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TMI Blog2019 (7) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... reated various confusions relating to the incidents and facts. The confusion gets reflected even in the impugned order. It appears to us that this company which appear to be running well needs to be protected from internal group rivalries. The appointment of 1st Respondent, Shri Deba Kumar Hazarika, as Director is held illegal - decision taken at the EOGM dated 14.11.2009 removing original R-5 as Director and Managing Director of the Company is set aside - Impugned order is set aside - appeal allowed. - Company Appeal (AT) No. 148 of 2018 - - - Dated:- 28-5-2019 - Mr. A.I.S. Cheema, Member (Judicial) and Balvinder Singh, Member (Technical) Mr. Gourab Banerjee, Sr. Advocate with Mr. Rajan Raj, Ms Raka Chatterjee and Mr. Subhro Prakash Mukherjee, Advocates for Appellants. Mr. Akhilesh Kr Shivastava, Mr. Abhijit Barvah and Ms Sunita Mukhopadhyay, Advocates JUDGEMENT The present appeal has been preferred by the appellants under Section 421 of the Companies Act, 2013 against the impugned order dated 8.3.2018 passed in T.P. No.25/397/398/GB/2016 (Earlier number as CP No.992/2011) passed by the National Company Law Tribunal, Guwah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to know that the Addl Distt Judge in Misc (Arb) Case No.527/2009 dated 13.11.2009 had restrained the requisionists from adopting any resolution on agenda No.2 of the Notice dated 21.10.2009. The Agenda Item No.2 of the Notice dated 21.10.2009 proposed the removal of the original Respondent No.5. Later on the suit was dismissed on withdrawal on 1.3.2011 and injunction order passed stood vacated. The newly constituted Board filed necessary returns to the ROC, Shilling. Later on 1st respondent was appointed as Managing Director of the company w.e.f. 25.11.2009. Another EOGM was held under the supervision of the District Magistrate, Kamrup, Guwahati on 5.1.2010 to transact the business, specified in the agenda of the EOGM and the removal of original Respondent No. 5 was confirmed. 4. After that the original Respondent No.5 started circulating frivolous and fabricated news in the local daily newspapers and opened a Bank account in the name of the company and started transacting business of the company through such an account. In the meantime, the original Respondent No.5 tampered the documents in the office of ROC Shillong and illegally and in an unauthorised manner issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of further shares to some existing shareholders and outsiders on 15.09.2010 and on any other dates, if any, subsequent thereto, are also declared illegal, null and void. f) The resolutions adopted in the EOGM, held on 14.11.2009, Board Meeting 25.11.2009, are restored. g) The shareholdings of the shareholders/members in the respondent company as it was on 14.11.2009 are restored. h) The respondent company shall normally function from its registered office. i) All the actions, taken by the BOD, headed by Petitioner No.1 are declared valid and stand protected. j) All the actions, taken by the BOD, headed by R-5 and R-4, to the extent they are inconsistent with the actions, taken by the BOD, headed by the Petitioner No.1 or to the directions, rendered hereinabove, are declared invalid and bad in law. k) However, the declarations, aforesaid would not in any way affect the transactions, which the BOD, headed by R-5 and R-4 may have entered into with third party. l) In view of the aforesaid directions, the ROC, Shillong is directed to make necessary amendments in the ROC records in the MCA 21 Porta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondents should not have been granted any relief. 10. Appellants have stated that the Hon ble High Court of Guwahati in his order dated 9.5.2016 has stated that CP No.992/2011 is mainly a fight between 1st respondent and Original Respondent No.5, Mr. D.N. Singh for the post of Managing Director and it is nothing to do with a case of oppression and mismanagement under Section 397/398 of Companies Act, 1956. Appellants stated that no evidence has been submitted by the respondents in support of oppression and mismanagement. The allegation of tax evasion is speculative and no evidence has been 11. Appellants stated that NCLT in para 80 of the impugned order has itself reiterated the settled proposition of law that directors are appointed and removed by competent and qualified shareholders who constitute simple majority in the general meeting of the company which is summoned to appoint or remove directors. 