Nclat Mro 500131

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
CHENNAI BENCH
(APPELLATE JURISDICTION)
TA (AT) No. 94/2021

(Company Appeal (AT) No.363/2019)
(IA No.517/2023)
(Under Section 421 of the Companies Act, 2013)
(Arising out of the Impugned Order dated 27.11.2019 in CP
No.486/BB/2018), (Filed under Sections 59, 210, 213, 216, 241
& 242 of the Companies Act, 2013, passed by the National
Company Law Tribunal, Bengaluru Bench)
IN THE MATTER OF:

Jitendra Virmani
R/o 341, Embassy Woods
6/A, Cunnigham Road
Bangalore – 560 052
Through Power of Attorney Holder

A.B. Mandanna
Office at 150, Embassy Point
Infantry Road, Bengaluru – 560001 …Appellant
Versus
1. MRO – Tek Reality Limited

A company registered under the
Companies Act, 1956
And having its Registered Office at:
Maruthi Complex, No. 6,
New BEL Road, Chikkamaranahalli,
Bangalore – 560 094
Represented by its Authorized Signatory
CFO Mr. Srivatsa Ganesh …Respondent No.1
2. S. Narayanan
12, CIL Layout, A Block, Sanjay Nagar
Bangalore – 560 094 …Respondent No.2
TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 1 of 225

3. Ms. Jayashree Narayanan
4. Murari Narayanan
5. Himadri Nandi
389, 4th Main 15th Cross
2nd Block, R.T. Nagar
6. Shyamali Nandi
389, 4th Main 15th Cross
2nd Block, R.T. Nagar
7. Ms. Prakrity N
365, 5th Street, 1st Block,
1st Main, R.T. Nagar
8. Srivatsa Ganesh
275, AMS Layout, Chikka Bettahalli
Vidyaranayapura
9. N.K. Rajasekaran
109/B, 4th Main, NGEF Layout,
Sanjay Nagar, Bangalore – 560 097 …Respondent No.9
10. Krishnan Rajamani
81-203, Sriram Shreyas Apt
Telecom Nagar, Koodigehalli
11. M/s Umiya Builders & Developers
Through its Proprietor
Mr. Anirudha Bhanuprasad Mehta
Having its office at:
29/3 HM Strafford, 2nd Floor, 7th Cross

12. Umiya Builders & Developers
Private Limited
A company registered under the Companies
act, 1956
Having its Registered office at:
29/3 HM Strafford, 2nd Floor, 7th Cross
13. Mr. Anirudha Bhanuprasad Mehta

3 India House, 2nd Floor
Floor No.6, KEMPS Corner
Mumbai – 400 026 …Respondent No.13
14. Sudhir Kumar Hasija

No. 7, Wellington Street,
Richmond Town
15. Gauri Anirudha Mehta

3 India House, 2nd Floor
Floor No.6, KEMPS Corner
Mumbai – 400 026 …Respondent No.15
16. Mohan Subramanium

East End D Main Road
29th Cross, 9th Block, Jayanagar
17. M. Venkatachala Sampath Kumar

163/6, 1st Main Road,
Opp. Fortis Hospital, Seshadripuram
18. Sudipto Gupta

D-1405, Purva Venezia Apartments
Next to Mother Dairy
Major Sandeep, Unnikris
Yelahanka New Town
19. Barun Pandey

House No. 47/33

Near Ganesh Temple, 2nd Cross,
Venkateshwara Layout, Sg Palya,
20. Serious Fraud Investigation Office

2nd Floor, Paryavaran Bhavan
CGO Complex, Lodhi Road,
New Delhi – 110 003 …Respondent No.20
21. The Registrar of Companies – Karnataka

2nd Floor, Kendriya Sadan
Koramangala
Present:
For Appellant : Dr. U.K. Chaudhary, Senior Advocate
Mr. Manisha Chaudhary, Advocate
Mr. Mansumyer Singh, Advocate
Mr. Manisha Sharma, Advocate
Mr. Shravan Chandrashekhar, Advocate
For Respondents : Mr. P.H. Arvindh Pandian, Senior Advocate

For Mr. Pawan Jhabakh, Advocate, For R1, R11,
R13 & R15
Ms. Parina Lalla, Advocate, For R2 to R8 & R14
J U D G M E N T
(Virtual Mode)
Justice M. Venugopal, Member (Judicial):
Background
The Appellant has preferred the instant TA No. 94 of 2021 (Comp. App.
(AT) 363 of 2019) in CP No. 486/BB/2018 as an ‘aggrieved person’, in respect
of the impugned order dated 27.11.2019 passed by the ‘National Company Law
Tribunal’ Bengaluru Bench.

2. The ‘National Company Law Tribunal’ Bengaluru Bench while passing the
impugned order dated 27.11.2019 in CP No. 20/2016 (TP No.248/2017) and CP
No. 486/BB/2018 at paragraph No. 21 to 25 had observed the following: -
“21. It is on record that in pursuant to the Special Resolution

which includes offers obtained from reputed developers and
evaluation proposal was also tabled and viewed. It was also
discussed that Company started discussion with prominent
builders in India for development of property situated at
Hebbal, Bengaluru. In order to avoid conflict of interest, duly
following Corporate governance follows hitherto by the
Company, the Company did not invite in Embassy Group since
its Chairman and Managing Director Mr. Jitendra Virwani had
655538 shares and RBD shelters LLPs since its managing
partner Mr. Austin Roach had 110350 shares and 957 shares
respectively as on 06.11.2015, which is a cutoff date considered
for issue of postal ballot notice to the shareholders. On scrutiny
of the offers received, it is found highest offers in terms of
square feet is 238005 made by M/s. Ummiya Builders and
Developers, and the Second highest is 212166 square feet from
victory infrastructure. However, the proposal from Victory
Infrastructure is not considered on the basis of lack of
credentials in the market and the lack of presence of sufficient
commercial project of similar size in India and the third highest
offer is received is 185000 square feet from Brigade Group.
Therefore, Brigade Group and Ummiya Builders and
Developers was invited for second round of discussions.

Accordingly, Brigade Group participated for second round of
discussions on 21.12.2015 at 2.30 p.m. Similarly, the Company
has represented Mr. Srivastava invited M/s. Ummiya Builders
and Developers for discussion, thus offered better consideration
the other participant namely Shri Puravankara made revised
offer of 197011 sq. ft., with revised estimates sales value of Rs.
200,00,00,000/- on 22.12.2015. However, the Company did not
invite them for further discussion on the ground its offer lower
than to better offers in hand. The comparative statement of
offers from Ummiya Builders and Developers and Brigade
Group is as follows:
Parameter Ummiya BRIGADE DIFFERENCE

Builders GROUP
Land 238005 180000 58505
owner’s
Share
Deposit Rs.9 Crs. Rs.10 Crs. (Rs. 1 Cr.)

Amount
Estimated Rs. 60 Rs.80 (Rs.20)

Rent per sft.
Estimated Rs. 152 lacs Rs.144 Lacs Rs.8 Lacs

Rent per
month
Estimated Rs.10000 Rs.12000 (Rs.2000)

Sales Value
per Sft.
Estimated Rs.250 Crs. Rs.216 Crs. Rs.34 Crs.

Sales Value

Duration of 42 months 42 Months No Difference
Constructive
Period
Therefore, the impugned Development Agreement cannot

be found fault with and thus it is held to be valid legal document
and thus no interference is called for.
22. So far as the issue of sale Purchase Agreement dated 19 th

March, 2016 in question is concerned, it is to be stated that it is
prerogative of shareholders to sell their assets for appropriate
consideration duly following extent Articles of Association of
the Company and the extent provisions Companies Act,
1956/2013 accordance with law. Accordingly, the parties have
sold their share for consideration for the amount of Rs.
29,64,02,240/- and the petitioners have no locus standi to
question it and the grounds raised by them are not tenable and
liable to be rejected. In fact, Mr. Virwani has also improved his
shareholding in the Company by purchasing its shares in
instalments. Therefore, the allegation of Petitioner selling of
shares also constitutes acts of oppression and mismanagement
is misconceived and liable to be rejected. Moreover the SEBI
has also rejected the contention of the Petitioner when he
approached the SEBI vide his complaint dated 16.06.2016.
23. It is to be pointed out here that any member of a Company

seeking equitable relief, U/s 241-242 of the Companies Act
2013, has to come to the Tribunal with clean hands. In the
instant case, as detailed supra, both the Petitioners at initial

stage started approaching Civil Courts with regard to the
affairs of the Company even though Company Law Board/High
Court/Tribunal have jurisdiction over the issue, under the
provisions of the Companies Act 1956/2013. The Petitioners,
admittedly lacking to possess the requisite percentage of shares
in the Company, at the time of filing their suits. However, after
obtaining the requisite percentage especially by Mr. Jitender
Virwani, as per law, has approached the then CLB/High court
and that too after they have failed to get interim orders in the
suits they have filed. As stated supra, vide orders dated 28 th
April, 2016 passed in CA No. 176 of 2016 in COP No. 20 of
2016, the Hon’ble High Court of Karnataka, while vacating the
interim orders dated 26.02.2016 has directed to Petitioner to
deposit a sum of Rupees five (5) Lakhs within a period of one
month by way of a demand draft drawn on Scheduled Bank with
Registrar General of High Court in order to show the bona fides
of the Petitioner. However, it is not known whether the
Petitioner has complied with the above directions. Similarly,
Mr. Jitendra Virwani has again suffered with costs of Rs 50,000
to be payable to Library of Appellate Tribunal, vide order dated
15.05.2017, passed in I.A.No.221 of 2017 in Company Appeal
(AT) No.138 of 2017. It is also not known whether the Petitioner
paid or not. The Petitioners continuously drag on the Company
on every action it initiates right from the day, the Company
initiated steps to explore the possibilities of utilising property of
the Company for its sustenance i.e., from the year 2015, when
he could not get the contract for development of Company's

property. Therefore, it is to be held that the Petitioners have
come to the Tribunal with unclean hands, and they are not
entitled to seek for any equitable relief as provided Under
Sections 397/398 of Companies Act, 1956, R/w Sections
241/242 of the Companies Act, 2013.
24. In order to seek relief(s) under Sections 241/242 of the

Companies Act, Applicant/Petitioner, who is eligible to file
Application/Petition, has to make out a case in which the affairs
of the Company have been or are being conducted in a manner
prejudicial or oppressive to any members or prejudicial to
public interest or in a manner prejudicial to the interest of the
Company, and that to wind up the Company would unfairly
prejudicial such member or members but otherwise the facts
would justify the making of wind up order on the ground it was
just and equitable that the Company should be wound up, and
in those circumstances, the Tribunal is empowered to pass
appropriate order(s) so as to end the affairs of Company
complained of. As stated supra, the Petitioners have suffered
various disqualifications even to maintain the instant main
Company Petition. The facts and circumstances as detailed
supra clearly established that the affairs of the Company are
not being conducted in any manner prejudicial or oppressive
either to the Petitioners or any of its shareholders or stake
holders. On the contrary, the Petitioners are interfering in the
usual business decisions being

taken by the Company by filing various vexatious litigations
before various courts and Tribunal.
25. It is also to be stated here that the Tribunal has perused

various judgements cited by both the parties, as mentioned
supra, and by keeping the ratio as decided in those cases, the
instant case is decided.”
and resultantly dismissed the ‘Company Petitions No. 20/2016 (T.P. No.
248/2017) & C.P. No. 486/2018’, but without costs.
Appellant’s Submissions
3. The Learned Counsel for the Appellant, (in TA No.94/2021) (Comp. App.
(AT) No. 363/2019 in CP No.486/BB/2018) submits that the ‘Tribunal’, had
erroneously, dismissed the ‘Company Petition’ of the Appellant, primarily and
substantially on the ground, that the Appellant, despite possessing 19.83%
shareholding in the 1st Respondent / Company, at the time of filing the present
petition, does not possess the ‘Requisite Shareholding’, necessary to maintain the
underlying petition, against the Respondents.
4. The Learned Counsel for the Appellant, contends that the ‘Tribunal’ had
committed an ‘error’, in coming to the conclusion that the ‘shareholding’ at the
time of accruing of ‘cause of action’, would be determinative, of the
‘maintainability of the petition’ and in ‘sequel’, had also held, that the Appellant,

at the relevant point of time, due to less than 10% shareholding at such time, could
not have maintained the ‘petition’ and eventually determine the said point, as well
as the underlying petition against the ‘Appellant’ herein.
5. The Learned Counsel for the Appellant points out that issue of
‘maintainability’ was already settled by the ‘Tribunal’, in IA 360/2018 and IA
17/2019 of 30.05.2019. In this connection, on behalf of the Appellant, it is
pointed out that the said ‘order’, was assailed by the Respondents in Comp. App.
(AT)(Nos.) 144 and 179 /2018 but this Tribunal, had refused to interfere with the
order dated 30.05.2019 and that the Respondents, had to withdraw the said
‘Appeals’.
6. According to the Learned Counsel for the Appellant, the 1st Respondent
Company, was incorporated as Private Ltd. Company, by shares in the year 1984,
and later, it became a ‘public Company’ and its name was changed to MRO-TEK
Limited. However, in the year, 2016, the name of the Company was changed to
MRO-TEK Reality Ltd. and that the 1st Respondent / Company, as per Balance
sheet, as on 31.03.2015 was having a positive network with reserves and
surpluses, to an extent of INR, 11,17,38,040. But the Respondents, in ‘collusion’
with the present management of the Company had ‘orchestrated’ and elaborate
‘fraud’ detriment to its shareholders and public at large. Moreover, the entire

assets of a ‘public listed company’ were alienated, without following the ‘due
process of law’ and without giving any material information to the shareholders,
in this regard.
7. The Learned Counsel for the Appellant, points out that as part of their
fraud, the Board of Directors of the1st Respondent /Company, in breach of the
fiduciary duties, towards the ‘Company’ and the ‘Shareholders’, through Board
Meeting 19.02.2015, had decided that in order to tide over the alleged prevailing
financial distress, faced by the Company, the land and manufacturing facility of
the 1st Respondent Company, situated at ‘Hebbal’ and ‘Electronic City’, could be
disposed of and the Corporate Office of the 1st Respondent / Company, could be
relocated.
8. It is represented on behalf of the Appellant, that this act was nothing but a
subterfuge to strip away the only valuable asset of the Respondent No. 1
Company and to hand over the same, to the Respondents, who are presently in
the management of the Company, who subsequently had received the majority
shareholding of the Promoters in the 1st Respondent / Company. It is the
contention of the Learned Counsel for the Appellant that the Management, knew
that outright sale and disposal of the entire undertaking would be beyond its

competence and the same is prohibited as per Section 180 of the Companies Act,
2013 and read with Section 179 of the said Act.
9. The Learned Counsel for the Appellant, points out that when the said
matter was allegedly considered by the ‘Board’ on 04.11.2015, the tenor of the
‘Agenda’ was completely changed and in a ‘volte face’, the management, junked
the idea of ‘disposal of asset’, as was countenanced, in the meeting of the Board
dated 19.02.2015 and for the first time, brought in, the idea of a possible joint
venture agreement, to dispose of the entire undertaking / substratum of the
Company, in favour of an unknown person with no material information to the
shareholders.
10. According to the Appellant, the Respondents, without any authorisation,
sought the ‘Shareholder’s Approval’ on the possible joint venture through a
‘tricky’, uninformed and statutorily non-compliant notice, as well as explanatory
statement that had not even mentioned the basic ‘contours of the joint venture’
including the relevant details thereof and its potential impact, on the working of
the 1st Respondent / Company. Also that the Board of 1st Respondent / Company
and never approved any such ‘draft notice’ or date of the meeting, in the purported
minutes dated 04.11.2015.

