TaxTMI 
TaxTMI 
2023 (10) TMI 241
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....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 and 957 shares respectively as on 06.11.2015, which i....
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....ers 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 in the Company, at the time of filing their suits. However, after obtaining the requisite percentage especially by Mr. Jitender Virwani, a....
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....es 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 possessing 19.83% shareholding in the 1st Respondent / Company, at the time of filing the present petition, does not possess the 'Requisite Shareholding', necessary ....
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....ic 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 asset', as was countenanced, in the meeting of the Board dated 19.02.2015 and for the first time, brought in, the idea of a possible joint venture agreement, to dispose of the....
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....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 Respondent / Company being Respondent No. 11 and other personnel connected with the said entity, which led to public offer under SEBI(take over Court). 15. The Learned Counsel for the Appellant, points out that the 'Joint....
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....ellant 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 grievance. 21. According to the Appellant, the issue of 'maintainability' was decided by the Tribunal, through an order dated 30.05.2019 in IA 360/2018 and IA 17 of 2019 filed by the Respondent. The said order was assailed by the Resp....
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....ourned 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 Rule 152(4) of 'NCTL' Rules, 2016 in support of its claim. Mr. Arun Kathpalia, Learned Senior Counsel has appeared on behalf of 'Vistra ITCL(India) Ltd.' ('Financial Creditor') accepts the aforesaid fact. In the facts and circumstances, as suggested by Learned Counsel for the parties and we are also of the opinion that the matter may be remitted....
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....bunal, 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 25.10.2018 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Adjourned 29.10.2018 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Adjourned 30.10.2018 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Adjourned 02.11.2018 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Adjourned at request of Respondents 09.11.2018 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Adjourned 26.11.2018 Shri ....
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....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 iii. Dale and Carrington Invt. Vs. PK Prathapan, 2004 Supp(4) SCR 334. 26. To fortify the contention that the 'impugned notice dated 10.11.2015', is 'malafide' in nature and has the effect of elevating the entire substratum of the 1st Respondent Company, also that the execution of the 'Agreement', reflects a conduct in breach of the fiduciary duties of Directors owed towards 1st Respondent / Company as per Section 166 of the Companies Act, 2013. 27. The Learned Counsel for the Appellant, cites the decision in 'Vaishnav Shori Lal Puri and Ors. And Seaworld Shipping and Logistics P. Ltd. And Anr.Vs.....
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....sue 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 SSL was created only as a vehicle to take away the business of Contship agency from SSTS. Besides, the finding of fact as recorded and which cannot be disturbed is that SSL is a newly formed company and is fully controlled by the Puri group only. More so, SSL has been established by the Puri group to do the same business as that of SSTS and its incorporation procedure was initiated much prior to the termination of the agreement of SSTS. All this has been done "clandestinely". The Board has then lifted the corporate veil of SSL and has found that it is the Puri group who has received the entire benefit by using the corporate enti....
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....f 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 submission is founded on wrong assumptions. Whereas my understanding of the conclusion reached by the Board is that, it proceeded to pass directions having found that there was oppression of the Sippy group and mismanagement in the affairs of the companies. More so, as is rightly contended on behalf of the Sippy group, that the provisions of Sections 397 and 398 cannot be given restricted meaning, whereas, the plain language of the said provisions would suggest that the conduct of the Puri group as alleged and established from the record was fully covered by the purport of the said provisions. Understood thus, there is no substance in the grieva....
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....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 SSCO by paying fair value therefor. Such a course was the appropriate relief and direction to be passed in the fact situation of the present case. 28. The Learned Counsel for the Appellant, refers to the judgement of the Hon'ble Supreme Court in 'Rajahmundry Electric Supply Corporation V. A. Nageshwara Rao & Ors. Reported in AIR 1956 SC 213 wherein at paragraph 5 it is observed as under:- "5. This point is not dealt with in the judgement of the trial court, and the argument before us is that as the objection went to the root of the matter and struck at the very maintainability of the application, evidence should have been taken on the matter and a fi....
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....at 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 the apex court that the validity of a petition must be judged on the facts as they were at the time of presentation. It is not the case of the respondents that the company petition was not validity presented. If that is so, when a petition is validly presented, in the absence of a provision to that effect in the statute, it does not cease to be maintainable by reason of events subsequent to its presentation." 30. The Learned Counsel for the Appellant, refers to the decision of Hon'ble Supreme Court in M/s. Jawahar Singh Bikram Singh Pvt. Ltd., Delhi v. Smt. Sharda Talwar, reported in 1973 SCC Online Del 48 wherein it is held as under:- "the petition cannot be held to be non-maintainable merely b....
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.... 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 consequences arising therefrom.' 35. Similarly, in E.Palanisamy v. Palanisamy (2003) 1 SCC 123 (vide para 5) this Court observed: (SCC p. 127) "5. Equitable considerations have no place where the statute contained express provisions.' 36. In India House v. Kishan N.Lalwani ((2003) 9 SCC 393 (vide para 7) this Court held that: (SCC p. 398) "7....... The period of limitation statutorily prescribed has to be strictly adhered to and cannot be relaxed or departed from for equitable considerations". 37. In the present case, while equity is in favour of the respondent Bank, the law is in favour of the appellant, since we are of the opinion that the impugned order (Punjab National Bank v. Bareja Kripping Fasteners, 2005 SCC OnLine P&H 552) of the High Court is clearly in violation of Section 31 of ....
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....lief 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 had BED candidates excluded from the selections. The impugned judgement of the Division Bench is both illegal inequitable and patently unjust. The TTC candidates before us as appellants have been wrongly deprived of due chance of selection and appointment. The impugned judgement of the Division Bench, therefore, deserves to be set aside and of the learned single judge restored." 34. The Learned Counsel for the Appellant, cites the decision of the Hon'ble Supreme Court in Messer Holdings Limited v. Shyam Madanmohan Ruia Others, (2016)11 SCC 484 at spl. Pg. 501 wherein at paragraph 34 it is observed as under:- "34. Suit 1 is admittedly withdrawn, therefore, any order passed during the pendency of the said suit by any Court (including this Court) in any proceeding arising out of the said suit automatically lapses with the withdrawal of the suit. ....
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....lief, 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 involved therein." 36. The Learned Counsel for the Appellant, points out the decision of Hon'ble Supreme Court in Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing Quota Vs. Shukla & Brothers reported in 2010 4 SCC at page 785 at spl. Pages 791, 93 wherein at paragraph 12, 13, 19 it is observed as under: - "12. In exercise of the power of judicial review, the concept of reasoned orders/actions has been enforced equally by the foreign courts as by the Courts in India. The Administrative Authority and Tribunals are obliged to give reasons; absence whereof could render the order liable to judicial chastisement. Thus, it will not be far from an absolute principle of law that the Courts should record reasons for their conclusions to enable the appellate or higher courts, to exercise their jurisdiction appropriately and in accordance with law. It is....
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....ved 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 law that assignment of reason is also one of the limbs of principles of natural Justice and an unreasoned order is nullity particularly when an appeal lies therefrom. When an unreasoned order is passed, even the Appeal Court would feel great difficulty in considering the same in its proper perspective." 38. The Learned Counsel for the Appellant adverts to the decision of the Hon'ble Supreme Court in Kranti Associates Private Limited & Anr. Vs. Masood Ahmed Khan & Ors. reported in (2010) 9 SCC 496, at Spl page 510 & 511 wherein at paragraph 47 it is observed as under: 51. Summarizing the above discussion, this Court holds: a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to ....
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....urg 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 Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions". o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process". 39. The Learned Counsel for the Appellant, places reliance upon the decision of the Hon'ble Supreme Court in Biswasnath Prasad Khaitan Vs. New Central Jute Mills, 1960 SCC OnLine Cal 148, wherein at paragraph 18, it is observed as under: 18. In view of my finding that the Articles forbid a declaration of further dividend the question whether there was an explanatory statement to the notice is of less importance. In view of the arguments of the counsel I propose in short to discuss the rival contentions. Mr. Sen, counsel on behalf of the plaintiff, did not contend that it was a 'tricky' notice but that the notice was misleading and did not correctly set out the ....
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....m 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 March 31, 1960 appearing in P.D. 5, D.D. 6 and also set out in the plaint in paragraph 12 declaring further dividend in respect of the year ending 31st March, 1959 is illegal, void and ultra vires the Articles of Association and the Companies Act. There will be an injunction restraining the defendants its servants and agents from impleading or giving effect to the said resolution. Apart from this question no other question was canvassed at the trial. The plaintiff is entitled to the costs in this suit. Certified for two counsel." 40. The Learned Counsel for the Appellant, refers to the decision of the Hon'ble Bombay High Court in Narayanlal Bansilal Vs. Maneckji Petit Manufacturing Co. Ltd. reported in 1930 SCC OnLine Bom 187, wherein at paragraphs 3, 4, 16, 19, 22, 24, 26 & 27, it is observed as under: "3. The only question in this case is of ??? sufficiency of the notice convening an meeting. The meeting in question as convened for the purpose of adopting new Articles of Association and entering into an agreement with ....
