Jagdish Kumar Dhingra vs A.R. Plaza Pvt. Ltd

[Arising out of order dated 31.07.2017 passed by National Company Law Tribunal, New Delhi Principal Bench in C.P. No.27 (ND) of 2013]

IN THE MATTER OF:

Mr. Jagdish Kumar Dhingra S/o Shri Kishan Chand Dhingra, E-5 Second Floor, Kailash Colony, New Delhi - 110048 ...Appellant (Original Petitioner) Versus

1. A.R. Plaza Pvt. Ltd. 8/508, Circular Road, Chota Bazar, Shahdara, New Delhi - 110032

2. Mr. Raj Kumar Mittal S/o Late Shri Raghuvir Saran, A-31, Anand Vihar, New Delhi - 110092

3. Mr. Rajeev Aggarwal, 7/80 Jawala Nagar, Shahdara New Delhi - 110032

4. Mr. Ajay Jolly, S/o Shri Madan Lal Jolly F-1082 Chitranjan Park, New Delhi - 110019

...Respondent Nos.1 to 4 (Original Respondent Nos.1 to 4)

Company Appeal (AT) No.341 of 2017 2

Present: Shri Sajiv Sen, Sr. Advocate with Shri Hemant Phalpher, Shri Sagan Ray and Shri Partha Goswami, Advocates for the Appellant

Shri P.K. Mittal, Advocate for Respondent Nos.1 to 3

Shri Naresh Kumar Joshi, Advocate for Respondent No.4

JUDGEMENT

A.I.S. Cheema, J. :

1. The Appellant - Original Petitioner in Company Petition 27 (ND) of

2013 has filed this Appeal against dismissal of his Company Petition filed

before National Company Law Tribunal, New Delhi, Principal Bench

('NCLT' in brief). The petition was filed complaining oppression and

mismanagement relying on Sections 397 and 398 of the Companies Act,

1956 ('old Act' in brief). The learned NCLT found that the Appellant had

failed to establish that he had shareholding in the Respondent No.1

Company and on such basis, dismissed the Company Petition. Hence this

appeal.

2. A brief reference needs to be made to the rival cases put up by the

parties.

3. The Appellant (Original Petitioner) filed the Company Petition

claiming irregularities, illegalities, mismanagement and oppression on the

part of Respondents 2 to 4 in the Company - Respondent No.1. The

Appellant claimed that Respondent Company was incorporated in 2002.

Company Appeal (AT) No.341 of 2017 3

He was appointed as Director on 18th February, 2008. There was illegal

allotment of shares to the extent of 2,40,000 of Rs.10/- each to Respondent

No.2 on 15.03.2010 in complete derogation of basic tenets of law, it is

claimed. He claimed that he had submitted complaint of theft dated 20th

March, 2010 of documents including Memorandum of Understanding to

the Goa Police which documents had been stolen from his luggage at the

Dabolin Airport. According to him on 30th March, 2010, there was increase

in authorized share capital of the Company from Rs.25 lakhs to Rs.100

lakhs and on the same date he was allotted 7,45,000 equity shares of

Rs.10/- each against share application money which had already been

received by the Company since 2007 - 2008. One Shri Narain Ladu

Mandrekar was appointed Additional Director on the same date of 30th

March, 2010. The Appellant was appointed as Managing Director on 1st

April, 2010. The Appellant claimed that on 04.06.2010, Respondent No.2

allegedly conducted Board Meeting and had submitted From 2 illegally and

claimed allotment of 7,50,000 equity shares. The Appellant came to know

that the company had been marked as "Management Dispute". The

petition filed by the Appellant claimed that in violation of the provisions of

the old Companies Act, he was removed from the post of Director on

26.07.2010 in sham Extra Ordinary General Meeting. The Petitioner claims

setting aside of the Resolution said to have been passed by Board of

Director on 15.03.2010 allotting shares to Respondent No.2; setting aside

Resolution passed in EOGM dated 26.07.2010 removing the Appellant

from the post of Director; setting aside Resolution of Board of Directors

Company Appeal (AT) No.341 of 2017 4

dated 04.06.2010 allotting shares to Respondent No.2 and Kanica Metals

Pvt. Ltd.; he also sought setting aside Resolutions authorizing Respondent

No.2, to execute sale deeds as mentioned in the prayer clause. Further

reliefs and investigation were also sought.

