TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 275
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....l 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 and later was not in position to make payment on time. The....
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....ed 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' entered into on 07.12.2017. The Learned Counsel for the Appellants state....
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....ointment 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. Ramji vs. Ashwath Narayan Ramji & Anr. (2017) 203 CC 574 (Madras). ➢ Claud-Lila Parulekar (Smt.) vs.....
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....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 Fchakna vs. South Asia Human Rights Documentation Centre Pvt. Ltd. and Ors. [2017] 204 Comp. Case 638. The Learned Counsel for the Respondents....
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.... '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'? (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, 20....
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.... 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 unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company, or the company may appeal in such form as may be prescribed, to the Tribunal, or to a competent court outside Ind....
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....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 therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law or of breach of trust; (b) the business of a company is not or has not been conducted and managed by such person in accordance with sound business principles or prudent commercial practices; (c) a company is or has been conducted ....
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....hares 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 after due notice and after obtaining the consent of the party concerned; (g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (h) removal of the managing director, manager or any of the directors of the company; (....
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.... 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 which may extend to one lakh rupees, or with both." [emphasis supplied] * The 1st Respondent i.e. the company as on 31.03.2015, 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. * It is the case of the 'Appellants' that the 1st Respondent is holding 2,31,589 shares of Rs. 10/- each which is only 7.5% of the total subscribed and paid up capital and the 2nd Respondent is not even a shareholder of the company and in view of t....
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....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 documents from their office to take required action for transfer of shares. * To settle the disputes after reconciliating meting among the shareholders, a 'Settlement Agreement' was entered between the parties on 09.12.2017, wherein it was mentioned that the 'Appellants' would transfer 4.5% shares of the company to the 'Respondents'. The 'Settlement Agreement' was recognized and approved by the board in its meeting on 12.12.2017. However, no such transfer was made. * The 'Appellant has claimed that the 'Respondents' are not qualified to file a petition under Section 241 and 242 of the 'Companies Act, 2013' as they lack th....
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....ares 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 '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 ? * The question on whether the 'Tribunal' has power to order investigation into affairs of the Company, contrary to the power granted to the Central Government and also whether the Tribunal could ask 'Institute of Chartered Accounts of India' to take disciplinary action again....
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....her 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 manner as provided in section 447". [emphasis supplied] ➢ This 'Appellate Tribunal' has also taken into account the judgment pronounced in its earlier two orders i.e in Company Appeal (AT) (Insolvency) No. 949 of 2019 titled as Vijay Pal Garg & Ors. vs. Pooja Bahry (Liquidator in the matter of Gee Ispat Private Limited). The relevant paragraph of the above cited judgment is being reproduce as under: "44. Be that as it may, this Tribunal on a careful consideration of respective contentions and also keeping in mind a prime fact that the Tribunal/ Adjudicating Authority is guided by the Principles of Natural justice and is to follow the procedure prescribed u/s 213(b) of the Companies Act comes to an 'irresist....