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2023 (10) TMI 241
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....13 & R15 Ms. Parina Lalla, Advocate, For R2 to R8 & R14 JUDGMENT Background The Appellant has preferred the instant TA No. 94 of 2021 (Comp. App. (AT) 363 of 2019) in CP No. 486/BB/2018 as an 'aggrieved person', in respect of the impugned order dated 27.11.2019 passed by the 'National Company Law Tribunal' Bengaluru Bench. 2. The 'National Company Law Tribunal' Bengaluru Bench while passing the impugned order dated 27.11.2019 in CP No. 20/2016 (TP No.248/2017) and CP No. 486/BB/2018 at paragraph No. 21 to 25 had observed the following: - "21. It is on record that in pursuant to the Special Resolution which includes offers obtained from reputed developers and evaluation proposal was also tabled and viewed. It was also discussed that Company started discussion with prominent builders in India for development of property situated at Hebbal, Bengaluru. In order to avoid conflict of interest, duly following Corporate governance follows hitherto by the Company, the Company did not invite in Embassy Group since its Chairman and Managing Director Mr. Jitendra Virwani had 655538 shares and RBD shelters LLPs since its managing partner Mr. Austin Roach had 110350 shares a....
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....e with law. Accordingly, the parties have sold their share for consideration for the amount of Rs. 29,64,02,240/- and the petitioners have no locus standi to question it and the grounds raised by them are not tenable and liable to be rejected. In fact, Mr. Virwani has also improved his shareholding in the Company by purchasing its shares in instalments. Therefore, the allegation of Petitioner selling of shares also constitutes acts of oppression and mismanagement is misconceived and liable to be rejected. Moreover the SEBI has also rejected the contention of the Petitioner when he approached the SEBI vide his complaint dated 16.06.2016. 23. It is to be pointed out here that any member of a Company seeking equitable relief, U/s 241-242 of the Companies Act 2013, has to come to the Tribunal with clean hands. In the instant case, as detailed supra, both the Petitioners at initial stage started approaching Civil Courts with regard to the affairs of the Company even though Company Law Board/High Court/Tribunal have jurisdiction over the issue, under the provisions of the Companies Act 1956/2013. The Petitioners, admittedly lacking to possess the requisite percentage of shares i....
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....ted supra, the Petitioners have suffered various disqualifications even to maintain the instant main Company Petition. The facts and circumstances as detailed supra clearly established that the affairs of the Company are not being conducted in any manner prejudicial or oppressive either to the Petitioners or any of its shareholders or stake holders. On the contrary, the Petitioners are interfering in the usual business decisions being taken by the Company by filing various vexatious litigations before various courts and Tribunal. 25. It is also to be stated here that the Tribunal has perused various judgements cited by both the parties, as mentioned supra, and by keeping the ratio as decided in those cases, the instant case is decided." and resultantly dismissed the 'Company Petitions No. 20/2016 (T.P. No. 248/2017) & C.P. No. 486/2018', but without costs. Appellant's Submissions 3. The Learned Counsel for the Appellant, (in TA No.94/2021) (Comp. App. (AT) No. 363/2019 in CP No.486/BB/2018) submits that the 'Tribunal', had erroneously, dismissed the 'Company Petition' of the Appellant, primarily and substantially on the ground, that the Appellant, despite possessi....
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.... the alleged prevailing financial distress, faced by the Company, the land and manufacturing facility of the 1st Respondent Company, situated at 'Hebbal' and 'Electronic City', could be disposed of and the Corporate Office of the 1st Respondent / Company, could be relocated. 8. It is represented on behalf of the Appellant, that this act was nothing but a subterfuge to strip away the only valuable asset of the Respondent No. 1 Company and to hand over the same, to the Respondents, who are presently in the management of the Company, who subsequently had received the majority shareholding of the Promoters in the 1st Respondent / Company. It is the contention of the Learned Counsel for the Appellant that the Management, knew that outright sale and disposal of the entire undertaking would be beyond its competence and the same is prohibited as per Section 180 of the Companies Act, 2013 and read with Section 179 of the said Act. 9. The Learned Counsel for the Appellant, points out that when the said matter was allegedly considered by the 'Board' on 04.11.2015, the tenor of the 'Agenda' was completely changed and in a 'volte face', the management, junked the idea of 'disposal of asse....
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.... petitioner was holding 7,68,88 number of Equity Shares, at the relevant time and had voted against the said Resolution. Furthermore, the e.voting results have suggested only 94,759 votes were cast against the 'motion' and 6,55,538 number of polling votes were cast against the motion. In fact, the final analysis, combining both polling papers and e.voting, showed only 750,297 were voted against the resolution, whereas the petitioner, himself was having 768,880 shares and had voted against the Resolution. 13. According to the Learned Counsel for the Appellant, the worse Act of operation and mis management, against the interest of shareholders and prejudicial to public interest was illegal and unlawful transfer of promoter shareholding by the Respondent No. 227, along with their relatives and persons acting in 'concert'. 14. Also that the Respondent No. 13 to 15 were appointed as 'Directors', on 08.08.2016, and later, on 21.09.2016 and 15.11.2017, the Respondent No. 17 and 16 were appointed as the Directors, and as a result of which, the whole substratum of the Company, including its assets controlling share and management was handed over to the Joint Venture Partner of the 1st....
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....d Counsel for the Appellant, to withdraw the said suit with liberty to urge all such grounds, as pleaded in the said suit, before the appropriate Forum. 19. The Learned Counsel for the Appellant, proceeds to point out that the Appellant on 29.08.2016, also moved a 'special notice', to the 1st Respondent Company as per Rule 23 of Companies (Management and Administration) Rules 2014 seeking the inclusion of a resolution in the Company's AGM dated 21.09.2016 for 'termination of Development Agreement'. Also that the moving of the said 'Resolution' was opposed by the Respondent No. 1 Company before the Regional Director of Companies and the Regional Director of Companies vide order dated 20.10.2016 allowed the Respondent No. 1 Company's Application. 20. The Learned Counsel for the Appellant, brings to the notice of this Tribunal that Appellant had moved a grievance before the Market Regulator Securities Exchange Board of India, on 16.06.2016 pointing out therein, the 'infractions', in the purported sale of equity shares from the SEBI perspective but, knowledge of the Appellant no cognizance, save and except inviting the 1st Respondent / Company to specify its comments on the said ....
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.... CD of file reply 22.01.2019 Mr. R. Vardharajan Absence of Coram Matter adjourned 18.02.2019 Ms. Deepti Mukesh Matter to be posted before regular bench 25.02.2019 Mr. R. Vardharajan Absence of Coram. Matter Adjourned 11.03.2019 Mr. R. Vardharajan Ms. Deepa Krishan Adjourned at joint request. 09.04.2019 Mr. R. Vardharajan Ms. Deepa Krishan Final Arguments heard. Parties directed to file written submission. 22.04.2019 Mr. R. Vardharajan Written submissions filed. Reserved for order. 19.07.2019 Ms. Deepa Krishan retires. 27.08.2019 Order delivered & pronounced by Mr. R. Vardharajan The Appeal was admitted by Hon'ble Member (Judicial) on 27th August, 2019 as in the meantime one of the Hon'ble Member(Technical) Ms. Deepa Krishan retired on 19th July, 2019. The order of 'admission' is challenged on the ground that the matter having been heard by two Hon'ble Members and the final order could not have been passed by Hon'ble Member(Judicial). Dr. Abhishek Manu Singhvi, Learned Senior Counsel appears on behalf of the Appellant referred to Section 419(3) of the Companies Act and Ru....
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....e Bench at Ahmedabad. He invites our attention to an order passed by Hon'ble Apex Court in Writ Petition No. 722 of 2019 dated 20th June, 2019, wherein the Hon'ble Apex Court, in a case of identical nature directed it to be heard by a Bench comprising of a Judicial Member and a Technical Member. This appeal is accordingly disposed of with request to the President, National Company Law Tribunal, New Delhi to constitute a Bench comprising of a Judicial Member and a Technical Member for disposal of the matter in hand in conformity with and compliance with the direction passed by Hon'ble Apex Court in the Writ Petition No. 722 of 2019. Copy of the order be communicated to President, NCLT, New Delhi for information." 24. The Learned Counsel refers to the 'List of Dates hearing and orders passed by the NCLT, Bengaluru Bench' in C.P. No. 20/2016 (T.P. No.248/2017), and C.P. No. 486/BB/2018, and the same are mentioned, in a 'Tabular Form' as under: Date Coram Particulars 10.09.2018 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Notice issued; Respondents to file reply 11.10.2018 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Adjourned 25.....
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....ra Rao Vittanala Dr. Ashok Kumar Mishra Adjourned 08.08.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Continuation of arguments; Part-Heard 29.08.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Continuation of arguments; Part-Heard 25.09.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Petitioner concluded arguments; Part-Heard 09.10.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Respondents' arguments; Part-Heard 25.10.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Reserved for orders 27.11.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Impugned Order passed and pronounced 25. The Learned Counsel for the Appellant, submits that the matter was always heard by a Division Bench, constituted by the orders of the President of the 'NCLT' New Delhi. Also that the Learned Counsel for the Appellant refers to the decision in:- i. Island Export Finance Ltd. Vs. Umunna and Ors., [1986] BCLC 460 (QBD); ii. Shri Kishore Kundan Sippy and Shri Kundan Hashmatria Sipply Vs. Samrat Shipping and Transport Systems Pvt. Ltd. & Ors. 2004 118 Comp Cas 472 CLB; and ....
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....ains unrebutted. If it is so, the Puri group being fiduciary of SSCO and SSTS were obviously in breach of their duties to the companies. 56. The next question is whether, even if the agency is not subsisting, or, in fact, was terminated, can SSTS or the Sippy group complain of breach of fiduciary duty by the Puri group. This question stands substantially answered by the discussion in the foregoing paragraphs. The fact that Contship had terminated the agency of SSTS or that the agency agreement with them was not subsisting on December 1, 2001, is of no consequence and cannot be the sole basis of answering the issue of fiduciary obligations and duty of the Puri group. However, taking the totality of the established facts, conclusion as reached by the Board relating to the breach of fiduciary duties by the Puri group is inescapable. 57. The next aspect that needs to be addressed is whether SSL, a newly formed company fully controlled by the Puri group, is accountable to SSTS for the benefits derived by it from the contract with Contship. Even this question will have to be answered against the Puri group and SSL. The substance of the view taken by the Board is that SS....
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.... differently, SSL is none other than the Puri group or its alter ego ; and the direction as passed ostensibly against SSL was, in fact, against the Puri group and such direction can be justified even by virtue of expansive provisions contained in the Act, including Sections 542, 543 and 544, which empowers the Board to pass appropriate directions against "any person" engaged in the objectionable activity so as to affect the company. Viewed in this perspective, there is no substance in the independent appeal preferred by SSL, making a grievance that no direction could have been passed against it at all. 59. It was argued on behalf of the Puri group that in the absence of a clear finding on the issue of the conduct of the Puri group being oppressive or resulting in mismanagement of the affairs of the companies, no directions could be passed under Sections 397, 398 of the Act. This submission proceeds on the premise that the Board has only found as a fact that there was deadlock between the two groups. According to counsel for the Puri group, mere finding of deadlock cannot be the basis for invoking powers under Sections 397, 398, 399 of the Act. In the first place, the submi....
