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TMI Blog2019 (10) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the issue in question, are as follows : (A) Brief facts mentioned in the main company petition bearing C. P. No. 82/BB/2019 filed by Mr. Chalasani Venkateswara Rao and two others (hereinafter referred to as the petitioners) are as follows : (1) The petition is filed against M/s. United Telecoms Ltd. and 11 others, under sections 241 and 242 of the Companies Act, 2013, by, inter alia, seeking to declare that the actions of respondents Nos. 2 to 5 (hereinafter referred to applicant/respondent No. 2) have been in a manner oppressive to the petitioners and prejudicial to the interests of the petitioners and respondent No. 1-company ; to declare that all the resolutions passed by respondents Nos. 2 to 5 for the period of March, 2017 till April, 2019 are void and that all the decisions to be considered afresh in a board meeting to be held jointly, etc. (2) The petitioners are directors of the first respondent-company, i. e., M/s. United Telecoms Ltd., which was incorporated on March 17, 1984 under the provisions of the Companies Act, 1956 as a private limited company. The first respondent-company was originally incorporated with the Registrar of Companies, Tamil Nadu. Subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided that the Tribunal may, on an application made to it in this behalf, waive all or any or the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241. Explanation.-For the purpose of this sub-section, where any share or shares are held by two or more persons jointly, they shall be counted only as one member. (2) Where any members of a company are entitled to make an application under sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them." (2) It is alleged that the petitioner have not only concealed certain essential facts regarding their shareholding, but hopelessly failed to provide any documentation/evidence to show their shareholding as detailed in their petition at page No. 4 under the heading of particulars of the petitioners. It is the case of petitioners that, certain respondents are acting prejudicial to their interest and hence they are entitled to file this instant petition as they claimed that they have jointly hold 42.76 per cent. of shareholding of the company. However, this is unknown to responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 vide Prob. C. P. No. 15 of 2017 and a petition challenging alleged will executed by late Basvapurnaiah vide Prob. C. P. No. 16 of 2017. The hon'ble High Court vide its order dated February 7 and February 15, 2019 directed petitioner No. 1 and later petitioner No. 1 and respondent No. 3 to maintain status quo with regard to will dated November 25, 2013 (executed by Smt. Sarojini Devi and March 30, 2015 executed by late Basvapurnaiah). In this manner, there has never been transmission of shares at any point of time. Even till date, the shareholding pattern of the petition remains same as mentioned supra. (5) It is further contended that the petitioners are also estopped from taking any contention that this petition has been filed together and hence they meet the threshold limit as mentioned under section 244. This contention cannot be entertained by this Tribunal as a bare perusal of the petition along with affidavit demonstrates that petitioner No. 1 has signed on behalf of petitioners Nos. 2 and 3 without producing or providing this Tribunal adequate authority under which he has executed on their behalf. The presentation of petition, which has been filed without any aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners, who are the shareholders and also the directors of respondent No. 1-company have jointly filed the present company petition, under sections 241 and 242 of the Companies Act, 2013, as members and shareholders of the company. The petitioner have satisfied the conditions as stipulated under the Companies Act, 2013 and have not deviated from it, as alleged by the respondents. (3) As per section 244 of the Companies Act, 2013 contemplates that the persons shown in the Registrar of members, annual returns and share certificates as shareholders or members are prima facie entitled to seek relief under sections 241 and 242 of the said Act. Additionally, section 244(1) permits a member or members holding not less than 10 per cent. of the issued share capital to approach the Company Tribunal for relief under section 241 and 242. In the year 2013, the shareholding pattern ("old shareholding pattern") of the petitioners, prior to the demise of late Basvapuranaiah was as follows : Chalasani Venkateswara Rao 8.93% Chalasani Padmavathi 8.10% Dr. Chalasani Sandhya Rao 8.52% Total 25.55 Thereafter, in terms of late Basvapuranaiah's will dated July 20, 2015 the ownersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves to be dismissed on this ground alone. (5) It is stated that the said application filed by the applicant/respondent is not maintainable either in law or on facts. The applicants/respondents have filed the said application with a mala fide intention to protract the on-going proceedings and thus, this application deserves to be dis missed. (6) It is stated that the averment that the petitioners have not only concealed certain essential facts regarding their shareholding but hopelessly failed to provide any documentation/evidence to show their shareholding as detailed in their petition at page No. 4 under the head of particulars of the petitioners is denied in toto. It is false to suggest that the petitioners have concealed certain essential facts regarding their share holding. The second respondent, without the knowledge of the petitioners has procured the share certificates owned by the petitioners through the company's former compliance officer Mr. B. S. Ballal, and retained the same with himself. The petitioners on several occasions have rightfully demanded that their share certificates be handed over to the petitioners in accordance with the provisions of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Section 244 of the Act is reproduced hereunder : "244. Right to apply under section 241.