National Company Law Appellate Tribunal
Safeco Hygiene Films Pvt. Limited vs Loganmoy Ltd. Matheson Trust 1 Co. Bvi ... on 9 August, 2021
NATIONAL COMPANY LAW APPELLATE TRIBUNAL,
PRINCIPAL BENCH, NEW DELHI
Company Appeal(AT) No. 262 of 2019
IN THE MATTER OF:
Safeco Hygiene Films Pvt. Ltd.
Plot No.708, Savli GIDC, Estate,
Manjujsar, Vadodara,
Gujarat ...Appellant
Vs
1. Loganmoy Ltd. Matheson Trust Co. (BVI) Ltd.
PO Box No. 36, Sommer Ville House
Phillips Street, Ste Heiler, Jersey
JE4 9NU, Channel Island ...Respondent No.1
2. The Registrar of Companies
Ankur Char Rasta
Navrangpure
Ahmedabad ...Respondent No.2
With
Company Appeal(AT) No. 263 of 2019
IN THE MATTER OF:
SBPL Polymers LLP
44, NilamberPams, VasnaBhaili Road
Village Vadodara, Vadodara, Gujarat - 391410 ...Appellant
Vs
1. Loganmoy Ltd. Matheson Trust Co. (BVI) Ltd.
PO Box No. 36, Sommer Ville House
Phillips Street, Ste Heiler, Jersey
JE4 9NU, Channel Island ...Respondent No.1
2. Safeco Hygiene Films Pvt. Ltd.
Plot No. 708, Savli, GIDC Estate,
Manjusar, Vadodara, Gujarat ...Respondent No.2
3. The Registrar of Companies
Ankur Char Rasta
Navrangpure
Ahmedabad ...Respondent No.3
Company Appeal (AT) No. 261 & 262 of 2019 1
Present:
For Appellant: Mr. Mohit Chaudhary and Ms. Garima Sharma,
Advocates
For the Respondents: Ms. Meenakshi Arora, Sr. Advocate with Hursh P.
Jani, Advocate for Respondent No. 1
JUDGMENT
DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER
1. These two appeals have been filed under Section 421 of the 'Companies Act, 2013' (for short 'Act') against the order dated 26.07.2019 passed by the 'National Company Law Tribunal, Ahmedabad Bench, Ahmedabad' (for short 'Tribunal')in 'C.P No.15/98(1) & 100/NCLT/AHM/2018'.Since both the appeals have been filed against the same impugned order dated 26.07.2019, accordingly, both the appeals have been clubbed together by their respective counsels for hearing, written submission set cand accordingly we are considering for disposal of the appeals.
2. The Appellants are aggrieved of the impugned order of the Tribunal as the Tribunal had held that there was no 'Oppression and Mismanagement' of the affairs of 'Safeco Hygiene Films Pvt. Ltd' (SHFP) and has also adjudicated on the rights arising out of the 'Joint Venture Agreement'(JVA) dated 22.03.2013 executed between the 'Loganmoy Limited Matheson Trust CO. Ltd' (LLMT)- Respondent No.1 and 'SBPL Polymers LLP' (SBPL) - Appellant and has directed the Appellant to convene an 'Extra-ordinary General Meeting' (EGM) for appointing four 'Nominee Directors' on the Board of Appellant. It was Company Appeal (AT) No. 261 & 262 of 2019 2 also informed that the Appellant in C.A (AT) No. 263 of 2019 (SBPL) who is a party to the JVA has not been heard.