11. Advancing his argument, the Learned Counsel for the Appellant, points out
that the so-called ‘Special Resolution’ is void and non-est in law for the reason
that:
(i) no Authority to issue notice dated 10.11.2015 as neither any date for
the meeting was fixed nor a draft notice agenda are explanatory statement,
was approved by the Board in violation of Secretarial standards, which
are mandatory, as per Section 118 of the Companies Act;
(ii) no disclosure of any name with whom joint venture is to be entered
into;
(iii) no terms and conditions of joint venture particularly price and other
monetary considerations / terms, development of area and benefits to the
Company etc. were placed before the Board or the shareholders;
(iv) notice was thus void / ineffective and tricky as it does not permit
‘application of mind’ by the ‘shareholders’ whose ‘approval’ is required
and that the ‘majority shareholders’ were devoid of any information;
(v) The purported ‘Explanatory Statement’, does not disclose any material
or relevant information and, therefore, the alleged ‘notice’, is illegal and
void; and
(vi) The purported ‘Joint Venture Agreement’ was never placed before
the ‘shareholders’ and ‘blanket approval’ was sought.

12. According to the Appellant, the said Special Resolution, which was
purportedly passed, as per scrutiniser’s report, apart from the ‘infirmities’, as
pointed, was marred with calculation errors, in as much as that the petitioner was
holding 7,68,88 number of Equity Shares, at the relevant time and had voted
against the said Resolution. Furthermore, the e.voting results have suggested
only 94,759 votes were cast against the ‘motion’ and 6,55,538 number of polling
votes were cast against the motion. In fact, the final analysis, combining both
polling papers and e.voting, showed only 750,297 were voted against the
resolution, whereas the petitioner, himself was having 768,880 shares and had
voted against the Resolution.
13. According to the Learned Counsel for the Appellant, the worse Act of
operation and mis management, against the interest of shareholders and
prejudicial to public interest was illegal and unlawful transfer of promoter
shareholding by the Respondent No. 227, along with their relatives and persons
acting in ‘concert’.
14. Also that the Respondent No. 13 to 15 were appointed as ‘Directors’, on
08.08.2016, and later, on 21.09.2016 and 15.11.2017, the Respondent No. 17 and
16 were appointed as the Directors, and as a result of which, the whole substratum
of the Company, including its assets controlling share and management was

handed over to the Joint Venture Partner of the 1st Respondent / Company being
Respondent No. 11 and other personnel connected with the said entity, which led
to public offer under SEBI(take over Court).
15. The Learned Counsel for the Appellant, points out that the ‘Joint Venture
Agreement’ was executed on 01.01.2016, whereas the 1st Respondent / Company
amended its ‘object clause’ only on 19.03.2016 by passing a resolution, on
19.03.2016 among other things, changing the name of the said Company to MRO-
TEK Reality Ltd. and ‘alter’ the main objects by including the Real Estate
Business. The Resolution, passed to amend the object clause would not validate
the illegality, puportrated by the Respondents on 01.01.2016, when the ‘Joint
Venture Agreement’ was entered into.
16. The Learned Counsel for the Appellant, points out that the combined effect
of the Joint Venture Agreement followed in quick succession, with the ‘Share
Purchase Agreement’ is that the contractual safeguards of the such Respondent
Company in the ‘Joint Venture Agreement’ were severely compromised and are
rendered vulnerable, for the reason that all such safeguards, as provided for the
1st Respondent Company in the Joint Venture Agreement or virtually rendered
ineffective, because the individual developer, being the 11 th Respondent is also

in De-Facto control of the Respondent No. 1 Company and would, case of a
conflict, axiomatically defect the interest of the Respondent No. 1 Company.
17. The Learned Counsel for the Appellant, refers to the Appellant, filing a
Civil Suit in OS No. 10303/15, seeking orders for restraining the illegal
development of assets of the 1st Respondent / Company but the said ‘suit’ was
withdrawn as per order dated 28.04.2016. Also that, the Learned Counsel for the
Appellant points out that the Appellant had filed a civil suit in OS No.25572/2016
on the file of City Civil Court, seeking a declaration, against the sale of ‘Equity
Shares’ of the Respondents to the Promoters/stakeholders of the Respondent No.
11 along with interim reliefs. An ex-parte ad-interim order was passed by the
Hon’ble City Civil Court restraining the ‘alienation of shares’.
18. The Learned Counsel for the Appellant, points out that the Respondents
had approached the Hon’ble High Court of Karnataka against the ex-parte ad-
interim order granted by the City Civil Court and the said Appeal was disposed
of with an undertaking of the learned Counsel for the Appellant, to withdraw the
said suit with liberty to urge all such grounds, as pleaded in the said suit, before
the appropriate Forum.
19. The Learned Counsel for the Appellant, proceeds to point out that the
Appellant on 29.08.2016, also moved a ‘special notice’, to the 1st Respondent /

Company as per Rule 23 of Companies (Management and Administration) Rules
2014 seeking the inclusion of a resolution in the Company’s AGM dated
21.09.2016 for ‘termination of Development Agreement’. Also that the moving
of the said ‘Resolution’ was opposed by the Respondent No. 1 Company before
the Regional Director of Companies and the Regional Director of Companies vide
order dated 20.10.2016 allowed the Respondent No. 1 Company’s Application.
20. The Learned Counsel for the Appellant, brings to the notice of this Tribunal
that Appellant had moved a grievance before the Market Regulator Securities
Exchange Board of India, on 16.06.2016 pointing out therein, the ‘infractions’,
in the purported sale of equity shares from the SEBI perspective but, knowledge
of the Appellant no cognizance, save and except inviting the 1 st Respondent /
Company to specify its comments on the said grievance.
21. According to the Appellant, the issue of ‘maintainability’ was decided by
the Tribunal, through an order dated 30.05.2019 in IA 360/2018 and IA 17 of
2019 filed by the Respondent. The said order was assailed by the Respondents
in Comp. Appls. (AT) Nos. 144 and 179 of 2019, but this ‘Tribunal’ had refused
to interfere with the order dated 30.05.2019 and the Respondents had to withdraw
the said ‘Appeals’ by an order dated 02.08.2019.

22. According to the Learned Counsel for the Appellant, the ‘matter’ was
always heard by a Division Bench constituted by the orders of the President of
the ‘National Company Law Tribunal’. Despite the non-availability of the
Division Bench, on 25.10.2019, the matter was heard ‘singly’ and ‘orders’ were
reserved by the Hon’ble single Member on very date, when the validly constituted
Bench was not available and, therefore, there was no Bench on 25.10.2019.
Appellant’s Decisions
23. The Learned Counsel for the Appellant, refers to the order of the Hon’ble
Supreme Court dated 20.06.2019 in WP(Civil)No. 722/2019 in “Sonu Cargo
Movers (I) Pvt. Ltd. & Ors. Vs. Union of India & Ors.” dated 20.06.2019
followed by the Principal Bench of this Tribunal in “Raj Singh Gehlot, Director
of Ambience Pvt. Ltd. vs. Vistra ITCL (India) Ltd. and Another” (vide order
dated 25.10.2019 in Company Appeal (AT) (Insolvency)No.971 of 2019 – Three
Member Bench) reported in 2019 SCC OnLine NCLAT 760 wherein it is
observed as under:
“The ‘Vistra ITCL(India) Ltd.’ filed an application Under

Section 7 of the Insolvency & Bankruptcy Code, 2016 (‘I&B’
Code, for short) for initiation of ‘Corporate Insolvency
Resolution Process’ against ‘Ambience Pvt. Ltd.’ (‘Corporate
Debtor’), the Divisional Bench of one Hon’ble Member
(Judicial) and another Hon’ble Member (Technical) of
‘National Company Law Tribunal’ Bench No. III, New Delhi

heard the application on 26th November, 2018 and passed
different orders as detailed below as shown in chart below:-
LIST OF DATES OF ORDERS

Vistra ITCL (India) Limited & Anr Versus Ambience Pvt.
Ltd. (NCLT) NCLT
Case No. IB-1600(ND)2018
Date Coram Particuars
26.11.2018 Mr. R. Vardharajan Vistra to file documents

Mr. V.K. Subbaraj
12.12.2018 Ms. Deepti Mukesh Matter be posted before

Mr. V.K. Subbaraj regular bench.
17.12.2018 Mr. R. Vardharajan CD of file reply

Mr. V.K. Subbaraj
22.01.2019 Mr. R. Vardharajan Absence of Coram.

Matter adjourned
18.02.2019 Ms. Deepti Mukesh Matter to be posted

before
regular bench
25.02.2019 Mr. R. Vardharajan Absence of Coram.

Matter Adjourned
11.03.2019 Mr. R. Vardharajan Adjourned at joint

Ms. Deepa Krishan request.
09.04.2019 Mr. R. Vardharajan Final Arguments heard.

Ms. Deepa Krishan Parties directed to file
written submission.
22.04.2019 Mr. R. Vardharajan Written submissions

filed.
Reserved for order.
19.07.2019 Ms. Deepa Krishan

retires.
27.08.2019 Order delivered &

pronounced by Mr. R.
Vardharajan
The Appeal was admitted by Hon’ble Member (Judicial)

on 27th August, 2019 as in the meantime one of the Hon’ble
Member(Technical) Ms. Deepa Krishan retired on 19th July,
2019.
The order of ‘admission’ is challenged on the ground that

the matter having been heard by two Hon’ble Members and the
final order could not have been passed by Hon’ble
Member(Judicial).
Dr. Abhishek Manu Singhvi, Learned Senior Counsel

appears on behalf of the Appellant referred to Section 419(3) of
the Companies Act and Rule 152(4) of ‘NCTL’ Rules, 2016 in
support of its claim.
Mr. Arun Kathpalia, Learned Senior Counsel has appeared

on behalf of ‘Vistra ITCL(India) Ltd.’ (‘Financial Creditor’)
accepts the aforesaid fact.
In the facts and circumstances, as suggested by Learned

Counsel for the parties and we are also of the opinion that the
matter may be remitted back for fresh hearing on merit relating

to admission of application Under Section 7 of the ‘I&B’ Code
after giving liberty to the parties.
Mr. Sandip, ‘Resolution Professional’ has appeared with

Mr. Mritunjay Kumar, Learned Counsel and submitted that he
has incurred certain expenses and entitled for fee of last one
month 20 days. However, we are not deciding his claim at this
stage as we intend to remit the matter to the Adjudicating
Authority.
We accordingly, set aside the impugned order dated 27th

August, 2019 without extending any opinion on merit of the
claim and counter claim of the parties. The matter is remitted
back to the ‘National Company Law Tribunal’ Bench III, New
Delhi should be heard by Divisional Bench of Hon’ble
Member(Judicial) and Hon’ble (Technical) as per the provisions
of the Act and after notice and hearing, the Adjudicating
Authority pass appropriate order in accordance with Law
uninfluenced by an impugned order dated 27th August, 2019. It
is expected that the application will be taken up and disposed of
on early date preferably within three weeks from the date of
appearance of the parties. Both the parties will appear before the
Hon’ble President of ‘NCLT’ on 6th November, 2019 and bring
this order to the notice of Hon’ble President.”
Also the Learned Counsel for the Appellant cites the order of this Tribunal
dated 24.08.2020 – (Three Member Bench) in “Indison Agro Foods Ltd. vs.

Registrar & Anr.” (vide Company Appeal (AT) (Insolvency) No. 726-727 of
2020) reported in 2020 SCC OnLine NCLAT 1153 wherein it is observed as
under:
“After hearing Mr. Abhijeet Sinha, learned counsel for the

Appellant for a while, we find that the appeal has turned
infructuous in-asmuch-as the matter, in terms of impugned
order, stood adjourned to 18th August, 2020 and that date is
over. We are informed by learned counsel representing the
Appellant that the matter is now posted for 27th August, 2020
before a Single Bench of the National Company Law Tribunal,
Indore Bench at Ahmedabad. He invites our attention to an
order passed by Hon’ble Apex Court in Writ Petition No. 722 of
2019 dated 20th June, 2019, wherein the Hon’ble Apex Court,
in a case of identical nature directed it to be heard by a Bench
comprising of a Judicial Member and a Technical Member. This
appeal is accordingly disposed of with request to the President,
National Company Law Tribunal, New Delhi to constitute a
Bench comprising of a Judicial Member and a Technical
Member for disposal of the matter in hand in conformity with
and compliance with the direction passed by Hon’ble Apex
Court in the Writ Petition No. 722 of 2019.
Copy of the order be communicated to President, NCLT,

New Delhi for information.”

24. The Learned Counsel refers to the ‘List of Dates hearing and orders passed
by the NCLT, Bengaluru Bench’ in C.P. No. 20/2016 (T.P. No.248/2017), and
C.P. No. 486/BB/2018, and the same are mentioned, in a ‘Tabular Form’ as
under:
Date Coram Particulars
10.09.2018 Shri Rajeswara Rao Vittanala Notice issued;

Dr. Ashok Kumar Mishra Respondents to file
reply
11.10.2018 Shri Rajeswara Rao Vittanala Adjourned

Dr. Ashok Kumar Mishra



02.11.2018 Shri Rajeswara Rao Vittanala Adjourned at request

Dr. Ashok Kumar Mishra of Respondents

26.11.2018 Shri Rajeswara Rao Vittanala Adjourned at request

Dr. Ashok Kumar Mishra of Petitioner





28.01.2019 Shri Rajeswara Rao Vittanala Adjourned with

Dr. Ashok Kumar Mishra direction that main
Petition will be taken
up for arguments on
the next date
18.02.2019 Shri Rajeswara Rao Vittanala Respondents

Dr. Ashok Kumar Mishra directed to place on
record the orders
passed by Karnataka
High Court in their
Writ Petition
regarding hearing of
interlocutory
applications by the
Tribunal

08.03.2019 Shri Rajeswara Rao Vittanala Adjourned with

Dr. Ashok Kumar Mishra direction to argue
maintainability
along with main
Petition

24.04.2019 Shri Rajeswara Rao Vittanala Adjourned for
Dr. Ashok Kumar deciding
Mishra maintainability as
per order of
Karnataka High
Court dated
16.04.2019 in W.P.

