TMI Blog2021 (5) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Companies Act, 2013 showers certain specific powers. Section 242(4) of the Companies Act is similar to the ingredients of Section 403 of the Companies Act, 1956. It is to be pointed out that allegations of oppression and mismanagement concerning mixed question of law and fact could not be decided at the Interim Stage - The term Oppression is any act exercised in a manner harsh, wrongful and burdensome manner. The Phrase Affairs of Company are being conducted points out a continuous wrong , the proceedings are meant to be in public interest of the Company or in the commercial interest of the company. The Tribunal can take preventive and a curative action for regulating the conduct of the Company s affairs in future and to bring to an end the matters complained of. It is to be pointed out that unfair utilisation of powers and impairment of confidence in probity with which the company s affairs have to be conducted, (in contra distinction) as distinguished from just resentment on the minority s part are the vital facts that are to be kept in mind by the Tribunal . It cannot be gainsaid that applying the standards of fairness the Tribunal , is to determine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse, after providing adequate opportunities to respective sides by adhering to the Principles of Natural Justice in accordance with Law and in the manner known to Law at an early date. Liberty is granted to the respective parties to raise all factual and legal issues before the Tribunal in the main Company Petition. Appeal disposed off. - Company Appeal (AT) (CH) No. 03 of 2021 - - - Dated:- 5-5-2021 - [Justice Venugopal M] Member (Judicial) And [V.P. Singh] Member (Technical) For the Appellants : Mr.Jayant K Mehta, Senior Advocate Mr.Arun C Mohan, Advocate Mr.R.Vijaya Suresh, Advocate For the Respondent No.1 : Mr.R.Murari, Senior Advocate For the Respondents No.2 : Mr.T.K.Bhaskar M/s.Medha Rao, Advocates to 5 : For the Respondent No.8 : Mr.S.R.Rajagopal, Advocate For the Respondent No.7 : Ms.Madhu Neelakantan, Advocate For the Respondent No.6 : Mr.R.Saravanakumar, Advocate JUDGEMENT ( VIRTUAL MODE ) PREFACE : The Appellants/Applicants have preferred the instant Appeal being dissatisfied with the order dated 23.01.2021 in CA/06/2021 in CP/393/2019 passed by the National Company Law Tribunal, Division Bench I Chennai. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-commence the mediation proceedings at the earliest commencing from 1st February 2-21 and complete the process of mediation by March 15, 2021 after giving advance notice to the parties concerned. 27. The Mediator is at liberty to conduct the proceedings by virtual mode and the other terms as fixed by the order dated 03.01.2020 shall remain intact. and finally disposed of the Application by observing that Let the Report of the Mediator be made available to it at least by 20th March, 2021 when the Company Petition is posted to await the Report of the Mediator and till then, the parties were directed to implicitly to obey all the orders passed by it from time to time including the order dated 16.04.2019 and any modifications passed by the Tribunal subsequently there on. Appellants Contentions: 3. The Learned Counsel for the Appellants submits that the seminal issue involved in the instant Appeal is whether the National Company Law Tribunal was justified in passing the impugned order dated 22.01.2021 leaving the valuable properties of the First Respondent/Company unprotected, despite manifest urgency and large scale under valued sales by the Respondents? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication of CP No. 393/2019. As a matter of fact, none of them had filed any counter to the main CP No. 393/2019 and only limited counters were filed pertaining to the maintainability issue . In any event, the maintainability of main CP No. 393/2019 is to be determined by the Tribunal. 10. The Learned Counsel for the Appellants submits that the Appellants are not aggrieved by the order dated 16.04.2019 and in fact, the said order correctly records the need to preserve and protect the assets of the First Respondent/Company, but, the Respondents were abusing the said order and continuing to use their brute majority to conduct undervalued sales, with the observer remaining silent and taking no steps to act or even consider any dissent. 11. The Learned Counsel for the Appellants forcefully contends that the Observer appointed by the Tribunal was a passive observer taking no steps to instil any transparency or fairness in the sale process and that the following decisions: (a) Record of the Meeting dated 12.10.2019 at page 187 (Relevant pages 189, 190, 192., 193). In the Committee meeting held on 12.10.2019, the observer in respect of Agenda-43 has merely agreed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue, a Sale by public auction to ensure transparency that the sale consideration flows to the First Respondent/Company and Sale with express permission of the Tribunal may be directed to be conducted by the Tribunal so that the parties are given time bound auctions to bring better proposals thereby ensuring that the sales are made at the best available rates and that the entire sale consideration flows to the First Respondent/Company. However, the impugned order had failed to direct a transparent, fair sale process or any other practical solution. 