The Mysore Stoneware Pipes And ... vs Mr.R.P Trivikram & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL AT CHENNAI (APPELLATE JURISDICTION) TA (AT) No. 82 / 2021 (Company Appeal (AT) No. 347 / 2019) (IA No. 3914 / 2019) In the matter of: 1. The Mysore Stoneware Pipes and Potteries Ltd. Registered office at No. 452, 11th Cross, 6th Main, Sadashivanagar, Benglauru - 560080 ... Appellant No.1

2. M.N. Ramu Jagirdar, S/o. late Nanjappa R. Jagirdar Aged about 80 years R/o. No. 205, Kamaraj Road, Benglauru - 560042 ... Appellant No.2

3. H.N. Shivananjaiah, S/o. Nanjappa Aged about 64 years R/o. No. 11, Devi Krupa, 11th 'A' Cross, II Stage, West of Chord Road, Bengaluru - 560086 ... Appellant No.3

V

1. Mr. R.P. Trivikram, S/o. late Prabhakar Rao Aged about 68 years R/a. No. 8, 6th Cross, Amarjyothi Nagar, Vijayanagar, Bengaluru - 560040. ... Respondent No. 1

2. Mrs. Sudha Trivikram, W/o. R.P. Trivikram Aged about 65 years R/o. No. 8, 6th Cross, Amarjyothi Nagar, Vijayanagar, Bengaluru - 560040 ... Respondent No.2

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 1 of 15 3. Sri. R.V. Raghavendra, S/o. Veprakallachar Aged about 65 years Rio. No. 91/2, `Parimala', Between 11th & 13th Cross, 4th Main, Malleswaram, Bengaluru - 560003 ... Respondent No. 3

4. Mr. W.P. Krishna, S/o. W. H. Puttaiah, Aged about 54 years R/o. No. 391/1, 8th Cross, 13th Main, RMV Extension, Bengaluru - 560080 ... Respondent No. 4

5. Smt. P. Urmila, D/o. late R.V. Prabhakar Rao Aged about 64 years R/o. Flat No. 202, `B' Block, Swamy Towers, 5/5, B.P. Wadia Road, Basavanagudi, Bengaluru - 560004 ... Respondent No. 5

6. Mr. R.T. Bhavana, W/o. Aditya P.K., Aged about 32 years R/o. No. 8, 6th Cross, Amarjyothi Nagar, Vijayanagar, Bengaluru - 560040 ... Respondent No. 6

7. Mr. R.T. Abhijit, S/o. R.P. Trivikram, Aged about 38 years R/o. No. 1418, West Lexington Street, Unit 2-F. Chicago, Illinois, USA 60607 Represented by his POA Holder Mr. R.P. Trivikram ... Respondent No. 7

8. Mr. H.K. Nanjundaswamy, S/o. H. Kapanipathi Rao, Aged about 92 years R/o. No. 297, 7th Block, Jayanagar, Kanakapura Road, Bengaluru - 560082 ... Respondent No. 8

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 2 of 15 9. Mr. Rajeev Ramuhalli, S/o. late Harshavardhan Aged about 56 years R/o. No. 451, 4th Main, Chamarajpet, Bengaluru - 560018 ... Respondent No.9

10.Mr. C. Vivekananda, S/o. late Gopala Rao, Aged about 64 years R/o. No. 1382/A, 6th Cross, Banashankari I Stage, Bengaluru - 560050 ... Respondent No. 10

11. Mr. R.K. Karthik, S/o. late Krishna Rao, Aged about 56 years R/o. No. 1, 'Krishna', 2nd Main Road, AECS Layout II Stage, Sanjay Nagar, Bengaluru - 560094 ... Respondent No.11

12.Mr. Mysore Manjunath Shetty Anandram, S/o. Mysore Manjunath Shetty Aged about 85 years R/o. No. 68/A, H. Siddaiah Road, Bengaluru - 560002 ... Respondent No.12

13. Sanjay Jayatsen, S/o. late Jayatsen, Aged: Major, R/o. No. 117/A, Nagaraja Layout, Bull Temple Road, Bengaluru - 560004 ... Respondent No.13

