D. Hymavathi Reddy vs Prajay Engineers Syndicate Ltd. & Ors

D. Hymavathi Reddy H.No.840, Road No.41, Peddamma Temple, Jubilee Hills, Hyderabad-500033 ...Appellant

Vs

01.Prajay Engineers Syndicate Ltd Represented by its Managing Director Mr. Rohit Reddy Dantapalli, 8-2-293/82/A/1091-A, Road No.41, Near Peddamma Temple, Jubilee Hills, Hyderabad-500033 Telangana.

02.Mr. Vijay Sen Reddy Dantapalli S/o Dantapalli Surya Prakash Reddy 1-1-380/11 Ashok Nagar, Chikkadpally, Hyderabad-500020

03.Mrs Sharmila Reddy, W/o Vijay Sen Reddy, 1-1-380/11,Ashok Nagar, Chikkadpally, Hyderabad-500020 Telangana

04.Mr. Rohit Reddy Dantapalli S/o Dantapalli Vijay Sen Reddy 1-1-380/11, Ashok Nagar. Chikkadpally, Hyderabad-500020.

05.Mr. Raghavender Reddy Marpadaga Additional Director, 1-2-56/60, Advocates Colony, Domalguda, Himayath Nagar, Hyderabad-500029.

06.Nageshwar Rao Neelakantam Plot No.40 and 41 Balaji Enclave Gunrock, Secunderabad 500 009

07.Mr. Vijay Kishore Mishra

Company Appeal (AT) No.179 of 2018 2

5-5-1019, goshamahal, Hindi Nagar, Hyderabad-500 012

08.Mr.Sumit Sen, Whole Time Director, 6-3-1012/1 E3, Hidden Treasure Apts, Somajiguda Hyderabad 500 082.

09.Mr.Sokke Kaliveerappa Rudresh, Director, H.No.7/8-1, 2nd MN Chakravarthy, L/O Bangalore Palace Road Cross, Bangalore-560020

10.Mr Ravi Kumar Kutikalapudi, Whole time Director 10-2-409/1, Street No.2, West Marredpally, Secunderabad-500 003.

11.Mrs Padmaja Kota, Director, 8-3-1112, Flat No.501, B.N. Residency, Keshav Nagar Colony, Yellareddyguda, Hyderabad-500073.

12.Mrs Deevi Madhavi Latha, Company Secretary, 101 Krishna Balajit Apartments Balaji Nagar, Mehdipatnam, Hyderabad-500067.

13.Mr Bhaskara Rao Patnana, CFO 22-1-178/101 Bhagya Nagar Colony, Kukatpally, Hyderabad-500072.

14.Prajay Velocity Developers Pvt Ltd, Rep.by its Director Mr. Vijay Sen Reddy Dantapalli, H.No.4-1-2/4, Eden Garden Road, Ramkote, Hyderabad-500001.

Company Appeal (AT) No.179 of 2018 3

15.Secunderabad Golf And Leisure Resorts Pvt Ltd, Rep by its Director, Mr. Vijay Sen Reddy Dantapalli, H.No.4/1/2/4, Eden Gardens Road, Ramkote, Hyderabad 500001.

16.Prajay Properties Pvt Ltd, Rep by its Director Mr. Vijay Sen Reddy Dantapalli H.No.8-2-293/82/A/1091-A, Road No.41, Near Peddamma Temple, Jubilee Hills Hyderabad 500033.

17.Prajay Lifestyle UPVC Windows Pvt Ltd, Rep by its Director Mr. Vijay Sen Reddy Dantapalli, No.1091, Road No.41, Jubilee Hills, Hyderabad 500033.

18.Prajay Holdings Pvt Ltd. Rep by its Director Mr. Vijay Sen Reddy Dantapalli, 5th Floor, Prajay Corporate House, 1-10-63 & 64, Chikoti Gardens, Begumpet, Hyderabad 500 016.

19.M/s Prajay Kamanwala Developers, Rep by Mr.Vijay Sen Reddy Dantapalli, H.No.8-2-293/82/A/1091-A, Road No.41, Near Peddamma Temple, Jubilee Hills, Hyderabad 500 033.

