TaxTMI 
TaxTMI 
2020 (12) TMI 1176
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....aluru Bench, Bengaluru while passing the impugned order dated 05.06.2020 at paragraph 10 and 11 had observed the following: - "10. It is not in dispute that the Applicant/Petitioner is still having 09% of the total share capital, after original shareholding was unjustifiable reduced from 45%, by virtue of rights issue, which is under challenge in the main Company Petition. While considering an Application filed seeking to waive the requisite conditions, U/s 244(1) of the Companies Act, 2013, the broad issues to be considered are whether the Petitioner has made out prima facie case in the main case or it is filed on mere baseless or frivolous grounds or on assumptions/presumptions, in order to abuse the judicial process. As stated supra, the main Company Petition is filed by the Petitioner by questioning various acts of oppression and mismanagement, which are found to be prima facie meritorious so as to consider those allegations at the time of final hearing of the Case, after waiving the requisite condition as sought for. A meritorious/disputed litigation cannot be thrown at threshold without looking into merits of litigation cannot be thrown at threshold without looking into mer....
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.... failed to appreciate that the First Respondent / Applicant / Petitioner had failed to make out a prima facie case for 'waiver' of statutory requirements as per Section 241 r/w Section 244 of the Companies Act, 2013. Appellants Submissions 4. The Learned Counsel for the Appellants contends that the resignation of the First Respondent / Applicant / Petitioner from her post as 'Director' was completely voluntary as held by the Civil Court and that the dilution of the First Respondent's shareholding in the Appellant Company was a consequence of her unequivocable refusal to avail of the rights offer made by the Appellant Company. Therefore, the impugned events are the result of First Respondent's own actions and hence, there is no allegation of oppression and mismanagement of the affairs of the Appellant Company made out by the First Respondent / Applicant / Petitioner in the petition. 5. The Learned Counsel for the Appellants comes out with a plea that the First Respondent / Petitioner had filed the application claiming 'waiver' on the very same grounds that form the basis of the long standing civil dispute between the parties, which in turn presently had attained finality through ....
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.... were raised before the Civil Court and in view of the findings rendered by it, in its judgement such allegations which are sought to be raised again are completely frivolous for the purposes of a fresh action alleging oppression and mismanagement. Under the garb of separate 'Cause of Action' the First Respondent is seeking to reagitate the same issues arising from the same transaction, same set of facts and grounds. 10. According to the Learned Counsel for the Appellants that the 'Doctrine of Issue of Estoppel' applies to the facts of the present case especially when a particular issue forming necessary ingredient in a 'Cause of Action' was litigated and determined and in subsequent proceedings between the same parties involving a different 'Cause of Action' to which the same issue is relevant one of the parties seeks to reopen the issue and the plea of 'Estoppel' bars such relitigation. 11. The Learned Counsel for the Appellants submits that the First Respondent in her 'Appeal Memorandum' before the Hon'ble High Court of Karnataka had assailed the Civil Court's order by specifically urging the same contentions. 12. It is the categorical stand of the Appellants that the present....
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.... the Tribunal before forming its opinion as to whether the application merits 'waiver' of all or one or other requirement as specified in clauses (a) and (b) of sub-section (1) Section 244: - (i) Whether the applicants are member(s) of the company in question? If the answer is in negative i.e. the applicant(s) are not member(s), the application is to be rejected outright. Otherwise, the Tribunal will look into the next factor. (ii) Whether (proposed) application under Section 241 pertains to 'oppression and mismanagement'? If the Tribunal on perusal of proposed application under Section 241 forms opinion that the application does not relate to 'oppression and mismanagement' of the company or its members and/or is frivolous, it will reject the application for 'waiver'. Otherwise, the Tribunal will proceed to notice the other factors. (iii) Whether similar allegation of 'oppression and mismanagement', was earlier made by any other member and stand decided and concluded? 79 (iv) Whether there is an exceptional circumstance made out to grant 'waiver', so as to enable members to file application under Section 241 etc.?" 15. The Learned Counsel for the Appellants relies on the decision ....
