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Companies Law - Case Laws
Showing 161 to 180 of 14639 Records
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2023 (7) TMI 443
Allegation of committing fraud and caused loss to the respondent company by incorporating and joining a company which had a similar name and operating pattern as that of the respondent company and diverted the business of management of the vessels of Daitoh - Offences under Sections 447 and 452 of the Companies Act, 2013 - HELD THAT:- This Court finds that the allegation with regard to the offence under Section 452 of the Act is that the petitioner had retained the laptop. This offence is quasi criminal in nature. It is well settled that the said offence has been incorporated only to provide a speedy remedy for the company to retrieve its property. Admittedly, the petitioner sent the laptop on 24.08.2021 by courier - this Court is of the view that the petitioner cannot be prosecuted for the offence under section 452 of the Act.
As regards the offence under Section 447 of the Act, this Court finds that the procedure prescribed for investigating the said offence is provided in Chapter XIV of the Act. A detailed mechanism is provided under the Act. It deals with the power of the Registrar of Companies to conduct an enquiry and submit a report to the Central Government. The Central Government may, on such report or on a report of any inspector appointed by the Central Government may, direct an investigation by SFIO. The Central Government may also direct such an investigation, suo motu, if it is in the public interest. Section 212 of the Act provides for an investigation by SFIO.
As regards the offence under Section 415 of the Indian Penal Code, there is no deception at the inception. It may at best amount to a breach of promise. Hence, cheating is not made out since the petitioner was admittedly working in the company for two years. Further, the offences under Sections 378, 403, 405, 408, 120 and 425 of the Indian Penal Code are not made out. This Court finds that the allegations that the confidential information and certain technical know-how were taken away by the petitioner are vague.
The allegation of misuse of information and making personal gain with the said information would, at best, make the petitioner liable civilly to the respondent. It may amount to a breach of trust as understood commonly and would not amount to a criminal breach of trust. In order to attract the said offence, the nature of the property entrusted and as to how it was misappropriated must be clearly spelt out. Vague allegations that confidential information and technical know-how were misused are insufficient. Even assuming that this offence is made out the complainant ought to have resorted to the remedy under the Act. This Court also finds that the complaint stems out from the grievance of the complainant that the petitioner had started a rival company and had diverted the business of the complainant. Such issues cannot be the subject matter of criminal prosecution in the absence of the necessary ingredients to constitute the offence alleged. The petitioner has other remedies available in law. Since the allegations do not attract the offences, this Court is inclined to quash the complaint.
This Court finds that the complaint, besides being unsustainable in law, does not disclose the alleged offences, and hence the continuation of the impugned proceedings would be an abuse of process of law. The non-interference of this Court would lead to a miscarriage of justice - Petition allowed.
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2023 (7) TMI 442
Validity of sale deed - sale of property by the company - Sale was approved by the Board of Director resolution - Locus of the third party - Seeking to relieve the petitioners wholly from the alleged acts of default and liability complained by the respondent - HELD THAT:- This Court finds that the petitioners have not committed any illegality as alleged by the ROC. Further, launching the prosecution under Section 628 of the Old Companies Act is also not permissible since the complaint has been filed under Section 628 of the Companies Act, 1956 (Old Act) and the new Companies Act commenced only from 2014 onwards. Any prosecution has to be launched in accordance with the provisions of Section 448 of the new Companies Act. Therefore, no prosecution can be launched under Section 628 of the old companies Act in view of the provision repealing Section 628 of the old Companies Act and hence, this Court feels that the present complaint is not maintainable.
This Court does not find any jurisdiction on the part of the respondent to prosecute the petitioners and this Court is of the prima facie view that the petitioners have not committed any offence as narrated by ROC and upon perusal it is clear that the petitioners cannot be prosecuted under Section 628 of the Old Companies Act. Therefore, all the petitioners are relieved from the prosecution - Petition disposed off.
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2023 (7) TMI 441
Continuation of suit / legal proceedings against the company where the name of the company has been struck off from the records of ROC - Respondent sought decree for rendition of accounts, directing the defendant to render a true and proper accounts for the usage of the software Program of the plaintiff in the various branches of the defendant - HELD THAT:- The provisions of Sections 248 and 250 of the Companies Act, 2013, make it very clear that even if the name of the Company is struck off from the Register of Companies maintained by the Registrar of Companies, its registration shall be deemed to have been cancelled from such date. However, there is no embargo for the suit to be filed or to be continued for the purpose of realising the amounts due to the Company and for the payment or discharge of the liabilities or obligations of the Company. In other words, the Company, whose name has been struck off from the Register of Companies maintained by the Register of Companies, cannot carry on any business - there is no case made out for striking off the plaint, merely because the name of the Company has been struck off from the Register of Companies maintained by the Registrar of Companies.
That apart, Order VI Rule 16 of C.P.C., deals with specific instances when a plaint can be struck off. Similarly, there are instances under Order IX of C.P.C., when a suit can be dismissed. In any event, it stands confirmed that the petitioner has also filed an application under Order VII Rule 11 of C.P.C. If advised, the petitioner may choose to pray for a relief in the said I.A. on merits if the facts so warrant. A reading of the impugned order also indicates that I.A.No.577 of 2021 filed under Order VII Rule 11 of C.P.C. is pending. I.A.No.577 of 2021 filed under Order VII Rule 11 of C.P.C. shall be disposed on merits and in accordance with law keeping in mind the observations made herein.
There are no merit in the present Civil Revision Petition. The Civil Revision Petition is therefore liable to be dismissed - petition dismissed.
