Vishnu Nischal Rajkumar vs Radha Krishnna Mills Ltd R1 & Ors

In the matter of: MR. VISHNU NISCHAL RAJKUMAR S/o. Late Mr. V. Rajkumar New No.430, Old No. 1338 Avinashi Road, Peelamedu, Coimbatore-641 004 ... APPELLANT

V

1. M/S. RADHA KRISHΝΑ MILLS LIMITED An unlisted Public Limited Company Rep. by its Director Mr. A. John Kennedy Incorporated under the Companies Act, 1913 Bearing Corporate Identification No. U1711TZ1923PLC013696 Having Registered office at No.54, Mettupalayam Road, G.N. Mills Post Coimbatore - 641 029

2. MR. SANDHIYAGU MARTIN Shalom Dwellings, 135/1, Thiruvalluvar Street, Vellakinaru Pirivu, GN Mills Post Coimbatore - 641 029

3. MR. R. PRABHU S/o. Late P.R. Ramakrishnan 12 Sathyanarayana Avenue, Boat Club Road, R.A. Puram, Chennai 600 028

4. MRS. RAJESWARY RAMAKRISHNAN W/o. Late P.R. Ramakrishnan "Jothi" 53-54, Race Course Road, Coimbatore 641018

5. MR. S.R.K. PRASAD S/o. Late P.R. Ramakrishnan "Jothi" 53-54, Race Course Road, Coimbatore 641018.

Comp App (AT) (CH) No. 107/2023 Page 1 of 21 6. MR. AROKIYAM JOHN KENNEDY Director of M/s. Radha Krishna Mills Limited R/o. 1A/4, Kamarajar Street, K.K. Pudur, Coimbatore - 641 043

7. MR. GOVINDASAMY NATRAJAN Director of M/s. Radha Krishna Mills Limited R/o. Site No.16/29, Capetown Thudiyalur, Appanaickenpalayam, Coimbatore - 641 034

8. MR. SELLAM NADAR RAVI Director of M/s. Radha Krishna Mills Limited R/o. 165, Old No.54, Sundarar Street, Nalvar Layout, Coimbatore - 641 027

9. M/S. FUTURE GAMING AND HOTEL SERVICES PRIVATE LIMITED 54, Mettupalayam Road, GN Mills Post, Coimbatore-641 029

10. M/S. INLOTT E GAMING SERVICES PRIVATE LIMITED 127, Triplicane High Road, Triplicane, Chennai 600 005

11. M/S. DAISY MERCHANDISERS PRIVATE LIMITED 54, Mettupalayam Road, GN Mills Post, Coimbatore - 641 029

12. M/S. SS RARE SKYSCRAPERS PRIVATE LIMITED 54, Mettupalayam Road, GN Mills Post, Coimbatore - 641 029

13. M/S. SARAVANA TOWERS INDIA PRIVATE LIMITED 54, Mettupalayam Road, GN Mills Post, Coimbatore - 641 029 ... RESPONDENTS

Present : For Appellant : Ms. G. Hema, Advocate For Respondents : Mr. R. Vidhya Shankar, Advocate for Comp App (AT) (CH) No. 107/2023 Page 2 of 21 R1 R2 R6 R7 R9-R13

JUDGMENT

(Hybrid Mode) [Per: Justice Sharad Kumar Sharma, Member (Judicial)] The Appellant, before this Appellate Tribunal, is being aggrieved by an

order dated 31.08.2023 that, was passed in the proceedings of CP/1246/2019,

preferred under Section 58, 59, 241, 242 and more particularly on an issue of

grant of waiver contemplated under Section 244 of the Companies Act, 2013,

dealing with an issue of satisfying conditions for grant of waiver for fulfilling

the pre conditions for the purposes of enabling the initiation of the proceedings

under Section 241 of the Companies Act, owing to the embargo in the shape of

restrictions created under Section 244 (1)(a) of the Companies Act, which

contemplates the foundational requirements for crystalizing, even the right to

apply for initiating the proceedings under Section 241/242 of the Companies

Act. The provisions contained under proviso to Section 244, enables the

Tribunals to carve out an exception for granting of an exemption, to override

the stipulations contained under Section 244 (1)(a) of the Companies Act, by

grant of a waiver for initiation of proceedings under Sections 241 and 242 of

the Companies Act.

