National Company Law Appellate Tribunal
Rbg Retail Pvt. Ltd vs Minakshi Gupta on 27 April, 2023
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
COMPANY APPEAL (AT) (CH) No. 18 of 2022
I.A. No. 208 of 2022
(Under Section 421 of the Companies Act, 2013)
(Arising out of the Impugned order dated 31/12/2021 in
C.P.No.114/KOB/2019, C.P. No.119/KOB/2019 and
C.P. No.125/KOB/2019, passed by the `National Company Law
Tribunal', Kochi Bench)
IN THE MATTER OF:
1. M/s. RBG Trading Corporation Pvt. Ltd.
Registered Office at VI/93, Jew Town,
Mattancherry P.O.,
Kochi, Kerala - 682 002. .....Appellant No.1
2. Rajkumar Gupta,
Residing at 6D Bay View Apartments,
Fort Kochi, Kerala - 682 002. ....Appellant No.2
3. Vishnukant Gupta,
Residing at 1B, Sunrise Apartments,
Indian Chamber Road, Mattancherry,
Kochi, Kerala - 682 002. ....Appellant No.3
Versus
1. Sulochana Gupta
Residing at House No. CCVII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ....Respondent No.1
2. Minakshi Gupta,
Residing at House No. CCVIII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ....Respondent No. 2
3. Mahesh Kumar Gupta,
Residing at House No. CCVIII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ....Respondent No. 3
Present:
For Appellant : Mr. Vijay Narayan, Sr. Avdocate
For Mr. Arun C. Mohan, Advocate.
For Respondents No. 1 - 3 : Mr. A. Kumar, Advocate.
WITH
COMPANY APPEAL (AT) (CH) No. 19 of 2022
(Under Section 421 of the Companies Act, 2013)
(Arising out of the Impugned order dated 31/12/2021 in
C.P.No.114/KOB/2019, C.P. No.119/KOB/2019 and
C.P. No.125/KOB/2019, passed by the `National Company Law
Tribunal', Kochi Bench)
IN THE MATTER OF:
1. M/s. RBG EnterprisesPvt. Ltd.
Registered Office at VI/93, Jew Town,
Mattancherry P.O.,
Kochi, Kerala - 682 002. ....Appellant No. 1
2. Rajkumar Gupta,
Residing at 6D Bay View Apartments,
Fort Kochi, Kerala - 682 002. ....Appellant No. 2
3. Vishnukant Gupta,
Residing at 1B, Sunrise Apartments,
Indian Chamber Road, Mattancherry,
Kochi, Kerala - 682 002. ....Appellant No. 3
Versus
1. Sulochana Gupta
Residing at House No. CCVII/2109,
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022
Page 2 of 49
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ....Respondent No. 1
2. Minakshi Gupta,
Residing at House No. CCVIII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ....Respondent No. 2
3. Mahesh Kumar Gupta,
Residing at House No. CCVIII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ....Respondent No. 3
Present:
For 1st Appellant : Mr. Aswin Gopakumar, Advocate.
For 2nd and 3rd Appellants : Mr. Vijay Narayan, Sr. Advocate
For Mr. Arun C. Mohan, Advocate.
For Respondent Nos. 1-3 : Mr. A. Kumar, Advocate.
WITH
COMPANY APPEAL (AT) (CH) No. 20 of 2022
(Under Section 421 of the Companies Act, 2013)
(Arising out of the Impugned order dated 31/12/2021 in
C.P.No.114/KOB/2019, C.P. No.119/KOB/2019 and
C.P. No.125/KOB/2019, passed by the `National Company Law
Tribunal', Kochi Bench)
IN THE MATTER OF:
1. M/s. RBG RetailPvt. Ltd.
Registered Office at VI/93, Jew Town,
Mattancherry P.O.,
Kochi, Kerala - 682 002. ....Appellant No. 1
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022
Page 3 of 49
2. Rajkumar Gupta,
Residing at 6D Bay View Apartments,
Fort Kochi, Kerala - 682 002. ....Appellant No. 2
3. Vishnukant Gupta,
Residing at 1B, Sunrise Apartments,
Indian Chamber Road, Mattancherry,
Kochi, Kerala - 682 002. ....Appellant No. 3
Versus
1. Sulochana Gupta
Residing at House No. CCVII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ....Respondent No. 1
2. Minakshi Gupta,
Residing at House No. CCVIII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ....Respondent No. 2
3. Mahesh Kumar Gupta,
Residing at House No. CCVIII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ....Respondent No. 3
Present:
For Appellant : Mr. Vijay Narayan, Sr. Avdocate
For Mr. Arun C. Mohan, Advocate.
For Respondents No. 1 - 3 : Mr. A. Kumar, Advocate.
WITH
Company Appeal (AT) (CH) No. 31 of 2022)
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022
Page 4 of 49
(Under Section 421 of the Companies Act, 2013)
(Arising out of the `Impugned Order' dated 16/03/2022
in Review Application 02/KOB/2022 in C.P. No.114/KOB/2019,
C.P. No.119/KOB/2019 and C.P. No.125/KOB/2019, passed by the
National Company Law Tribunal, Kochi Bench)
In the matter of:
1. M/s. RBG Enterprises Pvt. Ltd.
Registered Office at VI/93, Jew Town,
Mattancherry P.O.,
Kochi, Kerela - 682 002. ..... Appellant No. 1
2. Rajkumar Gupta
Residing at 6D Bay View Apartments,
Fort Kochi, Kerala - 682001. ..... Appellant No. 2
3. Vishnukant Gupta,
Residing at 1B, Sunrise Apartments,
Indian Chamber Road, Mattancherry,
Kochi, Kerala - 682 002. ..... Appellant No. 3
Versus
1. Sulochana Gupta
Residing at House No. CCVIII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ..... Respondent No. 1
2. Minakshi Gupta,
Residing at House No. CCVIII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ..... Respondent No. 2
3. Mahesh Kumar
Residing at House No. CCVIII/2109,
Gujarati Road, Mattancherry,
Kochi, Kerala - 682 002. ..... Respondent No. 3
Present:
For 1st Appellant : Mr. Ashwin Gopakumar, Advocate.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022
Page 5 of 49
For 2nd & 3rd Respondents : Mr. Vijay Narayan, Senior Advocate
For Mr. Arun C. Mohan, Advocate.
For Respondent Nos. 1 to 3 : Mr. A. Kumar, Advocate.
JUDGEMENT
(Virtual Mode) [Per: Shreesha Merla, Member (Technical)]
1. Aggrieved by the common Impugned Order dated 31/12/2021, passed in C.P./114/KOB/2019 and C.P./119/KOB/2019 and C.P./125/KOB/2019 by the National Company Law Tribunal, Kochi Bench; M/s. RBG Trading Corporation Pvt. Ltd, Mr. Rajkumar Gupta and Mr. Vishnukant Gupta preferred Company Appeal (AT) (CH) No. 18 of 2022, M/s RBG Enterprises Private Limited and Ors. preferred Company Appeal (AT) (CH) No. 19 of 2022 and M/s RBG Retail Private Limited and Ors. preferred Company Appeal (AT) (CH) No. 20 of 2022 respectively.
