TaxTMI 
TaxTMI 
2021 (8) TMI 396
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....ce both the appeals have been filed against the same impugned order dated 26.07.2019, accordingly, both the appeals have been clubbed together by their respective counsels for hearing, written submission set cand accordingly we are considering for disposal of the appeals. 2. The Appellants are aggrieved of the impugned order of the Tribunal as the Tribunal had held that there was no 'Oppression and Mismanagement' of the affairs of 'Safeco Hygiene Films Pvt. Ltd' (SHFP) and has also adjudicated on the rights arising out of the 'Joint Venture Agreement'(JVA) dated 22.03.2013 executed between the 'Loganmoy Limited Matheson Trust CO. Ltd' (LLMT)- Respondent No.1 and 'SBPL Polymers LLP' (SBPL) - Appellant and has directed the Appellant to convene an 'Extra-ordinary General Meeting' (EGM) for appointing four 'Nominee Directors' on the Board of Appellant. It was also informed that the Appellant in C.A (AT) No. 263 of 2019 (SBPL) who is a party to the JVA has not been heard. 3. The Tribunal after hearing the parties in the petition has directed the Board of Directors of the Respondent Companies- SHFP to call an 'EGM' of the members of the Respondent Company - (SHFP) in terms of requi....
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.... amplified Clause of 7 of JVA on management of the Joint Venture Company involving the composition of the Board, proceedings of the Board and Key Management employees. He has submitted that the management of the Respondent No.2 Company are in the hands of the Appellant group and Respondents being a foreign entity established in British Virgin Land having no business interest in India and were only investors. 'LLMT'- Respondent No.1 should only be interested in receiving Return on Investments. The Appellant has also submitted that the Respondent No.1 did not seek to appoint a single 'Director' on Board of Respondent No.2 between the years 2013 to 2016. The Appellants have challenged the impugned order on the various grounds like - it has no jurisdiction and it has not considered the JV rights and rights of minority shareholders. It was also submitted that the Tribunal has exercised wrong jurisdiction under Section 241 & 242 of the Act. Findings of the Tribunal qua JV Agreement is beyond the scope of the Section 98 of the Act. The JVA contains arbitration clause and the same cannot be decided in the Company Petition. They have also insisted that the JVA is valid and subsisting. The r....
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....ement and appointment of two 'Director' on Board of the 'SHFP' instead of four 'Directors' to be nominated by 'LLMT'. All this leads to 'LLMT' filing an application before the Tribunal under the Act. Brief background as submitted by the Appellants are stated below: Dates Events 11.02.2012 Respondent No.2 incorporated by Subhash Ratiwal Chawra and Hiren Subhash Chawra (Appellat Group) who are the original subscribers and first directors 22.02.2013 JVA between Appellant and Respondent No.1 for infusing 18Cr share capital in R2. As per JVA the management of R2 was to vest with Appellant. 21.11.2013 That the Union Bank of India while sanctioning credit facilities for R2 vide sanctioned letter dated 21.11.2013 put a condition that before the release of credit facilities the R2 shall execute a JVA between Appellant and R1. 2013-14 R2 was not issued 66% shareholding to R1 against the share capital infused by it wheras Appellant was allotted 34 % shareholding in proportion to the share capital infused by it. 30.09.2014 The board of the company (comprising of representatives of the appellant) was authorised by the shareholders resolution dated 30.09.20....
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....equisition notice R1 naming the 4 nominee Directors and calling EGM on 12.02.2018 04.01.2018 R1 issued reminder letter to the bank reiterating the contents of letter dated 19.09.2017 12.01.2018 R2 informed R1 regarding the decision of board death EGM will be held on 5.2.2018 and issues regarding amendment of AoA to bring it in accordance with JVA and appointment 2 out of 4 nominee Directors of R1 will be decided on the basis of a special resolution instead of ordinary resolution 31.01.2018 R1 filed application u/s 98 R/w Section 100 of the Act before the NCLT, Ahmedabad praying to set aside the notice dated 12.01.2018 as per their requisition. 17.02.2018 Affidavit in reply by the R2 to the Company Petition 23.03.2018 Before NCLT matter was adjourned at joint request as the parties were attempting to arrive at an amicable settlement whereby the Appellant would purchase the entire share capital of R1. 09.04.2018 Affidavit in Rejoinder by the R1 to the Company Petition 02.05.2018 The R1 requested the Bank that it should not restrict the disbursal of credit within the sanctioned limit due to the frivolous litigation instituted by R1 since non-a....
