Assam Chemical & Pharmaceuticals Pvt. ... vs Shri Deba Kumar Hazarika & Ors

IN THE MATTER OF: Before NCLT Before NCLAT

Assam Chemical & Pharmaceutical Pvt Ltd, A.K. Azad Road, Gopinath Nagar, Guwahati 781016 3rd respondent 1st appellant

2. The Managing Director, Assam Chemical & Pharmaceutical Pvt Ltd, A.K. Azad Road, Gopinath Nagar, Guwahati 781016 4th respondent 2nd appellant

Versus

01.Shri Deba Kumar Hazarika, Citizen Apartment, 1st Floor, D-Type, Six Mile, Guwahati -781022. 1st Petitioner 1st Respondent

02.Sri Bhupen Chandra Kalita, S/o Late Mukunda Ram Kalita, Jonakpur, Birubari, Guwahati 781 016 2nd Petitioner 2nd Respondent

03.Sri Pankaj Dutta Sarma, R/o Dr. Bhabendra Nath Thakuria Path, Santipur Hill Side (East) Guwahati 781 009 3rd Petitioner 3rd Respondent

Company Appeal (AT) No.148 of 2018 2

04.Sri Hiranmoy Kumar Das, R/o Kalitakuchi, 2 Nos. Birkuchi, H.No.847, Milanpur, Guwahati-781071 4th Petitioner 4th Respondent

05.Sri Atul Chandra Baishya, At Rudreswar, North Guwahati, Guwahati 781031. 5th Petitioner 5th Respondent

06.Sri Amiya Kumar Das, At-Kamakhya Gate, A.T. Road, Guwahati 781 009 6th Petitioner 6th Respondent

07.Sri Sarat Chandra Kalita, At Santipur Hill Side, Mathura Nagar, Guwahati 781009 7th Petitioner 7th Respondent

08.Sri Naba Kanta Deka, At Village Boragaon, P.O. Dorakahara Dist Kamrup. 8th Petitioner 8th Respondent

09.Sri Tulumani Sarma, At Village & PO Makhibaha, Distt. Nalabari, Assam. 9th Petitioner 9th Respondent

10.Sri Bijoy Deka, At Joyanagar, East Goshala, Guwahati 781011 10th Petitioner 10th Respondent

11.Sri Dilip Bora, At Rudreswar, North Guwahati Guwahati 781031. 11th Petitioner 11th Respondent

12.Sri Dipak Chandra Kalita, At Village-Kotalkuchi, P.O. Kamarkuchi Distt. Nalbari, Assam 12th Petitioner 12th Respondent

13.Sri Bipul Kumar Sarma, At-Village & P.O. Bagurihati, Distt. Nalbari (Assam) 13th Petitioner 13th Respondent

Company Appeal (AT) No.148 of 2018 3

14.Sri Khagen Bhuyan, S/o Late Hemeswar Bhuyan, C/o Late Bhumidhar Bhuyan, Bye-Lane-4, H.No.14, P.O. Silpukhuri, Guwahati 781003. 14th Petitioner 14th Respondent

15.Sri Dulal Chandra Baruah, S/o Late Kular Kanta Baruah, Silsakoo, North Guwahati, Distt. Kamrup (Assam). 15th Petitioner 15th Respondent

16.Sri Rubul Goswami, S/o Late Jogendra Chandra Goswami, At-Santipur Hill Site (West), Bhutnath Path, Guwahati 781009 16th Petitioner 16th Respondent

17.Sri Pradip Baishya, S/o Late Upen Baishya, At-Hatigaon, Sarudhar Gogi Path, Opp Little Flower School, Guwahati 781038 17th Petitioner 17th Respondent

18.Smt Rumima Das, W/o Late Dinesh Kumar Das, At-M.B. Enclave, Flat No.302, F.C. Road, Uzanbazar, Guwahati 781001 19th Petitioner 18th Respondent

19.Shri Rajendra Nath Rajbongshi, S/o Late Dandinath Rajbangshi, R/o Bhagawat Dham, Hill Side, Near Kalimandir, Jyotishree Nagar, Saukuchi, Guwahati 781034 Proforma Respondent

20.Shri Anup Kumar Deka, S/o Late Bipin Chandra Deka, R/o Usha Nagar, Pragati Path, Barbari Chowk, Hengrabari, Guwahati 781036 Proforma Respondent

Company Appeal (AT) No.148 of 2018 4

21.Shri Kanak Ch Das, S/o Late Bheluram Das, R/o Village & PO Dadara 781104 Distt Kamrup. Proforma Respondent

22.Shri Ajit Deka, S/o Sri Khargeswar Deka, Vill & PO Balisatra, P.S. Kayan, Distt. Kamrup Proforma Respondent

23.Sri Rajani Das S/o Srikanta Dass Village: Jajaibari, P.O. Nankarbhoria, Distt. Nalbari Assam. Proforma Respondent

24.Shri Madhab Das, S/o Late Bheluram Das, R/o Village & P.O. Dadara, Distt. Kamrup Proforma Respondent

25.Shri Ashim Sarma S/o Latge Dwijen Ch Sarma, R/o Village Katkuchi, P.O. Dubi, Distt Barpeta Pin 781325 Proforma Respondent

26.Sri Dipak Kalita, S/o Late Mahendra Kalita, Village & P.O. Ulubari, Nalbari, PS & Distt, Nalbari, Nalbari 781339 Proforma Respondent

27.Shri Muniindra Haloi, S/o Tasil Haloi, Vill & PO Panigaon, Distt. Nalbari Nalbari 781303 Proforma Respondent

28.Shri Tapan Chandra Bhuyan S/o Late Praneswar Bhuyan Vill & P.O. Gopalpur P.S. Rangia, Distt Kamrup Rangia 781354 Proforma Respondent

Company Appeal (AT) No.148 of 2018 5

Present: Mr. Gourab Banerjee, Sr. Advocate with Mr. Rajan Raj, Ms Raka Chatterjee and Mr. Subhro Prakash Mukherjee, Advocates for Appellants.