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2023 (7) TMI 420
Wrongful withholding of laptops (after resignation) which is punishable under Section 452 of the Companies Act, 2013 - HELD THAT:- This Court finds that it is well settled that the offence under Section 452 of the Act, which is pari materia with Section 630 of the Companies Act, 1956 is quasi criminal. It is also well settled that the provision is intended to provide a speedy mechanism for recovery of any property belonging to the company withheld wrongfully by any person. The Act provides that the Court trying an offence may order an employee to deliver the wrongfully withheld property, and the failure to comply with the said order is punishable with imprisonment and fine. In the instant case, the petitioners admittedly delivered the property said to have been withheld by them. The respondent cannot refute the communications and the receipt of the laptops. From the facts and circumstances, it cannot be said that the petitioners had wrongfully withheld the property.
The petitioners have returned the property and since, in the facts and circumstances, it cannot be said that they had initially wrongfully withheld the property, the continuation of the impugned prosecution would be an abuse of process of law. Therefore, this Court is of the view that the impugned prosecution is liable to be quashed.
Petition allowed.
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2023 (7) TMI 216
Maintainability of suit - Rejection of plaint on the ground that the dispute raised in the plaint cannot be decided by a Civil Court - appellant contended that the disputes in the plaint, falls within the exclusive jurisdiction of the National Company Law Tribunal (NCLT) - Section 9 of the Code of Civil Procedure and Section 430 of the Companies Act.
HELD THAT:- It is clear from the averments made in the plaint that it is not a proceeding for refusal of registration or rectification of register under Section 58 or 59 of the 2013 Act. Section 58 contemplates a situation where a private company limited by share refuses whether in pursuance of any power of the Company under its article or otherwise to register the transfer of or the transmission by operational law of the right to any security or interest within a period of 30 days from the date on which the instrument of transfer or the intimation of such transmission was delivered to the company if there is a refusal the transferee may appeal to the tribunal under Section 58(5) of the Companies Act, 2013 where, however, the name of a person is erroneously entered in the register in place of a rightful owner and such error appears to be apparent a proceeding under Section 59 would be permissible.
In ADESH KAUR VERSUS EICHER MOTORS LIMITED AND ORS. [2018 (8) TMI 836 - SUPREME COURT] the jurisdiction of the tribunal in a proceeding under Section 59 was not interfered with as the Hon’ble Supreme Court observed that it was “an open and shut case of fraud in which the appellant has been victim, and respondent no. 2 the perpetrator”.
As a corollary if it appears that the disputed questions of the facts are complicated and cannot be conveniently decided in a summary procedure the jurisdiction of the Civil Court is not ousted. Although it cannot be disputed that the NCLT may have jurisdiction to decide the title of any person who is a party to the application urging that his name has been wrongly omitted from the register or should have been entered in the register in a proceeding under Section 59 of the present Act or Section 155 read with Section 111 of the Companies Act, 1956, however, the issue in the suit is not one of rectification.
NCLT thus, would have jurisdiction to decide a rectification proceeding where facts are self evident and does not call for any serious enquiry or adjudication of fraud. It would depend on the facts of a case. However, the present proceeding is not for rectification although eventually it may lead to the same in the event the suit is decreed - the appellant has not filed any written statement and the time had expired in the meantime the appellant shall be permitted to file written statement within three weeks from date, in default, the suit may proceed ex parte against the appellant.
Appeal dismissed.
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2023 (7) TMI 158
Alleged illegal termination in respect of the Collaboration Agreement executed between the petitioner and the respondents - joint custody of the title deeds - HELD THAT:- The land/project in question has been excluded from the definition of “Demerged Undertaking” and the same has been directed to be retained by the petitioner herein (Demerged Company).
As far as the “Capital Towers Economic Benefit Agreement” dated June, 2017 is concerned, a duly signed copy thereof has not been placed on record. Morover, a perusal of the same reveals that it contemplates that MGF Developments Limited would became a “contributor” in respect of the project pertaining to construction and development of the land in question, and in lieu thereof, it would be entitled to a share of the economic benefit arising out of the “Developer Project Share”. The said agreement also contains an arbitration clause. If at all the said agreement creates any rights in favour of MGF and/or warrants that MGF should have joint custody of the title documents in respect of the land in question, it is open for MGF to initiate appropriate proceedings seeking the same - Likewise, if at all, the “Letter Agreement” confers any right upon MGF, it is open to MGF to assert those rights in appropriate proceedings and seek appropriate order/s. In the present proceedings, there is no warrant to accede to the prayer/s sought in IA No. 7896/2023.
In the circumstances, as jointly prayed by the petitioner and the respondents, the custody of the title deeds/documents are directed to be placed in the joint custody of the petitioner and the respondents.
Application disposed of with the direction that the title deeds of the land in question, which are presently lying with the Registrar General of this court, be released to the petitioner and the respondents, who shall retain joint custody thereof.
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2023 (6) TMI 1375
Professional misconduct by CA - penalty order u/s 132 (4)(c) of the Companies Act, 2013 - submission is that after filing of the Appeal and deposit of 10% of penalty, further proceedings as contemplated in Rule 12 regarding the intimation cannot take place - HELD THAT:- Rule 12, sub-rule (3), uses expression imposition of penalty or debars the Auditors from practices. Sub-rule (3) requires sending of the order to every company or body corporate in which the Auditor is functioning as Auditor. Sub-rule (3) of Rule 12 is, thus, independent provision. Thus, Rule 12, sub-rule (2) provides that action against Auditor in event the Appeal is filed under Rule 12, sub-rule (1), after depositing the 10% penalty amount, the consequences as contemplated under Rule 12, sub-rule (2) shall not take place. Thus, in case when an Appeal is filed with deposit of 10% of penalty, it is not obligatory to the company or body corporate to appoint a new Auditor as required by sub-section (2) of Rule 12. However, sub-rule (1) and (2) are only confine to cases where only monetary penalty has been imposed. These two sub-rules have no application with regard to cases where penalty of ‘debarment’ has been imposed. Omission of ‘debarment’ in sub-rules (1) and (2) are with the purpose and object.
