Ajit Mitial vs Rekha Garg & Ors

[Arising out of order dated 09.07.2021 passed by the National Company Law Tribunal (New Delhi Court III) in New CA-274/2021 in 270/241/242/ND/18]

IN THE MATTER OF: Ajit Mittal S/O Sh. SC Mittal R/O Flat No. 113, SFS, Punjabi Bagh Apartment, Madipur, New Delhi. Email: akmittal23@yahoo.com ...... Appellant.

Versus

1. Rekha Garg W/O Mahesh Garg, R/O H. No. 18A, Railway Officer Colony, S.P. Marg, New Delhi. Emai: rekhagarg@gmail.com 2. Yogesh Aggarwal S/O Tej Narain Aggarwal, R/O G-74, G Block, Pushkar Enclave, Paschim Vihar, Delhi-110063 Email: yogeshagarwal@yahoo.com 3. Amar Aggarwal S/O Lala Ram R/O A-1/41, Block A, Pocket-1, Rohini, Sector-8, Delhi-110085. Email: agbpartners@gmail.com 2

4. Sudhir Aggarwal S/O Brij Mohan Lal Aggarwal R/O 3, First Floor, Meenakshi Tower, Agra, Uttar Pradesh-282004 Email: agbpartners@gmail.com 5. Hari Om Prasad Sharma S/O Bhagwan Dass Sharma R/O Village Jodhpur, PO Repura Jat, District Mathura, Mathura Uttar Pradesh-281122 Email: hariomsharmabdm@gmail.com 6. M/S Bhero Baba Infosolutions Pvt. Ltd. C/O H. No. 18A, Railway Officer Colony, S.P. Marg, New Delhi. 7. M/S Bhero Baba Infosolutions LLP Through it's partners, H. No. 5/48, Second Floor, Old Rajinder Nagar, New Delhi Email: rrekhagarg@gmail.com 8. Chakradev Devcon Pvt. Ltd. Having its Registered Office At: 7, swallow Lane, Kolkata, West Bengal. Email: bbmiltd@gmail.com ....... Respondents

Present: For Appellant: Ms. Neha Kapoor, Advocate.

For Respondent:- Mr. Ajay Garg and Mr. Mahesh Sharma, Advocates for R- 1, 3, 5 & 7.

Company Appeal (AT) No. 122 of 2021 3

JUDGMENT

(08th December, 2022)

Justice Anant Bijay Singh;

The present Appeal is arising out of Section 421 of the Companies Act,

2013 against the impugned order dated 09.07.2021 passed by the National

Company Law Tribunal (New Delhi Court III) in New CA-274/2021 in

270/241/242/ND/18. By which, the Tribunal dismissed the company petition

along with the application under Section 244(1) vide order dated 09.07.2021 on

the ground that the Appellant does not satisfy the basic requirements of the

provision of Companies Act as the Respondents are not a company as on the

date of filing of the present petition.

2. The facts giving rise to this Appeal are as follows:

i) The Appellant and the Respondent No. 1 together purchased a company

namely M/s SAS Info Solutions for the purpose of establishing a Solar System

Project on the land of the erstwhile company on 20.09.2011. The Respondent

No. 1 is the wife of a friend of the Appellant namely, Mahesh Garg, who was made

director of the company as Mahesh Garg is an employee with Northern Railway

and Respondent no. 1 was made a director as being a woman, she will get some

concession/benefits. That in lieu of the same, after investing the entire amount

for the payment of all the liabilities of the company, the Appellant agreed to keep

only 100 shares in his name and rest 89,900 shares in the name of Respondent

no. 1 with the assurance that Respondent no. 1 will transfer the shares in her

name to the name of the Appellant. The entire amount of Rs. 58,50,000/-

towards the purchase of M/s SAS Info Solutions, it's assets i.e., the land

Company Appeal (AT) No. 122 of 2021 4

admeasuring 3 Bighas and 8 Biswas, out of Khasra no. 67//22/1/1 min (1-08),

67//19/2 (2-00) and for clearing all the said liabilities of the company, was paid