Mr. Akhilesh Kr Shivastava, Mr. Abhijit Barvah and Ms Sunita Mukhopadhyay, Advocates

JUDGEMENT

MR. BALVINDER SINGH, MEMBER (TECHNICAL)

The present appeal has been preferred by the appellants under Section

421 of the Companies Act, 2013 against the impugned order dated 8.3.2018

passed in T.P. No.25/397/398/GB/2016 (Earlier number as CP

No.992/2011) passed by the National Company Law Tribunal, Guwahati

Bench at Guwahati whereby the company petition filed by the original

petitioners was partly allowed.

2. The brief facts of the case are that the 1st appellant company is a private

limited company incorporated on 13th March, 1946 under the erstwhile

Companies Act, 1913 and subsequently covered under the Companies Act,

1956. As on 31.3.2009 the paid up capital of the company was 3072 equity

shares of Rs.100/- each out of which 600 equity shares were held by the Govt

of Assam and remaining 2472 equity shares were held amongst the

shareholders of the company, including some of its employees and ex

employees. It is stated that the registered office of the company initially was

at AK Azad Road, Gopinath Nagar, Guwahati but due to the dispute between

the shareholders and the then Managing Director, Sri Deep Narayana Singh,

Original Respondent No.5, the registered office of the company was shifted to

Santipur Main Road, House No.16, Near Pragjyotish College, Guwahati by a

Board Resolution dated 5.1.2010 vide Resolution No.4.

Company Appeal (AT) No.148 of 2018 6

2. However, in the month of July, 2009 a series of news items were

published in varius local newspapers reflecting that the company under the

stewardship of DN Singh, the then Managing Director, Original Respondent

No.5, since deceased, has been conducting the business of the company in a

manner which purportedly violated various laws and rules holding the field

which are put in place for ensuring good governance of the company. The

shareholders sent a requisition to the company together with a proposal

urging Mr. D.N. Singh, original Respondent No.5, to convene a EOGM of the

company. Accordingly, EOGM was held on 14.11.2009 attended by all

shareholders. However, Mr. D.N. Singh, original Respondent No.5, did not

attend the same, and that too, without seeking any permission therefor from

the authorised authority. EOGM was conducted and Mr. D.N. Singh was

removed from the Managing Directorship and directorship of the company

and 1st respondent was appointed as director in place of original Respondent

No.5. The original Respondent No.5 was asked to hand over charge but he

was avoiding. However, original Respondent No.5 informed that Addl. District

Judge, Kamrup, Guwahati had rendered an order on 13.11.2009, restraining

the company from holding any EOGM on 14.11.2009. However, on making

necessary enquiry, the shareholders came to know that the Addl Distt Judge

in Misc (Arb) Case No.527/2009 dated 13.11.2009 had restrained the

requisionists from adopting any resolution on agenda No.2 of the Notice dated

21.10.2009. The Agenda Item No.2 of the Notice dated 21.10.2009 proposed

the removal of the original Respondent No.5. Later on the suit was dismissed

on withdrawal on 1.3.2011 and injunction order passed stood vacated. The

newly constituted Board filed necessary returns to the ROC, Shilling. Later

Company Appeal (AT) No.148 of 2018 7

on 1st respondent was appointed as Managing Director of the company w.e.f.

25.11.2009. Another EOGM was held under the supervision of the District

Magistrate, Kamrup, Guwahati on 5.1.2010 to transact the business,

specified in the agenda of the EOGM and the removal of original Respondent

No. 5 was confirmed.

3. After that the original Respondent No.5 started circulating frivolous and

fabricated news in the local daily newspapers and opened a Bank account in

the name of the company and started transacting business of the company

through such an account. In the meantime, the original Respondent No.5

tampered the documents in the office of ROC Shillong and illegally and in an

unauthorised manner issued 1455 nos of equity shares of Rs.100/- to himself

on 20.2.2010 and to his associates without consent of all the existing

shareholders of the company. Original R5 without approval of the majority

shareholders fraudulently removed the 1st respondent from the office of

Managing Director and illegally got himself appointed as Managing Director

of the Company. Later on the authorised capital of the company was

increased from Rs.5 lacs to Rs.10 lacs of Rs.100/- each. Original R5 then

issued 6575 nos of fully paid equity shares of Rs.100/- in his name and in

the name of his supporters (1455 nos of shares on 20.2.2010 (Page 264) and

5260 nos of shares on 15.9.2010 (Page 280)) and filed return of allotment to

the office of ROC Shillong. Later on original R5 resigned from the post of

Managing Director w.e.f. 16.2.2011 (Page 474)and inducted one Sri Madhav

Das as being MD of the company (Page 474). Therefore, the 1st respondent

alongwith 19 others preferred company petition before CLB Kolkata alleging

oppression as well as mismanagement running the affairs of the company.

