AI Structured Summary
Not yet generated for this judgment
Judgment
[Per; Ms. Shreesha Merla, Member (Technical)]:
Aggrieved by the ‘Impugned Order’ dated 07.03.2019, passed by the National Company Law Tribunal (NCLT, Bengaluru Bench) in C.P.106/2022, TP No.42/2016, ‘M/s. Regal Machine Tools Private Limited & Ors.’ preferred this Appeal. By the ‘Impugned Order’, the NCLT has allowed the Company Petition No.106/2022 with the following directions:
“17…
1.The Respondents are directed to allot shares equivalent to 51% in the Company to the Petitioners;
2.We hereby set aside the impugned EGM held on 23rd February, 2012 and the resolution passed thereon for sale of property of the Company.
3.We hereby declared that Mrs. Vineeta Lal to be on of the Directors of the Company as per Sale Deed dated 27.07.2011 executed by KIADB;
4.We hereby direct the Respondents to convene the Board meeting of the M/s. Regal Machine Tools Private Limited, within a period of two months from the date of receipt of copy of this order to carry out directions above.
5.The other reliefs as sought for are hereby rejected as devoid of merit.
6.All pending I.As also stands disposed of.”
2. Submissions of the Learned Counsel appearing on behalf of the Appellants:
On 02.11.1982, one acre of land bearing Plot No.39, Bommasandra Industrial Area, Attibele, Hobli, Ankal Taluk, Bangalore admeasuring 3948 Sq. Meters was allotted to M/s. Regal Enterprises, a sole proprietorship concern owned by Mr. S.M. Mohan Lal (since deceased represented by Respondent No. 2 to 4 herein) upon payment of part consideration of Rs.9,856/-. The said allotment was initially on ‘lease basis’ for tenure of 11 years and thereafter a Sale Deed was to be executed subject to fulfillment of other conditions. It is further noted that the Balance Payment was to be made after 11 years. Thus, Respondent No. 1 has made the Balance Payment as Sale Consideration to KIADB on 27.07.2011, when the Sale Deed was executed in favor of the first Appellant.
On 12.10.1998, Mr. S.M. Mohanlal requested KIADB to change the constitution of the firm from sole ‘Proprietorship Concern’ to a ‘Private Limited Company’ under the name and style of ‘M/s. Regal Machine Tools Private Limited’ which was acceded by KIADB subject to the condition that Mr. S.M. Mohan Lal should hold 51% ‘Shares’ of the Company till the expiry of lease period of 11 years.
It is submitted that on 19.08.1994, the Appellants had requested KIADB for execution of the Sale Deed and KIADB had communicated that the Sale Deed shall be executed only if the original Allottee, Mr. SM Mohanlal continues to hold 51% of the Shareholding but there was no response to the request of the Appellant. It is submitted that finding no recourse, the Appellant approached the Hon’ble High Court of Karnataka vide Writ Petition No.20762/2019 seeking direction for execution of Sale Deed in respect of the said ‘premises’. The said Writ Petition was disposed of on 10.08.2019, whereby the Hon’ble High Court directed the Board to execute the Sale Deed in accordance with law. On 18.03.2011 and on 08.06.2011, KIADB informed the Appellant Company that KIADB has withheld the execution of Sale Deed until Resolution of disputes of both the parties through a Court of Competent Jurisdiction. Thereafter, the Appellant filed a Writ Petition No.6360/2010 and the matter was settled by a Memorandum of Understanding (‘MoU’) dated 18.03.2011. As per the said MoU, the Shareholding pattern is as under:
| Sl. No. | Shareholder | No. of Shares |
|---|---|---|
| 1. | Mr. D. Jayaram | 677 |
| 2. | Mr. Jawahar Vasan | 670 |
| 3. | Mr. R.J. V. Vasan | 488 |
| 4. | Mr. Mundhra | 488 |
| 5. | Mr. Edward | 220 |
| 6. | Ms. Juliet Vasan | 110 |
| 7. | Mr. Promodh | 8 |
| 8. | Ms. Suganthi Rajendrum | 50 |
| 9. | Mr. Mohan Lal | 365 |
| 10. | Ms. Kaushy Lal | 5 |
| 11. | Ms. Vineeta Lal | 209 |
| Total | 3290 | |
Subsequently, the Hon’ble High Court vide Order dated 08.06.2011, considered the MoU and directed KIADB to execute the Sale Deed in favor of the first Appellant Company. It is submitted that on 25.05.2011, the Appellant and the Respondent moved a representation to KIADB referring the MoU dated 18.03.2011 for execution of a Sale Deed in favor of the first Appellant Company.
