Mr. Vinod Kumar Sharma vs M/S. Bhawani Cold Storage Pvt. Ltd. & Ors

Review Application (AT) No. 01 of 2017 [In view of order of the Hon'ble Supreme Court dated 21st August, 2017 passed in Civil Appeal No. 11007 of 2017 (D. No. 16856/2017]

IN Company Appeal (AT) No. 22 of 2017 [Arising out of Order dated 18th November, 2016 passed by the Adjudicating Authority (National Company Law Tribunal), Allahabad Bench, Allahabad in C.A No. 23 of 2016 (in C.P. No. 68/ND/2010]

IN THE MATTER OF:

Mr. Vinod Kumar Sharma ...Appellant

Vs.

M/s. Bhawani Cold Storage Pvt. Ltd. & Ors. ...Respondents

Present: For Appellant:- Mr. U.K. Uniyal, Senior Advocate with Mr. Dhananjay Garg, Mr. Abhishek Garg, Mr. Deepak Mishra and Mr. Deepak Garg Advocates.

For Respondents:- Mr. Pushkar Malhotra and Mr. Somesh Tiwari, Advocates.

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

This Review Application has been preferred by Applicant/Appellant

in view of the observations made by the Hon'ble Supreme Court vide order

dated 21st August, 2017, passed in Civil Appeal No. 11007 of 2017,

relevant portion of which reads as follows:

"It is submitted by Mr. Uniyal after drawing

our attention to page Nos. 121 and 126 of the paper

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 2

book that the tribunal at the first instance has

recorded a finding that the appellant has 14.017%

shareholding, but has rejected it and the National

Company Law Appellate Tribunal, New Delhi, by the

impugned order, has not properly appreciated the

same because it has not adverted to the same.

Regard being had to the said submission, we

are inclined to grant permission to the appellant to file

an application for review before the National

Company Law Appellate Tribunal within three weeks

hence. On such application being filed, the same shall

be dealt with on merits without rejecting the same at

the threshold on the ground of limitation.

With the aforesaid liberty, the civil appeal

stands disposed of."

2. Before deliberating on the issue, it is desirable to observe that there

is no provision made under the 'Companies Act, 2013' or 'National

Company Law Appellate Tribunal Rules, 2016' to file or entertain a review

petition against a final order passed by this Appellate Tribunal. The

Hon'ble Supreme Court in some other case has also observed that this

Appellate Tribunal has no inherent jurisdiction. However, in view of the

observations made by the Hon'ble Supreme Court, which is binding on

all Courts and this Appellate Tribunal, we have decided to entertain this

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 3

review application and for the said reason, we recall the earlier order

dated 9th February, 2017 passed by this Appellate Tribunal in Company

Appeal (AT) No. 22 of 2017.

3. We have heard learned counsel for the Applicant/Appellant and the

Respondents on merit of the main case, as was pleaded before the

National Company Law Tribunal (hereinafter referred to as 'Tribunal') and

in the appeal and perused the records.

4. The main question requires to be determined in this appeal is

whether the Applicant/Appellant is eligible to file an application under

Sections 397 & 398 of the Companies Act, 1956 (now Section 241 of the

Companies Act, 2013).

5. Section 399 of the Companies Act, 1956 (hereinafter referred to as

"Act, 1956") stipulates the eligibility, relevant portion of which is as

follows:

"399. RIGHT TO APPLY UNDER SECTIONS 397

AND 398.─ (1) The following members of a company

shall have the right to apply under section 397 or 398:

(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

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 4

than one-tenth of the issued share capital of

the company, provided that the applicant or

applicants have paid all calls and other sums

due on their shares;

(b) in the case of a company not having a share

capital, not less than one-fifth of the total

number of its members."