Present :

For Appellants : Mr. D. Abhinav Rao, Mr. Rajul Jajoo & Mr. Raghav, Advocates For Respondents : Mr. Aditya Chatterjee & Mr. Karan Gupta, Advocates for R1 to R8

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 3 of 15 JUDGMENT

(Hybrid Mode)

Per : Justice Sharad Kumar Sharma, Member (Judicial):

1. The instant Company Appeal puts a challenge to the Impugned Order

dated 08.08.2019, which was rendered by the learned NCLT, Bengaluru Bench

in Miscellaneous Application No. 227 / 2019, as it was preferred in CP No. 13 /

2016, by virtue of which, certain elaborations have been made to an earlier

order of 07.08.2018 in the same Company Petition i.e. CP No. 13 / 2016.

2. The short question, which would be involving consideration in the instant

Company Appeal are;

(a) Whether, the recourse to filing of a Miscellaneous Application for

orders, would fall to be within the terms of the compromise and the

compromise order dated 07.08.2018.

(b) Whether the liberty granted in the Settlement, if it is to be read with

the compromise order of 07.08.2018, could permit the Applicants to do

something indirectly which they are not otherwise able to do directly,

owing to the stipulations of the compromise as captured in the Order

dated 07.08.2018.

(c) As to whether the extension of Order by resorting to the proceedings

by filing the Miscellaneous Application, could at all be permitted to be

carried, beyond the terms of the compromise or settlement, which may

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 4 of 15 have a bearing of revival of power of the erstwhile Director, who

otherwise, stands removed from the post of Managing Director, ever

since 2015 as a consequence of the approval of the same, removal granted

by the Registrar of Companies.

3. The present Appeal has been preferred by the Appellant by invoking

Section 421 of the Companies Act, 2013, in a proceedings which was otherwise

drawn under Sections 397, 398, 402 & 403 of the Companies Act, to be read

with Regulation 14 of CLB Regulations of 1991.

4. It happens so that a proceedings by way of Company Petition No. 13 /

2016, stood instituted by as many as three Applicants, as against the Respondent

under the aforesaid provisions of the Act, 1956, but, during the intervening

period, the compromise was entered into between the parties and as a

consequence thereto a Settlement was arrived at in writing, between the parties

alleged to be under Order XXIII Rule 3 of the C.P.C., to be read with NCLT

Rules of 2016.

5. In the terms of compromise which was placed in the Company Petition

No. 13 / 2016, the parties have jointly, under Joint Compromise Petition duly

signed by all the parties have resolved the dispute in the following manner:

``(a) All the Petitioners do hereby authorize Petitioner No. 1, Mr. R.P. Trivikram, to represent their interests in negotiations with the Respondents. It is agreed that all acts of Mr. R.P. Trivikram shall be

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 5 of 15 binding on all the Petitioners as if they were personally acted out by each individual Petitioner.

(b) The Petitioners and Respondents do hereby agree and confirm that the 1st Respondent Company's properties, as described and detailed in the Schedule hereto, and hereinafter referred to as `Scheduled Properties', shall be disposed of without any objection from either of the parties.

(c) The Respondents do hereby agree and confirm to involve Petitioner No. 1, Mr. R.P. Trivikram, in all sale negotiations and transactions for the sale of the Scheduled Properties.''

(d) All parties do hereby agree and confirm that sale proceeds from the sale of Scheduled properties shall be distributed within 9 months among the Shareholders/Members of 1st Respondent Company after deductions of applicable taxes and legitimate expenses incurred either directly or indirectly in relation to the sale of the Schedule Properties; which inter alia shall include expenses such as commission, brokerage, consultation fee, professional fee, legal fee, expenses towards development of Scheduled properties, change of Scheduled Properties', classification, etc.''

6. The compromise thus entered into specifically conferred the right of

negotiation limited with regards to the sale of the property to Petitioners in

Company Petition / Respondents herein, which was given in the Schedule of the

compromise and in relation thereto, it was unanimously resolved, that the

parties have unanimously agreed that the Petitioner No. 1 / Respondent No. 1

herein, Mr. R.P. Trivikram (who was the erstwhile Managing Director having

been removed from his post way back in 2015), would be involved in all

negotiations and transaction of sale of the Scheduled properties, detailed in

the compromise.

