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TMI Blog2023 (12) TMI 788X X X X Extracts X X X X X X X X Extracts X X X X ..... statement) which is barred by law vide Section 14 of the Specific Relief Act, 1963 with or without the amendment in 2018. Tribunal cannot make an order enforcing a contract which is dependent on personal qualifications such as those mentioned in Section 149(6) of the Companies Act, 2013 - Tata Consultancy Judgement has given clear rulings which are required to be followed by all the Courts/ Tribunals. It is already noted that the judgment of Tata Consultancy came after passing the Impugned Order by the Tribunal as such the Tribunal interpreted the facts and law in the original application without wisdom of Tata Consultancy judgment. The Tribunal will have to re-examine the original petition in light of the judgement of Hon ble Supreme Court of India in case of Tata Consultancy as prima-facie, the Tribunal has taken stand not in accordance with the Tata Consultancy judgments which dealt with various issues as in present case like what are instance of oppression mismanagement, removal and subsequent reinstatement of Director, quasi-partnership character of the Company etc. The Impugned Order is set aside and case remanded back to the Tribunal to have a fresh look on the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited rights whereas the Appellants continued to perform overall main role of discharging functions of the Company. 6. It is further the case of the Appellants that due to efforts of the Appellants, GMB allocated the use of Victor Port to the Company for cargo operations on licence basis and in pursuance of the same, the Appellants called upon the Contesting Respondents to provide capital for the necessary bank guarantees etc., so that the formal agreements could be entered into with GMB. Since the bank guarantees of Federal Bank were availed, the Appellants permitted the Contesting Respondents to operate the credit facilities qua the Federal Bank Account only. 7. The Appellants submitted that from 2018 onwards, the Contesting Respondents started raising frivolous disputes with the intention of avoiding their obligations of providing capital. The Appellants stated that despite knowing the fact that the Company was in dire need of funds, the Contesting Respondents did not fulfil their obligations and refused to give capital, creating hurdles in the functioning of the company. 8. It is also the case of the Appellants that the Contesting Respondents started raising other disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 18.12.2019 the Extra Ordinary General Meeting (in short EOGM ) of the Company was convened and after due consideration of the Reply of the Respondent No. 1, it was decided to remove the Respondent No. 1 from the post of Director under Section 169 of the Companies Act, 2013 to protect the interest of the Company. 11. The Appellants stated that they filed their reply before the Tribunal specifying that the disputes were merely in the nature of inter-se disputes and not disputes that come under the scope of Section 241-242 of the Companies Act, 2013. 12. The Appellants stated that the Contesting Respondents raised prejudicial arguments while filling the WP (PIL) No. 28/2019 before Hon ble High Court of Gujrat stating that environmental damage was being caused at the Victor Port site by the Company. The Hon'ble high Court of Gujarat admitted the Petition, however no stay was granted in favour of the Contesting Respondents herein. The Appellants submitted that they obtained all environment clearances during the period, which clearly indicate the falsity of the allegations of the Contesting Respondents, which were made just to harm the Appellants and in turn the Company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that removal of the Director amounted to oppression and hence a petition under Section 397/398 of the Companies Act, 1956 was maintainable, and that a similar position carried forward under the Companies Act, 2013. The Appellants submitted that legally there was no case of oppression mismanagement and the Contesting Respondents were not aggrieved by the same and simple dispute between the Directors could not be dealt under Section 240 -241 of the Companies Act, 2013 treating such cases as oppression mismanagement. 18. The Appellants assailed the Adjudicating Authority for taking reliance upon SREI Infrastructure Finance Limited Vs. Arcelor Mittal India Private Limited in I.A. No .245 of 2020 vide order dated 10.11.2020 (in short SREI ), because SREI was a judgment delivered under the Insolvency and Bankruptcy Code, 2016 and dealt with the jurisdiction of the Adjudicating Authority vis- -vis the IBC. In fact, in SREI itself, it is observed that exercise of powers by NCLT as Adjudicating Authority are more under the Provisions of the Code as compared to the Companies Act, 2013 . Despite recording that, the Tribunal passed the Impugned Order holding that it has jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chatterjee Petrochemical (supra) where specifically it was held that while on the one had it would be easy to apply the said concept to a closely held family company or a private limited company, in cases of partnership converted into a company, such an assumption could not be arrived at merely on the ground that the promoters of the company described themselves as partners . 