6. As per Section 434 of the Companies Act, 2013 (hereinafter referred

to as "Act, 2013"), if any application was preferred before the erstwhile

Company Law Board under Act, 1956, on its transfer, the same is

required to be heard by the Tribunal as per the present Act (Companies

Act, 2013), as apparent from Section 434 (1)(a), which reads as follows:

"434. Transfer of certain pending proceedings. ─

(1) On such date as may be notified by the Central

Government in this behalf, --

(a) all matters, proceedings or cases pending

before the Board of Company Law

Administration (herein in this section

referred to as the Company Law Board)

constituted under sub-section (1) of section

10E of the Companies Act, 1956,

immediately before such date shall stand

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 5

transferred to the Tribunal and the Tribunal

shall dispose of such matters, proceedings

or cases in accordance with the provisions

of this Act"

7. As per the present Act (Companies Act, 2013), the eligibility to file

application under Section 241 is prescribed under Section 244, as quoted

below:

"244. Right to apply under section 241. ─ (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;

(b) in the case of a company not having a share

capital, not less than one-fifth of the total

number of its members:

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 6

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.

Explanation.--For the purposes of this sub-section,

where any share or shares are held by two or more

persons jointly, they shall be counted only as one

member.

(2) Where any members of a company are entitled to

make an application under subsection (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."

8. From the aforesaid provision, it is clear that the eligibility criteria

provided in Section 399 of the Act, 1956 remain the same under Section

244 of the Act, 2013.

9. It is not in dispute that the Company has a share capital and the

appeal has not been filed by one-tenth of the total number of its members,

which is one of the eligibility criteria. As per the other eligibility criteria,

it is to be found out whether the Applicant/Appellant is a member holding

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 7

not less than one-tenth of the issued share capital of the Company or

not.

10. It is submitted by the Applicant/Appellant, who is a member

holding more than one-tenth share capital of the Company as noticed by

the Tribunal, which was also brought to the notice of the Hon'ble

Supreme Court, that the Tribunal recorded a finding that the

Applicant/Appellant has 14.017% shareholding.

11. On the other hand, according to the Respondents, the observations

of the Tribunal do not amount to a finding that the Appellant has

14.017% shareholding but that was one of the contention which was

advanced on behalf of the Applicant/Appellant and noticed by the

Tribunal.

12. Learned counsel for the parties relied on pleadings made by

Applicant/Appellant, who is the Petitioner before the Tribunal. We will be

referring to relevant paragraphs of the pleadings made by

Applicant/Appellant (Petitioner) in the Company Petition preferred before

the Tribunal in regard to the share capital.

13. The case of the Applicant/Appellant (Petitioner) as pleaded are as

follows: -

"(xv) That the petitioner had contributed to one of a

basic module of a project economics by transferring

his and his mother (consenting Party) 5 Pacca bighas

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(15125 Sq. Yards) of land located at Khasra No. 64

village Hajipur at the Main Highway Road, Hapur

Road, Meerut. In actual only 3 Pacca Biga (9075 Sq.

Yards) of land was agreed to transfer for the purpose

of project. And 2 Pacca Biga (6050 Sq. Yards) have

been assured by the Respondent 2, 3 & 4 to return

back to the petitioner. This was due to a reason that

the land of lessen volume could not be sold/registered

because of restriction given in Section 168 of the U.P.

Zamindari Abolition Act 1952 for commissioning a

project of the company. The promise of the

Respondent 2, 3 & 4 remain a promise from the last

20 years. Annexed hereto and marked as Annexure-

P12 is the copy of sale deed in favour of

respondent 1.

(xvi) That while finalizing the sale price of said land,

No amount was decided among the promoter directors

because the transaction was fully based on mutual

trust and commitment. The land have been

transferred at a the statutory circle rate of approx. Rs.

56000 per Pacca Biga. There was a perfect

understanding among the partners and the said price

was decided without considering a market price @ Rs.

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 9

150 per Sq. Yard of Rs. 1361250/- at that time. In a

clear understanding the petitioner was only supposed

to give 3 Pacca Biga of land against 25% of his share.

Though the petitioner has transferred the 5 Pacca

Biga of total value of Rs. 2268750/- in good faith to

see the implementation of project commissioning

which was otherwise impossible to start.

