TaxTMI 
TaxTMI 
2018 (2) TMI 1988
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the appeal memo are as under :­ (i) On 4.7.2005 respondent no.1 company was incorporated. The authorized, issued and paid up equity share capital of respondent no.1­Safe Heights Developers Pvt. Ltd. (the Company) at the time of incorporation was Rs. 2,00,000/­ divided into 20,000 equity shares of Rs. 10/­ each. Appellant no.1 and appellant no.2 and respondent no.2 and respondent no.3 were the first directors and shareholders of the company at the time of incorporation and account was opened in the name of the company on 7.7.2005 with Samata Sahakari Bank Ltd. in which appellant no.1 and respondent no.2 were the signatories. (ii) On 27.6.2006 an account was opened in the name of company with HDFC Bank, Goregaon branch in which appellant no.2 and respondent no.2 were joint signatories. Respondent no.2 resigned from office of director on 2.11.2006 which was accepted by Board and form 32 was filed accordingly with Registrar of Companies (ROC). (iii)On 6.11.2006 an Extra­ordinary General Meeting was called in which the authorized capital of the company was increased from Rs. 2,00,000/­ to Rs. 5,00,000/­. (iv)On 14.3.200....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ued. 4 Broadly stated, the issues raised by the appellants were as under :­ (a) By a rights issue in 2007, the shareholding of the Petitioners had been diluted; allegedly no notices were given for the meetings pertaining to the rights issue; (b) The Respondents had caused the registered office of the Company to be shifted on two occasions; allegedly no notices were given for the meetings pertaining to the shifting of the registered office; and (c) disputes pertaining to appointment and removal of directors. 5 The CLB has analysed in detail the various submissions made by the Appellants, and after considering the factual matrix, the submissions made on both sides and the position in law, passed a detailed, comprehensive judgment dismissing the Petition, but directing the Respondents to buy out the Petitioners' shareholding. Limited Scope of Section 10­F 1. It is well settled, as held, inter alia, by the Hon'ble Supreme Court in V.S. Krishnan & Ors .v. Westfort Hi­Tech Hospital Limited & Ors. and followed in Purnima Manthena & Anr. v. Renuka Datla & Ors that an Appeal under Section 10­F of the Companies Act, would lie only on a ques....
X X X X Extracts X X X X
X X X X Extracts X X X X
....LB in the present case. 8 The Appellants' submissions proceed on a fundamentally erroneous basis that the scope of this Court's jurisdiction under Section 10­F is not limited to adjudication of questions of law arising out of the order, but also extends to questions of facts in certain circumstances. This is a misreading of the judgments of the Hon'ble Supreme Court. It is clear that the scope of jurisdiction of this Court is restricted to a question of law and only if it can be held that a finding of fact is perverse and based on no evidence, then that perversity itself may be treated as a question of law. This is not to say that this Court would be required to minutely analyse the judgment of the CLB on all factual aspects and arrive at a conclusion that a particular fact ought to have been considered differently, or that some other conclusion ought to have been arrived at on the facts. This Court would truly be required to assess the judgment of the CLB holistically to ascertain whether the judgment is based on no evidence and is therefore perverse. In the present case, under no circumstances can it be said that the judgment of the CLB is either perverse or cursory or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....titled to submit to the superior court that a certain ground had been argued to which no reference is found in the judgment. Delay and Laches in filing the Petition 11. This Court, in the context of a similarly discretionary order under Section 111 of the Companies Act, 1956, in Sulochana Neelkanth Kalyani v. Takle Investments Co. & Ors., has held that exercise of such discretion could certainly be affected by inordinate and unexplained delay and laches and that any such delay may render granting of the relief inequitable, as there could be equities arising in favour of other parties as a result of such delay and also such delay may give rise to a case of acquiescence, waiver or estoppel. These aspects would be for the CLB to assess and would depend upon the facts and circumstances of each case. 12. In the Petition filed by the Appellants before the CLB, the Appellants have set out the various acts, which according to them constituted oppression and mismanagement, including the rights issue and the shifting of the registered office. Thereafter it is the case of the Appellants that when they became aware of the purported conduct of Respondent Nos. 2 and 3 "then on 5th Novem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gross delay in approaching the CLB, and the CLB in the exercise of its discretion has held that the delay was excessive. This exercise of discretion by the CLB ought not to be interfered with by this Court in its narrow jurisdiction under Section 10­F of the Companies Act, 1956. 15. Therefore, I find nothing wrong in the CLB concluding that on the ground of delay and laches alone, the Petition could have and ought to have been dismissed even without going into the allegations raised by the Appellants. Unclean Hands 16 The CLB has, after a detailed consideration of the Appellants' conduct, arrived at a finding of fact that the Appellants had suppressed material facts and had not come with clean hands, having indulged in various acts of misconduct as set out in the order, including running a parallel Board of Directors, holding meetings without any notice (as opposed to the Respondents having shown UPC records for service of notice for their meetings) and appointing / removing directors at their whim. The CLB has rightly noted that a party seeking relief in an equitable jurisdiction must itself act equitably (i.e., a person who wants equity must do equity), and has arriv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f