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TMI Blog2018 (4) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereinafter referred to as 'the Tribunal'), Mumbai Bench, Mumbai in Company Petition No.44 of 2015. In both these appeals the facts are the same, parties are the same and similar relief has been sought in both the appeals, therefore, we will dispose off these appeals by a common order/judgement. 2. The Tribunal vide its impugned order dated 3rd October, 2017 has held as under: i) Since these Respondents held Board Meeting without calling one of the directors representing majority of the shareholding of the company and general meeting was held without any notice to the Petitioners for increase of authorized share capital, the increase happened in the EOGM held on 28.11.13 is hereby held as invalid. ii) Allotment of shares to outsider is hereby held as invalid. iii) The allotment of shares made to R2 and R3 is bad in law and prejudicial to the interest of the Petitioners. iv) This Bench hereby declares holding of such meeting is bogus because the date of meeting in the notice purportedly sent to P2 is different from the date shown in Form-32, therefore Form 32 filed showing P2 vacated office as invalid. v) Allotment of shares to R5 itself is when said bad, the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners shall pay interest @10% over the amount payable to R5 after completion of three months as stated above. 4. The brief facts of the case are that the 2nd and 3rd respondents in appeal had filed a Company Petition No.44/2015 as petitioners before the Tribunal under Sections 397, 398 read with Section 402 of the Companies Act, 1956 being aggrieved by the acts of oppression and mismanagement committed by the appellants (2nd to 4th respondent in Company Petition) in 1st Respondent. It was also alleged in the company petition that the appellants in collusion and connivance with each other, have illegally and without any sanction and authority, filed false and frivolous documents with the Registrar of Companies (ROC) and on inspection of records available with ROC, it came to the knowledge that the appellants herein have illegally and unauthorisedly allotted shares of 1st respondent to themselves as well as to a third party and also fraudulently removed 3rd respondent from the post of director of 1st respondent. 5. 1st respondent is a company incorporated under the Companies Act, 1956 on 12.01.2005. It is engaged in the business of manufacture of tools and machineries used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent who will thereafter invest its time and resources to trade the final products in the market. As per the understanding, 1st respondent was entitled only to the processing charges for the above manufacturing and nothing else. 9. Being majority shareholders, 2nd respondent incurred huge expenditures to meet out the day to day expenses of 1st respondent and paid monies towards the salary of employees of the company. That the 2nd respondent made various payments with respect to the business of 1st respondent and the payment so made have not been accounted for. 2nd and 3rd respondents have been making all efforts to augment the business of 1st respondent, the appellants have been showing indifferent attitude towards the investments made by the 2nd and 3rd respondents in 1st respondent. The appellant issued a Demand Notice dated 28.2.2015 claiming a sum of USD 593605 from the 2nd and 3rd respondent to which the said respondents replied thereby reiterating the understanding between the parties referred above. The appellants failed to honour their obligations under the loan agreement and even did not pay the interest. The appellants induced the 2nd and 3rd respondents to issue wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel next argued that the allotment of unsubscribed portion of the rights issues of shares of a private company to a non-shareholder of that private company is valid and the Tribunal can not set aside the allotment of unsubscribed portion of the rights issue of shares of a private company to a non-shareholder and the company is not bound to allot right issue of shares of a private company to a non-shareholder at a premium. It is further argued that the appellants did not dilute the shareholding of the 2nd and 3rd respondent but the 2nd and 3rd respondent did not subscribe to the rights issue of shares and therefore unsubscribed portion of the rights issue was allotted to 4th respondent (appellant in appeal No.373/17), therefore the shareholding of 2nd and 3rd respondent got diluted. 13. It is further argued that the Tribunal cannot adjudicate whether the private company actually needed the funds when it decided to go in for a right issue of shares. It is further argued that the 2nd and 3rd respondent made the enquiries regarding the company and they made enquiry only when they received notice of their outstanding dues to the 1st respondent. It is stated that the Tribunal gav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company. The Tribunal has also wrongly reinstated 3rd respondent after being aware about his intentions while being in the Management and Tribunal has also wrongly held that the appellants shall not be director of company and the forensic audit is to be conducted from 1st April, 2013 till date and the exit route will be provided to the appellants on fair valuation taking 31st March, 2017 as the cut off date. 17. It is argued that the Tribunal has not considered that the respondents are liable to pay outstanding amount due to the company for the invoices raised by the company for processing charges. 18. The respondents stated that sending a calendar of events cannot be called as service of notice upon them. The respondents stated that the notice was sent by post from India to America one day before the Meeting. They further stated that can anybody believe that the postal notice would reach to US from India the next day. It is stated that 1st respondent is private company and four elements make a private company different from public limited company i.e. restriction of right to transfer of shares, limiting the number of its members to 50, prohibiting any invitation to the public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in appeal No.373/2017) was removed from the directorship position with immediate effect from the date of the order. 