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TMI Blog2022 (12) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... CLT allowed the Company Petition filed by the Respondents herein by passing the directions as made in para 48 of the order. Brief Facts: Appellant's Submissions: 2. Aggrieved by the aforesaid order the Respondents therein preferred the present Appeal. 3. Mr. Anshuman Sharma Learned Counsel appeared for the Appellants submitted that first and foremost that the target Company i.e. M/s Polygon Refractories Pvt. Ltd. which was incorporated on 13.09.1982 is a family owned Company. The entire equity of the Company is held by the brothers namely viz. Appellant No.1, Respondents No.1 to 3 and Mr. M.V. Ramana Rao and their respective wives and their children. There is no outsider holding any shares in the Company. Further, the Appellant No.1, Respondents No.1 to 3 and their family members have lived in the same house sharing a common kitchen for more than 30 years. 4. The Learned Counsel submitted that the Respondents filed the Company Petition before the NCLT, Hyderabad under Sections 241, 242, 59, 62 of the Companies Act, 2013 seeking the following reliefs: a) Set aside the allotment made on 25.03.2017 and direct consequent rectification of member's register of the R-1 Company; b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 after the allotment was made in EOGM dated 23.03.2017 the shareholding of the Appellants increased to 72.81%. 9. Whereas, the shareholding of the Respondent as on 31.03.2012 was 21.95%. As on 31.03.2013 the shareholding of the Respondents increased to 32.34%. As on 31.03.2016 the shareholding of the Respondents increased to 42.54% and as on 31.03.2017 the shareholding of the Respondents reduced to 22.33%. 10. From the aforesaid shareholding pattern, it is evident that as on 31.03.2012 the Appellants shareholding was 74% in the Company. 11. It is submitted that as the Company does not have the working capital limit with any banks in order to meet the working capital requirements, the Company was receiving loans and advances from Directors and Shareholders i.e. from the family members itself. As a customary practice adopted by the Company over the years that the Company allotted shares as against the loans and advances received. The loans and advances received by the Company since 2013 is as follows: a) A sum of Rs. 11,50,000/- received from 4th Respondent during 2012-13. b) A sum of Rs. 8,00,000/- received from 1st Appellant during 2013 to 2016. c) A sum of Rs. 6,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly adverted to principle of estoppel, family company, non-application of mind etc. The Learned Counsel also relied upon various judgments in support of his contention. He prayed this Tribunal to set aside the impugned order dated 06.06.2019 in CP No. 217 of 2018 and restore the position of the shareholding of the Company as on 25.03.2017. Respondent's Submissions: 17. Sh. S. Chidambaram Learned Company Secretary appearing for the Respondents submitted that the Respondent filed the Company Petition with the prayers to set aside the allotment made on 25.03.2017 and declare the EOGM conducted on 23.03.2017 and declare board meeting held on 28.03.2017 and 25.03.2017 are illegal and the resolution passed there at do not bind Company and its Shareholders. The Appellants in the present Appeal made contradictory averments with respect to list of dates and events. It is submitted that the Company was incorporated by Mr. M.V. Ramana Rao father of Respondent No.4 and Mr. G. Rama Lingeswara Rao and not by the 1st Appellant as contended. Further, the allotment of 14,000 shares and 5,000 shares made on 18.03.2013 and 15.09.2013 was not raised by the Respondents in their Company Petition and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific allegation of the Respondents in the Company Petition that none of the contesting Respondent received notice of EOGM. On this ground the NCLT set aside the increase in authorised share capital and allotment of shares to the Appellants. The Appellants contend that the Company taken advances and loans from the allottees right from 13.11.2013 to 29.09.2016, but no prior approval was obtained by way of a special resolution as per Section 62(3) of the Companies Act, 2013. 22. The Learned Company Secretary further submitted that the Appellants contend that they were in control of 72% of the paid-up share capital and by virtue of the purported allotment their shareholding restored to their percentage as per the practice of the Company is arbitrary and illegal. As on the date of incorporation of the Company the Appellants did not own a single share in the Company and on the same logic, they should not hold any shares in the Company. 23. It is further submitted that the Appellants were minority shareholders as per the Annual Returns for the year 2004 and 2009, the Appellants were holding 16.93% whereas the Respondents were holding 83.07%. While so, as on 24.03.2017 the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 25.03.2017 stands restored." 