20.M.s Prajay Binjusaria Estates, Rep By Mr Vijay Sen Reddy Dantapalli, H.No.8-2-293/82/A/1091-A, Road No.41, Near Peddamma Temple, Jubilee Hills, Hyderabad 500 033.

21.Prajay Developers Pvt Ltd, Rep by its Director Mr. Vijay Sen Reddy Dantapalli, 5th Floor, Prajay Corporate House, 1-10-63 & 64, Chikoti Gardens, Begumpet, Hyderabad 500 016.

Company Appeal (AT) No.179 of 2018 4

22.Prajay Land Capital Pvt Ltd. Rep by Mr.Vijay Sen Reddy Dantapalli, H.No.8-2-293/82/A/1091-A, Road No.41, Near Peddamma Temple, Jubilee Hills, Hyderabad 500 033.

23.Prajay Retail Properties Pvt Ltd. Rep by Mr.Vijay Sen Reddy Dantapalli, H.No.8-2-293/82/A/1091-A, Road No.41, Near Peddamma Temple, Jubilee Hills, Hyderabad 500 033.

24.M/s Vijaysena Construction Co H.No.4-1-2/5 Eden Garden Road, Ramkote, Hyderabad Telangana.

25.The Registrar of Companies, 2nd Floor, Corporate Bhawan, GSI Post, Tattiannaram Nagole Bandlaguda, Hyderabad 500068. Respondents.

For Appellants:Mr. Darpan Wadhwa, Senior Advocate, Mr.Ajay Bhargava, Mr. Aseem Chaturvedi and Mr.Sharangan. A, Ms Wamika Trehan, Advocates for appellants.

For Respondents:Mr. K. Datta, Advocate, Mr. Sridhar Potaraju, and Ms Sindoora VNL, Advocates for R1, R16, R18, R22.

Mr. P. Nagesh, Mr Ishaan George, Advocates for Intervenor in IA No.1622-1623/2018.

Mr. Yelamanchili Shiva Santosh Kumar, Advocate for Intervenor.

And Contempt Case (AT) No.6 of 2018

in

Company Appeal (AT) No.179 of 2018

IN THE MATTER OF:

Company Appeal (AT) No.179 of 2018 5

Prajay Properties Pvt Ltd & Others ...Applicants

Vs

Smt D. Hymavathi Reddy, ...Contemnor

And Contempt Case No.8 of 2018

in

Company Appeal (AT) No.179 of 2018

IN THE MATTER OF:

D. Hymavathi Reddy ...Applicant

Vs

Prajay Engineers Syndicate Ltd & Ors ...Respondents Syndicate Limited & Others

ORAL JUDGEMENT

A.I.S.CHEEMA, J:

05.10.2018- The appellant (original petitioner) has filed this appeal against

the impugned order dated 8.5.2018 passed by the National Company Law

Tribunal, Hyderabad Bench, Hyderabad (hereinafter referred to as the "NCLT")

in I.A. No.81/2018. The grievance of the appellant is that while dealing with

the IA No.81/2018 filed by Respondent No.1, 16, 18 and 22 requesting to

vacate interim order of Status Quo which had been passed by the Tribunal in

the petition at the time of filing on 6.3.2018, the NCLT decided the IA

No.81/2018 but without considering the claims made by appellant in IA

No.97/2018, the IA No.97/2018 was dismissed.

Company Appeal (AT) No.179 of 2018 6

2. The appellant filed the company petition making various grievances

that Respondent No.2 and associates, in the management of Respondent No.1

company committed acts of malfeasance and mismanagement such as acts of

embezzlement, siphoning of funds and fraud in Respondent No.1 and other

group companies. It is stated Respondent No.16 is associate company of

Respondent No.1; Respondent No.18 is subsidiary of Respondent No.1 and

Respondent No.22 is subsidiary of Respondent No.16 company. She filed

petition against the respondent relating to oppression and mismanagement

in Respondent No.1 company, M/s Prajay Engineers Syndicate Ltd. It is the

case that the Respondent No.1 is in real estate business and Respondent

No.16, 18 and 22 are also dealing in real estate business. Respondent No.1,

a listed company has shares in Respondent No.16 and 18. The contention of

the learned counsel for the appellant is that the Respondents were oppressing

the appellant minority shareholder and thus the company petition was

required to be filed, which is pending.

