Montreaux Resorts Pvt. Ltd. & Ors vs Ascot Hotel & Resorts Ltd. & Ors

(Arising out of order dated 13.01.2017 passed by the National Company Law Tribunal, (New Delhi Bench), New Delhi in Company Petition No.144(ND) of 2016.

IN THE MATTER OF: Before NCLT Before NCLAT

1. Montreaux Resorts (P) Ltd 1st Petitioner 1st Appellant D-367, 4th floor, Defence Colony, New Delhi-110024.

2. Mr Vir Jai Khosla, 3rd Petitioner 2nd Appellant D-367, 3rd floor, Defence Colony, New Delhi-110024.

3. Mr. Shiv Khosla, 4th Petitioner 3rd Appellant D-367, 3rd floor, Defence Colony, New Delhi-110024.

4. Mr Neel Khosla, 5th Petitioner 4th Appellant D-367, 3rd floor, Defence Colony, New Delhi-110024.

Vs

01.M/s Ascot Hotels & resorts Ltd 1st Respondent 1st Respondent 15th floor, Mohan Dev Building, 13, Tolstoy Marg, New Delhi-110001.

02.Mr. Vikram Bakshi, 2nd Respondent 2nd Respondent 157, Golf Links, New Delhi-110003.

03.Mr. Wadia Parkash, 3rd Respondent 3rd Respondent C-220, Defence Colony, New Delhi.

Company Appeal (AT) No.220 of 2017 2

04.Mr. Vinod Surha, 4th Respondent 4th Respondent B-43 Raju Park, (Near Sainik Farms), New Delhi.

05.Mrs Mahurima Bakshi, 5th Respondent 5th Respondent 157, Golf Links, New Delhi-110003.

06.Ms Devika Bakshi(nee Talwar) 6th Respondent 6th Respondent 15th floor, Mohan Dev Building, 13 Tolstoy Marg, New Delhi.

Also at: B-2 Greater Kailash-I, New Delhi.

07.Ms Kanika Bakshi, 7th Respondent 7th Respondent 15th floor, Mohan Dev Building, 13 Tolstoy Marg, New Delhi.

Also at: 157 Golf Links, New Delhi.

08.Mr P. Nagesh 8th Respondent 8th Respondent 142 Sahyog Apartments, Mayur Vihar-I, New Delhi.

09.Mr Rajeev Puri, 9th Respondent 9th Respondent C-109 Pratibha Apartments, Plot No.1, Sector 23, Dwarka New Delhi-110075.

10.Mr. Prem Singh, 10th Respondent 10th Respondent R/o Village Chattiyan Tehsil Kasauli, Dist. Solan, H.P.

11.Mrs Kaushalya Devi 11th Respondent 11th Respondent R/o Vill Chattiyan Tehsil Kasauli, Dist. Solan, H.P.

Company Appeal (AT) No.220 of 2017 3

12.Mr Vini Ahuja, 12th Respondent 12th Respondent Bungalow No.1, Neelkanth Teerth, Road No.6, Near Diamond Garden, Chembur, Mumbai 400071

(Respondents No.13 to 41 were deleted vide order dated 17.11.2017)

Present: For Appellant:-Mr Deepak Khosla, Advocate.

For Respondents: - Mr. Raj Shekhar Rao, Mr Rishi Sood, Advocates for Respondent No.1. Mr. P. Nagesh, Advocate for Respondent No.8.

JUDGEMENT

BALVINDER SINGH, MEMBER (TECHNICAL)

1. This appeal has been preferred by appellant under Section 421 of the

Companies Act, 2013 against the impugned order dated 13th January, 2017

passed by the Hon'ble National Company Law Tribunal, New Delhi Bench,

New Delhi in C.P. No.144(ND) of 2017. The appellant has sought the relief of

setting aside, quashing and setting aside the impugned order dated 13th

January, 2017.

2. The brief facts of the case are that the appellant company M/s

Montreux Resort was incorporated on 13.4.2005 by Mrs Sonia Khosla and

Mr. Vini Ahuja. One of the objects of the appellant company was to develop

a Holiday Resort at Kasauli on land belonging to Mr. R.P. Khosla father-in-

law of Ms Sonia Khosla. In terms of business arrangement, it was proposed

that 2nd respondent would infuse investment for developing the project and

would be a majority shareholder. Agreements dated 31st March, 2006 was

signed between the parties. Respondent No.2 to 4 were inducted as Directors.

