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TMI Blog2018 (10) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as Managing Director or Director, admittedly they never gave any Notice of any such meetings to the original Petitioner. They blow hot and cold in the same breath. In the face of these documents put up by them, Respondents also claim that as Petitioner transferred all his shares on 27.04.2011, he ceased to be Director in view of Articles of Association and no Notice was required to be given to him. Reading of these various minutes and the forms submitted at the hands of Respondent No.2 and the case put up by Respondents shows that the documents are not beyond suspicion. It is the case of the original Petitioner that after coercing him to sign the forms, the Respondents with the help of Respondent No.2 went on submitting Forms to the ROC and it was only when in the Civil Suit, the Respondent No.4 filed Affidavit that he came to know about what Respondents were up to. Coming to the question of coercion of the original Petitioner, we have purposely referred to the Company Petition and Reply of the Respondents which was filed in NCLT, in some details and we have purposely reproduced portions from the Affidavit of Respondent No.4 which he had filed in the Civil Suit and we fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 by the National Company Law Tribunal, Division Bench, Chennai (in short, NCLT ). The Company Petition was initially filed before Company Law Board, Chennai Bench, Chennai and was earlier dismissed as not maintainable by CLB, on 20.11.2015. The said Order was set aside by the Hon ble High Court of Kerala, Ernakulam in CA 13/2015 vide Judgement and Order dated 17th June, 2016. The matter was remitted back to the NCLT and now NCLT has by the Impugned Order allowed the Company Petition which had been filed under Sections 111, 397, 398, 402 and 406 of the Companies Act, 1956 ( old Act , in short). Aggrieved by the Impugned Order, the present Appeal is filed by the 3 Appellants (Original Respondents 2, 3 and 4). The Respondent No.2 in this Appeal M/s. Meezan Realtors Private Ltd. (hereafter referred as Company) is the Company relating to which the petition was filed. 2. We will refer to the parties in the manner in which they were arrayed before the NCLT. Pleadings of Petitioner (Respondent No.1) 3. Respondent No.1 original Petitioner went to the Company Law Board ( CLB in short)/NCLT with the Company Petition claiming in short that the Respondent Company was incor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent Company. Petitioner claimed that this was done to wrest control of the valuable property of Respondent Company and to highjack the profits. The Petitioner in Petition referred to the contents of the Affidavit filed in that suit that in a meeting of Board of Directors purportedly held on 27th April, 2011 under the chairmanship of one Panakkadu Hameed Ali Shihad Thangal (hereafter referred as - said Thangal), it was resolved to entrust the entire control of all the businesses of Meezan Group with Respondent No.4. Petitioner claimed that the said Affidavit also mentioned regarding purported Board Meeting dated 27th April resolving to transfer entire share of Petitioner to Respondent No.4. Petitioner claimed that said Thangal was unrelated person of the Company and could not have chaired the Board Meeting and Petitioner claimed that by purported Resolution by imaginary entity, power of management of the Company cannot be dealt with and are not binding on the Company. The petition then referred to further contents of the said Affidavit whereby Respondent No.4 sought to substitute himself in place of the Petitioner, in that litigation. Petitioner claimed that Respondent No.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y excluded from list of shareholders in the Annual Returns filed for financial year ending 31st March, 2011; Form 20B recorded transfer of shares to Respondents 2, 3 and 4 which could not have been done without authority of the Board which alone could authorize transfer of shares. Petitioner claimed that Respondent No.2 had no right to induct any other person as Director. Respondent No.2 in collusion with Respondent Nos.3 and 4, fraudulently without knowledge of Petitioner clandestinely and illegally transferred shares of the Petitioner to the 3rd Respondent. The impugned filings were done by Respondent No.2 on 12.09.2011. Petitioner claimed that Respondent No.4 fraudulently acquired shareholding of the Petitioner. The prayers of the petition read as under:- 1) Declare that the acts set out and complained of herein are acts of mismanagement and are oppressive to the Petitioner. 2) Set aside the transfers purported to have been made to the 4th Respondent by the Petitioner and the 2nd Respondent and the subsequent transfers made by the 4th Respondent to the 2nd and the 3rd Respondent and thereby direct rectification of register of members. 3) Declare as void all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany) and Walker Foot Care, etc. which are under same management. According to them, Meezan Realtors and Meezan Jewellers although separate legal entities, management and control of both are in the hands of same persons. The counter claimed that the Company had authority to decide who should represent the Company in the suit. They claimed that the Affidavit in the suit filed by Respondent No.4 referred to said Thangal regarding his leadership and not Chairmanship. It was pleaded that said Thangal did not chair the meeting. 