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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 ..... s also been added. Thus it is seen that in the company applications filed after the status quo order dated 3.5.2016, clarificatory order dated 18.8.2016 and NCLT order dated 1.10.2019 for the appointment of a Special Officer, the issue of violation of these orders has also been regularly raised by the Appellants. The order dated 1.10.2019 passed by NCLT, which pertained mainly to the appointment of Special Officer to investigate into the affairs of the Company and also supervise the conduct of business by holding meetings of the board of directors periodically was appealed before NCLAT in [ 2021 (1) TMI 766 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI ], and that the NCLAT dismissed the appeal in view of the fact that 'the Report of the Special Officer will give a true and fair picture of the state of affairs of the R-1 Company . This order of the NCLAT was challenged in ARUN GUPTA ANR VERSUS SOUTH EASTERN CARRIERS LIMITED ORS. [ 2021 (4) TMI 1359 - SUPREME COURT] before the Hon ble Supreme Court of India. 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 Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ran 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, R-5 preferred company petition viz. CP No. 176/2015 before Company Law Board, Kolkata (in short CLB ), but later withdrew the said company petition after the signing of an MoU dated 23.3.2016 with the group of R-2 and R-3, with the ostensible intention to divide the Company into two parts through a scheme of demerger to distribute the proceeds between themselves leaving out the daughter from the sharing. He has further stated that in pursuance of this nefarious intention, R-2 and R-5 started indulging in acts of oppression and mismanagemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing 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 possess the necessary qualification under section 196(3) of the Companies Act to become the Managing Director, as he was not currently holding the position of the Managing Director or Director of the Company, the NCLT refused to grant relief prayed by the A-1 in CA No. 1584/KB/2019 and after dismissing this Company Petition, the NCLT also dismissed IA No. 112/KB/2021 and found that CP No. 42/2016 as not maintainable which are erroneous application of law as the real reason of absence of A-1 and R-9 from board meetings were themselves due to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 attending board meetings, cooked up a story of A-1 and R-9 being absent from the board meetings for a period of one year, thus making A-1 ineligible to hold the position of Managing Director w.e.f. 6.6.2017, by fraudulently showing vacation of office under section 167(1)(b) of the Companies Act, 2013. He has, further, argued that upon this act of R-1 Company, which was duly aided by R-2, R-3 and R-5, the Appellants filed IA No. 112/2021, again bringing to the notice of NCLT that Respondents did not honour the status quo orders and use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 other directors. The shares held by Smt. Uttama Gupta were transferred to her daughters-in-law Smt. Veena Gupta and Smt. Savita Gupta by a gift deed dated 25.10.2007 and the transfer of shares was duly approved by the directors in the board meeting held on 3.11.2007, wherein five directors including A-1 were present, and thereafter the details of these shares were duly reflected in the Annual Report for the year 2007-2008 and balance-sheet for FY 2013-14, but the petitioners have still raised the objection regarding transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 working of the company has adversely affected, resulting in financial losses as well. Now, the Board Meeting is scheduled to be held on 01/05/2016 for convening the Extra Ordinary General Meeting for removal of Petitioner No.1 as Managing Director and his son, Mr. Siddharth Jain (Respondent No.9) as a Director of the company. However, the Respondents Advocate submitted that the Special Notice given by the shareholders will be considered on the Board Meeting to be held on 04/05/2016 and the Extra Ordinary General Meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Application remained pending and issues raised in the contempt application were not heard and adjudicated upon by the NCLT till the final disposal of the main company petition. 18. It is further noted that A-1 and R-9 were removed from the position of Managing Director and Director respectively w.e.f. 6.6.2017 and Form DIR-12 was filed with the Registrar of Companies that both A-1 and R-9 had been removed from the Board of Directors of the Company and the reason given for such removal was v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosing 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 well as declare all further board meetings held of the respondent Company as null and void. (d) Pass necessary orders for directing the Respondent Company to pay the pending salaries of petitioner No. 1 and the Respondent No. 9. (e) Pass such necessary orders against the Respondent No. 5 and 6 as deemed fit and proper. (f) To pass such Order and/ or Orders as deem fit and proper. In terms of Sections 241 to 246 read with Rule 11 of NCLT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llants 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 such report is placed on record to show that the Special Officer could conduct any investigation or enquiry in the affairs of the Company and thereafter submit a report. On the contrary, we note that despite the status quo order dated 3.5.2016 and clarificatory order dated 18.8.2016, the Contesting Respondents put hurdles before A-1 and R-9 in the performance of regular official duties as Managing Director and Director. We fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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. 112 (KB) 2021 that even though petitioner No. I became the Managing Director in 2005, he is not currently holding the position of managing director or director. Therefore, on this score, the judgment referred by the Ld. Counsel for the petitioner No. 1 is not applicable in the present case as it is not the case of the petitioner No. 1 that he continues uninterruptedly as managing d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 at the issues raised and the relevant prayers made therein. We are, therefore, constrained to hold that order regarding dismissal of CP No. 42/KB/2016 suffers from a very basic and fatal error and therefore, this part of Impugned Order is also liable to be set aside. 31. In the result, we set aside the Impugned Order dated 1.4.2022 in its entirety, including t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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