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TMI Blog2023 (10) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... t possessed 19.83% shareholding in the 1st Respondent / Company, at the time of filing the present petition - conduct in breach of the fiduciary duties of Directors owed towards 1st Respondent / Company as per Section 166 of the Companies Act, 2013. Appellant contends that the Tribunal had committed an error, in coming to the conclusion that the shareholding at the time of accruing of cause of action, would be determinative, of the maintainability of the petition and in sequel, had also held, that the Appellant at the relevant point of time, due to less than 10% shareholding at such time, could not have maintained the petition and eventually determine the said point, as well as the underlying petition against the Appellant herein. HELD THAT:- Section 419(3) of the Companies Act, 2013, enjoins that the powers, of Tribunal , shall be exercisable by Benches consisting of two Members, out of whom, one shall be a Judicial Member and other shall be a Technical Member . As a matter of fact, the proviso to sub-section 3 of Section 419 of the Companies Act, 2013 points out that it shall be competent for the Members of the Tribunal authorised in this behalf to function as a Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at although, the Appellant , held 10% as on date of filing of the CP No.486/2018, on 06.09.2018, but in respect of the events, that took place, before the Appellant , held 10% shareholding, then, it is held by this Tribunal, that he had not fulfilled the qualitative criteria , to sustain the Company Petition , in as much as, he had not possessed, the requisites shares , at the particular point of time, when the purported cause of action arose. As such, it is, safely and securdly concluded by this Tribunal, that the Appellant s / Petitioner s petition, in CP No. 486/2018, on the file of National Company Law Tribunal, Bengaluru Bench, on the date of filing of the petition, (on 06.09.2018), is, perfectly, maintainable , but he is precluded, from adverting, to the events , which took place, before he possessed / acquired, 10% shareholding in the Company . The onus , to establish Membership is on the Petitioner, and it is up to him to prove, that he is a Member, of a Company, on the day of filing of petition. When he is not a Member of Company, he cannot allege Oppression , to invoke, Section 241 of the Companies Act, 2013, against the Company, as opined, by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development of property situated at Hebbal, Bengaluru. In order to avoid conflict of interest, duly following Corporate governance follows hitherto by the Company, the Company did not invite in Embassy Group since its Chairman and Managing Director Mr. Jitendra Virwani had 655538 shares and RBD shelters LLPs since its managing partner Mr. Austin Roach had 110350 shares and 957 shares respectively as on 06.11.2015, which is a cutoff date considered for issue of postal ballot notice to the shareholders. On scrutiny of the offers received, it is found highest offers in terms of square feet is 238005 made by M/s. Ummiya Builders and Developers, and the Second highest is 212166 square feet from victory infrastructure. However, the proposal from Victory Infrastructure is not considered on the basis of lack of credentials in the market and the lack of presence of sufficient commercial project of similar size in India and the third highest offer is received is 185000 square feet from Brigade Group. Therefore, Brigade Group and Ummiya Builders and Developers was invited for second round of discussions. Accordingly, Brigade Group participated for second round of discussions on 21.12.2015 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he allegation of Petitioner selling of shares also constitutes acts of oppression and mismanagement is misconceived and liable to be rejected. Moreover the SEBI has also rejected the contention of the Petitioner when he approached the SEBI vide his complaint dated 16.06.2016. 23. It is to be pointed out here that any member of a Company seeking equitable relief, U/s 241-242 of the Companies Act 2013, has to come to the Tribunal with clean hands. In the instant case, as detailed supra, both the Petitioners at initial stage started approaching Civil Courts with regard to the affairs of the Company even though Company Law Board/High Court/Tribunal have jurisdiction over the issue, under the provisions of the Companies Act 1956/2013. The Petitioners, admittedly lacking to possess the requisite percentage of shares in the Company, at the time of filing their suits. However, after obtaining the requisite percentage especially by Mr. Jitender Virwani, as per law, has approached the then CLB/High court and that too after they have failed to get interim orders in the suits they have filed. As stated supra, vide orders dated 28th April, 2016 passed in CA No. 176 of 2016 in COP No. 20 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners are interfering in the usual business decisions being taken by the Company by filing various vexatious litigations before various courts and Tribunal . 25. It is also to be stated here that the Tribunal has perused various judgements cited by both the parties, as mentioned supra, and by keeping the ratio as decided in those cases, the instant case is decided. and resultantly dismissed the Company Petitions No. 20/2016 (T.P. No. 248/2017) C.P. No. 486/2018 , but without costs. Appellant s Submissions 3. The Learned Counsel for the Appellant, (in TA No.94/2021) (Comp. App. (AT) No. 363/2019 in CP No.486/BB/2018) submits that the Tribunal , had erroneously, dismissed the Company Petition of the Appellant, primarily and substantially on the ground, that the Appellant, despite possessing 19.83% shareholding in the 1st Respondent / Company, at the time of filing the present petition, does not possess the Requisite Shareholding , necessary to maintain the underlying petition, against the Respondents. 4. The Learned Counsel for the Appellant, contends that the Tribunal had committed an error , in coming to the conclusion that the shareholding at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trip away the only valuable asset of the Respondent No. 1 Company and to hand over the same, to the Respondents, who are presently in the management of the Company, who subsequently had received the majority shareholding of the Promoters in the 1st Respondent / Company. It is the contention of the Learned Counsel for the Appellant that the Management, knew that outright sale and disposal of the entire undertaking would be beyond its competence and the same is prohibited as per Section 180 of the Companies Act, 2013 and read with Section 179 of the said Act. 9. The Learned Counsel for the Appellant, points out that when the said matter was allegedly considered by the Board on 04.11.2015, the tenor of the Agenda was completely changed and in a volte face , the management, junked the idea of disposal of asset , as was countenanced, in the meeting of the Board dated 19.02.2015 and for the first time, brought in, the idea of a possible joint venture agreement, to dispose of the entire undertaking / substratum of the Company, in favour of an unknown person with no material information to the shareholders. 10. According to the Appellant, the Respondents, without any authorisat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, whereas the petitioner, himself was having 768,880 shares and had voted against the Resolution. 13. According to the Learned Counsel for the Appellant, the worse Act of operation and mis management, against the interest of shareholders and prejudicial to public interest was illegal and unlawful transfer of promoter shareholding by the Respondent No. 227, along with their relatives and persons acting in concert . 14. Also that the Respondent No. 13 to 15 were appointed as Directors , on 08.08.2016, and later, on 21.09.2016 and 15.11.2017, the Respondent No. 17 and 16 were appointed as the Directors, and as a result of which, the whole substratum of the Company, including its assets controlling share and management was handed over to the Joint Venture Partner of the 1st Respondent / Company being Respondent No. 11 and other personnel connected with the said entity, which led to public offer under SEBI(take over Court). 15. The Learned Counsel for the Appellant, points out that the Joint Venture Agreement was executed on 01.01.2016, whereas the 1st Respondent / Company amended its object clause only on 19.03.2016 by passing a resolution, on 19.03.2016 among other thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a resolution in the Company s AGM dated 21.09.2016 for termination of Development Agreement . Also that the moving of the said Resolution was opposed by the Respondent No. 1 Company before the Regional Director of Companies and the Regional Director of Companies vide order dated 20.10.2016 allowed the Respondent No. 1 Company s Application. 20. The Learned Counsel for the Appellant, brings to the notice of this Tribunal that Appellant had moved a grievance before the Market Regulator Securities Exchange Board of India, on 16.06.2016 pointing out therein, the infractions , in the purported sale of equity shares from the SEBI perspective but, knowledge of the Appellant no cognizance, save and except inviting the 1st Respondent / Company to specify its comments on the said grievance. 21. According to the Appellant, the issue of maintainability was decided by the Tribunal, through an order dated 30.05.2019 in IA 360/2018 and IA 17 of 2019 filed by the Respondent. The said order was assailed by the Respondents in Comp. Appls. (AT) Nos. 144 and 179 of 2019, but this Tribunal had refused to interfere with the order dated 30.05.2019 and the Respondents had to withdraw the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter to be posted before regular bench 25.02.2019 Mr. R. Vardharajan Absence of Coram. Matter Adjourned 11.03.2019 Mr. R. Vardharajan Ms. Deepa Krishan Adjourned at joint request. 09.04.2019 Mr. R. Vardharajan Ms. Deepa Krishan Final Arguments heard. Parties directed to file written submission. 22.04.2019 Mr. R. Vardharajan Written submissions filed. Reserved for order. 19.07.2019 Ms. Deepa Krishan retires. 27.08.2019 Order delivered pronounced by Mr. R. Vardharajan The Appeal was admitted by Hon ble Member (Judicial) on 27th August, 2019 as in the meantime one of the Hon ble Member(Technical) Ms. Deepa Krishan retired on 19th July, 2019. The order of admission is challenged on the ground that the matter having been heard by two Hon ble Members and the final order could not have been passed by Hon ble Member(Judicial). Dr. Abhishek Manu Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27th August, 2020 before a Single Bench of the National Company Law Tribunal, Indore Bench at Ahmedabad. He invites our attention to an order passed by Hon ble Apex Court in Writ Petition No. 722 of 2019 dated 20th June, 2019, wherein the Hon ble Apex Court, in a case of identical nature directed it to be heard by a Bench comprising of a Judicial Member and a Technical Member. This appeal is accordingly disposed of with request to the President, National Company Law Tribunal, New Delhi to constitute a Bench comprising of a Judicial Member and a Technical Member for disposal of the matter in hand in conformity with and compliance with the direction passed by Hon ble Apex Court in the Writ Petition No. 722 of 2019. Copy of the order be communicated to President, NCLT, New Delhi for information. 24. The Learned Counsel refers to the List of Dates hearing and orders passed by the NCLT, Bengaluru Bench in C.P. No. 20/2016 (T.P. No.248/2017), and C.P. No. 486/BB/2018, and the same are mentioned, in a Tabular Form as under: Date Coram Particulars 10.09.2018 Shri Rajeswara Rao Vittan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction to argue maintainability along with main Petition 29.09.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Adjourned 24.04.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Adjourned for deciding maintainability as per order of Karnataka High Court dated 16.04.2019 in W.P. 12746/2018-748/2019 27.05.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Orders reserved in IA No. 360 of 2018 and I.A. No. 17 of 2019 30.05.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Orders passed in I.A. No. 360 of 2018 and IA NO. 17 of 2019; Petitions held to be maintainable 17.06.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Adjourned 02.07.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Kumar Mishra Arguments commenced on Petition on behalf of the Petitioner 18.07.2019 Shri Rajeswara Rao Vittanala Dr. Ashok Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had rebutted that presumption, as it is seen from the records that Contship had terminated the agency of SSTS, there was no corporate opportunity to SSTS; no attempt was made by SSTS to approach Contship, because both parties knew that there was no corporate opportunity to SSTS, whereas the only grievance in the petition was using domain and name SAMRAT . There is no substance in this defence. The presumption of fact will have to be rebutted and could have been done so by the Puri group by adducing positive evidence that the business opportunity was not available to SSTS and that the agency was given to SSL, after disclosure to the Sippy group and SSTS and that there was refusal or waiver by the Sippy group or SSTS. The materials pressed into service on behalf of the Puri group would only indicate that Contship was keen to deal only with the Puris. That material, however, does not positively point out that Contship was unwilling to deal with SSTS with whom, admittedly, the Puri group continued to be the managing director and director of the companies (SSCO and SSTS). Even accepting the case of Contship that it was keen to deal only with the Puri group, no explanation is forthcomin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession of the Sippy group and of the two companies within the meaning of Section 397 of the Act and also mismanagement within the meaning of Section 398, relating to the affairs of the companies, which was in a manner prejudicial to the interests of the company, proceedings such as the present one, there would be no limitation or restriction of power of the Board. Reliance has been rightly placed by counsel for the Sippy group on the Division Bench decision of our High Court in Shanti Prasad Jain v. Union of India [1973] 75 Bom LR 778, which deals with the scope of power to be exercised by the court in the proceedings under Sections 397 and 398 of the Act. Section 402 of the Act is a provision without prejudice to the generality of the powers of the Board under Sections 397 and 398 to bring to an end or prevent the matters complained of or apprehended and make such orders, as it thinks fit. On a conjoint reading of Sections 397, 398, 402 and 406 with Sections 539 to 544 of the Act, it would appear from the legislative scheme that the Board has plenary powers to pass such equitable orders not only to remedy the mischief, but to prevent recurrence thereof. 