3. When the company petition was filed, the NCLT passed Status Quo

order on 6th March, 2018 as under:-

"Heard Mr S. Niranjan Reddy, Sr. Advocate along with Mr Satya Siv

Darshan, Ms Alekya Tadasina and Mr Khamar Kantamaneni,

Learned Counsels for the Petitioner. The Learned Sr.Counsel for

the Petitioner submit that in pursuant to this Tribunal Order dated

26.2.2018 notices were served to all the Respondents and proof of

services has been filed vide dated 6.3.2018. The Learned Counsel

Mr. Bhupesh, and Mr. Naresh Sangam, Learned Counsel for R-1

company appeared and undertakes not to take any action to

Company Appeal (AT) No.179 of 2018 7

alienate the subject properties till next date of hearing. Though

notices served on all respondents except R-1, none appeared for

the Respondents. Status Quo shall be maintained by Respondents

to whom notices were served with respect to impugned properties.

Mr. Bhupesh and Mr Naresh Kumar Sangam accepted notice for R-

1 company and waives further notice and requested time. Case

posted to 22.03.2018."

4. Thereafter, the Respondent No.1, 16,18 and 22 filed IA No.81/2018

(Page 584) seeking vacation or modification of the orders passed. The

grievance raised by these respondents was that the company is in the

business of property development and real estate and, there are various

projects in which various purchasers were there and the sale, purchase of

the various flats had come to a halt (which was the stock in trade) because of

the Status Quo order which has been passed. They pointed out that hundreds

of flats were involved, funds had been raised which got stuck and how

operation of business had got stuck. They denied the averments of company

petition.

5. The appellant appears to have filed IA No.97/2018 and in the said IA

the appellant questioned the basic right itself of the applicants who filed IA

No.81/2018 claiming that they were not entitle to file the IA. Her claim is that

she is legally elected Director in Respondent No.16 and 22 and the applicants

who had come forward to file IA No.81/2018 were not the authorised person.

She claimed Respondent No.4 and 5 were never validly appointed Directors in

Respondent No.16, 18 and 22 and could not be authorized to act for

Company Appeal (AT) No.179 of 2018 8

Respondent No.16, 18 and 22 companies in the litigation, or to appoint

Advocates.

6. The Ld NCLT heard the parties and took note of the various allegations.

The observations in para 28 in the impugned order are as under:

"I have heard the Counsels for applicants and also for Respondents.

When the matter was being heard, the Tribunal considers that

interim order dated 6.3.2018 is causing serious hardships to the

applicant companies in doing their business. The Applicant

companies are primarily dealing with construction of flats, villas

and selling them to prospective buyers. The interim order virtually

prohibited the companies from doing its business, in which the

stakeholders such as prospective buyers will be put to serious

hardships."

7. Thus the NCLT realised that the order dated 6th March, 2018 had

caused serious hardships to the applicant companies in doing their business

activities. Built on this the NCLT referred to the earlier orders which were

passed on 2.5.2018 and 3.5.2018 and keeping in view the fact that the

interim orders had resulted in stopping of the whole business activities of the

applicant companies in paragraph 33 of the impugned order, referred to

understanding reached between parties on 2.5.2018 that the applicant

companies will let petitioner examine the sale agreements and furnish

information regarding purchasers and sale price. The applicant companies

had collected information containing details of the names of the buyers,

amounts so far collected and amount yet to be collected from some of the

purchasers. NCLT then in paragraphs 35 to 38 observed as under:

Company Appeal (AT) No.179 of 2018 9

"35. The Counsel for applicant companies further undertakes,

during the course of arguments that the applicant companies

would file audited accounts in respect fo sales and amount realised

there on before the Tribunal. So the Respondent will have an

opportunity to look into the accounts if direction is given to the

applicants to file the audited accounts of the above applicant

companies, once in a month, so that she will be in a position to

know what is the income realised as well as expenditure incurred

and the purpose for which expenditure is incurred.

36. In the light of undertaking and basing on the above discussion,

IA No.81/2018 is disposed off by vacating the interim order dated

06.03.2018 but imposing direction on the applicants that the

applicant companies shall allow the Petitioner and her daughters

accompanied by her lawyer to inspect the sale agreements entered

from time to time without any obstructions. The Respondent to

intimate the applicant companies in advance prior to inspection.

