Hyderabad Pollution Controls Ltd. & Ors vs S. Radhakrishnan & Anr

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

[Arising out of Order dated 26.10.2017 in C.P No. 40/2011 (TP No. 50/HDB/2016) of National Company Law Tribunal, Hyderabad Bench]

Company Appeal (AT) No. 20 of 2018

IN THE MATTER OF:

1.M/s. Hyderabad Pollution Controls Limited 90/G, Phase - I, IDA, Jeedimetla, Hyderabad - 500 855 ... Appellant No.1

2.S.G.Nair S/o Late Sri.Shankaran Nair Aged about 66 years Occu: Managing Director of Hyderabad Pollution Controls Limited 90/G, Phase - I, IDA, Jeedimetla, Hyderabad - 500 855 ... Appellant No.2

3.G.Ravi Shankar S/o. Sri S.G.Nair Aged about 37 years Occu: Director of Hyderabad Pollution Controls Limited 90/G, Phase - I, IDA, Jeedimetla, Hyderabad - 500 855 ... Appellant No.3

4.G.Parameswaran Nair S/o. Sri.S.G.Nair Aged about 34 years Occu: Director of Hyderabad Pollution Controls Limited 90/G, Phase - I, IDA, Jeedimetla, Hyderabad - 500 855 ... Appellant No.4

5.Geetha G.Nair, W/o Sri. S.G.Nair Aged about 60 years Occu: House-hold-affairs Hyderabad Pollution Controls Limited

1 90/G, Phase - I, IDA, Jeedimetla, Hyderabad - 500 855 ... Appellant No.5

Versus

1.S.Radhakrishnan S/o Shankaran Nair Aged about 61 years Occu: Not known No.83/B, Vengal Rao Nagar, Hyderabad - 500 038 ...Respondent No.1

2.V.Thara W/o S.Radhakrishnan Aged about 51 years Occu: Not known No. 83/B, Vengal Rao Nagar, Hyderabad - 500 038 ...Respondent No.2

3.SGN Air System Pvt. Ltd. No. 83/B, Vengal Rao Nagar, Hyderabad - 500 038 ...Respondent No.3

4.SGN Air System, No. 83/B, Vengal Rao Nagar, Hyderabad - 500 038 ....Respondent No.4

Present:

For Appellant : Mr.K. Rajendra and Mr. Saurabh Jain, Advocates For Respondents : Mr. Virendra Ganda, Sr. Advocate with Dr. S.V. Rama Krishna, Advocate, Mr. A. Mitra, Ms. Shreya Jain, for R1 and R2 Mr. Abhindra Maheshwari with Mr. Samarah Arora, Advocate for R3 and R4.

2 JUDGMENT

(24th January, 2020)

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The present Appeal has been preferred under Section 421 of the

Companies Act, 2013 against impugned order dated 26th October, 2017

passed under Sections 397, 398, 402,403, and 237 of the Companies

Act, 1956 by the National Company Law Tribunal, Hyderabad Bench.

The Tribunal equally divided the share between the two shareholders.

The Appellants have sought following reliefs :

a) To set aside the order dated 26.10.2017 in C.P No.40/2011 (TP No.

50/HDB/2016) passed by the Hon'ble NCLT, Hyderabad Bench as

illegal and bad in law and pass such other or further orders as

may be deemed fit and proper in the interest of justice.

b) To suspend/stay the order dated 26.10.2017 in C.P No. 40/2011

(TP No. 50/HDB/ 2016) passed by the Hon'ble NCLT, Hyderabad

Bench pending disposal of the appeal supra.

2. The Appellants submit that as on 26.02.2007 the Appellant No.2 and his

family members were holding 42% shares of the Company and the

Respondent was holding 28 % shares of the Company. The Appellant

contends that Mr. N.A. Nayar owned 30% shares of the Company out of

which he sold 16% to the Appellant and 14 % to the Respondents. Share

transfer forms were executed on 27.02.2007. The Appellant submits that

the Respondent with mala-fide intentions had stolen in collusion with

3 Mr. N.A. Nayar, the executed share transfer deeds, other documents,

securities and records of the company which were in safe custody in the

company's office. Thereafter as stated by the Appellant the Respondent

blackmailed the Appellant to make him 50% stake holder of the

Company, using the share transfer documents as his bargaining chip.

The Appellant No.2 further submits that under the fear he had

unwillingly signed papers advanced by the Respondents on 08.04.2010

which he realized later has new set of shares certificates and share

transfer agreements illegally fabricated by Respondent in collusion with

Mr. N.A. Nayar.

3. The Appellants submits that in the month of June, 2010 he recovered

the original declaration papers dated 27.02.2007 signed by Mr.N.A.

Nayar and the Respondents agreed to the actual transactions dated

27.02.2007. The Appellant No.2 states that the Respondent transferred

8% share to the petitioner and claims that Respondent has admitted the

same and hence the Respondent's shareholding is 34%. The Appellant

No.2 introduced reforms in the company by which all the documents

signed by the Respondent were required to be jointly signed by Appellant.

There by taking away the absolute freedom and access enjoyed by the

Respondent.

4. The grievance of the Appellant is that the Respondent have fictitiously

used the transfer agreement dated 08.04.2010 to claim 50% stake in the

4 company. The Appellant further submits that NCLT proceeded to declare

the fictitious agreement dated 08.04.2010 as valid without any ruling on

maintainability issues and despite the agreement being under challenge

in Civil Suit, gives a ruling contrary to the pleadings, different from

prayer directing 50 : 50 share ratio without considering that the

Authenticity of the share agreement was in challenge in Civil Court. The

Appellant further submits that NCLT cannot usurp the exclusive

jurisdiction of a Civil Court and grant that the agreement is valid in a

summary proceeding.

