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TMI Blog2019 (4) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008. Its authorized equity share capital is Rs. 10,00,000/- (Rupess Ten Lakhs Only) divided into 1,00,000 number of equity shares of Rs. 10/- each. The paid up equity share capital is 10,000 number of equity shares equally subscribed by both the subscribers to the Memorandum of Association i.e. the appellant and the 2nd Respondent herein at 5000 shares each. Thus the appellant and 2nd Respondent are its co-promoter with 50:50 equity shareholding pattern. 4. The main objects of the Company is to carry on business as manufacturers, converters, producers, buyers, sellers, suppliers, suppers, stockist, servicing of Navigation Systems and calibration, Inertial and etc. 5. Appellant stated that the 2nd Respondent is indulging in anti-company activities and resorted to acts of mismanagement and creation of fake documents, tampering the public records of ROC/MCA web portal by uploading fake documents and resolutions. He has also failed to comply with the mandatory statutory compliances of the Companies Act, 1956/2013. 6. It is stated that a Board Meeting was held on 25.08.2014 where 2nd respondent was present. It is stated that 1st and 2nd respondent uploaded two Forms i.e. Form DIR-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as void and illegal and violative of provisions of Articles 17-22 of the Articles of Association of the 1st Respondent Company and set aside the said Form No.MGT-14 as illegal. b) To declare the allotment of 90000 shares solely to the 2nd Respondent at the purported board meeting dated 3.9.2014 as void and illegal, declare the Form No.PAS-3 filed by the Respondents as null and void. c) Order the Respondents 1 and 2 to convene and conduct the AGM for the year 31.3.2014 immediately as per the approved Annual Accounts at the Board Meeting held on 3.9.2014. d) To such further order or other orders as the Hon'ble Company Law Board may deem fit and proper in this service of justice. 11. 2nd and 3rd Respondents filed the reply thereby stating that the petitioner has come to the Tribunal with unclean hands by suppressing several material facts. 2nd respondent is a Founder Director and shareholder of the Company and he is currently holding 94,500 equity shares of Rs. 10/- each; it is next stated that the appellant has not disclosed another Company namely Gagan Aerospace Limited was floated by 2nd Respondent. It is the appellant who wanted the 2nd Respondent to be associated to promot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion admittedly doesn't belongs to the appellant. It is stated that between the years 2007-08 to 2013-14, 2nd respondent has contributed Rs. 16,455,000 through banking channels towards the share application money, while at the same time, the appellant has sold assets that were purported to be valued at Rs. 2,86,00,000 and the same was treated as share application money in the books of the Company. However by the end of 2013-14 the entire share application money was converted into unsecured loan and the unsecured amount from the 2nd respondent was Rs. 18,753,530/-however, appellant's unsecured loan has come down to Rs. 23,100/-. Therefore, it is stated that the appellant was well aware that there was share application money/unsecured loan to the credit of 2nd Respondent, which was pending allotment, and that the same would be allotted at any time. 15. After hearing both the parties, the Learned NCLT passed the impugned order dated 23.10.2017. The relevant portion of the impugned order is as under: "11. It is not in dispute that the petitioner has resigned as Director of the respondent No.1 company on 24.10.2015 (18.11.2014 is stated in the Company Appeal filed before the NCLAT). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of shares itself without directly affecting shareholding pattern of the petitioner cannot be called as an act of Oppression and Mismanagement. Both the petitioner and respondent have contributed to the Company as share application money. The Respondent No.2 contributed Rs. 1,64,55,000/- through banking channels and the petitioner also contributed to company for share application money as for an amount of Rs. 2,86,00,000/-. However, by the end of 2013-14 the entire share application money was converted into unsecured loan and while the unsecured amount from the Respondent No.2 is Rs. 18,753,530/- whereas the petitioner's has come down to Rs. 26,011/-. It is also to be noted the balance sheet as on 31.03.2014, which is also signed by the petitioner and the respondents contains details of share application money as on 31.03.2013 and unsecured loan as on 31.03.2014. 