National Company Law Appellate Tribunal
Emaar Hills Township Pvt. Ltd vs Telangana State Industrial ... on 10 October, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
AT CHENNAI
(APPELLATE JURISDICTION)
Company Appeal (AT) (CH) No. 84 of 2022
(Under Section 421 of the Companies Act, 2013)
(Arising out of the Impugned Order dated 25.07.2022 in
MA/21/2021 in CP/36/2021,
passed by the `National Company Law Tribunal',
Hyderabad Bench, Hyderabad)
In the matter of:
Emaar Hills Township Pvt. Ltd.
Rep. by its Authorised Signatory
Mr. S. Madhusudhana Rao
Having its Registered Office at
Boulder Hills Golf & Country Club,
Manikonda Village, Gachibowli,
Hyderabad, Telangana ..... Appellant/1st Respondent
v.
1. Telangana State Industrial
Infrastructure Corporation
Having its Office at 6th Floor,
Parishrama Bhavan,
Fateh Maidan Road, Basheerbagh
Hyderabad,
Telangana-500004 .....Contesting Respondent No.1
2. Emaar Properties, PJSC,
A Company incorporated in
Dubai, U.A.E., Having its
Registered Office at
P.O. Box-9440, Dubai .....Proforma Respondent No.2
3. Emaar Holdings,
A Company incorporated
under the laws of Mauritius,
Having its Office
C/O IQEQ Corporate Services
Comp. App (AT) (CH) Nos. 84 & 87 of 2022
Page 1 of 115
(Mauritius) Ltd.,
33 Edith Cavell Street,
Port Louis, 11324,
Republic of Mauritius .....Proforma Respondent No.3
4. Mr. Ahmad Thani Rashed
Almatrooshi
S/o. Mr. Thani Rashed Almatrooshi
Aged: 63 years, Occ: Business,
Director, R/o. 271, Wadi Alamardi,
PO Box: 21888, Dubai,
United Arab Emirates .....Proforma Respondent No.4
5. Mr. Ashish Narayan Prasad Kabra
S/o. Mr. Narayan Prasad Ramniwas
Kabra, Aged: 47 years, Occ: Business,
Director of M/s. EHTPL
R/o. E117, Sahakar Villa,
SV Road, Mumbai - 400064 .....Proforma Respondent No.5
6. Mr. Vijay Menon
S/o. Mr. K.R. Menon
Former Director of M/s. EHTPL
R/o. Boulder Hills Golf & Country Club
Opp: ISB, Manikonda Village,
Gachibowli, Hyderabad, Telangana .....Proforma Respondent No.6
7. Mr. A.J. Jaganathan
S/o. Mr. Arogyaswami Former Director
of M/s. EHTPL
R/o. Boulder Hills Golf & Country Club
Opp: ISB, Manikonda Village,
Gachibowli,
Hyderabad, Telangana ..... Proforma Respondent No.7
8. Mr. Shrikant Prabhakar Joshi
S/o. Mr. Prabhakar Joshi
Former Director of M/s. EHTPL
R/o. C-1, Manasarovar
19, 3rd Seaward Road,
Valmiki Nagar, Tamil Nadu ..... Proforma Respondent No.8
Comp. App (AT) (CH) Nos. 84 & 87 of 2022
Page 2 of 115
9. Mr. Amit Jain
S/o. Mr. Brij Kishore Jain,
Former Director of
M/s. EHTPL R/o. H.No. 317,
Sector 9, Faridabad-121006,
Haryana ..... Proforma Respondent No.9
10. Mr. Essamuddin Hussain
Ibrahim Galadari
Former Director of M/s. EHTPL
R/o. Boulder Hills Golf & Country Club
Opp: ISB, Manikonda Village,
Gachibowli, Hyderabad,
Telangana ..... Proforma Respondent No.10
11. Emaar MGF Land Ltd.
(Now known as Emaar India Ltd.)
306-308, Square One, C-2,
District Centre, Saket,
New Delhi-110017 .....Proforma Respondent No.11
12. Axis Bank Ltd.
6-3-249/6, 1st Floor, Alcazar Plaza,
Road No.1, Banjara Hills,
Hyderabad - 500034 ..... Proforma Respondent No.12
13. Registrar of Companies, Telangana
2nd Floor, Corporate Bhavan,
Tattiannaram, Bandlaguda,
Hyderabad - 500068 ..... Proforma Respondent No.13
14. Serious Fraud Investigation Office,
Ministry of Corporate Affairs,
Government of India,
Represented by its Director,
4th Floor, Corporate Bhavan,
Tattiannaram,
Bandlaguda, Hyderabad-500068 ..... Proforma Respondent No.14
Comp. App (AT) (CH) Nos. 84 & 87 of 2022
Page 3 of 115
Present :
For Appellant : Mr. Neeraj Kishan Kaul, Senior Advocate,
Mr. P.H. Arvindh Pandian, Senior Advocate,
Mr. Krishnendu Datta, Senior Advocate,
For Ms. Deepika Murali, Mr. Karthik
Sundaram, Ms. Anusha Peri, Ms. Shreya
Narayanan & Ms. Pratiksha Easwar,
Advocates
For Respondent No.1 : Mr. J. Ramachandra Rao, Addl. Advocate
General
For Mr. Andapalli Sanjeev Kumar,
Special Government Pleader
For DVAS Ravi Prasad, Advocate for
R1/Caveator
For Respondent Nos. : Mr. Arvind Nayar, Senior Advocate
2&3 For Mr. Suhrith Parthasarthy, Advocate
With
Company Appeal (AT) (CH) No. 87 of 2022
In the matter of:
1. Emaar Properties, PJSC,
A Company incorporated in
Dubai, U.A.E., Having its
Registered Office at
P.O. Box-9440, Dubai ..... Appellant No. 1/Respondent No.2
2. Emaar Holdings,
A Company incorporated
under the laws of Mauritius,
Having its Office
C/O IQEQ Corporate Services
(Mauritius) Ltd., 33 Edith Cavell Street,
Port Louis, 11324,
Republic of Mauritius ..... Appellant No.2/Respondent No.3
v.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022
Page 4 of 115
1. Telangana State Industrial
Infrastructure Corporation
Having its Office at 6th Floor,
Parishrama Bhavan,
Fateh Maidan Road, Basheerbagh
Hyderabad,
Telangana-500004 ..... Respondent No.1
2. Emaar Hills Township Pvt. Ltd.
Having its Registered Office at
Boulder Hills Golf & Country Club,
Manikonda Village, Gachibowli,
Hyderabad, Telangana ..... Respondent No.2
3. Mr. Ahmad Thani Rashed
Almatrooshi
S/o. Mr. Thani Rashed Almatrooshi
Aged: 63 years, Occ: Business,
Director, R/o. 271, Wadi Alamardi,
PO Box: 21888, Dubai,
United Arab Emirates ..... Respondent No.3
4. Mr. Ashish Narayan Prasad Kabra
S/o. Mr. Narayan Prasad Ramniwas
Kabra, Aged: 47 years, Occ: Business,
Director of M/s. EHTPL
R/o. E117, Sahakar Villa,
SV Road, Mumbai - 400064 ..... Respondent No.4
5. Mr. Vijay Menon
S/o. Mr. K.R. Menon
Former Director of M/s. EHTPL
R/o. Boulder Hills Golf & Country Club
Opp: ISB, Manikonda Village,
Gachibowli, Hyderabad, Telangana ..... Respondent No.5
6. Mr. A.J. Jaganathan
S/o. Mr. Arogyaswami Former Director
of M/s. EHTPL
R/o. Boulder Hills Golf & Country Club
Opp: ISB, Manikonda Village,
Gachibowli,
Hyderabad, Telangana ..... Respondent No.6
Comp. App (AT) (CH) Nos. 84 & 87 of 2022
Page 5 of 115
7. Mr. Shrikant Prabhakar Joshi
S/o. Mr. Prabhakar Joshi
Former Director of M/s. EHTPL
R/o. C-1, Manasarovar
19, 3rd Seaward Road,
Valmiki Nagar, Tamil Nadu ..... Respondent No.7
8. Mr. Amit Jain
S/o. Mr. Brij Kishore Jain,
Former Director of
M/s. EHTPL R/o. H.No. 317,
Sector 9, Faridabad-121006,
Haryana ..... Respondent No.8
9. Mr. Essamuddin Hussain
Ibrahim Galadari
Former Director of M/s. EHTPL
R/o. Boulder Hills Golf & Country Club
Opp: ISB, Manikonda Village,
Gachibowli, Hyderabad,
Telangana ..... Respondent No.9
10. Emaar MGF Land Ltd.
(Now known as Emaar India Ltd.)
306-308, Square One, C-2,
District Centre, Saket,
New Delhi-110017 ..... Respondent No.10
11. Axis Bank Ltd.
6-3-249/6, 1st Floor, Alcazar Plaza,
Road No.1, Banjara Hills,
Hyderabad - 500034 ..... Respondent No.11
12. Registrar of Companies, Telangana
2nd Floor, Corporate Bhavan,
Tattiannaram, Bandlaguda,
Hyderabad - 500068 ..... Respondent No.12
13. Serious Fraud Investigation Office,
Ministry of Corporate Affairs,
Government of India,
Represented by its Director,
4th Floor, Corporate Bhavan,
Tattiannaram,
Bandlaguda, Hyderabad-500068 ..... Respondent No.13
Comp. App (AT) (CH) Nos. 84 & 87 of 2022
Page 6 of 115
Present :
For Appellants : Mr. Arvind Nayar, Senior Advocate
For Mr. Suhrith Parthasarthy, Advocate
For Respondent No.1 : Mr. J. Ramachandra Rao, Addl. Advocate
General
For Mr. Andapalli Sanjeev Kumar,
Special Government Pleader
For DVAS Ravi Prasad, Advocate for
R1/Caveator
For Respondent No.2 : Mr. P.H. Arvindh Pandian, Senior Advocate,
For Ms. Deepika Murali, Mr. Karthik
Sundaram, Ms. Anusha Peri, Ms. Shreya
Narayanan & Ms. Pratiksha Easwar,
Advocates
JUDGMENT
(Virtual Mode) Justice M. Venugopal, Member (Judicial):
Company Appeal (AT) (CH) No. 84 of 2022:
Introduction:
The Appellant/1st Respondent has preferred the instant Comp. App (AT) (CH) No. 84 of 2022, before this `Tribunal' as an `Aggrieved Person', on being dissatisfied with the `impugned order' dated 25.07.2022 in M.A.No.21/2021 in C.P. No.36/2021, passed by the `National Company Law Tribunal', Hyderabad Bench-II, Hyderabad.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 7 of 115
2. The `National Company Law Tribunal', Hyderabad Bench-II, Hyderabad, while passing the `impugned order' dated 25.07.2022 in M.A. No. 21/2021 in C.P. No.36/2021, filed by the Appellant/1st Respondent from Paragraphs 26 to 31, had observed the following:
26. ``Precisely the question that is required to be decided in this application is: whether the transmission of shares from APIIC to TSIIC is required to be done in pursuance of the Companies Act or by virtue of Section 53 of the A.P. State Reorganisation Act, 2014, TSIIC would automatically become the owner of the shares by operation of law?
Before answering this Question, we are aware that the A.P. State Industrial Corporation Limited (APIIC) is formed as a Government Company. Subsequently, on the bifurcation of the State, TSIIC is also formed as a Government Company. We are very clear that a `Government Company' means a Company in which the entire holding of the shares is held by the Government concerned and in this case the State of Telangana and the ownership of such shares or property would be held by the Governor of that State in the name of the concerned entity. There are plethora of decisions of the Hon'ble Apex Court which say that Article 12 of the Constitution of India would apply in case of a Public Sector Undertakings, which are the estate of the State. The following decisions of the Hon'ble Apex Court would clearly establish that the Petitioner i.e. TSIIC is an instrumentality of the State covered under Article 12 of the Constitution of India. The following decisions would support us in this particular view:
i. Rajasthan State Electricity Board Vs. Mohan Lal and Others (AIR 1967 SC 1857), which says that Electricity Board of Rajasthan is ``State'' within the definition of Article 12, under the expression ``other authorities'', wherein interpretation of Rule of ejusdem generics is not applicable.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 8 of 115 ii. State of Punjab Vs State of Jalandhar & Ors (AIR 1979 SC 1981) iii. RD Shetty Vs The Indian International Airport Authority of India and Others (AIR 1979 SC 1628): this judgment said that the Government which represents the executive authority of the State, may act through the instrumentality or agency of natural persons or it may employ the instrumentality or agency or juridical persons to carry out its functions. In the early days, when the Government had limited functions, it could operate effectively through natural persons constituting its civil service and they were found adequate to discharge governmental functions, which were of traditional vintage.
iv. The Gujrat State Finance Corporation Vs M/s. Lotus Hotel Pvt Ltd (AIR 1982 Guj 198) v. SK Verma Vs Mahesh Chandra and Others (1983) 4 SCC 214) this case talks about maintainability of reference should not be questioned especially by Public Sector Corporations on mere technical grounds.
vi. A.L. Kalra Vs Project & Equipment Corporation of India Ltd (1984) 3 SCC 316, this case talked about Government Undertakings to be referred as ``Other authorities'' under Article 12 of the Constitution of India and that employees to such bodies are entitled to get protection under Part III though not under Part II.
vii. P.K. Ramachandra Iyer & Others Vs Union of India & Others (AIR 1984 SC 541), according to this judgment Indian Council of Agricultural Research (ICAR) is ``other authorities' under Article 12 of the Indian Constitution.
viii. NGEF Limited Vs Chandra Developers and Others (2005) 8 SCC 219, this Judgment says that Section 536 (2) ipso fact does not confer any power or jurisdiction to the Company Court for sale of assets of sick companies.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 9 of 115
27. From the above, we are sure that TSIIC is not a Company owned by some private individuals but it is an instrumentality of the State. Pausing here for a moment, we are very conscious of the conduct of the Respondent Company i.e., Emaar Hills Township Private Limited wherein in every correspondence right from the beginning, the letters addressed and also the manner in which it gave an impression to the TSIIC by appointing their Managing Director as one of the Directors of Emaar Hills Township Private Limited and also while addressing notices of the Meetings and at every stage and every document goes to show that in fact the Respondent Company have recognized and treated the Petitioner Company i.e. TSIIC as the successor company of APIIC as though TSIIC has absolute rights over its properties including the shares in the Respondent Company. Practically, the Respondent Company may advance arguments that they have only addressed letters by treating TSIIC as a future shareholder and always wanted the shares to be transmitted on to their name and apart from that the appointment of Directors on to their Board is nothing to do with the transmission of shares. Here, we consciously differ with the argument advanced by the Respondent Company and we hereby expressly, with all the knowledge of facts and circumstances of the case hold that the conduct of the Respondent Company i.e., Emaar Hills Township Private Limited with the Petitioner is certainly an act of recognizing TSIIC as the shareholder of the Respondent Company.
28. In addition to the above, Section 53 of A.P. State Reorganisation Act, 2014, also clearly establishes that the assets of the erstwhile industrial entities or commercial entities would automatically become the assets of the new entities established by the State of Telangana. Therefore, what we intend to reiterate here is that the legal position of the Petitioner Company i.e., TSIIC as an instrumentality of the State covered under Article 12 of the Constitution of India coupled with the conduct of the Respondent Company in treating the TSIIC as their shareholder and holding meetings in their office, issuing notices of General Meetings to TSIIC which clearly establish that the ground on which the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 10 of 115 Respondent Company is questioning the locus standi of the Petitioner is marred by wrongful intention and they are trying to escape the probable enquiry into the affairs of the Company,
29. The argument of the Respondents that an earlier petition filed by the APIIC for oppression and mismanagement has been withdrawn citing non-completion of demerger which is no obstacle to this petition. In our view, the petition filed under Section 397, 398 of the Companies Act, 1956 having been withdrawn due to non-completion of demerger, has absolutely no bearing on this case for the reason that in our opinion the demerger is not at all required in this case and the withdrawal of Company Petition by APIIC is also of no consequence and has no bearing on this petition.
30. It is also in the public interest that the niceties or technicalities and hair splitting arguments are to be ignored to unearth the truth hidden behind the curtain. In view of the same, we hold that the Petitioner has got all the locus standi to pursue the Company Petition No. CP 36/2021 and the Respondent Company i.e. Emaar Hills Township Private Limited is bound to file its counter in reply to the contentions raised by the Petitioner in the main Company Petition.
31. Apart from the issue of maintainability of this petition, the other issue that comes for consideration is whether the Petitioner Company is entitled for the reliefs sought in the application MA 21/2021. The contentions raised in the petition are in the public interest and it is the property of the State which is being sold away or alienated in a very deceitful manner by the Respondent Companies through their agents. This is our prima facie view. In view of the same, the balance of convenience and the damage that took place to the Government estate is very large. We are inclined to pass the following Interim Orders:
Therefore, we direct that _ i. The 2nd and 3rd Respondents, their officers, representatives, assignees or any other of their entities and their nominee Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 11 of 115 directors in the 1st Respondent Company to not in any manner deal with or otherwise dispose of or encumber, alienate, transfer and/or create third party interest in the assets and properties of the 1st Respondent Company.
ii. The Respondent Companies to compensate the financial losses incurred by the Government of Telangana / TSIIC till date, in regard to equity dilution and such other consequences.'' and allowed the `Miscellaneous Application' to the extent of Prayers `a' and `f' and directed the `Respondents', to file their `Counter', within four weeks from the date of the `Order' and posted the main C.P. No.36/2021 on 26.08.2022.
The Summation of Germane Facts :
3. The `1st Respondent'/`TSIIC'/`Petitioner' had filed CP/36/241-
242/HDB/2021 (under Sections 213, 241-244 of the Companies Act, r/w. Rule 11, 32, 34, 52 & 81 of NCLT Rules, etc.,), before the `National Company Law Tribunal', Hyderabad Bench), against the `1st Respondent'/`Emaar Hills Township Private Limited' (Appellant in Comp. App (AT) (CH) No.84 of 2022), the `2nd Respondent'/`Emaar Properties PJSC' (Appellant in Comp. App (AT) (CH) No. 87 of 2022) had sought the following reliefs:
``(a) Declaring the purported Development Agreement cum General Power of Attorney entered into between the `1st Respondent Company' /`Emaar Hills Township Private Limited' (Appellant in Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 12 of 115 Comp. App (AT) (CH) No.84 of 2022) and Emaar MGF Land Ltd. (11th Respondent) as `null and void';
(b) In directing the `2nd Respondent' /`Emaar Properties PJSC' (Appellant in Comp. App (AT) (CH) No. 87 of 2022 ) and `3rd Respondent' (Emaar Holdings) to truly and properly account for all the monies realized by them by sale of properties in the Township Project, either directly or through the said `Emaar MGF Land Ltd.' or any other entry;
(c) In granting an `Order' of injunction restraining the 2nd and 3rd Respondents from acting / conducting the affairs of the 1st respondent company and directing them to hand over the assets and records of the 1st Respondent Company including disclosing the details of all assets/properties/monetary transactions and accounts to the petitioner and further directing the regulation of the conduct of the affairs of 11th Respondent company upon such terms and conditions as may appear to be just and equitable;
(d) In directing an independent enquiry / investigation into the affairs of the 1st Respondent Company (Appellant in Comp. App (AT) (CH) No.84 of 2022), by appointing an `Independent Auditor';
(e) In directing an independent enquiry in to the affairs of the Respondent Companies by Central Government represented by Respondent No.14 (SFIO Office), under Section 213 of the Companies Act, 2013; and other reliefs.''
