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TMI Blog2018 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... Section (6) of Section 169 of the old Act provided that if the Board does not, within 21 days from the date of deposit of a valid requisition in regard to any matters, proceed duly to call a meeting for the consideration of those matters on a day not later than 45 days from the date of the deposit of the requisition, the meeting may be called by the requisitionist themselves. Although the Petitioners were part of the Board of Directors, the requisition (Page 235) of special notice for removal of Directors was given by the Original Petitioners as shareholders. It is not that any Board Resolution as such had been passed. In such circumstances, looking to the reasoning recorded by the learned NCLT and considering the provisions of Section 169 as mentioned above, we do not find that the decision recorded by the learned NCLT that removal of Respondents 2 and 3 was not valid, could be found fault with. Thus we do not interfere on this count also. Parties continue to make allegations and counter allegations against each other with regard to the EOGM called by Respondents 2 and 3 on 27.01.2010 and the EOGM called by the Original Petitioners on 05.03.2010 and whether or not the allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.I.S. Cheema, J. : Both these appeals have been filed by original Respondent Nos.2 - Hasmukhlal Madhavlal Patel and 3 - Dilipkumar Madhavlal Patel against the same impugned order dated 17.05.2017 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad ( NCLT , in short). In the NCLT, TP 197/2016 (new) CP 16/2012 (old) was filed by Manish Vipinchandra Patel and Krunal Vipinchandra Patel (Original Petitioners 1 and 2). Before this petition was filed earlier, Company Petition TP 10/2016 (new) (CP 86/2010) (old) had been filed by Kiritkumar Ochachhavlal Sheth (Respondent No.4 in T.P. 197/2016). Both the Company Petitions raised grievances of oppression and mismanagement. The NCLT disposed both the Company Petitions by common Judgement. Parties have been referred in the Judgement in the manner in which they were arrayed in TP 197/2016. We will also refer to them in the same manner as arrayed in TP 197/2016 and as indicated above against names of parties of CA 272/2017. 2. The parties have been referred by the NCLT also by their group names and which may be reproduced as under:- Sl. No. Parties G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eetings to increase authorized share capital. The Petitioners sent letter dated 18.12.2009 (Volume II page 389) to Registrar of Companies to mark the Company as disputed company. Petitioners with the support of Sheth Group gave Resolution on 22nd February, 2010, under Section 169 of the Companies Act, 1956 (old Act in short) for removal of Respondents 2 and 3 from the posts of Directors. Requisition dated 23.02.2010 was given to call EOGM on 05.03.2010. Notice was given on 23.02.2010 to contesting Respondents. Public notice of EOGM was also given in newspapers on 25.02.2010. In the EOGM dated 05.03.2010, Respondents 2 and 3 were removed as Directors. The Petitioners and Sheth Group have made allegations of siphoning also against contesting Respondents. 5. Original Petitioners claimed before NCLT that after the EOGM dated 05.03.2010, Sheth Group filed TP 10/2016 (CP 86/2010) in collusion with HM Patel Group. 6. Original Respondent No.4 who filed TP 10/2016 claimed before the NCLT that it was rather the HM Patel Group and VP Patel Group who were working against the interest of the Company. The Petitioners had filed Special CA 6090/2010 before High Court of Gujarat which came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Respondent No.1 Company was developed by them. Contesting Respondents further claimed that in 2008-2009, Sheth Group had taken away more than ₹ 98.72 lakhs from the Company. Further allegation in the nature of siphoning of money by Sheth Group were made for the year 2008-2009. These contesting Respondents claimed that the Original Petitioners and Sheth Group prepared frivolous notice on 23.02.2010 for removal of contesting Respondents from Board of Directors and on 22.02.2010 they falsely informed the banks regarding disputes to mark the bank accounts as disputed. They had accordingly moved the Registrar of Companies also. These Respondents submitted particulars regarding financial transactions done by them. It was claimed that there was shortage of funds in the Company and the Company through Respondent No.2 approached Bank of Baroda on 20.11.2009 to provide further loans. The Bank by letter dated 24.11.2009 asked the Company to maintain good, debt, equity ratio and to increase the share capital. The matter was discussed in the Board meeting and it was decided to increase further capital. Notice was given on 24.12.2009 to shareholders to consider increase in the share cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed that no share had been offered to them. The Petitioners and Sheth Group both claimed that they had written letters on 07.01.2010 and 08.01.2010 to the Company enclosing Demand Draft seeking that every communication should be sent to them by Registered Post with acknowledgement due. The Demand Drafts were deposited by Company in its accounts. Although they had made a request for notices by Registered Post acknowledgement due no such notice with acknowledgement due were sent. They claimed that contesting Respondents only made a show of sending of notices. When some of the envelopes were opened they contained papers in respect of working of the Company and not regarding Extraordinary General Meeting. They could show such envelopes. It was thus claimed that the contesting Respondents had committed