TaxTMI 
TaxTMI 
2014 (8) TMI 1214
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....ortunity to the petitioner. The 2nd respondent deliberately did not disclose that the respondent company had been unable to sell the commercial property that was offered to the petitioner and that the respondent company had also been unable to find occupants for such commercial properties. The 2nd respondent also represented that the respondent company was in negotiation to acquire 200 acres of additional adjacent lands to render the project more effective. The petitioner was assured that any investment in the company would be well served and offered to allot equity shares of the respondent company. The petitioner because of such assurances agreed to purchase 20% of the paid up capital (constituting 25,00,000) equity shares at the rate of Rs. 10/- of the respondent company for a total consideration of Rs. 2,50,00,000/-. The petitioner entered into Share Holding Agreement dated 28.09.2008 and in terms thereof the petitioner was allotted 25,00,000 equity shares on 17.10.2008. The petitioner approached the 2nd respondent when there was default in the payment of the Guaranteed Minimum Monthly Rent under the Property Management Agreement, he was informed that the economic recession had ....
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....n consonance with the terms of the shareholder agreement. The petitioner subsequently learnt that the 2nd 3rdd 5th respondent had again conspired to lure the petitioner to further invest in the respondent company to buy additional 45,00,000 equity shares with false assurances and suppressing material facts. The petitioner subsequently learnt that the 2nd 3rd 5th respondent had unlawfully enhanced share capital of respondent company without notice to the petitioner on two occasions i.e. (i) on 17.05.2009 from Rs. 12,50,00,000 to Rs. 13,50,00,000 by adding 10,00,000 preferential shares at nominal value of Rs. 10/- each and out of these preferential share 30,000 preferential share were allotted at a premium of Rs. 90/- to M/s. ABM Buildtech Pvt. Ltd. (ii) on 16.07.2007 the respondent company share capital was again increased from Rs. 13,50,00,000 to Rs. 15,00,00,000 by adding 20,00,000 of equity shares at nominal value of Rs. 10/- each and allotted these additional 20,00,000 of additional equity shares to the 2nd respondent. These increases in the authorised and paid up share capital of the respondent company were without notice to the petitioner and were contrived unlawfully with the....
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....vailed financial assistance from Karnataka State Financial Corporation (hereinafter referred to as the Financial Corporation) and as on December 2009 the respondent company was due by default of a total sum of Rs. 83,78,768/- to the financial corporation. The loan is sanctioned by this financial corporation subject to the terms contained in the letters of allotment. Despite the petitioner impressing upon the respondents that in terms of the compromise petition it was the respondents' obligation to obtain consent of all the concerned, including the financial corporation, and that the petitioner was not obliged to sign any personal guarantee, the respondents started insisting upon the petitioner to execute personal guarantee stating it was required by the financial corporation. It is emphasised that in so far as the increase in the petitioner's shareholding, the terms of the sanction by the financial corporation does not contemplate execution of "Personal guarantee" by the petitioner. The respondents 2 to 7 started using the correspondences from the financial corporation to stall and prevent enhancing the petitioner's shareholding from 20% to 45%. The respondents 2 to 7 ....
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....avoiding the inspection of books of accounts. The petitioner has ascertained that the respondents 2 to 7 are also responsible for commencement of different winding up proceedings against the respondent company. The petitioner state that the respondent company is a small domestic company in which the petitioner and the 2nd respondent came together as partners and that the said company is a quasi-partnership and accordingly the principles of the partnership law are applicable to the respondent company. The respondents 2 to 7 are conducting themselves in an unjustified and unlawful manner. The respondents 2 to 7 are also acting in harsh, burdensome and wrongful manner, wherein such acts are continuing till the date of filing of this petition. Therefore, it would not only be just and equitable but also in the interest of the petitioner who is entitled to 45% of the share capital of the respondent company and the other shareholders, if the petition is allowed granting reliefs as prayed for and in the alternative to direct the respondents 2 to 7 to purchase the petitioner's entitlement of 45% in 69,75,000 equity shares out of the respondent company's total equity shares in 1,55,0....
