National Company Law Appellate Tribunal
Dr. Joe Verghese & Ors vs M/S. Omega Hospitals Pvt. Ltd. ... on 10 June, 2021
National Company Law Appellate Tribunal, New Delhi
Principal Bench
I.A. No. 395 of 2021
in
COMPANY APPEAL (AT) No. 77 of 2019
(Arising out of Order dated 24th January, 2019 passed by National Company Law
Tribunal, Bengaluru Bench, in C.P No.- 64/2007 [T.P. No. 05 of 2016]
C.P. No.-77 of 2010 [TP No. 26/2016]).
IN THE MATTER OF:
1. Dr. Joe Verghese ...Appellant No. 1
S/o. C.P. Verghese
Near UBMC School, Kalpane Road, Balmatta,
Mangaluru City, D.K. District,
Karnataka, Mangalore - 575002
2. Dr. R.L. Kamath
S/o. Lakshmana Kamath,
Sushil Planter's Lane, Kadri,
Mangaluru City, D.K. District,
Karnataka, Mangalore - 575003 ...Appellant No. 2
3. Dr. P. Subramanya Bhat,
S/o P. Mhalinga Bhat
Geethanjali, BareBail, Near Polytechnic, Kadri,
Mangaluru City, D.K. District,
Karnataka, Mangalore - 575004 ...Appellant No. 3
Versus
1. M/s. OMEGA Hospitals Pvt. Ltd., ...Respondent No. 1
Rank of represented by its Managing Director
Mahaveera Circle, Bye Pass Road,
Mangaluru City, D.K. District,
Karnataka - 575002
2. Dr. K. Mukund,
S/o. K. Manjunatha
Prateeksha, Vyasa Rao Road,
Mangaluru City, D.K. District,
Karnataka, Mangalore - 575003 ...Respondent No. 2
3. Dr. Suresh Surathkal,
S/o. Mr. Sanil,
Bhuvaneshwari, Iddya, Suratkal,
Mangaluru City, D.K. District,
-2-
Karnataka, Mangaluru - 575014 ...Respondent No. 3
4. Dr. Bhasker Bappal
Bappal Raod, Jeppu, Mangalore
Mangaluru City, D.K. District,
Karnataka, Mangaluru - 575002 ...Respondent No. 4
5. Dr. A.G. Jayakrishnan,
The Planet Near Karnataka Polytechnic,
Kadi, Mangaluru City, D.K. District,
Karnataka, Mangalore - 575004 ...Respondent No. 5
6. Dr. Mohanchandra Suvarna,
Sanjeevani, Westgate Pride, Falnir Road,
Mangaluru City, D.K. District,
Karnataka, Mangalore - 575002 ...Respondent No. 6
7. Mangalore Heart Scan Foundation,
Represented by its Chairman and
Managing Director,
Opposite to Colaco Hospital, Bendoor Road,
Mangaluru City, D.K. District,
Karnataka, Mangalore - 575002 ...Respondent No. 7
Appellants: Mr. Naveen R. Nath and Mr. Rahul Jain, Advocates.
Respondents: Mr. Ajay P Johnson and Mr. Saji P John, for R-1, R-3.
Mr. Krishnan Venugopal, Sr. Advocate alongwith
Mr. Abir Phukam, Mr. Surya Prakash, Mr. Shivendra
Singh, Ms. Deepanshi Ishar and Mr. Ashkrit Tiwari,
Advocates for R-5.
Mr. PP Hegde, for R-2,4,6,7.
WITH
COMPANY APPEAL (AT) No. 105 of 2019
(Arising out of Order dated 24th January, 2019 passed by National Company Law
Tribunal, Bengaluru Bench, in C.P No.- 64/2007 [T.P. No. 05 of 2016]
C.P. No.-77 of 2010 [TP No. 26/2016]).