Company Appeal (AT) No.148 of 2018 8

4. Notice was issued to the Respondents (appellants herein) who appeared

and contested the proceeding alleging several infirmities in petition both

factual and legal and prayed for dismissal of the petition. They also stated

that the petition is not maintainable.

5. After hearing the parties the NCLT passed the order dated 8.3.2018.

The relevant portion of the order is as under:-

"234. In the result, this petition is allowed with the following conditions:-

a) The resolutions, adopted in the EOGM held on 02.03.2010 under which the petitioner No.1 was removed from the post of Director and MD and petitioner No.2 was removed from the post of Director of the respondent company, are declared illegal, null and void.

b) The resolution, adopted in the Board Meeting held on 14.11.2011 under which Respondent No.5 was appointed as MD of the respondent company, is declared illegal, null and void.

c) The issuances of further shares on 20.02.2010 to some existing shareholders and outsiders are declared illegal, null and void.

d) The resolution adopted in EOGM held on 06.09.2010 enhancing authorized capital of the respondent company from 5000 to 10000 is declared illegal, null and void.

e) Issuances of further shares to some existing shareholders and outsiders on 15.09.2010 and on any other dates, if any, subsequent thereto, are also declared illegal, null and void.

f) The resolutions adopted in the EOGM, held on 14.11.2009, Board Meeting 25.11.2009, are restored.

g) The shareholdings of the shareholders/members in the respondent company as it was on 14.11.2009 are restored.

h) The respondent company shall normally function from its registered office.

i) All the actions, taken by the BOD, headed by Petitioner No.1 are declared valid and stand protected.

j) All the actions, taken by the BOD, headed by R-5 and R-4, to the extent they are inconsistent with the actions, taken by the BOD, headed by the Petitioner No.1 or to the directions, rendered hereinabove, are declared invalid and bad in law.

k) However, the declarations, aforesaid would not in any way affect the transactions, which the BOD, headed by R-5 and R-4 may have entered into with third party.

Company Appeal (AT) No.148 of 2018 9

l) In view of the aforesaid directions, the ROC, Shillong is directed to make necessary amendments in the ROC records in the MCA 21 Portal.

m) The management of the respondent company is directed to manage the affairs of the company strictly in accordance the prescriptions of laws/Rules holding the field as well as mandates in the MOA and AOA of the company.

n) The management of the respondent company is further directed to do all the needful including the holding of EOGM as when required to ensure the corporate democracy in running the affairs of the company."

235. Further the company is directed to refund the money, collected from the persons on the dates aforesaid, within a period of six months from the date of receipt of the copy of the order, and that too, with simple interest @10% annually rest from the date of purported purchase of such shares till the repayment of such money in full."

6. Being aggrieved by the said order dated 8.3.2018 the appellants have

filed the present appeal praying therein the following reliefs:-

a) set aside and quash the impugned order dated 8.3.2018 as being

contrary to law.

b) Pass such other and further order(s) in favour of the appellants as

may be deemed fit and proper in the facts and circumstances of the

case.

7. Appellants stated that the profits of the company have consistently

increased and the rates of dividend paid to the shareholders including the

respondents have also increased and that none of the creditors etc of the

company have showed any grievances against the appellant management of

the company. Appellants further stated that it is wrong that the affairs of the

company are being conducted in such manner which is prejudicial to

company's interest, its creditors, public etc and the petition under Section

398 of the Companies Act, 1956 is not maintainable.

Company Appeal (AT) No.148 of 2018 10

8. Appellants stated that adverse media reporting was being done at the

instance of 1st and 10th respondent as mentioned in the said reports itself.

Appellants further stated that the termination of the services of the 1st and

10th respondent for anti-company activities was concealed in the company

petition. Appellants further stated that the services of 3rd, 11th and 13th

respondents were also terminated by the Board of Directors under the late

Mr. D.N. Singh, original Respondent No.5, was also concealed. Appellants

stated that the respondents had not approached the Tribunal with clean

hands, therefore, the respondents should not have been granted any relief.

9. Appellants have stated that the Hon'ble High Court of Guwahati in his

order dated 9.5.2016 has stated that CP No.992/2011 is mainly a fight

between 1st respondent and Original Respondent No.5, Mr. D.N. Singh for the

post of Managing Director and it is nothing to do with a case of oppression

and mismanagement under Section 397/398 of Companies Act, 1956.

Appellants stated that no evidence has been submitted by the respondents in

support of oppression and mismanagement. The allegation of tax evasion is

speculative and no evidence has been

10. Appellants stated that NCLT in para 80 of the impugned order has itself

reiterated the settled proposition of law that directors are appointed and

removed by competent and qualified shareholders who constitute simple

majority in the general meeting of the company which is summoned to appoint

or remove directors.

11. Appellants stated that the allegations in the company petition have

been levelled against the original Respondent No.5, Mr. D.N.Singh, who died

during the pendency of the company petition and the original petitiioners

Company Appeal (AT) No.148 of 2018 11

failed to bring his legal representatives on record within the prescribed period

of limitation, the company petition stood abated.

12. Appellants stated that the company petition filed by 19 shareholders

holding 680 shares constitutes 22.13% of the paid up capital which is not at

all a majority group. Appellants further stated that the it cannot be said that

further issue of shares led to the majority being converted to minority as it is

evident that even prior to the issue of shares the Respondents herein were

never in majority.

