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TMI Blog2021 (8) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... pany s formation documents i.e. AoA and MoA . It is the general practice that first the JV agreement is finalised then within a reasonable period the same is appropriately incorporated in AoA and MoA - Non-resident investor believed the Appellant group and left the management of the Company to the Appellant Group for the 3 years plus period and at a later date in 2017/2018 when they generated the doubt and wish to put its representative as Board Member based upon their investments, the Appellant group started playing truant. As a result of which the Respondent approached the Tribunal with their grievance for convening EGM under the provisions of the Act and the same has been permitted by the Tribunal in its impugned order dated 26.07.2019 by keeping extra precautions of appointing Observer and asking a permanent invitee to the meeting of the Board from the nationalised bank i.e. Union Bank of India which has sanctioned the credit facility to the Company. The impugned order is in conformity with terms of the provisions of the Act and the law laid down on the subject. There is also no jurisdictional error and violation of natural justice - Appeal dismissed. - Company Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as permitted the petitioners at the Tribunal LLMT to convene the EGM themselves in another 45 days if the Board of Director of SHFP does not proceed to call for the EGM . The Tribunal has also appointed an advocate as an Observer to the above said EGM and has further added that a nominee from the secured creditors of the Respondent company at the Tribunal, SHFP, preferably from a nationalised bank Union Bank of India to be a permanent invitee to the meetings of the Board of Directors/ General meetings and has directed that both of them shall submit an independent report to the Tribunal. This has been done to rule out any possibility of oppression with the minority shareholders of the company in the management of the Respondent Company SHFP. The Petition was filed under Sections 241- 246, Section 98(1) and Section 100 of the Act asking for related reliefs at the Tribunal. 4. The counsel for the Appellant commenced his submission first from Company Appeal (AT) No.263 of 2019. The Appellant group is comprising of the Appellant SBPL , Mr. Subhash Chawra and Mr. Hiren Chawra are promoters of SHFP are holders of 34% of shareholding in the Respondent No.2 Company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case is the JVA. They have treated the impugned order as oppressive and prejudiced to the interest of the Respondent No.- SHFP . The Appellant through Company Appeal (AT) 262 of 2019 where the SHFP who is the Appellant has submitted the followings: a. The appellant is the business of manufacturing microporus Hygiene Films that is used in Hygiene Industry for producing Baby Diapers, Sanitary Napkins and Surgical Pads etc. This company was incorporated on 11.02.2012 with an authorised share capital of ₹ 5,00,000 having 50,000 shares of ₹ 10/- per share and the Appellant group is the first Director of this Company. As per the JV Agreement, both the groups i.e. the Appellants Mr. SubhasChawra and Hiren Chawra and the Respondents- non-resident investor, both were entitled for two directors only. LLMT has alleged that the JVA was revoked vide its letter dated 18.11.2016 when the other party did not subscribe to 50 % shareholding in the Company SHFP and thereby the LLMT has become 66% shareholder and is entitle to appoint 3 Directors on the Board of the Company . Due to the financial conditions the Appellant group could not subscribe upto 50 % shareholding. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank of India advised the R2 to ensure that the JVA is incorporated in article of association of the company failing with the company will attract panel interest of 1% per annum and maximum 2% per annum till compliance of the condition and the fresh term loan proposal will not be considered 18.03.2016 That the R1 vide email addressed to the director of the R2 sought to appointment of its nominees Mr Jagdish Shah and Mr. HileshDevshi Shah as Directors on the Boards of R2. 21.06.2016 The R2 replied and not denied appointing the two nominees of R1 on the Board, requested the R1 to first take steps for updating of AoA in accordance with the JVA as agreed. 07.10.2016 Union Bank of India stated that the appellants should increase the stake in R2 to 50% and JVA shall be incorporated in Articles of the R2. 18.11.2016 28.12.2016 Legal notice from R1 to the Directors of R2 for appointing three nominee Directors on the Board. The notice alleged that due to failure of the Appellant to subscribe to 50% shareholding the JVA was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attempting to arrive at an amicable settlement whereby the Appellant would purchase the entire share capital of R1. 09.04.2018 Affidavit in Rejoinder by the R1 to the Company Petition 02.05.2018 The R1 requested the Bank that it should not restrict the disbursal of credit within the sanctioned limit due to the frivolous litigation instituted by R1 since non-availability of creditor was hampering the growth of the Company 20.06.2018 NCLT allowed R1 to amend/convert its application into a petition under Section 241 of the Act 16.07.2018 The R1 during the pendency of the Company Petition, moved IA No. 47 of 2018 seeking amendment of the main CP so as to incorporate pleadings under section 241-242 of the Act. The NCLT allowed the R1 to file an amended petition. 