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....h 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 of these details, especially in view of the large number of decisions of the Court of Chancery and the Court of Appeal in England which have been quoted in this case. I shall begin by setting out the notice and the circular accompanying it because in judging of the sufficiency of the notice the terms of the notice and circular are material. The notice Ex. A, states the resolutions which are to be put before the shara-holders, viz. (1) the adoption of the new Articles of Association and sanctioning the agency agreement referred to in Article 147 of the new Articles and (2) alteration of the provisions of the Memorandum of Association of the company by authorizing the investment of the funds in banks. No objection has been taken to the latter. The notice states that: "A copy of the new Articles of Association together with a copy of the said agency agreement may be inspected at the registered office of the company at any time during office hours prior to the date of the meeting. 4. This is a provision on which very great stress h....
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....s the more usual practice of permitting a vote in such a case to be recorded by the committee, curator bonis, or other legal guardian of the member, has been adopted. The opportunity has been taken of including in the new Articles the usual provisions for the creation of a Provident Fund and for granting pensions and annuities to employees and exemployees of the company, Opportunity has also been taken of incorporating in the new Articles the usual provision for the appointment of a debenture director, which appointment is usually now required if and when a debenture loan is raised. The agents of the company having ??? a desire to have an agreement with the company which will fix the duration of their agency and define more clearly their powers, the directors recommend to the approval of the share holders an agreement on the lines of the draft agreement which has been prepared and has been approved by the agents and is open to in ??? by any share-holder at the register office of the company at any time during office hours, when the draft new Articles of Association can also be inspected. Apart from the fixing of the duration of ??? agency at 30 years from 1st January 1927, th....
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....ings to which I shall refer later, in which it has been held that notices should not be too strictly construed. Unfortunately the statement in the circular that this clause as to compensation is the only real difference between the existing terms of the agency and the proposed agreement is not strictly correct in view of the clauses to which I have already referred in the agency agreement. The commission remains the same. Cl. 4 of the agreement refers, to the powers of the managing agents in conducting the business and affairs of the company, and I am not prepared to hold, although the powers are more particularly stated, that they go substantially beyond the powers in Article 99. It is contended that Cl. 4(k), "to purchase and sell and for that purpose to sign, endorse and transfer Government promissory notes or other securities issued by the Government of India and standing in the name of the company or any bonds of any public authority and to collect and give receipts for the dividends or interest from time to time due or to become due on any such securities gives power to the managing agents to raise money, but it is contended that it is not so. Cl. 10 of the proposed agreement....
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....lian Exploration and Development Syndicate, Par-shuram D. Shamdasani v. Tata Industrial Bank (Shah J.'s judgment), Henderson v. Bank of Australasia , Alexander v. Simpson , Grant v. United Kingdom Switchback Baihvays Gompany , and his main submissions-are as follows: 1. The notice must be in conformity with the Articles of each particular company. 2. Sufficiency of the notice must be decided with reference to the particular circumstances of each case. 3. Where the notices have been challenged, there was some arrangement for secret commission. 4. Except in Normandy v. Ind, Coope & Co., Ltd. the proposed resolutions were never offered for inspection prior to the meeting. 22. It was 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 upon the company. This was a case in which a sum of upwards of GBP40,000 had been received by the directors in respect of the subsidiary company, a fact which was not referred to in the circular, and it was held by the Master of the Bolls that if any attempt is to be made by the directors to get th....
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....Company held that the resolution of the general meeting was not invalidated by the fact that the notice convening it did not suggest any reason why the contract could not be carried into effect without the sanction of a general meeting. In Parshuram D. Shamdasani v. Tata Industrial Bank it was held by Shah, J., after a reference to most of the cases to which I have referred (p. 1003 of 26 Bom. L.R.): "The net result is that where there is any secret agreement or any interest of the directors in the agreement not disclosed in the circular, or in the notice, the Court will view with strictness any omission to refer to it in the notice or in the circular accompanying the notice; and the omission to mention any secret arrangement would constitute a serious defect in the notice. But where no secret agreement is proved or suggested and where there is no indication that there was anything to conceal the Court will as far as possible take a liberal view of the terms of the notice and will not upset the proceedings taken a notice for some defect, which might have been avoided, but which was not avoided on account of some honest mistake." 24. In that case however it was held that there w....
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....d given an opportunity of examining the proposed memorandum of agreement. There is no question of any secrecy here, because any shareholder who went to the company's office to see the proposed memorandum of agreement with a view to examine the proposals regarding compensation would in all probability look at the other terms so that the other proposals regarding assignment and the continuance of the agency would be brought to his notice. I think myself it would have been better if in the circular the directors in calling attention to Cl. 17, of the proposed memorandum of agreement, had also called attention to the clauses regarding the powers of assignment and the compulsory continuance of the agency in all events. The question is whether this is sufficient to invalidate the notice. There is no question of a secret agreement here as in some of the cases above quoted, but there is an interest of the directors in the agreement which is not disclosed in the circular or notice, an interest apart from the compensation clause. Now turning to the alterations in the Articles of Association, they are of a minor character. It was at one time contended that by the new Articles of Associati....
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.... given to the directors and officers of the company, and, secondly, as regards the agency agreement the omission to mention the power of assignment and the power conferred on the managing agents to insist on the continuance of their agency in the event of a transfer, both of which are, in my opinion, changes of which no notice was given to the share holders, and are even proposals which the terms of the circular might be said to conceal, and in that respect the circular is misleading. To put the matter as simply as possible, if the directors issue a circular in which they refer to certain alterations, and say that the only important alteration is with regard to cl, 10, whereas there are equally important alterations in cl. Y, can it be said that the shareholders have sufficient; notice of the proposed alterations in cl. Y? I do not think so. 27. The result is that I find on issue 1 that the notice was insufficient, and consequently on issue 2 that the meeting was not duly convened and the resolutions are not valid and operative. The plaintiff will be granted the declarations and injunctions sought in prayers (a) and (b) of the plaint together with costs of the suit." 41. The Lea....
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.... resolution was then put to vote and declared carried by the chairman on show of hands unanimously. Likewise, subject No. 3 which relates to appointment of directors resolved that Shri V.B. Padmanabhan, the second respondent, was appointed as director of the company. The said resolution was proposed by Mr. V.B. Jagadeesan and seconded by V.B. Devarajan. It is stated in the minutes that at that stage Sri V.B. Padmanabhan intervened and stated that it would not be proper for him to be the chairman while considering the resolution concerning his appointment as director and, therefore, he stepped down from the chair. Again, Shri V.B. Padmanabhan proposed and Shri V.B. Jagadeesan seconded that V.B. Gopalakrishnan be voted to the chair unanimously. After Sri V.B. Gopalakrishnan assumed the chair, the resolution relating to the appointment of Sri V.B. Padmanabhan as director was put to vote and declared carried by the chairman on show of hands unanimously. At this stage, Sri V.B. Gopalakrishnan stepped down from the chair and Sri V.B. Padmanabhan assumed the chair, having already been elected to the chair and he moved the following resolution: (a) That Shri V.G. Sundara Raj be appointed....
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....n of the contesting defendants, however, is that the solicitor-director was not a concerned or an interested director. This point has already been considered by me in connection with the resolution of the board of directors at its meeting on November 14, 1968, and I have already expressed the prima facie conclusion reached by me that he had a concern or an interest in this matter. The only question, therefore, which remains to be considered in this connection is the consequence of such non-disclosure. First, however, I will deal with the question whether the correspondence with the Company Law Board can be said to be a material fact concerning the business to be transacted at the said meetings. Now, the first meeting was for approving the private company's appointment as sole selling agents for a further term. The second meeting, namely, the meeting requisitioned by the plaintiffs, was for not approving the said appointment. Any fact which would have a relevance or bearing upon the approval or a non-approval of the said appointment would, in my opinion, be a material fact concerning the said items of business. The facts relating to this correspondence may be briefly recapitulat....
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....statutory authority to determine whether the terms and conditions of a sole selling agency are prejudicial to the interests of the company or not. Under section 10E these powers of the Central Government have been delegated to the Company Law Board. Where, therefore, a statutory authority empowered to decide whether the terms and conditions of the appointment of a sole selling agent are prejudicial to the interests of the company or not, had already opined that certain provisions of the said agreement dated September 24, 1963, were prejudicial to the interests of the company and had expressly required the company to bear its views in mind at the time of the renewal of the agency, it cannot be said that the disclosure of the views of the Company Law Board to the shareholders at the time of further appointment on terms which contained the very features objected to by the Company Law Board was not material. The object underlying section 173(2) is that the shareholders may have before them all facts which are material to enable them to form a judgment on the business before them. 70. Any fact which would influence them in making up their minds, one way or the other, would be a materi....
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.... with respect to the requisitionists' meeting, when the solicitor-director pointed out that the statement of facts set out in the requisition should be sent to the shareholders with the notice of the requisitioned meeting and, as the said statement was silent regarding the directors' interests in the resolution, the same should be added. There is no mention in the minutes of the explanatory statement in respect of both the said meetings being placed before or generally approved by the board as alleged. Further, by their said requisition dated March 17, 1969, the plaintiffs did not set out the whole of the explanatory statement to be incorporated in the notice. What they did was to make a request that in the explanatory statement which would be annexed to the notice the statement set out by them should be included. They were thus anxious that certain facts should be included and not that they did not want other material or relevant facts to be excluded. It is the duty of the company acting through its board to incorporate in the explanatory statement all material facts concerning the item of special business to be transacted at a meeting. At the said board meeting held on Ma....
