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TMI Blog2022 (12) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... res in order to invoke petition filed under Section 241 of the Companies Act, 2013? - HELD THAT:- It has been brought out that the Joint Managing Director, Managing Director along with the 2nd Respondent handed over all the documents including Original Share Certificates along with Share Transfer Forms to the 9th Respondent (Chartered Accountants Firm of the company). However, no action was taken despite reminders being sent by the Respondents to the Appellants. It is noted that upon receiving a letter dated 26.04.2017 from the Respondents, the 9th Respondent i.e. Chartered Accountants Firm conveyed that the Managing Director of the company had collected back necessary documents from their office to take required action for transfer of shares - To settle the disputes after reconciliating meting among the shareholders, a Settlement Agreement was entered between the parties on 09.12.2017, wherein it was mentioned that the Appellants would transfer 4.5% shares of the company to the Respondents. The Settlement Agreement was recognized and approved by the board in its meeting on 12.12.2017. However, no such transfer was made. It is the case of the Appellants that non transfer of sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Justice M. Venugopal ] Member ( Judicial ) And [ Naresh Salecha ] Member ( Technical ) For the Appellants : Mr. Vinay Mathew , Advocate For the Respondents : Ms. Hema Srinivasan , Advocate for R1 and R2 Mr. P.K. Biju, Advocate for R9 / Auditor No appearance for R3 to R8 and 10 to 15 JUDGMENT ( Virtual Mode ) NARESH SALECHA , MEMBER ( TECHNICAL ) The present `Appeal is filed against the impugned order dated 21.04.2020 passed in TCP/44/KOB/2019 (CP/62/KOB/2017-Chennai Bench) by the Tribunal (National Company Law Tribunal, Kochi Bench, Kerala), whereby, the Tribunal dismissed the Petition filed under the Companies Act, 2013 Brief Facts: 2. The 1st Appellant is a private limited company engaged in operation and running of hotels and was incorporated in 2009. The company has 12 Shareholders as on 31.03.2015. The company had issued subscribed and paid up capital of Rs. 30,87,857/- divided into 3,87,857 equity shares of Rs. 10/- each against the authorised share capital of Rs. 3,20,00,000/- divided into 32,00,000 equity shares of Rs. 10/- each. The 2nd Appellant - Mr. K.T. Thomas is the Managing Director of the 1st Appellant company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellants brought out that the company was set up as a private limited company on 13.02.2009 and a three star hotel by name of Olive International was being operated and for this purpose a term loan of Rs. 4 crores were taken from KSFC . 8. The Learned Counsel for the Appellants mentioned that the 1st Respondent is holding 2,31,589 shares of Rs. 10/- each which is around 7.5% of the total subscribed and paid up capital of the Company and the 2nd Respondent is not even a shareholder of the company. The Learned Counsel for the Appellants further submitted that in view of less than 10% holding of the shares of the company, the Companies Act, 2013 is not applicable since it does not meet the threshold limit and therefore the Tribunal erred in giving is verdict in the impugned order . 9. The Learned Counsel for the Appellants further mentioned that the minimum share qualification of 10% as required under Section 244 of the Companies Act, 2013 was not available with the Respondents and hence company petition could not have been entertained under Section 241, 243 247 of the Companies Act, 2013 . 10. The Learned Counsel for the Appellants emphasised that at best ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and stamped share certificates in original are required to be furnished to the company by either transferors or transferees. The Learned Counsel for the Appellants also assailed the impugned order against the 9th Respondent Mr. K.I. Abraham (Chartered Accountant) who did not has any role in the process. 14. The Learned Counsel for the Appellants faulted the impugned order as the Tribunal did not have any power to decide on issues regarding title of shares or inter se dispute among the parties. 15. The Learned Counsel for the Appellants also challenged the appointment of private agency namely, K. Venkitachalam Aiyer and Company (Chartered Accountants) to investigate into the affair of the company under Section 213 of the Companies Act, 2013 . The Learned Counsel for the Appellants further faulted the Tribunal in giving directions to the Institute of Chartered Accountants of India to investigate conduct of the Chartered Accountants. 16. The Learned Counsel for the Appellants also challenged wrongful award of cost of Rs. 25,000/- each awarded to the 1st and 2nd Respondents from 2nd to 8th Respondents without any legal or effective basis and without any compet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Respondent (Joint Managing Director of the company) handed over all these documents to the 9th Respondents (Chartered Accountants Firm). The Learned Counsel for the Respondents submitted that these facts are corroborated from various correspondence available and have also been taken note of by the Tribunal while pronouncing the impugned order . 23. The Learned Counsel for the Respondents refuted that there was inter se dispute between the Appellants along with non contesting Respondents with the Respondents . The Learned Counsel for the Respondents submitted that meeting was held on 12.09.2015 for reconciliation of the issues whereby transfer of shares were agreed unanimously and this decision was ratified in the Board Meeting. The Learned Counsel for the Respondents maintained that Board approved decisions cannot be termed as inter se disputes hence, the Tribunal was right in the impugned order . 