TaxTMI 
TaxTMI 
2020 (11) TMI 296
X X X X Extracts X X X X
X X X X Extracts X X X X
....hwanath, Advocate. Mr. Shabaz Hussain, Advocate for R-8. Mr. KS Ravichandran, PCS for R-10. JUDGEMENT Jarat Kumar Jain. J 1. National Company Law Tribunal, Bengaluru Bench, Bengaluru vide Order dated 18.10.2019 allowed an Application, I.A No. 317 of 2019 in CP No. 82/BB/2019, whereby dismissed the Company Petition as it did not meet the threshold criteria under Section 244 of the Companies Act, 2013 (hereinafter referred to as 'the Act'). Hence, the Petitioners (Appellants herein) have filed this Appeal under Section 421 of the Companies Act, 2013. 2. Brief facts of this case are that the Appellant Nos. 2 and 3 are the wife and daughter of Appellant No. 1 respectively. The Appellants are Directors and Shareholders of the Respondent No. 1 Company. The Respondent No. 1 Company was incorporated on 17.03.1994 under the Companies Act, 1956. It's Registered Office was in Tamil Nadu, subsequently in the year 1986, the Registered Office was shifted to Bengaluru, Karnataka. The Respondent No. 1 Company is primarily owned and controlled by the Appellant no 1's family and Respondent No. 3's family, the legal heirs of late Basava Purnaiah who acquired the same in the year 1992 from....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he entire proceeding before the Tribunal. Section 244(2) does not provide that the consent of the Members supporting the Petition is necessarily filed alongwith the Petition under Section 241 of the Act. The maintainability of the Petition is challenged on technical ground and the issue is mixed question of law and fact. Therefore, cannot be taken up as a preliminary issue hence, the Application deserves to be dismissed on this ground alone. 5. Learned Tribunal held that in fact the Appellants (Petitioners) are holding 8.93%, 8.10% and 8.52% shares respectively and remaining shares are sub-judice before the Hon'ble High Court of Karnataka as the Will of (Late) Mr. Basava Purnaiah and (Late) Mrs. C. Sarojini are in dispute and the implementation is stayed. The Appellants have based their claim on undeclared title of shares. Therefore, the Petition is not maintainable. The Appellants jointly hold 25.55% shares in the Respondent No. 1 Company but the Appellant No. 1 has not obtained and filed the written consent of the Appellant Nos. 2 and 3 alongwith the Petition. The General Power of Attorney of Appellant Nos. 2 and 3 in favour of Appellant No. 1 dated 04.04.2019 would not fulfil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of Hon'ble Supreme Court in the case of J. P. Srivastava Vs. Gwalior Company Sugar Ltd. (2005) 1 SCC 172 and Bhagwati Developers Pvt. Ltd. Vs. Peerless General Finance & Investment Company & Anr. (2013) 5 SCC 455. 8. Learned Counsel for the Appellants also submitted that Section 244 of the Act, only provides for obtaining written consent of other members but does not speak for filing such consent alongwith the Petition. Hence, non- filing of the Consent alongwith the Petition would not ipso facto result in the dismissal of the petition. 9. Learned Counsel for the Appellants further submitted that though Rule 81(2) of National Company Law Tribunal Rules, 2016 (in brief NCLT Rules, 2016) provides that the consent signed by the rest of members shall be annexed with the Petition. However, non-compliance of this Rule would not ipso facto result in the dismissal of the petition as Rule 58 of the NCLT Rules, 2016 provides that failure to comply with any requirement of these Rules shall not invalidate any proceedings, unless the Tribunal is of the view that such failure has resulted in miscarriage of justice. 10. Learned Counsel for the Appellants lastly submitted that the defec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....14%) of the Appellant No. 1 is contrary to the record, therefore, the Appellant No. 1 individually cannot maintain the petition. 15. Learned Senior Counsel for the Respondent Nos. 2 to 5 further submitted that a Joint Petition can be filed with the written consent of other members and the consent should be filed alongwith the Petition. There is no pleading in the petition that the Appellant No. 1 has obtained the written consent of Appellant Nos. 2 and 3 for filing the petition under Section 241 of the Act. Rule 81 of the NCLT, Rules, 2016 provides that in case of Joint Petition under Section 241 of the Act, written consent shall be annexed to the Petition. In the present case, the Appellant No. 1 produced a GPA of the Appellant Nos. 2 and 3 subsequently but not alongwith the Petition. The statement in the GPA shows that it was created subsequently, and did not exist at the time of presentation of the petition. It is also submitted that the Appellants produced another GPA which was undated and referred to a completely different proceeding to be initiated in future and which sought to rectify some other Power of Attorney dated 26.03.2019, which is non-existent. Thus, the GPAs fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vil Procedure, 1908. The Hon'ble Supreme Court in the Case of Bhau Ram Vs Janak Singh (2012) 8 SCC 701 has laid down the law that in order to decide an application for rejection of plaint under Order 7 rule 11 CPC, the Court is precluded from considering the defense of the defendants and their evidence. The Court has to look into the pleadings in the plaint and the documents annexed with the plaint. The stand of the defendants in the written statement or in the application is wholly immaterial for deciding the application under Order 7 Rule 11 of the CPC. 20. Hon'ble Supreme Court in the case of J.P. Srivastava (supra) held that the objection of maintainability of the petition on the ground that without obtaining the consent of members, a Joint Petition has been filed for mismanagement or oppression, then such issue can be decided on the basis of the averments contained in the petition alone, accepting the pleas therein as correct. 21. The law is well settled that an objection as to 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. It is general principle that a petition is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e turned on the wording of Section 153-C (3) of the 1913 Act such as Makhan Lal Jain vs. The Amrit Banaspati Co. Ltd AIR 1953 Allahabad 326 when in the context of Sub section 3 of Section 153-C (a) it was held: " the law requires that the consent should be in writing, i.e., in the form of a document. Therefore, the document itself should prove that the consent has been given. No evidence, either by way of affidavit or of oral sworn statement in Court, can be given to prove that such consent was given." 