(xvii) The company on such transfer of 5 Pacca Bigha

of Land gave the petitioner a cheque of Rs.

2,80,000=00 having No. 540302 dated 03-06-1988

as full consideration at Allahabad Bank, Khair Nagar,

Meerut, which the petitioner had deposited in his new

Open Bank Account No. 10866/85/14 & reciprocally

had given a cheque of the total amount of Rs.

2,80,000-00 on the same day reverting back to the

Company. Even the cost of said registration of land of

Rs. 32200-00 was paid by the petitioner of which he

gave the cheque of Rs. 32,200-00 of Allahabad Bank

dated 03-06-1988. The respondent No. 1 has failed to

carry the amount given by the petitioner to record it in

the books of Accounts. Annexed hereto and marked

as Annexure-P 13 is the copy of Pass Book of

Allahabad Bank.

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 10

(xviii) That the loan documents signed by the

Petitioner along with respondent No. 2, 3 & 4 duly

acknowledged the said net worth of the petitioner that

the petitioner has made an investment in Bhawani

Cold Storage as equity to the tune of Rs. 3.13 (Cash

for shares Rs. 01 lack, Cost of land Rs. 2.80 lacs &

cost of registration Rs. 32 lacks by the petitioner thus

total investment was Rs. 3,13,000-00 on 31-03-1990.

Though it valued at Rs. 10.33 at Bank papers while

the other three directors had contributed Rs.

5,88,000-00 for all purposes and economically. It was

largest and major contribution of the petitioner in the

affairs of the new company. The audited balance

sheet of 31st March 1988 shown the list of

Shareholders.

PARTICULARS AMOUNT AMOUNT %Shareholding As Per B/S In Real In Real 1.Narayan Dass 2,61,000/- 2,61,000/- 30% 2.Brij Mohan 1,96,000/- 1,96,000/- 21.77% 3.Pooran Chand 1,31,000/- 1,31,000/- 14.55% 4.Vinod Kumar 1,000/- 3,12,200/- 34.68% 5,89,000/- 9,00,200/-

So its clear evident that the petitioner had contributed

34.68% of the Equity at that time as per their own

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 11

signed Balance sheet but the same was shown as

0.16%. his equity was intentionally taken to

Unsecured Loan for Rs. 280000/-. The whereabouts

of Rs. 31200/- paid in cash is unknown. However, in

real money terms, the contribution of the Petitioner

was almost four times of the other contributors. The

total capital exposure of the Company from the first

year goes as follows, which clearly indicates the

continuation of 25% contribution towards capital.

PARTICULARS AMOUNT AMOUNT the Petitioner Cap. % As Per B/S In Real In Real In Real 31.03.1988 5,89,000/- 900200/- 312200/- 34.68% 31.03.1989 5,89,000/- 900200/- 312200/- 34.68% 31.03.1990 5,89,000/- 900200/- 312200/- 34.68% 31.03.1991 5,89,000/- 900200/- 312200/- 34.68% 31.03.1992 5,89,000/- 900200/- 312200/- 34.68% 31.03.1993 8,61,500/- 900200/- 312200/- 26.55% 31.03.1994 8,61,500/- 900200/- 312200/- 26.55% 31.03.1995 8,61,500/- 900200/- 312200/- 26.55% 31.03.1996 8,61,500/- 900200/- 312200/- 26.55% "

14. If the aforesaid pleading is noticed, then we find that the

Applicant/Appellant (Petitioner) is stated to have contributed 34.68% of

the equity but in the Balance Sheet it has been shown as 0.16% as long

back as on 31st March, 1988.

15. Clause 12 of the Articles of Association permits the Directors to

allot and issue shares in the capital of the Company, in full or part

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 12

payment, for any property sold or transferred, goods or machineries

supplied, which reads as follows: -

"12. The Directors may also allot and issue shares

in the capital of the Company, in full or part payment,

for any property sold or transferred, goods or

machineries supplied or for services rendered to the

Company in or about the formation of the Company of

the conduct of its business and any such shares may

be issued as fully or partly paid up."