It is submitted that ‘Chartered Accountants Certificate’ of NN Yuvraj & Associates dated 01.06.2011 stating that the Respondents are holding 51% Shareholding is fabricated and cannot be relied upon. It is also contended that the Respondents had failed to produce the said Chartered Accountants Certificate for exemption before the ‘Special Economic Offences Court’ at Bangalore. Hence, this ‘Certificate’ cannot be relied upon.
Learned Counsel for the Appellant argued that the proposal of purchasing 2,243 ‘Equity Shares’ for consideration of Rs.53,83,200/- was made by the Respondents and the first Appellant entered into an MoU on 01.07.2011 with Respondents 1 to 4 and the said consideration amount was handed over vide Cheque No.582870 dated 31.08.2011, but it was never presented and was returned to the Respondent. Therefore, no transaction for purchasing 2,243 ‘Equity Shares’ has ever been concluded.
On 23.02.2012 an Extraordinary General Meeting (‘EGM’) was called by the Appellant with an ‘agenda’ to sell the ‘property’ of the Company and a Resolution was passed by 91% of voting. On 11.12.2012, Respondents 1 to 4 filed a Petition before the Company Law Board (‘CLB’) Chennai Bench bearing C.P. No.106/2022 under Sections 111, 235, 237, 397, 398, 402, 406, 542 & 543, for relief against Oppression and Mismanagement.
On 28.12.2017, the third Respondent filed a Complaint CC No.224/2014 before the ‘Special Court for Economic Offences’ at Bangalore. It is submitted that the Appellants had agreed with 51% of the ‘Shares’ to be allotted to the Complainant and her family members and also submitted a Letter dated 01.06.2011 to KIADB vide ‘Certificate’ issued by the Chartered Accountants by confirming that the Respondents are holding 51% Shareholding with the Company and therefore the second and the third Appellant, being the Directors of the first Appellant Company, ought to have issued the ‘Share Certificates’ in respect of 2,243 ‘Equity Shares’. It was also contended that the Complainant had to be appointed as a Director of the first Appellant Company. This Complaint filed by the Respondents was disposed of by the ‘Special Court for Economic Offences’ vide Order dated 28.12.2017, holding that 2,243 ‘Shares’ were never allotted to Respondents 1 to 4.
On 07.03.2019, NCLT Bangalore had allowed the ‘Petition’ filed by the Respondents and erroneously directed the Appellants to allot the ‘Shares’ equivalent to 51% in the first Appellant Company and to set aside the EGM held on 23.03.2012. Learned Counsel submitted that the NCLT had wrongly declined Ms. Vinita Lal to be one of the Directors of the Company as per the Sale Deed dated 27.07.2011.
It is submitted that the ‘Certified Copy’ of the ‘Impugned Order’ was received on 26.03.2019 and the Appeal was filed on 09.05.2019 and therefore is within ‘Limitation’.
3. Submissions of the Learned Counsel appearing on behalf of the Respondents:
It is submitted that late Shri SM Mohanlal had employed the second Appellant as Manager to run the affairs of the Company in the mandate of a ‘Power of Attorney’.
The second Appellant was in search of ‘land’ to expand his own business of manufacturing of Hospital Equipment and late Shri SM Mohanlal reposed faith in him. But the second Appellant misused the scheduled ‘Property’ for manufacturing of Hospital Equipment in contravention of Clause 2(n) of the possession Letter/Lease cum ‘Sale Agreement’ dated 23.04.1984, executed between late Shri SM Mohanlal and the fifth Respondent. Clause 2(n) specifically states that the scheduled ‘Property’ would have been used for the purpose of manufacturing ‘Machine Components’ and ‘Sheet Metalwork’. It is submitted that the Appellants in their ‘Counter’ filed before the CLB admitted that the ‘property’ was used for manufacture of Hospital Equipment.
It is submitted that the second Appellant had filed contradictory documents with the fifth and sixth Respondents, whereunder it was submitted that Respondents 1 to 4 owns 51% of the ‘Shares’ for the first Appellant Company and the second Respondent is the Director thereof.