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....his submission is obvious misreading of the judgment of the Board. The Board has recorded a clear conclusion that there has been oppression of the Sippy group and the companies and which clearly attracted provision of Section 397 of the Act, in which case, the company would deserve to be wound up. But, such a course would unfairly prejudice the Sippy group and more so, the company as such. The approach of the Board, on the other hand, was not only to adjust the equities between the two groups, but to ensure that the mischief was brought to an end or to prevent the matters complained of or apprehended and more so, to sustain the companies. Viewed in this perspective, the direction issued by the Board which would enable the Puri group to take over SSTS, which was doing the same business as SSL, the newly formed company fully controlled by the Puri group. On the other hand, the Sippy group would take over the control and management of SSCO of which M/s. Meridian was the subsidiary. It is in that context the Board has issued direction that the Puri group would purchase shares of the Sippy group in SSTS by paying the fair value; and Sippy group shall purchase shares of the Puri group in....
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....ther the right of the applicant to proceed with the application or the jurisdiction of the court to dispose of it on its own merit." 29. The Learned Counsel for the Appellant, refers to the decision of Hon'ble High Court of Madras in L.Rm. K. Narayanan and Ors. Vs. Pudhuthotam Estates Ltd. and Ors. reported in MANU/TN/0083/1992 wherein at paragraph 16 and 17 it is observed as under:- "16. I now propose to deal with the judgements referred to above: Rajahmundry Electrical Supply Corporation Ltd.'s case MANU/SC0008/1955 : [1955] 2SCR1066 was filed under the old Act (VII of 1913) under sections 153C, 162(vi). The Supreme Court held thus (at page 95): Held, that the validity of a petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented cannot, in the absence of a provision to that effect in the statute, cease to be maintainable by reason of events subsequent to its presentation. The withdrawal of consent by thirteen of the members, even if true, could not affect jurisdiction of the court to the dispose of it on its own merits. 17. It is thus seen from the judgement of....
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....ty however important they may be, must yield to clear and express provisions of the law.' 31. In Council for Indian School Certificate Examination v. Isha Mittal (2000) 7 SCC 521) (vide para 4) this Court observed: (SCC p.522) "4.... Considerations of equity cannot prevail and do not permit a High Court to pass an order contrary to the law." 32. Similarly, in P.M. Latha v. State of Kerala (2003) 3 SCC 541: 2003 SCC (L&S) 339 (vide para 13) this Court observed : (SCC p. 546) "13. Equity and law are twin brothers and law should be applied and interpreted equitably but equity cannot override written or settled law." 33. In Laxminarayan R. Bhattad v. State of Maharashtra (2003) 5 SCC 413 (vide para 73) this Court observed : (SCC p. 436) "73. It is no well settled that when there is a conflict between law and equity the former shall prevail.' 34. Similarly, in Nasiruddin v. Sita Ram Agarwal (2003) 2 SCC 577 (vide para 35) this Court observed: (SCC p. 588) "35. In a case where the statutory provision is plain and unambiguous, the court shall not interpret the same in a different manner, only because of harsh conseque....
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....nts because they were selected earlier, but as observed earlier, if there is a conflict between equity and the law, it is the law which must prevail. The law, which is contained in Rule 27(c), it is clearly in favour of the appellants. Hence, we cannot accept the submission of the learned Senior Counsel for the private respondents. The language of Rule 27(c) of the Rules is clear and hence we have to follow that language." 33. The Learned Counsel for the Appellant, points out the decision of the Hon'ble Supreme Court in PM Latha & Anr. V. State of Kerala & Ors., (2003) 3 SCC 541 at spl. Pg. 546 & 547 wherein at paragraph 13 it is observed as under:- "13. Equity and law are twin brothers and law should be applied and interpreted equitably but equity cannot override written are settled law. The Division Bench forgot that in extending relief on equity to BED candidates who were unqualified and yet allowed to compete and seek appointments contrary to the terms of the advertisement, it is not redressing the injustice caused to the appellants, who were TTC candidates and would have secured a better position in the rank list, to get appointment against the available vacancies ....
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....f the court [vide A.R. Sircar (Dr.) v. State of U.P.(1993 Supp. (2) SCC 734), Shivshanker V. U.P.SRTC (1995 Supp.(2) SCC 726) Arya Nagar Inter College Vs. Sree Kumar Tiwary ((1997) 4 SCC 388), GTC Industries Ltd., v. Union of India (1998) 3 SCC 376 and Jaipur Municipal Corpn. V. C.L. MIAHE (2005) 8 SCC 423." "35. 'Withdrawal' means 'to go away or retire from the field of battle or any contest' thus the word withdrawal is indicative of the voluntary and conscious decision of a person. Therefore, if the said writ petitioners (Respondent 1 to 5) have voluntarily abandoned their claim withdrawing the said writ petition, they cannot take any benefit of the orders passed by the High Court or Statutory Authority in pursuance thereof. Once the foundation is removed, superstructure is bound to fall. Interim Relief is granted only in aid of and as ancillary to the main relief, which may be available to the party at the time of final adjudication of the case by the court. In case, the orders passed by the High Court and consequently by the Corporation are accepted, to be in effect even today, it would tantamount to allowing the writ petition without any adjudication on the issues inv....
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....llenge to that judgment. Now, we may refer to certain judgments of this Court as well as of the High Courts which have taken this view. 19. In the cases, where the courts have not recorded reasons in the judgment, legality, propriety and correctness of the orders by the court of competent jurisdiction are challenged in the absence of proper discussion. The requirement of recording reasons is applicable with greater rigour to the judicial proceedings. The orders of the court must reflect what weighed with the court in granting or declining the relief claimed by the applicant. In this regard we may refer to certain judgments of this Court." 37. The Learned Counsel for the 'Appellant', points out the decision of the Hon'ble Calcutta High Court in the Calcutta Municipal Corporation & Ors. Vs. Paresh R. Kampani & Ors. reported in 1998 SCC OnLine Cal 38, wherein at paragraph 4, it is observed as under: "4. The learned Trial Judge, in our opinion, has rightly held that the said order is not a reasoned order. The Hearing Officer while disposing of the objection filed by an assessee is statutorily obliged to pass a reasoned order. It is now well settled principles of la....
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....nd transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber-stamp reasons' is not to be equated with a valid decision making process. m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737). n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of ....
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....ars to be desirable and in certain cases absolutely necessary to disclose the fact in the notice convening the meeting or in some accompanying circular. In the present case counsel for the plaintiff did not allege 'trickery' or fraud but he did contend that the notice was misleading in the sense that the facts set out in the affidavit affirmed by Shyamlal Agarwal were not there. I agree with the contention of counsel for the plaintiff. I cannot help observing that if the company really wanted to put up before the shareholders what the company stated in the affidavit of Shyamlal Agarwal there was nothing to prevent them from saying so. The test laid down by Kekewich, J., is that "the man I am protecting is not the dissentient but the absent shareholder." Mr. Advocate-General contended that the notice could not be characterised as misleading the shareholders. In the present case the facts disclosed in the affidavit of Shyamlal Agarwal, in my opinion, should have been disclosed before the shareholders. On this ground also I am of opinion that the plaintiff is entitled to succeed. I, therefore, make an order declaring that the resolution passed at the extraordinary general meeting on M....
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....e terms of the agency agreement. It will be necessary to go into details, but put broadly, the changes in the articles are alleged to increase the powers and lessen the responsibilities of the directors and servants of the company imposing a corresponding obligation upon the shareholders, and with regard to the agreement with the managing agents the two main points are first that an agreement for compensation in the event of the mill being wound up has been made by which the agents are entitled to receive as compensation their average bonus for seven years prior to the date of winding up and what is almost as important, a clause has been inserted by which in the event of the mills changing hands, it is to be a condition of the sale that the purchaser should employ the same managing agents. The managing agents are also given the power to assign or transfer the agency and the company is compelled to employ as agents their transferees or assigns. Of course, if the shareholders so desire, they can enter into any agreement they like with the managing agents and we are only concerned with the question of notice but in considering the sufficiency of notice it is necessary to go into some ....
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....e that no greater powers are conferred upon the Board by the new Articles except as regards the proposal to increase the power of investment of surplus funds, which is confined at present to Government securities, so as to permit the placing of surplus funds on deposit at interest with banks. The principal alterations in the existing Articles are as follows: Provision is now made for the holding of shares in joint names and also for the holding of as many shares as may be desired in any one or more name or names. The existing Articles oblige a member who desires to sell his shares ??? offer them in the first instance to the Board of Directors. This Article has now been omitted. Under the existing Articles the voting power of members was according to a graduated ???, but opportunity has now been taken to follow the more usual practice of giving to each member one vote upon a show of hands and upon a poll one vote for every share held by him. Under the existing Articles, the vote of a member being a lunatic, an idiot, or a minor cannot be recorded, but under the new articles the more usual practice of permitting a vote in such a case to be recorded....
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....ded a clause for compensation and even the number of Cl. 17 is intimated to the shareholders and it is stated in the preceding paragraph that the proposed agreement is open to inspection by any shareholder at the registered office of the company during office hours. I should ordinarily regard this as sufficient notice of the proposed agreement, but it is contended by the learned counsel for the plaintiff that the circular should have stated that the compensation proposed to be given was calculated on the average commission for seven years. I am of opinion that inasmuch as the question of compensation to the agents was specifically brought to the notice of the shareholders, even the clause in which it was to ??? found being stated, the omission to state the amount of compensation, which is not a fixed amount but dependent on the average commission for seven years preceding the winding up, was not a fatal defect, and if that were the only objection on this point I should have put aside this objection as not sufficient in law to invalidate the notice in spite of the ruling in Normandy v. Ind. Coope & Co., Limited, . There are numerous other rulings to which I shall refer later, in whi....
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....t, but it is very doubtful whether the clause in the circular, which says that the only real difference between the existing terms of the agency and the proposed agreement is Cl. 17 for the payment of compensation, can be regarded as sustainable in view of the omission to refer to the clauses regarding the power of assignment of the managing agency during its continuance in the same firm in the case of a transfer of the company. There is some dispute as to whether this clause refers to sale or amalgamation. It is not necessary to go into that. The cases on which the learned counsel for the plaintiff has relied are: Normandy v. Ind, Coope & Co., Ltd. to which I have already referred, Baillie v. Oriental Telephone and Electric Co. Ltd., MacGonnell v. E. Prill & Co., Ltd., Tiessen v. Henderson, and Kaye v. Croydon Tramways Company . The learned counsel for the company has argued that the terms of the notice should not be strictly construed, and he-refers to Palmer on Companies, pp. 166 and 168, at which the learned author refers to Normandy v. Ind, Coope & Co., Ltd. as being contrary to this proposition. He further refers to Young v. South African and Australian Exploration and Develo....
