TaxTMI 
TaxTMI 
2016 (12) TMI 1807
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....Tribunal instead of Board for Industrial andFinancial Reconstruction BIFR) and, (iii) They have approached the Tribunal after delay of 8 years. 1. We shall refer to the factual matrix of the case for better understanding and to focus our discussion on the material points for deciding this application. (i) The Company Petitioners (henceforth called as 'non-applicants') complaining certain acts of oppression and mismanagement against the Respondents (henceforth called as 'applicants') sought for the reliefs under sections 58 and 59 of the Companies Act, 2013 read with Sections 397, 398, 399, 402, 403, 406 read with Section 111 of the Companies Act, 1956. The core reliefs are: (1) to declare the Respondents 2 to 4 ceased as Directors of the Company due to illegal, fraudulent, deceptive and highly prejudicial acts; (2) to restrain the Company from alienating the properties, investments and other assets; (3) to restrain the Company and other Respondents from changing, altering, modifying the capital and board structure and suspend the operation of any Board resolutions or the General meeting of members; and (4) To direct Respondent No. 4 to restore t....
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....irectors of the Company. The Petitioners, if they Have any grievances against the Orders or directions passed by the BIFR, they should approach the BIFR only and not the Tribunal. Their other contention is that the Petitioners are guilty of latches in complaining about the events occurred in the light of Order of BIFR dated 8.11.2005 and therefore, the Petition is barred by limitation. They urged to dismiss the Company Petition on the above grounds. (v) Responding to the said application-the non-applicants, have filed a detailed counter contending inter alia that they are having 54% of the total of the total paid up capital of the Company and that even if the 20 lacks shares (equal to 38%) allotted afresh to them in the EGM dated 14.6.2010 is excluded, the Petitioners are having 17% which is sufficient to maintain the Petition. It is contended that there was an understanding that after revival of the Company by the BIFR, it would be totally acquired by the Petitioners' group. They have shown in detail the dates and documents evidencing the allotment of shares claimed by them and asserted that even though the share certificates are given to them, the Respondents failed ....
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.... plaint. At the stage of considering the case for rejection of plaint the stand of the defendants in the written statement or in the application they made under Order VII Rule 11 is wholly immaterial. In all other situations, the claims will have to be adjudicated in the course of the trial only. (Vide: P.V. Guru Raj Reddy rep by GPA Laxmi Narayan Reddy vs. P. Neeradha Reddy; Bhau Ram vs. Janak Singh & Others. (2012) 8 SCC 701 (ii) Therefore, if on a meaningful, not formal, reading of the plaint it is manifestlyvexatious, and merit less in the sense of not disclosing a clear right to sue, the Court should exercise its power under Order VII Rule 11 of the Code taking care to sec that the grounds Mentioned therein are fulfilled. (iii) The Company Law Board in earlier cases has settled the position that an objection as to the maintainability of the Company Petition is only to be allowed at an initial stage if there is absolutely no doubt that the Petition is not maintainable and that it is a general principle that a petition is to be thrown out at an initial stage if it is unarguable on the demurrer and that the issue of qualification where being a question of fact a....
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....t Goyal & his associates by way of unsecured loan..." (ii) Annexure III, page 177 is showing details of fully paid 5,01,450 equity sharestransferred from Gagan Walia and Karuna Karanwal for a sum of Rs. 50,14,500/-. Page 178 and 179 shows the details of shares/debentures transferred in favour of Petitioners] group between 30.9.2009 and 30.9.2010 (Vide Annexure III). Likewise pages 191 and 192 contain the details of partly paid up shares transferred from Gagan Walia, Rupali Walia and 2 others (3,86,900 shares for a total consideration of Rs. 38,69,000 out of which a sum of Rs. 17,00,000 was paid by Petitioners' group) and page 192 contains the details of shares transferred between 30.9.2009 and 30.9.2010 in favour of Petitioners' group. Similarly, the Extract of the Minutes of the EOGM dated 14.6.2010 (page 313) reads: "RESOLVED THAT....in accordance with and conformity to the draft revival scheme as approved by the Hon'ble BIFR vide its order dated 08.11.2005 and supplementary orders dated 23.5.2007 and 6.5.2009, consent of the Company be and is hereby accorded to the Board to create, offer issue and allot 20,0,000 equity shares of Rs. 5/- each on pref....