3. The Tribunal after hearing the parties in the petition has directed the Board of Directors of the Respondent Companies- SHFP to call an 'EGM' of the members of the Respondent Company - (SHFP) in terms of requisition dated 20.12.2017 issued by LLMT (Petitioner at Tribunal). The Tribunal has directed at the 'EGM' be called for considering matters specified in the requisition notice dated 20.12.2017 within 30 days from the date of receipt of authentic copy of this order by prescribing minimum 21 days' notice to its all shareholders and has further directed that the same shall not be convened beyond 45 days from receipt of copy of this order without having express permission of the Tribunal and has permitted the petitioners at the Tribunal 'LLMT' to convene the 'EGM' themselves in another 45 days if the 'Board of Director' of SHFP does not proceed to call for the 'EGM'. The Tribunal has also appointed an advocate as an 'Observer' to the above said 'EGM' and has further added that a nominee from the secured creditors of the Respondent company at the Tribunal, SHFP, preferably from a nationalised bank - 'Union Bank of India' to be a permanent invitee to the meetings of the Board of Directors/ General meetings and has directed that both of them shall submit an independent report to the Tribunal. This has been done to rule out any possibility of oppression with the minority shareholders of the company in the management of the Respondent Company - SHFP. The Petition was filed under Sections 241- 246, Section 98(1) and Section 100 of the Act asking for related reliefs at the Tribunal. Company Appeal (AT) No. 261 & 262 of 2019 3
4. The counsel for the Appellant commenced his submission first from Company Appeal (AT) No.263 of 2019. The Appellant group is comprising of the Appellant - 'SBPL', Mr. Subhash Chawra and Mr. Hiren Chawra are promoters of 'SHFP' are holders of 34% of shareholding in the Respondent No.2 Company, while Respondent No.1 - 'LLMT' is holding 66% share capital. The Appellant has given collateral securities and personal guarantees against the loan availed by the 'SHFP' as per the sanctioned of credit facilities given by 'Union Bank of India' vide its letter dated 21.11.2013 and the same is mentioned in the sanctioned letter as appearing at page No.111 of the appeal paper book in CA(AT) No. 262 of 2019. The credit sanction letter of the said bank also contains a clause that the company to execute a JVA between 'SBPL Polymers' and 'LLMT'. The counsel for the Appellant has extensively submitted on the JVA between 'LLMT' - 'Non Resident Investor' and M/s.SBPL dated 22.02.2013. He has also elaborately amplified Clause of 7 of JVA on management of the Joint Venture Company involving the composition of the Board, proceedings of the Board and Key Management employees. He has submitted that the management of the Respondent No.2 Company are in the hands of the Appellant group and Respondents being a foreign entity established in British Virgin Land having no business interest in India and were only investors. 'LLMT'- Respondent No.1 should only be interested in receiving Return on Investments. The Appellant has also submitted that the Respondent No.1 did not seek to appoint a single 'Director' on Board of Respondent No.2 between the years 2013 to 2016. The Appellants have challenged the impugned order on the Company Appeal (AT) No. 261 & 262 of 2019 4 various grounds like - it has no jurisdiction and it has not considered the JV rights and rights of minority shareholders. It was also submitted that the Tribunal has exercised wrong jurisdiction under Section 241 & 242 of the Act. Findings of the Tribunal qua JV Agreement is beyond the scope of the Section 98 of the Act. The JVA contains arbitration clause and the same cannot be decided in the Company Petition. They have also insisted that the JVA is valid and subsisting. The right of management is contingent in 50% shareholding. The JVA has already given the management right to the Appellant group. Management right is not contingent upon shareholding. The Appellants were insistent that Management right will vest with the SBPL. The Respondents have infused more unsecured loan in the company. Right of majority shareholders to appoint majority Director in Board of Company is not absolute but subject to contractual arrangement between the shareholders which in this case is the JVA. They have treated the impugned order as oppressive and prejudiced to the interest of the Respondent No.- 'SHFP'.
The Appellant through Company Appeal (AT) 262 of 2019 where the SHFP who is the Appellant has submitted the followings:
a. The appellant is the business of manufacturing microporus Hygiene Films that is used in Hygiene Industry for producing Baby Diapers, Sanitary Napkins and Surgical Pads etc. This company was incorporated on 11.02.2012 with an authorised share capital of Rs. 5,00,000 having 50,000 shares of Rs.10/- per share and the Appellant group is the first 'Director' of this Company. As per the Company Appeal (AT) No. 261 & 262 of 2019 5 JV Agreement, both the groups i.e. the Appellants - Mr. SubhasChawra and Hiren Chawra and the Respondents- non-
resident investor, both were entitled for two directors only. LLMT has alleged that the JVA was revoked vide its letter dated 18.11.2016 when the other party did not subscribe to 50 % shareholding in the Company SHFP and thereby the LLMT has become 66% shareholder and is entitle to appoint 3 Directors on the 'Board of the Company'. Due to the financial conditions the Appellant group could not subscribe upto 50 % shareholding. The 'LLMT' requisitioned under Section 100(2) (a) of the Act to call an EGM of the Members to consider the appointment of the nominee Directors of LLMT on the Board of the SHFT. The Notice was given on 31.05.2017 and thereafter 20.12.2017. The LLMT on 04.01.2018 sent a letter to 'Union Bank of India' falsely alleged collusion between the Appellant Group and the Bank for not relieving the collateral security of 'LLMT' and accordingly, they asked the bank not to disburse the credit facility to the company unless a new Board is constituted. In January, 2018, the Appellant group proposed to hold EGM to decide by special resolution regarding adoption of 'Article of Association' (AoA) in conformity with JV agreement and appointment of two 'Director' on Board of the 'SHFP' instead of four 'Directors' to be nominated by 'LLMT'. All this leads to 'LLMT' filing an application before the Tribunal under the Act.