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....me. It is submitted that as per Clause 7 of the compromise petition, the Board of directors of the company was to be reconstituted by inducting one director nominated by the petitioner. The respondent company by the letter dated 08.02.2009 invited the petitioner to offer himself for appointment as a director to the company and whereas rather than accepting it, the petitioner refused to be a member of the Board but however chose to keep his option open. The respondent company at the very first instance has offered the petitioner the opportunity to be a member of the Board and thereby be engaged and aware of whatever the day-to-day operations of the company, but the petitioner keeping himself out of the day-to-day functions, has chosen to make such a false and frivolous petition and the same should be taken note of The compromise petition at Clause 9 contemplated for giving the petitioner an option for appointing an internal auditor. The respondent company by letter dated 09.05.2010 agreed for such appointment and sought that the terms of appointment be finalized keeping in line with the terms referred to in the compromise petition. Inspite of the immediate response to the petitioner....
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....n, the respondents would be ready and willing to purchase all the shares of the petitioner. It is submitted that subsequent to the compromise petition dated 02.12.2009 vide a letter dated 08.12.2009, the petitioner was invited to attend the Extraordinary General Meeting of the respondent company. This is in compliance with Clause 6 of the compromise petition. Despite letter being served and the petitioner duly-acknowledging the receipt of the said letter, he did not attend the Board meeting and therefore eventually the Board meeting was held on 14.12.2009 and on which date, Mr. Saravana Prasad, Mrs. Upasana Mittal, Mrs. Radhika Achutan, Mrs. Shashikala Venugopal and Mrs. Hema Lokaraj, who were the directors, were present and a resolution was passed by the respondent company, inter aha, ratifying the compromise petition. As per Clause 6 of the compromise petition, in the event the petitioner remains absent in the meeting despite proper notice being sent, the members present shall constitute a quorum and in compliance of the said Clause 6, despite notice being sent, the petitioner has choose to absent from the Extraordinary General Meeting. It is submitted that the day-to-day affairs....
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....se 13 of the compromise petition during the period December 2009 to August 2010 as the Supplementary Agreement was not entered into in this regard and the respondent believed that the petitioner will sign a supplementary agreement to the effect. After the petitioner having received a sum of Rs. 9 lakhs despite non-execution of the addendum to the lease, the respondent company was unable to utilize the area. The respondents by their reply dated 17.08.2010 as per Annexure RM acceded to the request of the petitioner to cancel the lease. Hence, the respondent company is not obliged to pay the rents. 6. It is submitted that the shareholder's agreement dated 28.09.2008 to the Annexure C of the petition and the agreement dated 22.07.2009 to the Annexure D of the petition and the Property Management Agreement being Annexure G to the petition are all superseded by the compromise petition and those prior shareholding agreement having a history by themselves, as averred in the statement of objections by the 2nd respondent in the CP No. 65/2009, cannot be gone into at this stage. As can be seen from the above and in compliance of the compromise petition, this respondent has undertaken var....
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....m the date of the compromise petition to as on this date on a monthly average has been at Rs. 1.10 lakhs only. It is submitted that the various obligations in the compromise petition set out against the respondent company were not fixed to a particular time line as the petitioner had understood very clearly that the preference shares etc. cannot be redeemed in a day's time. 7. It is submitted that at present the shareholding pattern of the respondent company is as follows: It is submitted that presently the directors of the respondent company are as follows: (i) Mr. J.V. Saravana Prasad, Managing Director and Chairman (ii) Ms. Shashikala Venugopal, Director (iii) Ms. Hema Lokaraj, Director (iv) Ms. Upasana Mittal, Whole-time Director (v) Mr. Suman Bhawaralal Piragal, Director (vi) Ms. Radhika Achuthan, Director It is submitted that the respondent company has filed the Income Tax returns for the financial year 2009-2010 on 11.10.2010 and filed the annual returns on 10.11.2010. It is submitted that subsequent to the compromise petition dated 02.12.2009 which was recorded in the company petition No. 65/2009, there has been no change in the entire shareholding pattern or t....
