2021 (5) TMI 430
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....ich are relevant to the issue in question, are as follows: "(1) M/s. United Telecoms Limited, (herein after referred to as R 1 Company) was incorporated on 17.03.1984 under the provisions of the Companies Act, 1956 as a Private Limited Company. It was originally incorporated with the Registrar of Companies, Tamil Nadu. Subsequent thereto, in the year 1986, the Registered office of the 1st Respondent Company was shifted to the State of Karnataka at Bangalore. Its registered office is situated at 18A/19, Doddanekundi Industrial Area, Mahadevapura post, Whitefield, Bangalore- 560048. The 1st Respondent pioneers in providing technological solutions in the fields of telecommunications and e-governance. Its annual turnover for the Financial Year 2018 was Rs. 267 crores and its authorised share capital is Rs. 115,000,000/- and the Paid-up capital is Rs. 111,557,180/-. The Company originally belonged to the UB group of companies and in 1992, it was acquired by Late Shri Basavapurnaiah. (2) Late Shri. C. Basavapurnaiah had 3 children i.e., Mrs. Potluri Padmavati (3rd Respondent), Mr. Chalasani Venkateswara Rao (1st Petitioner) and Mr. Chalasani Krishna Anjaneya Kumar. Mrs. Potluri Padma....
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.... and the other Members of the company unanimously chose the 1st Petitioner to lead the affairs 1st Respondent Company based on his merit and proven track record. In the year 2010, after the demise (at the age of 21) of Late Sri., Chalasani Gautham Braihmiah, son of the 1st Petitioner, both Late Smt. C. Sarojini Devi, Late Shri. C. Basavapurnaiah and Smt. Potluri Padmavathi unanimously decided to divide the shares of the company equally amongst all the Members of the family (including the children of the 1st Petitioner and the 3rd Respondent). (5) Furthermore, upon demise of Late Smt. C. Sarojini Devi., wife of Late Shri. C. Basavapurnaiah and mother of the 1st Petitioner and 3rd Respondent in the year 2013, all the shares held by Late Smt. C. Sarojini Devi in the 1st Respondent Company devolved solely to her husband, Late Shri. Basavapurnaiah by virtue of her will dated 8.12.2013. On 20.07.2015, Late Shri. Basavapurnaiah passed away. In terms of his will dated 20.07.2015, the ownership of the Company devolved equally upon two of his three children and their family i.e., the 1st Petitioner and the 3rd Respondent. Post the shares of Late Mr. C. Basavapurnaiah devolving in terms of ....
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....eholders who are the Petitioners herein. (8) The Respondents held several Board meetings. The petitioners received a notice dated 28/6/2017 informing the conducting of a board meeting on 03.07.2017, the 1st Petitioner vide letter dated 28.06.2017 replied to the 3rd respondent stating that since the notice convening the meeting was dubious on several counts and is lacking authority for convening of the meeting, the Petitioners would not be attending such board meeting. On 03.07.2017 when the respondents called for a board meeting, a resolution was passed relegating the role of the 1st Petitioner herein. Despite the 1st Petitioner having spent more than 18 years in conducting the affairs of the 1st Respondent Company, the 2nd and 3 Respondents redefined his role to only oversee the R&D and production unit of the 1st Respondent Company. Similarly, the 3rd Petitioner who was earlier an executive Director, is restricted to merely assisting the 1st Petitioner. (9) Further, in a Board meeting dated 30.11.2017, a Resolution was passed by the Board resolving, that two out of the three Members/Directors i.e., 1st Petitioner, 2nd Respondent and 3rd Respondent, would have the power to auth....
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....of the Respondent family, the Petitioners issued a letter to the Company's banks on 01.07.2017 requesting the banks to not accept any unilateral Board resolution or request for change of authorized signatory, until and unless certified by all shareholders of the Company. The total amount of funds withdrawn by Respondent Nos. 2 and 3 from the years 2006-2017 approximately amounts to 29 crores. Furthermore, in another instance of grave mismanagement, the Respondent No. 2 misused the funds relating to the Respondent No. 1's project executed at Ivory Coast. The actions taken by Respondent family itself would prove that they are conducting the affairs of the company detrimental to the interest of the company as well as the other Members of the company. (13) Due to the willful inaction by the Respondent No. 2 and recurring mismanagement done by him in Respondent Company, a C.P (IB) 274 of 2018 was filed against the 1st Respondent Company before this Hon'ble Tribunal by M/s. Oriental Bank of Commerce (Financial Creditor). To save the company from liquidation, the 1st Petitioner after several negotiations with the M/s. Oriental Bank of Commerce, deposited a sum of Rs. 21,30,0....
