Sri. D Savan Kumar & Ors vs M/S. The Aryan Industries Pvt. Ltd., Ors

(arising out of common order (s) dated 31st March, 2017 passed by the National Company Law Tribunal, Hyderabad Bench, Hyderabad in Company Petition No. 66/2016 and T.P. No. 14/HDB/2016)

IN THE MATTER OF:

Shri Dundoo Shirish & Ors. ... Appellants

V. Shri T. Nand Kishore Singh & Ors. ... Respondents

With Company Appeal (AT) No. 166 of 2017

Sri. D Savan Kumar & Ors. ... Appellants V.

M/s. The Aryan Industries Pvt. Ltd., Ors.,... Respondents

and Company Appeal (AT) No. 191 of 2017

Shri T. Nand Kishore Singh ... Appellant

V.

M/s. The Aryan Industries Pvt. Ltd. & Ors. ...Respondents

Present: For Appellant in CA(AT) 149/20 17: - Shri Yogesh Ravi, Advocate. S

For Appellant in CA(AT) No. 166/2017: - Shri Pradeep K Mittal and Shri Mayank Sharma, Advocates

1 For Appellant in CA(AT) No. 191/2017: - Shri Ananya Ghosh, Advocate.

For Respondent No. 6, 9 and 16 in CA(AT)149/2017: - Shri Arjun Singh and Shri Gaichang, Advocates For Respondent No. 17 to 22 in CA (AT) 149/2017: - Shri Abishek Jebraj, Advocate. For Respondent No. 25 to 37 in CA(AT)149/2017 and for Respondent No. 18 to 30 in CA(AT) No. 191/2017: - Shri Pradeep Kumar Mittal and Mr Mayank Sharma, Advocates.

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

These cross appeal (s) have been preferred by Appellant - Shri

T. Nand Kishore Singh & Ors. [Petitioners before the National

Company Law Tribunal (hereinafter referred to as Tribunal)] and

Appellant - Shri Dundoo Shirish & Ors. and Appellant - D. Savan

Kumar & Ors. (hereinafter referred to as Respondents) against order

dated 31st March 2017 passed by the Tribunal, Hyderabad Bench in

Company Petition No. 66/2016 and T.P. No. 14/HDB/20 16.

2. The Petitioners and others preferred the Company Petition

under Section 235, 237, 397 and 398 read with Schedule XI of the

Companies Act, 1956 alleging acts of 'oppression and

mismanagement' against Respondent, inter-alia, seeking for

following directions: -

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(i) To appoint Inspectors to investigate into the acts done

or continued to be done by persons claimed or claiming to

be 'Directors' of the 1st Respondent Company, with regard to

(a) filing of Form No. 32; (b) filing of Form No. 18; (c) Transfer

of 2340 shares in favour of (Late) Shri Dundoo Srinivas; (d)

Consequential Transmission of 2340 shares in favour of Shri

Dundoo Shirish, the 4th Respondent and (e) Removal of Soap

Unit etc.

(ii) Restoration of Soap Unit and electrical installations

and re-fixing of machineries by 4111, to 8th Respondents.

enabling 1st Respondent to commence production;

(iii) To order forfeiture of 2340 shares of 1s1 Respondent

company as transfer and subsequent transmission was

ultra-vires the Articles of Association; and

(iv) To 'lift or pierce' the 'corporate veil' of the 1St

Respondent company and declare that the partnership of

M/s. Sri Venkateshwara Oil Mills, is the only legal entity,

applying the principles laid down in "Mr A. Saloman v. MIs.

A Saloman & Co. Ltd" (1897) All England Law Reporter.

3. The Tribunal while held that the Company Petition itself is not

maintainable and barred by laches and limitation but exercised power conferred by Section 402 of the Companies Act, 1956 and

passed the following order: -

"29. In the light of the above discussion of case, we are of the considered opinion that though Company petition itself is not maintainable and also barred by latches and limitation, we pass the following directions, in exercise of powers conferred on CLB/Tribunalu/s 402 of Companies Act, 1956, nw Section 242 of Companies Act, 2013 and in the light of law as mentioned above, with a view to bring an end the matters complained of. f-

1. We do hereby declare and accept the shareholding of

1. Aryan Indust ries Private Limited consisting of the following Members:

Si. Name No. of Amount No. shares (Rs)

1. Dundoo Shinish 2270 2,27,000

2. Smt. Dundoo 50 5,000 Somalakshmi Tayaramma

3. Dundoo Rameswara 510 51,000 Rao

4. Dundoo Vikas & 510 51,000 Dundoo Akhil

5. Dundoo Madan 300 30,000 Mohan Rao

6. Thakur Singh 400 40,000 7. Narayan Singh 225 22.500 8. Ram Singh & Usha 150 15,000

9. Smt. D Kesar Bai 150 15,000 and Mrs. Usha 10. Manohar Singh 125 12,500

11. Pavan Kumar Singh 200 20,000

4 12. Smt. Amy Edi 55 5,500 Chenoy

13. Yadgar F. S. Chenoy 55 5,500 & Smt Gulbanoo Y Chenoy

Total 5000 5,00,000

2. We do hereby declare that the property registered vide sale deed dated 12.1-.1955 bearing Registration No. 70 of 1955 admeasuring 20,850 sq. yards measuring Municipal No. 108 (old) and 6-1-15, 6-1,23 to 6-1-26(New) Bhoiguda, Secunderabad, which is in possession of company since 1955 is the absolute property of the 1st Respondent company.

