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TMI Blog2021 (6) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... or acquiesced to the Respondent No. 1's claims of set-off. It is trite law that those persons/entities who are not party to a contract, do not have any right to initiate action or claim benefits/performance of the contract. This is enshrined within the legal doctrine of privity of contract, which is respected, followed, and enforced by all the courts, tribunals, and other adjudicating authorities of similar power and stature in India - Merely because the Petitioner/Applicant is a majority shareholder in the Respondent No. 1, it is not entitled or authorised to file the captioned Application relating to contractual rights of the Respondent No. 1 and the Respondent No. 4. There is no shareholder right of the Petitioner/Applicant involved in relation of the use of the Premises by the Respondent No. 1 in contractual arrangement with the Respondent No. 1 - the dispute is in respect of the payment of rent, which the respondent no. 4 is claiming from respondent no. 1 company and which according to the applicant is set off against the outstanding dues, which is payable by the respondent no. 4 to the respondent no. 1. A defence of set off can be claimed by the defendant in a suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of INR 600 crores (approx.) towards acquiring 92% majority shareholding and 100% Compulsorily Convertible Preference shares in the Company. In addition, the Petitioner/Applicant has committed a sum of INR 770 Crores (approx.) as financial support to the Company towards providing collaterals for securing the working capital and debt facilities availed by the Company. b. It is contended by the Applicant that as part of their sinister design to oppress the Petitioner/Applicant, the Respondent Nos. 2 to 8 have been constantly and deliberately obstructing the Petitioner/Applicant's attempts to manage the affairs of the Company in a smooth and efficient manner. Notwithstanding the fact that the Petitioner/Applicant has invested the aforesaid huge amounts to acquire majority control in the Company, the Petitioner/Applicant finds itself in a position that its nominee whole time directors on the board of directors of the Company and other employees of the Company are being constantly obstructed and impeded inter -alia by and at the behest of Respondent Nos. 2 to 4 from entering the corporate office of the Company and hindrances are being created in the day to day functioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were invoked solely owing to PCI Limited's inability to timely renew the bank guarantees furnished by them in favour of DHBVN and UHBVN despite the Company having provided back-to-back guarantees in favour of Respondent No. 4 PCI Limited. The mechanism for set-off of the rentals for Prime Tower office has also been clarified by the Company to Respondent No. 4 PCI Limited on several occasions including vide e-mails dated October 26, 2018, January 24, 2020, March 16, 2020 and October 24, 2020. In addition to INR 25,302,446, further amounts are also due to the Company from Respondent No. 4 PCI Limited including an amount of INR 5 million that was paid to PCI Limited for providing the requisite margin for the bank guarantees that were provided by PCI Limited for the DHBVN Dadri Paragon Cable project, which were invoked owing to the defaults of Respondent No. 4 PCI Limited. g. It is contended by the Applicant that Respondent Nos. 2 and 3 continue to place the interests of the company subservient to their company PCI Limited (Respondent No. 4) and conveniently choose to overlook the unpaid Debit Notes. h. In the first week of June 2020, the Company's HR Head namely Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction/objection. n. It was contended by the Applicant that on 04.01.2019 and 04.02.2019, Respondent No. 3 Mr. Rohan Mehta had violated the order dated 20.12.2018 by obstructing the entry of the Company Secretary Mr. Rajnish Kumar and the HR Head Mr. Mazhar Hussain into the Company Prime Tower premises. o. The Hon'ble Appellate Tribunal, in Contempt Case (AT) No. 02 of 2019 in Company Appeal (AT) No. 397-399 of 2017, vide order dated 30.01.2019 allowed the counsel for the respondent- Mr. Surinder Mehta and Mr. Rohan Mehta to hand over the proposed Terms of Settlement to the counsel for the petitioners by 01.02.2019. Also, Petitioners will go through it and if so required may suggest some change in the proposed Terms of Settlement and hand over the same to the counsel for the respondents by 06.02.2019. p. The Hon'ble Appellate Tribunal vide order dated 08.02.2019 allow