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Judgment
Dr. Alok Srivastava, Member (Technical)
This appeal has been filed under section 421 of the Companies Act, 2013 (in short “Companies Act”) by the Appellants, who are aggrieved by the order dated 1.4.2022 (in short “Impugned Order”) passed by the NCLT, Kolkata Bench in CP No. 42/2016.
Briefly, the facts of the case, as stated by the Appellants, are that Appellant No. 1’s (in short “A-1”) father-in-law Shri R.K. Gupta founded the Respondent No. 1 Company (in short “R-1”) and after his demise, his wife Smt. Uttama Gupta made a Registered Will by which the shares held by her and the shares transferred to her by virtue of the Will of her husband Shri R.K. Gupta were to be equally divided among their two sons, namely Shri Ravindra Kumar Gupta (“R-2”) and Shri Arun Gupta (“R-5”) and the daughter Smt. Usha Kiran Jain, who is Appellant No. 2 (in short “A-2”). Thereafter, A-1 became Managing Director of R-1 Company and started running the affairs of the Company in a smooth manner. The Appellant has further stated that the shareholding of Smt. Uttama Gupta was surreptitiously transferred to the wives of R-2 and R-5 respectively, and when A-1, through an e-mail dated 10.11.2011, demanded explanation/ clarification regarding the transfer of shareholding done in favour of wives of R-2 and R-5 respectively, he did not receive any reply.
The Appellants have further stated that due to differences between R-2 and R-5, both sons of the Company’s founder, R-5 preferred company petition viz. CP No. 176/2015 before Company Law Board, Kolkata (in short ‘CLB”), but later withdrew the said company petition after the signing of an MoU dated 23.3.2016 with the group of R-2 and R-3, with the ostensible intention to divide the Company into two parts through a scheme of demerger to distribute the proceeds between themselves leaving out the daughter from the sharing. He has further stated that in pursuance of this nefarious intention, R-2 and R-5 started indulging in acts of oppression and mismanagement of the Company, which became quite intense leading to their design to push out A-1 and his son Siddharth Jain (R-9) from the company, and for achievement of this evil design they fixed a board meeting on 24.5.2016 for fixing the date of Extra-Ordinary General Meeting (“EOGM”) in which they wanted to decide about removing A-1 and R-9 from the post of Managing Director and Director respectively. The Appellants, smelling such a design, approached the NCLT through C.P. No. 42/KB/2016 alleging oppression and mismanagement in the affairs of the company, and obtained a ‘status quo’ order on 3.5.2016 to stop the company from removing A-1 and R-9 from the posts of Managing Director and Director and also allow them to continue performing their official duties.
The Appellants have further stated that the Respondents put hurdles and obstructions in the way of A-1 and R-9 in the peaceful performance of their official duties, and hence in view of the above situation, they approached NCLT, Kolkata through CA No. 453/2016 seeking clarification of the ‘status quo’ order dated 3.5.2016, in which upon hearing, the NCLT vide order dated 18.8.2016 provided clarifications in continuation of the CLB’s order dated 3.5.2016, directing the Respondents to issue swipe cards to A-1 and R-9 for accessing the corporate office and also to provide access to the official e-mail of the Company and pay them salary as is payable to the other directors of the Company. When the Respondents disobeyed these orders of CLB/NCLT, the Appellants filed contempt application, viz. CA No. 487/KB/2017 but disregarding it, the respondents continued to place hurdles in the attempts by A-1 and R-9 to attend the board meetings and through a devious design, they surreptitiously engineered a fraudulent case against A-1 and R-9 regarding their absence from four board meetings of past one year which led to their cessation/vacation of office under section 167(1)(b) of the Companies Act. Thus A-1 and R-9 were removed from the post of Managing Director and Director respectively w.e.f 6.6.2017. The Appellants have further submitted that they also filed CA No.165/KB/2018, when the matter of non-compliance of directions given through two interim orders dated 3.5.2016 and 18.8.2016 was brought to the notice of NCLT. The Appellants again filed IA No. 112/2021 to highlight the acts of oppression and mismanagement being perpetrated by the respondents, inter alia submitting that A-1 and R-9 were forcibly prevented from attending the board meetings and were, through surreptitious means, removed as Managing Director and Director respectively of the company. The Appellants have thus, claimed that the Respondents, particularly R-2, R-3 and R-5 have continued to defy the interim status quo orders of NCLT and in a fraudulent manner removed A-1 and R-9 from the post of Managing Director and Director, which is a clear non-compliance of NCLT’s order.