12746/2018-
748/2019
27.05.2019 Shri Rajeswara Rao Vittanala Orders reserved in

Dr. Ashok Kumar Mishra IA No. 360 of 2018
and I.A. No. 17 of
2019
30.05.2019 Shri Rajeswara Rao Vittanala Orders passed in I.A.

Dr. Ashok Kumar Mishra No. 360 of 2018 and
IA NO. 17 of 2019;
Petitions held to be
maintainable

02.07.2019 Shri Rajeswara Rao Vittanala Arguments

Dr. Ashok Kumar Mishra commenced on
Petition on behalf of
the Petitioner

08.08.2019 Shri Rajeswara Rao Vittanala Continuation of

Dr. Ashok Kumar Mishra arguments; Part-
Heard
29.08.2019 Shri Rajeswara Rao Vittanala Continuation of

Dr. Ashok Kumar Mishra arguments; Part-
Heard
25.09.2019 Shri Rajeswara Rao Petitioner

Vittanala concluded
Dr. Ashok Kumar arguments; Part-
Mishra Heard
09.10.2019 Shri Rajeswara Rao Vittanala Respondents’

Dr. Ashok Kumar arguments; Part-
Mishra Heard
25.10.2019 Shri Rajeswara Rao Vittanala Reserved for orders

Dr. Ashok Kumar
Mishra
27.11.2019 Shri Rajeswara Rao Vittanala Impugned Order

Dr. Ashok Kumar passed and
Mishra pronounced
25. The Learned Counsel for the Appellant, submits that the matter was always
heard by a Division Bench, constituted by the orders of the President of the
‘NCLT’ New Delhi. Also that the Learned Counsel for the Appellant refers to
the decision in:-
i. Island Export Finance Ltd. Vs. Umunna and Ors., [1986]

BCLC 460 (QBD);
ii. Shri Kishore Kundan Sippy and Shri Kundan Hashmatria
Sipply Vs. Samrat Shipping and Transport Systems Pvt.
Ltd. & Ors. 2004 118 Comp Cas 472 CLB; and
iii. Dale and Carrington Invt. Vs. PK Prathapan, 2004
Supp(4) SCR 334.
26. To fortify the contention that the ‘impugned notice dated 10.11.2015’, is
‘malafide’ in nature and has the effect of elevating the entire substratum of the 1st
Respondent Company, also that the execution of the ‘Agreement’, reflects a
conduct in breach of the fiduciary duties of Directors owed towards 1 st
Respondent / Company as per Section 166 of the Companies Act, 2013.
27. The Learned Counsel for the Appellant, cites the decision in ‘Vaishnav
Shori Lal Puri and Ors. And Seaworld Shipping and Logistics P. Ltd. And Anr.

Vs. Kishore Kundanlal Sippy and Ors.’ reported in 2004, 120 Comp Cas 681
Bom; wherein paragraphs 55-60 & 65, it is observed as under:
“55. The main argument that needs to be addressed is whether

the Puri group has rebutted the presumption of fact regarding
its fiduciary duty. According to counsel for the Puri group, it
had rebutted that presumption, as it is seen from the records
that Contship had terminated the agency of SSTS, there was no
corporate opportunity to SSTS; no attempt was made by SSTS
to approach Contship, because both parties knew that there was
no corporate opportunity to SSTS, whereas the only grievance
in the petition was using domain and name "SAMRAT". There
is no substance in this defence. The presumption of fact will
have to be rebutted and could have been done so by the Puri
group by adducing positive evidence that the business
opportunity was not available to SSTS and that the agency was
given to SSL, after disclosure to the Sippy group and SSTS and
that there was refusal or waiver by the Sippy group or SSTS.
The materials pressed into service on behalf of the Puri group
would only indicate that Contship was keen to deal only with
the Puris. That material, however, does not positively point out
that Contship was unwilling to deal with SSTS with whom,
admittedly, the Puri group continued to be the managing
director and director of the companies (SSCO and SSTS). Even
accepting the case of Contship that it was keen to deal only with
the Puri group, no explanation is forthcoming as to why the
arrangement presently obtaining with SSTS, with whom the Puri

group was still associated, was required to be terminated and
given to SSL, which was newly formed and fully controlled by
the Puri group. Understood thus, the presumption of fact
remains unrebutted. If it is so, the Puri group being fiduciary of
SSCO and SSTS were obviously in breach of their duties to the
companies.
56. The next question is whether, even if the agency is not

subsisting, or, in fact, was terminated, can SSTS or the Sippy
group complain of breach of fiduciary duty by the Puri group.
This question stands substantially answered by the discussion
in the foregoing paragraphs. The fact that Contship had
terminated the agency of SSTS or that the agency agreement
with them was not subsisting on December 1, 2001, is of no
consequence and cannot be the sole basis of answering the issue
of fiduciary obligations and duty of the Puri group. However,
taking the totality of the established facts, conclusion as
reached by the Board relating to the breach of fiduciary duties
by the Puri group is inescapable.
57. The next aspect that needs to be addressed is whether SSL,

a newly formed company fully controlled by the Puri group, is
accountable to SSTS for the benefits derived by it from the
contract with Contship. Even this question will have to be
answered against the Puri group and SSL. The substance of the
view taken by the Board is that SSL was created only as a
vehicle to take away the business of Contship agency from SSTS.
Besides, the finding of fact as recorded and which cannot be

disturbed is that SSL is a newly formed company and is fully
controlled by the Puri group only. More so, SSL has been
established by the Puri group to do the same business as that of
SSTS and its incorporation procedure was initiated much prior
to the termination of the agreement of SSTS. All this has been
done "clandestinely". The Board has then lifted the corporate
veil of SSL and has found that it is the Puri group who has
received the entire benefit by using the corporate entity of SSL
as a shield. Understood thus, no fault can be found with the
conclusion reached by the Board for requiring the SSL to
account for the benefits derived by it from the contract with
Contship. Such a direction is possible in the wake of finding
recorded that the conduct of the Puri group resulted in
oppression of the Sippy group and of the two companies within
the meaning of Section 397 of the Act and also mismanagement
within the meaning of Section 398, relating to the affairs of the
companies, which was in a manner prejudicial to the interests
of the company, proceedings such as the present one, there
would be no limitation or restriction of power of the Board.
Reliance has been rightly placed by counsel for the Sippy group
on the Division Bench decision of our High Court in Shanti
Prasad Jain v. Union of India [1973] 75 Bom LR 778, which
deals with the scope of power to be exercised by the court in the
proceedings under Sections 397 and 398 of the Act. Section
402 of the Act is a provision without prejudice to the generality
of the powers of the Board under Sections 397 and 398 to bring
to an end or prevent the matters complained of or apprehended

and make such orders, as it thinks fit. On a conjoint reading
of Sections 397, 398, 402 and 406 with Sections 539 to 544 of
the Act, it would appear from the legislative scheme that the
Board has plenary powers to pass such equitable orders not
only to remedy the mischief, but to prevent recurrence thereof.
58. The question, however, is: Can such direction be parsed

against the person other than the company or the members of
the company. As mentioned earlier, SSL has been created by the
Puri group, who continue to be managing director and director
of SSCO and SSTS. To put it differently, SSL is none other than
the Puri group or its alter ego ; and the direction as passed
ostensibly against SSL was, in fact, against the Puri group and
such direction can be justified even by virtue of expansive
provisions contained in the Act, including Sections
542, 543 and 544, which empowers the Board to pass
appropriate directions against "any person" engaged in the
objectionable activity so as to affect the company. Viewed in this
perspective, there is no substance in the independent appeal
preferred by SSL, making a grievance that no direction could
have been passed against it at all.
59. It was argued on behalf of the Puri group that in the

absence of a clear finding on the issue of the conduct of the Puri
group being oppressive or resulting in mismanagement of the
affairs of the companies, no directions could be passed
under Sections 397, 398 of the Act. This submission proceeds
on the premise that the Board has only found as a fact that there

was deadlock between the two groups. According to counsel for
the Puri group, mere finding of deadlock cannot be the basis for
invoking powers under Sections 397, 398, 399 of the Act. In the
first place, the submission is founded on wrong assumptions.
Whereas my understanding of the conclusion reached by the
Board is that, it proceeded to pass directions having found that
there was oppression of the Sippy group and mismanagement in
the affairs of the companies. More so, as is rightly contended on
behalf of the Sippy group, that the provisions of Sections
397 and 398 cannot be given restricted meaning, whereas, the
plain language of the said provisions would suggest that the
conduct of the Puri group as alleged and established from the
record was fully covered by the purport of the said provisions.
Understood thus, there is no substance in the grievance made
on behalf of the Puri group to assail the conclusion reached by
the Board justifying legitimate exercise of its powers
under Sections 397 and 398 of the Act.
60. The next aspect that needs to be considered is whether the

Board could have issued the directions, as have been issued in
the present case, having regard to the nature of proceedings
under Sections 397, 398 and 399 of the Act. Before we proceed
to examine this aspect, it needs to be recalled that the direction
issued by the Board is qua the SSL to account for the benefits
derived by it from the Contship agency. I have already taken the
view that such a relief could be legitimately granted if the facts

of the case so warrant; and has been rightly granted in the
present case.
65. The next direction passed by the Board is to purchase the

shares of the other group by the respective groups. Even this
direction can be sustained having regard to the conclusion
reached by the Board that it was obvious that there was
deadlock in managing the affairs of the companies, SSCO and
SSTS. There seems to be substance in the reasoning adopted by
the Board that deadlock results in conduct, which is prejudicial
to the interests of the companies and can be the basis to wind
up the company on just and equitable grounds. To overcome this
position, it was contended on behalf of the Puri group that
neither Clause (a) nor Clause (b) of Section 397(2), nor Clause
(a) or Clause (b) of Section 398(1) of the Act was attracted in
the matters of deadlock. Moreover, no adjudication has been
done especially in the context of Clause (a) of Section 397(1) or
positive finding recorded that to wind up the company would be
unfair prejudice to the Sippy group. In my opinion, this
submission is obvious misreading of the judgment of the Board.
The Board has recorded a clear conclusion that there has been
oppression of the Sippy group and the companies and which
clearly attracted provision of Section 397 of the Act, in which
case, the company would deserve to be wound up. But, such a
course would unfairly prejudice the Sippy group and more so,
the company as such. The approach of the Board, on the other
hand, was not only to adjust the equities between the two

groups, but to ensure that the mischief was brought to an end or
to prevent the matters complained of or apprehended and more
so, to sustain the companies. Viewed in this perspective, the
direction issued by the Board which would enable the Puri
group to take over SSTS, which was doing the same business as
SSL, the newly formed company fully controlled by the Puri
group. On the other hand, the Sippy group would take over the
control and management of SSCO of which M/s. Meridian was
the subsidiary. It is in that context the Board has issued
direction that the Puri group would purchase shares of the
Sippy group in SSTS by paying the fair value; and Sippy group
shall purchase shares of the Puri group in SSCO by paying fair
value therefor. Such a course was the appropriate relief and
direction to be passed in the fact situation of the present case.
28. The Learned Counsel for the Appellant, refers to the judgement of the
Hon’ble Supreme Court in ‘Rajahmundry Electric Supply Corporation V. A.
Nageshwara Rao & Ors. Reported in AIR 1956 SC 213 wherein at paragraph 5
it is observed as under:-
“5. This point is not dealt with in the judgement of the trial
court, and the argument before us is that as the objection went
to the root of the matter and struck at the very maintainability
of the application, evidence should have been taken on the
matter and a finding recorded thereon. We do not find any
substance in this contention. Though the objection was raised
in the written statement, the respondents did not press the same

at the trial, and the question was never argued before the trial
judge. The Learned judges before whom this contention was
raised on appeal decline to entertain it, as it was not pressed
in the trial court, and there are no grounds for permitting the
appellant to raise it in this appeal. Even otherwise, we are of
the opinion that this contention must, on the allegations in the
statement, assuming them to be true, fail on the merits
excluding the names of 13 persons who are stated to be not
members and the two who are stated to have signed twice, the
number of members who had given consent to the institution of
the application was 65. The number of members of the
company is stated to be 603. If, therefore, 65 members
consented to the application in writing, that would be sufficient
to satisfy the condition laid down in Section 153-C, sub clause
(3)(a)(i) but it is argued that as 13 of the members who had
consented to the filing of the application add, subsequent to its
presentation, withdrawn their consent, it thereafter, ceased to
satisfy the requirements of the statute, and was no longer
maintainable. We have no hesitation in rejecting this
contention. The validity of a petition must be judged on the
facts as they were at the time of its presentation, and a petition
which was valid when presented cannot, in the absence of a
provision to the defect in the statute, cease to be maintainable,
by reason of events subsequent to its presentation. In our
opinion, the withdrawal of consent by 13 of the members, even
if true, cannot affect either the right of the applicant to proceed

with the application or the jurisdiction of the court to dispose
of it on its own merit.”
29. The Learned Counsel for the Appellant, refers to the decision of Hon’ble
High Court of Madras in L.Rm. K. Narayanan and Ors. Vs. Pudhuthotam
Estates Ltd. and Ors. reported in MANU/TN/0083/1992 wherein at paragraph 16
and 17 it is observed as under:-
“16. I now propose to deal with the judgements referred to

above:
Rajahmundry Electrical Supply Corporation Ltd.’s case
MANU/SC0008/1955 : [1955] 2SCR1066 was filed under the
old Act (VII of 1913) under sections 153C, 162(vi). The
Supreme Court held thus (at page 95):
Held, that the validity of a petition must be judged on the
facts as they were at the time of its presentation, and a petition
which was valid when presented cannot, in the absence of a
provision to that effect in the statute, cease to be maintainable
by reason of events subsequent to its presentation.
The withdrawal of consent by thirteen of the members, even if

true, could not affect jurisdiction of the court to the dispose of
it on its own merits.
17. It is thus seen from the judgement of the apex court that
the validity of a petition must be judged on the facts as they were
at the time of presentation. It is not the case of the respondents
that the company petition was not validity presented. If that is

so, when a petition is validly presented, in the absence of a
provision to that effect in the statute, it does not cease to be
maintainable by reason of events subsequent to its
presentation.”
Supreme Court in M/s. Jawahar Singh Bikram Singh Pvt. Ltd., Delhi v. Smt.
Sharda Talwar, reported in 1973 SCC Online Del 48 wherein it is held as under:-
“the petition cannot be held to be non-maintainable merely

because the petitioner has died and one of the consenting
respondents has been transposed. The transposed petitioner
was always constructively a petitioner, and, therefore, it is not
necessary for her to satisfy the same conditions as would be
necessary, if a new petition were to be filed. The contention
on behalf of the Company that the transposed party must also
satisfy the same conditions as the original petitioner does not
seem to be justified on any principle. If she was constructively
a petitioner initially then she continues to be a petitioner, and
a change in the situation vis.a.vis, the provisions of section 399
of the Companies Act, 1956, will not make the petition non-
maintainable(p-777 I-p.778AC)”.
31. The Learned Counsel for the Appellant, refers to the decision of the
Hon’ble Supreme Court in ‘National Spot Exchange Ltd.’ Vs. ‘Anil Kohli’,
Resolution Professional for Dunar Foods Ltd., reported in 2022 11SCC 761
wherein at paragraph 15.1 and 15.2 it is observed as under:-

“15.1. In Mishri Lal (BSNL v. Mishri Lal, (2011)14 SCC 739:
(2014) 1 SCC (L&S) 387), it is observed that the law prevails
over equity if there is a conflict. It is observed further that equity
can only supplement the law and not supplant it.
15.2. In Raghunath Rai Bareja (Raghunath Rai Bareja v.