4. In nutshell, the Respondents put up defence that no shares have

been allotted to the Appellant. According to Respondents, the Appellant

was not a shareholder in the Company. Respondents relied on affidavit

filed by Narain Ladu Mandrekar to counter the allegations made by the

Appellant that there was EOGM dated 30th March, 2010 and increase in

share capital and allotment of shares. The Respondents accepted that the

Appellant had deposited certain monies but claimed that the same were

towards unsecured loans and it was shown accordingly in the Financial

Statement from 2008 till 2012 and it was not subscription towards share

capital. They claimed that there was no agreement to give participation to

the Appellant in the Company. The Respondents countered various

averments made by the Appellant with regard to transactions relating to

properties at Goa. According to the Respondents, equity shares were

allotted to Respondent No.2 and the Appellant was aware about it and

there was no forgery. On 15.03.2010, Board Meeting took place in the

morning and on the same day, Respondent No.2 had left in the afternoon

for Goa, and the necessary formalities had been complied with. The

allotment was for bona fide purpose of expansion in the real estate. The

allotment of March, 2010 could not be challenged after delay of 3 years.

Company Appeal (AT) No.341 of 2017 5

The Respondents claimed that the removal of the Appellant from the post

of Director was after complying with the necessary provisions.

5. The record as well as the impugned order show that the learned

NCLT gave opportunity to both sides to put up their complete cases and

even referred to the rival claims in details but keeping in view provisions

of Section 399 of the old Act, framed following issues for consideration:-

"i) Whether the Petitioner satisfies the requirement of

Section 399 of the Companies Act, 1956 in order to

maintain the petition under Sections 397 and 398

read with Section 399 of the Companies Act, 1956?

ii) If the answer to the above is affirmative whether

under the facts and circumstances of the case the

principles of partnership can be applied in order to

sustain the petition as contended by the petitioner?

iii) Whether the petition suffers from any delay and

laches as contended by the respondents disentitling

the petitioner from maintaining the petition?"

6. The learned NCLT considered the concerned provisions and

observed in Para - 24:-

"24. The facts narrated in the earlier paragraphs as

culled out from the pleadings of the respective parties as

Company Appeal (AT) No.341 of 2017 6

well as perusal of the pleadings and documents clearly

shows that the 1st respondent company was incorporated

on 18th January 2002 as a private limited company with two

subscribers to the Memorandum and Articles Association of

the company, they being the 2nd and 3rd respondents

respectively subscribing to 5000 equity shares each. Hence

it is evident that the petitioner was not involved as a

promoter of the company at the time of its incorporation nor

was he subscriber to the charter documents of the 1st

respondent company at the time of incorporation of the

company and in the circumstances, he could have become

a member or shareholder of the 1st respondent company

only on the basis of allotment of shares subsequent to the

incorporation of the 1st respondent company or by way of

purchase of shares or other mode like inheritance, gift etc.

However, no letter of allotment of shares nor share

certificates issued by the 1st respondent company or share

transfer forms or any transfer/transmission document in

relation to 4,65,000 equity shares which is claimed to be

held by him has been produced along with the petition in

order to establish that he is in fact having title to the said

shares. The piece of evidence on which the petitioner is

relying to establish his claim over the 4,65,000 equity

shares is based primarily upon Form No.2, namely the

Company Appeal (AT) No.341 of 2017 7

return of allotment filed with the Registrar of Companies

which is seriously disputed by the respondents as not valid

and which has been categorized as "Management Dispute"

by the Registrar of Companies, NCT & Haryana, New Delhi.

In relation to the said Form No.2 and whether it can be made

as a basis by the petitioner for claiming the shares of the 1st

respondent company the same is dealt with separately

elsewhere in this order particularly in light of the absence of

any other document being produced, even though alleged to

be in existence, to sustain the claim of the petitioner relating

to the ownership of 4,65,000 shares in relation to himself

and 2,80,000 shares to his associates in all aggregating to

7,45,000 shares. At the cost of repetition, the onus is on the

petitioner to first establish his claim of shareholding in the

petitioner company to the satisfaction of this Tribunal,

before this Tribunal can venture into the merits of the case

as alleged by the petitioner in his petition."

[Emphasis supplied]

7. The learned NCLT then dealt with the claim of the Appellant that

there was a Memorandum of Understanding and that he was promised

equal shareholding as well as management rights. NCLT observed that the

Memorandum of Understanding in original or copy had not been produced.

