TMI Blog2018 (2) TMI 1988X X X X Extracts X X X X X X X X Extracts X X X X ..... e was thus obviously contemplated as being the avenue for increasing the funds of the Company and for the growth of the Company. The CLB has recorded a finding of fact (in paragraph 28) that the rights issue was necessary for the growth of the Company and therefore the action of issuing the shares could not be termed as oppressive to the Appellants and/or mismanagement of the affairs of the Company - Pertinently, despite being party to the above meetings, at no point did the Appellants seek to subscribe to the rights issue, and did not even make such enquiries for several years prior to filing the present Petition. The reason for this was clearly because the rights issue which commenced from April 2007, was not of interest to the Appellants, as the Appellants had received back the sum loaned by them to the Company to the tune of ₹ 73,00,000/ . The Appellants had accepted back the loan as they did not desire to partake in the functioning of the Company. The Appellants have no explanation for their having taken back their loan, save and except to contend that this was not reflective of their disinterest in the company. In this regard, the CLB has arrived at a finding of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances potentially directorial disputes may be raised. The judgments relied upon by the Appellants in this regard will have no application to a company such as Respondent No.1. Further, it does not appear that this issue of quasi partnership was pressed before the CLB, and was not pressed in arguments before this Court. The Appeal ought to be dismissed as it does not give rise to any question of law. The factual findings are strictly matters which were within the province of the CLB. The CLB having exercised its discretion after analysing the evidence before it, this Court cannot to replace the discretionary order passed by the CLB with any contrary order - Even otherwise, on the findings of delay/laches and unclean hands, the present Appeal ought to be dismissed as the CLB has rightly declined to exercise its equitable jurisdiction in favour of the Appellants. Appeal dismissed. - Company Appeal No.22 OF 2013 In CLB/Company Petition No.52 Of 2012 - - - Dated:- 24-2-2018 - K.R.Shriram, J. Mr.Abhishek Khare a/w Ms.Prapti Kedia i/by Khare Legal Chambers for appellants. Mr.Rohaan Cama i/by Hafeezur Rahman for respondent. JUDGMENT 1 The present appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 10 each at par by filing form no.2 w.e.f 23.8.2007 to the family members and company in which respondent nos.4 5 were interested and this allotment was without any notice, meeting, knowledge and consent of Board of Directors. It is also alleged that on 15.12.2007 respondent no.2 again filed form no.2 for allotment of 24,000 equity shares of ₹ 10 each at a premium of ₹ 120 per share w.e.f. 22.9.2007 to one Geeta Constructions Pvt. Ltd. wherein respondent no.5 is an interested director. (viii) On 5.11.2007, appellants caused a Show Cause Notice issued to respondent nos.2 3 calling upon them to explain their misconduct and activities detrimental to the interest of the company and to return the books of accounts, correspondence, original agreements, records and registers of the company. (ix)On 7.11.2007 respondent no.2 replied stating that appellants had sold their stake in the Company and the matter was settled, with one Mr.Deepak M.Mehta, who was acting as mediator/escrow agent for the purpose. 3 It should be noted that the appellants' counsel made oral submissions and followed it with 49 pages of written submissions. I have to note that the written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as the CLB is the final authority on facts, while exercising powers under Section 10 F of the Act, the Hon ble High Court ought not to re appreciate the evidence analysed by the CLB. Reliance was placed on the judgment of the Hon ble Andhra Pradesh High Court in D.Ramkishore Vs. Vijaywada Shavebrokes Ltd. (2008) 86 CLA 285 (AP) which in turn had relied upon various judgments of the Hon ble Supreme Court to hold that there was no jurisdiction under Section 10 F to entertain an Appeal on the grounds of erroneous findings of fact, however gross the error may seem to be. It was further held by the Hon ble Andhra Pradesh High Court that absent a conclusion that the judgment was not supported by any evidence or that it was unreasonable and perverse, the decision of the CLB is final even though the Hon ble High Court might not, on the same materials, have come to the same conclusion. 