TaxTMI 
TaxTMI 
2022 (12) TMI 275
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....17-Chennai Bench) by the 'Tribunal' (National Company Law Tribunal, Kochi Bench, Kerala), whereby, the ''Tribunal' dismissed the Petition filed under the 'Companies Act, 2013' Brief Facts: 2. The 1st Appellant is a private limited company engaged in operation and running of hotels and was incorporated in 2009. The company has 12 Shareholders as on 31.03.2015. The company had issued subscribed and paid up capital of Rs. 30,87,857/- divided into 3,87,857 equity shares of Rs. 10/- each against the authorised share capital of Rs. 3,20,00,000/- divided into 32,00,000 equity shares of Rs. 10/- each. The 2nd Appellant - Mr. K.T. Thomas is the 'Managing Director' of the 1st Appellant company. Mr. Abhraham Reji is the 1st Respondent and Mrs. Susamma Reji is the wife of Mr. Abhraham Reji is the 2nd Respondent who were two petitioners in the original Company Petition bearing No. TCP/44/KOB/2019. Remaining 13 Respondents from 3rd Respondent to 15th Respondents were also named as 'Respondents' in the original company petition before the 'Tribunal'. 3. The 1st Respondent company availed a term loan of Rs. 4,00,00,000/- from 'Kerala State Financial Corporate' ("KSFC") in 2011 an....
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.... the company. The Learned Counsel for the Appellants further submitted that in view of less than 10% holding of the shares of the company, the 'Companies Act, 2013' is not applicable since it does not meet the threshold limit and therefore the 'Tribunal' erred in giving is verdict in the 'impugned order'. 9. The Learned Counsel for the Appellants further mentioned that the minimum share qualification of 10% as required under Section 244 of the 'Companies Act, 2013' was not available with the 'Respondents' and hence company petition could not have been entertained under Section 241, 243 & 247 of the 'Companies Act, 2013'. 10. The Learned Counsel for the Appellants emphasised that at best transfer of shares certificate from other shareholders to the 'Respondents' can be classified as a matter of dispute between the alleged transferors and transferees and the same is not within the power of the 'Tribunal' to adjudicate. The Learned Counsel for the Appellants brought to the notice of this 'Appellate Tribunal' that several attempts were made for mediation and settlement but the same could not be fructified as parties did not seek specific enforcement of the 'Settlement Agreement' ....
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....g the parties. 15. The Learned Counsel for the Appellants also challenged the appointment of private agency namely, K. Venkitachalam Aiyer and Company (Chartered Accountants) to investigate into the affair of the company under Section 213 of the 'Companies Act, 2013'. The Learned Counsel for the Appellants further faulted the 'Tribunal' in giving directions to the Institute of Chartered Accountants of India to investigate conduct of the Chartered Accountants. 16. The Learned Counsel for the Appellants also challenged wrongful award of cost of Rs. 25,000/- each awarded to the 1st and 2nd Respondents from 2nd to 8th Respondents without any legal or effective basis and without any competency. 17. The Learned Counsel for the Appellants stated that contesting 'Respondents' have not produced any evidence to prove mismanagement or oppression and therefore Section 241 of the 'Companies Act, 2013' could not have been applied. 18. The Learned Counsel for the Appellants cited few judgements to supplement his arguments :- ➢ Mathrubhoomi Printing and Publishing Company Limited vs. Vardhanan Publishers Limited & Ors. (1992) 73 CC 80 Kerala. ➢ N. Ram....
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....ing 'Respondents' with the 'Respondents'. The Learned Counsel for the Respondents submitted that meeting was held on 12.09.2015 for reconciliation of the issues whereby transfer of shares were agreed unanimously and this decision was ratified in the Board Meeting. The Learned Counsel for the Respondents maintained that Board approved decisions cannot be termed as inter se disputes hence, the 'Tribunal' was right in the 'impugned order'. 24. The Learned Counsel for the Respondents countered the arguments of the 'Appellants' regarding maintainability of the petition under Section 241 of the 'Companies Act, 2013' and stated that non-transfer of shares is an act of oppression of the minority shareholder and cannot be thrown out merely on the pretext of threshold issues. The Learned Counsel for the Respondents cited the case of SVT Spinning Mills Ltd. vs. M. Palanisami (2009) 6 MLJ 821. The Learned Counsel for the Respondents further put the argument that but for illegal acts of the 2nd Appellant in withholding legitimate shares transfer to the 'Respondents', they would have hold 13.99% of the shareholding much more than required threshold and relied upon the judgment Suhas Fchakn....
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....r Section 241 of the 'Companies Act, 2013'. (b) Whether the 'Tribunal' could have entertained such petition under Section 241, 242 r/w Section 247 of the 'Companies Act, 2013'? (c) Whether the 'Tribunal' erred in directing the 'Appellants' to effect registration of shares by means of transfer in favour of the 'Respondents' under Section 58(5) of the 'Companies Act, 2013' ? (d) Whether the 'Tribunal' has power to order for cost to be paid to the 'Respondents' ? Issue: (II) (a) Whether the 'Tribunal' had the power to cause investigation into the affair of the company under the 'Companies Act, 2013'. (b) Whether the 'Tribunal' is empowered to recommend to Institute of Chartered Accountant to take suitable disciplinary action on 9th Respondent (Chartered Accountant Firm on alleged collusion with the 'Appellants' to falsify the record of the company ? 30. Issue : (I) (a) Whether the 'Respondents' possessed minimum 10% shares in order to invoke petition filed under Section 241 of the 'Companies Act, 2013'. (b) Whether the 'Tribunal' could have entertained such petition under Section 241, 242 r/w Section 247 of the 'Companies Act, 2013'? ....
