TMI Blog2020 (6) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... as directors way back in 2007 and 2009. The petitioners have also suppressed the fact of execution of shareholders agreement, indemnity bond and personal guarantees on 27.9.2007 in favour of respondents nos. 1 and 2. Thus it is apparent that the petitioners have not come with clean hands before the Court. In the facts of the present case as there is active suppression on part of the petitioners, the decision of the Jharkhand High Court in case of MUNNAM SANJAY AND ORS. VERSUS THE STATE OF JHARKHAND AND ORS. [ 2019 (1) TMI 1779 - JHARKHAND HIGH COURT] relying upon various decisions of the Supreme Court would be applicable wherein it has been held It is thus evident that it is the duty of the litigant to approach the Court at equity with clean hand and it is not available to him that which fact is to be disclosed and which fact is not to be disclosed rather his duty is only to approach the court of law by complete disclosure at each and every fact and it is upon the court to decide which fact is necessary to be accepted and which is not necessary to be accepted. This writ petition deserves to be dismissed only on the ground of suppression of material facts - When the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad invested into huge expansion and modernization in the year 2000, but due to repeated and extended labour problems and strike, such investments did not yield positive results and caused tremendous production/financial losses which resulted into the petitioner no.1 company as a sick company. 2.3) It appears that the petitioners therefore approached Board of Industrial and Financial Reconstruction (for short BIFR ) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short SICA ) and availed statutory protections under sections 18 and 22 of the SICA Act. 2.4) It is the case of the petitioners that the BIFR sanctioned the scheme on 17/07/2013 (SS13) and as per the said scheme as contained in Para no. 2.2, respondents nos. 1 and 2 were appointed as directors in the professional capacity to assist in the revival process of the petitioner no.1 company. 2.5) It is the case of the petitioners that respondents no. 1 and 2 were merely appointed as directors only for professional management of the company so as to assist in revival of the unit without in any manner conferring upon them any authority to further their rights in the management of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioner no.1 company. 2.10) According to the petitioners as the BIFR was not functional and no hearing was taking place before the BIFR at the relevant time, the petitioners have approached this Court with the aforesaid prayers. 3. This Court (Coram :Hon ble Mr. Justice S.H. Vora) passed the following order on 23rd June, 2016 : 1. By way of this petition under Article 226 of the Constitution of India, the petitioners challenge resolution dated 27th November, 2015, Annexure E to the petition passed by the Director, which reads as under: RESOLVED that pursuant to Section 161 of the Companies Act, 2013, and in terms of provisions of the Articles of Association of the Company Mr. Ashokkumar N. Shah (DIN: 06977676) who is qualified to become Director and has also consented to act as Director of the Company, be and is hereby appointed as an Additional Director on the Board of Directors of the Company, with immediate effect, who shall hold office up to the date of the ensuing Annual General Meeting. FURTHER RESOLVED for the purpose of to give effect to this resolution, Ms. Kavitha Konreddy, the Director, be and is hereby authorized to file requisite Form No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ride the provisions of the Companies Act, 2013 as both cannot exercise concurrent jurisdiction in regard to control of assets of the sick company, its management and allotment of shares. Reliance was placed on the decision of Supreme Court in case of NGEF Ltd v. Chandra Developers reported in (2005) 8 Supreme Court Cases 219 wherein it is held that the provisions of SICA Act would prevail over the provisions of the Companies Act because provisions of the SICA Act contains non obstante clause and it is a special statute which is a complete code in itself. 4.3) It was further submitted by Mr. Thaker that the procedure required to be followed as provided in the Companies Act 2013 would not be available in view of overriding provisions of the SICA Act and only remedy would be available for clarification of the working of the scheme as provided under section 18(9) of the SICA Act. It was submitted that since there was no hearing taking place before BIFR since about six months and that hearing was postponed for indefinite period, the petitioners had no other alternative remedy but to prefer this writ petition to protect the sanctioned scheme and its implementation so as to facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2005) 1 Supreme Court Cases 212 to contend that the action of reducing the majority shareholder to minority shareholder by mala fide act of the company or the Board of Directors of the company amounts to act of oppression to the petitioners no. 2, 3 and 4. It was therefore, contended by Mr. Thaker that the act of respondents no. 1 and 2 to issue the shares in their favour is without any authority and as such meeting held on 27.11.2015 and the resolutions passed therein are therefore, required to be quashed and set aside. 