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2020 (5) TMI 292
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....No.6 as illegal and contrary to the provisions of the Companies Act, 2013 and Articles of Association of the Respondent No. 1 Company; (2) To set aside the allotment of 1,89,000 equity shares made to Respondent No.6 by declaring the same as null and void and resultantly direct the Respondents to make requisite filings with the office of the Registrar of Companies, Mumbai in connection thereto etc. 2. Brief facts of the case, as mentioned in the Company Petition, which are relevant to the issue in question, are as follows: (1) M/s. AKP Ferrocast Private Limited (herein after referred to as Company) is a Private Limited Company, was incorporated on 11.06.2007 under the provisions of the Companies Act, 1956. The Authorized Share Capital of the Company is Rs. 8,00,00,000/- divided into 8,00,000 Equity Shares of Rs. 100/- each. The present issued, subscribed and paid-up capital of Company is Rs. 7,99,99,700/- divided into 7,99,997 equity shares of Rs. 100/- each. It was promoted by Respondent Nos.2 and 3 namely Shri Ram Balwant Bhandare & Shri Parag Ram Bhandare divided into 8,00,000 (Eight Lakhs) Equity Shares of Rs. 100/- (Rupees One Hundred Only) each. The Compan....
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....s, which is more than 10% of the share capital of the Company. (8) It is stated that in December 2007, the Company had availed credit facilities (working capital & term loan) from Axis Bank, Congress Road, Tilakwadi Branch to the tune of Rs. 18,45,00,000/- (hereinafter referred to as "loan"). The said loan was availed by offering security of assets of the Company, which inter alia included collateral security by way of mortgage of a land being all that piece and parcel of agricultural land measuring 14 Acres 10 gunthas as out of Survey No.663 situated at Machhe Village, Taluka and District Belgaum, Karnataka (hereinafter referred to as "Said Land") belonging to Respondent No.6 (spouse of Respondent No.2 and the mother of Respondent Nos.3 & 4) and by a personal guarantee given by Respondent Nos.2, 3 and 6. (9) It is also stated that the Respondent Nos.2 and 3 approached the Petitioner Nos.1 to 3 to invest in the Company. After extensive negotiations, the Petitioner Nos.1 to 3 invested the following amounts in the Company: Sl.No. Name of the Petitioner Amount invested Rs./Lakhs 1 Mr. Milind Dhume 60.83 2 Mr. Pankaj Dhume 75.83 3 Mr. ....
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....ent No.6 as mentioned above, the shareholding of the Petitioners in the Respondent No. 1 Company is as follows: Sl. No. Name of the Shareholders Shareholding in the Company 1. Mr. Anil Bakshi 16.37% 2. Mr. Pankaj Dhumie (jointly with his spouse) 12.41% 3. Mr. Sridar Swamy (jointly with his spouse) 15.00% 4. Mr. Milind Dhume 9.96% 5. Mr. Ganesh Kamath (jointly with his spouse) 10.36 (Along with the family members, Mr. Ganesh Kamath hold 16.91% of the paid-up share capital of the Company. Taking into consideration the aforesaid investment made by the Petitioners in the Company, Petitioners deemed it important to be appointed as Directors on the Board of the Company to protect their economic interests and to ensure that the operations and finances of the Company are effectively managed. During the meeting of the Board of Directors of the Company, convened on 6th October 2018, a Resolution was passed unanimously for appointment of the Petitioners as the Directors of the Company (in the category of Non-executive directors). The Petitioners also provided their consent to act as Direct....
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....No.1 Company). Secondly, the credit facility availed from Axis Bank, Belgaum (Congress Road, Tilakwadi Branch) has already been repaid and accordingly the corresponding charge created has already been satisfied on 31st March, 2012 under the provisions of Companies Act, 2013. (15) Under provisions of section 100 of the Companies Act, 2013, Shareholders have the power to requisition to the Board to call for an Extraordinary General Meeting ("EGM") and appoint new Directors in the said meeting, if the Board of Directors refuse to do so; and if the Board of Directors of the Company fail to call for the said EGM within the stipulated time frame then, the Shareholders requisitioning the meeting may themselves convene the EGM and pass necessary resolutions which shall be binding on the Company. Two of the Petitioners, namely Mr. Milind Dhume and Mr. Anil Bakshi, in their capacity as Shareholders hence sent a Special notice dated 8th January, 2019, requisitioning the Board of Directors to call an Extraordinary General Meeting of the Members of the Company proposing (i) appointment of the Petitioners as non-executive Directors on the Board of the Company and (ii) to propose the can....
