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TMI Blog2020 (8) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... riate for the appellant to raise the issue that it is a charitable company and the petition cannot be filed under Section 241/242 of the Act. Seeing the various irregularities committed by the appellants, this Tribunal cannot shut their eyes to let appellant go scot free undermining the spirit of charity - there are no force in the arguments of the appellants and the same are rejected. Administrator on behalf of 7th respondent submitted his report vide Diary No.21484 dated 10.5.2019. Learned Administrator submitted that this Tribunal vide order dated 9.4.2019 directed the appellants to hand over all documents of the company to Administrator but in wilful and rank disobedience to the orders of this Tribunal the appellants did not either product the documents before the Administrator or communicated the reasons, if any for not producing the same. Administrator submitted that he has filed a contempt application against the appellants with a prayer to direct the City Police Commission to apprehend the appellants and seize the records of the company from him. Administrator also submitted that the appellant is not handing over the documents as requires and the only presumption can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 7th Respondent deems fit, and for deployment of the funds of the company for the purpose of promoting education, industry and charitable activities. It is stated that the Hon ble High Court of Travancore, Cochin vide its order dated 10th November, 1952 (Page 107 of appeal) went on to reaffirm the charitable nature of the 7th respondent and interalia noted that the funds of the 7th respondent cannot be distributed for the benefit of the members of the Company. 3. The brief averments made in the Company Petition by the original petitioners were that- -Respondent/1st appellant herein took over the affairs of 7th respondent as Managing Director in the year 2013 and usurped the goodwill and the assets of the Company for oblique purposes and for personal gain and those who opposed the appellant, they were removed by the appellant. -The Respondent/appellant herein amended the Articles of Association without the prior approval of the Central Government and thereby violated clause 40 of the AOA and also diverted funds to certain members to gain loyalty. The membership of the company was for life but the appellant expelled the member stating that the Board has expelled them wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ody and not with the Board. Seven other directors were expelled and all have challenged their explusion before Civil Court. 4. Respondents/appellant herein filed their reply to the company petition and averred as under:- -The affairs of the company were being conducted in a transparent manner and the AGMS for the years have been conducted and there are no merits in the submissions of the petitioners/respondent herein. -2nd Respondent/1st appellant herein had filed a criminal complaint dated 6.6.2014 before the Additional Chief Magistrate (ACM) under Section 406 and 420 of the IPC against the petitioners/respondent herein and the said case was coming up for trial. The said complaint has been filed for their action of disposing the immovable property of the Company for a throw away price when they were at the held of affairs of Company. -The Company has decided to sell some of the properties for avoiding encroachments and the Managing Director was authorized by the Board of Directors to see the property vide resolution dated 13.1.2017 and 18.6.2017. -The judgement made by the erstwhile High Court of Travancore-Cochin does not have any relevance as far as the complaints ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that none of grounds raised in the Company Petition is legally tenable or worth consideration to annul the transaction between 10th respondent/8th respondent herein and the company. The company has acted well within the powers conferred by the Companies Act to carry out the transaction. The Tribunal lacks jurisdiction and the powers under Section 241 and 242 of the Act to examine the validity of the transaction in the present proceedings. The jurisdiction of this Tribunal is ultra vires its power as its jurisdiction is expressly made to depend upon the existence of certain conditions and particular facts by the Companies Act, 2013. This Tribunal cannot give itself jurisdiction by erroneously deciding the existence of the condition or existence of facts upon which the jurisdiction depends. This Tribunal has no jurisdiction to interfere in the sale transactions entered into between 4th to 6th, 8th Respondent and the Company. 7. The petitioners/1st to 3rd respondents herein filed rejoinder and reiterated the contents as stated in the company petition. 8. After the hearing the parties, NCLT held that order made in AS No.47 of 1125 in OS No.158 of 1122 made by the Hon ble High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2014 before the ACM under Section 406 and 420 of the IPC against the respondent and the said case was coming up for trial. The said complaint has been filed for their action of disposing the immovable property of the Company for a throw away price when they were at the helm of affairs of Company. 14. The Company has decided to sell some of the properties for avoiding encroachments and the Managing Director was authorized by the Board of Directors to see the property vide resolution dated 13.1.2017 and 18.6.2017. 15 The judgement made by the erstwhile High Court of Travancore-Cochin does not have any relevance as far as the complaints of the 1st to 3rd respondents are concerned. The judgement only prohibits the distribution of the funds of the company among its members or giving grants to the members. The 1st to 3rd respondents do not have any specific complaints that the Company has ever given any grants to any of its members or distributed its surplus funds amount among the members. 16. A notice dated 4.12.2014 was issued to convene the AGM on 28.12.2014 and the agenda for the meeting inter alia election of directors was duly mentioned in the notice. 17. The company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant, who has not passed even Matriculate examination, took over the affairs of the company as Managing Director in September, 2013 has usurped the goodwill and assets of the company for oblique purposes and for personal gains. The member who opposed his action was allegedly removed from the company even without a hearing. The so called meetings are manned by the 1st appellant and his cronies whose deliberate and criminal actions would show that adherence to the constitutional documents of the company have been observed iin their breach. 