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TMI Blog2018 (4) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... view of our earlier finding that since 2005 itself the petitioner has had Board of Directors constituted of its own selected Chairpersons and also its own nominee and nominees of other lenders, except one promoter, as well as the management of the Company itself has had been with Petitioner and other lenders, such Petitioner can clearly not be heard putting blames on others. Thus, the petition would require to be dismissed even on this count. With R.O.C. after Petitioner and Promoters with enquiry under Section 206 of the New Act, the Appellant s object in filing Petition appears to be to stop and delay action being taken against the Petitioner, its employees and other lenders for the acts committed with regard to Respondent No. 1 Company which in turn had an impact on the Project which the Respondent No. 1 had taken up. No doubt, a person lending money may put conditions to protect its interest but there has to be a limit and it is unthinkable that the lenders took over the Company itself and committed acts attracting actions under the Companies Act and other Acts from which now protection was sought. The NCLT rightly held that the Petitioner had not approached the NCLT with b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deal in generating, developing etc. energy including electricity and other types of power like gas, coal etc. Its authorized Share capital is ₹ 2500 Crores and Paid-up capital is ₹ 565,379,0000/-. The Petitioner is a Government of India Enterprise under the Ministry of Power, New Delhi. It is holding 13,18,46,779 equity shares of ₹ 10/- each in the Respondent Company representing 23.32% of Issued and Paid-up Share Capital. Respondents Nos. 2 to 5 are Promoter Directors of the Respondent Company. Respondent Nos. 2 to 6 are Personal Guarantors of the Respondent Company and Respondents Nos. 7 to 9 are Corporate Guarantors. Respondent No. 10 was one of the Executive Directors and Company Secretary of the Respondent Company at the concerned point of time. B. Maheshwar Dam was planned as part of the Narmada Valley Development Project in 1978 and in 1989, Madhya Pradesh State Electricity Board (MPSEB) was assigned the responsibility to build the same. In 1993, the Project was allotted to Respondent No. 8 - M/s. Entegra Limited (earlier known as - M/s. S.K.G Power Ventures Pvt. Ltd.) which floated Respondent No. 1 Company to implement the Project. It was required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to M.P. Power Management Company Limited. Scenario III Cancellation of PPA If the scenario I II above do not fructify, the last option will be that M.P. Power Management Company Limited cancels the existing Power Purchase Agreement, Government of Madhya Pradesh and M.P. Power Management Company Limited would be burdened on account of Govt. MP counter guarantee deed of ₹ 400 crores issued to petitioner company. This is apart from ₹ 102.48 crore which has already been paid by M.P. Power Management Company Limited to petitioner company. C. According to the Petitioner, the Promoters were given 90 days time to submit a firm and binding proposal regarding arrangement of additional equity of ₹ 600 Crores and the debt of ₹ 1100 Crores at concessional rate and to ensure that the tariff would not be more than ₹ 5.32 per unit. The Promoters of the Respondent Company were unable to infuse necessary cash equity and raise loan to complete the Project and Scenario-I failed. The lenders initiated recovery proceedings with issue of loan recall notice dated 5th January, 2016. D. According to the Petitioner, the Petitioner in such circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Petitioner for revaluation of loan, it was proposed that there should be nominee Director of the Petitioner in the Company and Articles of Association of Respondent No. 1 Company need to be modified. The Respondent Company availed credit facilities for the Project without raising any objection and after amendment to Articles of Association, Mr. G.S. Patra, Nominee Director of the Petitioner and nominee directors of other lenders were taken on Board of the Respondent Company. Prayers in Company Petition G. In the Company Petition, the Petitioner made following prayers : (A) Declare that the Respondent No. 2 to 6 and Respondent No. 10 have indulged in serious and grave acts of financial mis-management and siphoning of funds and other illegal and fraudulent acts; (B) Direct the Respondent No. 2 to 6 and Respondent No. 10 to restore the funds of the Respondent No. 1 Company, which would be ascertained/calculated after the trial of the present petition; (C) declare Respondent No. 2 to 6 and 10 have indulged in serious acts of fraud under Section 447 of the Companies Act, 2013 and consequently order for prosecution; (D) Declare that condonation/grant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Thus, Prayers A, C, D, J and K related to declaration while Prayer B claimed restoration of funds. The Prayer F related to claim of Petitioner for restoration of the statutory records. Rest of the prayers were mainly for seeking protection from various authorities. Case of