Ram Avtar Yadav & Anr vs H S Realty Pvt Ltd & Ors

[Arising out of order dated 30.09.2019 passed by the National Company Law Tribunal, Bench No. III, New Delhi in C.A.311/C-III/ND/2018 and C.P.81/241/242/ND/2018]

IN THE MATTER OF: 1. Ram Avtar Yadav Son of Digh Ram Yadav Resident of BVM-32, DLF City, Phase II, Gurugram 122002. 2. Ram Rati Wife of ram Avtar Yadav Resident of BVM-32, DLF City, Phase II, Gurugram 122002. ....... Appellants. Versus 1. M/s H.S. Realty Pvt. Ltd. Having its registered office at HIG Flat No. 410, N-5, Pocket-6, Sector-D, Vasant Kunj, New Delhi-110070. 2. Mahender Singh Yadav Son of Digh Ram Yadav Resident of A-14/6 DLF City, Phase I, Gurugram 122002. 3. Savitri Devi Wife of Mahender Singh Yadav Resident of A-14/6 DLF City, Phase I, Gurugram 122002. 2

4. Anil Yadav Son of Mahender Singh Yadav Resident of A-14/6 DLF City, Phase I, Gurugram 122002. 5. Sunita Yadav Wife of Anil Kumar Resident of House No. 26, NMT, Sector-1, Rewari, Haryana. 6. Sunil Yadav Son of Mahender Singh Yadav Resident of A-14/6 DLF City, Phase I, Gurugram 122002.

....... Respondents.

Present: For Appellant: Mr. Rakesh Kumar, Ms. Preeti Kashyap, Mr. Ankit Sharma, Mr. Aman Agarwal, Mr. Rishabh Arora, Advocate. For Respondent:- Mr. Manish Dembla, Advocate for R-2 to 6.

JUDGMENT

(23rd November, 2023)

Justice Anant Bijay Singh;

The present Appeal under Section 421(1) of the Companies Act, 2013, has

been filed by the Appellants being aggrieved and dissatisfied by the order dated

30.09.2019 passed by the National Company Law Tribunal, Bench No. III, New

Delhi in C.A.311/C-III/ND/2018 and C.P.81/241/242/ND/2018 whereby and

whereunder petition filed by the Appellants herein raising the cause of

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oppression and mismanagement being committed by the Respondents against

the Appellants in the Respondent No. 1 Company, was dismissed.

2. The facts giving rise to this Appeal are as follows:

i) The Appellant No. 1 and the Respondent No. 2 are the real brothers. The

Respondent NO. 1 Company is the company owned by the family members of the

Appellant No. 1 and the Respondent No. 2. The Respondent No. 1 Company is

the real estate company.

ii) The Respondent No. 2 had committed various illegalities in the Respondent

No. 1 company, whereby reducing the shareholding of the Appellant No. 1 from

33.53% to 17.44%. In addition, the Respondent No. 2 had also sold the properties

of the Respondent NO. 1 Company without the consent of the Appellant No. 1.

iii) The Company Petition was filed by the Appellants on 27.02.2018 sought

the following reliefs:

"a) To hold that the Respondents are guilty of oppression and mismanagement;

b) To declare the convening of any Board Meeting of Respondent No. 1 Company and the purported EGM dated 01.11.2017 for the increase in authorized capital from Rs. 7,19,01,000/- to Rs. 13,75,00,000/- as null and void and has no effect;

c) To declare the allotment of 65,51,587 shares in purported Board Meeting 16.11.2017 as null and void and has no effect;

d) To further direct the ROC to cancel the FORM No. DH-7 filed by Respondent No. 1 Company for the increase of capital from Rs.