4. According to the `1st Respondent'/`TSIIC'/Petitioner' in main CP/36/2021 (on the file of `National Company Law Tribunal', Hyderabad Bench), the `1st Respondent'/`TSIIC'/`Petitioner', is a wholly owned company of the `Government of Telangana', having its main objective to promote industries in the `State of Telangana' and thereby, to assist in Socio Economic Development of the State. Further, the `Telangana State' Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 13 of 115 was formed, as a result of bifurcation from the `Erstwhile United States of Andhra Pradesh', by virtue of an `enactment of Andhra Pradesh Reorganisation Act, 2014' (Act No.6 of 2014), which came in to effect from 02.06.2014.
5. It comes to be known that the 1st Respondent / TSIIC / Petitioner was incorporated on 04.09.2014, under the Companies Act, 2013, replacing the jurisdiction of `APIIC' in Telangana State. Moreover, in terms of Section 68 of the AP Reorganisation Act, 2014, all the `Assets and Liabilities of the Corporations' referred shall be appropriated between the Successor States in the manner mentioned in Section 53 of the Act, 2014. Apart from that, post reorganisation, the `Subject Land' formed part of the `State of Telangana', thereby it passed on to `TSIIC' from `APIIC', by means of `Operation of Law', as provided under Section 48 (1) (a) of the Andhra Pradesh Reorganisation Act, 2014.
6. It is represented on behalf of the `1st Respondent'/`TSIIC'/`Petitioner' that the `Government of Telangana', as the owner of the property, Viz. lands at Manikonda was keen to establish an integrated Project at Manikonda Village, comprising of a Golf Course and mixed use (Golf Course, Residential and Commercial Development and Boutique Resort Hotel) and Convention Centers cum Exhibition Complex (referred to as Integrated Project) and the said Project was to Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 14 of 115 boost Tourism and Development in the United State of Andhra Pradesh which would contribute to generate revenues.
7. The Learned Counsel for the `1st Respondent'/`TSIIC'/`Petitioner' points out that three `Expressions of Interests' were called by the then `State of Andhra Pradesh' on 05.04.1999. 30.03.2000 and 26.07.2001 respectively, from various `Bidders' for the development of the Project, for establishment of the `Integrated Project'. Out of three Bidders (to the `Last Expression of Interest'), the `2nd Respondent'/`Emaar Properties PJSC' (`Appellant' in CA AT CH No. 87 of 2022) was selected as the `Successful Bidder' by the State Government to implement the said `Project'.
8. It transpires that the then `Government of Andhra Pradesh', issued a G.O.M.S.359 dated 04.09.2022 of the Industries and Commerce Department, setting out the implementation structure of the `Integrated Project'. In fact, the `1st Respondent'/`TSIIC'/`Petitioner' (erstwhile `APIIC') was designated as the `Nodal Agency' to develop and implement the said `Project'. The `Vice Chairman & Managing Director' of the `Former Andhra Pradesh Industrial Infrastructure Corporation Limited' was authorised to enter in to a `Memorandum of Understanding' with the 2nd Respondent for implementation of the `Project'. In terms of the aforesaid G.O., the land use for the Project and Manikonda was Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 15 of 115 approximately 235 Acres for the Golf Course, 285 Acres for multiuse (Township) and 15 Acres for unusable land for water bodies, etc.
9. It is the version of the `1st Respondent'/`TSIIC'/`Petitioner' that `SPV1' (`Special Purpose Vehicle1') was to develop pre-championship 10 hole Golf Course and multiuse development, including Villas and Commercial Complexes at Manikonda. The `Equity' investment in `SPV1' was to be 26% by the Petitioner and 74% by the 2nd Respondent.
The `Equity Investments' in `SPV2', allocated on the Convention Centre and Hotel was to be 49% by the Petitioner and 51% by Emaar Properties PJSC in 15 Acres in NAC Grounds, etc.
10. On behalf of the `1st Respondent'/`TSIIC'/`Petitioner', it is brought to the notice of this `Tribunal' that the erstwhile United States of Andhra Pradesh and the `2nd Respondent'/`Emaar Properties PJSC' (`1st Appellant' in Comp. App (AT) (CH) No. 87 of 2022) had entered in to a `Memorandum of Understanding' dated 06.11.2002 which provided for creation of `SPVs' (`Special Purpose Vehicles') with `Equity' holding of both the parties as Companies having Registered Office in the then State of Andhra Pradesh (now in Telangana State), who would be responsible for the execution of different parts of the `Integrated Project'. Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 16 of 115
11. It is brought to the fore on behalf of the `1st Respondent'/`TSIIC'/`Petitioner' that a `Collaboration Agreement' dated 19.08.2003, was entered in to between the erstwhile United State of Andhra Pradesh and the 2nd Respondent, specifying the terms and conditions about the development of the `Integrated Project', including the Township Component. Indeed, the Government of Andhra Pradesh has issued a G.O.M.S. 14 dated 11.01.2005 and in regard to certain modifications, a Supplementary Agreement dated 19.04.2005 was executed between erstwhile United State of Andhra Pradesh and the 2nd Respondent, modifying certain aspects, including the revision in structure of the Integrated Project by the formation of three SPVs instead of two SPVs, but the basic character and role of the Parties, remained the same.
12. The stand of the `1st Respondent'/`TSIIC'/`Petitioner' is that, as per the terms of the `agreement', entered in to between the `Parties', the `Appellant' (in CA (AT) (CH) No.84 of 2020)/`Emaar Hills Township Private Ltd.'(1st Respondent in MA/21/2021 in CP/36/2021) is not having any `Right of Assignment', relating to the `Integrated Project', as per Clause 6.11 of the `Collaboration Agreement'. Also that, Clause 23 fastens a specific restrictions to the `Parties', from assailing their rights and obligations to a `Third Party' under any circumstances whatsoever. As per Clause 3.1(C)(iii), the `Appellant' / 1st Respondent is not to carry Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 17 of 115 on any operation or business or otherwise entered in to any Agreement or Arrangement with any person or incur any liability, which may have material bearing on the Financials of the `Appellant' / `M/s. Emaar Hills Township Pvt. Ltd.' (`1st Respondent'), without the prior written consent of the `Parties'.
13. The `1st Respondent'/`TSIIC'/`Petitioner' had averred in the main Company Petition that the `Appellant' / `Emaar Properties PJSC' (in Comp. App (AT) (CH) No. 87 of 2020) / `2nd Respondent' (`Developer') is entitled to assign its `Rights of Development, Maintenance and Operation of the `Integrated Project' only with the prior written approval of the `1st Respondent / Petitioner', in terms of Clause 2.4 (x) of the Collaboration Agreement. Under any circumstances, the `Respondents' had no power of allowing the sale of the subject lands to the Third Parties, as that had taken place in the instant case.
14. By means of the `Terms of the Understanding', between the State of Andhra Pradesh and the `EMAAR Properties PJSC' (2nd Respondent) three Joint Venture Companies were incorporated and the SPV1 / the Appellant EMAAR Hills Township Pvt. Ltd. / 1st Respondent was incorporated in regard to the Shareholding of the said Company, a Shareholders' Agreement was executed in Dec'2005, the State of Andhra Pradesh and Respondent Nos. 1 to 3, whereby, it was agreed that the `1st Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 18 of 115 Respondent/TSIIC/Petitioner' will hold 26% of the `Shareholding' in the `Appellant' / `M/s. Emaar Hills Township Pvt. Ltd.' (`1st Respondent Company') and the `2nd Respondent' / `Emaar Properties PJSC' (`2nd Respondent Company') will hold 74%.
15. On behalf of the `1st Respondent'/`TSIIC'/`Petitioner', it is stated that the whole Profit, from the `Sale of the Properties', which are the subject matter of the Joint Venture, would be shared between the Parties, in such a ratio and the parting of such `Profits' to the `Third Parties', was not contemplated. Indeed, the `State of Andhra Pradesh' with an `bonafide intent' of developing the `Integrated Project', had executed a `Conveyance Deed' in favour of the `Appellant' / `Emaar Hills Township Pvt. Ltd.' / `Company', which was entrusted with the `Township Development of the Project' and that the `Appellant'/M/s. Emaar Hills Township Pvt. Ltd. (1st Respondent) as a `Delegate', ought not to further `Delegate'.
16. The `Appellant' / `M/s. Emaar Hills Township Pvt. Ltd.' / 1st Respondent Company, had allotted and issued `Equity' Shares in its `Company', for a sum of Rs.1,70,03,070/- which was equivalent to 26% of its `Paidup Equity'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 19 of 115
17. According to the `1st Respondent'/`TSIIC'/`Petitioner', the Respondent Nos. 2 and 3 with the intent of appropriating for themselves had conceived a `Plan' to defraud the `APIIC' by assigning the whole Integrated Project to a `Third Party'.
18. In fact, the Appellant/Emaar Properties PJSC (2nd Respondent) through Letter dated 02.05.2005, had requested the `APIIC' to consider to allow `Fairbridge Holdings Ltd.,' to take 34% Equity out of 74% Equity, which the 3rd Respondent held in the `Appellant' / M/s. Emaar Hills Township Pvt. Ltd., but the same was rejected by `APIIC'.
19. The `Appellant'/`Emaar Properties PJSC'/`2nd Respondent', had conceived a mechanism by transferring the substantial rights in the Project land, to its `Group Company' / `11th Respondent'. In reality, the 2nd Respondent (Emaar Properties PJSC) and 3rd Respondent (Emaar Holdings), executed a Development Agreement dated 03.11.2006, in favour of the 11th Respondent (`an Entity'), wherein the whole Project was to be undertaken by the `1st Respondent/Emaar Hills Township Pvt. Ltd.', was hived of to the `11th Respondent', thereby making the `Appellant'/`1st Respondent' / `Emaar Hills Township Pvt. Ltd.', as a `Shell Company'. In violation of the `Collaboration Agreement' and the `Shareholders Agreement', the execution of the said Agreement was made in favour of the `11th Respondent'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 20 of 115
20. It is the case of the `1st Respondent'/`TSIIC'/`Petitioner' without APIIC's knowledge, a `Development Agreement cum General Power of Attorney' dated 25.07.2007, was entered in to by the `Appellant'/`Emaar Hills Township Pvt. Ltd.'/`1st Respondent' and `11th Respondent', through which the `purported Development Agreement' dated 03.11.2006 was cancelled and was reportedly replaced by the `New Development Agreement' dated 25.07.2007.
21. It is projected on the side of the `1st Respondent' / `TSIIC'/`Petitioner' that the execution of the purported Development Agreement come from the `General Power Attorney' and the mention that the allocation of Share Percentage in gross revenue would be decided separately was made with an intention of enriching the Respondent Nos. 2 & 3, while causing huge financial loss to the `APIIC'.
22. The plea of the `1st Respondent'/`TSIIC'/`Petitioner' is that the purported Agreements, which were entered in to with the 11th Respondent had entitled it to retain a sizeable / major portion of the Revenues and only a minimum of 5% and maximum 25% of the Revenues were to be passed on to the `Appellant' / `M/s. Emaar Hills Township Pvt. Ltd.'/`1st Respondent' and the `11th Respondent'/`Company' could appropriate the Revenues up to 95%.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 21 of 115
23. The act of diverting the Business Opportunity to another Company from that of the `Appellant / M/s. Emaar Hills Township Pvt. Ltd.', controlled by the `Appellant' / `Emaar Properties PJSC'/`2nd Respondent' and `Emaar Holdings' (`3rd Respondent') amount to Oppression, as it deprives the `APIIC' of the due Revenues, attributable to the said business opportunity. Such diversion impinges severely, the right of the `APIIC', as a `Shareholder' and is in clear violation of the Fiduciary duty owed by the Nominee Directors of the `2nd Respondent/Emaar Properties PJSC' (Appellant in Comp. App (AT) (CH) No. 87 of 2022) and the `1st Respondent/TSIIC/Petitioner' (also the `APIIC') is a `Government Company'.
24. The plea put forward by the `1st Respondent'/`TSIIC'/`Petitioner' is that, the Respondents had passed on the `Project' in a literal manner and its Revenues to another Companies, thereby, depriving the `Appellant'/`Emaar Hills Township Pvt. Ltd.' and the `1st Respondent'/`TSIIC'/`Petitioner' of the Revenues due to them.
25. It is pointed out on behalf of the `1st Respondent'/`TSIIC'/`Petitioner' that the Respondent Nos. 2 & 3 had passed on the `Project' to the `11th Respondent', who had no financial standing to take up the Project since it mortgaged the `Assets' of the `1st Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 22 of 115 Respondent'/`TSIIC'/`Petitioner', in favour of the `12th Respondent/Bank', to raise funds through Term Loan of Rs.150 Crore, the `Fund Raising', could have been made by the `Appellant'/`M/s. Emaar Hills Township Private Limited'.
26. Indeed, no permission was granted by the `1st Respondent'/`TSIIC'/`Petitioner' in respect of the mortgaging of the subject lands and the `Respondent Nos. 2 & 3' (`Emaar Properties PJSC' and `Emaar Holdings') had not approached the `APIIC'.
27. The mortgaging of the `Assets' of the `Appellant/M/s. Emaar Hills Township Pvt. Ltd./1st Respondent' is in `breach of the `Collaboration Agreement' and the `Provisions of the Companies Act'. Besides this, no appointment of an Independent Engineer and an Independent Auditor were made for the functioning and execution of the Integrated Project in a transparent manner.
28. It is the version of the `1st Respondent'/`TSIIC'/`Petitioner' that the Share Capital of the 11th Respondent is substantially held by the 2nd & 3rd Respondents and such an interest was to be disclosed to the Board of the `Appellant / Emaar Hills Township Pvt. Ltd.', but the same was not done and it amounts to violation of the Section 184 of the Companies Act, 2013, besides the breach of the Clauses of the `Shareholders' Agreement. Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 23 of 115
29. It is the stand of the `1st Respondent'/`TSIIC'/`Petitioner' that the `8th Respondent' (Mr. Srikanth Joshi) is the `Chief Executive Officer' of the `11th Respondent' and a `Director' of the `Appellant' / `M/s. Emaar Hills Township Pvt. Ltd.' and owing to the non-disclosure in respect of Mr. Srikanth Joshi is in negation of Sections 297 & 299 of the Companies Act, 1956.
30. The CEO of the `Appellant / Emaar Hills Township Pvt. Ltd.' had signed the `purported Development Agreement cum General Power of Attorney', on behalf of the 11th Respondent, and the said `Contract' had not secured the Board's sanction. The 6th Respondent / Director of the `Appellant/M/s. Emaar Hills Township Pvt. Ltd.', is also the Chief Executive Officer of the 11th Respondent.
31. The 2nd & 3rd Respondents representatives who had interest in `Appellant/Emaar Hills Township Pvt. Ltd.' and with the `11th Respondent' had not specifically mentioned their interest with the `Board Members' of the `Appellant/Emaar Hills Township Pvt. Ltd'. The `Appellant' / `Emaar Hills Township Pvt. Ltd.' had without securing the prior consent from the `1st Respondent'/`TSIIC'/`Petitioner' had caused issuance of `Notices' for the `Board Meetings' and `General Meetings' of the `Board' and the `Shareholders'. On a shorter notice, without getting Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 24 of 115 an earlier consent from the `1st Respondent'/`TSIIC'/`Petitioner' and hence violated the provision. The `transactions, material and financial in nature', were only tabled in the `Board Meetings', instead of furnishing the requisite details in the `Agenda' to the Meetings.
32. The `1st Respondent'/`TSIIC'/`Petitioner' points out that the `APIIC' had issued Letters dated 28.10.2010, 09.02.2010 to the `Appellant / M/s. Emaar Hills Township Pvt. Ltd.', expressing concern in respect of the Corporate Guarantee, issued by the Appellant / M/s. Emaar Hills Township Pvt. Ltd., relating to the `Loan' sought by the 11th Respondent, besides the concern over the mismanagement of the affairs of the `Appellant' / `M/s. Emaar Hills Township Pvt. Ltd'.
33. Moreover, according to the `1st Respondent'/`TSIIC'/`Petitioner', the Appellant / M/s. Emaar Properties PJSC / 2nd Respondent had entered in to an Agency Agreement dated 29.01.2005 with M/s. Stylish Home Private Limited on behalf of the `Appellant'/`M/s. Emaar Hills Township Pvt. Ltd.' for selling the Villa Plots in the integrated Project, about which, the `APIIC' knew it only on 02.09.2010, when the `Appellant/M/s. Emaar Properties PJSC' (`2nd Respondent') had enclosed the copy of the said Agreement vide Letter dated 02.09.2010, addressed to the `APIIC'. In fact, even before the `Transfer' of Land to the `Appellant'/`Emaar Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 25 of 115 Properties PJSC' (2nd Respondent) had executed such an Agreement and no information was ever disclosed to `APIIC'.
34. On the side of the 1st Respondent/TSIIC/Petitioner, a plea is taken that `APIIC' had filed a `Suit for Rendition of Accounts and for the relief of Injunction', against the 11th Respondent in O.S.No. 655 of 2010 before the Learned II Additional Judge, City Civil Court, Hyderabad, for selling / entering into `Sale Agreements' of the subject properties, without any `Right / Title / Interest', and the `Suit' was dismissed for `Default', on 04.10.2018, and for the `Restoration of Suit', IA 1764 of 2018 was filed by APIIC and that the 1st Respondent/TSIIC/Petitioner had sought impleadment in the Suit, in IA 147/2021 and the same is pending.
35. It is the averment of the `1st Respondent'/`TSIIC'/`Petitioner' in CP/36/2021 (on the file of the `National Company Law Tribunal', Hyderabad Bench, that the `Appellant'/`Emaar Properties PJSC' (Appellant in CA (AT) (CH) No. 87 of 2022) and the `Emaar Holdings / 3rd Respondent' were mismanaging the affairs of the `Appellant'/`Emaar Hills Township Pvt. Ltd.' (Appellant in CA (AT) (CH) No. 84 of 2022), by selling the lands of the `Appellant / Emaar Hills Township Pvt. Ltd.' through the 11th Respondent at a gross under valuation, thereby causing irreparable loss to the `APIIC'. The 11th Respondent had shown that the lands as sold at the price of Rs.5,000/- per Sq. yard which is not the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 26 of 115 correct value of the subject properties, because of the fact that the prevailing market rate at that time was approximately Rs.40,000/- per Sq. yard. The fraud may be gorged from the fact that lands are being shown as sold at a price of Rs.5,000/- per Sq. yard in some cases and on the same dates, some of the lands sold by the 11th Respondent were at more than four times at the said rate as seen from the Chart attached to the `Application' and this act amounts to cheating the `Public', despite, parting with the large sum of money, the `Buyers', would not get a clear `Title of the Properties', purchased by them.
36. According to the `1st Respondent'/`TSIIC'/`Petitioner', Respondent Nos. 8 to 10 are the nominees of the `Appellant'/`Emaar Properties PJSC' and `Emaar Holdings' and comprise majority on the Board of the `Appellant'/`Emaar Hills Township Pvt. Ltd.' (1st Respondent) and further that the Respondent Nos. 6 and 7, said to be holding 5000 `Shares' each are said to be aiding the other `Respondents'.
37. Moreover, the `Appellant'/`Emaar Properties PJSC' (2nd Respondent) in collusion with the `Emaar Holdings' (3rd Respondent) had defrauded the `1st Respondent'/`TSIIC'/`Petitioner', in the conduct of the affairs of the `Appellant'/`M/s. Emaar Hills Township Pvt. Ltd.' (1st Respondent). In fact, the conduct of the `Appellant'/`Emaar Properties PJSC' (2nd Respondent) and `Emaar Holdings' (3rd Respondent) and their Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 27 of 115 Directors, are harsh, wrongful and burdensome in respect of the `1st Respondent'/`TSIIC'/`Petitioner.