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....iffs' objections are well-founded and, consequently, the said notices and meetings, particularly the notice for the meeting of the 28th April and the meeting held on that day, and the resolution passed at that meeting are invalid. Closely connected with this point is the objection of the plaintiffs with reference to the non-disclosure of the Company Law Board's said letter of April 9, 1969, to the shareholders at the meeting of the 28th April. Tulsidas as the chairman of the board of directors took the chair at the said meeting of the 28th April. It was submitted on behalf of the plaintiffs that, since Tulsidas was vitally interested in the said resolution, he deliberately suppressed from the shareholders the receipt of the said letter so as to keep back from them the knowledge that the Company Law Board was objecting to the said further appointment. Tulsidas's answer is to be found in paragraph 15 of his affidavit-in-reply affirmed on August 14, 1969. The relevant portion is: "I say that by the said letter, the Company Law Board only sought clarification from the 1st defendant company which was given by the 1st defendant company by its letter dated 22nd April, 1969. ....
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....ng called upon proper notice any one can at that meeting either with or without notice, propose the appointment of a liquidator ......" Everyone connected with companies should know that, as soon as a resolution for voluntary liquidation has been passed, the appointment of liquidator can be proposed and carried." 36. The above decision was cited in support of the validity of the impugned resolution. 37. It does not clearly appear from the above decision whether there was any mandatory provision in the statute regarding appointment of a liquidator after a voluntary resolution for winding up is passed. In case of the Companies Act of our country, the provisions are expressly mandatory. In case of companies incorporated or deemed to be so incorporated under the Companies Act, which are accordingly bodies created by the statute, there is this express obligation provided in the Section 172 of the Act before a resolution can be adopted. The language of the obligation in Section 172 as already observed, clearly indicates its mandatory nature and accordingly the non-compliance will have the fatal consequence of rendering the resolution void and ultra vires. In the eye of law, such re....
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....on 5th September, 1961 would be invalid and so also would the resolution passed at that meeting be invalid. Mr. C.C. Gandhi and the learned Advocate General, therefore, contended that there was no non-compliance with the requirements of Section 173. Non-compliance with the requirements of Section 173 was alleged on behalf of the petitioners in three respects. It was first alleged that the agreement of sale between the Company and Bharat Kala Bhandar Limited was not available for inspection to the shareholders and the time and place where the said agreement could be inspected was not specified in the explanatory statement. This contention was based on sub-section (3) of Section 173. But that sub-section applies only where the item of business consists of according of approval to any document by the meeting. In the present case the item of business before the meeting of the Company held on 5th September, 1961 was not according of approval by the meeting to the agreement of sale between the Company and Bharat Kala Bhandar Limited. The item of business was whether the undertaking of the Company should be sold to Bharat Kala Bhandar Limited for the price of Rs. 11,40,000/- on certain te....
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....ter of his proprietary rights as a shareholder. It is in the light of these principles that we have to consider the facts in this case with reference to Section 397. 19. The main plank of the appellants case to prove oppression is the agreement of July 27, 1954 between himself and Patnaik and Loganathan. At that time he was not a member of the Company. It is not disputed that the Company was not a party to that agreement and is thus strictly speaking not bound by its terms. But even apart from this strict legal aspect of the matter, let us see what exactly the agreement provides. At that time Patnaik and Loganathan groups held shares of the value of Rs 21 lakhs in the Company, and the main provision of the agreement is that the share capital would be increased and the appellant would be given shares of the face value of Rs 10,50,000 so that his holding should be equal to the holdings of the other two groups. It also provides that the three groups would have an equal number of representatives on the Board of Directors and the appellant would be its Chairman. Other provisions of the agreement refer to matters of detail to which it is unnecessary to refer. It will be seen, however, ....
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....ment that the three parties concerned in the agreement intended that their shareholdings should remain equal even later. But this intention cannot be said to bind the Company, muchless so when the Company was not bound strictly speaking even by the express terms of the agreement. So far as the Company is concerned, it was free to dispose of shares as the directors or the shareholders in general meeting considered proper without regard to this agreement. 21. Another element came into the picture in January 1957 when the Company was converted into a public limited company. It is obvious that a public limited company was even much less bound by the agreement of July 1954 as compared to the private company. We have already pointed out that even when the Company was private its articles of association were not amended to bring them into line with the agreement and that shows that the agreement was only between two groups of shareholders and Jain with respect to the state of affairs as it was at the time of the agreement. When the Company became a public limited company and it was decided to issue new shares of the value of Rs 39 lakhs the question of allotment of these shares arose. B....
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....des that "where at any time subsequent to the first allotment of shares in a company, it is proposed to increase the subscribed capital of the company, by the issue of new shares, then, subject to any direction to the contrary which may be given by the company in general meeting and subject only to those directions, such new shares shall be offered to the persons who at the time of the offer are holders of equity shares of the company, in proportion as nearly as circumstances admit, to the capital paid up on those shares at that time". Further sub-section (3) of Section 81 provides that the section shall not apply to a private company. Thus Section 81 specifically applies to public companies only and comes into play when subscribed capital (as distinct from authorised capital) has to be increased. Therefore when the question of actually issuing new shares arose after the sanction of the Controller, Regulation 42 was no longer in force as it had been repealed, and action had to be taken in accordance with Section 81 of the Act. Section 81 does not require that direction to the contrary must be given by the resolution sanctioning the increase of share capital as under Regulation 42 o....
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....esolution which they did on March 29, 1958 was oppressive to the minority shareholders. The matter would have been different if the seven persons to whom shares were eventually allotted in July 1958 were benamidars or stooges of the Patnaik or Loganathan group, for in that case it may be said that these two groups forming the majority in the general meeting had acted fraudulently and unfairly by depriving the appellant of what he would have got under Section 81. But there can be no doubt that the seven persons to whom the shares were eventually allotted are respectable persons of independent means. There is nothing to show that they were stooges or benamindars of the Patnaik and Loganathan groups. The action of the majority shareholders in allotting the new shares to outsiders and not to the existing shareholders cannot therefore in the circumstances be said to be oppressive of the appellant and his group." 46. The Learned Counsel for the Appellant, adverts to the decision of the Hon'ble High Court of Bombay in Centron Industrial Alliance Ltd. vs Pravin Kantilal Vakil & Anr. reported in 1985(57) Comp. cases 12 Bom wherein at paragraph 4, 24, 25 it is observed as under:- 4. "In....
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....y statement which would show either that there are any alternative proposals more beneficial to the company, or that there is any possibility of renegotiation, with M/s. Brooke Bond India Ltd. Quite clearly, the purpose of requisitioning the meeting of the shareholders is to get rid of the company petition which is pending before this court for considering the scheme of amalgamation with M/s. Brooke Bond India Ltd. 24. Lastly, learned counsel appearing for the opponents and for the secured creditors have urged that the requisitioned meeting has been called to consider alternative schemes. Even if I accept this submission, it is clear from the requisition that no alternative schemes are being put before the shareholders at the requisitioned meeting. The resolutions which are proposed to be moved themselves do not refer to any specific alternative scheme. In the explanatory statement annexed to the requisition by the requisitionists, there is no reference to any specific alternative proposal. The explanation is confined mainly to pointing out in very vague and general terms why, according to the requisitionists, the Brooke Bond Scheme should not be approved. The requisitionists hav....
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....thetics and Chemicals Ltd., [1971] 41 Comp Cas 377 (Bom). The explanatory statement which is required to be annexed under s. 173 is for the purpose of ensuring that all facts which have a bearing on the question on which the shareholders have to form their judgment are brought to their notice. If this requirement is not complied with and all relevant facts in the present case, and the alternative schemes are not put before the shareholders fairly, then the resolutions will become bad in law. Calling such requisitioned meeting, assuming that the requisitioned meeting is to consider alternative schemes, will, in any case, be bad in law. 25. To sum up, the requisitioned meeting which is being called is not to consider matters which affect the company's management or which affect only the company and its members. In view of the several features of the meeting requisitioned in the present case, which distinguished it from ordinary requisitioned meetings, this is a fit case where shareholders can be prevented from holding the requisitioned meeting." 47. The Learned Counsel for the Appellant, cites the decision of the Hon'ble Supreme Court in Dale and Carrington Invt. (P) Ltd. and ....
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....calling a meeting of the Board of Directors in terms of Article 36. No copy of the notice intimating Suresh Babu about the meeting of the Board of Directors and asking him to attend the same, has been placed on record to show that Suresh Babu was informed about holding of the meeting in question Here reference is required to be made to certain other Articles of the company which are relevant for the controversy. Article 8 provides that shares of the company shall be under the control of the Directors who may allot the same to such applicants as they think desirable of being admitted to membership of the company. Article 10 provides that allotment of shares "shall exclusively be vested in the Board of Directors, who may in their absolute discretion allot such number of shares as they think proper..." Article 38 requires that the Directors present at the Board Meeting shall write their names and sign in a book specially kept for the purpose. Article 4 (iii) prohibits any invitation to the public to subscribe for any shares or debentures of the company. The above provisions of the Articles of Association show that the Board of Directors have an absolute discretion in the matter of a....
