AI Drafter 
TaxTMI 
TaxTMI 
2023 (3) TMI 1280
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....al (AT) No. 321 of 2019 Page 3 of 43 Tribunal, Kolkata Bench in C.A. No. 1755 of 2015 in CP No. 189/KB/2015. Respondent No. 1 Indrapuri Studios Private Limited (in short 'R-1') is a company within the meaning of the Companies Act, 1956 and is engaged in the business of running a film studio in Tollygunge, Kolkata. Respondent No. 2 Tejash Doshi (in short 'R-2'), Respondent No. 3 Rashmi Bubna (in short 'R-3'), Respondent No. 4 Sanjeev Bubna (in short 'R-4'), Respondent No. 5 Nirmal Kumar Karnani (in short 'R-5'), and Respondent No. 6 Shibnath Mazumdar (in short 'R-6') are former and present Directors of R-1 Company and Respondent No. 7 Dhirendra Kumar Doshi (in short 'R-7') is father of R-1 and present Managing Director of R-1 company. 2. Briefly, the case of the Appellant as stated in the appeal and argued by him, is that CP No. 189/KB/2015 was filed by him before NCLT, Kolkata alleging oppression and mismanagement on the part of the R-1 Company and R-2 in particular. He has stated that he has a shareholding of 61.92% of the total shares in the R-1 company, which was reduced to 0% by the respondents, which caused him to approach the then Company Law Board to challenge the r....
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.... this deed of nomination is null and void. Furthermore, this transfer is in violation of the interim stay order dated 20.7.2015 of Hon'ble High Court of Calcutta, which also makes the transfer of 3890 shares in favour of R-2 as guardian of Harshika Doshi void as the transfer contravenes the stay order. 5. As regards other acts of oppression, the Appellant has alleged that R-2 indulged into an illegal act of oppression by issuing a letter dated 17.9.2015 by which the sale of 4160 shares by R-2 to the Appellant was cancelled and the consideration amount of Rs. 4,16,000/- was returned to the Appellant in his bank account through RTGS. In addition, R-5 and R-6 were wrongfully removed as Directors of R-1 Company by R-2, R-3 and R-4. As a result of such wrongful and illegal acts of oppression and mismanagement perpetrated by R-2, R-3 and R-4, the Appellant filed company petition CP No. 189/2015, wherein R-1 to R-4 and R-7 filed a demurrer application CA No. 1755/2015 challenging the maintainability of original company petition, in which the NCLT has passed the Impugned Order. 6. We heard the arguments presented by Learned Senior Counsel/Learned Counsel for all the parties and perus....
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.... and consequent transfer of 4160 shares to the Appellant was void, without even providing an opportunity to the Appellant to prove legitimacy of his ownership of the said shares. He has claimed that this unilateral action of Shri Tejash Doshi is not in accordance with the principle of natural justice and the legal provision as provided in the Companies Act, whereby once the Appellant's name had been entered into in the Register of Members as owner of 4160 shares of R-1 Company, it could not have been deleted through unilateral action of R-2. 10. The Learned Senior Counsel for Appellant has further argued that a Company Petition being CP 189/2015 was filed by the Appellant alleging various acts of oppression and mismanagement against Respondents No. 1, 2, 3, 4 and 7 and while this application was under consideration, a demurer application CA No. 1755/2015 was filed by Respondents No. 1, 2, 3, 4 and 7 claiming that the petitioner Yash Vardhan Mall of the main Company petition does not satisfy the requirement of being a petitioner as required under Section 244 of the Companies Act, 2013 because he does not hold 10% of the issued, paid-up and subscribed shares capital of the Company....
