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TMI Blog2023 (5) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... n CP No. 42/2016. 2. Briefly, the facts of the case, as stated by the Appellants, are that Appellant No. 1's (in short "A-1") father-in-law Shri R.K. Gupta founded the Respondent No. 1 Company (in short "R-1") and after his demise, his wife Smt. Uttama Gupta made a Registered Will by which the shares held by her and the shares transferred to her by virtue of the Will of her husband Shri R.K. Gupta were to be equally divided among their two sons, namely Shri Ravindra Kumar Gupta ("R-2") and Shri Arun Gupta ("R-5") and the daughter Smt. Usha Kiran Jain, who is Appellant No. 2 (in short "A-2"). Thereafter, A-1 became Managing Director of R-1 Company and started running the affairs of the Company in a smooth manner. The Appellant has further stated that the shareholding of Smt. Uttama Gupta was surreptitiously transferred to the wives of R-2 and R-5 respectively, and when A-1, through an e-mail dated 10.11.2011, demanded explanation/ clarification regarding the transfer of shareholding done in favour of wives of R-2 and R-5 respectively, he did not receive any reply. 3. The Appellants have further stated that due to differences between R-2 and R-5, both sons of the Company's founder, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings of past one year which led to their cessation/vacation of office under section 167(1)(b) of the Companies Act. Thus A-1 and R-9 were removed from the post of Managing Director and Director respectively w.e.f 6.6.2017. The Appellants have further submitted that they also filed CA No. 165/KB/2018, when the matter of non-compliance of directions given through two interim orders dated 3.5.2016 and 18.8.2016 was brought to the notice of NCLT. The Appellants again filed IA No. 112/2021 to highlight the acts of oppression and mismanagement being perpetrated by the respondents, inter alia submitting that A-1 and R-9 were forcibly prevented from attending the board meetings and were, through surreptitious means, removed as Managing Director and Director respectively of the company. The Appellants have thus, claimed that the Respondents, particularly R-2, R-3 and R-5 have continued to defy the interim status quo orders of NCLT and in a fraudulent manner removed A-1 and R-9 from the post of Managing Director and Director, which is a clear non-compliance of NCLT's order. 5. The Appellants have stated that after accepting the erroneous contention of the Respondents that R-1 does not posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 apprehended that, in continuation of their acts of oppression, the Respondents were proposing to hold an EOGM to remove him from the post of Managing Director, he filed CP No. 42/KB/2016 before the CLB, Kolkata, which was heard on the prayer of interim relief on 3.5.2016, when a 'status quo' order was passed by the CLB restraining the R-1 Company from removing A-1 and R-9 from the posts of Managing Director and Director respectively. He has further argued that the Contesting Respondents, in contravention of this 'status quo' order, denied access to A-1 and R-9 in the corporate office of the Company and also of the company's official e-mail, and this contravention of status quo order was brought before the NCLT, Kolkata by the Appellants through CA 453/2016, upon which the NCLT reiterated the status quo order and clarified it by passing an unambiguous order on 18.8.2016. 8. The Learned Senior Counsel for Appellants has further claimed that the acts of oppression and mismanagement by the Contesting Respondents and the Company (which was controlled by them) did not stop despite these orders, the Contesting Respondents through devious means of first preventing A-1 and R-9 from atten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the past one year, and then selectively took up just one issue of section 196(3) and placing reliance on incorrect information about the absence of A-1 and R-9 from board meetings to hold that A-1 was not occupying the position of Managing Director once he had ceased to hold office, he could not get the benefit of the continuing in office after attaining the age of 70 years. The Learned Counsel for Appellants had lastly contended that there were many acts of oppression and mismanagement raised by him in CP No. 42/2016 and also in CA No. 1584/KB/2019, CA No. 165/KB/2018 and lastly in CA No. 122/KB/2021, but none of the prayers were considered appropriately and only on the incorrect ground that A-1 and R-9 had ceased to hold office on account of board resolution dismissed CA 1584/KB/2019, and thereafter without even looking at the issues raised in IA No. 112/KB/2019 and CP No. 42/KB/2016 dismissed them without recording any reason or adjudicating on the issues of oppression and mismanagement raised in these petition/applications. 11. The Learned Counsel for R-1, R-5 and R-6 ("Contesting Respondents") has submitted that A-1 and R-9 were whole time directors of R-1 Company along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd and the issues raised in the appeal. 14. It is noted that the Appellants filed Company Petition CP No. 42/KB/2016 under sections 235, 397, 398, 399, 402, 406 and 407 of the Companies Act, 2013, with prayers for interim relief for appointing a Special Officer in R-1 Company to make an inventory of all books and accounts and take possession of all books and record of the Company. In addition, the company petition also included prayers for restraining the Respondents from altering the shareholding, share capital and the structure of the board of directors of the company among many other prayers relating to affairs of the company's management. It is also noted that on hearing of CP No. 42/KB/2016, the following order was made on 3.5.2016:- "CP No.42/2016 mentioned today. The Petitioners Advocate submitted that the Petitioner No. I has been functioning as Joint Managing Director in the Respondent Company, however the Respondents have been indulging in transactions with entities in which directors are interested and thereby, the interest of