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TMI Blog2021 (3) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... #10146; to direct the 1st Respondent Company to conduct a valuation of shares of the Company before further allotment of Securities. 2. The Petitioners submit that the earlier Chairman and Managing Director of the Company Mr. Thambi Krishna, expired on 23.10.2011. A Director Board meeting was convened by Mr. C. K Vijayan on 25.11.2011 and got appointed himself as the Chairman and Managing Director of the Respondent No.1 Company. He removed Mr. C.K Sibi and Mr. K.C Babu who were the permanent Directors of the Company through forged letters of resignation and inducted several other persons into the Director Board and increased his shareholding by illegal reduction in the Shareholding of other promoter Directors. 3. The Federal Bank initiated SARFESI proceedings against the Company for a due amount of Rs. 18.6 crores, which further resulted in filing a case before the then Company Law Board as Company Petition No. 68 of 2015, which was transferred and renumbered as TCP No. 185 of 2016 after the constitution of National Company Law Tribunal, Chennai Bench. The 2nd Respondent and Mr. C.K. Sibi filed an Interim application as C.A. No. 1 of 2016 seeking permission to clear the arrears d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent Company. 7. The Petitioners enquired about the malpractices played by the 2nd Respondent and it was revealed that the entire amount of capital which was infused for discharging the liabilities with the Federal bank have been allotted 1,10,00,000 (One Crore Ten Lakh) equity shares in the name of 2nd Respondent and thereby his shareholding shows a sudden increase of 52.86% from nearly 4%, and that the shares were issued at a face value of Rs. 10 /- each and the said allotment is nothing but an abuse of the directions issued by the NCLT, Chennai Bench and in violation of statutory provisions. SUBMISSION OF RESPONDENT No. 1 8. Respondent No.1 in his counter stated that the Company Petition is not maintainable on the Principal underlying of the provisions of Section 241 (1) (b) of the Companies Act, 2013. The share allotment has taken place pursuant to the order passed by the NCLT Chennai Bench to settle the principal creditor Federal Bank and the change in the management and control thereafter being vested in the 2nd Respondent who had paid an amount of Rs. 22crores for such settlement cannot be further questioned even in the Company Petition filed under Sections 59 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners have to seek remedy elsewhere. When something is done based on Orders of the Hon. NCLT or by operation of law there is no question of any wrong or defect which requires rectification. C.K. Sibi and Eva Sibi were present in the Board Meeting which made the allotment of shares and hence afterwards they cannot challenge the validity of the issue of shares. 12. The first 3 Petitioners never attended personally the last 5 Annual General Meetings (AGM) and the 4th Petitioner attended only 1 AGM of the Company held on 30.09.2019 and at present the first two Petitioners are represented by POA holder A.A. Paulose who is one of the Petitioners in the Company Petition filed by Mrs. Eva Sibi and Mr. C.K. Sibi. Hence they are only benamies of Mr. C.K. Sibi and Mrs. Eva Sibi and are trying to blackmail the Company. A criminal case No. 25474/2019 dated 23.2.2019 has been filed before the First Judicial Magistrate, Emakulam by Baboo K.C. against Mr. Suresh George regarding this forged and fabricated MOU, and the same is pending. 13. At the time when the Interim Orders of NCLT 12.01.2017 was passed Mr. C.K. Vijayan was in control of the Registered Office of the Company and the Respondents h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules 2014 and the number of shares to be allotted shall be determined based on such valuation. The Respondent Company has chosen to evade from the mandatory valuation of securities and make allotment on face value, enabling unjust enrichment to the 2nd respondent at the expenses of all other shareholders. By infusion of funds to the tune of Rs. 11 crores for settling the dues with Federal Bank, and later on allocating shares at face value of Rs. 10 against the same, the Respondent No.2 managed to wrest more that 50 % of shares of the company have a total asset valuation of more than 360 crores. Such a situation will never have arisen provided a proper valuation of shares had been conducted before allotment in terms of the order dated 20.01.2017. The allotments at face value, carried without valuation of the assets of the company have resulted in dilution of value of shares possessed by the petitioners. Any aggrieved member of the Company can maintain a petition for rectification of register of member before this NCLT as per Section 59 allotment of additional shares to the Respondent No.2 is an entry of his name in the register as contemplated under Section 59. FINDINGS 18. This T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before 2 years, it is not fair to raise this issue now when the Petitioners have already consented to it for all these years. 21. Admittedly allotment of equity shares has already been done. Before examining this issue, it will be advisable to look into the legal provisions regarding issue of shares. The Companies Act, 2013 came into effect w.e.f. 01.04.2014. Hence, further issue of share capital will be done by complying the Companies Act, 2013. Section 62 of the Companies Act, 2013 deals with issue of Share Capital, which is applicable to all companies. It does not make any distinction whether it is a public or private company. Section 62(1)(c) of the Companies Act, 2013 reads as under: - "62. Further issue of share Capital. -- (1) Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered- (a) to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer subject to the following conditions, namely: - (i) the offer shall be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been produced or pleaded before this Tribunal that the special resolution has been passed in the AGM or EOGM. Neither any material has been placed before the Tribunal that the fair price has been determined with the approval of the registered valuer. It is noted that the allotment has been done at the face value of Rs. 10/-. In the absence of fair value, it cannot be determined that the Rs. 10/- is the fair value of the equity share. 24. I am of the view that compliance of Section 62(1)(c) ensures that the allotment is done to any person at a price which is not prejudicial to the interest of other shareholder or to the interest of the company. Though enough has been pleaded to justify allotment of shares to 2nd Respondent, not a single evidence could be placed or pleaded to show that the compliance of Section 62(1)(c) has been done. In view of the above position, allotment of shares to 2nd Respondent cannot be held to be validly done. Therefore, I am of the opinion that the exercise carried out is not only illegal but oppressive to the Shareholders. 25. In view of the aforesaid findings CP/122/KOB/2019 is disposed of with a direction to the Respondent No. 1 to cancel the allotm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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