TMI Blog2019 (9) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of the issue of limitation being a mixed question of law and fact. Grant of interim relief - HELD THAT:- The stand taken by Appellant before the Tribunal qua allegations of oppression and mismanagement is that the same are merely operational issues which included procurement of newsprint. Serious exception has been taken to the conclusions drawn from the pleadings of Appellant in Company Petition proceedings by the Tribunal when it observed in the impugned order that there are certain operational issues and there was a deadlock in the management of the Company. Whether the appointment of any Independent Director was consented to by the Appellant? - HELD THAT:- here being no love lost interse Respondents 4 and 5 on this material aspect, the only inference available is that they are pliable. We refrain from making any further comment on the merits of their respective stand lest same causes prejudice to either of the parties during inquiry in the Company Petition. Whether there are any errors apparent from the face of the record which renders the impugned order unsustainable? - HELD THAT:- The fact remains that in regard to convening of Board Meetings, Annual Gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 241 of the Companies Act, 2013 (hereinafter referred to as the Act ) alleging certain acts of oppression and mismanagement came to be admitted with further directions passed in the Company Petition and I. A. No. 275 of 2017 to appoint an Independent Director on the Board of Directors of Respondent No. 1 - The Lok Prakashan Ltd. (hereinafter referred to as the Company ) to act as Chairman of the Board of Directors with casting vote. The Tribunal adjourned the matter for naming the Independent Director and fixing his remuneration after hearing both the parties. 2. It is abundantly clear that the Company Petition as also the I.A. have not been finally disposed off and are still pending consideration before the Tribunal. 3. Before adverting to the grounds of appeals arising out of common order impugned in both appeals between the same set of parties, a peep into the factual matrix germane to the controversy involved at the bottom of the subject matter of these appeals is inevitable. Respondent No. 2 herein holds 22.79% of equity shareholding in the 1st Respondent Company incorporated under Companies Act, 2013 and engaged in the business of pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and latches as such cannot be taken into consideration at this stage unless a full-fledged hearing takes place as it involves several questions of fact. 23. In view of the aforesaid discussion, the petition is admitted. 6. A bare look at para 24 of the impugned order would bring it to fore that at the hearing learned counsel for Respondent No. 2 herein restricted the prayer for interim relief to only one viz. appointment of Independent Directors on the Board of Directors of the Company pending final disposal of the Company Petition to ensure that statutory and contractual liabilities and day to day expenses are met with. It was contended before the Tribunal that there was a deadlock in the management of the Company in as much as the two Independent Directors, one appointed by the Respondent No. 2 herein and the other appointed by the Appellant were respectively supporting their mentors, thereby creating a split situation where both sides were equally divided. However, the Appellant appears to have disputed the factum of existence of a deadlock by projecting that the Company was an ongoing entity producing Newspaper Daily despite Respondent No. 2 herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of news print and payment of salary etc., the Tribunal deemed it necessary to appoint Independent Director on the Board of the Company to act as Chairman of the meeting of Board of Directors with casting vote. The Tribunal accordingly admitted the petition and directed appointment of an Independent Director. The matter was adjourned to enable the parties to name the Independent Director and fixing his remuneration. 7. Before proceeding further to note the submissions made at the Bar, we deem it appropriate to refer to a development that occurred after passing of the common impugned order. Appellant (Original Respondent No. 2) filed I.A. No.06 of 2018 in the Company Petition No.16 of 2017 pending consideration before the Tribunal seeking recall or suitable amendment of the impugned order by rectification of certain mistakes pointed out in the I.A. Same was dismissed by the Tribunal vide order dated 12th December, 2018 on the ground that the relevant order had already been assailed in appeal and the observations made therein were conscious observations based on pleadings of the parties and submissions put forth by their learned counsel. It was also observed in the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Petitioner in the Company Appeal) failed to make out a prima facie case establishing acts of oppression and mismanagement before the Tribunal. It is urged that the alleged acts of oppression/mismanagement are nothing but operational issues arising in day to day management of the Company. It is further urged that