TaxTMI 
TaxTMI 
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2023 (3) TMI 178
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....Member ( Judicial ) : Comp. App (AT) (CH) No. 10 of 2021: Background : The 'Appellants', have preferred the instant 'Comp. App (AT) (CH) No. 10 of 2021', as being 'Aggrieved', with the 'impugned order' dated 10.02.2021 in CP/794/2020, passed by the 'National Company Law Tribunal', Division Bench - II, Chennai), whereby and whereunder, the main 'CP/794/2020', came to be 'Admitted', and the 'Interim Relief(s)', prayed for, by the 'Appellants / Petitioners', were not granted, etc. 2. The 'National Company Law Tribunal', Division Bench - II, Chennai, while passing the 'impugned order' dated 10.02.2021 in CP/794/2020, had observed the following: "Learned Senior Counsel Mr. P.S. Raman for the Petitioner is present. Learned Counsel Mr. Nikhil Sakhardande and Learned Counsel Mr. P. Giridharan for R3 to R5 and R11 are present. Learned Senior Counsel Mr. P.H. Arvindh Pandian for R6, R7 and R10 is present. CP/794/2020 is admitted. Interim reliefs sought by the Petitioner is not granted. Meanwhile, it has been brought to the notice that R1 company is not running by the Petitioner. Salaries and other day-to-day operations of the company is stuck due to various reasons. R3 to R....
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....n 118 (10) of the Companies Act, 2013, the 'Secretarial Standards', are 'mandatory' one, to be adhered by the 'Company'. 8. On behalf of the Appellants, a reference is made to the clause 6.2 of the 'Secretarial Standards' on 'Meetings' of 'Board of Directors', which runs as below: " 6. Passing of Resolution by Circulation ... 6.2. Procedure 6.2.1 A Resolution proposed to be passed by circulation shall be sent in draft, together with the necessary papers, to all the Directors including Interested Directors on the same day." Further the secretarial standards for the board meeting are mandatory to be followed the relevant section mandating the same is mentioned below: Section 118 (10) of the companies act, 2013: (10) Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government." 9. On behalf of the Appellants, it is contended that before this 'Tribunal', that the 'void Circular Resolutions', cannot be said to have been duly passed because of the fact that ....
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.... and that the conduct of the 'Respondent', can be questioned on account of the fact that they are creating road-blocks in the '1st Respondent / Company'. 14. According to the Appellants, that the Respondents action in informing the 'Registrar of Companies', 'Overseas Subsidiaries' and 'Clients', about the removal of the '1st Appellant', from the 'Board' of 'Overseas Subsidiaries', is not only an 'Oppressive' one, but also, not a responsible act of the 'Board', along with not following the 'Fiduciary Duty' of the 'Director', as per Section 166 of the Companies Act, 2013. 15. The Plea of the Appellants is that, the '9th Respondent', even after the 'Order of Interim Stay', granted by this 'Tribunal', for the 'Circular Resolutions Nos. 1 to 6', has brazenly endeavoured to sell the 'Shareholding' of the '1st Respondent / Company', even after knowing that the matter is 'subjudice', and further that, any action of 'Sale of Shares' of 'Indian Entity', is automatically stayed, because of the fact that all the 'Circular Resolutions', were stayed by the 'Order' of 'Interim Stay', granted by this 'Tribunal'. 16. According to the Appellants, the '1st Appellant' / 'one of the Directors of the....
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....ign Subsidiaries'. 20. It is represented on behalf of the Appellants that the 9th Respondent, had intentionally failed to approach the 'Competent Civil Courts' or produce the 'Certificate copy' of the 'Impugned Decree' of such 'Courts', to execute the same in consonance with 'Section 13 of the Civil Procedure Code'. 21. The Learned PCS for the Appellants, refers to the Order dated 05.03.2014, in Marine Geotechnics LLC vs. Coastal Marine Construction & Engineering Ltd., in Company Petition No. 69 of 2020, whereby it was underlined that when a foreign decree is delivered by a reciprocating company, it is implied that the same has to be executed as per 'Section 44A of the Civil Procedure Code', and ultimately, satisfy the 'Section 13 of the Civil Procedure Code'. In fact, the 9th Respondent took unauthorised charge of the '1st Respondent / Company', long before 03.11.2020. 22. The contention of the Appellants contend that nowhere does the 'impugned order' anything regarding 'Foreign Subsidiaries'. Also that, the 'Company Secretary' of the '1st Respondent Company', was not informed of the 'Circular Resolutions', and such 'modus operandi', was conducted by the '9th Respondent' ('IJM'....