7 Shri Khare relied upon the judgment in Dale Carrington Invt Private Limited Anr. v. P. K. Prathapan Ors. to contend that the Hon ble High Court could go into questions of fact. This contention is misplaced; in paragraph 36 of this judgment the Hon ble Supreme Court held that the judgment of the CLB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants having exited the Company after receiving the loan amount given by them, (paragraph 25); the rights issue and the reasons for the same being to infuse funds into the Company (paragraphs 26 to 28); shifting of the registered office (paragraphs 29 30); termination of directorship being outside the ambit of sections 397 / 398 (paragraph 35); the Appellants having come with unclean hands and having suppressed material facts (paragraphs 36 to 38); and gross delay and laches in the Appellants having approached the CLB (paragraphs 39 40). The above findings of fact cannot be interfered with by this Court in the exercise of the narrow jurisdiction under Section 10 F of the Companies Act, 1956. 10 Shri Khare submitted that there were various facts that the CLB, in the present case, ought to have noticed from the record but did not. Even if what Shri Khare says is correct, i.e., if it is the grievance of the Appellants that any material facts which were relied upon or any submission which was raised were not reflected in the judgment, it was incumbent upon the Appellants to draw the attention of the CLB to the same by filing a proper application for rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were taken by the Appellants to approach the CLB until July 2011 as noted by the CLB in paragraph 39 of the judgment. There was no explanation whatsoever from the Appellants to explain this significant delay aside from stating that they had preferred a representation to the Registrar of Companies. This explanation was rightly rejected by the CLB while noting that the reliefs which could be granted by the CLB could never have been granted by ROC, and therefore this could not be a reason for not approaching the CLB earlier. 14. In the written submissions of the Appellants also, there is no cogent explanation for the Appellants delay in approaching the CLB. It is simply contended that the alleged acts of oppression were continuing and culminated in the removal of the Appellants as Directors in 2011. Firstly, from the record before the CLB, as reflected in the judgment, the only ground to justify the delay pressed before the CLB, and indeed before this Court in arguments, was that the Appellants were prosecuting proceedings before the Registrar of Companies. No case of continuous oppression and/or mismanagement appears to have been pressed before the CLB and certainly not before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HREE ISSUES RAISED 18 As stated earlier, the Appellants had broadly raised three issues of alleged oppression and mismanagement. It should be noted that they are issues of fact which have been conclusively decided by the CLB and as held in M.Palanisamy Ors. (supra), the CLB is the final authority on facts. The rights issue of shares and the service of notices by UPC: 19 Respondents, in their Affidavit in Reply to the Company Petition have set out at length the sequence of events pertaining to the rights issue of shares, the funds raised by virtue of the rights issue and the details of service of notices for various meetings in this regard. The Respondents have also placed on record the relevant documents in relation to the rights issue, including the UPC register for service of notices on Appellant Nos. 1 and 2. The UPC register admittedly bears a stamp sufficient for service upon both Appellant Nos. 1 and 2 and no other party has raised a grievance that notices were not served upon them. 20 A grievance was raised by the appellants that the UPC proofs at pgs. 351 and 354 appear to be identical. While this is purely a factual matter which ought not to detain this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an admitted position that no notice was given to the director of the Company, which is completely different from the facts of the present case. (iii) Mr. Satish Kumar Singh v. Omkaleshwar Colonisers Private Limited again this judgment only lays down the principle that notice must be served, which has been done in the present case; (iv) M/s. Micromeritics Engineers Pvt. Ltd. Ors. v. S. Mun usamy in the facts of the case in question, there was no proof that the notice of the meeting was sent by post as held by the Hon ble Madras High Court in the last sentence of paragraph 34. This is very different from the facts of the present case. (v) Malleswara Finance and Investments Co. P. Ltd. v. Company Law Board and Others in the facts of that case the CLB, after taking into consideration all the materials, held that there was no evidence of posting, which is opposite to the factual finding in the present case. (vi) M. S. Madhusoodhanan v. Kerala Kaumudi Private Lim ited (supra) This judgment in fact aides the Respondents and has been followed in the context of Sections 397 / 398 in V. S. Krishnan s case (supra) to hold that once a rebuttable presumption arises under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they