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TMI Blog2019 (7) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... pany or its members. Clearly there can be no comparison between such valuers and the said reputed Chartered Accountant being relied on by the respondents. We are unable to uphold the findings of NCLT which has not at all either dealt with applicability of Section 236 or the manner in which respondents have tried to enforce the same and simply accepted whatever was claimed by the respondents in their application that they have already taken over the shares of original petitioners and so the petitioners are not shareholders and so they cannot maintain the petition - the petition was maintainable at the behest of original petitioners who were inter alia challenging the manner of take over of their shares and who constituted 2/3rd of the members of the company and were perfectly competent to maintain the company petition. The notices given by the respondents under Section 236 and their subsequent act of cancelling the shares of the original petitioners were illegal and stand set aside. Such acts of Respondent constituted oppression of minority shareholders-the petitioner - the Appellants could maintain the Company Petition under Section 241, 242 of the Act - application dispose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 329) and when the Appellants did not respond, the Respondent No.2 who was in control of Respondent No.1, issued Notices under the provisions of Section 236 of The Companies Act, 2013 ( Act in short) and went ahead to buy the shares of the Appellants in spite of their resistance. Consequently, the Appellants as Petitioners filed the Company Petition raising various grievances with regard to the documents executed and curtailing their shares and inter alia contended in Para 6.45 of the Company Petition as under:- 6.45 In spite of the petitioners dissent conveyed to the respondents vide their above reply letter dated 20/07/2017 the Respondent in hand and glove with each other and with the help of the Board of Directors who are nominee of the 1st respondent illegally and arbitrarily and fraudulently transferred the entire share holdings of the petitioners i.e. 2,40,000 equity shares of ₹ 10 each at a throw away price of ₹ 1.70 per share and sent two demand Draft as follow: i. ₹ 2,80,560 in the name of 1st petitioner drawn on Deutsche Bank ii. ₹ 1,20,240 in the name of 2nd Petitioner drawn on Deutsche Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r equity share or such higher amount as may be directed by this Hon ble Tribunal. Respondent No.2 filed IA 228/2017 and IA 229/2017 3. The Respondent No.2 OBO Germany appears to have filed in the Company Petition - IA No.228/2017 and IA No.229/2017 (Annexure A-3 and A-4). Annexure A3 referring to the contents of the Company Petition, claimed that the disputes being raised were required to be referred to Arbitration in view of Share Subscription Agreement and Put and Call Option Agreement under the provisions of Section 45 of the Arbitration and Conciliation Act, 1996. The other IA (Annexure A4) was filed seeking dismissal of the Company Petition as not maintainable under Section 244 of the Act. 4. The Ld. NCLT heard the parties with regard to these IAs and making brief references to the Company Petition and disputes raised, mainly with regard to maintainability, accepted the averments made in the Application questioning maintainability and held that the Respondent No.2 had acquired the shareholding of the minority shareholders, i.e. the Petitioners and thus, the Petitioners did not hold any shares in Respondent No.1 Company and were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No.2 to enforce its rights as per the Put and Call Option Agreement . Respondent No.2 claimed that at such point of time, the Petitioner and Respondent Company and Respondent No.2 executed Separation Agreement dated 07.06.2016 and the Petitioners agreed to step down from the post of Managing Director and did step down. The Application claimed that after the Separation Agreement, the Petitioners continued to remain minority shareholders to the extent of 0.36%. The Maintainability Application further claimed (Para 18) that the Appellant No.1 failed to comply with the terms of the Separation Agreement and so no payments were made to him by the Respondent No.1 under the terms of Separation Agreement and the Appellant No.1 had issued Notices making claims to which the Company had responded. Respondent No.2 claimed that the Respondent No.1 Company issued Notices to the Petitioners in accordance with provisions of Section 236 of the Act and when there was no response from the Appellant Petitioners, the Company sent demand drafts to the Appellants in consideration for transfer of their equity shares. It was claimed that the shares were thus transferred in accordance with the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100% shares which petitioners had. The Company Petition and its annexures showed the original petitioners questioning the separation agreement dated 7.6.2016 (Page 500) and relied on notice sent by original Petitioner No.1 on 9.6.2017 (Page 448) through Advocate R. Rajesh to show as to how Clause 2.6 of the Separation Agreement showed that the original petitioner No.1 was made to sign the resignation letter from the post of Managing Director as well as Director on 7.6.2016 itself when separation agreement was got executed. The Company Petition gave various reasons raising questions of law regarding applicability of Section 236 of the Act to the present set of facts and also if the provisions of Section 236 of the Act had really been complied. The Company Petition questions the manner in which the original respondents purporting to act under Section 236 of the Act took away their shares which they claim was at throw away price. The petitioners have also claimed that the Separation Agreement required certain payments to be made and gave particulars as to how the original petitioner No.1 was made to sign the resignation letter. The Petition gives particulars how payments as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have simply accepted whatever the respondents claimed (and which was disputed by the petitioner) that they have duly complied and enforced Section 236 of the Act. Thus we set aside the findings of NCLT that the appellants-original petitioners did not hold any shareholding and hence they were not eligible. We hold Appellants/Original Petitioners were and are eligible to maintain the Company Petition on the basis of number of Members. Dispute regarding Section 236 of the Companies Act, 2013 10. NCLT in the impugned order referred to the disputes raised by the appellants with regard to applicability of Section 236 but did not deal with the same or decided the same and concluded that Section 236 was complied with and Original Petitioners were no longer Members and could not maintain petition. 