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TMI Blog2018 (12) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial portion of the project and incorporate the same in the Article of Association of 1st respondent - We are in agreement with the Respondent that 1st respondent being a public company cannot normally refuse to register transfer of shares from the original promoters to the appellants. As regards the issue raised by the appellant that the commercial portion of the project will be demerged in appellants’ favour is concerned, no fresh SHA or fresh agreement entered on the subject have been put up to establish that appellants have such right to commercial property. Further we have noted that the appellants were not even parties to the earlier SHA signed between the original promoters and the 2nd respondent and the appellant has himself stated in its communication dated 28.2.2012 that the SHA has become defunct since it was not incorporated in the Articles of Association of 1st respondent. The communication is prior to the date of transfer of shares in the name of appellant. Therefore, the appellants cannot be permitted to approbate and reprobate on the validity of the SHA to suit their convenience from time to time. The nominee directors of 2nd respondent entered into a master c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Darpan Wadhwa, Senior advocate with Ms Tine Abraham, Mr. Anurag Misra and Ms Vatsala Kumar, Advocates. For the Respondents : Ms Ananya Kumar, Mr. Rajat Joneja, Advocates. JUDGMENT BALVINDER SINGH, MEMBER (TECHNICAL) The appellants, original petitioners, have filed this appeal, under Section 421 of the Companies Act, 2013, being aggrieved by the impugned order passed in CP No.109/2012 (TP NO.95/HDB/2016) and Company Application No.72/2016 filed in National Company Law Tribunal, Hyderabad Bench, Hyderabad (NCLT in short) whereby the Company Petition and company application were dismissed on 13th March, 2017. 2. The brief facts of the case are that the 1st respondent was originally promoted by one Mr. Lakshmi Prabaakar and Mrs Ratna Kumari. Both the promoters and one Mr. Sathya Venkata Srinivas Borusu were the first directors of the company. 1st respondent was registered as a private limited company under the name Vision Heights Private Ltd . The company was subsequently got converted as a Public Limited Company and correspondingly the name was changed as Vision Heights Limited . The name of the company was again changed on 10.07.2012 and presently the name o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 0.00 7 PVRK Prasad 100 0.00 8 Nageswara Rao 100 0.00 9 Seshavani 75,000 0.24 10 B.T. Nageswar 1,19,000 0.35 11 Kiranmai 70,000 0.22 12 Pragnya Capital I Private Ltd 2,29,81,818 73.41 Total 3,13,07,202 100.00 4. Later on the appellants purchased the shares held by Mr. Lakshmi Prabhaakar, his associates and also from Vision Ventures Ltd during February, 2012, only after confirming that the 2nd respondent would confine itself to residential portion as agreed by them, excluding the commercial portion, in the Letter of Interest and Shareholders agreement. Respondent No.6, a director of 1st respondent, vide email dated 29.2.2012 (Page 237) agreed upon the steps to ensure that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oppressive acts and mismanagement by the Respondents. i) To regulate the conduct of the affairs of the first respondent company in future; ii) To direct the Respondents to adhere to the Joint Development Agreement dated 19.6.2009 so that the first respondent company would not be committing breach of the said agreement due to the acts/omissions of the second respondent. iii) To direct the Respondents to adhere to the Letter of Interest dated 14.7.2011 and Share Holders Agreement dated 28.9.2011 and not to deviate from the said agreements. iv) To direct the Respondents to take suitable steps to demerge the non-residential portion of land to and in favour of an entity owned and managed by the petitioners, subject to the provisions of Section 391 to 394 of the Companies Act, 1956. v) To declare the Resolutions passed at the Board Meeting held on 5.11.2012 with regard to Demerger, New Share Purchase Agreement and Leasing out of School Premises to M/s Educomp Infrastructure and School Management Limited as null and void; vi) Any other order which in the opinion of this Hon ble Bench is just and equitable and thus render justice. 6. After hearing the parties, the NCLT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legitimate expectation that the commercial portion of the Project will be demerged in their favour as they have stepped into the shoes of the erstwhile promoters. The appellants further stated that they have invested only on the basis of an understanding between the parties and it would be unfair and prejudicial to allow the Respondents to ignore the same now. The appellant have drawn the attention of the Appellate Tribunal to the decisions in the cases of Paul Martyn Bennet Vs Peter Allen Bennett 2002 WL 820106 (Para 120, 125), Ebrahimi Vs Westbourne Galleries Ltd Others (1972) 2 WLR 1289 (Page 21, 22); Sh Gurmit Singh Others Vs Polymer Papers Ltd Others (2005) 123 CompCas 486 (CLB) (Para 25) to support his contentions. 