by the appellant from the account of M/s Flowmech Engineer Pvt. Ltd., which is

a private limited company of the Appellant and his brother Sh. Atul Mittal. Out

of this total amount of Rs. 58,50,000/-, an amount of Rs. 15,00,000/- was

transferred from the account of M/s Flowmech Engineer Pvt. Ltd. to the account

of Respondent no. 1 solely for the purpose of purchase of shares of M/s SAS Info

Solutions. That the liability of the above-mentioned amount was admitted as

outstanding in the accounts of M/s SAS Info Solutions vide letter dated

10.02.2015.

ii) The Appellant had last signed the balance sheet of the company for the

financial year 2013-2014 and in the month of January, 2015, the Appellant

started smelling some foul play on the part of Mr. Mahesh Garg. The Appellant

got suspicious and made enquiries and it was only in the month of October 2015,

that he came to know from ROC that he was shown as retired director of M/s

SAS Info Solutions. The Appellant was shocked upon receiving this information

as he had never resigned from the said company nor was aware of any

resignation letter being uploaded for him. The Appellant upon further enquiry

came to know that other persons were appointed as directors in the said

company by the Respondent no.1 alone and requested to be provided with the

copy of the board resolution by which they were allegedly appointed or the alleged

resignation of the Appellant was accepted however, the same was also refused to

him. The Appellant requested the Respondent no.1 and her husband to provide

with the copy of statutory record of the company maintained by them as they Company Appeal (AT) No. 122 of 2021 5

had taken the responsibility for the project apart from the register of

directors/shareholders, minute book of general meeting required to be

maintained, books of account and registers, however none was provided to him.

iii) The Appellant thereafter obtained certified copies of the relevant

documents from the office of ROC upon which it was discovered that apparently

a letter of resignation dated 03.02.2014 as mentioned on the copy received from

the office of ROC and in the DIR Form the date is written 03.02.2014 was sent

by the Respondent no.1 to the ROC on 28.03.2014 bearing forged signatures of

the Appellant. The Appellant thus having no choice, made a complaint dated

16.10.2015 to the ROC on 19.10.2015 (Annexure-P-10 at page 154 to 155 of the

Appeal Paper Book). The Appellant has filed another complaint dated 23.12.2015

in the ROC on 05.02.2016 against the Respondents (Annexure P-22 at page 275

to 276 of the Appeal). The Appellant while following actions on his complaints

before the ROC, came across another fraud played upon by the Respondent no.1

and 5 by claiming themselves as only directors and shareholders of Respondent

no.6 as they changed the entity of Respondent no.6 to Respondent no. 7 and got

it registered on 05.01.2016. The procedure as provided for in the Limited Liability

Partnership Act for conversion of Respondent no.6 to 7 was not followed which

was done only for the purpose of defrauding the Appellant and is illegal as the

liability of the Respondent no. 6 company towards M/s Flowmech Engineers Pvt.

Ltd. is still outstanding.

iv) Further case is that the Appellant has come to know that Respondent no.

l had even transferred the 89,900 shares in her name in the name of one Mamta

Aggarwal on 10.07.2014 who apparently held the same till September, 2015. The Company Appeal (AT) No. 122 of 2021 6

Respondents have together committed forgery in forming the Respondent no. 7

and thereafter, sold the only asset of M/s SAS Info Solutions i.e., one immovable

property i.e., the land admeasuring 3 Bighas and 8 Biswas, out of Khasra no.

67//22/1/1 min (1-08), 67//19/2 (2-00) situated in Revenue estate of village

Mundka, Delhi to Respondent No.8 for which the Appellant had made the

payment. The Appellant had earlier preferred a Civil Suit bearing CS No.