11. The question of applicability and compliance or otherwise of Section 236 has been extensively argued before us. The documents concerned in this regard are not disputed. It is more a legal question and thus we proceed to decide the same. Documents reflect developments 12. We have already referred as to how the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd document was Employment Agreement (Page 349) dated 20.10.2013 which was between the Original Respondent No.1 and Petitioner No.1 ensuring term of Managing Director for Original Petitioner No.1 from 1.1.2013 till 31.12.2017 (Page 356) and providing for compensation in the form of salary, bonus etc (Page 365). Then suddenly on 7.6.2016 there is a Separation Agreement (Page 500) with resignation in format as prescribed in the separate agreement with element of force and allurement mixed (See Clause 2-Page 504) followed by a Circulation circular dated 14.6.2016 (Page 551) and the term of original petitioner No.1 as MD and Director getting cut on 15.6.2016. 14. Before this on 15.2.2016, Respondent No.2 had sent Put and Call Option Notice (Page 401) to the petitioners to sell their shares on sale consideration rather than at the Agreed Price. Giving this up, later on 9th May, 2016 Respondent No.2 sent another notice (Page 405) to the petitioners invoking Put and Call Option calling upon them to sell at agreed price to be decided by mutually acceptable Chartered Accountant. Once the relation of Original Petitioner No.1 got cut with Separation Agreement dated 7.6.2016, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal right to have and hold property and not to be forcibly deprived of the same, the present Section has element of forcibly taking away the shares and thus this provisions has to be strictly construed and applied. The counsel submitted that the provision did not apply to the present company which is a private limited company and where there was no such contingency of merger, compromise or amalgamation and thus the respondents could not have relied upon such section to deprive the appellants of their shares. It is also argued that even if Section 236 was to be applied, its requirement was that price of shares should be determined on the basis of valuation by registered valuer and that too in accordance with the rules. It is argued that at the concerned time registered valuers were yet to be appointed by the Central Government and such rules for valuation were not yet made and the respondents could not have enforced Section 236. 17. Against this the learned counsel for the Respondents argued that when the appellants did not respond to put and call option notices, the Respondent No.2 had to resort to Section 236 as it holds more than 99% shares and Section 236 squarely a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determined on the basis of valuation by a registered valuer in accordance with such rules as may be prescribed. (3) Without prejudice to the provisions of sub-sections (1) and (2), the minority shareholders of the company may offer to the majority shareholders to purchase the minority equity shareholding of the company at the price determined in accordance with such rules as may be prescribed under sub-section (2). (4) The majority shareholders shall deposit an amount equal to the value of shares to be acquired by them under sub-section (2) or sub-section (3), as the case may be, in a separate bank account to be operated by the company whose shares are being transferred for at least one year for payment to the minority shareholders and such amount shall be disbursed to the entitled shareholders within sixty days: Provided that such disbursement shall continue to be made to the entitled shareholders for a period of one year, who for any reason had not been made disbursement within the said period of sixty days or if the disbursement have been made within the aforesaid period of sixty days, fail to receive or claim payment arising out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) When a shareholder or the majority equity shareholder fails to acquire full purchase of the shares of the minority equity shareholders, then, the provisions of this section shall continue to apply to the residual minority equity shareholders, even though,- (a) the shares of the company of the residual minority equity shareholder had been delisted; and (b) the period of one year or the period specified in the regulations made by the Securities and Exchange Board under the Securities and Exchange Board of India Act, 1992(15 of 1992), had elapsed. 19. Before analysing Section 236 we refer to the arguments in this context raised by the Learned Counsel for Respondents. Learned Counsel referred to judgement in the matter of Commissioner of Income Tax, Bombay Versus Ahmedbhai Umarbhai Co, Bombay reported in 1950 SCR 335. The counsel referred to para 15 of the judgement to argue that marginal notes in an Indian statute, as in an Act of Parliament, cannot be referred to for the purpose of construing the statute. This judgement was arising with reference to interpretation of certain portion of Section 42 of the Income Tax Act. Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions under Section 11 (2)(h). One of its functions is to regulate substantial acquisition of shares and take overs of companies. For this purpose the Regulations of 1997 as referred in explanation of Section 236 dealt with acquisition of shares and take overs. The said regulations have now been repealed and the operating provisions are Securities Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The word acquirer and person acting in concert are dealt with under these Regulations and have specified meaning in the context of listed companies. 22. Thus the first event with regarding sub-section (1) of Section 236 is in the context of the acquirer and the persons acting in concert as defined in provisions of SEBI Act with which we are not concerned in the present matter. 