11. The appellants submitted that the breach of express assurances given by the Respondents and actions of the Respondents not permitting the Appellants to exercise their rights under the SHA, amounts to oppression. The correspondences exchanged between the parties are binding assurances which formed the basis of the Appellants investment and part of the consideration paid by the Appellants for the transfer of shares from the erstwhile promoters. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st respondent. The appellants further submitted that the NCLT failed to appreciate that the rights and interests of the erstwhile promoters was duly transferred in favour of the appellants as the they have stepped into the shoes of the erstwhile promoters and are entitled to all rights pertaining to the commercial portion of the Project. 17. Reply on behalf 2nd Respondent has been filed. 2nd respondent submitted that he is a majority shareholder of 1st respondent and presently holding approximately 74.8% of shares and 2nd respondent have invested ₹ 23 crores approximately. 2nd respondent submitted that the appellants acquired the entire shareholding of the original promoters in 2012 and joined 1st respondent. 2nd respondent further submitted as the appellants had purchased the shareholding of the original promoters, the consideration for the shareholding was paid to the original promoters (Page 239). 2nd respondent submitted that, therefore, the appellants are neither investors in 1st respondent nor are they party to the SHA dated 28.9.2011 under which they are claiming reliefs. 18. 2nd respondent further stated that the appellants contended that under the SHA, 2nd re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants may be dismissed. 25. We have heard the learned counsel for both the parties and perused the record. 26. The first issue raised by the learned counsel for the appellant is that the respondent has failed to act upon the conditions and assurances based on which they have invested in 1st Respondent and that the 2nd respondent s investment was only qua the residential portion of the project. On the other hand, learned counsel for the 2nd respondent argued that there is nothing in the SHA, or any other agreement entered into between the parties, which can lead to the conclusion that the shareholding of 2nd respondent in 1st respondent is such that it enjoys restricted rights of participation in relation to the company s assets or activities. Learned counsel for the respondent further argued that it is settled law that on incorporation of a company, the corporate property belongs to the company and members have no director proprietary rights to it but merely to their shares in the company. Learned counsel for the respondent further argued that the shares in a company consist of a congeries of rights and liabilities, which are a creature of the Companies Act and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have noted that the appellants were not even parties to the earlier SHA signed between the original promoters and the 2nd respondent and the appellant has himself stated in its communication dated 28.2.2012 (Page 251) that the SHA has become defunct since it was not incorporated in the Articles of Association of 1st respondent. The communication is prior to the date of transfer of shares in the name of appellant. Therefore, the appellants cannot be permitted to approbate and reprobate on the validity of the SHA to suit their convenience from time to time. 30. The next objection raised by the appellant is that despite his objections, the nominee directors of 2nd respondent entered into a master collaboration agreement with 7th respondent for development of a school on the commercial area of the Project and that this is direct contravention of the appellants rights and amounts to oppression and mismanagement. Learned counsel for the respondent drawn our attention to the Minutes of the Board Meeting held on 5.11.2012 at Item No.26- Review and Approve the Master Collaboration Agreement and Lease Deed with M/s Educomp Infrastructure School Management Ltd, New Delhi (Page 273 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the appellants access to company related information by illegally keeping books of account at 2nd respondent s office instead of 1st respondent registered office. Learned counsel for the 2nd respondent submitted that appellant No.1 being a Director of 1st respondent was invited to attend all its Board Meetings and had access to all records of the 1st respondent. Learned counsel for the 2nd respondent argued that the 1st appellant never sought any documents from the 1st respondent, therefore, it does not lie in the mouth of the appellants to either state that they were not aware of any fact or that any documents that were requested, were not shared with them. Learned counsel for the 2nd respondent further argued that 1st appellant s allegation with regard to keeping of books of accounts of 1st respondent at the office of 2nd respondent and not at 1st respondent registered office, this is a gross distortion of facts, particularly when 2nd respondent does not have an office of its own in Hyderabad and the books are kept at 1st respondent registered office and are always available for inspection. 33. As regards appointment of director is concerned, 1st appellant was initially a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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