Nair Services Society Karayogam, Kodak ... vs V. C Velayundhan Nair & 6 Ors

[Arising out of Order dated 23.10.2017 passed by National Company Law Tribunal, Division Bench, Chennai CA 1/2013 with IA-170/2017 in T.C.P. No.55 of 2016 (CP No.75 of 2010)]

IN THE MATTER OF:

Nair Service Society Karayogam, (NSS Karayogam) Kodal Nadakkave ...Appellant (Original Applicant) Versus

1. V.C. Velayudhan Nair Churandath House Panthiranakavu Post Calicut - 673019 ...Respondent No.1 (Original Petitioner)

2. M/s. Mannam Centenary Textiles Limited OP 7/447, Olavanna, Panthiranakavu Post, Calicut - 673019 ...Respondent No.2 (Original Respondent No.1 - Company)

3. Prabhakaran Nair Cheruvanchery S/o Kuttykrishnan Nair Valaveettilchirundoth Kousthubham, Post - Pantheerankave, Kodalnadakave, Kozhikode - 673019 ...Respondent No.3 (Original Respondent No.2)

4. Gopinath Kannan Nair, S/o Kannan Nair, 11/11, Aiswarya, Olavanna, Kozhikode - 673019 ...Respondent No.4 (Original Respondent No.3) 2

5. Swaminathan Nair Perooli, S/o Ravuni Nair, 11/388, Veroli Abhilash, Olavanna, Kozhikode - 673019 ...Respondent No.5 (Original Respondent No.4)

6. Madhavan Kutty Nair Purangal, S/o Narayanan Nair Purangal, 12/61, Edakkoth, Olavanna, Kozhikode - 673019 ...Respondent No.6 (Original Respondent No.5)

7. The Registrar of Companies - Kerala Having office at Thrikkara, Cochin ...Respondent No.7 (Original Respondent No.6)

Present: Shri Delep Goswami and Shri Anirrud Goswami, Advocates for the Appellant

Shri Ayush Choudhary, Advocate for Respondent Nos.1 and 2

JUDGEMENT

A.I.S. Cheema, J. :

1. This Appeal arises out of the Impugned Order by which the

National Company Law Tribunal, Division Bench, Chennai ('NCLT', in

short) sat over the Order of this Appellate Tribunal which had set aside the

earlier Order of the NCLT rejecting impleadment of the Appellant and had

been directed to hear the parties on merits. By the Impugned Order, NCLT

analysed and discarded the additional document which was pointed out to

this Tribunal and was accepted in the earlier Appeal and again rejected the

claim of the Appellant seeking right of hearing.

Company Appeal (AT) No.410 of 2017 3

1.1 We have heard Counsel for both sides.

2. The Appellant - Nair Service Society Karayogam is a registered

society under the Societies Registration Act, 1860. The Appellant filed CA

1/2013 (Diary No.6149 - Page - 4) for impleadment as necessary and

proper party in the Company Petition 75/2010 (Diary No.6355) claiming

to be the sponsor/promoter and majority shareholder of the original

Respondent No.1 Company - M/s. Mannam Centenary Textiles Limited.

The CP 75/2010 was filed by present Respondent No.1 - V.C. Velayudhan

Nair (original Petitioner) (hereafter referred as 'Petitioner') against the

original Respondent No.1 Company and the present Respondent No.3 -

Prabhakaran Nair Cheruvanchery (hereafter referred as 'original

Respondent No.2') and the other Respondents who have been arrayed in

the Appeal as other Respondents 3 to 6. (Unless mentioned otherwise, we

will refer to the parties as arrayed in CP)

3. The original Petitioner in the Company Petition claimed to be

holding 14 shares and filed the Company Petition claiming oppression and

mismanagement under Sections 397 and 398 read with Sections 402 and

403 of the Companies Act, 1956 ('old Act', in brief). He claimed to be

holding 14 shares out of the authorized and paid up capital of Rs.1 Lakh

divided unto 1,000 equity shares. He claimed that he had consent of 23

members of the Company who hold 61.60% of issued capital in order to

show his eligibility to maintain the petition.

Company Appeal (AT) No.410 of 2017 4

4. In such Petition, the Appellant filed CA 1/2013 claiming that the

original Petitioner had filed the Company Petition with the alleged consent

of 23 members. The Appellant - original Applicant seeking impleadment

stated in CA 1/2013 that the claim of the original Petitioner was incorrect

and false as the alleged members were not members of the Respondent

Company. Counsel for Appellant has argued that Respondents 3 to 5 of

this appeal are Directors of Respondent No.2 Company and also office

bearers of Appellant but Appellant has independent entity and is promoter

of the Company and majority shareholder holding 520 equity shares. The

Appellant claimed in CA 1/2013 that the Company was incorporated in

1976 with the office bearers of the Appellant as the Board of Directors and

the Appellant had assigned 2 acres of land to the Company for the business

objectives and the Appellant (Applicant) had been allotted 520 equity

shares of Rs.100/- each in the Company and since then it was holding the

same. The Appellant claimed that it had not effected transfer of the shares

to any person including the alleged transferees. The Appellant questioned

the claim of original Petitioner that the shares had been transferred on

22.10.2008 pursuant to alleged Resolution of the Appellant dated

24.08.2008 and allege ratification in General Meeting dated 14.12.2008.