2. Company Petition No. 114/KOB/2019 was filed by Smt. Sulochana Gupta and Smt. Minakshi Gupta against M/s. RBG Enterprises seeking the following reliefs:
i.This Tribunal direct by an order that the Board of Directors of the 1st Respondent Company be reconstituted by the shareholders at a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
ii.Direct the 2nd and 3rd Respondents to place for consideration of the shareholders all related party Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 6 of 49 transactions for the year 2015-2016, 2016-2017 and 2017-2018 in a Meeting of the shareholders of the company to be convened by and conducted under the supervision of this Tribunal.
iii.Direct the 2nd and 3rd Respondents to refund to the company all amounts in related party transactions which do not obtain the approval of the shareholders in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
iv.Direct the 2nd and 3rd Respondents to remit to the accounts of the Company an amount of INR 1,92,00,000 (One crore and ninety two lakhs); or such amount as may be determined by the auditor to be appointed by the shareholders in a Meeting Of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal; being the rental income due from 'Sri Rubber Industries' for the period 2010 to 2018.
v.Direct the 2nd and 3rd Respondents to remit to the accounts of the company an amount of INR 36,00,000 (Rupees Thirty-Six Lakhs); or such an amount as may be determined by the auditor to be appointed by the shareholders in a Meeting of the Shareholders ofthe Company to be convened by and conducted under the supervision of this Hon'ble Tribunal; being the rental income due from 'RBG Trading Corporation Pvt. Ltd' being the rental income due from 'RBG Trading Corporation Pvt'. Ltd for the period 01.04.2018 to 30.09.2019.
vi.Direct the 2nd & 3rd Respondents to refund to the Company all amounts in related party transactions which do not obtain the approval of the shareholders in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 7 of 49 vii.Issue a direction to the 1st Respondent Company and to the 2nd and 3rd Respondents that the financial statements and annual accounts of the Company for the years 2015-16, 2016-17 &2017-18 be reopened under Section 130 of the Companies Act, 2013.
viii.Issue a direction to the 1stRespondent Company to appoint a new auditor in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal to scrutinize all transactions and to audit the accounts of the Company for the years 2015-16, 2016-17 & 2017-18; and to finalize the accounts for the years 2015-16, 2016- 17 & 2017-18 within a period stipulated by this Tribunal. ix.Issue direction to the 1st Respondent Company to appoint a new Internal Auditor in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal. x.Issue direction to the 1st Respondent Company to select a Company Secretary to render advice on statutory compliances as prescribed under the Companies Act, 2013 in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
xi.That the 1st Respondent Company be directed to cancel all agreements, guarantees entered into with or on behalf of related parties which do not obtain the approval of the shareholders in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal. xii.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd Respondent under Section 99 of the Companies Act, 2013 for not complying with the provisions of Section 96 of the Companies Act, 2013.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 8 of 49 xiii.Issue a direction to the Registrar of Companies, Kochi to initiate appropriate action against the 2nd and 3rd Respondents and all other persons as may be necessary, under Section 448 of the Companies Act, 2013 for submission of false statements and reports for the years 2015-16, 2016-17 & 2017-18.
xiv.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd and 3rd Respondents for failure to disclose interests as contemplated under Section 184 of the Companies Act, 2013.
xv.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd Respondent under Section 99 of the Companies Act, 2013 for not complying with the provisions of Section 96 of the Companies Act, 2013. persons as may be necessary, under Section 448 of the Companies Act, 2013 for submission of false statements and reports for the years 2015-16, 2016-17 & 2017-18.
3. Company Petition No. 119/KOB/2019 was filed by the same Petitioners, Smt. Minakshi Gupta and Smt. Sulochana Gupta against M/s. RBG Trading Corporation Private Limited seeking the following reliefs:
i.This Tribunal direct by an order that the Board of Directors of the 1st Respondent Company be reconstituted by the shareholders at a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
ii.Issue a direction to the 1st Respondent Company and to the 2 and 3 Respondents that the financial statements and annual accounts of the Company for the years 2015- 16, 2016-17, 2017-18 and 20182019 be re-opened under Section 130 of the Companies Act, 2013.
iii.Issue a direction to the 1st Respondent Company to appoint a new auditor in a Meeting of the shareholders of the Company to be convened by and conducted under Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 9 of 49 the supervision of this Tribunal to scrutinize all transactions and to audit the accounts of the Company for the years 2015-16, 2016-17, 2017-18 and 2018- 2019; and to finalize the accounts for the years 2015- 16, 2016-17, 201718 and 2018-2019 within a period stipulated by this Tribunal.
iv.Direct the 2nd and 3rd Respondents to place for consideration of the shareholders all related party transactions for the years 2015-16, 2016-17, 2017-18 and 2018-2019 in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
v.Direct the 2nd and 3rd Respondents to refund to the company all amounts in related party transactions which do not obtain the approval of the Shareholders in a Meeting of the Shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
vi.Direct the 2nd and 3rd Respondents to remit to the accounts of "RBG Enterprises Pvt Ltd', an amount of INR 36,00,000/- (Thirty-six lakhs); or such amount as may be determined by the auditor to be appointed by the shareholders in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal; being the rental income due to RBG Enterprises Pvt Ltd for the period 01.04.2018 to 30.09.2019.
vii.Direct the 2nd and 3rd Respondents to place the MOU dated 15.09.2016 before the shareholders for their consideration and approval at Meeting to be convened and conducted under the supervision of this Tribunal. viii.Restrain the 2nd and 3rd Respondents from claiming any benefit or exercising any rights under the MOU dated 15.09.2016 pending disposal of the Petition. ix.Issue direction to the 1st Respondent Company to appoint a new internal auditor in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal. Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 10 of 49 x.Issue direction to the 1st Respondent Company to select a Company Secretary to render advice on statutory compliances as prescribed under the Companies Act, 2013 in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
xi.Issue a direction to the 1st Respondent Company to cancel all agreements, guarantees entered into with or on behalf of related parties which do not obtain the approval of the shareholders in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal. xii.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd Respondent under Section 99 of the Companies Act, 2013 for not complying with the provisions of Section 96 of the Companies Act, 2013.
xiii.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd and 3rd Respondents, and all other persons as may be necessary, under Section 448 of the Companies Act, 2013 for submission of false statements and reports for the years 2015-16, 2016-17 & 2017-18.
xiv.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd and 3rd Respondents for failure to disclose interests as contemplated under Section 184 of the Companies Act, 2013.
xv.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd and 3rd Respondents under Section 185 of the Companies Act, 2013, for failure to report to shareholders the related party transactions during the years 2015-16, 2016-17, 2017-18 and 2018-2019.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 11 of 49
4. Company Petition No. 125/KOB/2019 was filed by the same Petitioners namely Smt. Minakshi Gupta and Smt. Sulochana Gupta against M/s RBG Retail Private Limited seeking the following reliefs:
i.This Tribunal direct by an order that the Board of Directors of the 1st Respondent Company be reconstituted by the shareholders at a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
ii.Direct the 2nd and 3rd Respondents to place for consideration or the shareholders all related party transactions for the years 2015-16, 2016-2017 and 2017-18 in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
iii.Direct the 2nd and 3rd Respondents to refund to the Company all amounts in related party transactions which do not obtain the approval or the shareholders in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
iv.Direct the 2nd and 3rd Respondents to place the MOU dated 15.09.2016 before the Shareholders for their consideration and approval at a Meeting to be convened and conducted under the supervision of this Tribunal.
v.Issue a direction to the 1st Respondent Company and to the 2nd and 3rd Respondents that the financial statements and annual accounts of the Company for the years 2015-16, 2016-17, 2017-18 be reopened under Section 130 of the Companies Act, 2013.
vi.Issue a direction to the 1st Respondent Company to appoint a new auditor in a Meeting of the shareholders Of the Company to be convened by and conducted under the supervision of this Tribunal to scrutinize all transactions and to audit the accounts of theCompany for the years 2015-16, 2016-17 & 2017-18; and to finalize the accounts for the years 2015-16, 2016-17 & 2017-18 within a period stipulated by this Tribunal. Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 12 of 49 vii.Issue direction to the 1st Respondent Company to appoint new internal auditor in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
viii.Issue direction to the 1st Respondent Company to select a Company Secretary to render advice on statutory compliances as prescribed under the Companies Act, 2013 in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
ix.That the 1st Respondent Company be directed to cancel all agreements, guarantees entered into with or on behalf of related parties which do not obtain the approval of the shareholders in a Meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal.
x.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd Respondent under Section 99 of the Companies Act, 2013 for not complying with the provisions of Section 96 of the Companies Act, 2013.
