Vamsidhar Maddipatla & Anr vs Techbond Labortories Pvt.Ltd

[Arising out of Order dated 11.02.2020 passed by the Tribunal/National Company Law Tribunal, Hyderabad Bench in CP No. 5/241/HDB/2017]

IN THE MATTER OF: 1. Vamsidhar Maddipatla Villa No. 62-63, NSL Orion Villas Raidurgam, Beside Raidurgam Police Station Serlingampally, K.V. Rangareddy Telangana-500032. ...Appellant No. 1

2. Dr. Ibrahimpatnam Krishna H.No. 8-3-169/83, Plot No. 83 Sidsidhartha Nagar Vengalrao Nagar Hyderabad-500038 (Appellant are represented by the GPA Holder Nikhil Baheti) ...Appellant No. 2 Versus

1. Techbond Laboratories Pvt. Ltd. Geetanjali Residency Plot No. 2, Navodaya Colony Road No. 14, Banjara Hills Hyderabad ...Respondent No.1

2. Clininvent Research Private Limited Block No. BN, Plot No. 7, Salt Lake Electronics Complex Sector V, Kolkata-700091 ...Respondent No. 2

3. Shri T. Bose Babu Flat No. 110, Vijaya Towers Nagarjuna Nagar, Ameepet Hyderabad- 500073 ...Respondent No. 3

4. Shri Swapan Bhattacharya Managing Director Block No. BN, Plot No. 7, Salt Lake Electronics Complex Sector V, Kolkata- 700091 ...Respondent No. 4 5. Shri Rahul Das Gupta T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 1 of 33 S/o A. Dasgupta 48/2, Kali Temple Road Kolkata-700026 ...Respondent No. 5

6. Shri C. Sanjeev Baba Plot No. 6, Road No. 3, Banjara Hills Aurora Colony, Hyderabad-500034 Telengana. ...Respondent No. 6

Present: For Appellants : Mr. R.V. Yogesh, Advocate

For Respondents : Mr. Abhijeet Sinha, Advocate for R1, R3 & R6. Mr. Sanjay Kishore, Advocate for R2, R4 & R5.

(Virtual Mode) (30.11.2022)

NARESH SALECHA, MEMBER (TECHNICAL)

The present `Appeal' is filed against the 'impugned order' dated

11.02.2020, passed in CP No. 5/241/HDB/2017 by the 'Tribunal' (National

Company Law Tribunal, Hyderabad Bench), whereby, the 'Tribunal'

dismissed the Petition filed under Section 241 of the Companies Act, 2013.

Brief Facts:

2. Mr. Vamsidhar Maddipatla is the '1st Appellant' and

Dr. Ibrahimpatnam Krishna is the '2nd Appellant' in the present appeal before

this 'Appellate Tribunal' are the investors holding 13.32% shares each

totalling to 26.64% of shares in the 1st Respondent company and are being

represented by the GPA Holder Mr. Nikhil Baheti.

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 2 of 33 Techbond Laboratories Pvt. Ltd. is the company in which 1st and 2nd

Appellants invested and is 2nd Respondent herein and the company was in

the business of manufacturing of fine chemicals used in pharmaceutical,

agro-chemical and leather industry.

Clininvent Research Private Limited is the 2nd Respondent herein to

whom the assets of 1st Respondent have been sold.

Shri T. Bose Babu and Shri Swapan Bhattacharya are 3rd and 4th

Respondents herein being Director and Managing Director of the 1st

Respondent company.

3. The 1st and 2nd Appellant acquired 26.64 % shares in 1st Respondent

company by way of signing an agreement termed as 'Share Purchase and

Shareholders Agreement' (in short 'SPSHA') dated 27.01.2014. It has been

brought out that the intention of the investors was to take over 1st

Respondent company. The 'SPSHA' was followed by one more agreement

termed as 'Addendum Agreement' to the 'SPSHA' dated 28.06.2014.

4. It has been alleged that subsequent to signing of 'SPSHA', the

'Appellants' have been adversely affected detrimental to their interest by

majority shareholders which resulted into their oppression as per Section

241 of the Companies Act, 2013. It has been stated that few conditions

which were required to be met with 'SPSHA' and the addendum were not

fulfilled which somehow led to decline in stock value of 1st Respondent

company.

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 3 of 33

5. Financial conditions of the 1st Respondent Company started

deteriorating and operation of the company was stopped in June, 2015.

Thereafter, negotiation started for sale of 1st Respondent's company to which

the 'Appellants' also agreed subject to specific timelines. The draft 'Assets

Transfer Agreement' (in short 'ATA') was approved in the 'Extraordinary

General Meeting' ('EGM') held on 16.04.2016 in which the 1st and 2nd

Appellants also participated.

6. Subsequent to approval in the 'EGM', the 'ATA' was signed on

24.06.2016 between 1st Respondent (company), 2nd Respondent (purchaser

of the company) and Shareholders named in the Schedule 1 of the 'ATA' (total

13 shareholder listed therein) including 1st and 2nd Appellant herein who are

listed at Serial No. 12 & 13 of the said Schedule 1 of the 'ATA'.