The NCLT had rightly held that the Appellants had removed the Respondent a lifetime Director, in contravention of the Articles of Association and has set aside the EGM.
It is contended by the Learned Counsel for the Appellant that the Appeal is ‘barred by Limitation’, and that the Appellants had obtained successive ‘Certified Copies’ of the ‘Impugned Order’ i.e., on 24.04.2019 & 30.04.2019 whereas the actual date of receipts of ‘Certified Copy’ is stated as to 26.03.2019 and having received the ‘Certified Copy’ way back on 26.03.2019, the Appellants failed to approach this Tribunal on time and only to cover the delay filed ‘Certified Copies’ which were obtained later on.
It is submitted that this Appeal is also preferred on behalf of Appellants 2 to 5, but the same is not supported by any ‘Affidavit’ or signature on the ‘Vakalatnama’ and that second Appellant is disqualified from being a Director under Section 164 of the Companies Act, 2013, (hereinafter referred to as ‘The Act’) by the Hon’ble High Court of Karnataka in Writ Petition No.28554/2018. The Appeal was also filed originally without any grounds and that this Appeal is ought to be dismissed, both on ‘Limitation’ and ‘on merits’.
Assessment:
It is seen from the record that a ‘Certified Copy’ of the ‘Impugned Order’ dated 17.03.2019 was received by the Appellant on 26.03.2019 and therefore this Appeal is not ‘barred by Limitation’ as the Appeal was filed on 09.05.2019. However, the Appellant had subsequently applied for ‘Certified Copies’ again. However, it is the first date of receipt of ‘Certified Copy’ is what is relevant for counting the ‘period of Limitation’ and it is seen that the present Appeal is filed within 45 days from the date of receipt of ‘Certified Copy’ of the ‘Order’.
It is the case of the Appellant that as per ‘MoU’ dated 01.07.2011, the first Respondent had issued a ‘Cheque’ of Rs.53,83,200/- dated 31.08.2011 to the first Appellant and it was explicitly agreed that the ‘Cheque’ was not to be presented without consent from the first Respondent. The first Respondent had not instructed the first Appellant Company to deposit the ‘Cheque’ and as such no ‘Shares’ were allotted to the Respondent.
It is a case of the Respondents that the ‘Supplementary Agreement’ placed on record by the Appellant was never signed by the 5th Respondent. It is significant to mention that the 5th Respondent has stated so in their reply before the ‘Hon’ble High Court of Karnataka’ in ‘Regal Machine Tools Pvt. Ltd. and Anr. V. KIADB & Ors.,’ W.P. No. 6360/2010 (GM-KIADB) that no ‘Supplement Agreement’ was ever entered into. It is also pertinent to mention that the ‘Schedule Property’ was allotted for establishing and running an industrial unit for a period of 11 years, failing which the ‘Sale Deed’ could not be executed in their favour. This is a matter of record. It is the case of the Respondents that Late Shri S.M.Mohan Lal and the 1st Respondent were removed as ‘Directors’ when Late Shri S.M.Mohan Lal had fallen ill and had to be taken to New Delhi for an angiogram.
A perusal of the material on record establishes that there is no ‘documentary evidence’ inasmuch as the relevant ‘Minutes of the Board Meeting’ or any other significant documents establishing that any ‘allotment’ or ‘transfer of shares’ were made with the consent of the 1st Respondent or the legal heirs of Late Shri S.M. Mohan Lal. There is no ‘Balance Sheet’ which has been filed by the 1st Appellant Company with the ROC and neither is there any record produced for having called any ‘Annual General Meeting’ after issuance of notice to the Respondents about the ‘purported sale’.
As per the ‘Articles of Association’ of the Company, no person can become a shareholder in the 1st Appellant Company without the consent of the existing shareholders.
It is also seen from the record that the ‘Writ Petition No. 20762/2009’ filed by the Appellants against the 5th Respondent without arraying the other Respondents as parties for seeking execution of the sale deed, was disposed of with a direction to consider the request of the 1st Appellant Company in accordance with law and upon fulfilment of the other necessary conditions relating to execution of sale deed. The 5th Respondent had communicated to the Company that without the family members of Late Shri S.M. Mohan Lal holding 51 % shares and one of their family members being on the ‘Board’, the request for execution of any absolute sale deed, cannot be considered. This ‘Tribunal’ is also conscious of the fact that as on the date of filing of Writ Petition No. 20762/2009, the name of the 1st Appellant Company was struck off by the ROC for not having filed their Returns for the period 1994 to 2007 and the said Returns for 13 years were filed by the Appellants without calling for any AGM and without the knowledge of the Respondents.
