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TMI Blog2023 (3) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... found that unless its jurisdiction is exercised, there will be complete mismanagement in regard to the affairs of the company. The ratio laid down in the aforesaid case is applicable in the facts of the instant case. The Consent Terms entered between the parties in the past, pursuant thereto, the Original Petition was disposed off, thereafter, violation of Consent Terms, applications were filed before the NCLT, therefore, the NCLT appointed Observer cum Facilitator to settle the disputes, to revive the company etc. however, the parties could not arrive at any amicable settlement despite several opportunities given by the NCLT - the order passed by the NCLT is correct in nature to meet ends of Justice and in the interest of the Company, winding up order was passed. Keeping in view of the aforenoted background, there are no merit in the instant appeal. The impugned order dated 08th June 2021 passed by the National Company Law Tribunal (Mumbai Bench, Court-II) is hereby affirmed. Appeal dismissed. - Company Appeal (AT) No. 92 of 2021 - - - Dated:- 23-3-2023 - [ Justice Anant Bijay Singh ] Member ( Judicial ) And [ Ms. Shreesha Merla ] Member ( Technical ) For the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner and their associates (Modi Group) 40% Respondent No. 2 and Mr. Mahesh Nanji Thakker (the husband of Respondent No. 3 and grandfather of Respondent No. 5) (Thakkar Group) 35% Respondent No. 4 (Ghule Group) 25% The Respondent No. 1 company was incorporated in the year 2006 by the Appellants (under the name of Modi Milk and Agro Products Private Limited) who were amongst the first directors of the Company not liable to retire by rotation, each holding 5000 equity shares of the Company. By the year 2010, the Company had acquired substantial assets worth Rs.46,52,24026/- as per the balance sheet dated 31st March, 2010. The Respondent No. 2 approached the Appellants with an investment proposal in the year 2010 whereupon the said Respondent No. 2 was inducted as shareholders of the company and Respondent No. 2 and Mr. Mahesh Nanji Thakker ( Deceased Director ) (the husband of Respondent No. 3 and grandfather of Respondent No. 5) were appointed as Directors of the Board. ii) Thereafter, the company purchased a piece and parcel of land admeasu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be constructed on the Residential Plot. In pursuant to the Development Agreement, an advance deposit of Rs.5,00,00,000/- in each case was paid by Saakaar to the Respondent No. 1 company. Thus, aggregate deposit of Rs.10,00,00,000/- in the name of the Saakaar was required to be refunded by the Company to Saakaar on receipt of a Completion Certificate from the Collector, Pune, However, the Respondents being in majority, decided to disburse the same. v) The Appellants thereafter requested the Respondent Nos. 2, 4 and the Deceased Director to cooperate in opening the escrow Account which the Respondent Nos. 2, 4 and the Deceased Director vide their letter dated 26th August, 2016 avoided while raising frivolous grounds. Despite requests made, the Respondent Nos. 2, 4 and the Deceased Director deliberately failed to comply with the requirements of the Development Agreements in relation to opening of the Escrow Account. Further, the Appellants came to know that the Respondent No. 4 was executing all agreements for sale of flats on behalf of the Respondent No. 1 company and that the proceeds were being deposited in a bank account in the name of Saakaar. However, Saakaar refused to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been alleged that on account of the proceedings initiated against Saakaar Corporation in the year 2016, its reputation was badly affected among others. As a result, whereof, M/s Saakaar Corporation claimed an amount of Rs.15 crores by way of damages from the Respondent No. 1, Modi Group, Thakkar Group and Ghule Group. The said legal notice appears to rake issues and make allegations in respect of events that occurred in the year 2016 and early 2017 i.e. much before execution and filing of the Consent Terms. The Consent Terms cast obligations on M/s Saakaar Corporation and, in fact, Mr. Chandrakant Ghule, Respondent No. 4, who is the signatory to the Consent Terms and who also happens to be one of the partners of the M/s. Saakaar Corporation. Hence, it is clear that the legal notice dated 10th March, 2018 was sent at the instance and/or on the instructions and/or with the knowledge of the Respondent No.4. viii) Pursuant to the receipt of the said notice by the Respondent No. 1, a meeting of the Board of Directors of the Company was called on 24th March, 2018. In the said meeting, all the Directors of the Respondent No. 1 company were present and Mr. Ramesh Thakkar was made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purview of