16. Therefore, there is nothing wrong if the Applicant/Appellant

(Petitioner) claimed that against the property he was to be given equity

shares. But the question is actually whether such equity share has been

allotted in favour of the Applicant/Appellant (Petitioner) or not and if so

allotted, whether it was reduced to below 10% prior to filing of the

Company Petition.

17. The Company records, as enclosed by Applicant/Appellant

(Petitioner) show share capital of the previous year against liability shown

in Chartered Accountant's Report dated 16th August, 1991 as

'Rs.5,89,000/-' against share application money amount of

'Rs.2,72,500/' has mentioned, relevant portion of which is quoted below:

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 13

"S.K. KUMAR & CO.

Chartered Accountants M/s. BHAWANI COLD BALANCE SHEET

PREVIOUS CURRENT YEAR YEAR LIABILITIES AMOUNT AMOUNT Rs. P. Rs. P. SHARE CAPITAL: 20,00,000-00 AUTHORISED: 20,000 Equity Shares of Rs. 100/- each 20,00,000-00

ISSUED, SUBSCRIBED & PAID UP: 5,89,000-00 5,890 Equity Shares of 100/- each fully paid 5,89,000-00 up

95,000-00 SHARE APPLICATION MONEY: 2,72,500-00

- BEAERVS AND SURPLUS -

3,64,183-87 INVESTMENT ALLOWANCE RESERVE: 3,64,183-87 (Created during the year)

42,98,375-72 SECURED LOAN FROM: ALLAHABAD BANK, BUILDING LOAN A/C (Secured against land building of the Co.) 22,62,918-27

ALLAHABAD BANK, MACHINERY LOAN A/C (Secured against Plant & Machinery of the Co.) 24,57,093-18

Allahabad Bank, Co.

A/c Meerut City. 3,45,744-00

Allahabad Bank C/A, Garh Road. 79,922-45 51,45,677-90

9,09,106-55 UNSECURED LOAN:

From Directors 3,63,606-55 From Share Holders - From Others 4,43,000-00 8,06,606-55 (As per list attached)

CURRENT LIABILITIES: 54,279-98 SUNDRY CREDITORS:

M/s Shyam Lal Prem Prakash 9,788-70 M/s Dharam Dass Hardwari Lal 30,255-00 40,043-70

1,50,500-00

1,95,400-00 ADVANCE RENT RECEIVED: EXPENSES PAYABLE:

Electricity Payable 1,03,877-03 Salary Payable 4,700-00 _____________ Audit Fee Payable 2,500-00 1,11,077-03

65,05,346-12 74,79,589-05

PLACE: (DIRECTOR) MEERUT. AU-DITOR'S DATE: 16.8.1991 In terms of our separate

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 14

18. The said Chartered Accountant in the list of 'unsecured loans' as

on 31st March 1990 has shown a sum of Rs. 2,80,000/- against one Shri

Pooran Chand Sharma and not the Applicant/Appellant (Petitioner) Mr.

Vinod Kumar Sharma, relevant portion of the same, is as follows:

"MESSRS: BHAWANI COLD STORAGE PVT. LTD. LIST OF UNSECURED LOANS AS AT 31ST March 1990

PARTICULARS: AMOUNT

FROM DIRECTORS:

Shri N.D. Maheshwari 60,000=00 Shri Brij Mohan Maheshwari 23,606=55 Shri Pooran Chand Sharma 2,80,000=00 3,63,606=55 FROM OTHERS: Shri Ved Prakash 25,000=00 Shri Ashok Kumar 47,500=00 Shri Deewan Chand 75,000=00 Smt. Kela Devi 30,000=00 Smt. Veena Devi 10,000=00 Smt. Raj Kumari Maheshwari 18,000=00 Shri Prakash Chand 30,000=00 Shri Raj Kishore 50,000=00 Shri Naresh Kumar 20,000=00 Shri Mukesh Chand 20,000=00 Smt. Shashi Devi 20,000=00 Shri Budh Prakash Vaid 1,00,000=00 Shri Sat Prakash 50,000=00 Shri Rajeev Sharma 50,000=00 5,45,500=00 TOTAL Rs. 9,09,106=55"