Respondent No. 1 4. In NCLT, Respondent No. 1 Company filed reply and claimed that one Mr. Nirbhay Goel had been appointed Company Secretary on 1st January, 2016. It was claimed that in the Board Meeting dated 1st January, 2016, the request of lenders was considered and approved invoking the pledge of shares due to which shareholding of Respondent No. 8 M/s. Entegra Limited in Respondent No. 1 Company reduced from 58% to 12.28%. The Petitioner being lead lender had decided to invoke the pledge. M/s. Entegra Limited thus ceased to hold the status of the holding company. This Respondent gave particulars as to the numbers of shares held by the Petitioner as well as other lenders. It was stated that the sub-debt was converted into equity from 1st June, 2016 for an amount of ₹ 66.10 Crores. This led to increase in the Paid-up capital of the Respondent Company. The Form submitted on this count with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal and wrongful manners in which the Petitioner was conducting the affairs of Respondent Company. According to them, in 2005, it is the Petitioner who took over control of the Respondent Company by appointing managing Committee of its own. They got the Articles of Association of the Respondent Company altered which amendments gave additional powers to the Petitioner. Because of this, Respondent Company was transformed from Promoter Managed Company to Lenders Managed Company . The day-to-day affairs of the Company were taken over by the Petitioner. The Petitioner appointed on the Board of Respondent Company persons as Chairman, Managing Director, Finance Director and Nominee Directors of its choice. The only right which remained with these Respondents was to appoint a single Non-Executive Director as Promoter Director. Thus, according to them, even if any acts of oppression and mismanagement are to be attributed, they are to be attributed to the officers of the Petitioner. These Respondents claimed that in 2010, the Company was in a position to commission three turbines but the Petitioner blocked the commissioning by diverting the entire funds of the Respondent Company t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Company Petition No. 511 of 2014, on 1st July, 2016 ordered winding-up of the Respondent Company but Respondent No.7 filed appeal against the said order and there is stay. Respondent No. 7 had on 5th April, 2007 asked the Petitioner to release Corporate Guarantee given by him to the lenders. Case of Respondent No. 10 8. It appears that Respondent No. 10, the Executive Director and Company Secretary had considering the approach of Petitioner resigned vide letter dated 26th August, 2015 and Board vide Meeting dated 17th December, 2015 accepted it w.e.f. 31st December, 2015. He claimed before the NCLT that Maheshwar Committee created by the Petitioner was Shadow Supervisory Board of Respondent Company. Since 2005, the lenders dominated the Board of Directors of the Respondent Company. The Petitioner illegally convened Board Meeting dated 1st June, 2016. The Petitioner diverted Project Funds to itself and to fellow lenders. The Petitioner illegally got shares transferred. According to him, Respondent No. 3 was non-Executive Director without any power since 2005. The Petitioner has suppressed documents which disclosed that the management control was with the Petitioner. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed resignation on 26th August, 2015. The Board on 29th September, 2015 asked him to continue till alternative arrangement is made. Later on, on 17th December, 2015, the Board accepted his resignation with effect from 31st December, 2015 without any reference to settlement of dues and without naming any official to whom the charge of the functions and records could be handed over. No officer was nominated to take charge. Respondent No. 10 filed form for cessation to ROC on 11th January, 2016 and stopped attending office. According to him, the Records were there where they had been for last 25 years. They were maintained in Mumbai Office and were in safe custody of employees. He also complained to the ROC regarding lack of governance in the Respondent Company. Points before NCLT 11. In NCLT, the parties completed their pleadings and were heard. NCLT framed following points for determination : (1) Whether the statements made in the sur-rejoinders filed by the respondents can be taken into consideration? (2) Whether this Tribunal is entitled to decide the dispute raised by the respondents on the shareholding of PFC and its supporters ? (3) Whether the invocatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) Failure to repay debts etc. and failure to infuse equity do not amount to acts of oppression and mismanagement. (6) Allegation of siphoning of funds is vague and there is no material to substantiate the same. (7) Parties are entitled for copies of ROC report from the office of ROC, Gwalior. (8) Petitioner is not entitled for reliefs C, D, E, F, G, H, I specifically. (9) Petition is not a Bona fide petition. (10) Row over records is raised as a pretext. 