It is alleged that Respondent No.2 further allotted shares to his wife and

Company Appeal (AT) No.220 of 2017 4

daughters i.e. Respondents No.5-8, in an attempt to fraudulently usurp

majority control of the appellant company under the garb of increasing its

capital. It is further alleged that the 2nd Respondent, during his tenure as

the Director of the 1st Appellant got sale deeds of various pieces of land parcels

executed in favour of 1st respondent or his nominees instead of getting it

executed directly in favour of 1st appellant. It is also alleged that 2nd

respondent being a majority stake holder in the 1st respondent has set up

competing business with that 1st appellant, breaching the fiduciary

relationship and the trust reposed in him by the appellants. Therefore,

appellants had filed Company Petition No.144(ND) 2016 before the National

Company Law Tribunal (hereinafter referred to as the Tribunal) under

Sections 241-246 of the Companies Act, 2013 read with Sections 397, 398

read with Section 402 and 403 and 235 of the Companies Act, 1956 accusing

1st respondent of oppression and mismanagement. After hearing the parties,

the Tribunal passed the following order:-

"12. I am unable to appreciate the arguments advanced by the

petitioner. Firstly, in the absence of any resolution passed by the

Petitioner No.1 company, the maintainability of the proceeding is

vitiated by lack of authorisation to file the same. The company

is a separate entity and cannot be represented through individual

petitioners. Mr Khosla has relied upon a catena of judgements.

Needless to say all these are proceedings pertaining to Suits and

not to Company Petitions. Moreover, in a derivative claim the

shareholders invoke their rights for wrongs done by their own

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company for which the company is necessarily a defendant. The

substance of allegations made by Petitioners 2 to 6 in a derivative

capacity, for and on behalf of Petitioner No.1 can be adjudicated

in civil proceedings only. The reliefs claimed are by way of

Declaration or Injunction on principles of Non Compete between

two business entities. The allegations of the petitioners are of

breach of fiduciary relationship. The respondents controvert it

and breach of an agreement. Such a dispute can be adjudicated

only in civil proceedings.

13.Similarly, in respect of the locus of the other petitioners as

shareholders, other than averments, there is no document to

substantiate the Resolution approving the transmission of the

shares of late Mrs Sonia Khosla, or the transfer of shares by Vini

Ahuja in favour of the Petitioner. While the respondents rely on

Courts directions and orders and admissions made in various

pleadings filed in Courts negating such a step, the petitioner

seeks to completely disregard them on grounds of being void

orders or being factually incorrect.

14.Though the objections raised by the respondents on all three

grounds find favour with this bench, their one point alone is

sufficient to dismiss the present petition on grounds of

maintainability. The petitioners not being the shareholders of 1st

respondent company, cannot invoke the provisions of Sections

241-242 of the Companies Act, 2013. The provisions of the Act

Company Appeal (AT) No.220 of 2017 6

make it abundantly clear as to who can initiate such proceedings

Section 241 of the Companies Act 2013 is reproduced as below:

"(1) The following members of a company shall have the right to

apply under Section 241, namely:-

(a) In the case of a company having a share capital, not less than

one hundred members of the company or not less than one-

tenth of the total number of its members, whichever is less, or

any member or members holding not less than one-tenth of the

issued share capital of the company, subject to the condition

that the applicant or applicants has or have paid all calls and

other sums due on his or their shares;

Provided that the Tribunal may on an application made to it in

this behalf, waive all or any of the requirements specified in

clause(a) or clause (b) so as to enable the members to apply under

section 241.

(b) Where any members of a company are entitled to make an

application under sub-section (1), any one or more of them

having obtained the consent in writing of the rest, may make

the application on behalf and for the benefit of all of them."

15.The petitioners have candidly admitted that neither

petitioner No.1 nor the other petitioners are shareholders of

Respondent No.1 company. I, therefore, find the present

petitioner not maintainable.

