TMI Blog2017 (1) TMI 1666X X X X Extracts X X X X X X X X Extracts X X X X ..... e first petitioner is concerned with reference to the alleged acts of oppression and mismanagement stated to have occurred after becoming a member of Respondent No. 1 Company i.e., from 21.03.2011 - It is not in dispute that Respondent No. 1 Company is a subsidiary of Respondent No. 6 company and thus the affairs of subsidiary company is always subject to holding company and the will of holding company would naturally prevails in the management of affairs of the subsidiary company. S.2(71) also says a Company, which is a subsidiary of a Company, not being a private Company, is to be deemed a public Company for the purposes of act even where such subsidiary company continues to be a private Company in its Article. Whether the 1 st Petitioner can raise the alleged oppression and mismanagement, which have taken place prior to becoming member of RI Company i.e. with effect from 21.03.2011? - HELD THAT:- A member of a Company can only raise oppression and mismanagement U/s 397/398. So cause of action arises only from that date. However, there are several allegations of oppression and mismanagement in the present company petition, which arise prior to the first petitioner ecoming a me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Miss. SpandanaVakkanti. ORDER Rajeswara Rao Vittanala , 1. This Company Petition bearing no. 42 of 2011 (which is hereinafter referred to as Company Petition for brevity) was initially filed by M/S Mahalaxmi Infra Ventures (India) Private Limited and Sh. Y.Harish Chandra Prasad, in June, 2011, before the then Company Law Board, Chennai Bench, at Chennai. On the constitution of NCLT Bench at Hyderabad for the cases pertaining to the States ofAndhra Pradesh and Telangana, the case is transferred to this Bench. Hence, I hav the case on records of this Bench and deciding it. 2. The Company petition was heard on several dates by the Law Board, and it was finally transferred to this Bench on 1 1.07.2016. Accordingly, the case was started listing before this Bench from 25.07.2016 onwards, and it stands adjourned several dates on 16.08.2016, 31.08.2016, 23.09.2016, 05.10.2016. When none appeared for petitioner on 05.10.2016, the case was directed to be posted under the caption for Dismissal on 07.10.2016, and on this date too, neither the petitioners nor their representative appeared and represented the case, and thus the case was dismissed for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Technical Partner (TP) and also agreed to shareholding of 50% each for all benefits. And Technical partner has to appoint staff of the following projects namely: New coal blocks, transmission projects, KVK Neelanchal and other KVK projects, gas allocation from Reliance-2000 MW around, power trading license, any other infrastructure projects like sewerage treatments plants, water projects, mining of minerals, roads, etc. c) In pursuant to the above Terms Sheet, Petitioner No.2 has been appointed as a Director ofthe Respondent No. 1 Company on 02nd November, 2005. So he has contributed a lot for the growth of the Respondent No.l Company. It is contended that in pursuance to above Term Sheet, on behalf of first Petitioner, the 2nd Petitioner paid an amount of₹ 13, (Rupees Thirteen Crores twelve lakhs fifty thousand) vide cheque No.312151 dated 26th February, 2007 towards the share application money for allotment of 1,31,25,000 equity shares of₹ 10/- each. So the 1st petitioner was finally allotted 1,3 1 equity shares of₹ 10/each of Respondent No. 1 Company vide resolution passed in Board of Directors meeting held on 21.03.2011. So, the 1st petitioner (Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for development of SEZ. 5. I have heard Shri. M.V. Pratap Kumar, the learned counsel for the Petitioners, Shri. Y. Suryanarayana the Learned counsel for Respondent Nos. 1 to 5; and Shri R. Raghunandan Rao, the Learned Senior Counsel for the Respondent No. 6. And I have also carefully considered all the pleadings made by the respective parties along with a large voluminous material papers filed in support of their case. 6. Shri. M.V.Pratap Kumar, Learned counsel for the Petitioners, while reiterating the pleadings made in the Company Petition/rejoinder etc, has further submitted that M/S Brahmani Power Company Private Limited was originally incorporated under the provisions of Companies Act, 1956 bearing CIN U40109AP1999PTC032289 with the Registrar of Companies on 12th Aug, 1999. The Company was subsequently changed to M/S Brahmani Infratech Private Limited, and fresh certificate of incorporation dated 2nd Nov, 2005 was issued. The Company office is situated at 6-31109/1, Nava Bharat Chambers, Raj Bhavan Road, Hyderabad - 500082. The Company is a public company within a purview of Section 3(4) of the Companies Act, 1956. 7. The Learned counsel submits tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... devoted full time and energy for the progress of the Company. He has reiterated that in pursuant to the said terms sheet, the second Petitioner , as a promoter of first petitioner , has paid an amount of 13,12,50,000/- vide cheque no. 312151 dated 26th February, 2007 drawn on UCO bank towards share application money for allotment of 1,31,25,000 equity shares of ₹ 10/- each of the company. It is also stated that an application duly filled in for the purpose of allotment of said shares was also furnished to the Respondent No. 1 Company. 