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....'Company', by paying all the 'GST', 'Income Tax' and other 'Statutory Dues', though not supported by any of the other 'Directors'. Gist of Counter of 1st Respondent / Company: 28. The Company Secretary of the '1st Respondent' / 'Technology Frontiers (India) Pvt Ltd.' and 10 Ors., had averred that, he is the 'Company Secretary' and 'Compliance Officer' of the '1st Respondent / Company' (in terms of the ingredients of Section 205(1) of the Companies Act, 2013), and in regard to the 'Circular Resolution Nos. 1 to 6' (subject matter of 'Litigation', before the 'Tribunal' and the 'Appellate Tribunal'), he was unaware of these 'Circular Resolutions, purported to have been passed during the end of October / early November 2020, by the Respondent Nos. 3 to 8, and also that, he was not informed by the said Respondents, despite the fact that he is the 'Company Secretary,' which fact, 'Respondent Nos. 3 to 8', were quite aware of it. 29. Indeed, the 'Company Secretary' of the '1st Respondent / Company', received an email notification from the 'Ministry of Corporate Affairs', on 09.12.2020, to the effect that the 'Circular Resolutions', were passed in respect of the '1st Respondent / Compan....
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....he 'Relief', prayed for, by the 'Appellants', to set aside the 'impugned order', on the basis that the 'Tribunal', had not 'stayed', the implementation of the 'Circular Resolutions', is a redundant and an 'infructuous' one. 35. According to the Respondent Nos. 3, 4, 5 and 11, the 'Circular Resolutions', among other things, had provided that 'no individual Director' or 'Officer' of the '1st Respondent', could 'act' / 'instruct' / 'represent' the '1st Respondent', before the 'Parties' / 'Courts' / 'Subsidiaries' / 'Operate Bank Accounts' / 'Appoint' any 'Accounting Firm', without an 'Express Prior Written Approval', from the 'Board' of the '1st Respondent / Company', and as long as there is an 'IJM'. Since, there is no 'IJM' and that the '1st Appellant', is the only 'Director', presently on the 'Board of Directors'. Hence, the 'Circular Resolutions', are not to be given effect to, as on date, and the 'Reliefs', sought for', by the 'Appellants', seeking 'Stay' of the same is an 'infructuous' one. 36. The Learned Counsel for the Respondent Nos. 3, 4, 5 and 11 points out that the Respondent Nos. 3 to 8 are no longer on the 'Board of Directors' of the '1st Respondent / Company', no 'In....
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....t had not provided any comments. Even, when the 1st Appellant's Advocates, had replied to the 9th Respondent, on 03.11.2020, they had not offered any comments, in regard to the 'Draft Circular Resolutions'. Also that, the 'Circular Resolutions', signed by the 'Nominee Directors' of the 'Respondent Nos. 10 and 11', were shared by the '9th Respondent', with the '1st Appellant', for his signature by an email dated 05.11.2020. 41. The Learned Senior Counsel for the Respondent Nos. 6, 7 and 10 contends that the 'Circular Resolution Nos. 1 to 6', were validly passed by the majority of the 'Board of Directors', as per Article 22.4 of the 'Articles of Association' of the '1st Respondent / Company'. The 1st Appellant, had objected to the 'Circular Resolutions' for the first time, as an afterthought on 06.11.2020 (vide email dated 06.11.2020). 42. It is represented on behalf of Respondent Nos. 6, 7 and 10, the requirements of Articles 29 to 31 of the 'Articles of Association' have been met with, while passing the Circular Resolutions and the 'Insight Shareholders', as mentioned in Articles 29 to 31 are Respondent Nos.10 and 11, the 'Financial Investors', in the parent company, Global Sport....
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....ng Ltd. (1981) 3 SCC Page 333, wherein at Paragraph 49, it is observed as under: 49. ".....The true position is that an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burdensome, harsh and wrongful ......." 48. It is represented on behalf of the Respondent Nos. 6, 7 and 10 that the 'Tribunal', by virtue of the 'impugned order' dated 10.02.2021, had simply made a suggestion to the 'Respondent Nos. 3 to 11', in considering the 'creation' of an 'Interim Committee' to run the day-to-day affairs of the '1st Respondent / Company'. 49. Further, the 'Board of Directors' of the 1st Respondent / Company, had constituted an 'Interim Committee', to run the day-to-day affairs of the 1st Respondent / Company and the 1st Appellant was part of the said 'Committee'. However, the 9th Respondent was not part of the said 'Committee'. As such, the 'Reliefs', prayed for, by the 'Appellants', are not only 'misleading' one, but became infructuous. 50. The Learned Counsel for the Respondent Nos. 6, 7 and 10 points out that the 'Tribunal', had recognised the creation of Inter....