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....llant paid Rs. 4,16,000/- for transfer of 4160 shares @ Rs. 100/- per share as decided by R-1 Company, and consequently vide Board's Resolution dated 19.6.2013, his name was entered in the Register of Members of the R-1 Company as holder of 4160 shares and thus, the Appellant became holder of 8050 shares as is evidenced by the Register of Members (attached at pgs.198-199 of the Appeal Paper Book Vol.I). 13. The Ld. Senior Counsel for the Appellant has further argued that as there was a long-standing dispute between late Smt. Shrutika Doshi and R-2 on one side and R-3 and R-4 on the other side, a suit had been filed in the Hon'ble High Court of Calcutta by R-3 and R-4 alleging acts of oppression and mismanagement against the other party. He has added that after the demise of Smt. Shrutika Doshi in May, 2015, a settlement was worked out between Shri Tejash Doshi (R-2) and Smt. Rashmi Bubna (R-3) and Shri Sanjeev Bubna (R-4) and after execution of this settlement, certain documents were fabricated and forged to throw out the Appellant from the family arrangement to his determent. He has claimed that this deed of nomination dated 15.1.2013 surfaced only in the year 2015 even though ....
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....f oppression and mismanagement were alleged in CP No. 189/2015 and by such determination of the demurer application, the maintainability of the original company petition No. 189/2015 has been decided against the Appellant and without even considering the reliefs sought through the CP No. 189/2015, which is denial of justice to the Appellant. He has further contended that the issue of maintainability as well as the issues raised in the main CP should have been decided together as that would have been a just and fair course of action, and this was also the intent of this Tribunal, when it ordered in Company Appeal No. 318/2018 that "the Tribunal should decide the main petition together with the IAs preferred by the parties on an early date without granting unnecessary adjournment to the parties, uninfluenced by any observation made in the Impugned Order 2.8.2018". 16. The Learned Senior Counsel for Appellant has also argued that the cancellation of 4160 shares by the R-1 Company was done in a unilateral manner by sending letter dated 17.9.2015 whereby the company informed the Appellant that the sale and consequent transfer of 4160 shares in R-1 Company was adjudged as void and the....
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....to consider the case on merits. 18. With regard to the power of the company to effect rectification in the Register of Members and such powers being available only if the rectification is made by way of correction of simple mistake, the Learned Senior Counsel for Appellant has cited judgments in the matters of PV Damodara Reddi & Anr. vs. Indian National Agencies Limited [MANU T/0217/1945] and Afzal Khan & Ors. vs. Mehboob Ayub Khan & Ors. [MANU/MH/0420/2016] in support. 19. The Learned Senior Counsel for R-1, R-2, R-3, R-4 and R-7 (collectively called "Respondents") has initiated his argument by showing that in both the deeds of nomination, the nominee is Harshieka Doshi and the Appellant Yash Vardhan Mall is not the nominee or the holder of 3890 shares, as he is claiming to be, and therefore it is not clear what case the Appellant is making out in his favour. He has pointed out that in the list of parties of the original company petition, Mr. Yash Vardhan Mall is cited as sole petitioner and there is no mention of Ms. Harshieka Doshi, who is the actual nominee of the shares held by Smt. Shrutika Doshi. Therefore, the case that the Appellant has come up with is an incorrect ....
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....has claimed that R-3 and R-4 (Rashmi Bubna and Sanjeev Bubna) had raised the issue that the petitioner in the original company petition had no right, title and interest in the said 3890 shares and therefore, he was not entitled to prefer the company petition CP No. 189/2015. He has added that the matter of allotment of 4160 shares being null and void was also stated in the reply of R-3 and R-4 in CP No. 189/2015. With regard to the directorship of R-3 and R-4, the Learned Senior Counsel for Respondents has referred to the reply of R-3 and R-4 to CP No. 189/2015 to contend that the appointment of R-3 and R-4 as directors of the R-1 Company was done in accordance with the requirements of Articles of Association after due decisions were taken in the AGM of Respondent No. 1 Company. 24. The Learned Senior Counsel for Respondents has further argued that section 59 of the Companies Act, 2013 empowers the Company to rectify the Register of Members, if the name of any person is entered in without sufficient cause, and in the present case, the name of Mr. Yash Vardhan Mall was entered in the Register of Members with regard to 4160 shares without entitlement and not in accordance with Art....