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....rore, whichever is lower. The Directors of the Company, i.e. Respondent No.2 and Respondent No.3, are also Directors and members of AKP Foundries, thereby making it a related party of the Company, as per section 2(76) of the Companies Act, 2013 and accounting standards. (18) It is also stated that the two of the Petitioners, namely Mr. Anil Bakshi and Mr. Milind Dhume issued a Notice dated January 31st, 2019, under section 100 of the Companies Act, 2013, requisitioning the Board of Directors to call an Extraordinary General meeting of the Company to propose the cancellation of the related party transaction of the Said Sale of 4 acres of land made by the Company to AKP Foundries Private Limited, which was undertaken without the approval of Shareholders and which was prejudicial to the interests of the Shareholders. Based on the aforesaid Special Notice, the Board of Directors of the Company, namely, Respondent No.2 and Respondent No.3 convened an Extraordinary General Meeting on 22nd February, 2019. In the aforesaid Notice of EGM dated January 31st, 2019 calling for EGM of the Company to be convened on 22th February, 2019, the Board of Directors of the Company (Respondents ....
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.... that the aforesaid two entities were different entities in the eyes of law. Respondent No. 6 is a Shareholder in both the Companies, namely the Respondent No.1 Company (which is incorporated in 2007) and AKP Foundries Private Limited (which is incorporated in 1978). (20) It is stated that the Respondent Nos.2 and 3 have allotted 1,89,000 (One Lakhs Eighty-Nine Thousand) equity shares of Rs. 100/- each amounts to 23.62% of the paid-up capital of Company Subsequently, it was brought to the knowledge of the Petitioners that such allotment has been made for consideration other than cash and pursuant to an Articles of Agreement dated 23rd January, 2019, entered into between Respondent No.1 (Company) and Respondent No. 6 (Mrs. Roopa Bhandare). Under the aforesaid Articles of Agreement entered between the Respondent No.1 and Respondent No.6, it is recorded that the above said allotment of 1,89,000 equity shares to Respondent No.6 was made for consideration in lieu of guarantee commission due to Respondent No.6 by virtue of an arrangement purported to have been existing between the Company and the Respondent No. 6, whereby Respondent No. 6 had furnished her personal guarantee and....
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....her conditions as may be prescribed. Rule 13 of the Companies (Share Capital and Debentures) Rules 2014 - Issue of shares on preferential basis Quote For the purposes of clause (c) of sub-section (1) of Section 62, if authorized by a special resolution passed in a general meeting, shares maybe issued by any company in any manner whatsoever including by way of a preferential offer, to any persons whether or not those persons include the persons referred to in clause (a) or clause (b) of sub-section (1) of section 62 and such issue on preferential basis should also comply with conditions laid down in section 42 of the Act. Section 42 of Companies Act, 2013 Quote Rule 14 of Companies (Prospectus and Allotment of Securities) Rules 2014 - Rule 14 - Private Placement of Securities Quote (ii) A company shall not make a private placement of its securities unless- (a) the proposed offer of securities or invitation to subscribe securities has been previously approved by the shareholders of the company, by a Special Resolution, for each of the Offers or Invitations: ....
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..../investors unwillingness to offer their personal guarantee and security towards the loans raised by the Respondent No.1. Having not to look after the interest of the Company at relevant point of time for their own reasons, the Petitioners cannot come and claim that they are entitled to interfere in the affairs of Company. The annual turnover of Company for the year 2018-2019 is about Rs. 126 Cr and the dividends paid amount to about 2 crore and one crore for the years 2017-18 and 2018-19. (3) The Respondent Nos.2, 3 & 6 have all along borne the brunt of furnishing securities to secure credit facilities for the Company, which undeniably has enabled the Company to secure its now enviable market presence. Petitioners have reaped the benefits derived from Respondent Nos.2, 3 & 6 furnishing securities to avail credit facilities from various banks, over the last decade i.e. shares and dividends. Having reaped the benefits for so long, Petitioners cannot now claim that the acts of Respondent Nos.2 & 3 are prejudicial and constitute oppression and mismanagement. In any event, Petitioners being majority Shareholders in the Company cannot allege oppression against these Respondents ....