the parties to reach an amicable settlement. q. It is contended by the Applicant in the present application that it is only after order dated 08.02.2019, Mr. Mazhar Hussain was permitted to enter the Company office building. And Mr. Rajnish Kumar was allowed to enter only after the Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as normal with effect from 04.01.2021. It is contended by the Applicant that such re-start is necessary for normalization of the operations of the Company (which have been severely battered owing to the COVID-19 pandemic) and aids the completion of long pending work and compliances, as the employees of the Company will have access to all physical records of the Company. The Head HR of the Company Mr. Mazhar Hussain vide his email dated 01.01.2021 accordingly communicated the said decision to the employees of the Company. However, Mr. Shiv Sharma (Admin In-Charge), DGM PCI Limited once again acting at the behest of Respondent Nos. 2 to 4 has issued an e-mail dated 02.01.2021 thereby curtailing the efforts of the Company to resume its operations from Prime Towers on the ground of maintenance work. 4. The Respondent Nos. 2 to 8 in its reply dated 21.01.2021 contends that: a. The Respondent Nos. 2 to 7 have also filed a cross Petition bearing Company Petition No. 394 (ND) of 2017 before this Hon'ble Tribunal under Sections 241, 242 and 244 of the Companies Act, 2013 (hereinafter the Act ) detailing various acts of oppression and mismanagement by the Petitioner acting throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent No. 4 decided to take appropriate measures in the central air-conditioning system installed at Prime Tower to contain the spread of Covid-19 for the safety of all employees working in Prime Towers, which includes the Premises. The measures to be undertaken included upgradation work of its Heating, Ventilation and Air Conditioning System ('HVAC System'). Thus, restrictions were imposed on entering Prime Towers on account of these measures and not to create obstructions for the Petitioner/Applicant or the representatives of the Respondent No. 1 Company. i. Respondent No. 1 Company has already started functioning from the abovementioned premises since October 2020, evident from the Circular Resolution dated 23.09.2020 allegedly approved by the Board of Directors of the Respondent No. 1 Company as per their own claim. j. The Respondent No. 4 company (Licensor) has issued a Legal Notice dated 04.01.2021 to the Respondent No. 1 company (Licensee) to recover the outstanding service charges for a period of 28 months from the Licensee under the Agreement amounting to ₹ 2,90,93,527/- (which includes the Service charge from October 2018 to January 2021 and facili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and iv. Share split Register. To this extent, Mr. Rajnish Kumar provided an acknowledgement to the security officers of Respondent No. 4 Company, thanking them for their cooperation. It is explained that on this day, 04.11.2020, Mr. Rajnish Kumar was provided full access to the Premises as per requirement of the Respondent No. 1 Company. The abovementioned documents were removed by Mr. Rajnish Kumar from his office almirah without any impediment from the Answering Respondents. r. No force was used by any person employed by Respondent No. 4 Company to restrain the representatives of Respondent No. 1 Company from entering Prime Towers or the Premises on 18.12.2020. There are Boom Barriers installed after the main gates of Prime Tower for security purposes to check the vehicles entering the said premises. 5. The Applicant in its rejoinder dated 25.01.2021 contends that: a. Respondent Nos. 2 to 4 the minority shareholders are misusing their ownership of the Prime Tower Building to harass and oppress the Petitioner/Applicant and Respondent No. 1 Company (which is a subsidiary of the Petitioner/Applicant, that holds 92% stake in Respondent No. 1 by preventing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarified that the present Company Application filed by the Petitioner/Applicant is squarely in relation to the affairs of the Company. It has not been filed on behalf of the Company, as was wrongly argued by the Respondent Nos. 2 to 8. The language of the Power of Attorney dated March 26, 2020 (authorising the Petitioner/Applicant's authorised representative to act on its behalf) is clear and unambiguous. 