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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 ..... that the appellant is ready to infuse the fund and the shares may be allotted to him. In the absence of any such 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 - impugned order upheld. Oppression and mismanagement - allotment of shares - Allegation that the 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 - HELD THAT:- It is not in dispute that the unsecured loan was given to Respondent No.1 company by the 2nd Respondent. It is also not in dispute that the Respondent No.1 company was in financial stress and a reference was made and the company was referred to BIFR who sanctioned the Scheme and directed that the unsecured loan to the tune of ₹ 2,00,00,000/-granted by 2nd Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate 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 enrichment at the cost of Appellant. The allotment of equity share worth ₹ 2.5 crores to the Respondent No. 2 on 28.03.2005 during the subsistence of AAIFR stay order dated 21.03.2005 is void ab initio and ought to be set aside outrightly. 4. It is submitted that the NCLT failed to appreciate various bonafied acts done by the Appellant in the interest of the Respondent No. 1 company. The Appellant infused substantial funds and worked hard for the betterment of Respondent No. 1 company when the company was in losses and in dire necessity of funds. 5. It is further submitted that the NCLT failed to consider acts of oppression and mismanagement done by Respondent No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 beginning which were duly reflected in various Company records. 12. It is further submitted that there is no period of limitation prescribed under the Companies Act, 1956 and the relevant sections prescribing limitations under the Companies Act, 2013 were only notified on 1st June, 2016 after filing of the Company Petition. 13. It is further submitted that NCLT failed to appreciate that in the instant case the acts of Oppression and Mismanagement as enumerated by the Appellant in the Company Petition have not concluded or stopped or exhausted in a particular year rather are continuing and persisting as on date. Accordingly, the company petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sanctioned fresh scheme under section 18(4) of SICA, which stipulated a further induction of unsecured loan of ₹ 250 lacs/- by the promoter and its conversion into equity shares by the company. Accordingly, the sum of ₹ 50 lacs/- that was brought in as an unsecured loan by respondent no.2 were to be converted into equity shares of the company for ₹ 10 / share. This scheme also envisaged OTS to IDBI and SBI and even before the scheme. In terms of the sanctioned scheme, the 2nd respondent converted his unsecured loan of ₹ 250 lacs into equity shares as the amount had been brought in onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B 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 null and void. After pursuing the pleadings filed by the appellant the Hon ble NCLT dismissed the petition by imposing ₹ 5 Lacs as fine. The reasoning of dismissal is based on res-judicata and delay/laches. 16. In the appeal the appellant has mainly prayed for the following relief: i) Set aside the impugned order dated 27.2.2018 passed by NCLT in C.P. N9o.42/2015; ii) Waive the cost of ₹ 5 lakh imposed on the appellant vide impugned order dated 27.2.2018; iii) Grant relief sought in Company Petition No.42/2015. iv) Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 huge monies which was dismissed by the NCLT solely on the basis of dismissal order passed in Company Petition No.42/2015. 21. Appellant submitted that the allotment which was made on 25.4.2003 pursuant to the sanctioning of the Scheme on 12.2.2002 by BIFR was challenged in the year 2005 within three years of the knowledge of the appellant. 22. Appellant stated that the allotment of shares is liable to be struck aside in view of the fact that it violates the provisions of Section 18(3) of SICA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 ₹ 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 as envisage in the Scheme. EOGM was held on 27.2.2003 for approving the allotment of shares. The provisions of Companies Act 1956 has been duly complied with in allotment of shares even though the provisions of Section 18(4) SICA 1985 provides an overriding effect in so far as compliances required under law are concerned. IT is stated that the sanctioned scheme also exempted the company from compliance under Companies Act, 1956. It is stated that in terms of resolution passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/2006 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 ₹ 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 ₹ 5.50 per share whereas the shares were issued at ₹ 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 challenged in appeal. It is not in dispute that the unsecured loan was given to Respondent No.1 company by the 2nd Respondent. It is also not in dispute that the Respondent No.1 company was in financial stress and a reference was made and the company was referred to BIFR who sanctioned the Scheme and directed that the unsecured loan to the tune of ₹ 2,00,00,000/-granted by 2nd Respondent be converted into equity shares and according ..... X X X X Extracts X X X X X X X X Extracts X X X X
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