Applicant companies shall furnish the required information to the

Respondent.

37.Further applicant companies are directed to file in this tribunal,

the audited accounts once in a month showing the details of

income received and expenditure incurred, etc, until further

orders.

38. Since IA 81/2018 is allowed, IA 97/2018 stands dismissed."

8. Learned counsel for the appellant is submitting that although these

paragraphs 35, 36 and 37 of the impugned order are in the nature of

Company Appeal (AT) No.179 of 2018 10

protecting the interest of the appellant also but according to the counsel his

instructions are that the accounts were not being filed as directed by the

NCLT. Against this the learned counsel for respondents in appeal are

submitting that the accounts are being filed in the Tribunal. We will leave

this for the NCLT to look into.

9. When the appeal was filed before this Tribunal and while Notice was

issued and the appeal was being posted for admission, this Tribunal had given

certain directions on 31.5.2018 which are as under:

"In the meantime, if the company sell flats or shops to any person,

deal be made in the presence of the appellant or her representative,

who will also sigh the same as a witness to the 'Agreement for Sale'

or 'Sale Deed'. For sale or 'Agreement to Sale', the company will

give advance notice to the appellant for her presence or presence

of her representative. On receipt of such notice, the appellant or

her representative will co-operate and sign the documents within

three days from the receipt of the notice."

10. Subsequent to such orders, intervention applications I.A.No.842 and

843/2018 came to be filed by persons with whom the agreement of sale were

entered into, making grievances.

11. The order dated 26.06.2018 passed by this Tribunal is as under:-

"The Intervention Applications have been filed by Mr. Abhijeet

Gupta, one of the home buyers are taken up on record. Taking into

consideration, intervener, Mr. Abhijeet Gupta is ordered to be

impleaded as Proforma Respondent.

Company Appeal (AT) No.179 of 2018 11

2. Taking into consideration the grievance made by Mr.

Abhijeet Gupta, one of the home buyer, we are of the view that the

competent representatives of Respondent No.1-'M/s Prajay

Engineers Syndicate Limited', Respondent No.16-M/s Prajay

Properties Pvt Ltd', Respondent No.18-'M/s Prajay Holdings Pvt

Ltd'. Respondent No.22-'M/s Prajay Land Capital Pvt Ltd' and the

Appellant-'Smt D. Hymavathi Reddy' should assemble in the office

of the Builder between 2nd July, 2018 to 12th July, 2018 from 11.00

AM to 01.00 PM to take step for 'Execution of Agreement' or 'Sale

deed' in the light of order of this Appellate Tribunal dated 31st May,

2018. If the order is not followed in its letter and spirit and home

buyers suffer or make grievance, the Appellate Tribunal may view

it seriously and may pass appropriate orders against the concerned

person/party (Appellant or Representatives of Respondent(s)).

3. It is made clear that if the appellant refuse to cooperate with

the concerned respondent(s) and the home buyers suffers from

'Execution of Agreement' or 'sale Deed', this Appellate tribunal

may allow the concern Respondent to sign such instrument even

in absence of the Appellant. Both the IA No.842 and 843 stands

disposed of."

12. The learned counsel for the appellant is accepting that the companies

are dealing in real estate where agreements are required to be executed and

sale deeds are also required to be executed and there cannot be blanket Status

Quo to the transactions. The submission, however, is that inspite of this, it

was necessary that the rights of the appellant should be protected. The

Company Appeal (AT) No.179 of 2018 12

learned counsel for the appellant submitted that the appellant needs to know,

whenever whatever agreements are executed and she deserves to be present

by herself or representative, at the time of execution of agreements, sale deeds

and with this object the appellant had sought the interim orders when this

appeal was filed and which were passed in her favour on 31.5.2018. The

learned counsel for the appellant states that the interim orders as passed on

31.5.2018 may be continued even when this appeal is disposed.

13. After filing of this appeal following applications have got filed:-

i) IA No.842/2018- Mr. Abhijeet Gupta for clarification.

ii) IA No.843/2018,-Mr. Abhijeet Gupta for Intervention.

iii) IA No.1509/2018- Sunit Parsad & Others for intervention

iv)IA No.1622/2018-Mr. MVS Parsad & Anr for intervention

v) IA No.1623/2018- Mr. MVS Parsad & Anr for clarification.