The learned Counsel for the Respondent has placed reliance on judgment of Hon’ble Supreme Court in MD. ALAUDDIN KHAN VERSUS KARAM THAMARJIT SINGH [2010 (7) TMI 1006 - SUPREME COURT] where Hon’ble Supreme Court while considering the principle of statutory construction has noted the principle that express inclusion of one thing is the exclusion of all others.
The consequence of subrule (4), Rule 12 is that when procedure under Rule 12, sub-rule (2) has been initiated, company or body corporate has to appoint a new Auditor, the clear intendment is that in case of a debarment, the Auditor is not entitled to continue to discharge his functions and a new Auditor as contemplated is to be appointed - Rule 11, sub-rules (6) and (7), which provides that the orders passed under sub-rules (6) and (7) shall not become effective until thirty days have elapsed from the date of issue of the order unless the Division states otherwise in the order along with the reason for the same.
Present are cases where the orders were not to become effective until thirty days have elapsed. There is purpose and reason for providing the thirty days period. Thirty days period is provided for Auditors against whom orders have been passed to wound up their affairs in company or body corporate where they have been functioning.
Filing of the Appeal by the Appellant(s) with deposit of 10% of the penalty shall have no effect on the order of ‘debarment’ passed against the Appellant(s) under Section 132(4)(c) and under head (B). Order of ‘debarment’ shall continue to operate unless an order is passed by the Appellate Tribunal - it is deemed fit and appropriate to give an opportunity to the Appellant(s) to make their submissions on the merit and this Tribunal after hearing the Appellant(s) as well as Respondents shall take appropriate decision on the application filed for the interim relief in each of the Appeal(s).
All these Appeal(s) be listed for admission and consideration of application for interim relief on 3rd July, 2023.
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2023 (6) TMI 1350
Jurisdiction of the National Financial Reporting Authority (NFRA) established inter alia under Section 132(1) of the Companies Act, 2013 - HELD THAT:- The direction is that all Petitioners must coordinate between themselves to present their arguments on one day together on the jurisdictional issue. It seems unworkable to expect the Authority to hear the same argument on jurisdiction repeatedly. How the submissions are to be divided between the parties and their counsel is a matter left to them but the scheduling by the Authority should ideally be in such a way that the jurisdictional point is on one day when all counsel for all matters can be heard. Thereafter a different schedule can be set for the facts for the individual cases that follow thereafter, if necessary, i.e., if the authority finds that it does have jurisdiction.
Petition disposed off.
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2023 (6) TMI 1086
Interest earned on the aggregate escrowed amount - Liability of the petitioners to deposit to the Investor Education Protection Fund (IEPF) under Section 125 of the Companies Act, 2013 - whether the petitioner no. 1-Company is liable to transfer the interest earned on the aggregate escrowed amount (including the principal and the accrued interest thereon) also to the IEPF? - Doctrine of estoppel against statute -
HELD THAT:- A close examination of Section 205C and Section 125 of the 1956 and 2013 Acts shows that the said provisions do not have any direct conflict with Chapter IIIB of the RBI Act. Whereas the provisions of the said two Companies Acts govern all companies generally, Chapter IIIB of the RBI Act pertains to certain provisions specifically relating to non-banking institutions receiving deposits and to financial institutions, insofar as such disputes are concerned.
The Peerless, that is, the petitioner, is squarely covered under the said definition and, as such, Chapter IIIB governs the functioning of the petitioner’s company as well - Chapter IIIB operates in particular spheres. Whereas a variety of functioning of NBFCs is covered by the directions contemplated in Chapter IIIB, very few of the same are pertinent in the present context. As for example, Section 45 IA pertains primarily to requirement of registration and net owned fund, Section 45 IB to maintenance of percentage of assets and 45 IC to reserve fund. Section 45 ID deals with the power of the bank to remove directors from office and Section 45 IE with supersession of Board of Directors of NBFCs other than Government Companies. Section 45 J pertains to regulation or prohibition of issue of prospectus of advertisement soliciting deposits of money.
It is relevant to mention here that the Escrow Account was created in terms of the order of Court and specifically to deposit the amount which was the subject-matter of the present lis. Hence, the said deposits were sub judice and it was de hors the authority of the RBI to dictate the fate of the same. Moreover, as discussed above, nothing in Chapter IIIB pertains to interest on Escrow Accounts in cases such as the present one. Even if the RBI advised the petitioner that any interest received by the Company on investment in FDs/government securities would be available to the company, the same pertained only to interest “received by the company”. However, the interest which accumulated on the deposits in the Escrow Account in the present case, under no stretch of imagination, could be said to be received by the Company. The said amounts were sub judice and were subject to the outcome of the present writ petition. Hence, the argument that the directives of the RBI prompted the petitioner to use such interest is neither here nor there.
The entire entitlement of the deposits in the Escrow Account, on which the interest was accrued, belongs to the IEPF.
The interest accrued in the Escrow Account in the present case was not a component of the usufructs of the petitioner’s functions in any manner but, all along, belonged to the IEPF, which is an entity constituted statutorily for specified purposes. The purpose of the creation of the IEPF would itself be defeated if the petitioner is permitted to usurp the said interest. Hence, it cannot be said that the petitioner is entitled to such interest in any manner.
