TaxTMI 
TaxTMI 
2019 (9) TMI 411
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.... board meeting held on July 24, 2007 are illegal and void ab initio and not binding on the company ; to declare that all acts, deeds and things carried out by respondents Nos. 2 to 6 in their capacity as directors of the company is illegal, void ab initio and not binding on the company, etc. 2. Second C. P. No. 77 of 2010 (T. P. No. 26 of 2016) is filed by Dr. Joe Verghese and four others (the "petitioners") under sections 397, 398 and 237 of the Companies Act, 1956 against M/s. Omega Hospitals P. Ltd., and 6 others (the "respondents"), by inter alia, seeking to appoint an independent chairman ; to appoint an independent auditor to inspect the books of account and submit a report ; to investigate into the affairs of the respondent-company ; to declare that the seventh respondent is a division of the first respondent-company and appoint an independent chartered accountant to investigate the profits earned by the seventh respondent ; to initiate proceedings against the second respondent for having diverted the business of the first respondent-company to another entity and to appoint an independent administrator to manage the affairs of the seventh respondent ; to direct the second....
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.... on June 15, 2007. (iii) The above share transfer deeds along with the share certificate have been submitted to the company for effecting the transfer of shares. The matter of share transfer came up before the meeting of the board of directors on June 21, 2007. For want of majority decision, the board was not able to effect transfer of shares and the meeting deferred the matter. (e) Due to all these conflicts and the deadlock in the management, timely renewal of the over draft facility and the repayment of other bank facilities have not been carried out and frequently issued cheques are bounced. Henceforth, the goodwill and reputation of company in the market is tarnished. (f) The shareholders of the company including the petitioner who was holding 1,06,196 equity shares of Rs. 100 each fully paid-up of the company which constituting about 45.81 per cent. of the total paid-up share capital of the company, have by their letter dated June 28, 2007 have requested the board of directors under section 169 of the Companies Act, 1956 to convene an extraordinary general meeting of the members of the company, wherein they intend to remove respondents Nos. 2 to 6 f....
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.... of the board, the notice calling board meeting is void and the meeting so-called is not in order. (ii) That the shareholders of the company constituting 45.81 per cent. of the total paid-up share capital of the company, have requested to the board of directors of the company under section 169 of the Companies Act, 1956 to convene an extraordinary general meeting of the members of the company for considering the resolutions mentioned in their letter dated June 28, 2006. As the board of directors of the company failed to convene/ proceed to convene the extraordinary general meeting within 21 days from the date of their requisition, the requisitionists have issued notice convening extraordinary general meeting on August 6, 2007 in terms of section 169(6) of the Companies Act, 1956 and provisions of the articles of association of the company. (iii) Having noted the shareholders lost their confidence in the board of directors who failed to convene the extraordinary general meeting of the members of the company in terms of provisions of section 169 of the Companies Act and articles of association of the company, the scheduled meeting of the board of directors of the co....
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....rees which was duly stamped and submitted to the company for effecting the transfer. The transferees are the existing members of the company. In terms of article 5 of the articles of association of the company, any member of the company can transfer his/her shares to any other member or his/her relatives without any prior permission of the board. The board in any event cannot take control of the shares of a member which is fully paid-up. Respondents Nos. 2 to 6 passed the resolution to take control of the shares of respondent No. 8, which are submitted to the company along with duly executed share transfer forms for effecting the transfer in favour of the transferees in gross violation of the provision of the Companies Act, 1956 and the provisions of the articles of association and misinterpreting the power of the board. (iii) Continuation of terms of office of directors Respondents Nos. 2 to 6 in the said meeting passed a resolution for extending the term of office of directors and appointment of additional directors in gross violation of the provision of the Companies Act, 1956 and the provision of the articles of association of the company. The additional direc....
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....ould do financially well. The second respondent is a cardiac physician and he had his own clientele and he agreed to devote his undivided attention to the business needs. (e) The petitioner and the second respondent became the subscribers to the memorandum of association and they subscribed to the shares 22 per cent. and 20 per cent. Initially 45 cents of land of the abovementioned partnership firm was leased to the company and later on the land was sold to the company itself. The consideration for the above sale was paid to the partners in the form of shares. (f) The first petitioner and the second respondent are permanent directors of the company and have been named so in the articles of association. Since the articles of association contemplated appointment of managing director, the first petitioner was appointed as managing director of the company in the year 2001, and he served in such capacity till 2003. The second respondent was appointed as managing director and he served as managing director during the year 2003-04. Thereafter, the second petitioner was appointed as the managing director in 2005 and continued till March, 2006. The company performed well u....
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....ept in a safe locker in the managing director's chamber by the cashier under the supervision of the first petitioner. And the next day it would be deposited in the bank. This practice was followed regularly ever since the commencement of the business. However, this tested method of safeguarding cash underwent a change when Dr. S. Suresh sent a circular that he would collect the cash daily and that no one else should interfere in the same (filed as annexure A7). From February, 2008 onwards the daily cash was collected by the internal auditor without furnishing any details to the petitioner. The daily cash collected was never deposited in the bank continuously for a period of nine months. Therefore, the company suffered financial mess and leading to default in payment of the term loan availed from SBI, leading to declare the company as "wilful defaulter". (k) Respondent No. 2 tried to take control of the funds of the company fully by opening a bank account in the name of the company with 2 persons as authorized signatories nominated by him. In the board meeting held on October 23, 2008 a resolution was passed to open a bank account in Yes Bank, Mangalore Branch in Dr. K.....