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 15

19. However, the said amount of Rs. 2,80,000/- has been shown as

'unsecured loans' as on 31st March, 1994 against the name of Mr. Vinod

Sharma Maheshwari (here the name of the Appellant is Mr. Vinod Kumar

Sharma), relevant of which, as quoted below:

"1st Floor, Usha Complex Near N.A.S. College Shivaji Road, MEERUT-250 001 Ph. : 540041

S.K. KUMAR & CO.

CHARTERED ACCOUNTANTS

M/S BHAWANI COLD STORAGE PRIVATE LIMITED List of Unsecured loans as at 31.3.94

From Directors Particulars Amount Amount

N.D. Maheshwari 7,55,000.00 Brij Mohan Maheshwari 23,606.55 Vinod Sharma Maheshwari 2,80,000.00 10,58,606.55

From Others

Sh. Ved Prakesh 25,000.00 Smt. Raj Kumari Maheshwari 18,000.00 Sh. Satya Prakesh 50,000.00 M/s Mansuk Dass & Sons 30,000.00 M/s. Meerut Credit Leasing P. Ltd. 50,000.00 Sh. Budh Prakesh 50,000.00 Sh. Kela Devi 34,000.00 2,57,000.00

13,15,606.55

List of Sundry Debtors as at 31.3.94

Particulars Amount

M/s. Frick India L 27,066.43 Sh. Noor Mohd. 10,000.00 Sh. Om Prakesh 8,000.00 Sh. Raghubir Singh 6,000.00 Sh. Anup Singh 10,000.00 Sh. Rafik 1,500.00 Sh. Ajab Singh 4,000.00 Electricity under dispute 48,642.00 Income Tax 898.93

1,16,107.36 "

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 16

20. The aforesaid documents have been enclosed by the

Applicant/Appellant (Petitioner). On 17th November, 2017, when the case

was admitted and heard in part, the Applicant/Appellant (Petitioner) was

allowed to file additional affidavit enclosing the copy of the Company

Petition, including annexures thereto and was also asked to state as to

whether any share certificates were issued in favour of the

Applicant/Appellant (Petitioner) by the Company. Though the documents

have been filed, but no copy of the share certificates has been filed by the

Applicant/Appellant (Petitioner) and in the additional affidavit no

statement has been made that any share certificates was issued by the

Company in favour of the Applicant/Appellant (Petitioner).

21. Learned counsel has also admitted that there is no share certificate

available with the Applicant/Appellant (Petitioner). Therefore, we have a

doubt whether any share certificate was issued in favour of the Appellant

or not. Merely on the basis of some statement made by somebody in the

year 1989 or calculation, it is not possible to hold that the

Applicant/Appellant (Petitioner) holds more than 10% of the share

certificates of the company.

22. Now, the question arises how this matter has been looked into by

the Tribunal and whether Tribunal has given any finding in favour of

Applicant/Appellant (Petitioner) that it holds 14.017% shares, as was

argued on behalf of the Applicant/Appellant before the Hon'ble Supreme

Court.

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 17

23. The Tribunal noticed the arguments advanced on behalf of the

parties and formulated with regard to the maintainability of the Petition

which was the Point No.1, referring to provisions of Section 399 of Act,

1956, the Tribunal observed as follows: -

"14. Therefore, we accept the contention of the

applicants, that the non-applicant has no sufficient

shareholding in the records of the Company and the

Register of Members, with reference to Rs. 2,80,000

and Rs. 30,200 respectively. The amount of Rs.

2,80,000 is reflected in the books as unsecured debt

even according to the Company petitioner's own

showing.

15. Then, we examine the other part of the equity

holding of the non-applicant. He was admittedly

having 10 shares out of 40, at the incorporation of the

Company. It is not his case that he has been allotted

with any other or more number of shares

subsequently. It is a different case if the Company

has accepted subscription from him but failed

to allot the shares. The CP is silent on that aspect.