21. The Appellants submitted that undue reliance upon one stray letter cannot be the basis to determine that the company is a quasi-partnership. It is the case of the Appellants that what is necessary is the substance and not the form. The Appellants elaborated that the parties did not know each other prior to the entering into the present agreement and they had no common business prior to coming to board in 2015 and therefore the present company cannot be said to be a case of quasi partnership. 22. The Appellants submitted that in Hanuman Paras Bagri v. Bagress Cereals, it has been held that the mere act of termination of Directorship, does not trigger the just and equitable clause and further the Hon ble Supreme Court in Tata Consultancy Services (supra) has held in law even the removal from Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents assailed the conduct the Appellants who lured them to invest huge money in the Company and did not allow the Respondents to participate in the conduct of affairs of the Company. The Respondents submitted that the Contesting Respondents are Ambalia Group, who were in the business of construction and real estate, having successfully concluded several projects and submitted that the Company was in the nature of a quasi-partnership, since the Ambalia Group as the Contesting Respondent and Banker Group as the Appellants herein were all shareholders as well as Directors of the Company. It is submitted by the Contesting Respondents that on account of higher financial and technical/business expertise, the Contesting Respondents were invited to join hands with the Appellants to execute various projects. 30. It is the case of the Contesting Respondents that the Contesting Respondents have contributed immensely to the business of the Respondent No. 4 company and made it a profitable venture. That owing to the present Respondent's vast experience in various sectors, the Respondent No. 4 Company received many contracts and huge projects. Since the company was not financial robust, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Respondents brought it to the notice that the excess payment of Rs. 43,13,778/- (including interest @12% PA) which was to be paid in 10 days has not been paid. Out of the excess paid amount, Rs. 27,21,000/- was paid much subsequently. The interest @ 12% p.a. from the date of investment i.e., 2015 till the date of payment has also not been paid. 34. The Contesting Respondents stated that even after the impugned order, the Appellants are not allowing the in the Contesting Respondents to participate in the management of the Respondent No. 4 company despite their being no stay or any restriction granted/imposed by this Appellate Tribunal. 35. The Contesting Respondents stated that the Appellants hold 55% equity in the Company and therefore, they should raise the funds from the financial institutions or banks by and the provide collateral security. The Contesting Respondents stated that the collateral security cannot be asked from the Contesting Respondents, and it is not the sole responsibility of the Contesting Respondents to continue to infuse funds. The Contesting Respondents reiterated that the Contesting Respondents had contributed excess funds and an agreement on 20.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in fact an instance of pooling of resources for sharing profit of business which is essential element of the quasi partnership and the Tribunal relied upon the landmark decision of Sangramsinh P. Gaelwad Ors. V. Shantadevi P. Gaekwad [(2005) 11 SCC 314] to establish that the Company was a quasi-partnership. 41. The Contesting Respondents stated that on the question whether the act of removal was valid under Section 169 of the Companies Act 2013, it was held by the Tribunal that removal of Mr. Hitesh Ambalia the Respondent No. 1 herein was on account of personal prejudice, and the letters admittedly written by the Contesting Respondents were in the interest of the company. 