TaxTMI 
TaxTMI 
2019 (8) TMI 1000
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....iginal petitioners. The present appeal has not been filed by the Original Petitioner No.3 (who is arrayed as Respondent No.7 in appeal). BACKGROUND 2. The brief facts of the case are that the original petitioners filed a petition under Sections 397, 398, 399, 402, 403, 406, 235, 237 and 247 read with Section 111 of the Companies Act, 1956 against the acts of oppression, mis-management, fraud, manipulation and falsification of Statutory and other records by and in active connivance of the Respondents before the Company Law Board, Mumbai Bench, Mumbai. a) On 7.9.1991 an agreement was executed between 1st appellant, 5th Respondent, 7th Respondent and one Late Upendra Shandilya for incorporation and promotion of 1st respondent and the 1st respondent was incorporated on 20.11.1991. The main object of the company was to establish, run and promote educational institutions. It was decided and agreed in the aforesaid agreement that the four signatories will have equal shares in the company. b) 1st appellant contributed Rs. 2 lakhs during the period April, 1992 to November, 1997 and 2nd appellant contributed Rs. 4 lakhs during the period November, 1992 to May, 1996 to....
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.... as Additional Director of the Company on 1.6.1996 and 2nd Respondent was also appointed as Additional Director on 11.6.1996. j) Later on Original Petitioner No.1 received a communication that she has been removed from the directorship of the company in AGM on 25.9.1998. k) The original petitioners filed company petition in July, 2013 before the NCLT alleging forged minutes of Meetings dated 1.6.1996 and 11.6.1996; withholding and non-payment of director's remuneration; withholding and non-payment of interest on contribution to original petitioners; fraudulent and wrongful increase of authorised capital and issue of fresh shares; allotment of 3200 shares as per Annual Return dated 28.10.1992; Minutes of Meetings and Accounts have not been permitted to be inspected nor copy of Accounts and other details of the affairs of the Company furnished to the Original Petitioners; alteration in the manner of operation of Bank Account of the Company; False and void Meetings of the company; staging the removal of the Original Petitioner No.1 and 3 from directorship of the company ; affairs of company in wrong hands and prayed for the following relief: i) The of Board ....
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....s towards stopping the Petitioner No.1 from claiming her rights as shareholder, director and creditor of the Company. x) Declaration that petitioners have proprietary interest in all the properties (moveable and immovable purchased/created out of the funds of the Respondent No.1 company as envisaged in Clause 11(e) of the Agreement dated 7.9.1991. xi) Injunction directing that one of the persons belonging to Petitioners group be made a compulsory signatory with respect to all the bank account operations of the Company. xii) Injunction directing the Respondents to pay to the Petitioners No.1 and 3 the amount of the remuneration due to them in their capacity as directors of the Company with pro-rata increment as compared to other directors, together with interest @ 18% with effect from the period the same fall due till the date of payment. xiii) Declare that the issuance and allotment of the equity shares of the Respondent No.1 company after the period from 31.3.1996, to be null and void and thereby direct that the position of the shareholding as on 31.3.1996 be restored. xiv) Injunction restraining the Respondents from altering or changin....
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....tated in the notice and later on it was withdrawn with liberty to approach Company Law Board, if permissible. o) Respondents stated that a number of suits and complaints have been filed by the original petitioners either jointly or severally. Since all the pending suits are based on the same cause of action as prayed in the petition, the petition deserved to be struck down and dismissed with costs on the ground of res judicata. p) Respondents prayed that the original petitioners are not entitled to choose different legal forums on the same cause of action; original petitioners have not come to court with clean hands; Original petitioners are causing harm to the interest of the Respondent No.1 company and further abusing the process of the Court by indulging in judicial process through coercive correspondence with various authorities. The agreement which is between two groups of persons, which cannot be agitated in Company Law Board and prayed that the Company petition be dismissed. Issues Framed 3. After hearing the parties the NCLT framed the following issues: a) Whether the petition is hopelessly time barred and whether the Limitation Act is appli....
