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TMI Blog2020 (10) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... ther contention that it was a private inter-party dispute or was merely amounts to an agreement to sell, is also too far-fetched and totally untenable. - Even in the absence of any proof, the petitioner cannot be shut out under Section 244 of the Companies Act, 2013 on mere statements of the respondents without any shred of evidence being produced to deny an opportunity to the petitioners to prosecute the company petition. In the light of the recorded facts and circumstances of this case, we, are of the view that this Tribunal is exercising its ample powers to waive the requisite shareholding percentage in order to maintain this petition even without filing a waiver application. The petitioners are considered as beneficial owners and has every right to protect their beneficial interest in such shares even before their name is entered in the share register. We have further gone through the list of citations submitted by the Respondents during the course of the hearing dated 10.03.2020. However, we consider none of the case sought to be relied on by the respondents are relevant in the present case. Therefore, we are of the view that the defences sought to be taken by the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to the downturn in the tourism business. KFC issued several demand notices to Respondent Company for repayment of outstanding dues. On 28.01.2015, the KFC sent a Recovery notice stating that the Company had an arrear to an extent of ₹ 4,23,28,188/- and gave a deadline for the payment of the amount by 12.02.2015, else it would be considered as default of loan. At that stage, when the loan was being declared as NPA, the shareholders of the Respondent No. 1 Company were again approached to contribute funds for repayment of loan proportionate to their respective shareholding. However, since some of the shareholders did not have adequate funds, Respondent Nos.2 to 8 requested the petitioner to contribute funds on their behalf and in consideration of the same promised to transfer a portion of their shares to the petitioners. A similar arrangement was made between Respondent Nos. 10, 11, 12, 15. Apart from the amount contributed towards the loan on behalf of these Shareholders, the petitioners also paid additional amounts to them as further consideration for the shares to be transferred as agreed. Thus, the petitioners had collectively transferred a sum of ₹ 43,75,000/- to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be carried out, but claimed that the certificates and transfer forms were given to Respondent No. 2 for his signature on the fresh share Certificates. Thereafter petitioners contacted the Respondent No. 2 as Managing Director and requested him to complete the process of transfer of shares. But Respondent No. 2 feigned ignorance of the entire transaction and claimed that there had not been any share transfer. Later, the petitioner sent several letters enquiring about the transfer of shares. In response to those letters it was stated by the Respondent No. 10 as Managing Director, that Respondent No. 2 promised and told that the share transfer in the petitioners' favour would be completed shortly and that the petitioners should not worry about this further. 6. In spite of the commitment received from the Respondent No. 10, since no positive action was initiated and no response has been forthcoming, the petitioner sent a further letter on 23.03.2017 stating that the share transfer had not been carried out as promised. The petitioners submitted that for the first time by a letter dated 07.04.2017, the Respondent No. 2 falsely contended that the transfer of shares as promised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent), the 4th Respondent (also on behalf of the 5th Respondent), 6th and 8th Respondents (also on behalf of the 7th Respondent) would transfer 4.5% shares of the company from their respective shareholdings to the Petitioners, immediately on the execution of the agreement and that the Respondents Nos. 2,4 6 would refund the balance amount by way of cash or cheque on or before 31.03.2018 with interest at 14.5% calculated from 14.12.2017. Failing which, they would transfer further shares in the ratio of 1:0.5:0.5 to the Petitioners and that the duly filled share transfer forms would be held by Mr. K.T. Joseph, brother of the Respondent No. 2. It was further recorded that the share transfer forms were handed over to the Respondent Company on 11.12.2017. It was also expressly set out in the minutes of the Board of Directors meeting held on 12.12.2017 that Company has received 6 share transfer requests accompanied with share transfer request forms duly signed and stamped along with other documents for approval of transfer of shares of the Company to the petitioner. It was also resolved that Board of Respondent No. 1 Company had consented to the transfer of 61756 shares of the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.5% shares of issued share capital of the 1st Respondent Company. The 2nd petitioner does not hold any shares in the Company; therefore, the petitioners thus hold only 7.5% of the total issued share capital of the Company, which falls short by 2.5% of the minimum requirement, which is at least 10% of the value of the issued share capital of the company. 10. lt is also submitted by the petitioner that they have not remitted any money to the company's account for making any repayment of loan taken by the Company and is any payments are made either to the shareholders or to the directors of the Company. As such Respondent company cannot be held liable for such payments. 11. It is also stated that Company cannot make any allotment of shares to the petitioners and there was no application for allotment of any shares by the petitioners, in the event of any loan given to or investment made by them in the Company. The transfer of Company's share is regulated by the Articles of Association and without share valuation, there cannot be any transfer of shares as provided under clause 12 of the Articles of Association. No such share valuation has been made. Submissions by Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 2 to 8, who are the shareholders of the 1st Respondent Company, pertaining to transfer of 108075 shares to Petitioner No. 1 and 92634 to petitioner No. 2 from their respective shareholdings as the Petitioners have repaid the loan on behalf of the Respondent Nos. 2 to 8, consideration being transfer of the above shares to the petitioners. 