Urmila Ray & Anr vs Seth Chemical Works Pvt Ltd & Ors

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI COMPANY APPEAL (AT) NO.99 OF 2020 (Arising out of judgement dated 5th June, 2020 passed by National Company Law Tribunal, Kolkata Bench, Kolkata in CP__/KB/2020).

In the matter of: 1. Urmila Ray, W/o Late Ramesh Kumar Ray, R/o 143b, NSC Bose Road, Kolkata 700040.

2. Shreekant Ray, s/o Late Ramesh Kumar Ray, R/o 143b, NSC Bose Road, Kolkata 700040 Appellant

Versus

1. Seth Chemical Works Pvt Ltd, 13, Camac Street, Kolkata 700017

2. Surendra Kumar Seth, S/o Late Nand Gopal Seth, R/o 3 Wood Street, Kolkata 700016

3. Ashok Seth, S/o Mahendra Kumar Seth, 1b, Outram Street, Kolkata 700017

4. Mahendra Kumar Seth, S/o Late Nand Gopal Seth 1b, Outram Street, Kolkata 700017

Company Appeal (AT) No.99 of 2020 2

5. Sheetal Seth W/o Sandeep Seth, 3 Wood Street, Kolkata 700016. Respondents

Mr. Shwetaank Nigam, Mr. Anirban Ray, Mr. Satadeep Bhatacharya, Mr. Jayant Mehta and Mr. Ashish Choudhary, Advocates for Appellant. Mr. Ratnako Banerji, Sr. Advocate with Mr. Rahul Malhotra, Advocate for R1 to R3. Mr. Shaunak Mitra, Mrs Anamika Pandey and Mrs Amrita Pandey, Advocatges for R4 to R5.

JUDGEMENT

(20th October, 2020) Mr. Balvinder Singh, Member (Technical)

1. The present appeal has been preferred by appellant under Section 421

of the Companies Act, 2013 against the impugned order dated 5th June, 2020

passed by National Company Law Tribunal, Kolkata Bench, Kolkata (in short

'Tribunal') in unnumbered CP __/KB/2020 vide which the Tribunal has

declined the interim relief prayed by the appellant.

2. The brief facts of the case are that the 1st respondent is a company

incorporated under Companies Act, 1956 on 7th April, 1971. The company

has issued and subscribed 22612 equity shares of Rs.100/- each. The

appellants are shareholders of 1st respondent and holds about 5652 equity

shares(24.99%). The Seth family consists of Nand Gopal Seth Group, Brij

Mohan Seth group and Ramlal seth Group altogether holds 74.97% shares in

1st respondent and each group individually holds 24.99% shares. The

appellants (original petitioners). The appellants and 2nd and 3rd Respondents

are director of the company

Company Appeal (AT) No.99 of 2020 3

3. The appellants filed an unnumbered application under Section 241 and

242 of the Companies Act, 2013 alleging that the 1st respondent company's

affairs have been conducted by the 2nd to 5th Respondent in a manner

oppressive to the appellants and in a manner prejudicial to the interest of the

1st respondent company and pressed for an early hearing of the application

seeking the following relief:

i) Injunction restraining the respondents and each of them and/or

their group and/or their men or agents and/or servants from giving

any effect or further effect to the Resolution dated 20th January,

2020 and/or from withdrawing any sum of money from the bank

accounts of R-1 company and/or altering in any manner the

shareholding pattern of R-1 company and/or from holding and/or

convening any Board Meeting or giving effect to or regularising any

matter in respect of R-1 company and/or from dealing with and/or

transferring or creating any third party interest in R-1 company or

the assets of R-1 company and/or from interfering with and/or

intermeddling in the management or administration of R-1 company

in any manner whatsoever;

ii) Injunction restraining the Respondents Nos 4 and 5 from holding

and/or claiming to be the Directors of R-1 company.

iii) Injunction restraining the respondents and each of them from

expending any funds of the company in any manner whatsoever

including the purpose of contesting the present proceedings;

Company Appeal (AT) No.99 of 2020 4

iv) In the alternative and without prejudice to the aforesaid prayers, this

Hon'ble Tribunal may be pleased to direct the management and the

administration of R-1 Company be conductged by

4. After hearing the parties on the interim relief at length, the Tribunal

ordered that "the balance of convenience also does not favour the

petitioners. In view of the matter I am not inclined to grant the interim

reliefs as prayed for".

5. Being aggrieved by the said order dated 5th June, 2020, the appellants

have preferred the present appeal.

6. Learned counsel for the appellant submitted as under:

a) that no Board Meeting was ever held on 20th January, 2020 either at

12 noon or at 4 PM as no notice of the Board Meeting held at 4 PM was

ever served upon the Appellants, who are the Directors of the Company.

b) that the appellants are making a story that two notices both dated

7th January, 2020 were sent together to the appellants for holding of

Board Meetings at 12 Noon and 4 PM respectively.

c) that two directors (one director and one Addl. Director) were illegally

appointed in the 1st Respondent company on 20th January, 2020 as the

appointment of director cannot be by way of Board Meeting by way of a

General Meeting. Further the Articles of the Association of the company

do not provide for appointment of Additional Director by way of Board

Meeting.