xi.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd and 3rd Respondents, and allother persons as may be necessary, under Section 448 of the Companies Act, 2013 for submission of false statements and reports for the years 2015-16, 2016-17& 2017-18.
xii.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd and 3rd Respondents for failure to disclose interests as contemplated under Section 184 of the Companies Act, 2013.
xiii.Issue a direction to the Registrar of the Companies, Kochi to initiate appropriate action against the 2nd and 3rd Respondents under Section 185 of the Companies Act, 2013, for failure to report to shareholders the related party transactions during the years 2015-16, 2016-17 & 2017-18.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 13 of 49
5. For the sake of convenience, C.A. (AT) (CH) No. 19 of 2022 is being taken as the lead case.
Brief Background:
6. The Petitioners in the main Company Petition are Shareholders of M/s RBG Trading Corporation Private Limited, the 1st Petitioner holding 2800 Equity shares of Rs. 1000/- each, constituting 14.07 % of the total paid up capital of the Company and the 2nd Petitioner holding 1900 Equity shares of Rs. 1000/- each, constituting 9.55% of the total paid up capital of the Company. The main business of the Company was to carry on Exports and Imports of all kinds of agricultural and non-agricultural Commodities including Metals, Herbs, Medicines, Health Care Products, Building materials, Textiles, Oils and also to carry on Business as Proprietors, Commission Agents etc. The Authorised share capital of the Company is Rs. 5,25,00,000/- divided into 52,00,000 Equity shares of Rs.1000/- each. The present Petitioners have subscribed fully paid-up capital of the Company of Rs.1,99,00,000 divided into 19,000,900 Equity Shares of Rs.1000/- each.
7. In the Company Petition, it is the main case of the Petitioners that the Financial Statements filed before the 'Registrar of Companies' (ROC, Kerala) for the Financial years 2015-16, 2016-17 & 2017-18 disclosed 'Related Party Transactions' in contravention of Section 188 of the 'Companies Act, 2013'; Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 14 of 49 that Mr. Rajkumar Gupta and Mr. Vishnukant Gupta have siphoned huge amounts from the 'Company' in the guise of remuneration for themselves and to their spouses without the approval of the majority of the shareholders; that these two Respondents (of the Company Petition) were occupying about 10,000 square feet., since 2010 in the name of their Partnership Firm 'M/s Sri Rubber Industries'; that these Respondents have not disclosed the rental income due from 'M/s Sri Rubber Industries' in the first instance and from M/s. RBG Trading Corporation Private Limited in the subsequent years in the Financial Statements of the 'Company' for the relevant years; that they are liable to pay rental income of approximately Rs. 2,00,000/- per month; the Financial Settlements did not present an accurate picture of the income of the 'Company'; the suspicious investments made by these Respondents classified as 'Current Investments' in violation of Accounting Standards, is required to be probed; that the Petitioners sent a communication on 17/07/2019 to the Respondent Company's Address to the Managing Director, to convene the Annual General Meetings for the purpose of considering the Financial statements of the 'Company' for the years 2015-16, 2016-17, 2017-18 and 2018-19; but the 2nd Respondent has declined to accede to the Petitioners' request to convene the Meeting to discuss the Financial Statements and that reliance was placed on 'Memorandum of Understanding', dated 15/09/2016, entered into between family members for protection of the wealth. Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 15 of 49
8. It is stated that Mr. Rajkumar Gupta informed the shareholders, vide Letter dated 08/08/2019 that he has violated an Original Suit No. 310/2019 with IA No. 2023 of 2019, before the Munsiff Court, Kochi and has obtained an 'Interim Injunction' for distributing the assets of the 'Company'. The National Company Law Tribunal, Kochi had directed the 'Company' through its Order, dated 03/10/2019 to furnish their Response, regarding the convening of their Annual General Meetings and also restrained Mr. Rajkumar Gupta and Mr. Vishnukant Gupta from operating any Related Party Transactions from the Bank Account of the 'Company'.
9. It is averred that a Meeting was convened by Mr. Rajkumar Gupta, on 10/10/2019 and an e-mail Communication, dated 08/10/2019 was sent to Mr. Mahesh Gupta, with an Agenda for appointment of Mr. Raj Kumar Gupta as the Managing Director and his wife Smt. Ritu Gupta as a full time Director and ratification of all 'Related Party Transactions' which are now under scrutiny of the National Company Law Tribunal, Kochi. It is stated that the Notice is in violation of Section 173(3) of the 'Companies Act, 2013'.
10. In the Annual General Meetings of M/s. RBG Trading Corporation Private Limited, held on 31/10/2019, the majority shareholders did not obtain the Financial Statements and also objected to the appointment of the Statutory Auditor. Mr. Rajkumar Gupta in collusion with Mr. Vishnukant Gupta has been managing the 'Company' in a manner prejudicial to the interest of the Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 16 of 49 Public and failed to demonstrate a 'fair conduct' in the Management of the Company and hence indulged in 'Oppression and Mismanagement', on account of which these Company Petitions have been filed, seeking the afore noted reliefs.
11. The NCLT in the Common Impugned Order, framed three issues, namely:-
1) Whether the Company Petition is maintainable?
2) Whether Mr. Rajkumar Gupta violated the provisions of articles of association of the Company?
3) Whether there is any 'Related Party Transactions' in the 'Company'?
12. After hearing the Parties, the National Company Law Tribunal, Kochi, concluded that the Petition was 'maintainable' as the Appellants cannot rely upon Notification No. 464(E) of the MCA, dated 05/06/2015 as the same is not applicable to them; held that the 2nd and 3rd Respondents herein have not followed the Articles of Association of the 1st Appellant 'Company' by not conducting the Annual General Meetings for the Financial Years 2015-16, 2016-17 & 2017-18 in a manner known to law, but however, did not impose any Penalty. It was also held that the 'Related Party Transactions' conducted by the Appellants were contrary to Law and the Articles of Association and hence were held to be invalid.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 17 of 49
13. Submissions of the Learned Counsel appearing on behalf of the Appellants:
• It is submitted by the Learned Counsel that the National Company Law Tribunal did not give any finding establishing that the appellants had siphoned of any funds and has ignored the exemption given to Private Companies under Notification No. 464(E), dated 05/06/2015, with regard to Section 185 and 188 of the Companies Act, 2013.
• It is submitted that the Appellants had conducted the Annual General Meetings for the said Financial Years which can be seen from 'Registrar of Companies' Records for the year 2015-16, 2016-17, 2017-18 and therefore the Articles of Association of the Company have not been violated.
• Having attended the Annual General Meetings in the afore noted years, it is not understood as to how the Respondents have taken a stand that the Annual General Meetings have been conducted violating the provisions of the 'Companies Act' and the Articles of Association of the 'Company'. The Learned Counsel drew our attention to the 'Notice' of Annual General Meetings, for the relevant Financial Years in support of his case that the Impugned Order did not consider the documents placed before NCLT, before arriving at a conclusion that the Annual General Meetings were improperly conducted/ not convened.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 18 of 49 • The Plea of Forgery by the Respondent that their Signatures have been forged ought to have been rejected by the National Company Law Tribunal, as there are no Material affirmations made in the Company Petition, regarding Forgery or any other vitiating standards.
• The Alleged Related Party Transactions were entered into by the 'Company' in the original course of business and hence they cannot be permitted to be within related Parties. The whole exercise has been profitable for the 'Company' and there were no siphoning of funds as observed under the Impugned Order.
• Section 188 defines 'Related Party Transactions' which however does not include loans. And to that extent, the finding of National Company Law Tribunal, is 'Erroneous'.
• The 'Company' is a 'Closely Held Family Concern' and operating a Quasi-Partnership, and all loans given and received were to the extended family members and were within the knowledge of the Respondents.
