TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 926
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and the Appellant claims that the Respondent No.1 Company (hereafter referred as 'Company') was incorporated on 7th March, 2005. The Appellant and Respondent Nos.2 (Prakash Kumar) and 4 (Manoj Kumar Jha) were the founding members, promoters and first Directors having equal shareholding in the Respondent No.1 Company. The authorized share capital of the Company was Rs. 1 crore (10,00,000 equity shares of Rs. 10/- each) and paid up capital was Rs. 3 Lakhs (30,000 equity shares of Rs. 10/- each). The authorized capital at the time of filing of the Company Petition (i.e. 13.05.2014) was Rs. 2 Crores and paid up capital was Rs. 1.4 Crores. 2.1 At the time of filing of the Company Petition, the Appellant and Respondent No.2 held 333400 equity shares each and Respondent No.4 held 333200 equity shares. "Prowess International Engineers and Consultants", a partnership firm held rest of the 4,00,000 equity shares in which the Appellant, Respondent No.2 and Respondent No.4 are equal partners. According to the Appellant, he and Respondent No.2 were employees of M/s. Usha Martin Ltd. and engaged in mechanical maintenance and allied functions. They decided to float their own venture and were in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this, the Appellant was forced to file the Company Petition on 06.05.2014 and on 13.05.2014, the Company Law Board was convinced of prima facie case and passed Orders as under:- "3. After considering the above submissions of the Ld. Counsel of the petitioner, I am of the considered opinion that a prima facie case has been made out against the interest of the petitioner and consequently, ad interim order is hereby passed by way of maintenance of status quo regarding shareholding pattern of the company and composition of the board of directors of the company. This ad interim order shall be effective until next date of hearing." 2.3 Thus, the Appellant claims that the Respondents were directed to maintain status quo regarding shareholding as well as the composition of the Board of Directors. It is not claimed by either side that during pendency of Company Petition, there was any change in these Orders. 2.4 The Appellant claims that in spite of Company Petition being pending, Respondents continued with their oppressive acts and passed Board Resolution dated 07.07.2014 withdrawing duties, functions and authorities, which had been earlier delegated to the Appellant as Director and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to have acted in an oppressive manner and on the basis of the Valuation Report, the Appellant was entitled to exit. According to him, when the relations between the two groups are such that they cannot function together, NCLT could not have simply rejected the Company Petition without giving a way forward. 3. Against this, the learned counsel for the Respondents referred to the prayers in Company Petition to claim that there was no prayer making grievance regarding transfer of shares from Respondent No.4 to Respondent No.3. It is claimed that the Appellant had set up another Company by the name, "Enteco" and had diverted corporate opportunity of Respondent Company and thus his conduct was not proper as Director and thus Respondents 2 and 3 were justified in the steps taken by them. He referred to the Reply filed in CLB (Annexure A-4 - Page 277, para - 37) to submit that the Respondents had pointed out to CLB that the Appellant - Petitioner had visited the clients of the Company to divert business of the Company to M/s. Enteco Engineers Pvt. Ltd. The Counsel claimed that Respondent No.2 had objected to the Appellant visiting Rourkela at place of one of the Company's client where M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to valuation but subsequently, created problems depriving the Appellant of participation in the Company affairs and in spite of his investments and efforts in the Company, he is neither getting salary nor dividends and has been simply left out. It is claimed that the Company - Enteco was established by the Appellant on 4th December, 2013 but he had resigned from it on 15th March, 2014 while Respondents established another Company - ELINA on 10th December, 2013 and are still continuing with that Company but keep grumbling against him. 5. We have gone through the record and the Impugned Order which has been passed by NCLT and we have heard counsel for both sides. We are first taking up the disputes raised by the Appellant with regard to Respondents not paying him the remuneration of Director since August, 2014. In this regard, we have already reproduced the operative part of CLB Order dated 13th May, 2014 which had directed maintaining of status quo regarding shareholding pattern of the Company and composition of Board of Directors of the Company. It is not the case of any of these parties that this interim Order did not continue to operate during the pendency of the Company Petitio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l be filed within one week hereof. Since the Ld. Counsel of respondents has already mentioned that the outstanding dues of all the existing directors shall be paid on availability of funds, no further action lies as of now. List the case of hearing of all applications along with CP on 17th November, 2014 at 10.30 A.M. Interim order dated 13.05.2014 passed by this Bench shall continue until next date of hearing." 5.1 Later on, when the matter came up on 22nd December, 2014, the CLB Order reads as under:- "In CA No.509/2014, the Respondents Advocate submitted that rejoinder has been filed and copy thereof served to the Petitioner Advocate. With this, pleadings are complete. 2. In CA No.780/2014 and CA No.781/2014 the Petitioner Advocate submitted that rejoinder has been filed and copy thereof served to the Respondents Advocate. With this, pleadings are complete in both the CAs. 3. The Respondents Advocate submitted that he has filed an affidavit on 25-11-2014 mentioning therein that the Respondent Company has not paid any remuneration since August 2014 due to financial crunch of the Respondent Company. The said affidavit does not disclose the status of payment of Directors....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se factors show that the Respondents 2 and 3 have acted in an oppressive manner. 