Jm Housing Ltd & Ors vs Surender Kumar Gupta & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI Company Appeal (AT) No. 182 of 2020 [Arising out of Ex- Parte Ad-Interim Order dated 05.10.2020 passed by the National Company Law Tribunal, New Delhi, Court No.- II in Company Petition No. /133/2020].

IN THE MATTER OF: 1. J.M. Housing Limited Having Registered Office At: D-334,Vivek Vihar, Delhi - 110095. Through its Authorised Representative Shri Smruti Ranjan Swain ...Appellant No.1

2. Mr. Ankur Aggarwal S/o Late Sh. R.K. Aggarwal R/o D-113, Ist Floor, Vivek Vihar Delhi - 110092. ...Appellant No. 2

3. Mr. Neeraj Jindal S/o Sh. S.L. Jindal R/o D- 334, Vivek Vihar, Delhi - 110095. ...Appellant No. 3

4. Mr. Rupesh Kumar Gupta S/o Sh. M.K. Gupta Flat No. 006,Tower - 2, JM Park Sapphire Ramprastha Greens Vaishali, Sector - 9, Ghaziabad - 201010 Uttar Pradesh. ...Appellant No. 4

Versus 1. Mr. Surender Kumar Gupta S/o Late Shri R.K.Gupta R/o. 109, Shreshta Vihar, Delhi - 110092. ...Respondent No. 1

1 Company Appeal (AT) No. 182 of 2020 2. Mrs. Anita Gupta W/o Shri Surender Kumar Gupta R/o. 109, Shreshta Vihar, Delhi - 110092. ...Respondent No. 2 3. Ms. Nikyta Gupta D/o Sh. Surender Kumar Gupta R/o. 109, Shreshta Vihar, Delhi - 110092. ...Respondent No. 3 4. Mr. Ashwani Kumar Gupta S/o Late Shri R.K. Gupta R/o. 109, Second Floor, Shreshta Vihar, Delhi - 110092. ...Respondent No. 4 5. Mr. Ashwani Kumar Gupta Karta (HUF) R/o. 109, Second Floor, Shreshta Vihar, Delhi -110092. ...Respondent No. 5 6. Pyramid Commodities Pvt. Ltd. Having Registered Office at: Space No. 201,202 & 203 Second Floor, Plot No. 07, LSC Market, Anupama Arcade, Mayur Vihar, Phase -1, Extn. Delhi - 110091. ...Respondent No. 6 7. M/s Trikaal Foods and Agro Products Pvt. Ltd Having Registered Office at: Space No. 201, 202 & 203 Second Floor, Plot No. 07, LSC Market, Anupama Arcade, Mayur Vihar, Phase - 1, Extn. Delhi -110091. ...Respondent No. 7 8. Durga Enterprises Pvt. Ltd. Having Registered Office at: Flat No. 006, Tower -2, JM Park Sapphire, Ramprastha Greens Vaishali, Sector -9, Ghaziabad, Uttar Pradesh. ...Respondent No. 8

2 Company Appeal (AT) No. 182 of 2020 Present: For Appellants: Dr. U.K. Choudhary, Sr. Advocate along with Mr. Pradeep Kumar Mittal, Mr. Praveen Kumar Mittal and Mr. Sharad Poddar, Advocates.

For Respondents: Rakesh Kumar (Caveator) and Ms. Preeti Kashyap, Advocates for R- 1 to 3. M/s Kamal Kapoor & Associates, Advocate for R - 4 & 5. Mr. Virender Ganda, Sr. Advocate along with Mr. Kamal Kapoor and Mr. Aman Nandrajog, Advocates for R- 6 to 8.

Venugopal M. J Preface The Appellants have preferred the present Company Appeal being

dissatisfied with the order dated 05.10.2020 passed by the National Company

Law Tribunal, New Delhi, Court No.- II, in CP/133/2020.

2. The National Company Law Tribunal, New Delhi, Court No.- II while

passing the impugned order dated 05.10.2020, had observed the following: -

"Counsel for the Petitioner is

present. The Registry is directed to

issue notice to the Respondents.

Counsel for Petitioner is permitted to

issue private notice to the

Respondents by all modes and file 3 Company Appeal (AT) No. 182 of 2020 proof of service along with an

Affidavit on or before the next date

of hearing.

Counsel for the Petitioners

submitted that they are the

shareholders in the first Respondent

company and together they are

holding 37% of shares of the issued

capital. It is submitted by the

Counsel for the Petitioners that

Respondents are selling property

and taking the consideration in their

accounts. In other words, the

Respondents are misappropriating

the property of the first Respondent

company and in case the property is

sold and consideration is taken by

the Respondents in their personal

accounts, they will deprive the

Petitioners of their rights.

In the facts and

circumstances, the Petitioners have

made out prima facie case, balance 4 Company Appeal (AT) No. 182 of 2020 of convenience is in the favour of

Petitioners and in case the property

of the Respondent No. 1 is sold, the

same will cause irreparable loss to

the Petitioners and Respondent No.

