Adbhut Vincom Private Limited vs Mis. Hotel Birsa Private Limited

Prese ri ::bhijeet Sinha, Shri Arijit shay Chandan and Shri

espondent: - Shri Prateek Khanna, Advocate.

JUDGEMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

This appeal has been preferred by Appellant "Adbhut

Vincom Private Limited" against part of the order dated 7th April

2017 passed by the National Company Law Tribunal (Kolkata

Bench) (hereinafter referred to as Tribunal), whereby and whereunder the Company Petition preferred by the Appellant

has been allowed but the Ld. Tribunal while allowing the same

directed to sell their shares to a 3rd party - 'Libra'.

2. The Company Petition was preferred by the Appellant

under Section 397, 398, 399, 11 IA, 402 and 406 of the

Companies Act, 1956 alleging wrongful acts and conduct of

'oppression and mismanagement' by 2-& to 7th Respondents to

the petition who are also Respondcnts herein Th€. application

was heard and by impugñei order dated 7th April 2017 the

Tribunal held as follows:

Therefore, omission to give notice of meeting was held to be oppression. Not sending notices to the shareholders/directors and passing resolutions therein is held oppressive to members and constitute mismanagement of companies. Moreover, the Respondents claim to have served the notice to the Petitioners through "Certificates of Posting" and it is their case that the Petitioners despite being in the know of the meetings chose not to attend the same. However, the Petitioners contend that they were never notified about the meetings that were held to pass the aforementioned resolutions and therefore the meetings were convened in violation of the Companies Act, 1956 Section 97 of the Companies Act, 1956 contemplates notice of increase of share capital or of members. Serving of notice to members for general meetings is mandatory under all circumstances. Serving of notice to members for general meetings is mandatory under all circumstances. Even though the Petitioner had apparently been notified of all the meetings and the on goings of the company which are evident only through "Certificates of Posting", the Petitionerfailed to attend any of the meetings. Moreover, since the Petitioner, until the share capital was increased, was the holder of 49°% shareholding in the company, no special resolutions could have been passed without his participation and vote on the same.

Therefore, in the light of the contentions, it is concluded that there is a clear case of oppression against the Petitioner. The meetings that were convened by the Board of Directors have not been properly notified to the Petitioner and resolutions therein were passed in absence of the vote of the Petitioner thereby constituting statutory violation. Also notices that were alleged served by the Respondents onto the Petitioner was not proper. The reason for the same being that the alleged notice for the meeting that was 3

held on 18th February 2010 was stated to have been sent by the company on the same day from Ranchi which was the date of the board meeting on 18th February 2010, another board meeting according to the Respondents was held at Kolkata on 19th February 2010, notice of which was sent on the same date 19th February 2010 to the shareholders of the company. Therefore, issue nos. 1 and 2 are conclusively decided in affirmative in favour of the Petition."

3. However, while allowing the petition in favour of

Appellant, the Tribunal passed the following order: -

"ORDER

The Petition is allowed. It is therefore in the interest of the company and for the existing shareholders of the company that since the Petitioner was agreeable to sell their shares to Libra, the same be effected. Also the shareholding of the Petitioner shall be reinstated to the amount at which it stood prior to the increase in the authorised capital and subsequent increase in issued capital. The resolution as passed in the meeting whereby the increase in authorised, share capital, alteration of the Memorandum ofAssociation and Articles ofAssociation, appointment of whole time directors in the meeting and allotment of shares stand cancelled as they were carried out in violation of the Companies Act, 1956. Consequently, the shares of 1,20, 000 and 90,000 allotted to R7 and R4 respectively are to be cancelled and the amount paid by them is to be refunded by the Ri company. The Memorandum of Understanding between Libra and the Petitioner will be binding on the parties.

1 I The Petitioner is hereby directed 14o execute the necessary share transfer forms in favour of Libra Retailer Private Limited 1 as per the Memorandum of Understanding. Libra is therefore directed to pay the balance amount due as per the Memorandum of Understanding after deducting the amount already paid to the Petitioner by Libra pursuant to the Memorandum of Understanding. Parties are directed to adhere to all other terms as agreed to in the Memorandum of Understanding strictly."

