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TMI Blog2021 (6) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Hon ble Supreme Court. The Learned Counsel for the Respondent submitted that as per the decisions of the Hon ble Supreme Court even where a case of Oppression has not been made the Jurisdiction of Erstwhile Company Law Board to pass any other or further order in the interest of the Company, if it is of the opinion that the same would protect the interest of the Company, it would not be powerless. It is apt to refer to the provisions of Companies Act, 1956 and Section 397,398 of the Companies Act, 1956 which dealt with the Oppression and Mismanagement in the affairs of the Company and the Jurisdiction Vests with the then the Company Law Board. The Company Law Board had wide powers under Section 402 of 1956 Act to give directions in the interest of the company and its shareholders. The New Companies Act, 2013 Section 241 provides a provision to make an Application to NCLT for relief in the case of Oppression and Mismanagement - the Judgments of the Hon ble Supreme Court with respect to Section 397,398 are squarely applicable to the provisions of Section 241 and 242 of the Companies Act, 2013 with respect to the Oppression and Mismanagement. Reliance placed in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition filed by the Appellants herein by providing reasonable exit from the Company firstly to the Appellants and thereafter to the Respondents group by appointing the Chartered Accountant to value the shares of the Company. The operative portion of the order is at paragraph 20,21,24,25,26 reproduced here at: 20. Therefore, taking into consideration of the paramount interest of the company and the mind-set of the petitioners, I feel it proper to give reasonable exit from the company first to the Petitioners, thereafter to the Respondent group. 21. Accordingly, I appoint Mr. V. Srinivas, Chartered Accountant (H.No. 6-3-600/3, C1, 3rd Floor, GiriSikhara Apartments, Hill Top Colony, ErramManzil, Hyderabad 500082; Mobile No. 9396233928; Land Line 040- 40164622) to value the shares of the Company as per the latest Audited Balance Sheets filed by the Company with Registrar of Companies and I direct R2 and his group to purchase the entire shares of the petitioner group for the value per share arrived at by the Chartered Accountant within three months from the date of submissions of Valuation Report by the Chartered Accountant. If the Respondents group fails to purchase the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Director of the R-1 Company and the Appellants were under the bona fide impression that the R-2 will take care of the Administration and Finance to the best interest of all the brothers. However, the R-2 betrayed by manipulating illegal and fraudulent filings for a period in excess of ten years. 7. The Learned Counsel further submitted that there are several Acts of Oppression and Mismanagement committed by the R-2 to 8 in the management of the R-1 Company. At Paragraph 9 of the Appeal the details of Acts of Oppression and Mismanagement on the part of R-2 and others have been narrated. 8. From the perusal of the Acts it is alleged that there are fraudulent filing of documents by the R-2, change in the constitution of the Board of Directors in the R-1 Company. R-4 has been inducted as a Director of the R-1 Company without conducting any Board Meeting on 31.08.2017. 9. No, notices of the board meetings were issued to the Appellant No. 1, shares were illegally allotted to the R- 4 5 by fabricating the Board and the General Meeting Minutes in violation of Section 101(3) of the Companies Act, 2013, indulging in fictitious purchase of coal and no coal was required by the R-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lack of quorum. 17. Further, the Appellants have not received notices for the Board Meetings and EOGM/AGM and they have not attended the Board Meetings dated 10.06.2017 or the EOGM dated 10.07.2017. 18. The Learned Counsel submitted that the Respondents have not issued notices for the Board Meetings and allotted shares to R- 4 5 by way of Private Placement. 19. Further, it is alleged that the R-2 siphoned the funds of the R-1 Company with respect to purchase of coal and made payments for the same. And details have been given at paragraph hh, a, b, c, d of pages 43,44 45 of the Appeal Paper Book . 20. The Learned Counsel for the Appellant submitted that the Hon ble NCLT erred in directing the Appellants to exit from the Company without any such prayer sought for by the Appellants and without dealing with the allegations made by the Appellants in the Company Petition. Further, the Hon ble NCLT did not deal with the I.A s filed by the Appellants. The Hon ble NCLT failed to discuss the several Judgments cited by the Appellants before the Hon ble NCLT. 21. The Learned Counsel further submitted that the Hon ble NCLT without dealing with the matter on merits and withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same house and they were always aware of all the meetings held in the Company. With regard to the allotment of shares to the 4th 5thRespondent on 27.03.2015. It is submitted that the first Appellant authenticated the Balance sheet of the R-1 Company for the year ending 31.03.2016 and he was aware of its contents and the allotment of shares made to the 4th 5thRespondents herein. 27. Further, it is submitted that the second Appellant was not residing in Hyderabad where the plant and Registered Office of the first Respondent Company is located and the Second Appellant never played any role whatsoever in the day to day affairs of the first Respondent Company. It is pertinent to mention that in place of Second Appellant Mr. M. Venkata Chaitanya was made as a Director and Mr. M. Venkata Chaitanya is the son of the Appellant. It is pertinent to note that the Appellants and the second Respondent were being paid the monthly salary and even the wives of the Appellant and the Second Respondent were also paid monthly salary. 