Brief background as submitted by the Appellants are stated below:
Dates Events
11.02.2012 Respondent No.2 incorporated by SubhashRatiwalChawra and
Company Appeal (AT) No. 261 & 262 of 2019 6
Hiren SubhashChawra (Appellat Group) who are the original subscribers and first directors 22.02.2013 JVA between Appellant and Respondent No.1 for infusing 18Cr share capital in R2. As per JVA the management of R2 was to vest with Appellant.
21.11.2013 That the Union Bank of India while sanctioning credit facilities for R2 vide sanctioned letter dated 21.11.2013 put a condition that before the release of credit facilities the R2 shall execute a JVA between Appellant and R1.
2013-14 R2 was not issued 66% shareholding to R1 against the share capital infused by it wheras Appellant was allotted 34 % shareholding in proportion to the share capital infusedby it. 30.09.2014 The board of the company (comprising of representatives of the appellant) was authorised by the shareholders resolution dated 30.09.2014 to borrow by way of the loan/ debenture for the purpose of business of the company and further the board by authorised to take all the steps necessary to give effect to the resolution 29.02.2016 That vide letter 29.02.2016 the Union Bank of India advisedthe R2 to ensure that the JVA is incorporated in article of association of the company failing with the company will attract panel interest of 1% per annum and maximum 2% per annum till compliance of the condition and the fresh term loan proposal will not be considered 18.03.2016 That the R1 vide email addressed to the director of the R2 sought to appointment of its nominees Mr Jagdish Shah and Mr. HileshDevshi Shah as Directors on the Boards of R2. 21.06.2016 The R2 replied and not denied appointing the two nominees of R1 on the Board, requested the R1 to first take steps for updating of AoA in accordance with the JVA as agreed.
07.10.2016 Union Bank of India stated that the appellants should increase the stake in R2 to 50% and JVA shall be incorporated in Articles of the R2.
18.11.2016 Legal notice from R1 to the Directors of R2 for appointing three 28.12.2016 nominee Directors on the Board. The notice alleged that due to failure of the Appellant to subscribe to 50% shareholding the JVA was revoked.
06.01.2017 The R2 replied to the above notice that as per clause 7.2 of JVA, R1 can appoint maximum of two Directors. They asserted that JVA was still subsisting and offered to purchase the excess shareholding of R1 to maintain the shareholding ratio of 50:50 25.01.2017 R1 rejected the proposal to sell excess holding to the Appellant and reiterated the contents of earlier correspondence. 03.02.2017 Letters from R1 to Union Bank of India to release the collateral 27.02.2017 security.
06.04.2017 Bank declined to release the property unless alternative security was offered.
31.05.2017 Notice from R1 under section 100(2) (a) of the Companies Act, 2013 to call EGM of members to inter alia consider appointment of its nominee Directors and non-compliance of provisions of the Act. 19.09.2017 Letter issued by the R1 to Union Bank of India to a stop further disbursement to the R2 2017 The appellant and R1 were in talks regarding the sale of entire shareholding of the R1 to the appellant for consideration of Rs25 Crores.