2. Primarily in the instant company appeal we would be requiring to deal

with the aspect of waiver, which has been denied to the Appellant by virtue of

the impugned order passed by Ld. NCLT, thereby denying an opportunity to

Comp App (AT) (CH) No. 107/2023 Page 3 of 21 the Appellant for initiation of proceedings under Section 58, 59, 241 and 242

of the Companies Act, by holding thereof that, since the Appellant had not

brought himself within the ambit of exception, as contained under proviso to

Section 244 (1) of the Companies Act, no waiver could be granted under

Section 244 (2) of the Companies Act.

3. Looking to the facts and circumstances of the instant case, brief facts that

are particularly required to be referred to, in the instant case are the following:

-

(a) Respondent No. 1 Company M/s. Radhakrishnan Mills was

incorporated with various shareholders, where Mr. V Rangasamy

Naidu, the great grandfather of the Appellant, herein had

subscribed to 150 shares.

(b) Upon his demise the entire shareholding of the company as was

held by him, had devolved upon his sons, namely Mr. R.

Venkatasamy Naidu and Mr. P.R. Ramakrishnan, Mr. P.R.

Ramakrishnan was succeeded by Respondent No. 3 Mr. R. Prabhu

(Son), Respondent No. 4 Mrs. Rajeswary Ramakrishnan (wife)

and Respondent No. 5, Mr. S.R.K. Prasad (Son). The Appellant is

the grandson of the other brother Late Mr. R. Venkatasamy Naidu,

and son of Late Mr. V. Rajkumar, who became the shareholder of

the company in 1960.

Comp App (AT) (CH) No. 107/2023 Page 4 of 21

4. The dispute started germinating between the family members of Late Mr.

R. Venkatasamy Naidu and Mr. P. R. Ramakrishnan Naidu, because of which

they had to engage themselves in multifarious litigations in order to settle the

estates, of Mr. Venkatasamy Naidu and Mr. P. R. Ramakrishnan Naidu.

5. In the course of the business, the family members and the family run

businesses, including Respondent No. 1 company, had developed various

financial liabilities, and the concerned creditors of the company initiated

winding up proceedings as against the Respondent No. 1 company and other

family-owned companies before the Hon'ble High Court of Madras. The said

proceedings were, carried before the Hon'ble High Court of Madras, in

Company Petition No. 17 of 1984 in the matters of M/S. Radha Krishna Mills

Limited, (the company under liquidation) and an order of winding up was

passed in the said proceedings in respect of M/s. Radha Krishna Mills Limited

& M/s. Ramakrishna Industrials Private Limited by the Hon'ble High Court of

Madras on 03.07.1987.

6. During the pendency of the said winding-up proceedings of Respondent

No. 1 company, subsequent to passing of the order dated 03.07.1987, Mr. P.R.

Ramakrishnan filed company applications CA Nos. 1617, 1618, 1619 & 1620

of 2006 in CP No. 17/1984, praying for appropriate direction permitting him to

deposit with the Official Liquidator a sum of Rs. 3,19,29,446/- for discharging

the liabilities of the company towards various creditors, to stay permanently the

Comp App (AT) (CH) No. 107/2023 Page 5 of 21 order of winding up dated 03.07.1987, to appoint him and Respondent No. 3, 4

& 5 as directors constituting the Board of Directors and to direct the liquidator

to hand over the company alongwith its assets and liabilities and the books of

accounts to the said Board of Directors thus constituted.

7. After hearing the parties, the Hon'ble High Court of Madras, passed an

order on 25.09.2006, permitting the applicants to deposit the aforesaid sum, and

asking the liquidator to settle the claims from out of this fund, ordering a stay

of the winding up order and permitting appointment of Respondent Nos. 3 to 5

as directors of the company. Subsequently, vide an order dated 16.03.2007,

Hon'ble High Court recalled the order of winding up dated 03.07.1987 and

noting that the assets have already been handed over to the Board, closed the

Company Petition No. 17 of 1984 and the company applications as mentioned

above.