7. Clause 6.1, Clause 6.2.1 and Clause 6.3.2 among various clauses, are

stated to be significant defining the time lines and making time as the

essence of the agreement. Clause 6.2.1 defines 'Long Stop Date' (in short

'LSD'). The 'LSD' could have been extended subject to mutual consents of

all the parties to the 'ATA'.

8. It is the case of the 'Appellants' that in dis-regard to provisions of the

'ATA', the 'Respondents' in connivance with each other fraudulently executed

three sale deeds pertaining to three properties on 03.11.2016 which allegedly

were antedated by the 'Respondents' on 01.11.2016 to overcome the

objections made by the 'Appellants' on 01.11.2016.

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 4 of 33

9. It is the case of the 'Appellants' that they have been subjected to

oppressions by the 'Respondents' on various occasions and aggrieved by the

act of operations by the 'Respondents', the 'Appellants' filed petition under

Section 241 of the Companies Act, 2013 before the 'Tribunal' which was

dismissed for default by the on 09.02.2017. This order was challenged by

the 'Appellant' which was again dismissed by the 'Tribunal' on 11.09.2017

and aggrieved by this the 'Appellant' has preferred an appeal before this

'Appellate Tribunal' which was upheld in Company Appeal (AT) No. 364 of

2017 dated 14.11.2017 and ordered for restoration of company petition

subject to payment of Rs. 30,000/-. After hearing the petition, the 'Tribunal'

dismissed the said petition vide 'impugned order' dated 11.02.2020 and

hence the present appeal before this 'Appellate Tribunal'.

Appellants' Submissions:-

10. The Learned Counsel for the Appellants gave overall view of the

appeal and the circumstances which led to the present appeal. The

Learned Counsel for the Appellants assailed the 'impugned order' and

alleged that the 'Tribunal' did not consider the relevant facts as well as

the provisions of the companies Act, 2013 and dismissed the 'Appellants'

petition wrongly.

11. The Learned Counsel for the Appellants stated that they are

investors who with genuine interest to acquire the 1 st Respondent

Company way back in 2014, signed the agreement i.e. 'SPSHA' on

27.01.2014. Subsequently, an addendum to the 'SPSHA' was also signed

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 5 of 33 on 11.06.2014. The Learned Counsel for the Appellants mentioned that

subsequent to signing of 'SPSHA' and making payments, the majority

shareholders started oppressions of the 'Appellants' in various ways. The

Learned Counsel for the Appellants briefed this 'Appellate Tribunal' that

the 'Respondents' were not interested to keep their part of the terms and

due to oppression of the minority shareholders as well as

mismanagement of the company, the value of the 1 st Respondent

company declined steeply. It finally resulted in stoppage of all operations

in June 2016. The 1st Respondent company was in dire state and was

under huge financial pressures. To resolve the same, it was decided to

sale the assets of the 1st Respondent company.

12. The Learned Counsel for the Appellants stated that on 15.04.2016

a notice for convening 'EGM' to be held on 16.04.2016 was issued and

the said EGM was held on 16.04.2016 at the registered office of the

company. Resolution for approval for sale of assets of the company was

approved. This resolution, inter-alia, provided for sale, lease or otherwise

dispose of whole of the undertaking of the company on such terms and

conditions as prescribed in draft sale and purchase agreement between

1st and 2nd Respondent and the said resolution also approved the draft

proposed sale agreement and further resolved to authorised Mr. Sanjeev

Baba director of the 1st Respondent to negotiate, settle the terms and

conditions and execute the requisite sale agreement, sale deed and such

other documents as may be found necessary, modify or amend the

document so executed. The said resolution also authorized Mr. Sanjeev

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 6 of 33 Baba to do all such agreement, deeds and things necessary, expedient or

desirable for giving effect to the said resolution. Admittedly, the 'EGM'

was attended by the Chairman and two directors of the 1 st Respondent

company along with both the 'Appellants'.

13. The Learned Counsel for the Appellants brought out that in

pursuant to above Board Authorisation, the 'ATA' was signed on

24.06.2016 between 1st Respondent (company), 2nd Respondent (purchaser

of the company) and Shareholders named in the Schedule 1 of the 'ATA' (total

13 shareholder listed therein) including the 'Appellants'.

14. The Learned Counsel for the Appellants further brought out that

the 'ATA' contained specific terms especially regarding clause which defined

the condition precedents in Clause 6.2.1 and emphasise the relevance of

clauses of the 'ATA' which were sacrosanct and recognized time to be essence

of the contract which could be extended mutually as agreed between the

parties in writing.

15. The Learned Counsel for the Appellants mentioned that all these

clauses were violated by the 'Respondents' just to cause oppression to

the 'Appellants'. The Learned Counsel for the Appellants alleged that due

to connivance and wrongful deeds of the 'Respondents', three sale deeds

were executed in gross violation of the 'ATA' as well as the 'SPSHA' along

with addendum to the 'SPSHA'.

