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TMI Blog2022 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... way. This establishes that although time is a significant concept in such transaction but cannot be a condition which cannot be altered with mutual consent of the concerned parties - This Appellate Tribunal also do not consider above action of extension of the LSD especially without consent of the Appellants as act of oppression of minority shareholders (the Appellants) by the majority shareholders. Looking into all these aspects and implication of extension of the LSD impacting favourably all stakeholders, the implementation of the ATA and revival of the company, this Appellate Tribunal do not find any error in the impugned order. Whether, the Appellants as minority shareholder were oppressed by the majority shareholder in the present case? - HELD THAT:- This Appellate Tribunal is not inclined to accept the arguments of the Appellants regarding their allegations of oppressions especially when the plant itself was shut down. There was no alternative except liquidation or revival of company through other modes including sale of assets to other entity who could revive the company. It is also not out of context to take into account that prima-facie payment of dues to stakehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This Tribunal, is of the considered opinion that there is no error, in the impugned order dated 11.02.2020, passed by the Tribunal and the Instant Appeal, is devoid of merits. Consequently, the Appeal fails. Appeal dismissed. - TA (AT) No. 11 of 2021 Company Appeal (AT) No. 108 of 2020 - - - Dated:- 30-11-2022 - [Justice M. Venugopal] Member (Judicial) And [Naresh Salecha] Member (Technical) For the Appellants : Mr. R.V. Yogesh, Advocate For the Respondents : Mr. Abhijeet Sinha, Advocate for R1, R3 R6. Mr. Sanjay Kishore, Advocate for R2, R4 R5. JUDGMENT (Virtual Mode) NARESH SALECHA, MEMBER (TECHNICAL) The present `Appeal is filed against the impugned order dated 11.02.2020, passed in CP No. 5/241/HDB/2017 by the Tribunal (National Company Law Tribunal, Hyderabad Bench), whereby, the Tribunal dismissed the Petition filed under Section 241 of the Companies Act, 2013. Brief Facts: 2. Mr. Vamsidhar Maddipatla is the 1st Appellant and Dr. Ibrahimpatnam Krishna is the 2nd Appellant in the present appeal before this Appellate Tribunal are the investors holding 13.32% shares each totalling to 26.64% of shares in the 1st Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd making time as the essence of the agreement. Clause 6.2.1 defines Long Stop Date (in short LSD ). The LSD could have been extended subject to mutual consents of all the parties to the ATA . 8. It is the case of the Appellants that in dis-regard to provisions of the ATA , the Respondents in connivance with each other fraudulently executed three sale deeds pertaining to three properties on 03.11.2016 which allegedly were antedated by the Respondents on 01.11.2016 to overcome the objections made by the Appellants on 01.11.2016. 9. It is the case of the Appellants that they have been subjected to oppressions by the Respondents on various occasions and aggrieved by the act of operations by the Respondents , the Appellants filed petition under Section 241 of the Companies Act, 2013 before the Tribunal which was dismissed for default by the on 09.02.2017. This order was challenged by the Appellant which was again dismissed by the Tribunal on 11.09.2017 and aggrieved by this the Appellant has preferred an appeal before this Appellate Tribunal which was upheld in Company Appeal (AT) No. 364 of 2017 dated 14.11.2017 and ordered for restoration of comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and such other documents as may be found necessary, modify or amend the document so executed. The said resolution also authorized Mr. Sanjeev Baba to do all such agreement, deeds and things necessary, expedient or desirable for giving effect to the said resolution. Admittedly, the EGM was attended by the Chairman and two directors of the 1st Respondent company along with both the Appellants . 13. The Learned Counsel for the Appellants brought out that in pursuant to above Board Authorisation, the ATA was signed on 24.06.2016 between 1st Respondent (company), 2nd Respondent (purchaser of the company) and Shareholders named in the Schedule 1 of the ATA (total 13 shareholder listed therein) including the Appellants . 14. The Learned Counsel for the Appellants further brought out that the ATA contained specific terms especially regarding clause which defined the condition precedents in Clause 6.2.1 and emphasise the relevance of clauses of the ATA which were sacrosanct and recognized time to be essence of the contract which could be extended mutually as agreed between the parties in writing. 15. The Learned Counsel for the Appellants mentioned that all these cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 stated that the present appeal is not maintainable and is an attempt to get contractual relief under the pretext of oppression application filed under Section 241 242 of the Companies Act, 2013 . 