Hence, the Respondents cannot now denounce such Transactions especially since all the money has been returned to the 'Company', with due interest and there is no evidence regarding the siphoning of funds as all the money has been disbursed and returned with interest and the same is reflected in the Company's Books of Accounts.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 19 of 49 • The Learned Counsel for the Appellant vehemently argued that there is no finding of 'Oppression and Mismanagement' or any act prejudicial to any member of the 'Company' and having held that the 'Related Party Transactions' were invalid, there was no requirements for the NCLT, to order investigation into the 'Company' or Penalise the Director.
• As per the Memorandum of Understanding, dated 15/09/2016, the 1 st Appellant's Company in all the three 'Appeals' was to be managed by the 2nd and 3rd Appellants, here in and this 'Memorandum of Understanding' was not challenged and therefore the management of the respective 'Company' was given effect to. The Respondents have negotiated huge, even after the Impugned Order dated 31/12/2021 and are enjoying the benefits of the hardwork of the 2nd and 3rd Appellants.
• In the absence of any finding regarding 'Oppression and Mismanagement', as provided for under Sections 241 and 242 of the 'Companies Act, 2013, the Impugned Order is required to be set aside.
14. Submissions of the Learned Counsel Mr. A. Kumar appearing on behalf of the Respondents:
• It is submitted that the Appellants who are Respondent Nos. 2 & 3 in the main Company Petition were acting against the interest of the Company and the shareholders and against the public interest in 'Gross Violation' of the provisions of the Companies Act and also the Articles of Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 20 of 49 Association of the Company and hence indulged in acts of 'Oppression and Mismanagement' of the Shareholders, resulting in Financial Loss, caused by the Appellants for having engaged in 'Related Party Transactions' and also having siphoned of huge amounts of Money through illegal deals.
• It is denied that the Appellants had conducted any Annual General Meetings and infact there was no 'Notice' issued to the Shareholders and no Meetings were convened at all. To establish the same, the Petitioners in the Company Petition, filed I.A. No. 87 of 2020, seeking a direction to the 1st and 2nd Respondents to produce the relevant records and allow investigation of the same. Vide Order dated 28/07/2021, the National Company Law Tribunal, directed the 1st and 2nd Respondent to produce the Records. The Learned Counsel for the Respondents submitted that the Appellants herein have filed fabricated Records and it is relevant to note that the 'Appellants' themselves had admitted that the Attendance Register of the Board Meetings and Annual General Meetings, prior to 2018, is mysteriously missing. The Attendance Register is the only Record which would indicate the presence of the shareholders in the Meeting and is a Statutory Record to be maintained in the Original Course of business. It is contended that the very establishment of the Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 21 of 49 relevant Records having disappeared indicates the Malafide Conduct of the Appellants herein.
• Not Conducting the Annual General Meetings is per se, an act of 'Oppression and Mismanagement' as the shareholders are denied the benefit of knowing the Company's Affairs, which is prejudicial to the affairs of the Company and the shareholders as well.
• The 2nd and 3rd Appellants, on the spurious premise of providing employment to their own spouse, who are also the shareholders, gave them exorbitant amounts in the name of their services rendered to the 'Company'. The Auditor's Report indicates that the transactions are 'Related Party Transactions' which devolve loans to related Parties and also amounts under the 'Remuneration'. It is submitted that these funds have been siphoned off for Personal benefit.
• A wholesome reading of Sections 184 and 188 of the 'Companies Act, 2013', indicates that the Director is obliged to reveal at all points of time, his interest including any 'firm' or 'association of individuals'. Under Section 184(2), every Director, if he is directly or indirectly concerned/interested in Contract or arrangement proposed or entered into with a Firm in which such Director is a Partner, shall disclose his nature of his concern and not participate in any such Meeting.
'M/s. Sri Rubber Industries', a Partnership concern of the Appellants Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 22 of 49 violated Section 184(1)(2) and without any Disclosure Participated in the decisions. In fact, no Meeting was even convened where these decisions were said to have been taken.
• The Auditor's Report indicates that the amounts are not periodic but is a 'windfall' and cannot be termed as 'Remuneration'. The Company is not in the business of Money Lending nor is it an ancillary or incidental business. Therefore, these Loan Transactions cannot fall in the nature of 'Arm's Length Transactions'.
• It is argued by the Learned Counsel that in both the situations, of non conduction of Board Meetings and Annual General Meetings and indulging in 'Related Party Transactions', the National Company Law Tribunal, Kochi has rightly come to a Conclusion that there is a Breach of Articles of Association of the Company and therefore the 'Related Party Transactions' were declared as Invalid.
Assessment:
15. It is the case of the Appellant that there was no Violation of the terms of the Clauses of the Articles of Association of the Company and that the AGMs were duly conducted under the Provisions of the Companies Act, 2013, by giving 'Notice' in an appropriate manner to the Respondent herein. At this juncture, we find it relevant to reproduce Clauses 32 and 44 of the Articles of Association of the Company, which are detailed as herein:
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 23 of 49 "Clause 34: - The business of the Company shall be managed by the Directors who may pay all expenses incurring in setting up and registering the Company and may subject to any regulation of these articles or regulation prescribed by the Company in general Meeting exercise all such powers of the company as are not governed by the Companies Act, 1956, or any statutory modification thereoffor all time being in force or by these articles, required to be exercised by the company in general Meeting".
"Clause 44:- The company shall always with the Provisions of the Companies Act, 1956 or any statutory modification thereof for the time being in force in respect of maintenance of accounts, balance sheet and audit".
16. Seen from the aforenoted Articles of Association that the business of the 'Company' should be managed by the Directors of the 'Company' who would act as Trustees, on behalf of the 'Company', it is the main case of the Respondents that the 2nd Appellant did not convene the AGMs of the 'Company', as maintained under the Act, for the years 2015-16, 2016-17 & 2017-18 and that the Records were all fabricated and False Reports were submitted to the ROC to the effect that the AGMs were 'Convened'. On a pointed query from the Bench as to which mode the 'Notices' were served, it was submitted that they were handed over 'personally', which was a common practice as all the Respondents were in the same floor. It is seen from the record that the said 'Proof of Service', is not available. Section 173(3) provides that 'Notice' of the Meeting of the Board of Directors shall be sent to all Directors giving not less than 7 days 'Notice'. Section 173(2) states that every Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 24 of 49 Director should record Attendance in the Meeting by signing in the Register. Sections 118(2)(4) and Section 118(10) provide that 'Minutes of the Meeting' of the 'Board of Directors' should be maintained in records.
17. It is significant to mention that the Respondents had sought for production of the following documents namely the 'Minutes Book' of the AGM for the last 5 years; 'Minutes of the Board Meetings', held during the last 5 years; 'Attendance Sheets of the Board Meetings' as well as the AGMs of the last 5 years and Proof of sending 'Notice' of this Board Meetings. It is relevant to mention that the 2nd Appellant has filed an Affidavit before the NCLT on 09/08/2021 admitting that the Records relating to the 'Notices' of the AGMs and the Attendance of the Participants at the said Meetings were 'misplaced'. It was also stated that the said Records were damaged by '2018 Floods'. The Records were filed from 2019 onwards. It is the case of the Respondents that the Documents prior to 2019 have been fabricated and further that they have grossly violated the Secretarial Standards. The Learned Counsel for the Respondents submitted that the documents were clearly tampered with; handwriting is similar from 2018-2021 that the Minutes had been maintained in loose sheets; that the time of commencement and conclusion of the Meeting was not mentioned; pages have not been consecutively numbered; the Statutory Auditor was absent; the Company's Secretary was also conspicuously absent Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 25 of 49 and further that the dates of entries in the Records by the Company Secretary is also missing, which is in violation of Section 118 of the Act.
