TMI Blog2017 (12) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... proper and equitable to pass appropriate orders by the Tribunal to put an end to the oppressive actions and mismanagement of second respondent being committed through R1 Company 1 Company by exercising powers U/ss. 397, 398, 402 & 403 of the Companies Act, 1956/Read with Section 241/242 of Companies Act, 2013. The Tribunal, however, cannot interfere in the day to day affairs of the Company. Since words of acts of Oppression and Mismanagement are not defined in the Act, they are to be inferred basing on facts of each case. Ultimately, it is for the management of a Company to manage its affairs, in accordance with its Memorandum and Articles of Association, however, subject to complying with extant provisions of Companies Act, 1956/2013. Therefore, the Tribunal is leaving all sundry issues to the Company to be decided by them, by directing the Company to conduct meetings of the Company to sort out their issues. Therefore, it is necessary to order the R1 Company to convene EGM at an early date so as to sort out their issues suitably. Hereby directed the respondents to restore the shareholding of the petitioners group and the second respondent Group in the ratio of 50:50 total sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the place of the Second Respondent in respect of 25,550 shares taken away by the second respondent by deceit and fraud. (f) To rectify the Register of Members of the 1st Respondent Company and substitute the name of the Second Petitioner in the place of 7th Respondent in respect of 37058 shares taken away by the Second Respondent and Respondent by deceit. (g) Direct the Respondents not to convert the 1st Respondent Company into a private limited Company. (h) Direct the Respondents not to allot any shares to the 5th or 6th Respondent Companies or any one claiming through or under them. 2. The Company petition was initially filed before the then Company Law Board, Chennai in the year 2011, and subsequently, it was transferred to this Bench, on abolition of CLB. On its transfer, the case was taken on the file of this Bench and posted it for final hearing on various dates viz: 22.07.2016, 03.08.2016, 09.08.2016, 23.08.2016, 23.09.2016, 26.10.2016, 25.11.2016, 09.12.2016, 13.12.2016, 29.12.2016, 10.01.2017, 24.01.2017, 06.03.2017, 12.04.2017, 24.03.2017, 20.04.2017, 27.04.2017, 04.05.2017, 23.06.2017, 03.07.2017, 26.07.2017 and 26.10.2017. The case was adjourned on those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Petitioner and 2nd Respondent. (5) The petitioner joined the Company in the year 1986 as Marketing Executive at the request of the 2nd Respondent and Mr.N.A.Nayar. On being satisfied with his performance in the Company, the petitioner was offered shares and also was appointed as the Director of the Company in the year 1996. (6) Since Mr.N.A.Nayar was not able to involve in the business actively due to his illness and old age, he decided to sell his entire shares in the Company to both the Petitioner and 2nd Respondent. Accordingly Mr.N.A.Nayar has decided to give 22% of his stake to the Petitioner and 8% to the 2nd Respondent in the year 2007. An agreement on transfer of shares dated 08.04.2010 was also duly executed by all concerned. (7) The shareholding pattern prior to the transfer of shares from Mr.N.A.Nayar to Petitioner and 2nd Respondent is as under: The 2nd Respondent and his group : 42% Mr.N.A.Nayar and group : 30% The Petitioner #39;s group : 28% However, Subsequent to the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondents have deleted important drawing and other technical details of fans and equipments from the computers of the 1st Respondent Company and they also destroyed its hard copies. It is very hard for the 1st Respondent Company to survive without the deleted drawings. All these drawings have been destroyed from the 1st Respondent Company by the respondents to halt the manufacturing activities of the R 1 Company so as to ensure its closure paving the way for developing Respondent 5 6 companies. (c) Apart from the above illegal acts, the Respondents have been verbally threatening all the employees to stop working and not to take up any fresh orders. Previously all the orders received by the Company were handled by the Petitioner for approval but the 2nd Respondent got into the shoes of the petitioner with a malafide intention to spoil all the valuable orders of the Company. (d) The Second respondent has mischievously acted in Ventilation System for Krishnapatanam Project (2x800MW) enquiry dated 9th June 2010 received from TATA Projects Ltd, Hyderabad. This enquiry was sent to the Company on 09.06.2010 with due date of submission of bid on 22.06.2010 which was further exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50% each for Respondent and petitioner group respectively and also was the figure as per record of the 1st respondent Company. ii. In the same meeting the 2nd respondent requested for appointment of his two sons 3rd 4th Respondents as Directors of the Company since their employment as Sr. Engineer-Design and Purchase Officer was without any Board approval for several years of their joining in the year 2005. The very reason behind the 2nd respondent asking the petitioner for appointment of respondents 3 4 as directors was that respondent 3 who was acting as Sr. Engineer-Design was not a qualified engineer and he was cheating the organization with a forged certificate, of which the veracity on enquiring with the university by the petitioner was found to be fake. It appeared that the certificate the 3rd respondent was forced to forge in connivance with 2nd respondent, in order to satisfy the ISO standard requirement as every employee has to fulfil the requirement of their qualification records depending on their designation and nature of work handled. iii. On informing