Institute Of Gastro And Kidney Care ... vs Dr. Kedarnath Panda

In the matter of : 1. INSTITUTE OF GASTRO & KIDNEY CARE PVT. LTD Regd. Office at: Plot No. 1460/61, N-1, IRC Village, Nayapalli, Bhubaneshwar, Khordha, Odisha - 751015 ..... Appellant V 1. DR. KEDARNATH PANDA, S/o. Bhagabat Panda, R/o. Plot No. 155, Sahid Nagar, Bhubaneshwar, Odisha - 751007 ..... Respondent No. 1

2. MR. RABINDRANATH TRIPATHY, S/o. Gopinath Tripathy, R/o. Plot No. 155, Sahid Nagar, P.S. Nayapalli, Dist. - Khordha, Bhubaneswar - 751007, Odisha ..... Respondent No. 2

3. MR. AMULYA KUMAR PANDA, S/o. Damodar Panda, R/o. 1-386, H.B. Colony, Baramunda, Bhubaneswar - 751013 Odisha ..... Respondent No. 3

4. MS. SUJATA TRIPATHY, W/o. Rabindranath Tripathy, R/o. Plot No. 155, Sahid Nagar, Bhubaneshwar, Odisha - 751007 ..... Proforma Respondent No. 4

5. DR. SUBODH KUMAR DAS, S/o. Sh. Braja Kishore Das, R/o. Flat No. 14, Block - 1, Metrocity Apartment, Bhubaneshwar, Odisha - 751015 ..... Proforma Respondent No. 5

Company Appeal (AT) No. 50 of 2022 Page 1 of 40 6. DR. BRUNDABAN NAHAK, S/o. Sh. Narasingha Nahak, R/o. Plot No. 77, Sahid Nagar, IMFA Park, Bhubaneshwar, Odisha - 751007 ..... Proforma Respondent No. 6

7. DR. PRAKASH CHANDRA DALAI, S/o. Sh. Karunakara Dalai, R/o. Plot No. 195/197, Paika Nagar, Bhubaneshwar, Odisha - 751003 ..... Proforma Respondent No. 7

8. DR. MANORANJAN MOHAPATRA, S/o. Sh. Braja Trilochan Mohapatra, R/o. Flat A-11, NS Enclave, Gadakana, Chandrasekharpur, Bhubaneshwar, Odisha - 751016 ..... Proforma Respondent No. 8

9. DR. SUKANTA KISHORE DAS, S/o. Sh. Braja Kishore Das, R/o. Flat No. 208, Jagannath Tower, Saileshri Vihar, Chandrasekharpur, Bhubaneshwar, Odisha - 751016 ..... Proforma Respondent No. 9

10. DR. KSHITISH CHANDRA MISHRA, S/o. Sh. Prahalad Mishra, R/o. Plot No. 739-P, Kaliabuda Road, Nadikula Sahi, Cuttack - 753004 ..... Proforma Respondent No. 10

11. DR. PRADEEP KUMAR MISHRA, S/o. Sh. Biswanath Mishra, R/o. A-101, Infocity Greens, Saileshwari Vihar, Bhubaneshwar, Odisha - 751021 ..... Proforma Respondent No. 11

12. DR. ABHAY KUMAR SAHOO, S/o. Sh. Batakrushna Sahoo, R/o. Sum Hospital, Kalinga Nagar, Bhubaneshwar, Odisha - 751003 ..... Proforma Respondent No. 12

Company Appeal (AT) No. 50 of 2022 Page 2 of 40 13. DR. LAXMIDHAR PADHI, S/o. Sh. Harekrushna Parhi, R/o. E-43, Cosmopolis, Dumuduma, Khandagiri, Bhubaneshwar, Odisha - 751019 ..... Proforma Respondent No. 13

14. DR. JITENDRA KUMAR PANDA, S/o. Sh. Kulamani Panda, R/o. N2/39, Nayapalli, IRC Village, Bhubaneshwar, Odisha - 751015 ..... Proforma Respondent No. 14

15. DR. NISHITH KUMAR MOHANTY, S/o. Sh. Radhanath Mohanty, R/o. Plot No. 665/4953, Shree Vihar, Chandrasekharpur, Bhubaneshwar, Odisha - 751016 ..... Proforma Respondent No. 15

Present: For Appellant : Mr. Abhijeet Sinha, Mr. Neeraj Kr. Gupta, and Ms. Saswat Acharya, Advocates

For Respondents : Dr. U. K. Chaudhary, Senior Advocate, No.1 to 3 Mr. Naveen Dahiya, Ms. Manisha Sharma, Mr. Rahul Sharma and Mr. Mansumyer Singh, Advocates For Respondents Mr. Ramji Srinivasan, Senior Advocate, No. 5 to 15 Ms. Patita Paban Bishwal and Mr. Rishav Banerjee, Advocates

JUDGMENT

(Virtual Mode)

Justice M. Venugopal, Member (Judicial) :

Preamble:

Company Appeal (AT) No. 50 of 2022 Page 3 of 40 The Appellant has preferred the instant Company Appeal (AT) No.

50 of 2022 before this `Tribunal' as an `Aggrieved Person' against the

`impugned order' dated 23.03.2022 in C.A. No. 45/CB/2021 in C.P. No.

98/CTB/2019, passed by the `National Company Law Tribunal'

(`NCLT'), Cuttack Bench, Cuttack.

2. Earlier, the `National Company Law Tribunal', Cuttack Bench,

while passing the impugned order in C.A. No.45/CB/2021 on 23.03.2022

at paragraphs 4 to 7, had observed the following:

4."It is brought to notice of this Tribunal during the course of the hearing that despite the fact that the aforesaid rights issue was grossly undersubscribed and further that the matter is pending before this Tribunal for disposal, the Respondent No.1 has come out with another Rights issue for 52,53,516 equity shares amounting to Rs. 11,30,23,836/-. This Rights issue has already opened for subscription on 08.03.2022 and is closing for subscription on 25.03.2022. This Tribunal finds it illogical and also that when the previous Rights issue was grossly undersubscribed, coming out with another Rights issue neck to neck is not at all desirable, more particularly when the matter is sub-judice before this Tribunal. As intimated during the course of hearing the Respondent Company is already having a Reserve and Surplus of more than Rs.17 Crore in its Balance Sheet. It is also brought to notice of the Tribunal during the course of hearing by the Applicant that there is already an order of this Tribunal dated 09.12.2019 wherein, the Respondent has been ordered not to dilute shareholdings.

5. The Respondent has primarily relied on some mails received from State Bank of India - mail dated 25.09.2021 before the first Rights issue and mail dated 26.02.2022 before the second Rights

Company Appeal (AT) No. 50 of 2022 Page 4 of 40 issue, which they submit, has prompted them with the need for the aforesaid two Rights issues. However, the Applicant side could convince this Tribunal with the details such as valuation report/date etc. that the Respondents have pre-planned the Rights issues i.e., much before receipt of such mails from the Bank.

Further, the Applicant side could also convince this Tribunal with supporting documents that the Bank's requirement for infusion of funds was from Directors and not from the shareholders, which also negates the necessity of two neck to neck Rights issues.