18. The Perusal of IA Nos. 49 and 58/2019 show that in accordance with the Directions of the NCLT, the Resolutions were adapted by the majority share holders in the AGM held in 31/10/19. Subsequently, the Hearing was adjourned by the NCLT, and the 2nd Appellant convened the 'Meeting of the Board of Directors' on 12/07/2021, pursuant to issuance of 'Notice' which did not contain any 'Agenda Notes' on the said matter issued for discussion in the said Meeting. The 3rd Respondent being the Director of the Company, advised the 2nd Respondent vide letter dated 06/07/2021 to refrain from conducting the said Meeting as he was from the Office of the Managing Director of the Majority Shareholders at the AGM, dated 31/10/2019. It is also seen from the record that the '2nd and 3rd Appellants' had contended that the 'Company' was exempted from the Operation of various Provisions of the Act by virtue of the Notification GSR/464(E), dated 05/06/2015 which was later amended on 13/07/2017. This argument was rejected by the National Company Law Tribunal, Kochi Bench, vide Order dated 18/11/2021, which was never challenged by the Appellants and has since attained Finality.
19. Having regard to the fact that there is no 'Proof of Service' with respect to the Service of 'Notice' on the Respondents, regarding the AGMs for the years 2015-16, 2016-17, 2017-18 and in the absence of any Records produced Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 26 of 49 before the NCLT, this Tribunal is of the earnest view that an 'adverse inference', can be drawn regarding the 'Maintenance of Records of the Company', with respect to the said alleged AGMs, which the Respondents strongly contend, were never convened.
20. The other issue which arises for consideration is the contention of the Respondents that there was large scale siphoning of funds from three companies by the 2nd and 3rd Appellants and their spouses through 'Related Party Transactions'. The Learned Counsel drew our attention to the Books of Accounts from 2015-2021 in support of his case that loans were given by 1st and 2nd Appellants to entities in which they have Financial Interest. It is seen from the Record that M/s Sri Rubber Industries, a firm in which the 2nd and 3rd Appellants are Directors, have entered into 43 transactions in the year 2015- 16, three transactions in 2016-17 and one transaction in 2017-18, pursuant to which more than Rs. 4 Crores were lent to this 'Company'. It is also seen from the record that more than 18 Crores amount was given to M/s RBG Trading Corporation Private Limited, vide several transactions from the years 2015- 2018, apart from loans given to spouses, Ms. Ritu Gupta of Rs. 50,46,778, through two transactions in 2018-19 and to Mrs. Ankita Gupta of Rs. 50,00,000, through two transactions in 2018-19.
21. This Tribunal is of the considered view that the transactions were conducted by the 2nd and 3rd Appellants in contravention of the provisions of Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 27 of 49 the 'Companies Act, 2013'; have not informed the third Director of these transactions in the 'Meetings of the Board of Directors'; that these transactions cannot be construed as 'Arm's Length transactions' as the 'Company' is not into 'Money Lending Business'. This Tribunal is of the earnest view that NCLT has rightly observed that the 'Memorandum of Understanding' cannot be enforced on shareholders who are not signatories therein and that such 'Memorandum of Understanding' would not be binding in accordance with Sections 5,6 and 10 of the Act. However, we do find force in the Contention of the Learned Counsel for the Appellant that the NCLT, did not give any finding with respect to 'Oppression and Mismanagement' and has only held that these 'Related Party Transactions' did not require investigation and therefore no 'Penalty' was imposed. This Tribunal is also conscious of the fact that the 3 rd Appellant has categorically stated in Para 11 of their Reply to the Review Application that the finding of this Honourable Tribunal in the Order dated 31/12/2021 in C.P. No. 114/KOB/2019 are Legally Correct and totally sustainable. The main Contention of the Learned Counsel for the Appellant is that there was no case of 'Oppression and Mismanagement' made out by the Respondents and that there was no finding given to that effect by the NCLT and therefore the directions given in the subsequent Review Order cannot be sustained.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 28 of 49 Comp. App. (AT) (CH) No.31/2022:
22. Aggrieved by the `Order' dated 16.03.2022 passed in `Review Application' 02/KOB/2022 in CP 114, 119 & 125/KOB/2019 under Section 420(2) of the Companies Act, 2013 (hereinafter referred to as `The Act'), this `Appeal' has been preferred by `M/s. RBG Enterprises Pvt. Ltd.', `Mr. Rajkumar Gupta' and `Mr. Vishnukant Gupta' arrayed as Appellants 1, 2 & 3 respectively. In the `Review Order', the NCLT has disposed of the `Review Application' granting the following consequential reliefs:
"I. The 2nd and 3rd respondents (i.e., Mr. Rajkumar Gupta and Mr. Vishnukant Gupta) have vacated office as directors of the 1st Respondent Companies (i.e., M/s. RBG Enterprises Private Limited, M/s. RBG Trading Corporation Private Limited and M/s. RBG Retail Private Limited) in accordance with Sections 167(1)(c) and167(1)(d) of the Act with effect from. 31.12.2021;
II. The 2nd and 3rd respondents are not fit and proper persons to hold the office of Director or any other office connected with the conduct and management of any company as contemplated under section 242(4A) of the Act with effect from 31.12.2021;
III. On a consideration of the documents filed by the Respondent pursuant to the directions of this Hon'ble Tribunal on 28.07.2021 and 12.08.2021, the affirmation of the 3rd Respondent (i.e., Mr. Vishnukant Gupta) to the Review Petition, the reliefs sought for in IA/195/KOB/2021 shall stand allowed. The Registry is directed to take necessary action forthwith;
IV. In view of our finding that the 2nd and 3rd respondent have failed to comply with the provisions of Act governing related party transactions (including Section Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 29 of 49 184 and 188), they shall stand disqualified as Directors of the 1st respondent Companies having regard to section l64(1)(g) of the Act with effect from 31.12.2021;
V. Mrs. Sulochana Gupta (DIN - 02233110) and Mr. Radha Ballabh Gupta (DIN -006430691 shall stand appointed as Directors of the lst respondent Companies with immediate effect;
VI. Mrs. Sulochana Gupta (DIN - 02233110) and Mr. Radha Ballabh Gupta (DIN - 00643069) are hereby directed to convene the Annual General Meetings of the 1st respondent Companies in CP/ 114/KOB/2O19, CP/119/KOB/2019 & CP/125/KOB/2O19 for the years FY 2015-2016 till date and to table the financial statements of the 1st respondent Companies for consideration of the shareholders;
VII. The 2nd and 3rd respondent, and their spouses, Mrs. Ritu Gupta and Mrs. Anika Gupta are hereby directed to refund all amounts drawn illegally by them through related party transactions including remuneration, as disclosed in the financial statements from FY 2015-16 till date, within 30 days from the date of this order;
VIII. The Registrar of Companies, Kerala is directed to notify the change in the Board of Directors of the 1 st respondent Companies (i.e., M/s. RBG Enterprises Private Limited, M/s. RBG Trading Corporation Private Limited and M/s. RBG Retail Private Limited) within a period of three working days from today;
IX. The Bankers of the 1st respondent Companies are hereby directed to immediately change the signatories to the bank accounts based on the mandate signed by Mrs. Sulochana Gupta (DIN - 02233110) and Mr. Radha Ballabh Gupta (DIN - 00643069);
X. The above directions shall apply in respect of all other Company Petitions, i.e., CP/119/KOB/2O19 and CP/125/KOB/2019;
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 30 of 49 XI. The Registry is also directed to immediately forward a copy of this order to the Registrar of Companies, Kerala for compliance."
23. Learned Counsel for the `Appellant' submitted that the allegations raised by the first and second Respondents in the Review Application can be summarised as follows:
"i. There is a finding in Paras 42 to 48 of the common order dated 31.12.2021 that the Articles of Association of the companies have been violated, however, no substantive relief has been granted for the same.
ii. There is a finding in Paras 49 to 55 of the common order date 31.12.2021 and the 2nd and 3rd Appellants have indulged in related party transactions and the same was declared invalid, however, no substantive relief has been granted for the same.
iii. There is a finding in the common order dated 31.12.2021 that all reliefs pursuant to the above findings are consequential but the same was not enumerated by the Hon'ble Tribunal and hence, the same requires immediate rectification.
iv. As a consequence of the findings on illegal acts committed, 2nd and 3rd Appellants are deemed to have vacated office under Section 167(1)(b) of the Companies Act, 2013."