This is being found fault with by the Appellant by referring to document at

Company Appeal (AT) No.341 of 2017 8

Page - 1339 of Volume 7 in the Appeal to say that it was before the learned

NCLT. The learned NCLT observed in Para - 28 as under:-

"28. Thus in the absence of any prima facie evidence to

sustain the plea of the petitioner in relation to the

shareholding in the 1st respondent company and to

corroborate the plea of equal participation and shareholding

of the petitioner, the only document which is required to be

considered in relation to shareholding is the Form 2 as filed

with the Registrar of Companies, NCT of Delhi & Haryana

by the petitioner himself and which has been categorized by

the said authority as under "Management Dispute". The

consistent refrain of the petitioner in the entire petition has

been that as between himself and the second respondent

there was an understanding of equal shareholding.

However, even assuming that the enhanced authorized

capital and the allotment of equity capital on 30.03.2010,

suo moto, by the petitioner to himself and to his nominees

are taken into consideration the same is clearly in excess of

the understanding as it almost comes to 74.5% of the capital

of the 1st respondent company and in clear violation of the

same demonstrating that the petitioner has not come before

this Tribunal with clean hands which is also a pre-requisite

for invoking the equitable jurisdiction of this Tribunal.

Company Appeal (AT) No.341 of 2017 9

Further it is seen that along with the petitioner, Mr Narayan

Ladu Mandrekar, his associate seems to have been also

allotted shares to the extent of 1,60,000 equity shares of

Rs.10/- each. However, the said Mr Narayan Ladu

Mandrekar, claimed by the petitioner initially to be his

acquaintance had given an affidavit (Annexure XXVI) dated

28.12.2011 filed by the respondents in their typed set to the

effect that the deponent therein never had any interest in

the Delhi based company, A. R. Plaza Pvt Ltd. (the first

respondent company) either as a director or a shareholder

or in any other capacity."

8. Considering this and other reasons as recorded in the Impugned

Order, the learned NCLT found that the Appellant failed to show that the

petition was maintainable and dismissed the same. It held that the plea

that Petitioner was issued shareholding could not be sustained.

9. Judgement of NCLT shows it allowed parties to put up their

complete respective cases and referred to the same in Impugned Order but

having concluded that shareholding itself was not proved by Appellant and

thus did not go into the merits of other issues raised.

10. We have heard learned counsel for the parties. It has been argued

by the learned counsel for the Appellant that since 2007 - 2008, Appellant

was investing huge amounts in the Respondent No.1 Company, from which

Company Appeal (AT) No.341 of 2017 10

amounts various properties were purchased by the Company. According

to the learned counsel, the Appellant was working as Director in the

Respondent No.1 Company and in such capacity issued Notice dated 2nd

March, 2010 convening Extra Ordinary General Meeting on 30th March,

2010 seeking Resolution to increase share capital. According to the learned

counsel, the Respondent No.2 illegally showed convening of Board Meeting

on 15th March, 2010 and submitting of Form 2 regarding allotment of

additional 2,40,000 equity shares to himself although on the same date he

travelled to Goa also. It is claimed that at Goa Airport, Respondents 2 to 4

had committed theft of original title deeds and other documents from the

luggage of the Appellant and FIR was filed. The learned counsel submitted

that on 30th March, 2010 in view of the Notice dated 2nd March, 2010,

EOGM was held and authorized share capital was increased and 4,65,000

equity shares were allotted to the Appellant, 1,20,000 equity shares in

favour of Anant Containers Pvt. Ltd. which is Company owned by the

Appellant and 1,60,000 equity shares were allotted in favour of Narain

Ladu Mandrekar. Form 2 was submitted to ROC in this regard. The learned

counsel referred to copy of Form 2 which was submitted. The copy has

been filed with Diary No.2247 at Page - 3. The learned counsel submitted

that subsequently on 4th June, 2010, Respondent No.2 allegedly conducted

Board Meeting and allotted 7,50,000 equity shares to himself and M/s.

Kanica Metals Pvt. Ltd., a company owned by him. It has been argued that

the Resolution passed to remove the Appellant as Director was also illegal.

The learned counsel referred to the document at Page 1339 Volume 7 as

Company Appeal (AT) No.341 of 2017 11

statement which was effected between the Appellant and Respondent No.2

in June, 2010 whereby Respondent No.2 was to return Rs.60 lakhs to the

Appellant with interest and to give equity shareholding in the ratio of 53.47

between R2 and the Appellant. According to the counsel, the original of

this document is with the Goa Police and the NCLT wrongly observed that

this document was not on record. It is further argued that Narain Ladu

Mandrekar had given affidavit in favour of the Respondents on 28.12.2011

which he later on retracted by filing another affidavit on 17.08.2017.

