Shri Praveen Kumar Singh vs Medinimata Agro Products Pvt Ltd

(Arising out of order dated 041April, 2017 passed by the National Company Law Tribunal, Kolkata Bench, Kolkata, in CP No. 16/2009)

IN THE MATTER OF:

1. Shri Praveen Kumar Singh, Son of Shri Rajendra Prasad Singh, R/o33/58B-2, C- 1, Bajrang Nagar Colony, Chhitupur, Sigra, Varanasi.

2. Shri Lalit Kumar Singh, Son of Shri Rajendra Prasad Singh, Rio 33/58 B-2 5 C-i, Bajrang Nagar Colony, Chhitupur, Sigra, Varanasi. Appellants

Appellant Vs

1. Medinimata Agro Products Pvt Ltd Regd Office, Rangamati, P.O. Vidyasagar University Distt Paschim Medinipur;

2. Shri Sacidanand Ojha s/o Shri Sitaram Ojha Rio ofOjhaNiwas, Rangmantt Mednapur, West Bengal

3. Ms Gomti Ojha w/o Shri Sachidanand Ojha Rio ofOjhaNiwas, Rangmantt Mednapur, West Bengal 4. Shri PremPrakash Shukia Son of Kedar Nath ShUkla, R/o Pratappur, Parsodha, Narayanpur, Distt. Mirzapur.

5. The Registrar of Companies, NCT of Delhi & Haryana, IFCI Tower, 5th floor, Nehru Place, New Delhi- 1100 19.

6. The Regional Director, Ministry of Corporate Affairs, Northern Region, B-2 Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex, New Delhi- i 10003. Respondents

Present: For Appellants:- Mr. Rakesh Kumar, Mr. P.K. Sachdeva and Mr. Vipin Kumar Yadav.

For Respondent: - Mr. R.D. Vats and Ms Aastha Gupta Advocates for Respondent No. 1, 2 and 3.

Mr. Ripu Daman Bhardwaj for ROC.

'JUDGEMENT

BALVINDER SINGE, MEMBER (TECHNICAL)

1. This appeal has been preferred by the appellants against

order dated 04.04.2017 passed by National Company Law

Tribunal, Kolkata Bench, Kolkata (hereinafter referred to as

the "Tribunal") in CP No.16/2009 filed under Section 397,

398, 4021, 408 read with I 1 of the Companies Act, 1956

alleginj oppression, mismanagement against the 3.

respondents and illegal removal of appellants from their

directorship from the Pt Respondent Company.

2. The Tribunal vide impugned order dated 4th April, 2017 has

concluded as follows:

"Therefore, in the light of the contentions, it is concluded that there is no case of oppression against the petitioners and the company petition deserves to be dismissed. Therefore, the issue No.1 of whether the reduction in the shareholding of the petitioners whereby they signed the share transfer forms and the subsequent resignation of the petitioners from the Board of Directors, prove the existence of the understanding, is decided in affirmative in favour of the Respondents. Furthermore, the issue whether the alleged acts of the Respondents in the present petition Constitute oppression against the petitioners, is decided in negative. Therefore, it is concluded that the subsequent acts of the petitioners thereby proved the existence of the understanding between the respondents and the petitioners and furthermore after careful consideration of the facts, contentions and arguments in the present case, the Tribunal is of the opinion that there is no proofofany acts of oppression committed against the petitioners."

3. The appellant aggrieved by the said order dated 04.04.20 17

has filed the present appeal and sought for the following

relief inter-alia:

a) Allow the present appeal and set aside the impugned

judgement dated 04.04.2017 passed in C.P. No.16/2009

titled as "Shri Praveen Kumar Singh and Anr Vs Mednimata 4.

Agra Products Pvt Ltd and Ors" filed under Section 397,

398, 402 and 408 read with Section 111 of the Companies

Act, 1956 by the Learned National Company Law Tribunal,

Kolkata Bench at Kolkata.

b) Pass such other or further order or orders, in favour of the

appellants and against the respondents, which this Hon'ble

Appellant Tribunal may deem fit and proper in the facts and

circumstances of the case and in the interest- of justice.

4. The brief facts of the case are that the 1st Respondent MIs

Medithmata Agro Products Pvt Ltd was incorporated on 10th

May, 2006 and its registered office is situated at Paschim

Medinipur.' The authorized share capital of the Pt

Respondent is Rs. 1 crore divided into 10 lakh equity shares.

Appellant No.1 is an engineer by professional and a social

activist who had earlier worked for Gujarat Heavy

Chemicals Ltd and started his own business which was a

construction firmed called MIs Ideal Constructions in 1999

wherein his brother appellant No.2 was helping him. The

appellant No.1 also had another company Purvanchal Agro

Products Pvt Ltd which was a private company 5.

incorporation in 2005. 2m1 Respondent is a businessman by

profession and is a majority shareholder and director in

various privately incorporated companies. 4." Respondent is

brother in law of 2rn1 Respondent and was a close friend to

appellant No.1 for a long time.