7. This cannot be compensated in

terms of money."

and resultantly restrained the Respondent Nos. 2 to 7 from selling the

property of the Respondent No. 1 till further orders and besides this,

further directed the Respondents not to change the shareholding pattern

of the first Respondent Company without seeking prior permission from

this Tribunal, etc.

Appellants Submissions

3. According to the Appellants, the First Appellant/Company was

incorporated on 08.05.2009 by the second and third Appellants as a 'Real

Estate Developer'. The First Respondent was neither a Promoter nor

Founder Director nor Subscriber to the Memorandum and Articles of

Association of the first Appellant. The First Respondent was appointed

as 'Executive Director' of the Appellant No. 1/Company on 08.12.2009

i.e., after almost seven months of its incorporation.

4. In the Main Company Petition, there are three Petitioners whose

aggregate shareholding is 36.65% of the total paid up share capital of the

First Appellant. However, the Respondent No. 1 to 3 are falsely claiming 5 Company Appeal (AT) No. 182 of 2020 shareholding to the tune of 49% shares; which includes the shareholder

whom are neither related to the Respondent No. 1 to 3 nor party in the

Company Petition. Except the Respondent No. 1-3 none of the other

proclaimed family members had given their written consent to file the

Company Petition nor became co- petitioners along with the Respondent

No. 1 to 3. A false claim was made by the Respondent No. 1 to 3 by

swearing an Affidavit that they along with relatives hold 49% Paid Up

Share Capital of the Appellant No. 1/Company.

5. The Respondent No. 1 to 3, in the main Company Petition had

claimed themselves that they are 'Quasi Shareholder' of the

Respondents. Under the Companies Act,2013, there is no such term

whereby a person can claim himself to be 'Quasi Shareholder'. Therefore,

the Respondent No. 1 to 3 do not have any right in Respondent No. 6 to

8.

6. The Learned Counsel for the Appellants contends that the

Respondent No. 1 to 3 filed CP/133/2020 before the Tribunal on

14.08.2020 and that the copy was served upon the Appellants on

17.08.2020 and that no action was taken for 50 days, for listing the

matter and suddenly the Company Petition got listed for the hearing on

05.10.2020 without informing by way of any e - mail, notice or letter -

mobile no. of Appellant No. 2 and 3 were got included in WhatsApp chat

group but no link was provided for attending virtual hearing on

6 Company Appeal (AT) No. 182 of 2020 05.10.2020 and that an ex-parte ad- interim order came to be passed by

the Tribunal.

7. The Learned Counsel for the Appellants submits that the

concerned Bench of the Tribunal sat only around 3.40 P.M. on

05.10.2020, the mobile no. of Appellant No. 2 and 3 was added in the

WhatsApp group and the Appellant No. 2 and 3 noticed the WhatsApp

group around 3.40 P.M. and since they had no clue as to the purpose

and intent of the said group, the Appellant No. 2 and 3 quit the said

group around 3.55 P.M. As a matter of fact, the Appellant No. 4 never

joined even the WhatsApp group.

8. The Learned Counsel for the Appellants point out that in the order

sheet dated 05.10.2020 of the Tribunal against the names of Appellant

No. 2 to 4, the title 'Advocate' is also written at the instance of

Respondent No. 1 to 2/ Petitioner so as to create an impression before

the Tribunal that the Learned Advocates of Appellant No. 2 to 4 were

present. Indeed, the Appellant No. 2 to 4 could not have otherwise

attended as the Appellant No. 2 was down with Covid -19 and Appellant

No. 3 and 4 were away to Nainital/Jim Corbett for holidays and that they

had not given any Vakalatnama to anyone to appear on their behalf

before the Tribunal on 05.10.2020.

9. It is represented that on behalf of the Appellants that Respondent

No. 1 to 3 in the Reply to the Present Company Appeal have taken a plea

that steno of the Tribunal had wrongly written 'Advocate' against the 7 Company Appeal (AT) No. 182 of 2020 name of Appellant No. 2 to 4 and in fact they are shifting their

mischievous act upon the staff of the Tribunal. In short it is reiterated

on behalf of the Appellants that on 05.10.2020, no link was made

available to any of the Appellants/Respondents and no way Appellant

No. 2 to 4 could attend the hearing before the Tribunal. In regard to the

plea of the Appellants that the conduct of the Respondent Nos. 1 to 3 /

petitioner amounts to fraud, a reliance is placed upon the decision of

Hon'ble Supreme Court 'S.P. Chengalvaraya Naidu (Dead) by L.Rs.'

V. 'Jagannath (Dead) by L.Rs. and Ors.' reported in

MANU/SC/0192/1994 wherein it is observed that 'a fraud is an act of

deliberate deception with the design of securing something by taking

unfair advantage of another'. Also, on behalf of the Appellants a

reference to the judgement of this Appellate Tribunal dated 01.04.2019

in Company Appeal (AT) No. 256 of 2018 is made wherein it is observed

that 'in a matter arising under sections 241 and 242 of the Companies Act

read with Rule 11, irrespective of what the parties plead, say or do, the

paramount consideration of the Tribunal is to keep in view as to what is in

the interest of Company and that the interest of the parties is subservient

to the interest of the Company'.