Punjab National Bank, (2007) 2 SCC 230), in paras 30 to 37,
this Court observed and held as under: (SCC pp. 242-43)
“30. Thus, in Madamanchi Ramappa v. Muthaluru Bajjappa
(AIR 1963 SC 1633) (vide para 12) this Court observed: (AIR p.
1637)
“12…[W]hat is administered in Courts is justice according to
law, and considerations of fair play and equity however
important they may be, must yield to clear and express provisions
of the law.’
31. In Council for Indian School Certificate Examination v.
Isha Mittal (2000) 7 SCC 521) (vide para 4) this Court observed:
(SCC p.522)
“4…. Considerations of equity cannot prevail and do not permit
a High Court to pass an order contrary to the law.”
32. Similarly, in P.M. Latha v. State of Kerala (2003) 3 SCC
541: 2003 SCC (L&S) 339 (vide para 13) this Court observed :
(SCC p. 546)
“13. Equity and law are twin brothers and law should be applied
and interpreted equitably but equity cannot override written or
settled law.”

33. In Laxminarayan R. Bhattad v. State of Maharashtra
(2003) 5 SCC 413 (vide para 73) this Court observed : (SCC p.
436)
“73. It is no well settled that when there is a conflict between law
and equity the former shall prevail.’
34. Similarly, in Nasiruddin v. Sita Ram Agarwal (2003) 2
SCC 577 (vide para 35) this Court observed: (SCC p. 588)
“35. In a case where the statutory provision is plain and
unambiguous, the court shall not interpret the same in a different
manner, only because of harsh consequences arising therefrom.’
35. Similarly, in E.Palanisamy v. Palanisamy (2003) 1 SCC 123
(vide para 5) this Court observed: (SCC p. 127)
“5. Equitable considerations have no place where the statute
contained express provisions.’
36. In India House v. Kishan N.Lalwani ((2003) 9 SCC 393
(vide para 7) this Court held that: (SCC p. 398)
“7……. The period of limitation statutorily prescribed has
to be strictly adhered to and cannot be relaxed or departed from
for equitable considerations”.
37. In the present case, while equity is in favour of the
respondent Bank, the law is in favour of the appellant, since we
are of the opinion that the impugned order (Punjab National
Bank v. Bareja Kripping Fasteners, 2005 SCC OnLine P&H 552)
of the High Court is clearly in violation of Section 31 of the RDB
Act, and moreover the claim is time-barred in view of Article 136
of the Limitation Act read with Section 24 of the RDB Act. We
cannot but comment that it is the Bank itself which is to blame

because after its first execution petition was dismissed on
23.8.1990 it should have immediately thereafter filed a second
execution petition, but instead it filed the second execution
petition only in 1994 which was dismissed on 18.8.1994.
Thereafter, again the Bank waited for 5 years and it was only on
1.4.1999 (sic 11.1.1999) that it filed its third execution petition.
We fail to understand why the Bank waited from 1990 to 1994
and again from 1994 to 1999 in filing its execution petitions.
Hence, it is the Bank which is responsible for not getting the
decree executed well in time.”
In the case before this Court, the claim made by the Bank was found to be
time-barred and to that this Court observed that while the equity is in favour of
the Bank, the law is not in favour of the borrower, however, since the claim is
time-barred, as the execution petition was barred by the limitation, this Court set
aside as such the execution petition.”
32. The Learned Counsel for the Appellant, points out the decision of the
Hon’ble Supreme Court in the Premanand and Ors. Vs. Mohan Koikal and Ors.
Reported in 2011 4SCC 266 wherein at paragraph 7 it is observed as under:-
“7. In our opinion, Rule 27(c) of the Rules is plain and clear.
Hence, the literal rule of interpretation will apply to it. No doubt,
equity may be in favour of the respondents because they were
selected earlier, but as observed earlier, if there is a conflict
between equity and the law, it is the law which must prevail. The

law, which is contained in Rule 27(c), it is clearly in favour of the
appellants. Hence, we cannot accept the submission of the
learned Senior Counsel for the private respondents. The
language of Rule 27(c) of the Rules is clear and hence we have
to follow that language.”
Hon’ble Supreme Court in PM Latha & Anr. V. State of Kerala & Ors., (2003)
3 SCC 541 at spl. Pg. 546 & 547 wherein at paragraph 13 it is observed as under:-
“13. Equity and law are twin brothers and law should be applied
and interpreted equitably but equity cannot override written are
settled law. The Division Bench forgot that in extending relief on
equity to BED candidates who were unqualified and yet allowed
to compete and seek appointments contrary to the terms of the
advertisement, it is not redressing the injustice caused to the
appellants, who were TTC candidates and would have secured a
better position in the rank list, to get appointment against the
available vacancies had BED candidates excluded from the
selections. The impugned judgement of the Division Bench is
both illegal inequitable and patently unjust. The TTC candidates
before us as appellants have been wrongly deprived of due
chance of selection and appointment. The impugned judgement
of the Division Bench, therefore, deserves to be set aside and of
the learned single judge restored.”

34. The Learned Counsel for the Appellant, cites the decision of the Hon’ble
Supreme Court in Messer Holdings Limited v. Shyam Madanmohan Ruia
Others, (2016)11 SCC 484 at spl. Pg. 501 wherein at paragraph 34 it is observed
as under:-
“34. Suit 1 is admittedly withdrawn, therefore, any order passed

during the pendency of the said suit by any Court (including this
Court) in any proceeding arising out of the said suit
automatically lapses with the withdrawal of the suit. A logical
consequence flowing from such lapsing of the orders is that any
act or omission of any party, to the said suit, either in pursuance
of or in obedience to such interlocutory orders, would be without
any legal efficacy.”
Hon’ble Supreme Court in Kalabharati Advertising v. Hemant Vimalnath
Narichania & Ors. reported in 2010 9 SCC at pg. 437, 446 and 451 wherein at
paragraph 15 and 35 it is observed as under: -
“15. No litigant can derive any benefit from the mere pendency
of a case in a court of law, as the interim order always merges
into the final order to be passed in the case and if the case is
ultimately dismissed, the interim order stands nullified
automatically. A party cannot be allowed to take any benefit of
his own wrongs by getting an interim order and thereafter blame
the court. The fact that the case is found, ultimately, devoid of
any merit or the party withdrew the writ petition, shows that a

frivolous writ petition had been filed. The maxim actus curiae
neminem gravabit, which means that the act of the Court shall
prejudice no one becomes applicable in such a case. In such a
situation, the court is under an obligation to undo the wrong done
to a party by the act of the Court. Thus, any undeserved or unfair
advantage gained by a party invoking the jurisdiction of the court
must be neutralised, as the institution of litigation cannot be
permitted to confer any advantage on a party by the delayed
action of the court [vide A.R. Sircar (Dr.) v. State of U.P.(1993
Supp. (2) SCC 734), Shivshanker V. U.P.SRTC (1995 Supp.(2)
SCC 726) Arya Nagar Inter College Vs. Sree Kumar Tiwary
((1997) 4 SCC 388), GTC Industries Ltd., v. Union of India
(1998) 3 SCC 376 and Jaipur Municipal Corpn. V. C.L. MIAHE
(2005) 8 SCC 423.”
“35. ‘Withdrawal’ means ‘to go away or retire from the field of

battle or any contest’ thus the word withdrawal is indicative of
the voluntary and conscious decision of a person. Therefore, if
the said writ petitioners (Respondent 1 to 5) have voluntarily
abandoned their claim withdrawing the said writ petition, they
cannot take any benefit of the orders passed by the High Court
or Statutory Authority in pursuance thereof. Once the foundation
is removed, superstructure is bound to fall. Interim Relief is
granted only in aid of and as ancillary to the main relief, which
may be available to the party at the time of final adjudication of
the case by the court. In case, the orders passed by the High
Court and consequently by the Corporation are accepted, to be

in effect even today, it would tantamount to allowing the writ
petition without any adjudication on the issues involved therein.”
36. The Learned Counsel for the Appellant, points out the decision of Hon’ble
Supreme Court in Assistant Commissioner, Commercial Tax Department,
Works Contract and Leasing Quota Vs. Shukla & Brothers reported in 2010 4
SCC at page 785 at spl. Pages 791, 93 wherein at paragraph 12, 13, 19 it is
observed as under: -
“12. In exercise of the power of judicial review, the concept of

reasoned orders/actions has been enforced equally by the foreign
courts as by the Courts in India. The Administrative Authority
and Tribunals are obliged to give reasons; absence whereof
could render the order liable to judicial chastisement. Thus, it
will not be far from an absolute principle of law that the Courts
should record reasons for their conclusions to enable the
appellate or higher courts, to exercise their jurisdiction
appropriately and in accordance with law. It is the reasoning
alone that can enable a higher or appellate court to appreciate
the controversy in issue in its correct prospective and to hold
whether the reasoning recorded by the court whose order is
impugned is sustainable in law and whether it has adopted the
correct approach to sub-serve the purpose of justice delivery
system, therefore, it is essential that the courts should record
reasons for their conclusions, whether disposing of the case at
admission stage or after regular hearing.

13. At the cost of repetition, we may notice, that this Court has
consistently taken the view that recording of reasons ‘is an
essential feature of dispensation of justice’. A litigant who
approaches the court with any grievance is entitled to know the
reasons for grant or rejection of his prayer. Reasons are the sole
of orders. Non-recording of reasons could lead to dual
infirmities; firstly, it may cause prejudice to the affected parties
and secondly, more particularly, hamper the proper
administration of justice. These principles are not only
applicable to administrative actions but they apply with equal
force and in fact, with a greater degree of precision to judicial
pronouncements. A judgment without reasons causes prejudice
to the person against whom it is pronounced, as that litigant is
unable to know the ground which weighed with the court in
rejecting his claim and also causes impediments in his taking
adequate and appropriate grounds before the higher court in the
event of challenge to that judgment. Now, we may refer to certain
judgments of this Court as well as of the High Courts which have
taken this view.
19. In the cases, where the courts have not recorded reasons
in the judgment, legality, propriety and correctness of the orders
by the court of competent jurisdiction are challenged in the
absence of proper discussion. The requirement of recording
reasons is applicable with greater rigour to the judicial
proceedings. The orders of the court must reflect what weighed
with the court in granting or declining the relief claimed by the

applicant. In this regard we may refer to certain judgments of
this Court.”
37. The Learned Counsel for the ‘Appellant’, points out the decision of the
Hon’ble Calcutta High Court in the Calcutta Municipal Corporation & Ors. Vs.
Paresh R. Kampani & Ors. reported in 1998 SCC OnLine Cal 38, wherein at
paragraph 4, it is observed as under:
“4. The learned Trial Judge, in our opinion, has rightly held
that the said order is not a reasoned order. The Hearing Officer
while disposing of the objection filed by an assessee is
statutorily obliged to pass a reasoned order. It is now well
settled principles of law that assignment of reason is also one
of the limbs of principles of natural Justice and an unreasoned
order is nullity particularly when an appeal lies therefrom.
When an unreasoned order is passed, even the Appeal Court
would feel great difficulty in considering the same in its
proper perspective."
38. The Learned Counsel for the Appellant adverts to the decision of the
Hon’ble Supreme Court in Kranti Associates Private Limited & Anr. Vs. Masood
Ahmed Khan & Ors. reported in (2010) 9 SCC 496, at Spl page 510 & 511
wherein at paragraph 47 it is observed as under:
51. Summarizing the above discussion, this Court holds:

a. In India the judicial trend has always been to record
reasons, even in administrative decisions, if such decisions affect
anyone prejudicially.
b. A quasi-judicial authority must record reasons in support

of its conclusions.
c. Insistence on recording of reasons is meant to serve the

wider principle of justice that justice must not only be done it
must also appear to be done as well.
d. Recording of reasons also operates as a valid restraint on

any possible arbitrary exercise of judicial and quasi-judicial or
even administrative power.
e. Reasons reassure that discretion has been exercised by the

decision maker on relevant grounds and by disregarding
extraneous considerations.
f. Reasons have virtually become as indispensable a
component of a decision making process as observing principles
of natural justice by judicial, quasi-judicial and even by
administrative bodies.
g. Reasons facilitate the process of judicial review by

superior Courts.
h. The ongoing judicial trend in all countries committed to

rule of law and constitutional governance is in favour of
reasoned decisions based on relevant facts. This is virtually the
life blood of judicial decision making justifying the principle that
reason is the soul of justice.
i. Judicial or even quasi-judicial opinions these days can be
as different as the judges and authorities who deliver them. All
these decisions serve one common purpose which is to
demonstrate by reason that the relevant factors have been
objectively considered. This is important for sustaining the
litigants' faith in the justice delivery system.
j. Insistence on reason is a requirement for both judicial

accountability and transparency.
k. If a Judge or a quasi-judicial authority is not candid

enough about his/her decision making process then it is
impossible to know whether the person deciding is faithful to the
doctrine of precedent or to principles of incrementalism.
l. Reasons in support of decisions must be cogent, clear and

succinct. A pretence of reasons or `rubber-stamp reasons' is not
to be equated with a valid decision making process.
m. It cannot be doubted that transparency is the sine qua non

of restraint on abuse of judicial powers. Transparency in
decision making not only makes the judges and decision makers
less prone to errors but also makes them subject to broader
scrutiny. (See David Shapiro in Defence of Judicial Candor
(1987) 100 Harward Law Review 731-737).
n. Since the requirement to record reasons emanates from

the broad doctrine of fairness in decision making, the said
requirement is now virtually a component of human rights and

was considered part of Strasbourg Jurisprudence. See (1994) 19
EHRR 553, at 562 para 29 and Anya vs. University of Oxford,
2001 EWCA Civ 405, wherein the Court referred to Article 6 of
European Convention of Human Rights which requires,
"adequate and intelligent reasons must be given for judicial
decisions".
o. In all common law jurisdictions judgments play a vital role
in setting up precedents for the future. Therefore, for
development of law, requirement of giving reasons for the
decision is of the essence and is virtually a part of "Due Process".
39. The Learned Counsel for the Appellant, places reliance upon the decision
of the Hon’ble Supreme Court in Biswasnath Prasad Khaitan Vs. New Central
Jute Mills, 1960 SCC OnLine Cal 148, wherein at paragraph 18, it is observed
as under:
18. In view of my finding that the Articles forbid a declaration