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.... transfer or intimation of transmission, appeal to the Tribunal. (5) The Tribunal, while dealing with an appeal made under sub-section (3) or subsection (4), may, after hearing the parties, either dismiss the appeal, or by order- (a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within a period of ten days of the receipt of the order; or (b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved. (6) If a person contravenes the order of the Tribunal under this section, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. [emphasis supplied] 59. Rectification of register of members - (1) If the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecess....
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....company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter. (2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter. [Provided that the applications under this sub-section, in respect of such company or class of companies, as may be prescribed, shall be made before the Principal Bench of the Tribunal which shall be dealt with by such Bench.] [(3) Where in the opinion of the Central Government there exist circumstances suggesting that - (a) any person concerned in the conduct and management of the affairs of a company is or has been in connection ....
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....y, with a view to bringing to an end the matters complained of, make such order as it thinks fit. (2) Without prejudice to the generality of the powers under sub-section (1), an order under that sub-section may provide for- (a) the regulation of conduct of affairs of the company in future; (b) the purchase of shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) restrictions on the transfer or allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; (f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e): Provided that no such agreement shall be terminated, set aside or modified except a....
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....any, permitted in the order, to make, without the leave of the Tribunal, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles. (6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum or articles of a company shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act and the said provisions shall apply accordingly to the memorandum or articles so altered. (7) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same. (8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but whi....
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....' notes that from the records made available and averments made by the parties, the 'Respondents' made desired payment to the company's bank account to repay the due interest to 'KSFC' and also paid money to other shareholders. * This 'Appellate Tribunal' also observes that the other shareholder did not transfer their shares as earlier agreed upon and therefore a conciliatory meeting was held on 12.09.2015, whereby the other shareholder had agreed to transfer their shares. The minutes of meeting has recorded the transfer of shares from the other shareholders to the 'Respondents'. * It has been brought out that the 'Joint Managing Director', 'Managing Director' along with the 2nd Respondent handed over all the documents including 'Original Share Certificates' along with 'Share Transfer Forms' to the 9th Respondent (Chartered Accountants Firm of the company). However, no action was taken despite reminders being sent by the 'Respondents' to the 'Appellants'. It is noted that upon receiving a letter dated 26.04.2017 from the 'Respondents', the 9th Respondent i.e. 'Chartered Accountants Firm' conveyed that the 'Managing Director' of the company had collected back necessary documen....
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....ransfer of shares should be treated as inter se dispute and the 'Respondents' herein should have approached appropriate Civil Court to enforce transfer of shares under 'Specific Relief Act, 1963'. In this regard, this 'Appellate Tribunal' observes that since the transfer of the shares were agreed upon between the parties which was approved in Board Resolution of the company and therefore the 'Tribunal' had suitable power under Section 242 of the 'Companies Act, 2013' r/w Rule 11 of the National Company Law Tribunal, Rules 2016. * As regard, oppression of the 'Respondents', this 'Appellate Tribunal' considered non transfer of shares in favour of the 'Respondents' herein tantamount to the oppressions of the 'Respondents' as per Section 242 r/w Section 58 of the 'Companies Act, 2013'. * As regard, the costs awarded in favour of the 'Respondents' herein, it is noted that the 'Tribunal' has power under Section 242(2)(l) of the 'Companies Act, 2013' for imposition of cost as may be deemed fit by the 'Tribunal'. This 'Appellate Tribunal' looking to the over all series of events do not want to interfere on this finding and order of the 'Tribunal'. 31. Issue: (II) (a) Whether the '....
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....ng or other director, or the manager, of the company, order, after giving a reasonable opportunity of being heard to the parties concerned, that the affairs of the company ought to be investigated by an inspector or inspectors appointed by the Central Government and where such an order is passed, the Central Government shall appoint one or more competent persons as inspectors to investigate into the affairs of the company in respect of such matters and to report thereupon to it in such manner as the Central Government may direct: Provided that if after investigation it is proved that- (i) the business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose; or (ii) any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, then, every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punishable for fraud in the manne....
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....dgment is being reproduce as under: "42. In view of the aforesaid position of law, we are of the view that the Adjudicating Authority was not competent to straight away direct any investigation to the conducted by the 'Serious Fraud Investigation Office'. However, the Adjudicating Authority (Tribunal) being competent to pass order under Section 213 of the Companies Act, 2013, it was always open to the Adjudicating Authority/ Tribunal to give a notice with regard to the aforesaid charges to the Promoters and others, including the Appellants herein and after following the procedure as laid down in Section 213, if prima facie case was made out, it could refer the matter to the Central Government for investigation by the Inspector or Inspector and on such investigation, if any,......" [emphasis supplied] ➢ From the above discussions, it is very clear that there is no power with the 'Tribunal' to directly order, an investigation of the Company's Affairs by an independent Person / Firm (Mr. K. Venkitachalam Aiyer & Company as Chartered Accountants). Similarly, no power exist with the 'Tribunal', to ask an `Autonomous Professional Body' (herein the 'Institut....