14. When the provisions of section 42 of the Companies Act, 2013 relating to allotment of securities came into force from 01.04.2014 which stipulate that the Company shall allot its securities within 60 days from the date of receipt of the application money, failing which the application money should be repaid w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the above articles of Association of the Company. It is also relevant to point out here that the petitioner is not disputing the appointment Mr. V Shashi Kumar (respondent No.3) but selectively opposing allotment of shares to him for the reasons best known to him. Since we hold that the impugned transfer and allotment are legal, there is no question of application of section 59 of Companies Act to the facts and circumstances of the case. 16. So far as the issue of Board of Directors is concerned, Articles 29- 47 of Articles of Association of the Company dealt with the constitution of the Board of Directors, appointment, retirement, etc., as per Article 30 Mr.R.Shiv Kumar (Petitioner) and Dr.Subba Rao P (Respondent No.2) of the First Directors of the Company. As per the Article-29 the member of Director should not be less than two and not more than 12 including Managing Director or nominated Director and other Directors if any.As per Article 34 Board of Directors shall have power to appoint Additional Directors subject to the maximum mentioned as sated above. As per Article-38: the quorum for a meeting of the Board of Directors shall be 1/3 of its total strength (any fraction co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icles 17 to 22 of the Articles of Association. 18. It is next stated that a Board Meeting was held on 3.9.2014 and the minutes were prepared and were duly signed by appellant and 2nd respondent. It is stated that the minutes contain 9 items and there was no agenda for allotment of equity shares. It is next stated that in November, 2014, 2nd respondent fraudulently uploaded fake return of allotment in Form PAS-3 showing an allotment of 90000 shares to himself due to which the shareholding of the appellant has been come down to 5% from 50% and 2nd respondent has been shown as holding 95% shareholding. 19. It is stated that the appellant through an email dated 17.12.2014 disputed the fraudulent actions of the 2nd respondent in tampering with the Board Resolutions dated 25.8.2014 and 3.9.2014 and the same has not been disputed by 2nd respondent. 20. It is next stated that the Board of Directors approved the annual accounts for the year ending 31.3.2014 and also approved the draft notice of AGM in its Meeting held on 3.9.2014 but the 2nd respondent failed to convene and conduct the statutorily mandatory AGM and thereby violated the provisions of the Companies Act, 2013. 21. It is ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 24. It is stated that the appellant is alleging transfer of 500 shares by 2nd respondent to 3rd respondent as oppression. It is stated that it is inconceivable as to how can the appellant call the transfer of shares made by 2nd respondent from his shareholding to 3rd respondent as oppression. It is stated that the allegation that the said transfer of shares is not in compliance of Article 17 and 18 of the Articles of Association is untenable since the appellant himself was present at the meeting and participated in the meeting and did not raise any objection to the said transfer of shares. The appellant was a party to the decision of the Board to approve the transfer. 25. We have heard the parties and perused the record. 26. The appellant has argued that the Board Meeting dated 25.8.2014 in which the appellant duly participated. The appellant argued that the transfer of 500 shares from 2nd respondent to 3rd respondent was done without the approval of the Board and in contravention of Articles 17 to 22 of the Articles of Association. 27. Learned counsel appearing on behalf of the respondents argued that it is not disputed that the appellant was present and participated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent was one of the agenda items. Learned counsel for the respondents also drawn our attention to Page No.70-75 of the Reply filed by the Respondents and argued that the minutes of the meeting dated 3.9.2014 are duly signed by the Chairman and the attendance sheet of the Meeting dated 3.9.2014 is duly signed by the appellant, 2nd and 3rd respondent, all directors, of 1st respondent. The Agenda is shown at Page 75 of the reply filed. The appellant consented to the allotment of equity shares to 2nd respondent. It is argued that once the appellant consented, he can not raise the objection now. 31. We have heard both the parties on this issue. It is not disputed that the appellant participated in the said meeting. We observe from the minutes duly signed at Page No.70 of the reply that the allotment of equity shares to 2nd respondent is there. NCLT in its impugned order has held that the appellant "is only a shareholder holding of 5% of shares of the total shares of the company. When the petitioner admittedly ceased to be a Director w.e.f. 14.10.2014/18.11.2014, the alleged acts of oppression and mismanagement are also ceased to exist. Therefore, he cannot continue the petition on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis-advantageous to the shareholders and the company; (b) to employees under a scheme of employees' stock option, subject to special resolution passed by company and subject to such conditions as may be prescribed; or (c) to any persons, if it is authorised by a special resolution, whether or not those persons include the persons referred to in clause (a) or clause (b), either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer subject to such conditions as may be prescribed. xxxxx 33. We note that Section 62(1)(a) of the Companies Act, 2013 deals with issuance of shares on the principle of Rights basis. Section 62(1)(b) of the Companies Act, 2013 deal with issuance of shares to employees under a scheme of employees' stock option, subject to special resolution passed by company and subject to such conditions as may be prescribed. Section 62(1)(c) deals with issue of shares to any person. The present case is covered und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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