11. The learned counsel for the Respondents submitted that the

Appellant himself averred in the Company Petition that the amounts

deposited by him were reflected as unsecured loans in the annual

accounts. The amounts were brought for purchase of immovable property

and not as share application money. According to the counsel, till 30 th

March, 2010 admittedly there were only Respondents 2 and 3 and the

Appellant as Directors and without the consent of the Respondent

Directors, no Board Meeting or AGM or EGM could be held. The

Respondents 2 and 3 were the only shareholder Directors. It is argued that

the Appellant illegally showed holding of meeting dated 30th March, 2010

and increase in shareholding and allotment of shares to himself and

Narain Ladu Mandrekar. The Appellant who was Director misused his

position to submit Form 2 to the ROC but the same has been disputed as

there was no Board Meeting. According to the learned counsel, there was

no Board Meeting before the alleged Notice dated 2nd March, 2010 was

Company Appeal (AT) No.341 of 2017 12

issued and there was no EOGM dated 30th March, 2010 and there was no

allocation of shares. It has been argued that pursuant to alleged and

purported Board Meeting held on 30th March, 2010, the Appellant claims

that there was allotment of 4,65,000 shares to himself although books of

accounts of the Company showed that only Rs.16.50 lakhs were there in

the name of the Appellant and Rs.13 lakhs were there in the name of his

wife Mrs. Shalini Dhingra. As such the learned counsel submitted that the

Appellant, even if it was to be said that there was increase in share capital,

could not have shown 4,65,000 shares allotted to himself. According to the

counsel, the Appellant could not allot the shares to himself for the value of

46.5 lakhs when such amount had not been contributed. It has been

argued that the Appellant without any Board Meeting filed Form 32 with

ROC showing appointment of Shri Narain Ladu Mandrekar as Additional

Director and his own designation as MD with the effect from 01.04.2010.

Even regarding the alleged EOGM, the learned counsel submitted that to

call EOGM, there has to be authorization of the Board and on 2 nd March,

2010, there were only Respondents 2 and 3 shareholder Directors and

there is no material to show that they had joined any such Board Meeting

to call EOGM. The Unilateral Act of Appellant issuing Notice dated 2nd

March, 2010 (Page - 427 Diary No.2752) cannot be said to be legal.

Without the authorized share capital increasing legally, there could not

have been any such allotment of shares on 30th March, 2010.

Company Appeal (AT) No.341 of 2017 13

12. The learned counsel for the Respondents referred to Page - 1339

relied on by the Appellant to claim that it was only a page having mere

scribbling made by the Appellant and cannot be said to be any agreement

as such. The page does not bear any date and no terms and conditions

have been written down. Mere scribblings cannot be relied on.

13. We have heard parties on respective claims. But we find that

necessity to go to other issues will arise only provided Appellant crosses

the first hurdle. Considering the rival claims, we find that the material

issue is only whether the Appellant is able to show that he was at any time

a shareholder in the Respondent Company. It is admitted fact that he was

working as a Director in the Company. The counsel for Appellant referred

to Annexure - XXIII (Page - 427) filed with the Reply. This document is a

Notice dated 2nd March, 2010 purporting to be Notice calling Extra

Ordinary General Meeting on 30th March, 2010 for increase in the

authorized share capital from Rs.25 lakhs to Rs.1 crore. The learned

counsel for the Appellant was unable to show us any Board Resolution

deciding on issue of such Notice by one of the Directors. Keeping in view

Section 169 of the old Companies Act, at the time of Arguments we asked

but the counsel was unable to show us any provision which permits one

of the Directors to unilaterally, without authority issue Notice on his own

calling EOGM to increase authorized share capital. We find substance in

the arguments of the learned counsel for Respondents that it is impossible

that the Respondents 2 and 3, the other Directors would support increase

Company Appeal (AT) No.341 of 2017 14

of authorized share capital and let the Appellant take away major part of

the shares on the same date when already before 30th March, 2010, the

Appellant had on 20th March, 2010 filed FIR against these Respondents,

copy of which is at Page - 431 with the Reply filed by the Respondents in

the Appeal. No Board Meeting deciding to call EOGM and no resolution of

EOGM is brought on record.