5. On the other hand learned advocate for the respondent no. 1 Mr. Ravish D. Bhatt submitted that the petition is not maintainable under Articles 226 and 227 of the Constitution of India and moreover, the same is also required to be rejected on the ground of suppression of material facts by the petitioners as the petitioners did not mention in the entire petition with regard to their submission of resignations as directors of the company in February 2015. Learned advocate Mr. Bhatt placed reliance upon the averments made in the affidavit in reply filed on behalf of respondent no.2 to submit that the respondent no.4 had passed away on 14.7.2016 due to heart at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sandesh and Divya Bhaskar on 18.3.2016 intimating to the general public at large that the petitioners no. 2, 3 and 4 have resigned from the office of director of the company. 5.2) Learned advocate for the respondents submitted that the petitioners have suppressed the execution of the shareholders agreement dated 27.9.2007 where under the petitioners had agreed to sell their entire shareholding in the company to respondents no. 1 and 2 and had also handed over the duly executed share transfer forms in respect of all their shares in their names in the petitioner no.1 company and the transfer of shares were only a formality to be performed. It was submitted by Mr. Bhatt that these facts are deliberately and intentionally concealed by the petitioners. 5.3) Learned advocate for the respondents also relied upon the email dated 24.12.2012 sent by petitioner no.2 to respondent no.1 wherein it is stated as under : It is more than four years since we closed our deal. I shall write to all concerned dept. after 10th April 2012 that l have given all my shares to you, and that the same should be transferred without further delay and that I am no longer director in HPCL, the management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s v. The State of Jharkhand and others in Writ Petition No. 3140/2016 and other allied mattes rendered on 8th January, 2019 to submit that if the petitioners have suppressed the material facts, the petition is liable to be dismissed. 6. Having heard the learned advocates for the respective parties and having gone through the materials on record, it appears that there are disputed questions of facts as stated by both the sides on affidavit. Moreover, it is also not in dispute that BIFR was functional when the interim order was passed by this Court. It appears that the petitioners have suppressed the material facts on record when the interim order was passed by this Court by pointing out that resolution dated 27.11.2015 was contrary to the directions of the BIFR in its order dated 18.2.2009. However, the petitioners did not point out that BIFR had already sanctioned the scheme on 17.7.2013 after taking into consideration the order dated 18.2.2009 and subsequent various orders passed from time to time and ultimately the BIFR held in its order dated 17.07.2013 as under : 2.1 In the today's hearing (17.07.2013), the Bench observed that there was no representative on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliefs from Unsecured Depositors and Unsecured Creditors. The company is not seeking any reliefs from any secured creditors or from any statutory authority. He requested the Bench to sanction the scheme, so as to enable the company to implement at the earliest. 2.4 The Bench noted that OA(BOI) in its report has also mentioned that three unsecured creditors have given their objections to the reliefs and concessions sought by the company in the DRS. Out of these three unsecured creditors, one is Mazda Agencies and the other two are M/s. Plastichemix Industrial and M/s. Perfect Colourants and Plastic Pvt. Ltd. The Bench also noted that the Board s office has also received objections from M/s. Hitkari Packaging Pvt. Ltd. vide their letter dated 12.7.2013, being a unsecured creditor of the company. The Bench further noted that all these three (03) unsecured creditors are opposed to the proposal of settlement of outstanding dues at 20% by the company in the DRS. The Bench observed that as per clause 8(2) on page 15 of the DRS, the company had proposed for settlement of outstanding dues at 20% and in case, this proposed settlement is not acceptable to both these unsecured cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions, BIFR has observed in the sanctioned scheme as under : 11. General Terms Conditions i) BOI is appointed as the Monitoring Agency (MA). The company shall pay the MA fees to BOI in consultation with the Board from COD. ii) The company shall constitute a Management Committee (MC) consisting of CEO of the company, Special Director of BIFR, if any and MA. The MC will review on a monthly basis, the operations of the company in all aspects closely monitor the implementation of the revival scheme. iii) The company shall appoint a reputed Chartered Accountant's firm as Concurrent Auditors with direct reporting relationship to MA with copy to the CEO of the company on terms satisfactory to it. The BOD shall review the Concurrent Auditor s Report and take needful corrective steps immediately thereof. iv) The company shall satisfy MA that the physical progress and all aspects of cost of the scheme/means of finance of the scheme is complied with as per the original schedule. To this end, the company shall furnish to MA such information and data as may be required by it at intervals stipulated by it. Any financial shortfall arising out of the delayed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all its aspects and shall submit a review of the implementation of the scheme to BIFR within a month of receipt of such PR with copies to BOD of the company and to all concerned. If the company defaults to submit the PR, OA must report to the Board also. xii) The loans inducted/to be inducted by the promoters shall be subordinated and interestfree and shall not be withdrawn during the rehabilitation period without the prior