10. The Learned Counsel for the Appellants brings to the notice of this

Tribunal that the First Respondent made an exit from the First

Appellant/Company through his letter of resignation on 01.11.2016, as

Director of the First Appellant/Company and that a Statutory Return in 8 Company Appeal (AT) No. 182 of 2020 Form DIR - 12 was filed with the Registrar of Companies. In fact

Respondent No. 1 to 3, after November 2016, had not attended the

Annual General Meeting of the year 2017,2018 & 2019 respectively. The

fourth Respondent is the real brother of First Respondent but he

supports the Appellant No. 1 to 4.

11. The Learned Counsel for the Appellants proceeds to submit that

the First Appellant during March 2017, had decided to completely quit

the First Appellant/Company and signed the Settlement Deed dated

19.04.2017, which was concealed by the first Respondent in the

Company Petition. The First Respondent, before resigning his position as

'Director' of the First Appellant/Company use to look after the day- to-

day affairs and with a view to siphon off the funds, instructed the

suppliers to raise invoice on a higher price than the market price and the

amount is to take back as kickback in cash and that the suppliers had

given Affidavits.

12. It is the version of the Appellants that the First Respondent made

false complaints with the Company's Banker Punjab & Sind Bank for

freezing the banking operations to jeopardize the operations of the First

Appellant/Company. However, the Bank had not freezed the banking

operations because of the fact all 'Equal Monthly Instalments' were paid

in time.

13. The Learned Counsel for the Appellants contends that the First

Respondent prior to his resignation in November,2016 parked/gave the 9 Company Appeal (AT) No. 182 of 2020 funds to various entities, without any approval of the Board of Directors

of the first Appellant/Company, before November,2016. The First

Respondent, who was responsible for the day- to- day affairs of the First

Appellant/Company had also signed the Annual Accounts for the

financial year ended 31.03.2016.

14. The stand of the Appellants is that the First Respondent purchased

8 Luxury Cars which were given for his family members. Moreover, the

Appellant No. 2 to 4 had paid back a sum of Rs. 159,29,07,782/- towards

the liability pertaining to the period prior to the resignation of the first

Respondent.

15. The Learned Counsel for the Appellants forcefully submits that the

interests of the Company is paramount in a petition under Section 241

of the Companies Act, 2013, as observed by the Hon'ble Supreme Court.

16. On the side of the Appellants, without prejudice to the above

contentions and demur, it is projected that the Appellants offer not to

dispose of 25 flats (Vide Annexure -III of written submissions) is purely

to protect temporarily the Appellants, in case this Tribunal, is inclined to

set aside the impugned order, till the matter is heard by the Tribunal.

17. The Learned Counsel for the Appellants contends that the sale of

flats are the 'stock in trade' of the First Appellant/Company being the

only source to generate funds to bear administrative expenses etc.

Furthermore, the First Respondent had levelled totally wild, baseless,

10 Company Appeal (AT) No. 182 of 2020 absurd allegations against the Appellant no. 2 to 4 of making money in

every possible way out of the sale of flats of J.M.Florence Project.

18. According to the Appellants, the ad-interim exparte order dated

05.10.2020 of the Tribunal is very much detrimental to the very survival

and existence of the First Appellant/Company. Added further, one Mr.

Rajkumar Goel was given the possession of flat and his matter was

settled and already the petition was withdrawn in 2018 itself. In respect

of Aggarwal Finance Company and Tilak Raj, the First Appellant /

Company had already offered possession of their respective flats to them

as per the judgement of this Appellate Tribunal and, therefore, their

petitions are not maintainable.

19. The Learned Counsel for the Appellants submits that the eighth

Respondent is now in the advance stage of development of industrial

park and is offering 'industrial plots' in the said 'industrial park' to the

interested parties and majority of the said plots were allotted and sale

deeds were executed and the balance plots are also in the process of

being sold. Also, that the First Appellant/Company had no role to play

in the sale of industrial plots of M/s. Durga Enterprises Pvt. Ltd. (the 6th

Respondent) which had separate business operations.

20. The Learned Counsel for the Appellants takes a plea that the First

Respondent levelled vague allegations qua 66 acres of land in the main

company petition and portrayed as if the said chunk of land is owned by

the First Appellant/Company and in fact, the same is owned by 8th 11 Company Appeal (AT) No. 182 of 2020 Respondent. Besides this, the obligation / liabilities paid back by the

First Appellant/Company relates to the period prior to the resignation of

the First Respondent. In respect of the outstanding amount to the

Punjab and Sind Bank out of the total availed credit facility of 173.46

crores, now only Rs. 68.37 crores are outstanding.