13. After recording such findings, learned NCLT considered as to what steps could be taken with regard to the Project and interest of lenders and promoters. Keeping in view Section 242 (2) of the New Act, the NCLT was of the view that workable solution would require consent of all the stakeholders. It expressed that the stakeholders should evolve a scheme with consent of all including promoters so that the Project could be completed. In the ultimate, the NCLT went on to dismiss the petition. Various I.As pending were also disposed of. 14. The Original Petitioner, aggrieved by the impugned judgment order has filed this appeal, raising various grounds. Arguments of Appellant - Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because there was no requirement of endorsement on the Memo of Transfer in the Share Certificate No. 47 as it was new share certificate issued to the Appellant-Petitioner on allotment of shares, pursuant to the conversion of subordinate loan into equity. The argument is that NCLT took hyper-technical approach while determining title of the shares of the Petitioner although there was evidence that on the date of filing of the Petition, the Appellant was member and the acquisition of shares had been consented to and acquiesced and that the Respondents had not filed petition challenging the petitioner. (d) It is argued that the other lenders who also invoked conversion of the loan into equity are not parties and they could not be condemned unheard. (e) It has been argued by the learned counsel for the Appellant-Petitioner that the NCLT committed error while dealing with Point No. 5 relating to conversion of debentures into equity. It is stated that reasoning with reference to subsequently introduced Clause 1.4 in the Subordinate Loan Agreement by way of letter dated 18th June, 2010 was wrong. Argument is that Clause 1.4 stating conversion rights was clearly a part of Subord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificates with the Appellant along with the share transfer forms duly filled by Respondent No. 8. It was transaction in the nature of mortgage of shares. Power of Attorney was executed by Respondent No. 8 to constitute, appoint and enable the Appellant as its attorney to execute and do all acts and to complete, when required, the transfer of pledged shares in its name. Petitioner was entitled to register shares in its name and the transfer of shares was procedural aspect. The Market value of the shares of Respondent was determined by SBI Capital Markets Limited at the time of notice of invocation dated 19th May, 2016 which was Nil. Token amount of Re.1/- was mentioned and it was not objected and shares were transferred. According to the learned counsel, the NCLT wrongly held that in spite the notice of 30 days, in 15 days itself the transfer was effected. According to the counsel, NCLT failed to appreciate that transfer of shares was prerogative of Respondent Company and it was for the Company to transfer the shares within the maximum time of 30 days, which was done on 1st June, 2016. The transfer thus could not be invalidated, it is argued. (j) It is stated that Section 176 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the Appellant-Petitioner, the impugned judgement order cannot be upheld and it should be held that the Respondents mismanaged the Company and also the Petitioner was entitled to reliefs as sought in the Company Petition. Arguments of Respondents Nos. 2, 4, 6, 8 and 10 17. Against this, Respondents Nos. 2, 4, 6, 8 and 10 have argued that Annexures -A/2 to A/5, A/7 to A/18 and A/21 filed with the appeal did not form part of the record before NCLT and should be struck-off. It is stated that the Appellant-Petitioner did not state in the appeal that new documents are being produced by it nor the Appellant identified the new documents. The reasonings of the Appellant that NCLT did not give opportunity to produce these documents in response to sur-rejoinder filed by the Respondents is liable to be rejected as the Appellant has not shown that any effort was made to seek permission from NCLT to place the documents on record and that such permission was declined. The conduct of the Appellant in not identifying and stating the new documents which are produced is unfair. The NCLT drew adverse inference against the Appellant on account of the documents not being produced. Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Respondent, the contention of the Appellant-Petitioner that the NCLT could not have gone into the question as to how the Appellant became shareholder has no substance because when the Respondents disputed the rights of the Petitioner, NCLT was bound to look into the question as to how the Petitioner claimed to be the Member or shareholder. It was not necessary for the Respondents to file separate petitions and they rightly raised dispute in the Company Petition and the same has been correctly decided by the NCLT. It is claimed that separate proceedings for rectification of Register have been filed before the NCLT to remove the name of the Petitioner from Register of shareholders. This Respondent has also claimed that the Petitioner did not produce necessary documents before the NCLT like (i) Pledge Deed dated 30th November, 2006, (ii) Common Loan Agreement dated 29th September, 2006; (iii) Notice Invoking Pledge dated 19th May, 2016; (iv) Subordinate Loan Agreement dated 29th