2018 (9) TMI 1966 - AT - Companies Law

Oppression and mismanagement - Cancellation of shares transfer - HELD THAT - There is no loan outstanding but investment has been shown representing that the loan has been repaid by this company in between and it has also made investment for the same amount necessitating looking into actual transfer of money both for repayment of loan as well as acquisition of shares of the same value. We have not examined this issue in detail because we have no benefit of examination of the NCLT over the issue. It is in the interest of fairness that NCLT must look into so called vital documents as the company petition has been decided by the NCLT. The matter is remanded back to the NCLT to take the documents into consideration and hear both the parties afresh in the light of the documents and then decide the company petition - Petition allowed by way of remand.

Issues Involved:
1. Validity of the cancellation of 9,90,000 shares.
2. Legality of the transfer of shares held by Appellant Nos. 2 and 3 to Respondent No. 33.
3. Legality of the shift of the company's registered office.
4. Validity of the appointments and removals of directors.
5. Proportionate representation on the Board and management of the company.

Detailed Analysis:

1. Validity of the cancellation of 9,90,000 shares:
The NCLT held that the cancellation of 9,90,000 shares was invalid, thus maintaining the shareholding of the appellants as it was on 15th March 2013. The appellants argued that they were always majority shareholders and the only directors, and the share allotment was not contested by the parties. However, the respondents claimed that the allotment was canceled in a Board Meeting on April 8, 2013, which was denied by the appellants. The NCLT's decision on this issue was challenged in the appeals, with the appellants asserting that the Tribunal's assumption that the allotment was uncontested was incorrect and unsustainable.

2. Legality of the transfer of shares held by Appellant Nos. 2 and 3 to Respondent No. 33:
The NCLT upheld the transfer of shares held by Appellant Nos. 2 and 3 to Respondent No. 33. The appellants argued that the transfer of 6,65,000 shares was illegal and violated Article 8(1) of the Articles of Association, which restricts transfer to non-members unless unanimously approved by the Board of Directors. They contended that no such unanimous approval was shown, making the transfer null and void. The respondents, however, maintained that the transfer was duly carried out with all secretarial compliance, and the consideration for the transfer was paid. The appellants also argued that the consideration shown was actually a repayment of loans, evidenced by the balance sheet of the 33rd respondent, which was not initially before the NCLT.

3. Legality of the shift of the company's registered office:
The appellants argued that the shift of the registered office was illegal and done without their knowledge or consent. They claimed that the attendance sheet of the alleged Board Meeting was forged, and no notice was served to them. The NCLT, however, did not adjudicate on this issue, which was under challenge in the company petition. The respondents contended that the shift was done following the due process, and the appellants' signatures on the documents were valid.

4. Validity of the appointments and removals of directors:
The NCLT held the removal of Appellant No. 1 as a director to be null and void and directed his reinstatement. The resignation of Appellant Nos. 2 and 3 was also held to be invalid. The appointments of Respondent Nos. 2 to 5 as directors were set aside as they were made in violation of statutory norms. The appellants argued that their removal and the appointments of new directors were done illegally and without their consent. The respondents, however, claimed that the appellants had resigned voluntarily, and the new appointments were valid. The NCLT's decision was challenged, with the appellants asserting that the resignation letters were forged and the appointments were not according to statutory provisions.

5. Proportionate representation on the Board and management of the company:
The NCLT directed that the parties would have proportionate representation on the Board and in the management of the company according to their shareholding. The appellants sought to set aside this direction, arguing that it was not in their favor. The respondents, however, contended that the direction was fair and in accordance with the law.

Conclusion:
The Appellate Tribunal quashed and set aside the impugned order dated 12th July 2017 and remanded the matter back to the NCLT to take into consideration the documents filed in the appeals and to rehear the parties afresh. The NCLT was directed to consider the record, including further documents filed in the appeal, and pass the necessary orders. The parties were directed to appear before the NCLT, Kolkata, on 12th October 2018.

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