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....cation of the Probate granted in Prob CP no. 14/2014. The same in pending before Hon'ble High Court of Karnataka. Hon'ble High Court of Karnataka has directed both Respondent No. 3 and Petitioner No. 1 to maintain status quo regarding the Wills called in question. (3) The Articles of Association, governs the operations and working of Respondent no. 1 Company through its Board. Articles of Association of Respondent No. 1 Company does not provide for appointment of nominee Directors for individuals and hence the averment that Respondent no. 4 and 5 along with Petitioner no. 3 are nominee Directors is false and a result of illusive imagination. It is true to an extent that BBNL tender was awarded to Respondent No. 1 and BBNL stopped payments to Respondent no. 1 Company, rest all averments are self-glorifying statements by the Petitioner No. 1 and is denied. It is necessary to state that, when BBNL floated the tender, Petitioner No. 1 bid to complete the project at 998 crores (approx.), while the nearest competitor was offering to complete the project at 1800 crores (approx.) (approx.). It is a matter of procedure that, every tender is awarded to lowest bidder and hence the t....
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....meetings, minute Books, Board resolutions etc. are illegally taken. Petitioner No. 1 is in complete custody of the documents and never returned to the board, in spite of requesting him to return the same. The Respondent No. 1 Company through its Board meeting held on 11th June, 2010 authorized Respondent no. 2 to deal with land bearing property patta no. 61, Old No. 108, in question. By virtue of this Board resolution, Respondent No. 2 was resolved to be President & CEO/Authorized Signatory to deal with Land in Vizag. It can be seen that, procurement of land in Vizag by way of an Agreement of Sale coupled with irrevocable Power of Attorney from the Vendor of land is not disputed by the Petitioners. Accordingly, Sale Deeds were executed by Respondent No. 2 on behalf of Respondent No. 1 Company. Hence it's false to state that Respondent No. 2 did not procure approval of Board. Petitioner no. 1 was the MD of Respondent No. 1 and having agreed to grant authorization to Respondent No. 2, who was not on Board cannot now question the existence of the same. It is reiterated that Respondent no. 1 has been the only beneficiary and no Respondent has earned any money or even enriched in an....
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....rector position to his advantage and has his relatives, who appear to have been running the company, without any authorization even on behalf of Petitioner No. 1. Petitioners have used the money/receipts received by the Respondent No. 1 Company to buy assets in other countries and even divert the amount to acquire shares in the Company in an illegal manner. (9) The Petitioners used to conduct their Board meetings without quorum as prescribed in Article 65 of Articles of Association and pass illegal resolutions. The Petitioner no. 1 has been Managing Director of the Respondent No. 1 since 2009, who was appointed by Board under the chairmanship of Late C Basavapurnaiah. In pursuant to gross mismanagement of affairs of Respondent no. 1 business by Petitioner No. 1 as MD coupled with losses being caused, Respondent No. 3 called the Board meeting dated 03.07.2017. The Board resolution where, Respondent no. 3 was given additional power especially regarding finance was out of abundant caution seeing dismal performance of Petitioner No. 1. The Petitioners without seeking leave, were absent in the Board meeting. Further, the sale proceeds of the land came to be accrued into Respondent no.....
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....any received 30% as initial receipts from Ivory Coast Project and Respondent no. 1 Company paid a sum of Rs. 12.73 crores as on 31st March, 2017 to M/s. IDBI Bank. A further sum of Rs. 5 crores was paid to IDBI on 26.09.2018 and a sum of Rs. 2 crores on 30.04.2019. In total, Respondent No. 1 Company has paid a sum of Rs. 19.73 crores to IDBI bank regularly. (12) The Respondent no. 1 Company as on July 2017 had an outstanding dues of Rs. 90 crores to various banks and with year ending March, 2017 the dues have reduced to a sum of Rs. 45 crores. Based on the projected revenue of the Respondent no. 1 Company, the dues are expected to reduce further. The statutory liabilities has been consistently been reducing and the same is due to pro-active steps taken by Respondent No. 1 Company Board and not by any individual." 4. The Respondent No. 2 to 5 has filed Statement of objections dated 08th March, 2021, by inter alia contending as follows: "(1) The Respondent No. 2 played a visionary role by acquiring United Telecom and ABB Telecom Division to create a large capacity to produce switching and transmission equipment, emerging as a formidable player in CDOT in India. Thus Respondent N....
