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Companies Law - Case Laws
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2025 (4) TMI 1413
Investigation into the affairs of the respondent company - eligibility to file an application under Section 213 of the Companies Act, 2013 - Illegal allotments of convertible debentures at a discount - illegal increase in authorized share capital of company - conversion of Respondent No. 1 Company from a private to a public entity - Illegal borrowing of funds based on fraudulent documentation - HELD THAT:- Admittedly the appellant is not a member of the Respondent No.1 company, hence cannot allege the business of Respondent No.1 company is being conducted in a manner oppressive to its members; or the company is guilty of fraud, misfeasance or other misconduct towards its members; or members of the company have not been given due information etc. The only argument of appellant is the business of the respondent company is being conducted with an intent to defraud its creditors, though the appellant was unable to substantiate his allegations the creditors of the company are being defrauded. Admittedly the appellant and the Respondent are in money dispute and arbitration proceedings are pending between two. It appears to circumvent such proceedings and to create pressure upon Respondent company, the appellant had filed the present Company Petition seeking investigation into its affairs.
The Ld. NCLT has held the petition is not maintainable under sub-section (a) of Section 213 of Companies Act, 2013 - petition disposed off.
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2025 (4) TMI 1293
Rejection of the plaint filed by the appellant - decree of permanent injunction from transferring any tenancy right in favour of any new tenant in respect of the property described in Schedule- “A” of the plaint - Company and its Directors have been mismanaging the assets of the Company - locus standi and a cause of action to seek a declaration of shareholding and related rights without having the transfer of shares recorded under Section 56 of the Companies Act, 2013 - misjoinder of causes of action - HELD THAT:- As rightly enumerated in the impugned judgment and deemed decree, the plaintiff does not disclose clearly in the plaint as to how he became such partial owner of the property - Thus, there is a palpable non-disclosure of the right of the plaintiff to the suit property, which forms an essential component of the bundle of facts which comprise of the cause of action for the suit.
For a plaintiff to claim a remedy in a suit, the plaintiff has to essentially disclose a legal right to the subject property as well as an infringement of such right, both of which ingredients are absent from the plaint inasmuch as the immovable property is concerned, which is the only subject-matter of the suit as mentioned in the plaint schedule - the learned trial Judge also proceeded on the premise that if the plaintiff has an axe to grind regarding the alleged mismanagement of the affairs of the Company by inducting third party-tenants, the appropriate remedy would be under Section 241 of the 2013 Act.
The reliance of the plaintiff/appellant on the Division Bench judgment of this Court in the matter of Eastern Indian Motion Picture Association [2024 (2) TMI 775 - CALCUTTA HIGH COURT] by the appellant is also misplaced, since in paragraph no.21 thereof, the coordinate Bench categorically observed that it did not find it necessary to go into the issue whether the dispute therein was covered by Section 241 of the 2013 Act. Thus, the said judgment cannot be said to be a binding precedent on the applicability of Section 241 in the facts of the present case - That apart, the said judgment was rendered in the particular factual matrix of the said case, which are not applicable to the present case.
There are no reason to interfere with the impugned judgment and deemed decree, both on the basis of the observations arrived at by the learned trial Judge and the additional reasons supplied - it is not inclined to interfere in the present appeal.
Conclusion - The suit is not maintainable due to lack of cause of action, misjoinder of causes of action, and bar under the Companies Act and procedural law.
Appeal dismissed.
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2025 (4) TMI 1120
Rejection of prayer for discharge of the petitioner - rejection on the ground that prayer for discharge by the petitioner cannot be entertained because Law is apposite that if any officer or employee of a company having validly obtained possession of a property of a company, wrongfully retains the same, as appears to be the case in this proceeding, it would constitute an offence contemplated in Section 452 of the Companies Act, 2013 - HELD THAT:- In the present case, the Learned Magistrate only issued summons upon the petitioner. The Learned Trial Court shall have to decide the case on its own merits on the basis of the evidence led by the parties for final decision. It is beyond the jurisdiction of this Court to embark upon final conclusion at this stage without leading evidences by the parties that the petitioner wrongfully withheld the articles of Company or not.
In the case of Hooghly Mills Company Limited Vs. State of West Bengal and Another [2019 (12) TMI 397 - SUPREME COURT], the Hon’ble Supreme Court held that 'In the present case, the order of the Magistrate under Section 630(2) was an interlocutory relief based on a prima facie assessment of facts and did not conclusively decide the ongoing trial under Section 630(1). If the Magistrate finds that the appellant company has been unable to prove that the 2nd Respondent was wrongfully withholding possession of the property, such interlocutory relief shall stand vacated. In light of the above discussion, it is clear that there was no exceptional case of illegality or lack of jurisdiction in the interlocutory order of the lower court calling for the exercise of the inherent powers of the High Court under Section 482, Cr.P.C.'
In the light of above discussion and judgments passed by the Hon’ble Supreme Court in the aforesaid referred case, this Court is of the opinion that the Criminal Revisional application has devoid of merits.
Conclusion - Order of rejection of discharge from the case is found correct, legal and well within the jurisdiction as such same is not required to be interfered.
Revision dismissed.
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2025 (4) TMI 1019
Oppression and mismamangement - Maintainability of suit - wrongfully continuing as members of the Executive Committee and are illegally occupying management positions - whether this Court has the jurisdiction to entertain the suit, in light of provisions of Section 430 of the 2013 Act? - whether the plaint can be rejected at the threshold in the absence of a formal application under Order VII Rule 11 CPC? - HELD THAT:- There is merit in the contention of Defendant No. 1 that under Order VII Rule 11 (d) of CPC, a plaint shall be rejected where the suit appears from the statement in the plaint to be barred by law and Court need not wait for the Defendant to appear on issuing summons and/or on appearance of the Defendant to file a formal application for rejection of plaint. In Sopan Sukhdeo Sable [2004 (1) TMI 726 - SUPREME COURT], the Supreme Court held that Rule 11 of Order VII CPC lays down an independent remedy made available to the Defendant to challenge the maintainability of the suit itself, irrespective of his right to contest the same on merits. The law ostensibly does not contemplate any stage when the objection can be raised and also does not say in express terms about the filing of a written statement.
In Patil Automation Private Limited [2022 (8) TMI 1494 - SUPREME COURT], the Supreme Court held that Order VII Rule 11 CPC does not provide that the Court is to discharge its duty of rejecting the plaint only on an application. The Rule is in fact silent about any such requirement. Since summon is to be issued in a duly instituted suit, in a case where plaint is barred under Rule 11 (d), the stage begins at that time when Court can reject the plaint.
Thus, there can be no debate that at the threshold itself, the Court can reject a plaint where it is barred on account of any infirmity or disability under Rule 11 of Order VII CPC and as observed by the Supreme Court, it is in fact that the duty and obligation of the Court to examine if the plaint has any infirmity based on the averments in the plaint, before issuing summons and therefore, there is no requirement of waiting for a formal application under Order VII Rule 11 CPC in that event and contention of the Plaintiffs to this extent merits rejection.
The inevitable conclusion is that Section 430 of the 2013 Act bars the jurisdiction of the Civil Court in matters falling in the domain of NCLT, which it is empowered to adjudicate under different provisions of the Act and these powers are wider and broader than the powers of the Civil Court under Section 9 CPC, being a specialised Tribunal created for the purpose of regulating adjudication of the affairs of the companies expeditiously.