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....tual position. Article 38 mandated that a book should be maintained to record presence of Directors at meetings of the Board of Directors. If a book for recording signatures of Directors attending meetings of the Board of Directors was not maintained, it was in clear violation of Article 38 of the Articles of Association of the company. The Company Law Board without going into these relevant aspects, proceeded on an assumption that a meeting of the Board of Directors did take place on 24th October, 1994. This assumption of the Company Law Board is clearly without any basis. (b) When no meeting of the Board of Directors of the company was held on 24th October, 1994, the question of validity of the meeting does not arise. On the relevant date Suresh Babu was the only other Director of the company. He denies having attended any meeting of the Board of Directors of the company. There is nothing to rebut this stand of Suresh Babu. In his absence no valid meeting of the Board of Directors could be held. (c) For considering this point let us assume that a meeting of the Board of Directors of the company did take place as alleged by Ramanujam. First question that arises is whether the ....
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....ecifying the number of shares to which each shareholder was entitled to. The notice further said, in case the offer was not accepted within 16 days from the date on which it was made, it was to be deemed to have been declined by the concerned shareholder. The Holding Company held 18990 shares and it was entitled to 9495 rights shares. The Holding Company could not avail its right to exercise the option for purchase of rights shares offered to it. As a result the whole of the Rights Issue consisting of 16000 shares was allotted to the Indian shareholders. The Holding Company filed a petition under Sections 397 and 398 of the Companies Act, 1956 in the High Court. The Single Judge held in favour of the Holding Company that it had suffered a loss in view of the fact that the market value of the rights share was Rs. 190/- whereas the shares were allotted at par i.e. at Rs. 100/-. The grievance of the Holding Company was that on account of postal delays it failed to receive the notice containing the offer of rights shares in time, and therefore, it could not exercise its option to buy the share. On appeal the Division Bench held that the affairs of Needle Industries India Ltd. were bein....
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....e court for an order under this section, provided such members have a right so to apply in virtue of Section 399. (2) If, on any application under Sub-section (1), the court is of opinion-- (a) that the company's affairs are being conducted in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up; the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit." 15. It gives a right to members of a company who comply with the conditions of Section 399 to apply to the court for relief under Section 402 of the Act or such other reliefs as may be suitable in the circumstances of the case, if the affairs of a company are being conducted in a manner oppressive to any member or members including any one or more of those applying. The court then has power to make such orders under Section 397 read with Section 402 as it thinks fit, if it comes to the conclusion that the affairs of the company are being ....
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....t for the making of a winding up order . . . but in which the ' alternative remedy ' provided by Section 210 by way of an appropriate order might well be open to the minority shareholders with a view to bringing to an end the oppressive conduct of the majority. (5) The power conferred on the court to grant a remedy in an appropriate case appears to envisage a reasonably wide discretion vested in the court in relation to the order sought by a complainer as the appropriate equitable alternative to a winding-up order." 17. Meyer's case was between a parent company and a subsidiary company and it was held that : " (1) when a subsidiary company is formed with an independent minority of shareholders, the parent company must, if engaged in the same class of business, conduct the affairs of the subsidiary, even though these are in a sense its own, in such a way as to deal fairly with the subsidiary ; (2) that, if the parent company deliberately pursues a course calculated to destroy its subsidiary, with resulting loss to the minority shareholders, this may amount to oppression within the meaning of Section 210 to ; (3) that the conduct of a majority shareholder may amount t....
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....d of appointment of the board of directors and managing director of the company has expired by efflux of time and an election to a new board of directors and managing director became necessary. 11. Nevertheless, we feel that we are bound to consider the correctness of the judgment challenged in this appeal. The company court, in its order, has extracted in full the notice issued by the chairman appointed by the company court and we do not want to repeat it in this judgment. The purpose for which the meeting is held is clearly stated in the notice. The purpose is for conducting an election to the board of directors and managing director of the company. There is no difficulty to hold that the notice was issued following the provisions contained in the articles of association and no argument was advanced by counsel for the appellant stating that the notice is defective on account of the fact that it has not complied with the provisions contained in the articles of association. 12. The gravamen of the charge against the notice is that it has not complied with the provisions contained in section 173 of the Companies Act. The articles of association provide for the nature of the noti....
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....eeting and make up their mind whether to go to and attend and vote at the meeting or abstain from voting (see Pearce, Duff and Co. Ltd., In re, [1960] 3 All ER 222 (Ch D)). We feel that the requirement of section 173 of the Companies Act is that the members of the company should be informed truly of the nature of business to be transacted at the general meeting. Too rigid an interpretation would not advance the object of the provision which will only hamper the conduct of business. 16. In this case, it has to be noted that the meeting was called by the chairman appointed by the company court and all proceedings were subjected to scrutiny and directions of the company court. No one can attribute any mala fide motive on the part of the chairman to cover up or to mislead the members as to the object and purpose of the meeting. In our view, the learned single judge has rightly rejected the contention of the appellant based on section 173(2) of the Companies Act. 17. Counsel for the appellant submitted before us that the provision contained in section 257(1A) of the Companies Act has not been complied with. It is contended that section 257(1A) of the Companies Act mandates the compa....
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....We see no error in this interpretation of the provision. In view of this, we see no merit in the second ground urged by counsel for the appellant." 50. The Learned Counsel for the Appellant, relies on the decision of the Hon'ble High Court of Calcutta in Shalagram Jhajharia Vs. National Co., Ltd., & Others reported in (1965) 35 Comp Cas 706, wherein at paragraphs 7, 8, 38, 39, 47 & 69, it is observed as under: 7. "None of the Directors has any interest in the aforesaid resolution save to the extent that they are members and directors of the company. 8. Resolution No. 8:- Since the production of wide loom cloth of the company has been increasing day by day, the Directors negotiated and finalised an arrangement with Messrs. Delca International Corporation of Delwara, U.S.A. having their principal place of business at New York on the terms and conditions set out in the resolution. The territories of operation are North America and South America. A Director of Messrs. B.M.T. Commodity Corporation is also a Director of this concern. Further an American who has experience for quite a long number of years in the trade of jute products is also a Director of Delca International Corpora....
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....mpany is a manufacturer of jute goods and products to wit jute backing cloth and burlap over the width of 100″ as well as below that figure. The material seems to be used mostly for the manufacture of carpet and had a large market in U.S.A. and other parts of the two American Continents. The defendants 2 to 5 are its directors while the plaintiff is a holder of ordinary shares numbering seventy five whose complaint in the suit is that the directors have violated mandatory provisions in the Indian Companies Act of 1960 and purported to appoint sole selling agents of the company's products disregarding provisions in the Act as to informing the shareholders of the arrangements entered into and trying to get the same approved at a general meeting in violation of the law. 69. The important change to note is that the appointment of a sole selling agent need not be brought before the company within six months as under the Act of 1956. The other important deviation is that there is no express provisions as to what is to happen if at the general meeting at which the matter is brought up before the company the share-holders do not expressly disapprove of the appointment. In my op....
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.... and Anr. Vs. Muir Mills Co., Ltd., and Ors. reported in (1952) 22 Comp Cas 248 wherein at paragraph, 14, 22-26 & 39, it is observed as under: 14. "Notice is hereby given that an Extraordinary General Meeting of the abovenamed Company will be held at the registered office of the Company, Kanpur, on Monday, the 20th day of, October, 1947, at 3 P.M. to consider and, if thought fit, to pass, with or without modification, the following Resolutions:- 1. (As a Special Resolution)- that the Regulations contained in the document submitted to this Meeting, and for the purpose of identification subscribed by the Chairman thereof, be and the same are hereby approved and that such Regulations be and they are hereby adopted as the Articles of Association of the Company in substitution for and to the exclusion of all existing Articles thereof. 2. (As a Special Resolution)- that Indian Textile Syndicate Ltd., be appointed Managing Agents of the Company for the period, at the remuneration, and on the terms contained in the draft of an agreement, providing for the same, submitted to this Meeting and signed in the margin by the Chairman of the Meeting by way of identification, which said agree....
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....r suing on behalf of himself and other shareholders for a declaration that the resolutions Were inoperative on the ground of insufficiency of notice and for injunction restraining the Directors from acting upon them, it was held that the notice should have given sufficiently full and frank disclosure of the facts and the effect of the resolutions and the agreement, and consequently the resolutions were inoperative and not binding upon the Company. The learned Judge observed that if the Directors issued a Circular in which they referred to certain alterations and said that the only alterations were with regard to clause "X" of the Articles of Association, whereas there were equally important alterations in clause "Y", it could not be said that the shareholders had sufficient notice of the alterations in clause "Y". 24. In the case before us, the documents referred to in the clauses of the notice which we have set out above, were not sent to the shareholders. Mr. Mitter's contention was that that might be so, but the shareholders had notice that the new Regulations were lying at the registered office of the company; so it was not necessary to send the documents to them. Accordi....
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....stered office and give the shareholders notice of that fact. In a case like this we entirely agree with Mr. Palmer that printed copies of the proposed new Articles should be sent with the notice. In this case that was not done, and therefore, we take the view that the notice did not disclose fully and frankly the facts upon which the shareholders were asked to vote. 26. It is quite possible to argue in this case that the notice in question was a 'tricky' notice, as was said in Kaye v. Croydon Tramways Co. (4) [(1898) 1 Ch. 358], and in Baillie's case (p. 515) (2) [(1915) 1 Ch. 503]. In this case there is no dispute that there was a partnership between defendant No. 5 and the two Nepalese gentlemen. There is no dispute further that they acquired a very large number of shares in the defendant Company. There is no dispute that the partners have acquired and now control the majority of the shares in the two Companies, namely, the Indian Textile Syndicate Ltd., and the Cotton Textile Corporation Ltd., one of which companies has been appointed the Selling Agent of the defendant company. It is quite clear therefore that the three partners through the said two Companies have acquired....
