TaxTMI 
TaxTMI 
2019 (7) TMI 1615
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....ai Bench and renumbered it as T. P. No. 80 of 2016, against Habitat Pragnya Property Developments and its directors (the respondents), by seeking relief : (a) Regulate the conduct of affairs of the first respondent-company in the future ; (b) To direct the respondents not to pass any resolution, either in a board meeting or general body meeting or by way of a circular resolution shifting the powers of management, including bank operations, from the designated partners of the petitioner to the nominee directors or representatives of the second respondent or any other employees and restore the management as on April 15, 2014 ; (c) To direct the respondents to strictly comply with the memorandum of understanding dated August 7, 2012 in letter and spirit and to direct the respondents not to pass any resolution or to take any action or to do any other act, deed or thing whether by way of board meeting or general body meeting or circularisation or otherwise from acting in breach of the memorandum of understanding ; (d) To direct the second respondent to sign and execute the share holders agreement kept as annexure 7 to the petition and direct the first....
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....nd Mr. Bhaskar T. Nagendrappa (hereinafter referred to as "designated partners") are on the board of directors of the first respondent-company. The designated partners happen to be qualified architects and are thoroughly acquainted with the real estate industry in Bangalore. They are the promoters of "Habitat Ventures group", a group of companies and other commercial entities engaged in real estate development and investment therein. (b) The first respondent-company bearing CIN No. U70101KA2012PTC064178 was incorporated under the Companies Act, 1956 on May 30, 2012. The main object of the company is, inter alia, to "act as project managers for land development, all types of construction and development projects, including construction site management and to supply various materials for use in building industry including furniture and all such other items of use for completion of construction projects of any nature", etc., in accordance with its memorandum and articles of association. The first respondent-company is a joint venture ("JV") company promoted by the petitioner and respondent No. 2. It is stated that the petitioner and respondent No. 2 have been associated with ....
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.... agreement specifically in relation to the first respondent was merely a formality and the same was deferred. (h) It is stated that the designated partners obtained the various approvals, no objection certificates, sanctions and licenses for the project from myriad Government Departments after long and persistent effort. The designated partners have already undertaken and completed substantial part of the design and development management including and not limited to due diligence, identifying and appointing numerous project consultants, donning the role of architects of the project, co-ordinating with various consultants, etc., after spending considerable amount of time, effort and resources. (i) It is stated that considering the time, money, resources, skill and expertise spent by the petitioner through the designated partners, the petitioner requested for fee payable as the memorandum of understanding. Respondent No. 2 deferred the payment assuring that the fees will be paid shortly. Thereafter the petitioner pressed for the formalisation of the share holders agreement. (j) In the second quarter of 2013, nominees of respondent No. 2 informed the design....
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....nt No. 2 began to make unreasonable demands and not being able to tolerate the oppression, the petitioner filed C. P. No. 33 of 2014 before the hon'ble Company Law Board and an interim order was passed on July 21, 2014 directing the respondents not to give effect to the resolutions that were passed for stripping off the power from the designated partners. (n) On July 22, 2014 a board meeting was held and three additional directors were appointed by the nominee directors of the first respondent- company. It is stated that the additional directors were appointed to enable respondent No. 2 to pass circular resolutions without any interference from the designated partners. (o) It is stated that a fixed deposit of the first respondent-company was placed with the Catholic Syrian Bank in order to facilitate a huge credit facility to another group company of respondent No. 2. It is stated that the nominees of respondent No. 2 have attempted to disparage the reputation of the petitioner before the land owners, asking them not to interact and co-operate with the petitioner in any manner. It is stated that all other consultants and contractors who rendered services to th....
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....tions and management power of the designated partners to the new company secretary, oppressing the rights of the petitioner as shareholder. (r) Against the ad interim injunction, the designated partners filed an appeal M. A. No. 7 of 2015, in which the order of temporary injunction was set aside. Aggrieved by this order, the first respondent filed W. P. No. 5835 of 2015 before the High Court of Karnataka at Bangalore. The designated partners and the first respondent-company filed a joint memo on February 27, 2015 whereby the designated partners undertook that they will not act in any manner detrimental to the rights of the first respondent-company under joint development agreement dated September 27, 2012. The hon'ble High Court of Karnataka allowed W. P. No. 5835 of 2015 in terms of the joint memo. However, the second respondent and its nominees have filed a case against the land owners unnecessarily involving the property in litigation and putting the project in jeopardy. (s) As the period of 120 days was nearing completion and the nominee directors had not taken any steps to call for the board meeting, one of the designated partners vide an e-mail requested....
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....t to the best of its knowledge and belief, the subject-matter of the petition is not pending before any other court. 3. The respondents have countered the submissions of the petitioner vide their counter dated April 22, 2017 contending and rebutting the facts in the company petition, inter alia, as follows : (i) The respondents deny all the averments, contentions and submissions made by the petitioner. The respondents submit that the present company application by the petitioner is with sole intention to harass the respondents and brow beat them into accepting the terms. The petition filed is an abuse of process of law and is filed with the oblique motive of circumventing the interim order granted against the partners of the petitioner firm in O. S. No. 9 of 2015. The petition filed is false, vexatious and is liable to be dismissed in limine. (ii) The petitioners were meant to bring in a capital of 19.99 per cent. of the total paid-up capital of the company. However the petitioners did not bring in this money towards issuance of shares and were issued shares worth 12.64 per cent. of the total paid-up share capital of the company. Despite repeated requests, no c....