The Appellants have stated that after accepting the erroneous contention of the Respondents that R-1 does not possess the necessary qualification under section 196(3) of the Companies Act to become the Managing Director, as he was not currently holding the position of the Managing Director or Director of the Company, the NCLT refused to grant relief prayed by the A-1 in CA No. 1584/KB/2019 and after dismissing this Company Petition, the NCLT also dismissed IA No. 112/KB/2021 and found that CP No. 42/2016 as not maintainable which are erroneous application of law as the real reason of absence of A-1 and R-9 from board meetings were themselves due to oppression and mismanagement and not acts done voluntarily by A-1 and R-9. The Appellants have stated that the Impugned Order passed by the NCLT in CP No. 42/2016 without considering and adjudicating on the allegations of oppression and mismanagement, which had been continuously brought to the notice of the NCLT by the Appellants, is therefore patently erroneous, and based on the incorrect premise of ineligibility under section 196(3).
We heard the arguments advanced by the Learned Senior Counsel for Appellants and the Learned Counsel for the Contesting Respondents R-1, R-5 and R-6 and perused the record. It is noted that vide order dated 30.1.2023 passed during the hearing of this appeal, an order was made for proceeding ex-parte` against R-3, R-4, R-6, R-7, R-8 and R-10, and during final hearing, none of these Respondents appeared before the bench to submit their arguments. Further, R-9 Shri Siddharth Jain, who is a proforma Respondent, has appeared in person and was heard in the matter.
The Learned Senior Counsel for Appellants has argued that A-1 was appointed as Managing Director of R-1 Company in the year 2005 and A-2 is a shareholder of the R-1 Company. He has argued that the Respondents, particularly R-2, R-3 and R-5, after entering into an MoU, started indulging in acts of oppression against A-1 and R-9, with the view to dividing the Company between themselves while keeping A-1 and A-2 out of the Company. He has argued that with this nefarious design, the Respondents started troubling and oppressing the Appellants and R-9, and when the shareholding of A-2, which was bequeathed to her by the Registered Will of her mother Smt. Uttama Gupta, was suspiciously transferred in the name of the wives of R-2 and R-5, A-1 sought clarification and the reasons for this act of the Company. He has further argued that when A-1 apprehended that, in continuation of their acts of oppression, the Respondents were proposing to hold an EOGM to remove him from the post of Managing Director, he filed CP No. 42/KB/2016 before the CLB, Kolkata, which was heard on the prayer of interim relief on 3.5.2016, when a ‘status quo’ order was passed by the CLB restraining the R-1 Company from removing A-1 and R-9 from the posts of Managing Director and Director respectively. He has further argued that the Contesting Respondents, in contravention of this ‘status quo’ order, denied access to A-1 and R-9 in the corporate office of the Company and also of the company’s official e-mail, and this contravention of status quo order was brought before the NCLT, Kolkata by the Appellants through CA 453/2016, upon which the NCLT reiterated the status quo order and clarified it by passing an unambiguous order on 18.8.2016.
The Learned Senior Counsel for Appellants has further claimed that the acts of oppression and mismanagement by the Contesting Respondents and the Company (which was controlled by them) did not stop despite these orders, the Contesting Respondents through devious means of first preventing A-1 and R-9 from attending board meetings, cooked up a story of A-1 and R-9 being absent from the board meetings for a period of one year, thus making A-1 ineligible to hold the position of Managing Director w.e.f. 6.6.2017, by fraudulently showing vacation of office under section 167(1)(b) of the Companies Act, 2013. He has, further, argued that upon this act of R-1 Company, which was duly aided by R-2, R-3 and R-5, the Appellants filed IA No. 112/2021, again bringing to the notice of NCLT that Respondents did not honour the ‘status quo’ orders and used the provision under section 167(1)(b) of the Companies Act, 2013 in a fraudulent and illegal manner to push A-1 and R-9 respectively out of their respective positions in R-1 Company. He has further argued that A-1 and R-9 did not receive any mandatory notice for some of the board meetings which they have been alleged to be absent from, which is required under section 173(3), and therefore, section 167(1)(b) would have no applicability. He has this claimed that the cessation of the offices of Managing Director and Director held by A-1 and R-9 respectively was predicated on wrong understanding and appreciation of facts and law and is therefore is a patently illegal action of the company.