38. Earlier, the `APIIC' had preferred CP/108/2020 (on the file of the Company Law Board, Chennai (u/n. Sections 397 & 398 r/w. Section 402 & 403 of Companies Act, 1956) and the same was transferred to the `Tribunal' (`NCLT', Hyderabad) and the same was disposed of on 06.04.2017, by granting `Liberty' to the `1st Respondent'/`TSIIC'/`Petitioner' to file a `Petition' on the basis of earlier cause of action, with additional material facts, if any. MA/21/2021 in CP/36/2021:
39. In fact, the `1st Respondent'/`TSIIC'/`Petitioner' in MA/21/2021 in CP/36/2021 (u/n. Section 241-242 of the Companies Act, 2013 r/w. Rule 11 of the NCLT Rules, 2016), against the Respondents had prayed for the under mentioned `interim reliefs':
(a) In directing the Respondent Nos. 2 and 3, their officers, representatives, assignees or any other of their entities and their nominee Directors in the 1st Respondent Company, to not, in any manner, deal with or otherwise dispose of or encumber, alienate, transfer and/or create third party interest in the assets and properties of the 1st Respondent Company;
(b) In restraining the Respondents from commencing or proceeding directly or indirectly with any kind of activity on the property belonging to the 1st Respondent Company;
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 28 of 115
(c) In appointing an Advocate Commissioner to secure and authenticate the statutory records and books of accounts of the 1st Respondent Company;
(d) In restraining the 1st Respondent Company from conducting any meetings without the leave of this Hon'ble Tribunal, pending disposal of the present Company Petition;
(e) In directing the 1st Respondent to furnish the revenue and expenditure statements once in a month;
(f) In directing the 1st Respondent Company to furnish the details of unutilised land and to pass such orders for resumption of unutilized land;
(g) To direct the Respondent Companies to compensate the financial losses incurred by the Government of Telangana / TSIIC, till date, in regard to equity dilution and such other consequences. Gist of Appellant's Reply (1st Respondent / M/s. Emaar Hills Township Pvt. Ltd.):
40. The `Appellant / 1st Respondent' (`M/s. Emaar Hills Township Pvt.
Ltd.') in its `Reply' to MA/21/2021 in CP(IB) No.36/241/HDB/2021, (before the `Tribunal'), had averred that the `1st Respondent'/`TSIIC'/`Petitioner' has no `Locus Standi', to file the main CP/36/2021, since it is not a recorded `Shareholder' of the `Appellant' / `1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.) and there is `no public interest' involved. Moreover, unless a person's name is entered in the statutory `Register of Members', as a `Member' of the Company, as maintained in terms of the provisions of the Companies Act, 2013, the person cannot be construed to be a `Member', in terms of Companies Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 29 of 115 Act, 2013, thereby disentitling it to maintain an `Application', under Section 241 and 242 of the Companies Act, 2013.
41. Continuing further, the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.) had stated that the name of `APIIC' is still shown as a `Member' only holding 26% `Shares' in its Company. Also that the subject land was conveyed absolutely to the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.), by means of a Registered Conveyance Deed dated 28.12.2005 and was no more of the composite State of Andhra Pradesh / `APIIC' on the appointed date `02.06.2014'. As such, the reliance placed by the `1st Respondent'/`TSIIC'/`Petitioner' on Section 48 of the Andhra Pradesh Reorganisation Act, 2014, is a misplaced one.
42. Likewise, placing of reliance by the ``1st Respondent'/`TSIIC'/`Petitioner', in respect of Section 53 of the Andhra Pradesh Reorganisation Act, 2014, is equally misplaced, because of the fact that as per Section 53 of the Act, the location of the property is the basis for an `apportionment'. Because of the fact that the land is transferred to the `Appellant' / `Emaar Hills Township Pvt. Ltd.' (1st Respondent) in lieu of consideration, the location of the land cannot be the basis for an `apportionment'. As per Section 68 of the Andhra Pradesh Reorganisation Act, 2014, the Successor States shall `apportion' the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 30 of 115 `Assets', `Rights' and `Liabilities' of the Corporations, mentioned in the IX Schedule, as provided for by Section 53 of the `Act'.
43. There is an `Arbitration Clause' in the `Agreements', Viz. under the `Shareholders' Agreement dated 28.12.2005, executed between the `Appellants' and the `Third Respondent' and `APIIC' and hence, the `Tribunal' has no `jurisdiction' to `entertain' the `Company Petition'.
44. On behalf of the `Appellant' (M/s. Emaar Hills Township Pvt. Ltd.) / `1st Respondent', a reference is made to the `Memorandum of Understanding 06.11.2002, which reads to the following effect:
(G) ``The Sponsor has selected the Developer through a process of competitive bidding for development of the Integrated Project, followed by negotiations, as provided in the Andhra Pradesh Infrastructure Development Enabling Act, 2001.'' and a plea is taken that the disputes between the parties are to be resolved through `Conciliation Board', established under the `Andhra Pradesh Infrastructure Development Enabling Act'.
45. Indeed, the Notice dated 29.10.2010 of the `APIIC' in W.P. 32285 of 2010, on the file of Hon'ble High Court of Telangana was stayed by an `Order' dated 23.12.2010 (concerning, `Terminating the numerous Agreements executed with Third Parties and restraining `APIIC' from terminating the Collaboration Agreement'. The `Appellant'/`Emaar Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 31 of 115 Properties PJSC' (2nd Respondent) gave many representations to `APIIC' with a view to resolve the issue, but no reply was furnished by `APIIC'. A `Committee of Secretaries' was constituted by the Government of Telangana as per G.O.R.T. 322 dated 15.10.2015, to examine the status of the Integrated Project and to come up with alternatives to resolve the issue.
46. The `Representatives of the `Appellant'/`Emaar Properties PJSC' (2nd Respondent) submitted a `Proposal' dated 15.11.2015 to ensure the completion of the Project, to protect the interest of the `Home Buyers', etc. In regard to the appointment of the 11th Respondent as a Developer, the `1st Respondent'/`TSIIC'/`Petitioner' had not placed on record the vital documents. Through a clarification dated 25.05.2007 of the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.), the 11th Respondent was confirmed as a `Co-Developer in all the Project components of the `Integrated Project' and was further mentioned that there would no dilution in the Shareholding of `APIIC', and the said position remains the same.
47. Furthermore, the `APIIC', through Letter dated 28.05.2007 had communicated the Secretary, Information Technology & Communication Dept. Government of Andhra Pradesh, that a Supplementary Agreement Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 32 of 115 was executed between `APIIC' and the `Appellant'/`Emaar Properties PJSC' (2nd Respondent), for the Development of Township Project.
48. Pursuant to the `Orders' issued in G.O.M.S. No. 14 I & C (I & F) Department whereby and whereunder it was informed that `APIIC' had no objection for including the 11th Respondent as co-developer in regard to the Development of the IT / ITES SEZ.
49. Later, the Government of Andhra Pradesh had issued a Letter dated 04.06.2007 (through Secretary IT & C Department), confirming that the State Government had no objection in regard to the request of the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.), relating to the inclusion of the 11th Respondent as Developer for the `Project'.
50. The `Ministry of Commerce & Industry', Govt. of India, as per Letter dated 19.06.2007, had approved the 11th Respondent, for providing infrastructure. Also that, the `APIIC' had caused a `Notice' dated 29.10.2010 to `Appellant'/`Emaar Properties PJSC' (2nd Respondent), calling upon it, to rectify the breaches, failing which the `Collaboration Agreement', would be terminated. The `Appellant'/`Emaar Properties PJSC' (2nd Respondent) gave a `Reply' dated 08.12.2010 stating the manner in which the Developer had invested approximately Rs.900 Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 33 of 115 Crores in the Project and as to how the interest of the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.) was not compromised in any manner, by virtue of an Agreement with the Developer.
51. When the `Appellant'/`Emaar Properties PJSC' (2nd Respondent) had made a request to `APIIC' to initiate the process of Conciliation, to arrive at a `Mutual Acceptable Solution to the Disputes raised, `APIIC' had not responded and that necessitated in filing of Writ Petition No. 32285 by the `Appellant'/`Emaar Properties PJSC' (2nd Respondent).
52. It is the stand of the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.), Clause 6 (v) of the `Memorandum of Understanding' and Clause 2.4 (v) of the `Collaboration Agreement', specifically provide for the `Assignment of Rights', towards Development, to other `Parties', through an `Appropriate Mechanism'. Further, the whole case of the `1st Respondent'/`TSIIC'/`Petitioner' revolves around the disputed questions of fact, pertaining to the `Developer's appointment, this `Tribunal' is not to adjudicate the same, since it is not a fact finding `Body'. The Nominee Director of the `APIIC' is on the `Board of the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.), even as on date, which was affirmed by `APIIC' through its Letter dated 20.08.2014. The `Appellant'/`1st Respondent' Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 34 of 115 (M/s. Emaar Hills Township Pvt. Ltd.) and other Respondents preferred WP (C) No. 1074 of 2020, before the `Hon'ble Supreme Court', against the `Govt. of Telangana', praying for the revival of the Project and the same is pending.
53. Also that, through G.O.M.S. No. 1279 dated 08.10.2010, the Govt. of Andhra Pradesh had prohibited the Registration of Documents relating to the Properties under the Integrated Project. Hence, there is no urgency or threat, to the properties from the perspective of the creation of any `Third Party' rights. Moreover, a mere allegation of fraud, will not entitle a `Person' to claim any `interim relief'. There is no evidence on the side of the `1st Respondent'/`TSIIC'/`Petitioner', to prove that there was fraud. Pleas of Registrar of Companies (13th Respondent) :
54. The 13th Respondent (RoC, Telangana, Hyderabad), in its `Counter' to CP/36/2021 (before the `Tribunal') had among things averred that the Notice dated 01.12.2020 to the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.), relates to the calling for information by the `Registrar', as per Section 206 (4) of the Companies Act, 2013, which was issued based on the `Orders' of the Govt. of India., Ministry of Corporate Affairs, which ordered an `Inquiry' into the Affairs of the `Appellant'/`1st Respondent' (`M/s. Emaar Hills Township Pvt. Ltd.')/`Company'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 35 of 115
55. Continuing further, based on the `Replies' of the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.), further action on `Inquiry', is under progress. In regard to `APIIC', an `Inquiry' as per Section 206 (4) of the Companies Act, 2013, was ordered by the Govt. of India, and a Notice was issued to the Company.
56. When the transactions of `APIIC' with the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.), were taken up during the `Inquiry', the `Registrar of Companies', was informed that the `1st Respondent'/`TSIIC'/`Petitioner' is the entity now handling the issues pertaining to the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.). The Office of RoC, Telangana /13th Respondent had suggested to the Govt. of India (Ministry of Corporate Affairs) that an `Inquiry' be ordered against the `1st Respondent'/`TSIIC'/`Petitioner', (instead of `APIIC').
57. According to the 13th Respondent (RoC, Telangana), an `Inquiry' is under consideration against `1st Respondent'/`TSIIC'/`Petitioner' as well as against the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.). Further, the prayer of the `1st Respondent'/`TSIIC'/`Petitioner' for directing the `Registrar of Companies', to mark the status of the `Appellant'/`1st Respondent' (M/s. Emaar Hills Township Pvt. Ltd.) as Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 36 of 115 `management dispute' can be complied with, subject to the `1st Respondent'/`TSIIC'/`Petitioner' establishing various facts before the `Tribunal' or before any `Regulatory Forum'.
Appellant's Submissions & Decisions (in Comp. App (AT) (CH) No. 84 of 2022):
58. Challenging the `impugned order' dated 25.07.2022 in M.A.No.21/2021 in C.P. No.36/2021, passed by the `National Company Law Tribunal', Hyderabad Bench-II, Hyderabad, the Learned Senior Counsels for the `Appellant'/`1st Respondent' submitted that the `Tribunal' had wrongly held that the main C.P. No. 36/2021 filed by the `1st Respondent'/`Petitioner' (`Telangana State Industrial Infrastructure Corporation' / `TSIIC'), as per Section 241-242 of the Companies Act, 2013, was a `maintainable one'.
59. According to the Appellant, a `right' to file an `Application' under Section 241-242 of the Companies Act, 2013, is available only to a `Member', as defined under Section 2 (55) of the Companies Act, and who meets the `Statutory' requirements, as per Section 244 of the Companies Act, 2013.
60. It is the stand of the Appellant that its `Shareholding' is held by the `Respondent No. 3' / `Emaar Holdings' (74%) and `Andhra Pradesh Industrial Infrastructure Corporation Ltd.'/`APIIC'(26%). Furthermore, Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 37 of 115 the `Respondent No.1'/`TSIIC' is not recorded in the Appellant's `Register of Members', and therefore, is not entitled to file a `Petition' under Section 241-242 of the Companies Act, 2013. However, the `Tribunal' had erroneously held that the `Company Petition' was `maintainable'.
61. The Learned Counsels for the Appellant place reliance upon the decision of the Hon'ble Supreme Court of India in Balkrishan Gupta and Ors. vs. Swadeshi Polytex Ltd. & Anr. (1985) 2 SCC 167 at Spl. Pgs.:
182 and 183, wherein at paragraphs 12 to 14, it is observed as under:
12. ``The principal ground urged on behalf of the appellants is that the extraordinary general meeting had not been validly called since the Cotton Mills Company had ceased to enjoy the privileges of a member of the Polytex Company by reason of the appointment of a Receiver by the Collector of Kanpur in respect of the ten lacs shares in the Polytex Company held by the Cotton Mills Company, the attachment of the 9 lacs shares out of the said 10 lacs shares and also the pledge of 3,50,000 shares out of the said 10 lacs shares with the Government of Uttar Pradesh as security for the loans advanced by it. The total paid-up equity share capital of the Polytex Company is Rs. 3,90,00,000 (39,00,000 shares of Rs. 10 each) and it is not disputed that if the 10 lacs shares held by the Cotton Mills Company are omitted from consideration, the remaining requisitionists would not have sufficient voting strength to issue a notice under section 169 of the Act. The appellants contend that the Cotton Mills Company could not, therefore, join the other requisitionists in issuing the notice under section 169 of the Act calling upon the Polytex Company to call the extraordinary general meeting and without the support of the shares held by the Cotton Mills Company, the remaining requisitionists would not Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 38 of 115 have been eligible to requisition the meeting. The material part of section 169 r.f the Act reads: Calling of extraordinary general meeting on requisition.
169. (1) The Board of directors of a company shall, on the requisition of such member or members of the company as is specified in sub-section (4), forthwith proceed duty to call an extraordinary general meeting of the company.
(2) The requisition shall set out the matters for the consideration of which the meeting is to be called, shall be signed by the requisitionists, and shall be deposited at the registered office of the company.
(3) The requisition may consist of several documents in like form, each signed by one or more requisitionist.
(4) The number of members entitled to requisition a meeting in regard to any matter shall be:
(a) in the case of a company having a share capital. such number of them as held at the date of the deposit of the requisition, not less than one-tenth of such of the paid-up capital of the company as at that date carries the right of voting in regard to that matter;..
13. We have already referred to the order of the Collector appointing the Receiver in respect of the shares in question, attaching them and ordering that 3,50,000 shares be pledged in favour of the Government of Uttar Pradesh.
14. Section 150 of the Act requires every company to keep a register of members containing the names, address and the occupation, if any, of each member and other particulars mentioned therein. Section 153 of the Act provides that no notice of any trust, express, implied or constructive, shall be entered on the register of members. Section 153-B of the Act, however, provides that notwithstanding anything contained in section 153, where any shares in a company are held in trust by any person, he (the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 39 of 115 trustee) shall within such time and in such form as may be prescribed make a declaration to the public trustee appointed under section 153A of the Act in accordance with and subject to the rest of the provisions of section 153B of the Act.''
62. On behalf of the Appellants, a reference is made to the decision of the Hon'ble Supreme Court in J.P. Srivastava and Sons vs Gwalior Sugar Co. Ltd. (2005) 1 SCC at Pages 172 and 173, wherein at Paragraphs 19 and 48, it is observed as under:
``Any member/members of a Company may apply under Sections 397 and 398 of the Companies Act, 1956 (``the Act'') to CLB complaining of mismanagement or oppression provided such member or members have the requisite shareholding as prescribed under Section 399 to do so. The object of prescribing a qualifying percentage of shares in the petitioners and their supporters to file petitions under Sections 397 and 398 is clearly to ensure that frivolous litigation is not indulged in by persons who have no real stake in the company. However, it is of interest that the English Companies Act contains no such limitation. What is required in these matters is a broad common-sense approach. If the Court is satisfied that the petitioners represent a body of shareholders holding the requisite percentage, it can assume that the involvement of the company in litigation is not lightly done and that it should pass orders to bring to an end the matters complained of and not reject the Petition on a technical requirement. Substance must take precedence over form. Of course, there are some rules which are vital and go to the root of the matter which cannot be broken. There are others which are directory where non-
compliance may be condoned or dispensed with provided there is substantial compliance with the rules read as whole and no prejudice is caused.
(Paras 19 and 48) Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 40 of 115
63. The Learned Counsels for the Appellant adverts to the judgment of this Tribunal in Capt. Valdamannati Jaya Pushpakumar vs. Madras Race Club (CA (AT) (CH) No. 17/2022 at paragraph 65, it is observed as under:
65. ``There is no two opinion of a primordial fact that a person whose name is not on the `Register of Members' is not entitled to prefer a `Petition' before a `Tribunal'. It is for the concerned person to establish that he is a `Member' of a Company' on the date of filing of a Petition/Application under the Companies Act, 2013. When a person is not a `Member of the Company' he cannot even come out with an allegation of `Oppression' to invoke the ingredients of relevant Provisions of the Companies Act, 2013, as the case may be.''
64. The Learned Counsels for the Appellant by referring to the above `Decisions' / `Judgment', point out that the `Statutory' requirement to be a `Member' to main a `Petition' under Section 241-242 of the Companies Act, 2013, must be construed strictly.
65. The Learned Counsels for the Appellant points out that the `1st Respondent' (`Telangana State Industrial Infrastructure Corporation') had wrongly relied upon Section 53 (1) of the Andhra Pradesh Re-organisation Act, 2014, in its `Counter Affidavit' dated 05.09.2022 and it had failed to mention and highlight Section 53 (1), must be read in conjunction with Section 53(2) of the Reorganisation Act which clearly Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 41 of 115 provides that the assets and liabilities of any commercial or industrial undertaking of the erstwhile united State of Andhra Pradesh must be apportioned and transferred in physical form on mutual agreement or by making payment or adjustment through any other mode as may be agreed to by the Successor States.
66. The Learned Counsels for the Appellant come out with a plea that a `Petition' filed under Section 241-242 of the Companies Act, 2013, is to be strictly governed under the `Aegis' of the Companies Act, 2013.
67. Further, it is represented on behalf of the Appellant that as per Section 68 of the Reorganization Act, the assets, rights and liabilities of the companies forming a part of the IX Schedule are required to be apportioned between the successor states, in the manner indicated in Section 53, wherein `APIIC' is found at Item 17.
68. It is the version of the Appellant that the `1st Respondent'/`TSIIC' had admitted in Paragraph 14 of its Counter Affidavit dated 05.09.2022, that till date, there was no `Transmission' or `Transfer of Shares' of the `Appellant' from `APIIC' to `TSIIC' and further admits that there was no need of either `Transmission' or `Transfer of Shares'. Furthermore, the `1st Respondent'/`TSIIC', had sought to justify that the `Shares' could be transferred either by `Transmission' or `Transfer' and this is a Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 42 of 115 `contradiction' to the stand taken by the `1st Respondent'/`TSIIC', not only before the `Tribunal', but also before the `Appellate Tribunal', wherein it was mentioned that the `Transmission of Shares' from `APIIC' to `TSIIC' stood completed by `Operation of Law'.
