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TMI Blog2020 (11) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the members authorized the Petitioners to file this Company Petition? - HELD THAT:- In the instant case none of the members (apart from the three Petitioners) have authorized (which authorization itself is not proper) the Petitioners to file the instant Petition under proviso to Section 244. It is seen that the consents submitted by the Petitioners clearly read as Consent Under Section 241 of the Companies Act, 2013 to make a Petition under Section 241 of the Companies Act, 2013 .Hence, this Tribunal cannot agree with the submissions made by the Petitioners in this regard. Whether (proposed) application under Section 241 pertains to oppression and mismanagement ? - HELD THAT:- In my view the allegation made against the Respondent Company in the instant petition will not amount to Oppression and Mismanagement. As shareholders of the respondent company, the petitioners were entitled to highlight the alleged acts. The petitioners have not produced any documents to prove that they raised/highlighted the issues and demanded explanation from the Board. In the letter dated 07.02.2020, the Petitioners have stated that a large number of shareholders have sentiments and apprehension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter called as Petitioners) against M/s Sea Blue Shipyard Limited Others (hereinafter called as Respondents).The Petitioners are shareholders of the 1st Respondent company and the Petitioners have paid all calls and other sums due on their respective shares. The Petition has been filed against the Respondents on account of severe acts of oppression and mismanagement being conducted by them which are detrimental to the 1st Respondent Company as well as its shareholders 2. The Petitioners along with the other shareholders who have given consent in writing to make the application on their behalf under Section 244(2) of the Companies Act, 2013 constitute 68 numbers i.e. 7.2% of the total shareholders of the 1st Respondent company being 951 as per the latest Annual Return of the company filed with the Registrar of Companies, Kerala as on the date of signing the application, i.e. the Annual Return of the 1st Respondent Company for the financial year 2017-2018. 3. Respondent No. 1 company viz M/s Sea Blue Shipyard Limited (hereinafter referred to as the Respondent Company) was incorporated on 08.12.2003 under the provisions of the Companies Act, 1956 as a Company limited by shares. 4. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compel the financial creditors of the company invoking the provisions of the IBC, 2016 which will be against the best interest of the shareholders who are the investors of the company. The 1st Respondent Company is seen not complying with many of the legal provisions of the Companies Act, 2013, in scant disregard to the principles of proper company management and administration. 9. It is their further contention that the applicants along with other shareholders do not have the threshold number or percentage as mandated by Section 244 of the Companies Act, 2013 to prefer application under Section 241. (The applicants along with the other shareholders constitute 93 numbers which is only 9.8% of the total shareholders of the respondent company. The required threshold is 10%). Hence their submission in such a situation is that under the provisions of Section 244 of the Companies Act,2013, this Tribunal has the power to waive the requirements enabling the aggrieved shareholder/members to prefer an application under Section 241. 10. Section 244 of the Companies Act, 2013 is reproduced hereunder; 244. Right to Apply under Section 241 244.(1) The following members of a company shall have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther liabilities are subject to confirmation of balances 2). ******** 3). The details of suppliers regarding their status under Micro, Small and Medium Enterprises Development Act, 2006 are not available and hence the details of amount unpaid if any have not been given 4). Inventories have been taken as valued and certified by the management. 2014-2015 1). Confirmation of balances under Trade payables has been obtained in some cases. No confirmation of balances has been obtained in respect of Trade Receivables and Loans Advances. There are long outstanding balances under Trade Receivables mostly of which are from Government Departments. Adequate provision may be made for Bad and Doubtful Debts, if there is any irrecoverable portion. 2). ********* 3). The details of Suppliers regarding their status under Micro, Small and Medium Enterprises Development Act 2006 are not available and hence the details of amount unpaid, if any, have not been given. 4). Inventories have been taken as Valued and Certified by the management. 5). There is much delay in remitting the Service Tax payable and Tax Deducted at Source. No provision for interest and penalty payable has been made. 2015-2016 1). Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he receivables in respect of the income recognized on Percentage completion basis as at the end of the year amounting to ₹ 4,30,51,267.38 of which ₹ 2,19,41,221.00 is recognized in the reporting year balance ₹ 2,11,10,046.00 Pertaining to periods prior to 2017-2018 financial, year for which progress invoices are not submitted by the company till 31.3. 2018.Confirmation of Balances has not been received in respect of Trade Receivables. There are long outstanding balances under trade receivable and we are not able to ascertain the recoverability of debts or whether any provision is required in this regard Management has clarified that they do not expect any bad debts and therefore no Provision is required in this regard. 8) ************* 9) ************* 10) Advance to suppliers for materials and services include an amount of ₹ 83,19,390/ due for more than one year paid to various suppliers against which expenses are not booked by the company and it's explained that these are relating to services supplies in Progress for which bills are yet to receive. These balances are subject to confirmation. 