The Learned Senior Counsel for Appellants has claimed that the acts of oppression by the Contesting Respondents continued even after the filing of CP No. 42/2016 as would be clear from various company/interlocutory applications and contempt application filed by the Appellants which should have been considered by the NCLT. He has further argued that the Impugned Order does not appreciate that the company’s management and R-5 did not allow the Special Officer Mr. D.C. Agarwal appointed vide NCLT’s order dated 1.10.2019 to perform his duty, and further the same order dated 1.10.2019 also directed that interim reliefs given vide orders dated 3.5.2016 and 18.8.2016 were to remain in force till further orders, but the Respondents wilfully violated the said orders, which forced the Appellants to file a Contempt Application.
The Learned Counsel for Appellants has argued that not allowing the A-1 and R-9 to attend certain board meetings through dubious design, was itself an act of continuing oppression, but the NCLT relied on the contention of the Contesting Respondents at face value that A-1 and R-9 were wilfully absent from the board meetings in the past one year, and then selectively took up just one issue of section 196(3) and placing reliance on incorrect information about the absence of A-1 and R-9 from board meetings to hold that A-1 was not occupying the position of Managing Director once he had ceased to hold office, he could not get the benefit of the continuing in office after attaining the age of 70 years. The Learned Counsel for Appellants had lastly contended that there were many acts of oppression and mismanagement raised by him in CP No. 42/2016 and also in CA No. 1584/KB/2019, CA No. 165/KB/2018 and lastly in CA No. 122/KB/2021, but none of the prayers were considered appropriately and only on the incorrect ground that A-1 and R-9 had ceased to hold office on account of board resolution dismissed CA 1584/KB/2019, and thereafter without even looking at the issues raised in IA No. 112/KB/2019 and CP No. 42/KB/2016 dismissed them without recording any reason or adjudicating on the issues of oppression and mismanagement raised in these petition/applications.
The Learned Counsel for R-1, R-5 and R-6 (“Contesting Respondents”) has submitted that A-1 and R-9 were whole time directors of R-1 Company along with other directors. The shares held by Smt. Uttama Gupta were transferred to her daughters-in-law Smt. Veena Gupta and Smt. Savita Gupta by a gift deed dated 25.10.2007 and the transfer of shares was duly approved by the directors in the board meeting held on 3.11.2007, wherein five directors including A-1 were present, and thereafter the details of these shares were duly reflected in the Annual Report for the year 2007-2008 and balance-sheet for FY 2013-14, but the petitioners have still raised the objection regarding transfer of shares. He has claimed that after the execution of the gift deed, the shares of R-1 Company were held by members of the Gupta family and A-1 wherein A-1 and A-2 combinedly held a total of 20% shares, and A-2 and A-1 individually held 16.49% and 3.51% shares respectively.
The Learned Counsel for Contesting Respondents has further argued that even though the Appellants held only 20% shareholding in the R-1 Company, the desire of A-1 to manage and control the Company as per his whims and fancy caused rift among the board of directors and when A-1 found that R-5 was a hurdle in achievement of his objective, he sent notice of a meeting to remove R-5 from the Board of Directors, after which R-5 was constrained to approach CLB, Kolkata to prevent such an action by A-1. He has further submitted that A-1 and his son R-9 filed CP No. 42/KB/2016 on imaginary grounds of oppression and mismanagement and obtained a stay order dated 3.5.2016 and further that there was never any hurdle from the side of respondents in the performance of official duties by A-1 and R-9, but as they chose not to attend the board meetings held on 14.7.2016, 26.10.2016, 19.1.2017 and 5.4.2017 and thus abstained from attending board meetings in the past 12 months, they were removed as Managing Director and Director of R-1 Company in view of section 167(1)(b) of the Companies Act, 2013. He has argued that the Impugned Order has correctly appreciated the issues raised in CA No. 1584/KB/2019 and dismissed it. Consequently, on the ground that A-1 Shri Yogendra Pal Jain was not eligible to hold the post of Managing Director, the NCLT also dismissed IA 112/KB/2021 and thereafter held that CA No. 42/KB/2016 is not maintainable, and all these inferences are correct in the eyes of law.