8. While the Respondent No. 1 company was under liquidation, Mr.

Venkatasamy Naidu expired and thereafter, after much deliberation, an oral

agreement was entered into between the families of Late Mr. Venkatasamy

Naidu & Mr. Ramakrishnan on 22.01.1995 and the same was reduced in writing

in the shape of a notarized affidavit on 10.02.1995. In terms of the said oral

family settlement, it was agreed that 50% of all assets of M/s. Radhakrishna

Mills Limited, both immovable and movable, inclusive of shares in M/s. South

India Viscose Limited, (now named as SIV Industries Limited), and bonus

Comp App (AT) (CH) No. 107/2023 Page 6 of 21 shares issued on the above shares and 50% of all liabilities were to be

transferred to the predecessor of the Appellant, Mr. V. Rajkumar. The appellant

contends that this family arrangement has been signed by Respondents No. 3,

4 & 5 along with Late Mr. V. Rajkumar.

9. The relevant extract of Part I of the family settlement dated 10.02.1995

for convenience, is extracted hereunder: -

MEMORANDUM OF FAMILY ARRANGEMENT THIS MEMORANDUM HAS BEEN SIGNED ON THIS THE 10TH DAY OF FEBRUARY, 1995 TO RECORD THE ORAL FAMILY ARRANGEMENT ENTERED INTO ON 22ND JANUARY, 1995 BY AND BETWEEN PART "A"

(TO BE ALLOTTED TO THE PARTIES HERETO OF THE FIRST PART) M/s. Radhakrishna 50% of all its assets, immovable Mills Limited and movable inclusive of shares in M/s. South India Viscose Limited, now known as SIV Industries Ltd., and the Bonus shares issued by the SIV Industries Ltd., on the above portion of the shares and 50% of all the liabilities of Radha Krishna Mills Limited to be transferred to Mr. V. Rajkumar.

10. Based upon the aforesaid extract of MoU dated 22.01.1995, the

Appellant claims, that since 50% of the assets and liabilities of Respondent No.

1 Company was allotted to Late Mr. V. Rajkumar, the predecessor in interest

Comp App (AT) (CH) No. 107/2023 Page 7 of 21 of the Appellant, and since the Appellant's father, uncles, grandmother and

other Respondents to the proceedings have jointly signed the family

arrangement, and the supplemental understanding dated on 12.03.1995, the

Appellant would be deemed to be holding 50% of the shares in Respondent No.

1 Company.

11. There had been an another proceeding in relation to another group

company, namely M/s. Ramakrishna Mills Private Limited, where the parties

are same as in the family arrangement, before the Hon'ble High Court of

Madras in CP No. 30/1981 in which the Hon'ble High Court of Madras had

passed an order on 21.09.1995, recording that the family arrangement as arrived

at between the parties will be implemented as it is and the parties to the

settlement are hereby directed to perform their obligations and their respective

undertakings accordingly. The Appellant contends that this judgment of

Hon'ble High Court of Madras dated 21.09.1995, has attained finality and hence

the Respondents are now at this stage estopped to question the genuineness of

the family settlement, merely because of the fact, that the said family

arrangement of 10.02.1995 doesn't find reference in any of the proceedings,

relating to Respondent No. 1 company.

12. Further, EGM of Respondent No. 1 company was conducted on

24.11.2006, wherein the authorized and issued capital of the company was

raised to Rs. 12 Crores, comprising of 48 Lakh equity shares of Rs. 25 each,

Comp App (AT) (CH) No. 107/2023 Page 8 of 21 consequential amendments were also directed to be carried in the Memorandum

and Articles of Association of the Corporate Debtor and the board was

authorized to allot on preferential basis, 21,66,560 equity shares of Rs. 25 each,

to Mr. P.R. Ramakrishna and to Respondent No. 3 in consideration of the

discharge of the liabilities of the Respondent No. 1 company by them. The

Appellant would go on to allege that this act of preferential allotment of shares

resulted in increase in shares held by Respondent No. 3, and his associates, to

45,88,053 which constituted 96.57% of the total authorized share capital of

48,00,000, reducing the shareholding of Appellant's father to a miniscule

minority and it amounted to an act of oppression and mismanagement.