6. The Respondent side has objected that there is no relief sought in respect of the second Rights Issue in IA No. 45/CB/2021. However, this Tribunal is of firm view, after going through the prayers in this Application and also on the facts that when the matter regarding the first Rights issue is pending, the subsequent Rights issues during the pendency of this application comes very much within the ambit of this Application and for purview of this Tribunal for necessary Orders.

7. Therefore, in the present facts and circumstances of the matter this Tribunal hereby restrains the Respondents from going ahead with the present Rights issue in progress or any further rights issue till disposal of this Application and the main petition CP No. 98/CB/2019. Since, the present Rights issue has already opened for subscription, Respondents shall either refund the amounts collected so far to the subscribers or keep it in a separate account and ensure that these amounts are not utilized or spent for any purpose whatsoever or included in the share capital account of the Company or to effect any change in the existing holding of the shareholders of the Company. Status quo in regard to existing shareholders and their shareholding shall be maintained till further orders or disposal of the main petition CP No.98/CB/201, whichever is earlier."

and directed listing of the matter on 21.04.2022 together with main

Petition for `Final Hearing' and `Disposal' in the second half at 2.30 p.m.

Company Appeal (AT) No. 50 of 2022 Page 5 of 40 Appellant's Submissions:

3. Challenging the `impugned order' dated 23.03.2022 in CA No.

45/CB/2021 in CP No.98/CTB/2019, passed by the `National Company

Law Tribunal' Cuttack Bench, Cuttack, the Learned Counsel for the

`Appellant' submits that the `impugned order' dated 23.03.2022, passed

by the `NCLT', Cuttack Bench, had ravelled beyond the ultimate reliefs,

as prayed for by the `1st Respondent'.

4. The Learned Counsel for the Appellant contends that the

`Tribunal' by passing the `impugned order' in CA No.45/CB/2021 in CP

No.98/CTB/2019, on 23.03.2022 had over reached the `Order' of the

`Tribunal' dated 04.12.2019 which provides that the said `Order' was to

continue, till the disposal of the main Company Petition.

5. The Learned Counsel for the `Appellant' proceeds to point out that

in the absence of prayer to restrain the `Rights Issue' of the company

from 08.03.2022 to 25.03.2022, the `Tribunal' could not have passed the

`impugned order' dated 23.03.2022. Also, the `Tribunal' by passing the

`impugned order' dated 23.03.2022 had acted against the `interest' of the

company and had put the opening of a 200 Bed Hospital of the

`Appellant/Company' in serious jeopardy.

Company Appeal (AT) No. 50 of 2022 Page 6 of 40

6. Advancing his arguments, the Learned Counsel for the `Appellant'

submits that the original Company Petition was filed by the `Contesting

Respondents No. 1 to 3 before the `NCLT' under Section 241 / 242 of

the Companies Act, 2013, in July 2019. In this connection, the main

grievance of the `Contesting Respondents' was that the Respondent No.1

was removed from the post of `Managing Director' due to various

activities against the Appellant/Company's interest, thus, furrowing the

main Company Petition into the domain of a `Directorial Complaint',

which is not permissible as per Section 241/242 of the Companies Act,

2013.

7. It is represented on behalf of the `Appellant' that when the main

Company Petition was moved before the `Tribunal', no interim relief was

granted to the `Contesting Respondents', as per `Order dated 18.09.2019,

which was assailed by the 1st Respondent, before this `Tribunal' in C.A.

(AT) No. 283 of 2019, which was disposed of, by an order dated

04.12.2019, by recording an undertaking from the `Appellant' that the

`shareholding' of the Respondent No.1 shall not be diluted and further,

`issue of shares', shall be made only by adhering to Section 62 of the

Companies Act.

8. It is the version of the Appellant that because of the various anti-

company activities, including incorporation of competing company on

Company Appeal (AT) No. 50 of 2022 Page 7 of 40 13.09.2019 (two months after filing of the Company Petition), writing to

Lenders to stop funding the 200 bedded multi-speciality hospital project,

including brutal physical assault on the then Managing Director of the

Company, the 1st Respondent was removed from the Board of Directors

of the Company. In fact, the 1st Respondent had filed I.A. No.

22/CTB/2020 to injunct such removal, which was neither entertained by

the `Tribunal' through its Order dated 17.01.2020, nor was it appealed

before this `Tribunal'.

9. The Learned Counsel for the `Appellant' brings it to the notice of

this Tribunal that the 1st Respondent had addressed an email dated

18.02.2020 to the company, asking for the release of its personal

guarantee from the loans of Rs.80 Crore sanctioned by State Bank of

India and Punjab National Bank Consortium for the 200 bedded hospital.

Later, a letter was issued by the State Bank of India on 18.09.2021,

whereby the `Personal Guarantee' of the 1st Respondent was released.

10. According to the Appellant, initially, the project cost was Rs.123

Crore. In the year 2017, whereby the company had to make a

contribution of Rs.43 Crore i.e., margin of 34.96%. But with the cost

escalation, in terms of the sanction letters issued by the Banks, the

company has to make a contribution of Rs.48,07,00,000/- and the

remaining Rs.80 Crore shall be funded by the Banks.

Company Appeal (AT) No. 50 of 2022 Page 8 of 40

11. Added further, on behalf of the Appellant, it is pointed out that the

State Bank of India on 21.09.2021, had addressed an email to the

Appellant for infusion of fresh funds to extend the `Date of

Commencement of Commercial Operation' and with a view to infuse

funds by way of `Equity', the `Appellant' had issued a `Letter of Offer'

dated 18.10.2021 for the 1st Rights Issue of 86,11,073 shares for an

amount of Rs.17,22,21,460/- (`1st Rights Issue') and the date of opening

of the `1st Rights Issue' was on 25.10.2021 to close on 09.11.2021 and

that the `1st Rights Issue' was challenged by the `1st Respondent' before

the `Tribunal' in C.A. No.45/CB/2021 (filed on 06.11.2021) with a

specific relief being sought for a declaration that the "present rights issue

of equity shares of the Respondent No. 1 is illegal, contemptuous,

arbitrary, oblique, uncalled for, bad in `Law' and `Equity' and all the

steps taken by the Respondents in this regard be quashed and set aside".

12. As an `interim relief', (a) Stay in regard to the present `Rights

Issue' of the `Equity Shares' of the `1st Respondent company' till the

final adjudication of the present Application / captioned Petition

(b) Restraining the `Respondents/Non-Applicants' from going ahead

with the `Rights Issue of Shares' were sought for.

13. The Learned Counsel for the `Appellant' submits that in C.A.

No.45/CB/2021, the `Tribunal' had adjourned the matter to 02.12.2021

Company Appeal (AT) No. 50 of 2022 Page 9 of 40 without granting any interim order and the `1st Rights Issue' was closed

on 09.11.2021 with no subscription from the `Contesting Respondents'

and with additional subscription of 33,57,557 shares of

Rs.6,71,51,140/-. As against the said order dated 09.11.2021, CA (AT)

No. 149 of 2021 came to be filed before the `Appellate Tribunal' and the

same was dismissed on 06.12.2021.

