TMI Blog2019 (9) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, which prima facie requires to launch prosecution by the statutory authorities. Therefore, respondent No. 1-company cannot be ordered to wind up as per law, however, the Tribunal can exercise its powers on it, under section 402 of the Companies Act, 1956 read with section 242 of the Companies Act, 2013 so as to put an end to the affairs of company as alleged in the company petitions, by granting liberty to the statutory authorities to take appropriate action basing on their findings during investigation as stated in their letters. It is settled position of law that the Tribunal is entitled to exercise its powers under the above sections of the Companies Acts. Since, independent chairman and valuer have already discharged their duties, they are no more required to be continued and they are discharged of their duties. The board of directors as existed on the date of filing of cases stands restored so as to take appropriate action basing on the valuation report. It is declared that the report of valuation of assets and liabilities of M/s. Omega Hospitals P. Ltd., dated September 6, 2018 submitted by SNSB Associates, chartered accountants, is legal and the same is binding on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent and make it available for the first respondent-company, etc. 3. Brief facts of C. P. No. 64 of 2007 (T. P. No. 5 of 2016), as mentioned in the company petition, which are relevant to the instant case, are as follows : (a) M/s. Omega Hospitals P. Ltd., the first respondent is a company (hereinafter referred to as the company ) was incorporated in the State of Karnataka, on March 23, 1998 bearing Registration No. U855110KA1998PTC023525 having its registered office at Pumpwell, Bypass Road, Kankanady, Mangalore-575 002. (b) The authorized share capital of the company is ₹ 2,10,00,000 (rupees two crores ten lakhs only) consisting of 2,10,000 (two lakh ten thousand) equity shares of ₹ 100 (rupees one hundred only) each and the issued, subscribed and paid-up share capital of the company is ₹ 1,99,03,800 (rupees one crore ninety-nine lakhs three thousand and eight hundred only) consisting of 1,99,038 equity shares of ₹ 100 (rupees one hundred only) each fully paid-up. The objects of the company, in brief, are to acquire, establish, lease, take on lease, and run hospital(s) with facilities of medical centre and adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 to 6 from the office of directors of the company under section 284 of the Act. (g) The company has moved a circular resolution to all the directors for the consideration of the board of directors for convening the extra ordinary general meeting of the members of the company as requested by the shareholders. Respondents Nos. 2 to 6, vide their letter dated July 10, 2007 informed the company that the notice under section 169 of the Companies Act, 1956 to convene the extraordinary general meeting of the member of the company was illegal and contrary to the provisions of the Companies Act, 1956 and objected for convening the extraordinary general meeting as requested. (h) The board of directors of the company failed to convene the meeting as requested by the petitioner and others within the time specified under section 169 of the Companies Act, 1956. As the board of directors of the company failed to convene/proceed to convene the extraordinary general meeting within 21 days from the date of submitting the valid requisition, the requisitionists have proceeded to convene the meeting by themselves and issued notice dated July 23, 2007 for convening the extraor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the board of directors of the company is unwarranted and any decision that may be taken therein shall be against the interest of the company. (iv) That one of the director of the company is travelling abroad. The time and date for the scheduled meeting is wilfully selected by the signatory to the notice with an intention to avoid him and pass resolutions in his absence knowing well that there is a dead lock in the board of directors if all the directors are present. (v) As the requisitionists shareholders have already preceded for calling the extraordinary general meeting of the company and have already issued notice for the said meeting, the board of directors may wait for the conclusion of the extraordinary general meeting scheduled to be held on August 6, 2007 and may be acted accordingly to the decisions that may be taken thereat. (vi) That the items listed out in the agenda may be considered in the interest of the company at a letter dated in a duly convened meeting of the board of directors of the company as per the provisions of the Companies Act, 1956 and articles of association of the company. (k) Respondents Nos. 2 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provision of the articles of association of the company. The additional directors can be appointed by the board in a duly convened meeting and the terms of additional directors shall come to an end at the next annual general meeting. The board has no power to fix any term contrary to the provisions of the Companies Act. The appointment of additional directors and extending the term of directors is illegal and contrary to the provisions of the Companies Act. (l) All the resolutions passed by respondents Nos. 2 to 6 in the meeting held on July 24, 2007 are invalid, illegal and contrary to the provisions of the Companies Act and articles of association of the company and is not binding on the company. 4. Brief facts of the second C. P. No. 77 of 2010 (T. P. No. 26 of 2016), as mentioned in the company petition, which are relevant to the instant case, are as follows : (a) Petitioners Nos. 1 to 5 are the directors of the company holding 92,834 equity shares of ₹ 100 each fully paid-up constituting about 47 per cent. of the paid-up share capital of respondent No. 1-company. And respondents Nos. 2 to 6 are also the directors of respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond petitioner was appointed as the managing director in 2005 and continued till March, 2006. The company performed well until March, 2006. The company generated enough funds to repay the term loan without default and declared dividend. This was due to co-operation of doctors and the whole hearted devotion by all the directors, who are shareholders and also directors of the company. Thus all the doctors hoped that they would not only serve the cause of the sick but also would gain good returns from the company and the same was wholly dependent on the essential functioning of the cardiac wing of the hospital as per the commercial success of most of the hospital nowadays depend on the cardiac wing of the hospital. At this juncture it is pertinent to point out, that there was a basic understanding that the second respondent being a renowned cardiac physician would take care of the cardiac wing and do his best to keep the said department going in good form. The second respondent requested other directors to heavily invest in the cardiology department promising good returns and the doc tors did so in