Venkatesh Koravadi vs Viney Kaushal & Ors

[Arising out of Order dated 22nd March, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench in C.P. No. 07 of 2016]

IN THE MATTER OF:

Shri Venkatesh Koravadi ....Appellant

Vs

Viney Kaushal & Ors. ....Respondents

Present: Mr. Antony R. Julian, Advocate for Appellant. Mr. Madhu N. Rao, Advocate for Respondent Nos. 1-3. Mr. George Pothan, Advocate for Respondent Nos. 4-9. Mr. Raghunath, Mr. Basant and Mr. Raghav Mehrotra, Advocates for Respondent Nos. 5-8.

[05th March, 2020]

JARAT KUMAR JAIN, J.

This Appeal has filed by Shri Venkatesh Koravadi against the order dated

22.03.2019 passed by National Company Law Tribunal, Bengaluru Bench in C.P

No. 07/2016.

2. Brief facts of this case are that M/s World Schools Pvt. Ltd. (in short

Respondent Company) was incorporated as a Private Limited Company on

24.01.2005 under the Companies Act, 1956 having their registered office at New

No. 76, Old No.29, 1st Main Road, Chamrajpet, Bengaluru - 560 018. The

Authorized Share Capital of the Company is Rs. 1,00,00,000/- (Rupees One -2-

Crore only) divided into 10,00,000/- Equity Share of Rs. 10/- each and the paid-

up capital of the Company is Rs. 95,58,060/-. The main objective of the

Company was to establish and run in any part of India or elsewhere colleges or

schools for imparting education to the students. Respondent Nos. 1, 2 & 3 are

shareholders holding 52530, 39420 and 12269 equity shares respectively in

Respondent Company. The sum and substance of the allegations in the Petition

is that the Company has allotted shares at different premiums on different points

of time; without proper notices, company meetings were convened; in the Auditor

Report Financial irregularities were found and material information has not been

supplied to Respondent Nos. 1, 2 & 3 (Petitioners). It is also alleged that some

shareholders have formed a Trust and are misusing the funds of the Respondent

Company.

3. It is stated that Respondent Nos. 1, 2 & 3 were removed from the

Directorship of the Company by a resolution dated 07.03.2016, therefore, they

have filed this Petition under Sections 241, 242, 210, 213 and 246 of the

Companies Act, 2013 seeking the following reliefs:-

" 1) To pass an order that the actions of the contesting Respondents

are oppressive in nature.

2) To pass an order that the action of the contesting Respondents

have not been approved by the other directors and the

shareholders.

3) To pass an order surcharging the contesting Respondents for

their illegal actions and return back the misappropriated money

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of the Company and the Trust to the accounts of the Company

and the Trust.

4) To pass an order directing the contesting Respondents to render

proper accounts to the Company and the Trust.

5) To pass an order for through inspection and investigation of the

affairs of the Company and the Trust by appointing Inspectors

through the Ministry of Corporate Affairs.

6) To pass an order to appoint an Independent Auditor to

investigate the dealings of the purchase of land and the amount

received and spent by the Company and how it is booked in the

accounts of the Company.

7) To pass an order that the allotment made to the contesting

Respondents without premium is null and void and consequently

direct the Company to reduce proportionately the numbers of

shares allotted to them and rectify the Register of Members.

8) To pass an order declaring that the Board Meetings and General

Meeting held without issuing notices to the Petitioner Directors

are null and void and the decision taken on the said meetings

will not bind the Petitioner Directors and other individual

investors and shareholders, etc."

4. The Appellant herein and Respondent Nos. 4 to 9 herein resisted the

Petition on various grounds including the ground of limitation.

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5. National Company Law Tribunal has disposed of the Petition with certain

directions. Being aggrieved, the Appellant filed this Appeal.

6. Heard Learned Counsel for the parties.

7. Learned Counsel for the Appellant submits that the impugned order is non

speaking and a vague order. In the impugned order the statutory authority did

not specify the time period for the completion and submission of the

Investigation Report and also to whom they will submit the report. It is also

submitted that National Company Law Tribunal has disposed of the Petition

without considering the submissions made on behalf of the Appellant, in such

circumstances it would be appropriate to remit the matter to National Company

Law Tribunal for passing specific directions after considering the submissions

made on behalf of the Appellant.

8. Learned Counsel for Respondents No. 1 to 3 are supporting the order.

However, he is unable to point out the scope of enquiry and time fixed for

submitting the report and to whom the report will be submitted. He is also

unable to point out at present the stage of investigation before the statutory

authorities.