of further dividend the question whether there was an
explanatory statement to the notice is of less importance. In
view of the arguments of the counsel I propose in short to
discuss the rival contentions. Mr. Sen, counsel on behalf of the
plaintiff, did not contend that it was a ‘tricky’ notice but that the
notice was misleading and did not correctly set out the facts. He
relied on the decisions in Tiessen v. Henderson (2) reported in
(1899) 1 Ch. 861, Baillie v. Oriental Telephone & Electric Co.
(3) reported in (1915) 1 Ch. 503 and Kaye v. Croydon
Tramways (4) reported in (1898) 1 Ch. 358 in support of the

propositions that the notice did not fairly disclose the purpose
for which it was called and secondly that the notice of
extraordinary meeting should be one to enable the shareholder
to determine if he ought to attend it. In other words counsel for
the plaintiff contended that the test would be whether the real
fact was placed before the shareholders. Thirdly, counsel for
the plaintiff contended that there was no full and frank
disclosure of facts on which the shareholders were asked to
vote. Mr. Advocate- General relied on the unreported decision
of the Appeal Court in Appeal from Original Decree Nos. 142
and 143 of 1953. where all these cases were considered. Two
broad principles can be extracted from the authorities. First,
that notice must be fairly and intelligently framed and it must
not be misleading or equivocal. A benevolent construction
cannot be applied. Secondly, some matters must be brought
pointedly to the attention of the shareholders, for example,
where the directors are interested in a contract or matter which
is to be submitted to a meeting for confirmation or approval, it
appears to be desirable and in certain cases absolutely
necessary to disclose the fact in the notice convening the
meeting or in some accompanying circular. In the present case
counsel for the plaintiff did not allege ‘trickery’ or fraud but he
did contend that the notice was misleading in the sense that the
facts set out in the affidavit affirmed by Shyamlal Agarwal were
not there. I agree with the contention of counsel for the plaintiff.
I cannot help observing that if the company really wanted to put
up before the shareholders what the company stated in the

affidavit of Shyamlal Agarwal there was nothing to prevent
them from saying so. The test laid down by Kekewich, J., is that
“the man I am protecting is not the dissentient but the absent
shareholder.” Mr. Advocate-General contended that the notice
could not be characterised as misleading the shareholders. In
the present case the facts disclosed in the affidavit of Shyamlal
Agarwal, in my opinion, should have been disclosed before the
shareholders. On this ground also I am of opinion that the
plaintiff is entitled to succeed. I, therefore, make an order
declaring that the resolution passed at the extraordinary
general meeting on March 31, 1960 appearing in P.D. 5, D.D.
6 and also set out in the plaint in paragraph 12 declaring further
dividend in respect of the year ending 31st March, 1959 is
illegal, void and ultra vires the Articles of Association and the
Companies Act. There will be an injunction restraining the
defendants its servants and agents from impleading or giving
effect to the said resolution. Apart from this question no other
question was canvassed at the trial. The plaintiff is entitled to
the costs in this suit. Certified for two counsel.”
Hon’ble Bombay High Court in Narayanlal Bansilal Vs. Maneckji Petit
Manufacturing Co. Ltd. reported in 1930 SCC OnLine Bom 187, wherein at
paragraphs 3, 4, 16, 19, 22, 24, 26 & 27, it is observed as under:
“3. The only question in this case is of ??? sufficiency of the

notice convening an meeting. The meeting in question as

convened for the purpose of adopting new Articles of Association
and entering into an agreement with the managing agents of the
company. The case for the plaintiff is that the notice convening
the meeting and the circular accompanying it did not give the
shareholders information that important changes were in
contemplation. Consequently they did not attend the meeting, and
in their absence resolutions were passed bringing into force new
Articles of Association and sanctioning an agreement with the
managing agents by which the interests of the shareholders were
seriously affected to their detriment. It is admitted that three of
the directors are members of the firm of the managing agents
D.N. Petit Sons & Co., and it is argued that this fact was
concealed from the shareholders. The managing agents of the
company have admittedly been the agents for fifty years ever
since the mills were started but up till now there had been no
formal agreement between them and the company. It was at this
meeting that a formal agreement was entered into and the
Articles of Association were brought up to date. There is no doubt
that the alteration of the Articles of Association and the
agreement entered into with the managing agents are matters of
the greatest importance to the interests of the company. In the
course of the arguments in this case counsel had dealt in detail
with the numerous Articles which have been altered and the new
articles and the terms of the agency agreement. It will be
necessary to go into details, but put broadly, the changes in the
articles are alleged to increase the powers and lessen the
responsibilities of the directors and servants of the company

imposing a corresponding obligation upon the shareholders, and
with regard to the agreement with the managing agents the two
main points are first that an agreement for compensation in the
event of the mill being wound up has been made by which the
agents are entitled to receive as compensation their average
bonus for seven years prior to the date of winding up and what is
almost as important, a clause has been inserted by which in the
event of the mills changing hands, it is to be a condition of the
sale that the purchaser should employ the same managing
agents. The managing agents are also given the power to assign
or transfer the agency and the company is compelled to employ
as agents their transferees or assigns. Of course, if the
shareholders so desire, they can enter into any agreement they
like with the managing agents and we are only concerned with
the question of notice but in considering the sufficiency of notice
it is necessary to go into some of these details, especially in view
of the large number of decisions of the Court of Chancery and
the Court of Appeal in England which have been quoted in this
case. I shall begin by setting out the notice and the circular
accompanying it because in judging of the sufficiency of the
notice the terms of the notice and circular are material. The
notice Ex. A, states the resolutions which are to be put before the
shara-holders, viz. (1) the adoption of the new Articles of
Association and sanctioning the agency agreement referred to in
Article 147 of the new Articles and (2) alteration of the
provisions of the Memorandum of Association of the company by

authorizing the investment of the funds in banks. No objection
has been taken to the latter. The notice states that:
“A copy of the new Articles of Association together with a
copy of the said agency agreement may be inspected at the
registered office of the company at any time during office
hours prior to the date of the meeting.
4. This is a provision on which very great stress has been laid

by the learned counsel for the company. This notice was
accompanied by a circular Ex. B, and as the case depends to a
great extent on the terms of the circular, it will be necessary to
give the substance of it. The circular says:
“Accompanying this letter is a notice convening an
extraordinary general meeting of the company for 15th
February 1927, to consider and if thought fit to approve
the adoption of new Articles of Association in substitution
for and to the exclusion of all the existing Articles of
Association, to approve an agency agreement between the
company and the agents and to alter certain of the
provisions of the Memorandum of Association.
The share-holders of the company will no doubt
desire to know the reason for the proposed changes.
The company was incorporated and registered in
the year 1876 with the existing Articles of Association as
its regulations since when the Companies Act 1882 and the
Companies Act 1913 have been passed and considerable
alteration in the law of companies has been made.

Your directors have therefore thought it advisable
to bring the articles of association of the company more
up to date and into line with the provisions of the
Companies Act 1913 as amended up to 1920.
Your directors would assure you in the first instance
that no greater powers are conferred upon the Board by
the new Articles except as regards the proposal to increase
the power of investment of surplus funds, which is confined
at present to Government securities, so as to permit the
placing of surplus funds on deposit at interest with banks.
The principal alterations in the existing Articles are as

follows:
Provision is now made for the holding of shares in
joint names and also for the holding of as many shares as
may be desired in any one or more name or names. The
existing Articles oblige a member who desires to sell his
shares ??? offer them in the first instance to the Board of
Directors. This Article has now been omitted.
Under the existing Articles the voting power of
members was according to a graduated ???, but
opportunity has now been taken to follow the more usual
practice of giving to each member one vote upon a show
of hands and upon a poll one vote for every share held by
him.
Under the existing Articles, the vote of a member
being a lunatic, an idiot, or a minor cannot be recorded,

but under the new articles the more usual practice of
permitting a vote in such a case to be recorded by the
committee, curator bonis, or other legal guardian of the
member, has been adopted.
The opportunity has been taken of including in the
new Articles the usual provisions for the creation of a
Provident Fund and for granting pensions and annuities
to employees and exemployees of the company,
Opportunity has also been taken of incorporating in the
new Articles the usual provision for the appointment of a
debenture director, which appointment is usually now
required if and when a debenture loan is raised.
The agents of the company having ??? a desire to
have an agreement with the company which will fix the
duration of their agency and define more clearly their
powers, the directors recommend to the approval of the
share holders an agreement on the lines of the draft
agreement which has been prepared and has been
approved by the agents and is open to in ??? by any share-
holder at the register office of the company at any time
during office hours, when the draft new Articles of
Association can also be inspected.
Apart from the fixing of the duration of ??? agency
at 30 years from 1st January 1927, the only real difference
between the existing term of the agency and the proposed
agreement ??? be found in Cl. 17 which provides for the
payment of compensation to the agents in ??? event of the

company being wound up ??? for the purpose of
reconstruction or???. This is in accordance with the preset
day practice in Bombay, which practice ??? directors
consider should be followed in the ca of this company more
particularly having ??? to the long and valuable services
extern ??? over more than 50 years rendered by ???
agents and their predecessors in business to ??? company.
“As regards the proposed alteration in the
memorandum of ??? para, (o) and (p) of Cl. 3 have
become illegal and therefore inoperative by reason of
Section 55(1) of the Companies Act, 1913. Para. (n)
restricted the investment of surplus funds to Government
Securities. The directors are of opinion that this restriction
is too narrow under present day conditions and that batter
use can be made-of the surplus funds of the company if the
power of investment is enlarged so as to permit the surplus
funds to be placed on deposit at interest with banks.”
16. The directors therefore plainly put before the shareholders

the fact that the proposed agreement included a clause for
compensation and even the number of Cl. 17 is intimated to the
shareholders and it is stated in the preceding paragraph that the
proposed agreement is open to inspection by any shareholder at
the registered office of the company during office hours. I should
ordinarily regard this as sufficient notice of the proposed
agreement, but it is contended by the learned counsel for the
plaintiff that the circular should have stated that the

compensation proposed to be given was calculated on the
average commission for seven years. I am of opinion that
inasmuch as the question of compensation to the agents was
specifically brought to the notice of the shareholders, even the
clause in which it was to ??? found being stated, the omission to
state the amount of compensation, which is not a fixed amount
but dependent on the average commission for seven years
preceding the winding up, was not a fatal defect, and if that were
the only objection on this point I should have put aside this
objection as not sufficient in law to invalidate the notice in spite
of the ruling in Normandy v. Ind. Coope & Co., Limited, . There
are numerous other rulings to which I shall refer later, in which
it has been held that notices should not be too strictly construed.
Unfortunately the statement in the circular that this clause as to
compensation is the only real difference between the existing
terms of the agency and the proposed agreement is not strictly
correct in view of the clauses to which I have already referred in
the agency agreement. The commission remains the same. Cl. 4
of the agreement refers, to the powers of the managing agents in
conducting the business and affairs of the company, and I am not
prepared to hold, although the powers are more particularly
stated, that they go substantially beyond the powers in Article 99.
It is contended that Cl. 4(k), “to purchase and sell and for that
purpose to sign, endorse and transfer Government promissory
notes or other securities issued by the Government of India and
standing in the name of the company or any bonds of any public
authority and to collect and give receipts for the dividends or

interest from time to time due or to become due on any such
securities gives power to the managing agents to raise money,
but it is contended that it is not so. Cl. 10 of the proposed
agreement says:
“It shall be lawful for the said firm to assign this
agreement and the rights of the said firm hereunder to any person
firm or company having authority by its constitution to become
bound by the obligations undertaken by the said firm hereunder
and upon such assignment being made and notified to the
company the company shall be bound to recognize the person
firm or company aforesaid as the agents of the company in like
manner as if the name of such person firm or company had
appeared in these presents in lieu of the names of the partners of
the said firm and as if such persons firm or company had entered
into this agreement with the company and the company shall
forth with upon demand by the said firm enter into an agreement
with the person firm or company aforesaid appointing such
person firm or company the agents of the company for the then
residue of the term outstanding under this agreement and with
the like powers and authorities remuneration and emoluments
and subject to the terms and conditions as are herein contained.”
19. It is contended that by thus drawing the major portion of

their commission half -yearly the company is deprived of interest
on the amount. This, I think, is a minor point, but it is very
doubtful whether the clause in the circular, which says that the
only real difference between the existing terms of the agency and

the proposed agreement is Cl. 17 for the payment of
compensation, can be regarded as sustainable in view of the
omission to refer to the clauses regarding the power of
assignment of the managing agency during its continuance in the
same firm in the case of a transfer of the company. There is some
dispute as to whether this clause refers to sale or amalgamation.
It is not necessary to go into that. The cases on which the learned
counsel for the plaintiff has relied are: Normandy v. Ind, Coope
& Co., Ltd. to which I have already referred, Baillie v. Oriental
Telephone and Electric Co. Ltd., MacGonnell v. E. Prill & Co.,
Ltd., Tiessen v. Henderson, and Kaye v. Croydon Tramways
Company . The learned counsel for the company has argued that
the terms of the notice should not be strictly construed, and he-
refers to Palmer on Companies, pp. 166 and 168, at which the
learned author refers to Normandy v. Ind, Coope & Co., Ltd. as
being contrary to this proposition. He further refers to Young v.
South African and Australian Exploration and Development
Syndicate, Par-shuram D. Shamdasani v. Tata Industrial Bank
(Shah J.'s judgment), Henderson v. Bank of Australasia ,
Alexander v. Simpson , Grant v. United Kingdom Switchback
Baihvays Gompany , and his main submissions-are as follows:
1. The notice must be in conformity with the Articles of each
particular company.
2. Sufficiency of the notice must be decided with reference to
the particular circumstances of each case.
3. Where the notices have been challenged, there was some
arrangement for secret commission.