Company Appeal (AT) No.220 of 2017 7

16. It would not be out of place to observe that the allegations

made in the present petition are almost the same as in CP

No.114/2007, which is still pending adjudication on account

of initiation of multiple proceedings. The petitioners seek to

array herein several other parties who may be just remotely

connected with Respondent No.2 and which he did not include

in the earlier proceedings. The arraying of such parties in a

proceedings under 241/242 of the Companies Act, 2013, is a

total manifestation of misjoinder of parties and an absolute

abuse of the process of law.

17. In the light of the above observations, this Company

Petition is dismissed as not maintainable."

3. Being aggrieved by the said order dated 13.1.2017 of the Tribunal the

appellants have preferred this appeal. The appellants have sought the

following reliefs:

i) Declare and hold by virtue of Article 141 of the Constitution of India

that the impugned order dated 13.1.2017 passed by the Tribunal in

Company Petition No.144 of 2016 titled Montreaux Resorts (P) Ltd &

Ors Vs Ascot Hotels & Resorts Ltd & Ors to be a nullity in law, void ab

initio as if non est, having been passed coram non judice, as well as on

fraud practised by the respondents, and in breach of audi alteram

partum.

In the alternative:

Company Appeal (AT) No.220 of 2017 8

ii) Declare and hold the impugned order dated 13.1.2017 passed by the

Tribunal in Company Petition No.144 of 2016 titled Montreaux Resorts

(P) Ltd & Ors Vs Ascot Hotels & Resorts Ltd & Ors to be a nullity in law,

void ab initio as if non est, being in violation of a cardinal principle of

natural justice when judged by the standards laid down by the Hon'ble

Supreme Court in the case of Needle Industries (India) Ltd Vs Needle

Industries Newey (India) Holdings (Ltd) AIR 1981 SC 1298-para 49.

In the alternative to all of the above:

iii) Strike down, quash and set aside the impugned order dated

13.1.2017 passed by the Tribunal in Company Petition No.144 of 2016

titled Montreaux Resorts (P) Ltd Vs Ascot Hotels and Resorts Ltd & Ors.

iv) Direct that the proceedings of the Hon'ble National Company Law

Tribunal while adjudicating Company Petition No.144 of 2016 titled

Montreaux Resorts (P) Ltd & Ors Vs Ascot Hotels & Resorts Ltd & ors

shall be video recorded thereafter and at the cost of Appellant, and the

recordings shall be preserved exclusively with the Hon'ble NCLT, with

copies to be provided directly by it only to the review or appellate courts,

as the case may be.

v) The cost of the appeal may be awarded to the Appellants(s).

vi) Pass ex parte orders and/or directions as prayed for above.

vii) Any further order or direction which this Hon'ble Appellate Tribunal

may deem fit and proper in the circumstances of the case be issued in

favour of the appellant;

Company Appeal (AT) No.220 of 2017 9

4. Appellants have argued that the Tribunal has dismissed the company

petition in relation to three preliminary objections raised by the respondents

that the appellants have no locus standi to file the petition under section

241/242 of the Companies Act, 2013; second objection is that no resolution

have been passed by the appellant company authorising appellant to sign,

verify or institute the present proceedings. Third objection raised to the

maintainability thereby questioning the locus of the appellants as

shareholders of 1st appellant itself.

5. Learned counsel for the appellants argued that the respondents, even

prior to issuance of notice, had challenged these factual assertions, raising 3

contentions. Learned counsel further argued that all these objections were

raised by the respondent in the nature of preliminary objections, which at the

highest can result in a rejection of the Company Petition and not its dismissal

on merits. Learned counsel for the appellants further argued that on this

ground alone the Appellate Tribunal may remand the parties back to the

Tribunal to proceed with the Company Petition after removal of the defects, if

any.

6. Learned counsel for the appellants argued that they are the

shareholders of the oppressed/mismanaged company. Learned counsel

further argued that the Tribunal should not have dismissed the petition

without going into the merits of whether or not such contention raised by

respondents that the appellants are not shareholders of the

oppressed/mismanaged company, merely at the preliminary stage even prior

to issuance of notice of the Company. Learned counsel for the appellant

Company Appeal (AT) No.220 of 2017 10

therefore stressed that the order of the Tribunal warrants being set aside by

this Appellate Tribunal as it had no jurisdiction to wade into an arena

involving adjudication of factual assertions made by both the parties at the

preliminary stage, prior to issuance of notice of the Company Petition.

