TMI Blog2017 (4) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the company quite illegally and such illegal removal has repeatedly been held to be an act of mismanagement and, therefore, the petitioners are entitled to statutory relief. Resultantly, the resolution dated 19.09.2014 is set aside and consequently, the petitioner Nos.l & 2 stand restored as Directors of the respondent No.1 company. Since the Board Meeting held on 19.09.2014 under which the petitioners stood removed from the Board of Directors is already held to be illegal, therefore, all subsequent Board Meetings and action(s), if any, taken thereunder, save and except, the allotment of equity shares to the respondent Nos. 4 & 5 made on 26.09.2014, in pursuance to the resolution dated 13.09.2014, are also held to be void and illegal and are accordingly quashed. - T.P.No. 19/397/398/GB/2016 (C.P. No. 182 of 2014) - - - Dated:- 3-3-2017 - Mr. PK Saikia, J. For The Petitioner : Mr. S.A. Sikdar, Miss Somila and Mr. S.K. Deori, Learned Counsel For The Respondent : Mr. S.Sancheti, learned counsel 1 This proceeding under Section 210 of the Companies Act, 2013 (hereinafter referred to as the 'the Act of 2013') and under Section 397/398/399/402/406 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FORM DIR 12 (ii) FORM PAS-3 (iii) All documents pertaining to the Board Meeting held on 19th September, 2014, including any document of the company brought into existence pursuant to the resolutions purportedly adopted at such Board meeting. (iv) Resolution allegedly adopted at the purported Board meeting held on 19th September 2014 and all records of the company prepared in connection with such meeting; (v) Resolution allegedly adopted at the purported Board meeting held on 26th September 2014 and all records of the company prepared in connection with such meeting; (vi) All documents pertaining to the Board Meeting held on 26th September 2014 or any other meeting held on thereafter including any document of the company brought into existence pursuant to the resolutions purportedly adopted at such Board meeting . 2. The facts, which are stated in the petition under the Act, 1956 and the documents, annexed therewith and which are necessary for disposal of the present proceeding, in short, are that the petitioner Nos. 1 and 2 were the directors of M/s Sashi Kumar Tea Company Pvt. Ltd., (respondent No. 1 company) which is a subsidiary company of M/s Prayag Infotech H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h and 5th instalments in spite of repeated demands therefor from the side of the petitioner No.3. 7. It is also the case of the petitioners that in terms of the agreement aforesaid, on 13.09.2014, an Extraordinary General Meeting of the company (in short, EOGM) was convened with only one agendum and same was for the appointment of respondent Nos. 2 and 3 as the Directors of the company. In pursuance thereof, respondent Nos. 2 and 3 were appointed as Directors of the company. 8. But subsequently, the respondent Nos. 2 and 3 also passed a resolution authorising the company for further issuance of equity shares to respondent Nos. 4 and 5 who are not the shareholders of the company on the date of issuance of shares to them and in doing so, the company totally violated the law, laid down in Section 42 and section 62 of the Companies Act, 2013. 9. Since the company had issued further equity shares to respondent Nos. 4 and 5 in violation of provisions of sections 42 and 62 of the Act of 2013, the allotment of shares, made to those two respondents in pursuance to the resolution adopted on the meeting held on 13. 09. 2013 became void and illegal. 10. However, the misdeeds, commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was next contended that the agreement dated 30.08.14 is not void or illegal since it offends neither the provision of Sections 13 nor 16 of the Regulation Act, 1956 nor the provision of section 10 of the Contract Act of 1878. In regard to alleged violation of Secs. 13 and 16 of the Regulation Act, 1956, it has been stated that Secs. 13 and 16 of the Regulation Act, 1956 are applicable only to the listed company. 17. The company in question not being a listed company but only being a closely held company is not subject to the prohibition incorporated in the aforesaid provisions of law. Therefore, the very allegation that the agreement dated 30.08.2014 is void for not being in conformity with the Sections 13 and 16 of the Regulation Act, 1956 or for that matter, with the Circular dated 27th September, 1969 falls flatten on its face. 18. In regard to contention that the agreement aforesaid was void for being not in tune of the requirements, specified in section 10 of the Contract Act, it has been stated that said agreement is voidable at the instance of the respondent No. 4. In that connection, it has been stated that originally, the respondent No. 4 agreed to purchase the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iabilities of the company and since the respondent No.4 believed such representation to be true and also acted on such representation, the petitioners are guilty of perpetuating fraud upon the respondent No.4 and, therefore, the agreement in question became voidable, but not at the instance of the petitioners, however, at the instance of respondent No.4 instead. 25. Since the respondent No. 4 had already paid an amount to the tune of ₹ 3 (three) crores and since the amount, so paid, is almost equal to the actual worth of the company inclusive of its liabilities and since the respondent No. 4 is still agreeable to do the remaining part of the contract, if any, the petitioners are bound by law to execute a sale deed delivering the title over the company to the respondent No.4. 