16. The Learned Counsel for the Appellants again highlighted the

importance of few clauses which protected the interest of the 'Appellants'

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 7 of 33 in terms of the 'SPSHA'. Like Clause No. 3.1, Clause No. 5.4 and Clause

No. 5.5.

17. The Learned Counsel for the Appellants highlighted that as per these

terms no decision could have been taken without specific consent of the

Appellants. The Learned Counsel for the Appellants alleged that in gross

violation to such specific conditions agreed upon, the 'Appellants' were

bypassed time and again.

18. The Learned Counsel for the Appellants cited following instances

which are akin to operation under Section 241 of the 'Companies Act, 2013'.

(i) The 'Appellants' were not served notice for 'Annual General Meeting'

("AGM") for 31.03.2016 and also not given the audited financial statements.

(ii) On 24.06.2016, 'ATA' was executed, which stipulates a Long Stop

Date ("LSD") and fulfilment of conditions precedent to the 'ATA' before 60

days from 24.06.2016. The Learned Counsel for the Appellants submitted

that on 01.11.2016, the 'Appellants' vide an email to the 2nd Respondent

informed that they never consented to the extension of 'LSD' nor signed the

supplementary agreement.

(iii) The Learned Counsel for the Appellants further pointed out that on

03.11.2016, despite the objections, the 'Respondents' registered three sale

deeds seemingly to have been executed on without the consent of the

'Appellants' and utilized the proceeds thereof violating 'SPSHA' and 'ATA'.

(iv) The Learned Counsel for the Appellants stated that after execution of

the 'SPSHA', the 1st Respondent failed to incorporate the changes in the 'AoA'.

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 8 of 33

19. The Learned Counsel for the Appellants concluded his arguments with

request to set aside the 'impugned order'.

Respondent's Submissions:-

20. The Learned Counsel for the Respondent Nos. 1, 3 & 6 assailed the

conduct of the 'Appellants' who are trying to harm the 1st Respondent

company by levelling false accusations.

21. The Learned Counsel for the Respondent Nos. 1, 3 & 6 stated that the

present appeal is not maintainable and is an attempt to get contractual relief

under the pretext of oppression application filed under Section 241 & 242 of

the 'Companies Act, 2013'.

22. The Learned Counsel for the Respondent Nos. 1, 3 & 6 stated that

subsequent to signing of the 'SPSHA' on 27.01.2014, the 'Appellants' were

appointed as Director and CEO and during this period financial health of 1st

Respondent company was adversely affected which resulted in shutting

down the plant in May, 2015. The Learned Counsel for the Respondent Nos.

1, 3 & 6 further stated that to avoid the 'Appellants' personal implications,

they resigned from Board positions and therefore, the remaining Directors

had to take necessary steps to revive of the company and finally decided to

sale the assets of the 1st Respondent company after passing the special

resolution in 'EGM' held on 16.04.2016 unanimously (including both the

'Appellants'), authorised Shri Sanjeev Baba to take necessary action to

execute the 'ATA', the draft of which was also approved in the same 'EGM'.

The Learned Counsel for the Respondent Nos. 1, 3 & 6 stated that at this

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 9 of 33 juncture raising issues about the 'ATA' by the 'Appellants' is only for ulterior

motives.

23. The Learned Counsel for the Respondent Nos. 1, 3 & 6 stated that

24.06.2016 was to be taken as the effective date and the provision regard

'LSD' was mainly for the protecting the rights of the 2nd Respondent as buyer

and as per standard drafting practices any change in the 'LSD' was to be

done with mutual consent of the concerned parties. The Learned Counsel

for the Respondent Nos. 1, 3 & 6 further stated that in the 'EGM' held on

24.06.2016, the 'Appellants' had already authorised Mr. Sanjeev Baba to

take all necessary action as required to affect the 'ATA' and as such no

further or separate consent of the 'Appellants' was required.

24. The Learned Counsel for the Respondent Nos. 1, 3 & 6 also stated that

the very fact that specific provision was made regarding extension of the

'LSD' period takes away the arguments of the 'Appellants' that time was

essence of the contract and in any case liberty was available to the 2nd

Respondent as purchase of the company to forgo this right and accordingly,

the 2nd Respondent gave the consent to extend the 'LSD' after negotiation

with Mr. Sanjeev Baba who was already authorised by all shareholders

including the 'Appellants'.

25. The Learned Counsel for the Respondent Nos. 1, 3 & 6 stated that both

the 'ATA' and the 'SPSHA' had specific clauses regarding Arbitration and the

'Appellants' could have gone for Arbitration and not taken the case to the

'Tribunal' under Section 241 and 242 of the 'Companies Act, 2013'.