13. Subsequently, Respondent Nos. 3, 4 & 5 transferred 39,41,635 shares to

Respondent No. 2 on 29.04.2015 and transferred further tranches of shares of

Respondent No. 1 company to the associates and entities owned by Respondent

No. 2 (that is, Respondent Nos. 6-11), which the Appellant alleges to be illegal

and an act of collusion.

14. Subsequently, Respondent No. 1 company, Respondent No. 12 &

Respondent No. 13 companies filed company applications CA No. 35-37 of

2018 before the Ld. NCLT, Chennai under Section 230 of the Companies Act,

seeking a demerger between the Respondent No. 1 Company, i.e. M/s.

Radhakrishna Mills Limited with M/s. SS Rare Skyscrapers Private Limited

and M/s. Saravana Towers India Private Limited. The said applications of

Comp App (AT) (CH) No. 107/2023 Page 9 of 21 demerger, came up before the Ld. NCLT Chennai bench, and the order was

passed on 28.11.2019. The Appellant preferred an appeal against, the said order

before the NCLAT, New Delhi Bench, in CA (AT) No. 66/2020 in which an

order has been passed by NCLAT on 12.03.2020, directing the Appellant to

approach NCLT with his grievances said order of this Appellate Tribunal is

extracted below: -

"12.03.2020: The Appellant - Shareholder has challenged the order dated 28th November, 2019 passed by the National Company Law Tribunal, Division Bench, Chennai (Tribunal' for short), whereby and whereunder the Scheme of Arrangement/ Demerger was accepted. The appeal has been preferred after delay of 4 days, which, being satisfied of the grounds, is condoned. On merit, it is submitted that the Appellant - Shareholder was not heard when the impugned order was passed.

2. However, that could not be a ground to interfere with the Scheme of Arrangement/ Demerger which is approved under Section 230-232 of the Companies Act, 2013, in absence of any irregularity.

3. Learned counsel for the Appellant submits that proceeding under Section 241-242 is pending and Appellant is the Petitioner in the said proceeding under Section 241-242. In this regard, we may observe that the issue pending consideration in proceeding under Section 241-242 being the subject matter of the present appeal, we are not inclined to interfere with the impugned order dated 28th November, 2019 or the present Company Petition before the Tribunal

4. However, we make it clear that the Tribunal in the petition under Section 241-242 will decide the matter on merit after hearing the parties uninfluenced by order dated 28th November, 2019.

Comp App (AT) (CH) No. 107/2023 Page 10 of 21 5. The appeal stands disposed of with aforesaid observation."

15. Thus, while disposing of the aforesaid company appeal, this Tribunal

left it open for the Appellant to initiate an appropriate proceeding under Section

241 and 242 of the Companies Act, 2013, which was to be considered by Ld.

NCLT exclusively on merits, uninfluenced by the order of demerger dated

28.11.2019.

16. Based upon the aforesaid directions, the Appellant had filed the company

petition, along with an application under Section 244 of the Companies Act,

seeking a waiver, for initiating the proceedings under Section 241 and 242 to

be read with Section 58 and 59 of the Companies Act, 2013, which was

numbered as CP No. 1246 of 2019. In the said application for waiver, the

Appellant had come up with the case, that even though he was holding 13,048

equity shares amounting to 0.27% of the paid-up share capital of the

Respondent No. 1 company, by way of transmission of the said shares held by

his late father, he is entitled to hold 50% of the Respondent No. 1 Company by

virtue of the family settlement agreement as referred to herein above, that

Respondent Nos. 3 to 5 have allotted shares to themselves in utter disregard of

the family settlement agreement dated 22.01.1995 which mandated 50% of the

assets of the Respondent No. 1 company to his late father, that Respondent Nos.

3 to 5 have illegally transferred their shares to Respondent No. 2 which has led

to Respondent No. 1 company being demerged, that there is a clear case of

Comp App (AT) (CH) No. 107/2023 Page 11 of 21 oppression and mismanagement by the Board of Directors of Respondent No.

1 company in form of a series of illegal actions to bring down his late father's

entitlement to the company shares and consequently his entitlement from 50%

of the paid-up share capital of the Respondent No. 1 Company, to a mere

0.27%, that these acts of unlawful dilution of shareholding of his father is a

clear case of oppression and mismanagement, against which he has a right of

redressal and he ought to be granted a waiver under Section 244 of Companies

Act, so as to maintain the company petition.

