Manoj Bathla & Ors vs Vishwanath Bathla & Anr

[Arising out of Order dated 4th September, 2018 passed by the National Company Law Tribunal, Bench III, New Delhi in CA No.54/C-III/(ND)/2018 in CP No. 84/(ND)/2018.]

IN THE MATTER OF:

1. Mr. Manoj Bathla 50-A, Saket, Opposite Punjab National Bank, Near Gole Market, Meerut, Uttar Pradesh.

2. Sarthak Madhur Publications Pvt. Ltd. Represented by its Authorised Representative B-34, Madhuban, Ground Floor, Delhi - 92.

3. Mr. Prakash Chand Bathla "Basera", Main Road, Dwarikapuri, Musaffarnagar, Uttar Pradesh - 251 001.

4. Mrs. Krishna Kumari "Basera", Main Road, Dwarikapuri, Musaffarnagar, Uttar Pradesh - 251 001. All resident of 50-A, Saket, Opposite Punjab National Bank, Near Gole Market, Meerut, Uttar Pradesh ...Appellants

Vs

1. Mr. Vishwanah Bathla Resident of 9-A, Shivlok Colony, Western Kutchery Road, Meerut, Uttar Pradesh.

2. Registrar of Companies, 4th Floor, IFCI Tower, 61, Nehru Place, New Delhi - 110 019. ....Respondents

Present: For Appellants: Mr. Sanchit Garga, Advocates. For Respondents: Mr. P. K. Mittal, Advocate. -2-

BANSI LAL BHAT, J.

Respondent No. 1 - 'Vishwanath Bathla' filed C.A. No. 54 of 2018

before National Company Law Tribunal, Bench III, New Delhi (hereinafter

referred to as 'Tribunal') seeking waiver of requirement specified in Section

244 of the Companies Act, 2013 (hereinafter referred to as 'Act') for

prosecuting the main Company Petition filed under Section 241 of the Act

alleging acts of oppression and mismanagement against Respondents

therein who figure as 'Appellants No. 1 to 3' in this appeal. On

consideration of the matter, the Tribunal was of the view that the status of

Respondent No. 1 as shareholder holding shares above the threshold limit

not being disputed by the Appellants and evidence in relation to share

allotment and share transfer not being produced by the Appellants, grant of

waiver of requirement postulated under Section 244 of the Act was

warranted. Aggrieved thereof the Appellants including those arrayed as

Respondents 1 to 3 in the application before the Tribunal preferred the

instant appeal questioning legality and correctness of the impugned order

primarily on the ground that the shareholding of Respondent No. 1 being

zero percent, he does not fall within the definition of "member" under

Section 2(55) of the Act.

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2. It is contended on behalf of Appellants that the Tribunal has waived

the eligibility condition of Respondent No. 1 despite the fact that he

admittedly holds zero percent shareholding in 'Sarthak Madhur Publications

Pvt. Ltd.' - Respondent No.2 (hereinafter referred to as 'Company'). It is

contended further that the impugned order has been passed ignoring the

dictum of law laid down by this Appellate Tribunal in Company Appeals No.

133 and 139 of 2017 titled 'Cyrus Investments Pvt. Ltd. & Anr.' Vs. 'Tata

Sons Ltd. & Ors.', in terms whereof, apart from other requirements the

primary consideration is that the applicant seeking waiver should be a

member of the Company in question. It is further contended that the

petition under Section 241 filed by Respondent No.1 does not relate to

allegations of oppression and mismanagement and that Respondent No. 1

has grievance only as regards transfer of his shareholding to Appellant No. 1

in respect whereof remedy is available under Section 58/59 of the Act and

not under Section 241/242 of the Act.

3. Respondent No. 1 has filed reply denying the allegations in appeal. It

is submitted that the shareholding of Respondent No. 1 has been illegally

reduced to 0.33% and the transfer of shares being illegal is liable to be set

aside as all actions had been done behind his back by forging and

fabricating the documents which have been suppressed. Respondent No. 1

has depended the impugned order contending that the Appellant No. 1,

being an elder brother, was looking after the accounting and secretarial

records and Respondent No. 1 had immense faith in him but Appellant No.1

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skillfully managed to transfer the shareholding of Respondent No. 1 by

forging and fabricating the documents, in gross breach of trust which

construed oppression as against Respondent No.1. Thus, it is submitted,

this was a fit case for grant of waiver.