69. It is the contention of the Appellant that `1st Respondent'/`TSIIC' has not emerged as a demerged or a successor of `APIIC', but has been a freshly `Incorporated Entity', which came into being, after the bifurcation of the united State of Andhra Pradesh. Therefore, it is the stand of the `Appellant' that the `1st Respondent'/`TSIIC' does not hold the `Shares' of the Appellant' and as such, is not entitled to maintain a `Petition' under Section 241-242 of the Companies Act, 2013. On behalf of the Appellant, a reference to the extract of Paragraph 14 of the 1st Respondent/TSIIC's Counter Affidavit is pointed out, which proceeds to the following effect:
``14 ......... The Appellant has harped on incompletion of the transmission of the shares and incompletion of the demerger process while as per fact and law there is neither transmission of shares or transfer of shares nor the demerger process was incomplete........''
70. The Learned Counsels for the Appellant submit that there is a procedure established under `Law for Transfer of Shares', which ought to be completed even as per the provisions of the `Reorganization Act', and not been completed in the instant case. Furthermore, when a `Statute' Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 43 of 115 specifically mentions that something has to be done in a certain manner, then, it ought to be construed strictly and shall be performed in that manner only.
71. According to the Learned Counsels for the Appellant, the `1st Respondent'/TSIIC's Letter dated 11.04.2016 is an admission to the fact that the change in the `Register of Members' of the `Appellant' will be affected, only upon the completion of `Demerger', which is admittedly pending as on date. Besides this, `APIIC' continues to be on the `Register of Members' of the `Appellant' and not the `1st Respondent'/`TSIIC'.
72. The Learned Counsels for the Appellant refer to the Appellant's Letter dated 19.01.2014 which mentions that the `Process of Transmission of Shares' was not completed as the `Original Share Certificates' are required to be surrendered to the `Appellant' (which is also confirmed by APIIC's Letter dated 02.09.2022 that the shares are in APIIC's physical possession).
73. The Learned Counsels for the Appellant advert to the `List of Shareholders' mentioned in the Appellant's Annual Returns as on 31.03.2019, which clearly reflects that `APIIC' is the shareholder of the Appellant Company and it merely reflects the name of `TSIIC', because there is a pending `Demerger', only post which `TSIIC' will be the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 44 of 115 `Shareholder' of the `Appellant'. Further, because of the pending `Demerger', the `Annual Returns' of the Appellant's Company is not reflecting that `TSIIC' is the Shareholder of the `Appellant'.
74. Therefore, it is the stand of the `Appellant' that the `Annual Returns' of the `Appellant' Company in no manner reflects the `TSIIC', as the `Shareholder' of the Appellant.
75. The Learned Counsels for the Appellant contends that the case put forward by `TSIIC' is merely a `Red Herring' in as much as the addresses of the Notices issued convening the `Appellant's Board Meetings were being sent to `TSIIC's Offices', but, fails to mention that the `Notices' were addressed to Mr. Narasimha Reddy, who is currently sitting in `1st Respondent'/`TSIIC's Offices'.
76. Moreover, Mr. Reddy was nominated as a `Director', as per `Letter dated 20.08.2014 by `APIIC' and continues to be the `Representative' of the `APIIC', on the Board of the Appellant and the said `Letter' is still subsisting and in force.
77. The Learned Counsels for the Appellant submit that 1st Respondent/TSIIC is not a `Member' of the `Appellant'/`Company' and does not qualify the `Statutory' requirements as per Section 244 of the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 45 of 115 Companies Act, 2013, to maintain a `Petition' under Section 241-242 of the Companies Act, 2013.
78. The Learned Counsels for the Appellant takes a stand that the `Appellant' had not made `any submissions' on the merits of the `Dispute' or in relation to the `interim reliefs' prayed for in MA/21/2021 by the `1st Respondent'/`TSIIC'. The `Tribunal' had not adverted to the `Notes of Submissions', filed by the `Appellant', together with the decisions relied on by the `Parties' and in reality, the `impugned order' is a drastic and a serious one, amounting to the grant of final relief.
79. Besides this, the `Tribunal' in the `impugned order' had not dealt with the `Notes of Submissions' filed by the `Appellant' and /or Respondent Nos. 2 and 3, the `Case Laws' and the `submissions made qua the maintainability of the Petition' and per contra, overreaching directions were passed, amounting to final relief.
80. It is the grievance of the Appellant that `without hearing the Appellant and the Respondent Nos. 2 and 3', the `Tribunal' had proceeded to grant `interim relief' and the `inter order' is in negation of the `principles of nature justice'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 46 of 115
81. In this connection, the Learned Counsels for the Appellant refers to the Judgment of this `Tribunal' in the matter of V.G. Selvaraj & Ors. Vs. VGP Housing Private Limited (vide CA AT CH 03/2021), wherein at Paragraphs 60 to 66, it is observed as under:
60. ``Conversely, it is the submission of Learned Counsels for the Respondents 1 to 5 that no reliance can be placed on an 'Arbitral Award' dated 18.03.2021 unrelated to the Companies to challenge the Impugned Order of the 'Tribunal' dated 22.01.2021 in CA/06/2021 in CP/393/2019 passed at earlier point of time.
Further, the said 'Arbitral Award' is contested by the 'Respondents' before the Hon'ble High Court of Madras in O.P.No.310/311/312/313 of 2021. Moreover, it is the plea of the 'Respondents' that in the Award the 'Appellants' were found guilty of mis-conduct (vide Paragraph 144) and this aspect was conveniently ignored by the 'Appellants'.
61. Considering the fact, that the 'Arbitral Award' dated 18.03.2021 is contested by the 'Respondents' (in the present 'Company Appeal') before the Hon'ble High Court of Madras in O.P.No.310/311/312/313 of 2021, the same is pending for determination.
62. In so far as the allegations made against the 'Observer' is concerned, since he is not a party to the 'Proceeding' in his personal/individual status, this 'Tribunal' is not expressing any opinion in this regard, in the present 'Appeal'.
63. In determining an Application/Petition under Section 241, 242 of the Companies Act, 2013, the 'Tribunal' is to keep in mind the principle of 'particularity' and 'proof'. No doubt, the object of exercise of power under Section 241 of the Companies Act is either to prevent a 'Winding up of Company' or to remove the continuance of harm or reasonable probability of injury to the 'interests of Company' or to the wider injury of 'public interests'. Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 47 of 115
64. Admittedly the main Company Petition C.P.393 of 2019 before the National Company Law Tribunal, Chennai Bench was filed on 14.03.2019. The 'Respondents' have raised issues in regard to the maintainability of the main Company Petition No.393/2019 on the file of the 'Tribunal' and the same is pending for 'Adjudication'. In fact, the plea of bar of the C.P.393 of 2019 (2nd Petition) being filed after the earlier C.P.32 of 2017 filed by the 1st Appellant as 1st Petitioner was withdrawn on 02.08.2017, with no liberty being granted by the 'Tribunal' to file fresh Petition, is taken by the Respondents 1 to 4 in their 'Interim Counter' filed in pending C.P.393 of 2019. It is not in dispute that an unnumbered Application dated 15.04.2019 seeking to rectify the error committed by the 'Petitioners' therein is pending before the 'Tribunal'.
65. The 'Tribunal' passed an Interim Order on 16.04.2019 in main Company Petition No.393/2019 to the effect that keeping in view the interest of the R1 Company both the parties had agreed for setting up of 'five member committee' headed by one 'Observer' and constituted a 'five member committee' comprising three representatives being appointed by the Respondent Nos.2, 3 and 4, one by the Respondent Nos.5 and 6; one by the 1st Petitioner and Mr. R. Shankaranarayanan, Senior Advocate was appointed as an 'Observer' and further it was mentioned that the Committee shall have the mandate to decide ERP rates as per the market value, prevailing in the area where the properties are situated, etc.
66. Also the 'Tribunal' in the Interim Order dated 16.04.2019 in the main Company Petition No.393/2019 had proceeded to observe that in case, any issue arises with regard to fixing ERP rates on which there is difference of opinion among the members, the same will be resolved by the 'Observer' amicably and it was made clear that all the pending booking shall also be subject to the ERP rates fixed by the 'Committee' and procedure mentioned.'' Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 48 of 115
82. The Learned Counsels for the Appellant points out that the `Tribunal' had granted the `relief' of compensation to the `1st Respondent'/`TSIIC' at an interim stage, without there being any basis or quantification of the amount of `Compensation' and in fact, the `1st Respondent'/`TSIIC' had not adduced `any evidence' or placed on record `any material', to show that it had suffered `any loss', let alone the `monetary loss'. Therefore, the `impugned order' of the `Tribunal' is liable to set aside.
83. The Learned Counsels for the Appellant points out that the `Tribunal', by granting the `relief' of restraining the Respondent Nos. 2 and 3' in dealing with the `Assets' of the `Appellant'/`EHTPL' had brought the affairs of the Appellant to a grinding halt and such a relief could not be given at an interim stage.
84. According to the Learned Counsels for the Appellant, `Interim Reliefs' can be granted only in `aid of as ancillary to the main/final reliefs', prayed for in the Company Petition. However, the grant of `interim reliefs' by the `Tribunal', in the instant case are in the nature of `final reliefs', without providing an `opportunity' to the `Appellant' to advance submissions on the merits of the `interim reliefs' prayed for by the `1st Respondent/TSIIC' and in this connection, the Learned Counsels Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 49 of 115 for the `Appellant' relies on the decision of the Hon'ble Supreme Court of India in Bank of Maharashtra v. Race Shipping and Transport Co. (P) Ltd., reported in 1995 3 SCC at Page 257; Spl Pg: 262, wherein at Paragraphs 10 and 11, it is observed as under:
10. ``By the interim order the High Court has directed the appellant-Bank to credit a sum of Rs. 95,000 in the Current Account No. 318 of Respondent 1. The High Court has recorded that respondent through their counsel had given an undertaking to bring back the amount if the Court so desires. The said interim order, in substance, grants the relief which the respondent would have been given at the final stage in the event of their writ petition being allowed by the High Court.
11. Time and again this Court has deprecated the practice of granting interim orders which practically give the principal relief sought in the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, the public interest and a host of other considerations, [See : Asstt. CCE, Dunlop India Ltd (1985) (1) SCC 260, 265; State of Rajasthan v. Swaika Properties, (1985) 3 SCC 217, 224.''
85. The Learned Counsels for the Appellant cites the decision of the Hon'ble Supreme Court of India in State of U.P. & Ors., v. Ram Sukhi Devi (2005) 9 SCC at Page 733; Spl Pgs: 735 & 736, wherein at paragraph 8, it is observed as under:
8. ``To say the least, approach of the learned Single Judge and the Division Bench is judicially unsustainable and indefensible. The final relief sought for in the writ petition has been granted as an interim measure. There was no reason indicated by learned Single Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 50 of 115 Judge as to why the Government Order dated 26.10.1998 was to be ignored. Whether the writ petitioner was entitled to any relief in the writ petition has to be adjudicated at the time of final disposal of the writ petition. This Court has on numerous occasions observed that the final relief sought for should not be granted at an interim stage. The position is worsened if the interim direction has been passed with stipulation that the applicable Government Order has to be ignored. Time and again this Court has deprecated the practice of granting interim orders which practically give the principal relief sought in the petition for no better reason than that of a prima facie case having been made out, without being concerned about the balance of convenience, the public interest and a host of other considerations. [See CCE, West Bengal v.
Dunlop India Ltd. (1985 (1) SCC 260 at p. 265), State of Rajasthan v. Swaika Properties (1985 (3) SCC 217 at p.224), State of U.P. and Ors. v. Visheshwar (1995 Supp (3) SCC 590), Bharatbhushan Sonaji Kshirsagar (Dr.) v. Abdul Khalik Mohd. Musa (1995 Supp (2) SCC 593), Shiv Shankar v. Board of Directors, U.P. SRTC and Anr. (1995 Supp (2) SCC 726) and Commissioner/Secretary to Govt. Health and Medical Education Deptt. Civil Sectt. v. Dr. Ashok Kumar Kohli (1995 Supp (4) SCC 214).] No basis has been indicated as to why learned Single Judge thought the course as directed was necessary to be adopted. Even it was not indicated that a prima facie case was made out though as noted above, that itself is not sufficient. We, therefore, set aside the order passed by learned Single Judge as affirmed by the Division Bench without expressing any opinion on the merits of the case we have interfered primarily on the ground that the final relief has been granted at an interim stage without justifiable reasons. Since the controversy lies within a very narrow compass, we request the High Court to dispose of the matter as early as practicable, preferably within six months from the date of receipt of this judgment.''
86. The Learned Counsels for the Appellant advert to the decision of the Hon'ble Supreme Court of India in Asst. Collector of Central Excise, Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 51 of 115 West Bengal v. Dunlop India Ltd. & Ors., reported in 1985 (1) SCC at Page 260; Spl Pgs.: 265 to 267, wherein at Paragraph 5, it is observed as under:
5. ``We repeat and deprecate the practice of granting interim order which practically give the principal relief sought in the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, the public interest and a host of other relevant considerations.
Regarding the practice of some clever litigants of resorting to filing writ petitions in far-away courts having doubtful jurisdiction, we had this to observe [SCC para 2, p. 648 : SCC (Cri) pp. 350-351]:
"..... Having regard to the fact that the registered office of the Company is at Ludhiana and the principal respondents against whom the primary relief is sought are at New Delhi, one would have expected the writ petition to be filed either in the High Court of Punjab and Haryana or in the Delhi High Court. The writ petitioners however, have chosen the Calcutta High Court as the forum perhaps because one of the interlocutory reliefs which is sought is in respect of a consignment of beef tallow which has arrived at the Calcutta Port. An inevitable result of the filing of writ petitions elsewhere than at the place where the concerned offices and the relevant records are located is to delay prompt return and contest. We do not desire to probe further into the question whether the writ petition was filed by design or accident in the Calcutta High Court when the office of the Company is in the State of Punjab and all the principal respondents are in Delhi. But we do feel disturbed that such writ petitions are often deliberately filed in distant High Courts, as part of a manoeuvre in a legal battle, so as to render it difficult for the officials at Delhi to move applications to vacate stay where it becomes necessary to file such applications.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 52 of 115 In Union of India v. Jain Shudh Vanaspati Ltd., Chandrachud, CJ., A. P. Sen, R.N. Misra, JJ. allowed an appeal against an interim order making the following observations:
"After hearing learned counsel for the rival parties, we are of the opinion that the interim order passed by the High Court on November 29, 1983 is not warranted since it virtually grants to the respondents a substantial part of the relief claimed by them in their writ petition. Accordingly, we set aside the said order.'' We have come across cases where the collection of public revenue has been seriously jeopardised and budgets of Governments and Local Authorities affirmatively prejudiced to the point of precariousness consequent upon interim orders made by courts. In fact, instances have come to our knowledge where Governments have been forced to explore further sources for raising revenue, sources which they would rather well leave alone in the public interest, because of the stays granted by courts. We have come across cases where an entire Service is left in a stay of flutter and unrest because of interim orders passed by courts, leaving the work they are supposed to do in a state of suspended animation. We have come across cases where buses and lorries are being run under orders of court though they were either denied permits or their permits had been cancelled or suspended by Transport Authorities. We have come across cases where liquor shops are being run under interim orders of court. We have come across cases where the collection of monthly rentals payable by Excise Contractors has been stayed with the result that at the end of the year the contractor has paid nothing but made his profits from the shop and walked out. We have come across cases where dealers in food grains and essential commodities have been allowed to take back the stocks seized from them as if to permit them to continue to indulge in the very practices which were to be prevented by the seizure. We have come across cases where land reform and important welfare legislations have been stayed by courts. Incalculable harm has been done by such interim orders. All this is not to say that interim orders may never be made against public authorities. There are, of Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 53 of 115 course, cases which demand that interim orders should be made in the interests of justice. Where gross violations of the law and injustices are perpetrated or are about to be perpetrated, it is the bounden duty of the court to intervene and give appropriate interim relief. In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration, a Court may well be justified in granting interim relief against public authority. But since the law presumes that public authorities function properly and bonafide with due regard to the public interest, a court must be circumspect in granting interim orders of far-reaching dimensions or orders causing administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the Court alleging prejudice, inconvenience or harm and that a prima facie case has been shown. There can be and there are no hard and fast rules. But prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There is the question of balance of convenience. There is the question of irreparable injury. There is the question of the public interest. There are many such factors worthy of consideration. We often wonder why in the case indirect taxation where the burden has already been passed on to the consumer, any interim relief should at all be given to the manufacturer, dealer and the like!''
87. The Learned Counsels for the Appellant contend that the reliance placed by the `1st Respondent'/`TSIIC' in the decision of the Hon'ble Supreme Court in Unitech Limited & Ors., v. Telangana State Industrial Infrastructure Corporation & Ors., (vide Civil Appeal No. 317 of 2021 dated 17.02.2021), reported in 2021 SCC Online SC at Page 99 is a misplaced one, because of the fact that the `Hon'ble Supreme Court of Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 54 of 115 India' had expressly refused to delve into `adjudicating' finally upon the `rights inter se' between `TSIIC' and `APIIC' and also categorically stated that `TSIIC' will be at liberty to pursue its remedies for apportionment in relation to `APIIC' in accordance with `Law'. No opinion is expressed on the merits or tenability of the `Claim' for apportionment asserted by `TSIIC', and that the `issue' was expressly left `unanswered', given the fact that `APIIC' and `TSIIC' were not able to confirm the status of `Demerger' and they ought not to `Approbate' and `Reprobate' from their stand at this stage.
88. The Learned Counsels for the Appellant submit that in the instant case there seems to be contrary stand taken by `APIIC' and `TSIIC', in regard to the `ownership' of the `Appellant' as `APIIC' through its `Letter' issued on 02.09.2022 has claimed `rights' over 26% of the Appellant's Shareholding and that till date, there is no `consensus' between the two Governments as to the status of the `Shares'.
89. The Learned Counsels for the Appellant urges that neither the `impugned order' contemplate regulating the company affairs nor does it mention that reason for passing such a `drastic order', and further that the nature of granting the substantive `Interim Reliefs, which are in the nature of final reliefs or without even providing an `opportunity', to the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 55 of 115 `Appellant', to project his case on merits of the `main Company Petition' and hence, the same is liable to be set aside by this `Tribunal' in `Appeal'. 1st Respondent Contentions (in Comp. App (AT) (CH) Nos. 84 & 87 of 2022:
90. The Learned Additional Advocate General for the `1st Respondent'/`TSIIC' submits that the `Tribunal' had extracted the `Letter' dated 11.04.2016, issued by the `Appellant', to drive home the point that the Respondent had informed the `Appellant' in the Year 2016, that consequent upon `Demerger' of the 1st Respondent/Company' from `APIIC', the name of the `Member may be changed from `APIIC' to `TSIIC' in respect of and in relation to the shareholding of the `Appellant'/``Company, held by the `APIIC'. Subsequently, the `Appellant' had recognised the `1st Respondent/Company' as its `Shareholder' and sent notices of the `Board Meetings' and meetings of the `Members' to the `1st Respondent'/`Company.
91. According to the 1st Respondent/Petitioner, the `Appellant/1st Respondent' had stated that it developed the `Project' but the fact of the matter is that the Project was partially developed and assigned to a `Third Party', without the consent of the `answering Respondent' and `disposed Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 56 of 115 of' the same for far under valuation and emptied the company and denied the `rights' of the `1st Respondent'.
92. The plea of the 1st Respondent/Petitioner is that the `Appellant'/1st Respondent' was esstopped to deal with the properties and assets, as their `Development Rights' were assigned to a `Third Party', in which, only the `Appellant'/`1st Respondent' is interested in total exclusion of the 1st Respondent (`TSIIC').
93. According to the `1st Respondent/Petitioner', the `Appellant'/`1st Respondent' has plans to dispose of the unutilised / undeveloped land, which is to an extent of 89.76 Acres, which is highly detrimental to the interests of the `1st Respondent' and in the interest of the Public Exchequer.
