TMI Blog2019 (1) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... not declaring any dividends. We find that the submissions are not without basis. The Respondents have to act in trust and they cannot deprive the Appellant, one third shareholder in the Company by neither giving him participation nor remuneration nor dividends. Such diverting of profits to salary and not declaring dividends, in the facts of the matter, must be held to be oppressive of Appellant. Going through the reasonings recorded, we do not think that the learned NCLT appreciated the matter in proper perspective. The Petitioner who had himself fairly put up all the e-mails and copies of the Board Resolutions, which Respondents 2 and 3 brought about by way of majority, has been presumed to be in the wrong. The very fact which is admittedly on record and which shows that when the relations strained, the parties did sit down together and on 2nd January, 2014 (Appeal Page – 213). Board Resolution was passed to appoint Valuer of the Company including of tangible and intangible assets and liability and Vani Consultants Private Limited was assigned the job, shows admitted position between the parties that they did accept between themselves that they could no longer continue toge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant - Surjeet Singh Original Petitioner has filed this Appeal against the Impugned Judgement and Order passed in TP 80/2016 in CP 71/2014. The Company Petition was filed complaining oppression and mismanagement on the part of Respondents 2 to 4 in Company Respondent No.1 Prowess International Pvt. Ltd. The Company Petition has been rejected by the National Company Law Tribunal, Kolkata Bench, Kolkata ( NCLT , in short) vide Judgement and Order dated 21st April, 2017. 2. It has been argued for the Appellant and the Appellant claims that the Respondent No.1 Company (hereafter referred as Company ) was incorporated on 7th March, 2005. The Appellant and Respondent Nos.2 (Prakash Kumar) and 4 (Manoj Kumar Jha) were the founding members, promoters and first Directors having equal shareholding in the Respondent No.1 Company. The authorized share capital of the Company was ₹ 1 crore (10,00,000 equity shares of ₹ 10/- each) and paid up capital was ₹ 3 Lakhs (30,000 equity shares of ₹ 10/- each). The authorized capital at the time of filing of the Company Petition (i.e. 13.05.2014) was ₹ 2 Crores and paid up capital was ₹ 1.4 Crores. 2.1 At t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther provision that any of the two Directors would be able to sign. This was with intention to side line the Appellant. The Appellant sent e-mail on 19th February, 2014 objecting to the changes made in signatory considering the on-going disputes in the Board and pending valuation. When the Petitioner Appellant insisted on participation in the affairs of the Company, Respondent No.2 put up proposal for removal of the Appellant from the Directorship and Respondent No.3 sent letter dated 23rd April, 2014 asking for reply of the Appellant. Because of this, the Appellant was forced to file the Company Petition on 06.05.2014 and on 13.05.2014, the Company Law Board was convinced of prima facie case and passed Orders as under:- 3. After considering the above submissions of the Ld. Counsel of the petitioner, I am of the considered opinion that a prima facie case has been made out against the interest of the petitioner and consequently, ad interim order is hereby passed by way of maintenance of status quo regarding shareholding pattern of the company and composition of the board of directors of the company. This ad interim order shall be effective until next date of hearing. 2.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and Respondents 2 and 3 are parties and how in that matter Respondents 2 and 3 have been found to be in the wrong. 2.6 Referring to such record, it has been submitted by learned counsel for the Appellant that the Respondents have acted in an oppressive manner with the Appellant even before and after filing of the Company Petition and even when the Valuation Report was submitted by the Valuer on 31.03.2014, the Respondents 2 and 3 did not place it before the Board and have simply avoided the same. According to him, the Respondents should have been held to have acted in an oppressive manner and on the basis of the Valuation Report, the Appellant was entitled to exit. According to him, when the relations between the two groups are such that they cannot function together, NCLT could not have simply rejected the Company Petition without giving a way forward. 3. Against this, the learned counsel for the Respondents referred to the prayers in Company Petition to claim that there was no prayer making grievance regarding transfer of shares from Respondent No.4 to Respondent No.3. It is claimed that the Appellant had set up another Company by the name, Enteco and had diverted cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putes because of which the Company suffered losses and unless the losses are settled, payments cannot be made to the Appellant. 