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 10 of 33

26. The Learned Counsel for the Respondent Nos. 1, 3 & 6 emphasised

that admittedly the company was not doing well and the plant was shut down

and only option available was to sale the assets of the company for benefit of

all the shareholders including the 'Appellants'. The 'ATA' was signed and the

three sale deeds were registered only for the benefit of the company and the

'Appellants' has no vested interests to infringe the process. The Learned

Counsel for the Respondent Nos. 1, 3 & 6 also stated that, not admitting and

even assuming for argument sake, the consent of the 'Appellants' were

required for change in 'LSD' and the same was not taken by the

'Respondents', this single act cannot be construed as case of oppression of

the minority shareholder.

27. The Learned Counsel for the Respondent Nos. 1, 3 & 6 mentioned that

the alleged changes in 'AoA' could not be carried out for want of compliances

from the 'Appellants'.

28. The Learned Counsel for the Respondent Nos. 1, 3 & 6 also refuted the

charges that the 'Appellants' were not given the notice of the 'AGM' and not

supplied with the copy of audited financial statements as no proof of the

same has been given and this was never raised before petition filed in

December, 2016.

29. The Learned Counsel for the Respondent Nos. 1, 3 & 6 stated that

there was no violation of the 'ATA' and all actions including extension of the

'LSD' were taken as authorised in the 'EGM' which was attended by the

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 11 of 33 'Appellants' who gave express approval to Mr. Sanjeev Baba to take all

further necessary actions to implement the 'ATA'.

30. The Learned Counsel for the Respondent Nos. 2,4 & 5 also supported

the stand taken by the Learned Counsel for the Respondent Nos. 1, 3 & 6

and mentioned that he is in general agreement. The Learned Counsel for the

Respondent Nos. 2, 4 & 5 emphasised that it was the right of the 2nd

Respondent as buyer to extend, relax or waive the conditions precedent and

upon request of the authorised representative of the seller, the buyer could

waive the requirements. As such, there is no merit in the arguments of the

'Appellants' on the 'LSD'.

31. The Learned Counsel for the Respondent Nos. 2, 4 & 5 stated that on

01.11.2016 the three sale deeds were executed in favour of 2nd Respondent

by Mr. Sanjeev Baba as the authorised director of the seller and only after

the sale was executed in the evening of 01.11.2016 the 'Appellants' sent

mischievous, unethical and vague e-mail knowing very well that the sale

deeds were already executed and there was no scope for the buyers to go

back. The sale deeds were registered on 03.11.2016, requisite payments

were made and the possession of the properties was taken over.

32. The Learned Counsel for the Respondent Nos. 2,4 & 5 further stated

that since taking over the assets from 1st Respondent, the buyers have

already invested additional amount of Rs. 66 crores to improve the running

of the factory. The Learned Counsel for the Respondent Nos. 2, 4 & 5

indicated that this was adequate proof of his genuine intentions to revive the

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 12 of 33 corporate debtor back into business which is now being challenged by the

'Appellants' with malafide intensions.

33. The Learned Counsel for the Respondent Nos. 2,4 & 5 concluding his

arguments stated that any interference at this stage will not only jeopardise

the economic and financial value of the company but will also affect all stake

holders and therefore urged this 'Appellate Tribunal' to dismiss the appeal.

Findings

34. Heard Learned Counsel for the 'Appellants' and the 'Respondents' and

also perused records made available to us. Several issues have been raised

in the Appeal which are required to be deliberated upon before coming to

final conclusions about the 'impugned order'.

(I) (a) Whether the time was essence of the 'Assets Transfer Agreement'

("ATA") as specified 'Long Stop Date' ("LSD") ?

(b) Whether the consent of the 'Appellants' was necessary for any change

in 'LSD' ?

(II) Whether, the 'Appellants' as minority shareholder were oppressed by

the majority shareholder in the present case ?

(III) (a) Whether the rights of the 'Appellants' have been violated in

implementation of the 'SPSHA' along with the 'Addendum' to the 'SPSHA'.

(b) Whether, the implementation of the 'ATA' was without consent of the

minority shareholder and whether this tantamount to their oppression and

detrimental to their rights ?

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 13 of 33

35. Issue No. (I) (a) Whether, the time was essence of the 'Assets

Transfer Agreement' ("ATA") as specified 'Long Stop Date' ("LSD") ?

(b) Whether, the consent of the 'Appellants' was necessary for any

change in 'LSD' ?

• Before examining further it will be worthwhile to look into the specific

provisions relating to this issue as provided in the 'ATA'

"6.2. Fulfilment of the Conditions Precedent

6.2.1 The Seller and the Shareholders shall jointly and- severally ensure that the Conditions Precedent, are fulfilled as soon as reasonably practicable and in any event on or before 60 days from the Effective Date ("Long Stop Date"). The Long Stop Date may be extended to such further date as may be mutually agreed between the Parties in writing.

6.2.2 The Parties hereby acknowledge that as a Condition Precedent, the Seller has to obtain the Unsecured Creditor Letters. However, the Purchaser hereby agrees that in case the Seller is unable to obtain the Unsecured Creditors Letters from the Unsecured Creditors - 1, who are untraceable and are not located even after the Seller taking all reasonable steps (including sending registered post acknowledgement due etc.) to trace and locate such Unsecured Creditors I and providing such documents and/ or materials showing the efforts that have been taken to contact/trace such Unsecured Creditors - 1, to the satisfaction of the Purchaser, the Purchaser shall relax such Condition

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 14 of 33 Precedent in writing (to the extent of Unsecured Creditors

- 1) on a case to case basis.

