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TMI Blog2017 (3) TMI 1764X X X X Extracts X X X X X X X X Extracts X X X X ..... or restoration of her name in the Register of Members of the Company by reserving her right to agitate the right issue later on. The petitioner is fully justified to file the said case restricting the illegal removal of her name by reserving her right to question the present issue. Whether the acts alleged in the Company petition constituted acts of oppression and mismanagement so as to invoke Sections 397/398 of the Act? - HELD THAT:- The Company/Respondent, on one hand making allegation that the petitioner was raising vexatious litigation against it, on the other hand, the Company/Respondent itself dragged the litigation upto Apex court and also took so much time to implement orders of CLB. The Company has not changed its mended his ways of dealing with minority shareholders like the petitioners especially when the Company is closely held Company and profit making Company and CLB already held that depriving the shareholding of the petitioner in the Company was illegal. All these acts constitute acts of continuous oppression and mismanagement and these acts justify winding up of the Company but it would certainly prejudice the interest of petitioner and the Company itself as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Mr. Ravikumar Duraisamy, Member (Technical) ORDER Rajeswara Rao Vittanala, 1. The Company Petition bearing C.P. No. 13 of 2013 (hereinafter referred to as Company Petition) was filed by Mrs. Mallina Bharathi Rao, (hereinafter referred as Petitioner) before the then Hon'ble Company Law Board, Chennai Bench, Chennai (CLB) and the same was initially taken up for hearing on 04.03.2013. The case was pending when the constitution of National Company Law Tribunal (NCLT) was notified by the Government of India. Accordingly, the case is transferred to this Bench in July, 2016 as the case relates to the states of Andhra Pradesh and Telangana. Hence, we have taken the case on record of this Bench. The case was initially taken up for hearing by this Bench on 29.07.2015 and subsequently posted it on 19.08.16,09.09.16,19.09.16, 07.10.2016, 25.10.2016, 15.11.2016, 29.11.2016, and finally on 15.12.2016. The case stands adjourned due the requests made by one counsel or the other. Ultimately, it was argued and subsequently filed their written arguments later on. 2. The Company Petition was filed under section 111A, 397 398, 402, 405 other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company) was incorporated under the provisions of the Companies Act, 1956 as a Private Limited Company with Registration No. 1699 of 197374 on 22nd day of March, 1974. The Company became a Public Limited Company on 28.08.2009. The Authorised Share Capital of the Company is ₹ 4,00,00,000/- (Rupees Four Crores Only) consisting of 3,98,000 (Three Lakhs Ninety Eight Thousand) equity shares of ₹ 100/- each and 2,000 (Two Thousand) preference shares of ₹ 100/- each and the subscribed and paid up capital is ₹ 2,64,00,000/- (Rupees Two Crores Sixty Four Lakhs Only) consisting of 2,64,000 (Two Lakhs Sixty Four Thousand Only) of equity shares of ₹ 100/-. (b) The Petitioner subscribed for 350 (Three hundred fifty) equity shares of ₹ 100/- each during 1974 by paying a total amount of Rs, 35,000/- and got allotted same vide share certificate No. 2 dated 28.12.74 with distinctive numbers from 501 to 850. The total shareholding in the Company is 2.120% during 1974-91: 1992-95 1.060% from 1996 onwards 0.265%. The address noted for the above certificates is at Undrajavaram. However, the address of the Petitioner was changed from Undrajavaram to Nandamur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1.32 Crores. The Petitioner's shareholding was reduced due to the oppressive acts of the Respondent No.2 in not offering rights issue in the year 1991-92. The Petitioner handed over an amount of ₹ 35,000/- (Rupees Thirty five thousand) to the 2nd Respondent through her husband, which was duly acknowledged by the 2nd Respondent for the said offer. However, the 2nd Respondent returned the said money to the Petitioner on the false ground that the Company had withdrawn the rights issues all together. When it was enquired with the 2nd Respondent about the return of the money, the 2nd Respondent assured the husband of the Petitioner that he would inform the Petitioner as and when the Company would come up with rights issue in future. Later, the Petitioner came to know, through other source, that the Company had not withdrawn the rights issue as stated by the 2nd Respondent, and on the contrary, those shares were subscribed by the 2nd Respondent himself behind her back. In the meanwhile, the Petitioner has shifted her address to Machalipatnam from Nandamuru and the change of address was duly informed to the Company and she used to take correspondence from the Company as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking that any bonus or right shares in respect of her 350 shares can be provisionally allotted to 2nd Respondent during the pendency of appeal and same would not be alienated, in order to safeguard the interest of the Petitioner, they would be allotted as per the final result of the case. (j) In pursuance to the direction of the CLB, ultimately, the membership of the Petitioner was restored to the extent of 350 shares, and paid dividend of ₹ 1,21,750 for the period during 2000-11, and interest was also paid @ 12% compounding annually. The Company has also paid the penalty of ₹ 2500/- as directed by the CLB. The Petitioner has also sought various AGM notices for the period 2000-2011 and also reminded them about the Petitioners rights/bonus