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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 ..... whether the petitioners came to the Tribunal with unclean hands. As per extant provisions of Companies Act, in order to maintain an application/petition, member(s) have to fulfil the requisite condition(s) as prescribed under section 244 of the Companies Act, 2013. 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st 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. The instant application is filed by suppressing the material facts and not fulfilling the requisite conditions and has come with unclean hands - Application is allowed. - I. A. No. 317 of 2019 in C. P. No. 82/BB/2019 - - - Dated:- 18-10-2019 - Rajeswara Rao Vittanala (Judicial Member) And Dr. Ashok Kumar Mishra (Technical Member) For the Applicant/Respondent No. 2 : Dhyan Chinnappa, Senior Counsel For the Respondent/Petitioner : Vivek Holla with Desiree Pais and Naman Jhabakh ORDER RAJESWARA RAO VITTANALA (JUDICIAL MEMBER). - 1. I. A. No. 317 of 2019 in C. P. No. 82/BB/2019 is filed by Dr. Potluri Raja Mohan Rao (hereinafter referred to as applicant/respondent No. 2 ) under section 244 of the Companies Act, 2013, read with rules 11 and 32 of the National Company Law Tribunal Rules, 2016, by, inter alia, seek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the actions of respondents Nos. 2 to 5, who are the share holders and directors of respondent No. 1-company, owing to the fact that there have been continued acts of oppression of the rights of the petitioners as shareholders of respondent No. 1-company and gross mismanagement of the affairs of respondent No. 1-company by the said respondents Nos. 2 to 5 for their own personal benefit and gratification without taking the interest of the company into consideration. (B) Brief facts of the case, as mentioned in the instant application filed by the applicant/respondent No. 2 are as follows : (1) The main company petition is wholly devoid of any merits and does not comply with statutory provisions of section 244 of the Companies Act, 2013. Section 244 of the Companies Act, 2013 states as under : 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners can be ascertained both as per the balance-sheets signed by petitioner No. 1 himself and statement of 2013-14 and 2014-15 of respondent No. 1-company : (a) Mr. C. V. Rao 8.93% (b) Mrs. Padmavathi 8.10% (c) Dr. C. Sandhya 8.52% (4) Therefore it is alleged that the petitioners have blatantly lied on affidavit regarding their shareholding in respondent No. 1-company. The shareholding of respondent No. 1-company is/was held by various per sons. It is the claim of petitioner that Smt. Sarojini Devi had executed a will dated November 25, 2013 making her husband late Basvapurnaiah sole beneficiary of the will. Late Basvapurnaiah acted upon the will and obtained probate in September, 2014. During that time shares held by Smt. Sarojini Devi was transferred to late Basvapurnaiah along with other properties. Late Basvapurnaiah, based on the probate without submitting any particulars to the hon'ble High Court, executed a will dated March 30, 2015 which was probated in 2017. Hence the shareholding and oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of having 10 per cent. of shareholding. It is the mandate through plethora of cases as decided by hon'ble apex court that consent must be in writing and the same must be filed along with the petition. Such consent cannot be submitted once the petition is filed ; hence the defect is not curable. This ground alone is sufficient to dismiss the petition filed by the petitioner in limine as not maintainable. 3. Respondent No. 2, i. e., Mrs. C. Padmavathi/petitioner No. 2 has filed Statement of Objections dated July 24, 2019 by, inter alia, contending as follows : (1) It is stated that the applicant/respondent No. 2 has suppressed material facts from this Tribunal and have also made several false statements. The above application is also liable to be dismissed on the ground of suppression of material facts as well as the unfair conduct of the applicant/respondent No. 2. The instant application filed by respondent No. 2 challenging the maintainability of Company Petition No. 82 of 2019 under section 244 of the Companies Act, 2013 on the ground of failure to comply with the statutory provisions as defined under the Act is fallacious and is contrary to the very provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioners amounts to 42.76 per cent. of the total issued share capital in the first respondent-company. The petitioners therefore meet the threshold stipulated under section 244 of the Companies Act, 2013 and hence are eligible to maintain the present company petition. Moreover, even by the respondents own admission, the total issued share capital held by the petitioners far exceeds the minimum requirement as postulated under section 244 of the Companies Act, 2013 as seen under : Chalasani Venkateswara Rao 8.93% Chalasani Padmavathi 8.10% Dr. Chalasani Sandhya Rao 8.52% Total 25.55 (4) It is irrefutable that in terms of section 244 of the Companies Act, it is imperative to have a minimum of 10 per cent. of the shareholding either individually or as a group. The said provision under clause (2) additionally entails that the said member or members, who are entitled to make an application under section 241 of the Companies Act, 2013, can jointly file an application on behalf or for the benefit of all them, if suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointly held by the petitioners is 42.76 per cent. of the shareholding and that this is classic case of misrepresentation is wholly false and unfounded. (7) The respondents in the said paragraph have averred that the true shareholding of the petitioners can be ascertained by virtue of the balance-sheets signed by petitioner No. 1 himself and statement of 2013-14 and 2014-15 of respondent No. 1-company is admitted in part to the extent of the aforesaid financial years. However, the respondents have conveniently abstained from bringing to the notice of this Tribunal the current share holding pattern of respondent No. 1. Subsequent to the death of late Bas vapuranaiah the shareholding pattern changed as per the presents of his will and therefore, the collective shareholding of the petitioners is 42.76 per cent. of the total issued share capital. (8) It is also stated that the non-filing of the power of attorney does not vitiate the entire proceedings before this Tribunal. Moreover, there mandate under section 244(2) is not applicable to the present petition. Section 244(2) does not envisage that obtaining of consent of shareholders/ members supporting the petition is necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in an application under section 241 of the Act ; a member must satisfy one of the following two criteria's : (i) The applicant member/s must account for not less than one hundred members or not less than one-tenth of the total number of its members, whichever is less ; or (ii) The applicant member/s must hold not less than one-tenth of the issued share capital of the company. (2) It is also stated that the contention canvassed by the second respondent-company, that the petition filed under sections 241 and 242 of the Act is not maintainable as the petitioners do not conform to the pro visions laid down under section 244 of the Act is erroneous and false. The petitioners, are not only members in the first respondent-company, but also satisfy both the stipulations laid down under section 244 of the Act as demonstrated hereunder : (i) The petitioner's being three (03) in numbers constitute more than one-tenth of the total number of members being nine (09) in the first respondent-company. Thus, satisfying the provisions stipulated under section 244(1)(a) of the Act. Even individually, the petitioners satisfy the requirements as each one of the petitioners satisfies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015. In accordance to the said will, all the shares held by (late) Mr. Basavapurnaiah in the first respondent-company (including the shares that developed upon him as aforementioned) came to be trans mitted in favour of petitioner No. 1 and respondent No. 3. The hon'ble High Court of Karnataka was pleased to probate the said will by its order dated January 6, 2017. Accordingly, the shares held by (late) Mr. Basavapurnaiah in the first respondent-company came to be transmitted in favour of first petitioner and the third respondent. Thereupon, the trans mission was duly effectuated by the board of the first respondent-company and 17.636 per cent. and 14.0115 per cent. of the share belonging to (late) Mr. Basavapurnaiah were transmitted in favour of the first petitioner and the third respondent respectively. Consequently, the share certificates of (late) Mr. Basavapurnaiah, the first petitioner and the third respondent were altered to reflect the said transmission. It is also pertinent to state that the share certificate of petitioner No. 1 was duly signed by respondent No. 3 and vice-versa being the directors of the company to give effect to the said transmission. When things sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. (6) It is irrefutable that in terms of section 244 of the Companies Act, it is imperative to have a minimum of 10 per cent. of the shareholding either individually or as a group. The said provision under clause (2) additionally entails that the said member or members who are entitled to make an application under section 241 of the Companies Act, can jointly file an application on behalf or for the benefit of all them if such consent is given in writing to one or more of such members. Petitioners Nos. 2 and 3 have executed a power of attorney dated April 4, 2019 in favour of petitioner No. 1 and have authorized and empowered him to, inter alia, sign, verify and present petitions, complaints applications, objection statements, affidavits, appeals, and other pleadings in to relation to/in connection with any company petition filed before the Bench. The petitioners have there fore