TMI Blog2018 (3) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to have a fresh settlement or it would appoint Independent Committee of Management. The directions are in interest of justice and cannot be faulted with. Under Section 424 of Companies Act 2013 NCLT can regulate procedure before it and while dealing with the matter, it could exercise inherent powers to do justice between the parties, the Company and public interest linked with the Company to give the directions it has given. We do not find any substance in these appeals to interfere with the impugned Judgement and Order which needs to be maintained and implemented. Thus the appeals deserve to be dismissed. - Company Appeal (AT) No.187 of 2017 With Company Appeal (AT) No. 215 of 2017 - - - Dated:- 15-2-2018 - Mr. A.I.S. Cheema And Mr. Balvinder Singh, JJ. For The Appellants : Dr. U.K. Chaudhary, Senior Advocate with Shri Naveen Dahiya, Shri Mansumyer Singh, Shri Himanshu Vij and Shri Ashok Mehta For The Respondent : Shri Animesh Sinha, Advocate, Shri Narendra M. Sharma, Shri Abhishek Sharma and Shri Akshay Arya and Ms. Sakshi Maheley, Advocates, Shri Ritin Rai and Shri Manu Aggarwal, AdvocatesShri Manoj Munshi and Shri R.D. Makheeja, Advocates, Shri V. Seshagi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A (Less The Annexures) read as under: Annexure A 1. The Petitioners and Dr. Seema Lodha shall cease to exercise powers as directors on the date of the present consent terms becoming effective by the Order of the Hon ble Company Law Board and shall resign from the Board of Directors of the Respondent No.1 Company forthwith. 2. Immediately on submission of the present acceptance, 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. The Respondent No.2 Mr. Anil Jain, 3 Dr. Subodh Jain along with Dr. Sunil Rajan (hereinafter referred to as the Respondents ) shall purchase 1070 (One Thousand Seventy) equity shares of the Respondent No.1 Company (the Sale Shares ) for aggregate consideration of ₹ 8,56,00,000/- (Rupees Eighty Crores Fifty Six Lakhs Only) at the rate of ₹ 80,000/- (Rupees Eighty Thousand only) per share from the shareholders of Respondent No.1 Company whose names are as under: Sr. Name of the Shareholder/Transferer Director No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit the same with the Learned Bench Officer for safe custody. 7. On passing of the Order by this Hon ble Board to this effect, the Respondents shall deposit all post dated cheques of due dates with the Learned Bench Officer for safe custody, with an option to the Respondents to make an early payment by depositing demand drafts to replace the cheques. 8. The outstanding professional fees and the amount of unsecured loan (Annexure 1) shall be paid by the Company within a period of six (6) months from the date of passing of the Order by the Hon ble Board. 9. On due date of payment or at an early date, if the Respondents choose to deposit demand drafts for early payment, the post dated cheques/demand drafts shall be released by the Learned Bench Officer to the Petitioners Others through their advocate for handing over to the respective seller. It shall be the responsibility of the advocate for the Petitioners Others to handover the cheque/demand draft to the respective seller and to deposit acknowledgement thereof with the Learned Bench Officer. 10. On realization of the consideration amount by the Petitioners Others in respect of the Sale Shares sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses 3 and 4 above within a period of six (6) months, they shall forthwith resign as Directors of Respondent No.1 Company and handover the management of Respondent No.1 Company to Petitioners along with all assets, records and accounts. 18. Thereafter, Petitioners shall purchase the shares of the Respondents held prior to the date of rights issued at ₹ 80,000/- (Rupees Eighty Thousand only) per share within a period of six (6) months from the date of default committed by Respondents on identical terms as earlier stated. 19. In the event of Petitioners and their nominees falling to purchase the shares from the Respondents, within a period of six (6) months from the date of failure of Respondents to complete their acquisition within six (6) months of the date of the Order of the Honorable Member, they shall forthwith resign as Directors of Respondent No.1 Company to be replaced by an independent committee of management to be appointed by the Honorable Company Law Board. 20. The parties undertake not to apply for extension of time to perform any of the actions stipulated in the present terms which shall be self operative. 21. For the supervisory services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 400 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 purchase of shares shall be paid by the Purchasers of Shares to the Selling Respondents in four (4) equal instalments starting from 4th month and ending before expiry of nine (9) months from the execution of the present consent terms. The cheques for the first trench of 5% shall be handed over at the time of execution of the present consent terms and the balance 95% shall be payable starting from 4th month and ending before expiry nine (9) months from the execution of the present consent terms and the respondents shall deposit all post dated cheques with the Learned Bench Officer, the last one of which will be payable before the expiry of nine (9) 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 Selling Respondents as provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Selling Respondents is not released the Purchasers of Shares shall stand guarantor to the Selling Respondents. 13. The parties undertake that after completion of the transaction as contemplated herein they shall not indulge into any kind of litigation, directly or indirectly, by filing cases against each other on any ground whatsoever concerning the affairs of the Respondent Company. 