Hemendra Aran vs Aranca (Mumbai) Private Limited

Company Appeal (AT) No. 10 of 2018 IN THE MATTER OF : Hemendra Aran, B 203, Lake Lurcerne, Lake Homes, Near Gopal Sharma School, Powai, Mumbai - 400 076. ... Appellant-Original Petitioner Versus

1. Aranca (Mumbai) Private Limited, Having its registered office at : 201 & 301, 'B' Wing, 2nd and 3rd Floor, Supreme Business Park, Hiranandani, Powai, Mumbai - 400076.

2. Christopher David Kingsman, Kreuzbuchstrasse 22, CH - 6045, Meggen, Switzerland.

3. Neeraj Bhardwaj, 48, Osterley Road, Isleworth, Middlesex TW74PN

4. Madhusudan Rajagopalan, Flat No. 142, Building 6A, Kalpataru Estate, JV Link Road, Andheri East, Mumbai - 400 093.

5. Greenwood Investment (Mauritius) Limited, HarelMallac Global Services Ltd. HarelMallac Building, 18 Edith Carvell Street, Port Louis, Mauritius.

... ORIGINAL RESPONDENTS/ RESPONDENTS

Present: Shri Amar Dave, Shri B. Mithun Rao and Shri Rajesh Sehgal, Advocates for the Appellant.

Shri Arun Kathpalia, Senior Advocate with Shri Puneet Singh Bindra and Ms. Smriti Tewari, Advocates for Respondents Nos. 1 to 3.

Company Appeal (AT) No. 10 of 2018 - 19.02.2018 2

Ms. Shilpa Gamnani, Advocate for Respondent No. 4.

Shri Nakul Mohta and Shri Videh Vaish, Advocates for Respondent No. 5.

ORDER

19.02.2018 Heard learned counsel for the parties. The present appeal

is filed against the impugned order dated 11th January, 2018 passed by

the National Company Law Tribunal, Mumbai Bench, Mumbai

(hereinafter referred to as 'NCLT') in C.P. No. 755/(MAH)/2017. The

appeal is against orders on interim stage.

2. The impugned order is a short order and may be reproduced as

under:

"ORDER

CP 755/241-242/NCLT/MB/MAH2017

The Petitioner Counsel mentioned this Company

Petition for stay of rights issue (slated to be closed

20.12.2017) on the ground that the Respondents ought

not have proceeded with the rights issue for there being

a Settlement Agreement in between the parties for

auction of this company, he further says, if this rights

issue is not stayed, the shareholding of the Petitioner will

be further diluted causing economic loss to the petitioner.

On this submission, the Respondents Counsel has

submitted that this rights issue has been proposed to

clear loan payment insisted upon by RBL Bank, but not

to dilute the Petitioner's shareholding, so that the

Company Appeal (AT) No. 10 of 2018 - 19.02.2018 3

Company is not exposed to litigation, for this reason

alone, the counsel says, they have proceeded to go with

rights issue on the Board Resolution passed by the

Company.

On perusal of the facts of the case, it appears that

it is not the contention of the petitioner the rights issue

has been proposed for a purpose other than making

payment to the lender. The only contention raised is that

ICICI Bank is ready and willing to provide loan so as to

set off the liability payable to the lender. Looking at the

Settlement Agreement entered between the parties, we

have noticed that it has not been mentioned anywhere

that the company is barred from proceeding with rights

issue, therefore, it cannot be the contention of the

Petitioner that by virtue of settlement agreement between

the parties, the company is not supposed to go for rights

issue. It appears on record that the petitioner has been

shown as vacated the office of Director by operation of

law therefore, his vacation of Director's office cannot be

attributed as an act of Respondents. An audit report has

been filed reflecting the petitioner entering into related

party transaction. Moreover, the valuation of the share

of the rights issue has been decided to subscribe at

premium, henceforth the petitioner could not say that the

rights issue has been taken out by the Respondents so

Company Appeal (AT) No. 10 of 2018 - 19.02.2018 4

as to gain advantage in case the petitioner failed to

subscribe to the issue. On the top of it, the Petitioner has

been given opportunity to subscribe the shares whereby

his inability to subscribe to the shares cannot become a

ground for stay of the rights issue in progress. Since a

necessity arisen for funding the company to clear the

loan of RBL Bank, we are of the view that the company

has gone for rights issue out of necessity, but not to

oppress the petitioner.