Conclusion - i) The Civil Court lacks jurisdiction to entertain the suit due to the bar under Section 430 of the Companies Act, 2013. ii) The plaint is liable to be rejected at the threshold under Order VII Rule 11(d) CPC as the suit is barred by law.
The suit is not maintainable as the remedy of the Plaintiffs lies in approaching NCLT. Accordingly, the plaint is rejected leaving the Plaintiffs to avail their remedies in accordance with law before the NCLT, making it clear that this Court has neither entered into nor expressed any opinion on the merits of the case.
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2025 (4) TMI 1018
Rectification of order - Exercise of suo motu powers under Rule 154 of the NCLT Rules, 2016, to rectify a docket order, particularly when the principal detailed order was uploaded after the rectification order was passed - vice of audi alterem partem - principles of natural justice - HELD THAT:- The provision of Rule 154 of the NCLT Rules, provides power with the Tribunal of ‘rectification’. The rectification herein would mean only making any clerical or arithmetical mistakes in the order within the scope contemplated under it, arising out of an accidental slip or omission, which could only be corrected by the Tribunal, “on its own motion” or on an application preferred under Sub-rule (2) of Rule 154, which prescribes the format i.e., NCLT-9, under which the application contemplated under Sub-rule (1) of Rule 154, is to be preferred. Exercising the aforesaid powers, the Ld. Tribunal is shown to have passed an order on 10.03.2025, whereby certain rectifications were permitted to be carried in the light of the observations made in Para 11 of the order dated 10.03.2025.
The basic parameters for putting a challenge to the said order dated 25.03.2025, as agitated by the Ld. Senior Counsel for the Appellant, is that the order dated 10.03.2025, involving rectification of order under Rule 154 of the NCLT Rules, and the order passed on 25.03.2025, on a memorandum filed by the Administrator, ordering rectification of orders of both 07.03.2025 & 10.03.2025 it is in utter derogation to the principle of natural justice, as the Appellants were not served with its copy nor were heard, and the order was permitted to be modified on the basis of a memorandum preferred by the Administrator above. Thus, they contend that the order happens to be bad in the eyes of law as it suffers from vices of audi alteram partem.
How could there be a rectification of a docket order dated 07.03.2025, by an order passed on 10.03.2025 when the order of 07.03.2025 effecting substantive rights, itself was uploaded for the first time on 11.03.2025? - HELD THAT:- It is an admitted case that at the stage of passing of the order on 10.03.2025, or even prior to it no notice of any nature whatsoever was ever issued to any of the parties to the proceedings. Hence, even if the orders of 10.03.2025, is taken as to be an order passed in the exercise of suo motu powers, it would be bad, suffering from derogation of the principles of natural justice, as prior to passing of an order, on much less substantial changes such as arithmetical corrections, the parties are required to be heard, which apparently was not done nor does it reflect that the said power was exercised by the Tribunal in the exercise of suo motu powers.
he docket order of 07.03.2025 itself attaches finality to it, upon being uploaded on 07.03.2025. Finality is more particularly attached when, by the docket order of 07.03.2025, itself was directed not to be enforced for the time specified there. The question would be whether the said order at all subsequently without notice to the other party could be suo motu rectified by the Ld. Adjudicating Authority. What effect such rectification would have to the final order, is altogether a different question which can be answered, only when such rectification, if any is passed after hearing the parties to the proceedings.
As far as the order, dated 10.03.2025 as rendered in CP No. 44/241/HDB/2023, is concerned, being in violation of the uploading of the docket order of 07.03.2025, coupled with the fact, that, as per available records, no prior notice was issued by the Tribunal even while taking a suo motu cognizance, while passing the order of 10.03.2025, the order would be bad in the eyes of law. Hence, the order of 10.03.2025 deserves to be quashed, and is hereby quashed.
Conclusion - The provision of Rule 154 of the NCLT Rules, provides power with the Tribunal of 'rectification'. The rectification herein would mean only making any clerical or arithmetical mistakes in the order within the scope contemplated under it, arising out of an accidental slip or omission, which could only be corrected by the Tribunal, 'on its own motion' or on an application preferred under Sub-rule (2) of Rule 154.
Appeal allowed.
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2025 (4) TMI 891
Rightful shareholder of 100 equity shares in the respondent company or not - rectification of register of members to reflect the appellant as a shareholder holding 100 shares - time limitation - HELD THAT:- It is observed that Section 59 of the Companies Act, 2013, does not specify a limitation period. However, Section 433 makes the Limitation Act, 1963, applicable. Therefore, Article 137 prescribes a three-year period from the date of knowledge of the cause of action. In the present case the share transfer was recorded in 2016. The Appellant’s failure to act until 2020, when he issued a notice, and subsequently filing the appeal in 2021, is beyond the three-year limitation period.
The Appellant’s argument of fraud lacks corroborative evidence. Shareholding details in the Annual Return for 2016 were publicly available, and no objections were raised within a reasonable time.
The challenge to the share transfer through this Appeal filed by the Appellant is barred by the limitation in view of the orders of the of the Hon’ble Supreme Court and the order of the Hon’ble NCLAT as referred above the shares were transferred in the name of the Respondent on the basis of the share transfer deed dated 02.05.2009 on 20.02.1016. Any Appeal was to be filed for the Share Transfer under section 59 of the Companies Act, 2013 within the 3 years as per the Article 137 of the Limitation Act, 1963. Whereas the present Appeal is filed on 29.01.2021 which is beyond the period of 3 years of Limitation.
Conclusion - The present Appeal is time barred as it was filed beyond the three-year limitation period prescribed under Article 137 of the Limitation Act, 1963.
Appeal dismissed.
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2025 (4) TMI 700
Violation of principles of natural justice - opportunity of hearing of impleadment application - impleadment application was never heard before it being reserved alongwith the main Company Petition for the purposes of it to be disposed of in a single combined order - HELD THAT:- The argument of the learned senior counsel for the appellant is not convincing that as the appellant claims a right to receive shares in Respondent No.1 company hence he should be impleaded in main Company Petition filed by Respondent No.1 against Respondent No.2. Admittedly the Company Petition is not a lis between two brothers viz. Mr. Suresh Kumar Khosla and Mr. Ashok Kumar Khosla. The argument which the appellant is trying to develop is in case he succeeds to get shares in Respondent No.1 company and then if not impleaded in this Company Petition 137/2019 then it could be decided without giving him an opportunity of being heard.
This Company Petition is not a lis between the two brothers. Further without adverting to the merits of the impleadment application, suffice is to say the impugned order dated 08.01.2025 does not in any manner dilute any right of the appellant and is only a procedural order. Admittedly the main Company Petition was filed in the year 2015 by Respondent No.1 against Respondent No.2 on the ground Respondent No.1 company had invested Rs.144 crore in Respondent No.2’s business and it holds 47% shares in Respondent No.2 and that Respondent No.2 has engaged in oppression and mismanagement.
The impugned order none of the rights of any of the parties were decided and it was merely a procedural order recording filing of notes of submission. The procedural order are not appealable orders per Central Bank of India Vs Gokal Chand [1966 (9) TMI 142 - SUPREME COURT].
The appellant had failed to challenge the main order dated 18.12.2024 which records conclusion of hearing of arguments and fixing the matter for 08.01.2025 for procedural compliances viz. filing of notes of submission. Rather the appellant had complied with order dated 18.12.2024 by filing her notes of submission. Hence after compliance the appellant has no right to challenge the impugned order.