4. Heard learned counsel for the parties and perused the record. The

case setup by Respondent No. 1 before the Tribunal for seeking waiver of the

requirement under Section 244(1)(a) of the Act for prosecuting the main

Company Petition alleging acts of oppression and mismanagement on the

part of Appellants may briefly be noticed. It was alleged that Respondent

No.1 held 25% shares in the Company which were reduced to NIL or Zero

percentage due to oppressive act of Appellants. Initially at the time of

incorporation of the Company in the year 2005, Respondent no. 1 held 2500

shares while his father - Appellant No.3 held 5000 shares and his brother -

Appellant No.1 held 2500 shares, the subscribed and paid up capital being

to the extent of 10,000 equity shares. Allegedly acts of oppression and

mismanagement committed in relation to other family owned companies as

well and the disputes were sub-judice before various Tribunals. It was

alleged that though Respondent No.1 was a member of the Company and

also a Director, Appellant No.1 managed to increase the shareholding

strength of Appellant No.3 from 5,000 shares to 4,20,000 shares and also

issued fresh 3,40,000 shares to mother - figuring as Appellant No.4. All this

is alleged to have been done without the knowledge of Respondent No.1

whose shareholding strength was brought down from 25% to 0.33%. It is on

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the strength of these allegations that the alleged illegal transfer of

shareholding was being assailed and grant of waiver was the only way out to

do complete justice to Respondent No.1 by rendering him eligible to

prosecute the main Company Petition. Appellants herein who figured as

Respondents before the Tribunal contested the application on the ground

that since Respondent No.1 presently held Zero percent of the share capital

of the Company, as such, he could not be considered as a member.

Reliance has been placed on judgment of this Appellate Tribunal rendered in

'Cyrus Investments Pvt. Ltd. & Anr.' Vs. 'Tata Sons Ltd. & Ors.' (supra) to

press the argument that the Respondent No.1 currently not being a member

of the Company, the application seeking waiver was to be outrightly rejected.

5. We have given our anxious consideration to the arguments advanced

at the Bar. In the wake of allegations of oppression of Respondent No.1 in

the form of reduction of his share capital from 25% to a bare 0.33%, albeit

by manipulation, fabrication of record and preparation of false documents

which are not forthcoming from the record of Appellants, it would be a

travesty of justice to non-suit the Respondent No.1. Learned Tribunal did

not find the explanation, offered by Appellant No.1 for non-production of

documentary evidence in relation to share allotment and share transfer,

convincing and we find no compelling reason to take a contrary view.

Admittedly, Respondent No. 1 was a shareholder of the Company since its

incorporation. It is not the Appellant's case that Respondent No.1 was

holding shares below the threshold limit. Appellants have not also been

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able to demonstrate that the number of members of the Company exceeded

10. Admittedly, the parties belong to one family. Respondent No.1 and

Appellant No.1 are brothers while Appellant No. 3 and 4 are their parents. It

is not disputed by the Appellants that both brothers i.e. Respondent No.1

and Appellant No.1 held 25% shareholding each in the Company while their

father Appellant No. 3 held 50% shareholding. Whether the shareholding of

parents stated to have been increased between year 2009 to 2011, the

substantial hike resulting in reduction of shareholding of Respondent No. 1

to 0.33% was an act of manipulation on the part of Appellant No.1 or had

been done with the consent and approval of Respondent No.1 who too was

the Director of the Company, is the core issue in the Company Petition,

which, alongwith other contentions raised may or may not establish

oppression as alleged by Respondent No.1. In the absence of relevant

record, being withheld and explanation for such withholding not being found

plausible and convincing, Respondent No.1 cannot be held as having been

divested of the status of a 'member' of the Company for limited purpose of

waivement of the requirement as specified in Section 244(1)(a) of the Act.

The judgment relied upon by the Appellants does not squarely apply in the

facts and circumstances of the instant case. We are convinced that refusal

to grant waiver would amount to adopting of a blood thirsty approach to a

case where relief is sought on the allegations of oppression manifesting in

the form of manipulation, fabrication and preparation of false record. When

the status of Respondent No.1 being a shareholder with 25% shareholding

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at the time of incorporation of the Company and also being one of the

founding Directors of the Company is admitted, it cannot be contended that

he ceased to be a "member" upon reduction of his share capital and that too

when the transfer of shareholding is alleged to be clandestine and product of

fabrication and forgery.

6. Since, we find no infirmity in the impugned order, we decline to

interfere. The appeal, being devoid of merit, stands dismissed. There shall

be no orders as to costs.

[Justice Bansi Lal Bhat] Member (Judicial)

[Balvinder Singh] Member (Technical)

NEW DELHI

30th April, 2019

AM

Company Appeal (AT) No. 399 of 2018