14. The other document relied on by the Appellant is Form 2, copy of

which has been filed with Diary No.2247 at Page - 3. Admittedly, this Form

was submitted to the ROC by the Appellant himself. This document is

being relied on by the Appellant without showing any Resolution of the

EOGM permitting increase in the authorized share capital. The Appellant

claims that EOGM took place on 30th March, 2010 and Form 2 claims that

on the same date, the allotment of shares was made. Form 2 is

accompanied by details of shares allotted on 30th March, 2010. Even this

has been signed by the Appellant as Director. Admittedly, the ROC did not

accept such Form 2 in the face of the fact that disputes had been raised.

When, till 30th March, 2010 along with the Appellant the only 2 other

Directors were the Respondents and the Respondents deny any such

meetings and the Appellant fails to show any attendance sheet or Board

Resolution or Resolutions passed in EOGM, merely brandishing From 2

signed by himself is not enough for the Appellant. This is poor attempt of

a non-member Director to give himself shares that did not exist as the

EOGM also could not be proved. The learned NCLT has rightly discussed

Company Appeal (AT) No.341 of 2017 15

the material on record and concluded that the Appellant failed to show

that he had shareholding in the Company.

15. The counsel for the Appellant argued that to maintain the petition,

it was sufficient for the Appellant to show that From 2 had been submitted

and the Appellant could not have been non-suited only on the basis that

Form 2 was disputed. We find that the learned NCLT did not dismiss the

petition at primary stage but complete hearing was given to the parties

after taking on record rival pleadings and hearing and only when the

learned NCLT found that basic shareholding itself is not established, it did

not go into the merits of other contentions. We do not find any fault with

this approach of the learned NCLT.

16. It has been then argued by the learned counsel for the Appellant

that Company Petition 62/ND/2014 was filed by the Respondent No.2 and

later on withdrawn. The learned counsel for the Appellant submitted that

the said petition was filed on 6th January, 2012. It was argued that in para

- H of the petition (Page - 1657 Volume VIII of the Appeal), the Respondent

No.2 had pleaded that the present Appellant had by fraudulent

misrepresentation increased authorized/subscribed capital by Rs.75 lakhs

and the Petitioner (i.e. Present Respondent No.2) had by way of extra

abundant measure applied to the Registrar for allotment of shares to avoid

slip out of the Company to rival hands. The learned counsel referring to

these pleadings submitted that the said Company Petition was filed on 6th

January, 2012 but brought up for registration only in 2014. Meanwhile,

Company Appeal (AT) No.341 of 2017 16

the present Company Petition 27/2013 had been filed by the Appellant on

28th January, 2013. According to the counsel, subsequently on 12th June,

2014, the Respondent No.2 withdrew his Company Petition 62/2014.

According to the learned counsel, in view of such withdrawal, Respondent

No.2 must be treated to have given up his rival claims against the

Appellant.

17. We find that there is no substance in this argument of the learned

counsel for the Appellant. We have seen the Order of withdrawal pointed

out by the Appellant, copy of which is at Page - 1 of Diary No.2247. The

Order shows that when CP 62/2014 was taken up, the learned Member of

the Company Law board noted that the Petitioner had filed for withdrawal

stating that the Company Petition could not be listed due to technical

reasons and so he wanted to withdraw the same. The Member (Judicial) of

the Company Law Board recorded that since the Company Petition had not

been moved before the Bench, the same was being dismissed as

'withdrawn', "giving liberty to the petitioner as permissible under the law".

When this withdrawal took place, the Company Petition 27(ND) of 2013

was already pending. If the petition was withdrawn with liberty to the

present Respondent No.2, it was the option of the Respondent No.2 to

pursue his remedy even by defending the petition which had been filed by

the Appellant. Thus, we do not find that the Appellant can take any

advantage by such a withdrawal. Merely by such withdrawal, the Appellant

does not become a shareholder and cannot be heard saying that there was

Company Appeal (AT) No.341 of 2017 17

legal increase in the authorized share capital of the Respondent No.1

Company as claimed by him.

18. For this view which we are taking, we need not go into various

other disputes and arguments raised by Appellant.

19. For such reasons, we do not find that there is any substance in

the appeal. We do not find that there is any error in the Impugned

Judgement and Order passed by the learned NCLT.

20. The Appeal is dismissed with costs quantified at Rs.2 lakhs to be

deposited by Appellant in the accounts of Respondent No.1 Company.

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

[Balvinder Singh] Member (Technical)

New Delhi

12th July, 2018

/rs/nn

Company Appeal (AT) No.341 of 2017