13. Appellants stated that it is settled law that directorial complaints

cannot be entertained in a petition under Section 397/398 of the Act unless

it is composite complaint and is in the case of a company which is in a nature

of quasi partnership. In the facts of the present case, it is clear that the

company cannot be said to be a quasi partnership.

14. Appellants stated that the respondents cannot claim any relief leading

to rectification of register of member under Section 397/398 of the Companies

Act, 1956 when an alternative remedy is available under Section 111 of the

Companies Act, 1956.

15. Appellants stated that due to the freezing of the Bank accounts on the

basis on the complaint of respondents the company needed fund for its

operation and hence the Company raised money by issue of shares to its

members on 20.2.2010 and 15.9.2010. Appellants stated that the action of

the appellants comes within the dictum of the Hon'ble Supreme Court in

Needle Industries (India) Ltd Vs Needle Industries Newey (India) Holding

Ltd AIR 1981 SC 1298 being a bonafide exercise of powers by the Board of

Company Appeal (AT) No.148 of 2018 12

Directors in the best interest of the company and thus is legal, valid and

proper.

16. Reply has been filed on behalf of the Respondents. Respondents has

stated that the NCLT passed the impugned order dated 8.3.2018 strictly

within the scope of terms of reference as determined by the Hon'ble High

Court Gauhati vide its final judgement and order dated 9.5.2016 in Appeal

No.3/2014 arising out of the final order dated 20.3.2014 passed by the

Learned Company Law Board, Kolkata Bench, Kolkata.

17. Respondents stated that the appellants have failed to frame any

question of law on the ground that the NCLT has exceed its jurisdiction or the

terms of reference set by the Hon'ble High Court of Gauhati vide its final order

dated 9.5.2016. Respondents further stated that the appellants have failed

to raise any question/point of law that Rule of Law has not been applied

correctly to the fact situation of the case or that a judicial precedent has not

been adhered to or violated. Respondent stated that the appellant has also

failed to raise any question of vitiated facts in their appeal.

18. Respondents stated that the 2nd appellant is not the Managing Director

of 1st appellant company at any point of time and it is also denied that 2nd

appellant has 1020 shares in the 1st appellant company. Respondents stated

that except 3072 initial shares rest all the allotments at any point of time by

the 1st appellant is fraud against the majority shareholders of the appellant

company.

19. Respondents stated that no order is passed against any person in a

Petition under Section 397 and 398 of the Companies Act, 1956 read with

identical provisions of Section 241 and 242 of the Companies Act, 2013 much

Company Appeal (AT) No.148 of 2018 13

less against a dead person in as much as a Petition of Oppression and

Mismanagement is a representative suit and orders are passed to regulate the

affairs of the Company in the best interest of the Company and its

stakeholders and as such the contentions are absurd.

20. Respondents denied that 1st to 10th Respondent ever hatched a plan to

grab the Management of 1st appellant company or started to defame the then

Managing Director, Mr. D.N. Singh, original Respondent No.5.

21. Respondents denied and disputed that they gave a notice dated

3.10.2009 for calling and convening an EOGM with ulterior motive.

Respondents stated that Mr. D.N. Singh committed a fraud against the

majority shareholders of the appellant company as well as the said Court of

Additional District Judge by filing Misc (Arb) Case No.571/2009 in as much

as there cannot be any arbitration agreement between the shareholders on

one side and the Board on the other as the same would tantamount to waiving

the most basic legal rights of shareholders to appoint and remove the directors

as envisaged in the Companies Act and as such the same is inconsistent

under Company Law Jurisprudence. Respondents further stated that the

provisions of Section 242 of the Companies Act, 2013 specifically rules out

possibility of any such agreement between the shareholders and the Board.

22. Respondents denied and disputed that there was any order handed over

to the Chairman of the Meeting dated 14.11.2009. Respondents denied and

disputed that 19 members present did not vote in view of Stay Order dated

13.11.2009. Respondents further stated that no such pleadings were made

before the Learned Company Law Board or the Hon'ble High Court.

Company Appeal (AT) No.148 of 2018 14

23. Respondents stated that the appeal filed by the appellants is wholly

frivolous, vexatious, misconceived, not tenable in law and made in gross

abuse of the process of this Hon'ble Tribunal and as such the same ae liable

to be dismissed in limine with costs.

24. Rejoinder has been filed on behalf of the appellants. Appellants stated

that 1st respondent has filed a Power of Attorney dated 21st March, 2018

authorising one Ms Suhita Mukhopadhyay and one Mr. Akhilesh Kumar

Srivastava to act not only on his behalf but on behalf of 2nd to 18th respondents

as well. However, no power of attorney or other document has been filed

before the Appellate Tribunal which authorizes 1st respondent to act on behalf

of 2nd to 18th Respondent. It is stated that 15th Respondent has sold his

shareholding in the 1st appellant company on 20.5.2018 and yet the reply

affidavit under reply has purportedly been filed on behalf of the 15th

respondent as well which is further indicative of the fact that the 1st

respondent is acting without authorisation of all/any of the 2nd to 18th

respondent.

25. Appellants stated that the appeal is maintainable. Appellants stated

that the NCLT has erred materially both in fact and law in deciding upon the

issues framed by the Hon'ble High Court at Guwahati in Comp. Appeal

No.3/2014 under S. 10F of the Companies Act,1956.