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....s "individual shareholder's right". Such individual shareholder's right pressed into service in this case by the transferors have been dealt with by the learned single judge in paragraphs 28, 29 and 30 of the judgment. They can be formulated thus: The questions that were considered in this connection are: Whether the notice and explanatory statement of the extraordinary general meeting are legal and valid, whether the resolution as passed was materially different from the resolution as proposed in the notice. The learned single judge, after considering the various aspects of these questions and also the relevant provisions contained in sections 171, 172, 173(2) and 189 has found that the notice and explanatory statement of the extraordinary general meeting were legal and valid. We shall in this connection reproduce the findings as regards question No. 1. "... As such, there was no suppression of any material fact. The personal concern or interest of the directors in the special resolution suggested by learned counsel, for the petitioner is far-fetched. Sub-section (2) of section' 173 only mentions 'the nature of the concern or interest, if any' of every director in the co....
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....n of Learned Sr. Counsel for R1, 11, 13 and 15, that by means of an order dated 22.10.2019, the 'Principal Bench of NCLT, New Delhi' had passed an order dated 22.10.2019, whereby and where under it was mentioned that 'consequent to order no. PFA/7/2016 dated 21.10.2019 and letter no A-12023/1/2019-Ad-IV-MCA dated 16.10.2019. The NCLT Bengaluru Bench is hereby reconstituted in the manner that Bench at Bengaluru will be that of Shri Rajeswara Rao Vittanalla, Member (Judicial) and further that the Constitution of the Bench was made as per Section 419(3) of the Companies Act, 2013. As such, the order dated 22.10.2019 of the Principal Bench of 'National Company Law Tribunal', New Delhi was in modification of even number dated 25.07.2019 for 23.10.2019 to 25.10.2019 only'. Added further, the order dated 22.10.2019 had the 'Approval' of the President of the 'National Company Law Tribunal', New Delhi. 54. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, takes an emphatic stand, that the Appellant, had failed to point out any provision of Law, which prohibits a matter i.e. part heard by the Division Bench of a Court from being heard further by the single Bench of the said cour....
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.... v. Syndicate of the Mysore University reported in MANU/KA/0244/1994 wherein at paragraphs 19 to 22, it is observed as under:- 19. "It is true, that jurisdiction cannot be conferred by consent, of the parties where it does not otherwise inhere in the authority concerned; but it is equally true that the High Court can while exercising its extraordinary and discretionary powers under Article 226 of the Constitution decline to interfere with an order of a subordinate authority if it is satisfied that an objection relating to a defect of procedure or jurisdiction which would have been and ought to have been raised at the earliest opportunity was not so raised by the party complaining before it. The Rule that acquiescence of the party belatedly making a grievance about the jurisdiction of the subordinate authority disentitles him to invoke the Writ jurisdiction of the High Court, does not rest on the foundation that acquiescence, confers jurisdiction but on the rationale that the High Court will be justified in refusing to exercise its jurisdiction in favour of a person who has either by reason of lack of diligence or by design remained on the fence, allowed the authority to pass an o....
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....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 to a Writ of Certiorari. It is fruitful to reproduce the following passage from the Book:- "The right to certiorari or prohibition may be lost by acquiescence of implied waiver. Acquiescence means participation in proceedings without taking objection to the jurisdiction of the tribunal once the facts giving ground for raising the objection are fully known. It may take the form of failing to object to the statutory qualification of a member of the tribunal, or (exceptionally) appealing to a higher tribunal against the decision of the tribunal of first instance without raising the question of jurisdiction." 60. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, points out that, in a 'petition' filed u/s 241of the Companies Act, 2013 the 'Petitioner', must satisfy, not just qualitative, qualifications, mentioned in Section 244 of the said Act, 2013, but also the qualitative aspect of the 'shareholding' viz., the mode, method and manner in which the petitioner had acquired shares for the p....
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....hareholders had no complaint. The qualitative issue never arose. As a matter of fact it could not have arisen at all in that case. The Petitioners therein were employees of Shaw Wallace and the Employees Union had complained to the Government about the mismanagement in the company. The government ordered an inspection and on the basis of the inspection report, while the employee shareholders filed a petition under Section 387/398, the government itself filed a petition under Section 408. Since the Petitioners therein were employees of the company itself, they had vital interest in ensuring better management in the company. Further, the petition was essentially a one under Section 398 and a large number of instances in the affairs of the company had been alleged as mismanagement. In so far as the reliance of Shri Sarkar on Killick Nixon case is concerned, it is to be noted that in that case, the transferor of the shares whose name continued in the register of members gave a power of attorney to the transferees to file a petition under Sections 397/398. A challenge was taken that the transferees, not being the members, had no personal interest in the affairs of the company. On this c....
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....ification. I would have given some thought, if the Petitioners had gathered or collected existing members to meet the qualification. However in the present case, 109 members were created, that too, by a single member, who himself had acquired shares only a few days before he transferred the shares to the consenters. Thus it is quite obvious that a single shareholder became 109 shareholders. As a court of equity, this Board cannot shut its eyes when a person creates 100 members only to qualify to file a petition under Sections 397/98. While, as a proposition of law, I do not want to hold that there should be personal interest for the Petitioners, yet, in the present case, the consenters do not have real interests in the affairs of the company as shareholders, but acquired shares only to lend their signatures to enable filing of this petition. Shri Datar relevantly referred to the judgment of the Supreme Court in Gwalior Sugar (MANU/SC/0927/2004 : 2005 1 SCC 172) case, wherein regarding Section 399, the Supreme Court has observed "The object of prescribing a qualifying percentage of shares in the Petitioners and their supporters to file petitions under Sections 397 and 398 is clearly....
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.... petitioners have bought shares of the respondent company from the shareholders just before lodging the petition. The petitioners have purchased the shares prior to filing of the petition but not lodged the said shares for registration raises the presumption that they were purchased merely to meet the threshold of entitlement for filing the petition. The respondents have submitted that the petitioners have approached the Board with unclean hands and their shareholdings are tainted calling for rejection of the petition. Reliance in this respect has been placed on M.C. Duraiswami v. Sakthi Sugars Ltd. [MANU/TN/0529/1978 : [19800 50 Comp. Cas. 154, (Mad)] and an unreported judgment of Principal Bench, CLB in C.P. No. 57/2004 vide order dated 19.10.2009 in Shri Jodh Raj Laddha & Ors. v. Birla Corporation Ltd. & Ors., wherein the proposition has been laid down that quantitative qualification in Section 399 is not the only criteria for determining maintainability but qualitative aspect of the shares should also be considered. Relying thereon, the respondents have submitted that the mode and manner of obtaining consent from other shareholders that predates the filing of the present petiti....
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.... withdrew the said petition on 20.08.2018 and projected CP No. 486/18 before the Tribunal, in respect of purported acts of 'oppression and mismanagement' that said to have taken place, on the relevant dates, of 'cause of action' mentioned supra. 64. Proceeding further, the learned Counsel for Respondents No. 1, 11, 13 and 15, comes out with a plea, that the 'Appellant' had no real interest in the affairs of the 1st Respondent / Company and he had 'acquired shareholding' in the Company, for the main purpose of maintaining his frivolous petition, that too, in respect of the events that took place before the Appellant having 10% shareholding. Although, the Appellant had 10% shares, as on date of filing of his petition, before the Company Law Board, Tribunal he had not met the qualitative criteria to sustain his petition, as he had not possessed the requisite shareholding, at the 'relevant point of time', when the alleged 'cause of action' arose. Furthermore, meeting a qualitative criterion is an established fact in equitable proceedings, under Section 397of the Companies Act, 1956 and Section 241 of the Act of 2013, the Appellant's petition, was not maintainable, as held, in the deci....
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....tain of justice with tainted hands is not entitled to any relief, interim or final. (vi) The Court must ensure that its process is not abused and in order to prevent abuse of the process the court, it would be justified even in insisting on furnishing of security and in cases of serious abuse, the Court would be duty bound to impose heavy costs. (vii) Wherever a public interest is invoked, the Court must examine the petition carefully to ensure that there is genuine public interest involved. The stream of justice should not be allowed to be polluted by unscrupulous litigants. (viii) The Court, especially the Supreme Court, has to maintain strictest vigilance over the abuse of the process of court and ordinarily meddlesome bystanders should not be granted "visa". Many societal pollutants create new problems of unredressed grievances and the Court should endure to take cases where the justice of the lis well-justifies it. [Refer: Dalip Singh v. State of U.P. and Ors. MANU/SC/1886/2009 : (2010) 2 SCC 114; Amar Singh v. Union of India and Ors. MANU/SC/0596/2011 : (2011) 7 SCC 69 and State of Uttaranchal v. Balwant Singh Chaufal and Ors. MANU/SC/0050/2010 : (2010) 3 SCC 402]. ....