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.... and it was held that the notice was artfully framed to mislead the share-holders. That is a very extreme case. The learned counsel for the company has referred to Young v. South African and Australian Exploration and Development Syndicate in which there was a notice of a special general meeting and thereby given in general terms notice of the character of the business to be submitted to it. That seems to be sufficient within Article 35, Table A; and besides that it was apparent on the face of the notice that the intention was to substitute new regulations, and the members of the company were told that they were at liberty to inspect a copy of the proposed regulations at the office of the solicitors of the company, whose address was given, and it was held to be a sufficient notice. Henderson v. Bank of Australasia only says that the notice fairly and reasonably expressed to the share-holders what matters were going to be discussed at the meeting. In Alexander v. Simpson it is laid down that the test is, what is the fair businesslike construction which businessmen in the position of shareholders would place on the document when they received it. Grant v. United Kingdom Switchback Ba....
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....tinuance of the same agency by any company which took over the business. And the question is whether the omission to refer in this circular to these alterations renders the notice insufficient. It might be contended that a shareholder might approve of the proposal to compensate the managing agents for the cessation of their interest, and therefore he might not think it necessary to attend the meeting, but it does not necessarily follow that he would approve of the clauses regarding assignment and the compulsory continuation of the agency in the event of a sale of the mill by the new proprietors, and it might therefore be argued that he was misled by this reference in the circular to Cl. 17 as constituting the only real difference between the existing terms of the agency and the proposed agreement. On the other hand it is quite clear that the directors did give notice to the shareholders that there was to be a change in the terms on which the managing agents were working for the company by the introduction of an agreement with them which contained one important clause regarding compensation which might conceivably involve the company in a large payment and therefore shareholders wer....
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....lso the restrictions on the inspection of accounts and discovery of trade secrets, Articles 161 and 180, which are not in the old Articles, are all minor points, but the new indemnity clauses undoubtedly go further than the old by the omission of the clause as to wilful default, there being a considerable difference in law between wilful negligence and dishonesty, as laid down in In re Brazilian Rubber Plantations Estates, Limited . It is further contended that the restriction on transfer in Article 44, where the directors have a new power of affecting the share-holder's rights and the right is again restricted by Article 130, which, however requires 14 clear days' notice of candidates for the office of director confer new powers. The assurance in the circular that "no greater powers are conferred upon the Board by the new Articles except as regards the proposal to increase the power of investment of surplus funds." 26. However liberal a view is taken of the notice and circular, and eliminating those of the changes in the Articles of Association which are more or less of a formal character or such as are usually found in modern Articles, there are two points, first....
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....be considered by the general body at the adjourned meeting. The above said resolution was seconded by Sri V.G. Muniraj. The chairman of the meeting Sri V.B. Padmanabhan, the second respondent herein stated that the accounts have already been passed by the board of directors, that this, meeting has been called pursuant to an undertaking given in the High Court and the proceedings before the High Court and that it is not proper to defer the subject and that, therefore, the chairman has stated that he was putting the resolution for adjournment to vote. It is also stated in the minutes that the resolution for adjournment was lost by only two members voting for the resolution and four members voting against the resolution and accordingly, the chairman declared the resolution as lost. At this stage, Sri V.G. Sundar Raj, Sri V.G. Muniraj and Sri V.G. Krishnaswamy Naidu (proxy for Sri V.G. Balasundaram) staged a walk out from the meeting and thereupon it was resolved that the profit and loss account for the year ended June 30, 1979, and the balance-sheet as on that date and the reports of the board of directors and the auditors be and they are thereby received, adopted and approved. Shri V....
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.... "68. According to the plaintiffs the said notices ought to have set out the nature of the concern or interest of the solicitor-director in the matter of the appointment of the private company for a further term as the sole selling agents of the company and the correspondence which took place between the company and the Company Law Board during 1965 and 1966, particularly the said letter dated July 28, 1965, and June 15, 1966, from the Company Law Board to the company. It was submitted that these were material facts concerning the item of business to be transacted at the said meetings and the non-disclosure, therefore, in the explanatory statement to the said notices invalidates the said notices. That the item of business to be transacted at the said meetings was special business is not disputed. The questions to be considered are whether the above facts were material facts and if either of them was a material fact, the consequence of the non-disclosure thereof in the explanatory statement. If the solicitor-director was an interested or a concerned director, the nature of his concern or interest in the further appointment of the sole selling agents was a material fact which was ....
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....ted the 18th September, 1965." 69. It was submitted by the contesting defendants that this was merely a suggestion and not a directive or an order and that the proceedings commenced by the show-cause notice under section 294(5) having terminated, there was no obligation to disclose this correspondence in the explanatory statement. This argument cannot be accepted. Under section 294(5) the Central Government has the power to require such information regarding the terms and conditions of the appointment of the sole selling agent as it considers necessary for the purpose of determining whether or not such terms and conditions are prejudicial to the interests of the company. Thereafter, if it is of the opinion that they are prejudicial to the interests of the company, it has the power to make such variations in those terms and conditions as would in its opinion make them no longer prejudicial to the interests of the company. If a company refuses to furnish such information, the Central Government has the power to appoint a suitable person to investigate and report on the terms and conditions of the appointment of the sole selling agents. Thus, the Central Government is conferr....
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....amine to what extent the terms and conditions require modification or abrogation. You are, therefore, hereby informed that if any such variation is ultimately made by the Company Law Board, the terms of the said agreement would be effective from 1st October, 1968." 72. There was further correspondence pursuant to this letter to which I will refer later. 77. It is alleged in the affidavits in reply filed on behalf of the company and Tulsidas that the explanatory statements to the notices of the meeting held on April 28, 1968, and April 29, 1968, respectively, were placed and generally approved at the board meeting held on March 27, 1969, at which Reighley was also present, the suggestion being that Reighley and through him the plaintiffs had approved both the said explanatory statements. It was submitted that even in their requisition dated March 17, 1969, for calling an extraordinary meeting, in the explanatory statement which the plaintiffs required to be included in the notice convening such meeting, they had not required the fact either of the interest or concern of the solicitor-director or the said correspondence with the Company Law Board to be set out. Now,....
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....ave already referred above, which letter was certainly known to Tulsidas but most certainly not known to the other shareholders of the company. This statement of the private company appeared in the newspaper "Indian Express" of April 15, 1969, and in the newspaper "Financial Express" of April 16, 1969, that is, after the receipt of the said letter of April 9, 1969. Secondly, in the light of what was stated in the said communication from the Company Law Board of June 15, 1966, the statement that the Company Law Board had cleared the terms of the sole selling agency was hardly a fair or a true statement. All that the Company Law Board did was to say that it had decided not to take any further action under section 294(5) at that stage but had clearly indicated that unless the objections raised by the Company Law Board were taken into account at the time of the renewal of the agreement, further action would be taken. The shareholders had thus before them a conflicting picture and at least with respect to the relevant facts a misleading picture as presented by the Kilachand group and those supporting it. The plaintiffs' objection to the validity of the notice, therefore, cannot be d....
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....s to be abolished and that Chunnilal Daw was to be appointed a store-in-charge from May 1, 1963 and that he ceased to hold and to continue to hold his present office as store-in-charge of the company with effect from May 1, 1963 was never notified to the shareholders. Accordingly for default in compliance with the mandatory provisions of Section 172 of the Act the said resolution cannot but be held as invalid and void. It may be noted that resolutions which were notified to the shareholders were not moved at all and it has not been and cannot be argued that the impugned resolutions were amendments to the resolutions notified as indeed they are not so nor claimed as such. 35. Mr. Banerjee has drawn my attention to a decision of the Court oil Appeal in re: Trench Tubeless Tyre Co. 1900-1 Ch. 408. In this case a resolution for voluntary winding up of the company by special resolution was legally passed. The notice of the confirmatory meeting included the appointment of a named person as liquidator; at the meeting the resolution for the appointment of the named liquidator was dropped and another person was appointed liquidator without further notice. This appointment was objec....
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....ing whether the statute is mandatory or directory. Judged by that test, the conclusion is irresistible that Section 173 enacts a provision which is mandatory and not directory. The object of enacting Section 173 is to secure that all facts which have a bearing on the question on which the shareholders have to form their judgment are brought to the notice of the shareholders so that the shareholders can exercise an intelligent judgment. The provision is enacted in the interests of the shareholders so that the material facts concerning the item of business to be transacted at the meeting are before the shareholders and they also know what is the nature of the concern or interest of the management in such item of business, the idea being that the shareholders may not be duped by the management and may not be persuaded to act in the manner desired by the management unless they have formed their own judgment on the question after being placed in full possession of all material facts and apprised of the interests of the management in any particular action being taken. Having regard to the whole purpose and scope of the provision enacted in Section 173 I am of the opinion that it is manda....
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.... under: "18. These observations from the four cases referred to above apply to Section 397 also which is almost in the same words as Section 210 of the English Act, and the question in each case is whether the conduct of the affairs of a company by the majority shareholders was oppressive to the minority shareholders and that depends upon the facts proved in a particular case. As has already been indicated, it is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of Section 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unles....
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....eholding in the Company of all the three parties hereto will remain equal and in the same proportion." It is urged that this term shows that the intention was that the shareholding of the three groups would remain equal for ever. We are not prepared to read this implication in this term. It was easy to provide in the agreement that whenever capital was actually increased, it would be divided equally between the three parties thereto. In the absence of such a provision we do not think that the fifth term is capable of the interpretation which is put on it on behalf of the appellant. It only deals with the shares worth Rs 4 lakhs held by the other two persons and provides that besides those shareholdings capital shares would be held equally by the three parties. Therefore as we read the agreement we cannot come to the conclusion that it provides that if in future there was an actual increase in capital that will necessarily be shared equally by the three parties. 20. However, it is said that the conduct of the three parties later on shows that when there was actual increase of capital to Rs 61 lakhs sometime after July 1954, this increase was shared equally by the t....
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....as bound to be so as the Company was then private. As, however, the Company wanted a loan from the Industrial Finance Corporation and as that Corporation would only grant loans to a public company, the Company was converted into a public company, as already indicated, in January 1957. 22. The contention of the appellant, however, is that when the share capital was decided to be increased by fresh issue within the limit of rupees one crore, Regulation 42 of the First Schedule to the 1913 Act was in force and that regulation required that direction to the contrary as to allotment of shares should be given by the resolution sanctioning increase of share capital. This was however not done at the time when the authorised share capital was decided to be increased in 1954 and consequently the new shares had to be allotted to the existing shareholders under Regulation 42. At that time, however, the Company was private and the shares had to be issued to the existing shareholders and no question of any direction to the contrary arose if the Company was to retain its private character. The sanction of the Controller of Capital Issues came in December 1957 when the Company had become ....