5. It is the case of the appellants that the matter in dispute that

the appellant was the successful bidder of the auction unit of

the factory unit of one Singh Constructions Pvt Ltd

conducted by the UPFC on 23.11.2005. The highest bid

offered by the appellant No.1 was of Rs.49 lacs. The said

unit was engaged in the business of Rise Bran oil. The

appellant No.1 did not have the experience of running the

said Unit. The Respondent No.4 who was the common

friend of appellant No.1 and brother in law of the

Respondent No.2 had introduced Respondent No.2 to

appellant No.1. The respondent No.2 had the experience of-

running the' said unit. The understanding was that the said

unit would be jointly run by the appellant and the

Respondent No.2. The understanding was further arrived

that since it was the effort Of the appellants' auction unit has

come to be acquired, therefore, it's price would be 6.

ascertained as Rs.75 lacs. The appellants were to get the

benefit of Rs.26 lacs as a premium of the said auction unit.

6. It is the case of the appellants that the condition of the said

bid was that the auction unit can be vested only in favour of

a Corporate entity, in which the highest bidder should have

the majority of shareholding. The Respondent No.2

introduced one of his company for having the auction unit in

it. The said company was the respondent No. l's company

The Respondent No.1 had also deposited the balance amount

of Rs.36 lacs to UPFC, which had been infused by the

Respondent No.2 and 3. That as per the understanding, the

auction unit was taken into the Respondent No.1 company.

The appellants were allotted 52% shareholding in it.

Further, the respondents were having 48% of shareholding

in it. The appellants were given the benefit of a premium of

Rs.26 lacs for acquiring the auction unit by having 52%

shareholding in the company.

7. It is further contended by the appellants that in the year 2008,

the dispute started between the appellant and the respondent.

2id respondent was trying to obtain the financial facilities by

creating charge over the auction unit, for which appellant showed their reluctance. The respondents started

misbehaving with the appellants. The appellants asked the

respondent for their share certificate in. 15t respondent

company. On non-receipt of the share certificates from the

respondent, the appellants lodged the FIR against the

respondents and the respondent No.2 also lodged FIR

against the appellants. Both appellants and respondents filed

the quashing petition before the Allahabad High Court. 2nd

respondent also filed civil suit in West Bengal seeking

declaration that the appellants have also transferred their

shareholding in favour of 2nd respondent. The appellant

came to know that the respondents have fraudulently

transferred their shareholdings in 15t respondent company in

their favour and not only that also, eliminated them from the

directorship of the 15t respondent.

8. The appellant further contended that though the respondents

had got his signatures on certain blank documents but the

appellants have never transferred his shareholding in favour

of the 21respondent and the appellant had never resigned

from the directorship of the 11' respondent company. The

appellant further contended that the respondents have 8.

committed forgery and illegally acquired the shareholdings

of the appellants by showing their resignation from the Pt

respondent company. The appellants have further contended

that they have not received any consideration for the alleged

transfer of their 52% shareholdings; have never resigned

from the directorship; compliance certificate filed by 1'

respondent company for the year 2007 with the ROC did not

indicate any transfer of appellants' share in favour of 2'

respondent. The respondents' stand regarding the transfer of

the shareholding of the appellants in their favour was

entirely different in the civil suit filed before the Medenipur,

Civil court. The appellant after acquiring the auction unit

with much efforts would never transfer their entire

shareholdings only on the meagre amount of Rs. 13 Jacs

which they had paid as earnest money. The director's report

file by the respondent itself show that the said auction unit

was acquired by them on a very favourable price. The share

transfer had taken place on 09.09.2006 and on that day the

appellants were on the Board of 1St respondent but no Board

Meeting was convened for the transfer of the said

shareholding. The alleged transfer was in complete 9.

violation of the provisions of Section 108 of the Companies

Act. The transfer of the appellants' shareholdings and their

removal from the directorship of Pt respondent was

indicated in the Annual Report of 15t Respondent for the year

2006 which was filed in July 2008 with ROC. The further

issue of 7 lacs shares which has been shown to be taken place

on 12.12.2006, the Form -2 for the said fresh allotment was

filed with ROC in the year 2008. The appellant did not

receive the consideration for the alleged transfer of

shareholding. The respondent did not show even a single

document such as Board Minutes, attendance sheet etc to

indicate the convening of Board Meeting on 9.9.2006,

12.9.2006 and 12.12.2006. The appellant further submitted

that the Article 7 of the Articles of Association of 1'

Respondent company mandates that the shareholding of any

existing member can be acquired on its fair value and the fair

value of their shareholding was much higher on 9.9.2006

whereas the respondents have fraudulently acquired their

shareholding on an alleged lesser value.