14. Indeed, because of the `undersubscription', the company being

cognizant of the fact that it has to bring in further infusion of `Equity' to

meet the terms of the `Bank's Sanction', carried out the `Valuation of the

Shares, and later, on 26.02.2022, the State Bank of India wrote an email

to infuse further funds by way of `Equity', to meet the `DCCO' of

01.04.2022 or else it will mark the Company's Account as `Non

Performing Assets'. As such, the Company had floated the `2nd Rights

Issue' of 52,53,516 shares for a sum of Rs.11,03,23,836/- and the date of

the opening of the same was 08.03.2022 to close on 25.03.2022.

15. The Learned Counsel for the `Appellant' points out that the `1st

Respondent' filed C.A. No. 15/CB/2022 as per Section 420 (2) of the

Companies Act with a prayer for `Rectification' of earlier `Order' dated

02.03.2022, in so far as it gave liberty to the Appellant to file its `Reply'

to C.A.No. 45/CB/2021. For the first time, mischievously the `1st

Respondent' had included documents pertaining to the `2nd Rights Issue'

Company Appeal (AT) No. 50 of 2022 Page 10 of 40 in C.A. No. 15/CB/2022 with no prayer at all for stay of the `2nd Rights

Issue'. In fact, C.A. No. 15/CB/2022 was dismissed by the `Tribunal' and

that the documents pertaining to the `2nd Rights Issue' do not form part

of the record of C.A. No. 45/CB/2021 and that there is no `suppression'

at all by any stretch of imagination.

16. The Learned Counsel for the `Appellant' contends that there is

illegality in the `impugned order' because of the fact that the `Tribunal'

had exceeded its `jurisdiction' in complete `Judicial Indiscipline' in

ignoring the `Three Member Bench' of this `Appellate Tribunal's Order

dated 04.12.2019'.

17. The Learned Counsel for the `Appellant' submits that the

`Contesting Respondents/Fence sitters having nothing to lose, since they

have already stood diluted owing to their `non-participation' in the

`Legitimate 1st Rights Issue' carried out by following the `Due Process',

which is not stayed by this `Tribunal'. Apart from this, the non-fulfilment

of `financial obligation' of meeting the requisite Share Capital level shall

also result into `1% penal interest' on the entire loan account and remains

a `trite question' `who will bear this cost of Rs.80 lakh per year?' and this

will adversely affect the interest of the company. Moreover, the Revised

Sanction Letter also mentions that all conditions of original sanction

continued to be operative.

Company Appeal (AT) No. 50 of 2022 Page 11 of 40

18. The Learned Counsel for the `Appellant' urges before this

`Tribunal' that the `impugned order' has not assigned any reasons,

whatsoever to the objections raised by the Appellant, but none of them is

either recorded or dealt with in the `impugned order'.

19. To lend support to the plea that the `Tribunal' cannot stay the

`Rights Issue', the Learned Counsel for the `Appellant' adverts to the

decision of the Hon'ble Supreme Court in Hanuman Prasad Bagri V.

Bagrees Cereals Private Limited, reported in 2009 SCC Online Cal 90,

wherein it is observed by the Hon'ble High Court of Calcutta that a "Civil

Court would not sit in judgment over the commercial wisdom of

corporators. The appellants do not show that the decision to issue further

shares was ultra vires the powers of the directors under the articles of

association of the company. In the absence of any apparent illegality, the

propriety of the issue hinges on the collective wisdom of the Board

against the assertion of the Appellants".

20. The Learned Counsel for the `Appellant' submits that there is a

misplaced reliance on the decision of the Hon'ble Supreme Court in S.P.

Chengal Varaya Naidu Vs Jagannath, reported in 1994 (1) SCC at Page

1, wherein it is observed that "A litigant, who approaches the court, is

bound to produce all the documents executed by him which are relevant

to the litigation. If he withholds a vital document in order to gain

Company Appeal (AT) No. 50 of 2022 Page 12 of 40 advantage on the other side then he would be guilty of playing fraud on

the court as well as on the opposite party." In fact, according to the

Appellant, the `Contesting Respondents' hardly have any case on merit.

21. The Learned Counsel for the `Appellant' comes out with a plea

that the `extent and mode of Equity contribution' is specifically

mentioned in the `Sanctioned Letter' and further that, the `non-payment

of interest' is applicable only for those persons, when the `Project' is

commissioned, `loan is utilized' and `repayment begins'. In the present

case, it is an eventuality even prior to the `proper commissioning' or

`repayment is occasioned' and `scheduled repayment' is to begin from

June 2023 and that the bank has power to cancel `facility' and also `penal

interest'. In such an eventuality of `cancellation of facility', it will

immediately become `Non Performing Asset'.

22. According to the Appellant, in the instant case, the `Contesting

Respondents' have not questioned the `value of shares' of the company

at which the `Rights Issue' was brought into and it means that the

`valuation' is a fair one, which would not cause any loss to them.

23. It is projected on the side of the Appellant that the `1st Rights Issue'

was at a premium of Rs.10 and the `2nd Rights Issue' was at a premium

of Rs.11, meaning that the `value' of the company has increased,

Company Appeal (AT) No. 50 of 2022 Page 13 of 40 resulting into benefit to all the `shareholders' (including the `Contesting

Respondents'). As such, the `paramount interest of the company is well

protected and demonstrated by the Appellant'.

24. The Learned Counsel for the `Appellant' contends that `timing of

valuation' is an evidence of fine management and cannot be said to be a

conspiracy. Furthermore, the `revised sanction for loan' was granted on

31.03.2021 and cut-off date to meet adequate `Share Capital Level' was

31.03.2022 and that the `Appellant/Company' had carried out the

`valuation exercise' in February 2022. In reality, a proactive disciplined

approach to the `Management of Affairs' cannot be regarded as

`conspiracy'.

25. The Learned Counsel for the `Appellant' submits that in respect of

`Private Companies' Section 23 (2) (a) of the Companies Act, 2013, only

imposes a condition for compliance of other provisions and only

applicable Section is Section 62 of the Act. Indeed, a `Rights Issue' to

the `Existing Handful of Shareholders' is within the `purview of Section

62 of the Companies Act, 2013, which has been fulfilled, as per `liberty'

granted by an `Order' dated 04.12.2019.