6.3. Conditions Fulfilment Date 6.3.1. Upon the fulfilment of each Condition Precedent, the Seller shall inform the Purchaser of such fulfilment and shall provide the Purchaser with documentary evidence of such fulfilment. Upon the fulfilment of all the Conditions Precedent, a certificate in a form satisfactory to the Purchaser, indicating compliance with the aforesaid Conditions Precedent ("Conditions Satisfaction Notice"), together with the balance documentary evidence thereof shall be given by the Seller to the Purchaser. If the Purchaser is satisfied with the completion of the Conditions Precedent or if the Purchaser has waived/extended/relaxed partially any of unfulfilled Conditions Precedent in writing, then the consummation of sale and purchase of the Assets as contemplated under this Agreement (the "Closing") shall take place on such date the Purchaser may indicate in writing ("Closing Date").

6.3.2 If any of the Conditions Precedent are not fulfilled on or before the Long Stop Date or any such Conditions Precedent shall cease to be capable of being satisfied, the provisions of this Agreement other than Clause I (Definitions and Interpretation): Clause 11 (Representations and Warranties); Clause 12 (Indemnity); Clause 13 (Non Compete and Non Solicitation); Clause 14 (Confidentiality); Clause 15 (Governing Law); Clause 16 Dispute Resolution): Clause 17 (Notice), and Clause 18 (Miscellaneous) shall cease to

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 15 of 33 have effect (so that no Party shall have any liability under them) and no Party hereto shall be entitled to make any Claim against any other Party, save and except in relation to a previous breach and such accrued rights of Parties shall survive the termination of this Agreement pursuant to this sub-Clause.

6.3.3 Upon completion / fulfilment of all the Conditions Precedent by the Seller on or before the Long Stop Date, to the satisfaction of the Purchaser. if the Purchaser fails to consummate the transaction as contemplated under this Agreement, except for the reasons as specified herein. the Purchaser shall be obligated to pay and the Seller shall be entitled to receive the Commitment Amount as exit charge ("Exit Charge"). The Exit Charge shall be paid through the Escrow Account in the manner specified in the Escrow Agreement. The Parties agree that in case the Purchaser is unable to consummate the transaction contemplated herein for any of the following reasons, no Exit Charge shall be payable by the Purchaser to the Seller: (a) if Conditions Precedent are not fulfilled on or before the Long Stop Date or any such Conditions Precedent shall cease to be capable of being satisfied; (b) if there is any law or regulation or judicial order that makes The consummation of the transactions contemplated by this Agreement, illegal; or (c) if any of the Representations and Warranties or covenants made by the Seller are not true as of the Closing Date; (d) any irregularities (save and except the Statutory Liabilities as per the statutory auditor certificate) which comes to the knowledge of the Purchaser with respect to the affairs of the Seller relating to the period prior to the Closing Date,

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 16 of 33 and which impacts the Assets; or (e) if the total liabilities required to be paid by Purchaser becomes in excess of the Purchase Price."

• Generally speaking long stop date is the last date by which something

as agreed upon must be done and failure to achieve the milestone may

result in termination of the agreement. In the same spirit there may

be concepts of 'Initial Long Stop Date' which is defined as original

milestone and which can be extended with the consent of the

concerned parties and can be termed as 'Extended Long Stop Date'. It

is well established practice in 'Merger and Acquisition', transactions

that the parties agree on the time frame in which all the conditions

precedent needs to be fulfilled and transaction completed. The concept

of extension in the 'LSD' is provided to take care of circumstances

beyond the control of any of the parties and is intended to facilitate the

implementation of the agreement with mutual consent.

• Sale and purchase of the assets under the 'ATA' was conditional to

completion of conditions precedent and if conditions are not fulfilled

on or before the 'LSD', the 'ATA' could be terminated. It has been

brought out that on 19.08.2016/20.08.2016 the 1st Respondent wrote

to the 2nd Respondent for extension of the 'LSD' purportedly to enable

it to submit no-dues certificate by all creditors of 1st Respondent which

is one of the conditions precedent of the 'ATA'. As per the 'ATA', the

Seller and the Shareholders were to jointly and severally ensure that

the Conditions Precedent are fulfilled as soon as reasonably

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 17 of 33 practicable and in any event on or before 60 days from the Effective

Date ("Long Stop Date"). The 'Long Stop Date' could be extended to

such further date as may be mutually agreed between the parties in

writing.

• In the present appeal before this 'Appellate Tribunal', it is noted from

Clause 6.2 and 6.3 that indeed the time was an important concept

provided in the 'ATA'. However, the 'ATA' also provided the provisions

for extension of the 'LSD' with the consent of concerned parties and

significantly the buyer could waive the requirements as stipulated in

the conditions precedent. This 'Appellate Tribunal' observes from the

records available as well as from the averments made that in this case

the buyer i.e. 2nd Respondent agreed to extend the 'LSD'.

