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TMI Blog2018 (3) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 22nd March, 2017 passed by National Company Law Appellate Tribunal, Ahmedabad Bench, Ahmedabad. Company Appeal (AT) No.187 of 2017 is filed by the Appellants (original Petitioners 2 to 4). Company Appeal (AT) No.215 of 2017 has been filed by original Respondent No.3. We will refer to the parties as arrayed and referred in the impugned order which is reflected in CA 187/2017. It may be mentioned that original Petitioner No.1 was Dr. Sobhagyamal Jain who was transposed as Respondent No.11 in the Tribunal Appeal Memo and thus the Appellants of CA 187 of 2017 have been referred in the impugned order as Petitioners 2 to 4. 2. A few facts under reference: Petitioners 2 to 4 and Respondent No.11 had filed CP 16 of 2014 (old), later on registered as TP 61/2016 in NCLT making allegations of acts of oppression and mismanagement against original Respondents 2 to 8. During the pendency of the company petition before Company Law Board certain mediators were appointed to resolve disputes between the parties and consent terms came to be recorded between the parties. The consent terms were recorded in two different documents referred as Annexure 'A' and Annexure 'B' by Company Law bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 1070 Note: The Petitioners and other shareholders at Sr. No.1 to 7 are collectively referred to as the "Petitioners & Others". 4. The entire consideration towards the purchase of Sale Shares shall be paid by the Respondents to the Petitioners & Others in four (4) equal instalments of Rs. 2,14,00,000/- (Rupees Two Crore Fourteen Lakhs only) each payable at forty five (45) days interval, and out the above, the first of the instalment shall be paid in two trenches, consisting of 5% (Rs.42,80,000/- Rs. forty two lacs eighty thousand) payable at the time of execution of the present consent terms and the balance 20% (Rs.1,71,20,000/- Rs. one crore seventy one lacs twenty thousand) shall be payable within a period of thirty days from the execution of the present consent terms and the respondents shall deposit post dated cheques, the last one of which will be payable before the expiry of six (6) months from the date of the consent terms becoming effective through the Order of the Hon'ble Company Law Board. 5. Until realization of the consideration amount to the Petitioners & Others as provided in Clause 4 above, the Respondents shall not transfer, dispose off and or create t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of default, a notice shall be issued by the Learned Bench Officer to the Respondents pointing out the default and to rectify the same within a period of fifteen (15) days from the date of receipt of such notice, on expiry of which it shall be assumed that the Respondents are not willing to purchase such shares and in such an event terms mentioned in Clauses 17 to 19 herein will come into effect immediately. In such an event, the amount already paid by the Respondents herein shall be paid back by the Petitioners within a period of one month from the date of expiry of six months. 13. Before the release of deeds of transfer of shares to the Respondents, the Respondents shall make necessary application and arrangement shall be made by the Respondents for release of the Personal Guarantee of the Petitioners & Others given to Bank of India and shall endeavour to complete the process without any further delay. 14. The Petitioners unconditionally agree to withdraw the legal cases as per Annexure - 2. 15. The Petitioners agree on best endeavour basis to pursue the complainants and facilitate the process of closure of legal cases as per Annexure - 3. 16. The Respondents and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Law Board and shall resign from the Board of Directors of the Respondent No.1 Company forthwith. 2. Immediately on submission of the present consent terms, the appointment of Dr. Sunil Rajan as Director of the Respondent No.1 Company shall be confirmed and ratified by the Hon'ble Board as prayed in Company Application No.248 of 2014. 3. Shri Anil Jain, Dr. Subodh Jain and Dr. Sunil Rajan (hereinafter referred to as the "Purchasers of the shares") agreed to purchase 1900 (One thousand nine hundred) equity shares of the Respondent No.4, 5, 6 & 7. The entire consideration towards the purchase of shares shall be calculated in the following manner: Sr. Name Existing Shares New Shares Amount Existing Shares Amount New Shares Total Rs. 1 Dr. Sandeep Julka 282 172 22560000 3071404 25631404 2 Dr. Nitin Modi 282 200 22560000 3571400 26131400 3 Dr. Ravi Nagar 282 200 22560000 3571400 26131400 4 Dr. H.P. Yadav 282 200 22560000 3571400 26131400 Total 1128 772 90240000 13785604 104025604 Note: The Shareholders at Sr.No.1 to 4 are collectively referred to as the "Selling Respondents". 4. The entire consideration towards the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective seller and to deposit acknowledgement thereof with the Learned Bench Officer. 