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2018 (3) TMI 559

ed of those applications recording reasons. - Held that:- The learned counsel for both sides however, went on with their arguments relating to one party finding fault with the other and vice versa but did not satisfy us that Annexures A and B read together and defaults of parties, creates strange situations making execution of the terms unworkable and unpractical. Even if we accept that enforcing term 19 of Annexure A would require certain compliances as is being argued, question is what is the way out? N.C.L.T. rightly appears to have searched way out in interest of Company and all stakeholders 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 th .....

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executed between Petitioners 2 to 4 and 3 others and Respondents 2 and 3. Annexure B was executed between Respondents 2 and 3 and Respondents 4 to 7. Both the Annexures drafted showed Dr. Sunil Rajan was to join, but he did not sign or join the same. 4. Before discussing the matter, it would be appropriate to reproduce the consent terms, though it would occupy space, but as the present disputes relate to compliance/non-compliance of these terms, to appreciate the impugned judgement and arguments, it would be easier. The consent terms Annexure 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 (her .....

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, 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 sold herein, the duly executed transfer deeds shall be released by the Learned Bench Officer to the advocate of the Respondents for completing n .....

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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 of the Learned Bench Officer the Hon ble Member may decide cost payable to him, which shall be payable in advance, equally by the Petitioners & Others and the Respondents. 22. Till the pr .....

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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 in Clause 4 above, the Respondents shall not transfer, dispose off and or create third party rights in any manner whatsoever, except in the ordinary course of business including the Banks for financial facilities, in any of the assets, fixed and movable of the Respondent No.1 Company. 6. On passing of the Order by this Hon ble Board to this effect, the selling Respondents shall execute transfer deeds in favour of the Purchasers of Shares in such manner as suggested by the Purchasers of Shares and shall 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 purchasers of shares shall deposit all post dated cheques of due dates with the Learned Bench Officer for safe custody, with an option to the Purchasers of Shares to make an early payment by depositing demand drafts to replace the cheques. 8. The outstanding professional fees on actual basis and the amount of unsecured loan as per .....

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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 willing to purchase such shares and in such an event the learned Bench Officer shall have liberty to issue notice of defaults to the purchasers and on expiry of seven (7) days of issue of such notice, the amount already paid in respect of the shares shall stand forfeited and the respective rights of the parties, as in vogue prior to signing of the consent terms shall become effective. 15. 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. 16. For the supervisory services of the Learned Bench Officer the Hon ble Member may decide cost payable to him, which shall be payable in advance, equally by the Selling Respondents and the Purchasers of Shares. 17. Till the process is pending, the CP before the Hon ble Company Law Board may be listed on monthly basis for reporting the status of the settlement process and on transfer of all shares and completion of all conditions precedent, the Hon ble Member may pass appropriate o .....

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mentioned tried to claim that their respective parties did what was necessary under the terms and the other side was at fault. 11. The learned counsel for Appellants - original Petitioners 2 to 4 with reference to Annexure A claimed that the Petitioners resigned forthwith as per term 1; that Respondents Nos.2 and 3 violated term 3; that Respondents 2 and 3 failed to make payments within stipulated period of six months as per term 4; in violation of term 5 Respondents 2 and 3 created charge on the property of the company. Money was transferred from companies bank account and siphoned to other companies and thus routing the same it was credited to the bank accounts of appellants - petitioners without prior intimation; Respondents 2 and 3 did not give instructions about the matter of transferring shares to the petitioners for compliance of term 6; Respondents 2 and 3 failed to deposit post-dated cheques as required by term 7; the professional fees required to be paid within 6 months as per term 8 was not paid within the period specified; post-dated cheques were not deposited as expected vide term 9; consent terms were not complied by Respondent Nos.2 and 3 and thus term 10 did not get .....

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itted with reference to Annexure B that Respondents 4 to 7 could not claim forfeiture as the amounts required to be paid had been paid within the period of 9 months as contemplated in para - 4. It is claimed that Respondents 4 to 7 had received the payments without delay and have not filed appeal against the impugned Judgement and Order. Respondent No.2 has claimed that the original Petitioners flouted the conditions of consent terms. They had failed to deposit blank share transfer deeds and refrained release of deeds of transfer shares although they received total consideration. They have filed frivolous police complaints violating term 16. The order passed by Madhya Pradesh High Court in WP 440/2015 has been stayed by Hon ble Supreme Court on 01.04.2016 in SLP Criminal 2374/2016. The cheques submitted by the petitioners were given to the Bench Officer asking him to keep the same in deposit till disposal of Company Application filed by the petitioners. The cheques expired before the Company Application was decided. It is argued that if the contentions of the petitioners - appellants are accepted, it will lead to anomalous situation where the Petitioners - Appellants would be buyin .....