24. It is the case of the `Appellants' that NCLT does not have the power to `Review' its `Order' and that the `Respondents' have cloaked the `Review' under the façade of rectifying errors in the `Common Order' dated 31.12.2021; that it is beyond the scope of the NCLT to modify `Orders' and powers are to Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 31 of 49 be exercised only by way of correcting arithmetic errors or minor clarifications. Learned Counsel for the `Appellant' strenuously argued that there have been new `Prayers' sought for in the `Review Application' which did not initially form part of the Company Petition. It is contended that NCLT has completely misconstrued Section 420 of the Act wherein the power to amend a mistake is vested with the Tribunal, whereas the nature of reliefs awarded in the instant case go beyond correction/rectifying of an error/mistake and hence ought to be set aside. The NCLT did not give any consideration to the proviso to Section 420(2) of the Act which states that no amendment is to be made to an error over which an `Appeal' has been preferred. Clause (h) to sub-Section (2) of Section 424 is to be construed in a harmonious manner to enhance the effect of the Act and the CPC, but NCLT has misconstrued the same and has affected Section 152 of CPC thereby indirectly exercising the `Power of Review' which is unavailable to NCLT.
25. Learned Counsel for the `Appellant' contended that NCLT has erred in holding that the second and third Appellants have vacated the Office of Director of the first Appellant Company since 31.12.2021 in accordance with Sections 167(1)(c) & (d) of the Act. Under Sections 167(1)(c) & (d), violation under Section 184 of the Act has to be necessarily established. There is neither any pleading nor any Prayer to this effect in both the `Parent Company Petition' and the `Impugned Review Application', and therefore, on this ground alone Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 32 of 49 the `Impugned Order' is to be set aside. It is also contended by the Counsel that there is no finding by the NCLT to the effect that Section 188 of the Act has been violated by the second and third Appellants. It is only by virtue of this `Order' that Ms. Sulochana Gupta, the first Respondent has become the Director of the Company and there were no reasons given for granting this relief. It is also brought to the notice of this `Tribunal' that an `Appeal' was preferred by the `Appellants' against the `Impugned Order' dated 31.12.2021 and that propriety demanded that a `Review' could not have been entertained by NCLT. It is submitted that the reasoning given in para 29 of the `Impugned Order' is incorrect and that the `Tribunal' has traversed beyond the original Order despite the fact that there was never any finding about `Oppression and Mismanagement'. It is strenuously argued by the Learned Counsel for the `Appellant' that there is no financial impropriety and that all amounts were returned and that whatever was received by the `Appellants' was put in the market and the same has come back to the Company and hence there is no anomaly.
26. It is the case of the `Appellants' that when NCLT has observed that there would not be any investigation, giving diametrically opposite directions, is unjustified. The consequence of the second Order is the `exit' of the `Appellants' from the Company despite the directions of NCLT that there would be `no penalty' and `no investigation'.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 33 of 49
27. It is also brought to the notice of this `Tribunal' that the `Order' in Review is dated 16.03.2022, subsequent to the numbering of the `Appeal' and that the `Order' is completely without jurisdiction. The `Review Order' was stayed by the Karnataka High Court for a short period to approach NCLT but the Division Bench vide `Order' dated 30.03.2022 in WA No.420/2022 observed in paras 12 & 13, as follows:
"12. We are of the view that once the court finds that alternate remedy is available before the appellate authority and hence directed the aggrieved party to approach that forum, writ court ought not have exercised its jurisdiction by deferring the operation of Ext.P6 unless and until there is any emergent circumstance, which on the facts and circumstance of this particular case arise.
13. As there is no emergent circumstance warranting deferring the operation of Ext.P6, we delete the last line of the judgement in W.P.(C)No.9819 of 2022 dated 22nd March, 2022 i.e., "if the petitioner files an appeal before the NCLAT within a period of 30 day." In all other respects, the impugned judgement is sustained.
With the above modification, writ appeal is disposed of."
28. On an `Appeal' preferred by `M/s. RBG Enterprises Private Limited', the Hon'ble Supreme Court in SLP No.6652/2022 dated 18.04.2022 observed as follows:
"We are not inclined to interfere with the impugned judgement passed by the High Court. Special Leave Petition is dismissed. At this stage learned senior counsel appearing for the petitioners submits that Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 34 of 49 pursuant to the order passed by the learned Single Judge on 22.03.2022, the petitioners have already filed Appeal before the National Company Law Appellate Tribunal (NCLAT) at Chennai, on 26th March, 2022.
We request the NCLAT to consider the Appeal, including the application seeking stay, as expeditiously as possible without being influenced by any of the observations made in the impugned order.
Pending applications, if any, also stand disposed of."
29. Learned Counsel for the `Respondent' Mr. Ashwin Kumar submitted that this `Appeal' was preferred by the `Company' and that it is not competent to do so. It is submitted that it is settled law that in the interpretation or construction of a statutory provision, reliance can be placed on other statute. The provisions of Rule 154 of the NCLT Rules, 2016, is analogous to Section 152 of the Code of Civil Procedure, 1908, (`CPC') and under such circumstances, the pronouncements in the context of Section 152 of the CPC should be followed for construction of the words in the latter statute. Learned Counsel placed reliance on the Judgement of the Hon'ble Apex Court in 'District Mining Officer' Vs. 'Tata Iron & Steel Company & Anr.'1, in support of this submission. The Learned Counsel also drew our attention to the proposition, laid down by the Hon'ble Apex Court, in 'Apex Laboratories Private Limited' Vs. Deputy Commissioner of Income Tax, Large Tax Payer 1 AIR 2001 SC 3134 Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 35 of 49 Unit-II'2, in which it is held that "no Court will lend its aid to a party that roots its cause of action in an `immoral' or `illegal act', meaning, thereby that none should be allowed to provide from any wrongdoing", which is based on the maxim "ex dolo malo non-oritur actio". It is argued that the `Appellants' have indulged in acts, contrary to the Articles of Association, in related party transactions, and in siphoning off funds of the Company; that the `Appellants' are the accused in Crime No.9916/2021 and an FIR is registered in Mattancherry Police Station in respect of the various offences committed by the Directors of the Company; that the `Appellants' were enlarged on Anticipatory Bail vide `Order' of the Hon'ble High Court dated 01.02.2022, in Bail Application No.7522/2021; that Mr. Rajkumar Gupta, the second Appellant has also been arrayed as the accused in FIR No.350/2022, pending before the Edathara Police Station in respect of several offences. It is submitted that the conduct of the `Appellant' is indeed oppressive as they have also violated the `Orders' of various Courts and were silent about the fact that `Order' of the NCLT dated 16.03.2022 was contested by them before the Hon'ble Supreme Court even when this matter was under consideration before this `Tribunal'. The `Appellants' have since 16.03.2022 indulged in various transactions to siphon off funds attracting the rigours of GST Laws and the Prevention of Money Laundering Act, 2002, and also the Benami Transaction 2 (2022) 7 SCC 98 Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 36 of 49 Prohibition Act, 1988 and, therefore, the Complaint was filed on 15.07.2022 before the Assistant Commissioner of Police, Mattancherry.
30. It is the main case of the Respondents that the reliefs sought in the `Review Application' is only on account of the `accidental slip' or `omission' by the NCLT in the `Common Impugned Order' dated 31.12.2022. It is vehemently argued by the Learned Counsel for the Respondent that the incorporation of the consequential `Order' is an Amendment to para 55 only and not to the whole of the `Order'; that no new evidence has been reappreciated to enter into any different conclusion; there is no new aspect introduced; that the same Quorum of the NCLT noticed this omission and rectified the same; that the NCLT in `Order' dated 31.12.2022 has found violation of the interest of the Shareholders in the non-conduction of the AGM/Board Meetings, which is affirmative of the breach of rights of the Shareholders, and merely because the words, `Oppression and Mismanagement' has not been used by the NCLT, it cannot be said that the findings which are explicitly based on facts, are not in the specie of `Oppression and Mismanagement'.
