Dr. Joe Verghese & Ors vs M/S. Omega Hospitals Pvt. Ltd. ...

National Company Law Appellate Tribunal, New Delhi Principal Bench I.A. No. 395 of 2021 in COMPANY APPEAL (AT) No. 77 of 2019 (Arising out of Order dated 24th January, 2019 passed by National Company Law Tribunal, Bengaluru Bench, in C.P No.- 64/2007 [T.P. No. 05 of 2016] C.P. No.-77 of 2010 [TP No. 26/2016]).

IN THE MATTER OF:

1. Dr. Joe Verghese ...Appellant No. 1 S/o. C.P. Verghese Near UBMC School, Kalpane Road, Balmatta, Mangaluru City, D.K. District, Karnataka, Mangalore - 575002

2. Dr. R.L. Kamath S/o. Lakshmana Kamath, Sushil Planter's Lane, Kadri, Mangaluru City, D.K. District, Karnataka, Mangalore - 575003 ...Appellant No. 2

3. Dr. P. Subramanya Bhat, S/o P. Mhalinga Bhat Geethanjali, BareBail, Near Polytechnic, Kadri, Mangaluru City, D.K. District, Karnataka, Mangalore - 575004 ...Appellant No. 3

Versus

1. M/s. OMEGA Hospitals Pvt. Ltd., ...Respondent No. 1 Rank of represented by its Managing Director Mahaveera Circle, Bye Pass Road, Mangaluru City, D.K. District, Karnataka - 575002

2. Dr. K. Mukund, S/o. K. Manjunatha Prateeksha, Vyasa Rao Road, Mangaluru City, D.K. District, Karnataka, Mangalore - 575003 ...Respondent No. 2

3. Dr. Suresh Surathkal, S/o. Mr. Sanil, Bhuvaneshwari, Iddya, Suratkal, Mangaluru City, D.K. District, -2-

Karnataka, Mangaluru - 575014 ...Respondent No. 3

4. Dr. Bhasker Bappal Bappal Raod, Jeppu, Mangalore Mangaluru City, D.K. District, Karnataka, Mangaluru - 575002 ...Respondent No. 4

5. Dr. A.G. Jayakrishnan, The Planet Near Karnataka Polytechnic, Kadi, Mangaluru City, D.K. District, Karnataka, Mangalore - 575004 ...Respondent No. 5

6. Dr. Mohanchandra Suvarna, Sanjeevani, Westgate Pride, Falnir Road, Mangaluru City, D.K. District, Karnataka, Mangalore - 575002 ...Respondent No. 6

7. Mangalore Heart Scan Foundation, Represented by its Chairman and Managing Director, Opposite to Colaco Hospital, Bendoor Road, Mangaluru City, D.K. District, Karnataka, Mangalore - 575002 ...Respondent No. 7

Appellants: Mr. Naveen R. Nath and Mr. Rahul Jain, Advocates. Respondents: Mr. Ajay P Johnson and Mr. Saji P John, for R-1, R-3. Mr. Krishnan Venugopal, Sr. Advocate alongwith Mr. Abir Phukam, Mr. Surya Prakash, Mr. Shivendra Singh, Ms. Deepanshi Ishar and Mr. Ashkrit Tiwari, Advocates for R-5. Mr. PP Hegde, for R-2,4,6,7.

WITH COMPANY APPEAL (AT) No. 105 of 2019 (Arising out of Order dated 24th January, 2019 passed by National Company Law Tribunal, Bengaluru Bench, in C.P No.- 64/2007 [T.P. No. 05 of 2016] C.P. No.-77 of 2010 [TP No. 26/2016]).