24. The Learned Counsel for the Respondents countered the arguments of the Appellants regarding maintainability of the petition under Section 241 of the Companies Act, 2013 and stated that non-transfer of shares is an act of oppression of the minority shareholder an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and delay transfer of shares in favour of the Respondents and hence deserved to be dismissed with exemplarily cost. Findings 29. Heard Learned Counsel for the Appellant and the Respondents and also perused record made available to us. Several issues have been raised in the Appeal which are required to be deliberated upon before coming to final conclusion. Issue : (I) (a) Whether the Respondents possessed minimum 10% shares in order to invoke petition filed under Section 241 of the Companies Act, 2013 . (b) Whether the Tribunal could have entertained such petition under Section 241, 242 r/w Section 247 of the Companies Act, 2013 ? (c) Whether the Tribunal erred in directing the Appellants to effect registration of shares by means of transfer in favour of the Respondents under Section 58(5) of the Companies Act, 2013 ? (d) Whether the Tribunal has power to order for cost to be paid to the Respondents ? Issue: (II) (a) Whether the Tribunal had the power to cause investigation into the affair of the company under the Companies Act, 2013 . (b) Whether the Tribunal is empowered to recommend to Institute of Chartered Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the company. (4) If a public company without sufficient cause refuses to register the transfer of securities within a period of thirty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, is delivered to the company, the transferee may, within a period of sixty days of such refusal or where no intimation has been received from the company, within ninety days of the delivery of the instrument of transfer or intimation of transmission, appeal to the Tribunal. (5) The Tribunal, while dealing with an appeal made under sub-section (3) or subsection (4), may, after hearing the parties, either dismiss the appeal, or by order- (a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within a period of ten days of the receipt of the order; or (b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved. (6) If a person contravenes the order of the Tribunal under this section, he shall be punishable with imprisonment for a term which shall not be less than one year but which may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter. (2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter. [Provided that the applications under this sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicial 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 purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) restrictions on the transfer or allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 so altered. (7) A certified copy of every order altering, or giving leave to alter, a company s memorandum or articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same. (8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than one lakh ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby the other shareholder agreed to transfer portion of their shares in favour of the Respondents herein. It was also aggrieved that the Respondents shall make additional payment towards acquisition of shares to the transferor. This Appellate Tribunal notes that from the records made available and averments made by the parties, the Respondents made desired payment to the company s bank account to repay the due interest to KSFC and also paid money to other shareholders. This Appellate Tribunal also observes that the other shareholder did not transfer their shares as earlier agreed upon and therefore a conciliatory meeting was held on 12.09.2015, whereby the other shareholder had agreed to transfer their shares. The minutes of meeting has recorded the transfer of shares from the other shareholders to the Respondents . It has been brought out that the Joint Managing Director , Managing Director along with the 2nd Respondent handed over all the documents including Original Share Certificates along with Share Transfer Forms to the 9th Respondent (Chartered Accountants Firm of the company). However, no action was taken despite reminders being sent by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llants had usurped the share transfer forms from the Respondents has been brought out from the letters dated 01.09.2016, 08.04.2017, 26.04.2017 and 02.06.2017 which have been noted by the Tribunal also. It is the case of the Appellants that non transfer of shares should be treated as inter se dispute and the Respondents herein should have approached appropriate Civil Court to enforce transfer of shares under Specific Relief Act, 1963 . In this regard, this Appellate Tribunal observes that since the transfer of the shares were agreed upon between the parties which was approved in Board Resolution of the company and therefore the Tribunal had suitable power under Section 242 of the Companies Act, 2013 r/w Rule 11 of the National Company Law Tribunal, Rules 2016. As regard, oppression of the Respondents , this Appellate Tribunal considered non transfer of shares in favour of the Respondents herein tantamount to the oppressions of the Respondents as per Section 242 r/w Section 58 of the Companies Act, 2013 . As regard, the costs awarded in favour of the Respondents herein, it is noted that the Tribunal has power under Section 242(2)(l) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (iii) the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, or the manager, of the company, order, after giving a reasonable opportunity of being heard to the parties concerned, that the affairs of the company ought to be investigated by an inspector or inspectors appointed by the Central Government and where such an order is passed, the Central Government shall appoint one or more competent persons as inspectors to investigate into the affairs of the company in respect of such matters and to report thereupon to it in such manner as the Central Government may direct: Provided that if after investigation it is proved that- (i) the business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose; or (ii) any person concerned in the formation of the company or the management of its affairs have in connection therewi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT) (Insolvency) No. 964 of 2019 titled as Union of India, Through Serious Fraud Investigation Office (SFIO) vs. Maharashtra Tourism Development Corporation Anr. The relevant paragraph of the above cited judgment is being reproduce as under: 42. In view of the aforesaid position of law, we are of the view that the Adjudicating Authority was not competent to straight away direct any investigation to the conducted by the Serious Fraud Investigation Office . However, the Adjudicating Authority (Tribunal) being competent to pass order under Section 213 of the Companies Act, 2013, it was always open to the Adjudicating Authority/ Tribunal to give a notice with regard to the aforesaid charges to the Promoters and others, including the Appellants herein and after following the procedure as laid down in Section 213, if prima facie case was made out, it could refer the matter to the Central Government for investigation by the Inspector or Inspector and on such investigation, if any, [emphasis supplied] ➢ From the above discussions, it is very clear that there is no power with the Tribunal to directly order, an investigation of the Company s Affairs by an indepen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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