9. We have gone through the impugned order the operative portion of the

impugned order reads as under:

"12. The above facts and circumstances prima facie shows that the

Respondents are resorting to acts of oppression and

mismanagement which are further to be investigated by the

Registrar of Companies and Principal Director of Income Tax

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(Investigation) with whom the complaints are already pending

submitted by the Petitioner. It would be just and proper to prevent

the present management to perpetuate further acts of oppression

and mismanagement and to prevent misuse of funds, by making an

interim arrangement by appointing independent Chairman as to see

the affairs of the Company should be conducted in accordance with

law. Since R-1 Company deals with imparting education, it would be

in the interest of justice to appoint an experienced person in

education field. Therefore, we found Prof. (Dr.) O.V. Nandimath,

Professor of Law & Registrar, National Law School of India

University, Nagarbhavi, Bangalore-560242, is suitable for

appointment of independent Chairman as he is having lot of

experience in the education field.

13. The Petitioner has addressed a complaint to PMOPG portal

complaint. As per the communication received from the PM's Office,

it is stated that the Petitioner is stated to have made a complaint

with the PMO Office with regard to the delay in making the

investigation into the affairs of the Company by the Registrar of

Companies, Principal Director of Income Tax (Inv.) and also the

matter is pending disposal on the file of this Tribunal. However, the

Tribunal could not get the latest developments on the stage of the

investigation pending on the above complaints with the above

authorities. In order to investigate into the complaints filed by the

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Petitioner by the Statutory Authorities, it is also necessary to dispose

of the instant Company Petition to complete the inquiry.

14. In the result, C.P No. 07 of 2016 is disposed of with the following

directions:

1) We hereby appointed Prof. (Dr.) O.V. Nandimath, Professor of

Law & Registrar, National Law School of India University,

Nagarbhavi, Bangalore-560242, as independent Chairman for

M/s. World Schools Private Limited to look after the affairs of the

Company, till the investigations are completed by the Statutory

Authorities;

2) We hereby fixed Rs. 75,000/-(Rupees Seventy Five Thousand

Only) per month, which is to be reimbursed from out of funds of

the R-1 Company;

3) The Company and Independent Chairman are at liberty to file

Miscellaneous Application(s) in the Tribunal seeking further

direction(s) if necessary;

4) The Petitioners are hereby granted liberty to file a fresh

Company Petition, if they are ultimately aggrieved by action taken

by the Statutory Authorities viz. Registrar of Company (ROC),

Principal Director of Income Tax (Inv.).

5) We hereby direct Registrar of Companies (ROC), Principal

Director of Income Tax (Inv.) to expedite the investigations and

take appropriate action in accordance with law.

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6) Registry of Bengaluru Bench is directed to mark the copy of this

order to the following authorities:

a. Prof. (Dr.) O.V. Nandimath, Professor of Law & Registrar,

National Law School of India University, Nagarbhavi,

Bangalore-560242.

b. Registrar of Companies Karnataka, E-Wing, 2nd Floor,

Kendriya Sadan, Koramangala, Bangalore-560034.

c. Principal Director of Income Tax (Inv.), C.R. Building

(Annexe), III floor, Bengaluru.

d. Prime Minister Office.

10. From bare reading of this order it seems that the National Company Law

Tribunal has appointed an Independent Chairman for interim arrangement till

the investigation is completed by the Registrar of Companies and Principal

Director of Income Tax (Investigation). However, the scope of enquiry time, for

completing the enquiry and to whom the statutory authorities will submit the

report, is not mentioned in the impugned order.

11. The impugned order is passed on 22.03.2019, till date about 11 months

has lapsed, but Learned Counsel for the parties are unable to apprise the present

stage of investigation before the statutory authorities.

12. In such a situation we are afraid that in absence of clear directions, the

statutory authority will not be able to complete the investigation.

13. In such a situation we think it appropriate to remit the matter. Therefore,

we set aside the impugned order and remit the matter to National Company Law

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Tribunal with a request that after hearing the parties to pass fresh order without

being influenced by this order.

14. We make it clear that we have not gone into the merits of this case and

even we are not confirming that the investigation by the Registrar of Companies

and Principal Director of Income Tax (Investigation) is required in this matter.

15. The Petition was filed somewhere in the month of September, 2016 and

therefore we hope and trust that the National Company Law Tribunal shall make

all endeavor to decide the Petition expeditiously.

Parties are directed to appear before the National Company Law Tribunal,

Bengaluru Bench on 25.03.2020.

With the above directions, the Appeal is disposed of. However, no order as

to cost.

Registry is directed to send the copy of this order to National Company Law

Tribunal, Bengaluru Bench forthwith.

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

(Ms. Shreesha Merla) Member (Technical) NEW DELHI SA

Company Appeal (AT) No. 101 of 2019