Doctrine of estoppel against statute - Power of RBI to issue instructions under the Companies Acts, 1956 or 2013 - NBFC - HELD THAT:- The same need not be invoked in the present case since, the RBI did not give any specific direction to the petitioner, nor did the petitioner construe any such direction so as to defeat the right of the IEPF conferred under a different statute that is the 2013 Act and, thereinbefore, by the 1956 Act.
Petition allowed.
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2023 (6) TMI 1059
Seeking mandamus in relation to an ongoing investigation and seek compliance of sections 217 and 220 of The Companies Act, 2013 - jurisdiction to hear the present writ petition on the same cause of action - whether the present writ petition is barred by the principle of constructive res judicata? - HELD THAT:- The statutory position under section 212 of The Companies Act, 2013 and the decision of the Supreme Court in Rahul Modi [2019 (3) TMI 1411 - SUPREME COURT], discourage passing of orders which would be contrary to law.
The observations made with regard to the legitimate expectation of the petitioners for completion of the investigation within a reasonable time frame however remains. The SFIO is hence expected to act in terms of such legitimate expectation as well as the principles of equity and fair play with regard to completing the investigation within a reasonable time frame.
Application disposed off.
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2023 (6) TMI 903
Liability of Purchaser of the Company which was sold as a going concern in liquidation proceedings - Old and past sales tax dues - raising tax demand against the petitioners as impugned, which include demands under the Sales Tax Act - HELD THAT:- In view of the orders dated 9th March, 2021 passed by NCLT, the petitioners would submit that it was always open to the respondents to take steps to recover the tax dues from the Directors of the erstwhile company, as it stood prior to the same being taken over by the petitioner.
The next contention as urged on behalf of the petitioners is that the respondents in the present case cannot take any action, which is contrary to resolution plan which has attained finality in view of the order dated 9th March, 2021 passed by NCLT - In the said application, the State Tax Authorities sought to contend that the claims of the Sales Tax Department, should be treated as the claim of a secured creditor and in that regard the adjudicating authority viz. NCLT had committed an error - It is stated that till the date no further steps are taken by the State Government to challenge the said order. In this view of the matter, there appears to be much substance in the contentions as urged on behalf of the petitioners in assailing the actions of the respondents as challenged in the petition.
The parties need to be finally heard on the present proceedings. Hence, Rule. Respondents waive service. Rule is made returnable on 25 August 2023.
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2023 (6) TMI 855
Prosecution proceedings against the petitioners / accused - Allegation of illegal removal complainant from Directorship - Using forged signatures and uploading DIR-12 with resignation letter - Allegation of mismanagement and oppression - authority to convene any extraordinary general meeting of the Company - whether the criminal proceeding instituted against the petitioners is liable to be quashed under Section 482 of the Cr.P.C.?
HELD THAT:- With extensive scope and ramification, inherent powers under Section 482 of the Criminal Procedure Code include the power to stop any criminal case pending before any court subordinate to the High Court. Depending on the specifics of a case, these powers may be used to secure the ends of justice, prevent abuse of any court's process, and issue any orders as may be necessary to give effect to any order under the Code. The court can always take note of any injustice and stop a criminal proceeding by using its authority under Section 482 of the Criminal Procedure Code. No other clause of the Code restricts or limits their capabilities. Such natural powers should only be used sparingly and with caution.
In State of Haryana v. Bhajan Lal [1990 (11) TMI 386 - SUPREME COURT], a two-Judges Bench of the Supreme Court of India considered in detail the provisions of Section 482 and the power of the High Court to quash criminal proceedings or FIR where it was held that The Government order authorised the Inspector General of Police to investigate only the offences failing under Section 5 of the Act. Therefore, the SHO who has taken up the investigation of the offences inclusive of those under Section 161 and 165 IPC is not at all clothed with any authority to investigate these two offences, registered under the IPC, apart from the offence under Section 5(2) of the Act.
The matter at hand is not a rare case that justifies the Court's interference at the investigation stage. The allegation in the FIR makes out a prima facie case against the accused, and for this reason, the FIR registered in the Hare Street Police Station under Sections 120B/406/465/467/468/471/420 of the Indian Penal Code, 1860 should not be quashed.
There are no reason to interfere with the investigational process of the investigating agency in the instant case. Criminal proceeding shall continue - the instant revision is dismissed on contest.
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2023 (6) TMI 854
Jurisdiction of Court to entertain the suit - doctrine of forum conveniens - Invoice is raised from Delhi for the work performed within the State of Maharashtra - Seeking a decree alongwith interest compounded annually - rejection of Plaint on the ground of jurisdiction - seeking deletion of names from the array of Defendants - HELD THAT:- The essential prerequisite for invoking clause 8 is the existence of a dispute. In the facts of the present case, the record bares out that infact the Defendants had at no point of time, prior to the filing of the Affidavit in Reply to the Summons for Judgment never raised any dispute whatsoever qua any of the said invoices - the Defendants have also received the Plaintiffs letter dated 8th April, 2020 and legal notice dated 14th August, 2020 both of which have remained unanswered and undisputed. Thus, in the facts of the present case, there infact exists no dispute and hence the Defendants’ reliance upon clause 8 is not only entirely misconceived but also malafide.
The invoices do not either expressly or by implication provide that the moneys are payable in Delhi. The invoices infact set out the modes of payment acceptable to the Plaintiff, i.e., either by account payee cheque, demand draft or NEFT/RTGS - Merely because the details of the receiving bank are within the jurisdiction of another city, this fact alone would not mean (a) that the amounts are payable in that city and (b) that part of the cause of action had arisen in that city. Additionally, even assuming that the only mode for payment under the said invoices was via RTGS/NEFT, the same would not by itself amount to monies being payable in Delhi under the contract. The details of the Plaintiff’s bank are set out only to facilitate the payment by electronic mode and nothing else. This by no stretch of imagination can be construed to mean that the amounts due under the said invoices were payable in Delhi.