607666/2016 title "Ajit Mittal vs Rekha Garg & Ors." which was withdrawn vide

order dated 18.10.2016 of the Court of Sh. Devender Kumar Jangala, ADJ-07,

Tis Hazari Court (West), Delhi (Annexure P-27 at page 341 to 342 of the Appeal).

The Appellant has also filed a complaint in P.S. Mayapuri, regarding forgery on

which FIR No.0259 dated 03.09.2016 has already been registered and presently

charge sheet has been filed in the above FIR and the same is pending before the

Court of Ms. Neha Pandey, MM-03, Tis Hazari Court (West), Delhi. (Annexure P-

28 at page 343 to 356 of the Appeal). Thereafter, The Appellant had preferred

Civil Suit before the Hon'ble High Court bearing no. CS (Comm.) No. 89/2020

against the same Respondents as in the present case and the same was

dismissed vide order dated 05.03.2020 (Annexure-P-29 at page 357 to 367 of the

Appeal) wherein the Hon'ble Court gave findings that the suit of the plaintiff is

not maintainable as NCLT is the proper forum for grant of relief prayed in the

suit which related to same subject matter and same cause of action.

v) Thereafter, the Appellant had filed the Company Petition No.

270/241/242/ND/2018 before the NCLT, Delhi and after hearing the parties,

the Tribunal dismissed the petition holding that the Appellant does not satisfy

the basic requirements of the provision of Companies Act as the Respondent are Company Appeal (AT) No. 122 of 2021 7

not a company as on the date of filing of the present petition, which led to filing

of this Appeal.

Submissions on behalf of the Appellant

3. The Ld. Counsel for the Appellant during the course of argument and in

her memo of Appeal along with written submissions submitted that it is an

admitted case position that the Respondent No. 6 was a company on the date of

the oppression and mismanagement pleaded by the Appellant i.e. when the

Appellant was fraudulently shown as having resigned from the directorship of

the said company. The Appellant resignation is forged and fabricated and the

Respondents have malafidely converted Respondent No. 6 company into

Respondent No. 7 LLP in order to avoid clearing their liability towards the

Appellant and his other concern namely M/S Flowmech Engineers to whom the

Respondent No. 6 owed money admittedly as per documents annexed as

Annexure- P-8 with the Appeal. The Appellant could have only agitated his

grievance upon discovering the fraud and not anytime earlier.

4. It is further submitted that jurisdiction in company matters rests

exclusively with NCLT and the jurisdiction of civil Court is barred under Section

430 of the Companies Act. It has been held in Sas Hospitality Pvt. Ltd. and Ors.

Vs. Surya Constructions Pvt. Ltd. and Ors. held that NCLT has been vested with

powers that are far reaching in respect of management and administration of

companies. The said powers of the NCLT include powers as broad as "regulation

of conduct of affairs of the company" under Section 242(2)(a), as also various

other specific powers. The NCLT is a Tribunal which has been constituted to

have exclusive jurisdiction in the conduct of affairs of a company and its powers Company Appeal (AT) No. 122 of 2021 8

can be contrasted with that of the CLB under the unamended Companies Act,

1956. A similar view was taken in Jaiveer Singh Virk Vs. Sir Sobha Singh And

Sons Pvt. and also in The Delhi & District Cricket Association Vs. Sudhir Kumar

Aggarwal & Ors. to say that the scope of Section 430 is vast, and jurisdiction of

the civil Court is completely barred when the power to adjudicate vests in the

Tribunal. The Respondents never acted in conformity with the provisions of

Companies Act which has otherwise not been denied in their reply and thus

necessary action ensued against them by filing of the petition before the NCLT

for non compliance of the provisions of Companies Act.

5. It is further submitted that the sum received from M/S Flowmech

Engineers was used for purchasing the land in question which was the only asset

of M/S SAS Infosolutions Pvt. Ltd. apart from the amount of Rs. 15 lakhs paid

for purchase of shares which has been fraudulently sold to Respondent No. 8.