We now consider the contentions and arguments of the rival parties in the light of record and the issues raised in the appeal.
It is noted that the Appellants filed Company Petition CP No. 42/KB/2016 under sections 235, 397, 398, 399, 402, 406 and 407 of the Companies Act, 2013, with prayers for interim relief for appointing a Special Officer in R-1 Company to make an inventory of all books and accounts and take possession of all books and record of the Company. In addition, the company petition also included prayers for restraining the Respondents from altering the shareholding, share capital and the structure of the board of directors of the company among many other prayers relating to affairs of the company’s management. It is also noted that on hearing of CP No. 42/KB/2016, the following order was made on 3.5.2016:-
“CP No.42/2016 mentioned today. The Petitioners Advocate submitted that the Petitioner No. I has been functioning as Joint Managing Director in the Respondent Company, however the Respondents have been indulging in transactions with entities in which directors are interested and thereby, the interest of the company is adversely affected. Besides, several employees reporting to the Petitioner No.1, have been terminated and thereby, the normal working of the company has adversely affected, resulting in financial losses as well. Now, the Board Meeting is scheduled to be held on 01/05/2016 for convening the Extra Ordinary General Meeting for removal of Petitioner No.1 as Managing Director and his son, Mr. Siddharth Jain (Respondent No.9) as a Director of the company. However, the Respondents Advocate submitted that the Special Notice given by the shareholders will be considered on the Board Meeting to be held on 04/05/2016 and the Extra Ordinary General Meeting will be convened and held in terms of Section 100(1) of the Companies Act, 2013 and at this stage, the fate of resolution for removal of Petitioner No.1 and Respondent No.9, from the Board of Directors is not known. Further, the Respondents Advocate levelled counter allegation against the Petitioner No. I for the transactions with the entities in which the P.I is interested.
Considering the submissions of the Petitioners Advocate and the Respondents Advocate, I am of the considered opinion that prima facie there are instances of oppression and mismanagement on the part of the Respondents and hence, the Petitioners deserve to get protection by way of interim relief Therefore, for the end of justice, the Respondent No.) company is hereby directed to maintain "the status quo as to the shareholdings and the Extra Ordinary General Meeting in terms of Section 100(1) of the Companies Act,2013, if held after the meeting of the Board of Directors on 04/05/2016, the resolution relating to removal of Mr. Y.P. Jain (P-1) as Managing Director and Mr. Siddharth Jain (R-9) as director of the company, if passed, will not be given effect to, till the disposal of the Company Petition.
After hearing the submissions of the Petitioners Advocate, the Advocate for the Respondent No.1, the Advocate for the Respondents No. 2, 3 8 4 and the Advocate for the Respondent No.5, are allowed 3 weeks' time to file their replies. The Petitioners Advocate is allowed to file the rejoinder, within 2 weeks from the date of receipt of reply.”
As noted, by the order dated 3.5.2016, R-1 Company was directed to maintain ‘status quo’ as to the shareholding and also holding EOGM which would have considered the agenda for removal of Shri Yogendra Pal Jain as Managing Director and Shri Siddharth Jain as Director.
We further note that the interim relief dated 3.5.2016 was clarified by NCLT by its order dated 18.8.2016 passed in CA No. 453/2016, and the relevant portion regarding clarification of the earlier ‘status quo’ order dated 3.5.2016 is as hereunder:-
“In continuation of the ad interim order dated 3 May 2016 of the CLB following clarifications are issued.
(1) As Access Swipe Card have been issued for other personnel of the Company similar cards may be issued for enabling the petitioner no.1 and respondent no. 9 to enter the office for discharging their duties.
(2) Similarly, official e-mail ids. of the petitioner no. 1 and respondent no, 9 may be activated for the official use of the petitioner no. 1 and respondent no.9.
(3) It was stated that no salary has been paid to the petitioner no. 1 as well as to respondent no. 9. If the other directors of the Company are getting salary as Directors of the Company, similar payments may be made to petitioner no. 1 and respondent no. 9 as per the laid down terms of the Company.”
It is also noted that the Appellants filed a Contempt Application being CA 487/2017 alleging that the Respondents were not complying with the orders dated 3.5.2016 and 18.8.2016. Significantly, this Contempt Application remained pending and issues raised in the contempt application were not heard and adjudicated upon by the NCLT till the final disposal of the main company petition.