The common law proposition is undoubtedly based on the doctrine of forum conveniens, it is basis this that the Plaintiff has filed the present suit in this Court only to be told by the Defendant who neither disputes nor denies the Plaintiffs claim that Suit must necessarily be instituted in a Court which for the Plaintiff is clearly not forum conveniens and within which, no part of the cause of action has arisen. Such a contention must only be stated to be rejected.
Challenge to the Jurisdiction Bombay High Court rejected.
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2023 (6) TMI 853
Violation of Section 148(6) of the Companies Act punishable under Section 148(8) of the Companies Act - failure to appoint cost auditor within the time limit prescribed under Section 148(3) and Rule 6(2) of Companies (Cost Records and Audit) Rules, 2014 - HELD THAT:- This Court finds that admittedly, the petitioner was the Chief Financial Officer of the Company from 02.05.2016 to 01.08.2016. The company ought to have appointed the cost auditor for the financial year 2015-2016 within 180 days from 01.04.2015 i.e. on or before 01.10.2015. The case of the respondent, therefore, is that the company committed the offence on 01.10.2015. The offence under Section 148(8) of the Companies Act may be a continuing offence. However, it cannot be said that the petitioner, who was not in the company when the offence was first committed, is liable merely because he did not rectify the alleged violation during the period when he held the office. The company and the officers, who are in default at the time when the offence was committed, could only be made liable.
The persons/accused of an offence cannot be based on the date on which the complaint is filed. The accused would and should remain the same whenever the complaint is filed since the offence is committed on a particular date. Persons who came to know of the offence subsequently cannot be made liable merely because the offence is continuing. Any interpretation to the contrary as submitted by the respondent, would lead to an illogical and absurd situation. Whether an offence is continuing or not is relevant only for the purpose of determining as to whether the complaint is barred by limitation. In this case, the company had already committed the offence and the persons who ceased to be the Directors before the alleged offence or had joined the company after the alleged offence cannot be held liable for the said offence.
In view of the admitted fact that the petitioner joined on 02.05.2016 and resigned on 01.08.2016, and the offence was committed on 01.10.2015, he cannot be held liable for the alleged violation. Hence, the impugned complaint against the petitioner is liable to be quashed.
Petition allowed.
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2023 (6) TMI 707
Anti-Competitive Agreements - Monopoly - abuse of dominant position - principal bone of contention of the appellants is that Coal India Limited, the first appellant (CIL) being a monopoly created by a statute and duty bound to achieve the objects declared in Article 39(b) of the Constitution of India - bound by the Competition Act, 2002 or not - HELD THAT:- Section 19(4)(l). It declares the relative advantage by way of contribution to economic development having or likely to have an appreciable effect on competition to be a relevant factor. What we have deliberately omitted and now supply are the following words to be found in Section 19(4)(l). They are the words “by the enterprise enjoying the dominant position”. Therefore, being found in a dominant position under Section 19(4)(g) is only one of the factors. We do not intend to elaborate further on the scope and impact of the other factors. It would all depend upon the facts of the individual case. Equally, we may only indicate, that, in particular, countervailing buying power would be a relevant factor. Section 26 provides for the procedure for holding the inquiry employing the methods declared in Section 19(4) to find the presence or absence of dominant position.
Section 26 contemplates that, in such conditions, if the CCI forms an opinion that a prima facie case exists, then, it should direct the Director General to cause an investigation into the matter. Under Section 26(2), the CCI may close the matter, if it finds that there exists no prima facie case. The Director General is obliged to submit a report on his findings. The CCI is to forward the report to the parties. The Director General may recommend that there is no contravention of the Act. In such an eventuality, the CCI is obliged to invite objections or suggestions on the said report - The orders which may be passed include a direction to discontinue abuse of dominant position as found in the case of abuse of dominant position. The CCI may impose penalty as provided therein. It can direct modification of the agreement. It can also direct the enterprise to abide by the orders that the CCI may pass. It has a residuary power to pass any other order as is deemed fit. Section 28, no doubt, contemplates a division. Section 31 deals with orders that may be passed on certain combinations. Chapter V deals with the duty of the Director General. The Director General is provided with powers available to the CCI under Section 36(2).
There must be an enterprise as defined or a group as provided under Section 5. Once it is so found, then, it must be inquired as to whether the said enterprise or group enjoys a dominant position - The Act overrides all laws to the extent of their inconsistency with the Act. It is also contended that as far as the question relating to compliance with Presidential Directives is concerned, if there is a bona fide adherence to Presidential Directives, it may pass muster.
The expression ‘common good’ in Article 39(b) in a Benthamite sense involves achieving the highest good of the maximum number of people. The meaning of the words ‘common good’ may depend upon the times, the felt necessities, the direction that the Nation wishes to take in the future, the socio-economic condition of the different classes, the legal and Fundamental Rights and also the Directive Principles themselves - Disinvestment done in a proper manner was perceived as a solution. However, sans disinvestment, State Monopolies, Public Sector Companies and Government Companies were expected to imbibe the new economic philosophy. The novel idea, which permeates the Act, would stand frustrated, in fact, if State monopolies, Government Companies and Public Sector Units are left free to contravene the Act. Now that the Nation was more than 50 years old after it became a Republic and it no longer was the infant it was, Parliament which best knows the needs of its people, felt that the time was ripe for ushering in the wholesome idea of fair competition.