21. The Learned Counsel for the Appellants 1 to 4 points out that the

Appellants No. 1 to 4 had made dedicated efforts to release the

immovable property bearing No. 109, Shreshta Vihar, Near Yamuna

Sports Complex, Delhi, valued at around Rs. 12 crores which was

charged mortgaged to Aditya Birla Finance Ltd. which belongs to the

second Respondent and the 8th Respondent in Company petition. That

apart, another immovable property bearing No. 26, Manak Vihar, Near

Yamuna Sports Complex, Delhi valued at Rs. 3.5 crores (owned by Sh.

Narender Kumar Gupta, real brother of the First Respondent) which was

also charged to Aditya Birla Finance was also discharged and relevant

title deeds of these properties were handed over to the First Respondent.

22. The Learned Counsel for the Appellants submits that the First

Respondent without any occasion had preclosed the loan availed from

the 'Aditya Birla Finance Ltd.' much before the scheduled repayment

plan amortized with the loan and prepaid Rs. 1,43,83,366/- which is

from his own account (Rs. 1.35 crores) and from his son's account (Rs.

8,83,366) which is outstanding as payable in the books of the First

Appellant/Company. Also that the First Respondent had fraudulently 12 Company Appeal (AT) No. 182 of 2020 and illegally shown the employment of his relatives, friends and

associates without approval and authority from the major shareholders

of the First Appellant/Company and that out of the salary, perks and

benefits paid by the First Appellant/Company, the First Respondent

used to get cuts from these persons.

23. The Appellants take a stand that the investment of the

Respondents remains Rs. 2.34 crores against Rs. 11.78 crores of the

Appellants and Respondents and for such a small investment, no order

can be passed prejudicial to the interest of the First Appellant / Company.

Furthermore, even for 'misappropriation' restraint order is not the

remedy.

Contentions of Respondent Nos. 1 to 3

24. The Learned Counsel for the Respondent No. 1 to 3 submits that

it is the admission on the part of the Appellants that the Petition was

served upon them on 14.08.2020, and that they ought to be vigilant of

the listing of the said Petition before the Tribunal. Further, after removing

the objections raised in the matter, the main Company Petition was listed

before the Tribunal on 05.10.2020, and in fact, the Appellants were very

well aware of filing of the said Petition and definitely putting a

surveillance on its listing and in fact, when the matter was listed on

05.10.2020, the 'WhatsApp Group' was created by the Bench Officer of

the Tribunal and in the said 'WhatsApp Group' the three Appellants were

added by the answering Respondents.

13

Company Appeal (AT) No. 182 of 2020

25. The Learned Counsel for the Respondent No. 1 to 3 takes an

emphatic stand that the Appellants were part of the 'WhatsApp Group'

throughout the day and the matter was listed at 2.30 P.M. before the

Tribunal in the cause list and that the Appellants were there in the group

till the hearing of the petition and they left the group after the petition

was heard.

26. The Learned Counsel for the Respondent No. 1 to 3 comes out with

a plea that not only the copy of the Petition was already served upon the

Appellant on 14.08.2020, they should have engaged Learned Counsels

to appear on their behalf. According to the Respondent No. 1 to 3, the

Appellants were added in the morning at 10 A.M. - 11 A.M. and they

could have informed their Learned Counsels to be present and seek for

a date. However, the Appellants were under the impression that nothing

would happen and only when ad-interim order was passed by the

Tribunal, they woke up and instead of approaching the Tribunal, they

directly approach this Tribunal.

27. The Learned Counsel for Respondent No. 1 to 3 before this

Tribunal, points out that the impugned order dated 05.10.2020,

categorically only records the Counsel for the Petitioners (answering

Respondents) was present and that the directions were issued by the

Tribunal, for serving the copy of the impugned order to the Appellants.

28. Further pursuant to the directions issued by the Tribunal, the

Respondents had served the copy of the interim order to the Appellants 14 Company Appeal (AT) No. 182 of 2020 through e-mail dated 08.10.2020, and that through e-mail dated

12.10.2020, the Appellants had answered the said e-mail.

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

the Respondents No. 1 to 3 do have 36.65% equity shareholding of the

First Appellant Company and that the First Respondent Company is in

'Real Estate Business' and it has two 'Real Estate Projects', one at Noida

in the name of J.M. Florence and the other is the Real Estate Land it

owns through the eighth Respondent.

30. The Learned Counsel for the Respondent No. 1 to 3 points out that

when the Appellants were not entertaining the concern of the Respondent

No. 1 to 3 in regard to the Properties, they are selling of the First

Respondent Company and of the eighth Respondent Company, the

answering Respondent wrote a detailed Letter dated 05.03.2020, to the

Appellants seeking the relevant financial information of the First

Respondent and the eighth Respondent.

31. It is stated on behalf of the Respondent No. 1 to 3 that the

answering Respondents e-mail dated 20.03.2020, was not answered by

the Appellants and even further the Respondent No. 1 to 3 came to know

that the Appellants were selling the properties of Respondent No. 1 and

Respondent No. 8 and misappropriating the funds, the letters were sent

to the Appellants as well as to the Other concerned.