IN THE MATTER OF:
Dr. P. Mahabala Rai ...Appellant
S/o Late Sh. K. Thimmappa Rai,
Door No. 15-10-866,
Bendoor Road, C-48,
1st Cross, Bendoor, Mangalore,
Karnataka - 575002
Email:- [email protected]
I.A. No. 395 of 2021
in
Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019
-3-
Versus
1. M/s. OMEGA Hospitals Pvt. Ltd., ...Respondent No. 1
Through its Managing Director
Pumwell, Bye Pass Road,
Mangaluru City, D.K. District,
Karnataka - 575002
2. Dr. K. Mukund,
Prateeksha, Vyasa Rao Road,
Mangaluru City, D.K. District,
Mangalore - 575003, Karnataka
E-mail: [email protected] ...Respondent No. 2
3. Dr. Suresh Surathkal,
S/o. Mr. Sanil,
Bhuvaneshwari, Iddya, Suratkal,
Mangaluru City, D.K. District,
Mangaluru - 575014, Karnataka
E-mail: [email protected] ...Respondent No. 3
4. Dr. Bhasker Bappal
Bappal Raod, Jeppu, Mangalore
Mangaluru City, D.K. District,
Mangaluru - 575002, Karnataka
E-mail: [email protected] ...Respondent No. 4
5. Dr. A.G. Jayakrishnan,
The Planet Near Karnataka Polytechnic,
Kadi, Mangaluru City, D.K. District,
Mangalore - 575004, Karnataka
E-mail: [email protected] ...Respondent No. 5
6. Dr. Mohanchandra Suvarna,
Sanjeevani, Westgate Pride, Falnir Road,
Mangaluru City, D.K. District,
Mangalore - 575002, Karnataka
Email Id: [email protected] ...Respondent No. 6
7. Mangalore Heart Scan Foundation,
Represented by its Chairman and
Managing Director,
Opposite to Colaco Hospital, Bendoor Road,
Mangaluru City, D.K. District,
Mangalore - 575002, Karnataka
E-mail Id.: [email protected] ...Respondent No. 7
I.A. No. 395 of 2021
in
Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019
-4-
8. Dr. Joe Verghese
S/o. Mr. C.P. Verghese
Near UBMC School, Kalpane Road, Balmatta,
Mangaluru City, D.K. District,
Mangalore - 575002, Karnataka
E-mail Id.: [email protected] ...Respondent No. 8
9. Dr. Errol Pinto
Collectors Gate, Balmatta,
Mangalore - 575001, Karnataka ...Respondent No. 9
10. Dr. P. Subramanya Bhat,
Geethanjali, Bare Bail, Near Polytechnic,
Kadri,
Mangaluru City, D.K. District,
Mangalore - 575004, Karnataka
E-mail Id: [email protected] ...Respondent No. 10
11. Dr. R.L. Kamath,
Sushil Planter's Lane, Kadri,
Mangaluru City, D.K. District,
Mangalore - 575003, Karnataka
E-mail Id: [email protected] ...Respondent No. 11
Appellant: Mr. Ayush Choudhary, Advocate.
Respondents: Mr. Saji P John, for R-1,3.
Mr. Krishnan Venugopal, Sr. Advocate alongwith
Mr. Abir Phukam, Mr. Surya Prakash, Mr. Shivendra
Singh, Ms. Deepanshi Ishar and Mr. Ashkrit Tiwari,
Advocates for R-5.
Mr. PP Hegde, for R-2,4,6,7.
ORDER
[Per; Shreesha Merla, Member (T)]
1. The Company Appeal (AT) No. 77 of 2019 has been preferred by Dr. Joe Verghese, Dr. R. L. Kamath and Dr. P. Subramanya Bhat aggrieved by the Common Impugned Order dated 24.01.2019 passed in CP No. 64/2007 and CP No. 77/2010 by National Company Law Tribunal, Bengaluru Bench (hereinafter referred to as the 'Tribunal'). In the Company Petition between I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -5- Dr. K. Mukund V/s. M/s. Omega Hospitals Pvt. Ltd. and 9 Ors. and Dr. Joe Verghese V/s. M/s. Omega Hospitals Pvt. Ltd. and 6 Ors.
2. Company Appeal (AT) No. 105 of 2019 is preferred by Dr. P. Mahabala Rai aggrieved by the Common Order dated 24.01.2019, passed by the Tribunal on the ground that the Tribunal has not given any findings on the aspect of oppression and mismanagement of the minority shareholders.