Company Appeal (AT) No.99 of 2020 5

d) that the Respondents have sought to illegally amend the Articles of

Association of 1st Respondent by way of Board Meeting by which the

Respondents are trying to change the upper limit of the number of

directors of Board of 1st respondent to 6 instead of 7.

e) that the Notice received by the Appellant for a Board Meeting to be

held on 20th January, 2020 at 12 PM was in respect of a completely

different agenda (Page 182 and 184 of the appeal).

f) that the Board Resolution has been manufactured as the signature of

the appellant prima facie appears do not match with the fonts and caps

of the letters on the first two pages.

g) that 4th Respondent was shown to be appointed as Director but in

the form DIR 12 the 4th Respondent No.4 is shown to have been

appointed as Additional Director.

h) that the Respondents are using the funds of the company to sponsor

the litigation against the appellants.

i) that the letter of appointment of 4th and 5th respondent and the letters

submitted to Bank are totally different (Page 187 and 188 read with

Paged 199 and 200).

j) that in the Board Meeting dated 20th January, 2020 the mandate to

Bank was changed. The Respondents have failed to explain why they

had intimated to the Bank about the change of mandate in Mid March,

2020 after a gap of 45 days approximately.

Company Appeal (AT) No.99 of 2020 6

7. Reply on behalf of 1st to 3rd Respondent has been filed and they have

submitted as under:

a) that two notices for the Board Meeting dated 20th January, 2020 were

sent. The appellants have deliberately suppressed the fact that he has

received only one notice for the Board Meeting scheduled to be held at

12 Noon. Learned counsel for the Respondent further submitted that

the appellants have attended the Board Meeting at 4 PM and duly

approved the resolution and the resolutions were passed unanimously

with the consent of appellant and the appellants have signed the

minutes of the Board Meeting.

b) that the appellants signed the minutes of the Board Meeting dated

20.01.2020 at 4 PM for appointment of Additional Directors and change

in bank account operations and the appellants also signed the KYC

documents being the signature card for change of bank account

operations.

c) that the allegations of appellant that the Articles of Association do

not contain power to appoint Additional Director is misconceived and

baseless. Learned counsel stated that Article 11 states that the

provisions of Table A in Schedule I of the Companies Act, 1956 Act are

adopted and applied as Articles of the company.

d)that Section 28 of the Companies Act, 1956 read with Clause 72 of

Table A there is power to appoint Additional Directors. Learned counsel

for the respondent further stated that it is settled law where Articles are

silent, the provisions of Table A will apply.

Company Appeal (AT) No.99 of 2020 7

e) that the appellants are guilty of wrongfully freezing the bank

operation of the Respondent company due to which the wages of more

than 55 employees could not be paid for several weeks from March

2020.

f) that the appellants deliberately filed returns fraudulently by

unilaterally manipulating the entries for their own malafide purposes

for which the Respondents have to file the revised returns and also

issued warning to the appellants vide email dated 31.10.2019 (Page 110

of reply).

8. Reply on behalf of 4th and 5th Respondent has also been filed.

Respondents have stated that the appeal has been filed upon suppression of

material fact in abuse of the process of law and is misleading and the balance

of convenience does not lie in favour of the appellant. Basically the

Respondents have supported the version of 1st to 3rd Respondent.

9. Rejoinder has been filed by the appellant and the appellant reiterated

its statement made in the appeal.

10. We have heard the parties and perused the record. We have heard the

parties and perused the record. We note that the relief sought in the main

petition was also sought in the interim relief. As the Company Petition is still

pending, therefore, we are not passing any order on the same.

11. However, the main issue raised by the appellant that he has not

received notice for Board Meeting to be held on 20th January, 2020 at 4 PM

and in the said meeting two directors have been appointed. Whereas the

Company Appeal (AT) No.99 of 2020 8

Respondent has argued that two notices were sent to the appellant in one

envelop, one for meeting at 12 Noon and the other for meeting at 4 PM. The

appellant argued that he has received only one notice and that is for Meeting

on 20th January, 2020 at 12 Noon.

12. As the subject matter on the validity of the meeting held with due notice

or not will be decided over a period of time. We have also notice alleged two

Board Meeting are allegedly held on 20th January, 2020 at 12 Noon and after

that, on the same day at 4.00 PM. The Appellant contends that he has

received notice of only one Board Meeting scheduled to be held 12 Noon on

20th January, 2020. However, service of notice of a second board meeting is

disputed, which can be decided finally along with the petition. Meanwhile we

think it proper to stay the operation on the Resolution passed in the alleged

Board Meeting held at 4 PM on 20th January, 2020.

13. We further expect that hencefortgh the Company and its Director will

communicate with each other with e-mail in addition to communication by

normal channel made by the Company. This will end the controversy

regarding service of notice. We also direct that till the decision of this case

account of the Respondent Company will be operated by all the four directors,

who were operating the account before the alleged board meeting dated 20th

January, 2020.

14. In view of the foregoing discussion Appeal is disposed of with the

direction to the National Company Law Tribunal to make an effort to decide

Company Appeal (AT) No.99 of 2020 9

the Appeal on merit, after hearing both the parties expeditiously in terms of

Section 422 of the Companies Act, 2013.

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

(V.P. Singh) Member (Technical) Bm

Company Appeal (AT) No.99 of 2020