The Appellant claimed that the original Petitioner had been removed from

the office of Secretary of the Appellant and further claimed that the original

Respondent No.2 - Prabhakaran Nair Cheruvanchery had been elected

Secretary of the Appellant on 11.12.2005 and since then, the activities and

affairs of the Appellant Society had been carried out by the other

Company Appeal (AT) No.410 of 2017 5

Respondents mentioned in the Company Petition. Appellant claimed that

since the shares of Applicant were claimed to have been transferred, it was

necessary party. The Appellant claimed that it was still holding 520 equity

shares which the supporters of the original Petitioner were claiming to have

acquired.

5. The learned NCLT by an earlier Order dated 21st November, 2016

rejected the claim of the Appellant for impleadment. The matter was

carried before this Tribunal and came up in Company Appeal (AT) No.2 of

2017 before the Bench presided over by the Hon'ble Chairperson and one

of us (Mr. Balvinder Singh - Member [Technical]) on 14.02.2017. This

Tribunal noticed the Order dated 21st November, 2016 which was

impugned in that Appeal and considered the additional Affidavit which was

filed in this Tribunal by the Appellant in which Form 20B had been filed

by the Company giving details including shareholding during Financial

Year ending 31st March, 2012. This Tribunal considered the list of equity

shareholders which had been enclosed with the said Form 20-B which

included 300 + 220 shares standing in the name of the Appellant. After

thus referring to Annexure - E which had been filed, this Tribunal

observed:-

"3. On notice Respondent No.1 and 2 have appeared but not denied the genuinity of Annexure - E. Ld. Counsel for the Respondents submits that the appellant otherwise had no case to contest the CP. It is also contended that the present signatory is not authorised to file petition on behalf of the appellant.

Company Appeal (AT) No.410 of 2017 6

4. Having heard Ld. Counsel for the parties we are not inclined to accept the submission made on behalf of the Respondents as the Tribunal rejected the petition only on the ground that the appellant is not a shareholder but we find that the appellant, M/s. NSS Karayogam, Kodalnadakkave has been shown as the shareholder and holds 520 shares out of 1000 fully paid-up equity shares as on 31.3.2012. We find that the Tribunal erred in holding that the applicants are not the shareholders and rejected the Company Petition on wrong ground.

5. For the reasons aforesaid we set aside the impugned order dated 21st November, 2016 and remit the case to the Tribunal for hearing on merit after notice to the parties without granting unnecessary adjournments."

5.1 After order as above was passed, the matter was remitted back to

the learned NCLT so that the case could be heard on merits after Notice to

the parties.

6. After going back, the Appellant appears to have filed IA 170/2017

(Diary No.6149 - Page - 11) claiming in the cause title and arraying itself -

as "IMPLEADED AS CONTESTING PARTY RESPONDENT". The application

referred to the earlier developments and how this Tribunal had passed the

earlier Judgement in CA 2/2017. The Appellant claimed before NCLT that

this Tribunal had accepted the Appellant as a contesting party Respondent

and thus, it was making submissions on merits of the pending Company

Petition. The Appellant pointed out that its authorized representatives were

already on record and claimed that the original Respondent No.2 -

Prabhakaran Nair will be representing in dual capacity before the Tribunal.

The Appellant thus referred to the case it was putting up and claimed that

Company Appeal (AT) No.410 of 2017 7

its shares had never been sold and transferred or alienated in favour of

anyone and that the contesting party Respondent had been and continues

to be majority shareholder in the Respondent Company. The Appellant

referred to Notice dated 28.11.2005 calling meeting of the Appellant to

remove the original Petitioner and one Shri P. Venugopala Menon and that

they were removed from their positions in the meeting held on 11.12.2005.

Referring to these and other facts in details, the Appellant claimed that the

original Petitioner was indulging in illegalities and non-compliance and

fabrication of documents which was elaborated in the IA 170/2017 and

claimed dismissal of the Company Petition.

7. The learned NCLT has then passed Impugned Order dated 23rd

October, 2017 purporting to pass Orders in CA 1/2013 with IA 170/2017.