Company Appeal (AT) No. 50 of 2022 Page 14 of 40 Contentions of Respondents No. 1 to 3 :

26. The Learned Counsel for the Respondents No. 1 to 3, submits that

`Appellant' has not furnished any `justifiable' reason in `Rejoinder' for

suppressing the `important documents' from this `Tribunal', and in fact,

the `Appellant' has `suppressed' the `pivotal documents', including all

such documents relating to the `2nd Rights Issue', Viz. (i) Email dated

05.03.2022 sent to shareholders regarding 2nd Rights Issue (ii) Valuation

Report dated 15.02.2022 taken for the 2nd Rights Issue as provided to

shareholders (iii) Letter of Offer dated 04.03.2022 given to Shareholders

for the 2nd Rights issue (iv) Application Form for allotment of Equity

Shares as given to shareholders (v) Minutes/Extracts of the Board

Meeting of the Appellant dated 04.03.2022, wherein the purported

approval for the 2nd Rights Issue was accorded by the Board (vi)

Annexures of CA No. 15 of 2022 filed by the Respondent No. 1 before

the Hon'ble NCLT, Cuttack Bench, deliberately removed from the

Appeal, which had all relevant documents (vii) Protest email dated

21.03.2022 sent by the Respondent No. 1, which was never answered by

the Appellant Group (viii) Form PAS 3 filed with Registrar of Companies

after the 1st Rights Issue, which would have shown that the First Right is

grossly undersubscribed (only 38.99%) (ix) Form No. CHG-1 filed with

the Registrar of Companies on 07.03.2022 evincing sanction of

Company Appeal (AT) No. 50 of 2022 Page 15 of 40 additional loan amount of Rs.4.45 Crores by the State Bank to the

Appellant Company (x) Form No. CHG-1 filed with the Registrar of

Companies on 24.03.2022 evincing sanction of additional loan amount

of Rs.3.50 Crores by the Punjab National Bank (PNB) to the Appellant

Company (xi) Inauguration of the new hospital by the Bank Officials on

30.03.2022.

27. The Learned Counsel for the Respondents No. 1 to 3 contends that

the `impugned order' dated 23.03.2022 in C.A.No. 45/CB/2021 in CP

No.98/CTB/2019, passed by the `National Company Law Tribunal',

Cuttack Bench, Cuttack, is only an `interim order' and further that the

Respondents No. 1 to 3 (`Petitioners' in main Company Petition) had

completed their arguments before the `Tribunal' in the main Company

Petition and in C.A.No. 45/CB/2021.

28. The Learned Counsel for the Respondents No. 1 to 3 brings it to

the notice of this `Tribunal' that the main Company Petition was fixed

for final hearing and disposal on 21.04.2022 at 2.30 P.M. before the

`Tribunal' and that the `Appellant' (`Oppressor') is not interested in

giving a quietus to the matter and added further, no `prejudice' will be

caused to the `Appellant' but the `Rights' of the Respondents No. 1 to 3

are being affected adversely.

Company Appeal (AT) No. 50 of 2022 Page 16 of 40

29. The Learned Counsel for the Respondents No. 1 to 3 urges before

this `Tribunal' that in Comp. App (AT) No. 149 of 2021 on the file of the

Principal Bench of the `National Company Law Appellate Tribunal',

New Delhi, on 06.12.2021 in the matter of Dr. Kedarnath Panda V

Institute of Gastro & Kidney Care Pvt. Ltd. & Ors., wherein at paragraphs

3 to 5, it is observed as under:

3.``Today, it is informed by Learned Counsel for the Appellant that matter was taken on 02nd December 2021, and the next date for further hearing is fixed on 6th January 2022.

4. Learned Counsel for the Respondent No. 1 screen-shares the Order dated 02.12.2021 passed by Ld. NCLT, Cuttack Bench wherein it has been stated that Ld. Counsel for the parties were present and Mr. Naveen Dahia, Advocate made his submissions on behalf of the petitioner at length and for continuation of arguments and for arguments of the respondent, the matter was listed on 06.01.2022 as a specially part heard order matter in the second half at 3.00 p.m. and also directed to tag all the applications along with the main CP and all pleadings in C.A. No. 45/CB/2021 be completed before next date of hearing.

5. In view of the above and as the hearing has commenced before the Ld. NCLT, Cuttack Bench and as has been listed as part-heard on 06.01.2022, this instant Appeal is not maintainable and the Appeal deserves to be dismissed."

and the `Appeal' was dismissed.

30. The Learned Counsel for the Respondents No. 1 to 3 advances an

argument that in the new Hospital `Operations' had commenced earlier,

Company Appeal (AT) No. 50 of 2022 Page 17 of 40 and that no `prejudice' will be caused to the `Appellant/Company', if the

`Appeal' is dismissed by this `Appellate Tribunal'.

31. The Learned Counsel for the Respondents No. 1 to 3 points out

that in C.A. No. 45/CB/2021 in CP No.98/CTB/2019, the legality of the

`Right Issues of Equity Shares' is under examination, which is assailed

on numerous grounds including a) `Flawed Valuation', b) `Inappropriate

Valuation Methodology c) `Non-supply of Relevant Documents to

Valuer' d) `Valuation on the basis un-audited Balance Sheets when

Audited Accounts were available', e) Necessity of the `Rights Issue',

etc., and as such, the `Tribunal' has exclusive jurisdiction to scrutinize

the legality of the `Rights Issues'.

32. In this connection, the Learned Counsel for the Respondents No.

1 to 3 seeks in aid of the decision in Punt V Symon (1903) 2 In Punt v

Symons & Co Ltd (1903) 2 Ch 506, wherein it is held that "Directors

abused their powers. The Directors issued new shares to give voting

rights to additional shareholders in order to secure the passing of a

special resolution."

33. The Learned Counsel for the Respondents No. 1 to 3 refers to the

decision of the Hon'ble Supreme Court of India in S.P. Chengal Varaya

Naidu (dead) by Lrs. V Jagannath (dead) by Lrs. and Others (1994) 1

SCC 1, wherein at paragraphs 5 and 6, it is observed as under:

Company Appeal (AT) No. 50 of 2022 Page 18 of 40

5.`` We have no hesitation to say that a person, who's case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation.

6. A litigant, who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation.

If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court as well as on the opposite party."

34. The Learned Counsel for the Respondents No. 1 to 3 contends that

the Appellant's and the Respondents No. 5 to 15 plea that the Account of

the `Appellant/Company' will become `Non Performing Asset' is

baseless and liable to be rejected at the initial stage in the light of the fact

that (i) no `Notice' under SARFAESI Act, 2002, was issued by the

`Consortium of Banks' to declare the `Loan Account' of the `Appellant'

as `Non Performing Asset' (ii) No defaults were made by the

`Appellant/Company' nor any details of `any default' given (iii) Loan

Account could not be declared as `Non Performing Asset' merely on an

email communication (iv) No Bank will one hand sanction additional

loan amounts of Rs.7.95 Crore to the `Appellant' and on the other hand

issue a notice of `Non Performing Asset'.

35. The Learned Counsel for the Respondents No. 1 to 3 cites the

decision in `Amar Alloys Pvt. Ltd. V State Bank of India (2019) SCC

Company Appeal (AT) No. 50 of 2022 Page 19 of 40 Online (P & H 571), wherein at paragraphs 19, 20, 23 & 24, it is observed

as under:

19. "Clause 2.1 of RBI guidelines Master Circular deals with Non-

Performing Assets and it inter alia provides that an asset including a leased asset becomes non performing when it ceases to generate income for the Bank. A non performing asset is a loan or an advance where interest and/or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan or the account remains out of order in respect of an overdraft/cash credit. As per clause 2.2, an account should be treated as "out of order" if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power for 90 days. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit/drawing power but there are no credits continuously for 90 days as on the date of balance sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as out of order. As per clause 4.1 under the heading "asset classification", it has been provided that the banks are required to classify non performing assets into further three categories i.e. substandard assets, doubtful assets and loss assets.