The present authorized capital of the Company at the

time of filing the CP is Rs. 20,00,000/- divided into

20,000 equity shares of Rs. 100. The Company

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Petitioner's holding comes to 0.05%. Even these 10

shares also were said to have been transferred by the

Company in favour of 6th Respondent. The Company

Petitioner's case is that he did not execute any

transfer deed and that the has never sold the 10

shares to anyone else.

The applicant contends that the non-applicant

has transferred his 10 equity shares and it was also

notified in the annual returns. The Annual Return, at

page 87 of Paper Book, is to be effect on 08.09.1996

AGM was held and page 97 thereof shows that 10

shares of the non-applicant Mr. Vinod Kumar Sharma

were transferred on 6.4.1996. The contention of the

non-applicant is that the transfer is false. Ld.

Counsel for the non-applicant argues that the

applicant did not produce the original or copy of the

transfer deed and from that circumstance the court

can deduce that there is no transfer deed and that

plea of the applicant is not plausible. He has also

argued that the questions whether or not the transfer

of shares is true and whether the transfer was made

according to procedure and whether the non-

applicant has any reason to transfer his shares have

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 19

to be decided on merits and the Company Petition

cannot be thrown away at the threshold.

The Ld. Counsel for the non-applicant further

contends that soon after the search report given by

the Chartered Accountant Mr. Amresh Vashisht on

30.03.2010 (Annexure P2), the non-applicant came to

know about the transfer of his shares and issued a

notice to Vishal Mittal but it was not served and

therefore Vishal Mittal is not a genuine transferee of

the shares. The Ld. Counsel therefore urged to

dismiss the CA mainly because the question whether

the transfer of shares is true is a pure question of fact

and has to be enquired into in the main CP only.

16. This argument seems missing force for the

particular reason, the Company Petitioner who claims

that he had never sold 10 shares, failed to file the

original share certificate along with his affidavit. He

did not explain in the entire pleading as to what

happened to that original share certificate. Therefore,

the natural presumption is that he might have parted

with the share certificate. It is for the Company

Petitioner to explain in the Petition this adverse

circumstance."

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 20

24. So far as the observations of the Tribunal with regard to 14.017%

of the equity is concerned, it was noticed as one of the ways of calculation

of the Tribunal and the line of the arguments made by the parties is

quoted below:

"19. Thus, the inference of his equity holding

calculated by the non-applicant is encompassing the

amount he has remitted to the Company viz, Rs.

2,80,000 (land value) on the understanding of

returning 2 bighas of land and Rs. 32,200 the costs of

Registration agreed to be shown as equity but never

reflected in the books of account. At the time of

incorporation the subscribed capital is 40 shares of Rs.

100 each out of the authorized capital of 20,000

shares. The non-applicant was given 10 shares

admittedly. When the paid up capital was raised

to Rs. 19,97,500 out of authorized capital of

20,00,000, as shown in Form 20B as on the date

AGM 29.09.2008, the non-applicant's holding of

10 shares worth Rs. 1000 comes to 0.05%. If the

sum of Rs.32,200 is also taken as his equity, he

will get another 322 shares. Then the total

holding comes to 332 shares and on that

hypothesis, his holding comes to 1.63% only.

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 21

However, since the incorporation of the Company,

the sum of Rs. 32,200 was never reflected in the

records of the company. If the investment of

2,80,000 is also accepted as his equity, it gives

him 2800 shares and the total comes to

2800+10=2810, then only the non-applicant's

equity holding comes to 14.017%."

25. However, the aforesaid contention of the Applicant/Appellant

(Petitioner) was not accepted by the Tribunal as apparent from the

observations made in the next Paragraphs, as quoted below:

"20. The contention of the non-applicant is that non-

production of the original documents relating to the

share transfer by the applicants is fatal to their case

and adverse inference has to be drawn. There is logic

in his submission but, in an enquiry into the

maintainability of the Company Petition, the Tribunal

shall have to take into consideration the pleadings and

the documents filed by the Company Petitioner only

and it cannot rely upon the defence of the opposite

parties or their evidence.