14. The purchasers of the shares shall have no option to back out from purchasing the agreed shares. The purchasers shall be responsible for the purchase of shares jointly and severally and in case of default a notice shall be issued by the Learned Bench Officer to the purchasers pointing out the default and to rectify the same within a period of fifteen days, on expiry of which it shall be assumed that the purchasers of shares are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation 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 taken appropriate steps as per the consent terms and the relief should have been granted to them as per the consent terms. They are questioning the final orders passed by NCLT calling upon the parties to enter into fresh settlement or face appointment of Committee of Management. 9. In this matter, the parties were asked to file charts specifying steps taken or not taken by the parties for compliance of various requirements under the consent terms. If steps were not taken, that also required to be mentioned. The contesting parties filed charts. Some selectively left out mentioning steps not taken by them. 10. We have also heard the counsel for the parties who have as mentioned tried to claim that their respective parties did what was necessary under the terms and the other side was at fault. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived 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 legal cases which had been filed and violating term 16, the appellants petitioners filed writ petition and police complaint although they had received full and final payments. The writ petition was filed in the High Court of Madhya Pradesh at Indore and police complaint was filed at Police Station Vijay Nagar, Indore on 13.07.2015. This Respondent has claimed that the original petitioners failed to refund the amount received by them and also failed to show that they had the necessary funds in bank and thus terms 18 and 19 were violated. It is argued that although cheques were deposited, the petitioners did not have the necessary funds in bank. This respondent No.2 has submitted with reference to Annexure B that Respondents 4 to 7 could not claim forfeiture as the amounts required to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims 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. It is also claimed that contingencies as required by terms 17 to 19 did not arise. With regard to Annexure B , this Respondent claims that the entire consideration was paid within time. With regard to violation of term 5, it is claimed that there was no breach as the assets which were already mortgaged were transferred to another mortgagee. As was required post-dated cheques were not deposited as per term 7 but it is claimed that payments were made within time. With regard to term 14 referring to forfeiture, it is claimed by this Respondent that these purchasing Respondents did not back out and thus there was no breach. It is claimed that in violation of term 13, Respondents 4 to 7 had filed FIR against Respondent No.3. This Respondent No.3 claimed that in Annexure A term 4 was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 of the Respondent No.1 Company. The money of the Company was siphoned by diverting the same to four private limited companies incorporated just 2 4 days before transfer of funds of Respondent No.1 Company in which close relatives are Directors and shareholders of Respondent Nos.2 and 3, with the object of paying purchase consideration to these Respondents. On this basis, these Respondents claimed that term 14 of Annexure B was required to be enforced regarding forfeiture of the payments made to them. It is claimed that NCLT could not have directed them to return the money. 15. Respondent No.11 Dr. Sobhagyamal Jain claims that the Appellants Petitioners are ready to purchase shares held by him and he is willing to transfer the shares and thus the appeal may be allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 the time schedule had not been maintained. The argument that reading term 4 with 12 of the Annexure A , would extend period by 15 days needs to be discarded as admittedly Bench Officer had not given any notice as required by term 12. Respondents 2 and 3 claimed before NCLT that there was overall understanding to pay within six months and that the same had been substantially complied with only a delay of 15 days. NCLT kept in view para 20 of Annexure A where the parties had undertaken not to apply for extension of time to perform actions stipulated. In the set of facts, NCLT concluded that consent term para 4 of Annexure A had also been violated by Respondents 2 and 3. Reading the consent terms Annexure A as a whole and specially terms 1, 4, 17, 18, 19 and 20, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iculty 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. 23. NCLT found that Respondents 4 to 7 had in compliance of para 6 of Annexure B deposited share certificates with duly executed transfer deeds with the Bench Officer and had also resigned as per term 1 of the consent terms. Although it was the finding that Respondents 4 to 7 cannot claim forfeiture clause but NCLT found that as Respondents 2 and 3 violated term 5 of the terms and thus Respondents 2 and 3 are not entitled for transfer of the shares deposited by Respondents 4 to 7. Considering the rival cases, we do not find that these findings can be found fault with. 24. At the time of arguments, we had asked the rival parties to address us with regard to the observations of NCLT in para 48 of its Judgement which are to the following effect: 48. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. 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 the shares from the Respondents, within a period of six (6) months from the date of failure of Respondents to complete their acquisition within six (6) months of the date of the Order of the Honourable Member, they shall forthwith resign as Directors of Respondent No.1 Company to be replaced by an independent committee of management to be appointed by the Honorable Company Law Board. In order to implement this, there must be issuance of a default notice. The Petitioners shall pay back the entire amount received by them from Respondents No.2 and 3 towards sale consideration of shares, and Petitioners No.2 to 4 by following the Paragraphs 18 and 19 of the Consent Terms in Annexure A shall purchase the shares of the Respondents No.2 and 3. No doub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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