the Respondent Nos. 2 and 3 considering that they form the quorum for holding the board meetings. Thereafter, due to alleged breach/con-compliance of the Consent Decree by the Appellants, the Respondents herein filed a Misc. Application No. 291 of 2018 inter-alia seeking relief of contempt as contemplated under Section 241 and 242 of the Companies Act, 2013. The said contempt application is misconceived since the Respondent Nos. 2, 4 and the Deceased Director failed to perform their obligations under the Consent Decree and as such, the Appellants also were constrained to file Misc. Application bearing No. 1046 of 2019 under Contempt of Courts Act against the Respondents for contravening/violating the Consent Terms wherein the Appellants prayed for reliefs in the form of directions to be given to the Respondent Nos. 2, 4 and the Deceased Director to comply with the consent decree. The said Respondents have filed reply to the aforesaid application wherein the Respondent No. 2, while admitting that the full amount as per the Consent Decree had not been deposited by the Respondent No. 4 through Saakar Corporation the escrow account, stated that the same ought to be set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants have received another letter dated 07th July, 2021 inviting proof of debts or claims from them. Further a notice of meeting was received by the Appellants on 28th July 2021 with an agenda to determine as to who are to be the members of the advisory committee. Thereafter, by the impugned order, the Tribunal disposed of MA 291/2019, MA 1046/2019 and MA 3186/2019 in Company Petition 29/2016 and passed an order directing winding up of the Respondent No. 1 Company. Hence this Appeal. 3. The Ld. Sr. Counsel for the Appellants during the course of argument and grounds taken in the memo of appeal along with written submissions and additional written submissions submitted that after immense efforts by the parties, the Consent Terms were drawn and came to be recorded by the Tribunal on 21st August, 2017. The said Consent Decree recorded the obligations and compliances required of each of the shareholder groups of Respondent No. 1. As per the chronology of the respective obligations of the parties to the Consent Decree, Saakar Corporation was required to pay a sum of Rs. 18,43,28,252 in the account of the Escrow Agent. However, Saakar Corporation admittedly paid only a sum of Rs.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Rama Narang v. Ramesh Narang Anr., (2006) 11 SCC 114, Para 23 to 25 . Thus, the NCLT ought to have directed compliance of its Consent Order dated 24.08.2017 instead of directing winding up of the company, especially when the Respondents own prayer in the Contempt Petition being M.A. No. 291 of 2019 was to have the consent decree executed. The impugned order has been passed on an Application bearing M.A. No. 3186 of 2019 (Annexure A-14, page 250 of the Appeal). Since the petition was under Section 271, no order of winding up could have been passed without compliance of Section 272(4) and 272(5) of the Act, which inter-alia requires the petition for winding up to be accompanied by a statement of affairs in the manner prescribed and for a 60 days period to be given to the Registrar whose views would be elicited before an order of winding up could be passed. Thus, there is non-compliance of Section 272 before the passing of the order of winding up. 6. It is further submitted that without prejudice to the above, even if the order of winding up is treated to be under Section 241 read with Section 242 of the Act, such an order of winding up could only be passed if it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 21.02.2018 (Annexure 22, page 395-396) that they would not deposit the balance amount of 4.75 crores as per the consent terms. Thus, the Respondents themselves are guilty of non-compliance of consent terms they cannot claim relief in equity against the Appellants. In this regard, the Appellants relied on following Judgment. Needle Industries (1981) 3 SCC 333, Para 68, 73. 9. It is further submitted that Mis. Application being 3186 of 2019 filed by Respondents under Section 271 of the Companies Act, 2013 in Company Petition being CP No. 29 of 2016 which was filed under Section 241-242 of the Companies Act, 2013 seeking winding up is not maintainable in the eyes of law: Section 271 of Companies Act, comes under Chapter XX of the Companies Act, 2013. Section 241 and Section 242 of Companies Act, comes under Chapter XVI of the Companies Act, 2013. Chapter XX lays down in detail as to how, when and in what manner winding up petitions are to be filed. Further, Companies (Winding up) Rules, 2020 provides the rules and regulations for filing of petition of winding up. Rule 3 of such rules provides that the petition for winding up shall be presented in Form-WI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. The Supplementary Agreement