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.... from the lack of notice under Article 58, as we have already noticed, the right of a transferor in terms of the articles of the Company to sell the shares to a person of the transferor's choice is required to be exercised within the period specified in the articles. This is clear from Article 63. According to the respondents the appellants had repudiated the contract by challenging the certification of the auditor in February 1985. If that were so then the Directors were required to give the notice to the transferor or if no such notices were given, the transferors could sell within the period of 30 days thereafter. Those 30 days had long since expired much before the date on which the sale of the shares is said to have taken place between Respondents 2, 3 and 4 and the Pawar Group." 26. The Learned Senior Counsel of Respondents has also cited the judgment Hon'ble Supreme Court in another matter of John Tinson & Co. Pvt. Ltd. & Ors -Vs- Surjeet Malhan (Mrs). & Anr. [(1997) 9 SCC 651] to show the sanctity of the Articles of Association of a company in the following manner: "7. The next question is whether the transfer of the shares held by Mr. B.K. Malhan is valid i....
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....e Companies Act 1985. He submitted that it should be taken as conclusive unless and until rectified, that there was no statutory power to rectify it in this respect under section 359, and that it had not been and could not now be rectified. I disagree. The register is of course prima facie evidence, but it can be rebutted, and has been. If it is or becomes plain that an entry is mistaken, it is open to the company to rectify it without an order of the court, and the company should do so: see Reese River Silver Mining Co. Lid. v. Smith (1869) L.R. 4 H. L. 64, 81. It is understandable, and appropriate, that the error should not have been rectified pending the current proceedings, but in my view it can and should now be corrected to show that Frogmore became a shareholder on 25 March, not 24 March, and even in the absence of that being done I am entitled to proceed on the basis of the facts as proved, albeit inconsistent with the entry in the register." 29. This judgment is distinguished on the ground that that while the register is the prima facie evidence and if an entry has been made therein by mistake, it is open to the Company to rectify it without an order of the court but in....
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....f the company, a name upon the register which ought not to have been there." 31. These facts of case in this judgment relate to a mistake where both the petitioner and the company are of the same view regarding correcting the mistake in the register of members and the petitioner (Mr. Smith) has filed a bill in the chancery for correction of the mistake. Thus, there is no difference of opinion between the petitioner and the company whereas in the present case the Appellant and the Company are on different page as far as the deletion of the Appellant's name from the register is concerned that if a petition is filed for a matter, which is not genuine and which is for exerting pressure in order to achieve a collateral purpose, the petition ought to be dismissed primarily on this ground. He has cited this judgment in support of his contention that the Appellant/petitioner filed the original company petition primarily to gain control of R-1 Company and not for any reason of oppression and mismanagement and therefore, he has mis-stated the fact of the ownership of 3890 shares, which are actually held by Ms. Harshieka Doshi as a nominee in pursuance of his ulterior motive, the original ....
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.... list of persons, who were non-members of the Company for transfer of shares starting from the year 1987-88 and pointed out that Mr. Tejash Doshi, Smt. Shrutika Doshi and Smt. Rashmi Bubna were also beneficiaries of transfer of shares at the time they did not hold any shares in the Company. He has emphatically argued that since the transfer of shares and inclusion of the name of the Appellant in the Register of Members was done in accordance with the decision of the Board of Directors, it was incumbent on the R-1 Company and its Managing Director to follow the principle of natural justice before cancelling such shares. He also argued that no reasons were stated in the letter cancelling 4160 shares and therefore, there wasn't sufficient cause to cancel those shares and the reason being given about infringement of Article 30 of Articles of Association for cancellation of these shares is an afterthought. He has also argued that section 95 of the Companies Act, 2013 lays down that the Register of Members maintained by the Company shall be the prima facie evidence of ownership of shares and therefore, the Register of Members as it stood after it recorded transfer of 4160 shares was the ....
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.... R-5 and R-6 as directors and altering the Board of Directors the Respondents have committed acts of oppression and mismanagement and therefore, the NCLT is not correct in holding that if R-5 and R-6 have not challenged their removal as directors. He has also argued that R-5 and R-6 were not retiring as Directors and were removed illegally in the purported AGM which never took place. In addition, the Learned Counsel for R-5 and R-6 has referred to section 152(6) read with section 160 of the Companies Act, 2013 to emphasize that the appointment of directors as laid down in these sections relate to a public company, whereas the present is the case of a private company. Finally, the Learned Counsel for has referred to Articles 111 to 117 of the Articles of Association to show that the rotation of directors has to be done in a particular manner in R-1 Company, which is a private company. He has clarified that in accordance with these provisions, one-third directors retire in every Annual General Meeting, which is how R-5 and R-6 have been removed as directors. 38. The main issue that is relevant in deciding this appeal is whether the Appellant is the owner of 3890 shares and 4160 sh....