1. Further, the minority shareholders (Respondent Nos. 2 to 4) are misusing their ownership of the Prime Tower Building to harass and oppress the Petitioner/Applicant and Respondent No. 1 Company. The Company personnel as well as representatives of the Petitioner/Applicant have been specifically conferred the rights to access the corporate office premises under the AoA of Respondent No. 1 Company, more particularly under Articles 112 and 170 (Annexure 13 at pages 107 to 118 of the instant Company Application).Respondent No. 4 (PCI Limited) who is the lessor for the premises under a service facility agreement dated June 01, 2016 (the Agreement ) and controls the ingress and egress at Prime Tower, is also a shareholder of Respondent No. 1 Company. Further, Respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is incomprehensible why Prime Tower has still not been able to meet the prescribed safety and sanitization measures for tackling the COVID-19 pandemic when offices across India including Delhi NCR are operational and more than 10 months have elapsed since the onset of the pandemic. In relation to the false allegations regarding non-payment of rent, it is relevant to mention that the Respondent No. 4 has already invoked the remedy of arbitration (as stipulated under the Agreement) and hence, ought not to be even taken into consideration by this Tribunal. Further, there is no merit in the submission made by Respondent Nos. 2 to 8 that the Petitioner/Applicant is attempting to enforce the Agreement by way of the present Application. At the expense of repetition, the Petitioner/Applicant respectfully submits that the incessant and continuous impediments being orchestrated by and at the behest of Respondent Nos. 2 to 4 for preventing the officials of the Company from accessing the Company's corporate office and the records lying thereat has adversely impacted the business and operations of the Company and the same constitutes gross oppression of the Petitioner/Applicant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner/Applicant to succumb to their unlawful demands. Even after passage of various orders, the Respondent Nos. 2 to 4 by utilising their muscle power prevented duly appointed employees of the Company (including the HR-Head Mr. Mazhar Hussain and Company Secretary Mr. Rajnish Kumar) from entering the corporate office of the Company. Despite warnings and in clear abuse of the orders passed by the Hon'ble NCLT, the Respondent Nos. 2, 3 and 4 prevented the corporate and statutory records of the Company from being handed over to duly appointed Company employees, thereby hindering the Company's operations. It was only pursuant to the Hon'ble NCLAT's orders dated February 06, March 04 and 12, 2020, and the fear of being pulled up for contempt of court that the said employees were allowed to enter the office premises and records were eventually handed over. (Annexures 9 at Pages 65-66, Annexure 10(colly) at pages 67-71 and Annexure 11(colly) at pages 72-79 of the instant Company Application). 10. It is relevant to mention that this is the usual modus operandi of Respondent Nos. 2 to 4 who have adopted similar coercive tactics in the past to oppress and harass the Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r their unlawful objectives by harassing the Petitioner/Applicant and the Company. 12. Apart from the aforesaid, the Respondent Nos. 2 and 3 are obstructing (Annexure 14 (Colly.) at Pages 131-137 of the instant Company Application) shifting of PML's corporate office despite resolutions (Annexure 12 (Colly.) at Pages 80-83 of the instant Company Application) to that effect having been passed by the Board of Directors of the Company. Pertinently. Respondent Nos. 2 to 8 admit the said resolution and the authority delegated to the Managing Director of the Company to negotiate the terms of the lease deed with DLF. However, to block shifting of the Company's corporate office, the Respondent Nos. 2 and 3 also approached the officials of DLF Limited (i.e., the lessor of the alternate premises at Cyber City, Gurugram to which the Company intends to relocate its corporate office) and misrepresented to them that transfer of the corporate office cannot be effected without their approval. At the same time, they are deliberately preventing access to the Company's office in Prime Tower, thereby completely choking the Company's operations. The Petitioner/Applicant submits that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 23-29 of the captioned Application] 17. Pertinently, the Agreement provides that the Respondent No. 1 would be allowed to use the Premises upon payment of the monthly service charges to Respondent No. 4. 18. The Respondent No. 1 has however failed and defaulted in payment of the monthly service charges from the month of October 2018, which is almost for 28 months with unpaid rent accumulating to over ₹ 2.90 Crore. The Respondent No. 1 is therefore in gross breach of its contractual obligations under the Agreement with Respondent No. 4. 