58. The question, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, having regard to the nature of proceedings under Sections 397, 398 and 399 of the Act. Before we proceed to examine this aspect, it needs to be recalled that the direction issued by the Board is qua the SSL to account for the benefits derived by it from the Contship agency. I have already taken the view that such a relief could be legitimately granted if the facts of the case so warrant; and has been rightly granted in the present case. 65. The next direction passed by the Board is to purchase the shares of the other group by the respective groups. Even this direction can be sustained having regard to the conclusion reached by the Board that it was obvious that there was deadlock in managing the affairs of the companies, SSCO and SSTS. There seems to be substance in the reasoning adopted by the Board that deadlock results in conduct, which is prejudicial to the interests of the companies and can be the basis to wind up the company on just and equitable grounds. To overcome this position, it was contended on behalf of the Puri group that neither Clause (a) nor Clause (b) of Section 397(2), nor Clause (a) or Clause (b) of Section 398(1) of the Act was attracted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised on appeal decline to entertain it, as it was not pressed in the trial court, and there are no grounds for permitting the appellant to raise it in this appeal. Even otherwise, we are of the opinion that this contention must, on the allegations in the statement, assuming them to be true, fail on the merits excluding the names of 13 persons who are stated to be not members and the two who are stated to have signed twice, the number of members who had given consent to the institution of the application was 65. The number of members of the company is stated to be 603. If, therefore, 65 members consented to the application in writing, that would be sufficient to satisfy the condition laid down in Section 153-C, sub clause (3)(a)(i) but it is argued that as 13 of the members who had consented to the filing of the application add, subsequent to its presentation, withdrawn their consent, it thereafter, ceased to satisfy the requirements of the statute, and was no longer maintainable. We have no hesitation in rejecting this contention. The validity of a petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion were to be filed. The contention on behalf of the Company that the transposed party must also satisfy the same conditions as the original petitioner does not seem to be justified on any principle. If she was constructively a petitioner initially then she continues to be a petitioner, and a change in the situation vis.a.vis, the provisions of section 399 of the Companies Act, 1956, will not make the petition non-maintainable(p-777 I-p.778AC) . 31. The Learned Counsel for the Appellant, refers to the decision of the Hon ble Supreme Court in National Spot Exchange Ltd. Vs. Anil Kohli , Resolution Professional for Dunar Foods Ltd ., reported in 2022 11SCC 761 wherein at paragraph 15.1 and 15.2 it is observed as under:- 15.1. In Mishri Lal (BSNL v. Mishri Lal, (2011)14 SCC 739: (2014) 1 SCC (L S) 387), it is observed that the law prevails over equity if there is a conflict. It is observed further that equity can only supplement the law and not supplant it . 15.2. In Raghunath Rai Bareja (Raghunath Rai Bareja v. Punjab National Bank, (2007) 2 SCC 230), in paras 30 to 37, this Court observed and held as under: (SCC pp. 242-43) 30. Thus, in Madamanchi Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter its first execution petition was dismissed on 23.8.1990 it should have immediately thereafter filed a second execution petition, but instead it filed the second execution petition only in 1994 which was dismissed on 18.8.1994. Thereafter, again the Bank waited for 5 years and it was only on 1.4.1999 (sic 11.1.1999) that it filed its third execution petition. We fail to understand why the Bank waited from 1990 to 1994 and again from 1994 to 1999 in filing its execution petitions. Hence, it is the Bank which is responsible for not getting the decree executed well in time. In the case before this Court, the claim made by the Bank was found to be time-barred and to that this Court observed that while the equity is in favour of the Bank, the law is not in favour of the borrower, however, since the claim is time-barred, as the execution petition was barred by the limitation, this Court set aside as such the execution petition. 32. The Learned Counsel for the Appellant, points out the decision of the Hon ble Supreme Court in the Premanand and Ors. Vs. Mohan Koikal and Ors. Reported in 2011 4SCC 266 wherein at paragraph 7 it is observed as under:- 7. In our opinion, Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be without any legal efficacy. 35. The Learned Counsel for the Appellant, refers to the decision of the Hon ble Supreme Court in Kalabharati Advertising v. Hemant Vimalnath Narichania Ors. reported in 2010 9 SCC at pg. 437, 446 and 451 wherein at paragraph 15 and 35 it is observed as under: - 15. No litigant can derive any benefit from the mere pendency of a case in a court of law, as the interim order always merges into the final order to be passed in the case and if the case is ultimately dismissed, the interim order stands nullified automatically. A party cannot be allowed to take any benefit of his own wrongs by getting an interim order and thereafter blame the court. The fact that the case is found, ultimately, devoid of any merit or the party withdrew the writ petition, shows that a frivolous writ petition had been filed. The maxim actus curiae neminem gravabit, which means that the act of the Court shall prejudice no one becomes applicable in such a case. In such a situation, the court is under an obligation to undo the wrong done to a party by the act of the Court. Thus, any undeserved or unfair advantage gained by a party invoking the jurisdiction of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court whose order is impugned is sustainable in law and whether it has adopted the correct approach to sub-serve the purpose of justice delivery system, therefore, it is essential that the courts should record reasons for their conclusions, whether disposing of the case at admission stage or after regular hearing. 13. At the cost of repetition, we may notice, that this Court has consistently taken the view that recording of reasons is an essential feature of dispensation of justice . A litigant who approaches the court with any grievance is entitled to know the reasons for grant or rejection of his prayer. Reasons are the sole of orders. Non-recording of reasons could lead to dual infirmities; firstly, it may cause prejudice to the affected parties and secondly, more particularly, hamper the proper administration of justice. These principles are not only applicable to administrative actions but they apply with equal force and in fact, with a greater degree of precision to judicial pronouncements. A judgment without reasons causes prejudice to the person against whom it is pronounced, as that litigant is unable to know the ground which weighed with the court in rejecting his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reasons facilitate the process of judicial review by superior Courts. h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice. i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. j. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phone Electric Co. (3) reported in (1915) 1 Ch. 503 and Kaye v. Croydon Tramways (4) reported in (1898) 1 Ch. 358 in support of the propositions that the notice did not fairly disclose the purpose for which it was called and secondly that the notice of extraordinary meeting should be one to enable the shareholder to determine if he ought to attend it. In other words counsel for the plaintiff contended that the test would be whether the real fact was placed before the shareholders. Thirdly, counsel for the plaintiff contended that there was no full and frank disclosure of facts on which the shareholders were asked to vote. Mr. Advocate- General relied on the unreported decision of the Appeal Court in Appeal from Original Decree Nos. 142 and 143 of 1953. where all these cases were considered. Two broad principles can be extracted from the authorities. First, that notice must be fairly and intelligently framed and it must not be misleading or equivocal. A benevolent construction cannot be applied. Secondly, some matters must be brought pointedly to the attention of the shareholders, for example, where the directors are interested in a contract or matter which is to be submitted to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular accompanying it did not give the shareholders information that important changes were in contemplation. Consequently they did not attend the meeting, and in their absence resolutions were passed bringing into force new Articles of Association and sanctioning an agreement with the managing agents by which the interests of the shareholders were seriously affected to their detriment. It is admitted that three of the directors are members of the firm of the managing agents D.N. Petit Sons Co., and it is argued that this fact was concealed from the shareholders. The managing agents of the company have admittedly been the agents for fifty years ever since the mills were started but up till now there had been no formal agreement between them and the company. It was at this meeting that a formal agreement was entered into and the Articles of Association were brought up to date. There is no doubt that the alteration of the Articles of Association and the agreement entered into with the managing agents are matters of the greatest importance to the interests of the company. In the course of the arguments in this case counsel had dealt in detail with the numerous Articles which hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the case depends to a great extent on the terms of the circular, it will be necessary to give the substance of it. The circular says: Accompanying this letter is a notice convening an extraordinary general meeting of the company for 15th February 1927, to consider and if thought fit to approve the adoption of new Articles of Association in substitution for and to the exclusion of all the existing Articles of Association, to approve an agency agreement between the company and the agents and to alter certain of the provisions of the Memorandum of Association. The share-holders of the company will no doubt desire to know the reason for the proposed changes. The company was incorporated and registered in the year 1876 with the existing Articles of Association as its regulations since when the Companies Act 1882 and the Companies Act 1913 have been passed and considerable alteration in the law of companies has been made. Your directors have therefore thought it advisable to bring the articles of association of the company more up to date and into line with the provisions of the Companies Act 1913 as amended up to 1920. Your directors would assure you in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proposed agreement ??? be found in Cl. 17 which provides for the payment of compensation to the agents in ??? event of the company being wound up ??? for the purpose of reconstruction or???. This is in accordance with the preset day practice in Bombay, which practice ??? directors consider should be followed in the ca of this company more particularly having ??? to the long and valuable services extern ??? over more than 50 years rendered by ??? agents and their predecessors in business to ??? company. As regards the proposed alteration in the memorandum of ??? para, (o) and (p) of Cl. 3 have become illegal and therefore inoperative by reason of Section 55(1) of the Companies Act, 1913. Para. (n) restricted the investment of surplus funds to Government Securities. The directors are of opinion that this restriction is too narrow under present day conditions and that batter use can be made-of the surplus funds of the company if the power of investment is enlarged so as to permit the surplus funds to be placed on deposit at interest with banks. 16. The directors therefore plainly put before the shareholders the fact that the proposed agreement included a clause for compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agreement and the rights of the said firm hereunder to any person firm or company having authority by its constitution to become bound by the obligations undertaken by the said firm hereunder and upon such assignment being made and notified to the company the company shall be bound to recognize the person firm or company aforesaid as the agents of the company in like manner as if the name of such person firm or company had appeared in these presents in lieu of the names of the partners of the said firm and as if such persons firm or company had entered into this agreement with the company and the company shall forth with upon demand by the said firm enter into an agreement with the person firm or company aforesaid appointing such person firm or company the agents of the company for the then residue of the term outstanding under this agreement and with the like powers and authorities remuneration and emoluments and subject to the terms and conditions as are herein contained. 