12. Appellants stated that the allegations in the company petition have been levelled against the original Respondent No.5, Mr. D.N.Singh, who died during the pendency of the company petition and the original petitiioners failed to bring his legal repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.5.2016. Respondents further stated that the appellants have failed to raise any question/point of law that Rule of Law has not been applied correctly to the fact situation of the case or that a judicial precedent has not been adhered to or violated. Respondent stated that the appellant has also failed to raise any question of vitiated facts in their appeal. 19. Respondents stated that the 2nd appellant is not the Managing Director of 1st appellant company at any point of time and it is also denied that 2nd appellant has 1020 shares in the 1st appellant company. Respondents stated that except 3072 initial shares rest all the allotments at any point of time by the 1st appellant is fraud against the majority shareholders of the appellant company. 20. Respondents stated that no order is passed against any person in a Petition under Section 397 and 398 of the Companies Act, 1956 read with identical provisions of Section 241 and 242 of the Companies Act, 2013 much less against a dead person in as much as a Petition of Oppression and Mismanagement is a representative suit and orders are passed to regulate the affairs of the Company in the best interest of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fidavit under reply has purportedly been filed on behalf of the 15th respondent as well which is further indicative of the fact that the 1st respondent is acting without authorisation of all/any of the 2nd to 18th respondent. 26. Appellants stated that the appeal is maintainable. Appellants stated that the NCLT has erred materially both in fact and law in deciding upon the issues framed by the Hon ble High Court at Guwahati in Comp. Appeal No.3/2014 under S. 10F of the Companies Act,1956. 27. Appellants stated that they have framed many facts in issue and question of law which conclusively demonstrate that the NCLT has erred in passing the impugned order both in fact and law resulting in miscarriage of justice. 28. Appellants denied that appellants have failed to raise any questions/points of law that rule of law has not been correctly applied to the fact situation of the case or a judicial precedent has not been adhered to or violated by the NCLT in passing the impugned order. Appellants stated that appellants have framed many facts in issues and questions of law as well as raised several grounds which conclusively demonstrate that rule of law has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties and perused the record. 33. Learned counsel for the appellant argued 1st and 10th Respondent manufactured newspaper reports which formed the very basis of the alleged oppression and mismanagement. 34. Learned counsel for Respondents argued that no reporting in media has been admitted as any evidence and as such the contentions are misleading and fraud against this Appellate Tribunal. Learned Counsel for the Respondents further argued that no petition of oppression and mismanagement can be filed under Companies Act on the basis of media reporting. 35. We have heard the arguments of the parties and perused the news item published in the newspapers. We observe that media reporting as such has nothing to do with the petition filed for oppression and mismanagement. 36. Learned counsel for the appellant argued that in the Board of Directors Meeting of 1st appellant company on 18th October, 2008 in which 2nd respondent, Director of 1st appellant, was present, voted in favour of the termination of services of 1st respondent and 10th respondent. However, 1st respondent continued to be on the Board of Director. This fact was never disclosed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the said is a sinister design to improve on their pleadings and a fraud against this Hon ble Appellate Tribunal. 41. We have heard the parties on this issue. We have also perused the impugned order and copy of the order dated 13.11.2009. NCLT in its paras 93 and 94 has observed as under:= 93. I have considered such submissions having regard to the arguments advanced from the side of the petitioner. Though the petitioners made a feeble attempt to dispute the aforesaid claim, more particularly, the allegation of their being served with the notice, issued from the office of the Principal Civil Judge on 13.11.2009, yet, the materials on record, more particularly, the letter dated 14.11.2009 (Annexure XIII to the reply of Respondent No.6 to 10, 13, 14), unmistakably demonstrates that the order was duly communicated to the petitioners. 94. In spite of that, they have taken a resolution on Item No.2 in total violation of directions of the Civil Judge, Guwahati rendered in order dated 13.11.2009 in Misc (Arb) No.571/2009. Such episodes were never made known to this tribunal by the Petitioners incorporate such information in the petition under considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring the petitioners not to make any discussion on the Item No.2 in the Notice dated 21.10.2009. Since the very removal of the R-5 from the office of the director and MD of the company was profoundly illegal and non-est in law, one can very well conclude that legally and technically, the R-5 continued to be the MD of the company even after 14.11.2009. 