4.2 We reproduce para 19 of the counter which reads as under: 19. Further, when the petitioner was the Managing Director, the first respondent company had collected ₹ 2,24,10,000/- (Rupees two crore twenty-four lakh and ten thousand only) as Share Application money from prospective investors, but did not allot the shares or even increase the authorised capital of the first respondent company. When the investors came to know about the mala fide intent of the petitioner (who was also the Managing Director of Meezan Jewellers Limited, a company under the same management) they raised a great hue and cry, which attracted mass attention and adverse me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (copy at Page 424). Respondents further pleaded that the Petitioner acquiesced to the transfer of shares on 27.04.2011 and after 7 months, he was making grievances of coercion. They claimed that the Petitioner had not approached police authorities to file complaint if he was threatened with death or bodily harm. It is pleaded that after the Petitioner transferred his shares with effect from 27.04.2011, he did not have the qualifying 5 shares as per Article 29 of Articles of Association and his Office stood vacated and thus according to the Respondents, they were not required to give any Notice to the Petitioner about the meetings. According to them, it was the acts of Petitioner which created fear and restiveness and the first Respondent company had to move swiftly to restore credibility and confidence in the Board, which is what was done. They claimed that all the meetings held by the Respondents had the required quorum. According to them, the Company Petition deserved to be rejected. The Case of Appellants in Civil Suit 5. Co-ercion is claimed and hence we re-produced parts of pleadings as above. Before proceeding further, looking to the fact that the Petitioner is clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2011, Mr. A. Abdulla ceased to have the Power to represent the company as having lost all association with the same. Thereafter, the petitioner herein is making all the sincere and earnest efforts to protect the assets of the plaintiff company as also the assets of its sister concerns, of course under the active support and co-operation of the members of the sub committee who are members of director board. It is pertinent to be noted in this connection that on 04.8.2010, there was a compromise entered into between the plaintiff and defendant in the above suit through mediators, in which it was agreed that the plaint schedule properties are to be partitioned between the parties without paying any consideration to each other. The terms of the compromise which was executed in white paper and signed by all the parties and witnesses are herewith produced. [ Emphasis supplied] 5.1 The above Affidavit filed by Original Respondent No.4 (Appellant No.3) claimed a General Body Meeting of Meezan Group and taking of decision to entrust all powers with him of entities mentioned including the present Company. Thus it is claimed Meezan Group (admittedly not a legal person) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged share transfer was with the approval of the Board of Directors of the 1st respondent Company, none of the documents produced along with Annex. A9 counter filed before the CLB or the additional affidavit filed before this Court would indicate any such approval/sanction. In such circumstances, we find no reason to sustain the finding in Annex.A12 order of the CLB that appellant ceased to be a shareholder of the 1st respondent Company and hence he has no locus standi to file the Company Petition. The question as to the locus standi of the appellant to maintain the Company Petition requires fresh consideration with reference to the original minutes of the meetings of the Board of Directors of the 1st respondent Company and other statutory records. [ Emphasis supplied] 6.2 For such reasons, the earlier Order of CLB questioning locus standi of Petitioner, came to be set aside and the matter was sent back to NCLT. The observations of Hon ble High Court put question marks to the Minutes on unnumbered pages and that too in Note Book to show Minutes to allege transfer of shares by Petitioner to Respondent No.4. Observation in Impugned Judgement and Order 7. NCL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company. In actual, it was on behest of the said outsider that the Petitioner was coerced to put his signature on the Share Transfer Form to transfer the shares to Respondent no.4. Obviously, the motive behind such action was make eligibility of Respondent No.4 for being appointed as Director as required under para 29 of the Articles of Association of the 1st Respondent company, which provides as under:- The qualification of a Director shall be holding in his own name 5(five) Equity Shares in the Company. The Directors appointed or elected shall take the qualification shares within two months from the date of their appointment. 10. Thus, this act of Respondent No.4, in connivance with the great man, clearly amounts to coercion and undue influence because it is nowhere mentioned that the Petitioner offered to sell his share to 4th Respondent with or without consideration. There was no properly constituted Board of the 1st Respondent company, to give the required approval to the transfer of the shares held by the Petitioner in 1st Respondent company. Thus, the act of removing the Petitioner from the position of the Managing Director to Director, and transfer of his shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised grievance on this count, the original Petitioner filed the police complaint. But even in that, the police have found that the transfer was voluntary. It is argued that although it was not the case of Petitioner that said Thangal coerced the Petitioner, still the NCLT held that the Petitioner was coerced by said Thangal. According to the counsel, the Petitioner coercively