Conclusion - The impugned order is nothing but a consequential order and in the absence of challenge to the main order dated 18.12.2024, the challenge to procedural order is not maintainable.
Appeal dismissed.
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2025 (4) TMI 640
Grant of anticipatory bail - Avoidance of legal proceedings - no non-bailable warrant issued against the respondent - HELD THAT:- It is no more res integra that economic offences constitute a class apart, as they have deep rooted conspiracies involving huge loss of public funds, and therefore such offences need to be viewed seriously. They are considered as grave and serious offences affecting the economy of the country as a whole and thereby posing serious threats to the financial health of the country. The law aids only the abiding and certainly not its resistants. When after the investigation, a chargesheet is submitted in the court, or in a complaint case, summons or warrant is issued to the accused, he is bound to submit himself to the authority of law. If he is creating hindrances in the execution of warrants or is concealing himself and does not submit to the authority of law, he must not be granted the privilege of anticipatory bail, particularly when the Court taking cognizance has found him prima facie involved in serious economic offences or heinous offences - The High Courts should also consider the factum of issuance of non-bailable warrants and initiation of proclamation proceedings seriously and not casually, while considering the anticipatory bail application of such accused.
In the instant case, as stated earlier, the Ministry of Corporate Affairs had directed the Appellant – SFIO to investigate into the affairs of 125 companies and on the completion of the investigation, the SFIO had lodged the private complaint before the Special Court against the accused including the respondents, alleging various serious offences under the Companies Act including Section 447 thereof and the offences under the IPC. It is pertinent to note that as per sub-section (6) of Section 212 the offence covered under Section 447 of the Companies Act has been made cognizable and the person accused of the said offence is not entitled to be released on bail or on his bond, unless twin conditions mentioned therein are satisfied.
In a recent case in Union of India through Assistant Director vs. Kanhaiya Prasad, [2025 (2) TMI 563 - SUPREME COURT] it has been observed by this Court that cryptic orders granting bail without adverting to the facts or the consideration of such restrictive conditions with regard to the bail are perverse and liable to be set aside.
Coming back to the facts of the present case, though the Special Court had taken cognizance of the alleged offences under the Companies Act including under Section 447 and other offences under the IPC, and even though the non-bailable warrants were issued from time to time against the Respondents, and even though the proclamation proceedings were initiated against them, the High Court has passed the impugned orders.
In none of the impugned orders, the High Court has bothered to look into the proceedings conducted, and the detailed orders passed by the Special Court for securing the presence of the Respondents – Accused. It cannot be gainsaid that the judicial time of every court, even of Magistrate’s Court is as precious and valuable as that of the High Courts and the Supreme Court. The accused are duty bound to cooperate the trial courts in proceeding further with the cases and bound to remain present in the Court as and when required by the Court. Not allowing the Courts to proceed further with the cases by avoiding execution of summons or warrants, disobeying the orders of the Court, and trying to delay the proceedings by hook or crook, would certainly amount to interfering with and causing obstruction in the administration of justice.
In the instant case, the Special Court considering the seriousness of the alleged offences had initially issued bailable warrants, however, the Respondents kept on avoiding the execution of such warrants and did not appear before the Special Court though fully aware about the pendency of the complaint proceedings against them. The Special Court therefore had to pass detailed orders from time to time for the issuance of non-bailable warrants, and thereafter had also initiated the Proclamation proceedings under Section 82 of the Code, for requiring respondents to appear before it. The High Court however without paying any heed to the proceedings conducted by the Special Court against the respondents, and ignoring the well settled legal position, granted anticipatory bail to the Respondents vide the impugned orders. As discussed earlier, the said Orders being perverse and untenable at law, cannot be allowed to be sustained, and deserve to be set aside.
Conclusion - The High Court's orders granting anticipatory bail were in disregard of the mandatory conditions of Section 212(6) of the Companies Act and were therefore perverse and untenable.
The impugned orders set aside - appeal allowed.
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2025 (4) TMI 639
Challenge to order from the National Company Law Tribunal (NCLT), Bengaluru, which directed the Central Government to investigate the affairs of the appellant company and its directors - Violation of principels of natural justice - HELD THAT:- This Appellate Tribunal is of the view, adherence to that the principles of natural justice is an aspect, which has to be evaluated on differing yard sticks depending upon the facts and circumstances of each case. The term ‘notice’ under legal connotation means imparting the knowledge to the party, of an proceedings being taken up before a court of law.
In the instant case, the knowledge is attributable to the Appellant in the light of the findings which has been recorded in para-4, coupled with the findings which has been recorded in Para-5 as regards the service of notice on the Appellants/Respondents by a publication. Hence, the ground taken by the Appellant that the order happens to be exparte will not be acceptable to this Appellate Tribunal. Further, since the Appellant had deliberately with a malicious intent at his own volition attempted not to appear before the Learned Tribunal, it cannot be said that the Impugned Order was passed exparte (or) having been passed without hearing the Appellant particularly when despite of several opportunities, being granted to him, he has deliberately avoided to appear before the Tribunal and to participate in the proceedings, apprehending the consequences, which may flow from the matters which were being considered by the Tribunal, made in its observations in the impugned order from para – 5 onwards, about the act of misconduct which, the Appellant was found to be involved.
The Impugned Order has been assailed on the solitary ground of being in violation of principle of natural justice, which is not being made out owing to the findings which are recorded in the Impugned Order. Besides since the consequential effect of the Impugned Order, would only result in carrying out of an investigation into the conduct of the Appellant, Company including its directors in its business operations based on a complaint, filed by the Respondent, normally, the courts/tribunals should keep their hands off in such process of investigation which has been directed under law to be carried against a party or person, so as to arrive at a conclusion about the veracity of the said allegations levelled by the Complainant. Since, the investigation is only a fact-finding stage, it does not require to be ventured into by this Appellate Forum, because all defences are still available to the Appellant, to be raised before the investigating agency as directed by the Impugned Order.
This Appellate Tribunal is of the considered view that the ground taken by the Appellant, that the proceeding happens to be in violation of the principles of natural justice is not made out from the records and from the findings which had been recorded in the Impugned Order about service of notice by a substitutive mode, no interference is required to be called for by this Appellate Tribunal in the Company Petition in question.
Conclusion - The Tribunal found no violation of natural justice principles, and the investigation order is upheld as a necessary measure to address the allegations.
Appeal dismissed.
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2025 (4) TMI 638
Power to grant an interim protection to the opposite parties i.e., the Respondents - directing the proceedings of the tentative Annual General Meeting (AGM), which was scheduled to be held as on 27.09.2024, has been directed to be kept on hold - whether an order which does not have a long-drawn bearing on the rights of either side of the parties or which does not have any bearing on the principal adjudication of the petition and which is an interlocutory arrangement made by the Ld. Tribunal or the courts while exercising their inherent powers, could, at all be treated as to be an order, which could be made appealable to the appellate jurisdiction? - HELD THAT:- The foundation of the relief, which was prayed for, in the said application was based upon, the earlier order which has been earlier passed by the Tribunal on 14.09.2023, which has been taken as to be a precedent for pressing upon the interim relief claimed in the application owing to the orders passed on 14.09.2023, whereby an advocate commissioner was appointed to conduct the Annual General Meeting (AGM) as per the Article of Association and the report was called upon to be submitted - When the Tribunal is exercising its exclusive jurisdiction of exercising its inherent powers, the earlier interim order cannot be taken as to be an-exampleror precedent to be laid as a foundation and application for the grant of a similar relief for conducting an Annual General Meeting (AGM) by appointing an Advocate Commissioner, was mandatorily required to be considered on the said basis.