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....clean breast cannot hold a writ of the court with soiled hands. Suppression or concealment of material facts is impermissible to a litigant or even as a technique of advocacy. In such cases, the Court is duty bound to discharge rule nisi and such applicant is required to be dealt with for contempt of court for abusing the process of the court. K.D. Sharma v. Steel Authority of India Ltd. and Ors. [MANU/SC/3371/2008: (2008) 12 SCC 481]. 36. Another settled canon of administration of justice is that no litigant should be permitted to misuse the judicial process by filing frivolous petitions. No litigant has a right to unlimited drought upon the court time and public money in order to get his affairs settled in the manner as he wishes. Easy access to justice should not be used as a licence to file misconceived and frivolous petitions. (Buddhi Kota Subbarao (Dr.) v. K. Parasaran, MANU/SC/0678/1996: (1996) 5 SCC 530)." That apart, the Learned Counsel for R1, 11, 13, and 15, refers to the decision, in Srikanta Datta Narasimharaja Wadiyar V. Sri Venkateswara Real Estate Enterprises (Pvt.) Ltd. and Ors., reported in [1991] 72 Comp Cas 211(Kar), wherein, at paragraph 18, 20, it is mentio....
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....tigations in other courts". Moreover, on behalf of R1, 11, 13 & 15, a reference, is made to the decision in K.R.S. Mani V. Anugraha Jewellers Ltd. reported in [2005]126 Comp Cas 878(Mad), wherein, the Hon'ble High Court of Madras at paragraphs 14 & 15 has observed he following: 14. "Further, it is seen that the appellants/petitioners have not approached the Company Law Board with clean hands. Even though in their company petition under the column 'matters not previously filed or pending with any other courts' a reference is made that Original Suit is filed in O.S. No. 945 of 1996 which is concerned only proceedings of the Annual General Meeting of the 1st respondent Company held on 4-9-1996 and O.S. No. 788 of 1996 on the file of the Sub Court, Coimbatore, which concerns only the issue as to the 2nd respondent holding Office as Managing Director of the 1st respondent. However, the relief claimed in the said suit is almost identical with the relief claimed in the Company Petition. It is only when a preliminary objection is raised about the maintainability of the company petition, the said suit seems to have been withdrawn later on. Merely because, the appellants/petitione....
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....lant's 'petition', not on the basis of his conduct, but also the 'qualitative analysis of his shareholding' and came to the right conclusion, that the Appellant, lacked 'Locus standi', at the 'relevant point of time', and that the 'petition' was 'not maintainable', on the aforesaid grounds. 68. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, contends that the interim order, of the 'Tribunal', in IA 360 of 2018 that the 'Appellant' had 'requisite shareholding', to maintain his 'petition', the same, was assailed, in Company Appeal (AT)/144/2019, and by an order dated 02.08.2019, this Appellate Tribunal, 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'. 69. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, brings to the notice of this Tribunal, that while passing the final order, on 27.11.2019 in CP No. 486/2018, the 'Tribunal' was required to reconsider the 'issue of maintainability', because of the directions issued by the 'Appellate Tribunal' and the 'Tribunal', un....
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....the said explanation mentions that, "it is planned to reward the existing shareholders by way of issue of bonus shares in such ratio as the board of directors may deem fit". Therefore, according to learned counsel it is evident from the explanatory statement that the existing shareholders as on September 1, 1999, were to be rewarded by the issue of bonus shares, and the petitioner was an existing shareholder on that date. So far as this submission is concerned it has to be stated that the explanatory statement is a part of the notice and cannot be read de hors the same. While it is necessary that an explanatory statement should be annexed to the notice in respect of any item of business, which is special, it is not necessary to include in it the text of the resolution or the draft of the resolution to be proposed at the meeting. Its purpose is that the members should be informed of the nature of the business to be transacted at the general meeting. As held by the Calcutta High Court in the case of East India Commercial Co. Private Ltd. v. Raymon Engineering Works Ltd., MANU/WB/0055/1966: AIR 1966 Cal 232, it is not the function of an explanatory statement to travel beyond the scope....
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....e necessary". 72. According to the Respondents No. 1, 11, 13 and 15, the Appellant was well aware that as on 10.11.2015, being the issuance of 'Postal Ballot Notice', the 1st Respondent / Company, was still in the 'process of collating Bids from the 'prospective Developers', for the joint development of its property. Therefore, the said information could at any event not having, been disclosed to the shareholders in the aforesaid notice or explanatory statement. 73. That apart, from the facts and documents available on record, according to the Learned Counsel for the Respondents No. 1, 11, 13 and 15 that as of the date of issuance of Postal Ballot Notice, there was no intention for R2 to R7, to sell their shareholding in the 1st Respondent / Company, much less to R12, 13 and 15, who are total strangers to the 1st Respondent /Company at the said 'point of time'. Therefore, there arose no question of disclosing such information in the 'Postal Ballot Notice', of 10.11.2015. In effect, there was no infirmity in the contents of Postal Ballot Notice nor was any material fact supressed by the 1st Respondent / Company by issuing notice. 74. According to the Respondents No. 1, 11, 13 and....
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....y Cases 830-31 that "a resolution passed by the directors may be perfectly legal and yet oppressive, and conversely a resolution which is in contravention of the law may be in the interests of the shareholders and the company". On this question, Lord President Cooper observed in Elder v. Elder [1952] S.C. 49: The decisions indicate that conduct which is technically legal and correct may nevertheless be such as to justify the application of the 'just and equitable' jurisdiction, and, conversely, that conduct involving illegality and contravention of the Act may not suffice to warrant the remedy of winding up, especially where alternative remedies are available. Where the 'just and equitable' jurisdiction has been applied in cases of this type, the circumstances have always, I think, been such as to warrant the inference that there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy. Neither the judgment of Bhagwati J. nor the observations in Elder are c....
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....Nahar v. Nilima Mandal and Ors. reported in 2008 (17) SCC 491, wherein at paragraphs 8 to 10, it is observed as under: 8. "The High Court, in this case, in its obvious zeal to cut delay and hardship that may ensue by relegating the plaintiffs to one more round of litigation, has rendered a judgment which violates several fundamental rules of civil procedure. The rules breached are: (i) No amount of evidence can be looked into, upon a plea which was never put forward in the pleadings. A question which did arise from the pleadings and which was not the subject matter of an issue, cannot be decided by the court. (ii) A Court cannot make out a case not pleaded. The court should confine its decision to the question raised in pleadings. Nor can it grant a relief which is not claimed and which does not flow from the facts and the cause of action alleged in the plaint. (iii) A factual issue cannot be raised or considered for the first time in a second appeal. Civil Procedure Code is an elaborate codification of the principles of natural justice to be applied to civil litigation. The provisions are so elaborate that many a time, fulfilment of the procedural requirements of the Cod....
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.... Learned Counsel for the R1, 11, 13 & 15, refers to the decision, in Sangramsingh P. Gaekwad v. Shantadevi P. Gaekwad reported in 2005 11 SCC 314, wherein at paragraph 185, it is observed as under: 185. "The jurisdiction of the Court to grant appropriate relief under Section 397 of the Companies Act indisputably is of wide amplitude. It is also beyond any controversy that the court while exercising its discretion is not bound by the terms contained in Section 402 of the Companies Act if in a particular fact situation a further relief or reliefs, as the court may seem fit and proper, is warranted. (See Bennet Coleman & Co. v. Union of India and Ors. MANU/MH/0054/1977 and Syed Mahomed Ali v. R. Sundaramurthy and Ors., MANU/TN/0089/1958 : (1958) 2 MLJ 259." Furthermore, in the decision, Akella Lalitha v. Konda Hanumantha Rao and Anr. reported in 2022 SCC OnLine SC 928, wherein at paragraph 17, it is observed as under: 17. "In the case of Trojan & Co. Ltd. v. Rm.N.N. Nagappa Chettiar, this Court considered the issue as to whether relief not asked for by a party could be granted and that too without having proper pleadings. The Court held as under:- "It is well settled that the d....
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....rned Counsel for Respondent No. 1, 11, 13 & 15, contends that the matters relating to 'transfer of shares' and validity thereof are beyond ambit of consideration of the 'Tribunal', in the teeth of ratio, prescribed, by the Hon'ble Supreme Court of India in the matter of IFB Agro Industries Limited V. SICGIL India Limited and Ors. reported in AIR 2023 SC 247, wherein at paragraph 37, 38, it is observed as under: 37. The position with respect to the SEBI (SAST) Regulations is similar to that of the SEBI (PIT) Regulations. Regulation 7 of Chapter III obligates the acquirer of more than 5% shares in a company to disclose the same to the company and the stock exchange. This is the prohibition, and non-disclosure is punitive. Chapter V deals with investigation and action by the Board, which includes the power of the Board to appoint an investigating officer (Regulation 38), the issuance of show-cause notice to the acquirer (Regulation 39), the obligation of the investigating authority to submit a report at the earliest (Regulation 41), the duty to supply the report to the acquirer and give him an opportunity of hearing before passing penal orders (Regulation 42) and lastly, the powers ....
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....ase was also duly approved by 'SEBI'. 82. The Learned Counsel for Respondent No. 1, 11, 13 & 15, points out that as seen from the 'Annual Report', of the 1st Respondent / Company, for the Financial Year 202-23, the 1st Respondent / Company, is engaged in the 'Business of products', solutions and Electronic Contract Manufacturing Service, and that even as on 31.03.2023, had 'Annual Turnover, of Rs. 3,334.81 Crores, from the same, out of which 'income' from 'real estate', comprises only Rs.534.20 Crores. Therefore, it is the plea of Respondent No. 1, 11, 13 & 15, that the 1st Respondent / Company, owns, another 'property' at Electronic City, Bengaluru, which the Appellant, had not disclosed, before this 'Tribunal' and as such, the Appellant's, contention, that the said 'Joint Development Property', comprises of the entire 'Assets' and substratum, of the 1st Respondent / Company, is a misleading and baseless one. 83. The Learned Counsel for Respondent No. 1, 11, 13 & 15, projects an argument that the Joint Development transaction complained of by the Appellant, has resulted in construction / development of a commercial building, of commercial complex, of which the 1st Respondent / C....