22. The Learned Counsel for the Respondent Nos. 1, 3 6 stated that subsequent to signing of the SPSHA on 27.01.2014, the Appellants were appointed as Director and CEO and during this period financial health of 1st Respondent company was adversely affected which resulted in shutting down the plant in May, 2015. The Learned Counsel for the Respondent Nos. 1, 3 6 further stated that to avoid the Appellants personal implications, they resigned from Board positions and therefore, the remaining Directors had to take necessary steps to revive of the company and finally decided to sale the assets of the 1st Respondent company after passing the special resolution in EGM held on 16.04.2016 unanimously (including both the Appellants ), authorised Shri Sanjeev Baba to take necessary action to execute the ATA , the draft of which was also approved in the same EGM . The Learned Counsel for the Respondent Nos. 1, 3 6 stated that at this juncture raising issues about the ATA by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AoA could not be carried out for want of compliances from the Appellants . 28. The Learned Counsel for the Respondent Nos. 1, 3 6 also refuted the charges that the Appellants were not given the notice of the AGM and not supplied with the copy of audited financial statements as no proof of the same has been given and this was never raised before petition filed in December, 2016. 29. The Learned Counsel for the Respondent Nos. 1, 3 6 stated that there was no violation of the ATA and all actions including extension of the LSD were taken as authorised in the EGM which was attended by the Appellants who gave express approval to Mr. Sanjeev Baba to take all further necessary actions to implement the ATA . 30. The Learned Counsel for the Respondent Nos. 2,4 5 also supported the stand taken by the Learned Counsel for the Respondent Nos. 1, 3 6 and mentioned that he is in general agreement. The Learned Counsel for the Respondent Nos. 2, 4 5 emphasised that it was the right of the 2nd Respondent as buyer to extend, relax or waive the conditions precedent and upon request of the authorised representative of the seller, the buyer could waive the requirements. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. (I) (a) Whether, the time was essence of the Assets Transfer Agreement ( ATA ) as specified Long Stop Date ( LSD ) ? (b) Whether, the consent of the Appellants was necessary for any change in LSD ? Before examining further it will be worthwhile to look into the specific provisions relating to this issue as provided in the ATA 6.2. Fulfilment of the Conditions Precedent 6.2.1 The Seller and the Shareholders shall jointly and-severally ensure that the Conditions Precedent, are fulfilled as soon as reasonably practicable and in any event on or before 60 days from the Effective Date ( Long Stop Date ). The Long Stop Date may be extended to such further date as may be mutually agreed between the Parties in writing. 6.2.2 The Parties hereby acknowledge that as a Condition Precedent, the Seller has to obtain the Unsecured Creditor Letters. However, the Purchaser hereby agrees that in case the Seller is unable to obtain the Unsecured Creditors Letters from the Unsecured Creditors - 1, who are untraceable and are not located even after the Seller taking all reasonable steps (including sending registered post acknowledgement due etc.) to trace and locate s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be obligated to pay and the Seller shall be entitled to receive the Commitment Amount as exit charge ( Exit Charge ). The Exit Charge shall be paid through the Escrow Account in the manner specified in the Escrow Agreement. The Parties agree that in case the Purchaser is unable to consummate the transaction contemplated herein for any of the following reasons, no Exit Charge shall be payable by the Purchaser to the Seller: (a) if Conditions Precedent are not fulfilled on or before the Long Stop Date or any such Conditions Precedent shall cease to be capable of being satisfied; (b) if there is any law or regulation or judicial order that makes The consummation of the transactions contemplated by this Agreement, illegal; or (c) if any of the Representations and Warranties or covenants made by the Seller are not true as of the Closing Date; (d) any irregularities (save and except the Statutory Liabilities as per the statutory auditor certificate) which comes to the knowledge of the Purchaser with respect to the affairs of the Seller relating to the period prior to the Closing Date, and which impacts the Assets; or (e) if the total liabilities required to be paid by Purchaser becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon between the parties in writing including shareholders of the seller whose names were given in Schedule 1 of the ATA and as such the Appellants consent was necessary and extension of 'LSD' and extension of LSD without their consent was invalid and illegal. On the other hand, the Respondents have brought out that in the EGM held on 16.04.2016 which was attended by all shareholders including both the Appellants , Mr. Sanjeev