Roop Ultrasonix Limited And Ors vs Telsonic Holding Ag

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI COMPANY APPEAL (AT) NO.187 OF 2023 (Arising out of judgement and order dated 28.07.2023 passed by National Company Law Tribunal, Mumbai Bench, Court V, Mumbai in CA No.102 of 2023 in CP No.57 of 2023.) In the matter of: 1. ROOP ULTRASONIX LIMITED having its registered address at A/41, Nandkishore Industrial Estate, Off Mahakali Caves Road, Andheri (East), Mumbai - 400 093. 2. ANANT SURYAKANT TRIVEDI, S/o Suryakant Shivshanker Trivedi, residing at 101, Magnum Opus, Opp. Nana Nani Park, 7 Bungalows, Juhu-Varsova, Link Road, Mumbai 400 061. 3. RUPA ANANT TRIVEDI, W/o Anant Suryakant Trivedi, residing at 101, Magnum Opus, Opp. Nana Nani Park, 7 Bungalows, Juhu-Versova, Link Road, Mumbai 400 061. 4. KODUR RAJAGOPALAN PUTHANVITIL, S/o Kuttikrishnan Nair, residing at Flat No. 14, Citadel, Sector 14, Vashi, Navi Mumbai - 400 703 5. KARISHMA VIPUL TANNA, D/o Vipul Mathuradas Tanna, residing at Bungalow No. 04, A- Wing, Arshie Complex, Panch Marg, Off Yari Road, Versova, Andheri (West), Mumbai - 400 061. 2

6. NATWARLAL VALLBHDAS TRIVEDI, S/o Vallbhdas Kalidas Trivedi, residing at B/23, Chandralok CHS Ltd, Jaywant Swant Road, Dahisar (West), Mumbai- 400 068 ......... Appellants VERSUS

TELSONIC HOLDINGS AG, through its authorized representative Mr. Yashpal Chauhan and having its registered office at Industriestrasse, CH - 9552, Bronschhofen, Switzerland. ...... Respondent Present: For Appellant : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Gaurav H. Sethi, Mr. Rahul Pawar, Mr. Rahul Kapoor, Mr. Kartik Nagpal, Advocates. Mr. Sanjeev Puri, Sr. Advocate with Mr. G. Bharucha, Ms. Rajni Kutty, Advocates. For Respondents : Mr. A.K. Ganguli, Sr. Advocate with Mr. Pankaj Prakash, Mr. Rahul Khosla, Mr. Sarang Rastogi, Advocates.

WITH COMPANY APPEAL (AT) NO.7 OF 2025 (Arising out of judgement and order dated 18.12.2024 passed by National Company Law Tribunal, Mumbai Bench in CA No. 387 of 2024 in CP No.57 of 2023.) In the matter of: 1. ROOP ULTRASONIX LIMITED having its registered address at A/41, Nandkishore Industrial Estate, Off Mahakali Caves Road, Andheri (East), Mumbai - 400 093. 2. ANANT SURYAKANT TRIVEDI, S/o Suryakant Shivshanker Trivedi, residing at 101, Magnum Opus,

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 3

Opp. Nana Nani Park, 7 Bungalows, Juhu-Varsova, Link Road, Mumbai 400 061. 3. RUPA ANANT TRIVEDI, W/o Anant Suryakant Trivedi, residing at 101, Magnum Opus, Opp. Nana Nani Park, 7 Bungalows, Juhu-Versova, Link Road, Mumbai 400 061. 4. KODUR RAJAGOPALAN PUTHANVITIL, S/o Kuttikrishnan Nair, residing at Flat No. 14, Citadel, Sector 14, Vashi, Navi Mumbai - 400 703 5. KARISHMA VIPUL TANNA, D/o Vipul Mathuradas Tanna, residing at Bungalow No. 04, A- Wing, Arshie Complex, Panch Marg, Off Yari Road, Versova, Andheri (West), Mumbai - 400 061. 6. NATWARLAL VALLBHDAS TRIVEDI, S/o Vallbhdas Kalidas Trivedi, residing at B/23, Chandralok CHS Ltd, Jaywant Swant Road, Dahisar (West), Mumbai- 400 068 ......... Appellants VERSUS

TELSONIC HOLDINGS AG, through its authorized representative Mr. Yashpal Chauhan and having its registered office at Industriestrasse, CH - 9552, Bronschhofen, Switzerland. ...... Respondent Present:

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 4

For Appellant : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Gaurav H. Sethi, Mr. Rahul Pawar, Mr. Rahul Kapoor, Mr. Kartik Nagpal, Advocates. Mr. Sanjeev Puri, Sr. Advocate with Mr. G. Bharucha, Ms. Rajni Kutty, Advocates. For Respondents : Mr. A.K. Ganguli, Sr. Advocate with Mr. Pankaj Prakash, Mr. Rahul Khosla, Mr. Sarang Rastogi, Advocates.

JUDGMENT

(Hybrid Mode)

[Per: Ajai Das Mehrotra, Member (Technical)]

COMPANY APPEAL (AT) NO.187 OF 2023 The appeal is filed against the impugned order dated 28.07.2023 of

NCLT, Mumbai Bench, Court-V in CA NO. 102 of 2023 in CP No. 57 of 2023.