94. It is represented on behalf of the 1st Respondent/Petitioner, the `Tribunal' had extracted the `Minutes of the Meeting' of the `Board of Directors' of the `Appellant/`Company' which took place on 16.06.2016, in which, the Managing Director of `1st Respondent'/`TSIIC' was present, at the invitation of the `Appellant/Company', and these `Extracts' were taken in to account to conclude that the `Appellant' had recognised the paramount importance and the objects of Andhra Pradesh Reorganisation Act, 2014.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 57 of 115
95. It is the version of the 1st Respondent/Petitioner that the `Tribunal' in its `impugned order' dated 25.07.2022 in MA/21/2021 in CP/36/2021 at paragraph 22, had mentioned the `Lists of Shareholders' as on 31.03.2019, forming part of the `Annual Returns' of the `Appellant'/`Company', filed by the `Appellant' which projects the `1st Respondent' /`Company' as a `Shareholder' of the `Appellant'/`Company', holding 2,50,32,202 Shares and hence, the plea of the `1st Respondent/Petitioner' is that the `Appellant'/`1st Respondent' had recognized the `1st Respondent/Petitioner' as a `Shareholder' of the `Appellant'/`Company'.
96. It is projected on the side of the 1st Respondent/Petitioner that the `Tribunal' had extracted the note appended to the Accounts of the Company for the Year ended 31.03.2019, as per which, it was clearly mentioned that `1st Respondent'/`TSIIC' had taken over the activities of `APIIC' in so far as it relates to the `State of Telangana' and is the `Beneficial Owner' of the `Shares'.
97. It is pointed out on behalf of the 1st Respondent/Petitioner that the `Tribunal' had held that `the state is bifurcated in to two states and in view of the formation of the state of Telangana, the new entity called `TSIIC' has been incorporated to take over the activities of `APIIC', so Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 58 of 115 far as it relates to the `State of Telangana' that means, all the assets, including the land bank held by the APIIC which are situated in the state of Telangana shall automatically become the properties of the TSIIC, as per `Section 53 of Andhra Pradesh Reorganisation Act, 2014'.
98. The Learned Additional Advocate General for the 1st Respondent/Petitioner submits that `APIIC' had filed pleadings in a case in regard to discharging of the liabilities by the `APIIC', in respect of the lands alienated to `Third Parties' and located in the State of Telangana (Hyderabad), the `APIIC' had filed the Scheme for `Apportionment for Demerger', before the Hon'ble Supreme Court of India and the Hon'ble Supreme Court had referred to the said pleadings of `APIIC' before it, wherein at Paragraph 56 of the Judgment in the matter of Unitech Ltd. & Ors. v. Telangana State Industrial Infrastructure Corporation (TSIIC) & Ors., reported in (2021) SCC Online SC 99, wherein at paragraph 56, it is observed as under:
56. ``The Scheme for apportionment/demerger has also been produced by APIIC in the course of the pleadings. Para 1 of Section 1 Part II of the Scheme is in the following terms:
1. Upon the coming into effect of the Scheme and with effect from the Appointed Date and subject to this Scheme, all the operational Units of the Demerged Undertaking (including all the estate, assets, rights, title, interest and authorities including accretions and appurtenances of the Demerged Undertaking namely Cyberabad Zone, Jeedimetla Zone, Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 59 of 115 Karimnagar Zone, Patancheru Zone, Shamshabad and Moula Ali Zone, Warangal Zone vest with the Transferee Company and shall, subject to the provisions of the scheme in relation to the mode of vesting and pursuant to Section 53 of the Act and without any further act or deed, or be deemed to have been apportioned and transferred to and vested in the Transferee Company as a going concern so as to become as and from the Appointed Date, the estate, assets, rights, title, interest and authorities of the Transferee Company as detailed in the Schedule-I.''
99. The emphatic contention advanced on behalf of the 1st Respondent/Petitioner is that by `Operation of Law', `1st Respondent'/`TSIIC' has become the `Shareholder' of the `Appellant'/`Company' and that Section 53 of the `Andhra Pradesh Reorganisation Act, 2014', explicitly provides that `Assets and Liabilities of any Commercial or Industrial Undertaking of the State', are required to be apportioned, on the basis of the location, operation of such Commercial and Industrial Undertaking', and such distribution, is not dependent upon the location of the Headquarters of such Industrial or Commercial Undertaking, such apportionment of `Assets' (i.e., APIIC's shareholding in the Companies) is provided in the Act, the consequent transfer of shares from `APIIC' to `TSIIC' will be by way of operation of law. Further, the Hon'ble Courts have distinguished between the term ``transfer'' and the phrase ``transmission by operation of law''. Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 60 of 115
100. Added further, it is the stand of the 1st Respondent/Petitioner that the term ``transmission by operation of law'' covers those cases where a person or authority acquires interest in the property, by operation of law, without any voluntary act on his part and a reference is made to the decision of the Hon'ble High Court of Allahabad in Maheswari Khan Sugar Mills (P) Ltd. & Ors. v. Ishwari Khetan Sugar Mills & Ors., reported in (AIR 1965 All Page 135) at Spl Pgs.: 140 & 141, wherein at paragraphs 23 to 27, it is observed as under:
23. ``An exception was, however, made in the case of shares ``transmitted by operation of law''. This continued to be the law of England even after a new Act was passed in 1948. Corresponding provision is contained in Section 75 of the English Companies Act, 1948.
24. A provision similar to Section 63 of the English Companies Act, 1929, was made in the Indian Act for the first time when the Indian Companies Act, 1913, was amended under the Companies (Amendment) Act, 1936. Sub-section (3) of Section 34 of the Indian Companies Act, 1913, as amended in 1936 was as below:
``It shall not be lawful for the company to register a transfer of shares in or debentures of the company unless the proper instrument of transfer duly stamped and executed by the transferor and the transferee has been delivered to the company along with the script''.
25. The proviso to Sub-section (3) however, gave power to the company to register the transfer if it was satisfied that the instrument of transfer had been lost. Sub-section (6) of S.34 was another exception to the provisions contained in sub-section (3). It gave power to the company to register as shareholder or debenture-holder any person to whom the right to any share in or Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 61 of 115 debentures of the company had been transmitted by operation of law.
26. When a new law was passed in 1956 a different provision was made in Section 108 of the Companies Act, 1956. Instead of laying clown that `it shall not be lawful for the company to register'' the Legislature provided that ``a company shall not register'' when the Parliament did not follow the wording of the English Companies Act, 1948, and departed from the corresponding provision of the Indian Companies Act, 1913, as amended under the Companies (Amendment) Act, 1936, they can be deemed to have had in mind not to declare the non-compliance of S. 108 as unlawful and illegal reasons for making the change are not far to seek. The term ``transmission by operation of law'' has not been defined in any of the laws, neither in the English Companies Acts, nor in the Indian Companies Act; but the old laws give out the meaning of this term.
In Table `A' of the First Schedule of the English Companies Act, 1862, and of the Indian Companies Act, 1882, separate sub-heads, were given for ``transfer of shares'' and ``transmission of shares''. Persons receiving shares by operation of law included Executors or Administrators of a deceased member, any person becoming entitled to a share in consequence of the death, bankruptcy or insolvency of any member or in consequence of the marriage of any female member. A similar provision existed in Table `A' of the First Schedule of the English Companies (Consolidation) Act, 1903 and Indian Companies Act, 1913 as originally passed, though both kinds of transfers were listed under a common sub-head ``transfer and transmission of shares''. ``Transmission by operation of law'' thus covers those cases where a person or authority acquires an interest in the property, by operation of law, without any voluntary act on his part.
27. It shall be found that Section 108 of the Companies Act, 1956, is not exhaustive nor was Section 34(3) of the amended Indian Companies Act, 1913, exhaustive. They cover only two kinds of transfer of shares viz., under an instrument of transfer duly stamped and executed by the transferor and the transferee and transmission by operation of law. There are other instances of a Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 62 of 115 person acquiring title to the shares of a company. A joint Hindu family can own shares and at the time of separation there shall be an actual partition of shares among the members thereof. Prior to the partition each and every member of the joint family has an interest in all the shares but after partition they become sole owners of the shares allotted to them, partition of property can be with or without the intervention of the court, and it is not necessary that formal instruments or transfer of shares be drawn up. Consequently, if the company cannot give effect to the partition by making alterations in the register of members, it shall be necessary for the person, to whom a share is allotted to move the Court under Section 155 of the Companies Act, 1956, for rectification of the register and he shall be put to unnecessary inconvenience and expenses. Similarly, if the actual owner of the shares standing in the name of another person is not out of possession his obtaining a mere-declaratory relief from the Court of law shall not enable him to have thy shares registered in his name. If we read Section 34(3) of the Indian Companies Act, 1913 and Section 108 of the Companies Act, 1956 in the above light, namely, that neither of the provisions are exhaustive, we can safely assume that the Parliament had an underlying object when the wording of S. 34(3) was not adopted while enacting Section 108 of the Companies Act, 1956. When the Parliament did not intentionally declare non- compliance of S. 108 to be illegal, S. 108 cannot be held to be mandatory. It is true that there has to be substantial compliance of a provision which is merely directory but in cases not strictly covered by the provision the authority can deviate from that rule and take a decision which is equitable and fair to both the parties.''
101. The Learned Additional Advocate General for the `1st Respondent/Petitioner' refers to the decision of the Hon'ble Supreme Court of India in Indian Chemical Products Ltd. v. State of Orissa & Anr., Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 63 of 115 (1966) SCR 380, wherein at paragraphs 2, 3, 4, 6 & 8, it is observed as under:
2. ``Both courts concurrently held that (1) the title to the shares vested in the State of Orissa by operation of law; (2) the, refusal of the Board of Directors to register the transfer was mala fide; (3) the State of Orissa was entitled to rectification of the share register and a proper case for the exercise of the Court's jurisdiction under Section 38 of the Indian Companies Act, 1913 had been made out;
(4) the petition was not liable to be dismissed on the ground that the State had asked the company to register the name of the Secretary to the Government of Orissa, as the shareholder in place of the Maharaja. The appellate Court also held that under the articles of association of the company the board of directors had no power to refuse registration of a transfer where the transfer was by operation of law. The appellant challenges the correctness of these findings.
3. The courts below concurrently found that the 7500 shares were held by the Maharaja in his capacity as ruler of the State of Mayurbhanj. This finding is amply supported by the documentary evidence on the record and is no longer challenged. The State of Mayurbhanj was one of the feudatory States of Orissa under the suzerainty of the British Crown. As from August 15, 1947, with the declaration of independence the paramountcy of the British Crown lapsed. Thereafter, steps were taken for the integration of the State with the Dominion of India. On October 17, 1948, the Maharaja of Mayurbhanj signed an agreement for the merger of the State with the Dominion. By Article 1 of this agreement, the Maharaja completely ceded to the Dominion his sovereignty over the State of Mayurbhanj as from November 9, 1948. Article 4 of the agreement allowed the Maharaja to retain the ownership of his private properties only as distinct from the State properties. On and from November 9, 1948, as a necessary consequence of the cesser of sovereignty all the public properties of the State including the 7,500 shares in the company vested in the Dominion. By operation of law in consequence of the change of sovereignty, all the public Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 64 of 115 properties of the State which were vested in the Maharaja as the sovereign ruler devolved on the Dominion as the succeeding sovereign.
4. As from January 1, 1949, the Government of India in exercise of its powers under Section 3(2) of the Extra Provincial Jurisdiction Act (47 of 1947) delegated to the Government of Orissa the power to administer the territories of the merged State. On August 1, 1949, the States Merger (Governors' Provinces) Order, 1949 came into force, and in consequence of Section 5(1) of the Order, all property vested in the Dominion Government for purposes of governance of the merged State become from that date vested in the Government of Orissa, unless the purposes for which the property was held were central purposes. By a certificate dated November 10, 1953, the Government of India declared that the 7,500 shares were not held for central purposes. Under the Constitution which came into force on January 26, 1950, the territories of the merged State were included in the State of Orissa. By reason of these successive constitutional changes, the shares became vested in the State of Orissa. The State is now the legal owner of the shares and the Directors of the company are bound to enter its name in the register of members, unless there is some restrictive provision in the articles authorising them to refuse the registration.
6. Article 1-A attracts the regulations in Table A of the First Schedule to the Indian Companies Act, 1913 so far as they are applicable to private companies and are not inconsistent with the articles. The regulations in Table A make a distinction between transfer and transmission of shares. In respect of a transfer, they require that the instrument of transfer shall be executed both by the transferor and the transferee. A transmission by operation of law is not such a transfer. In re Bentham Mills Spinning Company1, James, L.J. said "In Table A the word 'transmission' is put in contradistinction to the word 'transfer'. One means a transfer by the act of the partners, the other means transmission by devolution of law." Article 11 refers to transfers. A devolution of title by operation of law is not within its purview. Being a restrictive provision, the article must be strictly construed. In the instant case, Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 65 of 115 the title to the shares vested in the State of Orissa by operation of law, and the State did not require an instrument of transfer from the Maharaja to complete its title. Article 11 does not confer upon the Board of Directors a power to refuse recognition of such a devolution of title. We may add that we express no opinion on the question whether such an article applies to an involuntary transfer of shares by a Court sale having regard to the provisions of Order 21, Rule 80 of the Code of Civil Procedure with regard to the execution of necessary documents of transfer.
8. Though the State of Orissa had acquired title to the shares by operation of law, by way of abundant caution it obtained a deed of transfer and lodged it with the company together with the share scrip. The transfer deed was duly stamped and complied with all the formalities required by law. The claim of the State of Orissa based upon the transfer deed was within the purview of Article 11. Even with regard to this claim, the Courts below concurrently held that the Board of Directors acted mala fide in refusing to register the transfer. This finding is amply supported by the materials on the record. In spite of the fact that the State had filed with the company a certificate of the Collector of Stamp Revenue, West Bengal, that no stamp duty was payable on the transfer, the company raised the objection that the transfer deed must be stamped. To avoid this objection, the Government stamped the deed and again lodged it with the company. For over three years, the Directors delayed registration of the transfer on frivolous pretexts. On May 16, 1953, the Directors without assigning any reason declined to register the transfer. Before the High Court, the company asserted that the registration was refused because the Maharaja of Mayurbhanj was under an obligation to execute an agreement conferring valuable rights on the company and the State of Orissa had failed to honour this obligation. Reliance was placed on Clause 6 of the company's memorandum of association, which stated that the company and the Maharaja proposed to enter into an agreement and a copy of the proposed agreement was annexed. Clause 6 shows that there was a proposal between the parties to enter into an agreement, but there was no concluded agreement Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 66 of 115 between them, nor was there any binding obligation on the Maharaja to execute an agreement. The Directors could not use their power of declining to register the transfer under Article 11 for the purpose of forcing the State of Orissa to enter into the proposed agreement. Actually, the reason given at the trial was an afterthought. The Imperial Bank of India representing the Maharaja was pressing for registration of the transfer. By its letter dated March 17, 1953, the company assured the Bank that the registration would be effected shortly. Nevertheless, on May 16, 1953 the directors capriciously refused to register the transfer.''
102. On the side of the 1st Respondent/Petitioner, reliance is placed on the decision of the Hon'ble Supreme Court in Worldwide Agency Private Limited and Ors., v. Margaret T Desor & Ors. (1990) 1 SCC Page 536 at Spl Pgs: 542, 544, 547 to 549, wherein at paragraphs 12, 19, 24, 25 & 26, it is observed as under:
12. `` On behalf of the appellants it was contended that the right which is a specific statutory right, is given only to a member of the company and until and unless one is a member of the company, there is no right to maintain application under Section 397 of the Act. Mr. Nariman contended that there was no automatic transmission of shares in the case of death of a shareholder to his legal heir and representatives, and the Board has a discretion and can refuse to register the shares. Hence, the legal representatives had no locus standi to maintain an application under Sections 397 & 398 of the Act. Mr. Nariman submitted that the rights under Sections 397 & 398 of the Act are statutory rights and must be strictly construed in the terms of the Statute. The right, it was submitted, was given to "any member" of a company and it should not be enlarged to include "any one who may be entitled to become a member".
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 67 of 115
19. Mr. Nariman submits that in view of the specific provisions of Section 397 of the Act only a member is entitled to move a petition under Sections 397 and 398 of the Act and that member is one whose name is in the register of members in view of Section 41 of the Act, as mentioned hereinbefore. In this connection, it was emphasised that not only must the applicant be a member but in terms of Section 399 of the Act, he has to fulfil the conditions laid down under clauses (a) and (b) of Section 399 of the Act. These should be construed so as to mean what the words say. According to Mr. Nariman, a member is not, in view of the scheme of the Act, the representative of a deceased member.
24. We do not agree for the reason mentioned before. It further appears to us the Australian judgment does not reconcile to logic in accepting that legal representative can petition for winding-up, which is called the "sledge-hammer remedy", but would refuse the lesser and alternative remedy of seeking relief against oppression and mismanagement though the latter remedy requires establishment of winding up on just and equitable grounds as a precondition for its invocation. It would be rather incongruous to hold that the case for windingup on just and equitable ground can be made out by the legal representatives under Section 439(4)(b) of the Act but not the other. This does not appear to be logical. It appears to us that to hold that the legal representatives of a deceased shareholder could not be given the same right of a member under Sections 397 and 398 of the Act would be taking a hyper-technical view which does not advance the cause of equity or justice. The High Court in its judgment under appeal proceeded on the basis that legal representatives of a deceased member represent the estate of that member whose name is on the register of members. When the member dies, his estate is entrusted in the legal representatives. When, therefore, these vestings are illegally or wrongfully affected, the estate through the legal representatives must be enabled to petition in respect of oppression and mismanagement and it is as if the estate stands in the shoes of the deceased member. We are of the opinion that this view is a correct view. It may be mentioned in this connection that succession is not Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 68 of 115 kept in abeyance and the property of the deceased member vests in the legal representatives on the death of the deceased and they should be permitted to act for the deceased member for the purpose of transfer of shares under Section 109 of the Act.
25. In some situations and contingencies, the "member" may be different from a "holder". A "member" may be a "holder" of shares but a "holder" may not be a "member". In that view of the matter, it is not necessary for the present purpose to examine this question from the angle in which the learned Single Judge of the Calcutta High Court analysed the position in the case of Kedar Nath Agarwal v. Jay Engineering Works Ltd. and Ors., [1963] 33 Comp. Cas 102 (Cal), to which our attention was drawn.
26. Admittedly in the present case, the legal representatives have been more than anxious to get their names put on the register of members in place of deceased member, who was the Managing Director and Chairman of the company and had the controlling interest. It would, therefore, be wrong to insist their names must be first put on the register before they can move an application under Sections 397 and 398 of the Act. This would frustrate the very purpose of the necessity of action. It was contended on behalf of the appellant before the High Court that if legal representatives who were only potential members or persons likely to come on the register of members, are permitted to file an application under Sections 397 and 398 of the Act, it would create havoc, as then persons having blank transfer forms signed by members, and as such having a financial interest, could also claim to move an application under Sections 397 and 398 of the Act. The High Court held that this is a fallacy, that in the case of persons having blank transfer forms, signed by members, it is the members themselves who are shown on the register of members and they are different from the persons with the blank transfer forms whereas in the case of legal representatives it is the deceased member who is shown on the register and the legal representatives are in effect exercising his right. A right has devolved on them though the death of the member whose name is still on the register. In our opinion, Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 69 of 115 therefore, the High Court was pre-eminently right in holding that the legal representatives of deceased member whose name is still on the register of members are entitled to petition under Sections 397 and 398 of the Act. In the view we have taken, it is not necessary to consider the contention whether as on the date of petition, they were not members. In that view of the matter, it is not necessary for us to consider the decision of this Court in Rajahmundry Electric Supply Corpn. Ltd. v. A. Mageshwara Rao & Ors., AIR 1956 SC 213. In view of the observations of this Court in Life Insurance Corporation of India v. Escorts Limited & Ors., AIR 1986 SC 1370 at p. 1412, it is not necessary, in our opinion, to consider the contention as made on behalf of the appellant before the High Court that the permission of the Reserve Bank of India had been erroneously obtained and consequently amounts to no permission. In the present context, we are of the opinion that the High Court was right in the view it took on the first aspect of the matter.''