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....an in the Balance Sheet. 8. The appellant stated that the NCLT has given a wrong finding that the underlying the principles of res judicata is that a decision once rendered by a competent authority on a matter in issue between the parties after a full enquiry should not be permitted to be re-agitated. The appellant submitted that the Civil Suit No.49A/1998 was dismissed on 21.12.2016 (Page543 of the appeal). The appellant further stated that in the said order dated 21.12.2016 the Hon'ble Court had clearly held that the appellant had been succeeded to prove that the appellant has been illegally removed from the directorship of the 1st respondent company. The appellant further stated that the Hon'ble Court rejected the claim only on the ground that Civil Court does not have jurisdiction to try the present suit in view of Section 10 of the Companies Act, 2013 (Page 539 of appeal). The appellant, therefore, stated that the Civil Suit was decided on merit but was dismissed on the ground that the jurisdiction of the Civil Court is barred by the provisions of the Companies Act, 2013. Therefore, the appellant stated that it is a settled law that the principles of res judicata are applic....
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....oduce all the relevant record, however, the respondents did not produce the same despite the order of the Court. The Respondents only submitted the documents when the Hon'ble Supreme Court vide its order dated 13.1.2014 directed the respondents to submit the record to Chartered Accountant. It is stated by the appellant that in catena of judgements the Courts has held that the delay is not an absolute bar for dismissing the petition and the petition is not required to be dismissed when the delay has been explained. At last the appellant stated that the appeal may be allowed and the impugned order dated 6.11.2017 passed by the NCLT, Mumbai Bench, Mumbai may be dismissed. Reply of the Respondents 14. The Respondent No.1 to 3 stated that the said agreement dated 7.9.1991 has been never in their knowledge. The said Respondents further stated that even if it is assumed though not admitted that the said agreement existed, it being a private agreement between the individuals to which 1st respondent was never a party to the said agreement. The said Respondents further stated that none of the persons who were parties to the Agreement were the founding Directors of the company (Minutes ....
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....n the interest paid on the unsecured loan given by the appellants. The TDS was duly deposited with the Income Tax Department. The Respondents has further stated that in the Suit No.49-A, it is stated by the appellant that the appellants were to be given interest on deposits (Page 318, Para 18). The Respondent further stated that a sum of Rs. 1 lac was returned to 1st appellant vide Cheque No.173327 dated 17.4.1997 drawn on Allahabad Bank (Page No.49 of Additional Documents) which was issued by 2nd Respondent as Managing Director. 16. The Respondents stated that the shares were allotted to outsiders and Article 4 will not be binding. The Respondent further stated that 1st appellant was personally present in the meeting dated 28.10.1992 in which it was decided to allot shares of outsider and the 1st appellant never opposed the same. 17. The Respondents stated that the notice was given to 1st appellant on 8.9.1998 to 1st appellant that she was going to be removed as a Director in the AGM to be held on 25.9.1998. The resolution was also sent with the notice. The Respondent stated that the 1st appellant was proposed to be removed as Director due to her acts against the 1st respond....
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....s). The Respondents stated that by unconditionally withdrawing the suit has abandoned all its claim and allegations against 2nd respondent and 3rd respondent. Arguments of the parties: 19. We have heard the parties and perused the record. 20. Learned counsel appearing on behalf of the appellant argued that 1st respondent company had been incorporated pursuant to the agreement dated 07.09.1991 in consonance with the terms and conditions of the agreement executed between appellant and respondents. Learned counsel further argued that the Learned NCLT, Mumbai has wrongly held that the appellants cannot seek to enforce the terms and conditions of the agreement against the company and the directors which is not permissible in law and has wrongly decided the issue in favour of the Respondents. Learned counsel for the appellants argued that 1st appellant contributed Rs. 2 lakh and 2nd appellant contributed Rs. 4 lakhs towards share subscription whereas the same has been shown as unsecured loan in the Balance Sheet. Learned counsel for the appellant argued that the Learned NCLT has given a wrong finding that the underlying the principles of res judicata is that a decision once rend....
