TMI Blog2024 (3) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... ent nominated Directors, over the last four decades, have been unable to undertake any appreciable measures so as to develop the site in question despite having sold over 300 plots of the company. Even the CLB in the impugned order dated 24.05.2011, had the occasion to comment that the Directors nominated by the Central Government had thoroughly mismanaged the affairs of the company and yet on account of inter se disputes amongst the appellant/shareholders that exhibited lack of interest in managing and running the affairs of the company, it was not possible to give them back the control of the company. It is pertinent to mention that although doubts have been orally raised on the status of the unsold inventory described vide Annexure- C, no one has filed any objections disputing it, except the Greenfields Plot Holders-cum-Residents Association, the appellant in CO. A (SB) NO. 37/2011, but apparently there are just levelled bald allegations in their reply to the affidavit dated 03.01.2024, without substantiating the same with any categorical averment and/or documents - It is also pertinent to mention that the entire mess has been created due to inter se disputes amongst the shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/2019, CO. APPL. 601/2019, CO. APPL. 1024/2019, CO. APPL. 109/2020, CO. APPL. 574/2020, CO. APPL. 691/2020, CO. APPL. 69/2021, CO. APPL. 70/2021, CO. APPL. 142/2021, CO. APPL. 935/2023, CO. APPL. 157/2024 For the Appellant Through: Mr. Arun Srivastava, Adv. Mr. Pradeep Aggarwal, Mr. Arjun Aggarwal and Mr. Bhaskar Aditya, Advs. Mr. Saurabh Kirpal, Sr. Adv. with Mr. Dushyant Manocha, Ms. Anannya Ghosh, Ms. Chitra Vats, Mr. Brian Henry Moses, Ms. Mrinalini Mishra, Ms. Doel Bose, Ms. Mrinalini and Ms. Kashish Cahhabra, Advs. For the Respondents Through: Mr. Rakesh Kumar, CGSC with Mr. Sunil and Mr. Satyanand Kumar, Advs. for UOI/R-1 Mr. Anshuman Mehrotra and Mr. Sunny Khandelwal, Advs. Mr. Arun Srivastava, Adv. for R-4 Mr. D.S. Chauhan and Ms. Ruchi Singh, Advs.FOR Intervenor RWA/Awasiye Sudhar Mandal Mr. Rohit Gandhi, Mr. Hargun Singh Kalra and Mr. Surrender Sheoran, Advs. for applicant CA No. 678/2022 Mr. D.S. Chauhan, Ms. Ruchi Singh, Mr. Prashant Kumar, Mr. Shiker Badial and Mr. Sanbtosh Kumar Baitha, Advs. Mr. Shekhar Raj Sharma, Dy. AG Haryana and Ms. Akshaya Jebakumar, Adv. for MCF and DTCP Mr. Pradeep Aggarwal, Mr. Arjun Aggarwal and Mr. Bhaskar Aditya, Advs. for R-6 Mr. Arun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants in CO. A(SB) No. 36/2011 viz., Greenfields Resident Welfare Association, that between 1982 and 2008, a substantial portion of the Company s land was sold by means other than public auction. 4. In the interregnum, the Union of India (Ministry of Corporate Affairs) filed C.P. No. 50/2006, seeking extension of the term of the three Directors appointed to the board of the company. The same came to be approved by the Company Law Board vide order dated 09.08.2006, whereby the appointment of five Directors was permitted. 5. It is also borne out from the record that certain plots (48 Residential +1 for Cinema Complex) were advertised for sale by the then Board of Directors through the process of a tender on 13.12.2008 and such sale of plots was sought to be stayed by M/s. Greenfields Plot Holders-cum-Residents Association by way of an application being C.A. No. 23/2009 in C.P. 50/2006. The Company Law Board passed an order on 13.01.2009, whereby the company was directed to maintain status quo with respect to the plots advertised for sale. It is however stated that intimation letters were sent on the same date i.e., 13.01.2009, to the successful bidders in respect of the advertised plo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon areas like parks etc. 9. The appellant in CO. A.(SB) 36/2011-Greenfields Residents Welfare Society (wrongly stated as Greenfields Residents Welfare Association in the proceedings before the CLB), is a registered Society set up with the responsibility of looking after the interests of the residents. It has been stated by the appellants that the primary challenge to the impugned order dated 24.05.2011 put forth is that the Additional Directors appointed by the Company Law Board, are the very people who were the former directors of the Company and were ousted earlier on the allegations of widespread financial and fiduciary irregularities. The impugned order has been challenged on various grounds, which are now not relevant as such. 10. The appeal bearing No. CO. A.