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2023 (2) TMI 325 - AT - Companies LawTransfer of shares - family dispute - Seeking stay on operation of impugned order - petition was allowed ordering that the Register of Members of the 1st Respondent/company be rectified by registering the names of the Petitioners, after setting aside transfer of 760 shares of the 1st respondent dated 07.03.2005 in favour of the 6th respondent - appointments of 4th respondent/Nirmal Kumar Gupta and 5th respondent/ Girish Gupta as Directors of the 1st respondent/company was ordered to be set aside - reconstitution of the Board of the 1st respondent/company was directed - Extraordinary General Meeting dated 20.04.2005 declared as illegal and invalid - HELD THAT - It is seen from the record that the Impugned Order is dated 19.10.2022 and subsequent to the directions given by the NCLT, the Respondents has called for an EGM on 28.12.2022 and the Board has been duly reconstituted. Since, this is an event subsequent to the passing of the Impugned Order, unless the Impugned Order is decided on merits, this Tribunal, does not see any substantial grounds to Stay the Operation of the Impugned Order, passed by the Tribunal. As the Learned Counsel for the Applicant/Appellant has raised grounds regarding evidences not addressed to by the NCLT, it is imperative that the main Appeal be heard at length on merits and at this juncture, any consequent developments, subsequent to the Impugned Order, cannot be stayed, in the light of the fact that no substantial reasons have been found by this Tribunal, to order any Status Quo. Keeping in view the Balance Sheets uploaded with the RoC that the Appellants has siphoned off a sum of Rs.42 Lakhs/- and their strong opposition to granting the stay of the Impugned Order, it is believed that the main Company Petition is to be decided at the outset on merits - Additionally, the Prayer seeking permission to operate the Bank Accounts for executing day to day operation is denied keeping in view that the findings in the Impugned Order have a bearing on these consequent developments and unless the main matter is decided on merits, and further specifically keeping in view the Chequered History and Factual Matrix and Rival Contentions, this Tribunal, does not find any Justiciable reason(s), to grant any Interim Stay, as prayed for, by the Petitioner / Appellant. Application dismissed.
Issues Involved:
1. Legality of the transfer of 760 shares. 2. Validity of the Extraordinary General Meeting (EGM) dated 20.04.2005. 3. Reconstitution of the Board of Directors. 4. Freezing of bank accounts and fixed deposits. 5. Allegations of suppression of income and family understanding. 6. Compliance with procedural requirements for EGM and Board Meetings. Issue-wise Detailed Analysis: 1. Legality of the Transfer of 760 Shares: The National Company Law Tribunal (NCLT) directed the rectification of the Register of Members of the 1st Respondent/company by registering the names of the Petitioners and setting aside the transfer of 760 shares dated 07.03.2005 in favor of the 6th respondent. The Appellant argued that the transfer deeds were executed as part of a family understanding, which the Respondents initially denied but later admitted in their rejoinder. The witness to the transfer deed confirmed the execution of the transfer in the presence of Mr. Vinod Lath, the father of the bride. The Appellant contended that the possession of share certificates is prima facie evidence of shareholding. However, the Respondents argued that the transfers were not registered immediately due to genuine oversight and questioned the validity of the transfer forms and the compliance with Article 11 of the Articles of Association. 2. Validity of the Extraordinary General Meeting (EGM) dated 20.04.2005: The NCLT declared the EGM dated 20.04.2005 as illegal and invalid, setting aside the resolutions passed, including the decision to remove the 2nd respondent as Director. The Appellant sought a stay on the operation of the impugned order, arguing that the EGM was conducted without following due process and without giving a requisition to the Board of Directors as required under Section 100 of the Companies Act, 2013. The Respondents contended that the EGM was convened following the directions given by the NCLT and that there was no valid Board existing at the time, thus no violation of Sections 100 and 100(4) could be inferred. 3. Reconstitution of the Board of Directors: The NCLT set aside the appointments of the 4th and 5th respondents as Directors and directed the reconstitution of the Board of the 1st respondent/company. The Appellant argued that the NCLT had not considered key evidence and that the reconstitution of the Board was based on a misunderstanding of the facts. The Respondents argued that the Appellants were attempting to portray themselves as Directors before various banks to siphon off funds, despite the NCLT's order setting aside their appointments. 4. Freezing of Bank Accounts and Fixed Deposits: The Appellant argued that the freezing of bank accounts by Kotak Bank, HDFC Bank, and Citi Union Bank, consequent to the impugned order, was affecting the day-to-day operations of the company. They sought an order to freeze the fixed deposits of the first Appellant company and permission to operate the bank accounts for executing day-to-day operations. The Tribunal denied the request, keeping in view the findings in the impugned order and the chequered history and factual matrix of the case. 5. Allegations of Suppression of Income and Family Understanding: The Appellant argued that there was a family understanding to resolve differences, whereby the Respondents would take over the ice cream business in Chennai, and the Appellants would own 100% of the shares of the 1st Appellant company in Hyderabad. The Respondents denied any family settlement and argued that the deed of dissolution of the partnership firm was silent on any family settlement. The Tribunal noted the inconsistencies in the Appellants' claims regarding the nature of the 760 shares, whether they were part of a family settlement, consideration for share transfer, or a gift. 6. Compliance with Procedural Requirements for EGM and Board Meetings: The Appellant argued that the notice for the Board Meeting dated 05.03.2005 was sent by telegram and signed by a Director of the 1st Appellant company. The Respondents contended that the Board Meeting did not have a quorum, no agenda was served, and the transfer of shares was procedurally invalid. The Tribunal found that the Appellants had not furnished proper notice and that the evidence regarding the compliance with procedural requirements was inconsistent. Conclusion: The Tribunal dismissed the interlocutory applications, finding no substantial grounds to stay the operation of the impugned order dated 19.10.2022. The main appeal was to be heard on merits, and any consequent developments subsequent to the impugned order could not be stayed. The Tribunal emphasized the need to decide the main company petition on merits, given the chequered history and factual matrix of the case. No costs were awarded.
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