Although this Tribunal had accepted Annexure - E, when additional

Affidavit which was Form 20-B filed by the Company, genuineness of which

in this Tribunal was not questioned by the Respondents which included

the original Petitioner, the NCLT, on the basis of what the original

Petitioner had stated in his rejoinder, treating the same as evidence, went

on to conclude at interim stage itself that it was fully established that the

shares pertaining to the Appellant stood transferred on 22.10.2008 and

that such transfer had never been challenged before any of the Judicial

Forum and so the Appellant had no locus standi to become a party in the

Petition. the NCLT observed in para - 4 of the Impugned Order as under:-

Company Appeal (AT) No.410 of 2017 8

"Now question arises as to which was the document that has been produced before the Appellate Tribunal for getting the Order dated 21.11.2016 to be set aside. After perusal of Company Petition, Reply, Rejoinder, CA-1/2013 and IA - 170/2017, we have come to the conclusion that the Applicant viz., C. Prabhakaran Nair, who is Respondent No.2 in TCP 55/2016 (CP 75/2010) along with others, ousted the 1st Respondent/Petitioner and other Directors of the 1st Respondent Company at the EoGM held on 06.02.2010, and become the Director of the 1st Respondent Company and filed Form No.20B relating to AGM dated 20.09.2012 for the financial year ending 31.03.2012 with the Registrar of Companies, with which he has enclosed the lists of the equity shareholders as per the allotment dated 28.05.1984.

Thus, bringing on record an earlier document in order to show that M/s. NSS Karayogam still holds 520 shares in the 1st Respondent Company, which is contrary to the record as has been referred in the preceding paragraphs. The copy of the list showing allotment of shares made on 28.05.1984 had been produced before Hon'ble NCLAT to show that M/s. NSS Karayogam is still a shareholder of the 1st Respondent Company, whereas, the same is contrary to what has been stated in the preceding paragraphs."

8. We have heard the counsel for both sides who go on asserting rival

claims but we find the approach of NCLT quite surprising in making the

above observations after what had been observed by this Tribunal in para

- 3 of its earlier Judgement in CA 2/2017, which we have reproduced

above. Such approach of the NCLT, we find not to be in accordance with

judicial discipline expected. The earlier order in CA 1/2013 was at interim

stage seeking impleadment which prayer of Appellant was rejected and

against such order at interim stage when this Tribunal in Appeal had ruled

in favour of the Appellant, the matter should have proceeded further from

the stage of impleadment. The NCLT could not have again sat over the

Company Appeal (AT) No.410 of 2017 9

matter to see whether the Appellant had made out a case or not of being

shareholder. The original Petitioner has proposed to maintain the petition

on the basis of support of 23 members. The Appellant was pointing out

that the claim on the basis of which 23 members claimed rights, is a

disputed question and the Respondents from whom those persons claimed

to have got rights was the disputed question. In such situation in the first

place itself, CA 1/2013 should have been allowed. When the rejecting of

the CA 1/2013 had been set aside, it was not proper for NCLT not to treat

the Appellant as the impleaded Respondent. At such preliminary stage, it

was not necessary for the NCLT to go into what has been observed in OS

590 of 2009 relating to disputes between the parties, especially when it is

stated before us (and not denied by the counsel for Respondents) that

Appeal against the Impugned Order in OS 590 of 2009 is still pending. At

interim stage of the matter, if this Tribunal had observed that there was

document to show that the Appellant was shareholder and holding 520

shares out of 1,000 fully paid up shares, it was inappropriate for the NCLT

to sit over the Judgement of this Tribunal to conclude that the shares of

the Appellant - Applicant had been transferred on 22.10.2008 and thus,

the Appellant has no locus standi to file the application for impleadment.

In fact, the impleadment application already stood disposed vide this

Tribunal's earlier Judgement as mentioned above and the NCLT had no

other option but to proceed with the matter treating the Appellant as party

Respondent.

Company Appeal (AT) No.410 of 2017 10

9. We reject the arguments raised by the counsel for Respondent

No.1 - original Petitioner trying to justify and support the Impugned Order.

The averments made in the rejoinder by the original Petitioner in NCLT are

yet to be finally decided and they cannot form basis for the learned NCLT

to reject claim of Appellant of impleadment, for which prima facie case has

been made out, looking to the observations already made by this Tribunal

in CA 2/2017.

10(A). We thus set aside the Impugned Order. We direct that the CA

1/2013 filed by the Appellant shall be treated as having been allowed and

the Appellant shall be treated as party Respondent. The Appellant shall be

arrayed in the Company Petition as party Respondent, and heard.

(B). The Company Petition be now disposed on merits at the earliest.

(C). The Appeal is allowed as above. No Orders as to costs.

[Justice A.I.S. Cheema] Member (Judicial)

[Balvinder Singh] Member (Technical) New Delhi

19th September, 2018

/rs/nn

Company Appeal (AT) No.410 of 2017