2. The brief facts of this case are as under:

i. The main Appellant Roop Ultrasonix Ltd. is an unlisted company. The

Respondent, Telsonic Holding AG, a foreign body corporate holds shares in

the Appellant company. The Respondent has been identified as a "promoter"

in the annual returns up to 31.03.2022.

ii. Through a board resolution dated 09.11.2022, the Respondents were

reclassified as "public shareholder/other than promoter".

iii. The right issue was launched by the Appellant in the month of March,

2023 wherein the Respondents have applied but their application was rejected

as their shares were not held in the dematerialised form.

iv. Aggrieved by the said actions, Telsonic Holding AG (Respondent herein)

had filed CA No. 102 of 2023 on which the impugned order was passed

wherein the Ld. NCLT held that the entire process of issuance of equity shares

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 5

in rights issue stands vitiated and was set aside and directions were issued

to Roop Ultrasonix Ltd. to refund the amount received in the rights issue. The

relevant portion of the order of Ld. NCLT is reproduced below:

"35. We have thoughtfully considered the contentions raised by the Counsel for the Parties and have also gone through the record.

36. The primary grievance of the Applicant is that the Respondent Nos. 2 to 6 have hurriedly brought about a rights issue in Respondent No. 1 proposing to allot one equity share for each share held by the existing shareholders. The case of the Applicant Company is that all this has been done to dilute the shareholding percentage of the Applicant in Respondent No. 1 from the existing 38.45% with a view to wrest control of the Respondent No. 1. It has also been claimed that the entire process of the rights issue is illegal and has been conducted in utter violation of the statutory requirements of the Companies Act, 2013 a s well a s certain regulations which have also not been adhered to. It has also been claimed that the application for allotment of shares filed by the Applicant has also been wrongly and illegally rejected on a false and frivolous ground that the existing shares held by it were not in dematerialized form.

37. In order to see whether or not any illegalities have been committed by the Respondents while bring about the rights issue, the chain of events by way of which the rights issue was brought a bout has to be examined which is as under: (i) The last annual general meeting of Respondent No. 1 was held on 30.12.2022.

(ii) Subsequent to that, Extra Ordinary General Meeting (EOGM) was held on 25.01.2023 purported to amend the Memorandum of Association (MoU) and Article of Association (AoA) of the Respondent No. 1. (iii) Another Extra Ordinary General Meeting (EOGM) was held on 28.02.2023 to enhance the authorized capital of Respondent No. 1.

38. In the Annual General Meeting h eld on 30.12.2022, the idea of raising capital by way of a rights issue was not discussed at all. The notice for the EOGM held on 25.01.2023 is claimed to have been sent on 31.12.2022 through email. This EOG M was called to amend the Memorandum of Association and Articles of Association of Respondent No. 1 to ensure that the same were in line and in compliance of the provisions of the Companies Act, as is evident from the notice (Exhibit-G) placed on the file by the Respondent. Subsequent to this, the another EOGM was held on 28.02.2023 whereby the authorized capital of the Company was enhanced from Rs. 4 Crore to Rs. 9.75 Crore.

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 6

39. The letter of offer in respect of the rights share offered to the existing equity shareholders was issued on 03.03.2023. The letter of offer dated 03.03.2023 is Exhibit-L attached with the reply. In the letter of offer, the record date for the rights issue is mentioned as 03.03.2023. It further stated that the issue will open on 04.03.2023 and close on 19.03.2023. This was in utter disregard of Section 62(2) of the Companies Act which requires that the notice has to be dispatched at least 3 days prior to the opening of the issue. This displays the undue haste exercised by the Respondents while going through the process of rights issue. No doubt, subsequently, a notice (Exhibit-M) was issued on 08.03.2023 clarifying that the offer of rights shares to the existing shareholders would open on 09.03.2023 and issue will close on 24.03.2023. This seems to be an another illegality, as the fresh notice extending the date from 04.03.2023 to 09.03.2023 was issued only on 08.03.2023 which, in a way, again violates the provisions of Section 62(2) of the Companies Act in as much as such notice is required to be issued at least 3 days prior to the opening of the issue. The gap of these days in the notice and opening of the Right issue was again not maintained.

40. Another stark illegality purportedly committed by the Respondents while carrying out the issue is the non-compliance of the provisions of Rule 9A(2) of Companies (Prospectus and Allotment of Securities) Rules, 2014 which provides that an unlisted public company is proscribed from bringing a right issue till the time, the entire shareholding of all its promoters, directors and key managerial personnel are dematerialized. It has been rightly pointed out by the Counsel for the Applicant that the shares held by the promoters including the petitioner and other directors of Respondent No. 1 are not held in dematerialized form. Therefore, no such right issue could be brought about for Respondent No. 1 and the offer document is liable to be declared illegal and void on this ground. Rule 9A(2) of Companies (Prospectus and Allotment of Securities) Rules, 2014 provides that every unlisted public company making any offer for issue of any securities or buy b ack of securities or issue of bonus shares or rights offer shall ensure that before making such offer, entire holding of securities of its promoter, directors and key managerial personnel has been dematerialized in accordance with the provisions of the depositories Act, 1996 and Regulations made thereunder.

41. It is not disputed that Respondent No. 1 is a public unlisted company. Therefore, Respondent No. 1 is squarely covered under Rule 9A(2) of the aforesaid Rules, 2014. It is not the case of the Respondents that prior to the release of the rights offer, the Company had taken steps to dematerialize all the shares of Respondent No. 1 especially those held by the promoters,

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 7

directors or other key managerial personnel. In this regard, the Respondents have not placed on record any document or record of Respondent No. 1 which might show that the shares held by the Petitioner or the Respondents or other functionaries covered under the definition of key managerial personnel hold shares of Respondent No. 1 only on dematerialized form. Therefore, m our considered view, Respondent No. 1 was not entitled to go ahead with the rights shares offer without taking steps to dematerialize the shares held by at least the promoter, directors and key managerial personnel.