It is further noted that A-1 and R-9 were removed from the position of Managing Director and Director respectively w.e.f. 6.6.2017 and Form DIR-12 was filed with the Registrar of Companies that both A-1 and R-9 had been removed from the Board of Directors of the Company and the reason given for such removal was “vacation of office under section 167”. Upon this action by the R-1 Company, the Appellants filed CA No. 165/2018 in CP No. 42/2016 alleging that, in continuation of the acts of oppression being done by the Respondents, A-1 and R-9 were illegally removed from the posts of Managing Director and Director. The CP No. 165/2018 also stated that the step taken by R-5 of removing A-1 and R-9 was in violation of NCLT order dated 3.5.2016 regarding which a contempt application viz. CA 487/2017 had already been filed.
We now look at CA 1574/KB/2019 filed by the Appellant in CP No. 42/KB/2016 on 7.11.2019 which has been adjudicated by the NCLT, whereby the Appellants have sought the following reliefs:-
a) “Directions be given to the Respondent No. I to reinstate the Petitioner No. 1 and Respondent No. 9 as the directors of the Respondent No. I Company immediately;
b) Directions be given to the Special Officer appointed by the Hon'ble Tribunal to file necessary forms with the Registrar of Charges regarding induction of Petitioner No. 1 and Respondent No. 9 as directors of the said Respondent No. I company;
c) Directions be given to the Respondent No. 1 to remove the additional Directors appointed by the Respondent No. 5;”
Later, CA No. 1574/KB/2019 was filed by the Appellants Yogendra Pal Jain and Ms. Usha Kiran Jain seeking following reliefs:-
“(a) Directions be given to the Respondent No. 1 to reinstate the Petitioner No. 1 and Respondent No. 9 as the directors of the Respondent No. 1 Company immediately;
(b) Directions be given to the Special Officer appointed by the Hon'ble Tribunal to file necessary forms with the Registrar of Charges regarding induction of Petitioner No. 1 and Respondent No. 9 as directors of the said Respondent No. 1 company;
(c) Directions be given to the Respondent No. 1 to remove the additional Directors appointed by the Respondent No. 5;
(d) To pass such Order and/or Orders as deem fit and proper;”
Lastly, IA No. 112/2021 was also filed by the Appellants with the following prayers, which are quite similar to the reliefs sought is CA No. 1584/KB/2019:-
(a) “Pass necessary orders declaring Form DIR-12 dated 6th June, 2017 filed by the Respondent No. 5 on behalf of the Respondent Company as null and void and directing the Respondent No. 10 to correct and/or modify their records disclosing the names of the Petitioner No. 1 and Respondent No. 9 as Managing Director and the Director of the Company.
(b) Pass necessary orders declaring the appointment of additional directors subsequent to removal of the petitioner No. 1 and the Respondent No. 9 as the Directors of the respondent Company as null and void and thereby directing the Respondent No. 10 to correct and/or modify their records by removing the names of the additional directors.
(c) Pass necessary orders declaring the meeting dated 6th June, 2017 held by Respondent No. 5 for removal of the Petitioner No. 1 and Respondent No. 9 from the Respondent Company and the appointment of additional directors in the Respondent No. 1 as null and void and as well as declare all further board meetings held of the respondent Company as null and void.
(d) Pass necessary orders for directing the Respondent Company to pay the pending salaries of petitioner No. 1 and the Respondent No. 9.
(e) Pass such necessary orders against the Respondent No. 5 and 6 as deemed fit and proper.
(f) To pass such Order and/ or Orders as deem fit and proper.
In terms of Sections 241 to 246 read with Rule 11 of NCLT Rules, 2016 and Companies Act, 2013.”
A close perusal of various company applications and IA filed under CP No. 42/KB/2016 make it clear that the Appellants have been reiterating the prayers made in the original CP No. 42/KB/2016 even though in the later applications prayer about reinstatement of A-1 and R-9 as Managing Director and Director has also been added. Thus it is seen that in the company applications filed after the status quo order dated 3.5.2016, clarificatory order dated 18.8.2016 and NCLT order dated 1.10.2019 for the appointment of a Special Officer, the issue of violation of these orders has also been regularly raised by the Appellants.