would be sufficient if both communications were forwarded under the same UPC certificate and/or in the same packet. These are factual matters, which if had been pressed before the CLB would duly have been answered by the CLB after hearing both sides, but this aspect was not urged, as is apparent from the judgment of the CLB. 21 In this context, the CLB has rightly held on the basis of Section 53 of Companies Act, 1956, that there arises a rebuttable presumption that the documents were served on the Appellants under certificate of posting. As held by the Hon'ble Supreme Court in the case of V. S. Krishnan (supra) relying on the judgment of the Hon'ble Supreme Court in M. S. Madhusoodhanan v. Kerala Kaumudi Private Limited, the burden was on the addressee, i.e., the Appellants herein, to rebut the statutory presumption and show that the notice had not been received by them. Admittedly in the present case no such attempt has been made by the Appellants to show that the notice was in fact not received by them. In the circumstances, it cannot be said that the CLB judgment is perverse or unreasonable or arbitrary on this score. 22 The Appellants have sought to rely upon certain j....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paragraph 115 of M.S.Madhusoodhanan (supra) to contend that when the relationship between the parties was embittered the proof of service of notice by a certificate of posting must be viewed with suspicion. It is pertinent to note that in the present case, after the meeting of 14th March 2007 as set out later, in which the Appellants have participated in raising the share capital, and until the issuance of the show cause notice on 5th November 2007, (during which time the notices were sent by UPC) there is no record whatsoever to show that the relationships between the parties was in any manner embittered. During this period between March 2007 and November 2007 there was no embitterment whatsoever and it was during this period that the rights issue took place culminating on 22nd September 2007, as also the shifting of the registered office in April 2007 and July­August 2007. Hence, the notices sent for these meetings under UPC during this period, cannot possibly be required to be viewed with any suspicion on the ground of purported embitterment, or otherwise. 23 Before the CLB, the case of the Appellants was that the UPC notices were infirm and should not be relied upon beca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Company from Rs. 5,00,000/­ to Rs. 55,00,000/­. The explanatory statement for the meeting held on 14th March 2007, placed on record by the Appellants themselves , bearing Appellant No.1's digital signature, expressly records that the shareholding was being increased as the Company "wishes to enhance its current business greatly", and that the present authorised capital of the Company was "very small and would be a constraint to the growth of the Company". Admittedly, validity of these meetings which were referred to in paragraphs ii(a) and (b) of the Respondents' Reply , and the Appellant Nos. 1 and 2's presence have been accepted in paragraph 6 of the Appellants' Rejoinder . 26 The rights issue was thus obviously contemplated as being the avenue for increasing the funds of the Company and for the growth of the Company. The CLB has recorded a finding of fact (in paragraph 28) that the rights issue was necessary for the growth of the Company and therefore the action of issuing the shares could not be termed as oppressive to the Appellants and/or mismanagement of the affairs of the Company. 27 Pertinently, despite being party to the above meetings, at no point did ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oted that the jurisdiction of the ROC was notchanged, and there was no prejudice whatsoever caused to the Company by virtue of the change of the registered office. The sequence of events relating to the shifting of the registered office have been set out in paragraphs (i) to (iii) of the Reply filed by the Respondents in the CLB . 33 As laid down by the Hon'ble Supreme Court in Hanuman Prasad Bagri v. Bagress Cereals Private Limited, shifting of the registered office by itself may not be a reason or a ground to be raised in a Petition under Sections 397 / 398 as long as the Company did not suffer much loss on account of the shifting and no case was made out to show that such exercise was undertaken to put oppressive pressure or pain upon the Petitioners. As in the case that was before the Hon'ble Supreme Court, there is nothing in the present case to show that any prejudice was/is caused to the Appellants or that any wasteful expenditure amounting to mismanagement was incurred on behalf of the Company by shifting of the registered office. 34 Pertinently, it is the admitted position that the UPC amount paid was Rs. 3/­. It is more than sufficient for service on Appellant N....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... extent, on points not raised before the CLB or before this Court in the arguments canvassed by the Appellants. The said judgments pertain to several aspects which were neither pressed before the CLB or before this Court, and to the extent that the same are placed in reliance of a case not pressed before the CLB or this Hon'ble Court, the judgments ought to be disregarded. Nevertheless, the said judgments are broadly dealt with hereinbelow: 40 As regards Dushyant D.Anjaria Vs. M/s.Wall Street Finance Ltd. ; 17Yogendra Kumar Maheshwari Vs. Registrar of Companies; and P.Natarajan V/s. Central Government, of the Compilation are in cases which were not under Section 397/398. 41 As regards Dushyant D.Anjaria (supra), Yogendra Kumar (supra); P.Natarajan (supra) ; Sishu Ranjan Dutta Vs. Bhola Nath Paper House Ltd.,; 20Harikumar Rajah V/s.Sovereign Dairy Ltd. (Mad) ; Hindusthan Co­operative Insurance Society Ltd. In re ; Sintex Industries Ltd., In re, pertain to appointment of (Additional) Directors and the tenure thereof. The appointment and duration of Directors is a matter beyond the scope of jurisdiction of the CLB, and in any case is not the grievance urged before this C....