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.... fact and law. We may add that, though the objection was not taken in the petition, it seems to have been urged before the appeal court. Das, J. has dealt with it at length and we would have agreed with him if we had permitted the question to be raised. This attack on the validity of what happened on March 29, 1958 must thus fail. 24. We have already said that the public company which came into existence in 1957 was not bound by the agreement of 1954 and could offer shares to such persons as it decided to do in general meeting in accordance with Section 81. The mere fact that in the meeting of March 29, 1958 it was decided to offer shares to others and not to the existing shareholders would not therefore necessarily mean oppression of the minority shareholders. The majority shareholders were not bound to accept the view of the minority shareholders that new shares should be allotted only to the existing shareholders. It also appears that the Patnaik group was afraid at the time when the new shares were being issued that as they had no money the appellant group would take up the entire new issue and would thus obtain majority control of the Company. This they wanted to avoi....
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....on itself makes it quite clear that unless Company Petition No. 84 of 1981 is withdrawn, the company cannot either renegotiate with M/s. Brooke Bond India Ltd. or examine any alternative schemes. It was strongly argued by Mr. Bhabha, the learned counsel for the opponents, that the requisitioned meeting has been called mainly for the purpose of considering alternative schemes which may be beneficial to the company. On a perusal of the said resolution and the explanatory statement attached to it, it becomes quite clear that the requisitionists have not put forth before the shareholders any alternative scheme whatsoever. The explanatory statement sets out the following: (i) That one of the shareholders of the company, Mr. Joseph Sabastian D'Mello has filed an affidavit setting out the facts and figures for the proposed scheme of amalgamation with M/s. Brooke Bond India Ltd. as not fair and equitable to the shareholders of the company. Under sub-paras. (a) to (e), the explanatory statement sets out why, according to the requisitionists, the scheme of amalgamation is not beneficial to the shareholders of the petitioner-company. (ii) In the next paragraph, it is sta....
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.... by Harbans Lal Malhotra & Sons Ltd., which has been dealt with in the last annual report, has not been further considered in the light of legal advice that such a scheme of leasing would also require the approval of the Government of India under the MRTP Act. Learned counsel for the opponents and for the secured creditors have submitted that in view of the statements made in the two annual reports, it must be presumed that the shareholders knew what was the alternative scheme; and, hence, in the requisition or in the explanatory statement, it was not necessary to set out any alternative scheme. This contention cannot be accepted. In the first place, I have not been shown in either of the two annual reports in question, the alternative scheme of Harbans Lal Malhotra and Sons Ltd. set out in detail anywhere. Secondly, in the explanatory statement, there is not even a reference to the proposal of Harbans Lal Malhotra and Sons Ltd. If the purpose of calling the requisitioned meeting was to consider the scheme proposed by Harbans Lal Malhotra and Sons Ltd., it should have been so stated. The explanatory statement, in my view, is extremely vague and somewhat tricky. In fact, the explana....
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....ch additional Equity shares were allotted to Ramanujam were held at all. In this behalf the following facts are noticeable:- (a) The appellants have filed a photocopy of the minutes of the alleged meeting of the Board of Directors said to have taken place on 24th October, 1994. As per the photocopy the minutes appear to be signed by Ramanujam as Chairman. The presence of Suresh Babu as a Director of the Company has been shown in the minutes. However, there is no evidence of presence of Suresh Babu in the said meeting. Article 36 of the Articles of Association of the company requires that a notice convening the meetings of the Board of Directors shall be issued by the Chairman or by one of the Directors duly authorized by the Board in this behalf. Suresh Babu filed an affidavit in the proceedings before the Company Law Board wherein he has categorically stated that at no point of time he was involved in the affairs of the company and in running the business of the company. Further he has stated in the said affidavit that at no point of time he was informed that he had been appointed as Director of the company. He had never received any notice of any Board Meetings nor had h....
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....k meant to record signatures of Directors attending the meeting of the Board of Directors were produced. In the absence of these documents and any other proof to show that a meeting was held as alleged we are unable to accept that a meeting of the Board of Directors was held on 24th October, 1994. If no meeting of the Board of Directors took place on that date, the question of allotment of shares to Ramanujam does not arise. We are inclined to believe that photocopy of the minutes of the alleged meeting dated 24th October, 1994 produced by appellants, is sham and fabricated. The alleged allotment of additional equity shares of the company in favour of Ramanujam is, therefore, wholly unauthorized and invalid and has to be set aside. Normally this Court would not have gone into these questions of fact. However, the learned counsel for the appellant in the course of his arguments drew our attention to the various Articles of Association of the company, which unfortunately neither the Company Law Board nor the High Court considered. We cannot help referring to them, particularly in view of the fact that the Articles of a company are its constituent document and are binding on ....
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....nt of Rs. 6,86,500/- was utilised. It appears that Ramanujam who was managing the affairs of the company single handedly, realized that the company had turned around and the Hotel property had appreciated in terms of its market value. He started working on a strategy to get controlling shares in the company. It was in furtherance of this objective that Ramanujam managed to show the entry regarding advance against shares in the Balance Sheet as on 31st March, 1994. For this amount, he allotted equity shares to himself to gain control of the company. In these facts it is difficult for us to appreciate that the additional funds were required by the company. In our view the finding of the High Court that no funds were needed by the company is fully justified. The only purpose was to allot additional shares in the company to himself to gain control of the company and to achieve this objective, the books of the company appear to have been manipulated. The High Court was right in holding that the entire manipulation of records of the company by Ramanujam was an act of fraud on his part. (d) We may also test the alleged act of allotment of equity shares in favour of Ramanajum from....
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....quitable grounds. This is a new provision which came for the first time in the Indian Companies Act, 1913, as Section 153. That section was based on Section 210 of the English Companies Act, 1948, which was introduced therein for the first time. The purpose of introducing Section 210 in the English Companies Act was to give an alternative remedy to winding up in case of mismanagement or oppression. The law always provided for winding up, in case it was just and equitable to wind up a company. However, it was being felt for some time that though it might be just and equitable in view of the manner in which the affairs of a company were conducted to wind it up, it was not fair that the company should always be wound up for that reason, particularly when it was otherwise solvent. That is why Section 210 was introduced in the English Act to provide an alternative remedy where it was felt that, though a case had been made out on the ground of just and equitable cause to wind up a company, it was not in the interest of the shareholders that the company should be wound up and that it would be better if the company was allowed to continue under such directions as the court may consider pro....
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....ety Ltd., [1954] S.C. 381 ; Scottish Co-operative Wholesale Society Ltd. v. Meyer, [1958] 3 All E.R. 56; [1959] 29 Comp. Cas. 1 (H.L.) which was an appeal from Meyer's case, and In re H. R. Harmer Limited, [1938] 3 All E.R. 689 ; [1959] 29 Comp. Cas 305 (C.A.). Among the important considerations which have to be kept in view in determining the scope of Section 210, the following matters were stressed in Elder's case as summarised at page 394 in Meyer's case : " (1) The oppression of which a petitioner complains must relate to the manner in which the affairs of the company concerned are being conducted; and the conduct complained of must be such as to oppress a minority of the members (including the petitioners) qua shareholders. (2) It follows that the oppression complained of must be shown to be brought about by a majority of members exercising as shareholders a predominant voting power in the conduct of the company's affairs. (3) Although the facts relied on by the petitioner may appear to furnish grounds for the making of a winding up order under the just and equitable' rules, those facts must be relevant to disclose also that the m....
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....ult of having formed such a subsidiary an obligation so to conduct what are in a sense its own affairs as to deal fairly with the subsidiary." 49. The Learned Counsel for the Appellant, cites out the decision of the Hon'ble High Court of Kerala in K Meenakshi Amma K Vs. Sreerama Vilas Press and Publications(P) Ltd. & Ors. reported in (1992) 73 Comp Cas 285, wherein at paragraph 10-13, 15-17 & 19, it is observed as under: 10. "It has to be remembered that the chairman appointed by the company court was seeking directions in the matter of conducting the meeting. The company court gave certain directions for the proper conduct of the meeting. The former managing director, Sri N. Madhavan Nair, filed Application No. 187 of 1990 to stop the convening of the meeting on the ground that the notice is not in conformity with sections 171, 173 and 257(1A) of the Companies Act The company court overruled the objections, found the notice in order and dismissed the application of the former managing director. He filed an appeal, M.F.A. No. 333 of 1990. The appeal was dismissed by a Division Bench of this court observing that it will be open to the appellant to urge various contention....
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....assed after hearing all parties and the notice itself was approved by the company court. It was also pointed out that the meeting was convened by the chairman appointed by the company court and not exactly by the company. The intent and purpose of section 173 of the Companies Act is to give directions to the shareholders in the matter of holding a meeting by the management. 13. In Sitaram Jaipuria v. Banwarilal Jaipuria, AIR 1972 Cal 105, the Calcutta High Court has held that the provisions like section 173(2) of the Companies Act should not be construed in a rigid manner and an interpretation should not be made so as to hamper the conduct of business. The notice has to be section 173 of the Companies Act, the meeting should not be invalidated on the technical ground that the notice has not complied with the provisions of section 173 (2) of the Companies Act. The intention behind the provisions contained in section 173 of the Companies Act has to be understood in a meaningful manner. Of course, if a transaction of business has not been sufficiently notified or which is substantially different from the notification, it would be invalid. Beyond that on technicalities the mee....
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....any a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be, along with a deposit of five hundred rupees which shall be refunded to such person or, as the case be, to such member, if the person succeeds in getting elected as a director. (1A) The company shall inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting: Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid if the company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the place where the registered office of the company is located, of which one is published in the English language and the other in the regional language of that place. (2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company." ....
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....lowed by others in the trade. The share-holders are requested to give their approval for this resolution. 38. Section 173(1)(a) provides as follows:- Section 173(1): "For the purposes of this section- (a) In the case of an annual general meeting, all business to be transacted at the meeting shall be deemed special, with the exception of business relating to (1) the consideration of the accounts, balance-sheet and the report of the Board of Directors and Auditors, (ii) the declaration of a dividend, (iii) the appointment of directors in the place of those retiring, and (iv) the appointment of, and the fixing of the remuneration of, the auditors." 39. Section 173(1)(b) provides that- "in the case of any other meeting, all business shall be deemed special." In this connection section 173(2) may also be set out:- Section 173(2): "Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the notice of the meeting statement setting out all material facts concerning each such item of business, including in particular the nature of the concern or interest, if any, therein, of eve....
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....section 2(A) and if it did not approve of it, it would cease to be valid by the operation of the agreement itself. It was argued before us that section 294 was only directory and not mandatory as no penal provision was attached thereto. I find myself unable to accept this argument. The words of the Statute are quite clear in that it prohibits the Directors from entering into a contract with a sole selling agent without being obliged to bring the matter of the appointment before the company at the first general meeting thereafter. The only limitation imposed on the company's power of appointing a sole selling agent is that the period of agency must not exceed five years. The clear provision in the Act that the appointment by the Directors is not to be valid unless approved by the company in the first general meeting shows the obligatory nature of the enactment. It is well-known that the use of the negative language generally leads to the conclusion that the provision is mandatory. According to Craies on Statute Law, 6th Edition, page 263 "If the requirements of a Statute which prescribes the manner in which something is to be done are expressed in negative language, that is to s....
