TaxTMI 
TaxTMI 
2025 (11) TMI 1358
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....n CP No. 57 of 2023. 2. The brief facts of this case are as under: i. The main Appellant Roop Ultrasonix Ltd. is an unlisted company. The Respondent, Telsonic Holding AG, a foreign body corporate holds shares in the Appellant company. The Respondent has been identified as a "promoter" in the annual returns up to 31.03.2022. ii. Through a board resolution dated 09.11.2022, the Respondents were reclassified as "public shareholder/other than promoter". iii. The right issue was launched by the Appellant in the month of March, 2023 wherein the Respondents have applied but their application was rejected as their shares were not held in the dematerialised form. iv. Aggrieved by the said actions, Telsonic Holding AG (Respondent herein) had filed CA No. 102 of 2023 on which the impugned order was passed wherein the Ld. NCLT held that the entire process of issuance of equity shares in rights issue stands vitiated and was set aside and directions were issued to Roop Ultrasonix Ltd. to refund the amount received in the rights issue. The relevant portion of the order of Ld. NCLT is reproduced below: "35. We have thoughtfully considered the content....
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....espect of the rights share offered to the existing equity shareholders was issued on 03.03.2023. The letter of offer dated 03.03.2023 is Exhibit-L attached with the reply. In the letter of offer, the record date for the rights issue is mentioned as 03.03.2023. It further stated that the issue will open on 04.03.2023 and close on 19.03.2023. This was in utter disregard of Section 62(2) of the Companies Act which requires that the notice has to be dispatched at least 3 days prior to the opening of the issue. This displays the undue haste exercised by the Respondents while going through the process of rights issue. No doubt, subsequently, a notice (Exhibit-M) was issued on 08.03.2023 clarifying that the offer of rights shares to the existing shareholders would open on 09.03.2023 and issue will close on 24.03.2023. This seems to be an another illegality, as the fresh notice extending the date from 04.03.2023 to 09.03.2023 was issued only on 08.03.2023 which, in a way, again violates the provisions of Section 62(2) of the Companies Act in as much as such notice is required to be issued at least 3 days prior to the opening of the issue. The gap of these days in the notice and opening of ....
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.... of the Applicant for the issue right shares on the ground that since the Applicant had not converted his shares into dematerialized form, it was not entitled to subscribe to the Right shares. It has been claimed that this has been done in consonance with 9A(2) of Companies (Prospectus and Allotment of Securities) Rules, 2014. In addition to this, it has also been claimed by the Respondents that the Petitioner was not a promoter when it subscribed the Rights issue vide email dated 21.03.2023. 43. However, in our considered view, the act of the Respondents in blatantly rejecting the application for right issues of the Applicant was absolutely illegal and unjustified. Since the Respondents, who are undoubtedly running the company and are in control of its day to day affairs, did not take the necessary steps to get the shares of the Company converted into dematerialized form and even the shares of all other directors or key managerial personnel are not shown to have been converted into a dematerialized form any time prior to issuance of the Rights offer, the act of rejection of the application of the Applicant is out to out arbitrary and oppressional in nature. 44. S....
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....ares, the Applicant qualifies to be treated as a 'promoter'. Therefore, on this ground also, the rejection of the Applicant's application for shares under the Rights issue appears to be totally unjustified. 47. In the light of the above discussion, we are of the considered view that since the Respondents have acted arbitrarily and unfairly while carrying out the process of issue of right shares which was also in utter disregard of the provisions of Section 62(2) as well as 9A(2) of Companies (Prospectus and Allotment of Securities) Rules, 2014 and also that the application for the Applicant for rights shares has also been wrongly and illegally dismissed on illegal grounds, the entire process of issuance of equity shares stands vitiated and is, therefore, liable to be set aside. It is ordered accordingly. 48. As a consequence, any application money received from the existing shareholders of Respondent No. 1 shall be refunded and forthwith. However, this order will not preclude the Respondent No. 1 from bringing about a fresh share of rights issue while strictly adhering to the statutory provisions of the Companies Act and the Depositories Act, Rules and....