• It is the case of the 'Appellants' that as per the 'ATA' Clause 6.2.1 the

'LSD' could have been extended to such further date as may be

mutually agreed upon between the parties in writing including

shareholders of the seller whose names were given in Schedule 1 of the

'ATA' and as such the 'Appellants' consent was necessary and

extension of 'LSD' and extension of 'LSD' without their consent was

invalid and illegal. On the other hand, the 'Respondents' have brought

out that in the 'EGM' held on 16.04.2016 which was attended by all

shareholders including both the 'Appellants', Mr. Sanjeev Baba was

authorised and delegated all powers to negotiate and settle the 'ATA'

and there was no specific provision or conditions requiring the consent

of the 'Appellants'. This authorisation, therefore, independent and

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 18 of 33 over and above the 'SPSHA' or 'Addendum to SPSHA' since by express

specific consent in the 'EGM' held on 16.04.2016 the 'Appellants'

delegated the powers in favour of Mr. Sanjeev Baba.

• To this 'Appellate Tribunal' reasoning and the logic put forward by the

'Respondents' seems to be logical taking into account the entire series

of events from signing of the 'SPSHA', inductions of the 'Appellants' as

Director and CEO of the company, adverse financial conditions of the

company, shutting down of the plant and finally signing of the 'ATA' to

sale the assets of 1st Respondent. Admittedly, this process helped all

stakeholders and as submitted by the 2nd Respondent that they have

already invested Rs. 66 crores to revive the company.

• Alternatively, the other scenario may also be looked into considering

whereby the consent of the 'Appellants' were needed and not granted.

The consequences of the same could have been liquidation of the

company which in any case would not have served interest of any

stakeholder. Admittedly, the 'ATA' was approved by all shareholders

including the 'Appellants' and to that extent there cannot be any

dispute regarding the fairness of the 'ATA' and free consent accorded

to it by all the parties including all the shareholders of the seller

company including both the 'Appellants'. Nowhere, it has been brough

out that the 'LSD' could not have been extended or extensions of the

'LSD' was detrimental to right of the 'Appellants' in any way. This

establishes that although time is a significant concept in such

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 19 of 33 transaction but cannot be a condition which cannot be altered with

mutual consent of the concerned parties.

• This 'Appellate Tribunal' also do not consider above action of extension

of the 'LSD' especially without consent of the 'Appellants' as act of

oppression of minority shareholders (the 'Appellants') by the majority

shareholders.

• Looking into all these aspects and implication of extension of the 'LSD'

impacting favourably all stakeholders, the implementation of the 'ATA'

and revival of the company, this 'Appellate Tribunal' do not find any

error in the 'impugned order'.

Issue No. (II) Whether, the 'Appellants' as minority shareholder

were oppressed by the majority shareholder in the present case ?

• The 'Appellants' have quoted few instances which are akin to

oppressions under Section 241 of the Companies Act, 2013.

➢ Non service of notice for 'AGM' and non supply of the audited

financial statements

➢ Extension of the 'LSD' without the consent of the 'Appellants'

➢ Wrong interpretation of authorisation in the 'EGM' as

authorisation for all subsequent actions for implementation of

the 'ATA'.

➢ Breach of 'SPSHA' and 'Addendum' thereof, including failure on

part of concerned of the 'Respondents' for altering 'AoA'.

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 20 of 33 • In order to examine the above allegations of the 'Appellants' to

establish the case of oppression, it will be necessary to look into the

provisions relating to oppressions and mismanagement as provided in

the 'Companies Act, 2013'.

CHAPTER XVI PREVENTION OF OPPRESSION AND MISMANAGEMENT "241. Application to Tribunal for relief in cases of oppression, etc.-- (1) Any member of a company who complains that--

(a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or

(b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter.

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 21 of 33 (2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter.

[Provided that the applications under this sub- section, in respect of such company or class of companies, as may be prescribed, shall be made before the Principal Bench of the Tribunal which shall be dealt with by such Bench.] [(3) Where in the opinion of the Central Government there exist circumstances suggesting that -

(a) any person concerned in the conduct and management of the affairs of a company is or has been in connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law or of breach of trust;

(b) the business of a company is not or has not been conducted and managed by such person in accordance with sound business principles or prudent commercial practices;

(c) a company is or has been conducted and managed by such person in a manner which is likely to cause, or has caused, serious injury or damage to the interest of the trade, industry or business to which such company pertains; or

(d) the business of a company, is or has been conducted and managed by such person with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to public interest,

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 22 of 33 the Central Government may initiate a case against such person and refer the same to the Tribunal with a request that the Tribunal may inquire into the case and record a decision as to whether or not such person is a fit and proper person to whole the office of director or any other office connected with the conduct and management of any company.

(4) The person against whom a case is referred to the Tribunal under sub-section (3), shall be joined as a respondent to the application.