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....be deemed expedient to send printed copies of the proposed new Articles with the Notices. According to the decision of Kekewich, J., in Normandy v. Ind. Coope & Co (1) [(1908) 1 Ch. 84], the notice should call attention to any material alterations and in Baillie v. Oriental Telephone and Electric Co. (2) [(1915) 1 Ch. 503], the Court of Appeal (in England) Held that the notice of a proposed resolution to after Articles involving a large increase in the remuneration of the Directors was invalid on the ground that the proposed increase was not fully and frankly disclosed." 23. In Baillie's case, a shareholder brought an action on behalf of himself and all the other shareholders of a Company for a declaration that certain resolutions were not binding on the ground of insufficient notice of the Meeting at which they were passed, and for an injunction to restrain the Company and the Directors from acting upon them. The plaintiff moved for an interim order. The Court of Appeal held that the notice did not give a sufficiently full and frank disclosure to the shareholders of the facts upon which they were asked to vote; and that the resolutions were invalid and not binding upo....
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....nient to adopt a new set of Articles altogether and that where this course was adopted, a copy of the new Regulations should lie for inspection at the registered office of the Company, and the notice convening the Meeting should state that fact. But nowhere did he say that it was not necessary to send copies of the new proposed Regulations with the notices. On the other hand, from the latter passage which I have quoted, it is clear that the learned author said that in some cases it was expedient to send printed copies of the proposed new Articles with the notices and he has cited two English cases for that proposition. Assuming, however, that Mr. Palmer's observation supports Mr. Mitter's contention, it may not be possible for us to adopt that view in India, having regard to the local conditions and a variety of other considerations that prevail in India. It will not in all cases be sufficient in India to leave a copy at the registered office and state that fact in the notice, inviting the shareholders to inspect the proposed changes at the registered office. The travelling facilities here are not the same as in England, neither the country is so small as England. There are....
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....g the plaintiffs and committed fraud on the plaintiffs. In this case it may be fairly argued that not only there has been a suppression of true facts, but also a false suggestion. Such an argument, we cannot say, would be unreasonable." 52. The Learned Counsel for the Appellant, relies on the decision of the Hon'ble High Court of Kerala in Mathrubhumi Printing & Publishing Company vs. Vardhman Publishers Ltd. reported in 1991 SCC OnLine Ker 453, wherein at paragraphs 37-39 it is observed as under:- 37. "In the light of our finding that there was no proper lodgement and the transfer has not become effective as against the company, the transferees cannot be heard to contend for the position that the company in exercise of the power conferred on it under section 31 of the Act cannot alter the articles to their detriment. It should in this connection be remembered that the right of a shareholder to transfer his shares is always subject to the provisions in the articles of association as well as section 31 of the Act. The transferee, therefore, cannot have a better right than-the transferor and, therefore, his right as a transferee until the transfer becomes effective as aga....
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.... 39. The findings based on which the learned single judge answered the second question in favour of the company are extracted hereunder: "In the resolution as proposed in the notice there were two clauses in the new article 17. Clause (b) related to forfeiture of equity shares. The minutes of the extraordinary general meeting (Annexure R-1(e) to the counter affidavit on behalf of the first respondent in C.P. No. 29 of 1989 dated 9th November, 1989), shows that the alteration as proposed in the notice was proposed, duly seconded and the chairman said that the formal special resolution was before the meeting. Subsequently, Dr. N.V. Krishna Warrier as well as Sri P. Kumaranunni moved amendments to the special resolution. The amendment proposed by Sri Kumaranunni was supported by the transferors of shares as well as Sri P.R. Krishnamoorthy, Executive Director of the Times of India and Dr. Ram S. Tarneja, who were allowed to participate in the meeting on the basis of the powers of attorney in their favour. The amendment proposed by Sri Kumaranunni was rejected after putting it to vote. The amendment proposed by Dr. Krishna Warrier was approved by the general body. The propose....
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.... 56. The Learned Counsel for Respondents No. 1, 11, 13 and 15, takes an emphatic stand that the Appellant had not objected to the Hon'ble Member (Judicial) of Bengaluru Bench, hearing the 'part-heard' matter on 25.10.2019, sitting singly either on the said date of hearing, and further the Appellant had not questioned the same, at any point of time, subsequently, till the 'filing of the instant Appeal'. 57. In this connection, the Learned Counsel for the Respondents No. 1, 11, 13 and 15, points out that the 'Appellant' had willingly participated in the proceedings before the 'Tribunal', and 'permitted the proceedings' to continue, raising the said issue only after the 'impugned order', came to be passed. 58. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, raises a legal argument, that the 'Appellant', had 'acquiesced,' to the 'proceedings of 25.10.2019', being conducted, in the aforesaid manner, by the 'Tribunal', and hence, the Appellant is now 'estopped by his conduct' from challenging the same before this 'Tribunal', and in this regard, he relies, upon the decision of the Hon'ble Supreme Court in Tamil Nadu Generation and Distribution Corporation Ltd. Vs. P....
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.... order to be passed by the authority would be in his favour, but finding it go against him, he attacks the same as being without jurisdiction. In other words the person concerned indulges in what may be termed as 'diluted deception' by keeping quite, when he was, in fairness to all those concerned with the proceedings before the authority, under an obligation to speak out. He attempts by his silence to secure a favourable verdict, which if given, would have buried for ever the question of competence of the authority to handle the subject matter. It is this trickery which the Courts have frowned upon by declining to interfere with the actions of subordinate authorities, where acquiescence or acceptance of their jurisdiction is manifested by the facts of a given case. 21. D'Smith in his Book "Judicial Review of Administrative Action" 3rd edition at pages-372-373 has brought out the distinction between the two situations namely cases where the decisions are, void for want of jurisdiction and could be avoided and others were even though they are void but with which the Court will not interfere on account of the applicant's conduct. The Author states thus:- ....
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....r dated 20.04.2011, of the Hon'ble High Court of Calcutta, in Shri Jodh Raj Laddha & Ors. Vs. Birla Corporation Ltd. & Ors. APO No. 399 of 2009 and APO 274 of 2009, reported in MANU/WB/0269/2011(vide paragraph 3) wherein it is observed as under: 3. "In this matter, the Appellants' case has been argued by Mr. S. B. Mukherjee, Mr. Sudipto Sarkar and Mr. P. S. Sengupta, learned Counsel whereas on behalf of the Respondents argument has been advanced mainly by Mr. Anindya Kumar Mitra, Mr. P. C. Sen, Mr. Pratap Chatterjee, Mr. Abhrajit Mitra and Mr. Soumen Sen, learned Counsel. In this order, however, I shall refer to the submissions of the learned Counsel of the respective parties in a composite manner instead of dealing with their submissions individually as there are many overlapping points in their submissions. At the threshold a preliminary objection has been taken by the learned Counsel appearing for the Respondents as regards maintainability of the appeal itself. It has been argued on behalf of the Respondents that the appeal ought not to be admitted since in the judgment under appeal, the CLB has come to a finding that the petition is not maintainable and such findin....
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....pply his mind. But this does not disable him from appointing an agent to exercise that right or privilege. In fact, there may be a number of cases where a person concerned may be unable to apply his mind, e.g., an illiterate person who is not aware of the facts or a person who is too ill or infirm to exercise the power. Such persons are entitled to appoint an agent to look after their affairs. It is the agent who will apply his mind to the affairs of his principal and use his own judgment. Members who are given a right to file a petition under Sections 397 And 398 can, therefore, delegate their right to an agent who can exercise that right on their behalf". In this judgment, the statutory provision has been examined in facts of that case. While I do agree that Section 399 does not talk of the quality of a member, I have explained below as to why the quality of the member is necessary in a proceeding under Sections 397/398. 19. "In many of the proceedings before this Board, motive had been questioned, I do not remember that in any case, the qualitative aspect, as a point of law had been raised or considered by this Board. Shri Sarkar argued that there is no statutory provis....
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....ing the requisite percentage, it can assume that the involvement of the company in litigation is not lightly done and that it should pass orders to bring to an end the matters complained of and not reject it on a technical requirement". This would show that a petition under Section 397/398 can be filed only by those, even if qualified under Section 399, having some real stake in the company. As I have observed earlier in this paragraph, from the manner, mode and method of acquisition of shares, it is clear that the consenters have no real stake or interests in the company and therefore their fulfilling the requirements of Section 399 is of no consequence. In other words, in real sense, considering the equitable nature of the proceedings under Sections 397/398, it can be held that the Petitioners cannot maintain the petition" and the said order, of the 'Company Law Board', was subsequently relied upon by the Company Law Board in its order dated 29.09.2014 in CP No. 258/2011, in the matter of Rajiv Garg and Ors. Vs. Waxpol Industries Limited and Ors .(vide paragraph 6), wherein it is observed as under: 6. "Another important aspect which needs to be considered is the conduct ....
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....sed before the Board." 61. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, proceeds to make a pertinent mention that the 'alleged cause of action' for the Appellant, filing his petition, making an averment of 'oppression and mis-management', before the Tribunal, at first arose on 19.02.2015 and later, on 10.11.2015, 22.12.2015 and 01.01.2016, respectively and that the Appellant's shareholding in the Company, on each of the aforesaid dates was less than 10%. As on 19.02.2015, the Appellant had not even possessed any shareholding in the Company. 62. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, advances an argument that if the 'Appellant', was really 'aggrieved' by the aforesaid acts of alleged 'oppression and mis-management', the 'Appellant' should have immediately approached the then 'Company Law Board', on any of the aforesaid dates, by filing necessary /appropriate 'petition', under Section 399(4) of the Act of 1956. But the Appellant was aware that he had no grounds for claiming the waiver for maintaining a petition u/s 397 of the Companies Act, 1956 and that, therefore, his petition would be rejected at the very threshold. Resultantly, the Ap....
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....ression of material facts, not approaching the Court with clean hands, and thereby abusing the process of the Court. Before we dwell upon the facts and circumstances of the case in hand, let us refer to some case laws which would help us in dealing with the present situation with greater precision. The cases of abuse of the process of court and such allied matters have been arising before the Courts consistently. This Court has had many occasions where it dealt with the cases of this kind and it has clearly stated the principles that would govern the obligations of a litigant while approaching the court for redressal of any grievance and the consequences of abuse of the process of court. We may recapitulate and state some of the principles. It is difficult to state such principles exhaustively and with such accuracy that would uniformly apply to a variety of cases. These are: (i) Courts have, over the centuries, frowned upon litigants who, with intent to deceive and mislead the Courts, initiated proceedings without full disclosure of facts and came to the courts with 'unclean hands'. Courts have held that such litigants are neither entitled to be heard on the merit....