The reference made by the Ld. Counsel for the Appellant with regards to the extent of the exercise of the Appellate power for deciding the applications in the manner in which the ratio has been laid down in the matter of Dwarikesh Sugar Industry Limited [1997 (5) TMI 421 - SUPREME COURT]. Yet again, it cannot be a yardstick to be commonly applied where the proceedings are being governed by the provisions contained under Order XLI of the Civil Procedure Code, 1908, more particularly when the governing circumstances of Dwarikesh Sugar Industry Limited are absolutely distinct, to the appeal at hand.
The proceedings, which were subject matter of consideration in the matters of Opto Circuit India Limited [2021 (2) TMI 117 - SUPREME COURT], were the proceedings, which were held, on initiation of an investigation by the Central Bureau of Investigation (CBI), which was factually based on different reasoning altogether. Even reference to para 14 and 15, which has been relied upon by the Ld. Counsel for the Appellants is accepted, as laying down a guiding principle that, if the “statute provides a thing to be done in a particular manner, it has to be ensured to be done in that manner, or it has not to be done in any other manner, which is unknown to law”. In this regard, we will have to answer the question as to, whether the procedural implications as it has been pedestaled in Para 14 and 15 of the judgment of Opto Circuit India Limited, would at all be made applicable in the instant case, so as to treat the order of 14.09.2023, as to be the basis to judicially decide, that appointment of an Advocate Commissioner by the earlier order will form to be, a part and parcel of the procedure provided under law, which is required to be adhered to while passing of the order on IA. No. 283/2024. In fact, the ratio of Para 14 and 15 laying down for a strict adherence to the procedural law, was in a case where the matter was being finally adjudicated and, where there could not have been any deviation to any other process, unknown to the process of law. But the same principle cannot be adopted when a Court or a Tribunal is exercising its discretionary powers which has some element of human prudence too, which is variable from man to man, for considering the interlocutory applications and hence the procedure cannot be derived from the earlier interim orders, which as already observed is not a precedence for deciding the matter.
While declining to interfere in the company appeal, as against the impugned interlocutory order passed by the Ld. Tribunal while exercising its discretionary powers, it is apt apt to direct the Tribunal that, if the Appellant prefers the stay vacation application against the impugned order dated 27.09.2024, the same would be considered in accordance with the law without being influenced by any observations made by us in the order. And simultaneously, the Ld. Tribunal is requested also make an earnest effort to decide the IA. No. 282/2024, which the Appellant expects to be decided based on the procedures of the order 14.09.2023, which is yet again directed to be considered by the Ld. Tribunal, under the given facts and circumstances of the case, if at all made applicable, as per the provisions of law.
Conclusion - The appeal against the interim order was dismissed, with the affirmation that such orders are not appealable under Section 421.
Appeal dismissed.
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2025 (4) TMI 524
Exercise of jurisdiction under Section 482 of Cr.P.C. - amounts collected by the petitioners as advances for the sale of immovable property - 'deposits' under Section 73 of the Companies Act, 2013 - exemption under Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposit) Rules, 2014.
HELD THAT:- Section 482 of the Code of Criminal Procedure empowers the High Court to exercise its inherent power to prevent abuse of the process of Court. In proceedings instituted on complaint exercise of the inherent power to quash the proceedings is called for only in cases where the complaint does not disclose any offence or is frivolous, vexatious or oppressive. If the allegations set out in the complaint do not constitute the offence of which cognizance is taken by the Magistrate it is open to the High Court to quash the same in exercise of the inherent powers under Section 482.
There are considerable force in the contention of the petitioners that the said Guruzala Venkateswara Rao foisted many false complaints against the petitioners in order to settle his personal scores with petitioners herein and the other group of companies. Further, the said Guruzala Venkateswara Rao is neither allottee nor he is in any way directly involved or linked with the business transactions of the petitioners.
Whether the amounts collected by the petitioners for sale of immovable property as advance would come under the purview of ‘deposits’ or could be exempted from the purview of ‘deposits’ by virtue of Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014? - HELD THAT:- Admittedly, petitioners - companies had purchased the agricultural land and after obtaining the permission from the competent authorities for conversion of agricultural land into non-agricultural land, have obtained permission for development of the said land duly converting into layout of plots for residential/commercial housing. To unlock the funds invested in development of the lay outs etc., petitioners had offered to sell the land in its possession and for this purpose entered into written agreement/arrangement. By virtue of proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, the advances received by the petitioners for sale of immovable property are exempted from the purview of the deposits.
The respondent No. 3 is neither allottee nor he is in any way directly involved or linked with the business transactions of the petitioners, however, he lodged complaint against the petitioners with some ulterior motive to wreck vengeance on the accused.
This Court is of the considered view that continuation of proceedings against the petitioners in both cases/accused would amount to abuse of process of the Court.
Conclusion - The proceedings against the petitioners in both criminal cases are to be quashed, as the allegations did not meet the criteria for deposits under the Companies Act, and the proceedings appeared to be maliciously motivated.
Petition allowed.
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2025 (4) TMI 523
Seeking recall of the order passed by the NCLT, which application has been rejected - locus standi of appellant, who was not a party to the original proceedings, to file an application seeking the recall of an order - Sections 241 & 242 of Companies Act - HELD THAT:- Section 44 of the Evidence Act, 1872 provides that any party to a suit or other proceeding may show that any judgment, order or decree which is relevant under Sections 40, 41 & 42 and which has been proved by the adverse party was delivered by a Court, not competent to deliver it or was obtained by a fraud of the collusion. The purpose of the above provision is to give right to other party to prove that judgment of the Court which is relied as evidence was delivered by a Court nor competent to deliver it or was obtained by fraud of collusion - Section 44 cannot be used or utilised by the appellant since appellant was never party to the proceeding under Sections 241 & 242 of the Act and the order dated 15.12.2023 is not an order which was relied as evidence by any party in the proceeding under Sections 241 & 242, in fact the order dated 15.12.2023 is an order passed in the same very proceeding. The submission of the appellant that by virtue of Section 44 appellant can very well impeach the order dated 15.12.2023 on the ground that it was delivered by a Court, not competent to deliver it cannot be accepted.
The submission of the appellant on basis of Section 44 of the Evidence Act is misplaced and has no applicability to give any locus to the appellant to file an application to recall the order dated 15.12.2023 before the NCLT.
Order 1 Rule 8A of the CPC empowers a Court while trying a suit to allow a person or body of person to present case or his opinion on the question of law and to take parts in proceedings of the suit. If the Court is satisfied that person or body or person is interested in any question of law which is directly and substantially issued in the suit. The provisions of Rule 8A is enabling power which empowers the Court to permit person or body person interested in any question of law to present such opinion and to take part - When Col. Ashish Khanna, who was party to the proceeding and has filed various application, including the application CA 40/2022, which was rejected on 15.12.2023, NCLT has not committed any error in holding that appellant the wife of Col. Ashish Khanna has no locus to file the application to recall order 15.12.2023.