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....e letter dated 10.01.2008 and communicated their acceptance vide letter dated 14.01.2008. It was further agreed that the guarantee commission payable on all the above 3 counts, separately on each of the, be not less than 1.5% and not more than 2%, and that the shares would be issued on demand, in lieu and in respect of all the sums receivable by Respondent No.6 towards guarantee commission. Together, these two letters constituted a contract that bound Respondent No.1 & 6. As per the letter dated 10.01.2008, Respondent No.1 agreed that the aggregate guarantee commission that was payable to Respondent No.6 on all the 3 counts of furnishing primary & collateral security and her personal guarantee, for the first 10 years of Respondent No.1's operations shall be paid by issuance of equity shares at par value of Rs. 100/- per share, and thereafter in cash towards guarantee commission, if the said securities and guarantees subsist beyond 10 years. (5) It stated that at the time when Respondent No.6 furnished the aforesaid securities and guarantees on behalf of Respondent No.1, she was a complete stranger to the Company and was for intents and purposes, a third party-creditor ....
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....rments of the Petitioners that the said allotment was made to Respondent No.6 without obtaining approval of the shareholders of the Company and without obtaining the valuation report as required under the provisions of the Companies Act, 2013 are farcical, unsubstantiated, false and hereby denied. (7) It is also stated that the averments that there is a strong likelihood that the existing Board of Directors may divert the business of the Company to AKP Foundries Private Limited or to any other entity/controlled by the Respondents and their family members is mere speculation, conjecture and surmises and are hypothetical. It is stated that even single employee has been transferred from Respondent No.1 to AKP Foundries Private Limited till date and it is in fact the other way around. Several employees of AKP Foundries Private Limited have been transferred to Respondent No.1 over the last decade or so. Moreover, Petitioner Nos. 1 & 3, being the Directors of AKP Foundries Private Limited until recently and Petitioner No. 1 still continues to be a Director as on date, should be aware of the aforesaid facts and they cannot be permitted to hoodwink and mislead this Hon'ble Cou....
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....e allotment of shares to Respondent No.6 was not a fresh offer, but was an allotment made in pursuance of an existing decision of the Company based on a past commitment. Insofar as the applicability of section 42(10) of the Companies Act, 2013 to the present petition, apart from referring to the same, Petitioners have not explained as to how this provision is triggered. Furthermore, the issuance of shares to Respondent No.6 in the instant case does not call for the applicability of Section 42 since there is no private placement of shares in the instant case. The provision is categorical that in order to attract the provisions of section 42 of the Companies Act, 2013, an offer or invitation must be made to two or more persons comprising a group having certain common characteristics such as promoters, employees etc., and that there is no applicability of the section if the allotment is being to a single person, which is evident from a bare perusal of the provision. Moreover, sections 42 and 62 cannot operate in the same realm and are not exhaustive of the provisions governing allotment of shares and shares can be allotted in various other manners, provided it is not contrary to the A....
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....is Tribunal the power or jurisdiction to set aside a registered sale deed conveying immovable property i.e., the Schedule-II Property to M/s. AKP Foundries Pvt. Ltd., since such power vests only with the jurisdictional Civil Court. Thus, the prayer seeking setting aside of the Sale Deed dated 26.09.2018, executed by Respondent No.1 in favour of M/s. AKP Foundries is untenable and if granted, is akin to this Tribunal usurping the power which lies only with the jurisdictional Civil Court. It is well settled position of law that a seriously disputed question of title cannot be decided by this Tribunal, that too in summary proceedings such as the present one. The proceedings before this Tribunal are summary in nature and the examination of questions of title fall in the arena of substantive power a Civil Court of competent jurisdiction, where extensive evidence in required. (14) It is stated that when there was no meeting of Board of Directors was held, the question of validity of non-existing does not arise. As stated supra, the meeting held on 06.10.2018 was an informal meeting of the shareholders, and the same cannot in any manner within the contours of the Companies Act, 2....