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....ed capital of 19.99 per cent. Immediately upon assignment of agreements in favour of the first respondent by the land owner, the first respondent-company executed a development agreement which superseded the earlier agreements with the land owner. (vii) It was portrayed to the respondents that the lands were completely unencumbered, whereas the petitioner knew of several cases upon the said property and kept it hidden from the respondents. The existence of these cases were disclosed to the respondents only in May, 2014 by the partners of the petitioner. The fact that the lands fall within two different planning authorities, i. e., BDA and BMICAPA, was concealed from the respondents. In reply to an RTI application filed by the respondents dated March 28, 2012 and March 29, 2012 it was learnt that the property falls within the jurisdiction of two different authorities and that as the Foreign Direct Investment is sought to develop the lands, it is very important that the development of the entire parcel of land be approved by a single planning authority. For the purchase of additional lands in order to make the project economically viable, the partners of the petitioner gave ....
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....alvage the project undertaken. With a majority of vote of the board of directors, a resolution was passed to change the registered address of the first respondent. It was also voted to move the documents and statutory registers to the current registered office, transfer the custody of land records, and to change the authorised signatories who operate the bank accounts of the first respondent-company. The partners of the petitioner voted against all the resolutions. At the board meeting dated July 22, 2014 it was noted that the partners of the petitioner-company had failed to comply with the previous resolutions and continue to withhold the relevant documents. (xi) After repeated e-mails to the petitioner to comply with the same, the first respondent was constrained to issue notice dated August 27, 2014 under section 452 of the Companies Act, 2013. After an exchange of flurry of e-mails and rejoinders, Mr. Shivaram, one of the partners of the petitioner stated that the records are not in his possession which is a blatant lie and contrary to what was stated by him in the earlier correspondence dated September 2, 2014. The first respondent filed a suit in O. S. No. 9 of 2015 ....
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....tinue to be directors of the first respondent-company. (b) The allegation that there was an "understanding" between the parties that the petitioners alone would remain fully in charge of the day- to-day affairs of the first respondent-company is contrary to the well- established position of law that not every shareholder has an inherent right to participate in the management of the company, unless such rights are granted under the constitutional documents of the company, or by way of agreement. The management rights of each shareholder in the company are decided on the basis of corporate democracy, and in accordance with resolutions passed at meetings of the board of directors and shareholders. The averment that there was ever such an "understanding" is denied. Respondent No. 2, a majority shareholder holding 87.36 per cent. of the paid-up share capital of the company cannot be reduced to a mute spectator on the basis of an alleged understanding. The case of Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises P. Ltd. [1991] 72 Comp Cas 211 (Karn), paragraph 31 has been cited by the petitioner. (c) The allegation that the respondents ha....
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.... upon the petitioner's nominee directors and that the said nominee directors of the petitioner attended the meeting. It is well-settled that the items to be decided need not be specifically mentioned in the agenda, and so long as the meeting is duly held, such resolutions can be passed under the residuary caption of "any other business". The cases of Dr. T. M. Paul v. City Hospital P. Ltd. [1999] 97 Comp Cas 216 (Ker) (in paragraph 28) and Dr. Mrs. Banoo J. Coyajee v. Sakal Papers P. Ltd. [1995] 84 Comp Cas 534 (Bom) (in paragraph 44) have been cited in this regard. (f) Article 26 of the articles of association of the company authorises the board to, inter alia, fix the duties of the directors, and also have the power to vary them from time to time and accordingly, a resolution was passed to remove them from the list of authorised signatories. The petitioner's nominee directors had breached their fiduciary duty and as result, they were removed from the list of authorised signatories as the respondents were apprehensive that the petitioner's nominees would act in detriment to the interest of the first respondent-company. The allegation that third parties have be....
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....tries Ltd. v. P. V. Abdul Khader [2003] 114 Comp Cas 777 (Ker) which relied on Calcutta High Court decision of Kanika Mukherjee v. Rameshwar Dayal Dubey [1966] 1 Comp LJ 65 (Cal) has been cited. (j) The petitioner's nominees have concealed and suppressed regulatory issues, title disputes, and pending litigation in addition to being in breach of the fiduciary duty. They have also committed fraud during land acquisition and have taken mala fide actions to the detriment of the first respondent-company. The petitioner did not bring the capital to purchase 19.99 per cent. of the total paid-up share capital of the company as stated in the memorandum of understanding which they themselves seek to enforce. They are responsible for the stalling of the project and have not approached this hon'ble court with clean hands. The case of S. P. Chen galvaraya Naidu v. Jagannath [1994] 1 SCC 1 (paragraph 7) has been cited in this regard. The petitioner has made only bald statements without any documentary proof and the case of S. Seetharaman v. Stick Fast Chemicals P. Ltd. [1998] 93 Comp Cas 507 (Mad) (in paragraph 29) has been relied upon. 5. Heard Shri Guru Prasad, learned coun....