(SB) 37/2011 has been filed by Greenfields Plot Holders-cum-Residents Association, whose primary objection was regarding the individuals appointed as the Additional Directors. It is urged on behalf of the appellants herein that the shareholding of the company is in dispute and various litigations are pending currently for the determination of the shareholding of the company, so much so that the shareholders are yet to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case with a view to bringing to an end the matters complained of. This power of CLB is without prejudice to the generality of the powers of the Board under the provisions of the Act. The CLB has been conferred with wider jurisdiction to give an effective relief and to do complete justice to the parties. There cannot be any rigid rule which can be insisted upon. An order under section 408 may not be able to cure the illegal or prejudicial act which may already have performed but can be used to prevent further damage. The purpose of section 408 is to ensure that the Govt. Directors are appointed to act like a watch dog to ensure that the affairs of the company are in a proper manner. It is also beyond any controversy that the CLB while exercising its discretion is not bound by the terms contained in the provisions of the Act if in a particular fact situation a further relief or reliefs, as the CLB may deem fit and proper, is warranted. While hearing petition under Section 408, the CLB is not divested of its plenary powers under Section 402 and other provisions of the Act as well as its discretionary powers under Regulation 44 of the CLB Regulations 1991 which is mutatis m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee or any other expenses except travelling expenses limited to Rs. 25,000/- per month for each such Additional Director. The quorum for the Board shall be the Whole Time Director and any one or more of the Additional Directors. Before expiry of one year, the Whole Time Director shall mention a Company Application through the UOI to seek further extension of tenure of the Additional Directors for further one year. The Whole Time Director shall also update the CLB on the status of other shareholders on getting entitled to be on the register of Members on disposal of the pending proceedings before the Hon'ble High Court at Mumbai to enable the CLB to consider putting them as well on the Board of the R-1 Company. The Whole Time Director shall also constitute a Grievance Cell in the R-1 Company to redress the grievances of the so-called allotees of the plots as per law. The Grievance Cell shall be headed by the Whole Time Director and shall also cater to the requirements of the Greenfields Plot Holders as well as the Residents Welfare Association. Two representatives (duly elected) of these two associations shall also be made members of the Grievance Cell by the Whole Time Directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to time inter alia also enjoining that the company would be responsible for maintenance and upkeep of all roads, open spaces, public parks and public health services for a period of five years from the date of issue of Completion Certificate. 13. It appears that the DGTC vide order dated 01.12.2016 directed the company to transfer possession of all such roads, open spaces, public parks and public health services in the colony to the MCF on an as is where is basis leaving the colonizer to continue to be responsible for compliance of the various terms and conditions of the exemption, including but not limited to the following: a. Construction of community sites as per provision of Act No. 8 of 1975 as amended up to date. b. Liability to obtain completion/part completion certificate. c. Development of commercial pockets including approval of building plans and grant of occupation certificates. d. Liability to deposit Infrastructure Augmentation charges, if not deposited earlier. e. Clearance of outstanding dues on account of EDC/IDC including enhanced and interest thereupon, if any. f. You shall set aside all the bilateral issues with the allottees in the colony after affording an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maintenance Rs. 38,86,926/- 6. Park with five-year maintenance cost Rs. 13,74,25,154/- 7. Water supply/repair of existing booster Rs. 1,11,68,621/- 8. Sewer system Rs. 7,50,76,955/- 9. New community Centre construction Rs. 7,71,14,430/- 10. Construction of STP with MPS Rs. 26,25,00,000/- The Deficiencies in lieu of Electrical Infrastructure have not been included. The necessary amount in lieu of electrical infrastructure shall be deposited with Dakshin Haryana Bijli Vitran Nigam. The company shall submit NOC from all other respective Departments for payment of water supply charges and electricity bills. 12. That the deponent has issued instructions to the colonizer/developer company to ensure DTCP, Haryana directions issued on 01.12.2016 and order Dated 17.10.2022 circulated bearing memo no. 437 in which it is decided the principal takeover of Green Field colony. In order to provide mandatory public services and fulfill the statutory obligations within municipal limits as per the Haryana Municipal Corporation Act, 1994, it is responsibility of this Corporation to give facilities to the residents and to start the augmentation or creation of facilities but due to shortage of funds it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act, 1956 (1 of 1956) in regard to the jurisdiction, powers, authority and functions of the Board of Company Law Administration and court shall continue to apply as if the Companies Act, 1956 has not been repealed: [Provided further that] provisions of the Companies Act, 1956 (1 of 1956) referred in the notification issued under section 67 of the Limited Liability Partnership Act, 2008 (6 of 