21. As we have observed in the earlier paragraphs

of the order, even according to the non-applicant, the

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 22

sum of Rs. 2,80,000 was shown in the records of the

company as unsecured debt and not as equity from the

very inception. His case that it was understood at the

time of sale of land to the Company, the amount of sale

consideration is paid to the company as his equity

investment cannot inspire confidence as his another

plea that the applicants agreed to return 2 bighas of

land to him subsequently. If the total consideration of

Rs. 2,80,000 was taken as equity, returning part of the

land purchased by the Company from the non-

applicant does not arise. If that land is returned,

accepting the sale consideration for the total land of 5

bighas will not arise. Thus, the plea of the non-

applicant is mutually destructive.

Therefore, the non-applicant's stand that he

has possessed 10% quantitative equity eligibility to

maintain the Company Petition is sheer hypothesis.

The Company Petition itself discloses on its very face

that the Company Petitioner does not own 10% equity

prescribed by Sec. 399 of the Act. He will get that

qualified percentage of equity only when the Tribunal

declares that the investment made by him and shown

as 'unsecured debt' in the Company records is in fact

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 23

towards the equity. The fact, however, remains is that

the Company has not issued him shares for that sum

of Rs. 2,80,000 and even though the sum is shown as

unsecured debt, there is nothing on record to show that

he had demanded the Company to issue shares to him

prior this complaint to the Department of Company

Affairs in the year 2003.

22. Shri Siddhartha Varma, Ld. Counsel for the

non-applicant would submit that the holding of the

Petitioner prior to the date of acts of oppression has to

be taken into consideration for sustaining the

invocation of jurisdiction of the Tribunal under Sections

397 and 398. He placed reliance on the Division Bench

decision of Karnataka High Court in Vijayan Rajes vs.

MSP Plantations (P) Ltd. (2010) 98 SCL 383. The

Division Bench while considering the ambit of

qualifications under section 399 made the following

observation at para 32 of the report.

"On authority it had been established that

for the purpose of examining as to whether

the petitioning members qualified for

maintaining a petition under section 399,

the question to be looked into was as to

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 24

whether the petitioners constituted the

requisite number of members or they had

the requisite shareholding in the company

prior to the acts complained of. If the date

of presentation of the petition had to be

looked into in a technical way, it could

defeat the very purpose of the legislative

enactment of sections 397 and 398...".

Even if the above view is taken into

consideration, the Company Petitioner's equity holding

was only 0.5%, at the time when the acts of oppression

were complained of. Therefore, on the point No. 1, our

finding is that the Petitioner in the Company Petition

(non-applicant) was not holding one tenth of the equity

to be eligible to file the Petition under Sections 397 and

398 of the Companies Act, 1956."

26. From the detailed pleadings made by the Applicant/Appellant

(Petitioner) and the observations of the Tribunal, as noticed and recorded

and as detailed above, and in view of the fact the Applicant/Appellant

(Petitioner) does not hold any equity share, we hold:

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017 25

(i) The Applicant/Appellant (Petitioner) is not eligible to

maintain the petition under Sections 397 & 398 of the Companies

Act, 1956 (now Section 241 of the Companies Act, 2013) and;

(ii) The Applicant/Appellant (Petitioner) misled the Hon'ble

Supreme Court by stating that the Tribunal has recorded a finding

that the Applicant/Appellant (Petitioner) has 14.017%

shareholding.

We find no merit in this application. We accordingly reject the

Review Application (AT) No. 01 of 2017 and also dismiss the Company

Appeal (AT) No. 22 of 2017. However, in the facts and circumstances of

the case, there shall be no order as to costs.

(Justice S.J. Mukhopadhaya) Chairperson

(Mr. Balvinder Singh) Member (Technical)

NEW DELHI 7th March, 2018 AR

Review Application (AT) No. 01 of 2017 IN Company Appeal (AT) No. 22 of 2017