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2021 (3) TMI 305 - Tri - Companies LawSeeking to set aside all the allotment of shares made in violation of the provisions of Section 62(1)(a) 62(1)(c) and Section 62(2) in the 1st Respondent Company - seeking to remove the name of persons whose names are entered in the Register of Members of the 1st Respondent Company through the aforementioned allotment of shares - seeking to set aside all the decisions taken by the 2nd and 3rd Respondent without complying with the provisions of Section 173 and Secretarial Standards - seeking to issue appropriate order for the revisions of the Audited Financial Statements for the Financial Years 2015-16 2016-17 and 2017-18 in view of the violation of the provisions of Section 129 and Section 134 of the Act - seeking to rectify the accounting entry wrongly posted as Unsecured Loan in the books of accounts of the 1st Respondent Company - seeking to take action against the 2nd and 3rd Respondents and the 1st Respondent Company for violating the provisions of Section 73 of the Act - seeking to appoint an independent Chairman for the Board of the Company with such powers as the Tribunal may deem fit - seeking to appoint an Independent Chartered Accountant to conduct an investigative audit and draw up the accounts of the Company to identify the Accounting Fraud in the Financial Statements of the Company - seeking to take action under Section 447 448 449 and 450 of the Act against the 2nd 3rd Respondents for filing of false statement and adducing false evidence. Allotment of shares - HELD THAT - On-going through the Company petition and the relevant records placed before this Tribunal it is observed that application has been filed in the said company petition for ordering production of original of 107 documents under Rule 43 of the NCLT Rules 2016 which is pending. This Tribunal note that Section 62(1)(a) of the Companies Act 2013 deals with issuance of shares on the principle of Rights basis. Section 62(1)(b) of the Companies Act 2013 deals with issuance of shares to employees under a scheme of employees stock option subject to special resolution passed by Company and subject to such conditions as may be prescribed. Section 62(1)(c) deals with issue of shares to any person. The present case is covered under Section 62(1)(a) of the Act because there was an issue of Offer Letter to the existing shareholders of the Company in the proportion of their existing shareholding regarding the alleged allotments. The shares so issued must have the compliance of Section 62(1)(a). Therefore in case shares are not issued under Section 62(1)(a) the law envisaged that special resolution is a must whenever the shares are to be issued under Section 62(1)(b) or 62(1)(c) - The Respondents have produced documents to show that they have conducted the Board Meeting and passed resolution in this regard and thereafter issued Letter of Offer of Right Issue to both the Petitioners and allotment of shares has been offered at the face value of Re.1/-38. This Tribunal is of the opinion that the compliance of Section 62(1)(a) ensures that the allotment is done to existing shareholders at a price which is not prejudicial to the interests of other shareholders or to the interests of the Company. Apart from the allegation of share allotment the petitioners have in detail alleged about the Directorship and fraudulent filings. Section 161(1) of the Companies Act 2013 speaks about the appointment of the Additional Director. The Board of Directors may appoint an Additional Director to the Board only if they have given power in Articles of Association - In the present case the Petitioners were appointed as Additional Directors at the Board Meeting held on 04.11.2013 till the date of the ensuing Annual General Meeting or the last date on which Annual General Meeting (due date of Annual General Meeting for the Financial Year ended 31.03.2014 (being 30.09.2014)) on this ground of operation of law under section 161 (1) of the Companies Act 2013 the Petitioners ceased to be Directors of the Respondent No.1 Company - this Tribunal rejects the contentions of the Petitioners that the above allotments on 24.03.2017 15.03.2018 30.05.2018 was in violation of the Companies Act 2013. Conversion of professional fee to unsecured loans - HELD THAT - It is found that the Chairman discussed about the bad financial position of the Company and in order to improve its financial position the Board decided to transfer the professional fee to the loan accounts . The names of both the petitioners were mentioned in that minutes. It is also found from the counter statement that the Company would pay off all dues of the petitioners when the financial position of the Company is improved. Being a part of the Board Meeting and the discussions held therein and passing the agenda to transfer the professional fee and thereafter by making allegation of oppression against the Company cannot be accepted. Decisions taken by the 2nd and 3rd Respondent without complying with the provisions of Section 173 and Secretarial Standards - HELD THAT - A perusal of Section 241(1) of the Act would show that a petition field thereunder may be based on a complaint that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member of members including any one or more of themselves. Thus it will be clear that the foundation of a petition under Section 241 (1) will be the allegation or complaint that