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TMI Blog2018 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... in short). In the NCLT, TP 197/2016 (new) CP 16/2012 (old) was filed by Manish Vipinchandra Patel and Krunal Vipinchandra Patel (Original Petitioners 1 and 2). Before this petition was filed earlier, Company Petition TP 10/2016 (new) (CP 86/2010) (old) had been filed by Kiritkumar Ochachhavlal Sheth (Respondent No.4 in T.P. 197/2016). Both the Company Petitions raised grievances of oppression and mismanagement. The NCLT disposed both the Company Petitions by common Judgement. Parties have been referred in the Judgement in the manner in which they were arrayed in TP 197/2016. We will also refer to them in the same manner as arrayed in TP 197/2016 and as indicated above against names of parties of CA 272/2017. 2. The parties have been referred by the NCLT also by their group names and which may be reproduced as under:- Sl. No. Parties Group Name Arrayed as 1. Manish Vipinchandra Patel and Krunal Vipinchandra Patel VP Patel Group Original Petitioners 1 & 2 2. Hasmukhlal Madhavlal Patel and Dilipkumar Madhavlal Patel HM Patel Group Original Respondents 2 & 3 3. Kiritkumar Ochachhavlal Sheth and Ashwinkumar Kiritkumar Ochachhavlal Sheth Sheth Group Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed before NCLT that after the EOGM dated 05.03.2010, Sheth Group filed TP 10/2016 (CP 86/2010) in collusion with HM Patel Group. 6. Original Respondent No.4 who filed TP 10/2016 claimed before the NCLT that it was rather the HM Patel Group and VP Patel Group who were working against the interest of the Company. The Petitioners had filed Special CA 6090/2010 before High Court of Gujarat which came to be later on withdrawn. Although contesting Respondents had been ousted as Directors, there was still time to control the affairs of the Company. 7. Original Petitioners claimed that they and Vipinchandra Patel were guarantor of the Company and had given personal property as security for facilities availed from Bank of Baroda. Original Petitioners had received notice from DRT for recoveries. 8. The Original Petitioners in their petition prayed that the Registrar of Companies should be directed to take on record the forms submitted by them regarding removal of Respondents 2 and 3 as Directors. They sought setting aside of resolutions, deeds, acts done by contesting Respondents after 05.03.2010 the date of E.O.G.M. called by them. They also wanted that the forms submitted by contestin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough Respondent No.2 approached Bank of Baroda on 20.11.2009 to provide further loans. The Bank by letter dated 24.11.2009 asked the Company to maintain good, debt, equity ratio and to increase the share capital. The matter was discussed in the Board meeting and it was decided to increase further capital. Notice was given on 24.12.2009 to shareholders to consider increase in the share capital. There was meeting of shareholders on 27.01.2010. From 9th February, 2010 to 12.02.2010 allotment of shares was completed and relevant forms were filled up. The Petitioners were aware of the ongoing discussions and need of the Company and allotment of further shares. The Original Petitioners and Sheth Group without complying the provisions of Companies Act illegally removed contesting Respondents from the Board of Directors. 10. The contesting Respondents further claimed before NCLT that on 4th March, 2010 arbitrators as mentioned were appointed for distribution of the properties of the Company and the document executed on this count was signed by the father of Petitioner No.1 as well as Petitioner No.2 and contesting Respondents as well as Respondent No.5 for the 3 groups. These Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CA 39 of 2011 would have any effect on the reliefs prayed in CP 16 of 2012? (ii) Whether filing of CP 16 of 2012 by VP Patel group without filing their reply in CP 86 of 2010 is valid or not? (iii) Whether increase in paid up share capital from rupees one crore to rupees two crores in the EOGM dated 27.01.2010 is an act of oppression or not? (iv) Whether removal of respondents 2 and 3 as Directors of the company in Extra Ordinary General Meeting held on 05.03.2010 is valid or not? (v) What is the outcome of financial irregularities alleged by all the three groups of shareholders in both these petitions?" 14. NCLT recorded reasons. NCLT found that vide CA 39/2011, the Original Petitioners had moved the Company Law Board seeking directions for the Registrar of Companies to take on record Form - 32 filed on 9th March, 2010 relating to removal of contesting Respondents. The Company Law Board had dismissed the said CA on 16.08.2011 observing that it did not want to entertain the said CA at the stage concerned. Thus, NCLT found that it was only an Interim Order and dispute regarding removal of Respondents 2 and 3 was not yet finally decided. 