September, 2006; (v) Notice of Invocation of Subordinate debt dated 27th May, 2016; (vi) Share Transfer Certificates; and (vii) Minutes of Board Meeting dated 1st June, 2016. This defendant claimed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to documents showing that the actual control was shifted from promoters to lenders since 2005. Counsel referred to amendments carried out in the Articles of Association which show as to how the control was diverted to the lenders. It is argued that Respondent No.2 had stepped down as Chairman on 10th February, 2005. One P.V. Narsimhan (Ex. CMD of Petitioner) was appointed as Chairman of Respondent No. 1 Company at the instructions of Petitioner. The Managing Director and Director (Finance) were also appointed by the Petitioner. On 2nd March, 2005, the Appellant had issued letter setting out terms and conditions for loan which included that these posts would be controlled by the lenders and that they would be doing periodic review of transactions and the fund will flow through Trust and Retention Account (TRA). The Respondent has given further details to show the full control of the Petitioner since 2005. Thus the Respondent No. 9 wants the appeal to be dismissed. 20. Having heard counsel for both sides, we now proceed to analyse the material relating to disputes raised. In the arguments one thing is clear and there appears to be no dispute regarding the fact that since 1993 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment of Chairman, Managing Director and Director (Finance) on the Board of SMHPCL. 11. Lender s nominee Directors shall be allowed to exercise full management control for the smooth implementation of the project till the entire debt is repaid. Mechanism for such control will be finalized after discussion with other Lenders. 20. Lender s Auditors would be involved in periodic review of various commercial transactions including TRA transactions. Thus the Petitioner laid down the condition that the Petitioner and other lenders would be the persons who would appoint Chairman, Managing Director and Director (Finance) of Respondent Company and they should have full management control. C. Then, there is letter dated 18th April, 2005 (Reply Volume - 1 Page 160) where a reference was made to above letter dated 2nd March, 2005 and Petitioner inter-alia recorded that :- The following milestones would need to be achieved prior to commencement of disbursements by the lenders :- xxx xxx 4. Board Resolution of SMHPCL in a form acceptable to PFC; empowering the Management Team consisting of the Chairman, Manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nominee, Shri Ashok Gupta PFC Nominee, Shri V.K. Jain - Invitee . It is apparent from the above as to how outnumbered Respondent No. 3 was with so many other Directors being representatives of the lenders. This document shows that not only the Board of Directors was taken over but also the Management was taken over by Petitioner with other lenders, through what was called Management Team . E. Petitioner by this time, having taken a grip, the records show Amendatory and Restated Agreement dated 16th September, 2005 (Reply Volume I, Page 141) and later Supplementary Agreement dated 25th November, 2005 (Reply Volume I, Page 135), being passed. It has been argued by Respondent No. 9 with reference to these documents that by these documents, it was ensured that the Director (Finance) would be one recommended by the Petitioner and the lenders and the Management Team would also be nominated and appointed by them. The Trust and Retention Account (T.R.A.) was also to be opened in consultation with the lenders before financial closure for receiving all Equity, Project Loans etc. It is argued that the Supplementary Agreement executed ensured that for the release of ₹ 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bonds issue and equity issue. take measures to strengthen the Project team. All the funds will flow into the TRA and release in (b) above will be made as per the construction budget to be approved by the LE and accepted by the major lenders. (Emphasis supplied) Thus, in spite of earlier agreement, dated 16.09.2005, the restart of the project was being held back by not releasing funds and pushing for Amendment of Articles of Association to empower the Management Team of the lenders to exercise management control till the entire debt is serviced and repaid. Thus development and completion of the project was not the main object. Management control was targeted to ensure flow back of funds. G. Then if the Articles of Association of the Respondent Company are perused (Volume - VII, Page 1270), it can be seen that the material amendments were brought about in E.G.M. in the Articles of Association on 25th November, 2005. In Paragraph 105 of the Articles of Association, under the head- DIRECTORS , the substituted clause in the Extraordinary General Meeting held on 25th November, 2005, read as under. :- *#(d) The Board shall consist of four permanent (non-retir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the Government of India, Ministry of Power stood updated with the developments and he wrote letter dated 10th August, 2006 to the Joint Secretary, Ministry of Finance (Reply