5.4 The Counsel for Appellant has rightly pointed out the Directors Report (Annexure A-8 - Page 450) which is submitted with the 10th Annual Report of the Company together with audited statements of accounts for the year ending 31st March, 2015 where it is reflected that in March, 2014, the profit of the company was Rs. 117.96 Lakhs and the Report claimed that by the end of 31st March, 2015 it had become Rs. 12.43 Lakhs. The counsel for Appellant pointed out from the extract of Annual Report Form MGT - 9 (Paper Book Page - 461) that the Respondent No.2 had taken salary of Rs. 35,66,400/- and Respondent No.3 had picked up salary of Rs. 32,80,635/- and yet another amount was shown as spent in the column of "Other Non-Executive Directors" of Rs. 14,96,000/-. The Counsel pointed out that to the Appellant "0" had been paid while the Respondents took away these amounts and Directors Report showed that no dividend had been declared. According to Advocate for Appellant, such diversion of money to just two of them (Respondents 2 and 3) should be treated as siphoning. It is apparent that no amount was being pai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ese pleadings in para - (iv) and passed orders in para - 3 (which we have reproduced in this Judgement at para - 2.2), and directed maintaining of status quo regarding shareholding pattern. In the Reply filed by Respondents (Annexure - A-4) which was sworn in by the Respondent No.3 for herself and Respondent No.2, there was no specific denial of these pleadings with regard to the pattern of shareholding. In fact, the Reply started giving para-wise Replies only from para - 6 of the Petition in the Reply para - 6. The Appeal claims [para - 7(m)] that during pendency of the Petition, Respondents filed Annual Return dated 29.09.2014 on 25.10.2014 showing transfer of shares from Respondent No.4 in favour of Respondent No.3 who was non-member/stranger/outsider. Appellant claims that these were acts of oppression. According to him, Respondents 2 and 3 systematically tried to side line the Appellant and in order to take over complete management of the Company, he was systematically excluded from participation in the activities of the Company. The learned counsel for the Appellant has pointed out the Share Transfer Form, which is relied on by the Respondents and copy of which is at Page - 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Appellant - original Petitioner states that the Form was forged and the transfer was recorded in a back date of 25th March, 2014 to tide over the CLB Order dated 13th May, 2014. We find that the submission of the learned Counsel for the Appellant cannot be said to be without basis. If Section 108(1)(a) is kept in view, the Registrar of Companies will not stamp and date the Share Transfer Form if it has already been executed. Looking to the dates as mentioned above, there is substance in the argument that after getting the Share Transfer Form stamped from the Registrar of Companies, it was got filled up in back date. 8. In the Reply filed in Appeal (Diary No.2230), Respondent No.2 in para - 18 (Page - 15) in vague manner stated that Respondent No.3 was made signatory to the bank account of the Company in view of "her equal right with the appellant and the R2 as one-third owner of the R1 Company and also in view of the business needs". It is stated that it is denied that 333200 shares were transferred to Respondent No.3 from Respondent No.4 without following the due process of law. Thus although transfer is admitted, how process of law was followed in not shown. The learned Coun....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as witnessed from the Share Transfer Form which is filed at Page - 426 of this Appeal. 10. Coming to the case of oppression and mismanagement as was put up by the Appellant in CLB/NCLT, the Petitioner mentioned in the Petition as to how the Company came to be set up and according to him since beginning, he participated in its functioning leading to its growth and profit. He has also pleaded that he arranged for primary finances for such commencement of the Company through his connections with various banks and even mortgaging assets belonging to himself and/or his family members. In response, the Respondents pleaded in their Reply in NCLT (para - 9) that for obtaining bank finance, the assets in the name of the family members of both the Respondent No.2 and the Petitioner were mortgaged equally. Thus, admittedly the Petitioner has contributed to the upcoming of the Company. 10.1 The Company Petition then shows as to how the Appellant - Petitioner and Respondents 2 and 3 decided in 2013 that they would meet daily to discuss the affairs of the Company. According to him, it was decided that every business proposal would be brought to the notice of all Directors and with consent of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....had already gone to Muscat and Respondent No.2 replied on 26.12.2013 (Appeal Page - 208) telling the Appellant that it was not his functional area as Director and why he had written such a "silly" e-mail. Respondent No.2 also told the Appellant in this e-mail that as CEO, he does not need to explain this which is beyond functional area of the Appellant and alleged that the Appellant was maintaining a serious act of indiscipline by not attending the daily meetings. The Company Petition itself mentioned (para - 6.35) that Respondent No.2 sent e-mail dated 08.04.2014 alleging that the Appellant - Petitioner visited clients of Respondent No.1 with a view to divert business to a company incorporated by the Appellant namely, "M/s. Enteco Engineers Pvt. Ltd." The Petitioner also filed copy of that e-mail in the petition itself (Appeal Page - 250) where Respondent No.2 expressed displeasure to Appellant visiting AML Works, Rourkela on 4 - 5th April, 2014 and claimed that Ajay Shukla - Co-Director in Enteco was also present. Although the Respondent made allegations, the Appellant mentioned in the Company Petition itself in para - 6.36 that he had already resigned from such Enteco Engineers ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....about by way of majority, has been presumed to be in the wrong. 12. The very fact which is admittedly on record and which shows that when the relations strained, the parties did sit down together and on 2nd January, 2014 (Appeal Page - 213). Board Resolution was passed to appoint Valuer of the Company including of tangible and intangible assets and liability and Vani Consultants Private Limited was assigned the job, shows admitted position between the parties that they did accept between themselves that they could no longer continue together and need to split. 13. The Valuation Report is of July, 2014. According to the Appellant in spite of receiving the Valuation Report, the Respondents did not act upon the same and it was not placed before the Board. Counsel for Appellant submitted that the Appellant accepted this Report but the Respondents are avoiding. Against this, the learned Counsel for Respondents submitted that they were also accepting the Report but when they calculated their turnover which was going down allegedly due to Appellant spoiling the name, they suffered loss and thus did not act on the Report. Admittedly, the Respondents divested the Appellant of all executiv....