Milind Dayaram Kapse & Others vs Den Nasik City Cable Network Pvt. Ltd. & ...

COMPANY APPEAL (AT) No. 58 of 2017 [Arising out of order dated 31st January, 2017 passed by the National Company Law Tribunal, Principal Bench, New Delhi in C.P. No. 104(MB)/201 1.

IN THE MATTER OF:

Den Nasik City Cable Network Pvt. Ltd. & Others ... Appellants

Versus

Miind Dayaram Kapse & Others ... Respondents

Present: For Appellants: Shri Abhinav Vashisht, Senior Advocate with Shri Rahul Dwarkadas, Ms. Prachj Dhanani, Shri Sourabh Gupta, Shri Puneet Yadav and Shri Sumit Bhadana, Advocates

For Respondents: Shri Saourabh Kalia and Ms. Swaridhi Gogia, Advocates

WITH

COMPANY APPEAL (AT) No. 130 of 2017 [Arising out of order dated 31st January, 2017 passed by the National Company Law Tribunal, Principal Bench, New Delhi in C.P. No. 104(MB)/2011.

IN THE MATTER OF:

Milind Dayaram Kapse & Others Appellants

Versus

Den Nasik City Cable Network Pvt. Ltd. & Others ... Respondents

Present: For Appellants: Shri Saourabh Kalia and Ms. Swaridhi Gogia, Advocates For Respondents: Shri Abhinav Vashisht, Senior Advocate with Shri Rahul Dwarkadas, Ms. Prachi Dhanani, Shri Sourabh Gupta, Shri Puneet Yadav and Shri Sumit Bhadana, Advocates

JUDGEMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

These cross appeals have been preferred by the contesting parties

against common order dated 31st January, 2017 passed by the National

Company Law Tribunal, Principal Bench, New Delhi (hereinafter referred

to as 'Tribunal') in C.P. No. 104(MB)/201 1. They were heard together and

are disposed of by this common judgement.

2. The Company Petition was preferred by the Appellants -Milind

Dayaram Kapse and others (Respondents in Company Appeal (AT) No. 58

of 2017-hereinafter referred to as 'Petitioners') against M/s. Den Nasik Citi

Cable Network Pvt. Ltd. and others (Appellants in Company Appeal (AT)

No. 58 of 2017- hereinafter referred to as 'Respondents') under Sections

397 and 398 of the Companies Act, 1956. In the said petition, the

petitioners sought reliefs as per the amended petition.

3. The Tribunal by the impugned judgement dated 31st January, 2017,

came to a conclusion that there appears financial irregularities in the

company which is prejudicial to the interest of the Company and to find

the loss on account of irregularities, passed following order :- 3

"10) Having considered the rival submission and upon

careful analysis of the documents filed by the parties in

support of their respective allegations and counter

allegations, we have come to the conclusions that there

appears financial irregularities in the company which is

prejudicial to the interest of the company. However, all

the loss to the company on account of financial

irregularities in the company which is prejudicial to the

interest of the company can be ascertained by an

appointment of an Independent auditor who may

conduct the audit of the company from the financial year

2008-09 and onwards to find out the exact loss caused

to the company on account of siphoning, related party

transactions and other misdeeds committed by Directors

of the Company. As it is expert job we have not entered

in details of allegations except few samples to conclude

that there is prima facie case of financial

mismanagement. Auditor shall enquire into the loss, if

any, caused to the company and such loss, to be

recovered from the party whoever is found responsible,

from his/their personal resources and the amount so

recovered will be paid to the Company. Respondent No.

3 to 7, Directors of Respondent No. 1 company are

directed to provide inspection of accounts and records of Respondent No. 1 company to the Auditor and also to

the Petitioners who are shareholders of Respondent No.

1 company. The auditor shall give opportunity of

hearing to both the parties. Respondent No. 3 to 7

directors of Respondent No. 1 company are directed to

assist the auditor and furnish relevant documents as

and when asked for. The auditors shall fix their

remuneration in consultation with the Respondent No. 1

Company, to be paid by Respondent No. 1 Company. In

case of any difficulty in implementation of the directions,

liberty is given to file appropriate application before this

Tribunal."

4. The Petitioners have challenged part of the impugned order dated

31st January, 2017, wherein certain acts of oppression, inter alia, holding

of Extra-Ordinary General Meetings (EOGMs) dated 16th March, 2013 and

15th February, 2016 has been declared legal and not oppressive. According

to the Petitioners-Milind Dayaram Kapse and others, the Tribunal failed to

notice the fabrication of documents and wrongful cessation of the first

Petitioner as a Director of the Company and for that the Tribunal should

have granted appropriate relief under Section 242 of the Companies Act,

2013.

5. Learned counsel for the Petitioners submitted that both the EOGMs

held on 16th March, 2013 and 15th February, 2016 are only on paper to maintain the record. They were conducted with pre-determination 'not to

invest in digitalisation'. According to Petitioners, Den Nasik Citi Cable

Network Pvt. Ltd. (hereinafter referred to as 'Company') never applied for

Digital Addressable System License (DAS License) as they had no intention

to ever take up digitalisation as they have already decided to incorporate

in the 9th Respondent Company and diverted business therein.

6. It was also contended that the Tribunal wrongly held that notice was

received by the Petitioners of such EOGMs dated 16th March, 2013 and

15th February, 2016 and failed to notice that the Company called the first

meeting of EOGM on 2nd March, 2013, of which receipt of Under Postal

Cover (UPC) was only produced.