Page 164) mentioning : I may also inform that the management control of the project has since been taken over by the lenders and appropriate changes to effect this have been made in the Memorandum and Articles of Association of SMHPCL. In the process, PFC has been assigned the role of lead FI, with the approval of all the lending institutions. J. The Minutes of the Meeting of the Board of Directors held on 5th December, 2006 (Appeal Volume-XIII, Page 2690) recorded : The Chairman informed that he had himself written to the Chairman Managing Director of Power Finance Corporation Ltd. on the subject. He also mentioned that the Articles of Association does not preclude appointment of Vice-Chairman for the Company. The Chairman emphasized that such a position to Shri Mukul Kasliwal is in the overall interest of the Company as his services are still being used extensively and will be used for some more time in tackling sensitive and serious issues with the Central/State Governments. The Chairma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while lending money to the Respondent Company slowly and gradually took over the actual management of the Company as well as the finances on the plea that they would get the Project completed and implemented. In this, we are not absolving Respondent Promoters of Respondent No.1 also, as they had a responsibility and a duty to perform. Promoter - Respondents appear to have simply surrendered to the demands of Petitioner and other lenders when it was their responsibility to manage the Company as per the Companies Act. The incomplete project had public interest and pubic money involved taken through Banks. The Project was taken up from State Government with benefit of public in view. 23. Before the NCLT, Point No. 2 raised was whether it could decide the dispute raised by the respondents relating to shareholding of the Petitioner and other lenders. The respondents raised dispute that the pledge had not been validly invoked by the Petitioner and the other dispute was that there was no valid conversion of debt. The Petitioner claimed in the petition that it was holding 23.32% shares in the paid-up share capital of the Company. The NCLT, in order to consider the right claimed by the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceivables as collateral security but could not acquire ownership of the goods pledged to itself. NCLT observed that although the Petitioner claimed acquisition of shares by invoking pledge, it had not placed on record the deed of pledge as well as the notice invoking pledge. NCLT also observed that when notice given was of 30 days, if the shares had been got transferred in 15 days itself, the invocation of the pledge was not valid. The NCLT found that (1) the invocation of pledge of shares had not been done validly; and (2) even if it was to be said that invocation was validly done, the transfer of shares was not according to the provision of Section 56 of New Act. ADDITIONAL EVIDENCE FILED IN APPEAL WITHOUT LEAVE 26. In the course of present appeal, the Appellant-Petitioner filed documents which were not filed before NCLT, without taking leave of this Tribunal. Both the parties however have argued relating to these documents. We are not impressed by the argument of the learned counsel for the Appellant-Petitioner that National Company Law Tribunal Rules do not bar filing of new document(s). An appeal filed against an impugned order can be found fault with only on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record of NCLT/Tribunal below have been raised/filed. 27. Although we have recorded the above finding, in the present matter as both the sides have extensively argued even with regard to additional documents which were not before the NCLT, we are proceeding to consider these documents in the interest of justice as looking to the facts of this litigation, we find that it would not be in public interest to remand this matter. Remand would endlessly delay the matter and looking to the Project of dam which is stuck, it is necessary in the interest of justice and public interest that finality is reached in this Company Petition, which was filed making allegation of oppression and mismanagement . 28. The copy of notice dated 19-05-2016 invoking rights over the shares pledged has been filed in this appeal by the Petitioner-Appellant (Volume-V Page 848). It referred to the Deed of Pledge dated 30th January, 2006 (Volume IV at Page 575). It referred to Addendum dated 16th November, 2010 and the Deed of Pledge dated 14th January, 2011 for 29,17,20,330 fully paid-up equity shares held by Respondent No. 8, the pledgor. The notice was addressed to Respondent No. 8 and Respondent No. 