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....ces during the course of management of M/s. NSP Electronics. The Respondent No. 1 submitted a requisition under Section 100(2)(a) of Companies Act, 2013 dated 25.01.2020 addressed to Board of M/s. NSP Electronics for convening Extraordinary General Meeting of the shareholders which detailed 9 items which placed as agenda for the meeting. Again, a notice dated 23rd March 2020 for convening Extra ordinary General Meeting and informed Petitioners by way of email dated 24th March 2020 that the said Extra ordinary General Meeting would be held on 16th April 2020. Further, on 15th April 2020 due to issues surrounding COVID-19, M/s. United Telecom Limited issued another notice for conducting Extra ordinary General Meeting on 24th April 2020 and the same was informed to Petitioners by way of an email. Accordingly, Extraordinary General Meeting was convened as per the provisions of the Companies Act 2013 and Secretarial Standards well within 3 months from the receipt of the notice. It was unanimously resolved in the meeting by the majority shareholders that Petitioners and their relatives should be removed, and two new Directors must be appointed on the Board of Directors. After the conclus....
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.... articles of association of the Respondent No. 1 Company and therefore, AGM was adjourned in terms of Section 102 of Companies Act, 2013. On 30th April 2020, in terms of Section 102 of Companies Act, 2013, Respondent No. 1 Company issued a notice for conducting adjourned AGM on 6th May 2020. The Petitioners who are shareholders of the Company failed to appear for the AGM and when the agenda regarding reappointment was placed before Shareholders, Petitioner No. 1 and 2 were not reappointed. Thereby by act of law, Petitioner No. 1 and 2 ceased to be the Directors of the Respondent No. 1 Company. (7) In order to make out a case for oppression under Section 421(1)(a), it is to be seen whether the affairs of the Company have been carried out/conducted in a manner which is prejudicial or oppressive to any shareholder or is prejudicial to public interest. As defined in the Black's Law Dictionary 'Prejudice' refers to any "damage or detriment to one's legal rights or claims" while and 'prejudicial' means "tending to harm, injure or impair; damaging or hurtful" or "unfairly disadvantageous; inequitably detrimental". However, whether any particular act has caused pr....
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....2 & 3 and mainly by Late. Sri. C. Basavapurnaiah, the father of Petitioner No. 1 and Respondent No. 3. The entire shareholding of the first respondent company has all along been held by family members of Late. Basavapurnaiah. The 1st Petitioner, who is an Electronics Engineer has been actively involved in the management of the day to day affairs of the First Respondent Company and the company has shown consistent growth under his stewardship. The shareholding pattern of the company during the lifetime of Late. Basavapurnaiah was arranged in such a way that he held about 30.97% and the petitioner group and the respondent group held about 25.56% and 28.97% respectively. The 1st Petitioners' mother Smt. C. Sarojini Devi also held shares which was bequeathed to Late. Sri. Basavapurnaiah and those shares along with the shares held by Sri. Basavapurnaiah were bequeathed by Late. Sri Basavapurnaiah to the first petitioner and the 3rd Respondent who are his son and daughter respectively under his Will dated 30.03.2015. The Wills of Late. Smt. C. Sarojini Devi and Late. Sri. C. Basavapurnaiah were probated before the Hon'ble High Court of Karnataka and if the bequests as per the Wil....
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....ision in Vijay Krishna Jaidka v. Jaidka Motor Co. Ltd. [1996] 23 CLA 289 (CLB); V Natarajan v. Nilesh Industrial Products P Ltd., (2002) 51 CLA 149 (CLB) wherein courts have consistently held that where the company is in the nature of a partnership or a family company, every member or a branch is entitled to participation in the management of the Company. (4) All the actions, particularly the Board resolution passed against the interests of R 1 company, were being repeatedly questioned by the petitioner group. The 2nd Respondent took complete control over the affairs of the Company by throwing out the petitioners and even physically preventing the petitioners from entering the premises of the company. While matters stood thus, the 2nd Respondent convened a Board meeting to be held on 07.04.2020 to purportedly convene the annual general meeting of the company. It may be noted that nationwide lock down has just been imposed effective from 23rd March 2020 and during the period of lock down the Respondents sought to convene the AGM on 24.04.2020. However, the petitioners did not attend the meeting and consequently the Respondents again convened the AGM to be held on 06.05.2020. Howev....