11) The effect of qualifications number 1 to 4 shall be a) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 35,00,00,000 96,69,022.10 35,96,69,022.10 2016 35,00,00,000 50,07,003.30 35,50,07,003.30 2017 35,00,00,000 4,31,909.07 35,04,31,909 2018 35,00,00,000 -2,12,81,370.00 32,87,18,630 2019 35,69,89,470 -8,58,81,079.00 27,11,08,391 13. The 1st Respondent Company is seen not complying with many of the legal provisions of the Companies Act, 2013, in scant disregard to the principles of proper company management and administration. 14. The learned counsel further stated that as per the Form MGT-8 attached along with the annual return of the company for the financial year 2017-2018, according to the provisions of Section 92(2) of the Companies Act, 2013 and Rule 11(2) of Companies (Management and Administration) Rules, 2014, the following lapses on the part of the company: I. The company has not complied with Section 173 of the Companies Act, 2013. II. The Annual General Meeting for the year ending 31.03.2017 was held after the due date but no permission was obtained from the Registrar of Companies to hold the meeting after the due dates and III. One of the Directors of the company has not attended any of the board meetings held during 2017-2018 hance became disqualified as per the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not valid authorizations in accordance with the Indian Evidence Act and established judicial pronouncements. Therefore, the 35 consents, which are either defective or invalid. In view of the above, the total number of consents which may be accepted is 55 and not 90 as contended by the Petitioners. 19. It is their further contention that the Petitioner No. 1 has furnished an affidavit stating that he is swearing this affidavit on behalf of the other Petitioners. In the event Petitioner No.1 is swearing the affidavit on behalf of Petitioners 2 and 3 also, Petitioner No. 1 ought to have proper authorization from Petitioners 2 and 3 authorizing him to swear the affidavit on their behalf also. However, Petitioner No. 1 has failed to submit the said authorization. Even though Petitioners 2 and 3 have signed the petition, they have not furnished any affidavit. Therefore, in the absence of authorization in favour of Petitioner No. 1 or separate affidavits by Petitioners 2 and 3, the Company Petition itself is defective. 20. The learned counsel for the Respondents during arguments submitted that the members whom the petitioners claim to have authorized him to file the Company Petition u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition. If the leave application filed under Section 244 is disallowed on technical grounds, the Petitioners grievances will remain unaddressed forever. The consent letters are the consent as prescribed by Section 244(2) to make a Petition under Section 241 of the Companies Act, 2013. The counsel further stated that even if some of the consent letters are defective on technical or legal aspects, they are factually the consent of the aggrieved shareholders of the 1st Respondent Company. This aspect may be taken into consideration while deciding the leave application filed by the Petitioners. 24. The learned counsel further stated that the law does not prescribe any lower or upper limit within the statutorily prescribed threshold of 10% for submitting the leave application. This can be anywhere in the range of 0.00009(approx.) to 9.99999 (approx.) and that the Petitioners have an undisputed consent of 6.0988%. It may be appreciated that even 6.0988% is a good percentage in the case where the 1st Respondent Company is a Public Limited Company and shareholders are widespread across the globe. The learned counsel also submitted the introductory remark of the motion proposed by the Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticated by a notary public of the respective country or by the Indian consulate, hence they are not valid authorizations. This Tribunal therefore, cannot accept the argument advanced by the Petitioners in this regard. Point no (ii). In the light of the above discussion in point no (i) the members whom the Petitioners claim to have authorized the Petitioners to file the Company Petition under Section 241, ought to have authorized the Petitioners to file for waiver under proviso to Section 244(1) of the Act. In the instant case none of the members (apart from the three Petitioners) have authorized (which authorization itself is not proper) the Petitioners to file the instant Petition under proviso to Section 244. It is seen that the consents submitted by the Petitioners clearly read as Consent Under Section 241 of the Companies Act, 2013 to make a Petition under Section 241 of the Companies Act, 2013 .Hence, this Tribunal cannot agree with the submissions made by the Petitioners in this regard. Point no (iii). In my view the allegation made against the Respondent Company in the instant petition will not amount to Oppression and Mismanagement. As shareholders of the respondent company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal waives the requirement and enable the members to file application under Section 241 . 28. Paragraph 150 of the Judgment in Cyrus (supra) clearly lays down that merits of the case cannot be decided at the stage of waiver. The Hon ble Appellate Tribunal has arrived at this conclusion on the ground that if the merits are decided at this juncture, then the Tribunal would be adjudicating a Petition under Section 241 which is still in the proposed application stage at the juncture of grant of waiver. The petitioners have also agreed in the rejoinder filed by them that the merits of the case cannot be discussed at this juncture, stating that there are no issues to be decided in this Application . However, in all the pleadings the petitioners have cited the merits of the case, which is expressly barred by the decision in the above judgment. 29. Paragraph 148 of the Judgment in Cyrus (supra) is reproduced hereunder; 148. Now there is a clear departure from earlier provision i.e. sub-section (4) of Section 399 whereunder the Central Government was empowered to permit the ineligible member(s) to file an application for oppression and mismanagement by its executive power. Under pr ..... 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