In view of the reasons afore stated, this Bench

hereby holds that R1 company can proceed with rights

issue subject to the outcome of this Company Petition.

List the matter for hearing on 13.3.2018."

3. The learned counsel for the appellant is submitting that the

Appellant is Original Petitioner. During the pendency of the company

petition the respondents have been allowed to proceed with rights issue

which should not have been allowed. According to the counsel, letter dated

23rd November, 2017 (Volume - II at Page 338) which was made basis to

create an emergency before the NCLT was really not such a matter for

which the Respondents who had recently come into command of the

Company should have been allowed to proceed with the rights issue. The

learned counsel submitted that the bank had relied on terms mentioned

in the sanction letter to recall the credit facility or alternatively for placing

of additional FD as collateral. The learned counsel referred to the sanction

Company Appeal (AT) No. 10 of 2018 - 19.02.2018 5

letter concerned which is dated 21st March, 2017 (Rejoinder -Annexure R-

4 at Page 33) to submit that the conditions concerned were not of prior

approval but only of intimation.

4. The learned counsel for Respondents Nos. 1 to 3, however, claims

that the sum and substance of the letter from the bank was that it was

withdrawing the credit facility or alternatively asking further for collateral

security and thus the Company had a situation to meet. It was not

necessary for the company to go in litigation with Bank.

5. It appears that Appellant was in command of the Company till the

settlement agreement took place in June, 2017, copy of which is at Page

461 in Volume II. The Company Petition has been filed on 6 th December,

2017. Looking to the impugned order concerned, it is apparent that given

the facts, NCLT has taken a view to let the respondents proceed with the

rights issue since it was of the view that the Company was required to clear

the loan of RBL Bank. The order has, however, specified that Respondent

No. 1 Company may proceed with the rights issue subject to the outcome

of the Company Petition.

6. According to us, when the disputes between the parties are still open

before the NCLT, and as it is being stated that after the impugned order,

the rights issue have actually been issued also, it would not be appropriate

to interfere,

7. The learned counsel for the appellant has pointed out change in the

shareholding ratio of Respondent No. 1 Company by a Chart (Rejoinder

Annexure R13 at Page 99). The learned counsel for appellant is submitting

that it is necessary that Respondents Nos. 3 and 5 should not further

Company Appeal (AT) No. 10 of 2018 - 19.02.2018 6

transfer the shares and they should not be further diluting the

shareholding of Appellant in the Respondent No. 1 Company.

8. Learned counsel for Respondents Nos. 3 and 5 are submitting that

there is no allegation that these respondents are intending to further

transfer shares which have been recently issued pursuant to the rights

issue and there are no grounds that they are taking any steps to further

transfer the shares which they are holding. It is stated by the learned

counsel that it is not the prayer of the appellant that the shareholding

should not be diluted. Learned counsel added that wording used by the

NCLT that "the rights issue permitted would be subject to the outcome of

the company petition", takes care of the situation.

9. Learned counsel for the appellant is submitting that there are other

I.As also pending which need to be expeditiously decided by the NCLT.

10. Having gone through the matter and having heard the learned

counsel for both sides and keeping in view the provisions in Section 422 of

the Companies Act, 2013, we find no reason as to why the NCLT should

not be directed to dispose off the company petition itself expeditiously. The

IAs can also be taken up together while deciding the company petition.

There would be no harm if the parties maintain the position of rights issues

shareholding as at present till the disposal of the company petition.

10. We thus accordingly dispose of this appeal with a request to the

learned NCLT to dispose the company petition itself expeditiously keeping

in view the provisions of Section 422 of the Companies Act, 2013 and, at

the same time, when disposing the company petition take up the

Interim/Interlocutory Applications pending to dispose them with the

Company Appeal (AT) No. 10 of 2018 - 19.02.2018 7

company petition. The parties shall maintain the present shareholding of

the Company with regard to the impugned rights issue which have been

issued after the impugned order dated 11th January, 2018. If there is an

urgency to change such shareholding, the parties may move the NCLT for

approval before changing the shareholding.

11. With the above directions, the appeal stands disposed of. There shall

be no order as to costs.

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

[Balvinder Singh] Member (Technical)

/ng/nn

Company Appeal (AT) No. 10 of 2018 - 19.02.2018