19. It is contended that by thus drawing the major portion of their commission half -yearly the company is deprived of interest on the amount. This, I think, is a minor point, but it is very doubtful whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade on a fair and reasonably full statement of the facts upon which the directors are asking the shareholders to vote, and that the notice coupled with the circular was not frank, not open, not clear, and not in any way satisfactory. In MacGomiell v. E. Prill Co., Ltd. , it was held that notice of a meeting of a company to increase or sanction the increase of the share capital of a company is not sufficient if it merely refers generally to a proposed resolution to increase the share capital; it must show an intention to make the specific increase embodied in the resolution that is actually passed. In Tiessen v. Henderson it was held that notice of an extraordinary general meeting must disclose all facts necessary to enable the share-holders receiving it to determine in their own interest whether or not they ought to attend the meeting, and pecuniary interest of a director in the matter of a special resolution to be proposed at the meeting is a material fact for this purpose. Kaye v. Croydon Tramways Company was a case in which part of the purchase-money of the company was to be paid not to the share-holders but to the directors, and it was held that the notice was artfully framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to have been omitted. In this case the real difficulty is that while the circular pointedly calls the attention of the shareholders to the proposed arrangement for compensation to the managing agents in the event of the company being wound up, it refers to para. 17 of the proposed agreement as containing the only real difference between the existing terms of the agency and the proposed agreement. I hold that so far as the question of compensation to the managing agents is concerned, the share-holders had sufficient notice and the omission to mention the amount of the compensation is not sufficient to invalidate, the notice. The share-holders were put on inquiry to see what the nature and extent of the proposed compensation was. They were given an opportunity of inspecting the resolutions to be proposed at the meeting, and if they did not avail themselves of it and did not attend the meeting, that is their own fault. But the difficulty arises from the fact that no reference is made in the circular to the other alteration in the terms of the agreement with the agents, viz., the power of assignment and the compulsory continuance of the same agency by any company which took over t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aise money on behalf of the company which they did not possess under the Articles of Association, but that argument has had to be given up since under Articles 75-A and 75 B of the old Articles and Cls. 3(k) and 3(1) of the old Memorandum of Association the power of raising money by debentures was given to the directors: of p. 19 of the old Articles, S. 75, Cl. (i). The learned counsel for the plaintiff had to admit this was a complete answer to his argument on that point. Various objections have been taken to the alterations in the Articles of association, but they are really none of them of very great importance. The one to which much argument has been devoted is the question of the indemnity of the directors under the old and the new Articles. Under the old Articles 85 and 86 and the new Articles 183 and 184 the exceptions to wilful acts and defaults have been omitted, and the words wilful dishonesty substituted. There is nothing about this in the circular. The restrictions on the right of transfer, old Article 30, new Article 44, and the regulations as to the appointment of directors, old Article 78, new Article 133, also the restrictions on the inspection of accounts and disco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, brings to the notice of this Tribunal, the decision of the Hon ble Madras High Court in V.G. Balasundaram and Others Vs. New Theatres Carnatic Talkies Pvt. Ltd. and Others reported in (1993) 77 Comp Cas 324, wherein at paragraph 29, 33 39, it is observed as under: 29. In two decisions of our High Court and the Patna High Court respectively Self Help Private Industrial Estate Private Ltd., In re, [1972] 42 Comp Cas 605 (Mad) and Parikh Engineering and Body Building Co. Ltd., In re, [1975] 45 Comp Cas 157, it has been held by two learned judges that for want of proper or sufficient notice or other defect in procedure a special resolution is not effective. 33. It is also seen that the petitioners sent a telegram on January 5, 1981, itself. There is also a dispute as to what happened on January 5, 1981, in the said meeting. It is seen from the proceedings of the first respondent company under subject No. 3 that according to the members as soon as this subject was taken up Shri V.G. Sundar Raj moved a resolution that subject No. 1 of the agenda to be deferred to another date and that the same may be considered by the general body at the adjourned meeting. The above said r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. (b) The said resolution was seconded by Sri V.B. Jagadeesan and the resolution was then put to vote and declared and carried by the chairman on show of hands by three members voting for the resolution and Sri V.B. Gopalakrishnan voting against the resolution. (c) Sri V.B. Jagadeesan proposed another resolution, proposing to appoint Sri V.B. Gopalakrishnan as director of the company. (d) The said resolution was seconded by Shri V.B. Devarajan and then the said resolution was put to vote and declared and carried by show of hands unanimously. (e) The meeting terminated with a vote of thanks to the chair. The minutes of the meeting was signed by the chairman of the meeting. 39. Let me now deal with the validity of the meeting said to have been held on June 11, 1973. 42. The Learned Counsel for the Appellant, points out the decision of the Hon ble Bombay High Court, in Firestone Tyre and Rubber Co. Vs. Synthetics and Chemicals Ltd. and Others reported in 1969 SCC OnLine Bom 49, wherein at paragraphs 68, 69 to 72, 77 81, it is observed as under: 68. According to the plaintiffs the said notices ought to have set out the nature of the concern or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from this angle. The said letter dated July 28, 1965, was a show cause notice issued by the Company Law Board under section 294(5) on the ground that it appeared to the Company Law Board that the terms of appointment of the private company were prejudicial to the interests of the company. By this letter the company was required to show cause why under section 295(5)(c) the terms and conditions of the appointment of the private company should not be varied. This matter was at that time considered so important that a sub- committee of the directors was formed to consider it. Ultimately, by its said letter dated June 15, 1966, the Company Law Board decided not to take any further action in the matter at that stage. The said communication, however, expressly stated that: The Board would suggest, however, that at the time of the renewal of the agreement with the sole selling agents in 1968, your company should bear in mind the views of the Board which were communicated to you in their letter of even number dated the 28th July, 1965, read with their letter of even number dated the 18th September, 1965. 69. It was submitted by the contesting defendants that this was merely a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a material fact under section 173(2) and had to be set out in the explanatory statement to the notice of the meeting. The views expressed by the Company Law Board would have certainly played a part, and perhaps an important part, in enabling the company's shareholders to make up their minds whether to vote for approval of the further appointment or not. 71. The contention that the matter was closed by the said letter dated June 15, 1966, is too naive and is belied by subsequent events. By its letter dated April 9, 1969, headed Sole selling agents; terms and conditions of appointment under section 294(5) of the Companies Act, 1956 , the Company Law Board called upon the company to clarify how the renewed agreement was proposed for approval of the shareholders without reference to the views of the Board communicated to the company earlier. The concluding paragraph of that letter stated: From the perusal of the renewed agreement, it appears, prima facie, that the terms are prejudicial to the interests of your company and this Board will have to examine to what extent the terms and conditions require modification or abrogation. You are, therefore, hereby informed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard meeting held on March 27, 1969, one of the resolutions passed was that the secretary of the company should send out notices of the said two meetings together with the explanatory statements in consultation with the solicitors of the company. This shows that neither the explanatory statements nor their drafts thereof were placed before the board meeting, much less approved. 81. This again is a misleading statement, for the relevant and important words in the Company Law Board's communication, namely, that your company should bear in mind the views of the Board which were communicated to you in their letter of even number dated 28th July, 1965, read with their letter of even number dated 28th September, 1965 , were omitted and substituted by dots, thus suggesting that the Company Law Board had no objection to the renewal of the agreement in the same form in 1968. In my opinion, this omission is deliberate and made with the intention to mislead, particularly in view of the letter dated April 9, 1969, from the Company Law Board to which I have already referred above, which letter was certainly known to Tulsidas but most certainly not known to the other shareholders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter dated 22nd April, 1969. I say that there was no necessity for the said letter dated the 9th April, 1969, being circulated to the board of directors of the 1st defendant company as the same had been adequately dealt with and, as no further communication had been received from the Company Law Board, the said letter dated the 9th April, 1969, was dealt with in the ordinary course after consulting the solicitors of the 1st defendant company. I deny that the said letters dated the 9th April, 1969, and 22nd April, 1969, were wrongfully or with mala fide intention suppressed as alleged. I say that the said letter and the reply was placed at the first board meeting of the 1st defendant company held thereafter. 43. The Learned Counsel for the Appellant, adverts to the decision of the Hon ble Calcutta High Court in Asansol Electric Supply Co. and others Vs. Chunnilal Daw reported in AIR 1972 Cal 19, wherein at paragraphs 34 to 38, it is observed as under: 34. In the instant case, the resolution to the effect that the post of Supervisor was to be abolished and that Chunnilal Daw was to be appointed a store-in-charge from May 1, 1963 and that he ceased to hold and to continue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... void and ultra vires. In the eye of law, such resolution is to be deemed as being never in existence. 38. Such an event took place when the company, in the instant case, purported to pass a resolution which was not at all notified in gross violation of the mandatory obligations under the statute. The resolution impugned in the suit is accordingly void and ultra vires and has no existence in law. The plaintiff accordingly became entitled to a declaration prayed for in prayer (a) of the plaint. As consequential reliefs the plaintiff is also entitled to further reliefs as decreed by the courts below. 44. The Learned Counsel for the Appellant, falls back upon the decision of the Hon ble Gujarat High Court, in Mohanlal Ganpatram and another Vs. Shri Sayaji Jubilee Cotton and Jute Mills Co. Ltd. and others reported in AIR 1965 Guj 96, wherein at paragraph 60, it is observed as under: 60. It is, therefore, clear that regard must be had to the whole scope and purpose of the statute for the purpose of determining whether the statute is mandatory or directory. Judged by that test, the conclusion is irresistible that Section 173 enacts a provision which is mandatory and not dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Limited for the price of Rs. 11,40,000/- on certain terms and conditions. Whether there was already an agreement between the Company and Bharat Kala Bhandar Limited was immaterial. It was equally immaterial whether the agreement was oral or in writing. All that the meeting was concerned with was whether to accord consent to the sale of the undertaking by the Company to Bharat Kala Bhandar Limited. The agreement of sale between the Company and Bharat Kala Bhandar Limited was not required to be placed for approval of the meeting. Sub-section (3) of Section 173 had, therefore, no application and there was accordingly no non-compliance with the requirements of that sub-section. 