IN THE MATTER OF:

Dr. P. Mahabala Rai ...Appellant S/o Late Sh. K. Thimmappa Rai, Door No. 15-10-866, Bendoor Road, C-48, 1st Cross, Bendoor, Mangalore, Karnataka - 575002 Email:- drmahabalarai@yahoo.co.in

I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -3-

Versus

1. M/s. OMEGA Hospitals Pvt. Ltd., ...Respondent No. 1 Through its Managing Director Pumwell, Bye Pass Road, Mangaluru City, D.K. District, Karnataka - 575002

2. Dr. K. Mukund, Prateeksha, Vyasa Rao Road, Mangaluru City, D.K. District, Mangalore - 575003, Karnataka E-mail: mukundkumble@hotmail.com ...Respondent No. 2

3. Dr. Suresh Surathkal, S/o. Mr. Sanil, Bhuvaneshwari, Iddya, Suratkal, Mangaluru City, D.K. District, Mangaluru - 575014, Karnataka E-mail: surathkalsuresh@rediffmail.com ...Respondent No. 3

4. Dr. Bhasker Bappal Bappal Raod, Jeppu, Mangalore Mangaluru City, D.K. District, Mangaluru - 575002, Karnataka E-mail: bhaskerbappal@gmail.com ...Respondent No. 4

5. Dr. A.G. Jayakrishnan, The Planet Near Karnataka Polytechnic, Kadi, Mangaluru City, D.K. District, Mangalore - 575004, Karnataka E-mail: dr.jayakrishnan@gmail.com ...Respondent No. 5

6. Dr. Mohanchandra Suvarna, Sanjeevani, Westgate Pride, Falnir Road, Mangaluru City, D.K. District, Mangalore - 575002, Karnataka Email Id: mcsuvarna@gmail.com ...Respondent No. 6

7. Mangalore Heart Scan Foundation, Represented by its Chairman and Managing Director, Opposite to Colaco Hospital, Bendoor Road, Mangaluru City, D.K. District, Mangalore - 575002, Karnataka E-mail Id.: mheartfoundation@hotmail.com ...Respondent No. 7

I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -4-

8. Dr. Joe Verghese S/o. Mr. C.P. Verghese Near UBMC School, Kalpane Road, Balmatta, Mangaluru City, D.K. District, Mangalore - 575002, Karnataka E-mail Id.: drjoeverghese@yahoo.co.in ...Respondent No. 8

9. Dr. Errol Pinto Collectors Gate, Balmatta, Mangalore - 575001, Karnataka ...Respondent No. 9

10. Dr. P. Subramanya Bhat, Geethanjali, Bare Bail, Near Polytechnic, Kadri, Mangaluru City, D.K. District, Mangalore - 575004, Karnataka E-mail Id: drpsbhat@yahoo.co.in ...Respondent No. 10

11. Dr. R.L. Kamath, Sushil Planter's Lane, Kadri, Mangaluru City, D.K. District, Mangalore - 575003, Karnataka E-mail Id: rlkcardiologist@gmail.com ...Respondent No. 11

Appellant: Mr. Ayush Choudhary, Advocate. Respondents: Mr. Saji P John, for R-1,3. Mr. Krishnan Venugopal, Sr. Advocate alongwith Mr. Abir Phukam, Mr. Surya Prakash, Mr. Shivendra Singh, Ms. Deepanshi Ishar and Mr. Ashkrit Tiwari, Advocates for R-5. Mr. PP Hegde, for R-2,4,6,7.

ORDER

[Per; Shreesha Merla, Member (T)]

1. The Company Appeal (AT) No. 77 of 2019 has been preferred by Dr. Joe

Verghese, Dr. R. L. Kamath and Dr. P. Subramanya Bhat aggrieved by the

Common Impugned Order dated 24.01.2019 passed in CP No. 64/2007 and

CP No. 77/2010 by National Company Law Tribunal, Bengaluru Bench

(hereinafter referred to as the 'Tribunal'). In the Company Petition between

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Dr. K. Mukund V/s. M/s. Omega Hospitals Pvt. Ltd. and 9 Ors. and Dr. Joe

Verghese V/s. M/s. Omega Hospitals Pvt. Ltd. and 6 Ors.

2. Company Appeal (AT) No. 105 of 2019 is preferred by Dr. P. Mahabala

Rai aggrieved by the Common Order dated 24.01.2019, passed by the

Tribunal on the ground that the Tribunal has not given any findings on the

aspect of oppression and mismanagement of the minority shareholders.