4. The learned Counsel for the Appellant countered the submissions of Respondents and claimed that the Appellant had contributed to the growth of the Company and even the personal property of his children has been burdened with charge and the Appellant could not have been treated in the manner in which he is being treated. It is argued that when relations came to a deadlock, the Appellant himself offered to quit and Respondents agreed to valuation but subsequently, created problems depriving the Appellant of participation in the Company affairs and in spite of his investments and efforts in the Company, he is neither getting salary nor dividends and has been simply left out. It is claimed that the Company Enteco was established by the Appellant on 4th December, 2013 but he had resigned from it on 15th March, 2014 while Respondents established another Company - ELINA on 10th December, 2013 and are still continuing with that Company but keep grumbling against him. 5. We have gone through the record and the Impugned Order which has been passed by NCLT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g dues have not been paid. The same shall be released after availability of funds. As regards the other points raised in the application, the same will be addressed on the returnable date of hearing after the pleadings are complete. He has also requested that the application filed by respondents being CA No.509 of 2014 should also be heard on the next date of hearing along with the other applications. After consideration of the above submissions of the rival parties, it is hereby directed that the rejoinder affidavits in respect of C.A. No.780, 781 and 509 of 2014 shall be filed within one week hereof. Since the Ld. Counsel of respondents has already mentioned that the outstanding dues of all the existing directors shall be paid on availability of funds, no further action lies as of now. List the case of hearing of all applications along with CP on 17th November, 2014 at 10.30 A.M. Interim order dated 13.05.2014 passed by this Bench shall continue until next date of hearing. 5.1 Later on, when the matter came up on 22nd December, 2014, the CLB Order reads as under:- In CA No.509/2014, the Respondents Advocate submitted that rejoinder has been filed and copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant was a functional Director getting remunerations, the Respondents could not have on their own, on the basis of facts which were pending disputes before NCLT, taken a decision on their own to firstly withdraw the functions of the Appellant then also stop paying remunerations to the Appellant. Nothing stopped the Respondents from moving CLB/NCLT for getting the Order modified. Without seeking modification in the Order, such attitude of the Respondents 2 and 3 in converting the status quo order into a paper Order could not have been justified and NCLT did not take note of these factors properly. These factors show that the Respondents 2 and 3 have acted in an oppressive manner. 5.4 The Counsel for Appellant has rightly pointed out the Directors Report (Annexure A-8 Page 450) which is submitted with the 10th Annual Report of the Company together with audited statements of accounts for the year ending 31st March, 2015 where it is reflected that in March, 2014, the profit of the company was ₹ 117.96 Lakhs and the Report claimed that by the end of 31st March, 2015 it had become ₹ 12.43 Lakhs. The counsel for Appellant pointed out from the extract of Annual Report For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled on 13th May, 2014. In the Company Petition (Annexure A-2), it was claimed by the Appellant in Para 3.3 that the Respondent No.2 holds 333400 equity shares which is approximately 23.82% of the issued subscribed and paid up share capital of the Company. He further pleaded that the Respondent No.3 does not hold any equity shares in the Company. It was pleaded that Respondent No.3 is Director of the Company while Respondent No.4 holds 333200 equity shares in the Company which is approximately 23.8% of the issued, subscribed and paid up share capital. 7.1 CLB in its Order dated 13th May, 2014 (Annexure A-3) inter alia noticed these pleadings in para (iv) and passed orders in para 3 (which we have reproduced in this Judgement at para 2.2), and directed maintaining of status quo regarding shareholding pattern. In the Reply filed by Respondents (Annexure A-4) which was sworn in by the Respondent No.3 for herself and Respondent No.2, there was no specific denial of these pleadings with regard to the pattern of shareholding. In fact, the Reply started giving para-wise Replies only from para 6 of the Petition in the Reply para 6. The Appeal claims [para 7(m)] that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the Company within 12 months from the date of such presentation which was done before the prescribed authority. The learned counsel argued and it does appear from reading of the Share Transfer Form that the Share Transfer Form was stamped and dated by the Registrar of Companies on 06.11.2014. The transfer in the Form from Respondent No.4 in favour of Respondent No.3, however, is dated 20th March, 2014 and the Form is shown as approved by the Company on 25.03.2014. This is surprising. The learned Counsel for the Appellant submitted that the document also purports to have an attestation from Notary in the date of 20.03.2014. The learned Counsel for the Appellant original Petitioner states that the Form was forged and the transfer was recorded in a back date of 25th March, 2014 to tide over the CLB Order dated 13th May, 2014. We find that the