fraud as the envelopes did not contain the alleged notices of EOGM. 13. Considering the rival cases put up by the parties, the NCLT framed following points for consideration:- ( i) Whether dismissal of CA 39 of 2011 would have any effect on the reliefs prayed in CP 16 of 2012? ( ii) Whether filing of CP 16 of 2012 by VP Patel group without filing their reply in CP 86 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing shareholders as on 18.12.2009 in proportion to their shareholdings and in case any of the shareholders is not willing to subscribe for additional shares then those shares shall be allotted to other shareholders taking their option again proportionate to their shareholding. NCLT set aside the removal of Respondents 2 and 3 as Directors. It gave further directions of audit of accounts for Financial Year 2009 2010 and steps to be taken when the report of Auditor becomes available. It appointed M/s. A.R. Sulakhe Co. of Ahmedabad as Auditors. Directions were also given regarding appointment of independent valuer A.S. Gupta Co. of Ahmedabad to assess fair value of shares as on the date of filing of the petition. It directed that pending completion of the entire process, there shall not be any alienation of properties both movable and immovable of the Respondent No.1 Company. It was further directed that pending completion of the entire process as per the orders of the NCLT, there shall not be any allotment of shares or transfer or sale of shares except as indicated. Further incidental directions were also given. 18. Against the impugned order, the Original Respondents 2 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel, the Respondents of the appeals cannot challenge the findings which are in favour of the present Appellants. It is argued that the NCLT found that Section 160 of the old Act had not been complied and so removal of the Appellants was set aside. The Respondents have not filed appeal and so this finding should be treated as final. 20. The PCS (Practicing Company Secretary) for the Appellant in CA 273/2017 adopted the argument of the learned counsel for the Appellant in CA 272/2017 and submitted that the various forms submitted to RoC were pending due to the Company in dispute. 21. It has been argued on behalf of the Original Petitioners that record shows that the Appellants Original Respondents 2 and 3 issued notice of EOGM along with offer to subscribe for new shares presuming that the attempt to increase shareholding would be passed. It is stated that such procedure is not permissible. According to him, the Original Petitioners had asked contesting Respondents to send communication by Registered Post AD and keeping in view Section 53 of the old Act, it was necessary for Respondents 2 and 3 to send communication by Registered Post AD. This was not done and thus, acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Original Respondent No.2 - Hasmukhlal Madhavlal Patel to the Directors convening meeting on 18th December, 2009 with Agenda Item No.4, being - to consider increase in authorized share capital of the company from ₹ 1 crore to ₹ 2 crores. The Agenda refers to letter dated 24th November 2009 (Page 65) received from Bank of Baroda advising the company to increase share capital to minimum level of ₹ 2 crores with reference to the proposal for term loan. Then there is Notice/Letter from the Respondent Company to the shareholders (page 68) attaching copy of notice of Extra Ordinary General Meeting of shareholders as approved by Board of Directors on 18.12.2009, informing that the EGM is scheduled on 27.01.2010. The Notice informs the shareholders that as decided in the Board Meeting, Company has proposed to issue further shares to existing members in the ratio of 1:1 and, therefore, interested members would be required to exercise their rights on or before 5th February, 2010. The Notice states that it was Advance intimation and eligibility to apply for shares will be subject to approval of the increase in authorized share capital by the shareholders in EGM on 27.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Patel Group and HM Patel Group before NCLT took up stand that the postal covers sent did not contain papers of Notice but they contained some other communications relating to the company. Thus in effect they tried to claim before the NCLT that the HM Patel Group was playing fraud. However, as the impugned order shows, the learned NCLT had taken up the contention on these grounds and although it was demonstrated before the NCLT that on opening the envelope cover, it had some papers other than Notice of EOGM, NCLT found that bare perusal of the envelopes which were being shown, it could be seen by naked eye that they were once opened and again sealed. Looking to such approach of these litigants, we will not like to trust their contentions that they did not get notice of the EOGM. It appears that on 18.12.2009, in Board Meeting there was a decision taken to go to EOGM for increase in authorized share capital. Original Petitioner No.1 Manish Vipinchandra Patel sent off a letter on 18.12.2009 itself to the Registrar of Companies (Volume II Page 389) and raised various grievances with the Registrar of Companies and also inter alia mentioned that original Respondent No.2 - Hasmuk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition on 22.02.2010 (Page 235) along with draft Resolution (Page 236). They appear to have on the same day sent off letter to Banks to suspend withdrawal. The requisition (Page 235) dated 22nd February, 2010 from the Petitioners to the Board of Directors claimed that they were giving special Notice of their intention to propose the attached Draft Resolution (Page 236) as ordinary resolution for removal of Original Respondents 2 and 3 as Directors of the Board and that pursuant to the provision of Section 169 of the old Act they proposed to conduct Extra Ordinary General Meeting on 5th March, 2010. They requested the Board of Directors to do needful to give effect to the Special Notice. It appears that they also published in newspapers (Pages 239 and 240) the calling of the EOGM on 05.03.2010. The Minutes of the said EOGM dated 5th March, 2010 have been filed (Page 251). 