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....e Axis Bank Ltd to the tune of Rs. 18.45 crore. The Respondent No.6 has provided security/guarantee without any receipt of consideration. On the contrary, the Petitioners have sought and also received returns/dividend to the extent 25% (exclusive of taxes) of their investment i.e., the same runs into crore of rupees as admitted by them in their email dated 27.03.2019. The investments of Petitioners which is approximately around Rs. 4 to 4.5 crore and returns earned by them is more than the investment. On the contrary, the Respondent No.6 for having stood as guarantor and providing security of her exclusive stridhana property as not received any returns from the Company. (2) The Sanction Letter dated 19.12.2007 by the Axis Bank Ltd. sanctioning credit facilities to the tune of 18.45 crore to the Respondent No.1 Company has sought for Primary Security of 14 acres of land belonging to Respondent No.6 (Eastern Portion) and Collateral Security of 14 acres of land (Western Portion) belonging to Respondent No.6. Further, the Respondent No. 6 was also required to give personal guarantee for the credit facilities availed by the Respondent No.1. The Respondent No.1 Company vide reso....
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....funds is not entitled claim share (Head Note). (e) Chatterjee Petrochem (India) (P.) Ltd. (supra) (f) BSE Ltd. v. Ricoh Co. Ltd. [2017] 81 taxmann.com 383/142 SCL 165 (NCL-AT) 5. Heard Shri C.K. Nandakumar learned Counsel for the Petitioners, Shri Anant Mandgi, learned Senior Counsel for the Respondent No.6, Ms. Ramya Ramchandran, learned Counsel for the Respondent Nos. 1 to 3 and Shri K. Anandarama, learned Counsel for the Respondent Nos.4 & 5. We have carefully perused the pleadings of both the parties and extant provisions of the Act and Rules made thereunder. 6. Shri C.K. Nandakumar, learned Counsel for the Petitioners, after arguing the case at length, has also filed Common Written Submissions dated 23.12.2019 in the present case and other connected case (CP.No.159/BB/2019) which is also disposed simultaneously, by inter alia contending as follows: (1) It is stated that the Respondents have sought to circumvent the provisions of the law, with a view to gain majority shareholding of the First Respondent Company. In this regard, they have relied upon the decisions rendered in Capricorn Oils v. Ratan Mohan Sarda [2012] 21 taxmann.com 331/113 SCL 3....
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....8 CLA 597 (CLB) (5) It is a well-established proposition of law that where a property of the Company is deliberately sold at a price lesser than the market value, the erring directors are liable to make good the loss to the company. In this regard, they have relied upon decision rendered in the matter of Mohamed Ataulla v. Central Park Farm Developers (P.) Ltd. 2008 SCC online CLB 10. In the present case, while the prevailing price per acre of the Land was around Rs. 1,00,00,000/- (Rupees One Crore Only), the Respondents sold it for a measly sum of Rs. 5,00,000/-(Rupees Five Lakh Only). (6) They have relied upon the following cases in support of their case: (a) Sanjay Paliwal v. Paliwal Hotels (P.) Ltd. [2008] 84 SCL 329 (CLB) (b) MAIF Investment India (P.) Ltd. v. Ind-Bharat Power Infra Ltd. [2019] 108 taxmann.com 580/155 SCL 578 (NCL-AT) (c) Ultrafilter Gmbh v. Ultrafilter (India) (P.) Ltd. ILR 2012 Kar. 2809 (d) Dr. V. Sebastian v City Hospital (P.) Ltd. [1985] 57 Comp. Cas. 453 (Kar.) (e) Manoj Kumar Kanunga v. Marudhar Power (P.) Ltd. [2012] 27 taxmann.com 144 (CLB) (f) Incable Net (Andhra) Ltd. v. Apaksh ....
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....m Balwant Bhandare & Shri Parag Ram Bhandare, subscribing 500 Shares each. The relevant Articles contained in the Articles of Association of the Company are: Article 5 which deals with Issue of Shares, Article 14, which deals with Alteration of Capital, Article 15 deals with Meetings of the AGM, Article 16 deals with Appointment of Directors, Article 20 deals with the requirement of holding Qualification of Director and Article 25 deals with General Powers of the Board. The aforementioned Articles reads as under: "5. Issue of Shares Subject to the provisions of the Act and these Articles, the shares of the Company for the time being shall be under the control of the Board of Directors who may issue, allot or otherwise dispose of the same to such persons, in such proportion and on such terms and conditions and either at a premium or at par or subject to compliance with the provisions of Section 79 of the Act, at a discount and at such times as they may from time to time think fit and proper. 14. Alteration of Capital The Company may from time to time; by ordinary resolution increase the Shares Capital by such sum to be divided into shares of such ....