16. We have found that 1st Respondent Company obtained a term loan of ₹ 4,00,00,000/- from the Kerala Finance Corporation in the year 2011 for construction of a hotel. When the Company started defaulting its payment of interest on the loan, the shareholders began contributing amounts proportionate to their shareholding for the payment of the outstanding interest to avoid the loan from being declared as NPA. As the 2nd, 3rd, 4th, 5th, 6th, 7th and 8th Respondents did not have adequate funds at that point of time, they had requested the Petitioners to make payments on their behalf. The Respondents have agreed for transfer of shares from their shareholdings as consideration for making such payment on their behalf. Since the Petitioners were to acquire further shares, in good faith, the Petitioners also agreed to pay further amounts as a con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also expressly set out in the minutes that the transfer of 61756 shares of the 2nd Respondent in favour of the 1st Petitioner, 46317 shares of the 8th Respondent in favour of the 1st Petitioner, 15440 shares of the 6th Respondent in favour of the 1st Petitioner and 15440 shares of the 4th Respondent to the 1st Petitioner will be done immediately. Despite having admitted by the respondents herein that shares would be transferred to the Petitioners, and having passed a resolution taking the Settlement Agreement on record, have again deliberately and wilfully failed to fulfil their obligations under the Settlement Agreement. 21. Circumstances being above, we are of the view that the Respondents cannot benefit from their own wrong, and having taken the share certificates and duly filled forms, cannot now outrageously claim that the share transfer forms were not lodged with the Company by the Petitioners. As, share transfer was ratified during the Conciliatory Meeting, later the Settlement Agreement was taken on record and specifically mentioned in the minutes of the Board meeting, the Company can no longer contend that the issue pertaining to rectification of share register h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Apex Court in World Wide Agencies Pvt Ltd. v. Margarat T. Desor ( AIR 1990 SC7 37) held: 24. The applicability of Sections 397 and 398 of the Companies Act is an equitable jurisdiction which is intended to protect the minority members of the company from any oppression and mismanagement at the hands of majority members. It is in that background; the Supreme Court has held that the wider meaning of the term 'member' should be given in the context of Sections 397 and 398 of the Companies Act. On the facts and circumstances of the case, especially in the circumstance that the respondents filed a composite application, viz., the company petition seeking reliefs including the issuance of duplicate share certificates, I am of the considered view that the claim of the respondents herein in the company petition cannot be thrown out at the threshold without even going into the merits of the issue raised by the respondents under the guise of deciding the question of maintainability as a preliminary issue. 24. From the above judgements, we are of the considered view that, even in the absence of any proof, the petitioner cannot be shut out under Section 244 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owrah Trading (supra). 26. Considering the special circumstances of this case and relying on the above judgement, the petitioners are considered as beneficial owners and has every right to protect their beneficial interest in such shares even before their name is entered in the share register. We have further gone through the list of citations submitted by the Respondents during the course of the hearing dated 10.03.2020. However, we consider none of the case sought to be relied on by the respondents are relevant in the present case. Therefore, we are of the view that the defences sought to be taken by the Respondents herein are untenable. 27. In the light of the foregoing discussion and on due appreciation of facts and circumstances, considered along with the evidences on record as well as aforementioned case laws discussed hereinabove, this Bench is of the view that this is a fit case for considering the allegations of oppression and mismanagement as alleged by the Petitioners. In spite of rescuing the Respondent Company in critical times, the petitioners were made to run from pillar to post to get their rightful share transfers as agreed to by the Respondent Nos. 2 to 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) As regards to prayer to investigate into the accounts and affairs of the Respondent No. 1 Company, we hereby appoint K. Venkitachalam Aiyer Co., Chartered Accountants, No. 41, 3647B, first Floor, Blue Bird Towers, Providence Road, Ernakulam, Kochi- 682 018, email id: [email protected]. to investigate the same during the period from 01.04.2015 to 31.03.2019. A report in this regard may be submitted to the Registry within two months from the effective date of this order. The Respondent Company should bear the fee of ? 1,00,000/- to conduct this investigation by the Auditor appointed hereby. (iv) We direct The Institute of Chartered Accountants of India' to investigate into the conduct of the Chartered Account Firm - 'K.l ABRAHAM COMPANY', Chartered Accountants, Mar Thoma Buildings, S.C.S. Jn. Thiruvalla- 689 101, having email: [email protected] of the Respondent No. 1 Company, for having colluded with the Respondent Nos. 2 to 8 to falsify the records of the Company. Appropriate action if deemed necessary may be taken by the ICAI, based on the investigation report. (v) We hereby direct Respondent Nos. 2 to 8 to pay a sum of ₹ 25,000/- ea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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