4. Except in Normandy v. Ind, Coope & Co., Ltd. the
proposed resolutions were never offered for inspection prior
to the meeting.
22. It was held that the notice did not give a sufficiently full
and frank disclosure to the shareholders of the facts upon which
they were asked to vote; and that the resolutions were invalid and
not binding upon the company. This was a case in which a sum
of upwards of £40,000 had been received by the directors in
respect of the subsidiary company, a fact which was not referred
to in the circular, and it was held by the Master of the Bolls that
if any attempt is to be made by the directors to get the sanction
of the shareholders, it must be made on a fair and reasonably full
statement of the facts upon which the directors are asking the
shareholders to vote, and that the notice coupled with the
circular was not frank, not open, not clear, and not in any way
satisfactory. In MacGomiell v. E. Prill & Co., Ltd. , it was held
that notice of a meeting of a company to increase or sanction the
increase of the share capital of a company is not sufficient if it
merely refers generally to a proposed resolution to increase the
share capital; it must show an intention to make the specific
increase embodied in the resolution that is actually passed. In
Tiessen v. Henderson it was held that notice of an extraordinary
general meeting must disclose all facts necessary to enable the
share-holders receiving it to determine in their own interest
whether or not they ought to attend the meeting, and pecuniary
interest of a director in the matter of a special resolution to be

proposed at the meeting is a material fact for this purpose. Kaye
v. Croydon Tramways Company was a case in which part of the
purchase-money of the company was to be paid not to the share-
holders but to the directors, and it was held that the notice was
artfully framed to mislead the share-holders. That is a very
extreme case. The learned counsel for the company has referred
to Young v. South African and Australian Exploration and
Development Syndicate in which there was a notice of a special
general meeting and thereby given in general terms notice of the
character of the business to be submitted to it. That seems to be
sufficient within Article 35, Table A; and besides that it was
apparent on the face of the notice that the intention was to
substitute new regulations, and the members of the company
were told that they were at liberty to inspect a copy of the
proposed regulations at the office of the solicitors of the
company, whose address was given, and it was held to be a
sufficient notice. Henderson v. Bank of Australasia only says that
the notice fairly and reasonably expressed to the share-holders
what matters were going to be discussed at the meeting. In
Alexander v. Simpson it is laid down that the test is, what is the
fair businesslike construction which businessmen in the position
of shareholders would place on the document when they received
it. Grant v. United Kingdom Switchback Bailtoays Company held
that the resolution of the general meeting was not invalidated by
the fact that the notice convening it did not suggest any reason
why the contract could not be carried into effect without the
sanction of a general meeting. In Parshuram D. Shamdasani v.

Tata Industrial Bank it was held by Shah, J., after a reference to
most of the cases to which I have referred (p. 1003 of 26 Bom.
L.R.):
“The net result is that where there is any secret agreement
or any interest of the directors in the agreement not disclosed in
the circular, or in the notice, the Court will view with strictness
any omission to refer to it in the notice or in the circular
accompanying the notice; and the omission to mention any secret
arrangement would constitute a serious defect in the notice. But
where no secret agreement is proved or suggested and where
there is no indication that there was anything to conceal the
Court will as far as possible take a liberal view of the terms of
the notice and will not upset the proceedings taken a notice for
some defect, which might have been avoided, but which was not
avoided on account of some honest mistake.”
24. In that case however it was held that there was no essential
matter which could be said to have been omitted. In this case the
real difficulty is that while the circular pointedly calls the
attention of the shareholders to the proposed arrangement for
compensation to the managing agents in the event of the company
being wound up, it refers to para. 17 of the proposed agreement
as containing the only real difference between the existing terms
of the agency and the proposed agreement. I hold that so far as
the question of compensation to the managing agents is
concerned, the share-holders had sufficient notice and the
omission to mention the amount of the compensation is not

sufficient to invalidate, the notice. The share-holders were put on
inquiry to see what the nature and extent of the proposed
compensation was. They were given an opportunity of inspecting
the resolutions to be proposed at the meeting, and if they did not
avail themselves of it and did not attend the meeting, that is their
own fault. But the difficulty arises from the fact that no reference
is made in the circular to the other alteration in the terms of the
agreement with the agents, viz., the power of assignment and the
compulsory continuance of the same agency by any company
which took over the business. And the question is whether the
omission to refer in this circular to these alterations renders the
notice insufficient. It might be contended that a shareholder
might approve of the proposal to compensate the managing
agents for the cessation of their interest, and therefore he might
not think it necessary to attend the meeting, but it does not
necessarily follow that he would approve of the clauses
regarding assignment and the compulsory continuation of the
agency in the event of a sale of the mill by the new proprietors,
and it might therefore be argued that he was misled by this
reference in the circular to Cl. 17 as constituting the only real
difference between the existing terms of the agency and the
proposed agreement. On the other hand it is quite clear that the
directors did give notice to the shareholders that there was to be
a change in the terms on which the managing agents were
working for the company by the introduction of an agreement
with them which contained one important clause regarding
compensation which might conceivably involve the company in a

large payment and therefore shareholders were put upon inquiry,
and given an opportunity of examining the proposed
memorandum of agreement. There is no question of any secrecy
here, because any shareholder who went to the company's office
to see the proposed memorandum of agreement with a view to
examine the proposals regarding compensation would in all
probability look at the other terms so that the other proposals
regarding assignment and the continuance of the agency would
be brought to his notice. I think myself it would have been better
if in the circular the directors in calling attention to Cl. 17, of the
proposed memorandum of agreement, had also called attention
to the clauses regarding the powers of assignment and the
compulsory continuance of the agency in all events. The question
is whether this is sufficient to invalidate the notice. There is no
question of a secret agreement here as in some of the cases above
quoted, but there is an interest of the directors in the agreement
which is not disclosed in the circular or notice, an interest apart
from the compensation clause. Now turning to the alterations in
the Articles of Association, they are of a minor character. It was
at one time contended that by the new Articles of Association the
directors were given power to raise money on behalf of the
company which they did not possess under the Articles of
Association, but that argument has had to be given up since
under Articles 75-A and 75 B of the old Articles and Cls. 3(k) and
3(1) of the old Memorandum of Association the power of raising
money by debentures was given to the directors: of p. 19 of the
old Articles, S. 75, Cl. (i). The learned counsel for the plaintiff

had to admit this was a complete answer to his argument on that
point. Various objections have been taken to the alterations in
the Articles of association, but they are really none of them of
very great importance. The one to which much argument has
been devoted is the question of the indemnity of the directors
under the old and the new Articles. Under the old Articles 85 and
86 and the new Articles 183 and 184 the exceptions to wilful acts
and defaults have been omitted, and the words wilful dishonesty
substituted. There is nothing about this in the circular. The
restrictions on the right of transfer, old Article 30, new Article
44, and the regulations as to the appointment of directors, old
Article 78, new Article 133, also the restrictions on the inspection
of accounts and discovery of trade secrets, Articles 161 and 180,
which are not in the old Articles, are all minor points, but the
new indemnity clauses undoubtedly go further than the old by the
omission of the clause as to wilful default, there being a
considerable difference in law between wilful negligence and
dishonesty, as laid down in In re Brazilian Rubber Plantations
Estates, Limited . It is further contended that the restriction on
transfer in Article 44, where the directors have a new power of
affecting the share-holder's rights and the right is again
restricted by Article 130, which, however requires 14 clear days'
notice of candidates for the office of director confer new powers.
The assurance in the circular that “no greater powers are
conferred upon the Board by the new Articles except as regards
the proposal to increase the power of investment of surplus
funds.”

26. However liberal a view is taken of the notice and circular,
and eliminating those of the changes in the Articles of
Association which are more or less of a formal character or such
as are usually found in modern Articles, there are two points,
first, alteration in the indemnity given to the directors and
officers of the company, and, secondly, as regards the agency
agreement the omission to mention the power of assignment and
the power conferred on the managing agents to insist on the
continuance of their agency in the event of a transfer, both of
which are, in my opinion, changes of which no notice was given
to the share holders, and are even proposals which the terms of
the circular might be said to conceal, and in that respect the
circular is misleading. To put the matter as simply as possible, if
the directors issue a circular in which they refer to certain
alterations, and say that the only important alteration is with
regard to cl, 10, whereas there are equally important alterations
in cl. Y, can it be said that the shareholders have sufficient; notice
of the proposed alterations in cl. Y? I do not think so.
27. The result is that I find on issue 1 that the notice was
insufficient, and consequently on issue 2 that the meeting was not
duly convened and the resolutions are not valid and operative.
The plaintiff will be granted the declarations and injunctions
sought in prayers (a) and (b) of the plaint together with costs of
the suit.”
41. The Learned Counsel for the Appellant, brings to the notice of this
Tribunal, the decision of the Hon’ble Madras High Court in V.G. Balasundaram

and Others Vs. New Theatres Carnatic Talkies Pvt. Ltd. and Others reported in
(1993) 77 Comp Cas 324, wherein at paragraph 29, 33 & 39, it is observed as
under:
“29. In two decisions of our High Court and the Patna High
Court respectively Self Help Private Industrial Estate Private
Ltd., In re, [1972] 42 Comp Cas 605 (Mad) and Parikh
Engineering and Body Building Co. Ltd., In re, [1975] 45 Comp
Cas 157, it has been held by two learned judges that for want of
proper or sufficient notice or other defect in procedure a special
resolution is not effective.
33. It is also seen that the petitioners sent a telegram on

January 5, 1981, itself. There is also a dispute as to what
happened on January 5, 1981, in the said meeting. It is seen from
the proceedings of the first respondent company under subject
No. 3 that according to the members as soon as this subject was
taken up Shri V.G. Sundar Raj moved a resolution that subject
No. 1 of the agenda to be deferred to another date and that the
same may be considered by the general body at the adjourned
meeting. The above said resolution was seconded by Sri V.G.
Muniraj. The chairman of the meeting Sri V.B. Padmanabhan,
the second respondent herein stated that the accounts have
already been passed by the board of directors, that this, meeting
has been called pursuant to an undertaking given in the High
Court and the proceedings before the High Court and that it is
not proper to defer the subject and that, therefore, the chairman

has stated that he was putting the resolution for adjournment to
vote. It is also stated in the minutes that the resolution for
adjournment was lost by only two members voting for the
resolution and four members voting against the resolution and
accordingly, the chairman declared the resolution as lost. At this
stage, Sri V.G. Sundar Raj, Sri V.G. Muniraj and Sri V.G.
Krishnaswamy Naidu (proxy for Sri V.G. Balasundaram) staged
a walk out from the meeting and thereupon it was resolved that
the profit and loss account for the year ended June 30, 1979, and
the balance-sheet as on that date and the reports of the board of
directors and the auditors be and they are thereby received,
adopted and approved. Shri V.B. Jagadeesan seconded the above
resolution and the resolution was then put to vote and declared
carried by the chairman on show of hands unanimously.
Likewise, subject No. 3 which relates to appointment of directors
resolved that Shri V.B. Padmanabhan, the second respondent,
was appointed as director of the company. The said resolution
was proposed by Mr. V.B. Jagadeesan and seconded by V.B.
Devarajan. It is stated in the minutes that at that stage Sri V.B.
Padmanabhan intervened and stated that it would not be proper
for him to be the chairman while considering the resolution
concerning his appointment as director and, therefore, he
stepped down from the chair. Again, Shri V.B. Padmanabhan
proposed and Shri V.B. Jagadeesan seconded that V.B.
Gopalakrishnan be voted to the chair unanimously. After Sri V.B.
Gopalakrishnan assumed the chair, the resolution relating to the
appointment of Sri V.B. Padmanabhan as director was put to vote

and declared carried by the chairman on show of hands
unanimously. At this stage, Sri V.B. Gopalakrishnan stepped
down from the chair and Sri V.B. Padmanabhan assumed the
chair, having already been elected to the chair and he moved the
following resolution:
(a) That Shri V.G. Sundara Raj be appointed as director of
the company.
(b) The said resolution was seconded by Sri V.B. Jagadeesan
and the resolution was then put to vote and declared and
carried by the chairman on show of hands by three members
voting for the resolution and Sri V.B. Gopalakrishnan voting
against the resolution.
(c) Sri V.B. Jagadeesan proposed another resolution,
proposing to appoint Sri V.B. Gopalakrishnan as director of
the company.
(d) The said resolution was seconded by Shri V.B. Devarajan
and then the said resolution was put to vote and declared and
carried by show of hands unanimously.
(e) The meeting terminated with a vote of thanks to the chair.
The minutes of the meeting was signed by the chairman of the
meeting.
39. Let me now deal with the validity of the meeting said
to have been held on June 11, 1973.”
Hon’ble Bombay High Court, in Firestone Tyre and Rubber Co. Vs. Synthetics

and Chemicals Ltd. and Others reported in 1969 SCC OnLine Bom 49, wherein
at paragraphs 68, 69 to 72, 77 & 81, it is observed as under:
“68. According to the plaintiffs the said notices ought to have

set out the nature of the concern or interest of the solicitor-
director in the matter of the appointment of the private company
for a further term as the sole selling agents of the company and
the correspondence which took place between the company and
the Company Law Board during 1965 and 1966, particularly the
said letter dated July 28, 1965, and June 15, 1966, from the
Company Law Board to the company. It was submitted that these
were material facts concerning the item of business to be
transacted at the said meetings and the non-disclosure, therefore,
in the explanatory statement to the said notices invalidates the
said notices. That the item of business to be transacted at the said
meetings was special business is not disputed. The questions to
be considered are whether the above facts were material facts
and if either of them was a material fact, the consequence of the
non-disclosure thereof in the explanatory statement. If the
solicitor-director was an interested or a concerned director, the
nature of his concern or interest in the further appointment of the
sole selling agents was a material fact which was required to be
disclosed in the explanatory statement, and this position is not
disputed. The contention of the contesting defendants, however,
is that the solicitor-director was not a concerned or an interested
director. This point has already been considered by me in
connection with the resolution of the board of directors at its

meeting on November 14, 1968, and I have already expressed the
prima facie conclusion reached by me that he had a concern or
an interest in this matter. The only question, therefore, which
remains to be considered in this connection is the consequence
of such non-disclosure. First, however, I will deal with the
question whether the correspondence with the Company Law
Board can be said to be a material fact concerning the business
to be transacted at the said meetings. Now, the first meeting was
for approving the private company's appointment as sole selling
agents for a further term. The second meeting, namely, the
meeting requisitioned by the plaintiffs, was for not approving the
said appointment. Any fact which would have a relevance or
bearing upon the approval or a non-approval of the said
appointment would, in my opinion, be a material fact concerning
the said items of business. The facts relating to this
correspondence may be briefly recapitulated from this angle. The
said letter dated July 28, 1965, was a show cause notice issued
by the Company Law Board under section 294(5) on the ground
that it appeared to the Company Law Board that the terms of
appointment of the private company were prejudicial to the
interests of the company. By this letter the company was required
to show cause why under section 295(5)(c) the terms and
conditions of the appointment of the private company should not
be varied. This matter was at that time considered so important
that a sub- committee of the directors was formed to consider it.
Ultimately, by its said letter dated June 15, 1966, the Company
Law Board decided not to take any further action in the matter

at that stage. The said communication, however, expressly stated
that:
“The Board would suggest, however, that at the time of the
renewal of the agreement with the sole selling agents in
1968, your company should bear in mind the views of the
Board which were communicated to you in their letter of
even number dated the 28th July, 1965, read with their
letter of even number dated the 18th September, 1965.”
69. It was submitted by the contesting defendants that this was

merely a suggestion and not a directive or an order and that the
proceedings commenced by the show-cause notice under section
294(5) having terminated, there was no obligation to disclose
this correspondence in the explanatory statement. This argument
cannot be accepted. Under section 294(5) the Central
Government has the power to require such information
regarding the terms and conditions of the appointment of the sole
selling agent as it considers necessary for the purpose of
determining whether or not such terms and conditions are
prejudicial to the interests of the company. Thereafter, if it is of
the opinion that they are prejudicial to the interests of the
company, it has the power to make such variations in those terms
and conditions as would in its opinion make them no longer
prejudicial to the interests of the company. If a company refuses
to furnish such information, the Central Government has the
power to appoint a suitable person to investigate and report on
the terms and conditions of the appointment of the sole selling

