TMI Blog2016 (12) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... r the aforesaid reasons, find that it cannot be declared as such that the mortgage of the Company's property in favour of Bank of Baroda, the 8th Respondent herein, was unlawful, illegal, null and void, as claimed by the petitioners. We place on record that our observations, if any, would not stand in the way of the Debt Recovery Tribunal to decide the validity of mortgage, if raised before it, in accordance with law. It is suggested to the Respondent No. 8 Bank to take initiative to pursue the Company to hold Annual General Meeting and get ratification for the authorisation given to the Directors to create mortgage over the assets of the Company towards corporate guarantee. We are alive to the fact that there is conflict among the directors and therefore, it is necessary to place this subject in the agenda before the AGM. - Decided against petitioner. Unlawful appointment of directors in the meeting of the Board - Held that:- The letters of appointment issued to the Respondents 5 to 7 are in pages 364, 365 and 366 of the Petitioner's paper book and these letters are not disputed by the respondents. These documents show that the Respondents 5 to 7 are appointed as 'Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently illegal. Secondly, it has been contended that the petitioners came to know in the first week of March 2015 that on 5.3.2015 the Bank of Baroda (Respondent No. 8) has served a notice under Sec. 13 (2) of the SARFAESI Act, 2002 wherefrom it came to their notice that the Respondents 2 to 4 representing the Company have given 100% corporate guarantee by creating mortgage on the immovable property of the Company on 21.03. 2013 to secure a loan/credit limit of ₹ 5, 95, 76, 764 to M/s Shambhu Steel Forgings Pvt Ltd, and that the Respondents are never authorised to create such mortgage and the alleged Board Meeting of the Company held on 08.03.2013 wherein the authorisation to create. mortgage is said to have been given to the Respondents 2 to 4, is unfounded and no such meeting was ever convened and the mortgage created by the Respondents is without authority. In substance, the petitioners claim that the above narrated acts of the respondents would amount to oppression and mismanagement prejudicial to the interests of the company and the shareholders, particularly the petitioners. 3. In reply to the above material assertions, the Respondents 2 to 4 filed a detailed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Bank of Baroda to secure a loan and credit limit to M/s Shambhu Steel and Forgings Pvt Ltd is not legal? If so whether the said transaction is liable to be declared as illegal, null and void? (2) Whether the appointment of Respondents 5 to 7 as Directors is not legal? If so, whether their appointment is liable to be set aside. 6. Point No. 1: The Company is owning three items of immovable property, namely 2110 Sq. Mtrs, 1740 Sq. mtrs and 2490 sq. mtrs of land in Khasra No 1210 (items purchased on 19.7.2007,01.05.2008, and 30.12.2009 respectively) and there is no dispute on this fact. There cannot be any dispute that unless Board authorises the Directors to create mortgage, it cannot be done. The Ld. Counsel raised the following points to challenge validity of this mortgage, (i) It is not authorised by the meeting of the Board; (ii) The Company is not making any profits and instead of raising funds for the financial strength of the Company there is no justification to mortgage property of the company to raise loan for a third party company which is not related to the Respondent No. 1 company in any manner and on the other hand it is belonging to the Respondent No.2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that in fact notice was given. In the reply statement, it is only stated that the meeting was held as per rules. There is no specific denial to the assertion of the petitioner that notice of meeting was not issued to him. The following documents are produced by the Respondents to substantiate their contention that the meeting was convened according to statutory requirements. They are: (i) true copy of the Resolutions passed at the meeting on 8.3.2015, certified by the Chairman, (ii) Copy of Form No 8 uploaded on the MCA website showing that resolution was passed at the meeting to create a charge. These two documents will at best, testify the fact that a meeting of Board of Directors was held on 8.3.2015 but they do not indicate service of notice to all the Directors including the petitioners, as postulated by Sec. 286 of the Act. The Ld. Counsel for the petitioners pointed out various cynical features from the above documents to heave suspicion on the factum of convening of the meeting.. As rightly highlighted by Ld. Counsel, Form - 8 shows the Directors' resolution number is not given and is left blank. It is signed by the Director who is