The order dated 15.12.2023, which was sought to be challenged by Col. Ashish Khanna which challenge having not been entertained the order 15.12.2023 and the cost imposed by the order dated 15.12.2023 could not be allowed to be challenged by the appellant. Cost was imposed on Col. Ashish Khanna for the reasons as was noticed in the said order dated 15.12.2023. Col. Ashish Khanna having unsuccessfully challenged the said order, Appellant has no locus to question the imposition of cost on Col. Ashish Khanna.
Conclusion - The NCLT's decision to reject the appellant's application for recall rejected, due to lack of locus standi and there are no grounds to interfere with the order dated 15.12.2023.
NCLT (Principal Bench, New Delhi) did not commit any error in holding that appellant/applicant has no locus to file CA 90/2024 praying for recall of the order dated 15.12.2023 - appeal dismissed.
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2025 (4) TMI 522
Reduction of capital under Section 66 of the Companies Act, 2013 - shares got extinguished after passing special resolution by the Respondent No. 1 - selective capital reduction in terms of Section 66(1)(b)(ii) of the Code - Appellants minority shareholders could have been compelled to be ousted from the equity holding by passing resolution by majority of shareholders despite unwillingness of the minority shareholders - valuation of shares -valuation done by E&Y Merchant banking division was really "Independent" or was biased - applicability of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 - 25% Discount for Liquidity of Marketability (DLOM) was permitted and justifiable or not - minority shareholder who supported the Respondent company right from inception were entitled to receive "Control Premium" instead of "DLOM" - failure to disclose and attach the required documents in the explanatory statement, enclosed along with the notice for acquisition of shares from minority shareholders was issued - violation of Section 102 of the Companies Act, 2013 making the resolution passed for the approval of the scheme of reduction of share capital void and illegal or not.
Whether reduction of capital by the Respondent No. 1/ BTL was in accordance with Section 66 of Companies Act, 2013? - Whether selective capital reduction was permissible in terms of Section 66(1)(b)(ii) of the Code? - Whether the Appellants minority shareholders could have been compelled to be ousted from the equity holding by passing resolution by majority of shareholders despite unwillingness of the minority shareholders? - HELD THAT:- In Punjab Distilling Industries Ltd. v. CIT [1965 (2) TMI 6 - SUPREME COURT], the Hon'ble Supreme Court of India outlined the process of capital reduction i.e. the company's general body must pass a resolution approving the reduction of capital, often involving the distribution of accumulated profits to shareholders. An application for court (now NCLT) approval must be submitted. Once the court (now NCLT) confirms the reduction, it must be registered with the Registrar of Companies. Notices are issued to shareholders inviting applications for refunds of share capital and finally, upon receiving these applications, the company distributes the refunded amount.
Just like CoC in Corporate Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016, the Shareholder of the company are true owners and understand what is in interest of the company as well as owners (shareholders) and therefore shareholders have exclusive jurisdiction to decide on the issue of capital reduction in any manner including selective capital reduction and if so, in what manner. There are no conditions attached to the terms "in any manner" as stipulated under Section 66 of the Companies Act, 2013.
There is no vested right of minority shareholders to continue as shareholders in case of reduction of share capital and therefore, they can be ousted from shareholding if a special resolution is passed by the majority of the equity shareholder, which happened precisely in the present case where special resolution was passed by 99.92% of voting shares.
The reduction of capital by the Respondent No. 1/ BTL was in accordance with the Section 66 of the Companies Act, 2013. We also held that the selective capital reduction was permissible in terms of Section 66(1)(b)(ii) of the Companies Act, 2013. We further hold that Section 66 is applicable in case of any capital reduction, be it listed company or non listed company and therefore, the Respondent No. 1 was supposed to comply with Section 66 of the Companies Act, 2013 - there are no error in the Impugned Order on this account.
Whether valuation of the shares carried out by E&Y @ Rs. 196.80 was correct and in accordance with law along with established valuation practices done keeping in view the valuation of the same company done @ Rs. 310 few months back while allotting preferential shares to SingTel? - Whether the valuation done by E&Y Merchant banking division was really "Independent" or was biased? - Whether SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations, 2009) were applicable in the present case? - HELD THAT:- Share valuation under the Companies Act, 2013, involves the process of determining the value of shares, which is crucial in various corporate transactions. This process is governed by several provisions of the Act, particularly emphasizing the role of registered valuers. Valuation is essential in ensuring that shares are issued at a fair price, preventing undervaluation or overvaluation that could impact shareholder rights. The valuation of shares involves determining the fair value of a company's shares, which is significant for both listed and unlisted companies. This valuation can be used and becomes desirable in cases like selling a business, securing loans using shares as collateral, mergers and acquisitions, converting share types and compensating shareholders in case of capital reduction like the present case.
The contentions of the Appellants that, share valuation as done by the E&Y Merchant Banking Division in the present case, was not appropriate and this Appellate Tribunal should reject the same. In this connection, reference made to ratio laid down in the case of Cadbury India Ltd. [2014 (5) TMI 1189 - BOMBAY HIGH COURT] which noted that before a court can decline sanction to a scheme on account of valuation, an objector to the scheme must first show that the valuation is ex-facie unreasonable i. e. so unreasonable that it cannot be accepted. It was also held that plausible rationale provided by a valuer is not be readily discarded merely because an objector has a different view. It was held that valuation is not an exact science and all valuations proceed on assumptions and to dislodge a valuation, it must be shown that those assumptions as such as could never have been made, and that they are so patently erroneous that the end result itself could not, but be wrong unfair and unreasonable - the ratio laid down in case of Cadbury India Ltd. is quite explicit and hardly leaves any scope for interference by this Appellate Tribunal on the issue of valuation.
Noting that ICDR Regulations 2009 do not apply to the Capital Reduction in question, the current position with respect to period to be considered for the purpose of pricing has changed from 26/2 weeks to 90/10 days under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (as amended in 2022) further shortening the period to examine the days for the purpose of valuation, wherein 26 weeks was noted to be too long a period to value shares especially as price can be very volatile over a period of 26 weeks. Therefore, it is the judgement of a valuer on the historic price to be considered of a volatile listed share, that would represent the value of such shares correctly. This seems quite logical.
The allegation that Ernst & Young LLP on account of being the internal auditor of BAL and therefore amenable to influence by Respondent No. 1 is found to be untenable - the Tribunal has correctly complied the same, in the present appeal and there are no merit in the pleading of the Appellants on this ground.
Whether 25% Discount for Liquidity of Marketability (DLOM) was permitted and justifiable in determining the valuation for the purpose of offering the minority shareholders? - Whether the minority shareholder who supported the Respondent company right from inception were entitled to receive "Control Premium" instead of "DLOM"? - HELD THAT:- The valuation of shares is rather intricate and subjective matter for experts who has got domain knowledge of not only the valuation methodology but also have fair knowledge about relevant industry for which valuation is being done with the help of the relevant financial facts and figures. While doing these valuations there may be more challenges in case of valuation of unlisted companies like the Respondent No. 1/ BTL as the relevant market shares dates is not available - By no stretch of imagination, someone can expect that the court/ tribunal shall have such expertise to go into the correctness or otherwise of the valuation done by the independent valuers. The only duty of the court/ tribunal is to ensure that the whole process has been fair and unbiased and has not caused any prejudice to the rights of shareholders including and especially the minority shareholders.
In the present case, there are no such reason to come to the conclusion that whole process has been biased or unfair.
