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Shri Hem Raj Singh Versus Naraingarh Distillery Limited, Shri Baldev Singh Kang, Ms. Ravinder Kaur Kang, Ms. Deep Kamal, Smt. Renu Anand, Shri Rahul Anand, Ms. Bhavna Anand, Smt. Renu Anand, Shri Jitendra Anand, Shri Rahul Anand, Ms. Bhavna Anand, The Registrar of Companies And The Regional Director, New Delhi

2017 (11) TMI 842 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

Oppression and mismanagement - in spite of the status quo orders Directors have changed and shareholding in the company has been considerably changed - transfer of shares - control of the Company itself has changed in the face of status quo orders - Held that:- It is clear that the Respondents knew about the Status Quo Order and pending petition. Still they entered into the MoU and took steps under the same. Disputes inter say the two groups of Respondents later on arose because it appears that .....

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to added Respondents and the added Respondents have continued to act in violation of Status Quo Orders and there is change of shareholding in spite of knowing that there was a Status Quo Order and the shares could not have been transferred to them. - It is clear that original Respondents 2 to 4 acted in an oppressive manner by taking advantage of the Appellant being sent behind the bars at the instance of the Respondent No. 2 and brought about the EGM on 31.05.2006 and illegally removed the .....

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made to the agreement between these respondents shows that in the MOU dated 01.04.2009, these Respondents were aware that they need to tide over the status quo and the contract was to be concluded when the status quo is vacated and the petition filed by the Appellant is finally decided. It is surprising, however, that the learned NCLT even after noticing such conduct of the Respondents did not hold that Respondent Nos. 2 to 4 had committed acts of oppression and mismanagement because of which no .....

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Ms. Anupama Kumar and Shri Hrishikesh Baruah, Advocates ORDER A.I.S. Cheema, J: The Appellant filed Company Petition No. 128/2007 against the Respondents No. 2 to 4 (hereinafter referred to as 'Original Respondents') under Sections 397, 398, 399 read with Section 402, 403 & 406 of the Companies Act 1956 ('Old Act' in brief). The Company was arrayed as Respondent No. 1. During the pendency of the petition due to developments pending litigation, one Onkar Anand was added as Re .....

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ter hearing the matter, dismissed the Company Petition and disposed of pending Misc. Applications referred by it in the impugned order dated 07.04.2017. Hence the present appeal. 3. In short the Appellant-Original Petitioner claims as follows: The Respondent No. 1 -Company was engaged in distillery business on a 45 acres of land. The Appellant was promoter/ director and became Managing Director on 01.09.2004. The Appellant and Respondent No. 2 were jointly carrying on several other businesses al .....

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r the removal of the Appellant from the post of Managing Director. Without notice to the Appellant, who was behind bar and in his absence, the EGM (The document in this regard at page 517-Vol. III mentions it as Annual General Meeting ) was held and the Appellant was illegally removed as Managing Director. Appellant got bail in July, 2006 and when he came to know that he had been removed as Managing Director and his role in the affairs of the Company had been limited, he filed a Company Petition .....

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tus quo' on 11. 09.2007 regarding immovable property and shareholding. When the petition came up for hearing in 2013, the Appellant learned that in spite of the stay to maintain status quo regarding immovable property and shareholding of the company, the Original Respondents had changed the shareholding and the managing control had been given to third parties i.e., added Respondents violating the status quo order. Consequently, the Appellant brought on record the added respondents. He amende .....

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t No. 1 in favour of the added Respondents through MOU, but as added Respondents did not pay consideration and so they could not be given any indulgence. When the petition came up before the learned NCLT, the petition came to be dismissed. 6. The learned Counsel for the Appellant submitted that the Respondent No. 1-Company was a sort of quasi-partnership between the Appellant and Respondent Nos. 2 to 4. The Respondent No. 2 managed to send the Appellant behind the bars by filing criminal cases a .....

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sed order Of status quo on 11.09.2009 and status quo order was relating to fixed assets and shareholding of the company. This order, however, was violated by Respondent Nos. 2 to 4 and they transferred their shareholding to Respondents No. 5 to 9. Subsequently, 7,56,800 equity shares were allotted in favour of the added Respondents diluting the shareholding of the Appellant from 19.2 to 1.12 percent. The transfer of shareholding reflected in the Annual Return of 2012 because of which original pe .....

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sed and according to the learned Counsel for the Appellant, oppression of Appellant and mismanagement of the Company affairs was apparent on the record. According to the learned Counsel for the Appellant, the acts of the Respondents in contravention of the status quo order must be held to be illegal and need to be quashed and set aside. The learned Counsel for the Appellant stated that the main issues now are that illegal removal of the Appellant as Managing Director and the act of violation of .....

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claimed that these Respondents had not transferred their share to Respondent Nos. 5 to 9 8. Against this, the learned Counsel for the added Respondent No. 5(a) to 5(c) and 6 to 9 submitted that contentions raised by the Appellants are misplaced. It is stated that the Appellant alleged that he came to know about the allotment of shares to the added Respondents in 2013 and he had filed Contempt Petition before the Punjab & Haryana High Court. Reference is made to C.O.C.P 902/2013, copy of whi .....