20.12.2017 Second requisition notice R1 naming the 4 nominee Directors and calling EGM on 12.02.2018 04.01.2018 R1 issued reminder letter to the bank reiterating the contents of letter dated 19.09.2017 12.01.2018 R2 informed R1 regarding the decision of board death EGM will be held on 5.2.2018 and issues regarding amendment of AoA to bring it in accordance with JVA and appointment 2 out of 4 nominee Directors of R1 will be decided on the basis of a special resolution instead of ordinary resolution 31.01.2018 R1 filed application u/s 98 R/w Section 100 of the Act before the NCLT, Ahmedabad praying to set aside the notice dated 12.01.2018 as per their requisition.
17.02.2018 Affidavit in reply by the R2 to the Company Petition Company Appeal (AT) No. 261 & 262 of 2019 7 23.03.2018 Before NCLT matter was adjourned at joint request as the parties were attempting to arrive at an amicable settlement whereby the Appellant would purchase the entire share capital of R1. 09.04.2018 Affidavit in Rejoinder by the R1 to the Company Petition 02.05.2018 The R1 requested the Bank that it should not restrict the disbursal of credit within the sanctioned limit due to the frivolous litigation instituted by R1 since non-availability of creditor was hampering the growth of the Company 20.06.2018 NCLT allowed R1 to amend/convert its application into a petition under Section 241 of the Act 16.07.2018 The R1 during the pendency of the Company Petition, moved IA No. 47 of 2018 seeking amendment of the main CP so as to incorporate pleadings under section 241-242 of the Act. The NCLT allowed the R1 to file an amended petition.
20.07.2018 R1 filed the amended petition under section 241 of the Act. The R2 filed reply to the amended petition 14.08.2018 The partners of Appellant LLP namely Mr. SubhasChawra and Mr. Hiren Chawra invoked the arbitration clause in clause 30 JV agreement to refer the disputes arising from "(i) failure of R2 to transfer the excess shares to SBPL so as to have 50:50 shareholding ration, (ii) failure to amend AoA to incorporate the clauses of JVA and (iii) nomination of four directors by R1 on the Board of the Company in violation of the JVA.
12.09.2018 The R1 replied to the said arbitration notice. 26.07.2010 The NCLT passed the impugned order.
5. The Respondents have localised the matter of disputes for requisition of EGM under Section 100 of the Act. The meetings of shareholders of SHFP_ of which both Respondent groups (66%) and Appellants (34%) are shareholders was requisitioned by respondent in accordance with the Act but the Board comprising only Appellant group refused to comply with leading to all these dispute &litigation. Brief background as submitted by the Respondents are stated below:
Date Events
11.02.2012 Company was incorporated on 11.02.2012 by SubhashChawra and
Hiren Chawra- Original subscribers & First Directors Company incorporated with authorised share capital of Rs. 5,00,000 having 5000 shares of face value of Rs. 10/- per shares 22.02.2013 JV Agreement is signed between R1 &Appellant SBPL LLP:
1. Authorized capital of JV Company to be Rs. 18 Cr.
Consisting of 1,80,00,000 shares of face value of Rs. 10/- C1.5 - Authorized capital of JV Company - Shareholding ratio ½ & ½ / 50% each between SBPL & R1
2. C1.6 - Financing of Business & Funding C1.4 - Scope of Business
3. Term - Minimum 20 years unless terminated - C1.23
4. Board Composition-
-C1.7.2 - initially comprise of 2 directors nominated by SBPL. R1 can appoint max 2 directors with mutual consent between parties
-C1.7.4 - SubhashRatiwalChawra or Hiren subhashChawra - partners of A-shall be appointed as MD & that CFO & CS of JV company shall be nominated by SBPL with consent of R1.
Company Appeal (AT) No. 261 & 262 of 2019 8 Both parties had to invest 50% each in the equity of the Company, however the Appellant SBPL LLP failed to do so, as it did not had requisite funds.
