Home Case Index All Cases Companies Law Companies Law + AT Companies Law - 2018 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (7) TMI 459 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHIOppression and mismanagement - ineligible allotment of shares - invalid BOD meetings - proof of service of Notice of Board Meeting - Held that:- On the basis of a letter of 2009 from the Bank, suddenly on 28th February, 2011 large numbers of equity shares were issued and convertible debentures were issued without there being material to show that majority shareholders, i.e. the Appellants were involved in the decision making. The Appellants 2 and 3 were Directors and proof of service of Notice of Board Meeting to them was necessary. What is shown by the Respondents, we find as not reliable. If things were in order, Respondents would have referred in correspondence to the change of shareholding. NCLT accepted defence on this count of need of funds without seeking documents. Merely showing terms laid by bank for credit limit or loan is not enough. For such reasons, we find that the reasonings recorded by the learned NCLT in upholding allotment of 95,500 equity shares to Respondents 4 and 5 cannot be upheld by us. NCLT did not also look into the correctness of issue of convertible debentures on 28.02.2011. The debentures issued were soon converted into shares by the Respondents 2 and 3, to the extent of 80010 equity shares which was done on 19.04.2011 in Board Meeting. We find that the NCLT wrongly held POD 9 in favour of the Respondents. The EOGM called suffered from sufficient Notice to the Appellants, who are majority shareholders and thus, the decisions taken for increase in authorised share capital cannot be upheld and deserve to be set aside. Respondents 2 and 3 are guilty of oppression and mismanagement. Winding up of the Company, however, we find will not be in interest of Members. We agree with NCLT on this count. To conclude:- We note NCLT has already set aside 80010 equity shares by conversion in Meeting dated 19.04.2011 and 80010 shares issued on 25.07.2012. a) We set aside the allotment of 95,500 equity shares to Respondents 4 and 5 and the decision to issue convertible debentures as taken by Respondents 2 and 3 on 28.02.2011. b) We set aside the Resolutions taken in Board Meeting dated 18.05.2011 and E Form 32 dated 18.05.2011 submitted to the ROC and removal of Appellants 2 and 3 as Director in Board Meeting dated 02.07.2011. Appellants 2 and 3 shall be treated to have been Directors. c) We set aside Resolution and increase of Authorized Share Capital as done in EOGM dated 18.06.2011. d) We set aside the Resolutions taken in Board Meeting dated 02.07.2011 and 3,83,334 equity shares allotted to Respondent No.4 regarding which Respondents 2 and 3 took decision on 02.07.2011 and which were issued on 07.07.2011. e) We set aside the Resolution dated 18.09.2011 and the 3,87,066 equity shares allotted to Respondents 4 and 6 on 18.09.2011. We hold that decisions taken in the Board Meetings, EOGMs and AGM discussed in this Judgement regarding which there was no Notice or short Notice to the Appellants, are not binding on the Appellants. We restore shareholding as it stood ante 28.02.2011. The parties between themselves were also of the view that first option should be for the Respondents 2 and 3 to buy out the shares of the Cima Group. Reading the Judgement of NCLT with the findings recorded by us, all the shares issued to Respondents 4 to 7 stand set aside. We hold that there appears to be no scope for the groups of Appellants on one side and Respondents 2 and 3 on the other to work together and run the Company. We further direct:- It is just and expedient, as directed by the learned NCLT, to direct that the accounts of first Respondent Company be audited by a Chartered Accountant from the date of incorporation of the Company till the date of Order passed by NCLT taking into consideration the cancellation of all shares allotted to Respondents 4 to 7 and fix the shareholding of Petitioners and Respondents 2 and 3 which shall be one of the basis for determining the fair value of shares for Respondent No.1 Company. After the Report of the Chartered Accountant is finalized, the fair value of equity shares of the 1st Respondent Company shall be assessed by an Independent Valuer. As directed by the NCLT, the date of valuation is the date of filing of the Company Petition in NCLT. 4\ M/s. A.R. Gaudana & Associates, at 502-D, Shaily Complex, B/h. Old Gujarat High Court, Opp: Loha Bhavan, Navrangpura, Ahmedabad – 380009 is appointed as “Independent Valuer” to value the shares of the 1st Respondent Company as on the date of filing of petition. The Respondents 2 and 3 will have the first right to purchase the shares of the Appellants – original Petitioners in 1st Respondent Company, but not below the fair value fixed by Valuer, and in case Respondents 2 and 3 fail to purchase the shares of the Petitioners – Appellants at the value fixed by the NCLT, the Respondents 2 and 3 must sell their shares at the fair value determined by the Independent Valuer to the Petitioners – Appellants. After filing of the Report by the Independent Valuer, the Appellants and Respondents 2 and 3 would be at liberty to file application before the NCLT within two weeks from the date of service of the Valuer Report on them, to determine the mode and manner in which the transfer of shares shall take place. NCLT may, if necessary, extend the above date fixed for Audit Report and date fixed for Report of Independent Valuer, if necessary. NCLT will ensure carrying out of these Orders and if Auditor/Valuer have any difficulties, or for any other reasons it becomes necessary, may pass such further and other Orders deemed fit in the interest of justice to both sides. The appeal is allowed in terms of above directions and orders with costs quantified at ₹ 1 lakh to be paid by Respondent No.2 – Mr. Jaimin Girish Patel and ₹ 1 lakh by Respondent No.3 - Mr. Hemal Patel from their personal accounts, to the Appellants.
|