With effect from March 31, 2005, a substandard asset would be one which has remained NPA for a period less than or equal to 12 months. An asset would be 24 of 30 classified as "doubtful" if it has remained in the substandard category for a period of 12 months. A "loss asset" is one where loss has been identified by the Bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. Clause 4.2.1 provides that classification of assets into the above categories should be done taking into account the degree of well defined credit weaknesses and the extent of dependence on collateral security for realization of dues. Clause 4.2.4 provides that the bank should not classify an advance account as NPA merely due to the existence of some deficiencies which were temporary in nature such as non availability of adequate drawing power based on the latest available stock statement, balance Company Appeal (AT) No. 50 of 2022 Page 20 of 40 outstanding exceeding the limit temporarily, non submission of stock statements and non renewal of the limits on the due date etc. Further, considering the difficulties of large borrowers, stock statements relied upon by the banks for determining drawing power should not be older than three months.

Clause 4.2.5 provides for upgradation of loan accounts classified as NPAs. If arrears of interest and principal are paid by the borrower in the case of loan accounts classified as NPAs, the account should not longer be treated as non performing and may be classified as standard accounts. As per clause 4.2.6, the asset classification of borrowal accounts where a solitary or a few credits are recorded before the balance sheet date should be handled with care and without scope for subjectivity. Where the account indicates inherent weakness on the basis of the data available, the account should be deemed as a NPA. In other genuine cases, the Banks must furnish satisfactory evidence to the statutory auditors/inspecting officers about the manner of regularization of the account to eliminate doubts on their performing status. Clause 4.2.9 prescribes that in respect of accounts where there are potential threats for recovery on account of erosion in the value of security or non availability of 25 of 30 security and existence of other factors such as frauds committed by borrowers, it will not be prudent that such accounts should go through various stages of asset classification.

In cases of such serious credit impairment, the asset should be straightaway classified as doubtful or loss asset as appropriate. Erosion in the value of security can be reckoned as significant when the realizable value of the security is less than 50 percent of the value assessed by the Bank or accepted by RBI at the time of last inspection as the case may be. Such NPAs may be straightaway classified under doubtful category.

20. From the aforesaid, it clearly emerges that the decision of the Bank before classifying an asset as NPA should be based on the record of recovery. An account which has some temporary deficiencies like non- availability of adequate disbursing power based on the latest available stock statement, balance outstanding exceeding the limit temporarily, non- submission of stock

Company Appeal (AT) No. 50 of 2022 Page 21 of 40 statements and non-renewal of limits on the due date etc., should not be classified as NPA. Further, the Reserve Bank of India in its Master Circular dated 01.07.2015 in Clause 4.2.4 thereof enumerated various guidelines which the Bank must follow for the removal of the temporary deficiencies. Clause 4.2.5 of the said Master Circular mandates that where the arrears of interest and principal are cleared by the borrower in the case of loan accounts classified as NPAs, the accounts should not be any longer treated as non-performing and may be classified as 'Standard' account. Thus, in nutshell, it is concluded that where the borrower expresses willingness for regularizing the loan account by discharging the arrears of interest and principal, the Bank/financial institutions are obligated to accept the same as per mandate expressed in the Master Circular dated 01.07.2015 issued by the 26 of 30 Reserve Bank of India in exercise of powers under the 1949 Act and declare the account to be 'Standard' account.

23. Having analysed and crystallized the legal position as noticed hereinabove, we advert to the factual matrix in the present case. In our opinion, the action of the respondent is legally unsustainable. Undisputedly, the petitioner had availed cash credit facilities from the respondent Bank since 2007 against the company stock statements and book debts. Collateral security was given in terms of factory, land and building by the petitioner to fully secure the cash credit facility. The Bank was renewing the contract yearly. Suddenly on 27.6.2018, the Bank informed the petitioner that its account had been declared NPA by the statutory auditor and was directed to deposit the entire outstanding amount in the account. The reasons given by the Bank were that the company was incurring loss from its core activity for which the Bank had financed; the petitioner company was misusing the capital advanced to earn interests which was not directly related to the manufacturing activity of the company. The petitioner was not afforded any opportunity before reducing the disbursing power and declaring the account 29 of 30 as NPA. Further, as per clauses 4.2.4 and 4.2.5 of the Master Circular dated 01.07.2015 issued by

Company Appeal (AT) No. 50 of 2022 Page 22 of 40 the RBI, the petitioner could remove the temporary deficiencies in the maintenance of account as standard and to upgrade the account so as to be out of NPA.

24. In view of the above statutory provisions, factual matrix in the present case coupled with the settled legal position on the issue, the irresistible conclusion is that notice was required to be issued to the petitioner under the provisions of the SARFAESI Act the Bank before declaring its account as NPA. Accordingly, the impugned letter/email dated 27.6.2018, Annexure P.8 and all consequential action taken on that basis are set aside and the matter is remanded to the respondents to take a decision afresh in accordance with the guidelines issued by the Reserve Bank of India termed as RBI's prudential norms of income recognition, asset, classification and provisioning pertaining to advances after affording an opportunity to the petitioner. Consequently, the writ petition stands allowed."

36. The Learned Counsel for the Respondents No. 1 to 3 adverts to the

fact that no reply to C.A. No. 45/CB/2021 was filed by the `Appellant'

and Respondents No. 5 to 15, before the `Tribunal' till the conclusion of

the final arguments by the Respondents No. 1 to 3 on 02.03.2022 and

`Reply' was filed belatedly on 11.03.2022 post the conclusion of final

arguments, as seen from the `Order Sheet' of the `Tribunal' dated

16.03.2022.

37. The Learned Counsel for the Respondents No. 1 to 3 takes a stand

that the `Rights Issue' is nothing but a `pre-planned conspiracy' of the

`controlling majority' to `dilute the shareholding of the Respondents No.

1 to 3' during the pendency of the Company Petition and that the

Company Appeal (AT) No. 50 of 2022 Page 23 of 40 `malafide intent' of the `majority shareholders' is evident from the

undermentioned acts:

"(i) The reliance placed by the `Appellant' on email dated 26.02.2022 from the State Bank of India, which prompted them for the `2nd Rights Issue' of `Equity Shares', but the `Valuation Report' annexed with the `Offer Letter' is dated 15.02.2022, which is much earlier to the aforementioned email dated 26.02.2022.

(ii) Likewise, for the `1st Rights Issue', reliance was placed upon email dated 21.09.2021 from the State Bank of India, but the `Valuation Report' taken for the `1st Rights Issue' was dated 08.07.2021, exhibiting `malice' of the `majority Shareholders'.