14. The Learned Counsel for the Appellants submits that the ERP rates are the minimum rates for a property and this is like a base rate in and auction process but this does not mean that the sale is to be conducted at the base rate and not at the market rate. Indeed, it is the version of the Appellants that the present appeal is filed to seek protection of the properties of the First Respondent/Company in such way that its business is run transparently and honestly and in this regard, its Directors are its Trustees who are bound to in its best interest, as per section 166 of the Companies Act, 2013. 15. The Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scope of their authority arid must disclose that they are acting on behalf of the company. The fiduciary capacity within which the Directors have to act enjoins upon them a duty to act on behalf of a company with utmost good faith, utmost care and skill arid due diligence and in the interest of the company they represent. They have a duty to make full and honest disclosure to the shareholders regarding all important matters relating to the company. (Para 11) Courts in the Commonwealth countries including England and Australia have emphasised that the duty of the Directors does not stop at the to act bona fide requirement. They have evolved a doctrine called the proper-purpose doctrine regarding the duties of company directors. When the power to issue shares is used merely for an extraneous purpose like maintenance or acquisition of control over the affairs of the company, the same cannot be upheld. It will be seen from the judgment in Needle Industries. (1081) 3 SCC 333, and Tea Brokers, (1998) 5 Comp I.J 463, that the courts in India have applied the same tests while testing exercise of powers by Directors of companies as in other Common wealth countries. (Paras 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove if traversed in order to support his right to the judgment. (iii) If the evidence to support the two claims is different, then the causes of action are also different. (iv) The causes of action in the two suits may be considered to be the same if in substance they are identical. (v) The cause of action has no relation whatever to the defence that may be set up by the defendant, nor does it depend upon the character of the relief prayed for by the plaintiff. It refers to the media upon which the plaintiff asks the court to arrive at a conclusion in his favour. (Paras 16 and 17) Mohd. Khalil Khan v. Mahbub Ali Mian. 1948 SCC OnLine PC 44: (1947-48) 75 IA 121. relied on In the present case, the earlier suit for injunction was instituted plaint of which contained a recital of the agreement to sell dated 26-10-1995; he price fixed for the bargain between the parties; the payment of earnest money; the handing over of possession; the demand for performance and the failure of the defendant to perform the contract. The plaintiff also asserted that she was going to institute a suit for specific performance of the agreement dated 26-10-1995. Under the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a case where the plaintiff was deprived of an opportunity to explain the pleadings in the earlier suit. The finding that there was no prejudice lo the plaintiff cannot be faulted. The parties were all along aware of the pleadings, the nature of the objection to the maintainability of the subsequent suit on the ground of the bar under Order 2 Rule 2 and the fact that the plaint in the earlier suit was brought on the record. Indeed, it was at the behest of the plaintiff that a certified copy of the plaint in the earlier suit was allowed to be brought on the record and marked as Ext. 137. On facts, the bar under Order 2 Rule 2 is attracted. (Para 24) 19. The Learned Counsel for the Appellant adverts to the Hon ble Supreme Court in Vallabh das V Dr. Madan Lal and others reported in 1970 (1) SCC at Pages 761 762 wherein it is held as under: The expression subject-matter is not defined in the Civil Procedure Code. It does not mean property. That expression has a reference to a right in the property which the plaintiff seeks to enforce. That expression includes the cause of action and the relief claimed. Unless the cause of action and the relief claimed in the second sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a different relief than one claimed (Paras 28 and 30) in the earlier suit, can be prayed for. (Paras 28 and 30) While law does not compel a litigant to combine one or more causes of action in a suit in view of Order 2 Rule 3 CPC it is open to a plaintiff, if he so wishes, to combine more than one cause of action against same parties in one suit. But the embargo in Order 2 Rule 2 will arise only if the claim, which is omitted or relinquished and the reliefs which are omitted and not claimed, arise from one cause of action. If there is more than one cause of action, Order 2 Rule 2 will not apply. (Para 44) Cause of action is the bundle of facts, which if traversed, must be proved. However, if also means the media through which the plaintiff seeks to persuade the court to grant him relief. It could, therefore, be said to be the factual and legal basis or premise upon which the court is invited by the plaintiff to decide the case in his favour. It is also clear that the cause of action, in both the suits, a must be identical. In order that it be identical, what matters, is the substance of the matter. (Paras 39 and 31) 21. The Learned Counsel for the Appellant relies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Company being valued by M/s. Brahmayya Company. 