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TMI Blog2019 (5) TMI 1874X X X X Extracts X X X X X X X X Extracts X X X X ..... .2012 as null and void being oppressive and act of mismanagement. c) Pass an order declaring transfer of equity shares held by petitioners in favor of respondent No. 14 and 15 on 20.11.2011 being contrary to provisions of act, fraudulent, oppressive, manipulative as null and void and consequently directions be issued to rectify the register of members to incorporate names of petitioners by deleting the name of Respondent No. 14 and 15. d) Pass on order to declare null and void all the resolutions passed by board or members of respondent No. 1 company against the interest of petitioners being harsh, burdensome, prejudicial and oppressive. e) Pass on order directing to hold extra ordinary general body meeting to appoint board of directors by superseding the present board members. f) Pass an order directing to hold pending annual general meetings after causing completion of financials and audit thereof. g) Injunction restraining the respondents from altering or changing in any manner the shareholding of and in the respondent No. 1 company. h) An order for appointment of inspector or inspectors or any other competent person or persons as inspectors to investigate the affair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Respondent approached the petitioner to purchase the entire shareholding and on agreed terms the petitioners agreed to sell their 100% shareholding in the company for a sum or Rs. 24 crores and an amount of Rs. 1,08,98,000/- was paid as Earnest Money Deposit (EMD) through bank. The board of the Company was also reconstituted and R2 and R6 were appointed as directors of the Company on 23.06.2011 and the petitioners vacated the directorship on 22.11.2011. The control of the company was handed over to the R2 and R11, however, the equity shares were continued with the petitioners. * In order to get control over the board of directors of the Company, the R2 fraudulently transferred the shares of the petitioners to R14 and R15 on 20.11.2011, appointed the R3 as additional director of the company on 01.03.2012, appointed 12 directors on 23.10.2012 issued 39,800 shares to himself on 25.10.2012 without any justification of requirement of funds to the company, increased authorized capital from Rs. 5,00,000/- to Rs. 30,00,000/- on 26.10.2012, issued 2,50,000 equity shares to himself on 24.11.2012 and also failed to comply with filing of statutory returns after the annual return for the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er relief as it deems fit and proper in the circumstances of the case; (iv) To grant any relief or reliefs' as this Hon'ble Court deems fit and proper, in the circumstances of the case, in the interest of justice. * All the Respondents were set ex-parte in the said civil suit and the civil court framed the issues. The petitioners have also filed their evidences by way of affidavit in the said suit. * Before the appointment of R2 as director, the property of the Company was charged to Punjab National Bank as collateral security by way of conveyance deed in favour of the Company, however, the same was cancelled by the petitioners. The R1 company is disputing the same before DRT Hyderabad, therefore, the matter is sub-judice. * The Companies Act, 2013 was notified with effect from 29.08.2013 and the provisions of section 430 and 434 of the Act, 2013 were notified w.e.f. 01.06.2016. Section 430 envisages that no civil court has jurisdiction over the matter vested with the NCLT and the provision section 434 of the Act, 2013 envisages the transfer of pending matters. * Due to the statutory amendments, the City Civil Court vide its order dated 27.11.2017 returned the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 169 of the Act, 1956 of the petitioners by virtue of transfer of shares in the board meeting held on 22.11.2011 and the entire sale consideration was paid to the petitioners which is evident from the letter dated 17.09.2012 issued by R14 to the petitioners. * Subsequently the Company allotted the balance shares of 39,800 to the R2 and thereafter increased the authorized capital from Rs. 5,00,000/- to Rs. 30,00,000/- and allotted 2,50,000 equity shares of Rs. 10/- each amounting to Rs. 25,00,000/- to the R2 on 24.10.2012. * The petitioners fraudulently cancelled the Deed of Relinquishment dated 03.12.2011 by way of Deed of Cancellation dated 26.06.2013 by impersonating the Company to mala fidely give the impression that Mr. P.V.S. Sarma is authorized to represent the Company. Upon came to knowledge of cancellation deed, the Company has filed a complaint with District Registrar to recall and nullify the same. * During the year 2011-12, the R14 Company sustained huge business losses to an extent of Rs. 1000 crores, consequently, the PNB classified the account as NPA and issued a notice under SARFAESI Act, 2002 calling upon the R14, the Company and the 1st petitioner to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been substantiated by material facts or papers. * The petitioners also failed miserably to explain the delay in filing the present petition. It is the case of the petitioner that they have entered into an arrangement for sale of their entire shareholding in the year 2008 and they have received only the EMD of Rs. 1,08,98,000/- in the year 