15. This finding below point ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of shares except as indicated. Further incidental directions were also given. 18. Against the impugned order, the Original Respondents 2 and 3 have filed these 2 appeals as there were 2 Company Petitions in NCLT. Their main grievance is that when it was found that EOGM held on 27.01.2010 was legal and valid and not an act of oppression, in that case giving of right to shareholders of the Company as on 18.12.2009 to subscribe to the shares as illegal and once the allotment has been done there cannot be re-allotment of the shares. Reference is made to the Arbitration Agreement between the parties to claim that the entire disputes have already been settled and could not have been reopened. When CP 6090/2010 had been withdrawn, the reliefs as sought by the Petitioners could not have been granted. When siphoning and embezzlement was found in 2005 - 2006, direction of audit from 2009 - 2010 was not proper. Thus, the Appellants - Original Respondents 2 and 3 want impugned order modified where it directs giving option to the shareholders as on 18.12.2009 to subscribe. The Appellants also want that the audit of accounts should be from 2005 - 2006. They want that the arbitral award date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 53 of the old Act, it was necessary for Respondents 2 and 3 to send communication by Registered Post AD. This was not done and thus, according to the counsel, there was no notice of the EOGM. It is further argued that Original Respondents 2 and 3 had issued notice offering existing members to subscribe for new shares in the ratio of 1:1 but the forms submitted by members of HM Patel Group show that they calculated in advance and applied for new shares beyond the ratio of 1:1. The counsel submitted that this is not the correct procedure and the correct procedure is that after the new shares are offered in the ratio of existing shares, the unsubscribed shares are required to be thereafter again offered to other members. It has been argued that these Original Petitioners had also filed the appeal against Impugned Order but it got dismissed as time barred. The counsel submitted that although their appeal has been dismissed as time barred, they are entitled to question all the findings recorded in the Impugned Order. 22. Counsel for Original Respondents 4 and 5 (Sheth Group) submitted that NCLT did not consider if notices of all the Board Meetings and EOGM were duly sent and served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares will be subject to approval of the increase in authorized share capital by the shareholders in EGM on 27.01.2010. The Notice records that application form to apply for shares, is attached with the letter. 26. Then there is Notice to Directors (Page 69) dated 24.12.2009 attaching the agenda papers of meeting of Board of Directors to be held on 27th January, 2010 itself. Agenda and copy of the Notice of EOGM to shareholders was stated to be attached and the Notice states: "Further, we would like to inform you that as decided in the last Board Meeting, Company has proposed to issue further shares to its existing members in the ratio of 1:1 and therefore, interested members of the Board, who are also share holders of the Company are requested to make payment on or before, 5th February, 2010, so as soon as Authorised Share Capital is increased. Application Form for applying shares is attached with this letter." Agenda shows this meeting of Board of Directors was scheduled at 3.00 PM on 27.02.2010. With the Appeal at page - 72, is the Minutes of the EOGM dated 27.01.2010 held at 11.00 AM which shows increase in the share capital. At page - 74 are the Minutes of meeting of Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Registrar of Companies and also inter alia mentioned that original Respondent No.2 - Hasmukhlal Madhavlal Patel and Original Respondent No.3 - Dilipkumar Madhavlal Patel may increase authorized share capital and allot shares to them. The learned NCLT rightly referred to such correspondence and the instance in NCLT to conclude that the Original Petitioners did have knowledge about the increase in authorized share capital which was being proposed. The NCLT found that the sending of Notices by Registered Post was sufficient compliance and it concluded that the VP Patel Group and Sheth Group had chosen not to attend the EOGM in spite of knowledge. NCLT concluded that the Extra Ordinary General Meeting was held complying provisions of the Companies Act and the Articles of Association and Resolution regarding increase of authorized share capital was passed. The learned NCLT took note of the letter of the Bank of Baroda dated 24.11.2009 and the circumstances as to why it was necessary to increase the share capital. NCLT took note of the sequence of the events as to how the Original Respondent No.2 had approached Bank of Baroda for additional finance and the Bank of Baroda vide letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to