103. According to the 1st Respondent/Petitioner the `Registrar of Companies', Hyderabad had issued notice for an `enquiry' as per Section 206 (4) of the Companies Act, 2013, to the Appellant and their Associates, wherein `several oppressive acts' of the `Appellant' were spoken to by the `Registrar of Companies' and that an explanation dated 13.01.2021 was submitted by the Appellant.
104. On behalf of the 1st Respondent/Petitioner, a reference is made to the information / explanation furnished by the `Appellant'/`1st Respondent' to the Asst. Registrar of Companies, dated 13.01.2021, wherein at Serial No. 18, it is mentioned as under:
Ref No (as Information sought by the RoC Reply/Clarifications of the Company Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 70 of 115 per Notice of Office Inquiry u/s.206(4) 18 It has come to the notice of this As per the MoU, collaboration Office that the Andhra Pradesh agreement the share-holding High Court directed CBI to between Emaar and State conduct inquiry as to ``How Government (represented by its Andhra Pradesh Industrial nodal agency i.e., TSIIC Ltd / APIIC Infrastructure Corporation Ltd) is 74% and 26%. The (APIIC) was cheated out of shareholding pattern is attached equitable benefits from herewith. From the date of inception township project being to till date, the shareholding executed along with its Joint structure remained same. The Venture partner EMAAR inquiry notice and submissions are properties''. Further, attached.
Vigilance Department of Annexure No.1 Andhra Pradesh Government 1. Vigilance Order and Submissions found that entire project was 2. Shareholding certificate transferred by developer 3. Collaboration Agreement EMAAR properties to EMAAR To be more precise, the report MGF with all rights and both issued by Vigilance and the above developments were Enforcement Department has no not brought to the notice of the head and tail and it has not been Government and ARC. Also relied upon before any of the during the course of such judicial forums. In fact, the CBI in inquiry it is found that APIIC its Charge Sheet has concluded that stake in this project was there is only a sum of Rs.96-01 reduced to 46% and profit Crores which pertains to on-money sharing to 5%. A loss of on account of sale of villa plots by Rs.5,000/- Crore was incurred EHTPL. The Charge Sheet further by the exchequer. In this states that such amount of on-money regard, you are directed to has been received by certain provide the details of each individuals/companies not such inquiry and explanations connected to the EHTPL at all. Also, to the discrepancies found there is no whisper about the during such inquiry. Company in the said Charge Sheet with regard to this aspect.
and this `Reply' of the `Appellant' prima facie goes to prove that the `1st Respondent'/`TSIIC' is entitled to the limited reliefs that were granted by the `Tribunal'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 71 of 115
105. It is brought to the notice of this `Tribunal' on behalf of the `1st Respondent / Petitioner' that the `Appellant'/`1st Respondent' without the knowledge and content of the State has assigned the development of the Project in favour of a `Third Party' (EMAAR India Ltd./11th Respondent) on 25.05.2007 and it is a case of `Fraud' and with this action, the `Development Rights of the Project' were passed on to a `Company', in which the `Appellant'/`1st Respondent' alone, is interested in total exclusion of the `1st Respondent/Company'. In short, the actions of the `Appellant'/`Company' are not only against the `Co-Shareholder', but also against the `State' and `Public Exchequer', in addition to, the `Breach of the Terms and Shareholders Agreement'.
106. According to the 1st Respondent/Petitioner, whatever money that could be realized was already realised by the `Appellant', to the exclusion of the `1st Respondent/Petitioner/Company' and `siphoned of' the same' through the 11th Respondent and other Respondents and therefore the `interim reliefs' granted by the `Tribunal' in the `impugned order' are just and equitable to protect the interest of the `Public Exchequer', till the disposal of the Company Petition.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 72 of 115
107. While summing up, on behalf of the `1st Respondent/Petitioner', a plea is made for dismissing the instant two `Appeals', preferred by the `Appellant'.
Company Appeal (AT) (CH) No. 87 of 2022:
Preface:
108. The Appellants/Respondent Nos. 2 and 3 have preferred the instant Comp. App (AT) (CH) No. 87 of 2022, before this `Tribunal' as `Aggrieved Persons', on being dissatisfied with the `impugned order' dated 25.07.2022 in M.A.No.21/2021 in C.P. No.36/2021, passed by the `National Company Law Tribunal', Hyderabad Bench-II, Hyderabad. Appellants' Contentions:
109. The Learned Senior Counsel for the Appellants/Respondent Nos. 2 and 3 submit that the `1st Respondent' is not a member of the `Proforma Respondent No.2', as defined under Section 2 (55) of the Companies Act, 2013. Further, it is the plea of the `Appellants' that only a `Member' can prefer and maintain a `Petition' under Section 241-242 of the Companies Act, 2013.
110. It is projected on the side of the Appellants that the `impugned order' dated 25.07.2022 in M.A.No.21/2021 in C.P. No.36/2021, passed by the `National Company Law Tribunal', Hyderabad Bench-II, Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 73 of 115 Hyderabad, is completely contrary to the legal basic provisions of the Companies Act, 2013. Moreover, according to the `Appellants', the `Minutes of the Meeting' dated 16.06.2016, are of no help / assistance to the `1st Respondent/TSIIC' and that the `Tribunal' had `committed an error', in placing the reliance upon the same.
111. It is represented on behalf of the Appellants that in the absence of the `Original Share Certificates', `no transmission', could be effected to and in favour of the `1st Respondent'/`TSIIC'. As a consequence, the `1st Respondent/TSIIC', could not have filed the Petition before the `Tribunal', as per Section 241 and/or 242 of the Companies Act, 2013.
112. The Learned Counsel for the Appellants/Respondent Nos. 2 and 3 urges this `Tribunal' had passed the `impugned order' in a mechanical way without considering the `impact' of the `relief' granted, which has a cascading effect on the `Appellants' shareholding, in regard to the 2nd Respondent and is beyond the powers of the `Tribunal' in the light of Section 242 of the Companies Act, 2013.
113. The Learned Counsel for the Appellants point out that the mere `Agreement' in writing to become a `Member' of the company does not confer upon such person, the status of the `Member'. In fact, Section 2 (55) (ii) of the Companies Act, 2013, requires the name of such person, Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 74 of 115 who has agreed to become a `Member', to be entered in the `Register of Members' of the `2nd Respondent'.
114. The Learned Counsel for the Appellants contends that the `1st Respondent/TSIIC' is not entered in the `Register of Members' of the `2nd Respondent' and consequently placing reliance upon `Letters', `Minutes of Meeting', `Notice to Shareholders', etc. are of no consequence. Furthermore, even if the `Re-organisation Act' is taken into account, the `Procedure for Transfer of Assets' from `APIIC' to `TSIIC' has not yet concluded. In fact, the `1st Respondent'/`TSIIC' and `APIIC' in the `Affidavit' filed in the earlier Company Petition have unequivocally admitted, among other things, the `Scheme of Merger', between the `two entities' was still pending and the `distribution of the Assets and Liabilities' were not completed. In as much as the `Complete Demerger' was not finalized, the `Rights and/or Claims of `APIIC' could not be perceived by the `1st Respondent/TSIIC'.
115. The plea of the Appellants is that, the `Tribunal' at the stage of `Maintainability', had decided the complicated questions of facts and law, without going through the pleadings and hearings on the various issues.
116. The Learned Counsel for the Appellants submits that the `Tribunal' had granted the interim reliefs without hearing the `Appellants' or the `2nd Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 75 of 115 Respondent', on the merits of the `interim reliefs'. Moreover, the `Tribunal' should not have passed a sweeping order, by granting the relief of compensation to the `1st Respondent'/`TSIIC', at an interim stage.
117. It is the clear cut stand of the Appellants that the `interim reliefs' can only be granted in aid of and as `incidental' / `ancillary' to the `Main' / `Final Relief' that was prayed for in the `Company Petition'. Also that, the impugned order does not contemplate regulating the `Company Affairs' and it does not spell out the reason for passing such a drastic order and on this score, the `impugned order' is a `perverse', `erroneous' and an `illegal' one.
118. The Learned Counsel for the Appellants adverts to the Counter Affidavit of `1st Respondent/TSIIC' dated 05.09.2022, stating that it was wrongly relied upon that;
(a) Section 53(1) of the Andhra Pradesh Re-organisation Act, 2014 (`Reorganisation Act') has to be seen in isolation and has failed to mention and highlight that Section 53(1) must be read in conjunction with Section 53(2) of the Re-organisation Act which clearly provides that the assets and liabilities of any commercial or industrial undertaking of the erstwhile united state of Andhra Pradesh must be apportioned and transferred in physical form on mutual agreement or by making payment or adjustment through any other mode as may be agreed to by the Successor States. Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 76 of 115
119. Further, according to the Appellants, the `1st Respondent/TSIIC' had wrongly assumed that under a `Petition' filed under Sections 241-242 of the Companies Act, 2013, could be adjudicated on the premise of the Reorganisation Act, and in strict derogation of the Companies Act, 2013, thereto. Apart from that, it is the stand of the Appellants that `any interpretation', sought to be relied upon by the `1st Respondent/TSIIC' on the Reorganisation Act, is nullified by its own statement that the `Demerger', remained incomplete.
120. According to the Appellants, in terms of Section 68 of the Andhra Pradesh Reorganisation Act, 2014, the `Assets', `Rights' and `Liabilities' of the Companies, forming a part of IX Schedule are required to be `apportioned' between the `Successor States', in the manner indicated in Section 53 of the Reorganisation Act, wherein `APIIC' is found at Item No. 17.
121. The Learned Counsel for the Appellants strenuously contends that the 1st Respondent/TSIIC's Counter Affidavit at paragraph 14, reads to the effect;
``14 ......The Appellant has harped on incompletion of the transmission of the shares and incompletion of the demerger process while as per fact and law there is neither transmission of shares or transfer of shares nor the demerger process was incomplete.....'' Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 77 of 115 and comes out with an argument that once such a contention is admitted by the `1st Respondent/TSIIC', there is no aspect of `1st Respondent/TSIIC', looking to press the `Petition' under Section 241-242 of the Companies Act, 2013.
122. It is projected on the side of the Appellants that since the `APIIC' had confirmed through `Letter' dated 02.09.2022 that it is the `Holder' of `26% Shares' in the `2nd Respondent', it is clear that the provisions of the Andhra Pradesh Reorganization Act were not satisfied. Furthermore, the stand of the `1st Respondent/TSIIC', is that the `Owner of Shares' of the 2nd Respondent, which were held by `APIIC', by virtue of `Law', is a `Fallacy'.
123. On behalf of the Appellants, a contention is raised that when a `Statute' specifically mentions that something has to be done in a particular / certain manner, then it ought to be construed strictly and to be performed in that manner only. Apart from that, the two different entities cannot be simultaneously be the `Shareholders' of the same lot of `Shares'.
124. The Learned Counsel for the Appellants refers to the `1st Respondent/TSIIC's Letter dated 11.04.2016, being an admission to the fact that the change in the `Register of Members' of the `2nd Respondent' Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 78 of 115 would be effected only upon the completion of `Demerger', which is admittedly pending as on date. Therefore, it is the stand of the `Appellants' that `APIIC' continues to be on the `Register of Members of the `2nd Respondent' and not `TSIIC', which is affirmed by `APIIC's Letter dated 02.09.2022. Besides these, on behalf of the `Appellants', it is pointed out before this `Tribunal' that the 2nd Respondent's Letter dated 19.01.2014, clearly mentions that the `Process of Transmission of Shares' was not completed, as the Original Share Certificates, are required to be surrendered to the 2nd Respondent, `which is confirmed by `APIIC's Letter dated 02.09.2022 that the `Shares' are in `APIIC's physical possession'.
125. The Learned Counsel for the Appellants come out with a plea that the `List of Shareholders' mentioned in the 2nd Respondent's Annual Returns as on 31.03.2019, clearly reflect that `APIIC' is the `Shareholder' of the `2nd Respondent/Company' and it merely reflects the name of `1st Respondent/TSIIC' within brackets (because of the fact that there is a pending `Demerger' ONLY post which the `1st Respondent/TSIIC', would become the `Shareholder' of the `2nd Respondent/Company'. In short, according to the Appellants, the Annual Returns of the 2nd Respondent/Company in no manner reflects the 1st Respondent/TSIIC as the `Shareholder' of the `2nd Respondent/Company'. Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 79 of 115
126. The Learned Counsel for the Appellants takes a stand that the `Excerpts' of the 2nd Respondent's Balance Sheet clearly mentions that `however, the `Share Certificates' have not been transferred in the name of `TSIIC'.
127. The Learned Counsel for the Appellants contends that the whole case projected by the `1st Respondent/TSIIC' is just a `Red Herring' in as much as the address of the Notices issued convening the `2nd Respondent Board Meetings', were sent to `TSIIC's Offices, but fails to highlight and mention that the `Notices' were being in fact addressed to Narasimha Reddy, who is currently sitting in `1st Respondent/TSIIC's Offices. In reality, that Mr. Reddy was nominated as a `Director' through Letter 20.08.2014 by `APIIC' and continues to be representative of `APIIC' on the `Board' of the `2nd Respondent/Company'. Further, it is mentioned that a Letter dated 20.08.2014 is still in force and subsisting and was not revoked by the `APIIC', till date.
128. The Learned Counsel for the Appellants submit that the `1st Respondent/TSIIC and `APIIC' are separate juristic entities, wherein the `1st Respondent/TSIIC' was freshly incorporated after the bifurcation of the State and hence, is subject to the strict interpretation / rigours of the `Reorganisation Act'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 80 of 115
129. The Learned Counsel for the Appellants points out that the reliance placed by the 1st Respondent/TSIIC in respect of the decision of the Hon'ble Supreme Court in Unitech Ltd. v. TSIIC is a misplaced one, because of the fact that the Hon'ble Supreme Court in that case had refused to delve into adjudicating finally upon the rights inter se between the TSIIC and the `APIIC' and also categorically mentioned that `TSIIC will be at liberty to pursue its remedies for apportionment in relation to `APIIC' in accordance with `Law'. No opinion is expressed on the merits or tenability of the `Claim' for `apportionment', asserted by `TSIIC'.
130. Proceeding further, the Learned Counsel for the Appellants submits that in Unitech Limited case, the issue was pertaining to the `Assessment of Stamp Duty & Registration Charges', liable to be paid upon a `Development Agreement' and that is not the issue in the instant case on hand.
131. The Learned Counsel for the Appellants contends that the `Tribunal' had heard all the `Parties' in respect of the maintainability of the Company Petition and the `Appellants' had not made any submissions on the merits of the `Dispute' or in relation to the `interim reliefs' sought in MA/21/2021 by the `1st Respondent/TSIIC'. Also that, the `Tribunal' had not dealt with the `Notes of Submissions' filed by the `Appellants', Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 81 of 115 coupled with the `Citations' relied on by the `Parties' and in fact, the `impugned order' is a drastic one, virtually amounting to the grant of final relief.
132. The Learned Counsel for the Appellants also relied upon the `Citations'/`Decisions', projected by the Learned Counsels for the Appellant in Comp. App (AT) (CH) No. 84 of 2022 and hence they are not repeated (other than the one mentioned in this Judgment).
133. The Learned Counsel for the Appellants urges that as per `Order' of the Hon'ble High Court of Andhra Pradesh dated 23.12.2010 in W.P.M.P. 41023 of 2010 in WP No. 32285 of 2010, the `Dispute' ought to be referred to the `Conciliation Board', constituted under the Andhra Pradesh Enabling Act and further that, the present `Disputes' arise out of the `Memorandum of Agreement,', `Collaboration Agreement' and the `Supplementary Agreement', which fall within the ambit of `Dispute' under the `Andhra Pradesh Enabling Act'.
134. The Learned Counsel for the Appellants brings it to the notice of this `Tribunal' that the `1st Respondent/TSIIC' has not adduced / placed any `Evidence' on record, any material to show that it has suffered any loss, leave alone monetary loss and as such, the impugned order, is liable to be set aside, in the interests of the justice.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 82 of 115
135. The Learned Counsel for the Appellants prays for setting aside of the `impugned order' and to allow the `Appeal', to secure the `ends of justice'.
Appellants' Decisions (in Comp. App (AT) (CH) No. 87 of 2022):
136. The Learned Counsel for the Appellants seek in aid of the decision of the Hon'ble Supreme Court of India in Balkishan Gupta & Ors. v. Swadeshi Polytex Ltd. & Anr. (1985) 2 SCC at Page 167; Spl Pgs: 182 and 183 (paragraphs 12, 13 and 14) and contends that the `Statutory' requirement to be a `Member' to maintain a `Petition' under Section 241- 242 of the Companies Act, 2013, is to be construed strictly. Furthermore, the `Tribunal' is bound by the strict requirements of the Companies Act, 2013.
137. To lend support to the plea that the `Statutory' requirement to be a `Member', to maintain a `Petition', as per Section 241-242 of the Companies Act, 2013, is to be construed strictly, the Learned Counsel for the `Appellants' cite the decision of the Hon'ble Supreme Court in J.P. Srivastava & Sons v. Gwalior Sugar Company Limited (2005) 1 SCC at Pages 172 at Spl Pg.: 173, wherein at paragraphs 19 and 48, it is observed as under:
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 83 of 115 ``Any member/members of a Company may apply under Sections 397 and 398 of the Act to CLB complaining of mismanagement or oppression provided such member or members have the requisite shareholding as prescribed under Section 399 to do so. The object of prescribing a qualifying percentage of shares in petitioners and their supporters to file petitions under Sections 397 and 398 is clearly to ensure that frivolous litigation is not indulged in by persons who have no real stake in the company. However it is of interest that the English Companies Act contains no such limitation. What is required in these matters is a broad common-
sense approach. If the Court is satisfied that the petitioners represent a body of shareholders holding the requisite percentage, it can assume that the involvement of the company in litigation is not lightly done and that it should pass orders to bring to an end the matters complained of and not reject the Petition on a technical requirement. Substance must take precedence over form. Of course, there are some rules which are vital and go to the root of the matter which cannot be broken. There are others which are directory where non-compliance may be condoned or dispensed with provided there is substantial compliance with the rules read as a whole and no prejudice is caused.
(Paras 19 and 48)
138. Added further, the Learned Counsel for the Appellants refer to the Judgment of this `Tribunal' in Capt. Valdamannati Jaya Pushpakumar vs. Madras Race Club (CA (AT) (CH) No. 17/2022) at paragraph 65, wherein, it is observed as under:
65. ``There is no two opinion of a primordial fact that a person whose name is not on the `Register of Members' is not entitled to prefer a `Petition' before a `Tribunal'. It is for the concerned person to establish that he is a `Member' of a Company' on the date of filing of a Petition/Application under the Companies Act, 2013. When a person is not a `Member of the Company' he cannot Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 84 of 115 even come out with an allegation of `Oppression' to invoke the ingredients of relevant Provisions of the Companies Act, 2013, as the case may be.'' Member:
139. Section 2 (55) of the Companies Act, 2013, defines `Member', in relation to a company, meaning;
``(i) the subscriber to the memorandum of the company who shall be deemed to have agreed to become member of the company, and on its registration, shall be entered as member in its register of members;
(ii) every other person who agrees in writing to become a member of the company and whose name is entered in the register of members of the company;
(iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository;'' Shareholder:
140. The word `Shareholder', is undefined in the `Companies Act'. In the words of Salmond, `Ownership' denotes the relation between a `Person' and `Right' that is vested in him. It cannot be forgotten that a `Member' is a `Shareholder' and a `Shareholder', is a `Member'. The `Rights' of a `Member', may vary Viz. `Statutory Rights', `Rights conferred under Memorandum of Articles of a Company' and `Rights conferred in terms of General Law'.