3. I.A. No. 395 of 2021 is preferred by the 5th Respondent, Dr. A.G. Jaya

Krishnan, in Company Appeal (AT) No. 77 of 2019 seeking urgent directions

for appointment of an Interim Board of Management in the 1st Respondent

Company namely M/s. Omega Hospitals Pvt. Ltd. (hereinafter referred to as

the 'Company'), comprising of an independent Chairperson with full

Administrative Powers to run the day-to-day affairs of the Hospital.

4. Learned Counsel appearing for the Applicant strenuously argued that

the State of Affairs in the Company is vast deteriorating as;

 No Financial Statements have been prepared and no returns have

been filed for the Financial Year 2018-2019 and 2019-2020 by the

current management;

 The public interest at large continues to be affected because of gross

mismanagement of affairs of the Company and its financial condition

being kept a secret;

 The Learned NCLT has not given any finding with respect to

oppression and mismanagement of the minority shareholders;

 Internal Audit conducted during the pendency of the litigation before

NCLT/CLB rendered multiple findings of fraud and malfeasance

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relating to billing, cash balances, discrepancies in professional

charges of Doctors, discrepancies in sale of cathlabs, purchase of

stents, procedures carried out etc.;

 Learned NCLT had given liberty to 'Registrar of Companies' (ROC) to

appropriate action against Companies and all those who are

connected with multiple violations. As the investigation has not

commenced till date, there is an apprehension that the management is

likely to tamper with the records of the Companies.

5. The Learned Counsel for the Applicant drew our attention to

Annexure A-3 which is the email dated 10.02.2021 signed by four directors

namely Dr. K Mukund, Dr. Suresh Suratkal, Dr. MC Suvarna, Dr. Bhaskar

Bappal, Dr. Errol Pinto addressed to Dr. Joe Verghese head of the minority

group alongwith Dr. R. L. Kamath and Dr. A.G. Jayakrishnan (the Applicant

herein). The sum and substance of the email is that the Managing Director

of the Company had already called for a Board Meeting on 30.09.2020 but

due to Covid, the same was not convened and the same was postponed to

05.12.2020. Therefore, the notice sent by Dr. Joe Verghese and the

Applicant herein calling for another Board Meeting on 30.11.2020 is without

authority, illegal and invalid. The proceedings are invalid and non-binding

and it further states that the head of the minority group and Applicant

herein should make it convenient to attend the Meeting to be held on

05.12.2020 at 4:30 PM at the Registered Office.

6. Learned Counsel for Applicant drew our attention to the Letter dated

02.11.2020, addressed by Dr. Errol Pinto to Dr. Suresh Suratkal, Managing

Director of the Company informing that due to personal reasons and other I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -7-

commitments he is unable to continue as Director and is hence resigning

from the post with immediate effect. The Learned Counsel submitted that

the urgency is with respect to the resignation of Dr. Errol Pinto on

02.11.2020 as can be seen from the aforenoted letter. He vehemently

contended that due to deadlock within the Board, Members of the present

Board are unable to agree even on a particular date for a Meeting nor are

they able to elect the Chairperson and the group of the 2nd Respondent

vehemently opposed any forensic Audit to examine question of fraud which

is a necessary pre-condition to enable the shareholder to get a good value for

the shares in any auction in which a third party comes forward to buy the

Company.

7. It is seen from the record that two Interim Applications I.A. 2313 of

2020 and I.A. 2314 of 2020 were earlier filed on behalf of the Appellants

seeking a direction for conduction of a forensic Audit in respect of the affairs

and accounts of the Companies; appointment of an Independent Board of

Administrative Powers to manage the day-to-day affairs of the Companies

and further to restrain the 2nd and 3rd Respondent from participating in the

management of the Company. Subsequently the present Application is filed

for appointment of an independent Chairperson on account of the deadlock

in the management of the Company resulting from the resignation of Dr.

Errol Pinto. Such a deadlock in the management of the Company providing

critical care to the patients is against the interest of the Company and its

shareholders as well as against the public interest.