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....des and conduct of the Appellant (vide paragraph 7 to 9 of the said order) and that the said observations remained unchallenged by the 'Appellant'. Moreover, the TP No. 248/2017 was also not withdrawn by Mr. Kumar Dinesh Seth at any point of time, and ultimately was dismissed along with the Appellants CP No. 486/2018 through a common order dated 27.11.2019 of the 'Tribunal'. Therefore, the stand of the Respondent No. 1, 11, 13 & 15, is that the 'Tribunal' is entitled to place reliance on the earlier order passed in COP No. 20/2016, including the observations made therein, pertaining to the Appellant's, 'Bonafides'. 88. The Learned Counsel for the Respondent No. 1, 11, 13 & 15, points out that along with Mr. Kumar Dinesh Seth, the 'Appellant' had filed Original Suit No. 10303/ 2015 praying for an injunction 'reliefs' against the 'Respondents', in regard to the Joint Development Transaction, and upon failing to obtain any Ex-parte an interim order against the respondent, latter, 'suit' was withdraw, without seeking any liberty. 89. Apart from the above, the Appellant filed a suit in OS. No. 25572/2016, before the Civil Court, Mayo Hall Unit, Bangalore, praying for an Ex-parte inter....
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.... Bench. 95. Conversely, it is the submission of the Learned Counsel for the R1, 11, 13 and 15, that by means of an order dated 22.10.2019, passed by the Tribunal, (in terms of Section 419(3) of the Act, 2013), the Hon'ble Member (Judicial) of the Tribunal, was entitled to hear the matter, sitting singly, on the relevant date and this is evident from the order of the 'NCLT', New Delhi dated 22.10.2019(file No. 10/03/2019-NCLT and in short, the 'NCLT', Bengaluru Bench, was 'Reconstituted' as 'Bench at NCLT, Bengaluru' Shri Rajeswara Rao Vittanalla, Member (Judicial) and this constitution of the Bench as per Section 419(3) of the Companies Act, 2013 and this was in modification of order of even no. dated 25.07.2019 for 23.10.2019 to 25.10.2019. 96. The contention of the Learned Counsel for the R1, 11, 13 and 15, is that the 'Appellant', has failed to point out, 'any provision of Law' which bars a matter i.e. part-heard by the Division Bench of a 'Tribunal', from being heard further by the Hon'ble 'Single Bench' of the said 'Tribunal'. 97. It is represented on behalf of the Learned Counsel for the R1, 11, 13 and 15 that the Appellant had not objected to the Hon'ble Member (Judicial)....
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....ed Counsel for the Appellant cites the order of this 'Tribunal', dated 24.08.2020, in Indison Agro Foods Ltd. Vs. Registrar and Ors., wherein it is observed as under:- "After hearing Mr. Abhijeet Sinha, Learned Counsel for the Appellant for a while, we find that the Appeal has turned infructuous in as much the matter, in terms of the impugned order, stood adjourned to 18.08.2020 and that date is over. We are informed by Learned Counsel representing the Appellant that the matter is now posted for 27th August, 2020 before a single bench of the National Company Law Tribunal, Indore Bench of Ahmadabad. He invites our attention to an order passed by Hon'ble Apex Court in writ petition No. 722/2019 dated 20.06.2019, 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 the technical member for disposal of the matter in hand in conformity with and compliance with a direction passed by the Hon'ble Apex Court in Writ Petition....
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....g the objection at the very outset; It would also be reasonable to assume that he did so, deliberately hoping that the final 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....
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....ecial order specify. 106. Also, in the second proviso it is mentioned that if at any stage of 'hearing' of any such case or matter, it appears to the Member', that the case or matter is of such nature / character, that it should be Heard, by a Bench consisting of two members, the case or matter may be transferred by the President, or as the case may be, referred to him for transfer to such Bench, as 'President', may deem fit. Hence, considering the importance of issues / controversies / disputes involved in a case, a 'single member', of the Tribunal, may 'transfer' or refer the matter to the President, for hearing by a Bench consisting of two Members or to such Bench as the President may deem fit. 107. It cannot be gainsaid that the 'Principal Bench' of Tribunal, shall be at New Delhi, whose powers, shall be exercised by 'Two Members' it shall be competent for the Members, authorised in this behalf to function as Bench consisting of a single Judicial Member, in respect of such class of cases, as 'President', may by 'general' or 'special order' specify. 108. To be noted, the term, 'Acquiescence' is nothing more than 'absolute' or 'Positive Waiver'. Further, it amounts to an 'aban....
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....udicial) of NCLT, Bengaluru Bench, sitting singly, in Hearing, the 'Part Heard', 'matter' on 25.10.2019, also that the 'Appellant' had 'willingly' participated in the proceedings, before the 'Tribunal' 'without any murmur', by his own conduct, the Appellant, is now 'estopped', from 'assailing the 'impugned order', and also tacitly took part in the proceedings, cannot 'Approbate' and 'Reprobate' because of the fact, he had acquiesced to the 'proceedings of 25.10.2019 and viewed in that prospective, this 'Tribunal' holds that the 'impugned order' dated 27.11.2019, in Company Petition No. 20/2016 (TP No. 248/2017) passed by the Hon'ble Member (Judicial) of NCLT, Bengaluru Bench, sitting singly, cannot be found fault, with because of the fact that Section 419(3) of the Companies Act, 2013 empowers, the 'Judicial Member', of the 'Tribunal' to 'Hear the case', based on the order dated 22.10.2019 of the NCLT, New Delhi, which had the 'Approval', of 'President of NCLT', New Delhi and hence, the impugned order dated 27.11.2019, passed by the 'Tribunal' is not a 'nonest', 'illegal' and 'void ab initio' one and the point, is so answered. 112. As regards the plea of the Appellant that the 'im....
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....r dated 02.08.2019, in Company Appeal (AT) 144 and 179 of 2018 wherein this Tribunal, had passed the following order wherein at paragraph 2 and 3, it is observed as under:- "2. Dr. U.K. Chaudhary, Ld. Sr. Counsel appearing on behalf of 1st Respondent submits that Respondent has 19.83% of total shareholding as on the date of filing of the petition and further submits that he has no objection if the Appeal is allowed to be withdrawn for immediate decision pending before the Tribunal. 3. In the facts and circumstances, we allow the Appellant to withdraw the 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". 117. Contending contra, it is the submission of the Learned Counsel for the R1, 11, 13 and 15, the 'Tribunal', uninfluenced of its earlier order dated 30.05.2019, had rightly considered the question of maintainability of the 'Appellant's petition', at the stage of Final Hearing, along with consideration of matters, touching upon the merits of the case, including the 'Appellant's conduct', and 'qualitative analysis', of his shareholding. Hence, th....
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....etition as per 'Law' and that the 'Tribunal' had erred in holding, that the 'shareholding', at the time of 'accrual of cause of action' will be 'determinative' of the 'maintainability of the petition' and consequently, had wrongly held that the Appellant at the relevant point of time, was having less than 10% 'shareholding', at the relevant point of time, could not have maintained the 'petition. 120. The Learned Counsel for the R1, 11, 13 and 15, takes a 'plea', that the 'purported cause of action', in preferring the 'petition', in respect of the allegation of oppression and mis-management before the 'Tribunal' arose on 19.02.2015 and later, on 10.11.2015, 22.12.2015 and on 01.12.2015, respectively in reality, the Appellant's 'shareholding' in the Company, on each of the aforesaid dates was below 10% and indeed, as on 19.02.2015 the Appellant 'did not possess any shareholding' in the Company. 121. A perusal of Annexure R1 (vide volume 1 of the 1st Respondent's paper Book vide Dy. No. 17435 dated 03.01.2020) in respect of the Appellant'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 a....
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....8.08.2016. (5) The Petitioner was continuously perusing his grievance before the Hon'ble Civil Court till he acquired requisite 10% share holdings in the Respondent No.1 Company and thereafter also continued to accumulate the shares in the open market. After completing the accumulation of 10% shareholding, the Petitioner Mr. Jitendra Virwani also approached erstwhile Hon'ble CLB in C.P.No.22/2016 under section 397 of the Companies Act, asking for the nullification of the Resolution dated 22.12.2015, and the Joint Development Agreement dated 01.01.2016, along with prayer for certain interim reliefs. It is pertinent to note that the Hon'ble CLB vide its order dated 29.03.2016 has refused to grant any interim reliefs. Further, it is pertinent to note that the Hon'ble High Court vide its detailed order dated 28.04.2016 was pleased vacate the order of status quo vide its detailed order dated 28.04.2016 with specific observation regarding the conduct of the Petitioner herein and Mr. Kumar Dinesh 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 ....
