Pawan Kumar & Ors vs Newtech Agro Products Pvt. Ltd. & Ors

IN THE MATTER OF: Pawan Kumar & Ors. ... Appellants Versus

Newtech Agro Products Pvt. Ltd. & Ors. ... Respondents

Present: For Appellants: Shri Rakesh Kumar, Advocate

For Respondents Nos. 1, 5, 6, 7 to 9: Shri Arun Saxena, Ms. Nalini and Ms. Jayshree Dugar, Advocates

ORDER

23.08.2017 This appeal has been preferred by the Appellants/

Petitioners against order dated 21St April, 2017 passed by the National

Company Law Tribunal, Chandigarh Bench, Chandigarh (hereinafter

referred to as 'Tribunal) in C. P. Np. 11 (ND) of 2010, RT No. 20/Chd/

Pb/2016. By the impugned order, the Tribunal dismissed the

application preferred by the Appellants under Sections 397, 398 read

with Sections 237, 402 and 403 of the Companies Act, 1956 with the

following observations

"ACTS OF OPPRESSION AND MISMANAGEMENT

55. I will first of all deal with the allegation in

respect of the allotmerj.t of the increased 10,000

equity shares. The fact that due to losses suffered by the Company, the share capital was increased

from 70,000 to 80,000 is admitted in the re-joinder,

as already stated while discussing the facts of the

case. The controversy requiring adjudication is with

regard to allotment of the increased share capital

and also the transfer of the shares of R-2 to R-4 in

favour of the group of R-5 to R-7. So far as the

transfer of shares by R-2 and Suman Bala of their

5000 shares each, in favour of R-8 is concerned, that

happened in the year 2006, for which the remedy of

challenge to the petitioners is time barred.

56. However, the transfer of shares by R-2 to R4

in the AGM dated 29.05.2008 in favour of the group

of R-5 to R-7 is concerned, that can be a matter of

serious challenge by the petitioners. R-2 to R-4 were

holding 29,000 equity shares along with certain

members of their family in the year 2006 and 2007

and entire 29,000 equity shares are shown to have

been transferred in favour of six persons, out of

whom, only Pawan Kumar Garg is respondent No.7

and rest of the five people namely Harish Mittal,

Pankaj Garg, Hemant Mittal, Brij Bhushan Mittal

and Sat Narayan are not parties to the instant

petition nor any prayer was made to implead these 3

persons as necessary parties despite a specific

stand taken by the contesting respondents in their

written statement filed in February 2010. I am of

the view that even if, the act of transferring these

shares was illegal, the above transfer cannot be set

aside as those persons, who are entered as

shareholders cannot be condemned unheard.

57. An information was obtained from the office of

ROC at the time of hearing of the case on 24.03.2017

and it has been clarified that the Annual Return for

the year ending 31.03.2006 was filed on

11.05.2009 and Form 23AC and 23ACA relating to

the financial year ending 31.03.2008 were filed with

the Registrar of Companies on 16.03.2013 i.e.

during the pendency of the instant petition.

However, when there was a specific plea taken by

R-5 to R-9 about the name of the persons having

been allotted the shares by way of transfer from R-

2 to R-4, they should have been impleaded as

necessary parties. The petitioners should have been

vigilant or even attempted • to inspect the record of

ROC for seeking appropriate relief. They could apply

to the appropriate authority, CLB or by way of writ

petition in the Hon'ble High. Court, if so advised, seeking a direction for the said purpose and to

remove defects, if any, in the case.

58. Otherwise, I would find that when the

petitioners have categorically stated that they were

not served with any notice regarding the AGM

meeting, dated 29.05.2008, it was duty of the

respondents to place on record the documents to

show that such notices were issued and also to

place on record the copies of the minutes book of the

aid date. In the absence of such a material, the

transfer of shares on the basis of the absence of

such material, the transfer of shares on the basis

of meeting held on 29.05.2008 would be illegal and

not binding upon the petitioners.

59. Further, transfer of shares without complying

with the Articles of Association would be invalid as

the Articles of Association are binding upon the

members and the company. Articles 10 and 11 of

Articles of Association, which are relevant for the

purpose are reproduced as under

"10. No share be transferred to any person,

who is not a member of the Company so

long as any member is willing to 5

purchase the same at a valuation to be

determined as provided hereinafter.