31. Learned Counsel for the Respondent drew our attention to the Reply of the `Appellants' herein to the `Review Petition' filed before the NCLT, wherein it is observed in para 11 of the Reply as follows:
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 37 of 49 "11. Therefore, the findings of this Hon'ble Tribunal in the Order dated 31.12.2021, in CP/114/KOB/2019 are legally correct and totally sustainable".
32. It is contended that the `Appellants' forfeited their rights to challenge the NCLT `Order' dated 31.12.2021, in view of their submission that the `Order' is legally correct. Learned Counsel, placed reliance on the Judgement of the Hon'ble Apex Court in 'Laxmi Ram Bhuyan' Vs. 'Hari Prasad Bhuyan and Ors.'3, in which it is held that the reliefs should have been clearly drafted and cannot be left to be guessed and that the only solution is Section 152 of the CPC.
33. As the NCLT has placed reliance on this Judgement elaborately, the same is not being reproduced hereunder for the sake of brevity. It is also submitted that NCLT has rightly referred to the ratio in 'Ashutosh Das' Vs. 'Sushma Rani Das and Ors.'4. Learned Counsel for the Respondent also placed reliance on the following Judgements in support of his contention that when there is an `accidental slip' manifested in an `Order', the Courts can rectify the same and that this inherent flaw cannot be continued and the same rule is applicable to NCLAT under Rule 154 of the Rules, 2016:
o Sun Pharmaceutical Industries Ltd. and Ors.' Vs. 'Sumit Binani & Ors.'5.3
(2003) 1 SCC 197 4 AIR 2004 Gau 136 5 Comp. App. (AT) (Ins.) No.334/2021 Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 38 of 49 o 'Annapu Ramanna' Vs. 'Ponduri Sramulu & Ors.'6.
o 'Mahendra Singh' Vs. 'State of Uttarakhand and Anr.'7, in which it is noted in para 7 as follows:
"7. The principle behind Section 152 CPC is that no one should suffer due to the mistake of the Court and whatever is intended by the Court, while passing the order, must be properly reflected therein, otherwise it would only be destructive of the principle of advancing the cause of justice. (Jayalakshmi Coelho Vs. Oswald Joseph Coelho) (2001) 4 SCC 181. The basis of this provision, in Section 152 CPC, is found on the maxim actus curiae neminemgravabit i.e., an act of the Court shall prejudice no man. Hence, an unintentional mistake of the Court which may prejudice the cause of any party must be rectified. (Jayalakshmi Coelho Vs. Oswald Joseph Coelho) (2001) 4 SCC 181; Assam Tea Corpn. Ltd. v. Narayan Singh & Anr.) AIR 1981 Gau
41."
o 'Sampuran Singh' Vs. 'Nandu & Ors.'8.
o 'Honda Siel Power Products Ltd.' Vs. 'Commissioner of Income Tax'9. Assessment:
34. The brief point which falls for consideration in this `Appeal' namely Comp. App. (AT) (CH) No.31/2022 are:
a) Whether the NCLT has the power to review its own Order?6
(2007) 12 SCC 596 7 2020 SCC OnLine Utt 332 8 AIR 2004 P&H 239 9 (2007) 12 SCC 596 Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 39 of 49
b) Whether the NCLT can give any consequential reliefs, which were ought to be directed/mentioned in the main Company Petition, in the event of a finding of `Oppression and Mismanagement'?
c) Whether there was any `accidental slip'/`omission' in the main Company Petition warranting NCLT to entertain the `Review Application' and give these consequential reliefs?
35. At the outset, this `Tribunal' is of the earnest view that the question whether the Prayers sought for in the `Review Application', fall within the purview of `review', is to be addressed. The said Prayers are detailed as hereunder:
"I. The 1st Relief in CP/ 114/KOB/2019 on the re- constitution of the Board be modified in conformity with the Resolution adopted by the majority shareholders at the Annual General Meeting held on 31.10.2019 appointing Mrs. Sulochana Gupta as Managing Director of the /sf Respondent Company;
II. The 1st Relief in CP/ L14/KOB/2019 on the re- constitution of the Board be modified in conformity with the Resolution adopted by the majority shareholders at the Annual General Meeting held on 31.10.2019 appointing Mr. Radha Ballabh Gupta as Director of the 1st Respondent Company;
III. Issue a direction to Mrs. Sulochana Gupta and the 1st Respondent companies to convene the Annual General Meetings of the 1st Respondent Companies in CP/114/KOB/2019 and CP/ 119/KOB/2019 for the years 2015- 2016 to 2017-20i8 in the light of the finding in para 55 of the common order that the 2nd Respondent has not convened the said Annual General Meetings;
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 40 of 49 IV. Issue a direction to Mrs. Sulochana Gupta and the 1st Respondent companies to re-convene the Annual General Meetings of the 1st Respondent companies for the years 2018-2019 to 2020-2021 after holding the Annual General Meetings of the 1st Respondent companies for the years 2015-2016 to 2017-2018;
V. Permit the reconstituted Board of the 1st Respondent Companies in CP/114/ KOB/ 2019 and CP/119/ KOB/2019 to change the signatories in the accounts of the companies in all Banks and financial institutions.
VI. Issue a direction to the bankers of the 1st Respondent Companies in CP/114/KOB/2019 and CP/119/KOB/2019 to cease to honour with immediate effect all financial transactions initiated by the 2nd and 3rd Respondents;
VII. Issue a direction to the 2nd Respondent Rajkumar Gupta, Ritu Gupta (wife of Rajkumar Gupta), the 3 rd Respondent Vishnukant Gupta, and Anika Gupta (wife of vishnukant Gupta) to refund all amounts drawn illegally through related party transactions disclosed in financial statements from 2015 till date, within a date to be specified by this Hon'ble Tribunal;
VIII. Issue a direction to the Registrar of companies, Ernakulam to notify the changes in the constitution of the Board of Directors of the Respondent companies as may be filled by any of the Directors of the reconstituted Board on the website of the Ministry of Corporate Affairs in accordance with the orders of this Hon'ble Tribunal;
IX. Issue a direction that the reliefs granted in CP/114/ KOB/ 2019 be made applicable to CP/ 119/ KOB/2019, and CP/ 125/KOB/2019 with suitable modifications as warranted in the facts stated in the said CPs.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 41 of 49
36. At this juncture, it is relevant to reproduce Section 420 of the Act as hereunder:
"420. Orders of Tribunal.-- (1) The Tribunal may, after giving the parties to any proceeding before it, a reasonable opportunity of being heard, pass such orders thereon as it thinks fit.
(2) The Tribunal may, at any time within two years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it, and shall make such amendment, if the mistake is brought to its notice by the parties:
Provided that no such amendment shall be made in respect of any order against which an appeal has been preferred under this Act.
(3) The Tribunal shall send a copy of every order passed under this section to all the parties concerned."
(Emphasis Supplied)
37. The NCLT has conjointly referred to Section 424 and 420 of the Act and therefore we find it relevant to reproduce Section 424 of the Act also as hereunder:
"424. Procedure before Tribunal and Appellate Tribunal.-- (1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice, and, subject to the other provisions of this Act and of any rules made thereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure.
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 42 of 49 (2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of the following matters, namely:--
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public record or document or a copy of such record or document from any office;
(e) issuing commissions for the examination of witnesses or documents;
(f) dismissing a representation for default or deciding it ex parte;
(g) setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and
(h) any other matter which may be prescribed.
(3) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to send for execution of its orders to the court within the local limits of whose jurisdiction,--
Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 43 of 49
(a) in the case of an order against a company, the registered office of the company is situate; or
(b) in the case of an order against any other person, the person concerned voluntarily resides or carries on business or personally works for gain.