42. To add insult to injury, the Respondents have claimed that they rejected the application of the Applicant for the issue right shares on the ground that since the Applicant had not converted his shares into dematerialized form, it was not entitled to subscribe to the Right shares. It has been claimed that this has been done in consonance with 9A(2) of Companies (Prospectus and Allotment of Securities) Rules, 2014. In addition to this, it has also been claimed by the Respondents that the Petitioner was not a promoter when it subscribed the Rights issue vide email dated 21.03.2023.

43. However, in our considered view, the act of the Respondents in blatantly rejecting the application for right issues of the Applicant was absolutely illegal and unjustified. Since the Respondents, who are undoubtedly running the company and are in control of its day to day affairs, did not take the necessary steps to get the shares of the Company converted into dematerialized form and even the shares of all other directors or key managerial personnel are not shown to have been converted into a dematerialized form any time prior to issuance of the Rights offer, the act of rejection of the application of the Applicant is out to out arbitrary and oppressional in nature.

44. Secondly, on the face of it, the Respondents have wrongly claimed that the Petitioner is not a promoter of Respondent No. 1. According to the Respondents, the Petitioner was not shown as promoter of Respondent No. 1 in the annual reports and earlier the Petitioner was shown as promoter on account of the contracts it had entered into with Respondent No. 1 and its group companies. Since the contracts were unilaterally terminated and the Petitioner's nominee also resigned from the Board of Respondent No. 1, it was reclassified as a public shareholder other than a promoter.

45. On the other hand, the Petitioner has claimed that it is covered under the definition of promoter defined in Section 2(69) of the Companies Act, 2013 which provides that the promoter is stated to mean a person who has been named as such in a prospectus or is identified by the Company in the annual return referred to in Section 92 or who has control over the affairs of the

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 8

Company directly or indirectly whether as a shareholder, director or otherwise or in accordance with whose advice, directions or instructions, the Board of Directors of the Company is accustomed to act. According to the Petitioner, the latest annual return of Respondent No. 1 for the financial year ending 31.03.2022, as filed with the MCA on 07.02.2023, declares the Petitioner as promoter of Respondent No. 1. Simply because of the termination of some agreements of the Petitioner with Respondent No. 1, would not dislodge it from the status of being a promoter of the Company. Moreover, by the dent of its holding of 38.45% equity shares, the Petitioner is entitled to nominate its director in the name of Respondent No. 1 and, therefore, by no stretch of imagination can it be said that the Petitioner can no longer be treated as a promoter or has lost its right to be reckoned as a promoter.

46. Having considered the aforesaid contentions raised by the Counsel for the Petitioner j Applicant, we are of the considered view that the Respondents have wrongly claimed that the Petitioner is not a 'promoter' any more even though if the definition of the promoter given under Section 2(69) of the Companies Act is taken into consideration coupled with the other facts that in the latest Annual Return of Respondent No. 1, the Applicant is referred to as the promoter and continues to hold 38.45% of the equity shares, the Applicant qualifies to be treated as a 'promoter'. Therefore, on this ground also, the rejection of the Applicant's application for shares under the Rights issue appears to be totally unjustified.

47. In the light of the above discussion, we are of the considered view that since the Respondents have acted arbitrarily and unfairly while carrying out the process of issue of right shares which was also in utter disregard of the provisions of Section 62(2) as well as 9A(2) of Companies (Prospectus and Allotment of Securities) Rules, 2014 and also that the application for the Applicant for rights shares has also been wrongly and illegally dismissed on illegal grounds, the entire process of issuance of equity shares stands vitiated and is, therefore, liable to be set aside. It is ordered accordingly.

48. As a consequence, any application money received from the existing shareholders of Respondent No. 1 shall be refunded and forthwith. However, this order will not preclude the Respondent No. 1 from bringing about a fresh share of rights issue while strictly adhering to the statutory provisions of the Companies Act and the Depositories Act, Rules and other provisions of law.

49. In view of the above, CA No. 102 of 2023 shall stand accordingly allowed to the extent indicated above and disposed of."

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 9

3. The Ld. Sr. Counsel for the Appellant submitted that in CA No. 102 of

2023, the applicant had sought only stay of the rights issue whereas the Ld.

NCLT has gone beyond the prayers and has cancelled the rights issue and

has ordered refund of the amount collected. It is submitted that during the

period when the rights issue was open, there was no stay order and the

amounts as share application money were received and the shares were

allotted. No opportunity was given by the Ld. NCLT to more than 200 allottees

in whose favour the right shares were allotted. It was submitted that relief

beyond the prayers cannot be granted, as is held in Visweswara Infrastructure

Pvt. Ltd. and others v. Telangana State Industrial Infrastructure Corporation

Ltd. and others, 2003 SCC OnLine TS 2980 by the Hon'ble Supreme Court.

The relevant portion of the said judgment, is reproduced below:

47. We may now advert to the third issue, namely whether the Court can deny relief to a party on a ground not pleaded by it.

48. In V.K. Majotra v. Union of India, the Hon'ble Supreme Court did not approve the action of the High Court in issuing a direction beyond the pleadings or the points raised by the parties during the course of arguments. The Hon'ble Supreme Court in State of West Bengal v. West Bengal Registration Copywriters Association did not approve the order of the High Court which travelled much beyond the pleadings.

49. In State of Himachal Pradesh v. Himachal Pradesh Nizi Vyaysayik Prishikshan Kendra Sangh, the Hon'ble Supreme Court laid down the procedure in case of grant of relief beyond the prayer and held that the Court should first allow the writ petitioner to amend so as to include the relief sought to be given and then afford opportunity to all to put forth their stand on the issued.