32. The categorical stand of the Respondent No. 1 to 3 is that the

Appellants wanted to conceal the facts and to run the Affairs of the First 15 Company Appeal (AT) No. 182 of 2020 Respondent at their own whims and fancies and to misappropriate the

funds unto themselves. Only under these circumstances, the restraint

order was passed by the Tribunal protecting the interest of the answering

Respondent relating to the properties of the First Respondent and the

eighth Respondent.

33. The Learned Counsel for the Respondent No. 1 to 3 points out that

when the Appellants were not entertaining the concern of the Respondent

No. 1 to 3 in regard to the Properties, they are selling of the First

Respondent Company and of the eighth Respondent Company, the

answering Respondent wrote a detailed Letter dated 05.03.2020, to the

Appellants seeking the relevant financial information of the first

Respondent and Respondent No. 8.

34. It is stated on behalf of the Respondent No. 1 to 3 that their e-mail

dated 20.03.2020, was not answered by the Appellants and even further

the Respondent No. 1 to 3 came to know that the Appellants were selling

the properties of Respondent No. 1 and Respondent No. 8 and

misappropriating the funds, the letters were sent to the Appellants as

well as to the Other concerned.

35. The categorical stand of the Respondent No. 1 to 3 is that the

Appellants wanted to conceal the facts and to run the Affairs of the First

Respondent at their own whims and fancies and to misappropriate the

funds unto themselves. Only under these circumstances, the restraint

order was passed by the Tribunal protecting the interest of the answering 16 Company Appeal (AT) No. 182 of 2020 Respondent relating to the properties of the First Respondent and

Respondent No. 8.

36. The Respondent No. 1 to 3 had never signed any documents for 8

flats in J.M. Florence Project. The Appellants had misappropriated the

funds of the Respondents by allotting 8 flats in their name without

consent. The Appellants are transferring the funds from the First

Respondent Company to their associate companies as advances. The

First Respondent Company had itself took loan of Rs. more than

hundreds of crores and paying the interest and that the money is being

siphoned off.

37. There is no clarification furnished by the Appellants that how the

liability of Noida Authority is being discharged. The Appellants are not

providing the details of selling of the plots of Respondent No. 8 to the

Respondent No. 1 to 3. The Respondent No. 1 to 3 are also the personal

guarantor to the loan taken from the Punjab National Bank and further

that they are also liable for other contingencies of the Appellant No.

1/Company. The Tribunal had protected the interest of the answering

Respondents by passing the impugned order.

38. The Learned Counsel for the Respondent Nos. 1 to 3 submits that

as on 31.03.2019 audited financial statement of the First

Appellant/Company, there was an outstanding balance of INR

99,25,96,178 towards the loan from Punjab and Sind Bank and

17 Company Appeal (AT) No. 182 of 2020 additionally the outstanding balance of loans from other Banks and

Noida and Greater Noida Authorities was INR 1,06,60,85,837.

39. The Learned Counsel for the Respondent Nos. 1 to 3 points out

that the First Appellant / Company and the 7th Respondent together have

50-50% equity shareholding in the 6th Respondent and that the 8th

Respondent is wholly owned subsidiary of the 6th Respondent. In fact,

the First Appellant/Company's investment of Rs. 42 crores is lying with

Respondent No. 8 through Respondent No. 6.

40. The Learned Counsel for the Respondent Nos. 1 to 3 contends that

the Company 'SPR Agrogtech Pvt. Ltd.' is controlled by the Appellants

and that the Appellant No. 2 is the bank signatory of the Company and

that the employees of the First Appellant/Company are the Directors of

the said Company and that the 8th Respondent had transferred Rs. 40-

50 crores to the said Company. Besides this, one more Company 'Cross

River Construction and Developers P. Ltd.' belongs to the Appellants and

a sum of Rs. 6 crores were transferred from the 8th Respondent to the

said Company. Moreover, the properties of the 8th Respondent are being

sold secretly and funds are diverted to the related company of the

Appellants.

41. The Learned Counsel for the Respondent Nos. 1 to 3 contends that

the Appellants may be permitted to sell the properties provided that they

file the affidavit and undertakings which run as under:-

18

Company Appeal (AT) No. 182 of 2020

(i) The details of the properties

so far being sold by the First

Appellant and the Respondent

No. 8, the amount released from

the such properties, the amount

deployed after releasing the

sale consideration of such

properties and the production of

the documents of selling such

properties be submitted before

the 'National Company Law

Tribunal'.

(ii) The details of unsold

inventory as on today in the

First Appellant/Company and

Respondent No. 8 be filed before

the Tribunal.

(iii) The unsold inventory in

Appellant No. 1 and Respondent

No. 8 may be sold only with the

permission of the Tribunal and

with the participation of the

contesting Respondents.

19 Company Appeal (AT) No. 182 of 2020

(iv) The amount realized from the

selling of the properties should be

deposited in the designated bank

and the amount ought to be

withdrawn after giving intimation

to the Respondent No. 1 to 3 and

the Tribunal. Furthermore, the

utilization of the sale proceeds

must be strictly monitored with an

involvement of Respondent No. 1

to 3 in order to ensure recovery of

funds from the home buyers and

related parties and utilisation

thereof to complete the project and

also to pay off all the loan

liabilities towards banks, Noida

Authority and others.

