TMI Blog2007 (10) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... ered office of the Respondent No. 1 Company is situated at Kunj Rest Cum Plaza 'A' Tower, Palace Road, Vadodara-390001, Gujarat. The main objects for which the company was formed were to undertake and/or direct all type of construction and the maintenance of and to acquire by purchase, lease, exchange, hire or otherwise, lands, properties, buildings and estates, etc. On 4.5.1994 the Respondent No. 1 Company being a developer entered into an Agreement and MOU for development of Commercial Complex at Municipal No. 79. South Tokoganj, Indore (Premises in short) with the father of the R-3 who had perpetual lease of the plot admeasuring 77708 sq. ft. MOU dated 29.4.1997 was entered into between petitioner and the Respondent No. 2 for joint development of the Premises against the payment of a Isum of ₹ 6,06,89,948/- to be paid to Respondent No. 3 for the cost of land and towards development of Commercial Complex in anticipation of permission from R-3. On 18.6.1998 a Tripartite Agreement between Yashwant Entertainment and Investment Pvt. Ltd. and Respondent No. 1 and Respondent No. 3 for development of Premises was entered into through R-2. On 20,6.1998 the share capital of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Indore based Yashwant Talkies Project and that the Sale transactions for 50% of the project property at Indore based project at the Yashwant Talkies Indore be declared null and void. The petitioner has withdrawn the prayer at para 8,7 pertaining to the alleged transfer of 1531 shares by the petitioners to one Mr. V. Shukla. 3. Shri D.K. Aggarwal, Sr. Counsel for the R-3 arguing on C.A No. 396/07 contended that the petitioner has joined the applicant as respondent in the subject petition with ulterior intentions and without there being any cause of action. It was contended that the petitioner had prayed for an order against the applicant surreptitiously in as much as it was forwarded in such a manner that the applicant came to know of an ex-parte order on 2.8.2007 against it only subsequently. The petitioner could not have made any prayer against the present applicant and it did not and does not have any locus and/or cause of action against the applicant. In OJ Appeal being OJ Appeal No. 198 of 2007 against Company Law Board's order dated 2.8.2007 the Hon'ble High Court of Gujarat at Ahmedabad vide order dated 29,8.2007 directed the Applicant to file an interlocuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant for the said company petition or otherwise. In the present case, the applicant is neither a member nor a shareholder nor a director in M/s Unique Construction Pvt. Ltd. and that, therefore, the subject petition is not maintainable against the applicant and the same could not have been preferred against present applicant and no relief against present applicant could have been prayed for and/or granted. Further, it was argued that even otherwise there is no privity of contract between the applicant on one hand and the petitioner on the other hand. In the absence of any privity of contract between the applicant (R-3) and the petitioner, the petitioner does not and cannot have any cause of action against the applicant and/or any locus for any claim against the applicant. In this view of the matter also the petition and/or any of the relief prayed for therein are not maintainable against the applicant and the same could not and ought not have been granted. No relief can be prayed for by the petitioner against the applicant. Interim relief can not be granted and, therefore, the order dated 2.8.07 taking present applicant in its purview is unjustified, erroneous, untenable in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner. He did not enter into any contract agreement with the petitioner nor did he enter into any business transactions/ dealing with the petitioner particularly in connection with R-2. The petitioner has no locus to present the Petition under Sections 397 and 398 against him. It was argued that the agreement dated 18.6.1998 specifically provides in Clause 5 which appears at page 117 of the paper book that the R-2 company was entitled only to the cash consideration in the formula provided therein and nothing else. Further the R-3 pointed out that the company petition field a Civil Suit No. 19-A/2006 in the Court of learned District and Session Judge at Indore for declaration that the agreement dated 4.7.1998 was binding inter alia on Respondent No. 2 Company and R-3. The learned District Judge vide judgment and order dated 20.2.2007 dismissed the suit and refused to grant the injunction. The petitioner has filed an appeal in the High Court of Madhya Pradesh against the said judgment. It is argued by the petitioner that R-3 will be covered by Sections 397 and 398 because the word affairs of company as appearing in the Sections will include the contracts with the company. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efers. 7. Further, Shri Mookerjee argued that the R-3 is a necessary party as an owner of the land in respect of which the development agreement and MOU dated 4.7.1998 were signed. Therefore, it was specifically denied that the R-3 is liable to be discharged from the present proceedings. The R-3 had filed an appeal before the Hon'ble High Court at Ahmedabad being Appeal No. 198 of 2007. The R-3 had also filed an application under Section 24 of CPC for transfer of Suit No. 89-A/2006 from the court of 4th Additional Judge, Indore to some other Court. It was pointed out that the LD District Judge, Indore while deciding the said application had held that the dispute relating to construction of multiplex complex on the land owned by Yashwant Talkies is between Unique Construction (R-1), Anandrao Gaekwar (R-3), and the petitioner and R-2. In view of the above findings the R-3 cannot take a stand that he is not related to the present dispute. Therefore, he cannot be discharged from the present proceedings. It was pointed out that the parties to the Tripartite Agreement dated 18.6.1998 are registering the purchasers of developed area as per the agreement and in case he is not