2009) shall, until the relevant notification under such section applying relevant corresponding provisions of this Act to limited liability partnerships is issued, continue to apply as if the Companies Act, 1956 has not been repealed. (2) Notwithstanding the repeal under sub-section (1) of the repealed enactments, (a) anything done or any action taken or purported to have been done or taken, including any rule, notification, inspection, order or notice made or issued or any appointment or declaration made or any operation undertaken or any direction given or any proceeding taken or any penalty, punishment, forfeiture or fine imposed under the repealed enactments shall, insofar as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the correspon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gional Director or the Central Government under the Companies Act, 1956 (1 of 1956) before the commencement of this Act and not fully addressed at that time shall be concluded by the Registrar, Regional Director or the Central Government, as the case may be, in terms of that Act, despite its repeal. (3) The mention of particular matters in sub-section (2) shall not be held to prejudice the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal of the repealed enactments as if the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) were also a Central Act. 16. Mr. Saurabh Kirpal, learned Senior Counsel urged that consequent to repeal of the old Companies Act of 1956, the Central Government has no powers to appoint any Directors on the Board of the company and no longer controls its state of affairs and business in any manner; and that the company has to go back to its shareholders, who may have the liberty to appoint anyone on the Board so as to continue to manage and run the affairs of the company in question. 17. While the learned counsel for the Central Government acknowledged the changed position in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the situation at the site, status of the pending projects with timeline for their completion and unsold inventory disposition with regard thereto etc. if any. 10. Such affidavit cum undertaking shall also provide for setting up an escrow account with a bridge loan agreement from any nationalized bank or scheduled banks, or in the alternative without bridge agreement, as the case may be. It shall also specify the time line within which the petitioners/shareholders propose to hand over the site to the MCF and make the payment of lump sum amount claimed by the MCF in its affidavit dated 11.11.2022. 11. Needless to state, the affidavit cum undertaking to be furnished shall also allude to the claims of the petitioner in CO. A.(SB) 45/2011 as also any other claimant/intervener in C.A.No. 678/2022. 12. Learned Senior Counsel appearing for the petitioners/ shareholders requests for two weeks' time to submit the requisite affidavit cum undertaking. Let the same be filed after sharing the same with the other stakeholders. 19. In compliance to the aforesaid directions, an affidavit of Mr. Ish Godhwani dated 03.01.2024 has been filed on behalf of the appellants/ shareholders whereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and marked as Annexure - B . (vi). During execution of the Shareholder's Works, any variation/escalation m costs, shall be borne by the Appellants shareholders at their own costs. (vii). The Appellants shareholders will deposit the operations and maintenance cost for the Sewage Treatment Plants (including the main pumping station) and electricity charges / bills of Sewage Treatment Plants for a period of five years from the date of completion of colony by the Competent Authority. (c) The infusion of Development Cost shall commence from the Trigger Date, in a manner stipulated in this Affidavit and shall be as follows: (i) The Appellants shareholders shall raise the funds for Development Cost by selling the assets of the Company to the extent of the Development Cost. The disposal method will be commercially prudent and transparent and all the sale proceeds will be deposited in escrow accounts. The Appellants shareholders undertake that no asset shall be sold below the circle rate. It is clarified that monies from the said escrow accounts will be used exclusively for the purposes of development of the Greenfields Colony. A schedule of the unsold inventory of the Company, to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny including its assets and properties. It may further be indicated that the submissions advanced by the learned Counsels for the parties were heard at some length on 08.02.2024. It has been clarified that as per the estimates, Rs. 55 crores shall be payable to the MCF for the developmental work and about Rs. 45 crores shall be spent on the development work undertaken to be carried out by the shareholders/management. 21. However, there are certain objections which have been raised by the RWAs as also the Ministry of Corporate Affairs, which need to be considered. OBJECTIONS BY GREENFIELD PLOT HOLDERS: 22. Learned counsel appearing for the aforesaid RWA has urged that Mr. Ish Godhwani is not a duly authorised representative of the appellants/shareholders, as he is merely a property dealer and cannot be a part of the Board of Directors and it was pointed out that most of the appellants/shareholders are residing abroad and cannot be involved in the day to day affairs of the company and their intention to run the affairs of the company is manifestly suspect. 