26. Appellants stated that they have framed many facts in issue and

question of law which conclusively demonstrate that the NCLT has erred in

passing the impugned order both in fact and law resulting in miscarriage of

justice.

Company Appeal (AT) No.148 of 2018 15

27. Appellants denied that appellants have failed to raise any

questions/points of law that rule of law has not been correctly applied to the

fact situation of the case or a judicial precedent has not been adhered to or

violated by the NCLT in passing the impugned order. Appellants stated that

appellants have framed many facts in issues and questions of law as well as

raised several grounds which conclusively demonstrate that rule of law has

not been correctly applied to the fact situation of the case or a judicial

precedent has not been adhered to or violated by the NCLT in passing the

impugned order.

28. Appellants stated that appellants have framed many facts in issue and

questions of law which conclusively demonstrate that the NCLT has erred in

passing the impugned order both in fact and law resulting in miscarriage of

justice. Appellants stated that the NCLT has erred materially both in fact and

law in deciding upon the issues framed by the Hon'ble High Court at Guwahati

in Comp. Appeal No.3/2014 under Section 10F of Companies Act, 1956.

29. Appellants stated that 2nd appellant was appointed as Additional

Director of 1st appellant on 30.1.2010 and his appointment as Director was

ratified by the shareholders in the AGM held on 5.5.2010 which was attended

by the majority shareholders of the 1st appellant. 2nd appellant was appointed

as Managing Director of the Company in Board Meeting held on 25.5.2013

which was attended by other directors and the appointment of 2nd appellant

as Managing Director is as per Article 62 of the Articles of Association and the

2nd appellant is the bona fide owner of 1020 equity shares. Appellants stated

that there has been no fraud in allotment of shares by the 1st appellant and

Company Appeal (AT) No.148 of 2018 16

neither has the NCLT vide its final order dated 8.3.2018 ever given any finding

about any fraud in allotment shares by the 1st appellant.

30. Appellants stated that 1st respondent joined company in the year 1991

and 10th respondent joined the company in the year 2003. During the

employment these persons became shareholders of the company. These

respondents in association with 10 to 12 terminated and retired employee

shareholders hatched a conspiracy to grab the management of the company.

These said respondents started planting false news in the media and on the

basis of the false news made a requisition under Section 169 of the Companies

Act, 1956 to the Company to convene an EGM for passing a resolution for the

removal of Mr. D.N. Singh as Managing Director of the company. The said

respondents group started to defame the company and its Managing Director

by affixing posters in the office/factory and spreading false news in the media.

Further the appellants have reiterated the statements made in the appeal.

31. We have heard the learned counsel for the parties and perused the

record.

32. Learned counsel for the appellant argued 1st and 10th Respondent

manufactured newspaper reports which formed the very basis of the alleged

oppression and mismanagement.

33. Learned counsel for Respondents argued that no reporting in media has

been admitted as any evidence and as such the contentions are misleading

and fraud against this Appellate Tribunal. Learned Counsel for the

Respondents further argued that no petition of oppression and

mismanagement can be filed under Companies Act on the basis of media

reporting.

Company Appeal (AT) No.148 of 2018 17

34. We have heard the arguments of the parties and perused the news item

published in the newspapers. We observe that media reporting as such has

nothing to do with the petition filed for oppression and mismanagement.

35. Learned counsel for the appellant argued that in the Board of Directors

Meeting of 1st appellant company on 18th October, 2008 in which 2nd

respondent, Director of 1st appellant, was present, voted in favour of the

termination of services of 1st respondent and 10th respondent. However, 1st

respondent continued to be on the Board of Director. This fact was never

disclosed in the petition.

36. Learned counsel for the Respondents argued that termination of

employment has nothing to do with a petition of oppression and

mismanagement even if that may be the only reason to file an oppression and

mismanagement case. Learned counsel for the respondents argued that

nothing relevant was concealed from the NCLT and the matter claimed by the

appellants to have been concealed have no relevance in an oppression and

mismanagement.

37. We have heard the parties on this issue. We find that the 1st and 10th

respondents were terminated from the services of 1st appellant as an

"employee" which has nothing to do with the shareholding of 1st and 10th

respondent and with the case of oppression and mismanagement.

38. Learned counsel for the appellant argued that Civil Judge in Misc Arb

No.571/209 passed an injunction order on 13.11.2009 prohibiting any

discussion on item No.2 in the agenda notice dated 21.10.2009, which was

duly conveyed to the company and all concerned. Learned counsel for the

appellant further argued that in the said order the Court restrained the

Company Appeal (AT) No.148 of 2018 18

respondents from making any discussions on Item No.2 in the notice dated

21.10.2009 in the EOGM convened on 14.11.2009. The said order was

immediately conveyed to company, Respondents and all office bearers.

Learned counsel further argued that inspite of this orders, the respondents

not only made discussions but also took a resolution removing Late Mr. D.N.

Singh, original Respondent No.5, from the post of Director/Managing

Director.

39. Learned counsel for the Respondents argued and denied that any order

dated 13.11.2009 was handed over to the Chairman of the Meeting dated

14.11.2009 or that the proxy of the State of Assam acknowledged the stay

order dated 13.11.2009 or that the shareholders were informed of any such

stay order well before the Meeting dated 14.11.2009 or that 19 members did

not vote on the said item in view of the said stay order or that the respondents

went ahead with voting on Item No.2 in contempt of court. Learned counsel

for the Respondents further argued that the said Meeting was held under the

supervision of an Executive Magistrate appointed by District Magistrate.