129. Since R-5 continued to hold the office of the director and MD of the respondent company for all purposes even after 14.11.2009, one cannot but conclude that no casual vacancy ever occurred in the office of the director of the company on 14.11.2009 requiring the shareholders in the EOGM to fill such post by the petitioner No.1 immediately. Since the removal of the R-5 was found to be illegal and non-est in law, all subsequent appointments including the appointment of P-1 as director of the company on 14.11.2009, his appointment as MD of the company on 25.11.2009 as well as the subsequent appointment of P-2 as director of the company were all illegal and equally non-est in law. 130. In that view of the matter, the removal of the petitioner No.1 from the post of the director as well as MD of the company on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.10.2009 in connection with the removal of the respondent, Sri Deep Narayana Singh, by order dated 13.11.2009 and 19.11.2009. It clearly shows that there was restraint order from the Hon ble Court and the Respondents herein should have acted upon it. Therefore, we observe that the appointment of 1st respondent as Managing Director passed in that Meeting dated 25.11.2009 is not legal and also when we have already observed that removal of R-5, Mr. Deep Narayan Singh is not legal. 48. Learned counsel for the appellant argued that purported Assam Government nominee Mr. Bipul Das was never appointed a Director and could not have been unilaterally appointed by Assam Government under Article 51 which permits it to appoint 2 directors as long as it held shares above 25%, whereas as on 14.11.2009 and 25.11.2009, Assam Government share was around 19%. Learned counsel for the Respondents argued that the NCLT erred in holding that the percentage has come down to 6%, which was a subsequent event. Therefore, the conclusion drawn by NCLT is also erroneous when it holds that Assam Government can have one nominee director. Therefore, there was no quorum at the Board Meeting dated 25.11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant had approached Hon ble Gauhati High Court in 2010 and the Hon ble High Court passed order dated 24.7.2017 (Page 167-169 of Rejoinder) allowing the appellant to operate the Bank account. We observe that due to internal disputes within the Management, the bank account being suspended for operation, the company was in financial crises. In these circumstances the need for raising funds through issue of equity shares cannot be held to be unreasonable. There is also force in the argument of the Learned counsel for the Respondent that these shares have been issued to the appellant himself and his supporters. It cannot said that it is fair allotment of shares. We observe that even if the company was in need of funds, the new equity shares should have been issued in a fair manner to the existing shareholders on pro-rata basis as per their holding in the company. 53. Additional shares have been allotted who rightly have been continuing in the Management and the funds raised have been utilised by the company almost more than 8 years now. The impugned order asking for refund of the amount of allotted shares with simple interest @ 10% annually rest from the date of purported purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g run by the employees. While the present parties before us are rival groups who continue to claim right to Management and continue to assert rights against each other and have created various confusions relating to the incidents and facts. The confusion gets reflected even in the impugned order. It appears to us that this company which appear to be running well needs to be protected from internal group rivalries. It appears to be in the interest of justice that we appoint an Administrator so as to set things straight. ORDER 57. In view of the above observations and directions the impugned order dated 8.3.2018 is set aside. We pass the following order:- 1. The decision taken at the EOGM dated 14.11.2009 removing original R-5 as Director and Managing Director of the Company is set aside and the appointment of 1st Respondent, Shri Deba Kumar Hazarika, as Director is held illegal. 2. The further decision taken at the Board of Directors Meeting dated 25.11.2009 appointing Mr. Deba Kumar Hazarika, 1st respondent, as Managing Director of the company is set aside. 3. Existing Board of Directors stand suspended. Shri Anil Kumar Dubey, Company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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