the matter of forgery done by 3rd Respondent to 2nd respondent by the petitioner, the Bio-date along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and transfer of 37058 shares of the 2nd petitioner made in favour of 7th respondent apart from other reliefs as stated supra. (15) It is alleged that the 2nd respondent had successfully diverted the business of the 1st respondent Company to the 5th 6th Respondent Companies and committed breach of fiduciary duties. The 2nd respondent had siphoned off huge funds. (16) The conduct of reducing the petitioner from position of holder of equal number of shares to a minority by promising to buy him out and silencing him from blowing the whistle. Therefore the grounds are sufficient to order winding up of the Company but it would unfairly prejudice interest of petitioner, other shareholders and the Company in general, and thus it just and proper that this Tribunal may be pleased to pass appropriate orders, so as to put an end the affairs complained of and to regulate the affairs of the Company. 4. Opposing the Company Petition, the 2nd respondent S.G.Nair, has a filed a Counter dated 07.11.2011 on his behalf, and also on behalf of the 1st Respondent Company as its Managing Director. The following are the main contentions raised in his reply. (1) It is alleged that all the ave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y have also paid an amount of ₹ 6,26,080/- to the petitioner and his wife, in order to reimburse the amount paid to Mr.N.A.Nayar and his family. Therefore the 2nd respondent claims that the petitioner is holding only 34% of the total capital of the Company. (7) The Petitioner has filed two receipts dated 09.09.2010 as per Annexure R-5 (Page-60) of the counter, S.Radhakrishnan (Petitioner) has received ₹ 2,55,500/- by cash towards the cost of 25,550 numbers of the equity shares of Hyderabad Pollution Controls Ltd. and another receipt is also filed (Page 61) which states that V.Thara has received a sum of ₹ 3,70,580/- by cash towards the cost of 37,058 number of equity shares of Hyderabad Pollution Controls Ltd for the shares sold on 09.09.2010. (8) It is denied any discussion for offer of sale of shares by the petitioner. Further the said proposal was communicated to the 2nd respondent by the Auditor, and thereafter there was a meeting in September/October 2010 to sell his alleged shareholding of 50% for ₹ 2.5 Crores. There was no agreement at all between the parties. 5. The petitioner has filed a rejoinder dated 27.06.2013, in which, it is inter ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They have also filed suit bearing OS No.896/2015 on the file of Hon ble XV Additional District Judge, R.R.District at L.B.Nagar, U/s. 31 of the Specific Relief Act, seeking cancellation of the share certificate and its supporting void agreement dated 08.04.2010. 7. The petitioner has filed an additional rejoinder dated 02.03.2017, to the additional affidavit filed by Respondents No. 1 to 7. Following are the main contentions raised in the additional rejoinder: (1) The R1 Company and the 2nd respondent have filed a suit bearing O.S.No.605/2014 before Hon ble II Additional District and Sessions Judge, R.R. District, L.B.Nagar by inter alia seeking to declare the share agreement dated 08.04.2010 as null and void etc. (2) When the suit was opposed by the petitioner by filing I.A.No.959/2015 in O.S.No. 605/2014, the Court has dismissed the suit by an order dated 18.11.2016 by inter alia observing that the Civil Court has no Jurisdiction and the issue was already pending before the then CLB, Chennai. (3) Again respondents has filed another suit bearing O.S.No.896/2015 by again seeking to declare the share certificates totalling 86 number of equity shares with a supporting do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution dated 27.02.2017 and the shareholding transfer agreement dated 08.04.2010 is properly executed or not, and whether they are binding on the parties or not: (3) Whether the respondents are justified to proceed further, while the CP is pending in which an interim order dated 18.05.2011 passed by the CLB by directing the respondent to maintain status-quo with regard to shareholding and share capital of the Company until further orders; (4) If so, what is the relief the petitioner is entitled for? 12. It is not in dispute that the 1st respondent Company is closely held family Company. Both the parties are indulging in several litigations before various forums by raising various contrary stands without waiting for a decision by a competent court of law i.e. CLB/NCLT ,on the issues. 13. The shareholding pattern of the petitioner group and the respondent group is not in dispute till 27.02.2007 and 08.04.2010. The petitioner and his group hold 28%; 2nd respondent his group holds 42%, and Mr. N.A.Nayar and his group holds 30%. 14. The dispute started between brothers, when sons of second respondent i.e. Respondents No. 3 4 joined the Company and started involving in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of the shares in favour of Party No. 2 and Party No. 3 as per Annexure 1 attached. 3. After receiving full consideration thereof as agreed. Party No.1 agree that they have no further claim on Party Nos. 2 3 are the Company Hyderabad Pollution Controls Limited in respect of the transfer of shares as detailed in Annexure 1 of this Agreement. 4. This transfer agreement containing 2 pages along with Annexure 1 in two pages is duly signed by all the transferors and transferee. 