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....The house then finally observed ....(All ER p.50 C-E). "But there is room for the view that the underlying principles upon which estoppel is based, public policy and justice have greater force in cause of action estoppel, the subject matter of the two proceedings being identical then they do in issue estoppel, where the subject matter is different. Once it is accepted that different considerations apply to issue estoppel, it is hard to perceive any logical distinction between a point which was previously raised and decided and one which might have been but was not. Given that the further material which would have put an entirely different complexion on the point was at the earlier stage unknown to the party and could not by reasonable diligence have been discovered by him, it is hard to see why there should be a different result according to whether he decided not to take the point, thinking it hopeless, or argue it faintly without any real hope of success". 25. In Gulabchand Chhotalal Parikh v. State of Bombay (AIR 1965 Supreme Court page 1153) the Constitution Bench held that the principle of res judicata is also applicable to the subsequent suits where the same issues betwee....
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....e High Court, in our opinion, had no jurisdiction to go into the aforementioned question." 17. The Learned Counsel for the Appellants points out the decision of the Hon'ble Supreme Court in 'Hope Plantations Ltd.' v. 'Taluk Lan Board Peermade and Anr.' reported in (1999) 5 SCC p. 590 at spl. p. 607, 608 and 611 wherein at paragraph 26 and 31 it is observed as under:- "26. The principles of estoppel and res judicata are based on public policy and justice. Doctrine of res judicata is often treated as a branch of the law of estoppel though these two doctrines differ in some essential particulars. Rule of res judicata prevents the parties to a judicial determination from litigating the same question over again even though the determination may even demonstratedly wrong. When the proceedings have attained finality, parties are bound by the judgement and are stopped from questioning it. They cannot litigate again on the same cause of action nor can they litigate any issue which was necessary for decision in the earlier litigation. These two aspects are "cause of action" estoppel and "issue estoppel". These two terms are of common law origin. Again, once an issue has been finally det....
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....he First Appellant / Company and accordingly framed specific issues to consider that objection. Moreover, the Tribunal in the impugned order mentioned the reasoning for allowing the application of the First Respondent/Petitioner by noting that she had 45% shareholding in the First Appellant / Company for several years and that one of the acts of the oppression and mismanagement that the First Respondent / Petitioner was seeking relief was the fraudulent reduction of her shareholding to 09%. 19. It is represented on behalf of the First Respondent that the Tribunal, in the impugned order had proceeded to observe that the Civil Courts have no jurisdiction over matters of oppression and mismanagement and that the First Respondent's civil suit in OS No. 3554 of 2016 was restricted only to the issue of challenging her removal from the Board of Directors of the First Appellant / Company. 20. Added further, it is the plea of the First Respondent that neither the Civil Suit in OS No. 3554 of 2016 nor the pending Appeal, RFA No. 394 of 2019, filed by the First Respondent as an Appellant prevents the Tribunal from adjudicating upon the First Respondent / Petitioner's application under Secti....
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....ations relate to 'oppression and mismanagement'; it cannot be stated to be a frivolous application. We find that some of the allegations as made by the appellants and highlighted by the learned counsel for the 11th respondent as noticed in the preceding paragraphs, are of recent year, 2016. We are not expressing any opinion with regard to merit of such allegation, but have only notice the allegations. 170. Taking into consideration the aforesaid facts and exceptional circumstances of the case as apparent from the plain reading of the (proposed) application and as some of them relate to 'oppression and mismanagement', qua 1st respondent company and its member(s), we are of the view that the appellants have made out a case for 'Waiver' to enable them to apply under section 241." 22. The Learned Counsel for the First Respondent refers to the decision in 'Photon Infotech Pvt. Ltd. & Others' V. 'Medici Holdings Ltd. and Ors.' reported in 2018 SCC online 'NCLAT' 632 wherein at paragraph 16, 18 and 19 it is observed as under:- "16. Going through the application which was filed for waiver by the Respondent no.1 we find that the application pertains to 'oppression and mismanagement'. W....
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.... Company on 13.04.2016 and passed a 'Resolution' formally accepting the resignation of the First Respondent / Petitioner/plaintiff. 24. It is projected on the side of the Appellants that the First Appellant / Company in accordance with Section 168 of the Companies Act, 2013 and Rule 15 of the Companies (Appointment and Qualification of Directors) Rules, 2014 filed the requisite DIR-12 Form, intimating the 'Registrar of Companies' of the resignation of the first Respondent on 13.04.2016 after the board meeting. Later, the first Respondent and the first Appellant / Company exchanged several mails, where the first Respondent expressed without demur that her resignation was without coercion and was out of her own free will. 25. It is the version of the Appellants that to expand business, the second Appellant and other Directors of the first Appellant / Company made a decision to raise 'Further Capital' from shareholders by making a 'Rights Issue' and that the first Appellant / Company as per Section 62 of the Companies Act r/w Rule 13 of the Companies (Share Capital and Debenture) Rules, 2013 proposed a 'Rights Issue' on 25.04.2016. Apart from that, the 'Letter of Offer' was dispatch....
