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2022 (4) TMI 313 - AT - Companies LawOppression and Mismanagement - Allotment of Shares made in a Board Meeting - validity of Board Meeting - it was alleged that the Board Meeting was without mandatory notice to the Appellant (one of the Directors) - Maintainability of Resolution - HELD THAT - The Resolution is set aside in its totality, as the name of the first Respondent was not categorically mentioned in the operative portion of the Order. Whether the shares allotted to Smt. Usha Rani in the Board Meeting still hold good and whether she continues to be the shareholder as the last para of the Order does not mention the subject party/i.e., the first Respondent/Ms. Usha Rani? - HELD THAT - When the Resolution itself is set aside in its totality, merely because the name of the first Respondent was not categorically mentioned in the operative portion of the Order it has to be interpreted in its truest sense as NCLT has categorically set aside the Resolution dated 18/02/2014 whereby the authorised share capital was increased. In pursuance of the Resolution having held to be illegal, the allotment of further shares in favour of Respondent-4 was also set aside. Learned Counsel for the Appellant vehemently contended that only Mr. Surjeet Singh and Mr. Prakash Kumar have equal shareholding of 50% each and that Ms. Usha Rani was not at all a shareholder and therefore she does not have the locus standi to move an Application under Sections 241/242 of the Act. The only reference with respect to Ms. Usha Rani/first Respondent being a shareholder is the copy of an Annual Return MGT 7 dated 27/02/2018 wherein it is shown as the Shareholder/Director having 5,000 shares and the list of shares annexed dated 31/03/2018 showing the Applicant as well as M/s. Prowess International Private Ltd. as Directors and shareholders having 5,000 shares and ₹ 2,01,00,000/- shares respectively, but the same cannot be relied upon. The contention of the Learned Counsel for the first Respondent, that the last para does not mention the subject party/first Respondent and therefore the Order in C.P. 104/2014 does not pertain to the first Respondent is completely untenable - The alleged Board Meeting was without any notice, though the Petitioner No.1 was director of the Company. Therefore, the Impugned Act comes under the purview of oppression and mismanagement and Board Resolution regarding the permission to increase the authorised share capital and allotment of shares to Respondent No. 4 deserves to be set aside. This Appeal is disposed of with the clarification that in the light of the Resolution dated 18/02/2014, having been set aside and having attained finality pertains to the setting aside of the allotment of shares to the first Respondent/Ms. Usha Rani also. In view of this clarification, the matter is remitted back to the NCLT to decide the maintainability of Petition as expeditiously as practicable but not later than two months from the date of this Order. Appeal disposed off.
Issues Involved:
1. Validity of the Board Meeting dated 18/02/2014 and the resolutions passed therein. 2. Legitimacy of the share allotment to Respondents 1 and 4. 3. Maintainability of the Petition under Sections 241, 242, and 243 of the Companies Act, 2013. 4. Interpretation of the previous judgment dated 10/11/2016. 5. Constructive Res Judicata. 6. Status Quo order on the disputed property. Detailed Analysis: 1. Validity of the Board Meeting dated 18/02/2014 and the resolutions passed therein: The Appellant challenged the allotment of shares to Respondents 1 and 4 in a Board Meeting held on 18/02/2014, claiming the meeting was held without mandatory notice to him. The NCLT, in its order dated 10/11/2016, held that the Board Meeting was without notice to the Appellant, a Director, and thus the resolution passed was invalid. The Tribunal emphasized that under Section 286(1) and Section 173(3) of the Companies Act, it is mandatory to send Board Meeting Notices to all Directors. The absence of such notice invalidated the resolutions passed in the meeting. 2. Legitimacy of the share allotment to Respondents 1 and 4: The NCLT set aside the allotment of shares to Respondent 4, stating that the increased authorized share capital was not for the company's benefit and seemed to have an ulterior motive to gain management control. However, the allotment of shares to Respondent 1 (Ms. Usha Rani) was not explicitly quashed in the operative part of the judgment, leading to confusion. The Appellant argued that since the Board Resolution was declared invalid, it could not be partly invalid for Respondent 4 and valid for Respondent 1. The Tribunal clarified that the entire resolution, including the allotment of shares to Ms. Usha Rani, was set aside. 3. Maintainability of the Petition under Sections 241, 242, and 243 of the Companies Act, 2013: The Appellant argued that the Petition filed by the first Respondent under Sections 241, 242, and 243 was not maintainable as she failed to prove her membership/shareholding in the company. The NCLT observed that the maintainability of the application could not be heard until a clarification of the operative part of the judgment was obtained. The Tribunal directed the NCLT to decide the maintainability of Petition C.P. (IB) No.-763/KB/2020 expeditiously. 4. Interpretation of the previous judgment dated 10/11/2016: The Tribunal noted that the judgment dated 10/11/2016 set aside the Board Resolution dated 18/02/2014, which increased the authorized share capital and allotted shares to Respondent 4. The Tribunal clarified that this setting aside also pertained to the allotment of shares to Respondent 1, despite her name not being explicitly mentioned in the operative part. The Tribunal emphasized that the judgment should be read in its entirety, and the findings had attained finality in the absence of any appeal. 5. Constructive Res Judicata: The Tribunal discussed the principle of constructive res judicata, which prevents re-litigation of issues that have already been decided. The NCLT observed that the issue of shareholding had already been entertained in CP 104/2014, and the same question could not be entertained again as it would attract constructive res judicata. 6. Status Quo order on the disputed property: The NCLT directed maintaining the status quo regarding the disputed property until the final hearing of the petition. The Tribunal upheld this order, directing that the status quo be maintained for two months from the date of the order while the NCLT decides the maintainability of the petition. Conclusion: The Tribunal disposed of the appeal with the clarification that the setting aside of the Board Resolution dated 18/02/2014 included the allotment of shares to Ms. Usha Rani. The matter was remitted back to the NCLT to decide the maintainability of Petition C.P. (IB) No.-763/KB/2020 within two months, with the status quo on the subject property to be maintained during this period. The judgment was directed to be uploaded on the Tribunal's website and sent to the NCLT forthwith.
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