17. The application thus preferred, on 07.11.2019, along with the company

petition CP/1246/2019, came up for consideration before the Ld. Tribunal and

the same has been decided by the impugned order dated 31.08.2023, passed by

Ld. NCLT.

18. While pressing upon the application of waiver under Section 244 of the

companies Act, particularly in relation to the principal relief, contained under

Clause (a) of 244 application, the Appellant contended that even though he

holds 13,048 equity shares amounting to 0.27% of the paid-off share capital of

the Respondent No. 1 company, he, being the son of Late Mr. V. Rajkumar,

and grandson of Late Mr. R. Venkatasamy Naidu, and great grandson of Late

Mr. V. Rangasamy Naidu, who were the promoters of the Respondent No. 1

company and several other group companies, he has got a right to be granted a

Comp App (AT) (CH) No. 107/2023 Page 12 of 21 waiver under Section 244 of the Companies Act, in order to maintain the

petition against the act of oppression and mismanagement by the Respondents.

19. Appellant's case before Ld. Tribunal was that, owing to the terms of

family settlement agreement of 22.01.1995, which was later on transcribed in

the shape of a memorandum of settlement of 10.02.1995 along with a

consequential supplemental memorandum of 12.03.1995 and which has been

recorded to be binding by Hon'ble High Court of Madras in its order dated

29.10.1995 in CP No. 30/1981 in the matters of M/s. Ramakrishnan Mills, his

late father Mr. V. Rajkumar, son of Late Mr. Venkatasamy Naidu, would be

the actual holder of 50% of the assets and liabilities of the Respondent No. 1

company, and therefore there is sufficient ground to grant him a waiver in order

to permit to initiate the proceeding under Section 241 and 242 to be read with

Section 57 and 58 of the Companies Act.

20. At this juncture we make it clear that, in a proceedings which are to be

carried under section 57, 58 or 241 and 242 of the Companies Act, if an order

is solicited on an application under Section 244 of the Companies Act, the said

proceedings under Section 244 will necessarily have to be an independent

summary proceedings to justify the consideration of aspect relating to

conferment of right to initiate the principal proceedings under Section 241 and

242 of the Companies Act, and any decision taken thereof while deciding the

application under Section 244 would have to be treated to be of a prima facie

Comp App (AT) (CH) No. 107/2023 Page 13 of 21 nature limited to the extent of consideration for the purposes of recording the

satisfaction to meet the criteria of Section 244 (1)(a) and the proviso to Section

244 (1) of the Companies Act.

21. The Ld. Tribunal, upon considering the rival contentions, had proceeded

to pass the impugned order, taking the view that, all the rights that, were being

claimed by the Appellant, were exclusively by virtue of the family arrangement,

which was transcribed in the shape of an understanding of 10.02.1995 followed

by a supplemental arrangement of 12.03.1995, when the company was

admittedly under liquidation, and that such family arrangement of 10.02.1995

will have no binding effect, as such, on any of the issues pertaining to the

proceedings contemplated under the Companies Act before the Ld. NCLT in

relation to a public limited company.

22. The Ld. Tribunal, while recording its findings on the issue of allotment

of shares that, was made in 2006, had observed that, since the board's resolution

for increasing the authorised capital was unanimous and the subsequent

allotment of shares on preferential basis to Respondents was effectively carried

out based on the liability taken by them to discharge the liabilities of the

company and was duly recorded with the Registrar of Companies in 2006 and

2007, without a challenge given by the Appellants to the same at an appropriate

time, the said act of the Board cannot be taken as to be the recuse for the

purposes of granting of an exemption under Section 244 of the Companies Act.

Comp App (AT) (CH) No. 107/2023 Page 14 of 21

23. A very peculiar argument was raised by the Ld. Counsel for the

Appellant at the stage of pressing the application under Section 244 of the

Companies Act, to the effect that the Petitioner's predecessors had

"contributed cash" from time to time for discharge of liabilities of Respondent

No. 1 company and therefore the allotment of shares on preferential basis

should also have been made to their Petitioner's predecessors. This contention

was not accepted by the Ld. Tribunal, because any cash transaction or a cash

contribution for discharging the financial liability of the company, is a concept,

which is not legally contemplated under law and more particularly when it has

been raised as a second thought and was not taken as a defence at the first

opportunity in the pleadings raised by the Appellant in the application and

because ever since the allotment, which had been carried out in 2006, after the

enhancement of the share capital, the predecessor of the Appellant had at no

point of time, raised any objection to the allotment of shares based upon the

aforesaid ground of cash contribution till his demise in 2014 which even

otherwise remained unestablished due to absence of there being any supporting

evidence.