conformed to the requisites as provided for under section 244 of the Companies Act, 2013. (7) Further, there exists no legal impediment/wrong in not filing the power of attorney at the time of filing the petition. The power of attorney dated April 4, 2019 which is taken on record. Moreover, section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company are conducted in manner prejudicial to public interest. Sub-sections (1), (2) and (3) are attracted where prejudice to the interest of the company is alleged. The entire scheme clearly indicates that the courts power in this regard is to be used to protect the interests of the public or a group of shareholders. Sub-section (3) of section 399 permits an individual member to make an application 'on behalf and for the benefit of all' members of a company entitled to move the court. Such a person clearly acts in representative capacity and in the pre sent case, Banarsi Lall Bhagat was also representing the interest of a group of shareholders including the petitioners. With respect to the representative nature of the proceeding, the provision is similar to those of Order 1, rule 8, which states that where there are numerous persons and the same interest in one suit, one or more such persons with the permission of the court, sue or be sued or may defend in such suit on the behalf or for the benefit of persons so interested. (8) It is also stated that the hon'ble apex court in P. Punnaiah v. Jeypore Sugar Co. Ltd. [1994] 81 Comp Cas 1 (SC) ; [1994] 4 SCC 341 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '-that is to say, ratification is thrown back to the date of the act done, and the agent is put in the same position as if he had authority to do the act at the time the act was done by him. The Madras High Court in K. Santhanam v. Ms. S. Kavitha [2010] SCC Online Mad 6009 at paragraph 20 held that : 20. Thus, the law is well-settled that it is always open to the principal to ratify the act of the agent by producing an authenticated power of attorney. (11) It is further stated that the power of attorney executed as on April 4, 2019 has been duly stamped in accordance with the provisions under article 41(b) of the Karnataka Stamp Act, 1957. The power of attorney executed on September 3, 2019 has also been duly stamped in accordance with the provisions of the Karnataka Stamp Act under article 41. Even in the event the second respondent falsely contends that the power of attorney dated April 4, 2019 is insufficiently stamped, the law is well-settled that an insufficiently stamped document would not ipso facto invalidate the document itself. 5. The applicant/respondent No. 2 has filed written submissions dated September 27, 2019 by, inter alia, contending as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of shareholders. This stand is clearly incorrect given the fact that there is no such pleading. Applying the doctrine of election, if a party elects to be considered on one basis, he cannot be per mitted to alter the basis simply because he is put in a difficult position. In the present case, the petition filed clearly indicates an election ; namely that the collective shareholding of all the petitioners should be taken into account. (4) Respondent No. 2 has relied upon various judgments, in Mumbai International Airport P. Ltd. v. Golden Chariot Airport [2010] 10 SCC 422 the Supreme Court explained the doctrine of election clearly and held as follows (page 436) : This court has also applied the doctrine of election in C. Beepathumma v. Velasari Shankaranarayana Kadambolithaya [1964] 5 SCR 836 ; AIR 1965 SC 241, wherein this court relied on Maitland as saying : 'That he who accepts a benefit under a deed or will or other instrument must adopt the whole contents of that instrument, must conform to all its provisions and renounce all rights that are inconsistent with it.' (Maitland's Leactures on Equity, Lecture 18) . . . This court also took note of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive in natures (a) K. N. Sankaranarayanan v. Shree Consultations and Services P. Ltd. [1994] 80 Comp Cas 558 (Mad) (paragraphs Nos. 1, 3, 4 and 7). (b) Samarthmal Phoolchand Seth v. Pravin Mehta [2011] 161 Comp Cas 61 (CLB) (paragraph No. 10). (c) S. S. Laxminarayanan v. Mather and Platt India Ltd. [1998] 92 Comp Cas 109 (CLB) (paragraphs Nos. 14, 15, and 16). Requirement of section 244 of the Companies Act, 2013 (similar to section 399 of the Companies Act, 1956) of shareholding is mandatory. (d) Suhas Chakma v. South Asia Human Rights Documentation Centre P. Ltd. [2008] 142 Comp Cas 902 (CLB). (e) Kamal Kishor Singhaniya v. Vimal Kishor Singhaniya [2012] 169 Comp Cas 117 (CLB) (paragraph No. 4). (f) Chandra Pradhanani v. Mac Charles (India) P. Ltd. MANU/Karn/ 1650/2010 (paragraph No. 24). (7) The respondent have demonstrated that petitioner No. 1 com mitted the following illegal acts, which can never be justified : (a) Petitioner No. 1 has signed the petition for himself as well as the other petitioners. Petitioner No. 1 in verifying affidavit does not refer to any power of attorney. He simply affirms the affidavit saying that he is signing on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2019, August 19, 2019, September 9, 2019 and September 20, 2019 and the Tribunal has also passed interim order. 