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 6 of 15

7. Based on the said compromise, the rights settled were in relation to the

property, given in the Schedule of the Compromise, which is extracted

hereunder:

``All that piece and parcel of properties situated in;

1. Sy. Nos. 71, 79, 80, 81 and 90, Chikkabanavara Village, Yeshwantpur, Hobli, Bengaluru North Taluk, measuring 21 Acres and 21 Gunthas.

2. Sy. Nos. 75, 76, 79 and 80, Soladevanahalli Village, Hesaraghatta Hobli, measuring 16 Acres and 16 Gunthas. (1 and 2 totally measuring 37 Acres and 37 Gunthas)

3. Residential Sites of Approximately 1,02,000 Sq. Ft. formed in Sy. Nos. 83 & 87 of Soladevanahalli Village, Bengaluru North Taluk; in the name of `Achut Nagar Layout'.''

8. The right of Mr. R.P. Trivikram, as per the Joint Compromise was only

confined for the purposes to negotiate for sale and transactions for sale of the

Scheduled Properties and nothing beyond it.

9. It's based on this compromise, the CP No. 13 / 2016 was decided by the

NCLT, Bengaluru by Order of 07.08.2018. Consequentially, the compromise

thus entered into on 14.06.2017, was unanimously affirmed and the learned

Adjudicating Authority disposed of the CP No. 13 / 2016 in the following

manner:

``11. In view of the above facts of the case, the Company Petition bearing C.P. No. 13 / 2016 (T.P No. 84 / 2016) is disposed of with the following directions:

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 7 of 15 a) We hereby declared that the Joint Compromise Petition dated 14/06/2017 is legally valid and binding on all the parties;

b) We hereby appointed Shri B.N. Harish, Retired Regional Director, Ministry of Corporate Affairs, No. 18, Shuklam, I Main, I Avenue, Near ICICI Bank, Shub Enclave, Harlur Road via Sarjapur Road, Bangalore - 560017 as Executor / Observer to execute the terms and conditions of the Joint Compromise Petition dated 14.06.2017;

c) The Executor is directed to assess the financial requirements of the Company, and also for implementation of the terms and conditions contained in the Joint Compromise Petition.

Accordingly the Executor can submit to the Company for release of necessary funds and the Company is directed to take appropriate action to make available the funds required as submitted by the Executor;

d) We hereby fixed the fee of Rs 1.50 lakhs (Rupees One Lakh Fifty Thousand only) per month to the Executor/Observer excluding expenses, and the same is to be borne by the Company;

e) The parties including Executor/Observer are at liberty to file Miscellaneous Applications, if any, seeking any directions of the Tribunal, in implementation of terms and conditions of Joint Compromise Petition;

f) All the parties are directed to co-operate with the Executor / Observer;

g) The Executor/Observer is hereby directed to give opportunity to all the parties to submit their grievances/views, and he is directed to consider their views, in taking decision on the issues arises in implementation of the terms & conditions of the said Compromise Memo;

h) The Executor/Observer is also at liberty to take technical assistance from any professional, and the fee as fixed to those professional is to be borne by the Company.

i)All the I.A Nos. 67/2018; 93/2018; 94/2018 & 174/2018, are stand disposed of including any pending I.A. No order as costs.''

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 8 of 15

10. Owing to the Settlement, which was again referred to in the Order of

07.08.2018, which was exclusively Judgment of 07.08.2018, was exclusively

based on the compromise of 14.06.2017, the Tribunal appointed one Mr. B. N.

Harish, the Retired Regional Director, Ministry of Corporate Affairs, to execute

the terms and conditions of the Joint Compromise Petition dated 14.06.2017. It

naturally follows that, as far as the ambit of exercise of powers of Mr. B.N.

Harish was concerned, it was limited to the extent to be an Executor / Observer

to the terms and conditions of the Joint Compromise Petition dated 14.06.2017.

11. The controversy germinates from this point, where in accordance with the

Compromise as per Clause 5(c) ``all sale negotiations and transactions for the

sale of the Schedule Properties, was to be done with the involvement of Mr.