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....olders' agreement including the admitted and denied ones are no longer subsisting and are superseded by the compromise petition dated 02.12.2009 which is the sole document constituting the entirety of all the understandings and agreement between parties and evidencing the rights and liabilities of the parties hereto. The petitioner does not presently own any right, title and interest of the 45% shares in the respondent company and whereas his shareholding as admitted by him elsewhere in the CP filed by him is only 17.21% and that he owns only 25,00,000 shares. 9. It is submitted that the petitioner is in fact trying to execute the compromise petition before this Hon'ble Board, which is not permissible. If all the averments of the petitioner are taken together, it can be seen that he has not produced any material whatsoever to make out a case under the provisions under which this CP has been filed. The petitioner on having any difficulty in executing the terms of the compromise petition should have filed a suit for specific performance or an execution petition in the courts having jurisdiction and it would be only at Bangalore. The petitioner has no cause of action to file ....
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....rst place itself. The petitioner is sitting on the fence and not co-operating to give effect to the compromise petition and whereas on the other hand trying all ways and means for the down fall of the respondent company and which is not in the interest of the employees shareholders and the company itself. It is submitted that the payment of Rs. 2,50,00,000/- towards purchase of 25 lakh shares by the petitioner in pursuance to the shareholders agreement dated 28.09.2008 would disclose that the petitioner had only paid a sum of Rs. 20,00,0007/- and the remaining sum was not paid. In any event in view of the compromise petition supra, the said shares are now owned by the petitioner, but however, the petitioner has not paid the sum of Rs. 2,30,00,000/- towards balance consideration for the purchase of 25 lakh shares. It is submitted that the petitioner has refused to become a director of the company. The learned counsel requested the Bench to dismiss the petition as it is devoid of any merit. In support of the case he relied upon the following citations: 1. in the matter of Bhanu Kumar Jain Vs. Archana Kumar & Another. 2. in the matter of Rajinder Kumar Malhotra & Others Vs. Harbans ....
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....was Rs. 12,50,00,000/-. Thus the petitioner became a shareholder holding 25,00,000 equity shares in the R1 Company constituting 20% of the paid up share capital. In the very shareholder agreement at para 4.2 it was made clear that the company agrees to provide one Board seat for the petitioner or his nominee within a period of one year from the date of execution of the shareholder agreement. The company issued a share certificate to the petitioner dated 17.10.2008. Further the 2nd respondent in the capacity as Chairman and Managing Director of the R1 Company entered a shareholder's agreement dated 22.07.2009 with the petitioner to sell the shares in the RI Company to the petitioner. It is stated in the shareholder agreement that the seller is the principal promoter of the RI Company and had sought funds for development and completion of projects. Further it is stated that the respondents approached the petitioner for sale of 45,00,000 equity shares held by him in the R1 Company @ Rs. 4/- for equity share and the petitioner has agreed to purchase the same. Alter completion of the proposed sale the petitioner will hold 56% equity shares in the R1 Company. In the shareholder agree....
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.... be transferred as per Clause 2 of the compromise petition by Prasad Group to Somashekar to enhance the shareholding of Somashekar to 45% after obtaining the consent of the secured creditors if necessary. Until such time the 20% shareholding of Somashekar will carry a dividend right equivalent to 45% for which purpose the shares of Somashekar will be treated as a separate class having differential right of dividend. Prasad Group will take all necessary action to obtain such approval on a best effort basis. At para 7 of the compromise petition it is stated that the Board of directors of the company will be reconstituted by inducting one director nominated by Somashekar and the Chairman of the Board of directors shall be Shashikala Venugopal. Upon the shareholding of Somashekar being enhanced in terms of clause 2 of the compromise petition to 45% he shall have a right to nominate one more director. At para 8 of the compromise petition it is stated that Mr. Saravana Prasad will be the managing director of the company. The day-to-day management and affairs of the company shall be taken care of by managing director who shall function in accordance with the general directions and instruc....
