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TMI Blog2017 (12) TMI 1770X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember 26, 2016 and further directing the respondent-petitioner to sell his shares in the company to respondents Nos. 2 and 3. The appellants (original respondents Nos. 1 to 3), being aggrieved, have moved this Appellate Tribunal. We would be referring to the parties in the manner in which they have been arrayed before the learned National Company Law Tribunal. 2. It would be appropriate to refer to a few facts. The petitioner-respondent filed the company petition on November 15, 2016 claiming that he is one of the directors of the respondent-company having 5,000 equity shares. The petitioner and respondents Nos. 2 and 3 came to an understanding to set-up the company and the petitioner was to provide his medical expertise and respondents Nos. 2 and 3 were to manage business of the company. It was registered as private limited company on April 26, 2010 with the object of dealing in medical devices, instruments, etc. The authorised share capital as on August 19, 2016 was Rs. 25 lakhs, divided into 2.50 lakhs equity shares divided into 10,000 equity shares of Rs. 10 each. The issued and paid-up share capital was Rs. 1,00,000. The petitioner is one of the directors. Respondent No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oached the petitioner for settlement and meetings took place on August 24, 2016 and September 11, 2016 but no solution was found. The petitioner had gone out of city on December 7, 2016 and when he returned he found an envelope at his door regarding notice for next annual general meeting of the company on September 30, 2016. The notice was received after the date of meeting. Raising such grievances, the petitioner claimed that an independent committee needs to be appointed; the Central Government should appoint inspector to investigate and board of directors should be removed. 3. In response, respondents Nos. 1 to 3 put up their case before the National Company Law Tribunal claiming that relying on the petitioner, respondent No. 2 had asked his cousin brother, respondent No. 3 to join his business and after negotiations, a memorandum of understanding was entered between the parties and it was agreed that proprietorship "Surgi Aid Medical Equipments" would be taken over by newly promoted company, namely, "Surgi Aid Medical Equipments P. Ltd."--the first respondent. All the parties were to have one-third share each. The assets and liabilities were taken over on incorporation. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner and he siphoned off of the funds to his personal accounts although the proprietary concern was already taken over by the first respondent-company along with its debtors. The respondents gave further details of withdrawals made by the petitioner behind their back. The respondents further claimed that the petitioner was director in M/s. Zest Orthocare P. Ltd. and M/s. Zyro Woundcare P. Ltd. and his wife was the shareholder in these companies. They came to know of this when they made search in this regard. Thus, those companies took credit from the first respondent-company without disclosing to these respondents that the petitioner and his wife have got interest in those companies which was in violation of section 185 of the Act. The respondents also claimed that the petitioner was doing competitive business against respondent No. 1-company and it was resolved to issue show-cause notice in the board meeting dated November 12, 2016. The notice of this meeting was served on October 28, 2016. Non-participation of the petitioner was with full knowledge and express consent of the petitioner himself and thus he was estopped from raising issues. There was provision in the settlement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter allotted to the other respondents. Before the meeting dated December 26, 2016, the petitioner moved the National Company Law Tribunal vide I.A. No. 38 of 2016 and the advocate of the respondents gave an undertaking to the National Company Law Tribunal that the company would not give effect to the resolution as may be passed on December 26, 2016 till next date. On March 2, 2017 as the petitioner sought adjournment in the National Company Law Tribunal, counsel for the respondents withdrew the undertaking and thus the company acted upon the resolution dated December 26, 2016. 4. The learned National Company Law Tribunal heard the parties and recorded its reasons. It held that the petitioner was not served with the notice of board meeting dated October 8, 2013 appointing respondent No. 3 as director. The National Company Law Tribunal found that oppression of the petitioner had not been proved but proceeded to pass orders to set aside allotment of shares dated December 26, 2016. It also directed the petitioner to sell his shares to the company and directed respondents Nos. 2 and 3 to purchase the shares at fair market value fixed by independent valuer to be confirmed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Law Tribunal found in paragraph 18 of the impugned order that admittedly the petitioner had floated two companies without informing the respondents and the material on record showed that the respondents were made to sell the products of the respondent-company to the companies floated by the petitioner. 