(iii) The Respondent No. 1 raised his voice against the misconduct of the `Controlling Respondents', as their personal interest was in direct conflict with the interest of the `Appellant Company' and in fact, the `1st Respondent', who was the founder Director / Promoter of the `Appellant Company' who was `oppressed' by the `majority' through numerous `illegal acts', which are the subject matter of the Company Petition, including but not limited to an illegal removal of the 1st Respondent from the Managing Director's post, an illegal removal of the 1st Respondent from Directorship, an illegal change in the Appellant's Registered Office, illegal removal of the 1st Respondent from Joint Signatory of the Bank Accounts of the Appellant, an illegal termination of clinical services of the 1st Respondent, illegal withholding of remuneration, salary and other benefits of the 1st Respondent, diversion of patients and confidential information to the rival hospitals, refusal of controlling majority to work full time with the `Appellant', siphoning off funds of the `Appellant', refusal of `controlling majority' to work full time with the `Appellant', dilusion of shareholding of R1, R2 and R3 below 25%, siphoning of Appellant's Funds, Mismanagement of the Accounts and Records of the Appellant, Forgery, Fabrication and Falsification of Records / Documents, etc."

Company Appeal (AT) No. 50 of 2022 Page 24 of 40

38. It is represented by the Learned Counsel for the Respondents No.

1 to 3 the Appellant had failed to furnish any document in regard to the

requirements of the `Rights Issue', `Shorfall', `Default', `Reserves' and

`Surplus', available with the `Appellant/Company', etc., which was

supplied to the `Shareholders' of the Company.

39. According to the Learned Counsel for the Respondents No. 1 to 3

that the purported email clearly mentions that `if any shortfall is there,

you are advised to infuse the `Proposed Capital' within 06.03.2022 and

submit a CA Certificate in this regard'. As such, even the Bank is not

saying that there is any `Shortfall' or `Default'. Moreover, the purported

emails dated 21.09.2021 and 26.02.2022 contains a `Disclaimer' to the

effect that the opinion expressed in the email is of `individual sender' and

not necessarily of the `SBI Group'.

40. The Learned Counsel for the Respondents No. 1 to 3 points out

that despite of emails by the `Shareholders' dated 25.10.2021 and

21.03.2022 seeking answers on the Status of Disbursement, Rational

behind the `Rights Issue', Shortfall, etc., the `Appellant' has never

responded to the same and in short, `no information' was provided in

respect of the status of disbursement by the Bank to the `Shareholders'

till date and further that the `majority shareholders' have back to back

Company Appeal (AT) No. 50 of 2022 Page 25 of 40 come up with `two Rights Issue' of `Equity Shares' without providing

any details to the `Shareholders' justifying the `Rights Issue'.

41. The Learned Counsel for the Respondents No. 1 to 3 relies on the decisions of the Hon'ble Supreme Court of India in Dale & Carington Invt. (P) Ltd. & Another V P.K. Prathapan & Ors., reported in 2005 (1) SCC at page 212, wherein it is observed as follows;

11(d). ........``the directors in a private limited company are expected to make a disclosure to the shareholders of such a company when further shares are being issued. This requirement flows their duty to act in good faith and make full disclosure to the shareholders regarding affairs of a company. The acts of directors in a private limited company are required to be tested on a much finer scale in order to rule out any misuse of power for personal gain or ulterior motives."

42. The Learned Counsel for the Respondents No. 1 to 3 submits that

the undertaking not to dilute the shareholding of R1 to R3 by the

`Appellant' at paragraph 3 of the `Order' dated 04.12.2019 in Comp.

App. (AT) No. 283 of 2019 passed by this `Tribunal' was violated and

by the `1st Rights Issue' the `Shareholding' was already diluted from

27.7% to 23% and in fact, the `Appellant Group' had created `Charge'

on the `Assets of the Company' for availing `additional loan' of INR

Rs.7.95 Crore.

43. It is brought to the notice of this `Tribunal', on behalf of R1 to R3

that the `Appellant' after furnishing an undertaking before this `Tribunal'

Company Appeal (AT) No. 50 of 2022 Page 26 of 40 on 04.12.2019 had filed I.A. No. 200 of 2019 seeking permission from

the `Tribunal' for infusion of funds by the Directors and in fact, there was

no `whisper' about the `Rights Issue' of `Equity Shares' in I.A. No. 200

of 2019.

44. According to the Respondents No. 1 to 3, the `Tribunal' on

13.01.2020 had allowed the prayer to infuse funds from the Directors as

per Order dated 13.01.2020 and as a matter of fact, no infusion of funds

from the `Shareholders' was ever put across the table by the `Appellant'.

45. The Learned Counsel for the Respondents No. 1 to 3 submits that

the `Appellant' has failed to furnish `an answer' / `reason' in respect of

the following:

(i) If the rights issue was the mandate of Bank, why was the 1st rights issue grossly undersubscribed only to an extent of 38.99%?

The Appellant had no restriction to fully subscribe the 1 st Right Issue.

(ii) Why no justification is provided by the majority shareholders (being Proforma Respondents No. 5 to 15 herein) to not have fully subscribed to the shares offered to them in the 1st right issue?

(iii) Why was the fact of additional loans/funds being sanctioned by the SBI and PNB Bank to the tune of Rs.7.95 Crores being suppressed from this Hon'ble Appellate Tribunal, Hon'ble NCLT and shareholders?

(iv) Why was the Valuation Report prepared on 15.02.2022 for 2nd rights issue whereas the purported Bank email is dated 26.02.2022?

Company Appeal (AT) No. 50 of 2022 Page 27 of 40

(v) Why no details till date has been given to the Hon'ble NCLAT, Hon'ble NCLT and shareholders on the status of disbursement of loan, debt equity ratio, defaults, shortfalls, etc.?

(vi) Why vital documents/annexures were withheld by the Appellant?

46. The Learned Counsel for the Respondents No. 1 to 3 contends that

the `Tribunal has wide powers to pass orders as it deems fit and equitable

as per Section 242 (4) of the Companies Act, 2013, in respect of C.A.

No. 45/CB/2021 and in fact in C.A. No. 45/CB/2021 specific reliefs were

sought for, as observed by the `Tribunal'.

Submissions of R5 to R15:

47. On behalf of Respondents No. 1 to 15, it is represented before this

`Tribunal' they support the company and further that `Order' dated

04.12.2019, passed by the `NCLAT', New Delhi in Comp. App (AT) No.

283 of 2019 was not followed.

48. It is brought to the `Notice' of this `Tribunal' on 16.03.2022 in

C.A.No. 15/CB/2022, the `NCLT', Cuttack Bench, had observed that the

`Petitioner's side arguments were already heard and now on the

Respondent side, on 10.03.2022, `Reply' was filed on the `Petitioner's

side' strongly opposed to receive the `Reply', since it was filed after the

completion of `Petitioner's side' arguments.

Company Appeal (AT) No. 50 of 2022 Page 28 of 40

49. Furthermore, the `Tribunal' on 16.03.2022 in C.A.No.

45/CB/2021 had proceeded to observe that the `Right' to file `Reply' of

the Respondents was not forfeited or neither the `Respondent' was set

ex-parte and further that accepting or rejecting the `Reply' would have

nexus to the disposal of C.A.No. 15/CB/2022 and adjourned the

C.A.No.45/CB/2021 to 23.03.2022.

50. Added further, on 16.03.2022, the `Tribunal' in C.P.No.

98/CTB/2019, had observed that in this main Petition, Respondents' side

arguments were heard in `Part' and for continuance of the `Respondents'

side arguments, the matter was adjourned to 23.03.2022 at 2nd half of 2.30

P.M.