We also note that the order dated 1.10.2019 passed by NCLT, which pertained mainly to the appointment of Special Officer to investigate into the affairs of the Company and also supervise the conduct of business by holding meetings of the board of directors periodically was appealed before NCLAT in CA(AT) No. 329 of 2019, and that the NCLAT dismissed the appeal in view of the fact that ‘…the Report of the Special Officer will give a true and fair picture of the state of affairs of the R-1 Company’. This order of the NCLAT was challenged in Civil Appeal No. 1024/2021 before the Hon’ble Supreme Court of India, in which the Hon’ble Apex Court was pleased to pass the following order on 9.4.2021:-
“The order of the National Company Law Tribunal' appointing a Special Officer is based on sound reasons which have been adduced, particularly in paragraphs 42 and 44 of the judgment dated 1 October 2019. The order has been affirmed by the National Company Law Appellate Tribunal. There is no error, warranting interference.
Mr. Ashwani Kumar, learned counsel appearing on behalf of the appellants, submits that the petition for oppression and mismanagement has been pending since 2016 and, hence, it is appropriate that it is disposed of at an early date in compliance with the mandate of Section 422 of the Companies Act 2013. In the alternative, it has been submitted that having regard to the fact that the shareholding is held within the members of a family and is closely held, it would be appropriate if mediation is resorted to so that any one or more of the groups of shareholders can buy out the shareholding of others.
We are recording the above submissions in order to permit the appellants to move the NCLT for expeditious hearing having regard to the mandate of Section 422. Any offer which the appellants have for an amicable solution through a mediatory process can be urged before the NCLT when the proceedings are taken up. We make no observations or findings thereon and leave it open to the NCLT to take an appropriate view.
Subject to the aforesaid, the appeal shall stand dismissed.
Pending application stands disposed of.”
It is thus clear that the appointment of Special Officer was upheld by the Hon’ble Supreme Court and it was, therefore, not only desirable but necessary that the Special Officer submit his report regarding the affairs and management of the R-1 Company before the NCLT. It is noted by us that no such report is placed on record to show that the Special Officer could conduct any investigation or enquiry in the affairs of the Company and thereafter submit a report. On the contrary, we note that despite the ‘status quo’ order dated 3.5.2016 and clarificatory order dated 18.8.2016, the Contesting Respondents put hurdles before A-1 and R-9 in the performance of regular official duties as Managing Director and Director. We further note that the various hurdles and obstructions were put before A-1 and R-9 to prevent them from attending the board meetings and this issue was raised by the appellants before the NCLT from time to time. We note that eventually A-1 and R-9 were removed from office basically on the ground that they did not attend any of the four board meetings held on 14.7.2016, 26.10.2016, 19.1.2017 and 5.4.2017, though the hurdles being placed in their way of attending the board meetings was being regularly brought to the notice of the NCLT. It is not clear why the NCLT chose not to consider these prayers and give its findings in the Impugned Order. Thus the conclusion that A-1 and R-9 did not attend even one meeting in the past 12 months and were, therefore, presumed to vacate office under section 167(1)(b) of the Companies Act does not appear to be correctly arrived at after considering the rival contentions.
At this stage we note the relevant provisions of The Companies Act, 2013 which are pertinent to this appeal:
“167. Vacation of office of director - (1) The office of a director shall become vacant in case—
xx xx xx xx
(b) he absents himself from all the meetings of the Board of Directors held during a period of twelve months with or without seeking leave of absence of the Board;
Xx xx xx xx
Appointment of managing director, whole-time director or manager –
xx xx xx xx
(3) No company shall appoint or continue the employment of any person as managing director, whole-time director or manager who -
(a) is below the age of twenty-one years or has attained the age of seventy years:
Provided that appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person;
Provided further that where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made.”
We now peruse the conclusions in the Impugned Order in which are included in the relevant paragraphs no. 14 to 18 which are reproduced below:-
“14. The instant application has been filed by one Shri Yogendra Pal, and Smt. Usha Kiran Jain. Petitioner No. 2 was never a director of the Company. Admittedly at present, the age of the petitioner No. 1 is beyond 70 years and he has mentioned his age as 78 years in the record available before us.