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....nd hence, availed a term loan of Rs. 1.85 crore from 'Karur Vysya Bank', Jayanagar, Bengaluru, that the loan was sanctioned to the First Defendant (the First Appellant Company) and that the First Respondent / plaintiff and the Second Respondent / Second Defendant had pledged their aforesaid White Field Property as collateral security against the repayment of the said loan. 29. As a matter of fact, the First Respondent / plaintiff at paragraph 16 of the plaint in the aforesaid suit had proceeded to mention that she was seriously hurt by the scathing remarks and use of inappropriate language by the Second Respondent / Second Defendant against her and in a fit of anger, and as a knee jerk reaction, she wrote a letter of resignation in her hand, resigning from the post of Director of the First Appellant / Company etc. 30. Indeed, the First Respondent / plaintiff at paragraph 24 of the plaint had among other things observed that the Second Respondent / Second Defendant pushed her into deeper emotional turmoil because of the fraudulent steps taken by him and as a result of an emotional outburst she sent an e.mail on 13.04.2016 that she would like to part ways with the Second Respondent....
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....irst Respondent / plaintiff as an Appellant had filed RFA No. 394 of 2019 on the file of 'Hon'ble High Court of Karnataka' and the same is pending. 34. The First Respondent / plaintiff filed C.P. No.110/BB/2019 before the National Company Law Tribunal, Bengaluru Bench, Bengaluru against the First Appellant / Company and four others (u/s 241 of the Companies Act, 2013 and sought the reliefs of Declarations:- (i) that the affairs of the First Respondent / Company are being conducted by the Respondent Nos. 2,3 and 5 in a manner prejudicial to her and to the interests of the Respondent No. 1 Company itself; (ii) that the issuance of rights shares during 2016-17 by the First Respondent Company was illegal, set it aside and cancel the further shares so issued; (iii)To remove the First Respondent as the Managing Director of the Respondent No. 1 Company; (iv)To recover the undue gains made by the Respondent Nos. 2,3 and 5 during the period commencing from 01.04.2016 until the disposal of this petition and retain the same for the benefit of the Respondent No. 1 Company; (v) To Direct the valuation of the shares of the Respondent No. 1 Company and to provide for the purchase of th....
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.... the key factors to be taken into consideration by a Tribunal in case of oppression. What kind of oppression or prejudice or unfairness is caused in a given case will depend on the injury caused to an affected person by the concerned as visualised in section 241 of the Companies Act, 2013? 38. Undoubtedly, the burden is on the petitioner to prove oppression or mismanagement and the 'Tribunal' is to consider the entire material on record and to arrive at a final conclusion. The 'Rights Issue' can be examined by the 'Tribunal' in a petition u/s 241 of the Companies Act, 2013. Also, that, in law the Tribunal is to ascertain when the right to sue / to file an application accrued to the petitioner. There is no impediment for the Tribunal to consider the preliminary objections raised by a party at a later stage of the main proceedings. If maintainability is a triable issue, the acceptance of a petition or rejection of the same has to be decided along with the issues raised, to be heard with the merits of the case in the considered opinion of this Tribunal. No Time Limit 39. More importantly, although for filing a petition no time limit is specified under Section 241 of the Companies A....
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....ies Act, 2013. The power to issue further shares ought to be exercised for the benefit of the Company, notwithstanding the fact that the 'Increase of Capital' is an internal administration matter of the Company. Continuing further, whether the decision of the Board of Directors to increase share capital by way of issuing rights is in the interest of the company or bonafide or otherwise can be ascertained from each and individual set of attendant facts of a given case. Agents 45. It is an axiomatic principle in law that the Directors of a Company are just 'Agents' of the Company and they are quite competent to decide the Agency at his / her own end. In fact, Section 168 of the Companies Act, 2013 pertains to 'Resignation of director'. Res Judicata 46. The aspect of 'Res Judicata' is inhibition against the Court / Tribunal and it is certainly a mixed question of facts and law, to be specifically averred in one's pleading before the competent fora. In fact, 'Res Judicata' precludes a person from pleading the same thing in successive litigation. The burden to establish the plea of 'Res Judicata' is on the person to raises such plea. No wonder, the doctrine of 'Res Judicata' is rest....