23. As such, we come to the second event as noticed in sub-section (1) of Section 236 which should be read for companies other than listed companies. Although it has been argued by the respondent that the words for any other reasons should not be circumscribed by the preceding words of amalgamation, share exchange, conversion of securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be a scheme of merger or amalgamation entered into between two or more small companies or between a holding company or its wholly-owned subsidiary company or such other class or classes of companies as may be prescribed. Section 234 deals with merger or amalgamation of companies with foreign companies. This section provides that a foreign company, may with the prior approval of the Reserve Bank of India merge into a Company registered under this Act. The Section makes provisions to protect the shareholders (To recall-we have here Respondent No.2, a foreign company which having taken over more than 99% shareholding in Respondent No.1-an Indian company is now throwing out the Indian shareholders which in effect must be held to amount to back door merger or amalgamation by foreign company without approval of RBI as Respondent No.1 would then have no separate identity as respondent No.2 would be 100% shareholder of Respondent No.1). In this background Section 235 provides for power to acquire shares of shareholders dissenting from scheme or contract approved by majority. This is followed up by the present Section 236 dealing with purchase of minority shareholding. Thus there c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... honoured and in the event of dispute the affected had the option to move arbitration. There could not be a one sided takeover by Respondent No.2 who had by way of agreements got 99% shares in Respondent No.1 and thus was akin to Respondent No.1. Thus Section 236 of the Act was inapplicable to the facts of the matter. Invoking of Section 236 27. Further, even if it was to be said and held that Section 236 of the Act is applicable, question is if it was duly and legally invoked. After having considered the inapplicability of Section 236 even if in the alternative, if we proceed to look into the invoking the same also, we find fault with the steps taken by the Respondents. Sub-section (2) of Section 236 which we have reproduced above clearly provides that the offer to the minority shareholders of the company for buying the equity shares held by shareholders has to be at a price determined on the basis of valuation, by a registered valuer in accordance with such rules as may be prescribed. The notice given by Respondent No.2 under Section 236 is dated 7.4.2017 (Page 422). Notice refers to the original petitioners not honouring call option notice. The n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luer and that too in accordance with the rules prescribed. The Legislature appears to have been conscious and careful while using these words because it has made a special Chapter relating to Registered Valuer. Chapter XVII has only one Section which is Section 247 which reads as under:- 247. Valuation by registered valuers- (1) Where a valuation is required to be made in respect of any property, stocks, shares, debentures, securities or goodwill or any other assets (hereinafter referred to as the assets) or net worth of a company or its liabilities under the provision of this Act, it shall be valued by a person having such qualifications and experience, registered as a valuer and being a member of an organization recognized, in such manner, on such terms and conditions as may be prescribed and appointed by the audit committee or in its absence by the Board of Directors of that company. (2) The valuer appointed under sub-section(1) shall,- (a) make an impartial , true and fair valuation of any assets which may be required to be valued. (b) exercise due diligence while performing the functions as valuer; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 2/3rd of the members of the company and were perfectly competent to maintain the company petition. 30. For such reasons we hold that the notices given by the respondents under Section 236 and their subsequent act of cancelling the shares of the original petitioners were illegal and stand set aside. Such acts of Respondent constituted oppression of minority shareholders-the petitioner. Cursory Findings on other issues 31. It does not appear from the record that the respondents had filed any detailed response to the company petition or that Petitioners got opportunity to file rejoinder. It does not appear that the company petition as such was taken up and argued for final hearing. When the respondents moved application questioning maintainability, there may have been, as before us, reference to the other aspects of the matter but that would require proper pleadings, evidence and hearing. If the impugned order is perused which, considering the volume of the matter, is only a short order, there are findings recorded by NCLT which hardly have references to the record and are supported by little or no reasoning. We are making a brief referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents do not appear to have been given opportunity on this count. 34. In our view looking to the stage at which the matter was argued and impugned order passed, there were and are disputes raised in the proceedings which require pleadings to be completed by parties, evidence and arguments to legally decide the same. While deciding maintainability, cursory recording of findings regarding other aspects of the matter without proper reasoning and support of evidence is inappropriate and the impugned order as a whole would require to be set aside and the matter deserves to be remitted back to the Learned NCLT to decide the other issues raised in the matter. As we are not deciding other issues raised in the matter, we are not burdening this judgement with rulings referred to by Respondents to claim that Appellants are trying to enforce contractual rights. NCLT needs to decide the other issues in the matter. FINAL ORDER 35. For the above reasons, we set aside the impugned order. We hold that Appellants could maintain the Company Petition under Section 241, 242 of the Act. We further hold that in the facts of the matter, respondents could not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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