It is the case of the Appellants that instead of DLOM, the valuation should have provided Control Premium since promoters acquired shares from the minority shareholders forcefully. Hence it would be desirable to understand the concept of Control Premium and its applicability in the present case - Equity Shares may be subject to premium or discounts, depending upon the context of valuation including whether they represent controlling or minority interests.
The contention of the Appellants that Ernst & Young Merchant Banking Services Pvt. Ltd. submitted flawed Valuation Report as it failed to include a control premium, is not found convincing. The majority shareholders in the Respondent No. 1/ BTL already had control over majority of the shares and the remaining of 1.09% of shareholders were not in any significant position or say in the dealing with the company matters. Further, this percentage of minority shareholders did not have the ability to influence any major decision of the Respondent No. 1. Thus, the question of a control premium does not arise as there is no change in control of the Respondent No. 1 pursuant to the capital reduction.
There is no error in the Impugned Order which allowed scheme based on Independent Valuer report which provided 25% discount for DLOM in arriving at fair value of Rs. 196.80 per shares. It is already noted that in the present case, there seems to be no case of control premium which the Appellants have claimed, simply as majority of shareholder has brute majority of 98.91%.
Whether the Respondent company failed to disclose and attach the required documents in the explanatory statement, enclosed along with the notice for acquisition of shares from minority shareholders was issued? - Whether the Respondent company BTL violated Section 102 of the Companies Act, 2013 making the resolution passed for the approval of the scheme of reduction of share capital void and illegal? - HELD THAT:- Uder the Companies Act, 2013 Section 62 allows for a Preferential Allotment of shares like in the case of SingTel. Under Section 62(1)(c) read with Companies (Share Capital and Debentures) Rules, 2014, Rule 13, it is mandatory for a company to (a) obtain a valuation report and (b) send the valuation report along with the notice under Section 102 of the Companies Act, 2013. This requirement of law was duly complied for the SingTel Preferential Allotment.
In contrast to the provision relating to Preferential Allotment, in the case of Capital Reduction under Section 66 of the Companies Act, 2013 there is no such stipulated requirement to send the valuation report along with the notice. The only requirement is to permit an inspection by virtue of Section 102 (3) of the Companies Act, 2013 which was duly complied by the Respondent No. 1 company. Thus, it is not convinced with the arguments of the Appellants that failure to send the valuation report together with the notice has caused legal infirmity or any prejudice to the interest of the Appellants. In fact, the right to inspect was availed from by some of the Appellants as is evident from the email dated 12.07.2018, where an inspection was provided to the counsel of the Appellant.
Conclusion - i) Reduction of capital by the Respondent No. 1/ BTL was in accordance Section 66 Companies Act, 2013. ii) Selective capital reduction was permissible in terms of Section 66(1)(b)(ii) of the Companies Act, 2013. iii) The Appellants minority shareholders could have been compelled to be ousted from the equity holding by passing resolution by majority of shareholders despite unwillingness of the minority shareholders. iv) The valuation of the shares carried out by E&Y @ Rs. 196.80 was correct and in accordance with law along with establish valuation practices. v) The valuation done by E&Y Merchant banking division was Independent. vi) The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (“ICDR Regulations, 2009”) were not applicable in the present case. vii) 25% Discount for Liquidity of Marketability (DLOM) was permitted and justifiable in determining the valuation for the purpose of offering the minority shareholders. viii) The minority shareholder who supported the Respondent company right from inception were not entitled to receive “Control Premium” instead of “DLOM”. ix) The Respondent No. 1/ BTL did not fail to disclose and attach the required documents in the explanatory statement enclosed along with the notice for acquisition of shares from minority shareholders was issued. x) The Respondent No. 1/ BTL did not violate Section 102 of the Companies Act, 2013 and therefore making the special resolution passed for the approval of the scheme of reduction of share capital was valid.
Appeal dismissed.
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2025 (4) TMI 115
Prayer for declaration that the sale agreement is not binding upon the office of the official liquidator - validity of sale agreement - exercise of power under Section 536 (2) of the Companies Act, 1956, to dispose of the present proceedings - obligation to pay stamp duty and registration charges - HELD THAT:- The obligation for payment of stamp duty and registration charges was clearly on the applicant, who was described as “transferee” in the said sale agreement dated 29th May 2017. It is an admitted position that neither was the entire stamp duty ever paid nor was the document registered and hence, the charges for registration were also never paid/deposited by the applicant. It is also relevant to note that in the earlier application filed on behalf of the applicant i.e. Interim Application (Lodging) No. 4664 of 2022, the applicant prayed for permission of this Court to pay the necessary stamp duty and to register the document as per law, after completing all formalities. This makes it abundantly clear that the applicant was aware about its obligation under the above quoted clause of the sale agreement dated 29th May 2017 that the stamp duty and registration charges were to be paid by the applicant.
This Court finds substance in the contention raised on behalf of the official liquidator that the subject document i.e. the sale agreement dated 29th May 2017 is an incomplete and inchoate document, incapable of being validated under Section 536 (2) of the Companies Act.
The Supreme Court in the case of J. K. (Bombay) Private Ltd. v/s. New Kaiser-I-Hind Spinning and Weaving Co. Ltd. & Ors. [1968 (11) TMI 63 - SUPREME COURT] has laid down that once a winding up order is passed and the undertaking as well as the assets of the company in liquidation pass under the control of the liquidator, it is the statutory duty of the liquidator to realize them and to pay from the sale proceeds to creditors and that the creditors also acquire rights to have the assets realized and distributed amongst them pari-passu.
The official liquidator also alleged suppression on the part of the applicant, as it was claimed that there was nexus between the management of the applicant and the former management of the company in liquidation. The official liquidator claimed that the company in liquidation had a sister concern called M/s. Desmo Capital and Finance Limited, having the same management and ownership as that of the company in liquidation, prior to its winding up - there is some substance in the contention raised on behalf of the official liquidator that the applicant could not have feigned ignorance about the fact that company petition for winding up of the said company i.e. M/s. Desmo Exports Limited had been filed and it was pending when the subject sale agreement dated 29th May 2017 was executed. In any case, this Court has already rejected the substantial contentions raised in the present matter on behalf of the applicant and accepted those of the official liquidator herein.
As regards delay and laches on the part of the applicant, this Court is not inclined to hold against the applicant on that score. It is indeed observed in paragraph 33 of the judgment of this Court in the case of Rathnam P. V. v/s. Premier Automobiles Limited & Ors. [2012 (4) TMI 234 - BOMBAY HIGH COURT] that dispossession of the property of the company, during the interregnum period between the date of presentation of winding up petition and date of passing of the winding up order can be validated at any time, although the applicant would have to give explanation for any unreasonable delay in filing such application under Section 536 (2) of the Companies Act. In the facts of the present case, delay and laches in itself cannot be held to be a ground to hold against the applicant.
Conclusion - The applicant's failure to fulfill its obligations, such as paying stamp duty and obtaining necessary permissions, constituted a default, preventing the application of this provision. Similarly, the applicant's invocation of Section 53A of the Transfer of Property Act, concerning part performance, was rejected due to the lack of registration, as required by Section 17(1A) of the Registration Act.
The applicant's interim application for validation of the sale agreement is dismissed and the Official Liquidator's report, directing the applicant to hand over possession of the subject property to the Official Liquidator is allowed.