29. The grievance of the Respondents in their Company Petition before the NCLT, Hyderabad Bench, was that the company has increased the Authorised Share Capital in an EOGM held on 23.03.2017 from 50 lacs to 70 lacs and further a special resolution was passed in the said EOGM for allotment of 30,000 equity shares and the said shares were allotted to the Appellants whereby the Respondents groups shareholding become 26.39% from 50.3% and the Appellants who were minority shareholders have become majority due to the impugned allotment of 30,000 equity shares. The Respondents contend that several fabricated forms were filed by the Appellants. The main grievance of the Respondents is that the Respondents have not received any notice either for the Board Meeting or the General Meetings including the purported EOGM held on 23.03.2017. 30. Having aggrieved by the said allotment of 30,000 equity shares to the Appellants, the Respondents filed the above Company Petition before the NCLT, Hyderabad Bench seeking the following reliefs: "a) Set aside the allotment made on 25.03.2017 and direct consequent rectification of members' register of Respondent No. 1 Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants advanced the amounts and the Company utilised the said amount for the benefit of Company. As the Company had 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 shareholders who have advanced money to the Company. By virtue of allotments made on 25.03.2017 the combine shareholding of the Appellants No. 1 to 4 have gone up to only 72.81% as against 74% which was held by them as on 31.01.2012. The Learned Counsel for the Appellants contend that the increase in Authorised Share Capital and Paid-Up capital was not for self-aggrandizement or for gaining control over the Company but purely dictated for the commercial needs of the Company. 34. We have perused the shareholding pattern of the Company from which it is undisputed that prior to allotment of 30,000 shares, the Appellants were holding 49.7% whereas the Respondents Groups were holding 50.3%. 35. The whole dispute is with regard to holding of purported EOGM on 23.03.2017. The Company issued notice dated 28.02.2017 calling for the EOGM to be held on 23.03.2017 at 10 a.m. at the registered office of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place as per the averments made by the Respondents and there is no denial by the Appellants. Further it is contended that the Company has only valuable land of 4 acres worth Rs.20 crore and in such a situation when the Company is not in operation, there is no need of funds, hence no loans need to be taken from the Appellants. The Company made the allotment in the pursuant to the Board Meeting held on 25.03.2017 to the following members: 1. Mr. M. Appayya (A1) 8,000 shares=Rs.8,00,000 2. Mrs. M. Mrinalini (A2) 6,000 shares=Rs,6,00,000 3. Mr. M. Venkata Chaitanya (76) 500 shares=Rs.50,000 4. Mrs. M. Srilatha (A4) 500 shares=Rs.50,000 5. Mr. M. Sai Sudhakar (A3) 15,000 shares=Rs.15,00,000 Total 30,000 shares = Rs.30,00,000 39. In the EOGM held on 23.03.2017 it is mentioned that the company as a special resolution will issue and allot upto 30,000 equity shares of the Company. Further, it is stated that the said allotments are to be made to the promoters and others. Whereas in the Board Meeting dated 25.03.2017 by way of ordinary resolution the Company offered and allotted 30,000 shares to only the 5 members but not all the existing members / shareholders of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proof that the notices have been issued for convening the EOGM to all the Members and issued any letter of offer to the existing shareholders for subscribing to the shares in proportion to their shareholding. In such a situation, the allotment of shares exclusively made to certain group by excluding the other members leads to dilution of shareholding of the members whom the shares were not offered and allotted. Thereby the said allotment causes the reduction in shareholding of the other shareholders whom the shares have not be allotted, is detrimental to the interest of the said shareholders the said act is an oppressive. 42. It is contended that the company is a family company and is a quasi-partnership is concerned even though the company is a family-owned company and the entire equity is held by the family members, the law as applicable with regard to further issue of share capital and allotments of shares cannot be violated. Further, the principles of natural justice need to be followed more particularly in a family owned / run company. 43. Further, it is mandatory to issue a notice calling for the EOGM as per Section 100 of the Companies Act and a notice calling for the Annu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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