42. The Learned Counsel for the Respondent Nos. 1 to 3 contends that

since 'Noida Authority' dues and the 'Bank' dues are already pending

and the fate of 6000 persons are based on the First Appellant/Company

and there being an involvement of public interest, the Appellants cannot

have free hands to sell the properties of the First Appellant/Company.

20

Company Appeal (AT) No. 182 of 2020 The Pleas of Respondent Nos. 4 & 5

43. The Respondent No. 4 & 5 collectively hold more than 7% share

and share in the Company and Respondent No. 4 is the real brother of

Respondent No. 1 and Respondent No. 5 is Respondent No. 4's Hindu

Undivided Family. The impugned order of the Tribunal is blanket one

and also a non- speaking one, the same being passed without providing

an opportunity to them.

Stand of the Respondent No. 6

44. The Sixth Respondent is distinct, separate registered company and

that as neither control nor interest in the internal functioning of the

Appellant No. 1/Company. The Respondent No. 1 to 3 are neither

Director nor Shareholders nor in any manner connected with the day-to-

day affairs of the Respondent No. 6/Company. Hence, the Respondent

No. 1 to 3 have no cause of action against Respondent No. 6. The

Respondent No. 1 to 3 have no locus standi to file the Company Petition

Under Section 241 and 242 of the Companies Act.

45. The Respondent No. 1 to 3 have admitted that they are not the

shareholders of the Sixth Respondent/Company. The Respondent No. 6

is neither proper party or a necessary party to the present list. The

Company Petition is nothing more than an attempt to discredit the sixth

Respondent and obtain confidential records of the company to which

they are in no way entitled to get by way of indulging in fishing

expedition.

21

Company Appeal (AT) No. 182 of 2020 Pleas of the Respondent No. 7

46. The Company Petition filed by Respondent No. 1 to 3 contains no

cause of action against the Seventh Respondent and in fact, the company

Petition alleges no mismanagement or oppression of the Respondent No.

7. In short, the Respondent No. 7 is wrongly arrayed as one of the

Respondents to the main Company Petition. The Respondent No. 7 is

neither a necessary nor proper party to the present lis.

Stand of the Respondent No. 8

47. The Respondent No. 1 to 3 have no cause of action against the

Respondent No. 8. The Respondent No. 1 to 3 are neither Directors nor

Shareholders nor Connected with the day-to-day affairs of the

Respondent No. 8/Company. The Respondent No. 8 is neither a

necessary nor proper party to the present lis and it is wrongly arrayed as

one of the Respondents in the present Appeal.

Appraisal

48. At the outset, this Tribunal pertinently points out that the

Respondents 1 to 3 / Petitioners in Company Petition No.

/133/2020(filed u/s 241-242 of the Companies Act) against the

Appellants and others, before the Tribunal had sought the reliefs of

oppression and mismanagement, appointment of an investigator to

investigate into the affairs of the First Appellant / First Respondent

Company for the diversion of funds in favour of third parties viz.

subsidiary companies / associate companies and other parties, to find 22 Company Appeal (AT) No. 182 of 2020 out the mis-appropriation and siphoning of the funds by selling the plots

of the 7th Respondent Company at market price but looking the books of

the First Appellant / First Respondent Company on a lesser price etc.

49. The 'National Company Law Tribunal', New Delhi, Court No.- II had

passed the impugned order on 05.10.2020 in the main company petition

by restraining the Respondents 2 to 7 mentioned in the Company Petition

No. /133/2020 from selling the property of First Appellant / First

Respondent Company till further orders and also directed the

respondents therein not to change the shareholding pattern of the First

Appellant / First Respondent Company without seeking prior permission

from it.

50. The forceful stand of the Appellants is that the second Appellant

and third Appellant were added to the Whatsapp group at 3.40 P.M. on

05.10.2020 before the Tribunal and left at 3.55 P.M. and that the 4th

Appellant never joined any group and in fact the Appellant No. 2 and 3

not joined for virtual hearing on 05.10.2020 before the Tribunal and they

were not present during the course of hearing as shown in the attendance

since they had not logged in at all. In short, it is the contention of the

Appellants that the cell phone numbers of the Appellants Nos. 2 to 4 were

provided to the Bench officer of the Tribunal by the Respondents No. 1

to 3 side without any prior notice / intimation or knowledge of the

Appellants No. 2 to 4.

51. The plea of the Appellants is that none of the Appellants 23 Company Appeal (AT) No. 182 of 2020 represented before the Tribunal on 05.10.2020 and in the appearance

column their names were wrongly mentioned as Advocates appearing for

Appellants No. 2 to 4 and in fact there was mis-representation and

misconception which had resulted in the impugned order adversely being

passed by the Tribunal.