23. A strong objection is also taken in the affidavit on behalf of the RWA to the effect that there is no complete Register of Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential plots under litigation whereas 56 plots exist and the appellants/shareholders have omitted to make additions of the vacant sites for various facilities in Annexure-C to their affidavit; and lastly, that no statement has been given by the appellant/shareholders as regards the actual infusion of funds either through rights issue or otherwise through bridge loans with any banker. ANALYSIS AND DECISION: 27. Having bestowed my anxious consideration to the detailed and vociferous submissions advanced by the learned Counsels for the parties and on careful perusal of the record, first things first, unhesitatingly the control and interference by the Central Government appointees in the Board has to cease consequent to the repeal of Section 408 of the Companies Act, 1956. It is a matter of record that the Government nominated Directors, over the last four decades, have been unable to undertake any appreciable measures so as to develop the site in question despite having sold over 300 plots of the company. Even the CLB in the impugned order dated 24.05.2011, had the occasion to comment that the Directors nominated by the Central Government had thoroughly mismanaged the affairs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the Company or existing funds or amounts arranged through any other resources of Urban Improvement Company Pvt. Ltd., the Shareholders would deposit all the sale proceeds and funds from other resource if any (after deducting the expenses incurred in executing the sale, account of which shall be kept by the Shareholders) into two different escrow Accounts to be opened specifically for that purpose. THE FIRST escrow account jointly operated with COMMISSIONER MUNICIPAL CORPORATION OF FARIDABAD or his representative and CHAIRMAN of Urban Improvement Company or shareholders or any authorised representative for the works to be executed by MUNICIPAL CORPORATION OF FARIDABAD. THE SECOND Escrow account will be operated by CHAIRMAN of Urban Improvement Company or shareholders or any authorised representative specifically for works undertaken by the shareholders, as per the work taken from DPR in clause 2.3. The CHAIRMAN of Urban Improvement Company or shareholders or any authorised representative will give an undertaking that they will not use the funds in this account for any other purpose apart from works undertaken by shareholder from MUNICIPAL CORPORATION OF FARIDABAD as per works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properties of the company, is quite understandably, not acceptable to the other stakeholders. All said and done, there is no gainsaying that the proposal put forth by the MCF is worth consideration. There also appears to be a change in the circumstances surrounding the appellants/shareholders as it is brought to the fore that a board of directors have been since been constituted in terms of Annexure-D to the affidavit dated 03.01.2024 and the long standing disputes amongst the appellant/shareholders have since been resolved and that the legal heirs of the shareholders have entered into a family settlement before the Bombay High Court in terms of order dated 24.09.2018 and the position of the share holdings has been brought out as under:- S.No. Name of the Shareholder Relation with original shareholders/justification of present shareholding Number of shares 1. Prakash Dialdas . Original shareholder (2 shares) . Son of Balram Dialdas (10 shares from the estate of Balram Dialdas) . 138 shares from the estate of Bhai Pratap Dialdas and Lachmibai Dialdas 150 2. Anand Patwardhan . 5 shares from the estate of Nirmala Patwardhan and W.H. Patwardhan as their son (original shareholders hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an estimated cost of Rs. 99.79 crores, which is to be borne/shared by the MCF and the shareholders/stakeholder, there is a possibility that necessary development work may commence at the site. Therefore, in the totality of the abovesaid background, it is hereby provided that the company i.e. UICPL, will henceforth be under the exclusive control of the appellant/shareholders, who would be free to manage its affairs as per law and appoint its own Board of Directors including a Managing Director, auditors and Company Secretary within 15 days from today or 8th April, 2024, whichever is earlier, to run its affairs and take absolute control of its properties/assets. The Chairman Managing Director shall have unhindered access to the site for the purpose of carrying out inspection, planning and carrying out the development work. However, this disposition shall be to the following paramount conditions: A. DEVELOPMENT WORK TO BE CARRIED OUT BY THE COMPANY: (i) The company through its shareholders