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ad filed FIR against Respondent No.3. This Respondent No.3 claimed that in Annexure A term 4 was not a stand-alone term and was to be read with term 12 which requires notice to be given by Bench Officer requiring compliance within 15 days. No such notice was given and hence it is claimed that even if there was delay of 15 days, there was no violation of the terms requiring payments within 6 months. It is argued that the assets of the Company had been mortgaged to Bank of India as security for a loan of over ₹ 11 crores in which Appellants and Respondents 4 to 7 had given personal guarantees and the mortgage and personal guarantee were released by repayment of loan to Bank of India from the funds obtained from Religare Finvest Limited. It is claimed that term 5 permitted mortgaging of assets for obtaining financial facilities from banks. It is further argued that even if it is assumed that there was breach of term 5, it is necessary to consider consequences of alleged breach whether any consequences are provided by consent terms or what was the purpose of the term for damages if any. It is argued that the consent terms do not provide any consequence from breach of term 5 and t .....

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d by him and he is willing to transfer the shares and thus the appeal may be allowed. 16. Keeping in view the submissions made by the counsel for rival parties, we have considered the record and also the impugned order. When we look into the impugned order, we find that the learned Judge of the NCLT has painstakingly considered the rival cases of the parties which were argued before him and which are again being averred before us. A brief reference needs to be made to the reasons and findings recorded by the learned NCLT. 17. In the impugned order, NCLT reproduced para - 5 in the terms which has similar wordings regarding not creating charge etc. and observed that admittedly Respondents 2 and 3 had created charge over the assets of first respondent company to secure an amount of ₹ 21 crores, and out of this amount borrowed from M/s. Religare Finvest Limited, some amount was utilized for repayment of loan to Bank of India while some was used to purchase the shares of original Petitioners 2 to 4 and Respondents 4 to 7, routing the money through some of the companies where Respondents 2 and 3 were Directors. NCLT considered the affidavits of original Respondents 2 and 3 dated 5t .....

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s a whole and specially terms 1, 4, 17, 18, 19 and 20, it does appear that when the parties entered into the consent terms they did intend to have time as essence of the agreement. 19. The NCLT has then referred to para 8 of the Annexure A (supra) and found that the outstanding professional fees and the amount of unsecured loan which was required to be paid by Respondents 2 and 3 was also paid beyond period of 6 months, only by 30th June, 2015 and there was breach of term 8. 20. Respondents 4 to 7 claimed forfeiture of the amounts paid to them on the basis that there was violation of consent term 5. The learned NCLT considered term 4 of Annexure B which required payments in particular schedule and found that Respondents 2 and 3 had paid the entire sale consideration of the shares before the expiry of 9 months period specified and thus concluded that term 4 of the consent terms was not breached. NCLT discussed term 14 of the consent terms Annexure B and observed that no notice was issued by Bench Officer in terms of para 14, if there was default. This was apart from the fact that it observed that in the present matter, there was no default in payment of sale consideration towards pu .....

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effect: 48. The object of Consent Terms: A combined reading of Consent Terms, Annexures A and B goes to show that the management of the affairs of the Company shall be placed either in the hands of Respondents No.2, 3 and Dr. Sunil Rajan or in the hands of the Petitioners No.2 to 4. Even before the Consent Terms were filed before the Court, Dr. Sunil Rajan withdrew from the settlement and choose not to sign the Consent Terms. In order to achieve the said object, it can only be said that the Consent Terms as mentioned in Annexures A and B would go together as part of the settlement. In case if it is held that Respondents No.2 and 3 failed to follow the consent Terms; and if it is further held that the Petitioners are entitled to purchase the shares of Respondents No.2 and 3; and further held that Respondents No.2 and 3 are entitled for the shares of Respondents No.4 to 7, then the situation would be that the Respondents No.2 and 3 would be selling their shares to Petitioners and, at the same time, purchasing the shares of Respondents No.4 to 7. This contingency has not been visualized in framing two sets of Consent Terms in the form of Annexures A and B . No doubt, this Tribunal ca .....

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No.61-C of 2016 (CA No. 108 of 2015 Old), but they have not deposited the entire amount received by them towards sales of shares. The statements of accounts filed by them do not even reveal that they are having funds in their Bank accounts equal to the amounts they have received from the Respondents No.2 and 3 towards sale consideration of the shares. Therefore, it is a case where the situation has not reached to the stage that the Petitioners No.2 to 4 can be called upon to purchase the shares of Respondents No.2 and 3. Even assuming that such a situation has arisen, from the material on record the Petitioners have not complied with the condition of Paragraph No.19. It is pertinent to mention here, that Dr. Sunil Rajan filed winding-up petition before the Hon ble High Court of Madhya Pradesh, Indore Bench, vide Com. P. No.24 of 2016. In that petition, Counsel for Respondents sought time on 27.2.2017 to file their reply. Therefore, it is clear that the winding-up petition filed by Dr. Sunil Rajan is pending before the Hon ble High Court of Madhya Pradesh, Indore Bench. Therefore, a situation had arisen that an Independent Committee of Management has to be appointed as provided in P .....

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