32. The learned NCLT referred to Section 169 of the old Act to find fault with this procedure adopted by the Petitioners. The NCLT observed as under: It is clear from the material on record that, without calling any Board Meeting to consider the requisition for removal of respondents 2 and 3 as directors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the initial part relate to the Respondent Company, Ambika Food Products Pvt. Ltd. and some Shree Ambika Rice Mills . Then it appears that some arbitrators resigned and then there is another document (Appeal - page 94) with the translation reading something like Distribution Agreement of joint property of three sons of Madhavlal Damodardas Patel . This document is dated 18.07.2010 and at page 102 shows to have been signed by Original Petitioners and Original Respondents 2 and 3 as well as Vipinchandra Patel. The arbitrators and advisors also appear to have singed. The contesting Respondents 2 and 3 claim on the basis of this document that the Respondent Company has come to them. These documents may be efforts between some or the other groups of the Company to settle between them. Company as such does not appear to be party, nor Company as such appears to have accepted or adopted the documents. Then there appears to be compromise pursis dated 11.08.2010 (paper book page 112) and Order passed in the Special Civil Application No.6090 of 2010 by the Hon ble High Court of Gujarat at Annexure A/13 (Page 113) regarding the compromise between the Original Petitioners and contesting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creased share capital on its merit. It has been argued by the learned counsel for the Appellants (Original Respondents 2 and 3) that the learned NCLT in concluding part of para 78 of Impugned Order observed therefore, increase in share capital and allotment of shares itself is not an act of oppression of the rights of the other shareholders viz VP Patel Group and Sheth Group. It is argued that once having made such observation, the NCLT erred in its operative Order para 92(a) where it was directed that the allotment of shares in respect of increased share capital shall be made to all the existing shareholders of the Company as on 18.12.2009 in proportion to their shareholding. According to the learned counsel for Appellants the Original Respondents 2 and 3, this part of the impugned Order needs to be set aside as well as the directions for valuation of shares. Against this, the learned counsel for the Respondents in Appeal submitted that apart from their challenge in NCLT to the increase in share capital, they had questioned the manner in which the increased share capital was allotted, and so Impugned Order on that count may not be disturbed. 39. If the impugned Order is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 149 to 162 in that Appeal as the application form which had been submitted by members of the HM Patel Group. It has been argued that these documents are application forms of applicants to get equity shares allotted in the Respondent Company pursuant to the decision taken by the Board of Directors in the meeting held on 18th December, 2009 which would be before EOGM. These forms are dated 4th February, 2010 and if these documents are seen, they show that the applications were not in the ratio of 1:1 but much much beyond that. It is argued by Respondents in Appeal, that example would be the form submitted by Disha Ben, wife of Original Respondent No.2 having just 20 equity shares applying for 98,000 equity shares. It has been argued by the learned counsel for Respondents 2 and 3 in this Appeal that these members of the HM Patel Group calculated in advance and applied so as to consume the whole of increased share capital, anticipating in advance that they can get it. It has been argued by the learned counsel for Respondents 2 and 3 in Appeal (Original Petitioners) that in this regard the Articles of Association need to be seen. The counsel referred to the Articles of Association (Page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2005) 11 SCC 314 to argue that only one pre-emptive offer is required to be made which is otherwise to be accepted or not at all. We find, in the facts of present matter that proper and legal procedure for distribution of the additional shares after increase in share capital has not been properly followed and thus, the Board Resolution dated 9th February, 2010 (Page 137 of CA 273 of 2017) regarding allotment of increased share capital cannot be upheld. Thus it cannot be said that the offer as made was legally executed. NCLT rightly directed allotment of shares in respect of increased share capital to be made to all existing shareholders of the Company as on 18.12.2009. 43. Looking to the submissions, we find substance in what the learned counsel for Original Petitioners is submitting. Thus, although the learned NCLT did not record in so many words as to why it was directing that the allotment in respect of increased share capital still needs to be made, there is no reason why we should interfere with the above direction of NCLT in para 92 (a) of the impugned order. 44. One of the arguments raised by the learned counsel for the Appellants (Original Respondents 2 and 3) is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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