authorised by a resolution dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is void. In view of the law laid down by Shri Parmeshwari Prasad Gupta's case (supra), the resolution is undoubtedly void. Yet, we have certain other important reservation in reaching that conclusion.' That reservation is in the form of legal impediment created by section 402 of the Companies Act, 1956. Sec. 402 reads thus: Sec. 402-Powers of tribunal under Section 397 or 398: Without prejudice to the generality of the powers of the Tribunal under section 397 or 398, any order under either section may provide for- (a) The regulation of the conduct of the company's affairs in future' (b) The purchase of the shares or interests of any members of the company by other members thereof or by the company (c) In the case of a purchase of its shares by the company as afforesaid the consequent reduction of its share capital;' (d) The termination, setting aside or modification of any 'agreement howsoever arrived at, between the company on the one hand; and any of the following persons, on the other, namely - (i) the managing director, (ii) any other director....(v) the manager, Upon such terms and conditions as may, in the opinion of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief from being affected by the provision in this case because, in paragraph 6.11 it is stated by the petitioners- That around 1st week of March, 2015, the Petitioner No. 1 was informed by the Petitioner No. 2 that a notice had been received from Bank of Baroda under Sec. 13(2) of SARFAESI Act, 2012 dated 5.3.2015 at Registered office of the Company. The petitioner was shocked to read the contents of the said notice that the Directors of the Respondent NO. Company had been shown as guarantor for availing the credit facility sanctioned to M/s Shambhu Steel Forgings Pvt Ltd for an aggregate credit limit of... It is further averred in paragraph 6.12 thus: The petitioners were further shocked to know that the equitable mortgage had been created on 21.3.2013 on the land of the Respondent No. 1 Company of the properties located at .... The above passages from the Company Petition would make obvious that the petitioners came to know about the mortgage fraudulently created even in first week of March 2015. That must be invariably before 7.3.2015 and after 5.3.2015 whereas the petition was presented as abovesaid on 23.07, 2015 which is also ahead of three months postulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the parties under section 397 and 398 of the Act to foil the proceedings pending before the Debt Recovery Tribunal. This Tribunal for the aforesaid reasons, find that it cannot be declared as such that the mortgage of the Company's property in favour of Bank of Baroda, the 8th Respondent herein, was unlawful, illegal, null and void, as claimed by the petitioners. We place on record that our observations, if any, would not stand in the way of the Debt Recovery Tribunal to decide the validity of mortgage, if raised before it, in accordance with law. It is startling to note, the Bank of Baroda (R8) did not chose to enter appearance to reveal its stand and contest this matter. If this Tribunal declares that the mortgage is void, then, we are sure; the Bank may face difficulty in realising the debt due to it by enforcing the 100% corporate guarantee furnished by the first Respondent Company. With a view to protect the interest of the Bank which has invested its public funds in the transaction, we direct the Registry of this Tribunal to mark copy of this order to the General Manager of the Bank of Baroda for information and to examine the reasons why the Bank has not taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This filling up of vacancy shall be in the annual general meeting of the company. Sec. 258 provides a right to the Company to increase or reduce the number of Directors. This right has to be exercised in the annual general meeting only. Sec. 260 then deals with the appointment of 'additional directors'. This provision reads: Sec. 260- Additional Directors: directors: Nothing in sections 255, 258 259 shall affect any power conferred on the Board of Directors by the articles to appoint additional directors: Provided that such additional directors shall hold office only up to the date of the next annual general meeting of the company; Provided further that the number of the Directors and additional directors together shall not exceed the maximum strength fixed for the Board by the Articles. The letters of appointment issued to the Respondents 5 to 7 are in pages 364, 365 and 366 of the Petitioner's paper book and these letters are not disputed by the respondents. These documents show that the Respondents 5 to 7 are appointed as 'Directors' and not as 'Additional Directors'. In From DIR-12 (page No. 352 of the Petitioners' paper Book) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