Learned counsel for the Respondents further argued that no such contentions

were raised before the Learned Company Law Board or the Hon'ble High

Court, Gauhati and as such the said is a sinister design to improve on their

pleadings and a fraud against this Hon'ble Appellate Tribunal.

40. We have heard the parties on this issue. We have also perused the

impugned order and copy of the order dated 13.11.2009. NCLT in its paras

93 and 94 has observed as under:=

"93. I have considered such submissions having regard to the

arguments advanced from the side of the petitioner. Though the

Company Appeal (AT) No.148 of 2018 19

petitioners made a feeble attempt to dispute the aforesaid claim,

more particularly, the allegation of their being served with the

notice, issued from the office of the Principal Civil Judge on

13.11.2009, yet, the materials on record, more particularly, the

letter dated 14.11.2009 (Annexure XIII to the reply of Respondent

No.6 to 10, 13, 14), unmistakably demonstrates that the order

was duly communicated to the petitioners.

94.In spite of that, they have taken a resolution on Item No.2 in

total violation of directions of the Civil Judge, Guwahati rendered

in order dated 13.11.2009 in Misc (Arb) No.571/2009. Such

episodes were never made known to this tribunal by the

Petitioners incorporate such information in the petition under

consideration. Since the injunction order in Misc (Arb)

No.571/2009 has some bearing on the dispute in the present

proceeding and since it was not made known to this Tribunal by

the petitioner, such conduct on the part of petitioners now

requires me conclude that in approaching this Tribunal, the

petitioners never came with clean hands."

In view of the above observations/conclusion of the NCLT, we observe

that the decision taken in the EOGM held on 14.11.2009 in respect of Item

No.2 is not legal.

41. Learned counsel for the Appellant argued that 1st respondent and 7th

respondent had no locus as Directors as they were appointed at the EOGM

on 14.11.2009 de hors the agenda and in violation of Section 284 of the

Companies Act, 1956. Learned counsel for the appellant argued that there

Company Appeal (AT) No.148 of 2018 20

were only two agenda items for the Meeting dated 14.11.2009 and the

discussions on Item No.2 was stayed by the Court.

42. Learned counsel for the Respondents argued that they admit that there

were only two agenda for the said Meeting dated 14.11.2009, however, the

shareholders had proposed only agendum i.e. for removal of Late D.N. Singh

from the position of the Director of the Company whereas the proposal to

remove 2nd respondent from the directorship was proposed by the Board,

which has no authority to propose for removal and as such the same was a

fraud against the majority shareholders and the company. Learned counsel

for the Respondents argued that there was no violation of provisions of Section

284 of the Companies Act, 1956 or its applicability itself in the appointment

of 1st respondent. Learned counsel for the Respondents further argued that

General Meeting has power to appoint a Director without any agenda under

Section 255 of the Companies Act, 1956. Learned counsel for the Respondent

further denied that 1st respondent was appointed in a casual vacancy or the

concept of casual vacancy has any applicability in case of Private Limited

Companies.

43. We have heard the parties and perused the impugned judgement. In its

judgment, NCLT in paras 128, 129 and 130 (Page 141) has held as under:-

"128. But such resolution was totally illegal and non-est in law

since such a resolution to remove the R-5 from the post of director

and MD of the company was adopted on 14.11.2009 in complete

disregard to the lawful direction of the court of law requiring the

petitioners not to make any discussion on the Item No.2 in the

Notice dated 21.10.2009. Since the very removal of the R-5 from

Company Appeal (AT) No.148 of 2018 21

the office of the director and MD of the company was profoundly

illegal and non-est in law, one can very well conclude that legally

and technically, the R-5 continued to be the MD of the company

even after 14.11.2009.

129. Since R-5 continued to hold the office of the director and MD

of the respondent company for all purposes even after

14.11.2009, one cannot but conclude that no casual vacancy ever

occurred in the office of the director of the company on

14.11.2009 requiring the shareholders in the EOGM to fill such

post by the petitioner No.1 immediately. Since the removal of the

R-5 was found to be illegal and non-est in law, all subsequent

appointments including the appointment of P-1 as director of the

company on 14.11.2009, his appointment as MD of the company

on 25.11.2009 as well as the subsequent appointment of P-2 as

director of the company were all illegal and equally non-est in

law.

130. In that view of the matter, the removal of the petitioner No.1

from the post of the director as well as MD of the company on

2.3.2010 and the removal of the petitioner No.2 from the post of

director on 2.3.2010 are nothing more than mere formality. Such

revelation-according to the respondents-becomes a clear proof of

the action of the respondents in removing the petitioner No.1 from

the office of the director on 2.3.2010 as well as the removal of the

petitioner No.2 from the office of the director on 2.3.2010 not at

all being illegal or contrary to law.

Company Appeal (AT) No.148 of 2018 22

Since we have already observed that the removal of the R-5 in Meeting

dated 14.11.2009 is not legal, therefore, the subsequent appointment of 1st

and 2nd respondent is also not legal.

44. Learned counsel for the appellants argued that the Meeting dated

25.11.2009(Page 239) held by the Board of Directors is contrary to the order

of the Learned ADJ dated 19.11.2009 (Page 218, Annexure N, Vol II of

Respondent).

