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TMI Blog2017 (1) TMI 1666X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the States ofAndhra Pradesh and Telangana, the case is transferred to this Bench. Hence, I hav the case on records of this Bench and deciding it. 2. The Company petition was heard on several dates by the Law Board, and it was finally transferred to this Bench on 1 1.07.2016. Accordingly, the case was started listing before this Bench from 25.07.2016 onwards, and it stands adjourned several dates on 16.08.2016, 31.08.2016, 23.09.2016, 05.10.2016. When none appeared for petitioner on 05.10.2016, the case was directed to be posted under the caption for Dismissal on 07.10.2016, and on this date too, neither the petitioners nor their representative appeared and represented the case, and thus the case was dismissed for default. Afterwards, the petitioners have filed C.A. No.38 of 2016 by seeking to restore C.P. No.42 of 2011, and after being satisfied the reasons cited for their absence, the C.A was allowed by the Tribunal by an order dated 03rd November , 2016 by restoring the Company Petition on file. Subsequently, the case was posted on 29.11.2016, 15.12.2016 and 29.12.2016. On 29.12.2016, all counsels got ready and argued the case finally and thus orders are reserved. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed as a Director ofthe Respondent No. 1 Company on 02nd November, 2005. So he has contributed a lot for the growth of the Respondent No.l Company. It is contended that in pursuance to above Term Sheet, on behalf of first Petitioner, the 2nd Petitioner paid an amount ofRs. 13, (Rupees Thirteen Crores twelve lakhs fifty thousand) vide cheque No.312151 dated 26th February, 2007 towards the share application money for allotment of 1,31,25,000 equity shares ofRs. 10/- each. So the 1st petitioner was finally allotted 1,3 1 equity shares ofRs. 10/each of Respondent No. 1 Company vide resolution passed in Board of Directors meeting held on 21.03.2011. So, the 1st petitioner (Malaxmi Infra Ventures (India) Private Limited) was holding 20.79% of the shares of the Company only from 21.03.2011 and the 2nd Petitioner does not hold any shares at all in the Respondent No. 1 Company. d) The Second Petitioner is a Techno entrepreneur in power and Infrastructure Industries, and he is not a shareholder of the Respondent No. 1 Company. The Respondent No.l Company is a subsidiary of Nava Bharat Ventures Ltd (Respondent No.6). The Respondent No. I Company's Authorised initial Share Capital wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that M/S Brahmani Power Company Private Limited was originally incorporated under the provisions of Companies Act, 1956 bearing CIN U40109AP1999PTC032289 with the Registrar of Companies on 12th Aug, 1999. The Company was subsequently changed to M/S Brahmani Infratech Private Limited, and fresh certificate of incorporation dated 2nd Nov, 2005 was issued. The Company office is situated at 6-31109/1, Nava Bharat Chambers, Raj Bhavan Road, Hyderabad - 500082. The Company is a public company within a purview of Section 3(4) of the Companies Act, 1956. 7. The Learned counsel submits that total share capital of the company is Rs. 63,12,50,000/- divided into equity shares ofRs. 10/- each and the Petitioner No. 1 holds shares of Rs. 10/- each in the Respondent No. 1 Company which is equivalent to 20.79% of total share capital of the Company. The main object of the Company is to establish, own, operate, develop and maintain power generating stations, act as a generating Company in terms of the Electricity (Supply) Act, 1948, to develop special economic zones, to construct, build, operate, transfer infrastructural facilities including housing, roads, etc. The 1 st Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lan Construction Sdn. Bhd. ("Zelan"), a member of Tronoh Consolidated Malaysia Berhad, Malaysia as a co-developer/partner with Respondent No. 1 Company. Due to the Zelan association with Respondent No. 1 Company, the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) and agreed and entered into Memorandum Understanding (MoU) 12th July, 2006 with respondent No 1 for allotment of land to an extent of 250 acres at a cost ofRs. 20,00,000 per acre for a total consideration of Rs. 50 crores under the Information and Communications Technology (ICT) policy for the development of SEZ. Accordingly, APIIC has allotted the said land in survey No. 99/1(P), Mamidipalli Village, SaroornagarMadal and survey No. 1/1, Raviryal Village, Maheshwaram Mandal, Ranga Reddy District to Respondent No.1 and entered into a Deed of Sale ,which was duly registered bearing Registration No. 273/2009 with the Sub-Registrar of Chapapet . 12. It is alleged that Respondent No. 1 along with Respondent Nos. 2 to 4 with ulterior motives, replaced Zelan with Respondent No. 7, even though the Petitioner No. 2 made a strong protest against it. And the company did not follow proper procedure in removing Zelan. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 2 to 6 have completely overlooked the notices of APIIC, which threatened to cancel the allotment of land if the Company failed to offer valid reasons for the violation; f. The Petitioner No. 2 was unceremoniously and arbitrarily terminated from the Board of Directors of Respondent No. 1 Company from 24.06.2010, even though he offered himself for re-nomination as Director. The act of removing the second Petitioner as Director of Company amounts to grave acts of oppression and mismanagement of affairs of the company. The acts of the Respondents, who are in majority, are arbitrary, unfair and oppressive and done with malafide intention. g. The Learned counsel further submits that if the Petitioner No.l was issued shares immediately on the receipt of share application money, the Petitioner No.l would have held more than 26% shareholding of the company. So the Respondents with a malafide intention diluted the shareholding of Petitioner no. 1, which constitutes acts of oppression on minority shareholder i.e., Petitioner no. 1. h. The Petitioner further contends there is lots of violation of fiduciary duties by the Directors of the Company. 15. The Learned Counsel for the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 626 (CLB). By reading of the facts and circumstances of above cases, the ratio decided in those cases would not be applicable to present case for the reasons stated above. 16. In the light of above submissions, the Learned Counsel for the Petitioners submits that it is a fit case to allow the present Company Petition and grant the relief as sought for in the Company Petition. 17. Shri. R. Raghunandan Rao, Learned Senior Counsel for Respondent No.6, as filed a counter dated 7th June, 2011, and submitted that Second Petitioner is not a member of Respondent No. 1 Company, and thus he cannot join as a Petitioner to instant Petition in view of the provisions of Section 397 & 398 of Companies Act, 1956. Therefore, he prays his name has to be struck off as petitioner no. 2 from the Company Petition. In order to maintain a petition u/s 397,398, Petitioner has to satisfy the Tribunal that the affairs of the company are being conducted in manner prejudicial to Public interest and in a manner oppressive to member in any manner. And there is no averment in the Company petition about the oppressive conduct of affairs of the Company vis-a-vis the Petitioner no. 2 as a member. 18. The Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed accepting the terms of the so called Equity Term Sheet. MO over, the Equity Term Sheet was not in relation to the development of SEZ Project, which is being executed by the Respondent No. 1 Company. He as stated the so called Equity Term Sheet was executed for another venture, which was never materialised. So the Equity Term Sheet cannot be relied upon for any purpose by the petitioner in support of the present case. 21. The contention of the 2nd Petitioner that he was devoting his full time and worked tirelessly for the progress of the respondent Company is false and denied. He was a Managing Director for at least four Companies viz P.V.P. Mahalaxmi Energy Ventures Pvt. Ltd., Nava Bahrath Power Pvt. Ltd., Mahalaxmi NBFA Ventures Pvt. Ltd. and Mahalaxmi Infra Ventures India Pvt. Ltd. (1 st Petitioner herein) around the same time. So the question of concentrating full time to the Company by the Petitioner is far from truth. He has denied that the 2nd Petitioner was instrumental in bringing M/S. Zelan as Technical Associate for developing the project in question. M/S. Zelan did not come forward of renewal of MOU, it was automatically expired in November'2006. So there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 1 Company from 02.11.2005 to 24.06.2010, he was a party to all the decision taken by the Respondent No.l Company and consented to all its decisions without any objection and the minutes of the Board are conclusive evidence for the same. Therefore, he submits that the Company Petition was not maintainable and lacks merits and it is to be dismissed summarily. 26. Mr B. Saroj the Learned Counsel to the Respondent No. 7 to 10 has filed a counter dated 09.08.2011 and submit that the 2nd Petitioner is not a share holder at all of Respondent No. 1 Company and he cannot maintain the present petition under Section 397 & 398 of the Act. She submits that 7th Respondent is not a share holder of the Company and it is an entity, which has a contract with the Company for the performance of certain actions. Mantri Group has been involved in extensive real estate development projects in the country, and it has already completed over nine million sq. ft. of constructions in the last 10 years. 7th Respondent is special purpose vehicle incorporated by Mantri Group for the purpose of the project in question. After the 2nd Respondent ceased to be a Director of the Company, is raising all sort of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so much so that decisions are taken prejudicial to the shareholders as a whole or any minority group of shareholders or against the interest of the company, are shareholders permitted to approach the court to redress the wrong by passing appropriate orders. And once Company Law Board takes cognizance of wrongful act(s), it is empowered under section 402 of Act to pass a variety of orders in the interests of Company, its members, creditors and so on. iv. KRS Mani Vs. Anugraha Jewellers Ltd: The Hon 'ble Madras High coun has interalia held that it is more or less a settled position of law stating that it is the duty of the courts to recognize the Corporate Democracy of a Company in managing its affairs. The court should not restrict the powers of the Board of Directors and it shall not interfere with the day to day affairs and management and administration of the company. 