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terestingly, Paragraph 22 records that this action was being taken without prejudice to the rights of the Petitioner and other lenders in relation to the amounts due and payable by the Company under the Loan Agreements. Then there is Board Meeting dated 1st June, 2016 (Volume-V Page 865). This meeting had two persons acting as Chairman for different items and then there were Director (Finance) and nominee Directors of the investors. The Promoter Director, Mukul Kasliwal, was not present. The Minutes show that he had sent an e-mail giving his views on various agenda items and wanted the same to be recorded verbatim in the Minutes. The Board did not record the same. Apparently, he was opposing. Shri Rajiv Dak, Alternate Director to nominee of Strategic Investor also opposed the proposals taken up in this meeting. The Minutes show that these Chairmen and the Directors were aware that the Registrar of Companies (ROC) has on 29th April, 2016 flagged the company as Management Dispute and had even issued notice seeking various clarifications/documents/records. The Board of Directors proceeded in Item No. 134.11 to consider the notice sent by the Petitioner for transfer of shares an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32. The Government of Madhya Pradesh was having a second charge on the shares as seen in Deed of Pledge of Shares dated 30-11-2006 but this was fully ignored. The Appellant-Petitioner had got the Articles of Association amended. Article (2) of the Articles of Association was amended (Volume-VII, Page 1270 at 1276) to prescribe that the pledged shares of S. Kumars which had been pledged to the Lead Team Loan Lenders shall mean that S. Kumars had given right to vote in any meeting of shareholders also to the Lenders until the entire loan was repaid. Amendment to this effect had been brought in the definition of Pledged Shares of S. Kumars . Amendment had been brought to Article 89(2) also to provide that voting rights attached to shares pledged shall be exercisable in the pledgor and members name and on behalf of pledgee. How merely because the shares were pledged, right of the members to vote was taken away is surprising. Looking to the Minutes of the Board of Directors dated 1st June, 2016, it is clear that the nominee Director of the Petitioner and other lenders also participated. Additionally, there was invitee, the General Manager of Petitioner, Mr. P.K. Sinha also presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the subordinate loan agreement by way of letter dated 18th June, 2010, i.e. one day after EGM dated 17th June, 2010, is wrong as the document shows that clause was there since before. As the subordinate loan agreement itself was not before the Tribunal, which Appellant could have filed but did not, this may have happened but much will not turn on this. 35. In this appeal, the Appellant-Petitioner filed copy of the Notice dated 18th December, 2015 (Volume - V at Page 859- which had not been filed in NCLT). This document was Notice for conversion of loan into equity sent to the Board of Directors. Reference was made to Clause 1.4 of the subordinate loan agreement (Volume-III at Page 550) which prescribed that on the notice of conversion, the borrower (i.e. Respondent No. 1) shall allot and issue requisite number of fully paid-up equity shares at par to the Petitioner and the Petitioner shall accept the same in satisfaction of the principal amounts of the subordinate loan to the extent so converted. By this notice dated 18th December, 2015, the Appellant claimed Principal amount of ₹ 375 Crores with interest was due. It called upon Respondent No. 1 to issue 13,74,20,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the increase of the subscribed capital of a company caused by the exercise of an option as a term attached to the debentures issued or loan raised by the company to convert such debentures or loans into shares in the company. Provided that the terms of issue of such debentures or loan containing such an option have been approved before the issue of such debentures or the raising of loan by a special resolution passed by the company in general meeting. (Emphasis supplied) If the notice (Annexure A12 - page 859) by Appellant is seen, the Appellant referred to the subordinate loan agreement dated 29th September, 2006 Clause 1.4 to invoke conversion of the loan into equity shares. The Appellant claimed that the Company is in default of repayment of aggregate principal amount of ₹ 375/- crores disbursed under the subordinate loan agreement dated 29-09-2006 from time to time and also the interest thereon. The subordinate loan agreement dated 29-09-2006 (Annexure A6) in turn referred to the background that the borrower has sought financial assistance from the Appellant and other Lenders as defined in the common loan agreement dated 29-09-2006. The said common loan a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not maintain petition under Section 241 of the New Act. 40. Lot of arguments have been made by the counsel for both sides with reference to Clause (a) of Section 242 of the New Act. The relevant portion of that provision is as under : 242. Powers of Tribunal.