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....136 of the Constitution. While approaching the court, a litigant must state correct facts and come with clean hands. Where such statement of facts is based on some information, the source of such information must also be disclosed. Totally misconceived petition amounts to abuse of the process of the court and such a litigant is not required to be dealt with lightly, as a petition containing misleading and inaccurate statement, if filed, to achieve an ulterior purpose amounts to abuse of the process of the court. A litigant is bound to make "full and true disclosure of facts". (Refer: Tilokchand H.B. Motichand and Ors. v. Munshi and Anr. [MANU/SC/0127/1968: 1969 (1) SCC 110]; A. Shanmugam v. Ariya Kshatriya Rajakula Vamsathu Madalaya Nandhavana Paripalanai Sangam and Anr. [MANU/SC/0336/2012: (2012) 6 SCC 430]; C handra Shashi v. Anil Kumar Verma [MANU/SC/0558/1995: (1995) 1 SCC 421]; A bhyudya Sanstha v. Union of India and Ors. [MANU/SC/0612/2011: (2011) 6 SCC 145]; State of Madhya Pradesh v. Narmada Bachao Andolan and Anr. [MANU/SC/0599/2011: (2011) 7 SCC 639]; Kalyaneshwari v. Union of India and Anr. [MANU/SC/0217/2011: (2011) 3 SCC 287)]. 34. The person seeking equity mu....
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.... go into the objections and determine the issues for consideration on merits. In my considered view, this petition could be disposed of on the preliminary issue, viz., whether the petitioner has filed this petition in good faith in order to work out his rights within the framework of the Act. It is well-settled that the relief under sections 397 and 398 of the Act is an equitable relief which is entirely left to the discretion of the company court. In the 5th edition of Pennington's Company Law, dealing with relief from acts of oppression, it is stated (at page 750): "A petition for relief from oppression under the original statutory provision would be dismissed if it was not presented in good faith solely in order to obtain such relief, and because of the equitable and therefore discretionary character of the court's jurisdiction under both the original and the present provision, the requirement of good faith on the part of the petitioner undoubtedly continues. Thus, even if the directors or majority shareholders have been guilty of improper or irregular conduct, so that there is a prima facie case for relief, it will be refused if the real purpose of the petition....
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.... of relief the appellants on this score also. 15. Further, as per the various decisions rendered by this Court as well as the Supreme Court, it is the duty of the courts to recognize the Corporate Democracy of a company in managing its affairs. The court should not restrict the powers of the Board of Directors and it shall not interfere with the day to day affairs and management and administration of the company. The principles laid down in the decisions rendered by this court in Vivek Goenka v. Manoj Sonthalia [1992] 2 ML J 163; G. Kasturi v. N. Murali MANU/TN/0075/1990 : [1992] 74 Comp. Cas. 661 (Mad.); and in Nurcombe v. Nurcombe [1983] 3 CL J. 163 (CA), makes it clear that the appellants/petitioners are not entitled to the relief as claimed for in the company petition." 65. The other plea taken on behalf of Respondents No. 1, 11, 13 and 15, is that for sustaining a 'petition', u/s 397, of the Companies Act, 1956, (and now under section 241 of the Companies Act, 2013), the Petitioner, is to approach a 'Tribunal' with clean hands by proving his Bonafides''. If the Petition is 'borne out of malafides' and 'unclean' conduct, the said 'petition' 'will not be maintainable....
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....led with the consideration of matters, touching upon the merits of the case, including the Appellant's conduct, and qualitative, analysis of its shareholding, therefore, no fault, can be found in the Tribunal's order, as contended by the Respondents No. 1, 11, 13 and 15' side. 70. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, points out that there is no infirmity in the 'Postal Ballot Notice' dated 10.11.2015, issued by the 1st Respondent / Company and a mere perusal of the Minutes of the Board Meeting, of 04.11.2015 the Board had approved, the issuance of 'Postal Ballot Notice', clearly mentioning the reasons for opting for 'joint development' of the property and the said explanation was also contained in the 'Explanatory Statement' enclosed along with the postal ballot notice, as per Section 102 of the Companies Act, 2013, thus providing the shareholders all the requisite information in regard to the 'nature of transaction' proposed and thereby enabling them, to make an 'informed decision' while voting in favour of the Joint Development. 71. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, contends that the decisions on commercial details of tra....
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....armoniously with the contents of the resolution quoted in paragraph 8 of the notice, discloses no contradiction in terms. Existing shareholders will be those members holding equity shares as per the register of members on the date to be decided by the board of directors, as indicated in the proposed resolution quoted in item No. 8 of the notice. It is well settled that provisions like Section 173(2) of the Act should be understood in a meaningful manner and not to be construed rigidly so as to hamper the conduct of business." Added further on behalf of R1, 11, 13 & 15, a reference, is made to the decision in K. Meenakshi Amma V Sreerama Vilas Press and Publications (P.) Ltd. and Ors. reported in MANU/KE/0087/1991, wherein paragraph 11, it is observed as under: 11. It has to be remembered that the chairman appointed by the company court was seeking directions in the matter of conducting the meeting. The company court gave certain directions for the proper conduct of the meeting. The former managing director, Sri N. Madhavan Nair, filed Application No. 187 of 1990 to stop the convening of the meeting on the ground that the notice is not in conformity with Sections 171 173....
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....different manner, with a view to prevent such joint development. But the fact of the matter is that the Appellant had voted against the Resolution for Joint Development and that the Appellant has miserably failed to prove as to how he is aggrieved, in his capacity as shareholder of the 1st Respondent / Company, by the 'Postal Ballot Notice' and the alleged 'non-disclosure of material information' therein. 75. The Learned Counsel for Respondents No. 1, 11, 13 and 15, points out that an overwhelming 91.13% of the shareholders of the 1st Respondent / Company, present and voting, appreciating and understanding the need for entering into a development, with regard to the Company's properties to ensure recurring cash flow took an 'informed decision' leading to the Resolution being passed on 22.12.2015, for the benefit of the 1st Respondent / Company and all its shareholders, including the Minority shareholders. Indeed, not a single shareholder for the last 8 years, other than the Appellant has approached the Tribunal or any other Forum, disputing the actions of the 1st Respondent / Company or assailing the Joint Development Transaction, by alleging any infirmity in the 'Postal Ballot ....
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....its oppressiveness. In Elder a complaint was made that Elder had not received the notice of the Board meeting. It was held that since it was not shown that any prejudice was occasioned thereby or that Elder could have bought the shares had he been present, no complaint of oppression could be entertained merely on the ground that the failure to give notice of the Board meeting was an act of illegality. 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. But a series of illegal acts following upon one another can, in the context, lead justifiably to the conclusion that they are a part of the same transaction, of which the object is to cause or commit the oppression of persons against whom those acts are directed. This may usefully be illustrated by reference to a familiar jurisdiction in which a litigant asks for the transfer of his case from one Judge to another. An isolated order passed by a Judge which is contrary to law will not normally support the inference that he is biassed; but a series of wro....
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...., should not be a ground to float the settled fundamental rules of civil procedure. Be that as it may. We will briefly set out the reasons for the aforesaid conclusions. 9. The object and purpose of pleadings and issues is to ensure that the litigants come to trial with all issues clearly defined and to prevent cases being expanded or grounds being shifted during trial. Its object is also to ensure that each side is fully alive to the questions that are likely to be raised or considered so that they may have an opportunity of placing the relevant evidence appropriate to the issues before the court for its consideration. This Court has repeatedly held that the pleadings are meant to give to each side intimation of the case of the other so that it may be met, to enable courts to determine what is really at issue between the parties, and to prevent any deviation from the course which litigation on particular causes must take. 10. The object of issues is to identify from the pleadings the questions or points required to be decided by the courts so as to enable parties to let in evidence thereon. When the facts necessary to make out a particular claim, or to seek a par....
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....ide the pleadings of the parties and it is the case pleaded that has to be found. Without an amendment of the plaint, the Court was not entitled to grant the relief not asked for and no prayer was ever made to amend the plaint so as to incorporate in it an alternative case." As such the 'Tribunal' could not have traversed into the matters, that were not specifically pleaded by the 'Appellant' through his Petition filed under Section 241 and 242 of the Companies Act, 2013, before the 'Tribunal', especially when the 'Respondents' had no opportunity to counter the same. 78. The Learned Counsel for the Respondents No.1, 11, 13 & 15, points out that the Respondent No.11 was selected as the successful developer for the joint development transaction through a fair and transparent process, as is evident from the minutes of the Board Meeting dated 24.11.2015. As a matter of fact, much after the execution of 'Joint Development Agreement' dated 01.01.2016 that Respondent No.2 to 7 intending to dispose of their shares in 1st Respondent / Company had entered into share purchase agreement, with the Respondent No. 12,13 & 15 for selling the said shares and in fact, in compliance with the pr....
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....irections under Chapter VI-A and Section 24 of the SEBI Act (Regulation 44). It is significant to note that Regulation 45 provides for penalties for non-compliance with the said Regulations. The liability will be in terms of the Regulations and the SEBI Act. Here again, the SEBI (SAST) Regulation is a comprehensive scheme providing for inquiry, investigation, submission of report by the investigating officer, procedural safeguards in favor of the acquirer, and finally, the restitutionary order/directions to be passed by the Board. This whole procedure cannot be short-circuited by making an application Under Section 111A of the 1956 Act on the ground that there exists parallel jurisdiction with the SEBI and CLB/Tribunal. The transaction complained of must suffer scrutiny by the regulator, and it is only for the regulator to determine a violation of the provisions of the SEBI Act and the Regulations. 38. Having considered the matter from a different perspective, we are of the opinion that the Appellant is not justified in invoking the jurisdiction of the CLB Under Section 111A of the Act for violation of SEBI Regulations. We are also of the opinion that the Tribunal committe....
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.... 2 lacs sq. ft. and also continues to retain ownership over proportionate undivided share in the land comprising the said development. Furthermore, through utilisation officer of such developed property, the company had already garnered potential, to generate rental revenue of Rs.1.25 crores per month, thereby fructifying the original intent of the complained transactions. 84. Besides the above, the Learned Counsel for Respondent No. 1, 11, 13 & 15, points out that simultaneous with the execution of Joint Development Agreement, on 01.01.2016, the 1st Respondent / Company, had received funds to an extent of Rs. 9 crores, as none-refundable security, which funds the 1st Respondent / Company, used to resolve its cash crunch and help keep its business 'afloat'. Hence the allegation that the 1st Respondent / Company has not derived any benefit from the development and that the said transaction had effectively led to the winding up of the 1st Respondent / Company is an incorrect one. 85. The Learned Counsel for the Respondent No. 1, 11, 13 & 15 points out that the aspect of 'Good Faith' being a 'sine qua non' for maintaining a petition under Section 241 of the Companies Act, 2013, ....
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....of a temporary injunction against the Respondents and the said suit, was later on withdrawn by the Appellant. Therefore, it is contended on behalf of the Respondent No. 1, 11, 13 & 15, that the contra stand of the Appellant, that 'no' / 'any suit', was filed, before the 'Civil Court', and that the such 'suit', was filed by the Mr. Kumar Dinesh Seth, is a misleading one. 90. The Learned Counsel for R1, 11, 13 and 15, points out that the Appellant has not made out any grounds whatsoever depicting that any actions of the Respondents complained of has in any manner been prejudicial to the shareholders and further that the actions complained are of the year 2015-16 and no other shareholder has raised any grievance, in respect of the actions complained of by the Appellant till date. 91. The Learned Counsel for R1,11,13 and 15, submits that it is the actions of the Appellant that have been 'oppressive' and prejudicial to the interest of the 1st Respondent / Company. Also that the Appellant, has forced the 1st Respondent / Company to contest one frivolous litigation after the other for a seven years' period and being the Chairman and Managing Director of the Embassy Group, the Appell....