25. The Learned Counsel for the Respondents No. 1 to 5 points out that in the present main appeal at paragraph 13, the Appellants had averred that Both parties agreed that disputes can be resolved through mediation and as such, the prayer for urgent hearing of the Company Petition and the consequent appeal to set aside the impugned order dated 22.01.2021 in CA No. 6/2021 in CP No. 393/2019 on the file of the National Company Law Tribunal, Chennai is not only redundant but also an infructuous one. 26. The other contention of the Learned Counsel for the Respondents No. 1 to 5 is that the Appellants had not appeared before the Tribunal on 19.03.2021 when the main company petition No. 393/2019 was listed and allowed the matter to get adjourned to 05.05.2021. Also that, it is projected on the side of the Respondent No. 1 to 5 that the endeavour of the Appellants to handicap the functioning of the First Respondent/Company by means of the present Appeal , while simultaneously reaping the benefits of a successful mediation is in violation of Rule 29 of the Companies (Mediation and Conciliation) Rules, 2016 is nothing bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subash Mohan Dev v Santhosh Mohan Dev reported in (2001) 2 GLR 6 wherein it was inter alia observed and held that an order passed on the consent of the parties ought not be interfered with and the Appellants make a vain bid to alter the same through the present Appeal thereby circumventing the ingredients of section 421 (2) of the Companies Act, 2013. 31. The Learned Counsel for Respondent No. 1 to 5 contends that the Respondents have raised serious issues concerning the maintainability of main Company Petition No. 393/2019 which is pending before the Tribunal and that the Company Petition is barred by the principles analogous to Order XXIII Rule 1(3) of the Civil Procedure Code. 32. Besides this, the Appellants made misrepresentations in the Company Petition to state that earlier CP No. 32/2016 was withdrawn with liberty to file fresh proceedings and when the Respondents pointed out that no such liberty was granted, the Appellants were constrained to file an unnumbered application to remedy the same and a plea was taken that the misrepresentation was allegedly a mere mistake. 33. The Learned Counsel for the Respondents 1 to 5 brings to the notice of this Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1 to 5 submits that the Appellants are aware that since the date of consent order there is no requirement of a unanimous vote in regard to the decision being taken in the observer meetings . Further, the mechanism in terms of the consent order was to facilitate transparency in the affairs of the First Respondent/Company. In regard to the current observer is concerned, the said observer has held his position for more than a year and baseless allegations against his capabilities have been caused by the Appellants upon him and the said allegations lack bonafides and is only an attempt to impede the business of the First Respondent/Company. 38. The Learned Counsel for Respondent No. 1 to 5 contends that MA No. 1142 of 2019 filed by the Appellants is before the Tribunal , wherein the Respondents had filed their counter wherein the malafides on the part of the Appellants were brought to the attention of the Tribunal and that the Appellants had opted to mediate their disputes and thereby abandoned said application. 39. Moreover, any restraint in respect of the sale of the properties will cause prejudice and irrepairable harm to the interest of the First Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them, as specified in the interim order dated 16.04.2019. Also that, the Appellants/Applicants came to know that the Respondents were trying to sell several properties belonging to the 1st Respondent/Company that are worth several crores, without their consent. In fact, the Respondents, in the guise of Committee Meetings were unilaterally fixing rates for land sites of the 1st Respondent and were purporting to sell land parcels of the 1st Respondent using their majority in number. 45. The real grievance of the Appellants/Applicants is that the main Company Petition No.393 of 2019 on the file of National Company Law Tribunal, Chennai Bench is not taken up urgently, the Respondents, using their majority in number would dispose of all the properties of the 1st Respondent/Company, resulting in grave prejudice to the interest of the 1st Respondent/Company and therefore, they had filed the C.A.No.6 of 2021 in C.P.No.393 of 2019 seeking urgent listing of the main Company Petition for Arguments . 