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.... that of course he did not, and, although he stated that there were some irregularities of which he disapproved, he time and again emphasized that his real concern was to force an agreement with his co-directors for the repayment of the loans to the Simmons group. The urgency of this became apparent when he explained that the money was needed for the purpose of honoring an agreement made with the Inland Revenue in regard to the payment of arrears of tax. If the loan was not repaid, he was, he said, faced with ruin. A petition which is launched not with the genuine object of obtaining the relief claimed, but with the object of exerting pressure in order to achieve a collateral purpose is, in my judgment, an abuse of the process of the court, and it is primarily on that ground that I would dismiss this petition." We note from the appeal memo that the Appellant has mentioned that he is guardian of Ms Harsheika Doshi. He has certainly claimed incorrectly to be the owner of shares held by Smt Shrutika Doshi whose nominee is Harsheika Doshi but there is no evidence of his meddling in the affairs of the company or that he is trying to gain control of the company and it could be just a ....
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....eting and at every succeeding ordinary general meeting one-third of the Directors, or, if their number is not a multiple of three, then the number nearest to, but not exceeding one-third, shall retire from office and be eligible for re-election." 43. We note that the Impugned Order considered the issues raised in demurer application CA no. 1755/2015, which is regarding maintainability of the original company petition CP No. 189/2015 and finds that the company petition is not maintainable on two grounds, namely, (i) that 3890 shares were not held by the Petitioner/Appellant, since Harshieka Doshi is the correct rightful nominee of her mother Smt. Shrutika Doshi's 3890 shares, and (ii) the transfer of 4160 shares was done in contravention of Article 30 of the Articles of Association. Therefore, the impugned order infers that since Yash Vardhan Mall as petitioner of CP No. 185/2015 does not own any shares in R-1 Company, the company petition filed by him under Section 241-242 is not maintainable. 44. We note that Article 30 of the Articles of Association lays down that a share may be transferred to any member selected by the transferor, but it could also be transferred to a pers....
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.... are of the view that sufficient cause was to be shown by R-1 Company before cancelling 4160 shares. No document or evidence has been placed on record by the Respondents to show that there was sufficient cause in cancelling 4160 shares. The only document is the letter dated 17.9.2015 which purports to return Rs.4,16,000/- to Mr. Yash Vardhan Mall but significantly without recording any reason as to why the said shares were adjudged as void. 48. We also note that Hon'ble Supreme Court has held in the matter of M.C. Mehta vs. Union of India & Ors. (supra) that "breach of natural justice in adjudicating the matter may not be compulsion if on the admitted undisputable factual position, only one conclusion is possible and permissible." This judgment is distinguished on the ground that the present matter is a case where two conclusions regarding cancellation of 4160 shares was possible on the facts of the case because Article 30 of Articles of Association of R-1 Company allows transfer of shares to be made to non-members in the interests of the Company. The judgment in the case of Reese River Silver Mining Co. Ltd (supra) is also distinguished as in that case a member, after finding t....
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.... the shares to Yash Vardhan Mall, and therefore, we do not think that judgments in the matter of Smt. Biva Pyne vs. Pyne Properties (P) Ltd. (supra), M.C. Mehta vs. Union of India & Ors. (supra) and S.L. Kapoor vs. Jagmohan & Ors. (supra) can provide any support to the case of the Respondents. 51. A perusal of the appeal memo makes it clear that even though while filing the company petition the Appellant did not show how interests of Harshieka Doshi are being prejudiced, and also that he did not explicitly state that he is only acting as a guardian of Harshieka Doshi in relation to 3890 shares, the Appellant did state that he is the guardian of this minor Ms. Harsheika Doshi, who is the nominee of Smt. Shrutika Doshi in respect of 3890 shares. Therefore, we do not think that the Appellant approached the NCLT with 'unclean hands' as has been alleged by the Respondents. 52. We also find that the Article 30 of the Articles of Association of the R-1 Company has not been appreciated appropriately after looking at it in its entirety by the Learned Senior Counsel for Respondents. 53. We also consider the argument of the Learned Senior Counsel of the Respondents that cancellation ....