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....Judicial) of the Tribunal, hearing the part heard matter on 25.10.2019 sitting singly, either on the date of hearing nor the Appellant had challenged the same, at any time, thereafter, till the filing of the 'Appeal'. 98. According to the Learned Counsel for the R1, 11, 13 and 15, that the Appellant had willingly participated in the proceedings before the Tribunal and allowed the proceedings to continue and is now raising the same, only after the impugned order came to be passed by the 'Tribunal'. 99. It is the version of the Learned Counsel for the R1, 11, 13 and 15, that the Appellant had also acquiesced to the proceedings of 25.10.2019, being conducted in the Tribunal (the matter being heard by the Hon'ble Member (Judicial) of Bangalore), now he is estopped from assailing the same before this Appellate Tribunal. 100. On behalf of the Appellant, a reference, is made to the order of the Hon'ble Supreme Court dated 20.06.2019, in writ petition (Civil) No. 722 of 2019 in 'Sonu Cargo Movers (I) Pvt. Ltd. & Ors. Vs. Union of India & Ors.' wherein it is observed as under:- "The grievance of the petitioners was that their matter was being heard by a Bench in which ther....
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....ssed by the Hon'ble Apex Court in Writ Petition No. 722 of 2019." 103. On behalf of the Learned Counsel for the R1, 11, 13 and 15, a reliance is placed upon the decision, in Tamilnadu Generation and Distribution Corporation Ltd. Vs. PPN Power Generating Company Pvt. Ltd. reported in 2014 11 SCC 53 wherein at paragraph 47 it is observed as under:- "47. These observations, however, do not in any manner affect the jurisdiction exercised by the State Commission in the present matter. It has been rightly pointed out by the Respondent that having filed the written statement in reply to the petition filed by the Respondent, the Appellant willingly participated in the proceedings and invited the findings recorded by the State Commission. It would be too late in the day, to interfere with the jurisdiction exercised by the State Commission in these proceedings." 104. The Learned Counsel for the R1, 11, 13 and 15, adverts to the decision, in CY Parthasarathy V. Syndicate of Mysore University, reported in MANU/KA/0244/1994 wherein at paragraph 19 to 22, it is observed as under:- 19. "It is true, that jurisdiction cannot be conferred by consent, of the parties where it d....
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.... of jurisdiction and could be avoided and others were even though they are void but with which the Court will not interfere on account of the applicant's conduct. The Author states thus:- "A decision made without jurisdiction is void, and it cannot be validated by the express or implied consent of a party to the proceedings. It does not always follow, however, that a party adversely affected by a void decision will be able to have it set aside. As we have seen, certiorari and prohibition are, in general, discretionary remedies, and the conduct of the applicant may have been such as to disentitle him to a remedy." "Whether the tribunal lacked jurisdiction is one question; whether the court, having regard to the applicant's conduct, ought in its discretion to set aside the proceedings is another. The confused state of the present law is due largely to a failure to recognise that these are two separate questions." 22. He also states in the same Book that a person who though aware of the defect or lack of jurisdiction does not raise any objection on that account and acquiesces and takes a chance of getting a decision in his favour will be disentitled ....
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....ted, the term, 'Acquiescence' is nothing more than 'absolute' or 'Positive Waiver'. Further, it amounts to an 'abandonment of rights', as per decision in Govindsa Marotise V. Ismail, reported in AIR 1950 Nag. Pg. 22. 109. A 'person' may be precluded by 'way of his actions' or 'conduct' or 'silence' when it is his 'duty to speak', from 'asserting a right', which he would have otherwise had. Also, that 'Estoppel' is a 'Principle of justice' and 'Equity'. It is not a 'cause of action', and it is 'not a rule of evidence' as opined by this 'Tribunal'. 110. At this juncture, this Tribunal, pertinently points out that the 'principle of waiver', or of 'Approbation', and 'Reprobation' lies at the 'root of conduct', productive change, of activation and this 'principle', is akin to the 'rule of 'Constructive' Res judicata', as per explanation IV of Section 11 of the Civil Procedure Code, 1908 111. In so far as, the present case is concerned, although, the 'plea', is taken on behalf of the Appellant, that the impugned order dated 27.11.2019, in CP No. 20/2016 (TP No. 248/2017) and Company Petition No. 486/BB/2018, passed by the Hon'ble Member (Judicial) of the National Company Law Tri....
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....'illegal' and 'void ab initio' one and the point, is so answered. 112. As regards the plea of the Appellant that the 'impugned order', dated 27.11.2019, in effect, overrides, the earlier order, which categorically held that the 'petition' of the Appellant/Petitioner, is maintainable, the Learned Counsel for the Appellant points out that the issue of maintainability already got settled by virtue of the order dated 30.05.2019 in IA 360/2018 and IA 17/2019, the said order was assailed in Comp. Appeals (AT) No. 144 and 179/2019, by the Respondents, the Appellate Tribunal had refused to 'interfere' with the order dated 30.05.2019, through an order dated 02.08.2019, and that the Respondents' had to withdraw the said Appeals. 113. The primary plea of the Appellant, is that the Learned Single Member of the Bench of the 'Tribunal', had effectively over ruled the said order passed by the Division Bench and upheld by this Tribunal. In effect, the said point according to the Appellant, vitiates the impugned order of the Tribunal, and hence, the 'impugned order' of the Tribunal, is liable to be set aside. 114. It is represented on behalf of the Appellant, that the matter, was always He....
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....n of matters, touching upon the merits of the case, including the 'Appellant's conduct', and 'qualitative analysis', of his shareholding. Hence, the Appellant's submission' that having held the 'petition', being not maintainable the Tribunal's findings on merits of the matter were allegedly 'prejudged' and 'prejudicial' is a baseless and a reckless one. 118. Because of the fact that the 'Appellate Tribunal', in Company Appeal (AT) 144 and 179 of 2018 on 02.08.2019 had permitted the Respondent No. 11 to withdraw its Appeal, leaving all the contentions and issues to argue before the 'Tribunal', which may be decided, at the stage of Final Hearing, uninfluenced by the decision, made in the impugned order and viewed in that perspective, the 'Tribunal', while passing the final order on 27.11.2019 in CP 486/2018, was perforced to reconsider the 'Issue of Maintainability' in terms of the directions issued by this 'Appellate Tribunal' and as a logical corollary, the 'Tribunal' had given a 'Relook' by considering the question of maintainability of the Appellant's petition, at the stage of 'Final Hearing', along with other matters being considered, covering the merits of the main case (inc....
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....pellant's 'share movement' (consolidated) (Annexure R1) shows that the Appellant, on 19.02.2016 had 9.56% and 30.09.2016 possessed 19.83% of shareholding also in the order dated 30.05.2019 in IA No.360/2018 and IA No.17/2019 in CP No.486/2018 at paragraph 18, the 'Tribunal', had observed that the 'Applicants' / 'Respondents' had admitted in their pleading by contending that the Respondent/Petitioner, hold 10.32% of total 'paid up share capital', even at them of filing, earlier CP No.22/2016, and not it stands at 19.83%. Therefore, we are of the view that the Respondent/Petitioner holds the required percentage as per law to maintain the main Company Petition. As per law, litigation cannot be thrown at threshold without going into the merits of the case'. 122. In this regard, it is pertinently pointed out, by this Tribunal, that the Appellant, after securing the 10% shareholding, had approached, the then 'Company Law Board' by preferring CP No. 22/2016, on 21.03.2016 and later, withdrew the said company petition on 20.08.2018 and projected the CP No. 486/2018 before the National Company Law Tribunal, Bengaluru Bench, pertaining to the purported action of 'oppression and mismanagem....
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....sh Seth against the Respondent No.1 Company and its activities for joint development of its properties. (6) It is contended that in order to invoke the provisions of section 241 & 242, a person should have requisite number of shareholding in the Company on the date when alleged acts of oppression and mismanagement are complained of. In the instant case, cause of action or alleged acts of oppression and mismanagement were occurred on 22.12.2015 & 01.01.2016 and as stated above as on that dates, the Petitioner had only 4.12% & 4.27% shareholding respectively in the Respondent No.1 Company and hence, on this ground alone, the instant petition under Section 241 and 242 of the Companies Act, 2013 fails and liable to be rejected as not maintainable. (7) The Petitioner being a minority shareholder at that point of time, if really was aggrieved by the actions of the Respondents, nothing prevented him from seeking relaxation or waive off of the mandatory requirements under section 244 (1) (a) & (b) to enable him to invoke the jurisdiction of this Tribunal under section 241 at that relevant point of time itself. 124. In this connection, this Tribunal relevantly points ou....
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....t / company was beyond its competence and is prohibited by Section 180 of the Companies Act, 2013, read with the Section 179 of the said Act and to save itself from the 'rigours' of the aforesaid provisions, the management brought the idea of a possible 'Joint Venture Agreement', to dispose of the entire undertaking / substratum of the company in favour of an unknown person, 'with no material information to the shareholders' for the first time by the Board, on 04.11.2015 while completely changing the Agenda, as was countenanced in the 'Meeting of the Board' dated 19.02.2015. 128. The Learned Counsel for the Appellant, proceeds to point out that at a purported 'Board Meeting', that took place, on 04.11.2015, another decision was taken, to dispose of, the entire undertaking/substratum of the company, in favour of unknown person, 'with no material information to the shareholders' and put up the proposal of a 'Joint Venture Agreement', for development, of the entire land of the 1st Respondent /Company, through Postal Ballot, vide notice dated 10.11.2015 and in fact, the Board Resolution, dated 19.02.2015 was passed for disposal /sale of the property, and not for execution of 'Joint ....
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....ort to be submitted to the Chairperson of the Meeting, shall be counter-signed by both the scrutinisers. 131. Repelling the submissions of the Learned Counsel for the Appellant, the Learned Counsel for R1, 11, 13 & 15 contends that the 'Board', as per the Minutes of its Meeting on 04.1.2015, had approved the issuance of Postal Ballot notice, (vide page 710 of Appeal Paper Book, Vol. -V, of the Appellant), clearly explaining the reasons for entering into Joint Venture / Joint Development Arrangement and further, the said 'Explanation' was mentioned in the Explanatory, statement enclosed with the 'postal ballot notice', in terms of Section 102 of the Act (vide Annexure-6, page 714, Vol-V, of Appellant's Paper Book, thus, providing to shareholders, the requisite information in regard to the nature of the transactions proposed and thereby enabled them, to make an informed a decision, while voting in favour of joint development. 132. The clear cut stand of the R1, 11, 13 & 15 is that the 'determinations', in respect of 'commercial details', proposed to be entered into by the 'Company', including the details of the contracting party, essentially, relate to the Business of the Compa....