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....up company controlled by the respondents. On the other hand, the first petitioner had taken steps to settle the dues of the bank. The respondent Nos. 2 and 3 acting together have diverted funds of the company, resulting in the dues towards company's bankers viz., Canara Bank, Oriental Bank of Commerce and IDBI Bank Limited mounting and the said banks declaring the company's accounts with them as Non-Performing Assets (NPA). The banks have all initiated recovery proceedings before Debts Recovery Tribunal (DRT). Although the petitioner during his tenure as Managing Director has grown the company and has developed a market for this products, the respondents after seizing control over the same after the demise of Sri. Basavapurnaiah are running down the company so much so, that all three Banks of the company have initiated recovery proceedings before DRT. b) The company is a family company and if the probate of Late. Sri. C. Basavapurnaiah is given effect to, the shareholding of the Company will be equal between the petitioners and the Respondents and the mutual trust and confidence having completely been lost, there is a potential dead lock situation. There are enough ground....
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....any and it runs smoothly till Late Shri. C. Basavapurnaiah, passed away on 20.07.2015 and his wife Smt. C. Sarojini predeceased him in the year 2013. By virtue of will, all properties including shares of the Company standing in her name, devolved solely to her husband by virtue of her will dated 8.12.2013 Subsequently, Shri. Basavapurnaiah stated to have executed his will in question, devolving the ownership of the Company equally upon two of his three children and their family i.e., the 1st Petitioner and the 3rd Respondent. However, the Wills executed by the Parents of Petitioner are questioned and pending. Therefore, the issue of devolving shares of Late Sri Basavapurnaiah and his wife, totalling to 30.96 % is pending on the file of Hon'ble High Court of Karnataka. High court granted interim stay dated 15.02.2019 in Probate Petition No. 15 of 2017 by directing the Parties to maintain status quo relating to Properties, which should mean and include shares of R 1 Company in question until further orders. Therefore, the shares held by deceased parents cannot be claimed by either party. And the Parties herein can base their contentions only in respect of shares held by them. Unl....
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....thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence. Providing that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to appointed as a director in any company; (e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and he order is in force; (f) he has not paid any calls in respect of any shares of the Company held by him, whether alone or jointly with other and six months have elapsed from the last day fixed for the payment of the call; (g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or (h) he has not complied with sub-section (3) of section 152. (3) A Private Company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in sub-section (1) and (2): [Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section (1) shall continue to apply even if th....
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....r promoters, or directors of such holding Company, for an amount of fifty lakhs rupees, at any time during the two immediately preceding financial years or during the current financial year." 13. Articles 59 to 73 of Articles of Association of R 1 Company enumerate Power and duties of Directors. In terms of the above provisions of the Act also, the Petitioners as Directors of R 1 Company have to achieve the objects as mentioned supra. However, contrary to their statutory duties rather than discharging their duties, the Petitioners themselves have become litigants raising so many baseless and untenable allegations acts of oppression and mismanagement on the part of Respondents. It is settled law that Directorial Petition, in the normal circumstances, is not maintainable. The First Petitioner, admittedly being part of affairs of R 1 Company, as Director, MD and Shareholders is not at all justified to file the instant Company Petition along with his wife and daughter. Moreover, all the alleged actions of Oppression and Mismanagement made in the instant Petition, have taken during his tenure as such. And he is admittedly party to those proceedings. While alleging that the Respondents ....
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....ding on the Company and its stake holders and the Petitioners being Directors cannot plead contrary and they are estopped from raising un-tenable grounds. As stated supra, every act done by Respondents was done with the consent and authority provided by the Board. The Petitioner No. 1 who was appointed as MD by Board in 2009 and again in 2013 for 5 years has been signing and authenticating every financial transaction and annual balance sheets from 2013 till year end 31.03.2019. 16. So far as dispute with regard to registration of land pertaining to property bearing Patta No. 61, Visakhapatnam, in question, is concerned, the Board in its meeting held on 11th June, 2010, has duly authorised Dr. P.R. Mohana Rao, President & CEO/Authorised signatory of Company to deal with the Property. And the allegations in this regard are unfounded and baseless. So far as issue of equal representation for petitioners and Respondents group is concerned, as stated to have cherished by the founder and Mentor of R 1 Company is concerned, as stated supra, admittedly, even Wills in question are in dispute before the Hon'ble High Court of Karnataka and thus transmission of shares in question are not e....