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....titioners in support of the plea of their not possessing requisite shares to qualify the test of Sec. 1399. But, in the Rejoinder filed by the applicants (Respondents in the Company Petition) at paragraphs 5 and 6 they have pleaded as follows: "5. It is submitted that the alleged share transfer forms are incomplete and inappropriate, the said share transfer forms were never executed and no shares were issued/allotted to the Petitioners in pursuance of the alleged share transfer forms. That had there been any transfer in pursuance of the alleged shard transfer forms, the same would have reflected Annual Returns of Respondent No. 1 Company for the period ending 2010, 2011, 2012, and 2013, It is however an admitted position that the Annual Returns for period ending 2010, 2011, 2012 and 2013 do not reflect the name of any of the Petitioner as a shareholder in the Respondent No. 1 Company." "6. That the share certificates annexed with the Petition are of the year 2010, if the said share certificates were issued to the said Petitioners in June 2010, then the same would have reflected in the subsequent Annual Returns of the Respondent No. 1 Company. However, no such shar....
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....ar) a Division Bench of the Karnataka High Court took the view that the word "member" should be understood in the context in which it is used. It was held that allotment of shares is a matter of contract between the parties and such contract could be either expressed or implied. If a person is treated by the company as its shareholder, his right to membership cannot be questioned by the company at a later point of time on the ground that there was no compliance with the provisions of section 41(2) of the Act. When that finding of the Division Bench was challenged in Appeal before the Supreme Court the court refused to interfere with the findings of the High Court while deciding preliminary issue and held that only during the enquiry in the Company Petition, the Tribunal has to decide the question whether the Petitioners are members of the Company. (Vide: Balaji Textile Mills Private Limited vs. Ashok Kavle 1988 3 JT 2502) The observation of the Apex Court reads: "On the materials adduced before the court, the court came to the conclusion that there has been substantial compliance with S. 41(2) of the Companies Act. In the interest of justice we are of the opinion that it i....
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....light of the authorities cited above, that the interpretation tobe placed on section 399 vis-a-vis petitions filed seeking relief from oppression and mismanagement should be governed not strictly by the requirements of the section, so long as in substance and effect the person complaining of acts of oppression and mismanagement has been recognized or treated as shareholder/member by the conduct of the company, and that in giving effect to the remedies against the grievance, considerations of equity and justice should be allowed to prevail. (xiv) Coming to the facts of the case, now that the Petitioners in the CP have propounded their case as members of the Company holding not less than one tenth of the paid up share capital as on the date of filing of the Company Petition and further contended that the Respondents have fraudulently and deliberately omitted to show the transfer of the shares in favour of the Petitioners' group in the Annual Returns. This is a question of fact. Further, the contention of the Applicants/Respondents that the Share Transfer Forms are not properly submitted and That transfer is not affected etc are the questions of fact to be decided in the ....
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.... of the Board. In that context, the High Court came to hold thus: "54. Once the legal position and scope of the two Acts is understood in the manner explained above, the irresistible conclusion would be that for all matters relating to the SS, it is the BIFR alone which shall have the jurisdiction. Notwithstanding, attempt is made by learned senior counsel for Mr. Raj Kumar Jain to contend that issues raised could be dealt with by the CLB..." (iii) In fact, in the reported case, the parties have moved the BIFR seeking clarification of its order but the BIFR rejected that Petition. Then they moved the CLB which has ordered their Petition. Upsetting the order of CLB. The High Court commented in this background that: "69. Similarly, the CLB was wrong in rejecting the contention of the appellants herein that merely because the BIFR had rejected the application of the respondents for clarification on the ground of delay and latches and not on merits, the CLB could go into that question. It is a curious way of assuming jurisdiction. Once it is held that it is the BIFR which could issue such a clarification and application was also filed before the BIFR, if the grieva....