2010, therefore the petitioners are bound to file the present application in the year 2013 as per the provision of section 113 of the Limitation Act, whereas they have filed the present petition in the year 2018 after lapse of 6 years, hence, the petition is barred by limitation. * It is not true that they arrangement was for Rs. 24 cores for the entire shares whereas it is only Rs. 1,08,98,000/- for the entire shares which was duly paid through RTGS and it is also evident that they petitioners have not made any whisper about the EMD in the civil suit filed in OS No. 183 of 2012. The petitioners have not raised the issue of the shares for the balance original authorized capital and also the further 2,50,000 shares to R2 either in the petition or in the civil suit. In the event, the petitioners were very much below the 10% threshold of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the officials of the registration department. * A PIL has also been filed against him and it is being investigated by the Central Bureau of Investigation and the case is pending before the Hon'ble High Court. * Shri. P. V. S. Sarma has also filed a WP in 6523 of 2014 against PNB for the action taken under SARFEASI Act in respect of property admeasuring 48 guntas and the Hon'ble High Court directed them to file appeal before DRT. A Securitization Appeal No. 409 of 2014 was also filed before DRT against the action of SARFAESI Act and the same was dismissed for non-prosecution and no appeal is filed against the said order. 5. The learned Counsel for the Respondent 1 and 2 while reiterating the averments made in the counter statement submitted that the petitioners have no locus standi to file the petition and the petition is also barred by limitation. Therefore, he has prayed to dismiss the petition. The learned Counsel for the Respondent relied on following case laws in support of his submissions; * Advansys ((India) Private Limited & others VGs Ponds Investments Limited and others (Bombay High Court) - wherein it is held that applicant u/s 111 of the Act (1956 Act) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Ramesh Bhajanlal Thakur Vs. Sea Side Hotel Private Limited wherein it is held that the settle principle of law in proceedings under section 397 and 398 of the Act, is that the relief sought should be put an end to the acts of oppression/mismanagement and no for any oblique purpose. * (1991) 70 Comp Case 211 (Kar) - In the matter of Srikanta Datta Narasimharaja Wadiyar Vs. Sri Venkateswara Real Estate Enterprises Private Limited - wherein it is held that it is well settled that the relief under section 397 and 398 of the Act is an equitable relief which is entirely left to the discretion of the company court and therefore discretionary character of the court's jurisdiction, the requirement of good faith on the part of the petitioner is necessary. The question of good faith has to be tested by the conduct of the petitioner as reflected not only in the proceedings before the company court but also in parallel proceedings in civil courts and in other civil litigations in other courts. * (2004) 52 SCL 488 - In the matter of K.R. S. Mani Vs. Anugragha Jewelers Limited - wherein it is held that the single judge rightly held that the Company Law Board had not decided the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company. * After passing the interim directions on 17.05.2018, the R2 has filed forged, fabricated and ante dated annual returns and audited balance sheets for the financial years ending 31.03.2012 to 31.03.2017 with ROC on 18.05.2018 by concealing annual return and audited balance sheet for the year ended 31.03.2011. * As per the annual returns the R14 and R15 claimed to be the members of the Company as at 29.09.2012 whereas admittedly as 17.09.2012 no transfer deed was executed by the petitioners and the R14 and R15 only requested the petitioners to execute the transfer deed only vide their letter dated 17.09.2012. * As per directions of the Tribunal the original share certificates were produced before the Tribunal on 18.05.2018. The R15 adopted the counter of the R1 and R2 who is the transferee of the equity shares of the petitioner No. 2 and he has failed to bring on record any transfer deed. * The share certificate produced by the Respondent No. 15 is forged and fabricated document and as per the copy of the share certificate it is stated that it was issued by the Company to R15 against the subscription of capital which was neither called nor subscribed by the R15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is non germane to the issue raised in the instant petition. * The Respondents by referring non germane issues are attempting to divert attention of the Tribunal from the oppressive and prejudicial acts committed by the Respondents in the management and affairs of the Company. * The respondents for their collateral purposes leveled false and frivolous allegations against Mr. P.V.S. Sarma which no connection to the issues raised in the petition. 