3. I.A. No. 395 of 2021 is preferred by the 5th Respondent, Dr. A.G. Jaya Krishnan, in Company Appeal (AT) No. 77 of 2019 seeking urgent directions for appointment of an Interim Board of Management in the 1st Respondent Company namely M/s. Omega Hospitals Pvt. Ltd. (hereinafter referred to as the 'Company'), comprising of an independent Chairperson with full Administrative Powers to run the day-to-day affairs of the Hospital.
4. Learned Counsel appearing for the Applicant strenuously argued that the State of Affairs in the Company is vast deteriorating as;
No Financial Statements have been prepared and no returns have been filed for the Financial Year 2018-2019 and 2019-2020 by the current management;
The public interest at large continues to be affected because of gross mismanagement of affairs of the Company and its financial condition being kept a secret;
The Learned NCLT has not given any finding with respect to oppression and mismanagement of the minority shareholders; Internal Audit conducted during the pendency of the litigation before NCLT/CLB rendered multiple findings of fraud and malfeasance I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -6- relating to billing, cash balances, discrepancies in professional charges of Doctors, discrepancies in sale of cathlabs, purchase of stents, procedures carried out etc.;
Learned NCLT had given liberty to 'Registrar of Companies' (ROC) to appropriate action against Companies and all those who are connected with multiple violations. As the investigation has not commenced till date, there is an apprehension that the management is likely to tamper with the records of the Companies.
5. The Learned Counsel for the Applicant drew our attention to Annexure A-3 which is the email dated 10.02.2021 signed by four directors namely Dr. K Mukund, Dr. Suresh Suratkal, Dr. MC Suvarna, Dr. Bhaskar Bappal, Dr. Errol Pinto addressed to Dr. Joe Verghese head of the minority group alongwith Dr. R. L. Kamath and Dr. A.G. Jayakrishnan (the Applicant herein). The sum and substance of the email is that the Managing Director of the Company had already called for a Board Meeting on 30.09.2020 but due to Covid, the same was not convened and the same was postponed to 05.12.2020. Therefore, the notice sent by Dr. Joe Verghese and the Applicant herein calling for another Board Meeting on 30.11.2020 is without authority, illegal and invalid. The proceedings are invalid and non-binding and it further states that the head of the minority group and Applicant herein should make it convenient to attend the Meeting to be held on 05.12.2020 at 4:30 PM at the Registered Office.
6. Learned Counsel for Applicant drew our attention to the Letter dated 02.11.2020, addressed by Dr. Errol Pinto to Dr. Suresh Suratkal, Managing Director of the Company informing that due to personal reasons and other I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -7- commitments he is unable to continue as Director and is hence resigning from the post with immediate effect. The Learned Counsel submitted that the urgency is with respect to the resignation of Dr. Errol Pinto on 02.11.2020 as can be seen from the aforenoted letter. He vehemently contended that due to deadlock within the Board, Members of the present Board are unable to agree even on a particular date for a Meeting nor are they able to elect the Chairperson and the group of the 2nd Respondent vehemently opposed any forensic Audit to examine question of fraud which is a necessary pre-condition to enable the shareholder to get a good value for the shares in any auction in which a third party comes forward to buy the Company.
7. It is seen from the record that two Interim Applications I.A. 2313 of 2020 and I.A. 2314 of 2020 were earlier filed on behalf of the Appellants seeking a direction for conduction of a forensic Audit in respect of the affairs and accounts of the Companies; appointment of an Independent Board of Administrative Powers to manage the day-to-day affairs of the Companies and further to restrain the 2nd and 3rd Respondent from participating in the management of the Company. Subsequently the present Application is filed for appointment of an independent Chairperson on account of the deadlock in the management of the Company resulting from the resignation of Dr. Errol Pinto. Such a deadlock in the management of the Company providing critical care to the patients is against the interest of the Company and its shareholders as well as against the public interest. I.A. No. 395 of 2021
in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -8-
8. Respondents No. 1 and 3 filed their objections to this Application stating that it is neither maintainable in law or background based on the following reasons:-
The Appellants filed Petition before CLB in the year 2010 for conducting an independent Audit from 2006-2007 to 2013-14. The Hon'ble CLB Chennai was pleased to order for both internal and statutory Audit for 7 years under the supervision of independent Chairman appointed by CLB, Mr. Amirulla Millath. Group of Auditors Mr. Narasimha & Co. (Internal Auditors) and Mr. Thyagrajan & Co. (Statutory Auditors) have conducted the Audit and submitted the report to Hon'ble CLB through independent Chairman Amirulla Millath.