5. The Respondent submits that the contention of the Appellant is baseless.

He further points out that the Appellant's correct age is 72 years which

bars him from becoming Managing Director in terms of Section 196(3)(a)

unless approved by way of a special resolution with the support of 3/4th

majority of shareholders.

6. The Respondent submits that the contentions made in the affidavit given

by the Appellant that he is the Managing Director of the 1st Appellant is

baseless and vague because Managing Director tenure is only for 5 years

and 2nd Appellant was appointed as a Managing Director on 1st August,

2010 and his term ended long back on 31st July, 2015. The 2nd

Appellant has completed his term and he is no longer Managing Director

of the 1st Appellant company. He further states that the AGM meeting

was held on 16th September, 2010 and thereafter no AGM meeting has

taken place so far hence, the 2nd Appellant ceased to be director of the 1st 5 Appellant Company therefore the affidavit furnished by the Appellant

No.2 is false and cannot be considered as valid affidavit.

7. The Respondent also submits that serious violations and fabrication were

found during inspection by Regional Director (SER), Ministry of

Corporate Affairs at Hyderabad and that the Appellant failed to reply to

the notice given and instead filed a Writ in High Court of Judicature at

Hyderabad. The Respondent also submits that they only filed 'ex-parte

docket orders' dated 7th May, 2014 obtained from a Vacation Court in

O.S. No. 605 of 2014 and not the subsequent detailed order final orders

and that the Selective filing of 'ex-parte docket orders' and suppressing

the final orders from the knowledge of this Hon'ble Appellate Tribunal is

an attempt to willfully mislead this Hon'ble Appellate Tribunal. The

Respondent also submits that the criminal charges filed by the Appellant

against the Respondent is dismissed by the Hon'ble High Court and

Hon'ble Supreme Court.

8. Shareholding pattern of the Appellate Company is not disputed before

27.02.2007. The Appellant and his group held 42% shares and the

Respondent and his group held 28 % share. Mr. N.A. Nayar and his

group held 30% share. The dispute arose when Mr. N.A. Nayar wanted to

quit from the company by selling the shares in the company to both the

Appellant as well as Respondent. Transfer of shares takes place on

27.02.2007 by transferring all the shares of Mr. N.A. Nayar and his

group to the Appellant as well as the Respondent in such a way so as to 6 maintain balance between two brothers. When a dispute regarding share

transfer of said Nayar and his group arose, an agreement for transfer of

shares dated 08.04.2010 was executed by and between Mr.N.A.Nayar ,

S.G. Nair, S. Radhakrishnan. The Appellant raised objection about the

said resolution dated 27.02.2007 and agreement dated 08.04.2010. The

Appellant alleged that the agreement was signed by him under coercion

and depression. There were two suits filed questioning the transfer of

shares agreement dated 08.04.2010. The first suit got dismissed

thereafter another suit was filed by the Appellant for the same cause of

action as raised in the earlier suit.

9. The CLB has admittedly passed an interim order dated 18.05.2011 when

Company Petition was filed before them apprehending Oppressive actions

on the part of Appellants. The CLB vide its order directed the Appellants

to maintain status-quo with regard to shareholding pattern and share

capital. A contempt petition was further filed against the Appellant by the

Respondent on violation of the said order. The Appellant has further

without making any effort to settle the issue and without taking

permission of the Tribunal has taken several actions including transfer of

shares, removal of the 1st Respondent as Director of the company etc.

When the CLB passed an order, the Appellant company is not supposed

to take any action adversely affecting the interests of the Respondents.

Therefore, action taken by the Appellant, contrary to said interim orders

are declared illegal.

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10. The Respondent has rightly submitted that in anticipation of

amicable settlement of the issue, he has performed his obligation under

the proposed settlement i.e. by transferring the shares, agreeing to

appoint the sons of the 2nd Respondents as directors etc., as mentioned

above. The Appellants have in this regard never transferred the

consideration amount of Rs.2.5 crores. The Appellants have also not

shown any substantial evidence for the transfer of shares. Moreover such

transfer of shares cannot be done without the permission of the then

CLB as interim orders of CLB was under operation.

11. These various actions taken by the Appellant as stated Supra

clearly shows that 2nd Appellant is resorting to various acts of

Oppression and Mismanagement in the affairs of the company so as to

prejudice the interest of the Respondent and his group. The agreement

dated 08.04.2010 is declared to be legal and the same is binding on all

the parties concerned. The contentions raised by the second Appellant

against the said agreement of transfer of shares are liable to be rejected.

As mentioned supra both the parties got shares of Mr. Nayar, as per the

said agreement. Both the parties got 50% share holding of the company

as given in the said agreement. The subsequent transactions alleged to

have been made by the Appellant, as explained supra, are declared to be

illegal and liable to be set aside.

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12. Moreover, the Respondent is stated to have been removed from the

post of director. Appellant has failed to follow the process of law in the

removal of the Respondent from the post of director of the Company.

13. The affairs of the company are being conducted in a manner

prejudicial to Respondents herein. The Appellant has raised several

frivolous litigations by misusing process of law and has committed

several acts of Oppression and Mismanagement. The Appellant has acted

contrary to the interim orders passed by the CLB. Therefore, after going

through the submissions of both the parties and perusing documents on

record we uphold the judgement of NCLT and accordingly dismiss the

present petition. Interlocutory Application, if any, stands disposed off

with above observations. No order as to costs.

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

(Dr.Ashok Kumar Mishra) Member (Technical)

SS

New Delhi

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