2013-2014 Consequently, R1 had to invest upto Rs.12.27 Crores and was issued 66% shareholding against share capital infused by it whereas SBPL / Chawra Group was allotted 34% shareholding as per share capital infused by it Current shareholding structure SubhashChawra - 5000 Hiren Chawra - 5000 Loganmoy Limited 1,22,74,233(R1) SBPL Polymers LLP 63,13,016
-- o To meet financial requirements of Company, Appellant SBPL LLP infused unsecured loan in the Company & furnished collateralsecurities / personal guarantee o R1 also gave collateral security against Bank loan and personal Guarantee 21.11.2013 o Union Bank of India (UBI) vide letter dated 21.11.2013 30.09.2014 while sanctioning credit facilities, the company shall 29.02.2016 execute a JVA between SBPL & R1.
o Resolution dated 30.09.2014 passed by shareholders authorized Board of Companies (consisting of members of SBPL) to borrow by way of loan/ debentures on behalf of Company o UBI vide letter dated 29.02.2016 - advised Company to ensure that JVA is incorporated in AoA of Company failing which Company will attract penal interest of1 % p.a& max.2% p.a till compliance.
17.03.2016 R1 wrote to Charwa Group for seeking appointment of R1's 18.03.2016 nominees on the Board of the Company. 21.06.2016 Chawra Group on its behalf and on behalf of Company responded to R1 inter alia stating that confirmation on JVA is awaited and only once itsconfirmed the AoA of the Company will be updated. The appointment of R1's nominee will be only consequent to updation of AoA. 07.10.2016 UBI while sanctioning credit facilities for Company put the condition that:
-SBPL should increase stake in the Company to 50% and
-JVA should be incorporated in AoA of Company. 18.11.2016 o Legal notice served by R1 stating that due to financial difficulties of SBPL LLP was not able to bring 50% share in funding of the Project and could not subscribe to 50% shares of the Company as per the JVA o At Company's request R1 brought in deficit funds and consequently R1 holds 66% shareholding in the Company o JVA revoked by act of parties as it was never acted upon by the parties o R1's nominees not represented on the Board of the Company despite repeated requests o R1 being 66% shareholder was entitled to appoint 3 Directors on the Board o Loans obtained by Company without intimation or consent of R1 28.12.2016 Reminder notice sent by R1 to Company reiterating request made in 18.11.2016 and called upon Company to appoint the persons specified therein as directors 25. 25.01.2017 Company replied to the notice dated 18.11.2016 03.02.2017 Letters sent by R1 to UBI for releasing collateral security 27.02.2017 (property - Vila No. 524a, Aambey Valley, Gut No.93, Village Deoghar, Mulshi, Pune) submitted in its behalf for availing financial assistance for the Company. 06.04.2017 UBI replied to R1's letter stating that - collateral security cannot be released as it is mortgaged to UBI unless credit facilities availed by the company are repaid & alternate security offered 31.05.2017 Requisition notice sent by R1/u/sec 100(2) of the Companies Act, 2013 - to call an EGM of Members:
-to consider appointment of nominee Directors on Board of Company
- to consider matters of non-compliance of the provision of the Companies Act 20.12.2017 Requisition notice sent by R1 to call an EGM of members on 12.02.2018 - for appointing 4 Directors on the Board of the company.
04.01.2018 R1 wrote to UBI:Company Appeal (AT) No. 261 & 262 of 2019 9
o R1 majority shareholder - however JVC business conducted solely by Chawras without knowledge or consent of R1 o R1 had vide letter dated 19.09.2017 informed UBI that Chawras are conducting business without complying with the provisions of companies Act- UBI was also informed that business was carried on without R1's consent and the Ubi should not make any further disbursements without R1's consent - however UBI did not reply o SBPL LLP to be personally liable fore repayment of credit facilities since R1's consent not obtained by SBPL LLP o UBI to not make any further disbursement of credit facilities to Safeco until new Board of Directors constituted.
12.01.2018 Company instead of calling EGM as requisitioned by the R1, issued notice to call EGM on 05.02.2018 to:
-decide special resolution regarding adoption of AoA in conformity with the JVA
- appoint 2 Directors on the Board instead of 4 31.01.2018 R1 fined CP No. 15/2018 before the NCLT Ahmedabad u/sec.100 of the Companies Act seeking quashing of notice dated 12.01.2018 and to hold EGM as requisitioned vide notice dated 20.12.2017 02.02.2018 NCLT vide its interim order restrained both Company and R1 holding EGM 16.07.2018 NCLT granted permission to R1 for filing amended CP so as to incorporate pleadings u/s 241-242 of the Act. This order was not challenged and has attained finality. 20.07.2018 R1 filed amended CP No. 15/2018 2018 Company filed reply in amended CP No. 15/2018 14.08.2018 Partners of SBPl (SubhasChawra& Hiren Chawra) invoked arbitration Cl 30 of JVA. The issuance of notice establishes that even SBPl LLP accepted that JVA had been revoked vide letter dated 18.11.2016 12.09.2018 R1 replied to arbitration notice. Neither section 8 before the NCLT nor section 11 application before the High court is filed.