20.07.2018 R1 filed the amended petition under section 241 of the Act. The R2 filed reply to the amended petition 14.08.2018 The partners of Appellant LLP namely Mr. SubhasChawra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be nominated by SBPL with consent of R1. Both parties had to invest 50% each in the equity of the Company, however the Appellant SBPL LLP failed to do so, as it did not had requisite funds. 2013-2014 Consequently, R1 had to invest upto ₹ 12.27 Crores and was issued 66% shareholding against share capital infused by it whereas SBPL / Chawra Group was allotted 34% shareholding as per share capital infused by it Current shareholding structure SubhashChawra 5000 Hiren Chawra 5000 Loganmoy Limited 1,22,74,233(R1) SBPL Polymers LLP 63,13,016 -- o To meet financial requirements of Company, Appellant SBPL LLP infused unsecured loan in the Company furnished collateralsecurities / personal guarantee o R1 also gave collateral security against Bank loan and personal Guarantee 21.11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany reiterating request made in 18.11.2016 and called upon Company to appoint the persons specified therein as directors 25. 25.01.2017 Company replied to the notice dated 18.11.2016 03.02.2017 27.02.2017 Letters sent by R1 to UBI for releasing collateral security (property Vila No. 524a, Aambey Valley, Gut No.93, Village Deoghar, Mulshi, Pune) submitted in its behalf for availing financial assistance for the Company. 06.04.2017 UBI replied to R1 s letter stating that collateral security cannot be released as it is mortgaged to UBI unless credit facilities availed by the company are repaid alternate security offered 31.05.2017 Requisition notice sent by R1/u/sec 100(2) of the Companies Act, 2013 to call an EGM of Members: -to consider appointment of nominee Directors on Board of Company - to consider matters of non-compliance of the provision of the Companies Act 20.12.2017 Requisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.09.2018 R1 replied to arbitration notice. Neither section 8 before the NCLT nor section 11 application before the High court is filed. 26.07.2019 NCLT vide its impugned order allowed the R1 s petition. Companies notice dated 12.01.2018 was quashed being bad in law and R1 was permitted hold EGM. It was also held that Company s act of modifying agenda and changing date of EGM is contrary to law. NCLT also appointed observer for the EGM. 26.09.2019 This Hon ble Tribunal while issuing notice directed as under: During the pendency of the Appeal, if any Extraordinary General Meeting is conducted in terms of the impugned order dated 26.07.2019 of the Tribunal, it shall be subject to the decision of the Appeal. However, if any decision is taken to appoint any director(s) not more than two directors be inducted in the Board pursuant to such decision, until further order 24.10.2019 R1 issued requisition notice for EGM to eb held on 27.11.2019 for appointment of JagdishD.Shah HileshD.Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the majority shareholders and also minority shareholders can mismanage the company. The learned Sr. Counsel have also submitted that the SBPL is a limited liability partnership of Mr. SubhasChawra and Hiren Chawra and they are the only two partners. The Tribunal has given opportunity to the Company SHFP to present its submission before the Tribunal and the company was represented by these two partners. Hence, there is no violation of principle of natural justice nor there is any prejudice caused to the SBPL. As far as joint venture is concerned, the investment was to be made by the both Appellants groups and the Respondents by 50% investment by Board. Since, the Appellants group could not bring in investment as contemplated for joint venture, joint venture never took off. Since the foundation of JVA on equal investment was not complied by the Appellant group, the Respondent group has to make additional investments and JV agreement was never complied with also since 2013 JV Agreement was never incorporated in the company formation document as the Appellant group did not bring the investment. The Article of Association(AOA) Memorandum of Association (MoA) shall prevail over sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments remained inconclusive. In both the appeals, lead appeal will be Company Appeal (AT) No.263/2019. Let the matter be fixed for further hearing on 4th December, 2020 at 2 PM. b. The Appellant group was not transparent in working of SHFP, so called JV company, where the Respondents are non-resident investors and after three / four years working when the Respondents generated a doubts on non-filing statutory returns under the Act and not getting proper accounts, they wish to interfere into the company which any investor will do, if they have invested the fund. c. From 2013-17, the Appellant group who was in the management of so-called JV Company failed to carry the JV Agreement in the AoA and MoA and thereby they lose the right to enforce the JV Agreement into the company s formation documents i.e. AoA and MoA . It is the general practice that first the JV agreement is finalised then within a reasonable period the same is appropriately incorporated in AoA and MoA . d. Non-resident investor believed the Appellant group and left the management of the Company to the Appellant Group for the 3 years plus period and at a later date in 2017/2018 when they generated t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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