It is submitted that another Application was filled by the Appellants herein before the CLB, Chennai seeking to appoint an independent Chairman for supervision of Audit of Company and thereafter Audit was conducted for 3 years by Gopinath Shenoy & Co. as per the CLB direction under the supervision of independent Chairman E. Selvaraj who replace Mr. Amirulla Millath and he submitted Reports to CLB Chennai and NCLT, Bengaluru Bench thereby regularizing the accounts of the Respondent Company from 2014-2015 to 2017-2018. Thereafter the management is conducting both internal Audit through independent Auditors and statutory Audit through Mr. Gopinath Shenoy & Co. till today. All the Financial Statements of the Respondent Company are in Public Domain and the Financial Statements are prepared, audited and filed by CLB appointed I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -9- independent Chairman and Chartered Accountants. All the Financial Statements including Director's Report, Independent Auditors Report, Balance Sheet and other Financial Statements etc. were part of the pleadings before CLB and then NCLT, Bengaluru Bench. The final Order passed by the NCLT is proper and well-reasoned and justified in the facts and circumstances of the case.
It is submitted that Dr. A G Jayakrishnan (R-5) and the Applicant in I.A. No. 395/2021 has changed sides and is colluding with the Appellants due to which the current management is facing huge difficulty to manage the day-to-day affairs of the Hospital. Dr. A G Jayakrishnan is one of the signatories to the Bank Account of the Company and is not cooperating to sign the cheques even for the purpose of disbursement of funds for Supplier's Payment, Doctor's Payment, statutory payment and such other daily expenses of hospital etc. of the Hospital has led the operations of the Hospital to a standstill. Currently, with great difficulty, the Management is using Demand Drafts for disbursement of cash needed for the smooth functioning of its day-to-day activities and the same is duly recorded in the accounts of the Company. The Respondents 1 & 3 humbly state that on 05.11.2020 two Interim Applications (I.A. No. 2313/2020 & 2314/2020) filed by the Appellants herein were heard at length and is Reserved for Orders. Amongst the said two IAs one was seeking for appointment of Independent Board of Administration and other one for forensic Audit. The present I.A. filed by Respondent No. 5 is also I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -10- seeking for an Interim Board of Management and hence the present Application is not maintainable.
9. Learned Counsel contended that the Appeal before the Bench is ripe for final hearing as pleadings are completed and it is only to delay the matter that the 5th Respondent has filed this Application. The 1st and the 3rd Respondents have been facing these dilatory tactics right since the initiation of proceedings before CLB, Chennai; that Dr. A.G. Jayakrishnan, the Applicant has changed sides colluding with the Appellants and not co- operating with the day-to-day affairs of the Companies; the year wise Revenue generated by both group of shareholders clearly depicts that the Applicants together with the 5th Respondent/Dr. Joe Verghese are not generating any Revenue to the Hospital for more than 10 years; that the CLB appointed Chairman and Auditors have completed the Audit which attained finality; the signed Financial Statement of the Company for the year ending 31.03.2019 is circulated to all the Directors who were present in the Board Meeting dated 27.02.2021; that the current management has support of the majority shareholders of the Company and they were appointed by following due procedures of the Companies Act; that the main Revenue source of the Company is the 2nd Respondent himself; that the Applicant is working in Sri Lanka since 2016 and there is no need of appointing any independent Chairman; as the Company is facing huge financial crisis there are no funds to pay as already several lakhs of rupees were spent for the fees of the administrator and hence sought for dismissal of the Application.