26.07.2019 NCLT vide its impugned order allowed the R1's petition.
Companies' notice dated 12.01.2018 was quashed being bad in law and R1 was permitted hold EGM. It was also held that Company's act of modifying agenda and changing date of EGM is contrary to law. NCLT also appointed observer for the EGM.
26.09.2019 This Hon'ble Tribunal while issuing notice directed as under:
During the pendency of the Appeal, if any Extraordinary General Meeting is conducted in terms of the impugned order dated 26.07.2019 of the Tribunal, it shall be subject to the decision of the Appeal. However, if any decision is taken to appoint any director(s) not more than two directors be inducted in the Board pursuant to such decision, until further order 24.10.2019 R1 issued requisition notice for EGM to eb held on
27.11.2019 for appointment of JagdishD.Shah&HileshD.Shah as Directors of the Company EGM held on 27.11.2019 - Jignesh Shah &Hilesh Shah appointed as Directors. The Minutes of Meeting approving the aforesaid appointment are admitted.
2019-2020 Though the consent for appointment of Director in Form DIR2 was already submitted the Company the behest of ChawraGroup did not submit the form DIR-2 and once again called for same in February, 2020 that all the time of said notice the pandemic Covid-19 had already struck the world thereby limiting the working of the global populace.
2020 That on verification it was found that DIR-2 qua the nominees of the R1 had not been uploaded and immediately thereafter the Company was called upon to do the needful, however, once again the Company acting through Chawra Group denied complying with the orders passed by this Hon'ble Court.
Company Appeal (AT) No. 261 & 262 of 2019 10 16.04..2021 In response to R1's letter dated 16th April, 2021 the 25.05.2021 Company has refused to complete the appointment process of the Directors (nominees of R1) appointment was approved in EGM held on 27.11.2019.
The Respondents have observed that when they have asked for convening EGM of the members on 31.05.2017 to consider appointment of their nominee 'Directors' on Board of the Company and also to consider matters of non-compliance of the provisions of Act instead the Appellant group issued notice to call EGM on 05.02.2018 to decide special resolution regarding adoption of 'AoA' in conformity the JVA and appointment of two 'Directors' of the Board instead of four requested by Respondents. It was also submitted by the learned Sr. Counsel for the Respondents that shareholders have a right to requisition Extra Ordinary General meeting under section 100 of the Act and after the consideration by the Members the same can be considered and passed by the Members or may be rejected by the Members. It was also submitted by the counsel that Section 173 R/w Section 179 of the Act makes it clear that for a requisition meeting, the Board of Directors of the company do not have power to change or vary or alter the agenda for which the meeting is requisitioned. The learned Sr. counsel for the Respondents have submitted that oppression can be done by the minority shareholders on the majority shareholders and also minority shareholders can mismanage the company. The learned Sr. Counsel have also submitted that the SBPL is a limited liability partnership of Mr. SubhasChawra and Hiren Chawra and they are the only two partners. The Tribunal has given opportunity to the Company -'SHFP' to present its submission before the Tribunal and the company was Company Appeal (AT) No. 261 & 262 of 2019 11 represented by these two partners. Hence, there is no violation of principle of natural justice nor there is any prejudice caused to the SBPL. As far as joint venture is concerned, the investment was to be made by the both Appellants groups and the Respondents by 50% investment by Board. Since, the Appellants group could not bring in investment as contemplated for joint venture, joint venture never took off. Since the foundation of JVA on equal investment was not complied by the Appellant group, the Respondent group has to make additional investments and JV agreement was never complied with also since 2013 JV Agreement was never incorporated in the company formation document as the Appellant group did not bring the investment. The Article of Association(AOA) &'Memorandum of Association' (MoA) shall prevail over shareholder agreement whether it is in a JVA format or any other format in the similar way as the Companies Act, 2013 will prevail over 'AoA' and 'MoA'. The Appellant group did not approach the 'Arbitration and Conciliation Act, 1996' provisions before the Tribunal and hence, it has failed in its right to exercise under law to refer to arbitration. The learned Sr. Counsel submitted that an arbitration clause in the JVA itself is not a valid ground to bar the Tribunal to exercise its jurisdiction under the Act, if it fall within the purview of Section 100 of the Act. The Appellant while in management has always kept the Respondents in dark about the working of the company and they have also withheld vital information from majority shareholders as the company controlled by the Appellant group has failed to submits the accounts and participation of Respondents in AGM. The company controlled so far by Chawra group has not filed statutory returns for Company Appeal (AT) No. 261 & 262 of 2019 12 last 3 years. All this suggest that the Oppression and Mismanagement is being done by minority shareholders over majority shareholders.