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....y SBPL. R1 can appoint max 2 directors with mutual consent between parties -C1.7.4 - SubhashRatiwalChawra or Hiren subhashChawra - partners of A-shall be appointed as MD & that CFO & CS of JV company shall be nominated by SBPL with consent of R1. Both parties had to invest 50% each in the equity of the Company, however the Appellant SBPL LLP failed to do so, as it did not had requisite funds. 2013-2014 Consequently, R1 had to invest upto Rs. 12.27 Crores and was issued 66% shareholding against share capital infused by it whereas SBPL / Chawra Group was allotted 34% shareholding as per share capital infused by it Current shareholding structure SubhashChawra - 5000 Hiren Chawra - 5000 Loganmoy Limited 1,22,74,233(R1) SBPL Polymers LLP 63,13,016 -- o To meet financial requirements of Company, Appellant SBPL LLP infused unsecured loan in the Company & furnished collateralsecurities / personal guarantee o R1 also gave collateral security against Bank loan and personal Guarantee 21.11.2013 30.09.2014 29.02.2016 o Union Bank of India (UBI) vide letter dated 21.11.2013 ....
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....s mortgaged to UBI unless credit facilities availed by the company are repaid & alternate security offered 31.05.2017 Requisition notice sent by R1/u/sec 100(2) of the Companies Act, 2013 - to call an EGM of Members: -to consider appointment of nominee Directors on Board of Company - to consider matters of non-compliance of the provision of the Companies Act 20.12.2017 Requisition notice sent by R1 to call an EGM of members on 12.02.2018 - for appointing 4 Directors on the Board of the company. 04.01.2018 R1 wrote to UBI: o R1 majority shareholder - however JVC business conducted solely by Chawras without knowledge or consent of R1 o R1 had vide letter dated 19.09.2017 informed UBI that Chawras are conducting business without complying with the provisions of companies Act- UBI was also informed that business was carried on without R1's consent and the Ubi should not make any further disbursements without R1's consent - however UBI did not reply o SBPL LLP to be personally liable fore repayment of credit facilities since R1's consent not obtained by SBPL LLP o UBI to not make any further ....
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....the consent for appointment of Director in Form DIR2 was already submitted the Company the behest of ChawraGroup did not submit the form DIR-2 and once again called for same in February, 2020 that all the time of said notice the pandemic Covid-19 had already struck the world thereby limiting the working of the global populace. 2020 That on verification it was found that DIR-2 qua the nominees of the R1 had not been uploaded and immediately thereafter the Company was called upon to do the needful, however, once again the Company acting through Chawra Group denied complying with the orders passed by this Hon'ble Court. 16.04.2021 25.05.2021 In response to R1's letter dated 16th April, 2021 the Company has refused to complete the appointment process of the Directors (nominees of R1) appointment was approved in EGM held on 27.11.2019. The Respondents have observed that when they have asked for convening EGM of the members on 31.05.2017 to consider appointment of their nominee 'Directors' on Board of the Company and also to consider matters of non-compliance of the provisions of Act instead the Appellant group issued notice to call EGM on 05.02.2018 to decide special reso....
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....unsel submitted that an arbitration clause in the JVA itself is not a valid ground to bar the Tribunal to exercise its jurisdiction under the Act, if it fall within the purview of Section 100 of the Act. The Appellant while in management has always kept the Respondents in dark about the working of the company and they have also withheld vital information from majority shareholders as the company controlled by the Appellant group has failed to submits the accounts and participation of Respondents in AGM. The company controlled so far by Chawra group has not filed statutory returns for last 3 years. All this suggest that the Oppression and Mismanagement is being done by minority shareholders over majority shareholders. 6. Both the parties have supplemented their arguments with the citations of judgments including two common judgments - (1986) 1 SCC - 264 - Life Insurance Corporation of India Vs. Escorts Ltd & another is (2012) 6 SCC 613 - Vodafone International Holding BV. Vs. Union of India. 7. We have carefully gone through submission and citations made by the parties. We are having following observations: a. This Appellate Tribunal heard both the parties on 11.11.2020 on ....