9911796707
TMI Blog2019 (8) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been filed by the Original Petitioner No.3 (who is arrayed as Respondent No.7 in appeal). BACKGROUND 2. The brief facts of the case are that the original petitioners filed a petition under Sections 397, 398, 399, 402, 403, 406, 235, 237 and 247 read with Section 111 of the Companies Act, 1956 against the acts of oppression, mis-management, fraud, manipulation and falsification of Statutory and other records by and in active connivance of the Respondents before the Company Law Board, Mumbai Bench, Mumbai. a) On 7.9.1991 an agreement was executed between 1st appellant, 5th Respondent, 7th Respondent and one Late Upendra Shandilya for incorporation and promotion of 1st respondent and the 1st respondent was incorporated on 20.11.1991. The main object of the company was to establish, run and promote educational institutions. It was decided and agreed in the aforesaid agreement that the four signatories will have equal shares in the company. b) 1st appellant contributed Rs. 2 lakhs during the period April, 1992 to November, 1997 and 2nd appellant contributed Rs. 4 lakhs during the period November, 1992 to May, 1996 towards the share subscription, but the persons in control o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor on 11.6.1996. j) Later on Original Petitioner No.1 received a communication that she has been removed from the directorship of the company in AGM on 25.9.1998. k) The original petitioners filed company petition in July, 2013 before the NCLT alleging forged minutes of Meetings dated 1.6.1996 and 11.6.1996; withholding and non-payment of director's remuneration; withholding and non-payment of interest on contribution to original petitioners; fraudulent and wrongful increase of authorised capital and issue of fresh shares; allotment of 3200 shares as per Annual Return dated 28.10.1992; Minutes of Meetings and Accounts have not been permitted to be inspected nor copy of Accounts and other details of the affairs of the Company furnished to the Original Petitioners; alteration in the manner of operation of Bank Account of the Company; False and void Meetings of the company; staging the removal of the Original Petitioner No.1 and 3 from directorship of the company ; affairs of company in wrong hands and prayed for the following relief: i) The of Board of Directors of the Respondent Company be suspended and an Administrator and/or Special Officers be appointed to take charge ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the properties (moveable and immovable purchased/created out of the funds of the Respondent No.1 company as envisaged in Clause 11(e) of the Agreement dated 7.9.1991. xi) Injunction directing that one of the persons belonging to Petitioners group be made a compulsory signatory with respect to all the bank account operations of the Company. xii) Injunction directing the Respondents to pay to the Petitioners No.1 and 3 the amount of the remuneration due to them in their capacity as directors of the Company with pro-rata increment as compared to other directors, together with interest @ 18% with effect from the period the same fall due till the date of payment. xiii) Declare that the issuance and allotment of the equity shares of the Respondent No.1 company after the period from 31.3.1996, to be null and void and thereby direct that the position of the shareholding as on 31.3.1996 be restored. xiv) Injunction restraining the Respondents from altering or changing in any manner the shareholding of and in the Company; xv) Injunction restraining the Respondent Nos 2,3,4 and 5 and each of them from dealing with or disposing of, encumbering or alienating and/or transferring the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same cause of action as prayed in the petition, the petition deserved to be struck down and dismissed with costs on the ground of res judicata. p) Respondents prayed that the original petitioners are not entitled to choose different legal forums on the same cause of action; original petitioners have not come to court with clean hands; Original petitioners are causing harm to the interest of the Respondent No.1 company and further abusing the process of the Court by indulging in judicial process through coercive correspondence with various authorities. The agreement which is between two groups of persons, which cannot be agitated in Company Law Board and prayed that the Company petition be dismissed. Issues Framed 3. After hearing the parties the NCLT framed the following issues: a) Whether the petition is hopelessly time barred and whether the Limitation Act is applicable to the present case? b) Whether the acts complained of in the Petition are continuous in nature and the provisions of Section 397 and 309 of the Companies Act, 1956 are applicable or whether the Petition is dressed up to suit the requirements of Sections 397 and 398 of the Companies Act 1956? c) Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed on 21.12.2016 (Page543 of the appeal). The appellant further stated that in the said order dated 21.12.2016 the Hon'ble Court had clearly held that the appellant had been succeeded to prove that the appellant has been illegally removed from the directorship of the 1st respondent company. The appellant further stated that the Hon'ble Court rejected the claim only on the ground that Civil Court does not have jurisdiction to try the present suit in view of Section 10 of the Companies Act, 2013 (Page 539 of appeal). The appellant, therefore, stated that the Civil Suit was decided on merit but was dismissed on the ground that the jurisdiction of the Civil Court is barred by the provisions of the Companies Act, 2013. Therefore, the appellant stated that it is a settled law that the principles of res judicata are applicable only when a matter has been decided by the competent court/tribunal on the basis of merits and not on any other technical ground and stressed that in the present matter the decision of the Civil Court was not based on merits. 9. The appellant stated that the appellant No.1 and Respondent No.7 had been illegally removed from the directorship on 25.9.1998 and 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delay is not an absolute bar for dismissing the petition and the petition is not required to be dismissed when the delay has been explained. At last the appellant stated that the appeal may be allowed and the impugned order dated 6.11.2017 passed by the NCLT, Mumbai Bench, Mumbai may be dismissed. Reply of the Respondents 14. The Respondent No.1 to 3 stated that the said agreement dated 7.9.1991 has been never in their knowledge. The said Respondents further stated that even if it is assumed though not admitted that the said agreement existed, it being a private agreement between the individuals to which 1st respondent was never a party to the said agreement. The said Respondents further stated that none of the persons who were parties to the Agreement were the founding Directors of the company (Minutes of Meeting dt. 25.11.1991-Page 8 of the application filed by Respondent for additional documents). The said Respondents further stated that the said Agreement dated 7.9.1991 is neither a part of the Article of Association of 1st respondent nor was it ratified or adopted at any time and the agreement is neither binding for the operation and management of the affairs of the 1st res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cheque No.173327 dated 17.4.1997 drawn on Allahabad Bank (Page No.49 of Additional Documents) which was issued by 2nd Respondent as Managing Director. 16. The Respondents stated that the shares were allotted to outsiders and Article 4 will not be binding. The Respondent further stated that 1st appellant was personally present in the meeting dated 28.10.1992 in which it was decided to allot shares of outsider and the 1st appellant never opposed the same. 17. The Respondents stated that the notice was given to 1st appellant on 8.9.1998 to 1st appellant that she was going to be removed as a Director in the AGM to be held on 25.9.1998. The resolution was also sent with the notice. The Respondent stated that the 1st appellant was proposed to be removed as Director due to her acts against the 1st respondent and making defamatory and baseless allegations against 1st respondent. The Respondents further stated that the 1st appellant have himself mentioned in his Suit No. 49-A in para 16 and 19 (Page 318 and 319 of Appeal) that the appellant have received notice that they were going to be removed as Directors in the AGM on 25.9.1998. The Respondent stated that the suit was filed by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .09.1991 in consonance with the terms and conditions of the agreement executed between appellant and respondents. Learned counsel further argued that the Learned NCLT, Mumbai has wrongly held that the appellants cannot seek to enforce the terms and conditions of the agreement against the company and the directors which is not permissible in law and has wrongly decided the issue in favour of the Respondents. Learned counsel for the appellants argued that 1st appellant contributed Rs. 2 lakh and 2nd appellant contributed Rs. 4 lakhs towards share subscription whereas the same has been shown as unsecured loan in the Balance Sheet. Learned counsel for the appellant argued that the Learned NCLT has given a wrong finding that the underlying the principles of res judicata is that a decision once rendered by a competent authority on a matter in issue between the parties after a full enquiry should not be permitted to be re-agitated. The appellant argued that the Civil Suit No.49A/1998 was dismissed on 21.12.2016 and the Learned Court had held that the appellant had succeeded to prove that the appellant has been illegally removed from the directorship of the 1st respondent company, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the agreement dated 