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TMI Blog2017 (1) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... ation No. 217 of 2014 (In Company Petition No. 115 (ND) of 2014) - - - Dated:- 28-10-2016 - Mr. V.S.R. Avadhani and Mr. H.P. Chaturvedi, JJ. ORDER (Per Mr. V.S.R. Avadhani, Member Judicial) I. The non-applicant is the Petitioner in the Company Petition which is filed under Sections 397 and 398 of the Companies Act, 1956 (since repealed).The subject Company Application is filed by the Respondent No 1 in the Company Petition (hereafter be known as applicant ) with a prayer to dismiss the company petition on more than a few grounds namely: (i) There are serious testamentary disputes with respect to quantum of shares claimed by the petitioner in the Company Petition which can only be adjudicated by the Civil Court by way of obtaining a succession certificate and that the testamentary jurisdiction is not vested in the Company Law Tribunal; (ii) Unless the right of the Petitioner to the shares is declared by competent civil court, she would not have locus standi to file the Company Petition complaining of oppression and mismanagement, as postulated by sections 397 and 398 of the Companies Act, 1956; (iii) The Registrar of Companies inquired into the complaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are pertaining to the period earlier to filing of the Company Petition and they are already in the knowledge of the Company Petitioner-the non-applicant, without proper explanation as to why those documents were not filed along with or subsequent to filing of CP, we are not inclined to receive those documents and additional affidavit of the Company Petitioner when arguments were partly heard in the application. We are giving reasons as to why we are not considering the additional affidavit with documents, filed by the non-applicant during course of arguments. The said affidavit is in the nature of additional pleading. As seen from para 16 of the said affidavit, the non-applicant prayed the tribunal to allow the instant company petition and reject the preliminary objections taken by the respondents in the light of the facts and circumstances set out in the affidavit. Rule 41 of the NCLT Rules 2016 deals with filing of reply and other documents by the Respondents; and Rule 42 envisages filing of rejoinder by the petitioner. The Rules did not contemplate any additional pleadings after Rule 42, except where the Bench calls for further information or evidence under Rule 43. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esides that Bhagwati Prasad Bagla owns another 500 shares. BP Bagla is claiming the 40497 shares held by RP Bagla, by inheritance. In the year 2000 the Respondent No. 2 is said to have manipulated the members Register and attempted to sell the Company s property but the same was averted by BP Bagla. However, it is alleged in the Company Petition that in the Annual Return dated 29.09.2001, the 40497 shares was shown to have been held jointly by RP Bagla and HS Bagla and this was done by Respondent No. 2 to grab at the property of the Company. Ultimately, it is alleged, the Respondent No. 2 has sold the property to Respondent No. 3 on 11.10.2013. Thus, the Company Petitioner made the following grounds to substantiate her plea of oppression and mis-management of the company by the Respondent No. 2. (i) Taking over of 88.5% of shares belonging to RP Bagla which are belonging to RP Bagla which have to be devolved upon his heirs, namely BP Bagla and after his death, upon the Petitioner; (ii) Manipulation of records to show 40497 shares showing them to have been jointly held by RP Bagla with HS Bagla, in the year 2001; (iii) Denial of transfer of share of RP Bagla to the father ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same cause of action (vide: para 9 of the application), and that the issues between the parties which are pending adjudication before the civil court are the same and similar or substantially same or similar to that of the issues raised in the Company petition (Vide Para 8 of the application). We will first address to this question. The reliefs in the civil suit, claimed by the Company Petitioner herein as the plaintiff are: (A) A decree of declaration that the instrument of sale dated 11.10.2013 is void and unenforceable; (B) Prohibitory Perpetual injunction restraining the defendant No. 1 (the vendee of the property) from further alienating, or making constructions etc. over the property; (C) Prohibitory injunction restraining the defendants 2 and 3 (Respondents No. 2 and 1 in the CP respectively) from utilizing the sale proceeds of the property except keeping it in the Fixed Deposit of a Nationalized Bank; Para 17 of the plaint contains the cause of action which reads that it arose when the fraudulent deed was executed and subsequently on various dates when the defendants have refused to accede to the request of the plaintiff. The cause of action mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and grandfather (para 2); The father of Respondent No. 2 never held any share in the company (para 3); Petitioner s grandfather died in 1975 leaving behind him his wife Rukmani Devi and only son BP Bagla as his legal heirs and that Rukmini Devi relinquished her rights in favour of BP Bagla and so the plaintiffs father BP Bagla became owner of entire shares held by RP Bagla (Para 4); shares of RP Bagla could not be transmitted to BP Bagla as the Company became inoperative (Para 5); In the year 2000, the Defendant No. 2 fabricated Register of Members showing the shares in the joint names of HS Bagla and RP Bagla, fraudulently (para 6); Plaintiffs father BP Bagla who was the only legal heir of RP Bagla made request of Defendant No 2 to complete the process of transmission of shares in his name but the defendant No 2 avoided it on one pretext or the other (Para 7); Defendant No. 2 has fabricated various documents regarding meetings of the company and annual returns etc.(para 8) The above averments in the plaint are part of cause of action, as they are material facts which give the plaintiff (Company petitioner herein) a right to sue though the relief however is limited to declarati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and then to the non-applicant vis-a-vis manipulation of Members Register. All other reliefs which are claimed in the Company Petition are in one way or the other allied to the above two major issues only. Therefore, the strenuous argument of Mr. Nikhil Nayyar, the learned Counsel for the Company Petitioner-non applicant, that the reliefs claimed in both the proceedings are different, is not sustainable. We find that the issues involved in the Civil Suit and the issues involved in the Company Petition are substantially the same. VII. The other argument of Mr. Nikhil Nayyar is that the reliefs claimed in the Company Petition like oppression, mismanagement and rectification of Register etc. are exclusively within the domain of the Company Law Tribunal and the Civil Court cannot have competence to adjudicate