50. In Union of India v. Dinesh Prasad, the Hon'ble Supreme Court held that no relief to a party can be granted on the grounds not taken in the writ petition as it is not permissible for the Court to grant the relief beyond pleadings.

51. In Akella Lalitha v. Konda Hanumantha Rao, while dealing with a special leave petition based on child custody matter under the family law, the Hon'ble Supreme Court in paragraphs 16, 17 and 18 held as under:

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 10

16. ... ... ... It is settled law that relief not found on pleadings should not be granted. If a Court considers or grants a relief for which no prayer or pleading was made depriving the respondent of an opportunity to oppose or resist such relief, it would lead to miscarriage of justice.

17. In the case of Trojan & Co. Ltd. v. Rm.N.N. Nagappa Chettiar ((1953) 1 SCC 456 : AIR 1953 SC 235), this Court considered the issue as to whether relief not asked for by a party could be granted and that too without having proper pleadings.

The Court held as under:--

"It is well settled that the decision of a case cannot be based on grounds outside the pleadings of the parties and it is the case pleaded that has to be found. Without an amendment of the plaint, the Court was not entitled to grant the relief not asked for and no prayer was ever made to amend the plaint so as to incorporate in it an alternative case."

18. In the case of Bharat Amratlal Kothari v. Dosukhan Samadkhan Sindhi ((2010) 1 SCC 234) held:

"Though the Court has very wide discretion in granting relief, the Court, however, cannot, ignoring and keeping aside the norms and principles governing grant of relief, grant a relief not even prayed for by the petitioner."

52. In view of the aforesaid decisions of Hon'ble Supreme Court, it is evident that it is not permissible for a Court to grant the relief which is not even prayed for by the petitioner in the writ petition. Thus, the Court dealing with a writ petition has to bear in mind the prayer made by the petitioner in the case.

53. In Akella Lalitha (supra), the Hon'ble Supreme Court in paragraph 17 referred to the decision in Trojan and Company v. Rm.N.N. Nagappa Chettiar with approval and has held that "it is well settled that the decision of a case cannot be based on the grounds outside the pleadings of the parties and it is the case pleaded that has to be found". The aforesaid principles laid down by the Hon'ble Supreme Court for granting relief, in our opinion would apply with equal vigour to denial of a relief to a party on a ground not pleaded by it.

(Emphasis supplied)

4. The Ld. Sr. Counsel for the Appellant submitted that the Respondent,

Telsonic Holding AG was shown as 'promoter' in the annual return filed under

Section 92 of the Companies Act, 2013 as on 31.03.2022. However,

subsequently, through the board resolution dated 09.11.2022, Telsonic

Holding AG was re-classified as "public shareholder/other than promoter"

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 11

and in the subsequent annual return filed as on 31.03.2023, they were not

shown as "promoter". It was submitted that rights issue came in the month

of March, 2023 by which time Telsonic Holding AG had been re-classified as

"public shareholder/other than promoter".

5. It was submitted that certain instances prior to the board resolution

dated 09.11.2022 reflect that Telsonic Holding AG had itself shown its

intention to give up their control over the Appellant. It was submitted that Co-

operation Agreement dated September 14, 2005 was terminated by Telsonic

Holding AG on 20.08.2019 and the Shareholders Agreement dated

14.09.2005 was terminated on 04.04.2022. Further, Telsonic Holding AG

launched an Indian named subsidiary Telsonic Ultrasonic India Pvt. Ltd.

carrying out the same line of business, on 24.08.2022. Their intention can

also be seen from the resignation of the sole authorised representative of

Telsonic from the board of directors of the Appellant company on 05.10.2022.

6. It was in this context that the Respondent, Telsonic Holding AG was

reclassified as "public shareholding/other than promoter" vide board

resolution dated 09.11.2022. The relevant board resolution is reproduced

below for reference:

"RESOLVED THAT pursuant to the applicable provisions of The Companies Act, 2013, along with the relevant Rules made thereunder (including any statutory modification(s) or re- enactment(s) thereof for the time being in force), and subject to the provisions of the Articles of Association of the Company, the consent of the Board of Directors be and is hereby accorded to re- classify Telsonic Holding AG from 'Promoter' to "Public Shareholder / Other than Promoter" pursuant to the termination of the Co- operation Agreement dated September 14, 2005 on August 20, 2019, the Shareholder's Agreement dated 14th September, 2005 on 04th April, 2022 and resignation letter dated October 5, 2022 of the authorized representative of Telsonic Holding AG on the

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 12

Board of the Company and that all requisite steps be taken in this regard to reflect the same in the Annual Returns of the Company as also requisite filings to be made with the Ministry of Corporate Affairs."

7. The Ld. Sr. Counsel for the Appellant submitted that as on the date of

launch of rights issue, the Respondent was not a "promoter" and thus the

pre-requisite of dematerialization of the shares of Respondent as per Rule

9A(2) of the Companies (Prospectus and Allotment of Securities) Rules, 2014

was not the responsibility of the Appellant Company. It was submitted that

Ld. NCLT erred in assuming that the Respondent was a promoter. It was

submitted that as per Rule 9A(1) of the said Rules, the responsibility of the

company towards shareholders (other than directors, promoters and key

managerial persons) is only to facilitate dematerialization of shares.