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....ribunal, that the Appellant's / Petitioner's petition, in CP No. 486/2018, on the file of National Company Law Tribunal, Bengaluru Bench, on the date of filing of the petition, (on 06.09.2018), is, perfectly, 'maintainable', but he is precluded, from adverting, to the 'events', which took place, 'before he possessed / acquired, 10% shareholding in the Company'. 126. According to the Learned Counsel for the Appellant, the 'Tribunal', had committed an error, in not considering that the Notice dated 10.11.2015 and the 'Special Resolution' dated 22.12.2015 as 'void', inoperative' and 'nonest' in the 'eye of Law'. 127. In this connection the Learned Counsel for the Appellant points out that the 'Genesis', of 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 the took place on 19.02.2015, and that the management, knew the 'sale' and 'disposal' of the entire undertaking 1st Respondent / 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 provis....
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....e' and void, and further it does not permit Application of mind, by the shareholders, whose Approval, is required. Indeed, the majority shareholders were 'devoid of any information'. Besides, this, the purported 'Explanatory Statement', does not disclose any material or relevant information and hence, the alleged notice, is an illegal and void one. Moreover, the purported Joint Development Agreement' was ever placed before the 'shareholders' and 'blanket approval' was sought. 130. According to the Appellant, the impugned 'Ballot notice' was not issued, or circulated, as per Rule 15, 20, 22 of the Companies (Management and administration) Rules, 2014. As a matter of fact, 'voting' via postal ballot was not conducted as per Rule 21, of the Companies (Management and Administration) Rules, 2014 which obligates that two scrutinisers should remain present during the time, when voting takes place. Rule 21, further stipulates that the votes shall be counted by two scrutinisers and Report 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, 1....
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....as per decision in Sajal Dutta V. Ruby General Hospital Ltd., reported in (2010) 194 Comp. Cas. 16 (CLB). 135. It is to be remembered that Section 102 of the Companies Act, 2013 (173 (8) of the 1956 Act.) is 'Mandatory', and not 'Directory'. Further, if a 'shareholder' was 'aware of facts, relating to Resolution', later on, he cannot complain of 'insufficiency' of notice, or irregularity. Such a shareholder if he is present, in a 'Meeting', must point out to the 'Chairman' of the 'Meeting', about such an irregularity, before, the Meeting', proceeds with the 'Agenda'. 136. The intention of Section 102 of the Companies Act, 2013, is to enable the 'shareholders', to take an Informed Decision, in respect of each 'item of business', to be transacted and in case, 'any Director', 'Manager' or Key Managerial personal is interested in any item, he ought not to participate in deliberation or in a 'decision process', when such item being considered in the 'Meeting'. It is just 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....
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....absence of any intimation, falling back upon 'assumptions' cannot hold water. Looking at from any angle, there is, no requirement on the part of Appellant, to assume things, in his own manner. Viewed in this background, there is no requirement, to part with information, in respect of the 'Postal Ballot Notice', of 10.11.2021. Resultantly, the non-disclosure of the contents of 'Postal Ballot Notice', cannot be termed as an 'irregularity' or any legal 'infirmity', as opined by this Tribunal. 141. It is relevantly pointed out by the Tribunal, 91.13% of the shareholder / 1st Respondent Company, being present, and 'voted for', had realised, the requirement for entering into a development, in regard to the Company's property with a view to enable the recurring cash flow, finally took an informed decision, which culminated, in passing a Resolution, dated 22.12.2015 benefitting the '1st Respondent / Company' and all its 'majority' and 'minority' shareholders. 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 1....
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....reputed Business House to be finalized after careful negotiation on all the terms and conditions and that such Arrangement may include development of the properties of the Company in any manner including, but not limited to, the Company acting as Joint Developer along with the Business House or lease or sell, or dispose off, the whole or substantially whole or part of the undertakings of the Company, wherever, along with the appurtenants thereto. RESOLVED FURTHER THAT in terms of Sections 180 and 110 of the Companies Act, 2013 read with the applicable Rules thereto, approval of the Shareholders be sought for the above proposal by way of Special Resolution through Postal Ballot." 146. According to the Learned Counsel for the R1, 11, 13 and 15, the 11th Respondents, was selected as the Successful Developer, for the 'Joint Development transaction' through a 'fair and transparent process', as seen, from the Minutes of the Board Meeting, 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 B....
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....ut of pure 'conjuncture' and 'surmises', without any material brought forth in support of such allegations, by the 'Appellant'. 152. The Learned Counsel for R1, 11, 13 and 15 refers to the judgment of the Hon'ble Supreme Court in IFB Agro Industries Limited V. SICGIL India Limited and Ors. (vide Civil Appeal No. 2030/2019 dated 04.01.2023), wherein at paragraph 37 & 38, it was observed, that 'such actions', 'which fall' within the jurisdiction of 'SEBI' and the 'National Company Law Tribunal' cannot under Section 59 of the Companies Act, 2013 cannot exercise, a parallel jurisdiction, with 'SEBI', for addressing the 'breach' of 'SEBI Regulations'. 153. The Learned Counsel for R1, 11, 13 and 15 points out that the Appellant had filed two complaints, before SEBI, before agitating the issue of share transfer, before the Tribunal, but they proved 'futile'. In regard to the share acquisition process, being disrupted, the 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....
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....ellant, had 'voted' against the Resolution, for 'Joint Development'. Viewed in that prospective, without any haziness, this Tribunal, holds, that the 'Notice dated 10.11.2015, and the 'Special Resolution' dated 22.12.2015, are just, fair and valid one, in the eye of Law and the point is so answered. 158. Coming to the aspect of the plea of the Appellant, that the 'decision', to enter into a 'Joint Venture Agreement' and 'Joint Development Agreement' dated 01.01.2016, was in negation, of the 'Memorandum' of Association, of the Company, and violative of 'Fiduciary Duties of 'Directors' of the Company. This tribunal pertinently points out that the 1st Respondent / Company had invited, leading Land Developers, in Bengaluru, to make the best possible offers, commensurate, with the total area of land, offer of constructed area to the 'Landlord', 'FAR', ''adopted', advance Amount, 'Rental Value', and offer validity 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 ....
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....a 'Power of Attorney', document, was executed by the 1st Respondent / Company, to and in favour of 'M/s Umiya Builders and Developers', to facilitate the development of its property, as aforesaid in the manner has prescribed in the 'Joined Development Agreement'. Further, the 11th Respondent had paid, the 'non-refundable deposit of Rs.9 crores, by means of a Supplementary Agreement, dated 04.01.2016 (Registered one), and Registration cost of Rs.434,16,22/- was incurred, in regard to the 'Registration of Development and Supplement Agreement'. 163. According to the R1, 11, 13 & 15, the 11th Respondent / 'M/s Umiya Builders and Developers', being the 'Sole Proprietary concern' of the 13th Respondent (Mr. Aniruddha Mehta) and that the 13th Respondent together with the 15th Respondent (Ms. Gauri Mehta and Umiya Holding Pvt. Ltd. / sister concern of Umiya Group) had purchased the shares of the promoters 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 Re....
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....eeded with the 'Resolution' by altering the name of the Company and altering the objects, suitably, as per his Report dated 19.03.201. 168. It is brought to the Notice of this 'Appellate Tribunal', that the Tribunal (NCLT) had not interfered with the 'Development Agreement' because it was conclusive, viz., the project was completed without any interference. 169. In the light of detailed forgoing's, on a careful consideration of respective contentions advanced on either side, this 'Tribunal', comes to an 'inescapable and irresistible' that the joint transaction, had culminated in the 'construction / development of a commercial building of a commercial complex' and that 'just on a transparent process, was undertaken, in regard to the selection of the '11th Respondent' as 'Successful Developer', for the 'Joined Development, transaction, as seen from the Minutes of the Board Meeting, dated 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....
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....e Appellant / Petitioner, went on purchasing the shares of the 1st Respondent / Company from 'open market'. In fact, the Appellant's 'shareholding' in the Company as on 19.05.2016, was 10.34% and today, his shareholding is 19.83%. 172. When there is a violation, of 'SEBI Regulations', a 'Member' of a 'Company' cannot ask for, 'Rectification of Register', although, the 'Company', itself, can apply for such 'Rectification'. 173. Under the 'Companies Act, 2013', a Member of a Company, is not one of them, competent, to prefer an 'Application', for 'Rectification'. (i) 'Any Depositary', (ii) 'The Company', (iii) 'The Depositary Participant', (iv) 'The Holder of Securities' and / or the 'Securities and Exchange Board of India', can seek for 'Rectification' of 'Register'. 174. In granting the Application for 'Rectification', it is necessary, to determine other issues concerning '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, p....
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.... invoke, Section 241 of the Companies Act, 2013, against the Company, as opined, by this 'Tribunal'. 179. There is 'no straight jacket cast iron formula', specified, to define the 'term', 'oppression' and 'mismanagement'. A 'single act' may not be enough for the grant of relief of 'oppression', and 'continuous course, of oppressive code of conduct', on the part of the 'Majority Shareholder', is very much necessary. 180. In respect of the Appellant / Petitioner, in CP No. 22/2016, when the 'cause of action' had arisen, to enable him, to commence the litigation, in February, 2015, in terms of the 'consolidated' shares movement statement filed by the Respondent, showed, that the Appellant / Petitioner, as on 02.10.2015 was possessing 590695 shares (3.16%), which by efflux of time, rose to 9.65% as on 26.02.2016 and later, increase to 10.34% onwards. 181. It is 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 possess....