8. Learned senior counsels for both the parties, while reiterating various averments made in their respective pleadings, have further summarised their arguments by way of filing written arguments as brief stated supra. 9. Since the petitioners do not fulfil the requisite conditions as per extant provisions of Companies Act, 2013 as extracted supra, and filed several interim applications seeking various reliefs and respondent No. 2 has also raised preliminary objection about the maintainability and plea of perjury, the Tribunal decided to decide the instant application for maintainability. Therefore, main points for consideration in the instant application is whether the petitioners satisfy the requisite percentage as prescribed under section 244 of the Companies Act, 2013 ; whether the joint petition of the petitioners is maintainable without written consent ; whether the petitioners can be permitted to plead and change election of pleading conveniently to seek equitable relief ; whether the petitioners came to the Tribunal with unclean hands. 10. It is not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d minimum requisite as prescribed percentage/members, however, subject to obtaining written consent of other members. 12. In the light of above provision, the petitioners themselves made a statement in the original petitioner that the authorised share capital of the first respondent-company is ₹ 115,000,000 and the paid-up capital is ₹ 111,557,180 and out of it, the first petitioner claims 29,15,782 equity shares amount to 26.14 per cent. of its paid-up share capital, the second petitioner claims to hold 9,03,177 equity share amount to 8.10 per cent. of its paid-up share capital, the third petitioner is holding 9,50,000 equity shares amounting to 8.52 per cent. of its paid-up share capital. Therefore, all the petitioners have claimed they all together to possess total 42.76 per cent. of the total issued share capital. Therefore, as per the provisions of section 244 of the Companies Act, 2013, not less than one hundred members of the company or not less than one tenth of the total issued share capital of the company. Therefore, the petitioners are collectively shareholding the amount to 42.76 per cent. of the total issued share capital in the first respondent-company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition is liable to be dismissed on this ground alone. 13. While filing the petition, under sections 241 and 242 of the Companies Act, 2013 which is equitable jurisdiction, the petitioners are supposed to come with bona fide facts and clean hands. However, the petitioners have claimed that they are holding 42.76 per cent. of the total share capital. However, the fact remains that the petitioners are holding 8.93 per cent., 8.10 per cent. and 8.52 per cent. respectively and the remaining shares are sub judice before the hon'ble High Court of Karnataka as the wills in questions are in dispute with stay granted, as state supra. Until unless the competent court declares that they are entitled to shares under will, the petitioners cannot claim and file petition basing on undeclared title. Therefore, it is relevant to point out here that the first petitioner's undisputed share holding is less than 10 per cent. 14. The contentions of the respondents/petitioners that the petitioners being 3 in number, are more than one-tenth of the total number of members as stipulated under section 244(1) and thus the application is maintainable is not tenable and it is liable to be rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the disputed shares are excluded, that they are holding more than 10 per cent. is also not tenable as the first petitioner is holding less than 10 per cent. shareholding. 16. The respondent-company has also filed I. A. No. 318 of 2019, under sections 191, 193 and 195 of the Indian Penal Code, 1860, read with section 340 of the Code of Criminal Procedure, 1973 read with rules 11 and 32 of the National Company Law Tribunal Rules, 2016, by, inter alia, seeking to direct the registry of the Tribunal, inter alia, seeking to direct the jurisdictional magistrate to initiate proceedings for having committed perjury by swearing to an affidavit containing false and incorrect statements in the interest of justice and equity and the same is also pending. The petitioner has suppressed the order of the hon'ble Delhi High Court passed in O. M. P. (I) (COMM.) No. 125 of 2019 United Telecoms Ltd. v. Bharat Broadband Network Ltd., wherein the hon'ble Mr. Justice M. Jagannadha Rao, former Judge, Supreme Court of India. The petitioner has also made several allegations without any basis. Therefore, the instant application is filed by suppressing the material facts and not fulfilling ..... 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