No. 9567/2017 dated 20 August 2017, entered for the residential part of the Project was signed by and between M/s. Modi Landscape Pvt. Ltd. by the hand of its three directors Mr. Ramesh Nanji Thakkar, Mr. Bharat Shantilal Modi and Mr. Ramesh Shantilal Modi being party of first part, Shri. Ramesh Nanji Thakkar, Shri Ketan Ramesh Thakkar, Shri Mahesh Nanji Thakkar, Shri. Rohan Mukesh Thakkar and Shri. Chandrakant Shivajirao Ghule together being party of second part, collectively referred as the confirming parties and M/s. Saakaar Corporation, a partnership firm being party of other part. ii) Pursuant to this agreement, sale proceeds of the flats in the scheme were to be apportioned between party of on part Nos. (1) to (4) of the Confirming parties and No. (5) in proportion of 40:30:25. iii) There were 31 unsold residential flats of the same project, which were to be apportioned between the to be apportioned between the parties in the same proportion of 40:35:25. Annexure A to the said agreement (Annexure- R-14 of the Affidavit) gives details of the distribution of these flats. According to this Annexure A, flat no. A902, 8-103, 8-503. 8-806 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received the proceeds and in which account. A reply has been sent to me by M/S Saakaar Corporation. The Appellants have not responded to the letter. It is settled position that these two flats, i.e. flat no B-503 and B-806 are apportioned to the company as per the supplemental agreement attached in Annexure 14 above and the proceeds of the same should be handed over to the liquidator. Accordingly, the Liquidator prayed before this Tribunal that pleased to direct the Appellants to handover the proceeds of the sale of flats to the Liquidator. 12. The Ld. Counsel for the Respondent No. 2 during the course of argument and in his Reply Affidavit along with written submissions submitted that the Appellants failed to comply with and give effect to the provisions of the Consent Terms and in view thereof the NCLT passed an order dated 20th December, 2017 inter alia stating as follows: On hearing both the sides and also on perusal of the Consent Terms this Bench is of the opinion that Mr. Bharat Modi and Mr. Ramesh Modi are not cooperating in fulfilling their part of commitment as agreed upon in the Consent Terms although duly signed by them on 21st August, 2017. The NCLT f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned that the parties were unable to reach a settlement and stated that, Unfortunately, the efforts of settlement failed and parties did not agree upon a solution . The report of Chartered Accountant stated that despite sincere efforts of the Observer cum Facilitator, the parties were unable to reach any settlement and further suggested a course of action that may be adopted in the Original Proceedings by stating that, In view of the above mentioned facts and circumstances, it is our view that in order to put an end to a long standing disputes between the Modi Group on one side and the Thakkar and Ghule Group on the other side and in the interest of stakeholders, under these circumstances in an unavoidable case of winding up of Modi Landscape Pvt. Ltd. in accordance with provisions of Section 242 and other applicable provisions of Companies Act, 2013 on the grounds that is just and equitable to do so considering all options have been exhausted and no other remedy is now available to the parties. . 14. The current position of Respondent No. 1 Company and justification for passing of impugned order was that the Respondent No. 1 is effectively a defunct/dormant company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th statutory compliances, the NCLT considered it to be Just and equitable to pass an order for winding up the Respondent No. 1 company in accordance with relevant provisions of Companies Act, 2013. 16. The Ld. Sr. Counsel for the Respondent No. 3 and 5 during the course of argument and in his Reply Affidavit along with written submissions submitted that the several opportunities were given by the NCLT to the Appellants to settle the matter. The first opportunity relegated the Consent Terms dated 24th August, 2017, the second opportunity was under the order dated 20th December, 2017 and the third was by appointment of a Facilitator cum Observer on 8th March, 2021. How many attempts to salvage a rocking boat is to be given especially in the circumstances that are enumerated hereunder: There are no employees of Modi Landscape Pvt. Ltd. (for short MLPL ) in the last more than half a decade; There are not annual returns filed of MLPL in the last more than half a decade; There is no business being conducted of MLPL in the last more than half decade; On the basis of pleadings made by all Shareholders and Directors mutual trust, confidence and faith is uprooted; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . P No. 86 /397 - 398 /CLB /NCLT /MB /MAH /2014) which