42. The Contesting Respondents emphasised that the Company i.e.., Om Sai Navigations Ltd. is a quasi-partnership and hence removal of the Respondent No. 1 as a Director cannot be a directorial complaint . Further the Contesting Respondents submitted that Ambalia group and Banker group i.e., Contesting Respondents and the Appellants herein consisting of four persons, are shareholders and permanent directors of the Company. It has been submitted by the Contesting Respondents that the Company is a quasi-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of AoA make it expressly clear that the Company is a quasi-partnership. Clause 13 contemplates restriction on transfer of shares who is not a member of the company, Clause 31 names Contesting Respondents and Appellants as permanent directors , Clause 40 contemplates that the directors are not liable to retire by rotation at every AGM of the meeting. It is submitted that these clauses make it more than clear that the Company is a quasi-partnership . 45. It is submitted that removal of directors in a quasi-partnership has been held to be an act of oppression. It is submitted that the decision of the Appellants to remove the Contesting Respondents has been incited by complete prejudice and malice. It is submitted that removal of a Director, de-hors the Articles of Association and in violation of Section 169 of the Companies Act, 2013 would be a gross act of oppression. 46. The Contesting Respondents submitted that the law is well-settled that in a company, a person cannot claim that he has a right to remain as a director of the company. However, such a proposition is dislodged in case of a quasi-partnership, where a director has a legitimate expectation to act as a director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Companies Act, 2013. The Tribunal also decided to consider what reliefs can be granted. 53. We also note that in the analysis part, the Tribunal compared Sections 397 398 Companies Act, 1956 vis-a-vis Section 241 242 of the Companies Act, 2013. The Tribunal also referred to several judgments and concluded that the Tribunal has the jurisdiction to decide inter-se dispute between directors or shareholders which may or may not adversely affect the conduct of affair of the Company. The Tribunal also commented on issue regarding quasi-partnership of the company and held that removal of the Respondent No. 1 herein from the Director of the Company as bad in law and declared null and void. While dealing this aspect, the Tribunal recorded that they do not consider to dwell in detailed manner on other aspects. 54. As regard, question of validity of action under Section 169 of the Companies Act, 2013 w.r.t. removal of Respondent No. 1 herein as Director of the Company based on several ground which were contested and denied by the Appellants herein, the Tribunal noted the differences between both the parties as regard to functioning of the company especially regarding control o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal application before the Tribunal. (vi) The Tribunal failed to adhere to cardinal principle of bringing to an end of matters complained off and rather made complicated for the Company to function now. 57. The Appellants relied on several case laws including following :- (i) Tata Consultancy Servies Vs. Cyrus Investments Pvt. Ltd. Ors. [(2021) 9 SCC 449]. (ii) Chatterjee Petrochem (India) Pvt. Ltd. Vs. Haldia Petrochemicals Limited Ors. [(2011) 10 SCC 466]. (iii) Akkadian Housing and Infrastructure Pvt. Ltd. Anr. Vs. Pantheon Infra Pvt. Ltd. Ors. [(2016) 197 Comp. Cas 316]. (iv) In Re : Modern Furnishers (Interior Designers) Pvt. Ltd. [(1985) 58 Comp. Cas 858]. (v) Laguna Holdings Pvt. Ltd. Ors. Vs. Eden Park Hotels Pvt. Ltd. [(2013) 176 Comp. Case 118]. 58. The Appellants relied heavily on the Tata Consultancy (Supra) in establishing and bringing out that removal and restatement are two different things and according to Apex Court Section 241 and 242 of the Companies Act, 2013 does not encompasses power to the Court/ Tribunal to reinstate the removed Director. 59. On the other hand, the Contesting Respondents gave history of the Company, their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57.1. (i) Whether the formation of opinion by the Appellate Tribunal that the company's affairs have been or are being conducted in a manner prejudicial and oppressive to some members and that the facts otherwise justify the winding up of the company on just and equitable ground, is in tune with the well-settled principles and parameters, especially in the light of the fact that the findings of NCLT on facts were not individually and specifically overturned by the Appellate Tribunal? *** 57.2. (ii) Whether the reliefs granted and the directions issued by the Appellate Tribunal, including the reinstatement of CPM into the Board of Tata Sons and other Tata companies, are in consonance with the pleadings made, the reliefs sought and the powers available under sub-section (2) of Section 242? *** 90. But despite the huge shift in England, there appears to be a common thread running in all the enactments, both in India and England. In all the three Indian enactments, namely, the 1913 Act, the 1956 Act and the 2013 Act, the court is ordained, generally to pass such orders with a view to bringing to an end the matters complained of . This sentence is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never be the primary focus of a Tribunal under Section 242 unless the same is in furtherance of a conduct oppressive or prejudicial to some of the members. In fact the post of Executive Chairman is not statutorily recognised or regulated, though the post of a Director is. At the cost of repetition it should be pointed out that CPM was removed only from the post of (or designation as) Executive Chairman and not from the post of Director till the company petition was filed. 