19. In this regard, the Agreement specifically provides as under: That if the service charges or any part thereof shall remain unpaid for more than one month after the same becomes due and payable, and in case of any breach of any one terms conditions, the Licensee be adjudged insolvent, it shall be lawful for the Licensor notwithstanding any earlier waiver in respect of the same to enter the said portion of space and immediately thereupon revoke this Agreement without any prejudice to recover any due or claim antecedent of the terms and conditions herein contained. [Refer Annexure 1 at page 25 of the captioned Applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corporate office at Prime Tower: and (iii) Pass such other or further order(s) or direction(s) as this Hon'ble Tribunal may deem just and proper in the prevailing facts and circumstances. 25. The above prayers and reliefs as per the captioned Application cannot be granted as the Petitioner/Applicant has no locus standi, either in law or under the contract, to prefer an application of such nature. The Petitioner has no right, title, or interest in the Premises, either in law or in contract whatsoever. The Petitioner/Applicant cannot, and in fact do not, claim any such right in the captioned Application. 26. Despite the fact that the Petitioner/Applicant is an alien/a third party outside the four corners of the Agreement, and that the right to use the Premises vests solely with the Respondent No. 1, the Petitioner/Applicant has surreptitiously filed the captioned Application in contravention of the basic principles and tenets of contract law, company law and the procedures of this Hon'ble Tribunal. 27. It is trite law that those persons/entities who are not party to a contract, do not have any right to initiate action or claim benefits/performance of the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant's claims of set off are not only absurd but also against the legal principles under the law of contract. The Code of Civil Procedure, under Order VIII, Rule 6 provides for the claim of set-off, exercised by one party against another, only if the following conditions, as enumerated within Order VIII Rule 6, are satisfied: a. That it must be a suit for recovery of money; b. That the amount sought to be set-off must be a certain sum; and c. The right of set-off exists not only in case of mutual debits and credits but also where cross-demands arise out of the same transaction. [Refer Jitendra Kumar Khan and Ors. vs. Peerless General Finance and Investment Company Ltd. and Ors. - (2013) 8 SCC 769]. 34. Applying the abovementioned principles to the present facts, the principle of set-off cannot be allowed since the debit notes have not been issued in respect of the same transaction. Under the Agreement neither the Respondent No. 1 nor the Respondent No. 4 is provided with the right to claim set-off. Also, the Respondent No. 4 had never accepted the unrelated Debit Notes nor acquiesced to the Respondent No. 1's claims of set-off. 35. In any event, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months. But the Petitioner/Applicant's act of filing such applications on false, frivolous, baseless, specious, and unsubstantiated grounds has significantly and intentionally delayed the hearings in the main Company Petition. The Applicant intends to misuse the judicial process and powers of this Hon'ble Tribunal to harass the Respondents by filing such baseless and meaningless Applications. This Tribunal should reject such frivolous Applications and proceed with the adjudication of the main Company Petition. 40. The Petitioner/Applicant have alleged that the Respondent Nos. 2 to 4 are using muscle power to prevent the entry of the Respondent No. 1's employees into Premises, which is blatantly false and baseless. The falsity of these claims can be substantiated through the CCTV footage from the cameras placed upon the gate of Prime Tower. 41. The Respondent Nos. 2 to 4 submit that if this claim of the Petitioner/Applicant had any credibility, they would have beseeched this Hon'ble Tribunal to direct the Respondent Nos. 2 to 4 to produce the CCTV footage. Instead, the Petitioner/Applicant has resorted to put on record 1 frame of picture which exhibits the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent No. 1 stating that its Managing Director (Mr. Kazumi Ikarashi) will be visiting the Premises. Then, within 2 hours of the email, Mr. Kazumi Ikarashi presented himself at the gates of the Prime Tower. It is explained that the Wicket Gate was opened for him and he entered through it. The Boom Barriers which are situated immediately after main gate were closed. Resultantly, Mr. Kazumi Ikarashi stopped before the Boom Barrier and ascertained that Prime Tower was indeed closed. Then after 5 mins, Mr. Kazumi Ikarashi left Prime Tower. 