Distribution of coal is intended to subserve common good holds this Court in SAMATHA VERSUS STATE OF AP [1997 (7) TMI 600 - SUPREME COURT]. The content of common good is itself not a static concept. It may take its hue from the context and the times in which the matter falls for consideration by the Court. If Parliament has intended that State monopolies even if it be in the matter of distribution must come under the anvil of the new economic regime, it cannot be found flawed by the Court on the ground that subjecting the State monopoly would detract from the common good which the earlier Nationalisation Act when it was enacted, undoubtedly, succeeded in subserving. We see no reason to hold that a State Monopoly being run through the medium of a Government Company, even for attaining the goals in the Directive Principles, will go outside the purview of the Act.
It is true that the actions of the appellants can be challenged in proceedings in judicial review as contended by the appellants. Equally, the appellants are justified in pointing out as a matter of fact that there may be forums other than the CCI such as the Controller of Coal whereunder redress may be sought against action of the appellants. But that by itself, cannot result in denial of access to a party complaining of contravention of a law which is otherwise applicable. It must also be remembered that action can also be taken by the CCI suo motu. Such is the width of the power vouchsafed for the authority under the Act.
The appellants cannot resist the imposition of standards of fairness and the duty to avoid discriminatory practices when a specialized forum has been created by Parliament under the Act where also apart from the CCI being an expert body, it can seek and receive valuable inputs from experts and what is more, the matter is preceded by the report of Director General of Investigation.
Section 54 of the Act gives power to the Central Government to exempt from the application of the Act or any provision and for any period, which is specified in the Notification. The ground for exemption can be security of the State or even public interest. It is not as if the appellants, if there was a genuine case made out for being taken outside the purview of the Act in public interest, the Government would be powerless - there is no merit in the contention of the appellants that the Act will not apply to the appellants for the reason that the appellants are governed by the Nationalisation Act and that Nationalisation Act cannot be reconciled with the Act. This is subject to the appellants having all the rights to defend their actions under the law and as indicated hereinbefore. The transferred cases shall be sent back so that they may be dealt with on their own merits.
Application disposed off.
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2023 (6) TMI 706
Oppression and Mismanagement - increase in the paid-up capital from Rs.1 crore to Rs.2 crores in the Extraordinary General Body Meeting - Allegation of fraudulent allotment of shares in respect of the increased share capital against the appellant. - NCLT issued direction for re-issue of shares to existing shareholders - Further directions issued for conducting audit against allegation of siphoning of funds.
HELD THAT:- The shareholders from the V.P. Patel Group and the Sheth Group, admittedly, did not apply seizing the opportunity given to them. They did not participate in the Extraordinary General Body Meeting held on 27.01.2010 by which the Authorised Capital was increased. Though there is some controversy sought to be raised that the shareholders were not sent any intimation by way of reminder of their right to apply for the shares, we are inclined to hold that the communication was indeed sent in keeping with the decision taken by the Board of Directors, following the Extraordinary General Body Meeting held on 27.01.2010. The members of the appellants Group, on the other hand, applied for shares. Since, it was contemplated that shareholders could apply not only in the ratio of 1:1 but for larger number of shares, apparently, the members of the appellants Group, applied for more number of shares. Thus, though the wife of the first appellant may have been entitled to only 20 shares, if the rights issue was limited to ratio 1:1, since it was decided to give an opportunity to shareholders to apply for more shares than they held and as, apparently, shares were available to be allotted in numbers far greater than what the shareholders were actually holding, the wife of the first appellant, apparently, came to be allotted the seemingly disproportionate number of shares.
As regards the last complaint, the appellants would point out that actually all that happened was repayment of money brought in earlier by appellant-Group, which was parked with the Company and in connection with the marriage of a family member, the amount was returned. It must be noticed that the allegations and responses from both sides are the subject matter of the audit. We cannot be deflected by the same in ruling on the ‘defect’ or alleged illegality in the matter of allotment of the shares.
There is no case, that there was any impediment for the respondents to apply, once it is found that they were informed and aware of their right to apply.
In certain situations, a single act could found a case of oppression. This is not a case where allotment of additional shares was made to anyone other than the existing shareholders. This is a case where the terms were applied equally to all the existing shareholders. The change in shareholding, in that the appellants shareholding grew from 30.80% to 63.58% is the result of the respondents refusal to apply despite being given the opportunity.
One of the complaints of the respondents is that the purported reason for the increase in the authorized capital and the allotment of the shares also was to infuse fresh funds - HELD THAT:- A perusal of Section 81(1) indicates that it dealt with a proposal to increase ‘the subscribed capital’ of the company by allotment of ‘further shares’. Section 105-C of the Companies Act, 1913, used the words ‘where the Directors decide to increase the ‘capital’ of the company by issue of ‘further shares’. In Section 81 of the Companies Act, 1956, the words used are ‘it is proposed to increase the subscribed capital of the company by allotment of further shares’.
The Authorised Capital cannot be increased by the Board of Directors. It is out of the Authorised Capital that a company issues shares. It then becomes the Issued Capital. Whatever is issued, need not be subscribed to. Whatever is subscribed to, would become the Subscribed Capital. Paid-up Capital is defined in Section 2(32) of the Companies Act, 1956 as including capital credited as paid-up. The Subscribed Capital may be wholly or partly paid-up.