shall infuse or bring in a total investment of Rs. 50 crores from their personal sources including through banks and institutions, without creating any charge, mortgage or lien over the assets/pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Chairman and/Managing Director of the company under the overall supervision and monitoring of the Court Commissioner. B. DEVELOPMENT WORK TO BE CARRIED OUT BY THE MCF: (i) The company shall infuse funds in the first phase up to a sum of Rs. 55 crores through banks or financial institutions by creating charge, mortgage or lien over the assets/properties of the company to that extent, which shall be deposited in a second Escrow account, and said amount shall be utilized for the purposes of commencement of development work by the MCF in a phased manner; and such account shall be operated jointly by the Chairman of the company and the Commissioner of the MCF or his duly authorised officer not below the rank of Senior Superintendent Engineer. (ii) The company through its Board of Directors shall be free to raise loans from banks or financial institutions for the purpose of sale of the properties/assets of the firm in the initial phase to the extent of Rs. 50 crores only, till such time the development work is completed by the MCF; (iii) All proceeds from the sale of the plots of land or other properties of the company shall be deposited in the second escrow account. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commissioner shall ensure that a meeting is convened every month and not later than 45 days under his Chairmanship with the Chairman and/or Managing Director of the company as also the concerned official(s) from the MCF, besides inviting the present President Secretary of the RWAs, so as to take stock of the development work being carried out at the site and take remedial actions/measures, wherever necessary. (iv) The entire supervision of the finances and handing over of possession of the completed flats to the flat buyers shall be done under the control and supervision of the Court Commissioner. No immoveable property shall be sold/parted with or mortgaged without prior permission of the Court Commissioner. (v) The Court Commissioner shall ensure that no part of the funds shall be utilized in any manner for any other project and not be siphoned off in any manner; and in this regard may pass necessary directions to the concerned bank/financial institutions. (vi) The operation of the account shall be monitored by the Court Commissioner, who shall have inherent powers to issue any notice, seek rendering of accounts from the Chairman or the company through its Board of Directors in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or claiming any right, title or interest in the properties/assets of the company including criminal proceedings. 34. In view of the aforesaid disposition laid down by this Court, all the pending applications shall stand answered with regard to the management and running of affairs of the company. However, it is provided that in case this disposition does not fructify and the desired results are not reached on being assessed objectively, the concerned applicants shall be at liberty to revive the applications in future, for hearing and disposal. 35. Re-notify for compliance on 15.05.2024. ----------------------- Notes: 1. 408. Powers of Government to prevent oppression or mis-management .- (1) [Notwithstanding anything contained in this Act, the Central Government may appoint such number of persons as the [Tribunal][may, by order in writing, specify as being necessary to effectively safeguard the interests of the company, or its shareholders or the public interests to hold office as Directors thereof for such period, not exceeding three years on any one occasion, as it may think fit, if the [Tribunal] [Substituted by Act 31 of 1988, Section 54, for sub-Sections (1) and (2) (w.e.f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any qualification shares nor his period of office shall be liable to determination by retirement of Directors by rotation; but any such Director or additional Director may be removed by the Central Government from his office at any time and another person may be appointed by that Government in his place to hold office as a Director or, as the case may be, an additional Director. (5) No change in the Board of Directors made after a person is appointed or directed to hold office as a Director or additional Director under this section shall, so long as such Director or additional Director holds office, have effect unless confirmed by the [Tribunal] [Inserted by Act 65 of 1960, Section 155 (w.e.f. 28.12.1960).]. (6) [ Notwithstanding anything contained in this Act or in any other law for the time being in force, where any person is appointed by the Central Government to hold office as Director or additional Director of a company in pursuance of sub-section (1) or sub-section (2), the Central Government may issue such directions to the company as it may consider necessary or appropriate in regard to its affairs [and such directions may include directions to remove an auditor already ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