39.The reasoning in this decision would no longer be apposite having regard to the change in the language in Section 399(3) and the shifting of the requirement from the Act to Regulation 18 of the Company Law Board Regulations, 1991 (hereinafter referred to as "the Regulations"). Regulation 18 also does not itself contain the requirement for filing the consent letters. The Requirement has been prescribed in Annexure III, which is referred to in documents required to be annexed to Petitions relating to the exercise of Powers in connection with prevention of oppression or mismanagement under Sections 397, 398, 399(4), 400, 401, 402, 403, 404 and 405. The documents req....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the basis of evidence not annexed thereto. Since the CLB calculated the total shareholding of the company including preference shares based on the allegations contained in the respondent No.8's application, it was for the CLB to determine the issue of actual prior consent on evidence. This view finds support from Reg. 24 which says: 24. Power of the Bench to call for further information/evidence: - The Bench may, before passing orders on the petition, require the parties or any one or more of them, to produce such further documentary or other evidence as the Bench may consider necessary. - (a) for the purpose of satisfying itself as to the truth of the allegations made in the petition; or (b) for ascertaining any information which, in the opinion of the Bench, is necessary for the purpose of enabling it to pass orders on the petition." 25. With the aforesaid proposition, it is clear that the requirements contained in Regulation 18 of Company Law Board Regulation, 1991 can hardly be said to be mandatory in the sense that non-compliance would ipso facto result in the dismissal of the petition. Thus, we can say that sub-section 2 of Section 244 of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate that the persons who have signed the consent letters have applied their minds to the question before them and on application of minds have given consent for a certain action. Under section 402 of the Act, the court, on an application under sections 397-398 and without prejudice to the generalities of the powers of the court, can grant several types of reliefs. In this background, lit is necessary that the writing must indicate that the members giving consent had applied their minds to the allegations to the made and the reliefs sought to be prayed for in the proposed action and have given their consent for seeking those reliefs. This is apparent from the expression "consent in writing". Had the intention been that the writing should not indicate the application of mind, then there was no necessity for using the term "consent in writing" and mere word "consent" could have been used. To hold that the requisite members can give their consent in writing without applying their minds or without considering the nature of the allegations and the reliefs sought would frustrate the entire purpose of section 399 which prohibits the filing of an application under section 397 or 398 of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ical grounds as the written consent of the other members has not been obtained and filed alongwith the Petition. Whether consent should be given by a member personally or power of attorney holder of such member can give consent? 30. Hon'ble Supreme Court in the case of Bhagwati Developers (P) Ltd. (Supra) followed the earlier judgments in the case of J.P. Srivastava (Supra) and P. Punnaiah (Supra) and held as under:- "16. Section 399 of the 1956, Act neither expressly nor by implication requires that the consent to be accorded therein, should be given by a member personally, as the same can also be given by the power-of-attorney holder of such a shareholder. Furthermore, the issue of consent must be decided on the basis of a broad consensus approach, in relation to the avoidance and subsistence of the case. The same must (sic not) be decided on the basis of the form of such consent, rather on the substance of the same. There is hence, no need of written consent, or even of the consent being annexed with the company petition. [vide P. Punnaiah V. Jeypore Sugar Co. Ltd. and J.P. Srivastava and Sons (P) Ltd. V. Gwalior Sugar Co. Ltd.] 17. In view of the above, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... facto would not result in dismissal of the petition. The GPA executed and notarized on 04.04.2019 and the petition under Section 241 and 242 of the Act filed on 30.04.2019. There is no finding rendered by the Tribunal that the GPA is back dated or a forged document and the Appellant Nos. 2 and 3 are not denying the execution of this document. 34. Learned Tribunal in the impugned Order without discussing any evidence stated that execution of the GPA was itself doubtful which might have been executed subsequent to filing of the main Company Petition. In the case of J.P. Srivastava (Supra), there was an allegation that the stamp paper on which the Affidavits have been affirmed were purchased subsequently, however, the Hon'ble Supreme Court declined to accept this plea and held as under:- "37. It is true that criminal proceedings have been instituted by the respondents on the allegation that the stamp paper on which the affidavits have been affirmed were purchased subsequently. But we are not prepared to reject the documents as forged ones not only because the executants have hotly contested the allegations but also because there is no finding to that effect by any of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y. However, it is of interest that the English Companies Act contains no such limitation. What is required in these matters is a broad common sense approach. If the Court is satisfied that the petitioners represent a body of shareholders holding the requisite percentage, it can assume that the involvement of the company in litigation is not lightly done and that it should pass orders to bring to an end the matters complained of and not reject it on a technical requirement. Substance must take precedence over form. Of course, there are some rules which are vital and go to the root of the matter which cannot be broken. There are others where noncompliance may be condoned or dispensed with. In the latter case, the rule is merely directory provided there is substantial compliance with the rules read as a whole and no prejudice is caused. [See: Pratap Singh v. Shri Krishna Gupta AIR 1956 SC 140] In our judgment, Section 399(3) and Regulation 18 have been substantially complied with in this case." (Emphasis added.) 40. Now, in the light of settled position of law, we have considered the facts of the case in hand. Admittedly, the Respondent No. 1 is a family Company, in which ....