The applicant seeks to place reliance on the above referred judgment with a view to drive home the point that notwithstanding the age as provided in Section 196(3) of Companies Act, 2013, he is entitled to the relief prayed for by him in the present application. We have considered the judgment of the Hon'ble High Court relied upon by the Ld. Counsel appearing for Petitioner No. 1. It is an admitted position in this Company Application No. 112 (KB) 2021 that even though petitioner No. I became the Managing Director in 2005, he is not currently holding the position of managing director or director. Therefore, on this score, the judgment referred by the Ld. Counsel for the petitioner No. 1 is not applicable in the present case as it is not the case of the petitioner No. 1 that he continues uninterruptedly as managing director as on the date of coming into force of Section 196 (3) of Companies Act, 2013.
Therefore, the relief prayed by the petitioner No. 1 cannot be granted by this Adjudicating Authority in view of the legal position stated hereinabove and hence we find that we have no option except to dismiss COMP. APPL. 1584/KB/2019 as not maintainable.
In view of the findings arrived at by us in COMP. APPL. 1584/KB/2019 hereinabove the COMP APPL. 112/KB/2019 as a necessary consequence is also liable to be dismissed.
For the foregoing reasons, CP No. 42/KB/2016 is also not maintainable and the same is dismissed along with all the connected IAs.”
It appears strange that when A-1 raised the issue of his and R-9’s removal as Managing Director and Director of R-1 Company on the patently incorrect ground and pretext of wilful and voluntary absence in four meetings in the past one year, how the claim made by the contesting Respondents and R-1 Company about cessation of office by A-1 and R-9 under section 167(1)(b) was taken at face value without even looking into the reasons claimed and alleged by A-1 and R-9 about their absence from the said board meetings.
We are, therefore, of the view that inference of NCLT in CA No. 1584/KB/2019 is based on wrong premise that A-1 was not currently holding the position of Managing Director or Director when the ‘status quo’ order dated 3.5.2016 and the clarificatory order of 18.8.2016 had not been either vacated or modified, and therefore, A-1 and R-9 should have been allowed to function as Managing Director and Director with no hurdles or obstructions placed in the way of performance of their official duties. We, therefore, hold that the part of Impugned Order which dismisses CA No. 1584/KB/2019 is erroneous and is liable to be set aside.
We also find that IA No. 112/KB/2019 (mentioned as Company Application 112/KB/2019) in the Impugned Order has subsequently been dismissed on the basis of dismissal of 1584/KB/2019 in the same Impugned Order. Significantly IA 112/KB/2019 raised many issues of oppression and mismanagement, which were neither looked into by the NCLT nor adjudicated upon and yet on misunderstanding regarding non-maintainability of CA 1584/KB/2019, it was dismissed. This part of the Impugned Order is, therefore, also erroneous and liable to be set aside.
Finally, we note the Impugned Order dismisses CP 42/KB/2016 as being not maintainable and the connected IAs has also been dismissed. We note that the payers made in CP 42/2016, the original company petition, raised multiple issues of oppression and mismanagement in the affairs of R-1 Company, which were not even considered in the Impugned Order. The appointment of Special Officer and any report that he may have submitted, could have thrown light on the possible mismanagement of R-1 Company and aided the NCLT in adjudication of issues raised, but the NCLT inexplicably even forgot to look at its own order dated 1.10.2019, which was regarding the appointment of Special Officer and obtaining report on the affairs of R-1 company. We thus find that CP No. 42/KB/2016 has been dismissed summarily in the Impugned Order without appropriately looking at the issues raised and the relevant prayers made therein. We are, therefore, constrained to hold that order regarding dismissal of CP No. 42/KB/2016 suffers from a very basic and fatal error and therefore, this part of Impugned Order is also liable to be set aside.
In the result, we set aside the Impugned Order dated 1.4.2022 in its entirety, including the order relating to CA No. 1584/KB/2019. In the interest of justice and in view of multiple allegations of oppression and mismanagement raised by the Appellants in CP 42/KB/2016, we remand the matter to NCLT, Kolkata so that CP 42/KB/2016 may be looked at afresh, along with the other CAs and IAs filed under CP 42/KB/2016 as well as the Contempt Application No. 487/KB/2016 and adjudication be provided on the issues raised, after due consideration and opportunity of hearing provided to all the parties.
We also direct that ‘status quo’ order dated 3.5.2016, the clarificatory order dated 18.8.2016 and NCLT’s order dated 1.10.2019 shall continue to be in effect, while the NCLT is considering CP 42/KB/2016 and all the various applications preferred under the original Company Petition No. 42/KB/2016.
The Appeal is thus allowed with the directions as above and with no order as to costs.