issues entitlement after 2001.The Petitioner vide letter dated 20.11.2011 demanded for three rights issues by enclosing a demand draft dated 19.11.2011 for ₹ 13,65,000/-. However the same was illegally rejected on the ground that the Company's General Manager has retired from the service long time back. (k) The Petitioner claimed for all three rights issues immediately after restoring her as a shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner. The allegations with regard to the rights issue during the year 1991-92 are false and unsustainable. The issue of removal of petitioner was already settled in the previous petition filed by petitioner (CP No. 7 of 2000.) (c) They have denied that the Petitioner has ever paid any amount to the 2nd Respondent. The Petitioner failed to subscribe to the rights shares. The offer letter issued for the rights. They have also denied that the petitioner has informed the Company about the change of her addresses. The Petitioner has deliberately approached the wrong forum instead of CLB and she did not approach the CLB even after dismissal of O.P No. 26 of 1997 on 29.11.1999. In the meanwhile, the name of the Petitioner was removed from the Register of Members during EGM held on 30.11.1999 as she was dragging the Company into frivolous and vexatious proceedings at the instance of her husband. The Petitioner also filed a civil suit at Tanuku in which the petitioner did not raise any objections or claim or even whisper about rights issue during the year 1991-92 and 1995-96. In the subsequent CP 07/2000 also, she has not sought any prayer with regard to the rights issue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the High court in negative. The Respondents have illegally refused to receive the consideration of ₹ 13,65,000 paid for issue 3 Rights issues in question. The Respondents have illegally removed her name from the Register of Members and CLB, on considering the issue in detail, has directed the Company to restore the shares of Petitioner. On restoration of shares to the Petitioner, it would be natural that all consequential benefits like dividend, bonus, rights issue etc. are to be extended by the Company itself. b) There are no laches and limitation attracted in the case. The petitioner has been fighting for her right to participate in rights issue from 1997. As stated supra, the petitioner has earlier filed OP NO. 26 of 1976 and also filed original application to Central Government under section 399(4) on 21.2.1997; filed CP No. 7 of 2000; reserved her rights to agitate rights issue separately; again the petitioner applied on 1.11.2011 seeking permission from Central GO'.t. to agitate the present issue and the same was granted and thus filed the present petitioner. So there is no limitation involved and it is a continuous cause of action. c) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner was shareholder and the same was dismissed as withdrawn. However, this fact was suppressed. Hence, the Petitioner is stopped from re-agitating this issue in present petition in terms of Section 12 and Order Il Rule 2 of Code of Civil Procedure. v) The contention of the Petitioner that she paid cash to 2nd Respondent for allotment of shares is totally false. The Petitioner cannot claim any relief basing on the self-serving statement,. The Petitioner has not intimated the Company about the change of her addresses. The Petitioner did not pay anything for rights shares in question to the Company and even did not submit any application for the same. So, she was not allotted any shares. vi) It is contended that a registered notice was sent to the registered address of the petitioner available with the Company. However, the petitioner missed such notice either intentionally or otherwise. Under Section 53 of the Companies Act, 1956, a Company is under an obligation to serve a notice on any member either personally or by sending by post to him/her registered address in India. The section also provides an alternative to the member to request the Company for specific m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Petition is maintainable u/s. 397/398 of the Companies Act, 1956, when the Petitioner was admittedly not holding minimum 10% shares of the Company; (b) V,hether the Company Petition is within the limitation or it is barred by laches and limitation as contended by the Respondents ; (c) Whether the Petitioner was issued offers by the Company for the subscription of rights issues for all three years ie 1991-92, 1995-96 and 2004-05; (d) Whether the Acts alleged in the Company Petition constitute acts of oppression and mis-management so as to interfere in the issue by the Tribunal; (e) What is the relief the Petitioner is entitled for. 9. It is not in dispute that the Petitioner has approached the Central Government under section 399(4) of the Companies Act, 1956 seeking permission to file a petition in Company Law Board under section 397/398 of the Companies Act, 1956 with regard to right issues made in the year 1991-1992 and 1995-1996. Accordingly, the Government of India has passed an order dated 16.11.2012 (Annexure-4, page 44-48 of material papers filed by the Petitioner) by permitting the Petitioner to file a Petition under section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of respondents in this context is rejected as un-tenable. 