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TMI Blog2019 (9) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... illegal and void ab initio and not binding on the company ; to declare that all acts, deeds and things carried out by respondents Nos. 2 to 6 in their capacity as directors of the company is illegal, void ab initio and not binding on the company, etc. 2. Second C. P. No. 77 of 2010 (T. P. No. 26 of 2016) is filed by Dr. Joe Verghese and four others (the "petitioners") under sections 397, 398 and 237 of the Companies Act, 1956 against M/s. Omega Hospitals P. Ltd., and 6 others (the "respondents"), by inter alia, seeking to appoint an independent chairman ; to appoint an independent auditor to inspect the books of account and submit a report ; to investigate into the affairs of the respondent-company ; to declare that the seventh respondent is a division of the first respondent-company and appoint an independent chartered accountant to investigate the profits earned by the seventh respondent ; to initiate proceedings against the second respondent for having diverted the business of the first respondent-company to another entity and to appoint an independent administrator to manage the affairs of the seventh respondent ; to direct the second respondent to bring back the profits earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate have been submitted to the company for effecting the transfer of shares. The matter of share transfer came up before the meeting of the board of directors on June 21, 2007. For want of majority decision, the board was not able to effect transfer of shares and the meeting deferred the matter. (e) Due to all these conflicts and the deadlock in the management, timely renewal of the over draft facility and the repayment of other bank facilities have not been carried out and frequently issued cheques are bounced. Henceforth, the goodwill and reputation of company in the market is tarnished. (f) The shareholders of the company including the petitioner who was holding 1,06,196 equity shares of Rs. 100 each fully paid-up of the company which constituting about 45.81 per cent. of the total paid-up share capital of the company, have by their letter dated June 28, 2007 have requested the board of directors under section 169 of the Companies Act, 1956 to convene an extraordinary general meeting of the members of the company, wherein they intend to remove respondents Nos. 2 to 6 from the office of directors of the company under section 284 of the Act. (g) The company has moved a circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constituting 45.81 per cent. of the total paid-up share capital of the company, have requested to the board of directors of the company under section 169 of the Companies Act, 1956 to convene an extraordinary general meeting of the members of the company for considering the resolutions mentioned in their letter dated June 28, 2006. As the board of directors of the company failed to convene/ proceed to convene the extraordinary general meeting within 21 days from the date of their requisition, the requisitionists have issued notice convening extraordinary general meeting on August 6, 2007 in terms of section 169(6) of the Companies Act, 1956 and provisions of the articles of association of the company. (iii) Having noted the shareholders lost their confidence in the board of directors who failed to convene the extraordinary general meeting of the members of the company in terms of provisions of section 169 of the Companies Act and articles of association of the company, the scheduled meeting of the board of directors of the company is unwarranted and any decision that may be taken therein shall be against the interest of the company. (iv) That one of the director of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny member of the company can transfer his/her shares to any other member or his/her relatives without any prior permission of the board. The board in any event cannot take control of the shares of a member which is fully paid-up. Respondents Nos. 2 to 6 passed the resolution to take control of the shares of respondent No. 8, which are submitted to the company along with duly executed share transfer forms for effecting the transfer in favour of the transferees in gross violation of the provision of the Companies Act, 1956 and the provisions of the articles of association and misinterpreting the power of the board. (iii) Continuation of terms of office of directors Respondents Nos. 2 to 6 in the said meeting passed a resolution for extending the term of office of directors and appointment of additional directors in gross violation of the provision of the Companies Act, 1956 and the provision of the articles of association of the company. The additional directors can be appointed by the board in a duly convened meeting and the terms of additional directors shall come to an end at the next annual general meeting. The board has no power to fix any term contrary to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation and they subscribed to the shares 22 per cent. and 20 per cent. Initially 45 cents of land of the abovementioned partnership firm was leased to the company and later on the land was sold to the company itself. The consideration for the above sale was paid to the partners in the form of shares. (f) The first petitioner and the second respondent are permanent directors of the company and have been named so in the articles of association. Since the articles of association contemplated appointment of managing director, the first petitioner was appointed as managing director of the company in the year 2001, and he served in such capacity till 2003. The second respondent was appointed as managing director and he served as managing director during the year 2003-04. Thereafter, the second petitioner was appointed as the managing director in 2005 and continued till March, 2006. The company performed well until March, 2006. The company generated enough funds to repay the term loan without default and declared dividend. This was due to co-operation of doctors and the whole hearted devotion by all the directors, who are shareholders and also directors of the company. Thus all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... underwent a change when Dr. S. Suresh sent a circular that he would collect the cash daily and that no one else should interfere in the same (filed as annexure A7). From February, 2008 onwards the daily cash was collected by the internal auditor without furnishing any details to the petitioner. The daily cash collected was never deposited in the bank continuously for a period of nine months. Therefore, the company suffered financial mess and leading to default in payment of the term loan availed from SBI, leading to declare the company as "wilful defaulter". (k) Respondent No. 2 tried