3. We do hereby supersede the existing Board of Directors and appoint the following persons as Chairman and Directors of Aryan Industries namely Shri P.A. Choudary, IRS, Chief Commissioner of Income Tax (Retd) Srinagar Colony, Hyderabad Mob: 9440824455 as Chairman and following persons are Directors namely, (1) Sri K Suryanarayana, Advocate, 171, Ritesh Premier Towers, Ground floor, Vasavinagar, Opp: Karkana Police Station, Secunderabad, (2) Sri P. Dinakara Rao, CGM (Retd) State Bank of Hyderabad, Begumpet, Hyderabad Mob. 9849376477; (3) Shri M Subrahman yam, Executive Director (Retd) Hyderabad Stock Exchange and PCS Mob. No. 9849652290 and (4) Sri A Viswanadha Rao, CA, Narayanaguda, Hyderabad, Telephone No. 66887734.

4. The above Board of Directors are directed to take possession of the said property and take appropriate steps for 'public action' including 'e-auction' of the said property and distribute its proceeds in following manner to claimants basing on the said shareholding pattern shown atpara 29(1) above:

(a) Firstly, to all undisputed claimants as per the above shareholding pattern;

(b) Secondly to successors in proportion to their shareholding, on being produced supporting documents and affidavits/ orders of successions etc. and after being satisfied about their bonafide claim;

(c) And keep the remaining amount in Bank Account to apportion its later on being shown sufficient

5 proof about their succession to above shareholders of said list;

(d) The Board of Directors are entitled for reimbursement of expenses, and their remuneration/fees incurred to carry out public action from the previous Board of Directors, who are directed to bear expenses.

5. All expenses and remuneration/fee of Board of Directors are to be borne by the existing Board of Directors and they are entitled for reimbursement from final proceeds ofpublic auction of the property from new Board of Directors.

6. The Board of Directors are entitled for fee as follows:-

(i) Chairman of Board is entitled for Rs. 50,000/-for each Board Meeting -

(ii) Directors are entitled for Rs.40,000/- for each Board Meeting.

7. The Board of Directors are entitled to take any professional service required to carry out public action;

8. All the parties to the issue are directed to extend full cooperation to the newly constituted Board of Directors in discharging their duties assigned by the Tribunal.

9. The Board of Directors are entitled to seek any clarification (s) from the Tribunal by filing appropriate company applications;

10. We hereby dismiss all pending Company Applications including recently filed CA No. 76 of 2016 filed by B Uma Maheshwara Rao and 1 Oothers and also vacate all interim orders if any passed and still in force.

11. The Registry is directed to communicate the copy of this order to the Chairman and Directors mentioned above.

12. With the above directions, the C.P. No. 66/2006 (TP No. 14/HDB/2016) is disposed of.

13. The new Board of Directors are directed to carry out the above directions as expeditiously as possible.

No order as to costs."

4. Both the Petitioners and Respondents are aggrieved against

the aforesaid observation and direction at para 29 of the impugned

6 Order as according to them the direction issued by Tribunal is illegal

and without jurisdiction.

5. The Petitioners pleaded that they formed a partnership firm

on 27.8.1943 bearing name and style of "M/s. Sri Venkateshwara

Oil Mills" along with predecessors of 4th to 6th and 9th to 12th

Respondents. The partnership firm with Its own funds had

purchased the lands and buildings. The said partnership firm

floated 1St Respondent company -' M/s Aryan Industries Private

Limited' (1St Respondent before the Tribunal) under the Companies

Act, 1913. It was alleged that the company never went into

production and the fact of creating corporate identity was only to,

mobilise loans from the Andhra Pradesh State Financial Corporation

Limited and thereby, the company became defunct since 1963.

6. It was further alleged that in order to clear SFC loans, the

company leased out its plant and machineries along with land and

buildings to 'M/s. Thungabhadra Industries Limited' through

Official Liquidator, Hyderabad.

7. While the number of shares in favour of one or other petitioner

has been shown, it was alleged that the 4th to 6th Respondents of the

Company Petition were illegally managing the affairs of the company

and had taken away all its records in their house without following

7 any procedure laid down under the law and also changed the

registered office of the company.

8. It was also alleged that the 1st to 4th petitioners had made an

application to the company for transmission of the shares by letter

dated 9th September 1982 through Registered Post with

Acknowledgement Due but no reply was received, though requisite

documents along with Death Certificates of the original shareholders

were forwarded.