141. It is pointed out that the words `Shall be deemed to have agreed to become `Member', mean that by signing the `Memorandum', the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 85 of 115 `Subscribers', shall be treated to have become the `Members of the Company', as per decision Re, Union Bank, Allahabad, reported in AIR 1925 All.
142. As per Section 41 of the Companies Act, any `Person' can become a `Member' of a `Company'. No wonder, a `Person', may become a `Member' in relation to a Company (a) by subscribing his name to the `Memorandum of Association' (b) by having agreed to become a `Member' of the Company (c) by holding `Shares', as a `Beneficial Owner' in the records of the `Depository'.
Beneficial Owner:
143. To be noted that Section 2 (a) of the Depositories Act, 1996, defines the term `Beneficial Owner'. As per Section 10 of the `Depositories Act, 1996, a `Depository', shall be deemed to be the `Registered Owner of Shares' for the purpose of effecting `Transfer of Ownership of Shares', on behalf of `Beneficial Owner'. Person:
144. The term `Person' is defined in Section 3 (42) of the General Clauses Act, 1897, as `Person', shall include `any company' or `association' or `body' of `individual', whether `incorporated or not'. Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 86 of 115 Transfer and Transmission of Securities (u/n 56 of the Companies, Act, 2013:
145. In respect of `Transfer of Securities', there are two parties to the `Contract', i.e., (a) Transferor and (b) Transferee. Such transfer is like any other `commercial transaction'. However, in case of `Transmission of Shares', there is no `Transferor' or `Transferee', as `Shares' vests in favour of a `Person', by an `Operation of Law', like that of an `inheritance' of `property'. When an `individual' becomes the `owner' of `shares' as result of `Court Auction', the procedure, as provided in Section 56 and 59 of the Companies Act, 2013 (earlier Sections 108 to 111 of the Companies Act, 1956) will not apply. Furthermore, the `Procedure' is inapplicable to the `Transmission of Shares', by an `Order' of `Company Court'.
146. In reality, the wording of Section 56(2) of the Companies Act, 2013 (2nd Proviso to Section 108 (1) of the 1956 Companies Act), clearly mentions about the requirements that nothing in this Section shall prejudice any power of the Company, to `register' as a `shareholder' or `debenture holder', any `person' to whom the `right' to `any shares' in or `debentures' of the Company has been transmitted by `operation of law'.
147. To put it succinctly, as in case of `Transmission of Shares', `Transfer of Securities' takes place, by an `operation of law', there is no Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 87 of 115 further requirement, to be carried out, like executing an `instrument of Transfer' and `Company Law Register', the `Securities' on receipt of intimation of `Transmission', in favour of a `Person', to whom the `Shares' are `transmitted'. Moreover, when `Title' to the `Shares', come to `Vest' in another `Person', by an `Operation of Law', it is not essential to submit `Transfer Form'.
Registrar's Power:
148. Section 206 of the Companies Act, 2013, relates to the power of the `Registrar of Companies', to call for `information', `inspect books' and `conduct inquiries'. This Section will apply, if the `Registrar' on receipt of information is satisfied that a `business of a company' is being carried on for a `fraudulent' or an `unlawful purpose' or not `in compliance' with the provisions of this `Act' or the `Grievances' of the `Investors', are not being addressed.
149. A mere running of the eye of the contents of Section 206 (4) of the Companies Act, 2013, indicates that the Central Government may direct the `Registrar' or an `Inspector', appointed by it, to `conduct an inquiry' under this sub-section, if it is satisfied that the `Affairs of the Company' are being carried on in a `Fradulent' or `Unlawful Purpose' or not in accordance with the `Act'. The Central Government's Power is `Inquisitorial' and `Regulatory' in character. The `Investigation', is not a `Criminal Proceeding'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 88 of 115
150. As a matter of fact, the `Expression' Being Carried On, refers to the `Continuance of Business Activities', at the stage of `Information' is reported to the `Registrar'.
151. It is pertinently pointed out while carrying out an `Inquiry', the `Registrar' is to `adhere' to the `principles of natural justice' and provide the Company a reasonable `opportunity of Hearing'. Tribunal's Power:
152. Section 241 of the Companies Act, 2013, confers wide `Powers' to the `Tribunal', to grant `relief' in case of an `Oppression', etc., and to mould the `Relief', as it deems fit and proper, based on the facts and circumstances of a given case. No wonder, the `jurisdiction' of a `Tribunal' is not ousted / ejected out, till the `Dispute' is required to be referred to an `Arbitration'/`Conciliation', as the case may be (the `Tribunal', can grant `interim relief' or otherwise). Evaluation (in Comp. App (AT) (CH) Nos. 84 & 87 of 2022):
153. According to the Appellants' (in Two `Appeals'), the `Tribunal', had failed to note that the main CP/36/2021, filed by the `1st Respondent'/`TSIIC'/`Petitioner' is not maintainable, because of the fact that the name of `1st Respondent'/`TSIIC'/`Petitioner' is not recorded in the Appellants' `Register of Members' in Comp. APP (AT) (CH) No. 84 Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 89 of 115 of 2022 and therefore is not entitled to prefer a `Petition' under Section 241-242 of the Companies Act, 2013 and that the `Tribunal' had incorrectly held that the `main CP/36/2021 is maintainable'.
154. Per contra, it is the submission of the `1st Respondent'/`TSIIC'/`Petitioner' side that the `1st Respondent'/`TSIIC'/`Petitioner's Vice Chairman & the Managing Director had addressed a `Letter' dated 11.04.2016, to the `Appellant'/`Emaar Hills Township Pvt. Ltd.' (1st Respondent) had stated that a new `State of Telangana' was formed with effect from 02.06.2014, in terms of the Andhra Pradesh Reorganisation Act, 2014, and that a separate `Telangana Industrial Infrastructure Corporation' (`TSIIC') was formed `Demerging' the same from `Andhra Pradesh Industrial Infrastructure Ltd. and that the `1st Respondent'/`TSIIC'/`Petitioner', was incorporated on 04.09.2014 and that the `1st Respondent'/`TSIIC'/`Petitioner' is operating independently.
155. According to the `1st Respondent'/`TSIIC'/`Petitioner' in the `Letter dated 11.04.2016' of the `1st Respondent'/`TSIIC'/`Petitioner', the `Appellant' / `Emaar Hills Township Pvt. Ltd.' was informed that, as per `Demerger', the `Appellant'/ `Emaar Hills Township Pvt. Ltd.' (the Joint Venture Company) is the `Joint Venture' of the `1st Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 90 of 115 Respondent'/`TSIIC'/`Petitioner' and in this regard, necessary action was requested to be initiated and changes be carried out in the records and the `Equity' be changed in the name of `1st Respondent'/`TSIIC'/`Petitioner'
156. The prime plea of the `1st Respondent' /` TSIIC' / `Petitioner' is that the `Appellant' had recognized the `1st Respondent'/`TSIIC'/`Petitioner'/`Company' has its `Shareholder' and sent notices of the `Board Meetings' and the `Members Meeting' to the `Respondent' Company. Also that, on behalf of the `1st Respondent'/`TSIIC'/`Petitioner', a stand is taken that by an `Operation of Law', the `1st Respondent'/`TSIIC'/`Petitioner' has become the `Shareholder' of the `Appellant'/ `Emaar Hills Township Pvt. Ltd.', without any further act and deed.
157. The clear cut stand of the `1st Respondent'/`TSIIC'/`Petitioner' is that Section 53 of the Andhra Pradesh Reorganisation Act, 2014, provides that the `Assets' and `Liabilities' of any `Commercial' or `Industrial' Undertaking of the State, are required to be `apportioned', based on location, operation of such Commercial and Industrial Undertaking and such distribution was not dependant, based on the location of the Head Quarters of such Industrial or Commercial Undertaking. Besides this, the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 91 of 115 consequent `Transfer of Shares' from `APIIC' to `TSIIC' will be by way of an `Operation of Law'.
158. Continuing further, the stand of the `1st Respondent'/`TSIIC'/`Petitioner' is that the word `Transmission', means, passing of or devolution by an `Operation of Law', whereas the term `Transfer' means, conveyance by an act of a `Member' Viz. a `voluntary act' of `Parties' and in case of `Transmission of Shares by an Operation of Law', an `Instrument' of `Transfer' is not required.
159. On behalf of the `1st Respondent'/`TSIIC'/`Petitioner', it is brought to the notice of this `Tribunal' that the `Minutes of the Meeting of the Board of Directors of the Appellant / Company that took place on 16.06.2016, during which, the Managing Director of the `1st Respondent'/`TSIIC'/`Petitioner' was present, based on the invitation of the `Appellant'/`Company'. Also that, the Accounts of the Company for the year ended 31.03.2019 had clearly mentioned that the `1st Respondent'/`TSIIC'/`Petitioner' took over the activities of `APIIC' in so far as it relates to the `State of Telangana' and is the `Beneficial Owner' of the `Shares'.
160. It is represented on behalf of the `1st Respondent'/`TSIIC'/`Petitioner' that the `List of Shareholders' as on Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 92 of 115 31.03.2019, forming part of the Annual Return of the Appellant/Company (filed by the `Appellant' - Page 1676 of the main Company Petition), shows that the `1st Respondent'/`TSIIC'/`Petitioner' as a `Shareholder' of the `Appellant'/`Company' holding 2,50,32,202 Shares and therefore, the contention of the `1st Respondent'/`TSIIC'/`Petitioner' is that the `Appellant' itself had recognised the `1st Respondent'/`TSIIC'/`Petitioner' as a `Shareholder' of the `Appellant'/`Company' and to this effect also, the `Tribunal' had observed in its `impugned order'.
161. It is to be pointed out that Section 244 of the Companies Act, 2013, prescribes the `Qualification of Members', who shall have a `Right to Apply', as per Section 241 of the Act, 2013, in respect of a `Petition' for an `Oppression' or `Mismanagement'.
162. An `Ex-facie' evidence pertaining to the `Shares', can be (a) the Share Certificate or (b) Even the `Register of Members'. However, in the absence of a `Share Certificate' or an `Entry' in the `Register of Members', also if an `Individual' can prove that certain / particular Shares were allotted to him, for the purpose of this provision, is to be treated as a `Member' of a Company.
163. Besides the above, a `Shareholder' can establish the `Allotment of Shares', through `Statutory Returns' and the documents maintained by the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 93 of 115 Company. Strictly speaking, in a given case, if it is exhibited that although the concerned `Persons' name is not contained / shown in the `Register of Members', but it / he, had been treated as a `Member', by the Company, the `Tribunal', is to exercise, its `Unfettered Equity Jurisdiction' and cannot avoid the `Petition', by falling back upon the `Technicalities', in the considered opinion of this `Tribunal'.
164. It is not out of place for this `Tribunal' to pertinently refer to the decision of the Hon'ble Supreme Court in Bal Krishan Gupta & Ors. v. Swadeshi Polytex Limited & Anr., 1985 (2) SCC at Page 167; Spl. Pgs. 185 & 186, wherein at paragraph 17, it is observed as under:
17. ``In the Act, the expressions 'a member', 'a share holder' or 'holder of a share' are used as synonyms to indicate the person who is recognised by a company as its owner for its purposes. What does ownership of a share connote? `'Ownership in it most comprehensive signification; says Salmond, `'denotes the relation between a person and any right that is vested in him. That which a man owns in this sense is a right''. The right of ownership comprises benefits like claims, liberties, powers, immunities and privileges and burdens like duties, liabilities, disabilities. Whatever advantages a man may have as a result of the ownership of a right may be curtailed by the disadvantages, in the form of burdens attached to it. As observed by Dias, an owner may be divested of his claims etc. arising from the right owned to such an extent that he may be left with no immediate practical benefit. He remains the owner nonetheless because his interest will outlast that of other persons in the thing owned. The owner possesses that right which ultimately enables him to enjoy all rights in the thing owned by attracting towards himself those rights in the thing owned which for the time being belong to others, by getting rid of the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 94 of 115 corresponding burdens. An owner of a land may get rid of the interest of a mortgagee in it by redeeming the mortgage, may get physical possession of land by terminating a lease and may get rid of an attachment by discharging the debt for which it is attached. A Receiver appointed by a court or authority in respect of a property holds it for the benefit of the true owner subject to the orders that may be made by such court or authority. The different kinds of rights of ownership flowing from the ownership of a right depend upon the nature of the right owned. A person who is a shareholder of a company has many rights under the Act. Some of them, with which we are concerned in this appeal principally, are (i) the right to vote at all meetings (Section 87), (i;) the right to requisition an extraordinary general meeting of the company or to be a joint requisitionist (Section 169), (iii) the right to receive notice of a general meeting (Section 172), (iv) the right to appoint proxy and inspect proxy registers (Section 176), (v) in the case of a body corporate which is a member, the right to appoint a representative to attend a general meeting on its behalf (Section 187) and (vi) the right to require the company to circulate his resolutions (Section
188). The question for consideration is: when does a shareholder cease to be entitled to exercise any of these rights?''
165. Also, in the aforesaid decision in Bal Krishan Gupta v. Swadeshi Polytex Limited & Anr., 1985 (2) SCC at Spl. Pgs. 187 to 190, wherein at paragraphs 19 to 25, it is observed as under:
19. ``Section 149 of the Land Revenue Act which provides for the attachment and sale of movable property belonging to a defaulter reads thus:
149. Attachment and sale of movable property_ T`he Collector may, whether the defaulter has been arrested or not, attach and sell his movable property.
Every attachment and sale ordered under this section shall be made, according to the law in force for the time being for the attachment and sale of movable property under the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 95 of 115 decree of a Civil Court. In addition to the particulars mentioned in clauses (a) to (o) of the proviso to Section 60 of the Code of Civil Procedure, 1908 (Act V of 1908), articles set aside exclusively for the use of religious endowments shall be exempted from attachment and sale under this section. The costs of the attachment and sale shall be added to the arrear of revenue, and shall be recoverable by the same procedure.
20. We shall first consider the effect of appointment of a Receiver in respect of the shares in question. A perusal of the provisions of Section 182-A of the Land Revenue Act shows that there is no provision in it which states that on the appointment of a person as a Receiver the property in respect of which he is so appointed vests in him similar to the provision in section 17 of the Presidency Towns Insolvency Act, 1909 where on the making of an order of adjudication the property of the insolvent wherever situate would vest in the official assignee, or in section 28 (2) of the Provincial Insolvency Act, 1920 which states that on the making of an order of adjudication, the whole of the property of the insolvent would vest in the court or in the Official Receiver. Sub-section (4) of section 182-A of the Land Revenue Act provides that Rules 2 to 4 of Order XL of the Code of Civil Procedure, 1908 shall apply in relation to a Receiver appointed under that section. A Receiver appointed under Order XL of the Code of Civil Procedure only holds the property committed to his control under the order of the court but the property does not vest in him. The privileges of a member can be exercised by only that person whose name is entered in the Register of Members. A Receiver whose name is not entered in the Register of Members cannot exercise any of those rights unless in a proceeding to which the company concerned is a party and an order is made therein. In Mahathalone v. Bombay Life Assurance Co. Ltd. (1954 SCR 117) it has been laid down clearly that a Receiver appointed by a court in respect of certain shares which had not been duly entered in the Register of Members of the company concerned as belonging to him could not acquire certain Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 96 of 115 newly issued shares which could be obtained by the members of the company. This Court observed at page 143 thus:
Mr. Pathak argued that the plaintiff was entitled to reliefs A and B, both in his suit as well as in the Receiver's suit and that the Receiver's suit was wrongly dismissed by the High Court. We are unable to agree. In our opinion, the High Court rightly held that the Receiver appointed in the suit of Sir Padampat could not acquire the newly issued shares in his name. That privilege was conferred by Section 105-C only on a person whose name was on the Register of Members. The Receiver's name admittedly was not in the register and the company was not bound to entertain that application. Mr. Pathak argued that may be so but the Receiver was not making an application in his individual right but he had been armed by the court with power to apply in the right of the defendant Reddy. The fact however is that the Receiver made the application in his own name. Even if Mr. Pathak's contention is right the company was no party to the suit filed by Sir Padampat against Reddy and that being so, no order could be issued to the company in that suit to recognize the Receiver as a shareholder in place of Reddy.
21. Even where the holder of a share whose name is entered in the Register of Members hands over his shares with blank transfer forms duly signed, the transferee would not be able to claim the rights of a member as against the company concerned until his name is entered in the Register of Members. This Court in Messrs Howrah Trading Co. Ltd. v. C.I.T. (1959) Supp. 2 SCR 448, has observed at pages 453-454 thus:
The position of a shareholder who gets dividend when his name stands in the Register of Members of the company causes no difficulty whatever. But transfers of shares are common, and they take place either by a fully executed document such as was contemplated by Regulation 18 of Table A of the Indian Companies Act, 1913, or by what are Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 97 of 115 known as 'blank transfers'. In such blank transfers, the name of the transferor is entered, and the transfer deed signed by the transferor is handed over with the share scrip to the transferee, who, if he so chooses, completes the transfer by entering his name and then applying to the company to register his name in place of the previous holder of the share. The company recognises no person except one whose name is on the Register of Members, upon whom alone calls for unpaid capital can be made and to whom only the dividend declared by the company is legally payable. Of course, between the transferor and the transferee, certain equities arise even on the execution and handing over of 'a blank transfer', and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee. These equities, however, do not touch the company, and no claim by the transferee whose name is not in the Register of Members can be made against the company, if the transferor retains the money in his own hands and fails to pay it to him.
A Glance at the scheme of the Indian Companies Act, 1913, shows that the words "member", "shareholder" and "holder of a share" have been used interchangeably in that Act. Indeed, the opinion of most of the writers on the subject is also the same. Buckley on the Companies Act, 12th Edition, Page 803 has pointed out that the right of a transferee is only to call upon the company to register his name and no more. No rights arise till such registration takes place.
22. In this case this Court followed the dictum of Chitty, J. In re:
Wala Wynaad Indian Gold Mining Company (1882) 21 ChHD 849, which emphasised that the entry of the name of person in the Register of Members was an essential condition for exercising voting rights at the meeting of the company concerned. In Buckley on the Companies Act (14th Edn.), Vol. I, page 972 it is stated thus:
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 98 of 115 Company cannot enquire into beneficial ownership._ As between the shareholder and the company, the person entitled to exercise the right of voting is the person legally entitled to the shares, the member whose name is on the register.
23. In Kurapati Venkata Mallayya v. Thondepu Ramaswami & Co. (1963) Supp 2 SCR 995, this Court had occasion to consider the validity of a suit instituted by a Receiver to collect debts due to a party to a suit in his own name. The Count upheld the right of the Receiver to maintain the suit observing that a Receiver invested with full powers to administer the property which is custodia legis or who is expressly authorised by the court to institute a suit for collection of debts was entitled to institute a suit in his own name provided he did so in his capacity as a Receiver. But in the course of the said decision this Court approved the decision of the Calcutta High Court in Jagat Tarini Dasi v. Naba Gopal Chaki (ILR 1907) 34 Cal. 305, in which it had been stated:
On the whole, we are disposed to take the view that, although a Receiver is not the assignee or beneficial owner of the property entrusted to his care, it is an incomplete and inaccurate statement of his relations to the property to say that he is merely its custodian.
(emphasis supplied) Thus whatever may be the other powers of a Receiver dealing with the property which is in custodia legis while in his custody, he is not to be construed as either an assignee or beneficial owner of such property.
24. In Wise v. Lansdell (1921) 1 Ch 420, it was held that in the case of a bankrupt whose name was still on the Register of Members of a company as between himself and the company, the bankrupt, so long as his name remained on the register was entitled to vote in respect of the shares, though as between himself and the mortgagees he could vote only as they dictated. But the right to Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 99 of 115 vote was held to be unimpaired as long as his name appeared on the register.