the company is adversely affected. Besides, several employees reporting to the Petitioner No.1, have been terminated and thereby, the normal wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 was clarified by NCLT by its order dated 18.8.2016 passed in CA No. 453/2016, and the relevant portion regarding clarification of the earlier 'status quo' order dated 3.5.2016 is as hereunder:- "In continuation of the ad interim order dated 3 May 2016 of the CLB following clarifications are issued. (1) As Access Swipe Card have been issued for other personnel of the Company similar cards may be issued for enabling the petitioner no.1 and respondent no. 9 to enter the office for discharging their duties. (2) Similarly, official e-mail ids. of the petitioner no. 1 and respondent no, 9 may be activated for the official use of the petitioner no. 1 and respondent no.9. (3) It was stated that no salary has been paid to the petitioner no. 1 as well as to respondent no. 9. If the other directors of the Company are getting salary as Directors of the Company, similar payments may be made to petitioner no. 1 and respondent no. 9 as per the laid down terms of the Company." 17. It is also noted that the Appellants filed a Contempt Application being CA 487/2017 alleging that the Respondents were not complying with the orders dated 3.5.2016 and 18.8.2016. Significantly, this Contempt A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No. 5; (d) To pass such Order and/or Orders as deem fit and proper;" 21. Lastly, IA No. 112/2021 was also filed by the Appellants with the following prayers, which are quite similar to the reliefs sought is CA No. 1584/KB/2019:- (a) "Pass necessary orders declaring Form DIR-12 dated 6th June, 2017 filed by the Respondent No. 5 on behalf of the Respondent Company as null and void and directing the Respondent No. 10 to correct and/or modify their records disclosing the names of the Petitioner No. 1 and Respondent No. 9 as Managing Director and the Director of the Company. (b) Pass necessary orders declaring the appointment of additional directors subsequent to removal of the petitioner No. 1 and the Respondent No. 9 as the Directors of the respondent Company as null and void and thereby directing the Respondent No. 10 to correct and/or modify their records by removing the names of the additional directors. (c) Pass necessary orders declaring the meeting dated 6th June, 2017 held by Respondent No. 5 for removal of the Petitioner No. 1 and Respondent No. 9 from the Respondent Company and the appointment of additional directors in the Respondent No. 1 as null and void and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance with the mandate of Section 422 of the Companies Act 2013. In the alternative, it has been submitted that having regard to the fact that the shareholding is held within the members of a family and is closely held, it would be appropriate if mediation is resorted to so that any one or more of the groups of shareholders can buy out the shareholding of others. 3. We are recording the above submissions in order to permit the appellants to move the NCLT for expeditious hearing having regard to the mandate of Section 422. Any offer which the appellants have for an amicable solution through a mediatory process can be urged before the NCLT when the proceedings are taken up. We make no observations or findings thereon and leave it open to the NCLT to take an appropriate view. 4. Subject to the aforesaid, the appeal shall stand dismissed. 5. Pending application stands disposed of." 24. It is thus clear that the appointment of Special Officer was upheld by the Hon'ble Supreme Court and it was, therefore, not only desirable but necessary that the Special Officer submit his report regarding the affairs and management of the R-1 Company before the NCLT. It is noted by us that no su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made." 26. We now peruse the conclusions in the Impugned Order in which are included in the relevant paragraphs no. 14 to 18 which are reproduced below:- "14. The instant application has been filed by one Shri Yogendra Pal, and Smt. Usha Kiran Jain. Petitioner No. 2 was never a director of the Company. Admittedly at present, the age of the petitioner No. 1 is beyond 70 years and he has mentioned his age as 78 years in the record available before us. 15. The applicant seeks to place reliance on the above referred judgment with a view to drive home the point that notwithstanding the age as provided in Section 196(3) of Companies Act, 2013, he is entitled to the relief prayed for by him in the present application. We have considered the judgment of the Hon'ble High Court relied upon by the Ld. Counsel appearing for Petitioner No. 1. It is an admitted position in this Company Application No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned Order. Significantly IA 112/KB/2019 raised many issues of oppression and mismanagement, which were neither looked into by the NCLT nor adjudicated upon and yet on misunderstanding regarding non-maintainability of CA 1584/KB/2019, it was dismissed. This part of the Impugned Order is, therefore, also erroneous and liable to be set aside. 30. Finally, we note the Impugned Order dismisses CP 42/KB/2016 as being not maintainable and the connected IAs has also been dismissed. We note that the payers made in CP 42/2016, the original company petition, raised multiple issues of oppression and mismanagement in the affairs of R-1 Company, which were not even considered in the Impugned Order. The appointment of Special Officer and any report that he may have submitted, could have thrown light on the possible mismanagement of R-1 Company and aided the NCLT in adjudication of issues raised, but the NCLT inexplicably even forgot to look at its own order dated 1.10.2019, which was regarding the appointment of Special Officer and obtaining report on the affairs of R-1 company. We thus find that CP No. 42/KB/2016 has been dismissed summarily in the Impugned Order without appropriately looking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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