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.... Respondents further argued that the appellants have categorically admitted that the amount contributed by them was towards the unsecured loan. Respondent argued that the appellants have itself in para 7.3 of the appeal (Page 12 of the appeal paper book) stated that it is the case of the appellants that the amounts paid by them could be treated as unsecured loan. The respondents further stated that in the agreement dated 7.9.1991, in Clause 3 (Page 173 of paper book) it is mentioned that the amount paid could be treated as an unsecured loan and on which interest shall be paid as provided in Clause 10(e) (Page 175). Respondents argued that the appellants being aware of the same never challenged the same within the period of limitation. Respondents further argued that the Balance Sheet and Annual Return are public documents and could have been obtained by the appellants from the ROC. Respondents argued that as there was no grievance, therefore, the appellant never obtained the said documents. Respondents further argued that confirmation of accounts, ledger and balance sheet of the 1st respondent are duly signed by the appellants acknowledging that the amounts paid by them is an unsec....
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....respondent and Directors, which is impermissible under Law. 24. We have noted that the appellants have contributed Rs. 2 lakhs and Rs. 4 lakhs. We have gone through the para 7.3 of Appeal Paper Book (Page 12 of the Appeal) in which the appellants have stated "that necessary funds for the above said objective had to be brought in by said four executants which was to be shown in the accounts of the said Pvt Ltd company either as "capital or as unsecured loan". We have further noted that in Clause (3) of the Agreement dated 7.9.1991 (Page 173 of the Appeal Paper Book) it is also written "funds so brought may be shown as capital of the aforesaid private limited company and/or unsecured loans in the names of aforesaid person(s)" and on which 15% interest shall be paid as provided in Clause10(e) of the Agreement. We also noted that in the Suit No.49-A filed by the appellants (Page No.312 at Para 7 and Page No.318 at Para No.18) the appellants have also demanded interest on deposit @ 18% p.a. We have seen the Balance Sheet and Confirmation of Accounts (Pages 13 to 29 of additional documents filed by Respondent). We have also seen Annexure F Page 49 of additional documents filed by Resp....
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....ng in the situation where there is no reward for a person who has invested the money. On the face of it, it looks to us that provision of interest has been discontinued solely on the ground that the appellant is a shareholder of the company and has raised a number of issues with the company. 25. Learned counsel appearing on behalf of the appellants argued that 1st appellant and 7th respondent had been illegally removed from the directorship of 1st respondent without any notice to them. Learned counsel further argued that the Respondent have not shown any document pertaining to the resignation of 7th respondent and the respondents only submitted that it was an oral resignation. 26. Learned counsel appearing on behalf of the Respondent argued that the Notice was given to 1st appellant on 8.9.1998 (Page 176 of short Reply) that she was going to be removed as Director in the AGM to be held on 25.9.1998 (Page 171 of short reply). The Members resolution was also sent with the Notice. 27. We have heard the parties and have gone through the record. We found that the notice dated 8.9.1998 (Page 176 and 177) was duly served to 1st appellant as the postal acknowledgement is als....
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....for Respondent, we noted that 1st appellant was very well aware that 2nd respondent has been appointed on the basis of the documents placed before us. 31. We have also noted that the parties have been in litigation for a long period. It is also noted that a number of cases have been instituted by appellant group as well as the respondent group. The very fact that there have been a lot of litigation resulting in removal of directors of petitioners group (before CLB/NCLT), it will be detrimental to the interest of the company if litigation is continued on one pretext or other either by one group or the other. To save the company from litigating shareholders divided in groups and appellant group being too small in minority (holding 500 shares each), it would be desirable that an exit route is provided to the appellants. CONCLUSION 32. From the above we noted that the allegations of the appellants are pertaining to and arising out of the Agreement dated 7.9.1991. Appellants under the garb of the petition before NCLT and appeal before Appellate Tribunal are seeking specific performance of the Agreement dated 7.9.1991. We also noted that the appellants have launched various liti....