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2025 (4) TMI 18
Money Laundering - non–disclosure of transaction in the Specified Bank Notes during the period 8th November 2016 to 30th December 2016 - contravention of section 129 along with section 448 of the Companies Act 2013 - HELD THAT:- Section129 of the Companies Act 2013 deals with, obligation of the company for laying down the Financial Statement to be furnished by the company which shall give a true and fair view of the State of affairs of the company or companies as per section 133 and as the necessary forms to be filled up per schedule III . In case of contravention by the company as per section 129 (7) the Managing Director, the whole time director in charge of the finance, The Chief Financial Officer or any other person charged by the Board with the duty of complying with the requirement of this section and in the absence of any officers mentioned above,all the directors shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not less than Rs/-50 thousand.
It is pertinent to note that pursuant to the provision as enumerated in section 439 of the Companies Acts the specific bar has been imposed upon the court in taking cognizance of any offence under the companies act unless the complaint is filed by the Registrar of the company, any shareholder (or a member) of the company or of a person authorised by the central government in that behalf .In this case the Deputy Registrar has filed the complaint and no such reason has been assigned by the court regarding such deviation when taking cognizance of the offence.
The judgement relied on by the learned advocate of the petitioner reported in Usha Martin Telematics Limited and others vs-Registrar of companies, West Bengal [2022 (7) TMI 15 - CALCUTTA HIGH COURT] where Justice Ajoy Kumar Mukherjee questioned the role of the trial court regarding the satisfaction of the court about prima facie case against the accused person and about the grounds for proceeding against the accused person.
In order to attract section 448 of the Company’s Act the necessary ingredient must be false statement what would constitute Fraud as defined under section 447 of the Act. On bare reading of the petition of complaint, the report of the Auditor for the period November 8, 2016 to December 30, 2017 the reason that the company did not provide the requisite disclosure of specified banknotes shows as “as they were unable to provide details”. However the complainant alleges against the present petitioner and his wife the petitioner of second revisional application for non-disclosure of the statement and arrayed them as accused in the petition of complaint. The petitioner gave a reply to the said letter of Complaint to the said complainant challenging the identity of the complainant - Mere divisions of one common family business with no third party being ever prejudiced by any stretch of imagination consequent to the option of any such non –disclosure,if at all . The petitioner also prayed for withdrawal of the show cause notice issued but without any response.
The proceedings being Complaint Case no. 43/2019 pending before the Learned 2nd Special Court, Calcutta at West Bengal under section 129 /448 of the Companies Act appears to be bad in law and is liable to be set aside being not in accordance with law and is an abuse of the process of the process of law - Application allowed.
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2025 (3) TMI 1356
Validity of revival of struck off company - Interpretation of statute - second proviso of Section 252 of Companies Act, 2013 - Striking off the name of a company from the register of companies - HELD THAT:- The plain reading of second proviso to Section 252, shows that where the Registrar of Companies feels that the name of the company has been struck off from the Register of Companies either inadvertently or on the basis of incorrect information furnished (as has been stated to be the case by the Respondents in the present Petition), the Registrar of Companies may within a period of three years from the date of passing of the order dissolving such company under Section 248 of the 2013 Act, file an application under Section 252 of the 2013 Act seeking restoration of the name of such company before the Tribunal.
The procedure, as set out in second proviso to Section 252 of the 2013 Act, is that the Registrar must, within a period of three years from the date of order of dissolving the company, file an application before the National Company Law Tribunal seeking restoration of such company.
Concededly, the Respondent No. 2 has taken no such steps as are required under the provisions of the 2013 Act, yet the Company was revived. In addition, since the order dissolving the Company was dated 11.01.2016, such steps were required to be taken by the Respondent No. 2 within three years from such date – which has also not been done. Thus, the action of the Respondent No. 2 cannot be sustained.
Conclusion - The Respondent No. 2 is directed to strike off the name of the company from the Register of Companies and to take all necessary steps in accordance with the law.
Petition allowed.
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2025 (3) TMI 1257
Seeking restoration of the name of the appellant in the Register of the Companies - Section 252(3) of the Companies Act, 2013 - HELD THAT:- The appellant is right in the sense that in view of the findings recorded by the NCLT on the review petition, the time consumed in prosecuting the review petition ought to have been excluded. However, there is a delay on the part of the appellant at every stage. The application for restoration of the appellant’s name in the Register of the Companies was filed after a lapse of four months from the date on which it was struck out. The review petition was filed five months after the NCLT dismissed the application. After the review petition was dismissed, it took more than one year for the appellant to prefer an appeal before the NCLAT. There is no justification for this delay of five months and one year respectively.
Looking to the nature of the proceedings, the NCLAT was justified in holding that no case was made out to condone the delay, especially when under Section 421 of the Companies Act, the delay could have been condoned provided it was upto forty-five days.
Conclusion - The application for restoration was delayed by four months, the review petition by five months, and the appeal by over a year, with no adequate justification provided. Given these delays, the NCLAT was deemed justified in denying condonation, as Section 421 of the Companies Act limits condonation to delays of up to forty-five days.
Appeal dismissed.
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2025 (3) TMI 914
Power of Bombay High Court to intervene u/s 9 of the Arbitration and Conciliation Act, 1996, to protect the interests of the Petitioner, Manmohan, particularly concerning the Greater Kailash Property, which is not owned by Kapani Resorts but was released using Manmohan's funds - shares were not allotted to Manmohan as per the Agreement - parties are indeed privy to an arbitration agreement contained in the Agreement - HELD THAT:- Even a plain reading of the foregoing would show that it is now a statutory obligation of Kapani Resorts to refund the monies invested by Manmohan. The allotment of shares ought to have been made within sixty days of February 11, 2022 (for USD 350,000) and of February 22, 2022 (for USD 650,000). Such allotment not having been made, these amounts ought to have been refunded within fifteen days of such deadline to make allotment. Manmohan’s right to refund has accrued on expiry of the 75-day period from the date of the receipt of the share application money. Before the funds infused by Manmohan could have been used to repay SIDBI, it was incumbent on Kapani Resorts to allot shares (which would have given control to Manmohan over Kapani Resorts), after which allotment, it was permissible to use such funds to repay SIDBI. This was a necessary statutory condition precedent that has not been met. Now, the statutory obligation to refund has kicked in on the expiry of 75 days from each tranche of infusion.
Evidently, a strong prima facie case has been made out on behalf of Manmohan, for grant of protective reliefs. Grave and irreparable harm and injury would be occasioned to Manmohan if such intervention is not made. The protection that Manmohan enjoyed at the hands of the NCLT (a freeze on the capital structure of Kapani Resorts) too now stands removed owing the withdrawal of the NCLT proceedings in reaction to the objection raised on behalf of Virendra and Vaibhav, who have shown scant regard for legal obligations owed by them under the solemn Agreement executed by them.
Evidently, a strong prima facie case for refund of the amounts invested by Manmohan exists in law. Evidently, a strong prima facie case of the Respondents enjoying the fruits of their violation of the Agreement exists on the record. Evidently, a strong prima facie case to show that the properties mortgaged to secure Kapani Resorts’ obligations owed to SIDBI now stand released. Indeed, the personal guarantees too stand discharged. All these benefits are being enjoyed without fetter, thanks only to Manmohan’s funds, even while the Respondents frustrate Manmohan’s rights under the Agreement and under Company Law.