7. Learned counsel for the appellants further argued that it was not the

case of the appellants that they are the members/shareholders of the 1st

respondent. Learned counsel for the appellants argued that the 1st

respondent had been arrayed as a contesting respondent in context of its

being the vehicle used by the other respondents to commit acts of oppression

and/or mismanagement. Learned counsel for the appellants argued the

Tribunal was entitled to accept this as an objection and it ought to have

directed that 1st respondent stands removed from the array of parties, leaving

it to the appellants to challenge this order, if so advised. Learned counsel for

the appellants further argued that this was not a ground to dismiss the

petition.

8. Learned counsel for the appellants argued that the fair and just

opportunity ought to have been given to the appellants by the Tribunal to file

a copy of the Board Resolution or the Tribunal ought to have directed that the

appellant company stands removed from the array of the parties. Learned

counsel for the appellants further argued that it was not a ground to dismiss

the petition at the initial stage.

9. Learned counsel for the respondent argued that the appellants had no

locus to file the company petition under Section 241/242 of the Companies

Act, 2013 before the Tribunal below as they are not the shareholders of the

Company Appeal (AT) No.220 of 2017 11

1st respondent. Therefore, they are not entitled to file the present appeal

before this Appellate Tribunal. Secondly they are also not the shareholders of

the appellant company.

10. Learned counsel for the respondents further argued that no resolution

has been passed by the appellant company (original petitioner) to file the

present appeal and the earlier company petition authorising

appellant/petitioner to sign, verify or institute the present appeal/company

petition. In the absence of any resolution, filing of the present appeal against

the 1st Respondent and earlier petition is not maintainable.

11. Learned counsel for the Respondents raised the objection to the

maintainability is questioning the locus of the appellants as shareholders of

1st appellant itself. The respondents repudiate that 2nd appellant is either a

director or a shareholder of the appellant company. Learned counsel for the

respondent argued that the agreement dated 31.3.2006 recording the transfer

of major equity in favour of 2nd respondent, as also on the admissions made

by the deceased wife of the Mr. Deepak Khosla (original 2nd petitioner) in

various proceedings before different courts. Learned counsel for the

respondents argued that 2nd respondent is holding 51% equity in the

appellant company. Learned counsel for the respondent argued that this fact

was disputed, therefore, the Hon'ble High Court of Delhi vide its order 29th

February, 2008 restrained Mr. Deepak Khosla (original 2nd petitioner) from

acting as the Managing Director or from holding any Board or Shareholders

Meeting. Learned counsel for the Respondent further argued that even in the

C.P. No.114/2007, which is still pending before the NCLT, directions were

Company Appeal (AT) No.220 of 2017 12

given to maintain a status quo in respect of land as on 22.8.2007. Learned

counsel further argued that in the light of the orders, the appellants claim to

be shareholders on the basis of the transmission of shares of Late Mrs Sonia

Khosla could neither be approved by the Board of Directors nor given consent

to, restraining Mr. Deepak Khosla (original 2nd petitioner) from holding any

Board Meeting. Learned counsel for the respondent also denied the

submissions of the appellants (original 2nd petitioner) that he had purchased

the shares of 12th respondent and pointed out that there is no document on

record to substantiate either the said transfer or the transmission of shares

in favour of any of the petitioners.

12. Learned counsel for the Respondent further argued that an attempt is

being made to mislead the Appellate Tribunal with an attempt to improve

upon the pleadings which are subject matter of Company Petition No.114 of

2007 which is still pending.

13. We have heard the learned counsel appearing on behalf of both the

parties and perused the record.

14. Learned counsel for the appellants argued that they have not made any

claim that they are the shareholders of the 1st respondent and it is not their

claim. This is also the position pinpointed by the counsel for the respondent.

Learned counsel for the appellants argued that they are not required to be

shareholders of 1st respondent, as it is not 1st respondent whose affairs were

alleged to have been mismanaged or conducted oppressively. Learned

counsel further argued that the appellants agitating oppression and

mismanagement of affairs of 'x' company must be shareholder of that 'x'

Company Appeal (AT) No.220 of 2017 13

company, not of company 'y'. Learned counsel further argued at the highest,

1st respondent could have been stripped from the array of respondents instead

of dismissing the petition. We have given a thoughtful consideration on this

issue and it would have to be examined whether 1st respondent is a necessary

party or not and if so the appellants (original petitioners) would have been

directed to make suitable amendments. In the light of it we do not find that

the dismissal of company petition at the preliminary stage on this would be

justified and at best 1st Respondent could only be deleted from the arrays of

the parties which also we have to reach a conclusion after some examination.