the Company Petition is barred by limitation. It is also urged that the Tribunal has wrongly attributed it to Appellant that she had no objection in increasing the strength of the Board by inducting Independent Professional Directors. It is urged that the Tribunal has failed to notice that the allegations in the Company Petition merely related to operational issues and the Tribunal has drawn an erroneous conclusion in regard to existence of deadlock from such allegations. It is also urged that the Tribunal failed to notice that the Appellant had made attempts to convene a Board Meeting to ensure statutory compliances and in this regard sought consent of Respondent No. 2 to accord consent to the appointment of Hon ble Justice Shri P. B. Majumdar (Retd.) to be Chairman to oversee the proceeding of the Board Meeting. However, the same was opposed by Respondent No. 2. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect concessions have been attributed to Appellant in impugned order. Reference is made to para 25 and 28 of the impugned order in this regard. It is contended that there is no basis for findings recorded in the aforesaid paras of the impugned order in the record before the Tribunal on 13th October, 2017 and none of the parties made any such submissions. It is submitted that the aforementioned findings are factually incorrect in as much as the Appellant in her letter dated 5th October, 2017 nowhere mentioned that she had no objection in increasing the strength of the Board by inducting Independent Professional Directors. It is submitted that the Appellant only stated that in view of the pending proceedings before the Tribunal, a Chairman was proposed for overseeing the proceedings of the proposed Board Meeting. However, there was no concession on part of the Appellant for appointment of an Independent Director. Thirdly, it is contended that the pleadings of Appellant have been read/ misread out of context in the impugned order. It is submitted that references made to a 2010 Board Resolution containing recommendations for strengthening of the Board by approaching expert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have been decided at an interim stage and that too without referring to pleadings and evidence. Seventhly, it is submitted that the alleged non-convening of Board Meetings and AGMs/ Deadlock are self-engineered by Respondent No. 2, who himself avoided attending the meeting called for by way of Appellants letter dated 5th October, 2017. It is submitted that even during the pendency of proceedings Respondent No. 2 rendered it difficult to call for meetings by making false allegations against anyone attempting to carryout compliances for the Company. It is pointed out that even in absence of Respondent No. 2 in Board Meeting dated 25th July, 2018 and 75th and 76th AGMs of the Company, no resolutions were passed to the prejudice of Respondent No. 2, who has challenged the same only to create an artificial deadlock. It is further pointed out that Respondent No. 2 himself being the Managing Director has not taken any steps for calling any meeting and has not attended meetings despite notice. Eighthly, it is submitted that the net profits of the Company for the years 2014-15 to 2017-18 have doubled as indicated in the chart handed over during the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in the Company Petition. It is further submitted that the appeals are not maintainable also on the ground that the Appellant herself on 5th October, 2017 issued Board Notice for statutory compliances and proposed convening a meeting of the Board on Saturday, 14th October, 2017 and proposed name of Hon ble Justice Shri P. B. Majumdar (Retd.) to be appointed as Chairman to oversee the proceedings of the meeting. Respondent No. 2 opposed appointment of outside person as Chairman. It is submitted that if there was no deadlock then why the Appellant herself proposed the name of an outside person. It is further submitted that the Tribunal directed appointment of outside Independent Director keeping in view facts and circumstances and conduct of Appellant and her allies and not on the basis of alleged concession as claimed. It is further submitted that the Appellant herself made statement before the Tribunal seeking adjournment with consensus for naming Independent Director as borne out by the order dated 18th December, 2017 which followed the impugned order. It is submitted that the Appellant consciously made submission subsequently about naming an Independent Directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant assails the impugned order on various grounds noticed in the pleadings of the parties and arguments addressed on their behalf. The issues raised in these appeals relate to maintainability of the Company Petition and grant of interim relief. It appears that maintainability of the Company Petition in the context of eligibility of Respondent No. 2 (Petitioner) to file petition under Section 241-242 of the Act is not in controversy. The Appellant, however, has vociferously challenged finding as regards limitation at the very threshold stage. It is the settled position of law that limitation is a mixed question of law and fact. Reference in this regard may