The interim reliefs granted hereby shall hold the field until completion of the arbitral proceedings - Kapani Resorts, Virendra and Vaibhav shall jointly or severally deposit an Indian Rupee equivalent of USD 1 million (valued at the US Dollar-Indian Rupee exchange rate applicable as of the respective dates of their remittance by Manmohan) along with interest at the statutory interest rate of 12% per annum (on the INR equivalent of USD 350,000 from the expiry of 75 days after February 11, 2022; and on the INR equivalent of USD 650,000 from the expiry of 75 days after February 22, 2022, until the date of deposit) with the Registry of this Court, which deposit shall be made no later than two weeks from the date on which this Order is uploaded on the website of this Court.
Conclusion - i) The Greater Kailash Property is relevant to the arbitration dispute, and the Court can issue interim measures concerning it under Section 9 of the Act. ii) The failure to allot shares to Manmohan, despite using his funds to discharge debts, constitutes a breach of the Agreement and statutory obligations under Section 42 (6) of the Companies Act. iii) The actions of Virendra and Vaibhav, in benefiting from Manmohan's investment without fulfilling their obligations, demonstrate a misappropriation of funds.
Petition disposed off.
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2025 (3) TMI 785
Validity of Foreign Arbitral Award - Enforcement of the Award would be violative of the provisions of FEMA or not - remittance of Euro 5.5 million by Minda Corporation Limited to Mercedes Benz AG pursuant to the consent award passed in the arbitration proceedings - overlap between the settlement with the Liquidator of Minda Germany and Consent Award with Minda India - benefit of ‘double dip’ by virtue of the payments agreed by Minda India under the settlement - Whether the enforcement of the Award would be contrary to the public policy of India, as per Section 48(2)(b) of the A&C Act?
HELD THAT:- Considering in the instant case, the issue of violation of provisions of FEMA is not germane to the matter anymore considering the post facto approval of the RBI
Only issue would be whether ‘fundamental policy of law’ would cover the principal objection of the JD that they did not have visibility of the ‘Bilgery Settlement’ and therefore, could not ascertain whether there was a ‘double dip’ by the DH (i.e. recovery both from the Liquidator of Minda Germany and also from Minda India), or if there was a waiver in the ‘Bilgery Settlement.’ - Needless to state, both these aspects become a non-issue since the Consent Award was passed with the JD having full knowledge of what was before them.
The Settlement Agreement itself, would show that the agreement was the ‘entire agreement’ between the parties, superseded and extinguished all previous agreements, promises, assurances, warranties, and parties has agreed that no other claim shall lie between them with respect to the matters being settled.
Firstly, the parties have unconditionally and irrevocably waived any or all claims against each other existing prior to the date of the settlement; secondly, the request for ‘Bilgery Settlement’ had been made prior to the settlement with Minda India and a motion was filed before a court in Germany for disclosure, which had been rejected by the courts in Germany. This would obviously preclude the JD from raising this issue yet again, post the Consent Award; thirdly and more specifically, regards the issue of ‘double dip’, the communication of 28th September 2021 recorded Minda India’s confirmation to render an Award by consent and the preamble of the settlement leaves no doubt of the DH’s confirmation that it will not benefit from any ‘double dip’ by virtue of payments agreed under the settlement.
As regards the waiver, DH had filed an affidavit before this Court, pursuant to order dated 17th November 2023. The said affidavit of 22nd November 2023 also confirmed the enforcement of the Award will not result in a double benefit to the decree holder and that there was no overlap between the settlement with Minda Germany and the Consent Award with Minda India.
The JD, therefore, had consistently confirmed that they were agreeing to settlement, not only through the communication dated 28th September 2021 but also as per clause 3(i) of the Settlement Agreement and agreed to passing of the Consent Award. The objections being pressed by the JD to the enforcement are not bona fide, unjust, unreasonable and a clear attempt to obstruct the enforcement, deploying one stratagem or the other.
The Court deprecates the stand taken by the JD, particularly, having fully and knowingly entered into a settlement and agreed to a Consent Award being passed, in complete know of facts and circumstances available to them, relating to the previous ‘Bilgery Settlement’.
Accordingly, it is directed, that the Foreign Award dated 29th November 2021 passed by an Arbitral Tribunal comprising of Dr. Fabian Von Schlabrendorff, Dr. Ulrich Trost, And Mr. Arne Fuchs in Stuttgart, Germany under the Rules of Arbitration of the International Chambers of Commerce, 2012 in ICC Case No. 22523/FS, be enforced as a decree of this Court, per section 49 of the A&C Act.
As JD was directed to deposit the entire amount, being EUR 5.5 million, in terms of the Arbitral Award with the Registrar General of this Court in an interest-bearing deposit. The said amount is approximately Rs. 52 Crores and has since been deposited by JD before the Registry of this Court, as noted in the order of this Court dated 20th May 2024.
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2025 (3) TMI 692
Seeking direction from this Court to the official liquidator to handover vacant and peaceful possession of the said premises, which were taken on monthly tenancy basis by the company in liquidation - HELD THAT:- The instant application has been filed under Section 446 of the Companies Act. The said provision indeed provides wide powers to the Company Court to pass appropriate orders. The Court has jurisdiction to even entertain and dispose of any suit or proceeding by or against the company, as also any claim made by or against the company in liquidation.
In the case of Patel Engineering Co. Ltd. v/s. Official Liquidator [2004 (2) TMI 383 - HIGH COURT OF BOMBAY], even when eviction proceedings were initiated by the landlord in respect of the premises in question, this Court held that such an application by the landlord, seeking possession of the premises, could not be dismissed because, by approaching the Company Court, the landlord had invoked an independent and special remedy available to the landlord under the Companies Act.
There is substance in the contention raised on behalf of the applicant that under Section 446 of the Companies Act, this Court has wide powers, with the focus being on examining issues and passing orders with the object of carrying on the winding up proceeding and in that process, examining whether the premises are required for the purposes of winding up of the company in liquidation. In the case of Metal Tubes and Rolling Mills v/s. Official Liquidator [2020 (8) TMI 584 - BOMBAY HIGH COURT], after referring to a number of judgments of the Supreme Court in this context, it was held that the Company Court under Section 446 of the Companies Act, has very wide powers to decide all questions that may relate to or arise in the course of winding up of the company.
This Court is unable to agree with the learned counsel for the official liquidator that the present application ought not to be entertained, as the landlord can institute eviction proceedings.
There is substance in the contention raised on behalf of the applicants that in Official Liquidator’s Report No. 77 of 2022, the official liquidator has specifically stated that a search of flat Nos. 4 and 5 revealed that there were no books of accounts or records belonging to the company in liquidation. In the face of such material, this Court is of the opinion that the bald statement made on behalf of the official liquidator in the affidavit in reply, that the premises in question are required for storing books and records of the company in liquidation, is nothing but an attempt to somehow cling on to the said premises, despite the fact that the premises have been in disuse.
The contention raised on behalf of the ex-directors is only stated to be rejected, for the reason that perfunctory applications have been filed in these proceedings, claiming that the company can be revived. No genuine efforts appear to have been made on behalf of the ex-directors in that direction. In any case, as noted herein above, the continued burden of rentals is wholly unjustified and in the facts and circumstances of the present case, the prayer made on behalf of the applicants deserves to be granted.
Conclusion - The official liquidator's claim of needing the premises was not genuine and that the premises were not required for the winding up and liquidation process. Therefore, the issue decided in favor of the applicants, directing the official liquidator to hand over possession of the premises.
Application disposed off.
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