judgment was delivered on 22nd December, 2017. The judgment is at page No. 54 to 100 of the written submissions of Respondent No. 2. The Respondent No. 2's Affidavit in reply before this Hon'ble Forum dated 29th September, 2021 also ought to be relied upon as also the arguments made by the Counsel for Respondent No. 2 on 8th February, 2023 and 22nd February, 2023 and also the written submissions of Respondent No. 2 dated 3rd January, 2022 to be relied upon. 19. In so far as the law on the issue is concerned, the NCLT and NCLAT have wide powers which can set out the invocation of the provisions as per the Companies Act, 2013 within the spectrum of the facts of each case. Thus, on the basis of the provisions of Section 242 embedded in the order dated 20th December, 2017 is now borne out to be that Section 242 was invoked in the impugned order which was passed on 8th June, 2021. Thus, the Application seeking winding up being an Application No. 3186 of 2019 at the necessary ingredients which would relegate the NCLT to take credence whereby the Tribunal if found to have opinion would wind up a Company which would be prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Gopala Gases (P) Ltd. and Ors., (1994) 3 Comp LJ 435 (Del.) , admitted a petition for winding up of a company on the ground that there was a deadlock and the different groups of shareholders did not have any mutual confidence / trust between them. Resultantly, the business of the company had come to a standstill for the last several years and there appeared to be very little possibility of the business being revived. The facts of the present case fall are covered squarely within the ambit of this judgment. The Hon ble Patna High Court in its judgment passed in the matter of Registrar of Companies v. Shreepalpur Cold Storage Private Ltd., (1974) 44 Com Cases 479 (Pat.) , inter alia directed the winding up of a company whose business operations were closed for over a year and there was no hope for revival of its functioning / operations. 22. The Adjudicating Authority has intervened and granted ample opportunities to the parties to somehow revive the operations of Respondent No.1. However, after a series of protracted litigation and consistent breach of Consent Terms by the Appellants, all efforts failed. Hence, keeping in mind the guiding principles as laid down by the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, in order to bring to an end or prevent further mismanagement in the affairs of the company. 25. In M/s World Wide Agencies Pvt. Ltd. and Anr. v. Margaret T. Desor and Others, (1990) 1 SCC 536, Para 27 , the Hon ble Supreme Court has held that composite petition under Sections 397/398 and Section 433 (f) of the Companies Act, 1956 is maintainable. 26. The powers of the NCLT under Section 241-242 is of the widest amplitude and diverse reliefs including that of winding up, can be granted if the facts and circumstances so warrant. It is not the interest of the Appellants alone which is important but that of the Company and its shareholders as a whole. 27. The prayer Clause 11.2 of the Company Petition makes it abundantly clear that even the Appellants did not intend to continue to remain in the business of Respondent No. 1 and sought an exit from their shareholding by seeking a direction that Respondent No. 2 to Respondent No. 4 shall purchase their shareholding in Respondent No. 1. It is an admitted position that no business is being carried out in Respondent No. 1 since 31.03.2015. The shareholding interest of each of the three groups of shareholders is such that no spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and Rs. 13,68,11,181/- (amount transferred by Saakaar into the Escrow Account)]. Thereafter, Legal Notice dated 10th March, 2018 sent on behalf of Saakaar Corporation and addressed to the Respondent No. 1, Modi Group, Thakkar Group and Gule Group. The NCLT by an order dated 8th March, 2021, Hon ble Justice Dilip Karnik, Former Judge, High Court of Bombay was appointed as the Observer-cum-Facilitator. Thereafter, Observer-cum Facilitator submitted report dated 24th May, 2021 before the NCLT which is to the following effect: 4. After hearing the Learned Advocates for the parties in the first and second meeting, it appeared to me that the parties could not arrive at a consensus regarding the valuation or method of valuation of the lands and assets of the company. There, however, appeared to be a consensus about the respective share holdings of the parties, except a small difference regarding 5% of the shares. I therefore suggested to the Learned Advocates that one group may value the lands and assets of the company and the other group would have a call and put option- i.e. would have an option (i) to buy the shareholdings of the group valuing the land by paying price propo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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