7,19,01,000/- to Rs. 13,75,00,000/- and further filing of the FORM PAS-3 filed by Respondent No. 1 Company for allotment of 65,51,587 shares;

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e) To direct the rectification of the register of member of Respondent NO. 1 Company in terms of relief granted in "Point iii and iv";

f) To declare that the letter dated 29.01.2018 sent by the Respondent No. 2 in handwriting note with respect to the purported Board Meeting of the Respondent No. 1 Company or any aspect related thereto as null and void or any action done in pursuance of the said letter may also be declared as null and void.

g) To appoint independent auditor to investigate the financials of the Respondent No. 1 Company to ascertain the money siphoned off by the Contesting Respondents and for direction to restore said money to Respondent No. 1 Company, in case it's found to be misappropriate through report of the independent auditor;

h) To direct the independent auditor to find out whether the financial transactions by the Respondents in form of unsecured loans in Respondent No. 1 Company, were mere barely shell entries, without any actual transaction therein;

i) To direct that no major decisions of the Respondent No. 1 Company will be taken without having the consent of the Petitioners, such as "alteration of capital structure"; "increase in paid up capital"; "selling of land of Respondent No. 1 Company;

"enter into any Collaboration/Development Agreement with any third party", etc.;

j) To pass the appropriate directions for the future affairs of the Respondent No. 1 Company;

k) To order for the launch of prosecution against the Respondents under Section 447, 448, 449 and 450 of Companies Act, 2013, for playing fraud with the Petitioners, by creating/filling false statement and false evidences in the records of the Respondent No. 1 Company and the ROC, i.e. the Respondent 13, to prejudice the rights of Petitioners;

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l) To pass permanent injunction against the Respondents, thereby directing that no action shall be taken by them against the Petitioners in Respondent No. 1 Company, whereby their rights as shareholders or directors may get prejudice;

m) To direct and declare that in case of the distribution of the proceeds from the sale/transfer of 45% share of FAR from the Development Agreement dated 16.07.2012 with Respondent NO. 8 is received, the Petitioners shall be entitled to have their 33.33% rights over said sale proceeds;

n) To direct and declare that in case of any unlicensed land of Respondent No. 1 Company, sold to any third party, the proceeds there from shall be distributed in such manner, whereby Petitioner No. 1 gets 33.33% share of it;

o) To declare that the Respondents are ineligible to become the directors of the Respondent No. 1 Company or in any other Company in future."

iv) Further case is that the Respondent No. 1 had not filed the response to

the said Company Petition. The Respondent No. 1 filed an application for seeking

condonation to file the response of the said Company Petition which was closed

by the Ld. NCLT on 30.08.2018. It is pertinent to mention that the matter

between the Appellant No. 1 and the Respondent No. 2 was settled on the basis

of two Compromise Deeds dated 11.04.2018 and 31.05.2018. Both the

Respondents i.e. the Respondent No. 1 and Respondent No. 2 were to pay back

the amount of Rs. 55 Lacs and Rs. 1.91 Crores as per the Minutes of Meeting

dated 31.05.2018. However, the Respondent No. 1 and Respondent No. 2 could

only pay a sum of Rs. 20 Lacs, therefore amount of Rs. 55 Lacs and Rs. 1.70

Company Appeal (AT) No. 330 of 2019 6

Crores were still payable to the Appellant No. 1, which, till date the Respondent

No. 1 and 2 failed to pay back, therefore, the Appellant No. 1 had filed a Petition

under Section 7 of the IBC, 2016 before the NCLT at New Delhi Bench i.e. C.P.(IB)

No. 1420(PB)/2019 against the Respondent No. 1. The said IBC Petition was

allowed to be withdrawn by the NCLT on the ground that the Respondent No. 1

was not the Financial Creditor in terms of the IBC. However, the liberty was

granted to the Appellant No. 1 to pursue his remedy in accordance with law.

v) In the meanwhile, when the matter i.e. Company Petition had come up for

hearing before the NCLT, the Respondent No. 2 had addressed that the said

Company Petition may be dismissed as there was already a compromise between

the Appellant and the Respondent No. 2 on 11.04.2018 and which was also

recorded before the Ld. Civil Judge, Gurgaon and not only that the non-

compliance of the same was brought before the Hon'ble High Court of Punjab

and Haryana at Chandigarh in Writ Petition bearing No. CWP-6578/2018(O&M)

dated 20.04.2018. Therefore, in view of the compromise being arrived between

the parties, there is no purpose for the present petition to continue and the same

may be dismissed.

