TaxTMI 
TaxTMI 
2020 (6) TMI 16
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....egislative intent and Object as Enshrined. b) That the Honourable court be please to grant interim/ad interim injunction staying operation and implementation of the illegal meeting dated 27.11.15 and further be pleased to grant an order of status quo restraining Respondent nos. 1,2,3 & 4 from acting under the purported authority as shareholder, directors or as owners of the assets of the company. c) That the Honourale Court be please to pass such further orders or directions as justice of the case mandates." 2. Brief facts of the case of the petitioners are as under : 2.1) It is the case of the petitioners that petitioners no. 2 to 4 are the directors and shareholders of petitioner no.1 company. The petitioner no.1 company was incorporated by the petitioners no. 2 to 4 who are founders as well as the promoters, directors and with their family and friends hold 100% shareholding in the petitioner no.1 company. 2.2) It is the case of the petitioners that the petitioner no.1 company had invested into huge expansion and modernization in the year 2000, but due to repeated and extended labour problems and strike, such investments did not yield positive results and caused tremendous....
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....held on 27.11.2015, the respondents no. 1 to 4 increased the authorized share capital of the petitioner no .1 company, though there was no agenda for the same and after the increase in the share capital, shares were allotted to the respondents nos. 1 to 4 contrary to the provisions of section 42 of the Companies Act, 2013 without following due process of law prescribed therein, as the shares were not offered to the existing promoters and share holders or directors of the company under the private placement offers and such shares were allotted directly to respondents nos. 1 to 4 so as to affect the voting rights resulting into change in the management and obtain the back door control of the company. 2.9) It appears that respondents no. 1 and 2 addressed a letter dated 11.12.2015 to the Registrar of Companies, Gujarat State giving particulars and requesting for registering of the change in the shareholding of the directors of the company for declaring them as new management of the petitioner no.1 company. 2.10) According to the petitioners as the BIFR was not functional and no hearing was taking place before the BIFR at the relevant time, the petitioners have approached this Court ....
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.... 21(b) is granted. 5. In case of difficulty, the respondents are at liberty to apply for suitable clarification/modification of the present order. Direct service permitted." 4. Heard learned advocate Mr. Abhisst K. Thaker for the petitioners. It was submitted by him that the respondents no. 1 to 4 held illegal meeting on 27.11.2015 and false documents were submitted by them to effect a surreptitious "Change Of Management" in violation to BIFR order dated 17.07.2013. 4.1) It was submitted by Mr. Thaker that meeting dated 27.11.2015 should be declared illegal as in such meeting there is a "Change Of Management"and allotment of new shares which is not only in violation to the sanctioned scheme SS13, but also amounts to interfering with implementation of the sanctioned scheme in contravention of the bar of limitation contained in section 22 of SICA Act. 4.2) It was submitted by Mr. Thaker that provisions of SICA Act would override the provisions of the Companies Act, 2013 as both cannot exercise concurrent jurisdiction in regard to control of assets of the sick company, its management and allotment of shares. Reliance was placed on the decision of Supreme Court in case of NGEF L....
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.... old resignation letters dated 4.2.2015 of the petitioners no. 2 to 4 on Ministry of Company affairs (for short "MCA") website on 15.3.2016 with their own digital signatures. It is further stated that the respondents had also deactivated the digital signatures of the petitioners-directors and thereby they were prevented from their right to comply and regularize the requirements of the Companies Act,2013 on the MCA website. It was further pointed out that the resignation letters dated 4.2.2015 could not have been uploaded on 15.3.2016 after a period of almost 11 months. 4.6) Learned advocate for the petitioners therefore, submitted that there is a clear violation of the orders passed by BIFR and therefore, the petition deserves to be allowed. 4.7) The learned advocate for the petitioners also relied upon the decision in case of Dale & Carrington Invt. (P) Ltd. and another v. P.K. Prathapan and others reported in (2005) 1 Supreme Court Cases 212 to contend that the action of reducing the majority shareholder to minority shareholder by mala fide act of the company or the Board of Directors of the company amounts to act of oppression to the petitioners no. 2, 3 and 4. It was therefor....