restra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s qua land which is on perpetual lease with R-3, (iii) the observations of the Additional District Judge contained in Civil Suit No. 19-A/2006 clearly hold that the dispute relates to R-1, R-2, R-3 and the petitioner, (iv)the petitioner has paid a sum of ₹ 5 lakhs to the applicant (R-3) vide the cheque drawn on Karur Vyasya Bank, Indore which was directly credited to R-3's account; (v) merely because R-3 did not sign the Agreement dated 4.7.1998 would not keep him out of the dispute, the arguments on privity of contract and locus are not tenable. Considering the facts and circumstances of the case and in view of the uncontroverted contentions of the petitioner, I find no justification for allowing the R-3's Application for non-impleadment. The matter relates to R-3 as well. The allegations contained in C.P No. 111/07 cannot be adjudicated upon keeping R-3 out of the array of the parties. The petitioner's agreement with R-2 is also for the benefit of R-3. Then, R-3 has agreement with R-1. Any person who has I a contract with the company is concerned with the affairs of the company. Any person who is concerned with the affairs of the company can be a party, Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leum Civil Appeal No. 5156 of 2003 and in more recently in Rashtriya Ispat Nigam Limited and Anr. v. Verma Transport Co. Further, the learned Counsel placed reliance on various petitions decided by the CLB wherein matters have been referred to arbitration in the past when all the conditions as referred to in Re: P. Anand Gajapathi Raju had been fulfilled i.e., Naveen Kedia and Ors. v. Chennai Power Generation Ltd. and Ors. (1998) 4 Comp LJ 128 (CLB); Escorts Finance Ltd. v. G. R. Solvents and allied Industries Ltd. Ors. (1999) 96 Comp Cas 323 (CLB) and Pinaki Das Gupta v. Maadhyam Advertising (P) Ltd. (2003) 114 CC 346. It was argued that the Company Law Board has no jurisdiction in this matter as pointed out in the first preliminary objection contained in reply and now also by way of Application under Section 8 of the Arbitration and Conciliation Act, 1996. It was contended that the plea that it is an Arbitration matter has already been taken. It has been taken at the threshold. It has been taken as a preliminary objection which must be decided first. It is a severable objection. The Company Law Board has no jurisdiction to entertain and adjudicate the present-petition under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petition is the same as the subject matter of the arbitration agreement. And now there is an application under Section 8 of the Arbitration and Conciliation Act. Raising this issue earlier by way of preliminary objections in the reply to the CP does not, in any manner, dilute the contentions of the respondents in this regard. 13. Sh. S.N. Mookherjee Counsel for the petitioner responding to the first preliminary objection of the R-1 2 argued that the subject matter of a petition under Sections 397 and 398 of the Act cannot be referred to arbitration. Relying on the judgments in the cases cited at 47, Company cases 92 at 113 to 118, 120, 121; 48 Company Cases 312 at 318 to 320; 50 Company cases 771 at 781 to 785, he argued that the provisions contained in Sections 397 to 409 of the Act constitute a Code by themselves and are not subject to other provisions of the Act; the CLB has wide powers under Section 402 of the Act including the power to give directions contrary to other provisions in the Act; the only limitation on the power that CLB could exercise under Section 408 of the Act is that there must be a nexus between the complaint made and the reliefs granted. Further, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refer the parties to arbitration. There is no proper application under Section 8 of the Arbitration Act fulfilling mandatory requirements of Section 8. The application with requisite annexures must have been filed not later than submitting their first statement on the substance of the dispute. Counter Affidavit to the CP has already been filed. The application has been filed now to make good the default after having argued the matter. Even otherwise, assuming that the Application is proper, on consideration of the facts of the case and in view of the legal position, the respondents have failed to make their case for reference to arbitration. The petitioner has successfully controverted the respondents' contentions. I find that the petitioner's contentions are tenable. There is no provision for arbitration in case of disputes between the company and the petitioners. In Sukanaya Holdings Pvt. Ltd. v. Jayash H. Pandeya Supreme Court has observed that there is no provision in the Act as to what is going to be done in a case where some parties to the suit are not parties to the arbitration agreement. This being the observation of the Supreme Court, this Board has to only examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner is relying on the Articles. It is to be noted that the provisions of Sections 397/398 can be invoked only if the disputes, even among the shareholders, or allegations against each other, relate to the affairs of a company. Such disputes/allegations in the affairs of a company resulting in oppression or mismanagement can never be a subject matter of a suit. In the present case, composition of the Board of Directors and allotment of shares is in the affairs of the company. Further, every act of the Board is in the affairs of the company. Grievances of the petitioner fall squarely in the affairs of the company. Examining the respondents' claim for reference to arbitration on the touchstone of the tests applied by the Company Law Board, I find that they pass only the first test that there is Arbitration Agreement. But there is no commonality of parties. Entire subject matter of the petition cannot be referred to the Arbitrator specifically the statutory rights of allotment of shares and with reference to directorship, etc. not fettered by contract in any manner. Hence, C.A. No. 432/07 cannot be allowed. 