11. It is further stated that the second Petitioner was instrumental in bringing ws Zelan Construction Sdn. Bhd. ( Zelan ), a member of Tronoh Consolidated Malaysia Berhad, Malaysia as a co-developer/partner with Respondent No. 1 Company. Due to the Zelan association with Respondent No. 1 Company, the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) and agreed and entered into Memorandum Understanding (MoU) 12th July, 2006 with respondent No 1 for allotment of land to an extent of 250 acres at a cost of₹ 20,00,000 per acre for a total consideration of ₹ 50 crores under the Information and Communications Technolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to minority shareholders, which includes the Petitioners. Further, it is stated that the Directors of company are in fiduciary position vis-a vis the company and that the relationship between Directors and Company is of trustees and cestui que trust; d. Respondent Nos. 1 to 4 have allotted 85 lacs shares to respondent nos. 8 to 10, while the share application money of the first Petitioner was lying with RI Company's account since Feb, 2007. The same was done with an intention to keep petitioners away from the affairs of the Company by allotting shares to Respondent Nos. 8 to 10 at lower value than the actual value, which resulted in huge loss to the Company; e. The Respondent Nos. 2 to 6 have completely overlooked the notices of APIIC, which threatened to cancel the allotment of land if the Company failed to offer valid reasons for the violation; f. The Petitioner No. 2 was unceremoniously and arbitrarily terminated from the Board of Directors of Respondent No. 1 Company from 24.06.2010, even though he offered himself for re-nomination as Director. The act of removing the second Petitioner as Director of Company amounts to grave acts of oppression a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a Private Company etc. As mentioned above, the 2nd Petitioner was a Director ofRespondent No. 1 Company, for a long time i.e., from 02.11.2005 to 24.06.2010. So the 2nd Petitioner is having a fiducially responsible Respondent No. I Company. Moreover shares in Respondent No. I Company, after increasing share Capital, were allotted to all the respective parties including the 1 st petitioner in the same financial year as mentioned above. So the ratio as mentioned in the above Apex Court judgment is not applicable to the facts and circumstances of the present case. 4) Dale Carrington Invt. (P) Ltd and another Vs P.K. Prathapan and others, (2005) 1 SCC 212. 5) Dhananjay Pande vs. Dr. Bais Surgical Medical Institute Pvt. Ltd. Others, (2005) 125 comp Cas 626 (CLB). By reading of the facts and circumstances of above cases, the ratio decided in those cases would not be applicable to present case for the reasons stated above. 16. In the light of above submissions, the Learned Counsel for the Petitioners submits that it is a fit case to allow the present Company Petition and grant the relief as sought for in the Company Petition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 19. It is submitted that the 6th Respondent is a Member of a Company holding 4,14,99,998 fully paid up equity shares of ₹ 10/- each and the same constitute 65.74% of the total issued, subscribed and paid up capital of the Company. 20. The Learned counsel submits that the 2nd Petitioner on his own volition offered himself his services in the Respondent No. 1 Company by way of an investment into the Company. So there is no question of any inducement to him as alleged by the 2nd petitioner. As stated above, Respondent No.l Company was incorporated on 12.08.1995, and if any Equity Term Sheet was entered in respect of the present issue, as alleged by the second petitioner, the Respondent No. 1 Company should be certainly be a signatory to the said Term Sheet or at least, Board Resolution of the Company should ave been passed accepting the terms of the so called Equity Term Sheet. MO over, the Equity Term Sheet was not in relation to the development of SEZ Project, which is being executed by the Respondent No. 1 Company. He as stated the so called Equity Term Sheet was executed for another venture, which was never materialised. So the Equity Term Sheet cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not cause any prejudice to the 1 st Petitioner. 23. It is further denied the allegation of the 2nd petitioner that the Respondent Nos. 2 to 6 have completely over looked the notices of APIIC vide letters dated 09.02.2010 05.03.2010. He has stated that Company has promptly replied to those letters. 24. It is stated that the 2nd petitioner who was appointed as a Director was liable to be retired by rotation at the 1 I th Annual General Meeting. During the GM held on 24.06.2010, share holders have not chosen him to re-elect /-re appoint the 2nd Petitioner as Director of the Company. So it is not correct say that the second petitioner was terminated/ removed. The notice for the AGM along with Annual Report for the year 2009 10 was also served on the 2nd petitioner on 01.06.2010 under acknowledgment. 