11. As stated supra, aggrieved by the non-issue of two rights issues, the Petitioner has filed OP No.26/1999 before Andhra Pradesh State Consumer Dispute Redressal Commission at Hyderabad. However, the same was dismissed by an Order dated 29.11.1999 for lack of jurisdiction. On the very next day an EGM was conducted i.e. on 30.11.1999 and passed a resolution terminating the membership of Petitioner and compulsorily purchase of shares by the existing members of the Company. Accordingly, the Applicant was issued a letter No.GSO/99/2849 dated 11.12.1999 (Annexure-30, page 67 of material papers filed by the Petitioner) intimating about the termination of the membership and compulsorily purchase of her shares, and requested to surrender her share certificate, and indicate fair market value of shares within two weeks from the date of receipt of notice, failing which the Company itself will fix the rates and transfer those shares to any existing member without further notice. In the above circumstances, the Petitioner was left with no other option except to question the above decision of the Company, in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... changed its mended his ways of dealing with minority shareholders like the petitioners especially when the Company is closely held Company and profit making Company and CLB already held that depriving the shareholding of the petitioner in the Company was illegal. All these acts constitute acts of continuous oppression and mismanagement and these acts justify winding up of the Company but it would certainly prejudice the interest of petitioner and the Company itself as it is admittedly profit making Company. 13. It is not in dispute that the Respondents have made a commitment to restore all the bonus shares etc. in proportionate to 350 shares held by the Petitioner as mentioned above in CMP No.10988 of 01 in LPA No.207 of 01. It is also on record that the Petitioner was consistently making efforts by demanding to allot the Rights issues by enclosing necessary DD's and payments as mentioned above. However, the Company/Respondent for the reasons best known to them has refused to accept it on untenable grounds. The Respondents have opposed the Company Petition more or less on technical grounds, instead of meeting the ground realities. As stated above, the CLB has already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any are entitled to receive notices required under AGM/EGM and also entitled to receive corporate benefits such as dividends, bonus shares, rights issues etc. Moreover, it is not the case of the Respondents that the Petitioner has expressed her unwillingness to purchase the rights shares in question. On the other hand the Petitioner has offered sufficient money to allot rights issue and they were not accepted by the Company/Respondent No.2 on untenable grounds. As stated above, the petitioner has already enclosed a DD for ₹ 13,65,000/- and the same was returned vide letter of Company vide No. 391 dated 28th November, 2011(page 191 , Annexure 32). 15. It is also relevant to point out here that the Managing Director of the Company has addressed a letter dated 20.06.2012 to the Joint Secretary, Ministry of Corporate Affairs, New Delhi. So far as rights issues are concerned, it is stated as follows: With reference to the above and during the personal hearing held on 03.05.2012 in your chambers, New Delhi, we were directed to produce the following information; a. Payment of costs of ₹ 2500/- towards CLB costs; We have arranged the payment ofͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speed post, etc. at least by granting sufficient time to the shareholders either to subscribe or to reject. In the instant case, it is not in dispute that the Company is a closely held Public Limited Company. So the contention of the Company that current address of the Petitioner are not available at the time of issue of shares, the litigation is pending, records are not available, the time for preservation of records was over, etc. are not at all tenable and thus they are rejected. Moreover, while contending before the Government that there are no records available with regard to the proof of serving notices about the rights issue, they are denying the same on flimsy grounds: It is not the case of the respondents that the Petitioner has all of a sudden filed the present case. As stated above, the Petitioner making her grievance with the Company right from the first rights issue i.e., 1991-1992. On this ground also, the contention of the respondent that no records are available is not at all tenable and thus, it is rejected. Moreover, principles of natural justice demands that appropriate notice must be given to the parties before taking any substantial decision, especial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner was put to untold misery in forcing to approach this Tribunal again. This Tribunal cannot lose sight of frivolous contentions made by Respondents. In view of the above background, continuous oppression on the minority shareholder and mis-management deserves exemplary cost to be imposed to protect the interest of minority shareholders. Since, this frivolous litigation is prosecuted at the instance of Respondent No. 2 3 they have to be saddled with the exemplary cost to be borne by them personally from their personal accounts. 20. For the reasons stated above, the Company Petition bearing number 13 of 2013 (TP No. 97/HDB/2016) is allowed with the following directions: i. We direct the Respondents to allot all the three rights issues shares comprising a total of 5250 shares i.e., 350 in 1991-1992, 2100 shares in 1995-1996 and 2800 shares in 2004-2005. ii. We direct the Petitioner to pay the amount of ₹ 13,65,000/- by way of D.D. to the Respondents within a period of four weeks from the date of receipt of copy of the Order and thereafter two weeks time is granted to the Respondents to allot shares accrued through three rights issues to the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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