approval of BIFR/MA. xiii) All current dues arising after cutoff date to be paid by the company in the normal course and no special protection of the Act would be available for this purpose. xiv) Dues up to cutoff date not disclosed/covered in the DRS and any shortfall in performance or any other activity and the contingent liability as when any such liability falls due shall be met by the company/promoters/co-promoters by bringing in additional interest free funds from outside sources, upfront. xv) The company/promoters are directed u/s 22A of SICA not to dispose of, sell or lease or encumber in any manner whatsoever any part of land, building, plant machinery or equipments or any of its fixed assets without the Board's prior perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becoming majority shareholder and such allotment found to be mala fide, not in the interest of company and in violation of the proper and legal procedure prescribed in by the Articles of Association of the Company, it was held that it was a clearly an act of oppression on the part of the directors towards the majority shareholders. Therefore, the Supreme Court in the facts of the case before it came to the conclusion that fraud was played on the shareholders by manipulating the allotment of shares so as to gain control over the company. However, in facts of the present case, petitioner no.1 company was a sick company who approached the BIFR and the BIFR has sanctioned the scheme and thereafter the petitioners no. 2, 3 and 4 have tendered their resignations which is accepted by them in the rejoinder filed by them which clearly shows that there is suppression of material facts. 11.In the facts of the present case as there is active suppression on part of the petitioners, the decision of the Jharkhand High Court in case of Munnam Sanjay and others(supra) relying upon various decisions of the Supreme Court would be applicable wherein it has been held as under: 12. The question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent writ petition for renewal of the licence to manufacture liquor at the same distillery before the High Court was held to have been initiated for oblique and ulterior purposes and the interim order passed by the High Court in such subsequent application was set aside by this Court. Similar1y, a challenge to an order fixing the price was rejected because the petitioners had suppressed the fact that an agreement had been entered into between the petitioners and the Government relating to the fixation of price and that the impugned order had been replaced by another order. 14. In another judgment which was rendered by Hon'ble Supreme Court in case of Arunima Baruah Vrs. Union of India and Others, (2007) 6 SCC 120 [LNIND 2007 SC 55] material fact has been defined. It has been held by their Lordship at paragraph 12 which is quoted herein below: 12. It is trite law that so as to enable the court to refuse to exercise its discretionary jurisdiction suppression must be of material fact. What would be a material fact, suppression whereof would disentitle the appellant to obtain a discretionary relief, would depend upon the facts and circumstances of each case. Mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48) their Lordship in case of Arunima Baruah Vrs. Union of India and Others(2007) 6 SCC 120 [LNIND 2007 SC 556] have been pleased to hold at paragraph 22 that suppression of filing of suit is no longer is a material fact. 15. In another judgment rendered by Hon'ble Supreme Court in the case of Prestige Lights Ltd. Vs. State Bank of India, (2007) 8 SCC 449 [LNIND 2007 SC 978] their Lordship have held that the writ petition cannot be entertained in case of suppression of material facts. Even in the judgment relied upon by learned counsel in case at K.D. Sharma Vs. Steel Authorities of India Ltd. reported in (2008) 12 SCC 481 [LNIND 2008 SC 1361] wherein at paragraph Nos. 34, 36, 38 and 39 it has been held as under: 34. The jurisdiction of the Supreme Court under Article 32 and of the High Court under Article 226 of the Constitution is extraordinary, equitable and discretionary. Prerogative writs mentioned therein are issued for doing substantial justice. It is, therefore, of utmost necessity that the petitioner approaching the writ court must come with clean hands, put toward all the facts before the court without concealing or suppressing anything and seek a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truly but states them in a distorted manner and misleads the court, the court has inherent power in order to protect itself and to prevent an abuse of its process to discharge the rule nisi and refuse to proceed further with the examination of the case on merits. If the court does not reject the petition on that ground, the court would be failing in its duty. In fact, such an applicant requires to be dealt with for contempt of court for abusing the process of the court. 16. Thus there is no dispute about the fact that the litigant who is approaching the jurisdiction conferred under Article 226 of the constitution of India to High Court is supposed to come out with a clean hand and without suppression of material facts and the material facts has been defined which mean material for the purpose of determination of the issue. In the light of these judgments now the fact of the case is to be examined regarding suppression of facts which can be said to be material suppression important for determining the issue. 17. In the case of SP. Chengalvaraya Naidu Vrs. Jagannath reported in (1994) 1 SCC 1 [LNIND 1983 SC 901] and in the judgment rendered in the case of A.V. Papayya S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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