46. The Respondents No.1 to 4 before the Tribunal, had filed a Counter Affidavit interalia stating that keeping in mind the business of the 1st Respondent/Company, the Tribunal passed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man /Administrator to regulate the conduct of the affairs of the 1st Respondent /Company. (iii) to direct the Respondents 2 to 4 to contribute to the loss suffered by the1st Respondent/Company and appoint an independent Chartered Accountant to carry out a fair valuation of the Company and determine the value of the Petitioner s share in the Company after conducting Forensic Audit of Books of the Company. (iv) to pass an order of Division of undertaking of the Company comprising of Real Estate and amusement park in the ratio of valuation determined by Independent Chartered Accountant in favour of each of the families, also the Appellants/Petitioners had prayed for the interim reliefs in the main Company Petition. 50. An order on Section 241 Petition under the Companies Act, 2013 seeks reliefs with a view to end the matters complained of in the petition. Section 242 of the Companies Act, 2013 vests in the Tribunal very wide powers for granting a suitable relief to the concerned Petitioner(s). Section 242(1) of the Act gives the Tribunal an unfettered power to make such Order as it thinks fit, with a view to bringing to an end the matters complained of. Section 242(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Code, bars Subsequent suit . Whereas Order 23 Rule 1(3) of the Civil Procedure Code bars remedy . It is to be remembered that Order 23 Rule 1 of the Civil Procedure Code bars remedy but does not extinguish the right. Whether the second Petition is void abinitio is to be seen by the Tribunal . 56. Section 442 of the Companies Act, 2019 does not provide for a party to apply to the Tribunal merely to refer the matter for Mediation . However, this power can be exercised only there is a proceeding before the Central Government , Tribunal or the Appellate Tribunal . A Mediator acts as a Facilitator and an Award of Mediation is a settlement without admitting liability. 57. A matter is referred to Mediation by means of an Application at the instance of any of the parties to the Proceedings or by suo moto reference made by the Central Government , Tribunal or the Appellate Tribunal before which any Proceedings is pending. In Law, Mediation is an Alternate Dispute Resolution . At any stage of the Proceedings before the Central Government or Appellate Tribunal or the Tribunal any of the parties may apply for appointment of a Mediator for considering any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regard, in the present Appeal . 63. In determining an Application/Petition under Section 241, 242 of the Companies Act, 2013, the Tribunal is to keep in mind the principle of particularity and proof . No doubt, the object of exercise of power under Section 241 of the Companies Act is either to prevent a Winding up of Company or to remove the continuance of harm or reasonable probability of injury to the interests of Company or to the wider injury of public interests . 64. Admittedly the main Company Petition C.P.393 of 2019 before the National Company Law Tribunal, Chennai Bench was filed on 14.03.2019. The Respondents have raised issues in regard to the maintainability of the main Company Petition No.393/2019 on the file of the Tribunal and the same is pending for Adjudication . In fact, the plea of bar of the C.P.393 of 2019 (2nd Petition) being filed after the earlier C.P.32 of 2017 filed by the 1st Appellant as 1st Petitioner was withdrawn on 02.08.2017, with no liberty being granted by the Tribunal to file fresh Petition, is taken by the Respondents 1 to 4 in their Interim Counter filed in pending C.P.393 of 2019. It is not in dispute that an unnumb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout expressing any opinion on the merits of the matter, also not delving deep because of the fact that allegations of Oppression and Mismanagement concerning mixed question of Law and fact cannot be decided at the interim , stage by applying the yardstick of fairness directs the National Company Law Tribunal, Division Bench-1, Chennai to take up the main Company Petition No.393 of 2019 together with pending applications if any, for Hearing , (since the said Petition was filed on 14.03.2019) by requiring the Respondents concerned to file Counter(s) to the main Company Petition and to dispose of the same on merits (including dealing with the aspect of maintainability issue/point), of course, after providing adequate opportunities to respective sides by adhering to the Principles of Natural Justice in accordance with Law and in the manner known to Law at an early date. Liberty is granted to the respective parties to raise all factual and legal issues before the Tribunal in the main Company Petition. Before parting with the case, this Tribunal makes it explicitly clear that if the present Observer (who is to resolve the difference of opinion among the members) is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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