8. The Ld. Sr. Counsel for the Appellant further stated that they are

challenging the finding recorded in para 26 of the impugned order that the

petitioner (respondent herein) holds 38.45% of the issued share capital of the

Appellant Company. It was submitted that Telsonic, the petitioner before the

Ld. NCLT, holds only 0.73% shareholding and as such they could not have

maintained the said petition under the provisions of Section 244 of the

Companies Act, 2013 unless and until waiver was granted by the Ld. NCLT.

9. It was further submitted that an Extra Ordinary General Meeting

(EOGM) was held on 25.01.2023, the notice of which was sent on 31.12.2022.

The EOGM was called to amend Memorandum of Association (MoU) and

Articles of Association (AoA) of the appellant. Another EOGM was held on

28.02.2023 whereby the authorised capital of the company was enhanced

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 13

from Rs. 4 crores to Rs.9.75 crores. Notice of the first EGM was issued to the

Petitioner but it did not attend or vote in the above meeting despite notice,

with the result that the required resolutions were passed. The necessary

notices were issued through email and the notices were also set out on the

website. The second EGM was held on 28.02.2023 which was attended by the

Petitioner through its proxy. The letter of offer for rights issue was issued on

03.03.2023 and initially the issue was to open on 04.03.2023 and close on

19.03.2023. Finding that this was not in consonance with Section 62(2) of the

Companies Act, 2013, which requires the notice to be dispatched at least 3

days prior to the opening of the issue, an addendum was issued on

08.03.2023 clarifying that the rights issue will open on 09.03.2023 and will

close on 24.03.2023. It was submitted that the issue of addendum and

extension of the opening and closing dates of the rights issue were to comply

with the provisions of Section 62(2) of the Act requiring prior notice of at least

3 days before opening of rights issue.

10. It was submitted that no arguments regarding PAS form and

cancellation of rights issue was ever discussed during the hearing before the

Ld. NCLT. The hearing was over and order was reserved by Ld. NCLT on

13.04.2023, whereas the note was furnished by the Respondent (petitioner

before NCLT) on 19.04.2023. In the said note, the petitioner had given the old

PAS Form relating to period from 01.04.2022 to 30.09.2022 which did not

reflect the correct position as on the date of issue of rights shares. The correct

PAS form relating to period 01.10.2022 to 31.03.2023 is available at page 212

of the APB which was filed on 08.05.2023. The petitioner (Telsonic) had duly

applied for the rights issue but its application was rejected on 03.04.2023 on

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 14

the grounds that its shares were not dematerialized in terms of Rule 9A(1)

and Rule 9A(3) of Companies (Prospectus and Allotment of Securities) Rules,

2014. It was further submitted that the petitioners were not in the 'control' of

the appellant company and as per Accounting Standards 21, and judgment

of the Hon'ble Supreme Court of India in the case of "Arcelor Mittal India

Private Limited vs. Satish Kumar Gupta and Ors., reported in

MANU/SC/1123/2018" they were not promotors.

To summarise, the Learned Counsel for the Appellant pleaded that (a)

relief granted by Ld. NCLT was not sought, (b) the Ld. NCLT relied upon

documents which were never placed during the hearing, (c) the respondent

company was no longer a promotor at the time of issue of rights shares and

therefore, Rule 9A(2) of Companies (Prospectus and Allotment of Securities)

Rules, 2014 was not applicable.

11. The Ld. Sr. Counsel for the Respondent, Telsonic Holding AG stated

that Telsonic group is headquartered in Bronschhoren, Switzerland and deals

in industrial ultrasonic solutions. On 20.07.1992, Telsonic AG (renamed as

Telsonic Holding AG in 2001) and Roop Ultrasonix Private Limited entered

into a Financial Collaboration and Purchase of Machinery Agreement to

establish in India a joint venture for manufacturing high-power ultrasonic

machines developed by Telsonic. On 29.10.1997, the Respondent and the

Appellant signed a Co-operation Agreement. The second Co-operation

Agreement was executed on 20.09.2005. A Shareholder Agreement was

executed on 14.09.2005 with the Appellant. Due to multiple breaches of Co-

operation Agreement, Telsonic was constrained to terminate the Co-operation

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 15

agreement with effect from 20.08.2019. The Shareholder Agreement was

terminated on 04.04.2022. On 19.11.2022, the Appellant re-classified

Telsonic Holding AG from "promoter shareholder" to a "public shareholder".

It was submitted that the re-classification is patently illegal and void. No prior

notice was given nor any formal communication was given regarding said re-

classification.

12. It was submitted that Telsonic was identified as a promoter in the

Annual Returns submitted by the Appellant and in the latest annual return

for the Financial Year ending 31.03.2022, which was filed on 07.02.2023,

Telsonic was identified and declared as one of the promotors. The annual

return is a public document and is substantive evidence itself under Section

74(2) of the Evidence Act, 1872.

13. It was submitted that the Appellant had no authority to re-classify the

status of the Respondent from "promoter shareholder" to "public

shareholder". There is no provision in the Companies Act, 2013 or any other

law whatsoever which empowers the Appellant to re-classify the Respondent

from "promoter shareholder" to "public shareholder". It was submitted that

that Companies Act, 2013 recognizes that once a person is shown as a

promoter either in the memorandum or in the annual return, he remains a

promoter for all time. Attention was drawn to Section 300 of the Companies

Act, 2013 wherein it is stated that "any person who had been a promoter of

the company will continue to be responsible for all the investigations by the

Liquidator". The "status of the promoter" would not have been altered by mere

resolution passed by the company. The allegation that the Respondents

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 16

have started another company in the same line of business is irrelevant as

the Trivedi Group, who were the other major shareholders have also promoted

another company, namely, 3A Innovative Technologies Private Limited.