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.... respondents nos. 1 and 2 as directors in the year 2007 and 2009 by referring to such documents annexed with the affidavit in reply. It was therefore submitted by Mr. Bhatt that the scheme was sanctioned on 17.7.2013 whereas respondents nos.1 and 2 were appointed as directors much earlier which was suppressed by the petitioners. Learned advocate for the respondents further submitted that the petitioners have suppressed the fact of tendering of resignations by petitioners no. 2,3 and 4 on 4.2.2015 which were accepted in the meeting of the Board of Directors held on 15.3.2016 and relevant form NO. DIR12 has also been filed with the Registrar of Companies giving intimation of the said three persons ceasing to be the directors of the company as provided under section 168 of the Companies Act, 2013. It was further pointed out that a public notice was also published in the local daily newspapers Gujarat Samachar, Sandesh and Divya Bhaskar on 18.3.2016 intimating to the general public at large that the petitioners no. 2, 3 and 4 have resigned from the office of director of the company. 5.2) Learned advocate for the respondents submitted that the petitioners have suppressed the execution ....
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....% of shareholding is also false. 5.5) The learned advocate for the respondents further relied upon the sanctioned scheme of the BIFR to point out that in the proceedings held on 30.4.2010, BIFR directed the petitioner no.1 company and respondent no.5 Bank of India to furnish the information sought for within three weeks, wherein it is pointed out that the cutoff date of the scheme would be changed to 31.3.2009 instead of 1.4.2007 and moreover, the BIFR also took the notice of apparent change of management that has taken place in the company. It was therefore, submitted by Mr. Bhatt that when BIFR passed the sanctioned scheme, there was already a change of management and therefore, the contention raised by the petitioners is contrary to the facts on record. 5.6) Learned advocate for the respondents relied upon the decision of the Jharkhand High Court in case of Munnam Sanjay and others v. The State of Jharkhand and others in Writ Petition No. 3140/2016 and other allied mattes rendered on 8th January, 2019 to submit that if the petitioners have suppressed the material facts, the petition is liable to be dismissed. 6. Having heard the learned advocates for the respective parties an....
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....not be executed without the prior approval of BIFR. As such, Mazda Agencies does not have any right to raise any objection on the DRS. The ld consultant also drew the attention of the Bench to Clause 8(2) on page 15 of the DRS and stated that company in line of the judgment of Delhi High court in the matter of M/s. Continental Carbon ltd v. M/s. Modi Rubber Ltd has provided an option to all the unsecured creditors not to accept the scaled down value of their dues and wait till the scheme of rehabilitation of the company has worked itself out with an option to recover their debts post such rehabilitation. Thus, Mazda Agencies and all other unsecured creditors have option not to accept scaled down value of their dues under this clause and instead wait to recover their debts post such rehabilitation. The ld Consultant also stated that the company is mainly seeking two (02) reliefs from Unsecured Depositors and Unsecured Creditors. The company is not seeking any reliefs from any secured creditors or from any statutory authority. He requested the Bench to sanction the scheme, so as to enable the company to implement at the earliest. 2.4 The Bench noted that OA(BOI) in its report has a....
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....nds infusion has become possible. Until March 12 they have already brought in Rs. 539 lac and committed to bring further Rs. 362 lac to fully tie up the total means of Finance of Rs. 901 Lac needed to put through the Rehabilitation of the company. They would also bring in, if there is any shortfall, additional funds for the successful implementation of RS. The management undertakes to bring in any further funds in the form of equity interest free unsecured loans to finance any shortfall in cash generation to meet the repayment obligation as per DRS. In order to show a long term commitment of management to the cause of rehabilitation of the company promoters contribution to the extent of Rs. 500 lac is sought to be converted in to equity at part - 50 lac equity shares of Rs. 10 each." 7. With regard to general terms and conditions, BIFR has observed in the sanctioned scheme as under : "11. General Terms & Conditions i) BOI is appointed as the Monitoring Agency (MA). The company shall pay the MA fees to BOI in consultation with the Board from COD. ii) The company shall constitute a Management Committee (MC) consisting of CEO of the company, Special Director of BIFR, if any ....