51. According to the Respondents No. 5 to 15, the Respondent No. 1

has a competing interest, an in fact, in Comp. App (AT) No. 149 of 2021

the Principal Bench of this `Tribunal' in the matter of Dr. Kedarnath

Panda V Institute of Gastro & Kidney Care Pvt. Ltd. & Ors., had

observed that `as the hearing has commenced before the Ld. NCLT,

Cuttack Bench, and as has been listed as par-heard on 06.01.2022, this

instant `Appeal' is not maintainable and the `Appeal' deserves to be

dismissed, and ultimately dismissed the `Appeal'.

Company Appeal (AT) No. 50 of 2022 Page 29 of 40 Increase of Share Capital:

52. To be noted, Section 62 of the Companies Act, 2013, relates to an

`increase of Share Capital', of course, within the `Authorised Capital'. In

reality, it is aimed to include a matter, where the `Directors' determined

to `increase the Capital' by issuing further `Shares' within the

`Authorised Limit', as per the decision of the Hon'ble Supreme Court in

Nanalal Zaver And Another vs Bombay Life Assurance Co. Ltd. and

others, reported in AIR 1950 SC Page 172.

Aim of Section 62 :

53. The purpose of Section 62 of the Companies Act, 2013, is to

increase the `Capital' for the needs of the Company, the proportionate

allotment is coincidental to increase of `Subscribed Capital'. The

`Articles of Association' of a Company generally / ordinarily specify in

the Regulation about the aspect of `Rights Issue'. As a matter of fact,

Section 62 of the Companies Act, 2013, embodies in `Statutory Form'

the rudimentary notions as among the `Shareholders' inter se and

governing them, with power to allot `Shares'.

54. It is for the Directors to determine how may `Shares' and of what

`Value', they will issue the `Shares'. The enhancement of `Capital' is

purely a matter of an internal Administration of the Company and the

Company Appeal (AT) No. 50 of 2022 Page 30 of 40 Courts do not interfere in such matter in normal course, as per decision

R. Khemka V Deccan Enterprising (P) Ltd. 1998 16 SCL (A.P.)

55. Whether the decision, is in the interest of the company or

`Bonafide' or not can only be ascertained from each and individual, given

set of facts, as opined by this `Tribunal'. It cannot be forgotten that just

an allegation of `Malafide' or `absence of Bonafide' will not suffice. It

requires proof, more than a mere averment.

56. In terms of the ingredients of Section 62 of the Companies Act,

2013, the Directors have to offer further `Shares' issued, to the

`Shareholders' who are on the `Register of Companies' and not to anyone

else, and in fact, the `Offer' must be in the same proportion to all the

`Shareholders'. It is to be remembered that there shall be no

discrimination among them.

Foreign Decision:

57. It is pertinently pointed out by this `Tribunal' that in Miles V Safe

Deposit Trust Company, reported in (1921) 66 Law Ed at 923 at Spl. Pg:

926, the Hon'ble Supreme Court of Unites States of America held that

the right to subscribe new stock is not an organic product of the original

stock like the `Young Animals' or the `Fruit of Trees' but a `right' to take

part in preference to strangers and on equal terms with other existing

Company Appeal (AT) No. 50 of 2022 Page 31 of 40 `Shareholders' in the privilege of contributing `New Capital' called for

by the `Corporation' - an `Equity' that inheres in stock ownership under

such circumstances as a quality inseparable from `Capital Interest'

represented by the old `Stock'. It cannot be lost sight of that if an

`individual' likes he can `invest' further sum and `purchase' a

`Proportionate Share' of the `New Issue of Capital'.

58. Section 62 of the Companies Act, 2013 recognises the

`Shareholders Right' to renounce the `Shares' offered to him as his

`Right'. In fact, the `Right of Renunciation' is a `Statutory Right' and not

an `absolute one', as the term `unless the Articles of Company otherwise

provide'.

Rights Issue Principle:

59. Undoubtedly, the `Rights Issue' principle stems from the aspect of

pre-emption rights, and that any `New Shares' issued by a company is to

be offered to the `Existing Shareholders' in proportion to their holding of

old shares i.e., on pro-rata basis.

60. If the increase of `Capital' was found to be necessary for genuine

business purpose, the company as per Section 62 of the Companies Act,

2013, could raise further `Capital' from public, as per decision in Prem

Company Appeal (AT) No. 50 of 2022 Page 32 of 40 Seth V National Industrial Corporation Ltd., reported in (1959) 96 Comp

Cas at Page 575 (Del).

`Member', `Shareholder' and `Holder of Shares':

61. The word `Member', `Shareholder' and `Holder of Shares' are

employed in the Companies, Act, 2013, in same sense, meaning; persons

holding `Shares' in a company and registered as such in the `Register of

Members' of the company.

62. An `Issue of Shares' on `Rights' basis cannot ordinarily be subject

of a complaint, as an `act of Oppression'.

Hon'ble Supreme Court's decision:

63. In the decision of Hon'ble Supreme Court in Worldwide Agencies

(P) Ltd. V Margarat T. Debor (Mrs.), reported in AIR 1990 SC at Page

737, it is observed and held that in some situation and contingencies the

`Member' may be `Holder of Shares', but a `Holder' may not be a

`Member'.

Citations:

64. At this juncture, this `Tribunal' worth recalls and recollects the

decision in Jabalpur Tea Co. Ltd. V Bengal Dooars National Tea Co.

Ltd., reported in (1984) 55 Comp Cas 160 (Cal), wherein it is observed

Company Appeal (AT) No. 50 of 2022 Page 33 of 40 and held that an `allotment' made to increase the `Shareholding' so as to

reduce a `Majority Shareholder' to `Minority' is not `valid'.

65. Also, this `Tribunal' aptly points out that the decision in S

Varadharajan V Udhayem Leasings & Investments (P) Ltd., reported in

(2005) 125 Comp Cas at Page 853, wherein it is observed that if any

`Issue of Shares' solely to gain control over the company is not

permissible.

66. It is pointed out that if it is proposed to issue `Shares' to the

`Existing Members' (as distinguished from `Shareholders'), it is

desirable to pass a `Resolution' having regard to the decision in

Kedarnath Agarwal's case, reported in (1963) 33 Comp Cas 102.

English Decisions:

67. It is relevant for this `Tribunal' to cite the decision in Piery V

S. Mills & Co. Ltd., (1920) l Ch. 77, wherein it is observed as under:

"the basis of both cases is, as I understand, that Directors are not entitled to their powers of issuing shares merely for the purpose of maintaining their control or the control of themselves and their friends over the affairs of the company, for merely or the purpose of defeating the wishes of the existing majority of shareholders."

68. Further, in the decision in Hogg v. Cramphorn Ltd., (1967) l Ch.

254, Buckley, J. echoed the principle in Punt and in Piercy to the effect

Company Appeal (AT) No. 50 of 2022 Page 34 of 40 that ``if the power to issue shares was exercised for an improper motive

the issue was liable to be set aside and it was immaterial that the issue

was made in a bona fide belief that it was in the interests of the

company".