-(1) The following members of a company shall have the right to apply under section 241, namely :- (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares ; (b) in the case of company not having a share capital, not less than one-fifth of the total number of its members : Provided that the Tribunal may, on an application made to it in this behalf, waive all or any or the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241. Explanation.-For the purpose of this sub-section, where any share or shares are held by two or more persons jointly, they shall be counted only as one member. (2) Where any members of a company are entitled to make an application under sub-section (1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iah stood at 31.75 per cent. and that of (late) Mrs. C. Sarojini Devi is shown as nil. This in itself is an indirect admission on part of the first respondent that the shares of (late) Mrs. C. Sarojini Devi were transmitted to (late) Mr. Basavapurnaiah by virtue of the will dated November 25, 2013 contrary to the claims of the respondents. Furthermore, on perusal of the extracts of the notes to the balance-sheet for the financial year 2014-15, the same clearly indicates that the shares of (late) Mr. Basavapurnaiah stood at 30.98 per cent. of the total issued share capital. (Late) Mrs. C. Sarojini Devi's name does not even appear among the list of shareholders which is again an admission of the said transmission on part of the first respondent. Additionally, the said balance-sheet and annual returns for the year 2014-15 has been signed by the third respondent in her capacity as a director of the first respondent-company. Thus, it is false to state that (late) Mrs. C. Sarojini Devi held 30.96 per cent. of the shares in the first respondent-company for the financial year 2014-15. (4) Subsequently, even Mr. Basavapurnaiah expired leaving behind a will dated March 30, 2015. In acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Civil Petition No. 16 of 2017 respectively. Respondent No. 3 did not challenge the probate of (late) Mr. Basavapurnaiah and only challenged thereafter as an afterthought which clearly demonstrates the mala fides of respondent No. 3. Thereafter, the hon'ble High Court vide its order dated February 15, 2019 in Probate Petition No. 15 of 2017 (only), directed the parties to the petition to maintain "status quo" relating to the properties in question until further orders. The respondents have perversely interpreted the said order as to mean that the transmission of shares upon (late) Mr. Basavapurnaiah from (late) Mrs. C. Sarojini Devi stands vitiated. The said order can only be construed to mean that the parties are not to create any third party interests in properties of (late) Mrs. C. Sarojini Devi. In view of the aforesaid facts, petitioner No. 1 cannot be deprived of his status as owner of 17.636 per cent. of the issued share capital that devolved upon him nor his locus to seek redressal from this Tribunal due to failure on part of the compliance officer of the first respondent to make the necessary changes in the register of members and other such statutory records. (6) It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed with the company petition (vide P. Punnaiah v. Jeypore Sugar Co. Ltd. [1994] 81 Comp Cas 1 (SC) and J. P. Srivastava and Sons P. Ltd. v. Gwalior Sugar Co. Ltd. [2004] 122 Comp Cas 696 (SC)). In view of the above, the case at hand is required to be considered in light of the aforesaid settled propositions of law which provide that where the company petition is filed with the consent of the other shareholders, the same must be treated in a representative capacity and therefore the making of an application for withdrawal by the original petitioner in the company petition would not render the petition under section 397/398 of the 1956 Act, non-existence or non-maintainable. Further there is no requirement in law for the share holder himself to give consent in writing. Such consent may even be given by the power of attorney holder of the shareholder." (Rai Mathura Prasad v. Hanuman Prasad Bhagat [1984] 56 Comp Cas 467 (Patna) ; [1984] SCC Online Patna 360) paragraph 10 : "The authority under sub-sections (4) and (5) has been vested in the Central Government presumably for the reason that the power under section 398 can also be exercised where the affairs of the company are con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, it must be assumed that the Legislature was aware of such interpretation and intended it to be followed in later enactments". (10) It is further stated that in Kuttanad Rubber Co. Ltd. v. K. T. Ittiyavirah [1993] SCC Online Ker 161 ; [1997] 88 Comp Cas 438 (Ker), at paragraphs 5 and 6 it has been categorically held that (page 441 of 88 Comp Cas) : "If a particular individual or individuals who purpose to move an application under sections 397 to 399, to hold one-tenth of the shares then there is no question of anybody's consent for such a petition arises." The dictum of the Supreme Court in Jugraj Singh v. Jaswant Singh [1970] 2 SCC 386, 389 at paragraphs 9 and 10 stipulates that : "9. Now the law is quite clear that ratification relates back to the original act provided there is a disclosed principal . . . 10. Relation back of an act of ratification was expressly accepted in this case. Other cases have been summarised in the manual of the law and practice of power of attorney issued by counsel of the charter institute of secretaries. This follows from the maxim of law 'Omnis Ratihavitioretrotrahitur et mandate prioriacquiparatur'-that is to say, ratifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law. This is clear from paragraph 1(4) at page 4 of the petition where it is clearly stated as follows : "The petitioners are filing this petition in their capacity as share holders of the first respondent-company. The collective shareholding of the petitioners amounts to 42.76 per cent. of the total issued share capital of the first respondent-company. The petitioners meet the threshold required under section 244 of the Companies Act, 2013 for filing the present company petition." This paragraph makes it very clear that the petitioner are being referred to collectively and on that basis they claim that they satisfy the requirement of section 244 collectively and on the basis of their share holder percentage. Hence, they have categorically have admitted and decided to file the petition on the ground of shareholding only. (3) It is also stated that in arguments for the first time, learned counsel for the petitioners contends that petitioner No. 1 may not satisfy