132. In any event the removal of a person from the post of Executive Chairman cannot be termed as oppressive or prejudicial. The original cause of action for the complainant companies to approach NCLT was the removal of CPM from the post of Executive Chairman. Though the complainant companies padded up their actual grievance with various historical facts to make a deceptive appearance, the causa proxima for the complaint was the removal of CPM from the office of Executive Chairman. His removal from Directorship happened subsequent to the filing of the original complaint and that too for valid and justifiable reasons and hence NCLAT could not have laboured so much on the removal of CPM, for granting relief un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts otherwise justify the winding up of the Company under the just and equitable clause, is completely flawed. 146. The second question of law arising for consideration is as to whether the reliefs granted and directions issued [Cyrus Investments (P) Ltd. v. Tata Sons Ltd., 2019 SCC OnLine NCLAT 858] by NCLAT including the reinstatement of CPM into the Board of Tata Sons and other Tata companies are in consonance with: (i) the pleadings made, (ii) the reliefs sought, and (iii) the powers available under sub-section (2) of Section 242. 151. Thus, NCLAT granted [Cyrus Investments (P) Ltd. v. Tata Sons Ltd., 2019 SCC OnLine NCLAT 858] to the complainant companies (and indirectly to CPM) four reliefs, namely: (i) reinstatement of CPM; *** 152. We shall now see whether NCLAT could have granted any of these reliefs. Reinstatement of CPM 153. Removal and reinstatement are two different things. We have dealt with the issue of removal of CPM, while answering Question of Law No. 1, in the context of whether it was part of a scheme of oppressive and prejudicial conduct. Now we shall deal with the issue of reinstatement in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew to bringing to an end the matters complained of, make such order as it thinks fit cannot be interpreted as conferring on the Tribunal any implied power of directing reinstatement of a Director or other officer of the company who has been removed from such office. These words can only be interpreted to mean as conferring the power to make such order as the Tribunal thinks fit, where the power to make such an order is not specifically conferred but is found necessary to remove any doubts and give effect to an order for which the power is specifically conferred. For instance, sub-section (2) of Section 242 confers the power to make an order directing several actions. The words by which sub-section (1) of Section 242 ends, supra can be held to mean the power to make such orders to bring an end, matters for which directions are given under sub-section (2) of Section 242. 165. The architecture of Sections 241 and 242 does not permit the Tribunal to read into the sections, a power to make an order (for reinstatement) which is barred by law vide Section 14 of the Specific Relief Act, 1963 with or without the amendment in 2018. Tribunal cannot make an order enforcing a contract w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have granted the reliefs of: 182.1. Reinstatement of CPM. (Emphasis Supplied) 64. At the outset, we find that the Tata Consultancy (Supra) Judgement has given clear rulings which are required to be followed by all the Courts/ Tribunals. 65. We have already noted that the judgment of Tata Consultancy (Supra) came after passing the Impugned Order by the Tribunal as such the Tribunal interpreted the facts and law in the original application without wisdom of Tata Consultancy (Supra) judgment. 66. In this background, we feel that the Tribunal will have to re-examine the original petition CP No. 103/ 2019 in light of the judgement of Hon ble Supreme Court of India in case of Tata Consultancy (Supra) as prima-facie, the Tribunal has taken stand not in accordance with the Tata Consultancy (Supra) judgments which dealt with various issues as in present case like what are instance of oppression mismanagement, removal and subsequent reinstatement of Director, quasi-partnership character of the Company etc. 67. We are not expressing any opinion on several issues raised in the present appeal, since we are inclined to send back the case to the Tribunal. 68. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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