45. The Learned Counsel for the Appellant, refers to the order of the Company Law Board , Principal Bench, New Delhi dated 29.10.2003(vide CP No. 40 41 of 2002) between Kishore Kundan Sippy and Ors. vs Samrat Shipping and Transport Systems Pvt. Ltd. and Ors. reported in MANU/CL/0028/2003, wherein at paragraph 18 to 24, it is observed as under: 18. These observations from the four cases referred to above apply to Section 397 also which is almost in the same words as Section 210 of the English Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which it is unnecessary to refer. It will be seen, however, that there is no provision in the agreement as to what would happen if and when the share capital was actually increased beyond the increase envisaged at the time of the agreement. There is also no provision in the agreement to the effect that the articles of association of the private company as it then was would be amended suitably to bring the provisions of the agreement with respect to shareholding and the Board of Directors into line with the agreement. Thus there is nothing in the agreement about the future in the matter of allotment of shares in case capital was actually increased thereafter. In this connection our attention is drawn to the fifth term of the agreement which is in these terms: Ordinary shares of the face value of Rs 4 lakhs held by the French company (Rs 3,75,000) and Mr Rath (Rs 25,000) will continue to be held by them as heretofore, and none of the parties hereto will have any interest therein so that the shareholding in the Company of all the three parties hereto will remain equal and in the same proportion. It is urged that this term shows that the intention was that the sharehold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of Rs 39 lakhs the question of allotment of these shares arose. By then some differences had developed between the three groups. The appellant wanted the shares to be allotted to the existing shareholders while the Patnaik and Loganathan groups wanted the matter to be decided by a general meeting as evidenced by what happened in the meeting of the Board of Directors dated March 1, 1958. It appears that the decision to issue new shares was taken sometime in 1956 when the Company was a private company. At that time the authorised capital was rupees one crore though only Rs 61 lakhs had been issued. The fresh issue of Rs 39 lakhs worth of shares was thus intended to bring the subscribed capital up to the limit of the authorised capital. The application to the Controller of Capital Issues was made for that purpose on September 17, 1956. At that time the intention was that the issue would be private and would be made to the existing shareholders, directors and/or their nominees. This was bound to be so as the Company was then private. As, however, the Company wanted a loan from the Industrial Finance Corporation and as that Corporation would only grant loans to a public compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e resolution sanctioning the increase of share capital as under Regulation 42 of the First Schedule to the 1913 Act. Consequently it was open to the public company in 1958 when it proposed to increase the subscribed capital after the sanction of the Controller to act under Section 81 and this was what was done by the resolution of March 28, 1958 at the general meeting. The general meeting decided that new shares should not be issued to the existing shareholders but should be issued to others privately. The resolution of March 29, 1958 was in accordance with the law as it stood when it was passed and cannot be said to be vitiated in any way. 23. It is however urged that the notice for the general meeting of the 29th March, 1958 was not in accordance with Section 173, and so the proceedings of the meeting must be held to be bad. This objection was however not taken in the petition and we have therefore not permitted the appellant to raise it before us, as it is a mixed question of fact and law. We may add that, though the objection was not taken in the petition, it seems to have been urged before the appeal court. Das, J. has dealt with it at length and we would have agreed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(57) Comp. cases 12 Bom wherein at paragraph 4, 24, 25 it is observed as under:- 4. In order to consider whether an injunction as prayed for can be granted or not, it is necessary to consider the nature of the requisition which has been received by the petitioner-company and the purpose for which the requisition is made. The resolution which is proposed to be considered at the requisitioned meeting is in two parts. The first part of the resolution calls upon the company to renegotiate with M/s. Brooke Bond India Ltd. and/or to examine alternate schemes in the interest of the company. The main part of the resolution, however, calls upon the company to withdraw Company Petition No. 84 of 1981 (See [1984] 55 Comp Cas 731 (Bom)). The main purpose of requisitioning the meeting of shareholders is to compel the company to withdraw Company Petition No. 84 of 1981 (See [1984] 55 Comp Cas 731 (Bom)) which is a petition for sanctioning the scheme of amalgamation. The resolution itself makes it quite clear that unless Company Petition No. 84 of 1981 is withdrawn, the company cannot either renegotiate with M/s. Brooke Bond India Ltd. or examine any alternative schemes. It was strongly ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the requisitionists, the Brooke Bond Scheme should not be approved. The requisitionists have not put forth any alternative or better scheme for the consideration of the shareholders at the requisitioned meeting. If the purpose of calling the requisitioned meeting is for the shareholders to consider an alternative proposal which may be more beneficial to the company, that purpose is not going to be served by calling the requisitioned meeting. It has been argued before me that in the 30th annual report of the company for the year ending December 31, 1980, it has been mentioned that a modified proposal to lease the company's factory at Aurangabad to M/s. Harbans Lal Malhotra and Sons Ltd. had again been revived and that this has been forwarded to the solicitors and chartered accountants for advice. In the 31st annual report of the company for the year ended December 31, 1981, it has been stated that a proposal to lease the company's undertaking by Harbans Lal Malhotra Sons Ltd., which has been dealt with in the last annual report, has not been further considered in the light of legal advice that such a scheme of leasing would also require the approval of the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Appellant, cites the decision of the Hon ble Supreme Court in Dale and Carrington Invt. (P) Ltd. and Ors. Vs P.K. Prathapan and Ors. reported in 2004 Supp.(4) SCR at pg. 334 wherein at paragraph 11, 16 it is observed as under:- 11. This is the main issue which arises for consideration in this case. As already noted Ramanujam who was the Managing Director of the company got allotted 6865 equity shares to himself in a meeting of the Board of Directors of the company alleged to have been held on 24th October, 1994. Again on 26th March, 1997 he managed to get allotted further 9800 equity shares to himself. Prathapan has challenged these allotments of shares in favour of Ramanujam as acts of oppression on the part of Ramanujam, the Chairman and Managing Director of the company for which he filed a petition under Sections 397 and 398 of the Companies Act before the Company Law Board. A doubt has been cast about whether the alleged meetings in which additional Equity shares were allotted to Ramanujam were held at all. In this behalf the following facts are noticeable:- (a) The appellants have filed a photocopy of the minutes of the alleged meeting of the Board of Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Articles of Association show that the Board of Directors have an absolute discretion in the matter of allotment of shares. But this presupposes that such a decision has to be taken by the Board of Directors. The decision is taken by the Board of Directors only in meetings of the Board and not elsewhere. Ramanujam, the Managing Director cannot take a decision on his own to allot shares to himself. If Suresh Babu was present in the meeting, as is the case of Ramanujam, he must have signed a book specially kept for recording presence of the Directors at the Board Meeting in terms of Article 38.Ramanujam should have been the first person to produce such a book to show the presence of Suresh Babu at the alleged Board meeting said to have been held on 24th October, 1994 specially when Suresh Babu was denying his presence at the meeting. Nothing has been produced. Thus neither a copy of a notice convening the Board meeting nor the log book meant to record signatures of Directors attending the meeting of the Board of Directors were produced. In the absence of these documents and any other proof to show that a meeting was held as alleged we are unable to accept that a meeting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting of the Board of Directors of the company did take place as alleged by Ramanujam. First question that arises is whether the company required additional funds for which the shares were issued. We have already referred to Balance Sheets of the company, copies whereof have been placed on record. Till 31st March, 1993 the Balance Sheets did not show any investment of substantial amounts of money in the company. It is the Balance Sheet for the year ending 31st March, 1994 which for the first time shows an advance of Rs. 6,86,500/- towards share capital pending allotment. Nothing has been placed on record to show that during the financial year 1993-94 i.e. 1st April, 1993 to 31st March, 1994 suddenly need had arisen for a substantial investment. The company was running a hotel, the property whereof was owned by the company. No particular reason for making a major investment has been shown. Nothing has been shown as to how the amount of Rs. 6,86,500/- was utilised. It appears that Ramanujam who was managing the affairs of the company single handedly, realized that the company had turned around and the Hotel property had appreciated in terms of its market value. He started working on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not exercise its option to buy the share. On appeal the Division Bench held that the affairs of Needle Industries India Ltd. were being conducted in a manner oppressive to the Holding Company. The Division Bench ordered winding up of the company. A further appeal to the Court was allowed mainly on the ground that there was no oppression. However, a direction was issued that the Indian shareholders pay an amount equivalent to that by which they unjustifiably enriched, namely Rs. 90 x 9495 which comes to Rs. 8,54,550/- to the Holding Company. 48. The Learned Counsel for the Appellant, refers to the decision of Hon ble Supreme Court in Shanti Prasad Jain Vs. Kalinga Tube Ltd. AIR 1965 at pg. 1535 wherein at paragraph 13 to 18 it is observed as under:- 13. We shall first take up the case under Section 397 of the Act and proceed on the assumption that a case has been made out to wind up the company on just and equitable grounds. This is a new provision which came for the first time in the Indian Companies Act, 1913, as Section 153. That section was based on Section 210 of the English Companies Act, 1948, which was introduced therein for the first time. The purpose of introdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as power to make such orders under Section 397 read with Section 402 as it thinks fit, if it comes to the conclusion that the affairs of the company are being conducted in a manner oppressive to any member or members and that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts might 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 law, however, has not defined what is oppression for purposes of this section, and it is left to courts to decide on the facts of each case whether there is such oppression as calls for action under this section. 16. We may in this connection refer to four cases where the new Section 210 of the English Act came up for consideration, namely : Elder v. Eider and Watson, [1952] S.C.49 ; George Meyer v. Scottish Co-operative Wholesale Society Ltd., [1954] S.C. 381 ; Scottish Co-operative Wholesale Society Ltd. v. Meyer, [1958] 3 All E.R. 56; [1959] 29 Comp. Cas. 1 (H.L.) which was an appeal from Meyer's case, and In re H. R. Harmer Limited, [1938] 3 All E.R. 689 ; [1959] 29 Comp. Cas 305 (C.A.). Among the important considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , with resulting loss to the minority shareholders, this may amount to oppression within the meaning of Section 210 to ; (3) that the conduct of a majority shareholder may amount to oppression notwithstanding the fact that his own shares depreciate in value pro rata with those of the minority ; and (4) that, even if the majority shareholder has virtually destroyed the substratum of the company by his oppressive conduct and it is conceded by all parties to be just and equitable that the company be wound up, the oppressed minority may nevertheless be entitled to a remedy under Section 210. 18. These observations were approved by the House of Lords in appeal and it was held that whenever a subsidiary is formed as in this case with an independent minority of shareholders, the parent company must, if it is engaged in the same class of business, accept as a result of having formed such a subsidiary an obligation so to conduct what are in a sense its own affairs as to deal fairly with the subsidiary. 49. The Learned Counsel for the Appellant, cites out the decision of the Hon ble High Court of Kerala in K Meenakshi Amma K Vs. Sreerama Vilas Press and Publications(P) Ltd. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... men of the charge against the notice is that it has not complied with the provisions contained in section 173 of the Companies Act. The articles of association provide for the nature of the notice to be sent to the effect that what has to be done is to inform the members of the company of the general nature of the business to be transacted at the meeting. The learned single judge observed that since there is a specific provision in the articles of association regarding the notice of a general meeting where special business is to be transacted, section 173 of the Companies Act may not apply to the present case. Further, the company court said that the notice issued contains all material facts concerning the business that was to be transacted in the meeting, viz., election of managing director and directors and that the order to convene the meeting was passed after hearing all parties and the notice itself was approved by the company court. It was also pointed out that the meeting was convened by the chairman appointed by the company court and not exactly by the company. The intent and purpose of section 173 of the Companies Act is to give directions to the shareholders in the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant submitted before us that the provision contained in section 257(1A) of the Companies Act has not been complied with. It is contended that section 257(1A) of the Companies Act mandates the company to inform its members of the names of the persons who proposed to stand for election to the board of directors. In order to understand this submission of counsel for the appellant, we feel that it is apposite to quote section 257 of the Companies Act. 257. Right of persons other than retiring directors to stand for directorship. (1) A person who is not a retiring director shall, subject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member intending to propose him has, not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be, along with a deposit of five hundred rupees which shall be refunded to such person or, as the case be, to such member, if the person succeeds in getting elected as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Messrs. B.M.T. Commodity Corporation is also a Director of this concern. Further an American who has experience for quite a long number of years in the trade of jute products is also a Director of Delca International Corporation. As such your Directors have thought it fit that they would be in a position to market the products of your company which they have undertaken, in larger areas. If this arrangement is approved by the Reserve Bank of India, Messrs. B.M.T. Commodity Corporation have agreed for termination of their agreement entered into with your company by mutual consent. Further Delca International Corporation have agreed to take over all the outstanding forward contracts entered into between B.M.T. Commodity Corporation and the Company. The terms fixing the selling price are reasonable and are being allowed by others in the trade. The share-holders are requested to give their approval for this resolution. 38. Section 173(1)(a) provides as follows: Section 173(1): For the purposes of this section (a) In the case of an annual general meeting, all business to be transacted at the meeting shall be deemed special, with the exception of business relating to ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther important deviation is that there is no express provisions as to what is to happen if at the general meeting at which the matter is brought up before the company the share-holders do not expressly disapprove of the appointment. In my opinion this omission is of no significance. In such a case under the agreement itself the appointment would cease to be valid by virtue of the operation of sub-section (2) of section 294. The net result seems to be that the period of six months is done away with but the Directors are not free to make the appointment except on condition that it would cease to be valid if not approved by the company in a general meeting. The general meeting was to decide the fate of the appointment. If it disapproves the same it would cease to be valid under sub-section 2(A) and if it did not approve of it, it would cease to be valid by the operation of the agreement itself. It was argued before us that section 294 was only directory and not mandatory as no penal provision was attached thereto. I find myself unable to accept this argument. The words of the Statute are quite clear in that it prohibits the Directors from entering into a contract with a sole selling a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Company for the period, at the remuneration, and on the terms contained in the draft of an agreement, providing for the same, submitted to this Meeting and signed in the margin by the Chairman of the Meeting by way of identification, which said agreement be and the same is hereby approved and that the Directors shall be and they are hereby authorised to carry the said agreement into effect as on and from the 1st day of October, 1947, with full liberty, subject nevertheless to the provisions of the Indian Companies Act, 1913, to agree to any modification of such agreement before the same is executed . 22. But Mr. Mitter has overlooked a further statement which occurs in the same paragraph in Mr. Palmer's book: And in some cases it may be deemed expedient to send printed copies of the proposed new Articles with the Notices. According to the decision of Kekewich, J., in Normandy v. Ind. Coope Co (1) [(1908) 1 Ch. 84], the notice should call attention to any material alterations and in Baillie v. Oriental Telephone and Electric Co. (2) [(1915) 1 Ch. 503], the Court of Appeal (in England) Held that the notice of a proposed resolution to after Articles involving a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not sent to the shareholders. Mr. Mitter's contention was that that might be so, but the shareholders had notice that the new Regulations were lying at the registered office of the company; so it was not necessary to send the documents to them. According to Counsel it was quite sufficient to tell them that they could have inspection of the new Regulations at the registered office of the Company, and for this contention he relied on Mr. Palmer's observation which I have already set out. 25. But it should be observed that Mr. Palmer did not say that it was not necessary to send copies of the proposed Articles with the Notice. All that he said was that where a large number of alterations had to be made, it was generally more convenient to adopt a new set of Articles altogether and that where this course was adopted, a copy of the new Regulations should lie for inspection at the registered office of the Company, and the notice convening the Meeting should state that fact. But nowhere did he say that it was not necessary to send copies of the new proposed Regulations with the notices. On the other hand, from the latter passage which I have quoted, it is clear that the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, the Indian Textile Syndicate Ltd., and the Cotton Textile Corporation Ltd., one of which companies has been appointed the Selling Agent of the defendant company. It is quite clear therefore that the three partners through the said two Companies have acquired a preponderance of voting power in the defendant Company and is in a position to divide practically the entire profit of the Company amongst themselves. On these facts we are of opinion that it was necessary for the defendant Company to disclose to the shareholders the controlling interest of the partners in the two Companies. But that was not done. An argument is quite plausible that the notice deliberately withheld material facts from the knowledge of the shareholders including the plaintiffs and committed fraud on the plaintiffs. In this case it may be fairly argued that not only there has been a suppression of true facts, but also a false suggestion. Such an argument, we cannot say, would be unreasonable. 52. The Learned Counsel for the Appellant, relies on the decision of the Hon ble High Court of Kerala in Mathrubhumi Printing Publishing Company vs. Vardhman Publishers Ltd. reported in 1991 SCC OnLine Ker 453 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial fact. The personal concern or interest of the directors in the special resolution suggested by learned counsel, for the petitioner is far-fetched. Sub-section (2) of section 173 only mentions the nature of the concern or interest, if any of every director in the concerned item of business. By the alteration the power is conferred on the board of directors as a whole and not on any single director. In any view of the case the wording of the resolution itself was self-explanatory which did not require any further explanatory statement about the powers to be conferred on the board of directors. Accordingly I hold that the notice and explanatory statement of the extraordinary general meeting were legal and valid. 39. The findings based on which the learned single judge answered the second question in favour of the company are extracted hereunder: In the resolution as proposed in the notice there were two clauses in the new article 17. Clause (b) related to forfeiture of equity shares. The minutes of the extraordinary general meeting (Annexure R-1(e) to the counter affidavit on behalf of the first respondent in C.P. No. 29 of 1989 dated 9th November, 1989), shows tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, takes an emphatic stand, that the Appellant, had failed to point out any provision of Law, which prohibits a matter i.e. part heard by the Division Bench of a Court from being heard further by the single Bench of the said court. 55. Expatiating his submission, the Learned Counsel for Respondents No. 1, 11, 13 and 15 comes out with a stance that the Appellant had not raised any objection before the Hon ble Member (Judicial) of the National Company Law Tribunal , Bengaluru Bench Hearing the Part Heard matter on 25.10.2019, sitting singly on the said date of Hearing , nor did he assailed, the same at any time, thereafter, until the filing of the Appeal . 56. The Learned Counsel for Respondents No. 1, 11, 13 and 15, takes an emphatic stand that the Appellant had not objected to the Hon ble Member (Judicial) of Bengaluru Bench, hearing the part-heard matter on 25.10.2019, sitting singly either on the said date of hearing, and further the Appellant had not questioned the same, at any point of time, subsequently, till the filing of the instant Appeal . 57. In this connection, the Learned Counsel for the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not rest on the foundation that acquiescence, confers jurisdiction but on the rationale that the High Court will be justified in refusing to exercise its jurisdiction in favour of a person who has either by reason of lack of diligence or by design remained on the fence, allowed the authority to pass an order and seeing that the same has gone against him turned round to challenge its competence, to have done so. 20. In any such situation, it would be reasonable to infer that the party making the grievance about the competence of the subordinate authority, acted unfairly in not raising the objection at the very outset; It would also be reasonable to assume that he did so, deliberately hoping that the final order to be passed by the authority would be in his favour, but finding it go against him, he attacks the same as being without jurisdiction. In other words the person concerned indulges in what may be termed as 'diluted deception' by keeping quite, when he was, in fairness to all those concerned with the proceedings before the authority, under an obligation to speak out. He attempts by his silence to secure a favourable verdict, which if given, would have buried for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts out that, in a petition filed u/s 241of the Companies Act, 2013 the Petitioner , must satisfy, not just qualitative, qualifications, mentioned in Section 244 of the said Act, 2013, but also the qualitative aspect of the shareholding viz., the mode, method and manner in which the petitioner had acquired shares for the purpose of maintaining his petition and this position was laid down in the context of Section 399 of the Companies Act, 1956 (now Section 244 of the Act of 2013) in an unreported order of the Principal Bench of Company Law Board in CP No. 57 of 2004 through an order dated 19.10.2009 in Shri Jodh Raj Laddha Ors. Vs. Birla Corporation Ltd. Ors., as seen, from the order dated 20.04.2011, of the Hon ble High Court of Calcutta, in Shri Jodh Raj Laddha Ors. Vs. Birla Corporation Ltd. Ors. APO No. 399 of 2009 and APO 274 of 2009, reported in MANU/WB/0269/2011(vide paragraph 3) wherein it is observed as under: 3. In this matter, the Appellants' case has been argued by Mr. S. B. Mukherjee, Mr. Sudipto Sarkar and Mr. P. S. Sengupta, learned Counsel whereas on behalf of the Respondents argument has been advanced mainly by Mr. Anindya Kumar Mitra, Mr. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is to be noted that in that case, the transferor of the shares whose name continued in the register of members gave a power of attorney to the transferees to file a petition under Sections 397/398. A challenge was taken that the transferees, not being the members, had no personal interest in the affairs of the company. On this contention the court held In the present case, there is nothing in Section 397 Or Section 398 To indicate that any special personal skill, judgment or quality of a member is required to be used when a member exercises his right under Section 397 Or Section 398. In a broad sense every person who is required to exercise any right or privilege is required to apply his mind. But this does not disable him from appointing an agent to exercise that right or privilege. In fact, there may be a number of cases where a person concerned may be unable to apply his mind, e.g., an illiterate person who is not aware of the facts or a person who is too ill or infirm to exercise the power. Such persons are entitled to appoint an agent to look after their affairs. It is the agent who will apply his mind to the affairs of his principal and use his own judgment. Members who a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tar relevantly referred to the judgment of the Supreme Court in Gwalior Sugar (MANU/SC/0927/2004 : 2005 1 SCC 172) case, wherein regarding Section 399, the Supreme Court has observed The object of prescribing a qualifying percentage of shares in the Petitioners and their supporters to file petitions under Sections 397 and 398 is clearly to ensure that frivolous litigation is not indulged in by persons who have no real stake in the company. However, it is of interest that the English Companies Act contains no such limitation. What is required in these matters is a broad common-sense approach. If the court is satisfied that the Petitioners represent a body of shareholders holding the requisite percentage, it can assume that the involvement of the company in litigation is not lightly done and that it should pass orders to bring to an end the matters complained of and not reject it on a technical requirement . This would show that a petition under Section 397/398 can be filed only by those, even if qualified under Section 399, having some real stake in the company. As I have observed earlier in this paragraph, from the manner, mode and method of acquisition of shares, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down that quantitative qualification in Section 399 is not the only criteria for determining maintainability but qualitative aspect of the shares should also be considered. Relying thereon, the respondents have submitted that the mode and manner of obtaining consent from other shareholders that predates the filing of the present petition is proof enough to show that the petitioners have not satisfied the qualitative requirement of shareholdings. On the other hand, the petitioners' case is solely based on the concept of the parties acting as a group and equal partnership. However, before rendering any opinion, it will be worthwhile to consider other aspects canvassed before the Board. 61. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, proceeds to make a pertinent mention that the alleged cause of action for the Appellant, filing his petition, making an averment of oppression and mis-management , before the Tribunal, at first arose on 19.02.2015 and later, on 10.11.2015, 22.12.2015 and 01.01.2016, respectively and that the Appellant s shareholding in the Company, on each of the aforesaid dates was less than 10%. As on 19.02.2015, the Appellant had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed the requisite shareholding, at the relevant point of time , when the alleged cause of action arose. Furthermore, meeting a qualitative criterion is an established fact in equitable proceedings, under Section 397of the Companies Act, 1956 and Section 241 of the Act of 2013, the Appellant s petition, was not maintainable, as held, in the decision in Kishore Samrite V. State of U.P. and Ors. reported in (2013)2SC C 398, wherein at paragraphs 29, 33-36, it is held as under: Abuse of the process of Court: 29. Now, we shall deal with the question whether both or any of the Petitioners in Civil Writ Petition Nos. 111/2011 and 125/2011 are guilty of suppression of material facts, not approaching the Court with clean hands, and thereby abusing the process of the Court. Before we dwell upon the facts and circumstances of the case in hand, let us refer to some case laws which would help us in dealing with the present situation with greater precision. The cases of abuse of the process of court and such allied matters have been arising before the Courts consistently. This Court has had many occasions where it dealt with the cases of this kind and it has clearly stated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roblems of unredressed grievances and the Court should endure to take cases where the justice of the lis well-justifies it. [Refer: Dalip Singh v. State of U.P. and Ors. MANU/SC/1886/2009 : (2010) 2 SCC 114; Amar Singh v. Union of India and Ors. MANU/SC/0596/2011 : (2011) 7 SCC 69 and State of Uttaranchal v. Balwant Singh Chaufal and Ors. MANU/SC/0050/2010 : (2010) 3 SCC 402]. 33. The party not approaching the Court with clean hands would be liable to be nonsuited and such party, who has also succeeded in polluting the stream of justice by making patently false statements, cannot claim relief, especially under Article 136 of the Constitution. While approaching the court, a litigant must state correct facts and come with clean hands. Where such statement of facts is based on some information, the source of such information must also be disclosed. Totally misconceived petition amounts to abuse of the process of the court and such a litigant is not required to be dealt with lightly, as a petition containing misleading and inaccurate statement, if filed, to achieve an ulterior purpose amounts to abuse of the process of the court. A litigant is bound to make full and true dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o file misconceived and frivolous petitions. (Buddhi Kota Subbarao (Dr.) v. K. Parasaran, MANU/SC/0678/1996: (1996) 5 SCC 530). That apart, the Learned Counsel for R1, 11, 13, and 15, refers to the decision, in Srikanta Datta Narasimharaja Wadiyar V. Sri Venkateswara Real Estate Enterprises (Pvt.) Ltd. and Ors., reported in [1991] 72 Comp Cas 211(Kar), wherein, at paragraph 18, 20, it is mentioned as under: 18. A consideration of all these legal issues will necessarily take me to the detailed objections filed by the respondents. But the question is whether, on the facts of these cases, this court should go into the objections and determine the issues for consideration on merits. In my considered view, this petition could be disposed of on the preliminary issue, viz., whether the petitioner has filed this petition in good faith in order to work out his rights within the framework of the Act. It is well-settled that the relief under sections 397 and 398 of the Act is an equitable relief which is entirely left to the discretion of the company court. In the 5th edition of Pennington's Company Law, dealing with relief from acts of oppression, it is stated (at page 750): ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerns only the issue as to the 2nd respondent holding Office as Managing Director of the 1st respondent. However, the relief claimed in the said suit is almost identical with the relief claimed in the Company Petition. It is only when a preliminary objection is raised about the maintainability of the company petition, the said suit seems to have been withdrawn later on. Merely because, the appellants/petitioners have withdrawn the suit on subsequent date, the same will not absolve them about their conduct in not approaching the Company Law Board with clean hands. Hence, we do not agree for the grant of relief the appellants on this score also. 15. Further, as per the various decisions rendered by this Court as well as the Supreme Court, it is the duty of the courts to recognize the Corporate Democracy of a company in managing its affairs. The court should not restrict the powers of the Board of Directors and it shall not interfere with the day to day affairs and management and administration of the company. The principles laid down in the decisions rendered by this court in Vivek Goenka v. Manoj Sonthalia [1992] 2 ML J 163; G. Kasturi v. N. Murali MANU/TN/0075/1990 : [1992] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the stage of Final Hearing , uninfluenced by the decision, made in the impugned order . 69. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, brings to the notice of this Tribunal, that while passing the final order, on 27.11.2019 in CP No. 486/2018, the Tribunal was required to reconsider the issue of maintainability , because of the directions issued by the Appellate Tribunal and the Tribunal , uninfluenced of its earlier order dated 30.05.2019, rightly had reconsidered, the question of maintainability , of the Appellant s petition, at the stage of Final Hearing coupled with the consideration of matters, touching upon the merits of the case, including the Appellant s conduct, and qualitative, analysis of its shareholding, therefore, no fault, can be found in the Tribunal s order, as contended by the Respondents No. 1, 11, 13 and 15 side. 70. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, points out that there is no infirmity in the Postal Ballot Notice dated 10.11.2015, issued by the 1st Respondent / Company and a mere perusal of the Minutes of the Board Meeting, of 04.11.2015 the Board had approved, the issuance of Postal Ballo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he resolution or the draft of the resolution to be proposed at the meeting. Its purpose is that the members should be informed of the nature of the business to be transacted at the general meeting. As held by the Calcutta High Court in the case of East India Commercial Co. Private Ltd. v. Raymon Engineering Works Ltd., MANU/WB/0055/1966: AIR 1966 Cal 232, it is not the function of an explanatory statement to travel beyond the scope of the proposed resolution. Material facts have to be given but not detailed particulars. Considered in that light item No. 8 of the explanatory statement if read harmoniously with the contents of the resolution quoted in paragraph 8 of the notice, discloses no contradiction in terms. Existing shareholders will be those members holding equity shares as per the register of members on the date to be decided by the board of directors, as indicated in the proposed resolution quoted in item No. 8 of the notice. It is well settled that provisions like Section 173(2) of the Act should be understood in a meaningful manner and not to be construed rigidly so as to hamper the conduct of business. Added further on behalf of R1, 11, 13 15, a reference, is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, much less to R12, 13 and 15, who are total strangers to the 1st Respondent /Company at the said point of time . Therefore, there arose no question of disclosing such information in the Postal Ballot Notice , of 10.11.2015. In effect, there was no infirmity in the contents of Postal Ballot Notice nor was any material fact supressed by the 1st Respondent / Company by issuing notice. 74. According to the Respondents No. 1, 11, 13 and 15, it is not the case of the Appellant that if the information was made known to him before the Postal Ballot voting, then he would have voted in a different manner, with a view to prevent such joint development. But the fact of the matter is that the Appellant had voted against the Resolution for Joint Development and that the Appellant has miserably failed to prove as to how he is aggrieved, in his capacity as shareholder of the 1st Respondent / Company, by the Postal Ballot Notice and the alleged non-disclosure of material information therein. 75. The Learned Counsel for Respondents No. 1, 11, 13 and 15, points out that an overwhelming 91.13% of the shareholders of the 1st Respondent / Company, present and voting, appreciating and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in cases of this type, the circumstances have always, I think, been such as to warrant the inference that there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy. Neither the judgment of Bhagwati J. nor the observations in Elder are capable of the construction that every illegality is per se oppressive or that the illegality of an action does not bear upon its oppressiveness. In Elder a complaint was made that Elder had not received the notice of the Board meeting. It was held that since it was not shown that any prejudice was occasioned thereby or that Elder could have bought the shares had he been present, no complaint of oppression could be entertained merely on the ground that the failure to give notice of the Board meeting was an act of illegality. The true position is that an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in pleadings. Nor can it grant a relief which is not claimed and which does not flow from the facts and the cause of action alleged in the plaint. (iii) A factual issue cannot be raised or considered for the first time in a second appeal. Civil Procedure Code is an elaborate codification of the principles of natural justice to be applied to civil litigation. The provisions are so elaborate that many a time, fulfilment of the procedural requirements of the Code may itself contribute to delay. But any anxiety to cut the delay or further litigation, should not be a ground to float the settled fundamental rules of civil procedure. Be that as it may. We will briefly set out the reasons for the aforesaid conclusions. 9. The object and purpose of pleadings and issues is to ensure that the litigants come to trial with all issues clearly defined and to prevent cases being expanded or grounds being shifted during trial. Its object is also to ensure that each side is fully alive to the questions that are likely to be raised or considered so that they may have an opportunity of placing the relevant evidence appropriate to the issues before the court for its consideration. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthy and Ors., MANU/TN/0089/1958 : (1958) 2 MLJ 259. Furthermore, in the decision, Akella Lalitha v. Konda Hanumantha Rao and Anr. reported in 2022 SCC OnLine SC 928, wherein at paragraph 17, it is observed as under: 17. In the case of Trojan Co. Ltd. v. Rm.N.N. Nagappa Chettiar, this Court considered the issue as to whether relief not asked for by a party could be granted and that too without having proper pleadings. The Court held as under: It is well settled that the decision of a case cannot be based on grounds outside the pleadings of the parties and it is the case pleaded that has to be found. Without an amendment of the plaint, the Court was not entitled to grant the relief not asked for and no prayer was ever made to amend the plaint so as to incorporate in it an alternative case. As such the Tribunal could not have traversed into the matters, that were not specifically pleaded by the Appellant through his Petition filed under Section 241 and 242 of the Companies Act, 2013, before the Tribunal , especially when the Respondents had no opportunity to counter the same. 78. The Learned Counsel for the Respondents No.1, 11, 13 15, points out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, and non-disclosure is punitive. Chapter V deals with investigation and action by the Board, which includes the power of the Board to appoint an investigating officer (Regulation 38), the issuance of show-cause notice to the acquirer (Regulation 39), the obligation of the investigating authority to submit a report at the earliest (Regulation 41), the duty to supply the report to the acquirer and give him an opportunity of hearing before passing penal orders (Regulation 42) and lastly, the powers of the Board to take action/pass directions under Chapter VI-A and Section 24 of the SEBI Act (Regulation 44). It is significant to note that Regulation 45 provides for penalties for non-compliance with the said Regulations. The liability will be in terms of the Regulations and the SEBI Act. Here again, the SEBI (SAST) Regulation is a comprehensive scheme providing for inquiry, investigation, submission of report by the investigating officer, procedural safeguards in favor of the acquirer, and finally, the restitutionary order/directions to be passed by the Board. This whole procedure cannot be short-circuited by making an application Under Section 111A of the 1956 Act on the ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot disclosed, before this Tribunal and as such, the Appellant s, contention, that the said Joint Development Property , comprises of the entire Assets and substratum, of the 1st Respondent / Company, is a misleading and baseless one. 83. The Learned Counsel for Respondent No. 1, 11, 13 15, projects an argument that the Joint Development transaction complained of by the Appellant, has resulted in construction / development of a commercial building, of commercial complex, of which the 1st Respondent / Company once more than 2 lacs sq. ft. and also continues to retain ownership over proportionate undivided share in the land comprising the said development. Furthermore, through utilisation officer of such developed property, the company had already garnered potential, to generate rental revenue of Rs.1.25 crores per month, thereby fructifying the original intent of the complained transactions. 84. Besides the above, the Learned Counsel for Respondent No. 1, 11, 13 15, points out that simultaneous with the execution of Joint Development Agreement, on 01.01.2016, the 1st Respondent / Company, had received funds to an extent of Rs. 9 crores, as none-refundable security, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11, 13 15, points out that along with Mr. Kumar Dinesh Seth, the Appellant had filed Original Suit No. 10303/ 2015 praying for an injunction reliefs against the Respondents , in regard to the Joint Development Transaction, and upon failing to obtain any Ex-parte an interim order against the respondent, latter, suit was withdraw, without seeking any liberty. 89. Apart from the above, the Appellant filed a suit in OS. No. 25572/2016, before the Civil Court, Mayo Hall Unit, Bangalore, praying for an Ex-parte interim order of a temporary injunction against the Respondents and the said suit, was later on withdrawn by the Appellant. Therefore, it is contended on behalf of the Respondent No. 1, 11, 13 15, that the contra stand of the Appellant, that no / any suit , was filed, before the Civil Court , and that the such suit , was filed by the Mr. Kumar Dinesh Seth, is a misleading one. 90. The Learned Counsel for R1, 11, 13 and 15, points out that the Appellant has not made out any grounds whatsoever depicting that any actions of the Respondents complained of has in any manner been prejudicial to the shareholders and further that the actions complained are of the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 and this was in modification of order of even no. dated 25.07.2019 for 23.10.2019 to 25.10.2019. 96. The contention of the Learned Counsel for the R1, 11, 13 and 15, is that the Appellant , has failed to point out, any provision of Law which bars a matter i.e. part-heard by the Division Bench of a Tribunal , from being heard further by the Hon ble Single Bench of the said Tribunal . 97. It is represented on behalf of the Learned Counsel for the R1, 11, 13 and 15 that the Appellant had not objected to the Hon ble Member (Judicial) of the Tribunal, hearing the part heard matter on 25.10.2019 sitting singly, either on the date of hearing nor the Appellant had challenged the same, at any time, thereafter, till the filing of the Appeal . 98. According to the Learned Counsel for the R1, 11, 13 and 15, that the Appellant had willingly participated in the proceedings before the Tribunal and allowed the proceedings to continue and is now raising the same, only after the impugned order came to be passed by the Tribunal . 99. It is the version of the Learned Counsel for the R1, 11, 13 and 15, that the Appellant had also acquiesced to the proceedings of 25.10.2019, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to an order passed by Hon ble Apex Court in writ petition No. 722/2019 dated 20.06.2019, wherein the Hon ble Apex Court, in a case of identical nature directed it to be heard by a Bench comprising of a judicial member and a technical member. This appeal is accordingly disposed of with request to the President, National Company Law Tribunal, New Delhi to constitute a Bench comprising of a judicial member and the technical member for disposal of the matter in hand in conformity with and compliance with a direction passed by the Hon ble Apex Court in Writ Petition No. 722 of 2019. 103. On behalf of the Learned Counsel for the R1, 11, 13 and 15, a reliance is placed upon the decision, in Tamilnadu Generation and Distribution Corporation Ltd. Vs. PPN Power Generating Company Pvt. Ltd. reported in 2014 11 SCC 53 wherein at paragraph 47 it is observed as under:- 47. These observations, however, do not in any manner affect the jurisdiction exercised by the State Commission in the present matter. It has been rightly pointed out by the Respondent that having filed the written statement in reply to the petition filed by the Respondent, the Appellant willingly participated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of competence of the authority to handle the subject matter. It is this trickery which the Courts have frowned upon by declining to interfere with the actions of subordinate authorities, where acquiescence or acceptance of their jurisdiction is manifested by the facts of a given case. 21. D'Smith in his Book Judicial Review of Administrative Action 3rd edition at pages-372-373 has brought out the distinction between the two situations namely cases where the decisions are, void for want of jurisdiction and could be avoided and others were even though they are void but with which the Court will not interfere on account of the applicant's conduct. The Author states thus:- A decision made without jurisdiction is void, and it cannot be validated by the express or implied consent of a party to the proceedings. It does not always follow, however, that a party adversely affected by a void decision will be able to have it set aside. As we have seen, certiorari and prohibition are, in general, discretionary remedies, and the conduct of the applicant may have been such as to disentitle him to a remedy. Whether the tribunal lacked jurisdiction is one question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the President, for hearing by a Bench consisting of two Members or to such Bench as the President may deem fit. 107. It cannot be gainsaid that the Principal Bench of Tribunal, shall be at New Delhi, whose powers, shall be exercised by Two Members it shall be competent for the Members, authorised in this behalf to function as Bench consisting of a single Judicial Member, in respect of such class of cases, as President , may by general or special order specify. 108. To be noted, the term, Acquiescence is nothing more than absolute or Positive Waiver . Further, it amounts to an abandonment of rights , as per decision in Govindsa Marotise V. Ismail, reported in AIR 1950 Nag. Pg. 22. 109. A person may be precluded by way of his actions or conduct or silence when it is his duty to speak , from asserting a right , which he would have otherwise had. Also, that Estoppel is a Principle of justice and Equity . It is not a cause of action , and it is not a rule of evidence as opined by this Tribunal . 110. At this juncture, this Tribunal, pertinently points out that the principle of waiver , or of Approbation , and Reprobation lies at the roo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No. 20/2016 (TP No. 248/2017) passed by the Hon ble Member (Judicial) of NCLT, Bengaluru Bench, sitting singly, cannot be found fault, with because of the fact that Section 419(3) of the Companies Act, 2013 empowers, the Judicial Member , of the Tribunal to Hear the case , based on the order dated 22.10.2019 of the NCLT, New Delhi, which had the Approval , of President of NCLT , New Delhi and hence, the impugned order dated 27.11.2019, passed by the Tribunal is not a nonest , illegal and void ab initio one and the point, is so answered. 112. As regards the plea of the Appellant that the impugned order , dated 27.11.2019, in effect, overrides, the earlier order, which categorically held that the petition of the Appellant/Petitioner, is maintainable, the Learned Counsel for the Appellant points out that the issue of maintainability already got settled by virtue of the order dated 30.05.2019 in IA 360/2018 and IA 17/2019, the said order was assailed in Comp. Appeals (AT) No. 144 and 179/2019, by the Respondents, the Appellate Tribunal had refused to interfere with the order dated 30.05.2019, through an order dated 02.08.2019, and that the Respondents had to wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al leaving all the contentions and issues to argue before the Tribunal which may be decided at the stage of final hearing uninfluenced by the decision made in the impugned order . 117. Contending contra, it is the submission of the Learned Counsel for the R1, 11, 13 and 15, the Tribunal , uninfluenced of its earlier order dated 30.05.2019, had rightly considered the question of maintainability of the Appellant s petition , at the stage of Final Hearing, along with consideration of matters, touching upon the merits of the case, including the Appellant s conduct , and qualitative analysis , of his shareholding. Hence, the Appellant s submission that having held the petition , being not maintainable the Tribunal s findings on merits of the matter were allegedly prejudged and prejudicial is a baseless and a reckless one. 118. Because of the fact that the Appellate Tribunal , in Company Appeal (AT) 144 and 179 of 2018 on 02.08.2019 had permitted the Respondent No. 11 to withdraw its Appeal, leaving all the contentions and issues to argue before the Tribunal , which may be decided, at the stage of Final Hearing, uninfluenced by the decision, made in the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of oppression and mis-management before the Tribunal arose on 19.02.2015 and later, on 10.11.2015, 22.12.2015 and on 01.12.2015, respectively in reality, the Appellant s shareholding in the Company, on each of the aforesaid dates was below 10% and indeed, as on 19.02.2015 the Appellant did not possess any shareholding in the Company. 121. A perusal of Annexure R1 (vide volume 1 of the 1st Respondent s paper Book vide Dy. No. 17435 dated 03.01.2020) in respect of the Appellant s share movement (consolidated) (Annexure R1) shows that the Appellant, on 19.02.2016 had 9.56% and 30.09.2016 possessed 19.83% of shareholding also in the order dated 30.05.2019 in IA No.360/2018 and IA No.17/2019 in CP No.486/2018 at paragraph 18, the Tribunal , had observed that the Applicants / Respondents had admitted in their pleading by contending that the Respondent/Petitioner, hold 10.32% of total paid up share capital , even at them of filing, earlier CP No.22/2016, and not it stands at 19.83%. Therefore, we are of the view that the Respondent/Petitioner holds the required percentage as per law to maintain the main Company Petition. As per law, litigation cannot be thrown at thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment dated 01.01.2016, along with prayer for certain interim reliefs. It is pertinent to note that the Hon'ble CLB vide its order dated 29.03.2016 has refused to grant any interim reliefs. Further, it is pertinent to note that the Hon'ble High Court vide its detailed order dated 28.04.2016 was pleased vacate the order of status quo vide its detailed order dated 28.04.2016 with specific observation regarding the conduct of the Petitioner herein and Mr. Kumar Dinesh Seth against the Respondent No.1 Company and its activities for joint development of its properties. (6) It is contended that in order to invoke the provisions of section 241 242, a person should have requisite number of shareholding in the Company on the date when alleged acts of oppression and mismanagement are complained of. In the instant case, cause of action or alleged acts of oppression and mismanagement were occurred on 22.12.2015 01.01.2016 and as stated above as on that dates, the Petitioner had only 4.12% 4.27% shareholding respectively in the Respondent No.1 Company and hence, on this ground alone, the instant petition under Section 241 and 242 of the Companies Act, 2013 fails and liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution dated 22.12.2015 as void , inoperative and nonest in the eye of Law . 127. In this connection the Learned Counsel for the Appellant points out that the Genesis , of the whole series of acts of oppression and mismanagement lies in the illegal and unlawful acts of the Board of Directors , in a purported meeting that the took place on 19.02.2015, and that the management, knew the sale and disposal of the entire undertaking 1st Respondent / company was beyond its competence and is prohibited by Section 180 of the Companies Act, 2013, read with the Section 179 of the said Act and to save itself from the rigours of the aforesaid provisions, the management brought the idea of a possible Joint Venture Agreement , to dispose of the entire undertaking / substratum of the company in favour of an unknown person, with no material information to the shareholders for the first time by the Board, on 04.11.2015 while completely changing the Agenda, as was countenanced in the Meeting of the Board dated 19.02.2015. 