agents. Thus, the Central Government is conferred wide and
extensive statutory powers of control over the sole selling
agencies of companies and is constituted the statutory authority
to determine whether the terms and conditions of a sole selling
agency are prejudicial to the interests of the company or not.
Under section 10E these powers of the Central Government have
been delegated to the Company Law Board. Where, therefore, a
statutory authority empowered to decide whether the terms and
conditions of the appointment of a sole selling agent are
prejudicial to the interests of the company or not, had already
opined that certain provisions of the said agreement dated
September 24, 1963, were prejudicial to the interests of the
company and had expressly required the company to bear its
views in mind at the time of the renewal of the agency, it cannot
be said that the disclosure of the views of the Company Law
Board to the shareholders at the time of further appointment on
terms which contained the very features objected to by the
Company Law Board was not material. The object underlying
section 173(2) is that the shareholders may have before them all
facts which are material to enable them to form a judgment on
the business before them.
70. Any fact which would influence them in making up their
minds, one way or the other, would be a material fact under
section 173(2) and had to be set out in the explanatory statement
to the notice of the meeting. The views expressed by the Company
Law Board would have certainly played a part, and perhaps an
important part, in enabling the company's shareholders to make

up their minds whether to vote for approval of the further
appointment or not.
71. The contention that the matter was closed by the said letter
dated June 15, 1966, is too naive and is belied by subsequent
events. By its letter dated April 9, 1969, headed “Sole selling
agents; terms and conditions of appointment under section
294(5) of the Companies Act, 1956”, the Company Law Board
called upon the company to clarify how the renewed agreement
was proposed for approval of the shareholders without reference
to the views of the Board communicated to the company earlier.
The concluding paragraph of that letter stated:
“From the perusal of the renewed agreement, it appears,
prima facie, that the terms are prejudicial to the interests
of your company and this Board will have to examine to
what extent the terms and conditions require modification
or abrogation. You are, therefore, hereby informed that if
any such variation is ultimately made by the Company Law
Board, the terms of the said agreement would be effective
from 1st October, 1968.”
72. There was further correspondence pursuant to this letter
to which I will refer later.
77. It is alleged in the affidavits in reply filed on behalf of the

company and Tulsidas that the explanatory statements to the
notices of the meeting held on April 28, 1968, and April 29, 1968,
respectively, were placed and generally approved at the board
meeting held on March 27, 1969, at which Reighley was also

present, the suggestion being that Reighley and through him the
plaintiffs had approved both the said explanatory statements. It
was submitted that even in their requisition dated
March 17, 1969, for calling an extraordinary meeting, in the
explanatory statement
which the plaintiffs required to be included in the notice
convening such meeting, they
had not required the fact either of the interest or concern of the
solicitor-director or
the said correspondence with the Company Law Board to be set
out. Now, when one
turns to the minutes of the board meeting held on March 27,
1969, it is apparent that
the only discussion about the explanatory statements was with
respect to the requisitionists' meeting, when the solicitor-director
pointed out that the statement of facts set out in the requisition
should be sent to the shareholders with the notice of the
requisitioned meeting and, as the said statement was silent
regarding the directors' interests in the resolution, the same
should be added. There is no mention in the minutes of the
explanatory statement in respect of both the said meetings being
placed before or generally approved by the board as alleged.
Further, by their said requisition dated March 17, 1969, the
plaintiffs did not set out the whole of the explanatory statement
to be incorporated in the notice. What they did was to make a
request that in the explanatory statement which would be
annexed to the notice the statement set out by them should be

included. They were thus anxious that certain facts should be
included and not that they did not want other material or relevant
facts to be excluded. It is the duty of the company acting through
its board to incorporate in the explanatory statement all material
facts concerning the item of special business to be transacted at
a meeting. At the said board meeting held on March 27, 1969,
one of the resolutions passed was that the secretary of the
company should send out notices of the said two meetings
together with the explanatory statements in consultation with the
solicitors of the company. This shows that neither the
explanatory statements nor their drafts thereof were placed
before the board meeting, much less approved.
81. This again is a misleading statement, for the relevant and

important words in the Company Law Board's communication,
namely, that “your company should bear in mind the views of the
Board which were communicated to you in their letter of even
number dated 28th July, 1965, read with their letter of even
number dated 28th September, 1965”, were omitted and
substituted by dots, thus suggesting that the Company Law Board
had no objection to the renewal of the agreement in the same
form in 1968. In my opinion, this omission is deliberate and made
with the intention to mislead, particularly in view of the letter
dated April 9, 1969, from the Company Law Board to which I
have already referred above, which letter was certainly known to
Tulsidas but most certainly not known to the other shareholders
of the company. This statement of the private company appeared

in the newspaper “Indian Express” of April 15, 1969, and in the
newspaper “Financial Express” of April 16, 1969, that is, after
the receipt of the said letter of April 9, 1969. Secondly, in the
light of what was stated in the said communication from the
Company Law Board of June 15, 1966, the statement that the
Company Law Board had cleared the terms of the sole selling
agency was hardly a fair or a true statement. All that the
Company Law Board did was to say that it had decided not to
take any further action under section 294(5) at that stage but had
clearly indicated that unless the objections raised by the
Company Law Board were taken into account at the time of the
renewal of the agreement, further action would be taken. The
shareholders had thus before them a conflicting picture and at
least with respect to the relevant facts a misleading picture as
presented by the Kilachand group and those supporting it. The
plaintiffs' objection to the validity of the notice, therefore, cannot
be dismissed so lightly on the ground of their own knowledge of
its infirmity as contended by the contesting defendants. On the
contrary, in my opinion, the plaintiffs' objections are well-
founded and, consequently, the said notices and meetings,
particularly the notice for the meeting of the 28th April and the
meeting held on that day, and the resolution passed at that
meeting are invalid. Closely connected with this point is the
objection of the plaintiffs with reference to the non-disclosure of
the Company Law Board's said letter of April 9, 1969, to the
shareholders at the meeting of the 28th April. Tulsidas as the
chairman of the board of directors took the chair at the said

meeting of the 28th April. It was submitted on behalf of the
plaintiffs that, since Tulsidas was vitally interested in the said
resolution, he deliberately suppressed from the shareholders the
receipt of the said letter so as to keep back from them the
knowledge that the Company Law Board was objecting to the
said further appointment. Tulsidas's answer is to be found in
paragraph 15 of his affidavit-in-reply affirmed on August 14,
1969. The relevant portion is:
“I say that by the said letter, the Company Law Board only
sought clarification from the 1st defendant company which
was given by the 1st defendant company by its letter dated
22nd April, 1969. I say that there was no necessity for the
said letter dated the 9th April, 1969, being circulated to
the board of directors of the 1st defendant company as the
same had been adequately dealt with and, as no further
communication had been received from the Company Law
Board, the said letter dated the 9th April, 1969, was dealt
with in the ordinary course after consulting the solicitors
of the 1st defendant company. I deny that the said letters
dated the 9th April, 1969, and 22nd April, 1969, were
wrongfully or with mala fide intention suppressed as
alleged. I say that the said letter and the reply was placed
at the first board meeting of the 1st defendant company
held thereafter.”
43. The Learned Counsel for the Appellant, adverts to the decision of the
Hon’ble Calcutta High Court in Asansol Electric Supply Co. and others Vs.

Chunnilal Daw reported in AIR 1972 Cal 19, wherein at paragraphs 34 to 38, it
is observed as under:
“34. In the instant case, the resolution to the effect that the post
of Supervisor was to be abolished and that Chunnilal Daw was
to be appointed a store-in-charge from May 1, 1963 and that he
ceased to hold and to continue to hold his present office as store-
in-charge of the company with effect from May 1, 1963 was never
notified to the shareholders. Accordingly for default in
compliance with the mandatory provisions of Section 172 of the
Act the said resolution cannot but be held as invalid and void. It
may be noted that resolutions which were notified to the
shareholders were not moved at all and it has not been and
cannot be argued that the impugned resolutions were
amendments to the resolutions notified as indeed they are not so
nor claimed as such.
35. Mr. Banerjee has drawn my attention to a decision of the

Court oil Appeal in re: Trench Tubeless Tyre Co. 1900-1 Ch.
408. In this case a resolution for voluntary winding up of the
company by special resolution was legally passed. The notice of
the confirmatory meeting included the appointment of a named
person as liquidator; at the meeting the resolution for the
appointment of the named liquidator was dropped and another
person was appointed liquidator without further notice. This
appointment was objected to by some debenture-holders but the
Court of appeal overruling the objection held that:

“When a resolution for the voluntary winding-up of a
company has been passed at a meeting called upon proper
notice any one can at that meeting either with or without
notice, propose the appointment of a liquidator ......”
Everyone connected with companies should know that, as

soon as a resolution for voluntary liquidation has been passed,
the appointment of liquidator can be proposed and carried.”
36. The above decision was cited in support of the validity of

the impugned resolution.
37. It does not clearly appear from the above decision whether
there was any mandatory provision in the statute regarding
appointment of a liquidator after a voluntary resolution for
winding up is passed. In case of the Companies Act of our
country, the provisions are expressly mandatory. In case of
companies incorporated or deemed to be so incorporated under
the Companies Act, which are accordingly bodies created by the
statute, there is this express obligation provided in the Section
172 of the Act before a resolution can be adopted. The language
of the obligation in Section 172 as already observed, clearly
indicates its mandatory nature and accordingly the non-
compliance will have the fatal consequence of rendering the
resolution void and ultra vires. In the eye of law, such resolution
is to be deemed as being never in existence.
38. Such an event took place when the company, in the instant
case, purported to pass a resolution which was not at all notified

in gross violation of the mandatory obligations under the statute.
The resolution impugned in the suit is accordingly void and ultra
vires and has no existence in law. The plaintiff accordingly
became entitled to a declaration prayed for in prayer (a) of the
plaint. As consequential reliefs the plaintiff is also entitled to
further reliefs as decreed by the courts below.”
44. The Learned Counsel for the Appellant, falls back upon the decision of the
Hon’ble Gujarat High Court, in Mohanlal Ganpatram and another Vs. Shri
Sayaji Jubilee Cotton and Jute Mills Co. Ltd. and others reported in AIR 1965
Guj 96, wherein at paragraph 60, it is observed as under:
60. It is, therefore, clear that regard must be had to the whole
scope and purpose of the statute for the purpose of determining
whether the statute is mandatory or directory. Judged by that test,
the conclusion is irresistible that Section 173 enacts a provision
which is mandatory and not directory. The object of enacting
Section 173 is to secure that all facts which have a bearing on
the question on which the shareholders have to form their
judgment are brought to the notice of the shareholders so that the
shareholders can exercise an intelligent judgment. The provision
is enacted in the interests of the shareholders so that the material
facts concerning the item of business to be transacted at the
meeting are before the shareholders and they also know what is
the nature of the concern or interest of the management in such
item of business, the idea being that the shareholders may not be
duped by the management and may not be persuaded to act in the

manner desired by the management unless they have formed their
own judgment on the question after being placed in full
possession of all material facts and apprised of the interests of
the management in any particular action being taken. Having
regard to the whole purpose and scope of the provision enacted
in Section 173 I am of the opinion that it is mandatory and not
directory and that any disobedience to its requirements must lead
to nullification of the action taken. If, therefore, there was any
contravention of the provisions of Section 173, the meeting of the
Company held on 5th September, 1961 would be invalid and so
also would the resolution passed at that meeting be invalid. Mr.
C.C. Gandhi and the learned Advocate General, therefore,
contended that there was no non-compliance with the
requirements of Section 173. Non-compliance with the
requirements of Section 173 was alleged on behalf of the
petitioners in three respects. It was first alleged that the
agreement of sale between the Company and Bharat Kala
Bhandar Limited was not available for inspection to the
shareholders and the time and place where the said agreement
could be inspected was not specified in the explanatory
statement. This contention was based on sub-section (3) of
Section 173. But that sub-section applies only where the item of
business consists of according of approval to any document by
the meeting. In the present case the item of business before the
meeting of the Company held on 5th September, 1961 was not
according of approval by the meeting to the agreement of sale
between the Company and Bharat Kala Bhandar Limited. The

item of business was whether the undertaking of the Company
should be sold to Bharat Kala Bhandar Limited for the price of
Rs. 11,40,000/- on certain terms and conditions. Whether there
was already an agreement between the Company and Bharat
Kala Bhandar Limited was immaterial. It was equally immaterial
whether the agreement was oral or in writing. All that the
meeting was concerned with was whether to accord consent to
the sale of the undertaking by the Company to Bharat Kala
Bhandar Limited. The agreement of sale between the Company
and Bharat Kala Bhandar Limited was not required to be placed
for approval of the meeting. Sub-section (3) of Section 173 had,
therefore, no application and there was accordingly no non-
compliance with the requirements of that sub-section.”
45. The Learned Counsel for the Appellant, refers to the ‘order of the Company
Law Board’, Principal Bench, New Delhi dated 29.10.2003(vide CP No. 40 & 41
of 2002) between Kishore Kundan Sippy and Ors. vs Samrat Shipping and
Transport Systems Pvt. Ltd. and Ors. reported in MANU/CL/0028/2003,
wherein at paragraph 18 to 24, it is observed as under:
“18. These observations from the four cases referred to above

apply to Section 397 also which is almost in the same words as
Section 210 of the English Act, and the question in each case is
whether the conduct of the affairs of a company by the majority
shareholders was oppressive to the minority shareholders and
that depends upon the facts proved in a particular case. As has
already been indicated, it is not enough to show that there is just

and equitable cause for winding up the company, though that
must be shown as preliminary to the application of Section 397.
It must further be shown that the conduct of the majority
shareholders was oppressive to the minority as members and this
requires that events have to be considered not in isolation but as
a part of a consecutive story. There must be continuous acts on
the part of the majority shareholders, continuing up to the date
of petition, showing that the affairs of the company were being
conducted in a manner oppressive to some part of the members.
The conduct must be burdensome, harsh and wrongful and mere
lack of confidence between the majority shareholders and the
minority shareholders would not be enough unless the lack of
confidence springs from oppression of a minority by a majority
in the management of the company's affairs, and such oppression
must involve at least an element of lack of probity or fair dealing
to a member in the matter of his proprietary rights as a
shareholder. It is in the light of these principles that we have to
consider the facts in this case with reference to Section 397.
19. The main plank of the appellants case to prove oppression is

the agreement of July 27, 1954 between himself and Patnaik and
Loganathan. At that time he was not a member of the Company.
It is not disputed that the Company was not a party to that
agreement and is thus strictly speaking not bound by its terms.
But even apart from this strict legal aspect of the matter, let us
see what exactly the agreement provides. At that time Patnaik
and Loganathan groups held shares of the value of Rs 21 lakhs