9. It was further alleged that 4th and 5th Respondents have forged

the signature of the deceased father Shri Dundoo Srinivas and Form

No. 32 was antedated as 7.6.1998 and filed with the Registrar of

Companies, Hyderabad.

10. According to the Petitioners during the tenure of late Shri

Dundoo Srinivas as Director of the company, there were illegal

transfer of 2300 shares without exercising the rights of pre-emption

which was claimed by 4th and 5th Respondents, though they were

not entitled for transmission of shares.

11. It was further alleged that the 4th Respondent illegally

inducted the 6th and 8th Respondents as Directors, though they were

strangers to the company.

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12. A number of illegal allegation were made against the

Respondents, all of which related to action taken between the year

1981 and 1985 or earlier period.

13. A counter reply was filed by the Respondents, inter alia,

pleading that the 4th Respondent kept all the records of the company

in his personal capacity apart from the records of 'Sri

Venkateshwara Oil Mills'. It was also pleaded that a suit bearing

O.S. No. 64 of 2002 was filed before the 3rd Senior Civil Judge, City

Civil Court wherein ex-parte order were passed prohibiting 10th and

13th Respondents to function as directors, they being strangers to

the company. However, after hearing the parties, the Court finally

referred the dispute to the Arbitrator. It was further pleaded that

the petitioners are agitating in respect of the affairs of 'The Aryan

Industries Private Limited', which does exist.

14. It was brought to the notice of the Tribunal that O.S. No. 58 of

1992 was filed before the 3rd Additional Judge, City Civil Court,

Secunderabad in which both the parties were involved which was

dismissed on 23.1.2006. Another O.S. No. 529/2005 between the

parties was moved before the City Civil Court for reference to the

Arbitrator, which was allowed.

15. A third O.S. No. 1150/2005 was pending before the Civil Court

seeking interim measure to safeguard the properties of the Company

9 under Section 9 of the Arbitration and Conciliation Act, 1996 in

which order was passed on 3rd March 2009 appointing Hon'ble Mr.

Justice M.H.S. Ansari, a former judge of Andhra Pradesh High Court

as the Arbitrator. Other facts were also highlighted by Respondents

with request to dismiss the petition on the ground of delay, laches.

and limitation.

16. The main plea taken by the petitioners is that once Company

Petition held to be not maintainable and barred by laches and

limitation, as held by Tribunal, the Tribunal has no jurisdiction to

pass order under Section 402 of the Companies Act, 1956

superseding existing Board of Directors with directions to sell entire

company's property rendering existence of the company

meaningless.

17. From the impugned Order it is clear that the Tribunal has not

decided the case on merit in regard to allegation of 'oppression and

mismanagement', and held that the petition is not maintainable,

being barred by limitation as also delay and laches. Once such

finding is given, the Tribunal has no jurisdiction to issue any

direction nor can exceed its jurisdiction by giving extraordinary

direction to supersede the existing Board of Directors or to sell the

entire company's property rendering the company's existence

meaningless. For the reasons aforesaid, the direction given by

10 Tribunal in its impugned order dated 31st March 2017 cannot be

upheld.

18. The Petitioners while pleaded that during the pendency of the

Company Petition some of the original Petitioners have expired and

their wives or daughters have been brought on record, the impugned

order has been challenged on the ground that finding of the Tribunal

that the petition is barred by limitation and delay and laches is not

based on record.

19. From a bare perusal of the Company Petition, it would be

evident that all alleged acts of 'oppression and mismanagement'

have been alleged by Petitioners in respect of the acts between the

year 1963 to 1998. The Company became defunct since 1963 is the

allegation. The other allegation is that the Will was executed in

respect of the share certificates on 4th April 1979 and another Will

is stated to have been executed on 28.3.84. The alleged change of

shares stated to have been made on 3.1.94 and forged signature of

late Shri Dundoo Srinivas alleged to be committed on 7.6.98' in Form

no. 32. As all the allegations relate to the year 1963 to 1998, we

hold that the Company Petition preferred by petitioners in 2006 is

fit to be rejected on the ground of delay and laches which has not

been explained by the Petitioners.

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20. However, we agree with the submission as made on behalf of

the Respondents that the Tribunal while held that the petition was

not maintainable, exceeded its jurisdiction by giving certain

direction at paragraph 29, as quoted above. -

21. For the reasons aforesaid, the impugned order dated 31St

March 2017 insofar it relate to paragraph 29 wherein certain

observation has been made and direction has been issued by

Tribunal are set aside. The Company Petition is dismissed having

filed after long delay and laches. Both the appeals stand disposed

of with aforesaid observations. However, in the facts and

circumstances of the case there shall be no order as to cost.

(Mr. Balvinder Singh) (Justice S.J. Mukhopadhaya) Member (Technical) Chairperson

NEW DELHI

23rd August, 2017

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