4. Ld. Counsel for the Appellant submitted that initially the

Appellant intended to sell its share to a 3rd party 'Libra' by

Memorandum of Understanding dated 29.9.2009. After filing

of the petition under Section 397 and 398 by the Appellant, the

said 3rd party tried to intervene in the application which was

rejected by the Tribunal. Later on part payment was made which was adjusted against the outstanding loan which 'Libra'

had agreed to repay. But later on it decided by the Appellant

not to sell such shares to the 3rd party and to retain the same.

5. After filing of the Company Petition the said 3rd party

'Libra' filed an application for impleading it as Party

Respondent, which was rejected by Tribunal by order dated 24th

August 2016.

6. The grievance of the Appellant is that though 'Libra' was

not a party to the Company Petition an ion for 'oppression

and mismanagement' has been decided in our of the

Appellant and against Respondents No 2 to 7 but by last part

of the impugne er dated 7th April, 2017, the Ld. Tribunal

company to sell its shares to the 3rd party

'Libra'. It ;: submitted that the Tribunal has no jurisdiction

to pass such order under Section 402 of the Companies Act,

1956 or under Section 242 of the Companies Act, 2013 once

'oppression and mismanagement' alleged by Appellant

company is accepted against Respondent No. 2 to 7 and no

direction can be given to the complainant Appellant to sell its

shares to the 3rd party, who is not a shareholder of the 1st

Respondent company.

5

7. Ld. Counsel for the Respondents while alleged that

several illegal acts have been undertaken by the 2nd and 3rd

Respondents in collusion with the Appellant, also alleged

wrongful act on the part of the Appellant and other by holding

Annual General Meeting of the company on 30th December

2016. However, such alleged act on the part of one or other

party cannot be taken into considera this case, as the

Respondents have not raised such ques nd not challenged

the impugned order.

8. Similar question came for consideration before the

Hon'ble Supreme Court in "Dale on Invt. (P) Limited &

Anrv. P.K. Prathapan & Ors" (2005) 1 SCC 212. In the said case

:s earlier decision in "Tea

Prosad Barooah" (1998) 5 Comp

Li 463 and the observation made therein which is as follows: -

"25. On the question of relief, the Court observed:

A majority shareholder should not ordinarily be directed to sell his shares to the minority group of shareholders, ifper chance through fortuitous circumstances or otherwise, the minority group of shareholders comes into power and management of the company. The majority shareholders by virtue of their majority will usually be in a position to redress all wrongs done and to undo the mischief done by the minority group of shareholders, as it will always be possible for the majority group of shareholders to regain control of the company so long as they remain in majority in the company by virtue of the majority. Except in unusual circumstances, the majority group of shareholders, in my opinion should never be ordered or directed to sell their shares to the minority group of shareholders. An order directing 6

the majority group of shareholders to sell his shares to the minority group of shareholders will not redress the wrong done to the majority group of shareholders and will not give him sufficient compensation or relief against the act of oppression complained of by him, and, on the other hand, may add to his suffering and grievance and cause him greater hardship. Such an order will not further the ends of justice and indeed the cause ofjustice may be defeated."

9. Having heard Ld. Counsel for the parties while we hold

that the Tribunal has no jurisdiction to direct sale of shares to

an outsider particularly while there are other shareholders, who

may agree to purchase the same, a wrong doer, also cannot get

any relief.

10. For the reason aforesai ast para of the

order dated 7th April 2017 and as quoted at paragraph 3 above

and affirm the rest part of the finding, 'Whereby 'oppression and

mismanagement' as allege ppellant has been upheld.

11. The appeal is allowed to the extent above. However, in

the circumstances of the case, there shall be no order as to cost.

(Mr. Balvinder Singh) (Justice S.J. Mukhopadhaya) Member (Technical) Chairperson

NEW DELHI 11th August, 2017 $:c.