23. Respondents stated that 1st appellant frittered away valuable assets of the company; effecting amendments to the AOA without the prior consent of the ROC; violating Article 40 of the AOA by diverting funds to certain members to buy their loyalty; diverting funds of the company to fund a scheme to purchase computers with internet connection for the members on the alleged ground that the same was to be returned to the company upon termination of the membership of the company. Respondent stated that the Members who questioned this were illegally excluded by stating that the Board has expelled them whereas the Board has no power to expel the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnections for some of the members of the company ignoring the Judgement in AS No.47/1125 by the High Court of Travancore-Cochin holding that funds of the company cannot be spent for the members of the company or their relatives. 28. Respondent stated that no such resolution was passed to utilize the funds of the company to purchase the computers. 29. Respondent stated that 1st appellant arranged a trip to Goa on the company s expense and spent a huge amount. The huge expenses were incurred when the company suffered a loss of ₹ 2370483/- as per the report of the Board dated 10.09.2016. Respondents stated that they denied that they have gone for these pleasure trips. The sole motive of the 1st appellant to destroy the assets of the company in his personal aggrandizement. 30. Respondents stated that 1st appellant and other members sold 2 acres and 36 cents land for a low sum of ₹ 35 lacs on 3.5.2017 to 4th Respondent. Respondent stated that on the same day another 2.60 acres of land was alienated for a sum of ₹ 39 lakhs to 5th and 6th Respondent. 31. Respondent stated that none of the funds from the sale of land have been accounted for. They have been usu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bona fide purchasers of the property and the peaceful possession of the land was transferred to the Respondents. Respondents stated that they donot know the appellants and the Trustees in personal capacity and are not related in whatsoever manner with the authorized representative of the company. Respondents stated that after taking the possession of the property the respondents put their hard earned money to start the construction on the property for residential purpose and respondents applied the appropriate sanctioning from the Govt offices. 37. Respondents stated that they were surprised to serve with the Company Petition No.29/2017 and were made a party in an alleged/purported illegal sale of land. Respondents immediately communicated the same to appellants and its representative and sought an explanation regarding the said act of the original petitioners (1st to 3rd respondent herein) in the Company Petition. Respondents were shocked to received copy of the order dated 28.8.2018 passed by the NCLT. 38. Respondents stated that it is a fit case for applying the doctrine of indoor management as Respondents no way whatsoever in the decision making of the board of 7th Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, 2013 instead of Section 241 of the Act. 1st to 3rd Respondents stated that the NCLT took note of the collusive conduct of the appellants and commented on the stand taken by appellants alleging lack of jurisdiction and locus standi of these respondents. The appellants are not the bona fide purchaser. 1st to 3rd Respondent stated that the NCLT has rightly held that such a sale is illegal. An illegal act cannot be ratified by the shareholders. 45. Reply has been filed on behalf of the 5th to 9th Respondent. The reply has been filed by 5th respondent for himself and for 6th to 9th Respondent. 5th respondent stated that he has traversed the entire contents of the appeal. 5th respondent stated that being conversant with the facts leading to the appeal, he is competent to swear the counter affidavit. 5th respondent stated that he is advised that since the 5th respondent has already filed Company Appeal (AT) No.338 of 2018 assailing the very same order impugned through this appeal, the said respondent need not file its counter affidavit in the present appeal. 5th respondent stated that 5th to 9th Respondent do hereby adopt all the contentions raised by the appellants in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the removal of membership has been strictly in accordance with the Article 48(b) in the Article of Association regarding the disqualification of membership. 52. Learned counsel for the 1st to 3rd Respondent argued that no show cause notice was issued and principle of natural justice was not complied with and further argued that the expulsion order was stayed by the NCLT vide order dated 4.7.2017. Learned counsel for 1st to 3rd Respondent further argued that the appellants have themselves stated in their reply before NCLT, Chennai in Para 13 (Page 125 of the reply) that no member was expelled by the respondent company . Learned counsel for the 1st to 3rd Respondent further argued that the alleged resolution dated 18.5.2017 and Extract of Minutes of the Board of Directors Meeting held on 5.9.2017 (Page 175 and 176 of the appeal respectively) were not filed before the NCLT at any time. Learned counsel for 1st to 3rd Respondent further argued that the appellant have fabricated these documents for the purpose of the appeal. 53. We have heard the parties on this issue. We have gone through the para 13 of the reply filed by the appellants before the NCLT where it is clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, entering into such agreement for sale with the appellants in Company Appeal (AT) No.349/2018, which is very much a policy decision, on the basis of a resolution in the Board Meeting and submitting that the said order is not sustainable is nothing but deemed to be a contempt of court order. 57. Learned counsel for the Appellants in Company Appeal (AT) No.349 of 2018 and also appearing for 4th to 6th Respondent in Company Appeal (AT) No.338/2018 argued that they are the bona fide purchasers of the properties. Learned counsel further argued that the original petitioners has no locus standi to file the petition. Learned counsel further argued that they are not related parties to the appellants in the present appeal. Learned counsel further argued that they have started construction on the said plot and submitted photographs of the same. Learned counsel further argued that the NCLT has no jurisdiction to deal with the transaction of properties. 58. We have heard the parties and perused the record. We observe that the agreement of sale entered with the appellants of Company Appeal (AT) No.349 of 2018 is ultra vires powers of the company in view of the order made by the Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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