R.P. Trivikram''. But, the powers thus granted to Mr. R.P. Trivikram, were not

unfettered for the reason being that the Clause 5(c) to the agreement as

extracted above, only provided that Mr. R.P. Trivikram will only be permitted

to ``involve'' in all sale negotiations and transactions of sale of properties

forming part of the Schedule Properties of the Settlement.

12. On a simpliciter interpretation of the word ``involve'' herein would

mean, that when the compromise was in relation to the property, given in the

Schedule, the expanse of involvement which has been vested with Mr. R.P.

Trivikram, based on the compromise, would be limited to (a) sale negotiations

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 9 of 15 and (b) transactions for sale and that too, limited to the Schedule Property and

nothing beyond it.

13. It chanced so, that when the Order was rendered by the learned NCLT,

Clause (e) was added, wherein it reserved the liberty for the Executor / Observer

i.e. Mr. B.N. Harish to file a Miscellaneous Application, if any, seeking

directions from the Tribunal to implement the terms and conditions of the Joint

Compromise.

14. It would be apt to clarify at this point that, the right to file an application

or a liberty reserved was for the parties which included the Executor / Observer.

15. What is being argued by the learned counsel for the Respondent while

interpreting the contents of Clause (e) of the Order dated 07.08.2018, is as if,

the powers reserved to file a Miscellaneous Application, would be wide enough

to grant the liberty to the parties which will be inclusive of Mr. R.P. Trivikram

to file a Miscellaneous Application for ``any'' direction from the Tribunal.

16. We are of the view that Clause (e) of the Order of 07.08.2018, where the

liberty was granted to file a Miscellaneous Application for seeking directions it

was limited to seeking directions for removal of obstructions, if any, in the

implementation of the terms and conditions of the Compromise and not

otherwise and that too, this liberty to approach the Tribunal would be in context

to the rights reserved by the terms of the Compromise as entered into between

the parties on 14.06.2017, only and not beyond it.

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 10 of 15

17. Mr. R.P. Trivikram along with the other Petitioners on 07.05.2019, under the garb of alleged liberty provided in Clause (e) of the Order dated 07.08.2018, where the liberty was granted to file Miscellaneous Application, preferred an application numbered as IA No. 229 / 2019 in a Company Petition No. 13 / 2016, which stood already decided.

18. In the Application thus preferred, the Applicants had prayed for the following reliefs:

``a. To Supersede the Board of R1 Company by appointing the Executor Mr. B.N. Harish as the Administrator of the Company vesting with him all the powers with respect to management and any aspect of the affairs of the R1 Company.

b. To Appoint and declare the present Executor B N Harish as an / a joint authorized signatory to all the bank accounts including the Escrow Account bearing Current Account No. 36984343328, State Bank of India, Malagala Road Branch, Nagarbhavi, Bengaluru whether or not any Board Resolution to this effect is passed by the Board of R1 Company. c. and to pass such other order or orders in the facts and circumstances of the case in the interests of justice and equity.''

19. The relief thus extracted above, if considered in the context of power

given to Mr. R.P. Trivikram under the terms of Settlement as contained under

Clause (c) which has to be read with Clause (e) of the Order, goes far beyond

the liberty granted in the Order dated 07.08.2018. Seen from this view point, the

implications of the Application IA No. 227 / 2019 thus preferred was much

beyond the ambit, which was reserved for the parties for filing Miscellaneous

Applications. The nature of the relief of the Application filed by the Applicant,

in fact, was touching the issues of assuming of powers to supersede

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 11 of 15 the Board of Respondent No. 1 Company, appointment of the Executor Mr. B.

N. Harish, as an Administrator of the Company and declaration of the present

Executor as a Joint Authorized Signatory of the Bank Accounts including the

`Escrow Account' as detailed in the relief sought in IA No. 227 / 2019, which

was not envisaged in the Settlement.