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....dings and also filed several I. A./C. As. by allegations, counter allegations, etc., against each other. Since the parties are making various allegations against the each other leading to deadlock in the affairs of company, the then Company Law Board during the course of hearing held on November 7, 2013 in C. P. No. 64 of 2007 has directed to post the matter on November 13, 2013 to explore the possibility of settlement. Accordingly, the parties were present on November 13, 2013 the Company Law Board passed an order dated November 13, 2013, by, inter alia, recording as follows : (1) Dr. K. Mukund, Dr. Jayakrishnan, Dr. Surathkal, Dr. Mohan Chandra Suvarna and Dr. Bhaskar Bappal, are representing as one group as "Dr. Mukund group", and the other group represented by Dr. Joe Verghese consisting of other shareholders Dr. Mahabala Rai, Dr. P. S. Bhatt, Dr. R. L. Kamath and Dr. Pintoo, hereinafter referred to as "Dr. Verghese group". (2) Dr. Mukund group holds 53.36 per cent. and Dr. Verghese group holds 46.64 per cent. of the paid-up share capital of respondent No. 1- company. Both the groups are subscribers to the memorandum of association of the company, and also the....
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....013 has already discharged his statutory functions and that independent auditor (chartered accountant) has also filed a letter dated August 25, 2014 by stating that the audit for the financial year April 1, 2007 to March 31, 2013 (six years) were completed. Therefore, the Tribunal observed that since the board is in the possession of financial details of assets and liabilities duly audited by the independent auditor. The next question would be to arrive at the fair value of the shares thereon to decide as to which group decides to buy out the shares of other group. 9. Since the value of shares of the company remains to be determined to settle the issue, the Tribunal during the hearing held on June 14, 2018 has directed the parties to suggest a common name of chartered accountant. Accordingly, they have filed a joint memo dated June 22, 2018 by accepting Shri Subhash Chandra Salian, Chartered Accountant, SNSB Associates, Ideal Towers, Mangalore. Accordingly, the Tribunal by its order dated June 25, 2018 has appointed Shri Subhash Chandra Salian, to conduct the valuation of assets and liabilities of M/s. Omega Hospitals P. Ltd., with a direction to file his report in the Tribunal,....
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....e addressed the Tribunal their respective arguments. Therefore, we are deciding the issue as the Tribunal is admittedly competent to decide it. 12. The Registrar of Companies, Karnataka has addressed a letter vide Ref. No. ROCB/AROC(SR)/2011, dated October 28, 2013 to the Bench Officer, Company Law Board, Chennai Bench, which reads as follows : "With reference to the above, I am to state that as per the Minis try's instruction and subsequent order dated November 24, 2011 of the Company Law Board in C. A. No. 45 of 2011 in C. P. No. 64 of 2007, Shri Satyajit Roul, Assistant Registrar of the office carried out inspection of the company and furnished his report dated January 4, 2013 to the Ministry through the Regional Directorate (SER). Upon examination of the Inspection Report, Ministry vide its letter No. 1/25/2012-CL-II (SER), dated August 12, 2013 has instructed this office to launch prosecution under section 260 read with sections 629A, 285 read with section 629A, section 3(1)(iii)(d) read with 629A and section 58A read with provisions of rules 4A and 10 of the Companies (Acceptance of Deposits) Rules, 1975 with the permission of the hon'ble Company ....
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....lue to be decided by the valuer appointed by the Tribunal. And that exercise already stands concluded, and thus both the parties are estopped from contending contrary to their undertakings/declarations already given. They cannot blow hot and cold at one breath. 16. The then Company Law Board has made all efforts to resolve the issue by various proceedings. The parties also, more or less, have agreed for proposal of settlement. Accordingly, in pursuance to the steps initiated by the then Company Law Board, this Tribunal appointed chartered accountant with their consent as stated supra. Therefore, the parties are bound by valuation report unless it is shows as ex facie illegal basing on substantial evidence. Naturally, no valuation report would fully satisfy both the parties. We have carefully perused the valuation report along with supported documents and thus found that the valuation report submitted by SNSB Associates dated September 6, 2018 is based on sound financial principles, and it does not suffer any legal infirmities. Therefore, we are of the considered view that the report is prepared in accordance with law, and thus it is binding on both the parties. 17. For auditi....
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....facie no disputes with regard to shareholding of parties in respondent No. 1-company, and thus they can resolve the issue basing on the value of share given by the valuer as stated supra. 19. In view of the above facts and circumstances of the case and the law, we hereby disposed of both company petitions bearing C. P. No. 64 of 2007 (T. P. No. 5 of 2016) and C. P. No. 77 of 2010 (T. P. No. 26 of 2016) with the following directions : (1) We hereby declared that the report of valuation of assets and liabilities of M/s. Omega Hospitals P. Ltd., dated September 6, 2018 submitted by SNSB Associates, chartered accountants, is legal and the same is binding on both the parties. (2) Both the parties are at liberty to take appropriate action either to buy/sell their respective shareholding of respondent No. 1-company basing on the valuation report dated September 6, 2018. (3) It is hereby forthwith restored the board of directors of respondent No. 1-company, as existed, prior to initiation of the instant cases and thus they can discharge their duties as per law. (4) The services of Shri E. Selvaraj, independent chairman appointed by the Tribunal stands....