An increase in the Authorised Capital does not fall within the powers of the Board, as contemplated in Section 291 of the Act. In Nanalal Zaver (supra), this Court was essentially dealing with the question, as to whether the obligation to offer the shares upon there being a further issue of shares, must be made in conformity with Section 105-C of the earlier Act, which, as we have noticed is essentially the regime continued under Section 81 of the 1956 Act. It is in the said context that the Court held that the Directors could at their own initiative only increase the shares from out of the existing Authorised Capital, but the increase in Authorised Capital could be done only by the company in a meeting of its shareholders. It has been further held that once the Authorised Capital is increased, the Board of Directors would be bound to act under Section 105-C of the Act - The position under the Companies Act, 1956, under Section 81, remained the same in that it is only the company, in its General Body Meeting, which could increase the Authorised Capital. The position still continued that call it increase in Subscribed Capital, it must be within the limits of the Authorised Capital.
As far as the aspect that, the purported object was shown as generating fresh funds but in place of Rs.90 lakhs only Rs.21 lakhs was brought in goes, the fact that the paid-up capital was apparently shown as credited by cancelling loans due by the company to the appellants group, should not prevent this Court from overlooking the fact that the debt-equity ratio has undoubtedly been improved. It must be borne in mind that the whole idea was to get funds from the Bank for the expansion of the company. The case of the respondents that there were loans due to them also may not advance their case. It would have been different if the respondents had applied and sought adjustment of the consideration by cancelling loans given by them to the company and it was rejected.
The appellants cannot be described as having acted in a defective or in an unfair manner, in the matter of allotment of further shares particularly when the contention of the respondents about the bona fides of the decision to increase the authorised capital has been found in favour of the appellants - Appeal allowed in part.
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2023 (6) TMI 651
Seeking to declare the Meetings of the Board of Directors of the first Respondent Company/M/s. MetroCorp Infrastructure Ltd. as null & void - seeking to declare the Mortgage Deeds signed pursuant to the aforesaid Meetings as null & void - direction of removal of the second Respondent from the Board of Directors of MetroCorp. - case of Oppression and Mismanagement or not.
HELD THAT:- It is seen from the record that it is an admitted fact by the Appellants themselves that Board Meetings were conducted on 29.10.2008, 25.02.2009, 23.06.2009, 02.09.2009, 27.12.2010, 18.03.2011, 05.10.2011 & 17.10.2011, but it is the case of the Appellants that the four Board Meetings dated 02.11.2009, 10.11.2009 & 25.10.2010 were conducted without issuing proper Notice and were not convened as Article 87(iii) of the AoA and that their nominee Director was not present only because due process of service of Notice was not followed. It is seen from the record that the Board Meetings dated 02.11.2009, 10.11.2009 & 25.10.2010 which the Appellant is strongly contesting are illegal, null & void, are the dates falling in between the aforenoted admitted Board Meetings and being a majority Shareholder the Appellant has failed to adduce any evidence in support of his case that these Board Meetings were not conducted as per procedure of Law specifically taking into consideration that Mr. Jason Van Hoong, who has based in Singapore and China has not chosen to attend a single Meeting either personally or through video conference.
This Tribunal is of the view that the Appellant has not denied the submission of the Respondent before the NCLT regarding the entries in the passport of Mr. Jason Van Hoong standing testimony to the fact that he had never attended any of these Meetings in India. It is stipulated in Section 283 of the Act that if a Director absents himself from three consecutive Meetings of the Board of the Directors or from all Meetings of the Board for a continuous period of three months, whichever is longer without obtaining leave of absence from the Board, the said Director is ceased to be a Director - The Appellants have not filed any material/documents in support of their contention that being a majority Shareholder they had taken all the steps to be lawfully involved in the Project through their Directors.
It is evidenced from the record that a Notice of EGM dated 24.06.2013 for the Meeting proposed to be held on 30.07.2013 was sent through RPAD and the Respondent herein has filed the Postal Receipts establishing that the ‘Notices’ were indeed sent and served. A Board Meeting was also scheduled to be held on the same date and a Notice was also issued for the same, the agenda being increase of Share Capital to Rs.1,10,00,000/- and to pass special Resolution to allot Equity Shares to the existing Shareholders - This Tribunal keeping in view the fact and circumstances of the case on hand and the documentary evidence holds that both the EGM and the Board Meetings held on 30.06.2013 were legal & void. As far as the impugned Mortgage Meetings which the Appellant is contesting, keeping in view the material on record we agree with the finding given by NCLT that though the other Board Meetings held before and after the Impugned Meetings, were admitted by the Petitioner/Appellant, being a majority Shareholder, has indulged in dereliction of their statutory duties and has indulged in filing multiple proceedings before various fora.
Subsequent to these developments, a Settlement Agreement was entered into between the parties vide a Share Purchase Agreement dated 29.09.2016 an MoU of the same date and an Escrow Agreement dated 14.02.2017 of the same date. It is the case of the Appellant that a fraud was committed by the Respondents as the Plots which were meant to finance the purchase of the Appellant’s shares, have already been sold by the Respondents. The scope and objective of Sections 397, 398 & 399 of the Act defining Oppression and Mismanagement does not entail the Tribunal to adjudicate on the issues arising from the facts of the attendant case on hand. Even if there is any breach of the Terms of Settlement, it cannot be construed as an issue which would fall within the ambit of the definition of ‘Oppression and Mismanagement’ as defined under the Act.
Appeal dismissed.
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2023 (6) TMI 196
Sanction of scheme of Amalgamation - Section 230-232 of Companies Act - HELD THAT:- As per Section 230(9) of the Companies Act, 2013, the Tribunal may dispense with the calling of a meeting of creditors or class of creditors, where such creditors or class of creditors, having at least ninety per cent value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. As the Appellant/Transferor Company No-1 is a closely held family company and sole unsecured creditor, had conceded to the scheme of Amalgamation by way of affidavit, therefore, in terms of section 230(9) of the Companies Act, 2013 the meeting of sole unsecured creditor of Appellant/Transferor Company Appellant No-1 could have been dispensed with by the ‘Tribunal’ and as such, there are merit in the averments of the ‘Appellant’.