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....concerned parties would be free to withdraw the reliefs and concessions granted by them subject to prior approval of BIFR. x) In the event of default in payment of principal or interest on due dates. Such defaults shall carry as and by way of liquidated damages, extra interest @2% pa over and above the lending rates of the banks as may be prevailing at the time of such default for the period of such default. xi) The company shall submit progress reports (PR) regarding the implementation of the scheme to MA on quarterly basis within one month following the end of the quarter during the first two years of the scheme and on half-yearly basis thereafter till full implementation if the progress has been satisfactory in terms of projections. MA shall monitor the implementation of the scheme in all its aspects and shall submit a review of the implementation of the scheme to BIFR within a month of receipt of such PR with copies to BOD of the company and to all concerned. If the company defaults to submit the PR, OA must report to the Board also. xii) The loans inducted/to be inducted by the promoters shall be subordinated and interestfree and shall not be withdrawn during the rehabil....
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.... petition as stated here in above, more particularly, tendering of resignations in February 2015 which is not at all disclosed by the petitioners. 10.The decision of the Supreme Court in case of Dale & Carrington Invt. (P) Ltd. and another (supra) relied up on by the petitioners is also of no assistance in the facts of the case as in the case before the Supreme Court, it was a case of oppression and mismanagement under section 397 of the Companies Act, 1956. The Supreme Court therefore, held that whether issuance of such shares would amount to oppression or not would depend on the facts of a particular case. In facts of the case before the Supreme Court, it was found that the issuance of additional shares was with the sole object of gaining control of the company by becoming majority shareholder and such allotment found to be mala fide, not in the interest of company and in violation of the proper and legal procedure prescribed in by the Articles of Association of the Company, it was held that it was a clearly an act of oppression on the part of the directors towards the majority shareholders. Therefore, the Supreme Court in the facts of the case before it came to the conclusion t....
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.... it. But the suppressed fact must be a material one in the sense that had it not been suppressed it would have had an effect on the merits of the case. It must be a matter which was material for the consideration of the court, whatever view the court may have taken. Thus when the liability to income tax was questioned by an applicant on the ground of her non-residence, the fact that she had purchased and was maintaining a house in the country was held to be a material fact, the suppression of which disentitled her to the relief claimed. Again when in earlier proceedings before this Court, the appellant had undertaken that it would not carry on the manufacture of liquor at its distillery and the proceedings before this Court were concluded on that basis, a subsequent writ petition for renewal of the licence to manufacture liquor at the same distillery before the High Court was held to have been initiated for oblique and ulterior purposes and the interim order passed by the High Court in such subsequent application was set aside by this Court. Similar1y, a challenge to an order fixing the price was rejected because the petitioners had suppressed the fact that an agreement had been en....
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....d then moved an application under Article 32 before this Court for the same relief, normally the court will not entertain the application under Article 32 but wherein appellate jurisdiction the order is not a speaking one or the matter has been disposed of on some other ground, this court, as, in a suitable case, entertain the application under Article 32 and as such it has been held that the fact a suit had already been filed by the appellant was not such a fact the suppression of such could have affected the final disposal of the writ petition on merit. Taking into consideration the judgment passed by Hon'ble Supreme Court in the case of S.J.S Business Enterprises (P) Ltd. Vrs. State of Bihar and Others, (2004 7 SCC 166 [LNIND 2004 SC 348) their Lordship in case of Arunima Baruah Vrs. Union of India and Others(2007) 6 SCC 120 [LNIND 2007 SC 556] have been pleased to hold at paragraph 22 that suppression of filing of suit is no longer is a material fact. 15. In another judgment rendered by Hon'ble Supreme Court in the case of Prestige Lights Ltd. Vs. State Bank of India, (2007) 8 SCC 449 [LNIND 2007 SC 978] their Lordship have held that the writ petition cannot be entert....
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.... or distorted, the very functioning of writ courts and exercise would become impossible. The petitioner must disclose all the facts having a bearing on the relief sought without any qualification. This is because 'the court knows law but not facts" 39. If the primary object as highlighted in Kensington Income Tax Commrs. is kept in mind, an applicant who does not come with candid facts and "clean breast' cannot hold a writ of the court with 'soiled hands'. Suppression or concealment of material facts is not an advocacy. It is a jugglery, manipulation, manoeuvring or misrepresentation, which has no place in equitable and prerogative jurisdiction. If the applicant does not disclose all the material facts fairly and truly but states them in a distorted manner and misleads the court, the court has inherent power in order to protect itself and to prevent an abuse of its process to discharge the rule nisi and refuse to proceed further with the examination of the case on merits. If the court does not reject the petition on that ground, the court would be failing in its duty. In fact, such an applicant requires to be dealt with for contempt of court for abusing the process of the cou....