mismanaged the affairs of the Company and thus NCLT could not have held that there was no reason for the Petitioner to hand over management of the Company. According to the learned counsel, the Petitioner had transferred off all his shareholdings and he could not have maintained Petition. The learned counsel submitted that there were no sufficient pleadings to spell out coercion and thus NCLT wrongly held that the share transfer forms were signed by way of coercion. Arguments of Respondent No.1 (Original Petitioner) 10. Against this, the learned PCS for Respondent No.1 original Petitioner submitted that the Petitioner was running the Company and he was the MD. The Company had only 500 shares issued which were issued to the Petitioner. Respondent No.2 was Director but he had not been issued any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one under the signature of Respondent No.2 and which were done on 12.09.2011, the original Petitioner moved CLB for relief. PCS supported the Judgement and reasons recorded by the learned NCLT and according to him the appeal deserved to be dismissed. 12. We have heard the parties and perused the record. 13. From the pleadings, it is not in dispute that the original Petitioner along with Salahuddin Nalakath incorporated the Respondent Company and is the subscriber of 500 out of 1000 equity shares of the Company and has been the Managing Director of the Company till the disputes arose. It is not in dispute that Salahuddin did not pay for the shares allotted to him and thus was discontinued at the initial stage itself. It is not in dispute that on Salahuddin vacating office in 2003, Respondent No.2 - Abdusalam was admitted as Director on 29th August, 2003. Although the Respondents pleaded that the unsubscribed 500 shares meant for Salahuddin were transferred to Respondent No.2 on 05.11.2003 and tried to show the Minutes of Board of Directors dated 05.11.2003, the same has been disputed by the original Petitioner and Respondents have not brought material to show that indeed Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of the transferor and the transferee and completed in all other respects, be delivered to the company, - ( i) in the case of shares dealt in or quoted on a recognised stock exchange, at any time before the date on which the register of members is closed, in accordance with law, for the first time after the date of the presentation of the prescribed form to the prescribed authority under clause (a) or within [twelve months] from the date of such presentation, whichever is later; ( ii) in any other case, within two months from the date of such presentation.] 16. If the above provision is perused, it is quite clear that the Respondent Company could not have acted upon these forms to accept the transfer of shares as the forms were not stamped and used in the time specified by above provisions. 17. Respondents claim that on 27.04.2011 itself, there was a Board Meeting for which they rely on Annexure A4 - Page 199. It is not the case of Respondents that any Notice had been issued for this Meeting dated 27.04.2011. Admittedly, on 27.04.2011, the original Petitioner was still the shareholder and Managing Director even as per the Respondents. The transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondents do not say. These transfers are then recorded in what is shown to be the third meeting dated 28.05.2011 (Annexure A6 Page 202). The documents brought forth by the Respondents then have minutes of EOGM (Annexure A7 Page 204) confirming appointment of Salahuddin as Director and accepting transfer of shares. Then, what is approved by EOGM is set aside by Board Meeting (?) (Annexure A9 Page 207) where Salahuddin Nalakath is dumped for the same reason for which he had to leave the Company in 2003, namely that he had not subscribed to at least 5 shares as per the Articles of Association. But then this was a fact always known and still the Respondents conveniently picked up Salahuddin Nalakath to show holding of earlier meetings and then simply removed him. We have already referred to observations made by the Hon ble the High Court when the matter had earlier gone to the High Court where the Hon ble High Court had questioned the so called minutes written on Classmate Notebooks and requirements to comply Section 194 and 195 of the old Act regarding maintaining of the minutes. Hon ble High Court had also observed that documents produced did not show that the Board of Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondents with the help of Respondent No.2 went on submitting Forms to the ROC and it was only when in the Civil Suit, the Respondent No.4 filed Affidavit that he came to know about what Respondents were up to. 19. Coming to the question of coercion of the original Petitioner, we have purposely referred to the Company Petition and Reply of the Respondents which was filed in NCLT, in some details and we have purposely reproduced portions from the Affidavit of Respondent No.4 which he had filed in the Civil Suit and we find by referring to these details that the pleadings themselves (including what the Respondents have claimed), disclosed that the Petitioner was coerced to sign the transfer forms. Had it been a normal execution of forms, there would not have been so many questionable acts on record. The Respondents themselves in the case put up in the Civil Court and in the pleadings in NCLT demonstrated, what they call, that there was restive nature of the community at large and that Subsequently on 27.4.2011 another meeting of board of directors was convened under the leadership of Janab Panakkadu Hameed Ali Shihad Thangal, in which it was resolved that all the entire control ..... 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