TMI Blog2022 (12) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... at such an offer is made to any of the Petitioners to purchase the shares. There is also no valuation report to value the shares of the Company. This Tribunal having gone through the documents and the relevant provisions of law is of the view that the Company has not complied with the law with regard to allotment of shares to the existing shareholders and also has not followed the mandatorily requirement of notice calling EOGM. The stand of the Company is that since it is a family Company and the decisions are taken in an informal manner by the members and no formal notices were required to be issued in view of the closely held family company. Be that as it may, between the equity and law, the law will prevail. In the present case, the NCLT and this Tribunal is firm opinion that the company has not followed the principles of natural justice by issuing notice for the EOGM and issue letter of offer to the existing shareholders of the Company for allotment of shares. Appeal dismissed. - TA No. 10 of 2021 (Company Appeal (AT) No. 184 of 2019) & (I.A. No. 2765 of 2020) - - - Dated:- 5-12-2022 - [ Justice M. Venugopal ] Member ( Judicial ) And [ Kanthi Narahari ] Member ( Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94%, 2.04%, 7.05%, 8.6% and 1.41% respectively. 6. However, the Board of Directors in its meeting held on 18.02.2013 have allotted 14,000 shares of Rs.100/- each to the following members against the loan received from them during the year 2011-12: Mr. M. Appayya (A-1) 2000 shares amount paid Rs. 2 lacs Mr. M. Sai Sudhakar (A-3) 2000 shares amount paid Rs.2 lacs Mr. M. Sai Krishna (R-4) 6000 shares amount paid Rs.6 lacs Mr. M. Venkata Chaitanya (R-7) 2000 shares amount paid Rs.2 lacs Mr. M. Srilatha (A-4) 2000 shares amount paid Rs.2 lacs 7. It is submitted that although some shares have been allotted to the Appellant in the aforesaid allotment, however the shareholding of the Appellant reduced from 23.44% to 18.89%. Again, the Board of Directors in the meeting held on 15.09.2013 have allotted 5,000 shares of Rs. 100/- each to the 4th Respondent. By virtue of the said allotment the percentage of shareholding of the 1st Appellant reduced from 18.89% to 16%. Thus, it is evident that the 1st Appellant s shareholding in the Company has been reduced from 23.44% to 16%. 8. It is submitted that on 23.03.2017, the Company conducted an EGM increasing the Authorised Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d no means of paying back the said advances. Adopting the previous practice, the share capital of the Company has been increased and shares have been allotted to the shareholder who have advanced the money to the Company. By virtue of allotment made on 25.03.2017 the combined shareholding of the Appellants No. 1 to 4 has gone up to 72.81% as against 74% which was held by them as on 31.03.2012. The increase in authorised share capital and paid-up capital was not for self-aggrandizements or for gaining control over the Company but was purely for commercial need of the Company. 14. The Learned Counsel submitted that the Respondents have tried on many occasions to Oppress the Appellants with regard to the working capital of the Company. A special notice dated 12.06.2019 under Section 115 of the Companies Act, 2013 has been issued by Respondents No. 1, 2 and 4 making a requisition under Section 169 read with Section 100 of the Companies Act to the Board of Directors of the Company to conduct an EOGM with the agenda to remove the Appellants No. 2 and 3 as Directors of the Company. The said move is to oppress the Directors of the Company. 15. The NCLT has not taken into consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents No. 1 to 6 were holding 50.3% and the Appellants No. 1 to 4 were holding 49.7%. 19. Thus, the Respondents were majority shareholders prior to impugned allotment. It is submitted that as per Section 62 of the Companies Act, 2013 which deal with further issue of shares which includes the Private Limited Companies and the Appellants have not complied with the mandatory provisions of Section 62 of the Companies Act, 2013 while allotting shares to themselves and to the exclusion of contesting Respondents and their family members. Hence, it is a grave act of oppression as well as violation of Section 62 of the Companies Act, 2013. 20. It is submitted that two Annual General Meetings were conducted on 30.09.2016 and 28.09.2017 without giving notice to the contesting Respondents. The Appellants mere bald denial about the issue of notice did not refute this allegation in their counter affidavit to original CP, hence, it is admitted position that no notices were issued to contesting Respondents. It is submitted that pursuant to the allotment of shares only promotors are the beneficiaries and the allotment is contrary to the alleged special resolution passed on 23.03.2017. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that since no prior approval has been obtained from shareholders by way of special resolution as mandated under Section 62(3) of the Companies Act, 2013, impugned allotment made on 25.03.2017 is illegal and bad in law. 26. It is submitted that the Learned NCLT rightly passed the order and no interference is called for. The Appeal is devoid of merits and liable to be dismissed. Analysis / Appraisal: 27. Heard the Learned Counsel appeared for the respective parties, perused the pleadings, documents and citations relied by them. After hearing the parties, the issue that arise for consideration is whether the Appellants have made out any case calling interfering with the decision of the NCLT. 28. Upon filing of Company Petition being No. 217 of 2018 by the Respondents herein under Section 241, 242, 59 and 62 of the Companies Act, 2013 before the NCLT, Hyderabad Bench, the Learned NCLT allowed the said Company Petition by passing the following directions: (a) that Extra Ordinary General Meeting conducted on 23.03.2017 as illegal and consequentially the resolutions passed there at as null and void and do not bind the Company and its shareholders. (b) That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Respondents herein, however, on previous occasions the Board of Directors of the Company in the meeting held on 18.02.2013 have allotted 14,000 shares of Rs.100 each to the following members against the loan received from them during the year 2011-12: Name of Allottee No. of shares allotted Total amount paid (Including premium) M. Aappayya Appellant No.1 2000 Rs.2,00,000 Dr. M. Sai Sudhakar Appellant No.3 2000 Rs.2,00,000 M. Sai Krishna Respondent No.4 6000 Rs.6,00,000 M. Venkat Cheitanya Respondent No.7 2000 Rs.2,00,000 M. Srilatha Appellant No.4 2000 Rs.2,00,000 Total 14,000 Rs.14,00,000 32. It is further contended that the Board of Directors of the Company in the meeting held on 15.09.2013 have allotted 5000 shares of Rs.100/- each to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h ranking parri passu with the existing equity shares and the said resolution is an ordinary resolution. Clause 2 of the said notice emphasised amendment to Articles of Association reflecting the increase of the Authorised Share Capital as Rs.70,00,000/- divided into 70,000 equity shares of Rs.100/- each. Further, Clause 3 of the notice emphasises further issue of equity shares, whereby the Board was empowered to issue and allot up to 30,000 equity shares of Rs.100/- each to the Promoters and others aggregating to Rs. 30,00,000/- only. The said resolution was to be passed as a special resolution. Further, an explanatory statement issued which refers to the increase of Authorised Share Capital and issue of equity shares. The grievance of the Respondents is that the shareholders of the Company have not received the notice for the EOGM as mandated under the Companies Act and in absence thereof convening and holding the EOGM on 23.03.2017 is illegal and void. 36. The minutes of the EOGM dated 23.03.2017 shows that the Company increased its Authorised capital from Rs.50,00,000/- to 70,00,000/- by creation of 20,000 equity shares of 100 each ranking parri passu with the existing shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut not all the existing members / shareholders of the Company. From the perusal of special resolution which was passed in an EOGM held on 23.03.2017 in terms of Section 62 of the Companies Act, 2013, it was resolved to issue and allot 30,000 equity shares of Rs. 100/- each to the promoters and others, however, in the Board Meeting held on 25.03.2017 the shares have been allotted to only 5 members, ex-facie contradictory, and this Tribunal is of the view that it violates the mandatory provisions the Companies Act. 40. Since the Company issued and allotted shares pursuant to Section 62 of the Companies Act, 2013, the said provision same is relevant to refer. Section 62 deal Further issue of share capital : Sub-section (1) thereof read as under: 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) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the EOGM as per Section 100 of the Companies Act and a notice calling for the Annual General Meeting is mandatory under Section 101 of the Companies Act, 2013. This Tribunal does not find any proof of documents with regard to issuance of notice either to the EOGM or AGM to the members in accordance with law. In absence issuance of notice calling for any meeting is illegal and violation mandatory provisions of law. 44. The NCLT dealt in detail with regard to the allegations made in Company Petition and the relief sought by the Respondents / (Petitioners therein). The Learned NCLT at para 38 of the impugned order categorically observed that the Respondents have not placed any evidence on record to prove that notice of EGM was served on petitioners. So, convening on EGM on 23.03.2017 and if any decision is taken in the EGM is not valid since Respondent utterly failed to establish that notice of EGM was served on the Petitioners. 45. As discussed (supra) it is mandatory to offer to the shares to the existence shareholders in proportions their shareholding and this Tribunal does not find any document to establish that the company issued letter of offer to the existing shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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