I.A. No. 395 of 2021

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8. Respondents No. 1 and 3 filed their objections to this Application

stating that it is neither maintainable in law or background based on the

following reasons:-

 The Appellants filed Petition before CLB in the year 2010 for

conducting an independent Audit from 2006-2007 to 2013-14. The

Hon'ble CLB Chennai was pleased to order for both internal and

statutory Audit for 7 years under the supervision of independent

Chairman appointed by CLB, Mr. Amirulla Millath. Group of Auditors

Mr. Narasimha & Co. (Internal Auditors) and Mr. Thyagrajan & Co.

(Statutory Auditors) have conducted the Audit and submitted the

report to Hon'ble CLB through independent Chairman Amirulla

Millath.

 It is submitted that another Application was filled by the Appellants

herein before the CLB, Chennai seeking to appoint an independent

Chairman for supervision of Audit of Company and thereafter Audit

was conducted for 3 years by Gopinath Shenoy & Co. as per the CLB

direction under the supervision of independent Chairman E. Selvaraj

who replace Mr. Amirulla Millath and he submitted Reports to CLB

Chennai and NCLT, Bengaluru Bench thereby regularizing the

accounts of the Respondent Company from 2014-2015 to 2017-2018.

 Thereafter the management is conducting both internal Audit through

independent Auditors and statutory Audit through Mr. Gopinath

Shenoy & Co. till today. All the Financial Statements of the

Respondent Company are in Public Domain and the Financial

Statements are prepared, audited and filed by CLB appointed I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -9-

independent Chairman and Chartered Accountants. All the Financial

Statements including Director's Report, Independent Auditors Report,

Balance Sheet and other Financial Statements etc. were part of the

pleadings before CLB and then NCLT, Bengaluru Bench. The final

Order passed by the NCLT is proper and well-reasoned and justified in

the facts and circumstances of the case.

 It is submitted that Dr. A G Jayakrishnan (R-5) and the Applicant in

I.A. No. 395/2021 has changed sides and is colluding with the

Appellants due to which the current management is facing huge

difficulty to manage the day-to-day affairs of the Hospital. Dr. A G

Jayakrishnan is one of the signatories to the Bank Account of the

Company and is not cooperating to sign the cheques even for the

purpose of disbursement of funds for Supplier's Payment, Doctor's

Payment, statutory payment and such other daily expenses of hospital

etc. of the Hospital has led the operations of the Hospital to a

standstill. Currently, with great difficulty, the Management is using

Demand Drafts for disbursement of cash needed for the smooth

functioning of its day-to-day activities and the same is duly recorded

in the accounts of the Company. The Respondents 1 & 3 humbly state

that on 05.11.2020 two Interim Applications (I.A. No. 2313/2020 &

2314/2020) filed by the Appellants herein were heard at length and is

Reserved for Orders. Amongst the said two IAs one was seeking for

appointment of Independent Board of Administration and other one

for forensic Audit. The present I.A. filed by Respondent No. 5 is also

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seeking for an Interim Board of Management and hence the present

Application is not maintainable.

9. Learned Counsel contended that the Appeal before the Bench is ripe

for final hearing as pleadings are completed and it is only to delay the matter

that the 5th Respondent has filed this Application. The 1st and the 3rd

Respondents have been facing these dilatory tactics right since the initiation

of proceedings before CLB, Chennai; that Dr. A.G. Jayakrishnan, the

Applicant has changed sides colluding with the Appellants and not co-

operating with the day-to-day affairs of the Companies; the year wise

Revenue generated by both group of shareholders clearly depicts that the

Applicants together with the 5th Respondent/Dr. Joe Verghese are not

generating any Revenue to the Hospital for more than 10 years; that the CLB

appointed Chairman and Auditors have completed the Audit which attained

finality; the signed Financial Statement of the Company for the year ending

31.03.2019 is circulated to all the Directors who were present in the Board

Meeting dated 27.02.2021; that the current management has support of the

majority shareholders of the Company and they were appointed by following

due procedures of the Companies Act; that the main Revenue source of the

Company is the 2nd Respondent himself; that the Applicant is working in Sri

Lanka since 2016 and there is no need of appointing any independent

Chairman; as the Company is facing huge financial crisis there are no funds

to pay as already several lakhs of rupees were spent for the fees of the

administrator and hence sought for dismissal of the Application.

