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TMI Blog2019 (4) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... r value it cannot be determined that the ₹ 10/- is the fair value of the equity share. We are of the opinion that compliance of Section 62(1)(c) ensures that the allotment is done to any person at a price which is not prejudicial to the interest of other shareholder or to the interest of the company. Though enough has been pleaded to justify allotment of 90000 shares to 2nd respondent but not a single evidence has been pleaded or produced to show that the compliance of Section 62(1)(c) has been done. NCLT has not dealt with this issue and completely ignored the legal provision applicable on the date of issue of the shares. In view of the position, allotment of 90000 shares to 2nd respondent cannot be held to be validly done. We are of the opinion that the exercise carried out is not only illegal but oppressive to the appellant. As the company is ongoing it would not be in the interest of the company or in the interest of shareholder to be wound up. Petition allowed in part. - COMPANY APPEAL(AT) NO.09 OF 2018 - - - Dated:- 8-3-2019 - Justice A.I.S.Cheema) Member (Judicial) And Mr. Balvinder Singh) Member (Technical) For the Appellant : Mr S. Chidambaram, PCS, Ms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Articles 17 to 22 of the Articles of Association of 1st respondent and the said transfer is illegal and untenable and the 3rd respondent cannot become a Member of the 1st respondent. 7. It is next stated that another Board Meeting was held on 3.9.2014 in which the appellant, 2nd and 3rd respondent were present and there were nine items of agenda. It is further stated that from the web portal of MCA it is seen that an allotment of huge numbers of 90,000 equity shares of 1st respondent company were issued to 2nd respondent and stated that the application received for allotment of 90000 equity shares of ₹ 10 each was considered. It is stated that the allotment of 90000 equity shares was not an agenda of the Board Meeting dated 3.9.2014. It is stated that through this fake allotment of 90000 shares the 2nd respondent has misrepresented himself as if he is holding 95000 equity shares (including 5000 shares shown as subscriber to Memorandum of Association). altered and attaching a fake board resolution adopted on that date. 8. The 2nd Respondent failed to convene and conduct mandatory AGM and violated the provisions of the Companies Act, 1956/2013 in this regard. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L Account, in which a provision was made for ₹ 1.79 Crores for payment of technical services, salaries, etc., payable into the appellant s bank account. The appellant had sent the different balance sheet contrary to be based on 03.09.2014 before the Board of Directors of the Company. The Company tries to correct the balance sheet and placed proper balance sheet before the Board Meeting held on 03.09.2014. However, the appellant refused to sign the balance sheet, on the contrary, he is making counter allegations. Due to the non-cooperation of the appellant, it has become impossible for the Company to function in a normal manner resulting in non-finalization of account for the year 2013-14, non-holding of annual general meeting (AGM) etc 13. 3rd respondent was appointed as an Additional Director of the Company during Board Meeting held on 25.08.2014, and 500 shares of the Respondent No.2 were also transferred to him. The appellant, in fact was also present at the Board Meeting and necessary transfer deeds were duly executed by the Respondent No.2 in favour of Respondent No.3. The 2nd Respondent has chosen to file Form No.MGT-14 with the Registrar of Companies/MCA Portal onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available at the time of filing the Application/Petition but they should be perpetuated till the petition is actually taken up for final hearing. As held by the Hon ble High Court of Kerala in Palghat Exports private limited and P.;Ramkumr Vs. T.V.Chandran and _ others(1994)79 Comp cas 213(KER) , isolated acts cannot constitute oppression and there should be continuous acts which are unfair and unjust which can be construed as oppression. And it is relevant to point out here the statement of petitioner in his Rejoinder to the counter filed by Respondent No. 2, dated 15 December, 2016, under para 4.18, which reads as The_petitioner chose to exit as Director only with the right to nominate his nominee and with the trust that the second and 3rd respondents would be discharging their duties as per law and protect the interest of all stakeholders. It prima facie shows that the allegations of acts of oppression and mismanagement as made by him prior to his resignation holds no water. Therefore, it is to be held that the petition is not at all maintainable on this score also. 12. So far as reducing the shareholders of the petitioner is concerned, it is not in dispute that the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson who is not a member of the Company so long as any member is willing to purchase the same at the fair value to be determined in the manner hereinafter provided. The above provisions did not bar to transfer of the shares to non- member of the Company, but it is only says the Company should explore the possibility purchasing shares by the existing members of the Company before offering it to others. As stated supra, there are only two shareholders before the impugned transfer/allotment of shares So there is nothing wrong to transfer and allotment of shares to respondent No.1 and respondent No. 2 Admittedly the petitioner, who is aware proposal of transfer of shares of the 2ndrespondent, being a Director at the relevant point of time, has not opposed the transfer of shares of 2ndrespondent to the 3rdrespondent. Therefore, there is no illegality in transfer of the shares of the 2nd respondent as per Board Resolution 25.08.2014. So far as the issue of Board of Directors is concerned, Articles 29- 47 of Articles of Association of the Company dealt with the constitution of the Board of Directors, appointment, retirement, etc., as per Article 30 Mr.R.Shiv Kumar (Petitioner) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re that the petitioner is not disputing the appointment Mr. V Shashi Kumar (respondent No.3) but selectively opposing allotment of shares to him for the reasons best known to him. Since we hold that the impugned transfer and allotment are legal, there is no question of application of section 59 of Companies Actto the facts and circumstances of the case. 17. The learned counsel for the petitioner has relied upon the following cases in support of his case. SP Chengalvaraya Naidu vs Jagannath (AIR 1994 SC 853) Dale Carrington Investment (P.) Ltd. Vs P.K.Prathapan ([2004] 54 SCL 601 (SC)Smt.Claude- Lila Parulekar vs. Sakal Papers (P.) Ltd.