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....st necessary to 'Annexe' 'A Statement' of Material Facts, of 'items of special Business' along with Notice of Meeting. 137. At this stage, this Tribunal, ongoing through the Minutes of the Board Meeting of the Directors of 1st Respondent / MRO-Tech Limited dated 04.11.2015 and also looking into the 'Postal Ballot Notice' and the enclosed 'Explanatory statement', is of the considered view' that in respect of the Business of the Company, the shareholders cannot take a call or any decision in the matter and it is for the Board of Directors of the Company, to have talks / negotiations with parties concerned and in any event, the 'Postal Ballot Notice' and the enclosed 'Explanatory statement', are fulfilling the requirements of Section 102 'statement to be annexed to Notice'. As such, the 'contra plea', taken on behalf of the Appellant, is not acceded to by this Tribunal. 138. In this connection, this Tribunal, points out that the Appellant, in his 'Reply' dated 09.12.2015 (for the e-mail dated 18.11.2015 (DP ID & Client ID: IN302-15) addressed to him as a shareholder of MRO-Tech Limited) had stated that, 'as a shareholder of the Company', this notice does not allow him to exercis....
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....142. The Learned Counsel for the Appellant, points out that the whole series of acts of 'Oppression and Mismanagement' lies, in the illegal, and unlawful acts, of the 'Board of Directors' in a purported meeting, that took place on 19.02.2015. But the' Management' knew that 'sale and disposal' of the 'whole undertaking' of the 1st Respondent / Company, was beyond its competence and is prohibited by Section 180 of the Companies Act, 2013, read with Section 179 of the Companies Act, 2013 and to save itself, from the rigours of the above mentioned provisions, the management, brought the idea of a possible Joint Venture Agreement, to dispose of the entire undertaking/substratum of the Company in favour of unknown person with no material information to the shareholders for the first time by the Board on 04.11.2015 while completely changing the agenda as was countenanced in the meeting of Board dated 19.02.2015. 143. In this regard, this Tribunal, points out that the 1st Respondent / Company in its Reply, to Company Appeal (AT) (CH) No. 363/2019 at paragraph 4.2 had averred as under: I 144. According to the 1st Respondent / Company, after the passing of the Board Resolution, the ....
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....ting, dated 24.11.2015. 147. In reality, a mere glance of the 'Minutes of the 4th Meeting for the Financial year, 2015-16 of the Board of Directors / MRO-Tech Limited, that took place on 24.12.2015 at 9:30 a.m. at the registered office of the Company at Bellary Road, Hebbal Bangalore, indicates that the 'Board' had noted, and took on record of the Minutes of the Previous Audit Committee meeting that took on 04.11.2015 and also that the Board had reviewed the Scrutinisers Report dated 22.12.2015 furnished by the Scrutinizers appointed for the purpose of 'Postal Ballot' and it was informed that due notification of these results was made to the stock exchanges. As a matter of fact, the 'Board' had noted that the Resolution Proposed was passed with the requisite 'majority'. 148. According, to the 1st Respondent / Company Shareholders approved by the requisite majority through the Postal Ballot the proposal, as per the scrutinizer's report dated 22.12.2015. Further, in the interregnum, the Company, had commenced, discussed, with prominent builders, in India, for the development of property, situated at Hebbal, Bangalore. In fact, the 'Management', took the view that the shareholde....
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.... Appellant, filed a civil suit, and later he withdrew the same through an undertaking, before the Hon'ble High Court of Karnataka, in the 'Appeal' proceeding (vide Annexure R7, Pg. 85 and 93 of R1's 'Appeal' paper book, Vol.-1). Also that, as per R1, 11, 13 & 15 version is that such 'share purchase,' was approved duly by the 'SEBI'. 154. It is projected on the side of R1, 11, 13 & 15, that the 'Joint Development Transaction', as averred by the Appellant had culminated, in construction / development of a commercial building, of a commercial complex of which, the 1st Respondent / Company owns more than Rs.2 lakhs sq. ft. and continues to retain ownership, in respect of 'proportionate undivided shares', in the Land comprising the said development, and through the utilisation of its share, of such developed property, the 1st Respondent / Company, had garnered potential, to generate rental revenue, of Rs.1.25 Cr. per month, and thereby fructifying, the original intention, of the 'complained transaction'. 155. Besides the above, the simultaneous with the execution of Joint Development Agreement, on 01.01.2016, the 1st Respondent / Company had received funds to extent of Rs. 9 cr. a....
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....lidity period and on this aspect, numerous rounds of negotiations, took place, between the 1st Respondent / Company, and the aspiring Developers, and as a matter of fact, the 1st Respondent / Company had received proposals from victory infrastructure, Umiya Builders & Developers (Respondent No.11 herein), 'Brigade Group', 'Puravankara', and 'Salarpuria' & 'Sattva Group' for the 'Joint Development' of the aforesaid properties, of the Respondent No.1 / Company and in fact, the majority of the shareholders viz. 91.13% of the shareholders of the 1st Respondent / Company, (consequent to the issuance of 'Postal Ballot' dated 12.11.2015, and voting thereto), had voted in favour of entering into Joint Development of the properties, and resting upon the 'majority, consent of the shareholders' a 'Special Resolution' was passed on 22.12.2015, authorising the 'Board of Directors', to enter into a 'Joint Venture' with reputed 'Business House' to develop the properties, of the 1st Respondent / Company. 159. It comes to be known, that the 'Board of Directors', of the 1st Respondent / Company after 'shortlisting', (in respect of the various proposals received thereto) and made complete assessme....
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....s of the 1st Respondent / Company as per Share Purchase Agreement dated 19.05.2016, after fulfilling all the procedures, formalities and approval, in terms of the 'SEBI' Regulations, 2011 etc. Thus, the 13th and 15th Respondents, became the 'Members of the Board of Directors' of the 2nd Respondent / Company, from 08.08.2016. 164. It is projected on the side of R1, 11, 13 & 15, that the Appellant / Petitioner began, acquiring the shares of the 1st Respondent / Company from 30.09.2015 in the open market, and he made a halt, in regard to the acquiring of shares after he had reached the accumulation, of 19.83% shareholding, on 30.09.2016. In this connection, it is brought to the notice of this Tribunal, that the Appellant / Petitioner, (within a year) had increased a 'shareholding' from 3.16% (5,90,675 shares) on 30.09.2015 to 19.83% (37,04,684 shares) on 30.09.2016, by acquiring in the open market. Also that the current shareholding pattern of the Promoter and Promoter Group is (53.89% shareholding in the company) and also the General Public including the Appellant / Petitioner (46.11% shareholding in the Company). 165. According to the R1, 11, 13 & 15, the reason for the Appell....
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....ed 24.11.2015 (vide pg. 293, Vol.-II of the Appeal Paper Book). Viewed in this background, the contra plea, taken on behalf of the Appellant, that the determination, to enter into 'Joint Venture Agreement' and 'Joint Development Agreement' dated 01.01.2016 were in breach of 'Memorandum of Association' of a Company, and against the 'Fiduciary' duties of Directors, are not acceded to, by this 'Tribunal' and the point is so answered. 170. Dealing with the plea of the Appellant, that the 'Tribunal', went wrong, in not holding that 'invalid', 'illegal' and 'malafide' transfer of the entire shareholding of R2 to R10, constituting 39.66% in favour of R12 & 13 was an 'oppressive' one, the submission of the Learned Counsel for the Appellant, is that after the 'transfer of land', by way of 'Joint Venture' to the 12th Respondent, the execution of a 'Share Purchase Agreement' dated 19.05.2016, by R2 to R7, transferring entire promoter shareholding , in favour of R12 & 13, thereby effecting, an 'entire change of control', within a period of 5 months, of alienating the whole substratum of the 1st Respondent / Company and further that among the numerous acts, of 'oppression' and 'mismanagem....
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.... 'complicated', 'questions of Law and Fact', and 'disputed questions of title', right etc. then the 'Company Court' / 'Tribunal' may direct the parties to get their disputes, decided by the 'Competent Civil Court', in a Trial, in appropriate proceedings as the case may be. 175. At this juncture, this Tribunal, pertinently points out that, the Appellant, had filed 'two complaints' before SEBI, in relation the 'Share Transfer Issue', but it proved 'futile'. Also, this Tribunal, on a meticulous rumination, of respective contentions, advanced, on either side, holds, that in regard to the 'controversies' / 'disputes', relating to the 'Transfer of shares', which fall within the ambit of SEBI jurisdiction, the 'National Company Law Tribunal', is 'not the Competent Fora', to go into the aspects of 'purported breach' of 'SEBI Regulations'. Looking at from any angle, this Tribunal comes to a consequent conclusion the Appellant the transfer of shares by the 'promoters', as per 'Share Purchase Agreement' dated 19.05.2016 executed by R2 to 4 transferring their promoter shareholding, constituting 39.66% in favour of R12, 13 & 15 is 'not an invalid', 'illegal' and 'malafide transfer' of the en....
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.... significantly pointed out by this Tribunal, that in CP No. 22/2016 (TP No. 8/2016), filed before the then, Company Law Board, Chennai (under Sections 379, 398, 40, 403, 406 of the Companies, Act, 1956), was preferred on 21.03.2016. The Appellant / Petitioner had averred, that he was the 'shareholder' of the Company by possessing 19,32,596 shares, equal to 10.34% of the paid up share capital. 182. When the Appellant / Petitioner filed CP No. 486/BB/2018, on 06.09.2018, he averred that, he holds, 37,05,684, Equity Shares of Rs.5/- each, amounting to 19.83%, of the 'paid up share capital'. The Appellant, withdrew his former petition, in CP No. 22/2016, on 20.08.2016 and filed CP No. 486/2018 before the NCLT, Bengaluru Bench, in regard to the purported acts of 'oppression' and 'mismanagement' that took place, on the specific dates of 'cause of action' that had 'arisen'. 183. The ingredients of Section 242 of the Companies Act, 2013 has 'no application', whatsoever, for redressal of 'grievances of wrong acts', of the management of a company. A mere, 'illegal' or invalid acts would not be termed as acts of 'oppression'. 184. It is relevantly pointed out by this Tribunal, that t....
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.... in a manner prejudicial or oppressive to 'any Members', or against the 'public interest' / or in any way, 'prejudicial', to the interest of the Company etc. and this Tribunal, ongoing through the impugned order dated 27.11.2019 passed by the NCLT, Bengaluru Bench in CP No. 486/BB/2018, comes to a consequent conclusion, that the Appellant / Petitioner has not established to the subjective satisfaction of this 'Tribunal', that 'affairs of the Company', are conducted, in 'any manner prejudicial' or 'oppressive' either to the Appellant, or other 'shareholders' / stakeholders. Viewed in that prospective, the 'ultimate conclusion', arrived at by the NCLT, Bengaluru Bench, in dismissing the CP No. 486/BB/2018 through its order dated 27.11.2019, without costs is free from any legal flaws. Accordingly, the instant 'Appeal' fails. Disposition 189. In fine, the TA (AT) No. 94/2021 (Company Appeal (AT) No.363/2019) is dismissed, of course, for the reasons assigned by this 'Tribunal' in this 'Appeal', No costs. The connected pending IA(s) No. 4295/2019 (for status quo), 4296/2019 (for Exemption), 517/2023 (for stay) are closed. ============= Document 1 Owing to stiff competition and....