieved by the impugned order original respondents 1 to 5 have filed CA 375/ 2017, original respondent nos. 6 to 8 have filed CA 396/2017 and original respondent no. 9 has filed CA 395/2017. 2. We have heard the appeals together. The impugned order is also same and thus we are disposing these appeals by this common judgment and order. We will be referring to documents and page numbers from the record of CA no. 375/2017. 3. The impugned order shows that the learned NCLT considered the CA (copy of which is at page 270 in the appeal). The learned NCLT painstakingly summarized the averments made in the application for waiver, which we need not reproduce. NCLT considered the arguments and counter arguments which were made and referred to rulings cited and in Para 13 of the impugned order considered the question whether the original applicant has made out case to seek waiver of clause (a) and (b) of section 244 of the new Act. D....
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....lders but the offer made to the original applicant came to be withdrawn. Similar process was adopted on 10.01.2011 and even that was given up. According to the original applicant on 28.10.2011 8,50,000 shares of face value of Rs. 1 were issued to original respondent no. 9 as Employee Stock Option and on the very day in the same meeting the board of directors passed another resolution approving buy-back of the very same shares from respondent no. 9 by the respondent company at a price of Rs. 66 per share and respondent no.9 was enriched by a sum of Rs. 1,08,37,500 as the differential share price. 5. The application for waiver has contents making averments as to how there was effort at demerger scheme and even that was abandoned when objected and as to how the only business of the respondent company which was of software has been sold off to original respondent no. 5, on slump sale basis. According to the original applicant on 15.11.2011 several shareholders were issued just 1 share each so as to ensure that the original applicant is not able to resort to application under section 399 of the companies Act, 1956 (old Act in brief) as then applicable. The applicant claimed in the NCLT....
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....imed that there was enough merit in its application and prima facie case of oppression and mismanagement had been made out. 7. It has been argued by the appellants that original applicant filed civil suit 887/2013 before Madras High Court which is pending and the averments in the suit are identical to the averments in the application for waiver. The only new ground now made was that accounts of financial year 2013-14 and 2014-15 had not been filed. According to the appellants the suit has not been withdrawn and the remedy of derivative action civil suit and a claim of oppression are inconsistent and original applicant must be precluded from seeking relief before NCLT. 8. The appellants have further submitted that the Central Government had passed order dated 06.05.2015 permitting original applicant to file petition under section 399(4) which was challenged in writ petition no. 17681 of 2015. The High Court granted interim stay and the writ petition is pending. Thereafter, Ministry of Corporate Affairs passed another order dated 03.07.2015 purportedly correcting a defect which was in the earlier order dated 06.05.2015 and granted permission to the original applicant to file origin....
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....ter the arguments were completed in the NCLT but still the same was brought to the notice of NCLT and it has considered the same. According to the counsel it is admitted fact that capital and original applicant/respondent no.1 is having 6.62 per cent of the paid up equity capital. According to the counsel the present appellants made various efforts to oppress the original applicant and even made efforts at demerger of the company and when the original applicant objected to such acts, they withdrew from those acts but by a subsequent act whole business of the company by an agreement dated 27.03.2013 has been handed over to the present appellant no. 5 on slump sale basis which was hugely undervalued and when the substratum of the Company which was the business itself has been transferred, it is an exceptional circumstance and case for grant of waiver. Referring to the judgment of NCLT, it has been argued by learned counsel for respondent no. 1 that NCLT took note of the shareholding position of original applicant and considered that it was a case of oppression and mismanagement and kept in view the judgment in the matter of Cyrus Investment and held exceptional circumstance was made ....
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.... 241. Explanation:- For the purposes of this sub-section, where any share or shares are held by two or more persons jointly, they shall be counted only as one member. (2) Where any members of a company are entitled to make an application under sub-section (1) any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them." 14.2 in the matter of Cyrus Investments, after referring to the provisions of section 241 to 243 it was observed:- "135. From plain reading of sub-section (1) of Section 244, the following facts emerges. In the case of a company having a share capital, the following member(s) have right to apply under section 241: (i) not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less; and (ii) any member or members holding not less than one-tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares. 136. Apart from two categories of members who have right to apply under Section 241, unde....
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....ompany Law Board under section 397 or 398. It was observed in Para 143 as under :- "143. Under proviso to sub-section (1) of Section 244 now the Tribunal is required to decide the question whether application merits 'waiver' of all or any of the requirements as specified in clauses (a) and (b) of sub-section (1) of Section 244 to enable such member(s) to file application under Section 241. Such order of 'waiver' being judicial in nature, cannot be passed by Tribunal, in a capricious or arbitrary manner and can be passed only by a speaking and reasoned order after notice to the (proposed) respondent(s). The basic principle of justice delivery system is that a court or a Tribunal while passing an order is not only required to give good reason based on record/evidence but also required to show that after being satisfied itself the Court/Tribunal has passed such order. To form an opinion as to whether the application merits waiver, the Tribunal is not only required to form its opinion objectively, but also required to satisfy itself on the basis of pleadings/evidence on record as to whether the proposed application under Section 241 merits consideration." 14.4 It ha....
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....y having less than 10% of the shareholding. 156. That means in the context of present case, except that the minority shareholders join together, i.e. either six in numbers or such numbers of members whose joint shareholding will come up to 10% of the issued share capital of the Company, which will be also not less than 3 to 4 members, none of the 49 shareholders can file an application under Section 241 alleging 'oppression and mismanagement'. It will remain only in the hands of major shareholders, namely Mr. Ratan Naval Tata or Mr. Narotam S. Sekhsaria, who only have right and their prerogative to file such application. 157. One or the other minority shareholder cannot be asked or directed to form a group of 10% of the member(s) that means six person(s) in the present case, as it will be dependent on the prerogative of the other member(s). 158. We are of the view that this is one of the exceptional and compelling circumstances, which merit the application for 'waiver' subject to the question whether (proposed) application under Section 241 relates to 'oppression and mismanagement'." The judgment then noted the interest of the appellants in the ov....
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....that Section 244 could not be satisfied. 16. Going through the application which was filed for waiver by the Respondent no.1 we find that the application pertains to 'oppression and mismanagement'. We keep in view the pleadings of alleged oppression and mismanagement. There is no dispute that the original applicant/ respondent no.1 is member of the company. It cannot be said that the application is frivolous. It is not a case that similar allegations of 'oppression and mismanagement' were earlier made and stood decided or concluded (please see Para 146 of the judgment in the matter of Cyrus Investments). It has already been held in Para 150 of the judgment in the matter of Cyrus Investments that Civil Court has no jurisdiction to entertain any suit or proceeding in respect of alleged acts of 'oppression and mismanagement' if it is preferred by any member of the company. When any member of the company complaints of 'oppression and mismanagement' in the company, in view of the Companies Act, the issue has to be decided by NCLT. Thus only because the Respondent no. 1 filed suit in the High Court would not be a Bar to present application as the question of oppression and mismanagement....