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....s could be transferred shares of the company if it is in the interest of the company. This provision is supported by the list of non-members produced by the Appellant who have been transferred shares of R-1 Company from the year 1987-88 onwards. Significantly, this averment has not been disputed by the Respondents. 55. Insofar as the issue of the Appellant claiming ownership of 3890 shares while preferring CP No. 189/2015 is concerned, we find that the nominee of these shares is the minor Ms. Harshieka Doshi. The Learned Senior Counsel for Respondents has cited the judgment in the matter of Aruna Oswal Versus Pankaj Oswal & Ors [(2020) 8 Supreme Court Cases 79] wherein it is held as hereunder: "15. It is quite apparent from a bare reading of the aforesaid provisions of Section 72(1), every holder of securities has a right to nominate any person to whom his securities shall "vest" in the event of his death. In the case of joint holders also, they have a right to nominate any person to whom "all the rights in the securities shall vest" in the event of death of all joint holders. Subsection (3) of Section 72 contains a non obstante clause in respect of anything contained i....
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....that the proceedings before NCLT filed under Sections 241 and 242 of the Act should not be entertained because of the pending civil dispute and considering the minuscule extent of holding of 0.03%, that too, acquired after filing a civil suit in company securities, of Respondent 1. In the facts and circumstances of the instant case, in order to maintain the proceedings, the respondent should have waited for the decision of the right, title and interest, in the civil suit concerning shares in question. The entitlement of Respondent 1 is under a cloud of pending civil dispute. We deem it appropriate to direct the dropping of the proceedings filed before NCLT regarding oppression and mismanagement under Sections 241 and 242 of the Act with the liberty to file afresh, on all the questions, in case of necessity, if the suit is decreed in favour of Respondent I and shareholding of Respondent 1 increases to the extent of 10% required under Section 244. We reiterate that we have left all the questions to be decided in the pending civil suit. Impugned orders passed by NCLT as well as NCLAT are set aside, and the appeals are allowed to the aforesaid extent. We request that the civil suit be ....
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.... no difference, the admitted or indisputable facts speaking for themselves. Where on the admitted or indisputable facts only one conclusion is possible and under the law only one penalty is permissible, the court may not issue its writ to compel the observance of natural justice, not because it approves the non-observance of natural Justice but because courts do not issue futile writs. Bur it will be a pernicious principle to apply in other situations where conclusions are controversial, however, slightly, and penalties are discretionary." The above judgment is also distinguished as in the present case two different outcomes were possible in case notice regarding the transfer of 4160 shares was given to the Appellant before cancelling them as Article 30 of the Articles of Association did provide for shares to be given to non-members when it was in the interest of the company. 58. We come to the conclusion that the ownership of 4160 shares, an issue which has been discussed in detail in earlier paragraphs, certainly vests with Mr. Yash Vardhan Mall and the allegation that the Company has not followed the due procedure in cancelling these shares is found to be correct. The plea....
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....en such dismissal at threshold will lead to serious repercussions as held in Jer Rutton Kavasmaneck v. Gharda Chemicals Limited (supra). The conduct of the respondents cannot in any way disentitle them from agitating their rights before any forum. However, the issues raised by the respondents in the present application involving a mixed question of law and fact and not being pure issue. of law touching upon the question of jurisdiction of the Court or bar by any law, cannot be tried as preliminary issues in the light of the provisions of Order 14 Rule 2 of CPC and as reinforced' in Saurashtra Cement and Chemicals Industries Limited v. Esma Industries Private Limited (supra). Thus, it cannot be contended that maintainability should be tried as a preliminary issue." 61. We also take note of an earlier order of this tribunal in Yash Vardhan Mall Versus Indrapuri Studios Pvt. Ltd. & Ors. (2018 SCC Online NCLAT 502) which was passed on an interim order of the NCLT in the original company petition while it was being adjudicated and which is as follows: "3. Taking into consideration the fact that the Company Petition is pending since 2015 and more than two and a half years....