15. In view of the finding that this matter cannot be referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2002 has become 6.12% of the total subscribed and paid up capital at the time of filing the present petition which is less than 10% as required under Section 399 of the Act. My attention was further drawn to the preliminary objection with respect to delay in filing this petition. 16. Responding to the respondents' preliminary objections Sh. Mookherjee contended that there are no parallel proceedings. Relief sought in the petition, is different; there is no decision on suit on merits. It is admitted position that only notice has been issued in appeal in appellate court and matter is still pending. However, there is no gain since here the matter is under Sections 397/398 of the Companies Act and in the case before the Hon'ble High Court no such relief has been asked for, subject matter is different as the petitioner in the present petition is asking for the restoration of the shareholding by declaring the transfer and allotment null and void and also the removal of the petitioner and his group as directors as-null and void. Shri Mookherjee argued that by not giving full fact about the pendency of first appeal in the MP High Court and using the word 'injunction' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here are no notices of Board of Directors or general meeting regarding increase of shareholding, no notice of board meeting. Reliance was placed on the ratio of the cases of Clemens v. Clemens (1976) 2 AIR 268; there was no letter of offer Dale v. Carrington (2005) 21 SCC 212 and Ruby (2006) 7 SCC refers. It was contended that there was no need for funds which stands established. Allotment has been done at par. Further, it was pointed out that transfer to Shukla was without revalidation of the transfer deed. The Annual return filed until 2005 shows the petitioner as holder of 50% whereas the transfer deed was given by the Petitioner in 2002. The said transfer to Shukla is in violation of Articles 4, 8, 9 11 of the Articles of Associations of the Company. 19. Further, rejoining on merits of the case, it was argued that the Respondents have not answered anything on allotment of shares which reduces the petitioner's shareholding from 25% to the present holding of 6%. Also no evidence for the removal has been produced. Even at the time of argument no evidence has been shown as to how the allotment has been made. There is no reply as to why shares were sold to Shukla in the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e form 32 was filed after lapse of 10 months in October though the date of the form is 27.12.2004. Thus the date on the form filed is after the shares were bought from VP Shukla group. All this shows how the respondent has manipulated and fabricated all records of the company and its documents. 20. Further, it was pointed out that the payment of Rs. One crore at the signing of the Agreement which was a precondition for execution of MOU dated 29.4.1997 is an admitted position. Also that the admission of payment ₹ 82 lacs in cash and 18 lacs by way of the cheque which cannot be disputed now since it is paid and accepted in the agreement which has been accepted by the respondent and not even one correspondence have taken place in 8 years regarding non payment of this money. It is very obvious that no one will give 50% shares in the company without taking any money at all only on the basis of advance cheques. Also this money was paid in two instalments one at the time of signing of the first agreement on 29.4.1997 by an amount of 25 lacs and finally on 4.7.98 by paying 1.00 crores including earlier 25 lacs which substantially proves the genuineness of the transaction done norm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16, 94, 31 of Companies Act, 1956 and necessary submissions in office of Registrar of Companies, Gujarat Ahmedabad has been effected and kept open on email line for inspection by any member of the public including the petitioner. The increase in the subscribed and paid up share capital from time to time in terms of Sections 69 and 75 of the Companies Act, 1956 has been completed strictly in accordance with the law. It was pointed out that the petitioner had a right under Section 234 of the Companies Act to challenge the act of increase of share capital of the Respondent No. 1 Company which was filed in Proforma Form No. 5. Dr. Singhvi argued that all the prayers relate to quashing of allotment. There is no prayer that increase in the Authorised Capital is bad. Allotment, it was argued, is a consequence. What is challenged is the consequence, not the action. 23. Regarding vacation of office of director, it was argued by Shri Dalai, that due to the absence of the petitioner and Mrs. Meera Tekriwal and Shri Gaurav from more than three meetings of Board of Directors held on 30.3.2004, 26.6.2004 and 9.9.2004, the absence of the petitioner, Mrs. Meera Tekriwal and Gaurav Tekriwal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 25% shares before further issue of shares by the R-1 on 24.11.2003, 14.7.2005 and 27.7.2005 since transfer of 1531 shares being 50% of the petitioner's shareholding for consideration on 23.12.2002, on his own volition discretion is not only in violation of the terms of the MOU and Agreement disentitling the petitioner from any relief, but such act of dilution in shareholding committed by the holder of shares himself thereby putting him into minority position, the provisions of oppression and mismanagement as contemplated under Sections 397 and 398 of the Act cannot be resorted to, he cannot be allowed to take advantage of his own wrong. The petitioner has failed to meet this contention that reduction in shareholding from 50% to 25% is due to his own act and choice. As regards further reduction in his shareholding from 25 % to 6.12%, I find that the respondents have no answer except that it has been done as per the provisions of the Act and Articles and that the Registrar of Companies has been duly informed. But the counsel for the petitioner has drawn my attention to the Articles, which have been violated as pointed out above, and this contention regarding illegal allotment w ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