(5) Every application under sub-section (3)-

(a) shall contain a concise statement of such circumstances and materials as the Central Government may consider necessary for the purposes of the inquiry; and

(b) shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908 (5 of 1908), for the signature and verification of a plaint in a suit by the Central Government.]

242. Powers of Tribunal.-- (1) If, on any application made under section 241, the Tribunal is of the opinion--

(a) that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and

(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 23 of 33 winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.

(2) Without prejudice to the generality of the powers under sub-section (1), an order under that sub- section may provide for--

(a) the regulation of conduct of affairs of the company in future;

(b) the purchase of shares or interests of any members of the company by other members thereof or by the company;

(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital;

(d) restrictions on the transfer or allotment of the shares of the company;

(e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case;

(f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e):

Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned;

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 24 of 33

(g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;

(h) removal of the managing director, manager or any of the directors of the company;

(i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims;

(j) the manner in which the managing director or manager of the company may be appointed subsequent to an order removing the existing managing director or manager of the company made under clause (h);

(k) appointment of such number of persons as directors, who may be required by the Tribunal to report to the Tribunal on such matters as the Tribunal may direct;

(l) imposition of costs as may be deemed fit by the Tribunal;

(m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made.

(3) A certified copy of the order of the Tribunal under sub-section (1) shall be filed by the company with

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 25 of 33 the Registrar within thirty days of the order of the Tribunal.

(4) The Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company's affairs upon such terms and conditions as appear to it to be just and equitable.

[(4-A) At the conclusion of the hearing of the case in respect of sub- section (3) of section 241, the Tribunal shall record its decision stating therein specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.] (5) Where an order of the Tribunal under sub-section (1) makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make, without the leave of the Tribunal, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles.

(6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum or articles of a company shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act and the said provisions shall apply accordingly to the memorandum or articles so altered.

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 26 of 33 (7) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same.

(8) If a company contravenes the provisions of sub- section (5), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both."

[emphasis supplied]

• Now, let us examine alleged acts of oppression.

• As regard, non service of the notice of the 'AGM' for period ending

March 2016, no concrete case has been made out as to establish the

fact as well as the adverse implication for the same caused to the

'Appellants' which can be termed as oppression. Since, the word

'Oppression' has not been specifically defined in the 'Companies Act,

2013', generally speaking it can be construed as unfair treatment of

minority shareholder by those who are in control of the company. It

is also noted that both the 'Appellants' were inducted on the board of

director of the company and subsequent during deteriorating financial

conditions of the company, the 'Appellants' resigned from the 'BoD'

and in June 2015 the plant itself was shut down. As such, prima-

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 27 of 33 facie no reasons or logic is appreciated for non-service of the notice of

the 'AGM' to the 'Appellants' and similarly non-supply of audited

financial statements which can be assumed to be oppressive to the

'Appellants'. In any case, one single act of Non-supply/ Non-service

cannot be interpreted as the act of the oppression.

• As regards, the points regarding extension of the 'LSD' without the

consents of the 'Appellants' as well as wrong interpretation of

authorisation granted in the 'EGM' from approval of specific resolution

to general authorisation, this 'Appellate Tribunal' has already

discussed these issues in previous paragraphs while elaborating Issue

No. I. As already concluded earlier, these cannot be treated as acts of

oppressions of the minority shareholders.

• As regard, breach of 'SPSHA' and 'Addendum' including lake of

amendment to 'AoA', this Appellate Tribunal has already noted from

the averments that non-amendment of 'AoA' was perhaps attributed

for non compliance.

• Looking to all above, this 'Appellate Tribunal' is not inclined to accept

the arguments of the 'Appellants' regarding their allegations of

oppressions especially when the plant itself was shut down. There was

no alternative except liquidation or revival of company through other

modes including sale of assets to other entity who could revive the

company. It is also not out of context to take into account that prima-

facie payment of dues to stakeholders and bringing an additional

investment of Rs. 66 crores by the 2nd Respondent as purchaser of the

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 28 of 33 company as helped the company has well as all stakeholders including

the 'Appellants'. By no stretch of imagination these acts and deeds can

be construed as oppression of the 'Appellants' and therefore this

'Appellate Tribunal' do not find any error in the 'impugned order' on

this account.

Issue No. (III) (a) Whether the rights of the 'Appellants' have been

violated in implementation of the 'SPSHA' along with the 'Addendum'

to the 'SPSHA'.

(b) Whether, the implementation of the 'ATA' was without consent of

the minority shareholder and whether this tantamount to their

oppression and detrimental to their rights ?