At this juncture, we find it relevant to reproduce Clause 3.3 of the ‘Mediation Settlement Agreement’, which Agreement was in pursuance to the Writ petition No. 6360 of 2010:
“Notwithstanding the undertaking in clause 3.2 the shareholders, for no additional consideration apart from the agreed consideration under the Agreement, agree and undertake to co-operate to fulfil any condition that may be imposed by the KIADB for the completion of the transfer of the schedule Property in favour of the Company. Such co-operation may or may not include payments to be made by the shareholders. To that extent the shareholders undertake to provide approval for all or any resolution to be passed by the Board of Directors and/or the Company”
It is also a matter of record that the 5th Respondent had executed the ‘Sale Deed’ based on the ‘Joint Declaration’ given by the Appellants and the Respondents vide their letter dated 25.05.2011, which inter alia states as follows:
“The Company and the heirs of Shri Mohan Lal, namely Mrs. Kaushy lal wife of late Mohan Lal and Ms. Vineeta lal Ms. Chitra Mansukhani and Mr. Anju Singh, all daughters of Late Mohan Lal, being the Legal Heirs of the deceased Mohan Lal, jointly own 51% equity shares in the Company. The parties agreed that it is essential that execution of an absolute deed of sale by the Board in favour of the Company be executed so as to render the absolute ownership of the Schedule Property and in the overall interests of the Company, have settled all their disputes by the Settlement Agreements in WP No. 6360/2010. The Copy of the Agreement is enclosed along with this representation.”
In the aforenoted letter, it is clearly mentioned that 51% shareholding of the 1st Appellant Company was with the legal heirs of Late Shri S.M.Mohan Lal and the same is also certified by the Company’s Chartered Accountant. It is vehemently denied by the Respondents that the Cheque was given by the Respondent and was never presented and taken back.
It was only pursuant to the disposal of the said ‘Writ Petition’ that the Company had addressed a letter dated 25.05.2011 to KIADB and certificate dated 01.06.2011 was issued by Shri NN Yuvaraj and Associates, Chartered Accountants which reads as under:
“This is to certify that Mrs. Kaushy Mohall al wife of Mohan Lal S.M, aged about 67 years residing at No. 36, 5th Cross, Nandidurga extension, Bangalore acquired 2243 equity shares of Regal machine Tools Company No. 39, 5th Cross, Bommasandra Industrial area, Bangalore on 05.05.2011. Further in addition to these her family members were holding 579 equity shares. Hence as on 31.05.2011 she and her family members were holding 579 equity shares. Hence, as on 31.05.2011 she and her family members put together holds 2822 equity shares being 51%. This certificate is issued after verification of required documents produced before me. Kindly, accept this certificate and do the needful.”
It is reiterated that the main objective of the `Memorandum of Understanding’, was for `Allotment of Land’, in the name of the `Company’, by `KIADB’ and Cheque No.582870 dated 31.08.2011 for Rs. 53,83,200/-, was for consideration for the `Shares’ to be issued, but the same was ‘conditional’. A perusal of the ‘documentary evidence’ on record establishes that the `Respondents’ are entitled for `51% Shareholding’, in the Company and the Memorandum of Understanding’s in question, specifies that the above percentage, is to be maintained and the initial lease period of 11 years in question will not have any bearing. This `51% Shareholding’, has to be maintained and without the `Consent’ of the `Respondent’, who are holding `51% Shareholding’, no `Transaction’, can be entered into by the `Company’, which would effectively dilute the `Shareholding’ of the `Respondents’. At the cost of repetition, this `Tribunal’, is of the earnest view that the `Appellants’, had acted in `Violation’ of the ‘Articles of Association’ of the ‘Company’ and have not approached the ‘Tribunal’ with clean hands. This `Tribunal’, does not find any ‘illegality’ or ‘infirmity’, in the well reasoned order of the `Tribunal’ (`National Company Law Tribunal’), and hence, TA No.55/2021 (Comp. App (AT) No.128 of 2019), is accordingly `dismissed’. No order as to costs.