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....law, the Hon'ble Supreme Court in paragraphs 16, 17 and 18 held as under: 16. ... ... ... It is settled law that relief not found on pleadings should not be granted. If a Court considers or grants a relief for which no prayer or pleading was made depriving the respondent of an opportunity to oppose or resist such relief, it would lead to miscarriage of justice. 17. In the case of Trojan & Co. Ltd. v. Rm.N.N. Nagappa Chettiar ((1953) 1 SCC 456 : AIR 1953 SC 235), 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 decision of a case cannot be based on grounds outside the pleadings of the parties and it is the case pleaded that has to be found. Without an amendment of the plaint, the Court was not entitled to grant the relief not asked for and no prayer was ever made to amend the plaint so as to incorporate in it an alternative case." 18. In the case of Bharat Amratlal Kothari v. Dosukhan Samadkhan Sindhi ((2010) 1 SCC 234) held: "Though the Court has very wide discretion in granting relief, th....
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....llant company on 05.10.2022. 6. It was in this context that the Respondent, Telsonic Holding AG was reclassified as "public shareholding/other than promoter" vide board resolution dated 09.11.2022. The relevant board resolution is reproduced below for reference: "RESOLVED THAT pursuant to the applicable provisions of The Companies Act, 2013, along with the relevant Rules made thereunder (including any statutory modification(s) or re- enactment(s) thereof for the time being in force), and subject to the provisions of the Articles of Association of the Company, the consent of the Board of Directors be and is hereby accorded to re- classify Telsonic Holding AG from 'Promoter' to "Public Shareholder / Other than Promoter" pursuant to the termination of the Co- operation Agreement dated September 14, 2005 on August 20, 2019, the Shareholder's Agreement dated 14th September, 2005 on 04th April, 2022 and resignation letter dated October 5, 2022 of the authorized representative of Telsonic Holding AG on the Board of the Company and that all requisite steps be taken in this regard to reflect the same in the Annual Returns of the Company as also requisite filings to b....
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....03.2023 and will close on 24.03.2023. It was submitted that the issue of addendum and extension of the opening and closing dates of the rights issue were to comply with the provisions of Section 62(2) of the Act requiring prior notice of at least 3 days before opening of rights issue. 10. It was submitted that no arguments regarding PAS form and cancellation of rights issue was ever discussed during the hearing before the Ld. NCLT. The hearing was over and order was reserved by Ld. NCLT on 13.04.2023, whereas the note was furnished by the Respondent (petitioner before NCLT) on 19.04.2023. In the said note, the petitioner had given the old PAS Form relating to period from 01.04.2022 to 30.09.2022 which did not reflect the correct position as on the date of issue of rights shares. The correct PAS form relating to period 01.10.2022 to 31.03.2023 is available at page 212 of the APB which was filed on 08.05.2023. The petitioner (Telsonic) had duly applied for the rights issue but its application was rejected on 03.04.2023 on the grounds that its shares were not dematerialized in terms of Rule 9A(1) and Rule 9A(3) of Companies (Prospectus and Allotment of Securities) Rules, 2014. It w....
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....he Respondent from "promoter shareholder" to "public shareholder". There is no provision in the Companies Act, 2013 or any other law whatsoever which empowers the Appellant to re-classify the Respondent from "promoter shareholder" to "public shareholder". It was submitted that that Companies Act, 2013 recognizes that once a person is shown as a promoter either in the memorandum or in the annual return, he remains a promoter for all time. Attention was drawn to Section 300 of the Companies Act, 2013 wherein it is stated that "any person who had been a promoter of the company will continue to be responsible for all the investigations by the Liquidator". The "status of the promoter" would not have been altered by mere resolution passed by the company. The allegation that the Respondents have started another company in the same line of business is irrelevant as the Trivedi Group, who were the other major shareholders have also promoted another company, namely, 3A Innovative Technologies Private Limited. Similarly, resignation of a director nominated by a promoter does not affect the status of the promoter. 14. It was submitted that the Respondent is still the single largest sharehol....
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....r shareholder' to a 'public shareholder' in a public listed company is governed by Regulation 31 (A) of the Securities and Exchange Board of India (listing of obligation and disclosure requirements) Regulation 2015 which prescribes various conditions to be met for such re- classification, including that there should be a request from the promoter shareholder to the listed entity seeking re-classification. However, the Learned Senior Counsel fairly admitted that the said Regulation 31 A is not applicable to unlisted public company, like the Appellant. On specific query by the bench, Learned Senior Counsel fairly admitted that there is no prohibition or restriction under the Companies Act, 2013, or the Rules/Regulations made thereunder, regarding re-classification of 'promoter shareholder' as 'public shareholder' in an unlisted public company. 18. We have heard the Ld. Sr. Counsel for the Appellants and Ld. Sr. Counsel for the Respondent and have perused the records. We note that the impugned order is passed by Ld. NCLT on an application seeking interim relief. We note that in the said application, the applicant had only prayed for staying the rights issue. We note that when the i....