the requirement of shareholding if the admitted shareholding of 8.93 per cent. is considered, but he satisfies the requirement of being more than one-tenth of the total number of shareholders. This stand is clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses for the last 10 years even after the expiry of its licence on May 26, 2000." (5) A mere reading of the above judgment of the Supreme Court will clearly indicate that when the petitioner has chosen to justify his eligibility on the basis of the shareholding percentage, he cannot be permitted to alter it as and when he chooses by saying that petitioner No. 1 will satisfy this requirement being more than one-tenth of the shareholding. The entire probate of the will of Late C. Basavapurnaiah as well as his wife late Smt. Sarojini Devi have been challenged before the High Court of Karna taka and the High Court has granted an interim order of status quo with respect to the properties by order dated February 15, 2019. This makes it clear that not merely does petitioner No. 1 not have the requisite share holding but he also has deliberately made a false statement before this Tribunal. Proceedings will have to be initiated for perjury against petitioner No. 1. (6) Respondent No. 2 relies on the following precedents to support their contentions : Consent is mandatory for filing the petition under section 241 and the same is substantive in natures (a) K. N. Sankaranarayanan v. Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power of attorney seeks to ratify some other power of attorney dated March 26, 2019 which is non-existent. (8) All of these facts make it apparent that the petitioners are seeking to cure some defect or the other by providing before this Tribunal contradictory and false documents. Such conduct is completely depreciable. Therefore, there is no power of attorney or authorization to maintain this petition by petitioners Nos. 2 and 3. The power ought to have existed prior to the date of the petition and cannot be created afterwards. 6. Heard Shri DhyanChinnappa, learned senior counsel applicant/ respondent No. 2 and Shri Vivek Holla with shri Disiree Pais and Shri Naman Jhabakh, learned counsels for respondent/petitioner. We have carefully perused the pleadings of the both the parties and the extant provisions of the Companies Act, 2013 and various judgments cited by both the parties. 7. The main company petition along with several IAs have been listed for various dates, viz., May 3, 2019, May 6, 2019, May 27, 2019, June 17, 2019, June 27, 2019, July 4, 2019, July 18, 2019, July 25, 2019, August 13, 2019, August 14, 2019, August 19, 2019, September 9, 2019 and September 20, 2019 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Provisions of section 244 of the Act enumerate members, who are eligible to invoke section of 241 of the Act. The Tribunal will decide the question of eligibility in the light of claim/contention(s) made by the members in the company petition and it cannot consider all the provisions of the above section so as to suit petitioners/members basing on subsequent contentions/documents filed by the parties unless in justified reasons as per law. In the instant case, as per provisions of section 244 of the Act, in the case of a company having share capital, a petition can be filed by members of a company, who constitute either not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less or any members or members holding not less than one-tenth of the issued share capital of the company; in the case of a company not having a share capital, not less than one-fifth of the total number of its members can file petition. The section further provides members of a company to join together to maintain a petition even in a case where members do not hold minimum requisite as prescribed percentage/members, however, subject to ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of provision of law. The petitioner has only filed verifying affidavit dated April 29, 2019 by, inter alia, stating as follows : "I, Chalasani Venkateswara Rao, aged about 58 years, s/o. late Mr. C. Basauapurnaiah, shareholder/director of the respondent-company having residence at Villa 5, Chaitanya Oakville, Hagadur Road, Whitefield Bangalore-560 066, do hereby solemnly affirm and state oath as follows : (1) I am the first petitioner herein and I am aware of the facts of the instant case and hence competent to swear to this verifying affidavit. I am also swearing this affidavit on behalf of the second and third petitioner. (2) I state that the averments contained in paragraphs 1 to 44 in the accompanying company petition are true and correct to the best of my knowledge, information and belief." Therefore, admittedly, the first petitioner has not taken any authorisation/written consent from the second and third petitioners and therefore, only first petitioner signed in place of second and third petitioners on each page of the company petition, which is ex facie illegal and thus the petition is liable to be dismissed on this ground alone. 13. While filing the petition, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners 8.93 per cent., 8.10 per cent. and 8.52 per cent. respectively. The remaining shareholding claimed by the first petitioner is sub-judice having granted stayed by the hon'ble High Court of Karnataka. Therefore, the disputed shares cannot be claimed by the first petitioner to file the petition on that basis and the fact of dispute and stay was suppressed. Therefore, it is also to be held that the petitioners came to the Tribunal with unclean hands. 15. In this regard it is relevant to point out the judgment given by hon'ble High Court of Madras in K. N. Sankaranarayanan v. Shree Consultations and Services P. Ltd. [1994] 80 Comp Cas 558 (Mad), wherein the hon'ble High Court held question of authority to institute a suit on behalf of the company not mere technicality, it will have far reaching affect. The contentions of the respondent that not obtaining the written consent of the remaining petitioners at the time of the filing the said petition, it is mere technicality is not tenable for the reasons stated supra. The other contentions of the petitioner that even though the disputed shares are excluded, that they are holding more than 10 per cent. is also n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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