consider the requisition for removal of respondents 2 and 3 as directors, straight away Extra Ordinary General Meeting was convened on 05.03.2010. Section 169 of the Companies Act, 1956 says that, "The Board of Directors of a company shall, on the requisition of such number of members of the company as is specified in sub-section (4) forthwith proceed duly to call an extraordinary general meeting of the company". Therefore, when it is mandatory that Board of Directors of the Company shall call Extra Ordinary General Meeting on the requisition given by required number of members, calling of Extra Ordinary General Meeting by one of the Directors without convening a Board Meeting and without passing any Board Resolution, it is not valid convening of Extra Ordinary General Meeting." 33. Sub-Section (6) of Section 169 of the old Act provided that if the Board does not, within 21 days from the date of deposit of a valid requisition in regard to any matters, proceed duly to call a meeting for the consideration of those matters on a day not later than 45 days from the date of the deposit of the requisition, the meeting may be called by the requisitionists themselves. Although the Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the compromise between the Original Petitioners and contesting Respondents 2 and 3. In the compromise pursis, these parties recorded consents regarding working of the bank account, the compromise note which was arrived at between the parties "without prejudice to the rights and contentions of the parties". 35. The Hon'ble High Court appears to have given instructions to the HDFC Bank and the petition before High Court was disposed of without expressing opinions on merits. If the Special Civil Application 6090 of 2010 (Page 117) is seen, it appears to have been filed by the Original Petitioners seeking directions for the ROC to take on record Form No.32. Even if such petition was withdrawn, we do not find that it created bar for the Petitioners in the matter before NCLT. 36. There is yet another document dated 14.01.2011 (Page 135) with the translation claiming that it is "Draft of distribution regarding land properties and rice mill of joint partners of Village Bavla". The first party is shown as Original Respondents 4 and 5 and second party is shown as Original Respondents 2 and 3 and the third party is shown as Vipinbhai Madhavlal Patel. At page - 141 of the Appeal is a comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be disturbed. 39. If the impugned Order is seen, in para - 68 point No.(iii) taken up was "Whether increase in paid up share capital from rupees one crore to rupees two crores in EOGM dated 27.01.2010 is an act of oppression or not?". Thus the point raised was not regarding allotment of share capital increased. In the paragraphs that followed, the learned NCLT discussed the documents regarding increase of share capital and in para - 78 took up discussion regarding sequence of events because of which increase in share capital became necessary and in that context dealt with the case of the contesting Respondents that from 09.02.2010 till 12.02.2010 allotment of shares was completed and relevant forms were filed with Registrar of Companies and again reverted to the question of knowledge of the Sheth Group and VP Patel Group regarding increase in share capital and concluded the point No.(iii) which it had taken up for discussion by observing that increase in share capital and allotment of shares by itself are not an act of oppression of rights of the other shareholders. There does not appear to be any discussion regarding the allotment of the shares. In the operative order, NCLT d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to the Articles of Association (Page 198 of CA 274 of 2017) and referred to the "General Authority" mentioned (at page - 199) which reads as under: "General Authority Wherever in the Companies Act, 1956 it has been provided that the Company shall have any right, privilege or authority or that Company can not carry out any transaction unless the Company is so authorised by its Articles then in that case, Articles hereby authorise and empower the Company to have such rights, privilege or authority and to carry out such transaction as have been permitted by the Companies Act, 1956." 41. It has been argued that in view of this Article of Association applicable to the Respondent Company, Section 81 of the old Act would be applicable and even if the Original Respondents 2 and 3 had issued notice in anticipation for the members to apply for shares on increase of share capital (which was till that point of time still to be decided) the offer could not have been of more than 1:1 and the right procedure would have been that after the share capital was increased claims of 1:1 should have been considered and only thereafter the unsubscribed portions could be offered. 42. Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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