and award them and therefore, pendency of suit in civil court cannot have any overlapping effect on the sustainability of the Company Petition. His argument though impressive, seems lacking logic. As we have already observed above, the causes of action for the suit and Company Petition are substantially the same. The reliefs on the basis of oppression, mis-management and for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment by Act 31 of 1988), the Supreme Court further proceeded to observe about the jurisdictional aspect of Civil Court vis-a-vis the Tribunal in the following words: .. .It cannot be doubted that in spite of exclusiveness to decide all matters pertaining to the rectification it has to act within the said four corners and adjudication of such matters cannot be doubted to be summary in nature. So, whenever a question is raised the court has to adjudicate on the facts and circumstances of each case. If it truly is rectification, all matters raised in that connection should be decided by the Court under sec. 155 and if it finds adjudication of any matter not falling under it, it may direct a party to get his right adjudicated by a civil court. Unless jurisdiction is expressly or implicitly barred under a statute, for violation or redress of any such right the civil court would have jurisdiction. (Vide para 31 of the Report) Keeping in view the law laid down in Ammonia Supplies Corpn. (P.) Ltd. case (supra) the disputed facts before us oblige us to hold that they are beyond the exclusivity of the jurisdiction of the Tribunal under Sec. 111 for ordering rectification of Regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agla, during his life time itself made requests to the 2nd Respondent (Applicant in the present CA) to transfer the shares pertaining to RP. Bagla, and was also challenging the management by the 2nd respondent. It may be recalled, the petitioner has averred that in the annual return made as on 29.09.2001 itself, the 40497 shares of RP Bagla have been wrongly shown to have been held jointly with late HS Bagla. On 10.05.2004, BP Bagla sent a letter to Respondent No.2 by registered post (Annexure P-6) wherein it has been mentioned that he is having 500 shares in his own name in LF No. 45 and another 40497 shares of RP Bagla are devolved on him and in total he is having 90% of the total voting power. It has not been mentioned in the letter that the 40497 shares acquired by him by devolution are transferred in his name and no request for affecting such transfer is made in that letter. He has questioned the rightness of dilution of his capital contribution in illegal manner by fabrication of records in a unilateral and unlawful manner. He then demanded for induction of his nominee on the Board. Thus, the entitlement of RP Bagla to the 40497 number of shares exclusively, itself was u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndi of the non applicant to file the Company Petition, we find it desirable to extract Sections 397 and 398 of the Companies Act, 1956 for instant reference. Section 397: Application to Tribunal for relief in cases of oppression: (1)Any member of a company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Tribunal for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1), the court is of opinion - (a) that the company s affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, -the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. Section 398 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sections 397 and 398 of the Act, 1956. She is claiming to be the legal heir of RP Bagla but, the entitlement of RP Bagla to the 40497 shares itself was obscure; and so far as the disputed 40497 shares are concerned, RP Bagla is not shown as exclusive holder of those shares. HS Bagla is also having joint right in those shares and rectification of Register of Members was never sought for by RP Bagla during his life time by approaching the Company Law Board under Sec. 111 of the Act, 1956. Even if BP Bagla (on applicant s father) had approached the Company Law Board, he had to assert that the 2nd Respondent (applicant) has played fraud, as he has already alleged in the letters and the complaint to ROC as referred above. In fact, in the Civil Suit pending before Civil Judge, the petitioner raised the contention of fraud as major ground to confront validity of sale transaction besides alleging other grounds. Therefore, unless fraud alleged by the petitioner is established, there cannot be rectification Register of Members in relation to joint holding of 40497 equity shares standing in the joint names of RP Bagla and HS Bagla. Unless that rectification is ordered, BP Bagla canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Auto Ltd MANU/DE/2632/2008 a Division Bench of Delhi High Court referring to the principles settled by Ammonia Supplies Corporation (P) Ltd vs. Modern Plastic Containers Pvt Ltd (1998) 7 SCC 105= AIR 1998 SC 3153 held that under Sec. 111 of the Companies Act, the company has power to refuse registration and the said refusal is appealable and as per sub-section (7), the Tribunal may decide the question of title of any person, who comes up in appeal against such refusal. But, in a case, similar to the facts in the case before the Division Bench, where the appellant gets a declaration from competent Civil Court that the share transfer deed in question already made in favour of the Respondent is forged and fabricated, the appellant has no basis to approach the Respondent company to register the disputed shares in his favour. The Division Bench proceeded to observe- Therefore, we are of considered opinion, the Appellant cannot be relegated to avail of the remedy under sec. 111 of the Companies Act, 1956 at this stage and the Appellant is well within its right to maintain his civil suit to seek the declaration as prayed for by him in the present suit. With that finding, the Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so to do, authorise any member or members of the company to apply to the [Tribunal] under section 397 or 398, notwithstanding that the requirements of clause (a) or clause (b), as the case may be, of sub-section (1) are not fulfilled. (5) The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the Tribunal dealing with the application may order such member or members to pay to any other person or persons who are parties to the application. The Company has the paid up capital of ₹ 9, 15, 000 as mentioned in para 2.2 of the Company Petition. It is equal to 91,500 shares of ₹ 10/ each. The Petitioner s holding of 500 shares comes to 0.54% of the total equity i.e. less than 1/10th. Such holding does not qualify the petitioner under sec. 399 to maintain the Company Petition under sections 397 and 398 of the Act. Therefore, point No. 2 is answered against the Company Petitioner and in favour of the applicant (2nd Respondent in CP) to the effect that the non-applicant-Company Petitioner has no lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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