14. The learned counsel for the respondents as well as the counsel who

have filed intervention/clarification applications are opposing the request of

the appellant regarding the continuation of the order dated 31.5.2018.

According to them they have filed intervention applications as inspite of

various requests the appellant was not responding to attend to let

transactions of sale get completed.

15. There is already Contempt Case No.6/2018 filed by the Respondent and

it is stated they are making grievance that the appellant is not cooperating in

execution of the sale deeds. Against this there is a Contempt Case No.8/2018

filed by the appellant and it is stated she is claiming that the appellant wanted

to know when the sale deeds are being executed and details of advances and

in absence of being informed she has filed the contempt application.

Company Appeal (AT) No.179 of 2018 13

15 This Tribunal directed on 13.7.2018 that the contempt applications will

be taken up after the disposal of the Company Appeal (AT) no.179/2018.

16. Although the learned counsel for the appellant vehemently argued and

submitted that the appellant should be informed of every transaction which

is taking place in these respondent companies No.16, 18 and 22 with regard

to the sale of flats and also submitted that the appellant would cooperate, we

find that it would not be a practical approach. In the company petition

making grievance of oppression and mismanagement if the petitioner who is

one of the shareholder is to be called and allowed to be present at all times in

what is basically the business of these companies it would not be a proper

thing. The appellant where shareholder has a right to have inspection of

accounts and should be entitled to look into the transactions of sale but

according to us the request of the appellant that she should be given prior

notice and while doing the dealings of the real estate, the transactions should

wait for her and take her signatures is not required to be accepted. Individual

shareholder cannot claim right of presence in what essentially is business of

these companies Respondent No.1, 16, 18 and 22. In such multiple

companies, with multiple transactions of sale of flats taking place which go

through multiple stages, accepting right of claimant to be present, only on

apprehensions, will make the business impossible. Direction of Status Quo

to what is business of the companies can not be allowed. It amounts to

putting brakes to business when it is going concern. Allegations of oppression

and mismanagement claimed in Respondent No.1 will have to be decided in

the Company Petition. The allegations are yet to be established. Individual

shareholder cannot claim right of presence in all business dealings of the

Company Appeal (AT) No.179 of 2018 14

company and also in business dealings of group companies. We find that the

impugned order still takes care of the interest of the appellant also as can be

seen from paragraphs 35 to38 which have been reproduced above and that

should be enough.

17. In IA No.97/2018, the grievance of the appellant is that she had

questioned the right of applicants to file IA No.81/2018 regarding their

authorisation to file the same. She also questioned authority under which

limited counter was filed by Respondent No.1 and Memo dated 31.3.2018 filed

by counsel for Respondent Nos 16, 18 and 22. In the circumstances, it would

have been more appropriate that IA No.97/2018 should not have been

dismissed as such but averments regarding authorisation of applicants to file

the same could be left to be considered and decided with the company

petition.

18(A). For the above reasons, the appeal is partly allowed. The

impugned order where it dismisses IA No.97/2018 is quashed and set aside.

It is maintained as regards its decision of IA No.81/18.

(B) IA No.97/2018 is restored. NCLT may decide the averments made in

the same by appellant regarding authorisation of applicants, while disposing

the company petition finally. The rest of the claims made by appellant as

regards IA No.81/2018 are rejected.

(C) The pending interim applications for intervention/clarification stand

disposed off. We do not wish to entertain Contempt Petition No.6/2018 and

Contempt Petition No.8/2018 where the parties have made allegations of

contempt against each other as it would involve entering into disputed

questions of facts which are not possible and necessary to decide now. We do

Company Appeal (AT) No.179 of 2018 15

not also find them fit to invoke Contempt Jurisdiction. Both Contempt

Petitions are disposed off alongwith pending intervention/clarification and

other applications.

(D) Interim orders dated 31.5.2018 and 26.6.2018 passed by us during

pendency of this Appeal no more survive, as we are disposing this appeal as

above.

(E) NCLT is directed to expedite hearing of the company petition in terms

of Section 422 of the Companies Act, 2013 and dispose off the same as early

as possible.

(F). Appeal is disposed accordingly. No order as to costs.

(Justice A.I.S. Cheema) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

Bm

Company Appeal (AT) No.179 of 2018