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....Respondent No.1 Company were filed in December 2021 for the period from April 1, 2018 till March 31, 2019." 54. According to the Respondent Nos. 6, 7 and 10, the 2nd Respondent had never attended any 'Board Meeting' from December 2012 and she vacates the Office, as a Director, as per Section 283(1)(g) of the Companies Act, 1956, that was in effect, during that period, in and by which, if a 'Director', absence himself, from three consecutive Meetings of the 'Board of Directors', or from all 'Meetings' of the 'Board', for a continuous period of three months, whichever is longer, without obtaining 'Leave' of 'Absence', from the 'Board'. Even as per Section 167 (1) (b) of the Companies Act, 2013 (came into effect on 01.04.2014). The 2nd Respondent vacates the Office, as she was absent in all the Meetings of the Board of Directors, held, during the period of 12 months, with or without seeking, 'Leave of Absence' of the 'Board'. 55. The Learned Counsel for the Respondent Nos. 6, 7 and 10 points out that the '8th Respondent', was appointed by the Board at its Meeting, held on 20.07.2020, subject to the approval of the 'Shareholders' at the next 'Annual General Meeting' of the Company. A....
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...., from the date of 'Interim Order' dated 23.04.2021, passed by this 'Tribunal', and hence, the instant 'Appeal', is liable to be 'dismissed'. Stance of the 8th Respondent: 59. The Learned Counsel for the 8th Respondent submits that the '8th Respondent', was appointed as a 'Nominee Director', to the 'Board' of the '1st Respondent / Company', with a primary object of protecting the interests of the 'Debenture Holders', and that the operations of the '1st Respondent / Company', is conducted on day-to-day basis. 60. In the main CP/794/2020, on the File of 'National Company Law Tribunal', Chennai ('Oppression and Mismanagement Petition'), 'no prayer', is sought specifically against the '8th Respondent'. The '8th Respondent', is not appointed in any of the 'Key Committees', and further does not have any 'Voting Rights', and therefore, the 'Circular Resolutions', which are assailed, will have no bearing, even if the '8th Respondent', 'votes in favour or against the Resolutions'. 61. The Learned Counsel for the 8th Respondent points out that the 'Debenture Trustee', filed a 'Petition', before the 'National Company Law Tribunal', under Section 7 of the I & B Code, 2016, in respect of th....
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....rder' of 'Stay', in regard to the 'implementation of Circular Resolutions dated 03.11.2020, till the next date of hearing i.e., 11.06.2021', was passed, and till date, it is not 'vacated'. 68. The 'National Company Law Tribunal', Division Bench - II, Chennai in CP No. 794 of 2020 (Filed by the 'Appellants' / 'Petitioners'), on 10.02.2021, had admitted the main 'Company Petition', and had not granted the 'interim relief', sought for, by the 'Appellants / Petitioners'. However, the 'Respondent Nos. 3 to 11', was required to consider, creating an 'Interim Committee', to run the 'Day-to-Day Affairs' of the '1st Respondent / Company', and the matter was directed to be listed on 11.03.2021, for 'Counter' and 'Hearing'. 69. Before the 'Tribunal', in the main CP/794/2020, the 'Appellants / Petitioners', have sought the following 'Interim Reliefs': '(i) In suspending the implementation of the Circular Resolutions No. 1 to 7 / 2020-2021 dated 3rd November 2020, passed in accordance to the proposals issued by the Board Dated October 2020, circulated to the Petitioner by the 9th Respondent on 5th October 2020. (ii) In ordering the 'Interim Injunction', restraining the 'Respondents', from....
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.... specified by the Institute of Company Secretaries of India constituted under Section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government'. 75. Although, on behalf of Respondent Nos. 6, 7 and 10, a plea is raised that the 'Circular Resolutions', in 'Draft Form', were shared by the '9th Respondent' with the 'Advocates' of the '1st Appellant', through email dated 31.10.2020 and the '1st Appellant', on receipt for the same, had not provided any comments, etc., this 'Tribunal', pertinently points out that in the instant case, the 'Circular Resolutions', were not circulated to the '1st Appellant' in 'Draft', and as such, there is a 'Violation' of 'Section 175 (1) of the Companies Act, 2013, there is a negation of clause 6.2 of the Secretarial Standard-1, non-observance of the ingredients of Section 118 (10) of the Companies Act, 2013, and non-compliance of the clause 22.4 of the 'Articles of Association' of the Company. 76. Furthermore, it is latently and patently quite clear that, as per 'Article 21.3 of the Articles of Association, the 'Majority', includes the consent of the '1st Appellant'. That apart, as per Secretarial Standards-1 c....