25. The 2nd petitioner being a Director of the Respondent No. 1 Company from 02.11.2005 to 24.06.2010, he was a party to all the decision taken by the Respondent No.l Company and consented to all its decisions without any objection and the minutes of the Board are conclusive evidence for the same. Therefore, he submits that the Company Petition was not ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held that court should first make an order under SS 394,397 and 398 and, in that order, it has to provide matters more particularly stipulated in section 402 of the Act. This section read rule 9 of Companies (Court )Rules, 1959, which deals with inherent powers of the court to give such direction to meet the ends of justice was the basis of decision of Hon'ble Supreme court in Needle Industries case(1981)51 Comp Cas 743 SC . And inter alia held court powers are wide enough on the facts and circumstances of cases in consideration. iii. Descon Ltd Vs. Biman Behari Sen and Ors (MANU/WB/ 0231/2011): Ordinarily an outsider, which includes the court, is not permitted to interfere with the affairs of a company. It has shareholders who constitute the general body and this general body elects the Board of Directors to administer the affairs of the company. Only when the company is wrongfully in control of a body of shareholders or persons, so much so that decisions are taken prejudicial to the shareholders as a whole or any minority group of shareholders or against the interest of the company, are shareholders permitted to approach the court to redress the wrong b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, it is stated that 50% each shareholding by FP and TP. So it is not known under what circumstances/agreement, the Petitioner has paid the amount of ₹ 13, 12,50,000/- for issue of shares. The 2nd Petitioner also filed CP No. 5/397 398/CB/2010 in the year 2010 by placing reliance on the very Equity terms sheet. Moreover, this term sheets also did not have any date to draw any inference that said term sheets relates to the issue in the present Company Petition. For the reasons stated above, I am not inclined to accept that the issues rose in the Company petition arises out of said Term Sheet. However, the fact remains that the first petitioner paid the said amount for allotment of shares, and shares were also allotted to first petitioner, and Second petitioner became a Director for the above period. 31. The Petitioner No.2, as a Director of 1 st Petitioner Company has addressed a letter dated 28th Feb, 2007 to the RI Company (Annexure - 13(1), Page 92 and 93) by enclosing share application form duly filled in and cheque No. 312151 dated 26.2.2007. The letter dated 28th February, 2007 reads as follows: To Brahmanilnfratech Private Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The 1 st Petitioner was also allotted shares on 21.3.2011 by Respondent No.l Company. So all the allotments took place during the financial year 2010-11. Hence, there is no prejudice caused to the first petitioner. Moreover, it is not the case of the petitioners that they are making demands to allot shares at an early date except on few occasion(s) as stated above. The petitioners also not claiming that he was entitled for same prior to 21.3.2011. 33. The expression 'any member of a company' as found in sections 397 398 of 1956 Act(Corresponding to section 241(1) of 2013 Act) refers to a member or members having interest in 10 percent share capital in the Company and not out outsiders and they have a right to apply by virtue of Section 399 of 1956 Act. So expression 'any member of a company would refer only to a person, who is recognized by the Company as owner of its shares and whose name is registered in the register maintained by the Company. In the present case, admittedly, the Shares of Respondent No.l Company was allotted to the first Petitioner only on 21.03.2011 and the second was not a member at all. So the Second petitioner cannot join the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire cost of the land of ₹ 51.7 crores would likely to be forfeited. Accordingly, the Respondent No. 1 Company obtained the consent of shareholders for surrender of land to Govt. of AP/ APIIC by passing an Ordinary Resolution u/s 293(I)(a) at the 13th AGM of Respondent No. 1 Company. It is also to be pointed out here that the Petitioner of this CP had moved a Company Application bearing No. 119 of 2002 in CP No. 42 of 2011 by interalia seeking injunction against the surrender of immovable property, etc. However, the CLB dismissed the CA vide order dated 5th July, 2012. In the above circumstances, the Respondent No.l Company was able to get refund of ₹ 49.75 crores from APIIC vide letter dated 15.1.2013. If the company has not taken prompt decision, the entire amount of ₹ 51.75 crores would likely to be forfeited by the APIIC. Considering various pros and cons of the issue of allotment and cancellation of the land by APIIC in question, I am convinced that there is nothing wrong in the above transaction and the allegations made by the petitioner with regard to the above transactions are baseless. 37. Another issue to be considered in the case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly incorporated a private limited company, it subsequently became a subsidiary of respondent no. 6, which is a Public Limited Company. Section 2(35) 3 of Companies Act, 1956(Corresponding to Section(68) Companies Act, 2013 ) will apply here. Section 255 of the Companies Act, 1956 is applicable to the present case and the Petitioner No.2 is liable to be retired by rotation. Moreover, as I held that the 2nd Petitioner cannot maintain the present petition and the legality or illegality of not re-electing or re-appointing him as Director cannot be considered. And the record shows that the case of the 2nd Petitioner for re-election as Director was duly considered and not ccepted in accordance with relevant law. 40. In view of the above explanation of the case, I am of the Considered opinion that the affairs of Respondent No. 1 Company are not being conducted in a manner oppression to any member or members and there is no case is made out by the petitioners for winding up Respondent No. 1 Company in terms of provisions Section 397/398 of Companies Act, 1956 so as to interfere in the case. However, since the second petitioner has worked as Director of Respondent No. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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