24. As regards to the dispute sought to be raised in respect of the transfer of

shares, the Ld. Tribunal came to a conclusion that, no right will accrue to the

Appellant, because of the fact that the family arrangement agreement cannot be

taken into consideration for the purposes of deciding the proceedings under the

Companies Act, and that too for the purposes of regulating the aspects relating Comp App (AT) (CH) No. 107/2023 Page 15 of 21 to the transfer of shares, when, the late father of the Appellant has not chosen

to challenge constitution of the board of the company and its decision relating

to preferential allotment of shares.

25. The conditions that are necessarily required to be satisfied for allowing

an application preferred under Section 244 of the Companies Act, have been

laid down by the principles laid down, in the matters of Cyrus Investments

Private Limited & Anr. versus Tata Sons Limited & Ors. as decided in

Company Appeal (AT) No. 133 & 139 of 2017 by this Appellate Tribunal on

21.09.2017. The said stipulations as contained under para 151 of Cyrus (Supra)

are as under: -

151. Normally, the following factors are required to be noticed by the Tribunal before forming its opinion as to whether the application merits 'waiver' of all or one or other requirement as specified in clauses (a) and (b) of sub-section (1) Section 244:-

i. Whether the Petitioners are member(s) of the Company in question? If the answer is in the negative i.e. the Petitioner(s) are not member(s), the Petition is to be rejected outright. Otherwise, the Tribunal will look into the next factor.

ii. Whether (proposed) Petition under Section 241 pertains to oppression and mismanagement? If the Tribunal on perusal of the proposed Petition under Section 241 forms opinion that the Petition does not relate to 'oppression and mismanagement' of the company or its members and / or is frivolous, it will reject the Petition for 'waiver'. Otherwise, the Tribunal will proceed to notice the other factors.

Comp App (AT) (CH) No. 107/2023 Page 16 of 21 iii. Whether similar allegations of 'oppression and mismanagement' were earlier made by any other member and stood decided and concluded?

iv. Whether there is an exceptional circumstance made out to grant 'waiver', so as to enable the members to file Petition under Section 241, etc.?

26. Upon considering the rival contentions, the Ld. Tribunal came to a

conclusion that, the application under Section 244 does not merit a 'waiver' of

requirements of Section 244 (1) because of the following: -

a) according to the pleading of the Appellant himself in the

application under Section 244 of the Companies Act, he holds

only 13,048 shares, which is equivalent to 0.27% of the paid-up

share capital. Even though he asserts that he is entitled to 50% of

the shares of the company as per family settlement agreement, the

same has not been acted upon by a duly constituted Board,

constituted in 2006 by an order of Hon'ble High Court and it has

not been challenged by him.

b) Admittedly, the Appellant is a member of Respondent No. 1

company but he has to make out a prima facie case of oppression

and mismanagement to be considered for grant of waiver from the

provisions of Section 244 (1) of the Companies Act.

c) The Appellant has staked his right to 50% of shares based on the

memorandum of family arrangement, but as per the ratio of Aruna

Comp App (AT) (CH) No. 107/2023 Page 17 of 21 Oswal Vs. Pankaj Oswal & Ors. (2020) 8 SCC 79, non-

implementation of family arrangement is in nature of a civil

dispute and it cannot be pleaded as an act of oppression to justify

grant of waiver from provisions of Section 244 (1) to file petition

under Section 241 of Companies Act. Further, mere averment that

he came to know of preferential allotment of shares done in 2006

and its subsequent transfer in 2015 to Respondent No. 2 only

when he received the notice of a general meeting to consider the

scheme of demerger will not entitle him to file a petition for

oppression and mismanagement because his father had chosen

not to challenge the constitution of board in 2006 and its decision

to go for preferential allotment of shares to Respondent No. 3 and

his group during the entire period from 23.11.2006 to 2014 and

not to challenge non-implementation of the said 'family

arrangements'.