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....anged from 21,000 shares to 210,000 shares, by virtue of the impugned allotment. Therefore, there is no change in the shareholding of the Petitioner. 11. As stated supra, Axis Bank has issued letter dated 19th December, 2007 sanctioning of Credit Facilities to R-l Company for total amount of Rs. 18.45 cr., wherein one of the Conditions is equitable mortgage of 14 Acres of land in question, personal guarantees of R-2, 3 and 6. Subsequently, Axis Bank has issued a sanction letter Ref. AXIS/SME/HUB/MEG-27/2018-19 dated 04.10.2018 to MD of R-l Company, which is enclosed as Document No. 27 to Reply of R-l to 3, wherein (under clause 12) one of the conditions imposed by the Bank is that Borrower/Obligator shall not without prior written approval of the Bank permit any change in its ownership/control/Management (including pledge of promoter/Sponsor shareholding in the Borrower to any third party etc. In tune with the said conditions, the Board of Directors of the Company in its meeting held on 7th January, 2008 has placed the above Bank letter and thus resolved to go ahead with the said loan. Another Board meeting held by the Second and Third Respondent on 26th September, 2009, wherein....
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...., after increasing Authorized share capital, which could ultimately not be done due to the opposition by the Petitioners. Therefore, the facts and circumstances as detailed supra, fully justified the impugned allotment of shares to the Respondent. The Petitioners cannot question the decisions taken by the Board of Directors of the Company before they have entered into the Company and the impugned allotment is made by the Directors well within their powers and the allotment is purely consequential to security taken from the Respondent No. 6 and the assurance given to her. Moreover, as stated supra, the Petitioners, for the reasons best known to them, did not want to offer any security and guarantee and be part of management of Company by becoming Directors, at the relevant point of time. And it is not the case of Petitioners that the Petitioners are not associated with another Company namely, AKP Foundries Ltd to plead their ignorance of developments takes place in both the Companies. 13. It is relevant to point out here that Sanction of Credit Facilities, Axis Bank letter No. AXISB/BLGM/AKP/2007-2008 dated 19.12.2007, inter alia contains several terms and conditions and one of t....
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....intment as Directors. On the contrary, they were not willing to share responsibility for obtaining loans to the Company. As per Articles of Association, Directors are not required to hold any shares of the Company. 15. The Respondent No.1 and Respondent No.6 have also entered into Articles of Agreement dated 23.01.2019, agreeing to the following terms and conditions: 1. Issuance and Allotment of Equity Shares: In consideration of the personal guarantee and surety of her immovable property furnished by the guarantor to Axis Bank Limited from 2008 onwards and as agreed in the term sheet attached as Exhibit A and the Company's letter cited above, the Company through a board resolution in the board resolution in the board meeting held on this 23rd January 2019 allots 1,89,000 (One Lakh Eighty Nine Thousand) equity shares of Rs. 100/- (One Thousand) each aggregating to a sum of Rs.l,89,00,000/-(One Crore Eighty Nine Lakhs Only) to the guarantor, through one shares certificate bearing distinctive Nos.6,10,998 to 7,99,997 and the Guarantor hereby accepts such part settlement of her dues. 2. Share Value: The equity shares are being iss....
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....mpany assembled in this extraordinary general meeting acting in terms of sub-section 3 of section 188 of Companies Act, 2013 do hereby cancel the related party transaction of 4 acres of land made by the Company to AKP FOUNDRIES PRIVATE LIMITED which the requisitionist allege, is under this Company without the approval of share holders. .......... carried with majority vote of five members, three members voted against the resolution on show of hands". Explanatory Note: "The Chair and Board under the circumstances deemed that the Board having already maintained that the Deed of Sale of 4 acres in favour of AKP Foundries as executed in pursuance of a Resolution passed by it on 25th July, 2018 was a legal imperative and was in the best interest of the Company apart from being legal, competent and valid as above. And the Directors of this Board, nonetheless, make it clear that in the event the sale deed as executed in terms of Board Resolution dated 25th July, 2018 stands validly cancelled eventually by a judgment of a court of competent jurisdiction, if the Company faces any claim for damages and suffers any losses or damages, 1) Anil Bakshi 2) Milin....