10.

9. However, it is the case of the respondents that the appellants

are no more shareholders of the 1St respondent and therefore

the said company appeal is not maintainable.

1 0.The respondent stated that a rice mill was purchased and the

Respondent No.2 and 3 invested huge personal capital in the 15t respondent and also obtained financial accommodation

from the West Bengal Financial Corporation. The appellant

approached in 2006 to 2nd and 31(1 Respondent and requested

to invest at least Rs.49 lakhs to purchase an extraction unit

from the Uttar Pradesh Financial Corporation to save the

investment of the appellants of Rs. 13 lakhs from getting

forfeited by UPFC. The appellant then induced the

respondent to bail them out from forfeiture of their amount

of Rs. 13 lakhs by UPFC and they were not having enough

money to complete the transaction to make payment of

balance amount of Rs.36 lakhs. The respondent agreed to

bail out the appellants from the threat of forfeiture of a sum

of Rs. 13 lakhs with the following understanding:

i) That the plant, machinery and land of the said

MIs Singh Extraction Pvt Ltd would be 11.

purchased through the newly formed company,

namely 1st respondent.

ii) Equity shares equivalent to RsJ3 lakhs would

be issued in the name of the appellant.

iii) The appellant herein would get their share

capital increased but to the extend as desired by

UPFC.

iv) The appellant would sign a share transfer form

in favour of the 2nd respondent so that after the

execution of the sale deed by UPFC, the

appellant could be removed from the company

after paying off their investment of Rs. 13 lakhs.

Up to the execution of sale deed, the appellants

would be shown as the director of the company.

The appellant agreed to sign duly resignation

letter which would. be effect upon making

payment of sum of Rs. 13 lakhs.

On the above clear understanding the respondent infused the

amount in the company and then UPFC agreed to execute

sale deed. Thereafter the 2'' and 3"' respondent further 12. 111 infused Rs.9 lakhs in the company, as a sum ofRs.410111

had been paid to UPFC on account of interest and also had

charges expenditure incurred in registration of the sale deed.

Thereafter the 2nd and 3' respondent and the appellant

became the shareholder on 21.9.2006 in the manner

2'Respondent = Rs. 10 lakh

3rd respondent = Rs.2 lakh

Appellant - Rs.1,30,000I-

11 .That on 12 September, 2006 the appellants were shown as

having resigned from the Board of Directors ofthe company.

Thereafter the 21x respondent duly lodged the executed share

transfer form ofthe appellants for registration of those shares

in their name in the Company. After receiving the amount,

the appellant refused to hand over physical possession ofthe

said plant, machinery and land of the said MIs Singh

Extraction Pvt Ltd taking advantage of the local ground

situation prevailing at Mirzapore. The appellant prevented

the respondent, who belong to West Bengal, to take

possession of the land, plant and machinery. Thereafter the 13.

appellant started blackmailing the respondent and demanded

huge money. The appellant continued with their obstructive

attitude and proceeded to file false criminal complaints one

after the other against the respondent on the alleged ground

that they had invested Rs.40 lakhs in the company which was

not the case. On seeing the negative attitude-of the appellant,

the respondent filed a civil suit in West Bengal that the

purchase of the entire shares of the petitioner in the company

by the 2' Respondent is legal, valid and consideration and

also illegal notice dated 29.7.2008 was issued by the

appellant. The appellant never participated in the

management of the company since 12.9.2006. They never

made any complaint regarding non participation in the

management.

1 2.Vide order, dated 12.07.2017 this Appellate Tribunal has

held as under:

"Respondents are allowed a week's time to file reply and state whether the appellants/petitioners had 52% shareholding and their shares were transferred on payment of consideration amount or not. If the appellants/petitioners had 52% equity shareholding and their shares were transferred in 2006 and reflected in Annual Return of 2007, then the respondents will give details of the instruments(s) through which the 14. consideration amount was paid to the appellants/petitioner."

13.On 17.8.2017 both the parties made a statement before this

Appellate Tribunal that the settlement process is going on

between the parties and on their request the case was

adjourned the time was allowed to the parties to settle the

matter failing which the Appellate Tribunal may decide the

case on merit.

14.Further vide order dated 08.09.2017 this Appellate Tribunal

had diiected the parties that "As a last chance parties are

allowed a week's time to settle the matter,failing which the

Appellate Tribunal will decide the case on merits."

At last on 5.10.2007 the arguments of the parties were heard

and the judgement was reserved.