10. By way of rebuttal the Applicant filed an Affidavit deposing that he is not associated with either of the disputing factions and has been praying for I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -11- appointment of independent Chairperson and for directions for conducting a forensic Audit; that the Minutes of the purported Meeting dated 27.02.2021 were not even circulated to the Directors and directly filed before the Tribunal; that Dr. K. Mukund faction has manipulated all the rules of the group and committed fraud; on 26.02.2021, the Applicant wrote to the other Directors requesting for arrangements so that he can attend the Board Meeting on 27.02.2021 through virtual conferencing as he would be out of station, but the link was provided to him only at 3:50 PM when the Meeting was scheduled to begin at 4:00 PM and the Applicant was not allowed to participate in the Meeting for more than 15 minutes. It was also deposed despite several phone calls he was not allowed to login till he called one of the staff members by which time substantial part of the Meeting had already taken place. It is contended that the Applicant was not allowed to participate in the Meeting deliberately. It is further deposed that the approval of the Financial Statement buttressed the motive of the Dr. K. Mukund faction to circumvent the objections raised by the other Directors regarding the functioning of the Company; that Dr. Joe Verghese, Dr. R.L. Kamath and Dr. P. Subramanya Bhat submitted the dissent note regarding their objections to the purported Meeting dated 27.02.2021 that the Minutes recorded that since the Applicant is not present, the dissent note is accepted only on behalf of the other three Directors.
11. It is further stated that the Applicant stopped signing cheques due to several irregularities and further contended that the manner in which the Applicant was denied participation in the Meeting is nothing but a sabotage and against the well settled principles of natural justice. I.A. No. 395 of 2021
in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -12-
12. Having heard the Applicants and Respondents and gone through the Annexures on record we find it a fit case to reproduce Annexure-B dated 27.02.2021, a Letter addressed by Dr. Joe Verghese group to Dr. K. Mukund group which is as hereunder;
I.A. No. 395 of 2021
in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -13- (Emphasis Supplied) I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -14-
13. For the sake of brevity, the factual matrix is not being repeated. It is quiet clearly seen that there appears to be deadlock between both the groups specially with the resignation of Dr. Errol Pinto from the Board of Directors and the Board now has 8 Directors split into 2 groups of 4 each, as seen from the Meeting dated 27.02.2021 the Chairman could not be elected and no other matters were discussed or approved. In fact, it is significant to mention that the Appellants together with the Applicant are contending that the group led by Dr. K. Mukund is falsely claiming that the Financial Statements for the year ending 2018-19 has been approved by the Board. It is also pertinent to note that the Applicant and Appellants made a request to the Auditor not to accept the fabricated Minutes and unapproved accounts of Auditing. Additionally, vide a Letter dated 05.03.2021, it was informed that the Board Meeting scheduled on 06.03.2021 has been postponed. In the light of this deadlock and taking into consideration that it is a Hospital and specially keeping in view that the Hospital is involved in the critical care of patients, pertinently in today's scenario, we are of the considered view that such a deadlock is unhealthy both for the Companies, its shareholders and in the public interest and for all the aforenoted reasons, we allow this Application and direct the parties to file a Panel of three names/persons within 10 days with the following particulars:
(i) Consent to act as an Independent Chairperson with full administrative powers.
(ii) A declaration that such person is not related to any of the parties.
(iii) Experience of administration and expected remuneration.
(iv) Email address and Mobile No. and place of Residence. I.A. No. 395 of 2021
in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019 -15-
14. The aforesaid Chairperson would administer and manage the affairs of the Company till the disposal of these Appeals. The Tribunal will appoint any suitable person out of the Panel filed by the parties. In case, the party/parties fail to file the aforesaid Panel of names, the Tribunal shall appoint any suitable person to act as an Independent Chairperson.
15. This Application is allowed with the aforenoted directions.
[Justice Jarat Kumar Jain] Member (Judicial) [Ms. Shreesha Merla] Member (Technical) NEW DELHI 10th June, 2021 ha I.A. No. 395 of 2021 in Company Appeal (AT) No. 77 of 2019 With Company Appeal (AT) No. 105 of 2019