26. That being so, the respondents instead of taking steps to declare the agreement void, has taken steps to enforce the contract agreement and in that connection, they have already approached the Civil Court of appropriate jurisdiction seeking a decree requiring the petitioner No.3 to perform his part of duty under the agreement since the respondent No.4 had discharged or almost discharged its part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that both sides have heavily relied on the said agreement dated 30.08.2014 to advance their respective claim, of course, by interpreting the same in their own way. Therefore, before I proceed further, I find it necessary to go through the aforesaid agreement of sale to understand the disputes between the parties well. 33. Thus, the petitioners contend that the agreement, which was supposed to have paved the way for the respondent No.4 to secure full ownership over the respondent company, is unenforceable since such agreement was entered into in blatant violations of mandatory provisions incorporated in various Acts, such as, the Contract Act of 1872, the Securities Contract (Regulation) Act, 1956 and the Companies Act, 1956 etc. 34. The further claim of the petitioners is that since the respondent No. 4 was to complete his part of the obligation under the agreement aforementioned within the period, stipulated in the agreement and since the said respondent did not do its part of the obligations under the agreement within such time schedule, the later can no longer legally required the petitioner No. 3 to enforce such agreement, more particularly, in view of clear recitals made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lkata- 700034 represented by its Director Mr. Basudev Bagchi (DIN: 00743904) hereinafter called the First Party and Asomi Industries Pvt. Ltd (CIN: U01400AS 2009PTC 009034) with Head Office at 2nd Floor, Bharalumukh, Guwahati 781009, Assam represented by its Director Mr. Subhra Jyoti Bharali (DIN: 018995925) hereinafter called the Second Party. Where as the first party had agreed to dispose off its 100% subsidiary company, namely, Sashi Kumar Tea Co. Pvt. Ltd (CIN: U74210AS199 PLCO 05716) owning Tea Garden at Simlitola, Goalpara, Assam, India. Whereas the 1st party has agreed to sell the entire equity shares of Sashi Kumar Tea Co. Pvt. Ltd to the second party by more specifically described in Schedule A attached to this agreement which provided that the second party will pay off the loan components of the scheduled company. Whereas the first and second party desire to put down the terms of their understanding in writing and both the parties having fully aware of the terms give their consent as below: 1. The second party offered a price of ₹ 11,00,00,000/- (Rs. Eleven crore only) comprising of value of equity shares of ₹ 1,01,45,790 and a loan from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any. 12. It is expressly agreed by both the parties that in case of failing scheduled dates of payment by the second party, this agreement will stand null and void and none of parties will be entitled to raise any matter whether legal or illegal in any court of law. 13. In case of breach of contract, this agreement will stand null and void ab initio and the amount taken by the first party from the second party shall be refunded without any interest only after the sale of the scheduled property to any other person/company as well as the directors representing the second party shall resign from the board of Sashi Kumar Tea Company Private Limited. 14. Any dispute is subject to Kolkata Jurisdiction. 15. All the clauses have been clearly read and understood by both the parties. IN WITNESS WHEREOF both the parties here to have signed on this agreement on 30th day of August Two thousand fourteen along with duplicate thereof. 40. A very careful perusal of the pleadings, more particularly, the petition in the light of the recitals in the agreement for sale dated 30.08.2014, would reveal that the petition under sections 397 /398 of the Companies Act, 1956 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted under the Act of 2013, have exclusive jurisdiction to deal with such matters. Various decisions on this point rendered by the Apex Court of the country, the various High Courts and CLBs have made such position abundantly clear. 45. In my very considered opinion, narration of events, so made in petition under Section 397/398 of the Act of 1956 projects to the fore a clear view that the petitioners have joined different causes of actions, triable by courts having different jurisdictions, in one proceeding, same being the proceeding in hand. In other words, the present proceeding suffers from the vice what is commonly called as misjoinder of causes of action. Now, the question is what this court would do in such a situation. 46. In this connection, we may look into the decision of Hon'ble Calcutta High Court in the case of Anil Kumar Roy v. Manasanath Shaw AIR 1975 Cal 293. In the reported case, a suit was filed before the court of Munsif with two set of causes of action. One set of causes of action is exclusively triable by Small Causes Court whereas the other set of causes of action is triable by Munsif court. 47. The learned Munsif, on hearing the parties, came t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances in Anil Kumar Roy (supra) since here also, though the Tribunal has exclusive jurisdiction over the matters pertaining to section 397/398 of the Companies Act, it has no jurisdiction, whatsoever, to try other set of allegations since such allegations, as stated above, are triable by court of Civil Jurisdiction, and none else. This is more so, since both the sets of allegations are clearly separable from one another and that too, without damaging the fabrics of other. Situations being such, I have no other option but to leave those disputes to be tried by court of appropriate jurisdiction as and when such suit (s) are filed. 