Similarly, resignation of a director nominated by a promoter does not affect

the status of the promoter.

14. It was submitted that the Respondent is still the single largest

shareholder of the Appellant company holding 38.45% of the shares. The

Trivedi Group holds 42.79% shares, which are held in three names, namely,

Dr. Anant S. Trivedi, Rupa A. Trivedi and Aditya A. Trivedi. The balance

18.76% shares are widely held by more than 900 public shareholders.

15. It was submitted that the rights issue was in violation of Rule 9(A)(2) of

the Companies (Prospectus and Allotment of Securities) Rules, 2014 as the

shares of the promoters, directors, key managerial personnel were required to

be dematerialized before offering the rights issue. Also, the requirement giving

minimum three days of notice prior to opening of the right issue provided in

Section 62(2) of the Companies Act was not adhered to. The notice was issued

on 03.03.2023 and the rights issue opened for subscription on 04.03.2023.

Subsequently, an addendum was issued on 08.03.2023 and rights issue

opening date was revised to 09.03.2023. Even then, the requirement of three

days' notice was forgone. On the objection of the Appellant that relief granted

by the Ld. NCLT exceeded the relief claimed, it was submitted that these

issues were pleaded and detailed arguments were held before Ld. NCLT.

16. The Ld. Sr. Counsel relied upon the decision of the Hon'ble Supreme

Court in the case of Bhagwati Prasad v. Shri Chandramaul (AIR 1996 SC 735),

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 17

wherein in para 10 it has been held that where the parties having extensively

argued on an issue they may not subsequently turn around and plead that

the said plea was not specifically raised in pleadings. It was submitted that

Courts of law and the authorities entrusted with the duties of adjudication

can always mould the relief and grant such relief as the Adjudicating

Authority may deem fit. This legal position is well settled in various judicial

pronouncements including (a) U.P. State Brassware Corpn. Ltd. & Another v.

Uday Narain Pandey, (2006) 1 SCC 479, para 38 and (b) Smt. Kasturi Devi &

Ors. v. Shripal Singh & Ors., 1953 SCC OnLine Pat 62, Para 2. Further it was

submitted that it was duty of the company to dematerialise shares of the

shareholder and the Respondent cannot be denied the benefit of rights issue

merely on the grounds that their shares were not dematerialised.

17. The Ld. Senior Counsel for the Respondent further submitted that

Appellant is an unlisted public company. He submitted that the re-

classification of a 'promoter shareholder' to a 'public shareholder' in a public

listed company is governed by Regulation 31 (A) of the Securities and

Exchange Board of India (listing of obligation and disclosure requirements)

Regulation 2015 which prescribes various conditions to be met for such re-

classification, including that there should be a request from the promoter

shareholder to the listed entity seeking re-classification. However, the Learned

Senior Counsel fairly admitted that the said Regulation 31 A is not applicable

to unlisted public company, like the Appellant. On specific query by the

bench, Learned Senior Counsel fairly admitted that there is no prohibition or

restriction under the Companies Act, 2013, or the Rules/Regulations made

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 18

thereunder, regarding re-classification of 'promoter shareholder' as 'public

shareholder' in an unlisted public company.

18. We have heard the Ld. Sr. Counsel for the Appellants and Ld. Sr.

Counsel for the Respondent and have perused the records. We note that the

impugned order is passed by Ld. NCLT on an application seeking interim

relief. We note that in the said application, the applicant had only prayed for

staying the rights issue. We note that when the interim impugned order was

issued by Ld. NCLT, the rights issue had already closed and allotments were

made. We also note that other shareholders, who were in hundreds, were not

issued any notice prior to cancellation of rights issue by Ld. NCLT. Further,

we note that there is no challenge to valuation of shares, that is, the price at

which rights shares were issued.

19. The Respondents have also raised the issue that provisions of Section

62(2) of Companies Act, 2013 were not followed which require minimum three

days notice to shareholders before the opening of the issue. We note that

realising its mistake, the Appellant Company had issued an addendum and

had delayed the opening date of rights issue from 04th March, 2023 to 09th

March, 2023 and had delayed the closing date from 19th March,2023 to 24th

March,2023. We hold that the requirement of Section 62(2) was thus met, as

the Appellant company had corrected the mistake.

20. We are of the view that the following questions need to be answered in

this appeal:

i. Whether Telsonic Holding AG was a promoter on the date when the

rights issue was launched by the appellant;

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 19

ii. What were the responsibilities of the Appellant Company while

making the rights issue and whether these were complied with;

and

iii. Whether the Ld. NCLT has erred in cancelling the rights issue

and directing refund of share application money.

21. In common parlance, 'promoter' of a company is a person who had the

intention to form the company, who undertakes necessary steps to fulfil this

intention and brings about incorporation of the company. A promoter is a

person who sets in motion the machinery which leads to the formation of the

company. The promoter is the person who undertakes the pre-incorporation

contracts, and who is responsible for the acts prior to incorporation. Once a

company is formed and is running, it is the board of directors who control the

company. The term promoter, however, is statutorily defined in sub-Section

(69) of Section 2 of the Companies Act, 2013 as under:

"Section 2 (69) Companies Act, 2013 (69) "promoter" means a person--

(a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or

(b) who has control over the affairs of the company, directly or indirectly whether as a share holder, director or otherwise; or

(c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act.

Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity;"

22. In the present case, the Appellant Company was established in 1992 as

a joint venture of Telsonic Holding AG and Roop Ultrasonix Pvt. Ltd. Initially,

it was incorporated as a private company and the status was changed from

private to public w.e.f. 25.10.1994. A number of agreements were signed

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 20

between Telsonic Holding AG and Roop Ultrasonix Limited. However,

apparently Telsonic Holding AG started withdrawing from the control of the

Appellant Company. The co-operation agreement made on 29.10.1997, and

further on 20.09.2005, to establish strategic partnership between the two

groups was cancelled by Telsonic on 24.08.2019. The shareholders agreement

was terminated by Telsonic on 04.04.2022. Telsonic also incorporated a

company in India undertaking similar line of business by the name, Telsonic

Ultrasonics India Pvt. Ltd. on 24.08.2022. The authorised representative of

Telsonic on the board of directors of the Appellant Company resigned from

the Board on 05.10.2022. After 05.10.2022, there was no representative of

Telsonic on Board of Appellant Company. Apparently, thereafter, Telsonic was

not having any control over the Appellant Company as it was neither the

majority shareholder nor had a representative on the Board of Directors, and

therefore cannot be termed as 'promoter' by virtue of sub-section (b) or sub-

section (c) of Section 2(69) reproduced above.

23. Regarding applicability of sub-section(a) of Section 2(69), it can be seen

that the Respondent (Telsonic) was identified as a promoter in the annual

return as on 31.03.2022 and in the PAS-6 form for the period ending

30.09.2022. However, considering the termination of various agreements and

withdrawal of their nominee from board of directors, the board of directors in

their meeting dated 09.11.2022 resolved to reclassify Telsonic Holding AG

from "promoter to public shareholder/other than promoter". The concerned

board resolution dated 09.11.2022 is reproduced below for reference:

"RESOLVED THAT pursuant to the applicable provisions of The Companies Act, 2013, along with the relevant Rules made

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 21

thereunder (including any statutory modification(s) or re- enactment(s) thereof for the time being in force), and subject to the provisions of the Articles of Association of the Company, the consent of the Board of Directors be and is hereby accorded to re- classify Telsonic Holding AG from 'Promoter' to "Public Shareholder / Other than Promoter" pursuant to the termination of the Co- operation Agreement dated September 14, 2005 on August 20, 2019, the Shareholder's Agreement dated 14th September, 2005 on 04th April, 2022 and resignation letter dated October 5, 2022 of the authorized representative of Telsonic Holding AG on the Board of the Company and that all requisite steps be taken in this regard to reflect the same in the Annual Returns of the Company as also requisite filings to be made with the Ministry of Corporate Affairs."

24. In the PAS-6 form and annual return of the subsequent period i.e. as

on 31.03.2023, the Respondent (Telsonic) is not shown as a promoter of the

Company. It is apparent that when the rights issue was undertaken by the

Appellant Company in March, 2023, Respondent (Telsonic) was not a

'promoter' of the company.

25. The Respondents have also taken an objection that there is no enabling

provision in the Companies Act by which the 'promoter' can be reclassified as

'public shareholder'. On our specific query, the Ld. Sr. Counsel for the

Respondent fairly admitted that there is nothing in the Companies Act which

prohibits such a reclassification. On this issue, we are guided by the judgment

of the Hon'ble Supreme Court in Rajendra Prasad Gupta v. Prakash Chandra

Mishra and Others AIR 2011 SC 137 wherein in paragraphs no. 4 and 5, the

Hon'ble Supreme Court has held as under:

"4. We do not agree, Rules of procedure are handmaids of justice. Section 151 of the Code of Civil Procedure gives inherent powers to the court to do justice. That provision has to be interpreted to mean that every procedure is permitted to the court for doing justice unless expressly prohibited, and not that every procedure is prohibited unless expressly permitted. There is no express bar in filing an application for withdrawal of the withdrawal application.

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 22

5. In Narsingh Das v. Mangal Dubey, Mahmood, J. the celebrated judge of the Allahabad High Court, observed:

"Courts are not to act upon the principle that every procedure is to be taken as prohibited unless it is expressly provided for by the Code, but on the converse principle that every procedure is to be understood as permissible till it is shown to be prohibited by the law. As a matter of general principle prohibition cannot be presumed."

(Emphasis supplied)

26. It is apparent that the general principle is that every procedure is to be

understood as permissible till it is shown to be prohibited in law. We also note

that the regulator for securities market, i.e., SEBI in Security Exchange Board

of India (LODR) Regulations, 2018 had laid down the procedure for

reclassifying "promoter" in the case of listed companies. Thus, there is no

prohibition in reclassification of promoter. However, the said circular of SEBI

is for listed companies, and since the Appellant Company, is an unlisted

public company, the said procedure is not applicable to it.

From the above discussion it is clear that a 'promoter' can be

reclassified as 'non-promoter/public shareholder' and the Respondent

(Telsonic) was correctly re-classified as ''public shareholder/other than

promoter" on 09.11.2022 , much before the launch of rights issue of equity

shares.

27. On the second issue, we note that the relevant provisions are contained

in Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules,

2014, which is as under:

9A. Issue of securities in dematerialised form by unlisted public companies.

(1) Every unlisted public company shall -

(a) issue the securities only in dematerialised form; and

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 23

(b) facilitate dematerialization of all its existing securities.

in accordance with provisions of the Depositories Act, 1996 and regulations made there under.

(2) Every unlisted public company making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been demateriarised in accordance with provisions of the Depositories Act 1996 and regulations made there under. (3) Every holder of securities of an unlisted public company,

(a) who intends to transfer such securities on or after 2nd October, 2018, shall get such securities dematerialized before the transfer; or

(b) who subscribes to any securities of an unnlisted public company (whether by way of private placement or bonus shares or rights offer) on or after 2nd October, 2018 shall ensure that all his existing securities are held in dematerialized form before such subscription.