Baba was authorised and delegated all powers to negotiate and settle the ATA and there was no specific provision or conditions requiring the consent of the Appellants . This authorisation, therefore, independent and over and above the SPSHA or Addendum to SPSHA since by express specific consent in the EGM held on 16.04.2016 the Appellants delegated the powers in favour of Mr. Sanjeev Baba. To this Appellate Tribunal reasoning and the logic put forward by the Respondents seems to be logical taking into account the entire series of events from signing of the SPSHA , inductions of the Appellants as Director and CEO of the company, adverse financial conditions of the company, shutting down of the plant and finally signing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablish the case of oppression, it will be necessary to look into the provisions relating to oppressions and mismanagement as provided in the Companies Act, 2013 . CHAPTER XVI PREVENTION OF OPPRESSION AND MISMANAGEMENT 241. Application to Tribunal for relief in cases of oppression, etc.- (1) Any member of a company who complains that- (a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or (b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company s shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down in the Code of Civil Procedure, 1908 (5 of 1908), for the signature and verification of a plaint in a suit by the Central Government.] 242. Powers of Tribunal.- (1) If, on any application made under section 241, the Tribunal is of the opinion- (a) that the company s affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. (2) Without prejudice to the generality of the powers under sub-section (1), an order under that sub-section may provide for- (a) the regulation of conduct of affairs of the company in future; (b) the purchase of shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any s affairs upon such terms and conditions as appear to it to be just and equitable. [(4-A) At the conclusion of the hearing of the case in respect of sub- section (3) of section 241, the Tribunal shall record its decision stating therein specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.] (5) Where an order of the Tribunal under sub-section (1) makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make, without the leave of the Tribunal, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles. (6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum or articles of a company shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act and the said provisions shall apply accordingly to the memorandum or articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to AoA , this Appellate Tribunal has already noted from the averments that non-amendment of AoA was perhaps attributed for non compliance. Looking to all above, this Appellate Tribunal is not inclined to accept the arguments of the Appellants regarding their allegations of oppressions especially when the plant itself was shut down. There was no alternative except liquidation or revival of company through other modes including sale of assets to other entity who could revive the company. It is also not out of context to take into account that prima-facie payment of dues to stakeholders and bringing an additional investment of Rs. 66 crores by the 2nd Respondent as purchaser of the company as helped the company has well as all stakeholders including the Appellants . By no stretch of imagination these acts and deeds can be construed as oppression of the Appellants and therefore this Appellate Tribunal do not find any error in the impugned order on this account. Issue No. (III) (a) Whether the rights of the Appellants have been violated in implementation of the SPSHA along with the Addendum to the SPSHA . (b) Whether, the implementation of the ATA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it has been noted from the averments that the Appellants were appointed as Director and CEO on 02.02.2014 assuming charge and control of the company. However, due to deteriorating financial health of the company causing heavy losses and incurring debts, the Appellants resigned from the BoD and CEO position on 02.01.2015. It is also observed that the ATA was singed on 24.06.2016 by 1st Respondent, 2nd Respondent and each of the shareholder of the seller whose name was listed out in Schedule 1 of the ATA . This ATA was signed subsequent to resolution passed in EGM held on 16.04.2016 wherein Mr. Sanjeev Baba director of the company to authorise to negotiate, to settle the terms and conditions, signing and executing the requisite the Sale Agreement , Sale Deeds and such other documents as may be found necessary. This resolution also authorised Mr. Sanjeev Baba to amend the documents and sign on behalf of the company for registration and do all other acts, deeds and things as are incidental or consequential thereto. This Appellate Tribunal consciously note that no reference has been given which prohibit authorised representative from taking action without specif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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