15.In compliance with our order, the respondent in a written

reply had submitted the papers wherein respondent has paid

off the sum of Rs. 13 lakhs which was the investment made

by the petitioner by account payee cheques which were duly

encashed by the appellants without raising any objection in

the following manner:

Bank & Cheque No. Dt. Amount Praveen Singh Axis Bank 504 08.09.2006 Rs.10 lakh 15.

Lalit Singh Axis Bank 505 08.09.2006 Rs.3 lakh

16.In the light of the above submissions made by the respondent

that the payment has been made and the instrument for

transfef of shares having been signed by the appellant, it is

only a matter of time when the shares will be transferred

from the appellant to the respondent and Once the shares

have been transferred and have been shown as transferred,

the appellant shall not be a shareholder of the 1st respondent.

As soon as the appellant is no more/longer a shareholder of

the Pt respondent, or the appellant is not shareholder of the 15t respondent on the date of filing of the petition, no petition

is maiitainable under Section 397, 398 of the Companies

Act, 1956 read with Section 241 of the Companies Act,

2013.

17.1t is observed that the appeal of the appellant is not

maintainable in as much as the appellants have not come to

Hon'ble Court with clean hands. The appellants have no

right to file the appeal as the appellant was not holding any

shares at the time of filing of appeal. The claim of the 16

appellant is based on oral assertions, which is devoid of any

force and is. inadmissible in evidence. The tribunal held:

xxxx "The claims that the petitioners have made regarding the signatures, on the share transfer forms and the resignation letters being forged, merit scarce attention; as the claims have not been substantiated with any pieces ofproof because the burden ofproof relating to the proving or disproving the aforementioned signatures is on the party who claims forgery. Regarding the exclusion of oral evidence in presence of documentary evidence relating to the same, Section 91 of the Indian Evidence Act, 1872 contemplates evidence of terms of contracts, grants and other dispositions ofproperty reduced to form of documents which lays down that when the terms of a contract, or of a grant, or of any other disposition of property, have been reduced to the form of U document, and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence shall be given in proof of the terms of such contract, grant or other disposition of property, or of such matter, except the document itself, or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions hereinbefore contained.

Section 92 of the Indian Evidence Act, 1872 excludes evidence of any oral agreement or statement, when the terms of a contract, grant or disposition of property or any matter required by law to be in writing have been proved as per Section 91 of the Indian Evidence Act, 1872 for the purpose of contradicting, varying, adding to or subtracting from its terms. The principle lays down that when the terms of any such document have been proved by the primary or secondary evidence of the document, no evidence of any oral agreement or statement shall be admitted. Also Section 94 of the Indian Evidence Act, 1872, deals with the exclusion of evidence against 17 application of document ofexistingfacts. This section applies when the execution of the document has been admitted and no vitiatingfact has been proved against it. )ocx

18. It has further been noted that participation of the appellant

in the auction of UPFC which was held on 23.11.2005

wherein the appellant appeared to be the highest bidder by

depositing Rs. 13 lacs and further in order to comply with

the requirement of UPFC for execution of sale deed also

formed a company in the name of Purvanchal Kisan Agro

Pvt. Ltd. on 17.01.2006. The appellant then-approached the

respondents for purchasing the auction property and the

whole proceeds appear to be an arrangement between the

appellants and respondents. The tribunal held that:

xxxx "Out of the amount ofRs.38 lakhs, which the petitioners claim to have invested, the Rs. 12 lakhs that was allegedly lent by the Petitioners to the company has no receipt against it, and therefore, the veracity of this payment cannot be asserted The amount of Rs. 13 lakhs allegedly paid by the petitioners in consideration of the share capital allotted to them in the Company whereby they held Rs. 13 lakhs is also found to be false, because of the apparent contradiction in the statements in the petition and the rejoinder of the pet itioners, whereby the petitioner has contended in the petition that consequent to the terms of arrangement and understanding, Rs.25 lakhs was paid while Rs. 13 lakhs was retained for the 52% equity shareholding, and in the, rejoinder have contended that Rs. 13 lakhs, that the petitioners invested as a consideration in lieu of the share capital that they held in the company, has never been paid back by the 18 Respondents. However, the petitioners contend that the remaining Rs. 13 lakhs that was paid to UPFC as earnest money by the petitioners, has been paid off by the Respondents through account payee cheques which have also been produced for proof The subsequent acts of the petitioner of resigning from directorship on 12th November, 2006, and selling their shares that they held of the company through share transfer forms on 9' September, 2006, prove the existence of the understanding that the respondents have claimed to have entered with the Petitioners at the inception."

19. In view of the above observations, we are not inclined

to intrfere with the impugned order. The appeal is

dismissed accordingly. No order as to cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice A.I.S. Cheema) (Mr. Balvinder Singh) Member(Judicial) Member(Technical)

Dated: 14 -11-2017 New Delhi

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