7.9.1991, in Clause 3 (Page 173 of paper book) it is mentioned that the amount paid could be treated as an unsecured loan and on which interest shall be paid as provided in Clause 10(e) (Page 175). Respondents argued that the appellants being aware of the same never challenged the same within the period of limitation. Respondents further argued that the Balance Sheet and Annual Return are public documents and could have been obtained by the appellants from the ROC. Respondents argued that as there was no grievance, therefore, the appellant never obtained the said documents. Respondents further argued that confirmation of accounts, ledger and balance sheet of the 1st respondent are duly signed by the appellants acknowledging that the amounts paid by them is an unsecured loan as per the books of account and on which they were receiving interest (Pages 26 to 29 of the Application filed by Respondents for additional documents). Respondents further argued that the appellants had received interest @ 15% per annum on unsecured loan. The Respondents stated that the 1st respondent was duly deducting TDS on the interest paid on the unsecured loan given by the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Pvt Ltd company either as "capital or as unsecured loan". We have further noted that in Clause (3) of the Agreement dated 7.9.1991 (Page 173 of the Appeal Paper Book) it is also written "funds so brought may be shown as capital of the aforesaid private limited company and/or unsecured loans in the names of aforesaid person(s)" and on which 15% interest shall be paid as provided in Clause10(e) of the Agreement. We also noted that in the Suit No.49-A filed by the appellants (Page No.312 at Para 7 and Page No.318 at Para No.18) the appellants have also demanded interest on deposit @ 18% p.a. We have seen the Balance Sheet and Confirmation of Accounts (Pages 13 to 29 of additional documents filed by Respondent). We have also seen Annexure F Page 49 of additional documents filed by Respondent, which is a cheque No.173327 dated 17.4.1997 of Rs. 100000/- favouring Original Petitioner No.1 Ms Suman Dhir. On the basis of these documents we are of the view that the amount invested by the appellants is shown as unsecured loan and the confirmation of accounts are duly signed by 1st appellant and the appellants' accounts with 1st respondent are showing provision of interest on the amount in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n illegally removed from the directorship of 1st respondent without any notice to them. Learned counsel further argued that the Respondent have not shown any document pertaining to the resignation of 7th respondent and the respondents only submitted that it was an oral resignation. 26. Learned counsel appearing on behalf of the Respondent argued that the Notice was given to 1st appellant on 8.9.1998 (Page 176 of short Reply) that she was going to be removed as Director in the AGM to be held on 25.9.1998 (Page 171 of short reply). The Members resolution was also sent with the Notice. 27. We have heard the parties and have gone through the record. We found that the notice dated 8.9.1998 (Page 176 and 177) was duly served to 1st appellant as the postal acknowledgement is also there. Further we also noted from para 16 and 19 of Suit No.49-A filed by the appellant (Page No.318 and 319 of the Appeal) in which 1st appellant has admitted that appellant have received notice that they were going to be removed as Directors in the AGM on 25.9.1998. In the face of the evidence available on record it cannot be said that 1st appellant has been removed without a due notice and hence her co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removal of directors of petitioners group (before CLB/NCLT), it will be detrimental to the interest of the company if litigation is continued on one pretext or other either by one group or the other. To save the company from litigating shareholders divided in groups and appellant group being too small in minority (holding 500 shares each), it would be desirable that an exit route is provided to the appellants. CONCLUSION 32. From the above we noted that the allegations of the appellants are pertaining to and arising out of the Agreement dated 7.9.1991. Appellants under the garb of the petition before NCLT and appeal before Appellate Tribunal are seeking specific performance of the Agreement dated 7.9.1991. We also noted that the appellants have launched various litigations before the various forums and have not succeeded. Since the dispute is contractual in nature, Company Petition under Section 397 and 398 was not maintainable. However, we noted that the original petitioners are holding 500 shares each and 1st and 2nd appellant have infused Rs. 2 lakhs and Rs. 4 lakhs respectively. We noted that Rs. 1 lakh has been returned to 1st appellant vide cheque No.173327 dated 17.4.1997 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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