20. In fact, the Interlocutory Application thus preferred on 07.05.2019 cannot

be argued to be within the ambit of the rights reserved for filing the

Miscellaneous Application by the Order of 07.08.2018, as provided in its Para 9

(e), as the relief sought for under the garb of liberty to file an Application was

much beyond the terms of the compromise itself, where the liberty for filing of

an Application was to be limited to the confirmation of the sale negotiations and

transactions for the sale of the Schedule Property.

21. The modulation of relief in the application thus preferred, in fact, had a

direct bearing as if, the Respondent No. 1 who otherwise stood ousted from

being the Managing Director, as back as in 2015, with an approval granted by

the Registrar of Companies, is being sought to be placed again in the helm of

the affairs of the Company in pursuance to the Impugned Order which has been

rendered by the learned NCLT.

22. The learned counsel for the Appellant has only expressed his concern

towards the relief which has been granted by the learned NCLT in Sub Para 1 of

Para 11 which is extracted hereunder:

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 12 of 15

``11. In the result, IA No. 227 / 2019 in C.P. No. 13 of 2016 (TP No. 84 of 2016) is disposed of with the following directions;

(1) The Respondents are hereby directed to involve the Applicant / Petitioner (Shri R.P. Trivikram) in all the affairs of the R-1 Company which include negotiations and sale transactions for the sale of Schedule Property as per the Clause 5(c) of the Joint Compromise Petition dated 14.06.2017, and take him into confidence all those transactions.''

23. If sub relief 1 is taken into consideration, in fact it uses the language in a

manner as if, the Respondent No. 1 Mr. R.P. Trivikram has to be indirectly

inducted into a position in a manner so as to enable him to manage the affairs of

the Company of Respondent No. 1 and this conferment of power given to Mr.

R.P. Trivikram, happens to be in supersession, to the cessation of his status as a

Managing Director by the orders of the Registrar of Companies, beside being in

excess to the powers which was reserved by the terms of the compromise, as

well as the directions given by the Order of 07.08.2018.

24. In view of what has been observed above, the argument as extended by

the learned counsel for the Respondent, that in fact, the directions given in the

Impugned Order only intends to meet the terms of Settlement of Sub Clause (d)

of Para 5 of the Settlement is absolutely a mis-normer for the reason being that

the power of Mr. R.P. Trivikram, was not a power which was enshrined to him

in relation to the affairs contemplated under Sub Clause (d) of Para 5 of the

Settlement of 14.06.2017.

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 13 of 15

25. So far as Mr. R.P. Trivikram is concerned, his role, post the Settlement of

14.06.2017 coming into effect, which has been affirmed by the Order of

07.08.2018, will be limited to and confined only for sale negotiations and

transactions of the Schedule Properties, which was part of the Settlement, and it

cannot be stretched to an extent to enable him or grant him a liberty to exercise

powers in all affairs of Respondent No. 1 Company.

26. In that eventuality and for the reasons assigned above, the powers

conferred by the directions given in Sub-para 1 of Para 11 of the Impugned

Order runs contrary to the spirit of the Order of 07.08.2018, which was only

limited to confirming the Settlement of 14.06.2017 particularly when, the

Settlement or the Order of 07.08.2018 is not in dispute nor under challenge

before any Superior Forum.

27. Thus, the directions issued in Sub-para 1 of Para 11 of the Impugned

Order since being contrary to the earlier Order of 07.08.2018, is not

maintainable particularly, when the same has been obtained by way of filing of

a Miscellaneous Application in a Company Petition which has already been

decided, especially when the case is being sought to be re-opened in a manner

of review / recall and modify the Order which was not permissible under the

terms of the earlier Order of 07.08.2018.

28. Hence, the Appeal TA (AT) No. 82 / 2021 (CA (AT) No. 347 / 2019)

would stand allowed. The observations made in Sub-para 1 of Para 11 of the

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 14 of 15 Impugned Order to the extent ``the Respondents are directed to involve the

Applicant / Petitioner (Shri. R.P. Trivikram) in all the affairs of

Respondent No. 1 Company'', would hereby stand quashed. However, there

will be no order as to costs.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Jatindranath Swain] Member (Technical)

13/12/2024 SR/TM/MS

TA (AT) No. 82 / 2021 (Comp App (AT) No. 347/2019) Page 15 of 15