20. It is further argued that the ex parte interim order dated 17.10.2017 passed by the Appellate Tribunal may be vacated as no notice was issued to the 2nd and 3rd respondents. The company appeal filed by the appellants were served on respondent on 18.10.2017 at 4.30 PM. 21. We have heard the learned counsel for the parties and perused the record. 22. The appellants have raised an issue that when a 'calendar of events' which discloses when meetings of the Board of Director of Company are to be held is sent is sufficient notice to the shareholders within the meaning of Section 172 of the Companies Act. The Respondents have argued that no notice of Board Meeting was received by them. On hearing both the parties at length, we have come to the conclusion that whenever any meeting is held, either Board meeting or General Meeting, duty is cast upon the persons holding meeting to send the respective notice with Agenda items as prescribed under the Companies Act. Since no such notice has been received by the 2nd and 3rd respondent, sending a calendar of events cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.10.2013? More than one month fifteen days left in between, they did not admittedly send any notice, perhaps, to ensure that it should not reach to the Petitioners in time, so that they could not attend to the meeting on 28.11.2013. This notice was not sent by e-mail. It was sent by post from India to America one day before the meeting. Could anybody believe that a postal notice would reach to US from India on the very next day? Would anybody expect that a man living in America, even if it is assumed that it was reached on 27.11.2013, would be able to reach to the meeting scheduled to be held on the very following day? All these actions of the respondents can in clear terms sound that these respondents applied every trick of the trade to ensure that Petitioners do not to attend the meeting dated 28.11.2013. 15.Since these Respondents held Board Meeting without calling one of the directors representing majority of the shareholding of the company and general meeting was held without any notice to the Petitioners for increase of authorized share capital, the increase happened in the EOGM held on 28.11.13 is hereby held as invalid. Moreover, though it has been categorically menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we read section 81, it is a section deals with rights issue for allotment of shares offering them to the holders of the equity of the company in proportion to the capital paid up on those shares as on the date of subscription, if any of the existing shareholders, failed to respond to the offer of allotment within 15 days from the date of notice, then it can be deemed as declined by such existing shareholder/s, meaning thereby, these shares could be issued to the remaining existing shareholder/s, this section 81 (1) does not deal with as to the procedure to be followed if such shares are to be issued to outsider. A separate sub-section has been carved out as section 81 (IA) saying that if such shares are proposed to be offered to any person/s, whether or not those persons are covered under sub-section 81(1), a special resolution has to be passed for allotting those shares to a person other than the persons covered under sub section 81(1). Of course, under sub section 81 (3), it has been said that this proposition is not applicable to a private limited company. But, for it has been specifically incorporated in the Articles of Association of this company that it requires to pass s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants and it was not mentioned in the notice that what meetings have not been attended by 3rd respondent and when these meeting were held. Form No.32 filed by 1st appellant, it appears as if Board Meeting was held and resolution was passed on 20.03.2014 with a confirmation that 3rd respondent is not associated with the company w.e.f. 14.12.2013. All these documents shows that as per notice sent by 1st appellant to 3rd respondent on 23.1.2014, meeting should have been held on 30.01.2014, whereas in Form 32 it was shown as meeting held on 23.12.2013. Therefore, both the documents are contradictory and 1st appellant is not certain on which date meeting was held, therefore, the 1st appellant failed to establish that a Board Meeting was held to pass a resolution for invoking Section 283(1)(g) to show deemed vacation of 3rd respondent of 1st respondent. Therefore, we hold that date of meeting in the notice purportedly sent to 3rd respondent is different from the date shown in Form 32. Further we have already expressed our opinion that calendar of events is not a sufficient notice, non-attending of the meeting as per calendar of events cannot be held against a director for not atten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and win win situation for both sides if the petitioners are directed to ascertain from records the infusion and utilization and if satisfied, immediately pay back the funds infused by R5 within two months of the order in these appeals. The disputes qua Respondent No.5 shall then rest at that stage. The forensic audit directed by NCLT will then be done for other Respondents. However, if the original petitioners, for any reason, do not pay back the funds infused by original R5 within the above period, Company should be liable to pay interest if the auditor later finds that amounts are liable to be refunded as per directions (iv) of the impugned order, in which case the three months clause put by the NCLT deserves to be deleted, ad directions modulated. 29. Hence for above reasons we pass the following order: i) CA(AT) No.338 of 2017 is disposed in terms of Order being passed in CA(AT) No.338/2017. Parties to bear their own cost. ii) CA(AT)No.338 of 2017 is partly allowed. Direction No.(i) to (iii) of the impugned order passed by NCLT Mumbai are maintained. iii) In place of Direction No.(iv) recorded by NCLT, following direction is given: "iv(a) The original petitioners may ..... X X X X Extracts X X X X X X X X Extracts X X X X
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