52. The contra stand of the Respondents No. 1 to 3 is that because of

the inadvertent mistake committed by the staff of the Tribunal the

appearance of Appellants' name in the impugned order was shown and

in fact the Respondent Nos. 1 to 3 had added all the three Appellants in

the WhatsApp group created by the Bench Officer of the Tribunal on

05.10.2020 and apart from that the Appellants were added in the

morning at 10.00 a.m. - 11.00 a.m. on 05.10.2020 and the Appellants

could have informed the Learned Counsel to represent them and seek

the date. Apart from this, the copy of the main petition since it was

already served on the Appellants on 14.08.2020 they should have

engaged some counsel by the time when the matter got listed on

05.10.2020.

53. In the instant case, although the Appellants have come out with

the plea that the Appellant No. 2, his wife and both children were tested

positive for COVID 19 and were self-home-quarantine on 05.10.2020 and

that the Appellant No. 3 and 4 were out of station along with their family

and friends for excursion during the weekend of 2nd October, 2020 to 6th

October, 2020 etc. and none of the Appellant Nos. 2 to 4 were aware of 24 Company Appeal (AT) No. 182 of 2020 any such hearing on 05.10.2020 and neither in a situation to attend the

hearing or nor was in a position to appoint any Advocate for them to

attend the hearing, and not withstanding the fact that the name of

Appellant Nos. 2 to 4 were wrongly shown in the appearance column of

the impugned order as Advocates, this Tribunal without precipitating

the matter any further and not delving deep in this regard is of the

considered view that a latent and patent error had crept in the

appearance column of the impugned order and by mistake the Appellants

Nos. 2 to 4 were shown as Advocates and this Tribunal at this juncture

is of the earnest view that utmost diligence, care, caution and

circumspection are required on the concerned person(s) of the Tribunal

while marking / noting the appearance of Learned Advocates /

Parties/Representatives and quite in the fitness of things, this Tribunal

hope and trust such an inadvertent error will not recur again in the near

future. Further, the registry of the Tribunal hearing a particular matter

is to furnish requisite information to the parties / Learned Counsels

representing the matter much prior to the hearing of the case, of course

well in advance, so that it will enable them to get prepared for their

matters.

54. In this connection, this Tribunal pertinently points out in

Company Petition No.133/2020 dated 05.10.2020 the Tribunal while

passing the impugned order had directed its registry to issue notice to

25 Company Appeal (AT) No. 182 of 2020 the Respondents etc. Therefore, it is quite evident that the impugned

order of the Tribunal is an ex parte one.

Tribunal's Powers

55. It is to be pointed out that the Tribunal as per Section 241 of the

Companies Act, 2013 has wide powers to grant relief in cases of

oppression etc. It can pass interim orders pertaining to the functioning

of the Company in case of oppression and mismanagement. Apart from

that, the Tribunal has discretion in moulding the relief even when the

concerned petitioner fails to make out a case of an oppression and

mismanagement. The Tribunal has to weigh equitable considerations, to

be super imposed on legal rights. However, whether an act is an

oppressive one or not is basically a question of fact.

56. Undoubtedly, the Tribunal has power to decide whether a

particular transaction is a bonafide one entered into in the ordinary

course of business without notice of any internal squabbles of the

Directors of a Company. In a petition u/s 241 of the Companies Act,

2013 (i) materials ought to be supplied (ii) figures are to be furnished (iii)

the allegations are to be proved.

57. Be it noted, that every illegal act may not be oppressive, some

illegal acts can be considered oppressive depending upon the facts of the

case. The Companies Act provides a remedy to the minority shareholders

against oppression by majority shareholders by their continuous acts.

The legality or illegality of an act has nothing to do with an oppressive or 26 Company Appeal (AT) No. 182 of 2020 non-oppressive act and, therefore, the Tribunal must examine the facts

of each case.

58. The plea of limitation is a mixed question of Law. The power of the

Tribunal is to correct oppressive conduct and the said power under

section 241-242 of the Companies Act, 2013 is a statutory one.

59. Section 420(1) of the Companies Act, 2013 enjoins that the

Tribunal may, after giving the parties to any proceeding before it, a

reasonable opportunity of being heard, pass such orders thereon as it

thinks fit. The settled legal proposition is that the rules of justice are to

supplement the law and not to supplant the same. The term natural

justice relates to the quality of fairness to be adopted and the term

'Natural Justice' is another name for common justice.

Audi Alteram Partem

60. The 'audi alteram partem' rule is that no one ought to be

condemned unheard. Assigning of reasons for a decision to be arrived at

in an administrative but also a judicial of order is the basic hallmark of

an order, passed by the Competent Authority / Court of Law / Tribunal.

61. As a matter of fact, the rule of 'just and proper opportunity of

hearing' connotes that no order should be passed against a party without

providing him a reasonable opportunity of being heard as per decision of

Hon'ble Supreme Court 'Swadeshi Cotton Mills Company Ltd.' V.

'Union of India' reported in (1981) 51 Comp. Cases 210 255 (SC).

62. The term 'Natural Justice' is incapable of precise definition. The 27 Company Appeal (AT) No. 182 of 2020 rules of 'Natural Justice' are not the edicts of a statute. In short, the

principle of natural justice is a rule of fair play and it cannot be brushed

aside so lightly because of the fact that justice is founded on human

values.