to take control of the funds of the company fully by opening a bank account in the name of the company with 2 persons as authorized signatories nominated by him. In the board meeting held on October 23, 2008 a resolution was passed to open a bank account in Yes Bank, Mangalore Branch in Dr. K. Mukund, the second respondent herein and Dr. A. G. Jayakrishnan, the fourth respondent herein as autho rized signatories. Contrary to law, board meetings of the company were called by the MD (respondent No. 3) in some clubs and restaurants, and not in the registered office of the company by sidelining the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to post the matter on November 13, 2013 to explore the possibility of settlement. Accordingly, the parties were present on November 13, 2013 the Company Law Board passed an order dated November 13, 2013, by, inter alia, recording as follows : (1) Dr. K. Mukund, Dr. Jayakrishnan, Dr. Surathkal, Dr. Mohan Chandra Suvarna and Dr. Bhaskar Bappal, are representing as one group as "Dr. Mukund group", and the other group represented by Dr. Joe Verghese consisting of other shareholders Dr. Mahabala Rai, Dr. P. S. Bhatt, Dr. R. L. Kamath and Dr. Pintoo, hereinafter referred to as "Dr. Verghese group". (2) Dr. Mukund group holds 53.36 per cent. and Dr. Verghese group holds 46.64 per cent. of the paid-up share capital of respondent No. 1- company. Both the groups are subscribers to the memorandum of association of the company, and also they are the first directors. Subsequently, the strength of the directors was increased to ten, and thus five directors for Dr. Mukund group, and four directors for Dr. Verghese group are inducted into the board of directors. Both the groups have tentatively agreed to continue in the company as doctors in event of buy out or sell out either of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y audited by the independent auditor. The next question would be to arrive at the fair value of the shares thereon to decide as to which group decides to buy out the shares of other group. 9. Since the value of shares of the company remains to be determined to settle the issue, the Tribunal during the hearing held on June 14, 2018 has directed the parties to suggest a common name of chartered accountant. Accordingly, they have filed a joint memo dated June 22, 2018 by accepting Shri Subhash Chandra Salian, Chartered Accountant, SNSB Associates, Ideal Towers, Mangalore. Accordingly, the Tribunal by its order dated June 25, 2018 has appointed Shri Subhash Chandra Salian, to conduct the valuation of assets and liabilities of M/s. Omega Hospitals P. Ltd., with a direction to file his report in the Tribunal, within a period of four weeks from the date of receipt of copy of the order. 10. Accordingly, the valuation report was submitted by the valuer vide letter dated September 6, 2018 by assessing the share value of the company at Rs. 520 per equity share, paragraph 7 of the report reads as under : "7. Recommendation of value Based on the information provided by the management, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction and subsequent order dated November 24, 2011 of the Company Law Board in C. A. No. 45 of 2011 in C. P. No. 64 of 2007, Shri Satyajit Roul, Assistant Registrar of the office carried out inspection of the company and furnished his report dated January 4, 2013 to the Ministry through the Regional Directorate (SER). Upon examination of the Inspection Report, Ministry vide its letter No. 1/25/2012-CL-II (SER), dated August 12, 2013 has instructed this office to launch prosecution under section 260 read with sections 629A, 285 read with section 629A, section 3(1)(iii)(d) read with 629A and section 58A read with provisions of rules 4A and 10 of the Companies (Acceptance of Deposits) Rules, 1975 with the permission of the hon'ble Company Law Board in respect of the matter stated in paragraph A of the Inspection Report. Likewise in respect of matters stated in Parts B and C of the Inspection Report, the Regional Director (SER) vide his letter No. 5(3)/ROC-B/RD(SER)209A/2012/6398, dated August 21, 2013 has instructed this office to launch prosecution under section 209(1)(c), section 297, AS-15 of the Companies (Accounting Standard) Rules, 2006 read with section 211(3A), section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teps initiated by the then Company Law Board, this Tribunal appointed chartered accountant with their consent as stated supra. Therefore, the parties are bound by valuation report unless it is shows as ex facie illegal basing on substantial evidence. Naturally, no valuation report would fully satisfy both the parties. We have carefully perused the valuation report along with supported documents and thus found that the valuation report submitted by SNSB Associates dated September 6, 2018 is based on sound financial principles, and it does not suffer any legal infirmities. Therefore, we are of the considered view that the report is prepared in accordance with law, and thus it is binding on both the parties. 17. For auditing of statement of accounts, an auditor was appointed by the Tribunal, and two successive independent chairman, so also valuer was appointed at the request of parties in order to resolve the issue rather than to adjudicate it since various allegations of acts of oppression and mismanagement are hardly tenable, as alleged. Moreover, as stated supra, the Registrar of Companies has already conducted its investigations into various allegations made by the parties, and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report of valuation of assets and liabilities of M/s. Omega Hospitals P. Ltd., dated September 6, 2018 submitted by SNSB Associates, chartered accountants, is legal and the same is binding on both the parties. (2) Both the parties are at liberty to take appropriate action either to buy/sell their respective shareholding of respondent No. 1-company basing on the valuation report dated September 6, 2018. (3) It is hereby forthwith restored the board of directors of respondent No. 1-company, as existed, prior to initiation of the instant cases and thus they can discharge their duties as per law. (4) The services of Shri E. Selvaraj, independent chairman appointed by the Tribunal stands discharged forthwith. (5) The Registrar of Companies or any statutory authorities are at liberty to initiate appropriate action, against respondent No. 1-company, and all the people connected with alleged violations/irregularities basing on the findings arrived during investigation in the affairs of company. (6) Since all main parties are very reputed doctors, having their super specialisations, in their respective fields, and such services are in dire need for the people of the country, all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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