[2005] 59 SCL 414 (SC) We have perused the facts and circumstances of those cases, and found that the ratio held in those cases would not applicable to the facts and circumstances of the present case as stated supra. 18. For the aforesaid reasons, we are of the considered view that the petitioner failed to make out any case so as to interfere in the issue by the Tribunal, and thus itis liable to be dismissed. Accordingly, we hereby dismiss the company petition bearing CP No. 58 of 2015 (TP No.80/HDB/2016) with no order as to costs. 16. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2014, the acts of oppression and mismanagement also ceased to exist, without considering that fraudulent transfer of shares to 3rd respondent and the allotment of 90000 shares to 2nd respondent. It is further averred that the NCLT has erred in holding that the shareholding of the appellant in 1st respondent was not at all touched upon the transfer of shares to 2rd respondent and issuance of further shares to 2nd respondent without considering that appellant has been reduced into a minority shareholder and that the appellant being a director and having participated in the Board Meeting dated 25.8.2014 and 3.9.2014 is stopped from challenging the same, without considering that the Minutes of the Meeting donot actually reflect any agenda of Transfer of Shares and Allotment of 90000 equity shares and the same has been tampered with by 2nd respondent. 22. In reply Respondent stated that the appellant was present at the Board Meetings held on 25.8.2014 and 3.9.2014 and the meetings were chaired by 2nd respondent. It is stated that the no signed copy of the notice or the agenda has been annexed with the company petition. It is stated that the minutes of the Board Meetings held on 25.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pprove the transfer. 28. We have seen the Agenda of the Meeting dated 25.8.2014 (Page 69 of the Reply). In the agenda, there is Item No.4 i.e. Approval for transfer of shares to Mr. Shashi Kumar Vijaybalan. We also observe from the minutes of the Meeting dated 25.8.2014 that the minutes are duly signed by the Chairman and the transfer of shares is one of the minutes. We further observe from the attendance sheet of the said meeting and the same is also signed by the appellant. The decision to transfer shares from 2nd respondent to 3rd respondent was taken in the said Meeting and the appellant was present and participated in the said Meeting. When the decision has been taken and the appellant was present there, therefore, it is not fair to raise this issue now when the appellant has already consented to it. Further, even if the contention of the appellant is accepted and the transfer of shares from 2nd Respondent to 3rd Respondent is set aside by us, then the shares in the name of 3rd Respondent will be transferred back to the 2nd respondent, even then there would be no benefit which would accrue to the appellant. That this transfer has not impacted the interest of appellant as hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is held to be not oppressive, there will be no further issue out of it. But if this is held to be oppressive appellant being permanently reduced from 50% to 5% will be continuous oppressive act. Hence the petition has to be tested whether this allotment is oppressive or not. 32. Admittedly allotment of 90000 shares have been done on 3.9.2014. Before we examine this issue, it will be advisable to look into the legal provisions regarding issue of shares. The Companies Act, 2013 came into effect w.e.f. 1.4.2014 and further issue of share capital will be done by complying the Companies Act, 2013. Section 62 of the Companies Act, 2013 deals with further issue of Share Capital. Section 62 of the Companies Act, 2013 is applicable to all companies. It does not make any distinction whether it is a public or private company. Section 62(1)(c) of the Companies Act, 2013 reads as under:- 62. Further issue of share Capital.-- (1) Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered- (a) to persons who, at the date of the offer, are holders of equity shares of the company in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be determined by valuation report of registered valuer. 34. It is noted that the special resolution can be passed only in the AGM or EOGM where all the shareholders will have a say. That is so, even if the shares have to be issued as Employees Stock Option in terms of Section 62(1)(b), a special resolution is envisaged under the law. Therefore, in case shares are not issued under Section 62(1)(a), the law envisaged that special resolution is must whenever the shares are to be issued under Section 62(1)(b) or 62(1)(c). No such material has been produced or pleaded before this Tribunal that the special resolution has been passed. Neither any material has been placed before the Tribunal that the fair price has been determined on the basis of the registered valuer. It is noted that the allotment has been done at the face value of ₹ 10/-. In the absence of fair value it cannot be determined that the ₹ 10/- is the fair value of the equity share. 35. We are of the opinion that compliance of Section 62(1)(c) ensures that the allotment is done to any person at a price which is not prejudicial to the interest of other shareholder or to the interest of the company. 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