• It is noted that the 'SPSHA' was signed on 27.01.2014 between the

'Appellants' as investors, the 'Respondents' as existing shareholders

and the 1st Respondent as the company. The 'SPSHA' prescribed sale

of entire shareholding to the investors on terms and conditions

specified therein in three tranches along with conditions precedent to

1st, 2nd and 3rd closing. The 'SPSHA' also laid down conditions

subsequent, shareholder's rights and obligation and other terms and

conditions, the important rights of the shareholder and their

obligations have been defined in Clause 5 of the 'SPSHA'. In terms of

the 'SPSHA'. i.e. Clause No. 3.1, Clause No. 5.4 and 5.5 reads as

under:-

"3.1 The Parties agree and undertake that they shall do all such acts ensure the amendment of the

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR)

29 of 33 Articles of Association of the Company, within 10 (ten) days from the Execution date, to reflect the terms, conditions and understanding as set out under the Transaction Agreements in compliance with Section 5 of the Companies Act, 2013.

5.4 Ouorum: In addition to the quorum requirement as prescribed under applicable law, the quorum for any meeting (including any adjourned meeting) of the Board (including any committee of the Board) or the shareholders of the Company shall require the presence of an Investor nominee at the commencement of such meeting and for the entire tenure of the meeting.

5.5 Voting Rights: On and from the Execution Date, no decision shall be taken by or for and on behalf of the Company, whether at a meeting of the Board (or by a committee of the Board or by way of circulation), a meeting of the shareholders (whether held in person or by video conferencing or otherwise) or otherwise unless and until such decision has been approved by the Investors in writing."

• Similarly, addendum to the 'SPSHA' was signed on 28.06.2014

between the 'Appellants', the 'Promoters' and company stipulating

conditions precedent to closing and other conditions and conditions

subsequent, right of first refusal among other terms and conditions.

• From these agreements, it seems that all decisions were required to be

taken with approval of 'Investors' and the 'Chairman' was supposed to

be 'Director' nominated by the 'Investors' (the 'Appellants') and it has

been noted from the averments that the 'Appellants' were appointed as

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 30 of 33 Director and CEO on 02.02.2014 assuming charge and control of the

company. However, due to deteriorating financial health of the

company causing heavy losses and incurring debts, the 'Appellants'

resigned from the BoD and CEO position on 02.01.2015.

• It is also observed that the 'ATA' was singed on 24.06.2016 by 1st

Respondent, 2nd Respondent and each of the shareholder of the seller

whose name was listed out in Schedule 1 of the 'ATA'. This 'ATA' was

signed subsequent to resolution passed in 'EGM' held on 16.04.2016

wherein Mr. Sanjeev Baba director of the company to authorise to

negotiate, to settle the terms and conditions, signing and executing the

requisite the 'Sale Agreement', 'Sale Deeds' and such other documents

as may be found necessary. This resolution also authorised Mr.

Sanjeev Baba to amend the documents and sign on behalf of the

company for registration and do all other acts, deeds and things as are

incidental or consequential thereto. This 'Appellate Tribunal'

consciously note that no reference has been given which prohibit

authorised representative from taking action without specific consent

of the 'Appellants'. It is further observed that the 'SPSHA' was signed

on 27.01.2014 and the Addendum was signed on 28.06.2014, the

'Appellants' resigned from the Board position and CEO position on

02.01.2015, the 'EGM' was held on 16.04.2016 authorising

Mr. Sanjeev Baba and finally the 'ATA' was singed on 24.06.2016. It

is further observed that subsequent to singing of the 'ATA', the three

sale deeds were signed on 01.11.2016 and were registered on

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 31 of 33 03.11.2016. It is evident from this chronological sequence of events

that though originally the 'SPSHA' and 'Addendum' thereto prescribed

consent of the 'Appellants', however subsequent to their resignation,

passing over of 2nd and 3rd Closing dates without further requisition of

shares (to take over 100% shareholding of 1st Respondent) and

delegating full power to Mr. Sanjeev Baba as 'Director of the Company'

to execute and implement the 'ATA' without any conditions that there

was no violation on the part of the 1st Respondent and 3rd Respondent.

This 'Appellate Tribunal' therefore do not find that the provisions of

the 'SPSHA' or the addendum to the 'SPSHA' were breached. Similarly,

it is also held that no prior consent of the 'Appellants' was needed for

any amendments (in the present case extension of the 'LSD'). Looking

to all these agreements, events as discussed earlier and proper legal

documents signed this 'Appellate Tribunal' do not find any error in the

'impugned order'. Similarly, not taking consent of the 'Appellants'

cannot be construed as act of oppression by majority shareholders

especially keeping in view that the sale of the assets of the company

was for the benefits of all stakeholders including shareholders and the

company itself.

36. Therefore, this 'Tribunal', is of the considered opinion that there is no

error, in the 'impugned order' dated 11.02.2020, passed by the 'Tribunal'

and the Instant `Appeal', is `devoid of merits'. Consequently, the `Appeal'

fails.

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 32 of 33 In fine, the instant Company Appeal (AT) No. 108 of 2020 [TA (AT) No.

11 of 2021] is dismissed. No costs. The connected pending `IAs', if any, are

Closed.

[Justice M. Venugopal] Member (Judicial)

[Naresh Salecha] Member (Technical)

Simran

T.A. No. 11/ 2021 (Company Appeal (AT) No. 108 of 2020/TR) 33 of 33