8. In paragraph 18 of the impugned order, it was observed (page 89 of 203 Comp Cas): "18. The petitioner having kept quiet without bothering about affairs of the company for four years, chose to write to the bankers to freeze accounts of the company. Moreover, the petitioner, admittedly floated two companies, viz., M/s. Zest Orthocare P. Ltd. and M/s. Zyro Woundcare P. Ltd. without informing the respondents. Material on record also show that the respondents were made to sell the products of the first respondent-company to the companies floated by the petitioner. A perusal of annexures R10 and R11 give support to the aforesaid facts. Further, perusal of annexure R9 to reply show that the petitioner after having sold the first respondent-company all the debtors including debtor B. Hasamal and Cie from whom Rs. 11.34 lakhs were recoverable, recovered the said amount and siphoned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beginning that respondent No. 3 would also be made director. Reference has been made to paragraph 4 of the affidavit in reply filed by respondents Nos. 1 to 3 in the company petition (page 244 of Volume-II of paper book). Counsel then referred to the minutes of the meeting dated November 12, 2016 where without raising objections to respondent No. 3 signing as director, the petitioner also had signed the minutes. No doubt, the minutes are dated November 12, 2016 and the petition came to be filed on November 15, 2016 but the submissions are that if the petitioner had objections, he would not have signed the minutes without protest. We find substance in these arguments. Learned counsel for the respondent-petitioner was asked at the time of hearing as to why there was delay in questioning the appointment of respondent No. 3 which was made on October 8, 2013 till the petition came to be filed in 2016. However, learned counsel for the respondents made submissions with reference to subsequent issue of further shares and when again asked regarding the appointment of respondent No. 3, counsel stated that he was not pressing the matter as regards the appointment of respondent No. 3 as direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,000 shares and respondent No. 3 applied for 5,000 equity shares against his eligibility of 500 shares. Necessary cheques were deposited with bank account of the first respondent-company." 13. The learned National Company Law Tribunal found fault with such decision of the respondents calling upon the petitioner to deposit Rs. 14.54 lakhs to tide over the financial crunch and on failure to proceed to issue rights shares to other shareholders. It can be seen that the petitioner had before the meeting moved I.A. No. 38 of 2016 to restrain the respondents from holding the meeting dated December 26, 2016. At the time of hearing on December 23, 2016 counsel for the respondents gave an undertaking that the resolutions as may be passed in the board meeting scheduled to be held on December 26, 2016 will not be given effect to till the next date of hearing. 14. On the next date, as the original petitioner sought adjournment, the undertaking was withdrawn. It appears that the petitioner had sought adjournments of the meeting from the respondents but for reasons recorded in the minutes that was not acceded to. The National Company Law Tribunal interfered with the issue of the right shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be issued. If facts and figures of contributions of other directors was put on record and the petitioner was asked to match it or accept issue of further right shares under section 62 of the Companies Act, 2013, it was internal decision. When procedure is followed and steps taken, the acts could not have been questioned branding them as undue haste. Such considerations of the board cannot be found fault with being matters of company affairs. If the petitioner had difficulty, he should have participated in the meetings to say whatever he wanted. In the facts of present matter, we find ourselves unable to agree with the learned National Company Law Tribunal. 17. We find that when the National Company Law Tribunal could not record finding of oppression or mismanagement and there was material to show that the petitioner had not come with clean hands, it was not open for the learned National Company Law Tribunal to still go on to set aside the appointment of respondent No. 3 and set aside shares issued as per the resolution passed on December 26, 2016 or give direction that the respondents will purchase the shares of the petitioner. For the above reasons, the appeal is allowed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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