63. When an order has adverse consequences, the Competent

Authority / Court of Law / Tribunal before passing the order must

provide an adequate opportunity of hearing to the concerned person(s).

If reasons are given in an order then, when the matter is taken up before

a higher forum, there will be an opportunity to examine the concerned

order in regard to the manner and quality of exercise undertaken at the

time of passing it. A reasoned order will have an appearance of justice.

An unreasoned order will not be of any assistance to the affected

person(s) and that the absence of reasons in an order will make it

susceptible to challenge before an Appellate Forum.

64. If reasons are assigned in an order then it will point out fairness

in decision making and also that the affected person(s) will come to know

as to why the said order was passed. In this connection, this Tribunal

pertinently points out that Section 424 of the Companies Act says that

the 'Tribunal' and the 'Appellate Tribunal' shall be guided by the

principles of 'Natural Justice'. In fact, the Tribunal can regulate its own

procedure.

Glimpses of 'NCLT' Rules, 2016

65. Rule 37 of the 'NCLT' Rules (part IV General Procedure) speaks 28 Company Appeal (AT) No. 182 of 2020 of 'notice to opposite party' in and by which the Tribunal shall issue

notice to the Respondent to show-cause against the application or

petition on a date of hearing to be specified in the Notice etc. Rule 38

of the Rules deals with 'service of notices and processes'. Rule 39 deals

with 'production of evidence by affidavit'. Rules 40 relates to 'production

of additional evidence before the Bench'.

66. In fact, Rule 41 of 'NCLT' Rules, 2016 pertains to 'Filing of reply

and other documents by the Respondents'. Rule 42 is concerned with

'Filing of rejoinder'. Rule 43 relates to 'Power of the Bench to call for

further information or evidence'. Rule 44 mentions about 'Hearing of

petition or applications'. Rule 45 pertains to 'Rights of a party to appear

before the Tribunal'. Rule 46 deals with 'Registration of authorised

representatives interns'. Rule 48 enjoins 'Consequence of non-

appearance of the Applicant'.

67. In the present case the Appellants have come out with a plea that

the impugned order of the Tribunal has paralysed, jeopardized and

completely affected the operations of the First Appellant/Company in a

grave manner thereby affecting the 'Allottees' 'Bankers' and 'Creditors'.

68. As far as the present case is concerned, ongoing through the

impugned order dated 05.10.2020 in Company Petition No. /133/2020

passed by the National Company Law Tribunal, New Delhi, Court No.-

II, it is latently and patently evident that it is an exparte ad-interim

order wherein the registry of the Tribunal was directed to issue notice 29 Company Appeal (AT) No. 182 of 2020 to the Respondents (Appellants and others). In fact, the Respondents

No. 2 to 7 in the main Company Petition by the impugned order were

restrained from selling the property of the Respondent No. 1 (Appellant

No. 1) till further orders etc. and a copy of the order was directed to be

obtained by the Counsel for the petitioners (Respondent Nos. 1 to 3 in

Appeal) for sending to the Appellants and other Respondents for

information and compliance.

69. Be that as it may, in the light of foregoing discussions, on a

careful consideration of the contentions advanced on respective sides,

this Tribunal, based on the surrounding facts and circumstances of the

instant case in a conspectus manner and especially bearing in mind the

ex-parte impugned order dated 05.10.2020 was passed by the Tribunal

in Company Petition No./133/2020 which has adverse civil

consequences of affecting the First Appellant / Company's business

arising thereto without expressing any opinion on the merits of the

subject matter in issue, one way or other comes to a consequent

conclusion that the said impugned order is in negation of the 'Principles

of Natural Justice' and, therefore, to prevent an aberration of justice and

to promote substantial cause of justice the said impugned order dated

05.10.2020 in Company Petition No./133/2020 is set aside by this

Tribunal. Further, this Tribunal remits back the matter to the 'National

Company Law Tribunal', New Delhi, Court No.- II for denovo

consideration and appreciation of the whole gamut of the controversies 30 Company Appeal (AT) No. 182 of 2020 centering around the main Company Petition in Company Petition

No./133/2020 in an objective, threadbare and dispassionate manner on

merits and to pass necessary orders by taking into account of the

reply/response/explanation/rejoinder, if any, offered by the parties in

respect of allegations made in the petition, of course after providing due

opportunity of hearing to the respective parties by adhering to the

principles of 'Natural Justice'. Liberty is given to the respective parties

to raise all factual, legal pleas and to put forward their suggestions

(including the offer of Appellants not to dispose of 25 flats to protect their

interests, as well as the plea of R1 to R3 made before this Tribunal as

regards the selling of properties by Appellants) at the time of fresh

hearing of the Appeal before the Tribunal.

In fine, the instant Appeal is allowed. No costs. I.A. No. 2556/20

(stay application) is closed.

[Justice Venugopal M.] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

NEW DELHI

18th December,2020

ss 31 Company Appeal (AT) No. 182 of 2020