(4) Every unlisted public company shall facilitate dematerialisation of all its existing securities by making necessary application to a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 and shall secure International Security Identification Number (ISIN) for each type of security and shall in-form all its existing security holders about such facility.

(5) Every unlisted public company shall ensure that-

(a) it makes timely payment of fees (admission as well as annual) to the depository and registrar to an issue and share transfer agent in accordance with the agreement executed between the parties;

(b) it maintains security deposit at all times, of not less than two years, fees with the depository and registrar to an issue and share transfer agent in such form as may be agreed between the parties; and

(c) it complies with the regulations or directions or guidelines or circulars, if any, issued by the securities and Exchange Board or Depository from time to time with respect to dematerialisation of shares of unlisted public companies and matters incidental or related thereto.

(6) No unlisted public company which has defaulted in sub-rule (5) shall make offer of any securities or buyback its securities or issue any bonus or right shares till the payments to depositories or registrar to an issue and share transfer agent are made. (7) Except as provided in sub-rule(s), the provisions of the Depositories Act 1996, the securities and Exchange Board of India (Depositories and participants) Regulations, 2018 and the securities and Exchange Board of India (Registrars to an Issue and share Transfer Agents) Regulations, 1993 shall apply mutatis mutandis to dematerialisation of securities of unlisted public companies.

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 24

(8) Every unlisted public company governed by this rule shall submit Form PAS-6 to the Registrar with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within sixty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice.

(8A) The company shall immediately bring to the notice of the depositories any difference observed in its issued capital and the capital held in dematerialised form.

(9) The grievances, if any, of security holders of unlisted public companies under this rule shall be filed before the Investor Education and protection Fund Authority.

(10) The Investor Education and protection Fund Authority shall initiate any action against a depository or participant or registrar to an issue and share transfer agent after prior consultation with the securities and Exchange Board of India.

(11) This rule shall not apply to an unlisted public company which is:--

(a) a Nidhi;

(b) a Government company or

(c) a wholly owned subsidiary."

(Emphasis supplied)

28. The Appellant Company is an unlisted public company, a fact which is

accepted by both the sides. As per Rule 9A(2) every unlisted public company

before issuing fresh shares is required to ensure that entire holding of

securities of its promoters, directors, and key managerial personnel has been

dematerialised in accordance with provisions of the Depositaries Act, 1996.

As we have noted earlier, the Respondent (Telsonic) was no longer classified

as 'promoter' of the Appellant Company on the date when rights issue was

announced. Thus, a plain reading of the said Rule clearly shows that the

company was not required to ensure, on its own, that shares of the

Respondent (Telsonic) are dematerialised.

29. As per Rule 9A(3)(b), it is responsibility of the holder of securities of an

unlisted company to ensure that all its/his existing securities are in

dematerialised form before any fresh subscription. Here, the role of the

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 25

Appellant Company is only to facilitate dematerialisation of all existing

securities as per Rule 9A(1)(a). Thus, for shareholders other than promoters,

directors and key managerial personnel, the responsibility of the Appellant

Company, as prescribed in Rule 9A(1)(b) is limited to "facilitation" of

dematerialization. The steps required in ''facilitation'' of the process are listed

in sub rules (4) to (8A) of Rule 9A. It is not the case of the Respondent

(Telsonic) that it had applied for dematerialisation which was blocked by the

Appellant Company. Apparently, Telsonic had never applied for

dematerialization of its shares.

30. We also note that as per Rule 9A(1)(a) every unlisted public company is

required to issue the securities "only" in dematerialised form. Since the shares

of Telsonic were not in dematerialized form, the act of Appellant Company in

rejecting the application of the Respondent is fully in consonance with Rule

9A(1)(a) of the Rules cited supra.

31. On the third issue, in the conspectus of facts and circumstances of this

case, we hold on the basis of above noted facts and law that the impugned

order of Ld. NCLT cannot be sustained and the Ld. NCLT has erred in

cancelling the rights issue and directing refund of share application money.

The impugned order is thus set aside. We note that the main company petition

for 'Oppression and Mismanagement' bearing no. CP No. 57/MB/2023 is still

pending before the Ld. NCLT. We request the Ld. NCLT to dispose CP No.

57/MB/2023 as expeditiously as possible, though without being influenced

by any observation made in this judgment.

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025 26

COMPANY APPEAL (AT) NO.7 OF 2025

32. This appeal is filed against the order dated 18.12.2024 wherein Ld.

NCLT had issued a show cause notice as to why proceedings under the

Contempt of Court Act be not initiated against the Respondents for having

disobeyed the directions of the Ld. NCLT given in their order dated

28.07.2023. This show cause notice has been issued in the contempt

application filed by the Respondent (Telsonic). Since we have set aside the

order dated 28.07.2023, this order dated 18.12.2024 regarding issuance of a

show cause notice for contempt now has no basis. Accordingly, the said order

dated 18.12.2024 is also set aside.

33. In summary, both the appeals viz. Company Appeal (AT) No. 187 of

2023 and Company Appeal (AT) No. 7 of 2025 are allowed. All pending

application(s), if any, are also closed. No order as to costs.

[Justice Yogesh Khanna] Member (Judicial)

[Mr. Ajai Das Mehrotra] Member (Technical)

Place: New Delhi Dated: 20.11.2025 Ram N.

Company Appeal (AT) Nos. 187 of 2023 and 7 of 2025