The Appellant had already moved an application under Section 244 of the

Companies Act, 2013 which was also summarily dismissed vide the impugned

order without giving any reasons. Therefore, the Appellant ought to have been

given an opportunity to satisfy the NCLT on waiving the requirements as per

Section 244 before summarily dismissing the petition and the application under

Section 244 of the Act. There was no delay in filing the company petition as the

Appellant was only in the month of October 2015 that he came to know about

the fraud played upon him by the Respondent No. 1, Therefore, in the month of

April 2016, he inadvertently failed a civil suit which was withdrawn by him with

liberty to approach the NCLT on 18.10.2016. The Appellant then filed the

company petition in July 2018 which is admittedly within 3 years of his gaining Company Appeal (AT) No. 122 of 2021 9

knowledge of the fraud. The time spent by the Appellant before the Civil Court

would be excluded for the purposes of counting the limitation period.

6. It is further submitted that the judgments relied upon by the Respondents

are not applicable in the facts of the present case as there has been no fraud,

concealment or misrepresentation on behalf of the Appellant and there has been

no judgment in place which is being sought to be declared a nullity herein. The

judgment relied upon by the Respondent in fact supports the case of the

Appellant as he has made out a case for waiver in view of the fraud played upon

by him by the Respondents more so for the reason that the Respondents have

not specifically denied the fact that the Appellant was made to resign

fraudulently, therefore, the fraudulent conversion of the company to LLP is a

circumstance supporting the case of the Appellant for seeking waiver under

Section 244 of the Act. The contents of the order dated 05.03.2020 passed by

the Hon'ble High Court has to be read in its entirety and when done so, it clearly

mentions that the NCLT has the jurisdiction to adjudicate the grievance raised

by the Appellant.

7. It is further submitted that in the case of Brookeield Technologies Pvt. Ltd.

Vs. Shylaja Iyer and Others reported in 2020 SCC OnLine NCLAT 829 held that

"To determine whether the petition filed under Section 241 and 242 of the

Companies Act, 2013, the Tribunal has to examine only the averments

mentioned in the petition. The concept of 'oppression' is larger than the idea of

'legal rights' and indeed, the term 'interests' is wider than rights. As a matter of

fact, the law does not define an 'oppressive act'. Whether an act is oppressive

one or not is fundamentally a question of fact. The law relating to 'oppression' is Company Appeal (AT) No. 122 of 2021 10

cemented on the principles of equity and fair play as against the strict

compliance of law. A company is merely an abstract of Law. It cannot be gainsaid

that right to complain about 'oppression and mismanagement' lies with the

members of a company. No wonder fairness and probity rather than legality are

the key factors to be taken into consideration by a Tribunal in case of oppression.

What kind of oppression or prejudice or unfairness is caused in a given case will

depend on the injury caused to an affected person by the concerned as visualised

in Section 241 of the Act,

8. It is further submitted that there is no bar under the Companies Act from

filing a petition against the company which has malafidely changed it into a

LLP/Partnership to forego the claims of its creditors. The Respondents including

the Respondent company are liable to clear its liability even after conversion to

LLP as per Section 56 and 58(4) of LLP Act. Based on these submissions the

impugned order is fit to be set aside and the Appeal be allowed.

Submissions on behalf of the Respondents

9. The Ld. Counsel for the Respondent Nos. 1, 3, 5 and 7 during the course

of argument and in his Reply Affidavit along with written submissions submitted

that the Appellant is not eligible to file Company Petition / Appeal under Section

241(1) and 421 of the Companies Act, 2013 as on the date of filing of original

petition, the petitioner is neither Director nor Shareholder. To hide this fact, the

Appellant has always preferred false affidavit (without disclosing relation with

defendant entity). The Appellant resigned from Directorship from the company

on 28.03.2014 and sold his entire shareholding of 100 shares on INR 10/- each

on 31.03.2014. The provisions of Section 241 and 242 of the Act, regulating Company Appeal (AT) No. 122 of 2021 11

oppression and mismanagement in companies are applicable only on companies

registered under Companies Act, 2013 and/or Companies Act, 1956 and in this

case Respondent No. 6 the erstwhile company i.e. Bhero Baba Infosolutions Pvt.