15. The other issue on which the company petition was dismissed raised in

this appeal that No Board Resolution authorising representation of appellant

company was presented. On this issue learned counsel for the appellants

argued that No Board Resolution is required to be shown by shareholders of

a Company claiming to act in the name of that company, on the principle of

derivative rights to act for and/or on behalf of, and/or in the name of the

company. Learned counsel further argued that at the highest appellants

(original petitioners) could have been directed that the company shall not be

allowed to be represented until such time a Board Resolution was presented

or it could have been directed to stand stripped from the array of appellants.

We are, therefore, of the opinion that the appellants (original petitioners)

should have been given time to produce the authority to represent the

company or it could have been directed to stand stripped from the arrays of

the appellants. Further 2nd to 4th appellants have also an independent right

to move the application for oppression and mismanagement against their

Company Appeal (AT) No.220 of 2017 14

interest even if they are representing the company. Therefore, the dismissal

of the petition that they do not have a Board Resolution etc would be a partial

truth only which should not amount to denial of right of a shareholder to

move an application for oppression and mismanagement.

16. The other issue raised by the Respondents was that the appellants are

not shareholders of the appellant company. On the other hand, the

appellants have stated that they are the shareholders of the appellant

company on affidavit, therefore, the Tribunal would have directed the

appellants to present the proof of their shareholding during the course of

hearing and then should have come to the conclusion whether the appellants

are shareholders of the appellant company or not.

17. This Appellate Tribunal vide its judgement dated 24th January, 2017 in

the matter of Anup Kumar Agarwal & Anr Vs Crystal Thermotech Ltd &

Others has held as under:

"A shareholder/member or group of shareholder/members

without and notice or information cannot visualize or presume

that his/their share(s) will be brought down to their

disadvantage, which amounts to oppression and

mismanagement. On such anticipation or presumption no

petition under Section 397 or 398 of the Companies Act, 1956

can be filed. Such aggrieved shareholder(s)/member(s) can file

the petitioner under Section 397 and 398 of the Companies Act,

1956 only after cause of action has taken place. If that be so, the

day on which a petitioner under Section 397 and 398 is filed by

Company Appeal (AT) No.220 of 2017 15

a shareholder/member, whose shareholding has been brought

down below the requirement of having an aggregate of 10% out of

the total shareholding, will be deprived to avail remedy under

Section 387 and Section 398, without their fault. He will be

remediless. In 'Bhagwati Developers Pvt Ltd' and

'Rajahmundry Electric Supply Ltd' aforesaid issue was not

raised nor decided. For the reasons aforesaid, we are of the view

that the law laid down by Supreme Court in 'Bhagwati

Developers Pvt Ltd' and 'Rajahmundry Electric Supply

Corporation Ltd' are not applicable in the case where an

applicant alleges 'oppression and mismanagement' in bringing

down his shareholding below the requirement of 1/10th of the

total shareholding of the company, thereby depreived him of his

right to sue.

28. For the reasons recorded above, we hold that in the cases

where an applicant alleges that his shareholding has been

brought down by way of oppression and mismanagement below

1/10th of the total shareholding without notice and knowledge

then it is the duty of the Tribunal to determine whether the

applicant had 1/10th of the shareholding prior to the date of

alleged oppression and mismanagement. Such petition cannot

be dismissed on the ground that the applicants shareholding is

below 1/10th of the total shareholding of the Company on the

actual date of presentation of the Company Petition."

Company Appeal (AT) No.220 of 2017 16

18. In view of the above observations, we set aside the impugned order

dated 13.1.2017 passed in Company Petition No.144/2016 and direct the

Tribunal to rehear the company petition in view of our above observations.

Parties are directed to appear before the Tribunal on 26 .11.2018.

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

New Delhi

Dated:02-11-2018

Bm

Company Appeal (AT) No.220 of 2017