45. Learned counsel for the Respondent argued that the holding of Board

of Directors Meeting on 25.11.2009 is admitted except the contention that

there was any violation of the Order dated 19.11.2009 as alleged.

46. We have heard the parties and perused the record. We have perused

the order dated 19.11.2009 of ADJ passed in the matter of Deep Narayan

Singh Vs Assam Chemical & Pharmaceuticals Ltd. In the said order dated

19.11.2009 the learned ADJ has ordered as under:

"Considering the facts and circumstances of the case, the Opposite Parties are directed not to give effect to the resolution (Item No.2) passed in Extra-ordinary General Meeting of the Opposite Party No.1 (Assam Chemicals & Pharmaceutical Pvt Ltd) held on 14.11.2009 regarding removal of the petitioner as its Managing Director of the Assam Chemical & Pharmaceutical Pvt Ltd, till next date."

We have already observed in the previous para that the removal of the

R-5, Mr. D.N.Singh is not legal and the subsequent appointment of directors

in the said Meeting dated 14.11.2009 is also not legal. We also observe from

the Company Petition filed by the Respondents before the NCLT, they

themselves have stated in para (XV) at page 180 of the Appeal Paper Book,

"that the Addl. District Judge, Guwahati, without giving an opportunity

to the petitioners to be heard in person, passed an interim order dated

Company Appeal (AT) No.148 of 2018 23 Section 9 of the Arbitration & Conciliation Act, 1996 restraining

operation of Resolution No.2 of the notice dated 21.10.2009 in

connection with the removal of the respondent, Sri Deep Narayana

Singh, by order dated 13.11.2009 and 19.11.2009." It clearly shows that

there was restraint order from the Hon'ble Court and the Respondents herein

should have acted upon it. Therefore, we observe that the appointment of 1st

respondent as Managing Director passed in that Meeting dated 25.11.2009 is

not legal and also when we have already observed that removal of R-5, Mr.

Deep Narayan Singh is not legal.

47. Learned counsel for the appellant argued that purported Assam

Government nominee Mr. Bipul Das was never appointed a Director and could

not have been unilaterally appointed by Assam Government under Article 51

which permits it to appoint 2 directors as long as it held shares above 25%,

whereas as on 14.11.2009 and 25.11.2009, Assam Government share was

around 19%. Learned counsel for the Respondents argued that the NCLT

erred in holding that the percentage has come down to 6%, which was a

subsequent event. Therefore, the conclusion drawn by NCLT is also

erroneous when it holds that Assam Government can have one nominee

director. Therefore, there was no quorum at the Board Meeting dated

25.11.2009.

48. Since we have already observe that the appointment made in the

Meeting dated 14.11.2009 and 25.11.2009 are not legal, therefore, this issue

is immaterial.

49. Learned counsel for the appellant argued that the issue of further

shares at the Board Meeting dated 20.2.2010 and further issue at the Board

Company Appeal (AT) No.148 of 2018 24

Meeting dated 15.9.2010 have been declared illegal, null and void. Learned

counsel for the Appellant argued that a total of 6715 shares were allotted by

the Company after increase in authorised share capital on 6.9.2010. Learned

counsel for the appellant argued that because the Respondents illegally

usurped the management of company and issued letters to is bankers

requiring them to freeze all the accounts of the company, therefore, the

appellant were left with no alternative but to raise capital. Appellants also

argued that they also approached Gauhati High Court but it took seven years

to finally get the required relief. Learned counsel for the appellant argued

that Article 28 (Page 226) permits non-members if there is no member willing

to purchase shares at fair value. Learned counsel for the appellant further

argued that the findings of the NCLT that the increase of authorised share

capital on 6.9.2010 at the EOGM is contrary to the MOA and AOA, and it was

oppressive, is simply incorrect as there is no violation of MOA or AOA

increasing the authorised share capital.

50. Learned counsel for the Respondents argued that with mala fide

intention the original Respondent No.5, Mr. D.N. Singh, has illegally and

fraudulently allotted 6715 nos of fully paid equity shares of Rs.100/- of the

company (Page 264 and 280) in his name and in the name of his supporters,

to deceive the existing share holders, converted the majority share holdings

to minority share holding and also filed Return of Allotment in the office of

the ROC in contravention of the provisions of law. Learned counsel for the

Respondents further argued that R-5, Mr. Deep Narayana Singh resigned

from the post of Managing Director as reflected in the ROC record w.e.f.

16.2.2011 and appointed Mr. Madhab Das as Managing Director of the

Company Appeal (AT) No.148 of 2018 25

company w.e.f. 16.2.2011. Learned counsel for the Respondents argued that

this all has been done in a Board of Directors Meeting held on 16.2.2011 (Page

34).

51. We have heard the parties on this issue. We observe that the appellant

had approached Hon'ble Gauhati High Court in 2010 and the Hon'ble High

Court passed order dated 24.7.2017 (Page 167-169 of Rejoinder) allowing the

appellant to operate the Bank account. We observe that due to internal

disputes within the Management, the bank account being suspended for

operation, the company was in financial crises. In these circumstances the

need for raising funds through issue of equity shares cannot be held to be

unreasonable. There is also force in the argument of the Learned counsel for

the Respondent that these shares have been issued to the appellant himself

and his supporters. It cannot said that it is fair allotment of shares. We

observe that even if the company was in need of funds, the new equity shares

should have been issued in a fair manner to the existing shareholders on pro-

rata basis as per their holding in the company.