good faith even at the cost of not developing their specialities fully. (g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nominated by him. In the board meeting held on October 23, 2008 a resolution was passed to open a bank account in Yes Bank, Mangalore Branch in Dr. K. Mukund, the second respondent herein and Dr. A. G. Jayakrishnan, the fourth respondent herein as autho rized signatories. Contrary to law, board meetings of the company were called by the MD (respondent No. 3) in some clubs and restaurants, and not in the registered office of the company by sidelining the business and deposits of the company. All policies and major decisions in the administration of the hospital were taken unilaterally. (l) It is further stated that respondent No. 2 has started a parallel institution by the name Mangalore Heartscan Foundation (MHF) in the year 2006 (respondent No. 7 herein). Respondent No. 4 is a director in the new entity and most of the patients were directed to MHF for treatment and diagnosis. Therefore, there is a severe loss for the hospital. Respondent No. 2 has successfully diverted all the business of the hospital to the new entity. Respondent No. 2 being the director of the company stands in a fiduciary capacity with the company and must show his loyalty to the company and shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Dr. Verghese group holds 46.64 per cent. of the paid-up share capital of respondent No. 1- company. Both the groups are subscribers to the memorandum of association of the company, and also they are the first directors. Subsequently, the strength of the directors was increased to ten, and thus five directors for Dr. Mukund group, and four directors for Dr. Verghese group are inducted into the board of directors. Both the groups have tentatively agreed to continue in the company as doctors in event of buy out or sell out either of their shares. (3) Dr. Jayakrishnan representing Dr. Mukund group have also expressed that their group was willing to buy out the shares of Dr. Verghese group for ₹ 800 per share, and also undertake all the liabilities of the company. And also given the option to the other group to buy out their shares, and pay back all the moneys brought by them into the company and also discharge all the liabilities of the company. (4) Dr. Mukund group suggested for appointment of independent chairman for the company to conduct the meeting of the company to com ply with the statutory requirements in the meanwhile. (5) On beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lore. Accordingly, the Tribunal by its order dated June 25, 2018 has appointed Shri Subhash Chandra Salian, to conduct the valuation of assets and liabilities of M/s. Omega Hospitals P. Ltd., with a direction to file his report in the Tribunal, within a period of four weeks from the date of receipt of copy of the order. 10. Accordingly, the valuation report was submitted by the valuer vide letter dated September 6, 2018 by assessing the share value of the company at ₹ 520 per equity share, paragraph 7 of the report reads as under : 7. Recommendation of value Based on the information provided by the management, the net asset value of the company is computed as per annexure 1. Particulars Amount (in Rs.) Net value of assets (book value) (2,89,89,757) Net value of assets (replacement value) 10,34,99,653 Net book value of the assets arrived based on the management reports as shared by the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state that as per the Minis try's instruction and subsequent order dated November 24, 2011 of the Company Law Board in C. A. No. 45 of 2011 in C. P. No. 64 of 2007, Shri Satyajit Roul, Assistant Registrar of the office carried out inspection of the company and furnished his report dated January 4, 2013 to the Ministry through the Regional Directorate (SER). Upon examination of the Inspection Report, Ministry vide its letter No. 1/25/2012-CL-II (SER), dated August 12, 2013 has instructed this office to launch prosecution under section 260 read with sections 629A, 285 read with section 629A, section 3(1)(iii)(d) read with 629A and section 58A read with provisions of rules 4A and 10 of the Companies (Acceptance of Deposits) Rules, 1975 with the permission of the hon'ble Company Law Board in respect of the matter stated in paragraph A of the Inspection Report. Likewise in respect of matters stated in Parts B and C of the Inspection Report, the Regional Director (SER) vide his letter No. 5(3)/ROC-B/RD(SER)209A/2012/6398, dated August 21, 2013 has instructed this office to launch prosecution under section 209(1)(c), section 297, AS-15 of the Companies (Accounting S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by various proceedings. The parties also, more or less, have agreed for proposal of settlement. Accordingly, in pursuance to the steps initiated by the then Company Law Board, this Tribunal appointed chartered accountant with their consent as stated supra. Therefore, the parties are bound by valuation report unless it is shows as ex facie illegal basing on substantial evidence. Naturally, no valuation report would fully satisfy both the parties. We have carefully perused the valuation report along with supported documents and thus found that the valuation report submitted by SNSB Associates dated September 6, 2018 is based on sound financial principles, and it does not suffer any legal infirmities. Therefore, we are of the considered view that the report is prepared in accordance with law, and thus it is binding on both the parties. 17. For auditing of statement of accounts, an auditor was appointed by the Tribunal, and two successive independent chairman, so also valuer was appointed at the request of parties in order to resolve the issue rather than to adjudicate it since various allegations of acts of oppression and mismanagement are hardly tenable, as alleged. More ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s bearing C. P. No. 64 of 2007 (T. P. No. 5 of 2016) and C. P. No. 77 of 2010 (T. P. No. 26 of 2016) with the following directions : (1) We hereby declared that the report of valuation of assets and liabilities of M/s. Omega Hospitals P. Ltd., dated September 6, 2018 submitted by SNSB Associates, chartered accountants, is legal and the same is binding on both the parties. (2) Both the parties are at liberty to take appropriate action either to buy/sell their respective shareholding of respondent No. 1-company basing on the valuation report dated September 6, 2018. (3) It is hereby forthwith restored the board of directors of respondent No. 1-company, as existed, prior to initiation of the instant cases and thus they can discharge their duties as per law. (4) The services of Shri E. Selvaraj, independent chairman appointed by the Tribunal stands discharged forthwith. (5) The Registrar of Companies or any statutory authorities are at liberty to initiate appropriate action, against respondent No. 1-company, and all the people connected with alleged violations/irregularities basing on the findings arrived during investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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