49. In view of our foregoing discussions, now, I propose to focus my attention on the allegations which are exclusively triable by this Tribunal and for this purposes, I first take up the allegation that the agreement in question is void for being in contradiction with Sections 13 16 of the Securities Contract (Regulation) Act, 1956, for discussion. In order to appreciate the disputes on this count accurately, I find it necessary to reproduce Section, 2(h), Section 13 Section 16 of the Act: Section 2(h) Securities include- (I) shares, scrips, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7th September, 1969, exists for application of same to the respondent No.l, therefore, aforesaid provisions have no application to the respondent No.l. Being so, I find no difficulty in rejecting the allegation under consideration. 51. It is worth noting here that the petitioners claim that the appointments of the respondent Nos. 2 3 as Directors of the company are illegal and as such, the resolution appointing them as Directors of the company needs to be set aside. Such a plea is required to be rejected outright since there is indisputable evidence to show that the EOGM of the company, held on 13.09.2014, had empowered the company to appoint the respondent No. 2 and 3 as directors thereof. 52. What is quite important to note here is that the petitioners had attended such EOGM and they themselves inducted the respondent Nos 2 and 3 as Directors of the company which is evident from the resolution adopted in the EOGM as well as the letter dated 11.10.2014 which was authored by none other than the petitioners. For ready reference said letter is also reproduced below: To Shri Gulab Chandra Yadav Registrar of Companies (ROC), Shillong, Ministry of Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.2 3 had issued further shares to some outsiders without following the prescription of law, laid down in Section 42 and also in violation of section 62 of the Companies Act, 2013. Before addressing such an allegation, we need to have a look at the materials on record. 55. In para 11 of the reply, filed by the respondents, they claimed that on 13.09.2014 a special resolution was adopted by the shareholders of the company whereby 9, 85, 421 nos. of equity shares of face value of ₹ 10/ each in the company was recommended for allotment to the respondent Nos.4 and 5 through private placement. It may be stated here that during the course of argument too, the learned counsel for the respondents had placed on record, a photocopy of a part of the certified copy of resolutions, adopted in the EOGM of the company, held on 13.09.2014. 56. Such resolutions were brought on record having filed affidavits in that regard. For ready reference, same is reproduced below: Para 3. That in para 4 of our affidavit dated 17.02.2017 we have stated that in item No.3 it was discussed between the members regarding the pending due to Labour wages, provident fund, payment of arrear salary and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vened and in that meeting, as many as five resolutions were adopted by the shareholders of the company. While the resolution No 4 relates to appointment of respondent No.2 as Director of the company, the resolution No. 5 relates to appointment of respondent No 3 as Director of the respondent No. 1 company. 59. The said affidavits further show that out of remaining 3 agenda, one relates to offer for subscription of equity shares to the respondent Nos.4 5 through private placement. In that connection, I have perused the Form No.PAS-3 vide Annexure P-5 (which the petitioners annexed as Annexure-P 12 to the petition). The Annexure P-5 too reveals that the company, in its EOGM, held on 13.09.2014, had adopted a special resolution recommending the Board to allot 9,85,421 Nos. of equity shares of ₹ 107- each to the respondent Nos.4 5 through private placement for which on 26.09.2014, the Board had allotted aforesaid number of shares to the respondent Nos.4 5. 60. The above revelations, in my considered opinion, firmly show that the issuance of 9, 85, 421 Nos. of equity shares of ₹ 10/- each to the respondent Nos.4 5 through private placement was made in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to be heard on the resolution at the meeting. (4) Where notice has been given of a resolution to remove a director under this section and the director concerned makes with respect thereto representing in writing to the company and requests its notification for members of the company, the company shall, if the time permits it to do so.- (a) in any notice of the resolution given to members of the company, state the fact of the representation having been made; and (b) send a copy of the representation to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representation by the company). and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company's default, the director may without prejudice to his right to be heard orally require that the representation shall be read out at the meeting: Provided that copy of the representation need not be sent out and the representation need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive developments should be given a freehand to continue with their efforts so that the company does not again slip into insolvent condition. This is more so, because the Tribunal while exercising the power under Section 397/398 of the Act is expected to render equitable justice to all concerned. 69. Such a contention was opposed to by the petitioners stating that when a case of mismanagement/oppression is made out, the aggrieved party is entitled to the statutory relief prescribed under the law whatever may be the capacity of the new dispensation in running the company, more so, when the act, complained of, is as serious as removing of the petitioners from the Board of Directors illegally. 70. I have considered the rival submissions on this count and as stated above, it is found that the petitioners have clearly made out the claim that petitioner Nos.l 2 were removed from the Board of Directors of the company quite illegally and such illegal removal has repeatedly been held to be an act of mismanagement and, therefore, the petitioners are entitled to statutory relief. 71. Here , one may profitably recall what Chancery court observes in Clemens v. Clemens Bros Ltd. [1976] ..... X X X X Extracts X X X X X X X X Extracts X X X X
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