profitably be made to the judgment of Hon ble Apex Court rendered on 11th July, 2006 in Civil Appeal No. 4766 of 2001 titled Ramesh B Desai Ors. Vs. Bipin Vadilal Mehta Ors. reported in (2006) 5 SCC 638 (para 19). It is not in dispute that in regard to matters falling within the purview of Section 241-242 of the Companies Act, 2013, the Limitation Act does not specifically provide for a period of limitation. In terms of Article 137, which is applicable to matters for which no period of limitation is speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding that most of the acts of oppression and mismanagement were continuing one. As indicated hereinabove, if some acts of oppression or mismanagement do not form part of a series so as to give rise to a continuing cause of action, right to apply would accrue from the date when the first violation of right occurred or was discovered. The Tribunal appears to have given short shrift to the matter by making a general observation that most of the acts of oppression and mismanagement are continuing one. This observation is not based on consideration of material. Admittedly, it is also not based on any admission on the part of Appellant. Since the matter was still at the very threshold stage and the issue of limitation involving mixed questions of law and fact was required to be examined in the light of relevant material/ evidence let in by the parties during inquiry of the Company Petition, the Tribunal ought not to have indulged in this exercise at the very initial stage. The observation in para 20 of the impugned order does not have the trappings of a judicial finding and cannot be supported . The Tribunal would have done well by not going through this exercise at the very initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive relief that can be granted though same is only illustrative and not exhaustive. Section 242(4) of the Act provides for interim relief which the Tribunal may grant for regulating the conduct of the company s affairs. Such interim relief can be granted by virtue of an order passed on the application of any party to the proceeding and such order can be subjected to terms and conditions which appear to the Tribunal to be just and equitable. On a plain reading of these provisions, it is abundantly clear that pending consideration of application by a member or member(s) of a Company alleging oppression or mismanagement, the Tribunal is vested with wide discretion to make any interim order on the application of any party to the proceedings, which it thinks fit for regulating the conduct of company s affairs. Such interim order can be subjected to terms and conditions which appear to the Tribunal to be just and equitable. The nature of interim order would depend upon the nature of complaint alleging oppression or mismanagement and the relief claimed therein. A member alleging that the affairs of the company have been or are being conducted in a manner prejudicial or oppressive to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Respondent No. 3 has usurped the powers of Editor without declaration though he was only a publisher also being one of the signing authority. It was further alleged that the Appellant and Respondent No. 3 created impediments in conducting of Board Meetings/ Annual General Meetings. Besides, the Board Meeting on 10th June, 2016 was not allowed to do business as per agenda. Respondent No. 2 alleged harassment at the hands of Appellant, who wrote letter dated 3rd September, 2016 making some allegations targeting Respondent No. 2 herein and disrupting the affairs of management. It was further alleged that after the demise of Shri Shantilal Shah, Appellant and Respondent No. 3 created many impediments in smooth functioning of the Company, no legal appointment of Editor was made and one Mrs. Illa Parikh employee of Gujarat Samachar was being paid salary though her services were utilized by Respondent No. 6. It was further alleged that Respondent No. 3 was reluctant to sign the cheques and letter of credit. It was alleged that the Appellant had addressed letter dated 13th January, 2017 to Respondent No. 2 herein in order to defame him and to hide the irregularities committed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was filed on account of such objection raised by the Appellant reference to record is inevitable. In this regard reliance is placed on email dated 13th December, 2016 from Respondent No. 2 to Respondent No. 3 (at page no. 305 of the Paper Book) requesting him to sign cheques and L/C papers regarding case matter of Fibro and HDFC Bank . Reply thereto (at page 359 of the Paper Book) indicates that Respondent No. 3 took serious exception to the consent terms agreed upon by Respondent No. 2 with the supplier terming the same as being extremely prejudicial to the Company as the consent terms enjoined upon the Company to place orders for additional 15,000 metric tons of New print in future with Fibro even when such material was available at more competitive prices from other suppliers. Respondent No. 3 also alleged that he as also the Appellant had been kept in dark about the settlement and the settlement was foisted on them exposing the interests of Company to peril. Appellant, in