25. In a later case, Morgan v. Gray (1953) 1 Ch 83, 87, after referring to the decision in Wise v. Lansdell (1921) 1 Ch 420, Danckwerts J. observed:
It seems to me that, unless there is some provision in the company's articles or in the Companies Act which empowers me to say that the bankrupt is no longer a member of the company, and is, therefore, unable to vote, expressly. I must come to the conclusion that the bankrupt still remains a member as long as he is on the register; notwithstanding that by taking appropriate steps under the appropriate provisions the trustee in bankruptcy may be able to secure registration of himself as the proprietor of the shares. Unless and until that is done, and as long as the bankrupt remains on the register of the company, he remains a member in respect of those shares and is entitled, as it seems to me, to exercise the votes which are attributable to that status, notwithstanding that he has no longer any beneficial interest in the shares and that the company is entitled to pay any dividends to his trustee in bankruptcy.''
166. More importantly, if an Individual's name is not on the `Register of Members' of a Company, but who proves his `Shareholding' in a `Company', by other evidence, the `Tribunal' (National Company Law Tribunal), in `Law', is to permit a `Person' to pursue / prosecute the `Petition', so filed, in accordance with Law and in the manner known to Law. Viewed in this back drop, the `Petition' filed by a `Person' cannot be thrown out or rejected out at the initial stage, as opined by this `Tribunal'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 100 of 115
167. Coming to the aspect of Section 53 of the Andhra Pradesh Reorganisation Act, 2014, it enjoins as under:
(i) ``The assets and liabilities relating to any commercial or industrial undertaking of the existing State of Andhra Pradesh, where such undertaking or part thereof is exclusively located in, or its operations are confined to, a local area, shall pass to the State in which that area is included on the appointed day, irrespective of the location of its headquarters:
Provided that where the operation of such undertaking becomes inter-State by virtue of the provisions of Part II, the assets and liabilities of--
(a) the operational units of the undertaking shall be apportioned between the two successor States on location basis; and
(b) the headquarters of such undertaking shall be apportioned between the two successor States on the basis of population ratio.
(2) Upon apportionment of the assets and liabilities, such assets and liabilities shall be transferred in physical form on mutual agreement or by making payment or adjustment through any other mode as may be agreed to by the successor States.''
168. Notwithstanding the fact, an emphatic contention is advanced on the side of the `Appellants' in both `Appeals' that there is no `iota of evidence' to exhibit in the instant case, that the Assets and Liabilities of `APIIC' were `apportioned' physically to the `1st Respondent'/`TSIIC'/`Petitioner', yet this `Tribunal', is of the considered view that in terms of the ingredients of Section 53 of the Andhra Pradesh Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 101 of 115 Reorganisation Act, 2014, `every Government Asset Viz. located in the `State of Telangana' shall by an `Operation of Law' will become the `Assets' of the `State of Telangana'.
169. Besides the above, this `Tribunal', makes a pertinent and useful reference to the ingredients of Section 68 of the AP Reorganisation Act, 2014, which proceeds as under:
(1) ``The companies and corporations specified in the Ninth Schedule constituted for the existing State of Andhra Pradesh shall, on and from the appointed day, continue to function in those areas in respect of which they were functioning immediately before that day, subject to the provisions of this section.
(2) The assets, rights and liabilities of the companies and corporations referred to in sub-section (1) shall be apportioned between the successor States in the manner provided in section
53.''
170. To put it succinctly, the `Ninth Schedule' of Section 68 of the Andhra Pradesh Reorganisation Act, 2014, at Serial No. 17, there is a mention of `Andhra Pradesh Industrial Infrastructure Corporation Limited', as one of the `entities', owned by the `Former State of Andhra Pradesh'.
171. In the present case, the `Minutes of the Meeting' of the Board of Directors of the `Appellant'/`Company' that took place on 16.06.2016, in which, the Managing Director of the `1st Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 102 of 115 Respondent'/`TSIIC'/`Petitioner', based on the invitation of the `Appellant'/`Company'.
172. It cannot be brushed aside, that the `List of Shareholders' as on 31.03.2019, forming part of the `Appellant'/`Company' focuses the `1st Respondent'/`TSIIC'/`Petitioner', as a `Shareholder' of the `Appellant'/`Company' holding 2,50,32,202 Shares. Even the note, appended to the `Accounts of the Company' for the year ended 31.03.2019, clearly mentions that the `1st Respondent'/`TSIIC'/`Petitioner' took over the activities of `APIIC', relating to the State of Telangana. These would clinchingly, unerringly and without any simmering doubt, establish that the `1st Respondent'/`TSIIC'/`Petitioner' was recognised as the `Shareholder' of the `Appellant' / `Emaar Hills Township Pvt. Ltd.' / `Company'.
173. Suffice it for this `Tribunal' to make a pertinent observation that in the instant case, the conduct of the `Appellant' / `Emaar Hills Township Pvt. Ltd.' with reference to the letters and correspondences exchanged with the `1st Respondent'/`TSIIC'/`Petitioner', clearly exhibit that the `1st Respondent'/`TSIIC'/`Petitioner', was treated by the `Appellant'/`Company and given the recognition and treatment as the Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 103 of 115 Incoming / Successor company of `APIIC', with full rights over its properties (including the Shares).
174. In regard to the reliance being placed upon the Letter dated 02.09.2022 of `APIIC', addressed to the Vice Chairman & Managing Director of the `1st Respondent'/`TSIIC'/`Petitioner', to lend support to the contention of the `Appellants' that the `physical apportionment' in question, had not taken place, and further that the `APIIC' continues to be 26% `Shareholder' of the `Appellant' / `Emaar Hills Township Pvt. Ltd.', this `Tribunal', is of the considered opinion that the said letter will not heighten the stand of the `Appellants' any further, because of the fact that this `Tribunal', has opined that the `1st Respondent'/`TSIIC'/`Petitioner' has every `Locus', to file a `CP/36/2021', under Section 241-242 of the Companies Act, 2013, before the `Tribunal' (`National Company Law Tribunal', Hyderabad), and the same is `per se' `entertainable' / `maintainable', for an `Inquiry', in the `eye of Law'.
175. As regards the submission of the `Appellant' side that on earlier occasion, the `Petition', filed by the `APIIC' on the ground of `Oppression and Mismanagement' and the same being `withdrawn', owing to the `Non-completion of Demerger', this `Tribunal, is of the cock Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 104 of 115 sure opinion that the `withdrawal' of earlier `Company Petition', is neither a `Bar' nor there being a `Resjudicata Principle', being applied to the instant CP/36/2021, filed by the `1st Respondent'/`TSIIC'/`Petitioner', before the `Tribunal'.
176. In regard to the plea taken on behalf of the `Appellants' (in Comp. App (AT) (CH) No. 87 of 2022) that instant `Disputes' arise out of the `Memorandum of Understanding' dated 06.11.2002, `Collaboration Agreement' dated 19.08.2003 and the `Supplementary Agreement' dated 19.04.2005, and therefore, the matter, is to be referred to the `Conciliation Board', under Section 41 of `Andhra Pradesh Infrastructure Development Enabling Act, 2001' and that the `Tribunal' has no jurisdiction to entertain the Company Petition, it is for the `Tribunal' (`National Company Law Tribunal', Hyderabad) in main CP/36/2021, pending on its file, to examine / look in to the aspect in thread bare, as to whether the `Dispute' in the main `Company Petition', is to be referred to the `Conciliation Board' or otherwise, as per the Andhra Pradesh Enabling Act, 2001, in the teeth of the `impugned order' dated 25.07.2022 of the `Tribunal' in MA/21/2021 in CP/36/2021, which is conspicuously absent in this regard and it is open to the respective `Parties' to agitate over the same, both on `Factual' and on `Legal Plane'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 105 of 115
177. In so far as the plea of the `Appellants' that the `Tribunal' had not provided an `opportunity' to the `Appellants' to put forth their case / submissions on the merits of the main `Company Petition', and granted substantive `interim reliefs', which are in the nature of `final reliefs', only the `issue of maintainability' was urged before the `Tribunal', and the observation made by the `Tribunal' at Para 31 of the `impugned order' dated 25.07.2022 in MA/21/2021 in CP/36/2021 to the effect, `Apart from the Issue of maintainability of this Petition', the other `Issue' that comes for consideration is whether `the Petitioner is entitled for the `reliefs' sought in the `Application' MA/21/2021, is an `incorrect one', at this stage, this `Tribunal', points out that a plea is taken on behalf of the `1st Respondent'/`TSIIC'/`Petitioner' that the `Tribunal' had considered the MA/21/2021 in all respects and maintainability is one of the grounds, other than the grounds raised by the `Appellants', opposing the said `Miscellaneous Application'.
178. In this Connection, this `Tribunal', worth recalls and recollects the decision of the Hon'ble Supreme Court of India in Central Bank of India Vs. Vrajlal Kapurchand Gandhi & Anr. SCC 573, wherein it is observed that; ``Statements of fact as to what transpired at the hearing recorded in the judgment of the court, are conclusive of the facts so stated and no one can contradict such statements by affidavit or other evidence. If a Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 106 of 115 party thinks that the happenings in Court have been wrongly recorded in a judgment, it is incumbent upon the party, while the matter is still fresh in the minds of the Judges, to cull the attention of the very Judges who have made the record. That is the only way to have the record corrected. If no such step is taken, the matter must necessarily end there. It is not open to a party to contend before this Court to the contrary. This Court cannot launch into an enquiry as to what transpired in the High Court. It is simply not done. Public policy and judicial decorum do not permit it. Matters of judicial record in that sense are unquestionable. However, the Court can pass appropriate orders if a party moves it contending that the order has not correctly reflected happenings in Court.''
179. As regards, the plea of the `Appellants' (in both `Appeals'), none of the `Written Submissions' and the `Case Laws' relied upon by them were not considered by the `Tribunal' at the time of passing the `impugned order' dated 25.07.2022 in MA/21/2021 in CP/36/2021, this `Tribunal' significantly points out that the `Judicial Proceedings', `Orders' / `Judgments' of a `Tribunal', do have a `sanctity' and in our `Justice Delivery System'. The conduct of `Judicial Proceedings' / `Discharge of Judicial Functions' by a `Tribunal', not only is to `inspire confidence', but to `maintain faith and trust' of the `Parties'.
Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 107 of 115
180. An onerous duty is cast upon the `Tribunal' to conform to the yardstick of Judicial Procedure, in adhering to the same, while performing its functions, in exercise of its `Power' or `Authority'.
181. `Rules of Natural Justice' are not the `Edicts of a Statute'. The ingredients and the `Principles of Natural Justice' do form an integral part of `Article 14 of the Constitution of India'. It is a fair play in action, cementing upon `Natural Ideals' and `Homo-sapien's Values'.
182. It is the prime duty of a `Tribunal' / an `Adjudicating Authority', to `ascribe reasons', for arriving at a just and fair conclusion. Before arriving at a decision in a given case, the submissions, counter submissions and `Citations' of the respective `Parties' (relied on by their Learned Counsels are to be delved into, by analysing the `pros and cons' of the same and that alone, without any simmering doubt `Guarantee' consideration, in an imperative manner. Without any doubt, it will exhibit clarity in the `Order' / `Judgment' / `Decision' and it will lessen the scope of `vice' of an `Arbitrariness', as opined by this `Tribunal'.
183. Answering / meeting out the contentions advanced in a given case, by specifying `cogent', `coherent', `clear', `unambiguous', `unequivocal' and `explicit' reasons, will show that the `Tribunal' / `Adjudicating Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 108 of 115 Authority', by adhering to the `Principles of Nature Justice', had given due weightage / consideration to the points in controversy.
184. It is needless to point out that `ascribing of reasons', in a prudent and diligent manner, by a `Tribunal' / `Adjudicating Authority', is the `Heart' and `Soul Beat of a conclusion', being arrived at in a given case, which will stand the test of scrutiny, before a `Superior Forum'. Therefore, writing / passing of an `Order' / `Judgment', by an `Authority' / `Tribunal', is to be done with great `care', `caution' and `circumspection', because of the `latent' and `patent' fact that `inviolability of judicial proceedings' is the `source of everything'.
185. As regards the `relief' (`a') in MA/21/2021 in CP/36/2021, sought by the `1st Respondent'/`TSIIC'/``Petitioner', before the `Tribunal' Viz. in directing the `Respondent Nos. 2 & 3', their `Offices', `Representatives' and `Assignees' or any other `Entities' and their `Nominee Directors' in the `Respondent No.1 Company' (`Appellant'/`M/s. Emaar Hills Township Pvt. Ltd.' in Comp. App (AT) (CH) No. 84 of 2022), to not, in any manner, deal with or otherwise dispose of or encumber, alienate, transfer and / or create `Third Party' interest in the `Assets and Properties of the Respondent No. 1 company' and the same being granted by the `Tribunal' in its `impugned order' dated 25.07.2022 in MA/21/2021 in CP/36/2021, this `Tribunal' points out that the aforesaid `interim order', Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 109 of 115 passed by the `Tribunal', making prima facie observations that `the contentions raised in the `Petition' are in the `Public Interest' and it is the `property of the State', which is being sold away or alienated in a very deceitful manner, by the `Respondent Companies through their Agents', pending full consideration of controversies, in the main CP/36/2021, at this distant point of time, are not displaced by this `Tribunal', because of the fact that the intent of the `Tribunal' at the time of passing the `interim order of restraint', can very well be clearly gathered, in appreciating the case, in a proper and real perspective, in the teeth of `1st Respondent'/`TSIIC'/`Petitioner's plea, that the `Appellant'/`M/s. Emaar Hills Township Pvt. Ltd.' in Comp. App (AT) (CH) No. 84 of 2022 has plans to dispose of the untilised / undeveloped land, to an extent of 89.76 Acres being `highly detrimental to its interest' and `interest of Public Exchequer'.
186. In regard to the `relief' (`g'), claimed by the `1st Respondent'/`TSIIC'/``Petitioner' in MA/21/2021 in CP/36/2021 Viz. `To compensate the `Financial Losses', incurred by the `Government of Telangana' / `TSIIC', till date, with regard to the `Equity' dilution and such other consequences', and the same being granted, by the `Tribunal' (`National Company Law Tribunal', Hyderabad Bench-II, Hyderabad) in the `impugned order' dated 25.07.2022 in MA/21/2021 in CP/36/2021, it Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 110 of 115 is the plea of the `Appellants' (in both `Appeals'), that the `1st Respondent'/`TSIIC'/`Petitioner' had not placed any acceptable proof / any material on record, to show that it had suffered any loss, let alone monetary loss, it is pertinently pointed out by this `Tribunal' that the `Tribunal' (`National Company Law Tribunal', Hyderabad Bench-II, Hyderabad') is to determine whether the Respondent Companies are liable for the `Breach of Memorandum of Understanding'/`Contract'/`Monetary Loss suffered', and the `Tribunal' is to assess `what the `Liability'? is. But, till that is determined, there is no `Liability', in the considered opinion of this `Tribunal'. Viewed in that perspective, in the absence of quantification of `Financial Loss', that was incurred by the `Government of Telangana'/`1st Respondent'/`TSIIC'/`Petitioner' in regard to `Equity Dilution' and such other consequences, the direction issued by the `Tribunal' in the `impugned order' dated 25.07.2022 in MA/21/2021 in CP/36/2021, in ordering the `Respondent Companies', to compensate the `Financial Loss' that were incurred by the `Government of Telangana'/`1st Respondent'/`TSIIC'/`Petitioner' is clearly unsustainable in `Law' and the same is hereby set aside by this `Tribunal', to prevent an `aberration of justice' and in furtherance of `substantial cause of justice'. Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 111 of 115
187. In the light of foregoing discussions and reasons, this `Tribunal' on a careful consideration of the respective contentions advanced on either side, keeping in mind that by an `Operation of Law' that the `1st Respondent'/`TSIIC'/`Petitioner' has become the `Shareholder' of the `Appellant'/`Company' and considering the facts and circumstances of the instant case (especially, according to the `13th Respondent' / `RoC, Telangana, Hyderabad', an inquiry under Section 206 of the Companies Act, 2013, is under progress and consideration by the Government of India, Ministry of Corporate Affairs against the `1st Respondent'/`TSIIC'/`Petitioner'/`Company' and as well as against the `Appellant'/`M/s. Emaar Hills Township Pvt. Ltd'/`Company' in Comp. App. (AT) (CH) No. 84 of 2022, this `Tribunal' comes to a consequent cock sure conclusion that the main CP/36/2021, filed by the `1st Respondent'/`TSIIC'/`Petitioner', before the `Tribunal' (`National Company Law Tribunal', Hyderabad Bench-II, Hyderabad), is exfacie maintainable in `Law'. However, the `Order of Restraint', passed by the `Tribunal' in the `impugned order' dated 25.07.2022 in MA/21/2021 in CP/36/2021, in directing the Respondent Nos. 2 & 3, their Offices, Representatives, etc., in the `1st Respondent'/`Company' (`M/s. Emaar Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 112 of 115 Hills Township Pvt. Ltd.' / `Appellant' in Comp. App (AT) (CH) No. 84 of 2022) not in any manner to deal with or otherwise dispose of / encumber / alienate, transfer and / or create `Third Party' interest in the Assets and Properties of the `1st Respondent'/`Company' (`M/s. Emaar Hills Township Pvt. Ltd.' is sustained by this `Tribunal'. However, this `Tribunal' sets aside the direction issued by the `Tribunal' in the `impugned order' dated 25.07.2022 in MA/21/2021 in CP/36/2021 in directing the `Respondent Companies' to compensate their `Financial Losses' incurred by the `Government of Telangana' / `TSIIC', till date, in regard to `Equity Dilution' and such other consequences', to secure the `ends of justice'.
188. Before parting with the case, this `Tribunal' pertinently directs the Respondents, in main CP/36/2021, pending on the file of the `National Company Law Tribunal', Hyderabad Bench-II, Hyderabad', to file their `Counter', within four weeks' from the date of Judgment. Thereafter, two weeks' time is granted for filing of Rejoinder by the `Petitioner' in CP/36/2021. After the completion of the pleadings, the `Tribunal' (`National Company Law Tribunal', Hyderabad Bench-II, Hyderabad) shall take up the main CP/36/2021 on its file for `Final Hearing' and after Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 113 of 115 providing adequate opportunities to the respective `Parties' is to pass a `reasoned speaking order' on merits, based on `fair play', `equity' and `good conscience' in a just manner, ofcourse, uninfluenced and untrammelled with any of the `observations' made by this `Tribunal', in these `Appeals'. `Liberty' is granted to the respective `Parties' to raise all factual and legal pleas (touching upon the aspect of referring the matter to the Conciliation Board as per Section 41 of the `Andhra Pradesh Infrastructure Development Enabling Act, 2001' and also to cite Case Laws, mentioning the relevant paragraphs being relied upon), before the `Tribunal' and the `Tribunal' (`National Company Law Tribunal', Hyderabad Bench-II, Hyderabad) is to deal / meet out the same (including the applicability / otherwise of the Case Laws relied upon), by analysing the `pros and cons' of the contentions so raised and to pass necessary orders in CP/36/2021, as it deems fit and proper, while exercising its `equity jurisdiction'.
Conclusion:
In fine, with the above said observations and directions, the instant Comp. App (AT) (CH) Nos. 84 & 87 of 2022 stand disposed of. No costs. IA No. 735 of 2022 (For Stay), IA Nos. 736 & 737 of 2022 (For Exemption) in Comp. App (AT) (CH) No. 84 of 2022 and IA No. 750 of Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 114 of 115 2022 (For Exemption) and IA No. 751 of 2022 (For Stay) in Comp. App (AT) (CH) No. 87 of 2022 are closed.
[Justice M. Venugopal] Member (Judicial) [Naresh Salecha] Member (Technical) 10/10/2022 SR/TM Comp. App (AT) (CH) Nos. 84 & 87 of 2022 Page 115 of 115