7. According to Petitioners, the Tribunal failed to appreciate the protest

letter dated 15th March, 2013 written by the petitioners wherein they

lodged their protest for not attending the meeting there being a threat of

life to the first Petitioner by Respondents and some of their members.

Learned counsel for the Petitioners tried to highlight the activities of the

Respondents, the majority shareholders and submitted that they have not.

invested a single penny for digitalisation and transferred the entire

business to 9th Respondent Company.

8. Other alleged acts of 'oppression' were also highlighted, such as

investment in Set Top Boxes (STBs), which according to the Petitioners,

were not required as they were property of 2d Respondent Company alone. 6

It was also submitted that the Respondents abused their power as

directors with malafide intention in order to oppress the minority

shareholders.

9. Learned counsel for the Petitioners submitted that the Tribunal,

while partly allowed the Company Petition, disposed of the Company

Petition in its totality without granting any relief to bring an end to the

matters complained of.

10. On the other hand, according to the Respondents, the Tribunal

rightly decided this issue, in so far as allegations regarding oppression of

minority shareholders by majority of shareholders are concerned. The

Tribunal noticed that despite clear knowledge of the EOGMs, the

Petitionèr-Milind Dayaram Kapse, suo moto chose not to participate and,

therefore, bald allegation of the alleged breach of fiduciary duty of directors

was not accepted by the Tribunal.

11. It was further contended that the Tribunal rightly held that the

majority members (85.78%) having clearly decided not to invest further for

digitalisation, and convert to digital mode, the Tribunal cannot interfere

with the business decisions nor can compel the majority shareholders to

do any business against their wishes.

12. The grievance of the Respondent Company (Appellant in Company

Appeal (AT) No. 58 of 2017) is that the Tribunal though held that the

Petitioners have failed to establish the allegation regarding fabrication of 7

documents and that the Appellant - Mr. Milind Dayaram Kapse, did not

attend the Board meetings since August, 2008 and having rejected the

prayer of the Petitioner-Milind Dayaram Kapse for declaring him as a

director, wrongly closed the case.

13. The Respondents have challenged the same very impugned order on

the ground that the Tribunal despite observing that a loan of Rs. 10 Crores

was sanctioned in favour of 10th Respondent which was never advanced,

merely on presumption, observed that there appears to be financial

irregularities in the Company.

.14. It was contended that the Tribunal on the one hand appointed an

independent auditor to ascertain financial irregularities, which is the job

of an expert, on the contrary, the Tribunal without any reasoning, held

that there appears to be financial irregularities.

15. We have heard the learned counsel for the parties and perused the

records.

16. From the record, we And that the Tribunal, taking into consideration

the evidence on record rightly held that notices of EOGMs in respect of

meeting 15th. February, 2016 were served on the Petitioners, except 12th

Petitioner, and they did not choose to participate in the said meeting.

1 17. For coming to such conclusion, the Tribunal also noticed the consent

order passed by the Hôn'ble Bombay High Courts dated 4th February, 8

2016, wherein the Company was allowed to hold EOGM after giving due

notice to all the shareholders. Hon'ble Bombay High Court in the consent

order also observed that if any resolution was passed in the EOGM, the

Company would not act until further orders from the Company Law Board.

As the Petition was pending before the Company Law Board, the Board

was requested to hear the case expeditiously. In compliance of the Hon7ble

High Court's order, the Company again issued notices, including public

notices in Newspapers, to all its shareholders informing them about the

EOGM to be held on 16thMarch, 2013. From the record it is clear that the

Petitioners sent a letter to the Company on 15th March, 2013, a day before

the EOGM which was scheduled to be held on 16th March, 2013. The said

letter shows that the Petitioners had prior knowledge of the meeting dated

16th March, 2013.

18. Taking into consideration the relevant facts including the investment

made for digitalisation purpose and installation of digital headend in the

premises of Mayur Plaza, exclusive property of 2nd Respondent and other

records, the Tribunal rightly came to a conclusion that 'there appears to

be financial irregularities in the Company which is prejudicial to its

interest'. In the aforesaid background, the Tribunal ordered to appoint an

independent auditor to ascertain financial irregularities and to conduct an

audit of the Company from the financial year 2008-09 and onwards. In

these circumstances, no interference is called for.

19. However, we agree with the submission made on behalf of the Parties

that once independent action has been appointed to ascertain the financial

irregularities, after report of the auditor, the Tribunal was required to

notice as to whether financial irregularities were actually committed or not,

and if there is irregularities they are prejudicial to the interest of the

Company. In this background, we are of the view that the case is required

to be kept pending, for appropriate order, as may be passed by Tribunal,

after receipt of the report of the Auditor and notice to the parties.

20. For the reasons aforesaid, the last part of the impugned order, which

reads as-"C.P. No. 104/2011 is partly allowed, accordingly, without

any order as to cost", is set aside. The case is remitted to the Tribunal

to proceed further taking into consideration the report of the Auditor for

deciding as to whether there are financial irregularities in the Company

committed by any of the party which is prejudicial to the interest of the

Company and causing loss or not.

21. Both the appeals stand disposed of with the aforesaid observations

and directions. However, in the facts and circumstances of the cases, there

shall be no order as to costs.

[Balvinder Singh] [Justice S.J. Mukhopadhaya] Member (Technical) Chairperson

NEW DELHI 23rd August, 2017

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