44. The Petitioner/Applicant has wrongly alleged that physical force was used by Respondent Nos. 2 to 8. They never filed a police complaint. This in itself shows that the claims of use of physical force are baseless, frivolous, unsubstantiated and should be disregarded by this Tribunal. 45. We have heard the Ld. Counsels for both the parties and perused the averments made in the application, rejoinder and the written submissions filed by the respective parties as well as the decisions upon which the parties have placed reliance. 46. Since, Ld. Counsels for the parties in the course of hearing have raised all the points mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y breach of any terms and conditions, the Licensee be adjusted insolvent, it shall be lawful for the licensor notwithstanding any earlier waiver in respect of the same to enter the said portion of space and immediately thereupon revoke this agreement without any prejudice to recover any due or claim antecedent of the terms and conditions herein contained . 51. Further, the term and condition is That if the conditions mentioned herein before is violated by the Licensee, the Licensor shall have right to cancel this agreement and evict the Licensee provided that any such violation is not cured by the Licensee within one month of receipt of prior written notice from the licensor requiring the licensee to cure such violation . 52. Apart from these two conditions, there are other conditions also but since these two conditions are relevant to consider the submissions made on behalf of the parties, we have quoted only these two conditions herein above. 53. When we consider these two conditions together, we notice that if the service charge or any part thereon shall remain unpaid for more than one month, it gives licensor/respondent no. 4 the right to revoke the agreement. It wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we consider the contention of the applicant on the point of set off, and we are of the considered view that a defence of set off can be claimed by the defendant in a suit for the recovery of money and set off must be a certain sum but herein the case in hand, of course by filing the written submissions, the respondent claimed set off of the service charge but nowhere it is mentioned in the application that any suit for the recovery of money is pending in which the applicant has claimed set off. Of course, amount of claim is certain. Therefore, in our considered view the first condition is lacking. Hence defense of set off claim by the applicant is not liable to be accepted. 57. For the reason discussed above, we further notice that service charge for more than one month has become due and payable, therefore, it comes under the purview of breach of terms and conditions of the service facility agreement, on the basis of which, the respondent no. 1 company had/has been using the premises of respondent no. 4. Therefore, we agree with the submissions of respondent no. 4 that the matter alleged in the application is essentially civil contractual disputes under the agreement. 58. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider the case in hand, we notice that agreement was also subject matter of consideration in that proceeding too. Similarly, herein also the grievance is based on the agreement and the violation of that would be decided by the competent court and not under the proceeding under Section 241-242 of the Companies Act, 2013. 61. Arbitration Proceedings are also between the respondent no. 1 and 4 and the applicant is not a party to the same. 62. It is also true that the agreement was between the respondent no. 1 and 4. The applicant is of course the shareholder but since the dispute is in respect of the payment of rent on the basis of the said agreement which was entered between the respondent no. 1 and 4, we are of the considered view that the aggrieved person would be the respondent no. 1 and not the applicant, who is only the individual shareholder of the respondent no. 1 Company. 63. Since the applicant in its application has admitted that there is a rent dispute due to which this situation arose. Admittedly, while exercising powers under Section 241-242 of the Companies Act, 2013, this Tribunal is not empowered to decide the rent issue. Therefore, the petitioner is well advi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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