vi) Further case is that the Appellant had also placed on record the Rejoinder

of the said Petition. In the rejoinder, the fact of filing of the said IBC Petition was

not brought on record before the NCLT. It was also intimated that the

Respondent No. 2 is wrongly relying on Compromise Deed dated 11.04.2018. The

Respondent No. 2 has concealed that there is a subsequent Compromise deed

dated 31.05.2018, whereby the Respondent NO. 1 and Respondent No. 2 were

Company Appeal (AT) No. 330 of 2019 7

liable to pay an amount of Rs. 55 lacs and Rs. 1.70 Crores to the Appellant No.

1. Till the said amount is not paid, there is a continuous cause of oppression

and mismanagement in the said Company Petition and the said Company

Petition cannot be disposed of without addressing the complete cause of the

Appellant No. 1. It was also brought on record into the notice before the NCLT

that in response to the said IBC Petition, the Respondent No. 2 had admitted in

the reply that the amount of Rs. 55 Lacs and Rs. 1.70 Crores is liable to be paid

after the Appellant No. 1 performing certain obligations.

vii) Further case is that the Appellant No. 1 is ready to comply any obligation

as referred in the said response/reply filed by the Respondent No. 1 provided the

said amount is paid by the Respondent No. 1 and Respondent No. 2 to the

Appellant No. 1.

viii) Since the Respondent No. 1 is a closely held company owned by the family

members. The dispute is between the two brothers. The entire cause can be

settled, if as per the admission of the Respondent No. 1 and Respondent No. 1,

the amount of Rs.55 Lacs and Rs. 1.71 Crores is paid to the Appellant No. 1.

Further, even pending the Execution Petition before the Ld. Civil Judge, Gurgaon

or before the Hon'ble High Court of Punjab and Chandigarh, the Appellant No. 1

continue to have the shareholding in the Respondent No. 1 Company and the

directorship. In that cause, due to both the brothers had loggerheads, the affairs

of the Respondent No. 1 Company would continuously be prejudiced.

ix) In the said matter, the NCLT in the particular facts and circumstances

cannot abdicate its jurisdiction when the affairs of the company are not only

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prejudicial to the creditors and shareholders but also to the prejudicial to the

company itself. In the present case, the affairs are directly prejudicial to the

interest of the Respondent No. 1 Company and not only that it was also

prejudicial to the interest of the Appellant No. 1.

x) The NCLT after hearing the parties the said Company Petition was

dismissed on the ground that since there is a compromised already arrived

between the parties on 11.04.2018 and in view therefore, the said Company

Petition now cannot be entertained by the NCLT. Hence this Appeal.

3. The Learned Counsel for the Appellant during the course of argument and

in his memo of Appeal along with written submissions submitted that the NCLT

has failed to consider that the Compromise Deed dated 11.04.2018 was further

supplemented by the Compromise Deed dated 31.05.2018 and it was not placed

before the Ld. Civil Judge, District Court, Gurgaon.

4. It is further submitted that the NCLT has also failed to understand that in

the said IBC Petition, there was an admission by the Respondent No. 1 that the

said amount is payable subject to Appellant No. 1 complying certain conditions.

The Ld. NCLT did not look into the substance of the matter, but passed the

technical directions for the parties to pursue the execution proceedings before

the different courts.

5. It is further submitted that the respondent in the response to the present

appeal has taken a very surprising stand by stating that the settlement deed was

though signed by him, but through coercion. The relevant portion of the response

is reproduced herein below:

Company Appeal (AT) No. 330 of 2019 9

"However, Respondent No. 2 (who is the Managing Director of

Respondent No. 1 Company) was forcibly made to sign the said

minutes at the office of the counsel for Appellant No. 1. Thus, the

said minutes are not binding."