the affairs of the Company were being conducted in a manner prejudicial to public interest which will necessarily and naturally involve giving particulars as to how it was prejudicial to public interest. Similarly an averment or allegation as to the affairs of the Company being conducted in a manner oppressive to any member must necessarily involve giving particulars as to what constituted oppressive manner . Section 241 (1) of the Act in its turn contemplates a complaint that the affairs of the Company were being conducted in a manner prejudicial or oppressive to public interest or in a manner prejudicial to the interests of the Company. The opinion of this Tribunal is that if a dispute is to be resolved and litigation is to be settled then both the sides are required to take a pragmatic approach. To settle a dispute a thumb rule is that both the sides have to sacrifice some of their rights. Simultaneously both the sides have to forget about the past especially the events triggering the dispute or may be hurting each other s repute. Keeping this benevolent approach in mind this Bench is of the view that on one hand the Petitioner be directed to surrender the shareholdings in favour of the Respondents and on the other hand the price duly determined by a Valuer be paid to the Petitioner. Additionally the Petitioner should also be paid Professional Fees and perquisites for a reasonable period which was already been converted into unsecured loans even if with the permission. The Respondents are also directed to file necessary forms to change the petitioners name from the MCA portal if they no longer hold the position of Additional Director. On the basis of several years past experience it is worthwhile to draw an analysis that a Court-decree or a Court-Judgment do not satisfy 100% both the litigants either Petitioner or Respondent. The Tribunals do not pass a Judgment for the satisfaction of the litigants but a Judgment is based upon principle of natural justice and equity. What is most appropriate fair justifiable and reasonable are the landmarks for a judicial decision. In the instant case the petitioners have failed to prove the continuing oppressive acts conclusively and this Tribunal cannot rely upon a single act of the Respondents as an oppressive act - this Tribunal do not find any reason to entertain the Company Petition and to set aside the allotment of shares in the 1st Respondent Company and consequently all other reliefs sought in the Company Petition is to be rejected. Petition dismissed without costs.
Issues Involved:
1. Validity of the allotment of 15,550,200 equity shares. 2. Violation of Section 73 of the Companies Act, 2013 and the misposting of accounting entries. 3. Shifting of the Registered Office of the 1st Respondent Company. Detailed Analysis: Issue 1: Validity of Allotment of 15,550,200 Equity Shares The petitioners argued that the allotment of shares was done in violation of the provisions of Section 62(1)(a) of the Companies Act, 2013, and was aimed at taking control over the 1st Respondent Company. The respondents countered that the allotments were made to raise capital for the company, and the petitioners were offered these shares but declined. The Tribunal noted that Section 62(1)(a) ensures allotment is done to existing shareholders at a fair price. The Tribunal found that the company issued the required "Letter of Offer" to the petitioners, who did not accept the shares. Therefore, the Board of Directors was within their rights to dispose of the shares. The Tribunal concluded that the allotments were valid as the company complied with the procedure, and the petitioners' claims of oppression were unsubstantiated. Issue 2: Violation of Section 73 of the Companies Act, 2013 and Misposting of Accounting Entries The petitioners alleged that the conversion of "Professional Fees payable" to "Unsecured Loans" was done without their consent and constituted mismanagement. The Tribunal found that the decision to convert professional fees to loans was discussed and approved in a Board Meeting attended by the petitioners. The minutes of the meeting indicated that this was done to improve the company's financial position. The Tribunal held that the petitioners, having participated in the decision, could not later claim oppression. Issue 3: Shifting of the Registered Office The petitioners claimed that the shifting of the registered office was done to deprive them of their rights. The Tribunal found that the registered office was initially the residential address of Respondent No.3 and was later shifted to the hospital's address. The petitioners attended meetings held at the new registered office and did not object at the time. The Tribunal concluded that the shifting of the registered office did not constitute oppression or mismanagement. Conclusion The Tribunal dismissed the petitioners' claims, finding no evidence of continuous oppressive acts. The allotments of shares were deemed valid, the conversion of professional fees to unsecured loans was approved in a Board Meeting, and the shifting of the registered office did not prejudice the petitioners. The Tribunal emphasized that for relief under Section 241, continuous acts of oppression must be proven, which was not the case here. Consequently, the Company Petition No. 4/KOB/2020 was dismissed without costs, and the Interlocutory Application No. 96/KOB/2020 was closed.
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