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....pute or differences. If the counsels are unable to resolve the same, such differences or disputes shall be adjudicated in the appropriate forums. 12. In order to implement the compromise petition the respondents addressed a letter dated 07.12.2009 to the DGM, Karnataka State Finance Corporation seeking NOC for introducing Mr. Somashekar (the petitioner) and to induct two new directors which will be nominated by the petitioner. The KSFC vide their letter dated 14.12.2009 addressed to the R1 Company requested them to submit the details of the investor (the petitioner) in order to examine the request. The details were sought are 1. Biodata and net worth statement. 2. Profession and Educational background. 3. If he has invested in any other company if so, details of company's profile along with the balance sheets for the last 3 years. 4. Latest income tax clearance certificate, PAN number and recent photograph. 5. An undertaking from the proposed investor agreeing to offer his personal guarantee for repayment of loan i.e. 39,00,000 as principal, 44,77,466 interest thereon, Rs. 1302/- other debits and the total amount is Rs. 53,78,768/-. 13. On receipt of the letter from KSFC....
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....05.2013. As seen from the documents the respondent have made all the efforts to abide by the terms and conditions as stated in the compromise petition. As seen from the letter of the KSFC it is clear that the KSFC sought certain details of the petitioner from the company. It is seen that the petitioner has not furnished the details as required by the KSFC. Therefore I am of the view that the petitioner is in default in furnishing the details. The petitioner in this petition made certain averments and sought the reliefs which are reproduced hereunder for proper adjudication of the matter. (i) To transfer/issue/allot necessary equity shares in favour of the petitioner to enhance the petitioner's holding to 45% without insisting upon the petitioner to execute personal guarantee in favour of the Karnataka State Financial Corporation, established under the State Financial Corporation Act, 1951: (ii) To redeem the preferential capital and not to convert to equity and in the event of conversion from preference to equity capital, to transfer such additional equity shares as required for maintaining the petitioner's holding to 45%; (iii) To bring back to the respondent company a ....
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....reliefs as sought in the present petition, it is crystal clear that the petitioner seeking directions mainly to transfer and allot necessary equity shares in favour of the petitioner to enhance the petitioner's holding to 45% without insisting upon the petitioner to execute personal guarantee in favour of the KSFC. The other reliefs are consequential to the main relief. The terms of the compromise dated 02.12.2009 is reproduced hereunder for better appreciation- (a) The shareholding in the respondent company between the 2nd respondent's group and the petitioner would be in the ratio of 55:45. (b) The 2nd respondent after obtaining the consent of all the secured creditors shall transfer the necessary equity shares/issue/allot necessary equity shares in favour of the petitioner to enhance the petitioner's holding to 45% after; (c) That until the petitioner's shareholding is enhanced to 45% the petitioner's shareholding as on the date of compromise shall carry Dividend Right Equal to 45% of the share capital; (d) The existing preferential share capital of the respondent company shall be converted to equity shares and in view of conversion of such preferential s....
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.... the equity share, without fulfilling the terms and condition as mentioned in the compromise petition. It is only an understanding between the panics that the petitioner will be entitled to 45% of the equity shares. The contention of the petitioner that this Bench appointed valuer on the basis of joint memo filed by the parties to determine the value of equity shares of the Company for considering the petitioners claim under relief 18.3 (viii). It is only a claim made by the petitioner, but the petitioner's entitlement to 45% of the equity shares in the company has not been determined by any court or authority. Admittedly the petitioner is holding 25,00,000 equity shares constituting 17.5% of the shares. Even on the merits of the case, the petitioner failed to fulfil the obligation on his part and for that reason me petitioner cannot put, blame on the part of the respondents. The petitioner has filed the present petition by invoking Section 397/398 and 402 of the companies Act, 1956 alleging certain acts of oppression and mismanagement in the affairs of company. From the pleading and document, the petitioner has not made out any case either on oppression or mismanagement in the....