Ltd. has been converted into (Respondent No. 7) LLP i.e. Bhero Baba Info

Solutions LLP way back in 05.01.2016 more than 2 and ½ years before filing of

original petition, therefore, the Tribunal held that the Respondent are not the

company as on the date of filing of the petition.

10. It is further submitted that in this case the inordinate delay of more than

4 years in filing the Company Petition under Section 241 of the Act, before the

Tribunal. The Appellant resigned from the Directorship on 28.03.2014 and the

shares were transferred way back on 31.03.2014 and the Appellant filed his case

before the Tribunal on 13.07.2018 without any application to condone the delay

while filing the company petition. As per Section 244(1) of the Act, in the case of

"S. Ahamed Meeran Vs. Ronny George & Ors. Company Appeal (AT) No. 162

of 2018" wherein this Tribunal observed as under:

"6. Thereafter Appellate Tribunal proceeded and made

following observations:-

"150. The Tribunal is not required to decide merit of

(proposed) application under Section 241, but required to

record grounds to suggest that the applicants have made

out some exceptional case for waiver of all or of any of

the requirements specified in clauses (a) and (b) of sub-

section (1) of Section 244. Such opinion required to be

formed on the basis of the (proposed) application under Company Appeal (AT) No. 122 of 2021 12 Section 241 and to form opinion whether allegation

pertains to 'oppression and mismanagement' of the

company or its members. The merit cannot be decided till

the Tribunal waives the requirement and enable the

members to file application under Section 241.

151. Normally, the following factors are required to be

noticed by the Tribunal before forming its opinion as to

whether the application merits 'waiver' of all or one or

other requirement as specified in clauses (a) and (b) of

sub-section (1) Section 244:--

(i) Whether the applicants are member(s) of the

company in question? If the answer is in negative

i.e. the applicant(s) are not member(s), the

application is to be rejected outright. Otherwise, the

Tribunal will look into the next factor.

(ii) Whether (proposed) application under Section

241 pertains to 'oppression and mismanagement'?

If the Tribunal on perusal of proposed application

under Section 241 forms opinion that the application

does not relate to 'oppression and mismanagement'

of the company or its members and/or is frivolous,

it will reject the application for 'waiver'. Otherwise,

the Tribunal will proceed to notice the other factors.

Company Appeal (AT) No. 122 of 2021 13

(iii) Whether similar allegation of 'oppression and

mismanagement', was earlier made by any other

member and stand decided and concluded?

(iv) Whether there is an exceptional circumstance

made out to grant 'waiver', so as to enable members

to file application under Section 241 etc.?

Similarly, this case is also liable to be rejected with the above conditions:

• The Respondent No. 6 company already converted in LLP on 05.01.2016.

• The Appellant is neither the Shareholder nor Director.

• The Company Petitioner barred by limitation and the Appeal is also barred

by limitation.

• The company petition as well as Appeal are totally fraud played with the

Respondents and to mislead the Tribunal as well this Tribunal.

11. It is further submitted that dismissal on the grounds of fraud and

concealment by the Appellant played upon this Tribunal:

• First Fraud- The Flowmech Engineers Pvt. Ltd. (non Applicant) sought

balance confirmation for the year 2010-11 for the purpose of Income Tax

audit of books of accounts, from the Respondent No. 1 on behalf of

Respondent No. 6 on 10.02.2015 because he knew that he cannot sign

such confirmation.

• Second Fraud- The Appellant has deliberately and malafidely concealed

material facts, circumstances and documents which in itself do not

Company Appeal (AT) No. 122 of 2021 14

reflects any claim of Appellant but reflect past settled claim of non

applicant.