6. Both the parties have supplemented their arguments with the citations of judgments including two common judgments - (1986) 1 SCC - 264 - Life Insurance Corporation of India Vs. Escorts Ltd & another is (2012) 6 SCC 613 - Vodafone International Holding BV. Vs. Union of India.
7. We have carefully gone through submission and citations made by the parties. We are having following observations:
a. This Appellate Tribunal heard both the parties on 11.11.2020 on the issue of mediation and order is enumerated below:
11.11.2020 - Heard Learned Counsel ShMohitChaudhury on IA No.2641/2020 and 2642/2020 in Company Appeal (AT) No.263/2019 and also IA No.2639/2020 and 2640/2020 in Company Appeal (AT) No. 262/2019. These applications are filed for the direction and reference to mediation under Section 442(2) of the Companies Act, 2013. We have also heard Learned Counsel for both the parties. Learned Counsel for respondent submits that earlier there was an attempt for settlement but it could not be materialised. It is also submitted that she has instructions that there is no possibility of settlement in these matters. We find no substance in these applications. Therefore, the applications are disposed off. Heard Learned Counsel for the Appellant in part. Due to paucity of time the arguments remained inconclusive. In both the appeals, lead appeal will be Company Appeal (AT) No.263/2019. Let the matter be fixed for further hearing on 4th December, 2020 at 2 PM.Company Appeal (AT) No. 261 & 262 of 2019 13
b. The Appellant group was not transparent in working of SHFP, so called JV company, where the Respondents are non-resident investors and after three / four years working when the Respondents generated a doubts on non-filing statutory returns under the Act and not getting proper accounts, they wish to interfere into the company which any investor will do, if they have invested the fund.
c. From 2013-17, the Appellant group who was in the management of so-called JV Company failed to carry the JV Agreement in the 'AoA' and 'MoA' and thereby they lose the right to enforce the JV Agreement into the company's formation documents i.e. 'AoA' and 'MoA'. It is the general practice that first the JV agreement is finalised then within a reasonable period the same is appropriately incorporated in 'AoA' and 'MoA'.
d. Non-resident investor believed the Appellant group and left the management of the Company to the Appellant Group for the 3 years plus period and at a later date in 2017/2018 when they generated the doubt and wish to put its representative as Board Member based upon their investments, the Appellant group started playing truant. As a result of which the Respondent approached the Tribunal with their grievance for convening EGM under the provisions of the Act and the same has been permitted by the Tribunal in its impugned order dated 26.07.2019 by keeping extra precautions of appointing 'Observer' and asking a permanent invitee to the meeting of the Board from the nationalised bank i.e. Company Appeal (AT) No. 261 & 262 of 2019 14 Union Bank of India which has sanctioned the credit facility to the Company (appearing at para 32 of the impugned order). e. All this suggests that the impugned order is in conformity with terms of the provisions of the Act and the law laid down on the subject. There is also no jurisdictional error and violation of natural justice. Accordingly, we find the impugned order of the Tribunal is in order both on facts and law and hence appeal deserves to be dismissed and is accordingly dismissed. Pending IAs, if any, stands disposed of.
Interim orders, if any, passed by this Appellate Tribunal stands vacated. No order as to costs.
[Justice Jarat Kumar Jain] Member (Judicial) (Dr. Ashok Kumar Mishra) Member(Technical) 09th August, 2021 New Delhi Raushan.k Company Appeal (AT) No. 261 & 262 of 2019 15