(4) All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code (45 of 1860), and the Tribunal and the Appellate Tribunal shall be deemed to be civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
(Emphasis Supplied)
38. It is held by NCLT that a conjoint reading of Section 424 and 422 of the Act would posit the fact that this Court while discharging the functions under the provisions of the Act has the same powers as vested in a Civil Court under the Code of Civil Procedure, 1908. Section 252 of the CPC, which is para materia with Rule 154 of the NCLT Rules, 2016, reads as hereunder:
"154. Rectification of Order.- (1) Any clerical or arithmetical mistakes in any order of the Tribunal or error therein arising from any accidental slip or omission may, at any time, be corrected by the Tribunal on its own motion or on application of any party by way of rectification.
(2) An application under sub-Rule (1) may be made in Form No. NCLT 9 within two years from the date of the final order for rectification of the final order not being an interlocutory order."
(Emphasis Supplied) Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 44 of 49
39. While this `Tribunal' is of the view that if there is any mistake apparent from the face of record and if such a mistake is brought to its notice by the parties, the same can be amended or modified, it is to be seen that the question of adherence to Section 152 of CPC arises only when the `Tribunal' is satisfied that there was a `clerical' or `arithmetical mistake' in the Judgement or an `accidental slip' or `omission', which can be corrected.
40. In the instant case, the reliefs sought for in the `Review Application' do not appear to be seeking any rectification of any `clerical' or `arithmetical mistake'. The contention of the Learned Counsel for the Respondent that these reliefs were mistakenly not included in the `Impugned Order' by way of `accidental slip' or `omission' cannot be sustained, specifically, keeping in view that the reliefs sought for emanate from a finding of `Oppression and Mismanagement', which the `Common Impugned Order' does not specifically observe. At this juncture, it is pertinent to mention that this `Tribunal' does not wish to dwell deep into the merits of the matter and therefore the aspects of FIR registered, Criminal Complaints and other offences and issues between the parties is not being addressed to. This `Tribunal' is also conscious of the fact that an `Appeal' against the `Common Impugned Order' was pending before this `Tribunal' when the `Review Application' was disposed of. Having regard to the fact that this `Tribunal' is not satisfied that the reliefs granted in the Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 45 of 49 `Review Application' are `consequential reliefs', in the absence of any specific findings of `Oppression and Mismanagement', in the `Common Impugned Order' dated 31.12.2021, it cannot be said to be an `accidental slip', or `omission', for NCLT to have placed reliance on Sections 420(2) & 424 of the Act. At the cost of repetition, a perusal of the `Common Impugned Order' dated 31.12.2021, shows that there was `no penalty'/`no investigation' ordered, apart from the fact that there were no specific findings of `Oppression and Mismanagement'. This `Tribunal' is of the considered view that Section 420(2) is to be applied only when there are `clerical' or `arithmetical errors' and we do not find that these reliefs granted in the `Review Application', viewed from any angle be defined as `clerical' or `arithmetical errors'.
41. It is relevant to place reliance on the Judgement of this `Tribunal' in 'Agarwal Coal Corporation Private Limited' Vs. Sun Paper Mills Ltd.'10, in which it is held that 'in the absence of any inherent `Power of Review' or `Recall' vested with the `Adjudicating Authority'/`Appellate Authority', any `Order'/Judgement passed by it cannot be either `reviewed' or `recalled'. Section 151 of the CPC deals with `Inherent Powers' and the statute of CPC provides `Inherent Powers' to the Civil Court to advance the cause of justice, on the contrary, any such `Inherent Powers' of `review' are absent in the Companies Act, 2013.
10
2021 SCC OnLine NCLAT 367 Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 46 of 49
42. We rely on the decision of the Hon'ble Supreme Court in the case of 'My Palace Mutually Aided Cooperative Society' Vs. 'B. Mahesh & Ors.'11 wherein it is held as follows:
"27. In exercising powers under Section 151 of the CPC, it cannot be said that the civil courts can exercise substantive jurisdiction to unsettle already decided issues. A Court having jurisdiction over the relevant subject matter has the power to decide and may come either to a right or a wrong conclusion. Even if a wrong conclusion is arrived at or an incorrect decree is passed by the jurisdictional court, the same is binding on the parties until it is set aside by an appellate court or through other remedies provided in law.
28. Section 151 of the CPC can only be applicable if there is no alternate remedy available in accordance with the existing provisions of law. Such inherent power cannot override statutory prohibitions or create remedies which are not contemplated under the Code. Section 151 cannot be invoked as an alternative to filing fresh suits, appeals, revisions, or reviews. A party cannot find solace in Section 151 to allege and rectify historic wrongs and bypass procedural safeguards inbuilt in the CPC."
(Emphasis Supplied)
43. Having regard to the facts and circumstances of the instant case, this `Tribunal' is of the view that no `Procedural Review' could have been availed. The `Power of Review' is a creator of statute and is not an `Inherent Power' as laid down by the Hon'ble Apex Court in 'Lily, Thomas' Vs. 'Union of India'12, 11 Civil Appeal No.5784/2022 @ S.L.P. (Civil) No.7015/2022 12 AIR 2000 SC 1650 Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 47 of 49 `Review' is not an `Appeal' in disguise for the NCLT to have given the reliefs in the `Review Application', there ought to be `reappraisal of materials' which cannot be permitted in a `Review', as it would amount to re-arguing or re- hearing the parties on `fact' and `law'. The contention of the Learned Counsel for the Respondents that there was no reappraisal of evidence on record, keeping in view the peculiar facts of this case, cannot be sustained as the directions in the `Review Application' were termed as consequential reliefs. This `Tribunal' in 'Agarwal Coal Corporation Ltd.' Vs. 'Sun Paper Mill Ltd. & Anr.'13, held as follows:
"26. Resting upon 'Review' the ''Tribunal'' would not rehear the parties on 'Facts' and 'Law. No wonder, a re-appraisal of evidence on record for unearthing an error will amount to an exercise of 'Appellate Jurisdiction" which is not permitted in Law. A ''Review'' is not to be sought for a 'Fresh Hearing' or 'Arguments' or 'Correction of an erroneous view' taken earlier. To put it precisely, the contentions raised and determined in main proceedings are not to be reopened/re-agitated under the garb of ''Review Petition'' as per decision Sharada Bai V. Padamlal, 2003 All India High Court Cases 1756 (1757) (Andhra Pradesh). Also for correcting an erroneous decision, "Review" will not lie, as opined by this "'Tribunal''. Further, the Hon'ble Supreme Court in Patel Narshi Thakershi vs. Pradyumansinghji Arjunsinghji reported in AIR 1970 Supreme Court 1273 had observed and held that 'power of Review' is not an 'inherent power'.
(Emphasis Supplied) 13 I.A. No.265/2019 in Comp. App. (AT) (Ins.) No.412/2019 Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 48 of 49
44. Keeping in view that this `Tribunal' has found no error in the `Common Impugned Order' dated 31.12.2021 and has confirmed the findings of the NCLT with respect to `Related Party Transactions', but at the same time it is noted that there was no specific findings of `Oppression and Mismanagement', by the `NCLT', the directions given in the `Review Application', are set aside to secure the `ends of justice', and the matters are remanded back to the `NCLT'/`Tribunal' to hear the matter afresh on the limited point of whether the acts committed by the `Appellant' herein fall within the ambit of `Oppression and Mismanagement', and then, pass a `reasoned speaking order', by adverting to the points raised and to grant `appropriate relief', as deemed fit in the matter, based on the facts and circumstances of the case, which float on the surface, ofcourse, within the four parameters of `Law'.
45. The instant `Appeals', are `disposed of', with the aforesaid observations / directions. The connected pending `Interlocutory Applications', if any, are `closed' [Justice M. Venugopal] Member (Judicial) [Ms. Shreesha Merla] Member (Technical) 27/04/2023 SPR / HA / TM Comp. App. (AT) (CH) Nos. 18 to 20 &31/2022 Page 49 of 49