could not or were not in a position to receive the same. Even otherwise, the CLB has rightly held that after knowledge of those resolutions being passed by November 2007 January 2008, no steps were taken by the Appellants to approach the CLB for redressal of their grievances for close to four years. On the contrary, the Appellants held their own meetings without even attempting to send notices thereof to the Respondents; what has weighed with the CLB therefore is the inequitable conduct on the part of the Appellants and this factual finding cannot to be interfered with. 24 Even otherwise, the rights issue having been done in the interest of the Company with a view to infuse funds into the Company, can under no circumstances be said to be an act of oppression. The Hon ble Supreme Court in the case of Needle Industries (India) Limited v. Needle Industries Newey India Holdings Limited relied upon in V. S. Krishnan (supra), has held that if the shares are issued in the larger interest of the Company and bonafide with a view to enable capital to be raised, the rights issue cannot be termed as oppressive. 25 In the present case, in the meeting of the Board of Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the company until issuance of the show cause notice on 5th November 2007. If the Appellants truly desired to partake in the management of the company and felt that they had been wrongly prevented from doing so, any reasonable person would have approached the appropriate forum, i.e., the CLB in 2007 itself. However, no such steps were taken by the Appellants until July 2011. 29 In the circumstances, even on merits it cannot be said that the rights issue was either oppressive or done behind the back of the Appellants. Shifting of registered office: 30 The Appellants have sought to raise certain factual contentions as to where the notices for the Registered Office shifting were posted from. These are all factual matters, which would turn on evidence as to where Respondent No.2 resided and where he posted the notices from. It is not necessary that the notices be posted only from the Post Office adjacent to the Registered Office of the Company. Be that as it may, this factual analysis is beyond the scope of this Court s jurisdiction under Section 10 F of the Companies Act, 1956. 31 The Appellants raised a grievance that the registered office of the Company was shifted from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain any RTI on the delivery of notices for all the meetings which are the subject matter of dispute between 2007 and 2010, but have only purported to obtain an RTI for a meeting held in 2011. Be that as it may, the Appellants have been removed by resolutions and with appropriate Form 32 s filed, to the satisfaction of the ROC. It is nobody s case that the ROC has thereafter raised any objections to the filing of the Forms or indeed to the manner of removal of the Appellants. 37 As held by the Hon ble Supreme Court in Hanuman Prasad Bagri v. Bagress Cereals Private Limited (supra) directorial disputes are beyond the jurisdiction of the CLB under Sections 397 and 398. Thus, the same cannot be raised before the CLB as rightly held by the CLB in paragraph 35 of the judgment. 38 Further the Company is not under any circumstances either a family company or a closely held quasi partnership, in which circumstances potentially directorial disputes may be raised. The judgments relied upon by the Appellants in this regard will have no application to a company such as Respondent No.1. Further, it does not appear that this issue of quasi partnership was pressed before the CLB, and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed right of pre emption as is now sought to be contended in the Appellants Written Submissions. The Appellants in fact had accepted repayment of their loan by March 2007 and were clearly not interested in the functioning of the company. Pertinently, even after having full knowledge, as per their own case, in November 2007, the Appellants did not take steps to challenge the Rights Issue or to seek allotment of shares to them in the ensuing several years. In any event, the judgments relied upon take the position that if the Rights Issue is not bonafide but is only for the purpose of enabling a party to obtain a majority, then such action will constitute oppression; this is not so in the present case. The CLB has concluded that funds were required for which the Rights Issue was carried out, and therefore it cannot be said that the same was not bonafide. 44 As regards Sanjay Paliwal and Anr. Vs. Paliwal Hotels Pvt. Ltd., ; Rajesh Patil V/s. Moonshine Films Pvt. Ltd. ; M.L.Arora V/s. Green Valley Frozen Food Ltd. Ors. ; and A.Kalyani V/s. Vale Exports P. Ltd., the same pertain to the allegation of continuous oppression and mismanagement, to justify the delay in filing of the Compa ..... 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