27. Against this backdrop and based on the pleadings submitted, it is seen

that the Appellant and his late father have not sought implementation of the

terms of the family settlements from 2006 till the date of filing of the company

petitions. The constitution of the board made under the order dated 25.09.2006,

of the Hon'ble High Court has not been questioned. The plea that his late father

had made cash transfers and hence is entitled to further allotment of shares is

not supported by evidence. Prima facie, a duly constituted board, constituted Comp App (AT) (CH) No. 107/2023 Page 18 of 21 under the orders of the Hon'ble High Court, has decided to increase the

authorised share capital and to allot the same on a preferential basis to

Respondent No. 3 and his group on the grounds that they had helped discharge

the liabilities of the company, which has not been challenged till the filing of

the company petition, in spite of timely filing of the documents with RoC,

which could have been accessed by the Appellant or his late father. Further, no

exceptional circumstances has been made out by the Appellant to merit grant

of a waiver as per principles laid down by the ratio of Cyrus Mistry (Supra).

28. Hence, the dismissal of the application under Section 244 of the

Companies Act, doesn't call for interference at our hands except for the

observations which has been made by the Ld. Tribunal while parting the

judgment in para 20 of it, which is extracted hereunder: -

"20. For the aforestated reasons, we are of the view that the Petitioner has miserably failed to establish a case of oppression and mismanagement under Section 241 / 242 of the Companies Act, 2013 and also upon perusing the pleadings and arguments advanced by the Learned Senior Counsel for both the parties, we are of the view that there is no 'exceptional circumstance' made out by the Petitioner in order to grant 'waiver' under Section 244(1)(a)and(b) of Companies Act, 2013."

29. At this point we are of the view that, the Ld. Tribunal has exceeded its

brief in recording the said findings in para 20, by observing thereof on merits

of proceedings under Section 241 & 242 of the Companies Act, that no act of

oppression and mismanagement is made out, because the finding there in

Comp App (AT) (CH) No. 107/2023 Page 19 of 21 should have been only a prima facie expression given at that point of time when

the Ld. Tribunal was considering the application under Section 244 (1)(a) &

(b) of the Companies Act, for grant of a waiver. However, this cannot be an

exclusive reason to interfere in face of the orders passed by the Hon'ble High

Court of Madras and the consequential actions taken thereafter, to which the

Appellant's father himself had submitted to without giving a challenge to it, and

Appellant's own failure to resort to recourse available under law to get the

family arrangement implemented.

30. In that eventuality, while dismissing the company appeal along with all

the interlocutory applications, we rephrase para 20 observing thereof that the

findings recorded in the impugned order dated 31.08.2023 as contained in para

20, may not be construed as to be a finding deciding any of the aspect of

oppression and mismanagement because that was not a stage yet reached by the

Ld. Tribunal to be decided, particularly when the Ld. Tribunal at the relevant

point of time was seized with the proceedings of deciding the application under

Section 244 of the Companies Act, which was a decision bound to be preceded

before actually venturing on merits the petition to be filed under Sections 241

and 242 of the Companies Act.

31. We are the view that the rejection of the application under Section 244

of Companies Act, does not suffer from any apparent error, because of inaction

of the predecessor of the Appellant and inaction of the Appellant himself, and

Comp App (AT) (CH) No. 107/2023 Page 20 of 21 because no exceptional circumstances has been made out and established by

the Appellant to allow the application under Section 244. But having said so,

the finding pertaining to the act of oppression and mismanagement in the

impugned order is ruled out at this stage against the Appellant, leaving all

contentions open for the Appellant to be agitated in an appropriate proceeding

to be carried by him if permissible in accordance with law, before any other

forum except for the forum contemplated under Sections 241 and 242 of the

Companies Act. Subject to the aforesaid and the exceptions as carved out, the

'company appeal' lacks 'merit' and the same is accordingly 'dismissed'.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Jatindranath Swain] Member (Technical)

27/08/2026 SN/MS/AK

Comp App (AT) (CH) No. 107/2023 Page 21 of 21