15. However, the 2nd Respondent, subsequently raised objection about the said resolution dated 27.02.2007 and the agreement dated 08.04.2010. While admitting that the said agreement 08.04.2010 was signed by him, he tried to dispute it by saying that it was executed by him under coercion and depression. And also creating other story stating they have recovered lost documents and basing on that, the respondent have also filed two civil suits bearing OS Nos. 605/2014 896/2015 on the same cause of action. It is also to be mentioned here that the pleadings in both the suits more or less similar i.e., questioning the transfer of shares agreement of transfer of shares dated 08.04.2010. Even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the proposal made by the petitioner expressing his willingness to sell his and group shares for total consideration of ₹ 2.5 Crore or to sell the respondents share for agreeable consideration, the second respondent has denied any agreement to that extant except saying that his Auditor has the knowledge of the same. In anticipation of the acceptance of proposal of the petitioner by the second respondent, the petitioners have transferred their shares without actually receiving any consideration for the same. Admittedly, in consonance to the said proposal, the first petitioner transferred his shares totalling 25550 shares in favour of respondent and the second petitioner s share totalling 35058 in favour of respondent No. 7, who is wife of second respondent. While claiming that the above shares have been transferred to the respondents, they have not shown any substantial evidence for that transfer of shares. On the contrary, the petitioner has substantially proved the circumstances as to why the above shares are transferred to respondent Nos. 2 and 7. Moreover, it is contrary to the said interim orders, and the respondents cannot transact the issue of shares of R1 Company with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement only, both the petitioner s group and Second respondent s group got equal share holding of 50% shares of the Company, and the subsequent transactions alleged to have been made by the respondents, as explained supra, are declared to be illegal and liable to be set aside. 22. It is also relevant to point out here that transferors namely N.A.Nayar his group, have not disputed the agreement for transfer of his shares as per agreement dated 08.04.2010, and it is only the 2nd respondent and his group are disputing the agreement of transfer shares made by others. The contentions raised by the second respondent against the said Agreement for transfer of shares are not at all tenable, and they are liable to be rejected. As stated supra, OS No.605/2014 is dismissed as not maintainable, and again filed another suit OS No. 896/2015 on the same cause of action. 23. As per Articles of Association of Respondent No.1 Company, first Directors are Mr. R.Radhakrishnan and N. AyyappanNayar (NA Nayar). Article 21 deals with appointment of new Directors, which reads as under:- The Company may from time to time by ordinary resolution increase or reduce the number or Directors withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as miserably failed to discharge his duties as the first petitioner, is none other than his younger brother and also a Director/MD of the Company. 25. Articles 39 to 50 of R1 Company deals with the procedure for convening Board Meetings/ General meetings of the Company, passing a resolution, powers of Managing Director etc. As per Article 39, all meetings of the Board shall be called by the Chairman and he may call a meeting at any time and shall call a meeting upon requisition by any two Directors. A general meeting of the company may be held by giving not less than 21 days notice in writing. As per Article 40, the quorum for a meeting of the Board shall be one third of its total strength or five Directors whichever is higher. Section 166 of the Companies Act, 1956/Section 96 of the Companies Act, 2013, says that every Company shall hold general meeting in each year. As per Section 167 of the Companies Act 1956/Section 97 of the Companies Act 2013 give powers to the Company Law Board / Tribunal to call annual general meeting. As per Section 100 of the Companies Act, 2013, an Extraordinary General Meeting of the Company can be called, even on requisition by number of requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its shares by the company as aforesaid, 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 xxxxx (v) the manager Upon such terms and conditions as may, in the opinion of the [Company Law Board], be just and equitable in all the circumstances of the case; (e) The termination, setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned. (f) The setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398 which would, if made or done by or against an individual, be deemed in his inso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal is leaving all sundry issues to the Company to be decided by them, by directing the Company to conduct meetings of the Company to sort out their issues. Therefore, it is necessary to order the R1 Company to convene EGM at an early date so as to sort out their issues suitably. 28. In the result, the Company petition bearing C.P. No. 40 of 2011(TP NO.50/HDB/2016) is disposed of with the following directions: (1) Hereby directed the respondents to restore the shareholding of the petitioners group and the second respondent Group in the ratio of 50:50 total shareholding of R-1 Company, in consonance with the Board s resolution dated 27th February, 2007 and Agreement for Transfer of shares dated 8th April, 2010; (2) Hereby declared that all actions/decisions taken contrary to the interim orders dated 18.05.2011 and 27.09.2012 passed by the CLB are non-est in the eye of law, and these interim orders shall be in force till the next EGM, which is to be conducted by virtue of this order; (3) Hereby directed Respondents No. 1 2 to convene an EGM within a period of two months from the date of receipt of copy of this order, by duly following all the provisions of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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