her letter dated 13th January, 2017 (page 287 of the Paper Book) also responded to email dated 13th December, 2016 emanating from Respondent No. 2 in the same tone and tenor reiterating the stand take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to affidavit in reply of Appellant filed before the Tribunal which refers to Board of Directors Meeting dated 27th September, 2010. It emerges therefrom that a committee constituted in January, 2009 examined the operational problems faced by the management of the Company and submitted its report containing 26 recommendations which was placed before a meeting of the Board of Directors held on 27th September, 2010. One of the recommendations related to strengthening the Board for which eight names were suggested. Respondent No. 2 and Respondent No. 3 were jointly authorized to approach the said eight persons so as to obtain consent of any three to be appointed on the Board before 31st March, 2011. It appears that the various committees formed in terms of the resolutions passed by the Board of Directors could not function and all recommendations were not implemented. Recommendation to increase the strength of the Board and the resolution in that behalf also could not be enforced. The Appellant further stated in her reply affidavit before the Tribunal that she had no objection to increasing the strength of the Board by inducting Independent Professional Directors (page 459 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Queer enough is the statement in additional affidavit of Appellant dated 29th January, 2019 that Respondent No. 4 has filed an I.A. before the Tribunal that since his term was only for one year commencing from 30th December, 2015, he ceased to be Independent Director of the Company by operation of law and gave intimation thereof to Registrar of Companies, Gujarat, Ahmedabad. It would therefore, for the purposes of consideration of appeal on the aspect of grant of interim relief, be not out of place to observe that Respondents No. 4 and 5 have been taking stands as suits their mentors which compounds the deadlock. This conclusion is clearly deducible from the contradictory stands taken by Respondents 4 and 5 regarding their mode of appointment. This is apart from controversy interse the dominant characters (Appellant and Respondent No.3 (Couple) on one side and Respondent No.2 on the other side). There being no love lost interse Respondents 4 and 5 on this material aspect, the only inference available is that they are pliable. We refrain from making any further comment on the merits of their respective stand lest same causes prejudice to either of the parties during inquiry in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017. She proposed appointment of Hon ble Justice Shri P. B. Majumdar (Retd.) as Chairman to oversee the proceedings of the meeting (Page 441 of the Paper Book). Though, Respondent No. 2 did not object to the convening of the meeting but maintained that it was not permissible to take an outside person as Chairman without being a member of the Board. This lends credence to the plea of Respondent No. 2 that the affairs of the Company were not being conducted smoothly and, in the least, outside intervention was required to oversee the proceedings of the Board of Directors for managing the affairs of the Company and also to ensure statutory compliances. The fact remains that in regard to convening of Board Meetings, Annual General Meetings and filing of statutory compliances there is a deadlock. Appellant s contention that such deadlock is artificial and self-engineered by Respondent No. 2 cannot be decided at this stage of the proceedings and within the ambit of application seeking interim directions. The contentions raised on behalf of Appellant in this regard are accordingly repelled. 23. Now coming to the aspect of deadlock in the context of the Board of Directors bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not speak of the two Independent Directors respectively supporting their mentors. However, since we have come to an independent conclusion about existence of a prima facie case as regards deadlock and for existence of grounds justifying interim directions for regulating the affairs of the Company, we do not want to enter the controversy as regards such concessions and errors pointed out on behalf of the Appellant as the same may embarrass the inquiry. So far as the interim orders dated 2nd November, 2017, 23rd November, 2017 and 18th December, 2017 are concerned, same can be interpreted only as attempts at seeking adjournment as a sequel to the impugned order. Interpreting the same as falling in line with the impugned order would not only be absurd but preposterous too. 25. For the foregoing reasons, we hold that the impugned order in so far as the same dealt with the issue of limitation suffers from legal infirmity and cannot be supported. The Tribunal would be required to arrive at a finding on the issue after inquiry in the Company Petition, the same being a mixed question of law and fact. The impugned order to that extent has to be set aside and appeal partly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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