It is noted that Transferee company did not obtain the NoC/consent from its secured and unsecured creditors. Therefore, the directions were sought by Transferee Company from the ‘Tribunal’ to convene the meetings of its secured and unsecured creditors - As per Explanation to Rule 5(d) of the Companies (Compromises, Arrangements and Amalgamation Rules,) 2016 the Chairman, inter-alia shall, at the general meeting, at the end of discussions on the resolutions on which voting is to be held, allow voting by use of electronic voting system for all those members who are present at the general meeting but have not cast their votes by availing the remote e-voting facility. Hence, by not allowing to vote in other modes other than in person in meeting of secured and unsecured creditor of Transferee company as permitted as per Companies Act, 2013 and rules made thereunder to vote on resolution is not sustainable and the ‘Tribunal’ erred on this account.
The ‘impugned order’ deserves to be set aside with direction to look into all these issues in accordance with the law - Appeal allowed.
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2023 (6) TMI 105
Restoration of the name of the Appellant Company to the register of the Registrar of Companies, NCT of Delhi and Haryana - Section 252 of the Companies Act, 2013 - HELD THAT:- The Company is a juristic person, it takes birth with its incorporation which takes place in terms of Section 7 of the Act and after incorporation and registration, its effect has been mentioned in Section 9 of the Act. Section 248 of the Act provides the power to the Registrar to remove name of company from register of companies for the reasons mentioned from 248(a)to(e) and effect of the order passed under Section 248 is provided in Section 250 of the Act. However, the remedy to an aggrieved person against the order of the Registrar, passed under Section 248 is provided under Section 252 and in Section 252(3) it is provided that the Tribunal, if satisfied that the company at the time of its name was struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored on the register of Companies it may pass the order that the name of the company be restored to the register of the Companies.
It would be a hard case if the name of the company is struck off of the Companies and it falls under ‘the just or otherwise’ category even if it is not being called in operation as stated. However, it cannot be lost sight of the fact that the Appellant has been remiss in its statutory obligation which became the basis for striking off the name of the Company from the register of the Registrar of the Companies, therefore, in the peculiar facts and circumstances, the end of the justice would meet with the restoration of the name of the Company to the Register of Registrar of the Companies with imposition of fine/cost.
The present appeal is hereby allowed. However, subject to payment of Rs. 2 lakh as cost which shall be deposited by the Appellant with the RoC within a period of 30 days from the date of passing of this order.
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2023 (6) TMI 104
Oppression and Mismanagement - Transfer of Shares - allotment of shares - Forum Shopping - Removal of Appellants No. 2 and 6 from the Directors of the Company and to declare them as unfit to be appointed as Directors in any Company - whether the Company Petition was barred by Limitation? - HELD THAT:- Keeping in view that the Form 32 for removal of the Respondent as Director was filed only on 01/12/2005 and the Petition was filed in April 2008, apart from the fact that the removal is interlinked with the subsequent development and form a continuous act, this Tribunal is of the considered view that the Petition is not barred by limitation.
As regards the merits of the matter and the issues raised in this Appeal, this ‘Tribunal’ address to whether the Resolution dated 05/02/1996 allotting 420 shares to Mr. T.S. Rathnasabapathy by himself was in accordance with Law. There is no documentary evidence on record to establish that the ‘Notice’ of the Meeting stated to be sent to the Respondent are known to have been received. Even if the Notice of the Meeting was indeed dispatched and served, it is seen from the record that the requisite quorum as maintained under Law and as per the Articles of Association was not available for conduct of the 05/02/1996 Board Meeting, as the Petitioner/Respondent is holding 50% of the shares and is one of the two Directors. Annexure R-2 is the Notice issued by the ‘Registrar of Companies’ to the 1st Appellant Company on 09/12/1998, which is reproduced as hereunder for better understanding of the case.
It is clear that even as on 1998, there was no business conducted by the Company, and hence there was no need to infuse any additional Capital by allotting Shares specifically in the absence of any offer to the Petitioner/Respondent to subscribe to any Rights issue, as no Rights issue was ever offered. Keeping in view these aforenoted reasons, this Tribunal is of the considered view that the Resolution dated 05/02/1996 is null and void.
It is not in dispute that the only asset of the ‘Company’, is the immovable Property, that is the subject land in question, which the Appellant contends has been sold legally with the knowledge of the Petitioner/Respondent. The documentary evidence on record does not substantiate that the subject land was sold involving the Petitioner/Respondent. Admittedly, disputes were raised before the Hon’ble High Court of Karnataka in the Civil Court and in ‘Company Law Board’ and when the Company Petition is pending, the act of the Appellants No. 2 to 5, in selling the ‘Land’ without ‘Notice’ to the Petitioner/Respondent is held to be a unilateral sale, constituting an act of Oppression and Mismanagement meaning thereby that the affairs of the Company were mismanaged by the Appellants, as the only asset of the Company was this ‘Land’ - the subsequent act of the Appellants herein in selling the subject land, without informing the Respondent; in the ‘absence’ of a specific ‘Notice’ issued to the Petitioner/Respondent herein, as per the Provisions of Law; and increasing the ‘Share Capital’ in the ‘Board Meeting’, once again in the absence of the Petitioner/Respondent who is the only other Director; all fall within the ambit of the ‘definition’ of ‘Oppression and Mismanagement’, as defined under Sections 395 and 396 of the Companies Act, 1956.
This Tribunal is of the earnest view, that there is no illegality or infirmity in the Impugned Order dated 11/10/2018 and hence this Company Appeal fails and is accordingly dismissed.
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