128. The Learned Counsel for the Appellant, proceeds to point out that at a purported Board Meeting , that took place, on 04.11.2015, another decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ballot notice was not issued, or circulated, as per Rule 15, 20, 22 of the Companies (Management and administration) Rules, 2014. As a matter of fact, voting via postal ballot was not conducted as per Rule 21, of the Companies (Management and Administration) Rules, 2014 which obligates that two scrutinisers should remain present during the time, when voting takes place. Rule 21, further stipulates that the votes shall be counted by two scrutinisers and Report to be submitted to the Chairperson of the Meeting, shall be counter-signed by both the scrutinisers. 131. Repelling the submissions of the Learned Counsel for the Appellant, the Learned Counsel for R1, 11, 13 15 contends that the Board , as per the Minutes of its Meeting on 04.1.2015, had approved the issuance of Postal Ballot notice, (vide page 710 of Appeal Paper Book, Vol. V, of the Appellant), clearly explaining the reasons for entering into Joint Venture / Joint Development Arrangement and further, the said Explanation was mentioned in the Explanatory, statement enclosed with the postal ballot notice , in terms of Section 102 of the Act (vide Annexure-6, page 714, Vol-V, of Appellant s Paper Book, thus, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larity, before, the Meeting , proceeds with the Agenda . 136. The intention of Section 102 of the Companies Act, 2013, is to enable the shareholders , to take an Informed Decision, in respect of each item of business , to be transacted and in case, any Director , Manager or Key Managerial personal is interested in any item, he ought not to participate in deliberation or in a decision process , when such item being considered in the Meeting . It is just necessary to Annexe A Statement of Material Facts, of items of special Business along with Notice of Meeting. 137. At this stage, this Tribunal, ongoing through the Minutes of the Board Meeting of the Directors of 1st Respondent / MRO-Tech Limited dated 04.11.2015 and also looking into the Postal Ballot Notice and the enclosed Explanatory statement , is of the considered view that in respect of the Business of the Company, the shareholders cannot take a call or any decision in the matter and it is for the Board of Directors of the Company, to have talks / negotiations with parties concerned and in any event, the Postal Ballot Notice and the enclosed Explanatory statement , are fulfilling the requirements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s relevantly pointed out by the Tribunal, 91.13% of the shareholder / 1st Respondent Company, being present, and voted for , had realised, the requirement for entering into a development, in regard to the Company s property with a view to enable the recurring cash flow, finally took an informed decision, which culminated, in passing a Resolution, dated 22.12.2015 benefitting the 1st Respondent / Company and all its majority and minority shareholders. 142. The Learned Counsel for the Appellant, points out that the whole series of acts of Oppression and Mismanagement lies, in the illegal, and unlawful acts, of the Board of Directors in a purported meeting, that took place on 19.02.2015. But the Management knew that sale and disposal of the whole undertaking of the 1st Respondent / Company, was beyond its competence and is prohibited by Section 180 of the Companies Act, 2013, read with Section 179 of the Companies Act, 2013 and to save itself, from the rigours of the above mentioned provisions, the management, brought the idea of a possible Joint Venture Agreement, to dispose of the entire undertaking/substratum of the Company in favour of unknown person with no ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sections 180 and 110 of the Companies Act, 2013 read with the applicable Rules thereto, approval of the Shareholders be sought for the above proposal by way of Special Resolution through Postal Ballot. 146. According to the Learned Counsel for the R1, 11, 13 and 15, the 11th Respondents, was selected as the Successful Developer, for the Joint Development transaction through a fair and transparent process , as seen, from the Minutes of the Board Meeting, dated 24.11.2015. 147. In reality, a mere glance of the Minutes of the 4th Meeting for the Financial year, 2015-16 of the Board of Directors / MRO-Tech Limited, that took place on 24.12.2015 at 9:30 a.m. at the registered office of the Company at Bellary Road, Hebbal Bangalore, indicates that the Board had noted, and took on record of the Minutes of the Previous Audit Committee meeting that took on 04.11.2015 and also that the Board had reviewed the Scrutinisers Report dated 22.12.2015 furnished by the Scrutinizers appointed for the purpose of Postal Ballot and it was informed that due notification of these results was made to the stock exchanges. As a matter of fact, the Board had noted that the Resolution Propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Company Law Tribunal cannot under Section 59 of the Companies Act, 2013 cannot exercise, a parallel jurisdiction, with SEBI , for addressing the breach of SEBI Regulations . 153. The Learned Counsel for R1, 11, 13 and 15 points out that the Appellant had filed two complaints, before SEBI, before agitating the issue of share transfer, before the Tribunal, but they proved futile . In regard to the share acquisition process, being disrupted, the Appellant, filed a civil suit, and later he withdrew the same through an undertaking, before the Hon ble High Court of Karnataka, in the Appeal proceeding (vide Annexure R7, Pg. 85 and 93 of R1 s Appeal paper book, Vol.-1). Also that, as per R1, 11, 13 15 version is that such share purchase, was approved duly by the SEBI . 154. It is projected on the side of R1, 11, 13 15, that the Joint Development Transaction , as averred by the Appellant had culminated, in construction / development of a commercial building, of a commercial complex of which, the 1st Respondent / Company owns more than Rs.2 lakhs sq. ft. and continues to retain ownership, in respect of proportionate undivided shares , in the Land comprising the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.01.2016, was in negation, of the Memorandum of Association, of the Company, and violative of Fiduciary Duties of Directors of the Company. This tribunal pertinently points out that the 1st Respondent / Company had invited, leading Land Developers, in Bengaluru, to make the best possible offers, commensurate, with the total area of land, offer of constructed area to the Landlord , FAR , 'adopted , advance Amount, Rental Value , and offer validity period and on this aspect, numerous rounds of negotiations, took place, between the 1st Respondent / Company, and the aspiring Developers, and as a matter of fact, the 1st Respondent / Company had received proposals from victory infrastructure, Umiya Builders Developers (Respondent No.11 herein), Brigade Group , Puravankara , and Salarpuria Sattva Group for the Joint Development of the aforesaid properties, of the Respondent No.1 / Company and in fact, the majority of the shareholders viz. 91.13% of the shareholders of the 1st Respondent / Company, (consequent to the issuance of Postal Ballot dated 12.11.2015, and voting thereto), had voted in favour of entering into Joint Development of the properties, and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,16,22/- was incurred, in regard to the Registration of Development and Supplement Agreement . 163. According to the R1, 11, 13 15, the 11th Respondent / M/s Umiya Builders and Developers , being the Sole Proprietary concern of the 13th Respondent (Mr. Aniruddha Mehta) and that the 13th Respondent together with the 15th Respondent (Ms. Gauri Mehta and Umiya Holding Pvt. Ltd. / sister concern of Umiya Group) had purchased the shares of the promoters of the 1st Respondent / Company as per Share Purchase Agreement dated 19.05.2016, after fulfilling all the procedures, formalities and approval, in terms of the SEBI Regulations, 2011 etc. Thus, the 13th and 15th Respondents, became the Members of the Board of Directors of the 2nd Respondent / Company, from 08.08.2016. 164. It is projected on the side of R1, 11, 13 15, that the Appellant / Petitioner began, acquiring the shares of the 1st Respondent / Company from 30.09.2015 in the open market, and he made a halt, in regard to the acquiring of shares after he had reached the accumulation, of 19.83% shareholding, on 30.09.2016. In this connection, it is brought to the notice of this Tribunal, that the Appellant / Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective contentions advanced on either side, this Tribunal , comes to an inescapable and irresistible that the joint transaction, had culminated in the construction / development of a commercial building of a commercial complex and that just on a transparent process, was undertaken, in regard to the selection of the 11th Respondent as Successful Developer , for the Joined Development, transaction, as seen from the Minutes of the Board Meeting, dated 24.11.2015 (vide pg. 293, Vol.-II of the Appeal Paper Book). Viewed in this background, the contra plea, taken on behalf of the Appellant, that the determination, to enter into Joint Venture Agreement and Joint Development Agreement dated 01.01.2016 were in breach of Memorandum of Association of a Company, and against the Fiduciary duties of Directors, are not acceded to, by this Tribunal and the point is so answered. 170. Dealing with the plea of the Appellant, that the Tribunal , went wrong, in not holding that invalid , illegal and malafide transfer of the entire shareholding of R2 to R10, constituting 39.66% in favour of R12 13 was an oppressive one, the submission of the Learned Counsel for the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 173. Under the Companies Act, 2013 , a Member of a Company, is not one of them, competent, to prefer an Application , for Rectification . (i) Any Depositary , (ii) The Company , (iii) The Depositary Participant , (iv) The Holder of Securities and / or the Securities and Exchange Board of India , can seek for Rectification of Register . 174. In granting the Application for Rectification , it is necessary, to determine other issues concerning complicated , questions of Law and Fact , and disputed questions of title , right etc. then the Company Court / Tribunal may direct the parties to get their disputes, decided by the Competent Civil Court , in a Trial, in appropriate proceedings as the case may be. 175. At this juncture, this Tribunal, pertinently points out that, the Appellant, had filed two complaints before SEBI, in relation the Share Transfer Issue , but it proved futile . Also, this Tribunal, on a meticulous rumination, of respective contentions, advanced, on either side, holds, that in regard to the controversies / disputes , relating to the Transfer of shares , which fall within the ambit of SEBI jurisdiction, the National Company Law Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. 180. In respect of the Appellant / Petitioner, in CP No. 22/2016, when the cause of action had arisen, to enable him, to commence the litigation, in February, 2015, in terms of the consolidated shares movement statement filed by the Respondent, showed, that the Appellant / Petitioner, as on 02.10.2015 was possessing 590695 shares (3.16%), which by efflux of time, rose to 9.65% as on 26.02.2016 and later, increase to 10.34% onwards. 181. It is significantly pointed out by this Tribunal, that in CP No. 22/2016 (TP No. 8/2016), filed before the then, Company Law Board, Chennai (under Sections 379, 398, 40, 403, 406 of the Companies, Act, 1956), was preferred on 21.03.2016. The Appellant / Petitioner had averred, that he was the shareholder of the Company by possessing 19,32,596 shares, equal to 10.34% of the paid up share capital. 182. When the Appellant / Petitioner filed CP No. 486/BB/2018, on 06.09.2018, he averred that, he holds, 37,05,684, Equity Shares of Rs.5/- each, amounting to 19.83%, of the paid up share capital . The Appellant, withdrew his former petition, in CP No. 22/2016, on 20.08.2016 and filed CP No. 486/2018 before the NCLT, Bengaluru Bench, in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18, through an order dated 27.11.2019. Looking at from all these angles, no fault can be attributed to the Tribunal s role, in taking in to account of the Erstwhile legal proceedings, to find out the Appellant s conduct, as held by this Tribunal . 188. Be that as it may, in the light of qualitative, and quantitative, detailed discussions, keeping in mind, that the onus of proof , in proving the affairs of the Company , were / are being, conducted in a manner prejudicial or oppressive to any Members , or against the public interest / or in any way, prejudicial , to the interest of the Company etc. and this Tribunal, ongoing through the impugned order dated 27.11.2019 passed by the NCLT, Bengaluru Bench in CP No. 486/BB/2018, comes to a consequent conclusion, that the Appellant / Petitioner has not established to the subjective satisfaction of this Tribunal , that affairs of the Company , are conducted, in any manner prejudicial or oppressive either to the Appellant, or other shareholders / stakeholders. Viewed in that prospective, the ultimate conclusion , arrived at by the NCLT, Bengaluru Bench, in dismissing the CP No. 486/BB/2018 through its order dated 27. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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