11. The person proposing to transfer the

share (hereinafter called the

transferring member shall give notice in

writing to the Company of his intention

to sell his share. Every such notice shall

specify the distinctive number of shares

proposed to be sold and shall constitute

the Company as his agents for 'the sale

of such shares to any members of the

Company at a fair value to be

determined by the Board. The Company

shall communicate the notice of sale to

each of its members. No notice of

intended transfer once given shall be

withdrawn except with the sanction of

the Directors."

60. The respondents should have placed on record

the documents for showing the compliance of the

aforesaid Articles of Association before accepting the

transfer of shares in favour of Pawan Garg

respondent and others, but such observations will 6

not help the petitioners in the absence of impleading

the other transferees of the shares as necessary

parties.

61. Learned counsel for the petitioners, however

relied upon "V.B. Rangaraj Vs. V.B.

Golpalakarishnan and others" (1992) 1 SCC 160.

The Hon'ble Supreme Court held that the Articles of

Association of the Company are the regulations of

the Company binding on it and the shareholders.

There cannot be any quarrel with the above

proposition of law and that being the settled

principle. Otherwise, the plea of the respondents

that the petitioners should have filed a case for

rectification of the register of members is without

substance because the present is a case based on

the challenge about the fraudulent transfer of shares

and not rectification of the register, though the

petitioners may not have been successful in the

challenge made by them.

62. As already observed that in the absence of the

necessary parties, this Tribunal would not be able to

set aside the transfer made by R-2 to R-4. There is

absolutely no reason forthcoming as to why all the transferees of the shares from R-2 to R-4 have not

been impleaded as party despite the objections to

this effect taken in the written reply filed in

February, 2.010 by R-1 and R-5 to R-9. List of the

shareholders as on 29.05.2008 are given at page 65

and 66 of the reply of contesting respondents, which

is in consonance with the plea taken in paragraph 6

(g) of the written statement.

63. In view of the findings on various issues, as

discussed above, I find no merit in the instant

petition, which is hereby dismissed. In view of the

facts and circumstances of the case, the parties are

left to bear their own costs."

2. Learned counsel appearing on behalf of the

appellants/ petitioners submits that the appellants have no grievance

with regard to the first part of the observations made by the Tribunal

at paragraph 55. However, according to the appellants, the Tribunal

having found 'oppression and mismanagement' for various acts on the

part of the respondents, ought to have granted appropriate relief

under Sections 402 and 403 of Companies Act, 1956 (now Section

241/242 of the Companies Act, 2013).

8

3. We have heard learned counsel for the appellants/ petitioners

and the learned counsel for the respondents.

4. From the impugned order, we find that certain activities on the

part of the respondents, alleged to be 'oppressive' are based on the

facts brought to the notice of the Tribunal by the Registrar of

Companies, Chandigarh ('ROC' for short). The appellant has not

pleaded any such acts nor impleaded such persons as party

respondents. The company petition was pending since 2009 and after

about 7 /2 years, it was decided in April, 2017. In such a case, in

absence of any prayer made by the appellants in respect of affected

parties, the Tribunal rightly passed the order.

5. In so far as the finding relating to the delay and laches is

concerned, as finding of the Tribunal is not perverse, this Appellate

Tribunal is not inclined to interfere with the impugned order on such

ground.

6. After the matter was heard and order was dictated in the open

Court. Learned counsel for the appellants submits that the appellants

having 37.45% of the total share capital be allowed to 'exit' from the

Company, as the parties are in loggerheads. In absence of such

finding and deliberation by the Tribunal, we are not expressing any

opinion, but we allow the appellants to negotiate with the respondents 9

and other shareholders for 'exit' from the company. If such offer is

given by the appellants, the respondents and other shareholders may

consider the same and may provide an honourable 'exit' based on

appropriate value of shares and the assets and goodwill of the

company.

8. The appeal stands disposed of with the aforesaid observations.

However, in the facts and circumstances of the case, there shall be no

order as to costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Balvinder Singh] Member (Technical)

/ng/