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....he 'Committee', and 'IJM', was not a 'part' of the same, and further, the 'Committee', being constituted on 08.03.2021, vide 'Circular Resolution No. 10 / 2020-2021', comprising of the '1st Appellant' and 'Respondent Nos. 8, 4 and 7'. 80. As a matter of fact, as on date, none of the 'Members' of the 'Former Interim Committee', are an integral part of the 'Board of Directors' of the '1st Respondent / Company', and further that after passing of the 'impugned order', the 'Respondent Nos. 3 to 7', had resigned from the 'Board of Directors' of the '1st Respondent / Company'. Moreover, the '8th Respondent', had ceased to be a 'Director' with effect from 30.09.2020 from the '1st Respondent / Company'. 81. Continuing further, according to the Respondent Nos. 3, 4, 5 and 11, even in the near future, no such 'Interim Committee', could be appointed and it cannot be lost sight off that, no such 'Interim Committee' exists, and in any event, the 'Relief', regarding the 'Interim Committee', is an 'Otiose' one, as held by this 'Tribunal', in 'unequivocal term'. 82. At this juncture, this 'Tribunal', pertinently points out that even though, on either side 'Pleas', were raised, touching upon the ....
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....o. 10 of 2021' ('Contempt Petition'), is filed, by virtue of the 'Interim Stay', of all the 'Circular Resolutions', passed by this 'Tribunal', through its 'Interim Order' dated 23.04.2021, in the present 'Company Appeal'. 88. The grievance of the Petitioners /Appellants, projected in IA No. 195 of 2021 in Comp. App (AT) (CH) No. 10 of 2021 is that, inspite of the 'Interim Order' dated 23.04.2021 in Comp. App (AT) (CH) No. 10 of 2021, wherein and whereunder, an 'Order' of 'Interim Stay', was granted by this 'Tribunal', relating to all the 'Circular Resolutions', the '9th Respondent' ('Mr. Chee Chong Tam'), had chosen to conduct a 'Meeting' of the 'Creditors' of 'Global Sports Commerce Pte. Ltd.', wherein the main 'Agenda', was to ensure that there is a 'Stake Sale' of the '1st Respondent / Company', whereby more than 90% of the 'Shares' of the '1st Respondent / Company', is put up for 'Sale', by the '9th Respondent'. 89. Advancing his argument, the Learned Practising Company Secretary for the Petitioners/Appellants submits that, by means of 'Circular Resolution No.1', the '9th Respondent' gave all powers of the 'Board' of the '1st Respondent / Company' to himself and when the 'Cir....
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...., 'Expeditious Resolution' of 'Disputes', cannot be done. Contempt of Courts Act , 1971 : 94. The prologue of The Contempt of Courts Act, 1971 (70 of 1971), is for the purpose of securing a feeling of confidence of people in general for 'Due and Proper Administration of Justice', in the Country, as per decision in Prem Surana v. Addl. Munsif & Judicial Magistrate, AIR 2002 SC 2956. Twin Purpose : 95. The 'dual purpose' of 'Contempt Proceedings', against a 'Person', who has failed to 'Comply' with the 'Court' / 'Tribunal's Order' (a) Vindication of Public Interest, by punishment of Contemptuous Conduct and (b) A compulsion to coerce the Contemnor to do what the 'Law', requires him to perform. Ingredients of Contempt : 96. The 'Onus' of proving the 'Contempt', is on the 'Person', who alleges the 'Contempt'. It must be established that an 'Order', was passed by a 'Court of Law' / 'Tribunal', which either directs 'certain things', to be performed by a 'Person' or to 'Prohibit' such person(s) from doing 'Particular / Certain' acts, and that the 'Person', had knowledge of the said 'Order'. 97. A mere disobedience of an 'Order' of a 'Court', may not be sufficient to amount to a ....
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....unal'. 103. In this connection, this Tribunal, relevantly points out that the 'Law of Contempt', is ofcourse, to be strictly interpreted and the requirements of 'Law', is to be strictly 'complied with'. No wonder, while dealing with an 'Application' for 'Contempt', the 'Court' cannot traverse beyond the 'Order', passed by it. Also that, the 'Court' / 'Tribunal', cannot test the 'correctness' or 'otherwise' of the 'Order' or give any added direction or delete any direction, as the case may be. 104. Before any 'Person', can be committed for 'Contempt', as per decision of the Hon'ble Supreme Court, in the matter of Roshan Sam Joyce v. S.R. Cotton Mills Ltd. AIR 1990 SC 1881. In reality, the 'Contempt Proceeding', is primarily between the 'Court' and the 'Contemnor', as per the decision in State v. Mahboob AIR 1996 SC 2131. 105. In view of the fact that the 'Contempt Jurisdiction', should be sparingly exercised, with due care and caution, as per decision Mrityunjoy Das v. Sayed Hasibur Rahaman (vide Contempt Petition (Civil) No. 202 of 2000 - Order dated 16.03.2001), AIR 2001 SC 1293. This Tribunal', keeping in mind of the fact that the 'void Circular Resolutions', have no longer ha....