submission of the learned Counsel for the Appellant cannot be said to be without basis. If Section 108(1)(a) is kept in view, the Registrar of Companies will not stamp and date the Share Transfer Form if it has already been executed. Looking to the dates as mentioned above, there is substance in the argument that after getting the Share T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding, if the Respondents could quietly record the transfer and show the same in back date, we find substance in the submissions made on behalf of the Appellant that the Respondents were acting in sync with each other to oppress him. 9. We find that the Respondents have not been able to satisfy us that the transfers from Respondent No.4 in favour of Respondent No.3 were before the date of CLB Order dated 13th May, 2014 and this being so, it is immaterial whether the Company Petition prayed for setting aside such transfer. When it was in violation of the CLB Order, this being appeal out of the same proceedings, we set aside such transfer of 333200 shares as witnessed from the Share Transfer Form which is filed at Page 426 of this Appeal. 10. Coming to the case of oppression and mismanagement as was put up by the Appellant in CLB/NCLT, the Petitioner mentioned in the Petition as to how the Company came to be set up and according to him since beginning, he participated in its functioning leading to its growth and profit. He has also pleaded that he arranged for primary finances for such commencement of the Company through his connections with various banks and even mortgaging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Appellant against such changing of bank signatories from the Appellant and Respondent No.2 (as was the earlier arrangement) to any 2 of the 3 Directors was justified as the Respondent No.3 did not hold any shares in the Company. The Company Petition read with the e-mails shows Respondent Nos.2 and 3 alleging against the Appellant that he had been behaving badly and the Appellant claiming that Respondents 2 and 3 were colluding against him (Petition para 6.18). The Company Petition shows the Appellant sending e-mail to Respondent No.2 questioning as to why he was travelling to Muscat for review and execution of a project when an employee of the Company had already gone to Muscat and Respondent No.2 replied on 26.12.2013 (Appeal Page 208) telling the Appellant that it was not his functional area as Director and why he had written such a silly e-mail. Respondent No.2 also told the Appellant in this e-mail that as CEO, he does not need to explain this which is beyond functional area of the Appellant and alleged that the Appellant was maintaining a serious act of indiscipline by not attending the daily meetings. The Company Petition itself mentioned (para 6.35) that Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dated 13.03.2014 was of ₹ 54,72,000/-. The Appellant has claimed that he resigned from Enteco on 15th March, 2014. The quotation of Enteco cannot be compared with ₹ 64,60,000/- quoted by the Respondent No.1 Company in its quotation (Page 97 of Reply) on 10.07.2013. If there was to be insider information, difference in quotes would not be of a couple of Lakhs of rupees. 11. We have gone through the Impugned Order. Going through the reasonings recorded, we do not think that the learned NCLT appreciated the matter in proper perspective. The Petitioner who had himself fairly put up all the e-mails and copies of the Board Resolutions, which Respondents 2 and 3 brought about by way of majority, has been presumed to be in the wrong. 12. The very fact which is admittedly on record and which shows that when the relations strained, the parties did sit down together and on 2nd January, 2014 (Appeal Page 213). Board Resolution was passed to appoint Valuer of the Company including of tangible and intangible assets and liability and Vani Consultants Private Limited was assigned the job, shows admitted position between the parties that they did accept between themselves that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that winding up of the Company would unfairly prejudice the members of the Company but otherwise the facts justify making a winding up order on the ground that it is just and equitable that the Company should be wound up. 16. Although we are finding Respondent No.2 to 4 guilty of acts of oppression of appellant we are proceeding to give directions that Respondent No.2 and 4 will be given first option to purchase shares of the appellant in view of the fact of the matter where the appellant had opted for quitting the company and valuation report had been called by parties taking decision in Board Resolution. In case Respondent No.2 and 4 fail to purchase the shares of the appellant (for which we are proceeding to pass directions), the appellant should get benefit of discount in purchase of the shares of Respondent No.2 and 4. This should even the scales of justice considering that Respondents are being found guilty of acts of oppression. This is also because Respondents after having agreed to get valuation done and passing Board Resolution, have sat over the Valuation Report giving some lame excuses. 16. We pass following directions and Orders:- (A) We set aside the transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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