29. In the light of the above discussion of the case, the following issues arises for consideration: a) Whether the Equity Term Sheet in question relates to the present issue or not; b) Whether the 2nd Petitioner can join as Petitioner to the Company petition as he was not a share holder of the RI Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque No. 312151 dated 26.2.2007. The letter dated 28th February, 2007 reads as follows: "To Brahmanilnfratech Private Limited D.No. 6-3-1109/1, Navabharat Chambers Rajbhavan Road, Hyderabad - 500082 Dear Sir, Sub: Application money for allotment of Equity shares - Reg With reference to the above subject, we herewith enclosed cheque no. 312151 dated 26th Feb, 2007 for an amount of Rs. (Rupees Thirteen crores twelve lakhs and fifty thousand only) drawn on UCO bank, MG Road Branch, Secunderabad in your favour towards share application money for allotment of equity shares of 1,31,25,000 of Rs. 10/- each in your company. Duly filled in application in this regard is enclosed. Please acknowledge the receipt of the same. Thanking You, Very truly yours, For Mahalaxmi Infra Ventures (India) Private Limited Sd/- Y. Harish Chandra Prasad Director" So the above letter also did not refer the said equity term sheets. The enclosed prescribed format submitted to the Board of Directors reads as under: "Dear Sirs, I/We hereby apply to you for allotment to me/us of the equity shares stated below. The amount payable on application as shown below is remitted here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner; but he can represent the first petitioner as a Chairman. Since the first petitioner is admittedly holding 20.79 % of shareholding in the Respondent No. 1 Company, the present petition is maintainable so far as the first petitioner is concerned with reference to the alleged acts of oppression and mismanagement stated to have occurred after becoming a member of Respondent No. 1 Company i.e., from 21.03.2011. 34. It is not in dispute that Respondent No. 1 Company is a subsidiary of Respondent No. 6 company and thus the affairs of subsidiary company is always subject to holding company and the will of holding company would naturally prevails in the management of affairs of the subsidiary company. S.2(71) also says a Company, which is a subsidiary of a Company, not being a private Company, is to be deemed a public Company for the purposes of act even where such subsidiary company continues to be a private Company in its Article. 35. The next question for consideration is whether the 1 st Petitioner can raise the alleged oppression and mismanagement, which have taken place prior to becoming member of RI Company i.e. with effect from 21.03.2011. As stated above, a member of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d doesn't show that the 1 st petitioner is entitled for allotment within a stipulated period. It is also not in dispute that any effort or request was made on behalf of the 1 st petitioner till 28th May, 2010. It is also relevant to point out here that 2nd Petitioner was admittedly a Director of Respondent No.l Company from 2.11.2005 to 24.06.2010 and he has participated in the affairs of the company during that period. As a Director of the Company for a considerable time, he is also responsible for all the decisions taken by Respondent No.l Company. So it can be concluded that the 2nd Petitioner being a Director, did not make any effort in order to allot shares to 1 st Petitioner, if they were so much interested to allot the shares in question earlier to the allotment made by the Respondent No. 1 Company: 38. It is also not in dispute that no shares of Respondent No. 1 Company were allotted during 2006-07 to 2009-10. All the shares allotted including the 1 st Petitioner shares were allotted during 2010-11. The 6th Respondent, though he invested huge money in the company (Rs. 50.14 crores in Nov, 2006), he was also allotted shares only on 28.5.2010 and 23.09.2010 and likewise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9% of shareholding of Respondent No.1 Company, equity demands that at least some representation should be provided to such party in the affairs of Company and majority shareholders should not totally ignore minority shareholders and the same would not be in the interest of Respondent No. 1 Company. I am conscious of law as enumerated by various courts holding that CLB/Tribunal is having very little power, once it holds that there is no oppression and mismanagement after considering facts of a case in question. However, by revoking general powers conferred on CLB/Tribunal under Section 402 especially provisions (a) (g) of Companies Act, 1956 R/w corresponding Section of 242 of Companies Act, 2013, it is just and equitable that the second petitioner can be considered for appointment of a Director of Respondent No. 1 Company. Article 83 ofArticles of Association of Brahmani Infratech Private Limited (Respondent No. 1 Company) confer power on the Board to appoint any person as Director at any time, in addition to existing Directors. 41. In the result , I dispose of Company petition bearing No. 42 of 2011 , and consequently , I held as follows: i. That the Company Petition No. 42 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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