• Third Fraud- The Appellant never extended any loan to erstwhile company

Respondent No. 6. The Appellant is intentionally and shrewdly mixing

settled issues.

Further, the Appellant at many places i.e. FIR, Company Petition before the

Tribunal and Hon'ble High Court (based on petition filed) has deliberately

mentioned the wrong shareholding of the Respondent No. 1 and wrong paid up

capital of the Respondent No. 6 Company for his benefit to divert the

Tribunal/Courts as well as Authority in his favour. The judgment obtained on

the basis of the fraud played upon the Court shall be rendered nullity as has

been held by the Hon'ble Supreme Court in the case of "Chengalvaraya Naidu

Vs. Jagannath, AIR 1994 SC 853". Further, the stage of the present Appeal

does not render the merits of the present Appeal of a lesser importance, as in

cases of fraud, the stage of the proceedings has no consideration. The same has

been observed in the case of "M.C.D. Vs. State of Delhi & Anr., (2005) 4 SCC

605". Based on above submissions, the Tribunal has rightly passed the

impugned order, therefore, there is no merit in the present Appeal, the Appeal is

fit to be dismissed with heavy costs.

12. After hearing the parties and going through the pleadings made on behalf

of the parties, we observe that the Company Petition filed on 13.07.2018 by the

Appellant before the Tribunal after delay of 4 years (Annexure P-30 at page 368

to 294 of the Appeal) whereby the Appellant made following reliefs:

Company Appeal (AT) No. 122 of 2021 15

"a. declare the alleged resignation of the Applicant dated 03.02.2014

as null and void;

b. declare the appointment of the respondent no. 2-5 as directors of

the company as null and void in M/S SAS Infosolution Pvt. Ltd.;

c. declare the change of name of M/s SAS Infosolutions Pvt. Ltd. to

respondent no. 6 as null and void;

d. declare the conversion of respondent no. 6 to 7 i.e. M/S Bhero

Baba Infosolution Pvt. Ltd. to Respondent No. 7 i.e. Bhero Baba

Infosolutions LLP as null and void;

e. declare the sale of the immovable property i.e. land admeasuring

1 beghas 8 biswa in khasra No. 67/22/1/1 min(1-8), 2 bigha 8

biswa situated in Revenue estate of village Mundka, Delhi by

Respondent No. 7 to Respondent No. 8 as void and restore the

same.

f. Direct the registration of criminal cases against the Respondent

No. 1 to 5 for the forgery and illegality committed by them in

accordance with law."

Further, it is observed that the Appellant lodged FIR No.0259 dated

03.09.2016 regarding forgery, which has already been registered and presently

charge sheet has been filed in the above FIR and the same is pending before the

Court of Ms. Neha Pandey, MM-03, Tis Hazari Court (West), Delhi.

It is also observed that the Respondent No. 6 the erstwhile company i.e.

Bhero Baba Infosolutions Pvt. Ltd. has been converted into (Respondent No. 7)

Company Appeal (AT) No. 122 of 2021 16

LLP i.e. Bhero Baba Info Solutions LLP way back in 05.01.2016 more than two

and half years before filing of Company Petition.

• Taking all the facts aforenoted, we agree with the reasons given by the

Tribunal that the Respondents are not a company as on the date of filing

of the company petition, therefore, Impugned Order dated 09.07.2021

passed by the National Company Law Tribunal (New Delhi Court III) in

New CA-274/2021 in 270/241/242/ND/18 is hereby affirmed. The

instant Appeal is hereby dismissed. No order as to costs.

13. Registry to upload the Judgment on the website of this Appellate Tribunal

and send the copy of this Judgment to the National Company Law Tribunal (New

Delhi Court III), forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical)

New Delhi 08th December, 2022 R. Nath.

Company Appeal (AT) No. 122 of 2021