10. On realization of the consideration amount by the Selling Respondents in respect of the Sale Shares sold herein, the duly executed transfer deeds shall be released by the Learned Bench Officer to the advocate of the Purchasers of Shares for completing necessary formalities by the Company for giving effect to the transfer of Sale Shares in the books of accounts. 11. The Selling Respondents shall have no option to deny acceptance or realization of the cheques/demand drafts and in case of intentional denial, it shall be presumed that the payment has been made to the respective seller and the Learned Bench Officer shall be free to release the transfer deeds to the advocate of the Purchasers of Shares. 12. Before the release of deeds of transfer of shares to the Purchasers of Shares, the Purchasers of Shares shall make necessary application and arrangement shall be made by the Purchasers of Shares for release of the Personal Guarantee of the Selling Respondents given to Bank of India and shall endeavour to complete the process without any further delay till the personal guarantee of the Sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettlement process and completion of conditions, the Company Law Board disposed of the Company Petition. Subsequently, it appears that some steps were taken by parties in pursuance of the consent terms for implementation of the same while regarding certain aspects, disputes arose between the parties and various applications came to be filed by these parties against each other. While some parties pressed for execution of the consent terms, other parties claimed breach and forfeiture, etc. The impugned order has disposed of those applications recording reasons. 8. In the impugned order, NCLT inter alia disposed of CA 141/2015 where Respondents 4 to 7 claimed that Respondents 2 and 3 violated consent terms and amounts paid by them should be forfeited. Purchasing Respondents filed CA 115/2015 seeking interpretation of the consent terms and sought relief as per the consent terms. Inter alia, Petitioners filed CA 108/2015 to acquire consequential rights. When these matters came up before us, both the sides have argued at length and tried to convince us that the opposite party is responsible for violation of the consent terms. Original Respondents 2 and 3 are trying to show that they have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further claimed that terms 14 and 15 were never invoked requiring them to withdraw legal cases as according to them Respondents 2 and 3 had defaulted in honouring consent terms. The petitioners claimed that term 17 deserves to be enforced and Respondents 2 and 3 should resign as Directors and handover management to the petitioners as per term 17 for which the appeal is filed. It is claimed that the petitioners - appellants should have been given the rights as required by term 18 to purchase shares of the Respondents 2 and 3. According to the petitioners - appellants, the impugned order wrongly set in motion term 19. 12. Against this, Respondent No.2 has claimed and it has been argued that the petitioners failed to deposit and execute transfer deeds as required by term 6 although Petitioners received full and final payments by 3rd June 2015. This Respondent claims referring to term 11 that although payments were made, the petitioners chose to create controversy on flimsy ground of delay of just 15 days. Referring to term 12, it is claimed that no default notice was issued by the petitioners. According to this Respondent, Petitioners in violation of terms 14 - 15 failed to withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no default. Referring to term 6, this Respondent claims that the Petitioners in violation of term 6 failed to deposit share transfer deeds and when they were filed after a delay of 210 days, the same were defective. As required post-dated cheques were not deposited as per term 7 of Annexure 'A' but it is claimed that the payments had been made as stated above. This Respondent also argues that the petitioners failed to withdraw legal cases as was required vide term 14 - 15. The Respondent claims to have complied with term 13 of Annexure 'A' with regard to release of bank guarantees. With regard to term 8, this Respondent claims that the outstanding professional fees was paid although there was a delay of 15 days beyond the given period of 6 months. Referring to term 10, this Respondent claims that the petitioners did not duly execute transfer deeds and also resisted release of the executed transfer deeds. As regards violation of term 5 of Annexure 'A', this Respondent claims that the only assets which were already mortgaged were transferred to another mortgagee and thus there was no breach. It is claimed that the petitioners violated term 16 by filing FIR against Respondent No.