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thus he cannot be permitted to take a contrary position as far as this Company Petition is concerned. According to these Respondents, the present petition was bound to be withdrawn by the Petitioner/Appellant. When the petition was filed, the only grievance was wrongful removal of Managing Director, which could not have been said to be an act of oppression. Notice to the Appellant was issued before he was removed as Managing Director. It is claimed that the Appellant only wanted to exit but he .....

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ismissed. 9. At the time of argument, the learned Counsel for the added Respondents claimed that notice had been issued to the Appellant about the meeting of 31.05.2006 and thus, Appellant could not make any grievances. When the learned Counsel was asked to show service of the notice, he referred to notice published in the newspapers. Learned Counsel pointed out the copies of the newspaper at pages 570-571 (in Vol. III of the Paper Book) to support his submission. When we perused these notices p .....

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arned Counsel for added respondents could not show any other Newspaper cutting. One copy of the notice dated 05.05.2006 has been filed as Annexure-R16 (page no. 578 of Vol.-II of the Paper Book) issued by Respondent No. 2 claiming that requisition from M/ s United .Vanaspati Limited holding more than 1/20th of the total equity voting power in the Company has been received. Even this notice relates to Naraingarh Sugar Mills Limited. Respondents have not been able to show notice served on the Appe .....

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nt in the case of Hanuman Prasad Bagri (supra), we hold that removal as Managing Director is not a subject matter of oppression and mismanagement u/s 397 and 398 of the Companies Act, 1956. The other instances cited in both the original and amended petitions namely, not being given a notice of meeting dated 8.4.2006 and AGM dated 31.5.2006 as well as filing of criminal complaints against him by the original Respondents are not considered as instances of O&M. We say so because of notices of m .....

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ted in these cases, as they were quashed after the compromise/settlement agreement between R-2 and the Petitioner. (Emphasis supplied) It is apparent that the learned NCLT did notice that no specific notice was served on the Appellant, who was apparently behind the bars at the concerned time. The learned NCLT, without going through the contents of the newspapers (as pointed out above) observed that the notice was published in the newspapers and Petitioner may not be aware of the same as he was b .....

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d unceremoniously Appellant was removed. The record also shows that original Respondent Nos. 2 to 4, in violation of the status quo order, transferred their shares to the added Respondents and it also appears that subsequent shareholding itself of the company was increased and the Appellant with his 9600 shares was reduced to minority. 11. The impugned order has reproduced from the amended petition, what reflected in the Annual Return of 2012, of the Respondent No. 1- Company as under: - Directo .....

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d out the Directorship and shareholding pattern as was appearing in the Annual Return of R- 1 Company on 30.09.2 006 (which would be just after the subsequent order which has been passed on 11.09.2007) as under (which also is reproduced in Impugned Order):- DIRECTORSHIP PATTERN OF THE COMPANY AS ON 30.09.2006 St. No. Name Designation Date of Appointment Date of Ceasing 1. Baldev Singh Kang Director 15.04.2002 01.09.04 2. Hem Raj Singh Director Managing Director 15.04.2002 01.09.2004 31.05.06 31. .....

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arma 1 100 10 6. Jyoti Kumar Singh 1 100 10 7. Lokesh Kumar Singh 1 100 10 12. It would be appropriate here to reproduce the status quo order which was passed by Company Law Board on 11.09.2007. The relevant portion is as under:- Petition mentioned and interim relief sought exparte. In facts of this case, I direct the Company/Respondents to maintain status quo as on date in regard to the immovable properties of the Company as also shareholding in and of the company 13. If the above charts, from .....

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Respondents that the Appellant and original Respondents had entered into agreement and in view of that the Contempt Petition filed in the High Court came to be disposed. We find that even if subsequently the Appellant and original Respondents entered into agreement which lead to withdrawal of the Contempt Petition filed in the High Court, by that itself the contempt does not get purged and illegal act committed in violation of the status quo order referred above, cannot be ignored. Looking to t .....

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R-5 dated 01.4.2009 (reproduced at para 8.5 above) vide which it is stated that the 2nd Party (R-5) had offered to purchase the shareholding of R-2 and R-3, immovable property, licence and bottling plant of NDL at a cost of ₹ 28 crores. As per this agreement, a sum of ₹ 15 lacs was accepted by R-2 as token money, the balance amount was to be paid on fulfilment of certain conditions. The condition of final conclusion of the contract is that the contract shall be concluded as soon as t .....

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er the same. Disputes inter say the two groups of Respondents later on arose because it appears that original Respondents received a sum of ₹ 15 lakhs as token money but as the balance was not paid, they have started denying the transfer of shares to added Respondents while the added Respondents appear to be in-charge of the affairs of the Company on the basis of their claim that the original Respondents did transfer their shares. It appears there has been enhancement in the shareholding a .....

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