9. The learned Counsel for the petitioners while reiterating the averments made in the petition as well as in the rejoinder submitted that the petitioner have not executed any share transfer deeds transferring their entire shares to the R14 and R15 and the said respondents have also not produced such transfer deeds executed by the petitioners. Further, the original share certificates issued by the company has also been produced before the Tribunal as such the petitioners are only the shareholders of the Company. The part payment made to the petitioner does not give the status of the shareholders to the R14 and R15, therefore, he prayed to allow the petition. The learned Counsel for the petitioners relied on the following case laws in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs would have to be transferred to the NCLT. * (2202) Vol. 109 CC 732 - In the matter of Deepak C. Shriram Vs. General Sales Limited - wherein it is held that if the effect of the single act has permanent or continuous effect and it is alleged to be an act of oppression then the same can be agitated in a proceeding under section 397. * (2015 SCC Online CLB 91) - In the matter of Narrotam Singh Vs. Notam India Private Limited wherein it is held that it is need not to be reiterated here that a civil court adjudicates the validity of an acat on the anvil of legality of an act, but whereas the process of adjudication under section 397 and 398 of the Act is different, it will perceive the issue on the anvil or equity, at time though act is legal, still it may be held not right, at time thought act is not in compliance of any provisions of law, still it may be held right, it all depends on whether by this act any member or company put to prejudice or not. * (2012) SCC Online CLB 66 - In the matter of G. R Singhal and others Vs. Taurus Englobe Limited - wherein it is held that admittedly even though the CP No. 31/2007 was disposed off in terms of the MFS by order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies under the India law, Existence of right to issue shares to one director may technically be there, but the question whether the right has been exercised bona fide and in the interest of the company has to be considered in the fact of each case and it is found that it is not so such allotment is liable to set side. * (1974) AC 821 - in the matter of Howard Smith Limited Vas Ampol Petroleum Limited and others (Privy Council) wherein it is held that their Lordships therefore agree entirely with the conclusion of Street J that the power to issue and allot shares was improperly exercised by the issued of shares to Howard Smith. It was not disputed that an action to set aside the allotment and for rectification of the register was properly brought by Ampol as plaintiff. 10. In view of his above submissions, the learned Counsel for the petitioners prayed for allowing the petition. 11. Heard the parties and perused the pleadings, documents and written submission of the petitioners. 12. The petitioners contended that they have not transferred then-entire shares to the R14 and R15, however, there was an arrangement of transfer of shares for a total consideration of Rs. 24 crores wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal order was passed on 27.11.2017. Since this petition is filed in the year 2018, the petition is not barred by limitation. Therefore, the issue (1) is answered in favour of Petitioners. 15. With regard to the issue of transfer of shares, it is on record that one Mr. Y. V. Prasad (P2) and M/s. Gold Stone Exports Private Limited were the subscribers to the memorandum of association. It is also on record that M/s. Gold Stone Exports Private Limited had transferred its entire share capital including the shares allotted after incorporation to the PI on 13.11.2007 and the copies of share certificates were filed before this Tribunal. (Page No. 64 to 67 in rejoinder filed by the Respondents (the Petitioners) in CA. No. 163 of 2018 and it was not disputed by the Respondents. The names of the petitioners alone mentioned in the Annual Return for the year ending 31.03.2010. Therefore, there is no doubt about the shareholding of the petitioners in the Company. However, the question is whether both the petitioners have transferred their shares to R14 and R15 or not. Both the parties have agreed that there was an arrangement of transfer of shares to the R14 and R15 and according to the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of Petitioners. 16. With regard to the issue of appointment of directors, it is a fact that the board of the directors can appoint additional directors. However, their directorship should be confirmed in the next AGM. It is held that the petitioners are only the shareholders, in case, the appointment of directors and their confirmation is brought before the AGM that comprise of the Petitioner's, there was likely hood of rejecting the same by the petitioners. It is also on record that the balance sheet and the annual Return except for the year 2011 were filed in the year 2018 and therefore it creates a suspicion as to whether the AGMs have been conducted properly. In view of the above, I am of the opinion that the appointment of directors is made in violation of the provisions of the Act, Hence, their appointment is illegal, null and void. Therefore, the issue (3) is answered in favour of Petitioners. 17. With regard to increase of authorized capital, it is on record that the same was done behind back of the Petitioners. The resolution to increase the share capital was passed without the participation of the petitioners, who are declared as shareholders of the Company, Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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