69. Before the `Tribunal' in C.A.No. 45/CB/2021, the Respondents

had filed a `joint Reply' (in response to the Application C.A.No.

45/CB/2021 filed by the Respondent No. 1 and Ors., as `Applicants',

inter alia stating that the `Rights Issue of Shares', was carried out in terms

of the requirement of the Bankers and only in the interest of the

Company, and further that there cannot be any `prejudice' caused to the

Company when the `Rights Issue of Shares' shall be bringing more funds

by way of `Equity'.

70. It is the version of the Respondents in their `Reply' in C.A. No.

45/CB/2021 in C.P.No. 98/CTB/2019 that there were no restrictions

whatsoever imposed by the `Appellate Tribunal' and rather, the `option

of Rights Issue was left open for the Company, as per Section 62 of the

Act, 2013, in short, the Respondents were acting as per the Order of the

Appellate Tribunal dated 04.12.2019.

71. The Respondents proceeding further in the `Reply' to C.A.No.

45/CB/2021, had mentioned that as long as the `Rights Issue' under

Company Appeal (AT) No. 50 of 2022 Page 35 of 40 Section 62 of the Companies Act, 2013, is in the better interest of the

Company and further it is only to meet the financial requirement of new

Project at Ghatikia, the same shall be a `valid one'. Moreover, the

purported Applicant No. 1 had launched another company with the same

object namely Sisum Health Care Private Limited, which is completely

against the interests of the company.

72. Indeed, the conduct of the purported Applicant No. 1 speak

volumes about his anti-company activities. He was removed because of

his misbehaviour with the management of the Kalinga Hospital Limited

with effect from 14.03.2013. He had physically assaulted the Managing

Director of the Company in the present case and created an extremely

untoward environment in the hospital premises. The company has to

defend itself and to incur litigation expenses within the `Rights' of the

company because of the purported Applicant No. 1 had filed the instant

case.

73. The Respondents had denied that there is any violation of the

alleged negative covenants, as imposed by the Bank in the `Sanction

Letter' dated 17.03.2017 as alleged or at all. The `Rights Issue' was done

as per the terms of the Bank's Letter dated 21.09.2021, requiring the

Company Appeal (AT) No. 50 of 2022 Page 36 of 40 Respondent No. 1 company to raise `Capital' by way of `Equity'. The

Respondent company had duly complied all the provisions regarding the

`Rights Issue'. The `Valuation Report' was made by the `Independent

Valuer' and registered as `Registered Valuer' with `IBBI'.

74. The Respondents in their `Reply' to C.A. NO. 45/CB/2021 had

submitted that the `Rights Issue' was carried out and 33,57,557 number

of Shares was subscribed culminating in infusion of 6,71,51,140 by way

of `Equity'. That apart, the Respondents had averred in their `Reply' that

the perusal `Bank Statement' relied upon by the purported Applicant No.

1 reveals that the `Loan' is very much in the name of the `Company', and

prayed for the dismissal of the `Application' with `exemplary costs'.

`Natural Justice':

75. Undoubtedly, the Principles of Natural Justice are not the edicts of

a Statute. An absence of ascribing reasons will give a person, a sense of

`feeling of injustice' whether it is before `an Administrative / Judicial /

Quasi-Judicial Forum' which passes it, in the considered opinion of this

`Appellate Tribunal'.

76. Be that as it may, as far as the instant case is concerned, this

`Tribunal' keeping in mind of the fact that the Company Petition No.

Company Appeal (AT) No. 50 of 2022 Page 37 of 40 98/CTB/2019 was filed in terms of Section 241 & 242, read with other

provisions of the Companies Act, 2013, among other things averring

`oppressive and mismanagement acts', purportedly committed by the

Respondents therein, and considering the observation made by the

`National Company Law Tribunal', Cuttack Bench, in the `impugned

order' in C.A. No. 45/CB/2021 dated 23.03.2022 that when the `1 st

Rights Issue' was pending, the subsequent `Rights Issue' during the

pendency of the `Application' comes very much within the ambit of this

`Application' and when the `Tribunal' by the `impugned order' in C.A.

No. 45/CB/2021 in C.P. No. 98/CTB/2019 had restrained the

Respondents therein, from going ahead with the present `Rights Issue' in

progress or any further `Rights Issue' till the disposal of the `Application'

and C.P. No. 98/CTB/2019, etc., (including the grant of `Status Quo' in

regard to the `Existing Shareholders' and their `shareholding shall be

maintained till further orders or disposal of the main Company Petition',

whichever is earlier, coupled with the direction to list the matter on

21.04.2022 along with the main Petition for Final Hearing and Disposal

in the 2nd half at 2.30 P.M.)., being an `interim order', this `Tribunal',

without expressing any opinion one way or the other on the merits of the

matter in pending C.P. No. 98/CTB/2019, on the file of the `Tribunal'

and also not delving deep into the same, exercising its prudent sound

Company Appeal (AT) No. 50 of 2022 Page 38 of 40 discretion in a subjective manner is not inclined to interfere with the

`impugned order' dated 23.03.2022 in C.A. No. 45/CB/2021 in C.P. No.

98/CTB/2019, (although, it is brief and cryptic, yet not fatal), passed by

the `Tribunal', since, the same is neither desirable nor palatable in the

teeth of the observations made in Comp. App (AT) No. 149 of 2021 dated

06.12.2021 by this `Tribunal' that it will not interfere with the

proceedings, when the main Company Petition hearing was pending

before the `Tribunal', of course, based on the surrounding facts and

circumstances of the present case in an integral manner, especially, when

the operations in the new hospital had commenced, apart from the fact

that the `Final Hearing' and `Disposal' of the main C.P. No.

98/CTB/2019 was slated for Final Hearing and Disposal on 21.04.2022

(and in reality, in the main C.P. No. 98/CTB/2019, the Petitioners' had

already completed their arguments both in the Company Petition and in

C.A. No. 45/CB/2021) and that the pending main C.P. No. 98/CTB/2019

comes up before the `Tribunal' on 14.07.2022. Viewed in that

perspective, the instant `Appeal' fails.

77. Before parting with the case, this `Appellate Tribunal', quite in the

fitness of things, directs the `National Company Law Tribunal', Cuttack

Bench, to complete the `Hearing' of the main C.P. No. 98/CTB/2019 on

its file, when it comes up for `Hearing' on 14.07.2022 (in all respects)

Company Appeal (AT) No. 50 of 2022 Page 39 of 40 within three weeks from 14.07.2022 and to pass final orders in the main

C.P. No. 98/CTB/2019 within a period of two weeks' thereafter.

Conclusion:

In fine, the instant Company Appeal (AT) No. 50 of 2022 is

dismissed. No costs. The connected I.A. No. 898 of 2022 (for Stay), IA

No. 899 of 2022 (seeking exemption to file Certified Copy of the

impugned order) and IA No. 900 of 2022 (seeking exemption from filing

Translated Copies of the DIM, etc.) are Closed.

[Justice M.Venugopal] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical) 04/07/2022

SR/GC

Company Appeal (AT) No. 50 of 2022 Page 40 of 40