52. Additional shares have been allotted who rightly have been continuing

in the Management and the funds raised have been utilised by the company

almost more than 8 years now. The impugned order asking for refund of the

amount of allotted shares with simple interest @ 10% annually rest from the

date of purported purchase of such shares till the repayment of such money

in full as ordered will severally put the company into financial problem and to

carry out these orders it may have to issue more shares to the existing

shareholders so as to raise its finances. Even for meeting this financial needs

the company may have to issue shares again to raise finances. Instead to

Company Appeal (AT) No.148 of 2018 26

taking the option of refund and raising the money it would be desirable if the

shares allotted are distributed to the rightful shareholders in the

proportionate they were holding shares as on 14.11.2009.

53. It has been observed in the earlier paragraphs that Mr. D.N. Singh,

original Respondent No.5, was continuing as Managing Director as no casual

vacancy occurred to fulfil it by appointing any body else. It is also observed

in the earlier paragraphs that a Resolution dated 2.3.2010 was adopted in

which original petitioners (1st and 2nd respondent herein) were removed as

Director/Managing Director of the company. It is formality. In the light of it

the conclusion has been drawn that Resolution dated 2.3.2010 in which

original petitioners (1st and 2nd respondent herein) have been removed from

the post of Director/Managing Director and Director, that these are illegal,

null and void is a wrong decision reached by NCLT which cannot be upheld.

54. Further there is no resolution dated 14.11.2011 on record to suggest

that R-5 (Original Respondent No.5) was appointed as Managing Director of

the Company. The appellant has stated in his appeal at Page 95 (Para xlviii)

that "para 234(b) of the impugned order is based on incorrect facts as

no Board Meeting ever took place on 14.11.2011 and further Late Mr.

D.N.Singh (Respondent No.5 in the Company Petition) had resigned

from the service of the company on 15.2.2011 itself. Thus, there was

no question of Late Mr. D.N. Singh (Respondent No.5 in the Company

Petition) having been appointed as Managing Director of the Company

on 14.11.2011 and there is nothing in the record to suggest the same."

Company Appeal (AT) No.148 of 2018 27

Respondents also in its reply at Para 73 (Page 33) has not touched this issue.

Therefore, we can draw the conclusion that original Respondent No.5, Mr.

D.N. Singh, is continuing as Director and Managing Director till he resigned.

55. Going through the complete material on record what appears to us is

that this company being company of employees is being run by the employees.

While the present parties before us are rival groups who continue to claim

right to Management and continue to assert rights against each other and

have created various confusions relating to the incidents and facts. The

confusion gets reflected even in the impugned order. It appears to us that

this company which appear to be running well needs to be protected from

internal group rivalries. It appears to be in the interest of justice that we

appoint an Administrator so as to set things straight.

ORDER

56. In view of the above observations and directions the impugned order

dated 8.3.2018 is set aside. We pass the following order:-

1. The decision taken at the EOGM dated 14.11.2009 removing original

R-5 as Director and Managing Director of the Company is set aside

and the appointment of 1st Respondent, Shri Deba Kumar Hazarika,

as Director is held illegal.

2. The further decision taken at the Board of Directors Meeting dated

25.11.2009 appointing Mr. Deba Kumar Hazarika, 1st respondent,

as Managing Director of the company is set aside.

3. Existing Board of Directors stand suspended. Shri Anil Kumar

Dubey, Company Secretary, Todi Mansion, 22 Madan Mohan Talla

Company Appeal (AT) No.148 of 2018 28

Street, Kolkata (Mobile No.9883039240) is appointed as an

Administrator with immediate effect for a period of six months to

manage the company and complete the below mentioned process. If

the process is not completed within six months, then the

Administrator can seek extension for the same from NCLT. The

company will pay a sum of Rs.1 lac per month to the Administrator.

The Administrator can take secretarial assistance of his own for

which the actual reimbursement will be done by the company. The

company will also reimburse to the Administrator actual TA, stay

and other expenses, if any.

4. 6715 shares issued by the original Respondent No.5, Mr. D.N. Singh

on 20.2.2010 and 15.9.2010 shall be re-allotted by the

Administrator as under:-

i) These shares shall be first offered to the then shareholders of

the company as on 14.11.2009 on pro-rata basis on the price

at which they were allotted on the above dates of 20.02.2010

and 15.09.2010. The offer shall be made by the Administrator

adopting the procedure as in Section 62 of the Companies Act,

2013 as far as may be. The then existing members who come

forward to accept such shares shall pay the earlier allottees

the money through the Administrator.

ii) The exercise may be completed by the Administrator within a

period of three months from the date of this judgement.

iii) The new shareholding pattern as would then emerge will be

reported to the ROC.

Company Appeal (AT) No.148 of 2018 29

5. After completing the above process, the Administrator will hold

EOGM and reconstitute the Board of Directors so as to run the

company.

6. Appellants and Respondents will cooperate with the Administrator.

7. Interim order, if any, passed by this Appellate Tribunal is vacated.

8. Registry is directed to send a copy of this order to all concerned.

9. Copy of this order be sent to Administrator immediately.

(Justice A.I.S. Cheema) (Balvinder Singh) Member (Judicial) Member (Technical)

New Delhi Dated: 28-5-2019

Bm

Company Appeal (AT) No.148 of 2018