- (1) If, on any application made under section 241, the Tribunal is of the opinion- (a) that the company s affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and (b) the Tribunal may, with a view to bring to and end the matters complained of, make such order as it thinks fit. 41. The arguments of the counsel for the Respondents are that the past and concluded acts could not be made grievance of. The learned counsel for the Petitioner-Appellant, however, submitted that the affairs which have been or are being conducted in a prejudicial or oppressive manner both can be looked into and thus past affairs can also be considered. We find that have been relates to present perfect tense. It relates to action that began some time in the past and is still in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided in Sub-Section 1 voting right cannot be denied on any other ground. Even after coming into force of the new Act, how such Articles of Association can continue to exist restricting the right of a member who has pledged his shares to another is not shown. There are yet other Articles which also do not appear to be in consonance with either the Old Companies Act or New Companies Act. We have already reproduced earlier Articles 108 and 109 (Para 21 G) which were made subject to Article 105 and although Section 260 of the Old Act was referred, the benefit of Old Section 260 appears to have been taken away by adding proviso laying down that the appointment of Additional Directors will require approval/consent of majority of the lenders and PFC. With regard to casual vacancies of the Directors also, the amendment made provisions that it can be filled up only with the consent of PFC and majority of lenders . If this is so, clearly there was no right and discretion as such left with the promoters and shareholders of the Company to take decision on these counts and even the Board created was to act as per what Petitioner and Lenders desired. Thus the overriding effect of the Act was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued converting loan into equity. With such restrictive articles which will not let even fresh equity flow, there appears hardly any scope for the original promoters and shareholders to take charge of the company affairs so as to complete the Project. The Petitioner naturally is interested in such amended Articles of Association and Respondents also do not appear to be enthusiastic to get status quo ante restored in the Articles of Association nor inspire confidence that if we strike down these amendments made on 25-11-2015 (and subsequently) they can take charge and complete the project which attracts public interest. Promoters have not brought to our attention that at any time they opposed, or stood up to the gradual takeover. No opposition worth the name in Board Meetings is shown. Both sides have not brought to our attention the Resolutions which approved these amendments on 25th November, 2005 and thereafter to consider respective roles of parties, although so many other documents have been loaded on Record. HIGH LEVEL COMMITTEE REPORT 45. In the appeal (Volume -V at Page 798), there is letter dated 2nd May, 2015 submitting report of the High Level Committee const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding is correct as the prayers made in the company petition itself show that attributing oppression and mismanagement to the Respondents, what was being tried to be sought were directions to various Government Authorities to stop them from taking action, without making those authorities party. We have reproduced the prayers made by Petitioner and reading of the same itself shows that the petition is not bonafide. It is unthinkable that NCLT could direct these so many authorities not to do their job. Keeping such petition pending and now this appeal pending must have been used for telling the concerned Registrar of Companies, Income Tax Authorities as well as authorities of industrial and labour laws to refrain from actions as the litigation is pending. It is surprising how the Appellant - Petitioner can claim that it should be given declaration of condonation/granting immunity to violations of various provisions of the Companies Act with regard to its employee, Gauri Shankar Patra, and earlier nominee Directors. With R.O.C. after Petitioner and Promoters with enquiry under Section 206 of the New Act, the Appellant s object in filing Petition appears to be to stop and delay actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also Government of India Enterprise, that forensic audit of accounts should be done. Hundreds of Crores of Rupees are involved and the Project is still incomplete even after 2 Decades and Company is declared Non-Performing. Audit and Investigation should give clear picture. Letter dated 28.04.2016 of Government of M.P., Energy Department (Volume V - Page 883) sent to Petitioner refers to the stopped work on MW Maheshwar HEP since last four years and that since then, there is no maintenance of dam, power house, hydraulic gates etc. Letter records that dewatering of power house has also been stopped and hydraulic spillway gates are not being maintained. The letter adds that, failure of these gates may endanger safety of dam and would affect population at downstream and upstream side. The letter then asked Petitioner to take steps regarding maintenance. The letter makes evident seriousness of the issue and matter cannot be left to present warring parties. The Central Government and M.P. State Government need to urgently find a way out in public interest, to get the project completed. We are not directing appointment of administrator to avoid further litigation on that basis and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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