10. By way of rebuttal the Applicant filed an Affidavit deposing that he is

not associated with either of the disputing factions and has been praying for I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -11-

appointment of independent Chairperson and for directions for conducting a

forensic Audit; that the Minutes of the purported Meeting dated 27.02.2021

were not even circulated to the Directors and directly filed before the

Tribunal; that Dr. K. Mukund faction has manipulated all the rules of the

group and committed fraud; on 26.02.2021, the Applicant wrote to the other

Directors requesting for arrangements so that he can attend the Board

Meeting on 27.02.2021 through virtual conferencing as he would be out of

station, but the link was provided to him only at 3:50 PM when the Meeting

was scheduled to begin at 4:00 PM and the Applicant was not allowed to

participate in the Meeting for more than 15 minutes. It was also deposed

despite several phone calls he was not allowed to login till he called one of

the staff members by which time substantial part of the Meeting had already

taken place. It is contended that the Applicant was not allowed to participate

in the Meeting deliberately. It is further deposed that the approval of the

Financial Statement buttressed the motive of the Dr. K. Mukund faction to

circumvent the objections raised by the other Directors regarding the

functioning of the Company; that Dr. Joe Verghese, Dr. R.L. Kamath and Dr.

P. Subramanya Bhat submitted the dissent note regarding their objections

to the purported Meeting dated 27.02.2021 that the Minutes recorded that

since the Applicant is not present, the dissent note is accepted only on

behalf of the other three Directors.

11. It is further stated that the Applicant stopped signing cheques due to

several irregularities and further contended that the manner in which the

Applicant was denied participation in the Meeting is nothing but a sabotage

and against the well settled principles of natural justice. I.A. No. 395 of 2021

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12. Having heard the Applicants and Respondents and gone through the

Annexures on record we find it a fit case to reproduce Annexure-B dated

27.02.2021, a Letter addressed by Dr. Joe Verghese group to Dr. K. Mukund

group which is as hereunder;

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13. For the sake of brevity, the factual matrix is not being repeated. It is

quiet clearly seen that there appears to be deadlock between both the groups

specially with the resignation of Dr. Errol Pinto from the Board of Directors

and the Board now has 8 Directors split into 2 groups of 4 each, as seen

from the Meeting dated 27.02.2021 the Chairman could not be elected and

no other matters were discussed or approved. In fact, it is significant to

mention that the Appellants together with the Applicant are contending that

the group led by Dr. K. Mukund is falsely claiming that the Financial

Statements for the year ending 2018-19 has been approved by the Board. It

is also pertinent to note that the Applicant and Appellants made a request to

the Auditor not to accept the fabricated Minutes and unapproved accounts

of Auditing. Additionally, vide a Letter dated 05.03.2021, it was informed

that the Board Meeting scheduled on 06.03.2021 has been postponed. In the

light of this deadlock and taking into consideration that it is a Hospital and

specially keeping in view that the Hospital is involved in the critical care of

patients, pertinently in today's scenario, we are of the considered view that

such a deadlock is unhealthy both for the Companies, its shareholders and

in the public interest and for all the aforenoted reasons, we allow this

Application and direct the parties to file a Panel of three names/persons

within 10 days with the following particulars:

(i) Consent to act as an Independent Chairperson with full

administrative powers.

(ii) A declaration that such person is not related to any of the parties.

(iii) Experience of administration and expected remuneration.

(iv) Email address and Mobile No. and place of Residence. I.A. No. 395 of 2021

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14. The aforesaid Chairperson would administer and manage the affairs of

the Company till the disposal of these Appeals. The Tribunal will appoint

any suitable person out of the Panel filed by the parties. In case, the

party/parties fail to file the aforesaid Panel of names, the Tribunal shall

appoint any suitable person to act as an Independent Chairperson.

15. This Application is allowed with the aforenoted directions.

[Justice Jarat Kumar Jain] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

NEW DELHI 10th June, 2021

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I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019