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claims that when the Petitioners were walking out of the Company, the manner in which consideration was raised and paid was immaterial. 14. Respondents 4 to 7 claimed that before the Annexure 'A' and 'B' were accepted by the Company Law Board, the purchasing Respondents 2 and 3 had submitted affidavits dated 05.12.2014 and affirmed before the Company Law Board that they shall buy the shares from their own funds. This was pre-condition for purchase of shares. According to these Respondents, they were the largest group of shareholders which was holding 30% share capital whereas Respondent No.2 Anil Jain held 12.86% and Respondent No.3 Dr. Sobhagyamal Jain held 9.64% shares. According to these Respondents, had such affidavit and condition of use of personal funds for purchase of the shares not been there, these Respondents 4 to 7 would have certainly acquired proportionate shares to remain in control and management of Respondent No.1 Company. According to them, Respondents 2 and 3 have betrayed them and committed breach of term 5 as the payments were not made from the funds of Respondents 2 and 3 but were made by borrowing funds from Religare Finvest Limited by mortgaging the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration was raised and paid. We find that the detailed reasons recorded by NCLT for coming to a finding that Respondents 2 and 3 had violated consent term 5 in the Annexures 'A' and 'B' are well founded. A simple way of looking at the consent terms would be that had Petitioners 2 to 4 or Respondents 4 to 7 known that charge can be created on the property of the company to raise money to buy the shares of the opposite party, then they could also have claimed to buy the shares of the opposite party by resorting to such method. With this we find that NCLT has rightly concluded that Respondents 2 and 3 violated term 5 as stated in Annexure 'A' as well as Annexure 'B. 18. NCLT then considered the claim of original Petitioners 2 to 4 that Respondents 2 and 3 did not pay the sale considerations in the time schedule as agreed in para 4 of Annexure 'A'. NCLT referred to the fact that the consent order was passed on 15.12.2014 and referred to the arguments as to what were the due dates for the payments and the dates on which actually the payments were made. Counting from 15.12.2014, six months would be over by 15.06.2015. Admittedly the last instalment was paid on 30th June, 2015 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure 'B'. NCLT rightly discarded claims of Respondents 4 to 7 that the amounts they have already paid should be forfeited and they should be allowed to hold on to the shares they have. Against impugned order against claim of Respondents 4 to 7, they have not filed appeal. 21. NCLT has then found the Petitioners in default of term 6 of Annexure 'A' which required execution of transfer deeds in favour of respondents and depositing the same with the Bench Officer for safe custody. NCLT has rightly discarded the averments made for petitioners that Respondents 2 and 3 did not suggest the manner in which transfer deeds were to be deposited by observing that petitioners could have deposited the same without filling the name of transferee. Considering that such difficulty did not arise with similar term 6 of Annexure 'B', the approach of NCLT on this count cannot be faulted with. 22. The NCLT further found the petitioners in default with regard to paras 14 and 15 of Annexure 'A' which required them to unconditionally withdraw the legal cases and endeavour to pursue the complainants and facilitate process of closure of legal cases which had been made in Annexure 3 of the documents. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled for their shares. In case of succeeding of Respondents No.4 to 7, Respondents No.2 and 3 will go out of the Company. In case if Respondents No.2 and 3 succeed as against the Petitioners and they fail as against Respondents No.4 to 7, Petitioners will go out of the Company, and it is Respondents No.2 and 3 and Respondents No.4 to 7 who will remain in the Company. During the pendency of these Applications, Dr. Sunil Rajan offered to sell his shares also, but it does not come within the purview of the Consent Terms. Therefore, this Tribunal refrain itself to act on such request. Further, the Consent Terms also cover the litigations filed by third parties. It is pertinent to mention that the 3rd parties who filed the cases are not parties to the settlement. Therefore, it is a case where Respondents No.2 and 3 in the first instance and Petitioners in the second instance failed to perform in accordance with the Consent Terms. Respondents No.4 to 7 had not made out a case to invoke the forfeiture clause. Here, it is pertinent to refer to Paragraph 19 of Consent Terms in Annexure "A", which reads as follows: "19. In the event of Petitioners and their nominees failing to purchase t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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