28. It is an admitted fact that the Second Respondent and his family Members hold 45.81% stake in the R-1 Company and the Appellants hold only 21.54% stake i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indulged in various illegal activities and siphoned off the funds of R-1 Company through two proprietorship concerns in the name of National Enterprises and Ashapura Enterprises by placing orders for supply of materials from R-1 Company without making the payments to the R-1 Company. It is also stated that the sum of ₹ 19,38,186/- is due from Ashapura Enterprise since February, 2018 in respect of material supplied by the first Respondent Company. The third Appellant had neglected and defaulted in paying the amounts due to R-1 Company. 29. The Hon ble NCLT passed the directions to provide for reasonable exit of the Appellants as the Appellants themselves had demanded the amount of ₹ 7.5 Crores for the entire stake in the Company. The Hon ble NCLT also recorded the said fact in the Judgment. The Learned Counsel further submitted that the Hon ble NCLT passed the directions keeping in mind the ratio of the decisions of the Hon ble Supreme Court where the Hon ble Supreme Court upheld the decisions of Hon ble High Court and the Erstwhile Company Law Board that one of the group may exit the Company in view of the complete deadlock situation and stale-mate in the day to day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the R-1 Company that the Respondents have hold the Board and General Meetings without issuing notices to the Appellants. Further, the Respondents have allotted shares and fabricated the minutes of the meetings and siphoned off the funds. On the other hand, the Respondents also alleged that the Appellant doing the competitive business and the Appellants are aware of the allotment of shares and the Appellants also aware with regard to the Board and General Meetings and in view of the closely held family Company the notices sometimes have been dispensed with. 37. We are of the view that the Learned NCLT ought to have discussed each and every allegations made by the parties and should have framed issues and dealt the same in sequence wise. Further, it was also alleged that the Appellants have filed several I.A s and Learned NCLT has not dealt the I.A s on its merits. We have perused paragraph 25 of the impugned order whereby the Learned NCLT of the view: Further in view of the orders I feel it is not proper to go into merits of each and every I.A filed by the Petitioner in spite of resistance by way of filing counter in all the IA s denying the allegations, for the reasons u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the first Appellant has no interest whatsoever in the R-1 Company. We are of the view that since there are allegations and counter allegation, the Learned NCLT ought to have meticulously examined each and every allegation and on the basis of supporting documents/evidence ought to have decided the matter on its merit. 44. The Appellants in Volume- II at page 350,351 in their Written Submissions filed before the Learned NCLT have categorically given the index of the IA s, Particulars and Status, and its details have been given. As per the impugned order it is on record that the IA s have not been dealt and disposed off. It is seen that IA 120 and 121 of 2018 are allowed the said IA s were filed with respect to amendment to the Company Petition and inspection of statutory records. The IA 212, 278, 327, 328, 370 of 2018 the status of these IA s shown that these IA s have been argued on 29.11.2018 along with the CP. The IA 415 of 2018 status shows that the time was granted to the Appellant to get information from Airlines with regard to the confirmation of travel. Further, IA 481,482 of 2018 the Status shows that the Respondent on 31.10.2018 submitted that they are not filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Section 241 and 242 of the Companies Act, 2013 with respect to the Oppression and Mismanagement. 49. The Learned Counsel for the Respondent relied upon the Judgment of the Hon ble Supreme Court in Needle Industry (India) Ltd. vs. Needle Industry Newey (India) Holding Ltd. [1981] 3 SCR 698. It is held as under: 172. Even though the Company petition fails and the appeals succeed out on the finding that the Holding Company has failed to make out a case of Oppression, the court is not powerless to do substantial justice between the parties; and place them, as nearly as it may, in the same position in which they would have been, if the meeting of May 2 were held in accordance with law. (emphasis supplied) 50. The Learned Counsel also relied upon the Judgment of the Hon ble Supreme Court in the matter of Sangramsinh P. Gaekwad Ors. Vs. Shantadevi P. Gaekwad (Dead) through LRs. Ors. (2005) 11 SCC 314. held as under: 181. The jurisdiction of the court to grant appropriate relief under Section 397 of the Companies Act indisputably is of wide amplitude. It is also beyond any controversy that the court while exercising its discretion is not bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act empower the Company Law Board to remove oppression and mismanagement. If the consequences of refusal to exercise jurisdiction would lead to a total chaos or mismanagement of the company, would still the Company Law Board be powerless to pass appropriate orders is the question. If a literal interpretation to the provisions of Section 397 or 398 is taken recourse to, may be that would be the consequence. But jurisdiction of the Company Law Board having been couched in wide terms and as diverse reliefs can be granted by it to keep the company functioning, is it not desirable to pass an order which for all intent and purport would be beneficial to the company itself and the majority of the members? A court of law can hardly satisfy all the litigants before it. This, however, by itself would not mean that the Company Law Board would refuse to exercise its jurisdiction, although the statue confers such a power on it. (emphasis supplied) 52. From bare perusal of the above Judgments of the Hon ble Apex Court there is no doubt that the then Company Law Board was not powerless to pass orders even though the case of oppression is not made out. We are bound by the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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