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....ther as a share holder, director or otherwise; or (c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act. Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity;" 22. In the present case, the Appellant Company was established in 1992 as a joint venture of Telsonic Holding AG and Roop Ultrasonix Pvt. Ltd. Initially, it was incorporated as a private company and the status was changed from private to public w.e.f. 25.10.1994. A number of agreements were signed between Telsonic Holding AG and Roop Ultrasonix Limited. However, apparently Telsonic Holding AG started withdrawing from the control of the Appellant Company. The co-operation agreement made on 29.10.1997, and further on 20.09.2005, to establish strategic partnership between the two groups was cancelled by Telsonic on 24.08.2019. The shareholders agreement was terminated by Telsonic on 04.04.2022. Telsonic also incorporated a company in India undertaking similar line of business by the name, Telsonic Ultrasonics India Pvt. Ltd. on 24.08.2022. The authorised representative of Telsonic ....
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....dents have also taken an objection that there is no enabling provision in the Companies Act by which the 'promoter' can be reclassified as 'public shareholder'. On our specific query, the Ld. Sr. Counsel for the Respondent fairly admitted that there is nothing in the Companies Act which prohibits such a reclassification. On this issue, we are guided by the judgment of the Hon'ble Supreme Court in Rajendra Prasad Gupta v. Prakash Chandra Mishra and Others AIR 2011 SC 137 wherein in paragraphs no. 4 and 5, the Hon'ble Supreme Court has held as under: "4. We do not agree, Rules of procedure are handmaids of justice. Section 151 of the Code of Civil Procedure gives inherent powers to the court to do justice. That provision has to be interpreted to mean that every procedure is permitted to the court for doing justice unless expressly prohibited, and not that every procedure is prohibited unless expressly permitted. There is no express bar in filing an application for withdrawal of the withdrawal application. 5. In Narsingh Das v. Mangal Dubey, Mahmood, J. the celebrated judge of the Allahabad High Court, observed: "Courts are not to act upon the principle that....
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....es to any securities of an unnlisted public company (whether by way of private placement or bonus shares or rights offer) on or after 2nd October, 2018 shall ensure that all his existing securities are held in dematerialized form before such subscription. (4) Every unlisted public company shall facilitate dematerialisation of all its existing securities by making necessary application to a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 and shall secure International Security Identification Number (ISIN) for each type of security and shall in-form all its existing security holders about such facility. (5) Every unlisted public company shall ensure that- (a) it makes timely payment of fees (admission as well as annual) to the depository and registrar to an issue and share transfer agent in accordance with the agreement executed between the parties; (b) it maintains security deposit at all times, of not less than two years, fees with the depository and registrar to an issue and share transfer agent in such form as may be agreed between the parties; and (c) it complies with the regulations o....
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....Depositaries Act, 1996. As we have noted earlier, the Respondent (Telsonic) was no longer classified as 'promoter' of the Appellant Company on the date when rights issue was announced. Thus, a plain reading of the said Rule clearly shows that the company was not required to ensure, on its own, that shares of the Respondent (Telsonic) are dematerialised. 29. As per Rule 9A(3)(b), it is responsibility of the holder of securities of an unlisted company to ensure that all its/his existing securities are in dematerialised form before any fresh subscription. Here, the role of the Appellant Company is only to facilitate dematerialisation of all existing securities as per Rule 9A(1)(a). Thus, for shareholders other than promoters, directors and key managerial personnel, the responsibility of the Appellant Company, as prescribed in Rule 9A(1)(b) is limited to "facilitation" of dematerialization. The steps required in ''facilitation'' of the process are listed in sub rules (4) to (8A) of Rule 9A. It is not the case of the Respondent (Telsonic) that it had applied for dematerialisation which was blocked by the Appellant Company. Apparently, Telsonic had never applied for dematerialization ....