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TMI Blog2020 (8) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... ging oppression and mismanagement against the Respondent No. 1 and 2 and simultaneously, imposed a cost of Rs. 5 lakhs on the Appellant. The Appellant was one of the Promoters/Directors of the Respondent No. 1 Company. The Appellant being an NRI had brought in the Respondent No. 2 into the Respondent No. 1 Company who was his close relative to look after his interest in the company. The Respondent No. 1 Company was formed in the year 1990 with plans to manufacture important life-saving drugs like Terfanidin, Mebendazole, Atenlol, Norfloxacin and other Intermediate drugs for a total capacity of above M.T. per annum. The Respondent No. 1 company was promoted in the erstwhile State of Andhra Pradesh as a Private Limited with one Dr. Sadasiva Reddy and Dr. V. Sai Sudhakar as signatories to the Memorandum and Articles of Association. At this juncture, the Respondent No. 2 was not the original signatory to the Memorandum and Articles of Association. The company was later on converted into a Public Company on 1.02.1993. 3. It is stated by the Appellant that the Respondent No. 2 breached his trust and abused the position of power to usurp control on the company and resort to illegal enric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment was also challenged since the entire structure of equity was being disturbed by the Respondent No. 2 only with the ultimate intent of consolidating his equity structure to the detriment of the Appellant through his various oppressive acts. The allotment was also challenged in view of the fact that it was declared as a nullify in terms of the order of the AAIFR dated 31.03.2005 and the said order remained undisturbed. 10. It is submitted by the Appellant that the allotment of equity shares grossly violated the various statutory provisions/ procedures of Companies Act pertaining to approval of general Body through special resolutions under provision 81(1A) for the allotment and the increase in authorised capital, amending memorandum and articles of associations. Hence it is null and void. 11. It is also submitted that the Respondent No. 2 has been falsely contending himself as a promoter of the Respondent No. 1 Company when in fact the Respondent No. 2 was only representing before BIFR as professional Managing Director of Respondent No. 1 Company and he could by no stretch of imagination be considered as promoter with his holding and his financial position and humble beginnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also (ii) barred by delay/latches. The conversion has an overriding effect and cannot be subject matter of challenge before NCLT. d) That, appellant was never the original promoter and joined the company on 9.12.1993 and is not a signatory to the memorandum and articles of association of the company. The appellant was holding 9% of the shares as oppose to 26.9% as mentioned in para 7 of the appeal the financial participation of the shareholding was only to the extent of Rs. 50,00,000/- out of the total paid up capital amounting to Rs. 5,55,00,000/- which constitute only 9% of the total paid up capital. The appellant despite stay order of the High Court acquired further shares (from open market and not by infusion in company). e) That, respondent no.2 became the managing director of the company on 1.01.1997 and by the time the 2nd respondent took over as the managing director of the company, the entire net worth of the company stood eroded, hence the reference was made to BIFR and registered as case no. 91/97 as per statutory mandate of provisions of SICA. 2nd respondent file form A with BIFR as promoter and not as managing director as case no. 91/97. f) That, BIFR sanctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to respondent no. 2(25 lacs upon conversion of unsecured loan of Rs. 250 lacs) and to IDBI (1.5 lacs no. of shares). Thus, the AAIFR (final order dated 28.12.2005), High Court (6.11.2007) and appellant all proceeded on basis that allotment of 25 lacs shares was existing and not declared null and void by AAIFR interim order dated 31.03.2005. k) That, Respondent no.2 approached CLB, Hyderabad by way of company petition 14/2007 assailing the appellant's illegal occupation of the company on 20.10.2006 and actions taken consequent to such illegal occupation. The CLB vide its order dated 14.08.2009 declared as the meeting held by the appellant on 22.10.2006 to cancel the allotment of shares to respondent no. 2 as "null and void" and further held that board constituted by respondent no.2 would carry on the business of the company. l) That, the order of the CLB dated 14.08.2009 was challenged by the appellant before the High Court in CA 22/2009 and CA 24/2009 which were dismissed by the Hon'ble High Court. m) That, the appellant has filed the CP No. 42/2015 with the prayer to cancel and annul the allotment of 25 lacs equity shares to respondent no.2 by declaring the allotment as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch offer and in the light of the Scheme approved by the BIFR directing the conversion of unsecured loan to equity shares what other alternatives could be operated in the circumstances. It is but natural that who has granted unsecured loan to the company, will be allotted shares as per the scheme approved by BIFR and upheld by AAFIR. The Hon'ble High Court has dismissed the appeal filed by the appellant challenging the orders of BIFR and AAIFR. Conclusion 19. In view of above discussions and observations we find that the impugned order a well reasoned order. Company Appeal (AT) No.344 of 2018 20. The brief facts of the case are that the appellant filed Company petition No.22/2005 against the Respondent for oppression and mismanagement. Appellant infused huge amount in Respondent Company and brought Respondent No.2 to look after the interest of the company but Respondent No.2 beached his trust and abused the position of power to usurp control on the company and resort to illegal enrichment at the cost of appellant. Respondent got allotted 20 lakhs shares in his name to control the company. The appellant challenged allotment of 20 lakhs shares to Respondent No.2 and siphoning off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is not a signatory to the Memorandum or Articles of Association. 27. Respondent No.1 and 2 further stated that 2nd respondent because the Managing Director of the company on 1.1.1997 and on that date the entire net worth of the company stood eroded. Therefore, a reference was made to BIFR who sanctioned Scheme of 2002 (SS02). The Scheme stipulated allotment of 20 lakhs shares as against the unsecured loan to be brought in by 2nd Respondent. 28. Respondent No.1 and 2 further stated that the appellant attended only 5 Board Meetings out of 18 Meetings held during the period 1994 to 1997 and appellant attended only one Board Meeting out of 35 Meetings held during the period of rehabilitation from 1998 to 2004. 29. Respondent No.1 and 2 further stated that appellant attend the Meeting on 26.2.2002 and at the meeting went on record to appreciate the efforts put in by 2nd Respondent in obtaining approval of obtaining the rehabilitation package (Annexure R-7, Page 190 of respondents' reply) and was thus fully aware of the conversion of Rs. 200 lakhs unsecured loan in to equity. 30. It is stated that 2nd Respondent held Board Meeting on 27.1.2003 for the allotment of 20 lakhs shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the unsecured loan to be brought in by the promoter, 2nd Respondent. Board Meeting was held on 27.1.2003 for allotment of 20 lakhs shares as per BIFR Scheme. EOGM was held on 27.02.2003 for approving the allotment of shares. 5 lakhs shares were offered to appellant who declined the offer (Page 87 of Reply, para 6(iii). The Hon'ble High Court of Andhra Pradesh at Hyderabad has also in its order dated 6.11.2007 while deciding writ petition No.350/2006 filed by the appellant challenging the AAIFR order has observed (para 25 page 117 of reply) that the "Board of Directors offered the shares to the extent upto Rs. 50 lacs to the Petition and his associates. However, the Petitioner did not accept the offer due to reason that the share value of the company as on the date of allotment was around Rs. 5.50 per share whereas the shares were issued at Rs. 10/-. As the offer of allotment was not accepted by the Petitioner the Board of Directors of the company proceeded to allot the shares to his alternate director/relatives/associates to comply with the Scheme.". The Hon'ble High Court in its orders dated 6.11.2007 (Page 613 of appeal) dismissed the writ petition. The said order was not ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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