6. It is further submitted that the NCLT has failed to consider that with the

continuous co-existence of the Appellant No. 1 and the Respondent No. 2 who

are at the loggerheads, will prejudice to the affairs of the Respondent No. 1

Company. For the interest of the Respondent No. 1 Company, the appropriate

orders were ought to be passed in consideration of the said Company Petition

filed by the Appellant No. 1 against the Respondents before the NCLT. The NCLT

did not look onto the said matter and rather dismissed the said Company Petition

on the basis of the conjecture and surmises.

7. It is further submitted that the NCLT did not considered that Respondent

No. 1 was a closely held family company, it has abdicated its Jurisdiction under

Section 241-242 of the Companies Act, 2013, which is for putting an end to the

dispute between the parties. The impugned order is of such a nature which will

multiply the proceedings/litigations between the parties; that even otherwise

Oppression and Mismanagement being caused by the Respondent No. 2 against

the Appellant in Respondent No. 1 Company was continuous in nature. The

NCLT has failed to comprehend the situation.

8. The NCLT has taken note of other collateral proceedings and judicial

proceedings between the parties. The said judicial/collateral proceedings cannot

Company Appeal (AT) No. 330 of 2019 10

be a reason for the NCLT to dismiss the main petition of Oppression and

Mismanagement being filed by the Appellant.

9. The Learned Counsel for the Respondent during course of argument and

in his reply affidavit along with written submissions submitted that appeal is

misconceived and baseless as the Appellants have no locus standi to file the

present Appeal. The dispute was essentially between real brothers i.e. Appellant

No. 1 and Respondent No. 2 and both of them have arrived at a settlement vide

compromise deed dated 11.04.2018 in terms of which a compromise decree

dated 03.12.2018 was passed by the Ld. Civil Judge, Gurugram. As per the

compromise deed dated 11.04.2018, the Appellant inter alia agreed as follows:

"That it is further agreed by both the parties as a part of this

compromise that Ramavtar would resign from M/s H.S. Realty

Pvt. Ltd. along with His wife Smt. Ramrati. Mr. Ramavtar will

also transfer all his shareholdings in M/S H.S. Realty Pvt Ltd in

favour of existing director of M/s H.S. Realty Pvt. Ltd"

10. It is further submitted that while it is the case of the Respondents that the

Minutes of Meeting dated 31.05.2022 are not binding, the said Minutes also

reiterate that the Appellants were required to resign and Appellant No. 1 was

required to relinquish his shares in Respondent No. 1 Company. As evident from

the above, the Appellants had agreed to and was willing to resign from

Respondent No. 1 company and the Appellants had agreed to give up their

shareholdings in Respondent No. 1 company. Therefore, the question of

Company Appeal (AT) No. 330 of 2019 11

oppression or mismanagement does not arise and the Appellants lacked the

locus standi to maintain the petition before the NCLT.

11. It is further submitted that the Appellants have dishonestly failed to

comply with the obligations under the said compromise deed dated 11.04.2018

and on account of the same the Respondents have filed a contempt case before

the Hon'ble High Court bearing being COCP No. 3979 of 2018. The Hon'ble High

Court vide an order dated 10.12.2018 was pleased to issue notice of the said

contempt petition to Appellant No. 1 requiring it to show cause as to why

contempt proceedings should not be initiated against it. As a counter blast to

the said contempt petition, Appellant No. 1 also filed a contempt petition before

the Hon'ble High Court being COCP No. 1833 of 2019 wherein notice was issued

on 16.05.2019. It is evident that irrespective of the disputes between the parties

regarding fulfilment/non fulfilment of their respective obligations under the said

compromise deed dated 11.04.2018, both the Appellants and the Respondents

are seeking to enforce the said compromise deed. In such circumstances, the

Appellants lacked the locus standi to maintain the Petition and therefore, the

Petition was rightly dismissed vide the impugned Order.

12. It is further submitted that by filing the Company Petition, the Appellant

had abused the process of law by initiating multiple proceedings for the same

cause of action. In this regard, the Tribunal while dismissing the company

petition noted in the impugned order. The Tribunal passed the impugned order

after duly considering that the jurisdiction of the Tribunal cannot be invoked for

giving effect to a compromise between the parties. The impugned order does not

Company Appeal (AT) No. 330 of 2019 12

suffer from any jurisdictional error and the Tribunal, by passing of the impugned

order, ensured that there is no multiplicity of proceedings between the parties.

The Tribunal comprehensively dealt with the issues mentioned in the Company

Petition. The impugned order was passed on the ground that the parties had

already mutually settled their disputes. In view of the mutual settlement, the

Company Petition ought to have been dismissed which the Tribunal rightly did

by way of the impugned order.

13. The Appellants have wrongly alleged that Respondent No. 1 had not filed

a response to the company petition. In this regard, it is submitted that the

Respondents initially Could not file the reply to the Company Petition within a

reasonable time for the reasons stated in the application filed by them under

Section 11 of the NCLT Rules, 2016. The Respondents were under the impression

that since the matter is already compromised between the parties through

compromise deed dated 11.04.2018, the Appellants would have withdrawn the

Company Petition. However, on the contrary the Appellants had not informed

the Tribunal about the compromise deed dated 11.04.2018 and the decree dated

03.12.2018 passed pursuant to the same. Pursuant to the filing of the

application, the Respondents were permitted to file reply by the Tribunal and the

delay in filing the reply was condoned.

14. The Appellants' contention that till the amounts mentioned in the minutes

dated 31.05.2018 are not paid, there is a continuous cause of oppression and

mismanagement is completely misconceived and unsustainable. The Tribunal

and this Appellate Tribunal are not the appropriate forums for adjudicating as

Company Appeal (AT) No. 330 of 2019 13

to whether the parties have acted in terms of the compromise deed dated

11.04.2018 and whether the alleged minutes dated 31.05.2018 are binding or

not. It is submitted that the Appellants have dishonestly failed to comply with

their obligations under the said compromise deed and the above-mentioned

contempt petition filed by the Respondents is pending before the Hon'ble High

Court for enforcing the same. The Appellant No. 1 has also filed a contempt

petition as a counterblast. The Hon'ble High Court being seized of the matter,

the present Appeal is liable to be dismissed. Further, it has been rightly noted

by the tribunal that in the light of the compromise deed dated 11.04.2018, if at

all there is any remedy available to the Appellant then it is before the Hon'ble

Punjab & Haryana High Court and Civil court at Gurugram.

15. The Learned Counsel for the Respondent further submitted that the

dispute between Appellant No. 1 and Respondent No. 2 does not affect the

Respondent No. 1 Company as the matter has already been solved through the

aforesaid compromise deed. Therefore, in light of the abovementioned, the

present Appeal may kindly be dismissed.

16. After hearing the parties and going through the pleadings made on behalf

of the parties, we are of the considered view that the Tribunal while passing the

impugned order had rightly taken note of the fact that in view of the settlement

between the parties and as recorded by Hon'ble High Court of Punjab & Haryana,

the said allegations cannot be gone into further and in the circumstances in view

of the compromise arrived at outside the Tribunal and as recorded by Hon'ble

High Court of Punjab & Haryana passed vide order dated 20.04.2018 as well as

Company Appeal (AT) No. 330 of 2019 14

Ld. Civil Judge, Gurugram on 11.04.2018 nothing survives in the Company

Petition. Keeping in view of the aforenoted facts, we agree with the reasons given

by the NCLT. Therefore, the impugned order dated 30.09.2019 passed by the

National Company Law Tribunal, Bench No. III, New Delhi in C.A.311/C-

III/ND/2018 and C.P.81/241/242/ND/2018 is hereby affirmed. The instant

Appeal is hereby dismissed. No order as to costs.

17. Registry to upload the Judgment on the website of this Appellate Tribunal

and send the copy of this Judgment to the concern Tribunal, forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

New Delhi 23rd November, 2023 R. Nath.

Company Appeal (AT) No. 330 of 2019