in the Company, and the main provision of the agreement is that
the share capital would be increased and the appellant would be
given shares of the face value of Rs 10,50,000 so that his holding
should be equal to the holdings of the other two groups. It also
provides that the three groups would have an equal number of
representatives on the Board of Directors and the appellant
would be its Chairman. Other provisions of the agreement refer
to matters of detail to which it is unnecessary to refer. It will be
seen, however, that there is no provision in the agreement as to
what would happen if and when the share capital was actually
increased beyond the increase envisaged at the time of the
agreement. There is also no provision in the agreement to the
effect that the articles of association of the private company as it
then was would be amended suitably to bring the provisions of
the agreement with respect to shareholding and the Board of
Directors into line with the agreement. Thus there is nothing in
the agreement about the future in the matter of allotment of
shares in case capital was actually increased thereafter. In this
connection our attention is drawn to the fifth term of the
agreement which is in these terms:
“Ordinary shares of the face value of Rs 4 lakhs held by

the French company (Rs 3,75,000) and Mr Rath (Rs
25,000) will continue to be held by them as heretofore, and
none of the parties hereto will have any interest therein so
that the shareholding in the Company of all the three

parties hereto will remain equal and in the same
proportion.”
It is urged that this term shows that the intention was that the
shareholding of the three groups would remain equal for ever.
We are not prepared to read this implication in this term. It was
easy to provide in the agreement that whenever capital was
actually increased, it would be divided equally between the three
parties thereto. In the absence of such a provision we do not think
that the fifth term is capable of the interpretation which is put on
it on behalf of the appellant. It only deals with the shares worth
Rs 4 lakhs held by the other two persons and provides that
besides those shareholdings capital shares would be held equally
by the three parties. Therefore as we read the agreement we
cannot come to the conclusion that it provides that if in future
there was an actual increase in capital that will necessarily be
shared equally by the three parties.
20. However, it is said that the conduct of the three parties

later on shows that when there was actual increase of capital to
Rs 61 lakhs sometime after July 1954, this increase was shared
equally by the three parties and further when Mr Rath sold his
holdings in the Company they were purchased equally by the
three parties so much so one odd share out of 250 shares was
held by the three parties jointly. This is undoubtedly so, and does
give some colour to the argument that the three parties
concerned in the agreement intended that their shareholdings
should remain equal even later. But this intention cannot be said

to bind the Company, muchless so when the Company was not
bound strictly speaking even by the express terms of the
agreement. So far as the Company is concerned, it was free to
dispose of shares as the directors or the shareholders in general
meeting considered proper without regard to this agreement.
21. Another element came into the picture in January 1957

when the Company was converted into a public limited company.
It is obvious that a public limited company was even much less
bound by the agreement of July 1954 as compared to the private
company. We have already pointed out that even when the
Company was private its articles of association were not
amended to bring them into line with the agreement and that
shows that the agreement was only between two groups of
shareholders and Jain with respect to the state of affairs as it was
at the time of the agreement. When the Company became a public
limited company and it was decided to issue new shares of the
value of Rs 39 lakhs the question of allotment of these shares
arose. By then some differences had developed between the three
groups. The appellant wanted the shares to be allotted to the
existing shareholders while the Patnaik and Loganathan groups
wanted the matter to be decided by a general meeting as
evidenced by what happened in the meeting of the Board of
Directors dated March 1, 1958. It appears that the decision to
issue new shares was taken sometime in 1956 when the Company
was a private company. At that time the authorised capital was
rupees one crore though only Rs 61 lakhs had been issued. The

fresh issue of Rs 39 lakhs worth of shares was thus intended to
bring the subscribed capital up to the limit of the authorised
capital. The application to the Controller of Capital Issues was
made for that purpose on September 17, 1956. At that time the
intention was that the issue would be private and would be made
to the existing shareholders, directors and/or their nominees.
This was bound to be so as the Company was then private. As,
however, the Company wanted a loan from the Industrial
Finance Corporation and as that Corporation would only grant
loans to a public company, the Company was converted into a
public company, as already indicated, in January 1957.
22. The contention of the appellant, however, is that when the

share capital was decided to be increased by fresh issue within
the limit of rupees one crore, Regulation 42 of the First Schedule
to the 1913 Act was in force and that regulation required that
direction to the contrary as to allotment of shares should be given
by the resolution sanctioning increase of share capital. This was
however not done at the time when the authorised share capital
was decided to be increased in 1954 and consequently the new
shares had to be allotted to the existing shareholders under
Regulation 42. At that time, however, the Company was private
and the shares had to be issued to the existing shareholders and
no question of any direction to the contrary arose if the Company
was to retain its private character. The sanction of the Controller
of Capital Issues came in December 1957 when the Company had
become a public limited company, and the question of allotment

arose thereafter. By that time the Act (i.e. the 1956 Act) had been
passed and Regulation 42 of the First Schedule to the 1913 Act
was no longer in force. Instead it had been replaced by Section
81 of the Act, which provides that “where at any time subsequent
to the first allotment of shares in a company, it is proposed to
increase the subscribed capital of the company, by the issue of
new shares, then, subject to any direction to the contrary which
may be given by the company in general meeting and subject only
to those directions, such new shares shall be offered to the
persons who at the time of the offer are holders of equity shares
of the company, in proportion as nearly as circumstances admit,
to the capital paid up on those shares at that time”. Further sub-
section (3) of Section 81 provides that the section shall not apply
to a private company. Thus Section 81 specifically applies to
public companies only and comes into play when subscribed
capital (as distinct from authorised capital) has to be increased.
Therefore when the question of actually issuing new shares arose
after the sanction of the Controller, Regulation 42 was no longer
in force as it had been repealed, and action had to be taken in
accordance with Section 81 of the Act. Section 81 does not
require that direction to the contrary must be given by the
resolution sanctioning the increase of share capital as under
Regulation 42 of the First Schedule to the 1913 Act.
Consequently it was open to the public company in 1958 when it
proposed to increase the subscribed capital after the sanction of
the Controller to act under Section 81 and this was what was
done by the resolution of March 28, 1958 at the general meeting.

The general meeting decided that new shares should not be
issued to the existing shareholders but should be issued to others
privately. The resolution of March 29, 1958 was in accordance
with the law as it stood when it was passed and cannot be said to
be vitiated in any way.
23. It is however urged that the notice for the general meeting
of the 29th March, 1958 was not in accordance with Section 173,
and so the proceedings of the meeting must be held to be bad.
This objection was however not taken in the petition and we have
therefore not permitted the appellant to raise it before us, as it is
a mixed question of fact and law. We may add that, though the
objection was not taken in the petition, it seems to have been
urged before the appeal court. Das, J. has dealt with it at length
and we would have agreed with him if we had permitted the
question to be raised. This attack on the validity of what
happened on March 29, 1958 must thus fail.
24. We have already said that the public company which

came into existence in 1957 was not bound by the agreement of
1954 and could offer shares to such persons as it decided to do
in general meeting in accordance with Section 81. The mere fact
that in the meeting of March 29, 1958 it was decided to offer
shares to others and not to the existing shareholders would not
therefore necessarily mean oppression of the minority
shareholders. The majority shareholders were not bound to
accept the view of the minority shareholders that new shares
should be allotted only to the existing shareholders. It also

appears that the Patnaik group was afraid at the time when the
new shares were being issued that as they had no money the
appellant group would take up the entire new issue and would
thus obtain majority control of the Company. This they wanted
to avoid and that is why the new issue was resolved in general
meeting to be issued to others and not to the existing
shareholders. If this was the reason why new shares were not
issued to the existing shareholders it can hardly be said that the
action of the majority shareholders in passing the resolution
which they did on March 29, 1958 was oppressive to the
minority shareholders. The matter would have been different if
the seven persons to whom shares were eventually allotted in
July 1958 were benamidars or stooges of the Patnaik or
Loganathan group, for in that case it may be said that these two
groups forming the majority in the general meeting had acted
fraudulently and unfairly by depriving the appellant of what he
would have got under Section 81. But there can be no doubt that
the seven persons to whom the shares were eventually allotted
are respectable persons of independent means. There is nothing
to show that they were stooges or benamindars of the Patnaik
and Loganathan groups. The action of the majority
shareholders in allotting the new shares to outsiders and not to
the existing shareholders cannot therefore in the circumstances
be said to be oppressive of the appellant and his group.”
46. The Learned Counsel for the Appellant, adverts to the decision of the
Hon’ble High Court of Bombay in Centron Industrial Alliance Ltd. vs Pravin

Kantilal Vakil & Anr. reported in 1985(57) Comp. cases 12 Bom wherein at
paragraph 4, 24, 25 it is observed as under:-
4. “In order to consider whether an injunction as prayed for

can be granted or not, it is necessary to consider the nature of
the requisition which has been received by the petitioner-
company and the purpose for which the requisition is made. The
resolution which is proposed to be considered at the
requisitioned meeting is in two parts. The first part of the
resolution calls upon the company to renegotiate with M/s.
Brooke Bond India Ltd. and/or to examine alternate schemes in
the interest of the company. The main part of the resolution,
however, calls upon the company to withdraw Company Petition
No. 84 of 1981 (See [1984] 55 Comp Cas 731 (Bom)). The main
purpose of requisitioning the meeting of shareholders is to
compel the company to withdraw Company Petition No. 84 of
1981 (See [1984] 55 Comp Cas 731 (Bom)) which is a petition
for sanctioning the scheme of amalgamation. The resolution
itself makes it quite clear that unless Company Petition No. 84 of
1981 is withdrawn, the company cannot either renegotiate with
M/s. Brooke Bond India Ltd. or examine any alternative schemes.
It was strongly argued by Mr. Bhabha, the learned counsel for
the opponents, that the requisitioned meeting has been called
mainly for the purpose of considering alternative schemes which
may be beneficial to the company. On a perusal of the said
resolution and the explanatory statement attached to it, it
becomes quite clear that the requisitionists have not put forth

before the shareholders any alternative scheme whatsoever. The
explanatory statement sets out the following:
(i) That one of the shareholders of the company, Mr.

Joseph Sabastian D'Mello has filed an affidavit setting out
the facts and figures for the proposed scheme of
amalgamation with M/s. Brooke Bond India Ltd. as not
fair and equitable to the shareholders of the company.
Under sub-paras. (a) to (e), the explanatory statement sets
out why, according to the requisitionists, the scheme of
amalgamation is not beneficial to the shareholders of the
petitioner-company.
(ii) In the next paragraph, it is stated that the final

sanctioning of the scheme will not be granted before
September, 1982, and this delay is very long. It then sets
out that the company should either renegotiate the terms
of merger with M/s. Brooke Bond India Ltd. or it should
examine any alternative course of action. There is nothing
in this explanatory statement which would show either that
there are any alternative proposals more beneficial to the
company, or that there is any possibility of renegotiation,
with M/s. Brooke Bond India Ltd. Quite clearly, the
purpose of requisitioning the meeting of the shareholders
is to get rid of the company petition which is pending
before this court for considering the scheme of
amalgamation with M/s. Brooke Bond India Ltd.

24. Lastly, learned counsel appearing for the opponents and
for the secured creditors have urged that the requisitioned
meeting has been called to consider alternative schemes. Even if
I accept this submission, it is clear from the requisition that no
alternative schemes are being put before the shareholders at the
requisitioned meeting. The resolutions which are proposed to be
moved themselves do not refer to any specific alternative scheme.
In the explanatory statement annexed to the requisition by the
requisitionists, there is no reference to any specific alternative
proposal. The explanation is confined mainly to pointing out in
very vague and general terms why, according to the
requisitionists, the Brooke Bond Scheme should not be approved.
The requisitionists have not put forth any alternative or better
scheme for the consideration of the shareholders at the
requisitioned meeting. If the purpose of calling the requisitioned
meeting is for the shareholders to consider an alternative
proposal which may be more beneficial to the company, that
purpose is not going to be served by calling the requisitioned
meeting. It has been argued before me that in the 30th annual
report of the company for the year ending December 31, 1980, it
has been mentioned that a modified proposal to lease the
company's factory at Aurangabad to M/s. Harbans Lal Malhotra
and Sons Ltd. had again been revived and that this has been
forwarded to the solicitors and chartered accountants for advice.
In the 31st annual report of the company for the year ended
December 31, 1981, it has been stated that a proposal to lease
the company's undertaking by Harbans Lal Malhotra & Sons

Ltd., which has been dealt with in the last annual report, has not
been further considered in the light of legal advice that such a
scheme of leasing would also require the approval of the
Government of India under the MRTP Act. Learned counsel for
the opponents and for the secured creditors have submitted that
in view of the statements made in the two annual reports, it must
be presumed that the shareholders knew what was the alternative
scheme; and, hence, in the requisition or in the explanatory
statement, it was not necessary to set out any alternative scheme.
This contention cannot be accepted. In the first place, I have not
been shown in either of the two annual reports in question, the
alternative scheme of Harbans Lal Malhotra and Sons Ltd. set
out in detail anywhere. Secondly, in the explanatory statement,
there is not even a reference to the proposal of Harbans Lal
Malhotra and Sons Ltd. If the purpose of calling the requisitioned
meeting was to consider the scheme proposed by Harbans Lal
Malhotra and Sons Ltd., it should have been so stated. The
explanatory statement, in my view, is extremely vague and
somewhat tricky. In fact, the explanatory statement is insufficient
and misleading. If this is so, then the requisition for calling the
meeting must be considered as bad in law. In this connection,
reference may be made to the decision in the cases of Laljibhai
C. Kapadia v. Lalji B. Desai, [1973] 43 Comp Cas 17 (Bom) and
Firestone Tyre and Rubber Co. Ltd. v. Synthetics and Chemicals
Ltd., [1971] 41 Comp Cas 377 (Bom). The explanatory statement
which is required to be annexed under s. 173 is for the purpose
of ensuring that all facts which have a bearing on the question

on which the shareholders have to form their judgment are
brought to their notice. If this requirement is not complied with
and all relevant facts in the present case, and the alternative
schemes are not put before the shareholders fairly, then the
resolutions will become bad in law. Calling such requisitioned
meeting, assuming that the requisitioned meeting is to consider
alternative schemes, will, in any case, be bad in law.
25. To sum up, the requisitioned meeting which is being called

is not to consider matters which affect the company's
management or which affect only the company and its members.
In view of the several features of the meeting requisitioned in the
present case, which distinguished it from ordinary requisitioned
meetings, this is a fit case where shareholders can be prevented
from holding the requisitioned meeting.”
47. The Learned Counsel for the Appellant, cites the decision of the Hon’ble
Supreme Court in Dale and Carrington Invt. (P) Ltd. and Ors. Vs P.K.
Prathapan and Ors. reported in 2004 Supp.(4) SCR at pg. 334 wherein at
paragraph 11, 16 it is observed as under:-
11. “This is the main issue which arises for consideration in

this case. As already noted Ramanujam who was the Managing
Director of the company got allotted 6865 equity shares to
himself in a meeting of the Board of Directors of the company
alleged to have been held on 24th October, 1994. Again on 26th
March, 1997 he managed to get allotted further 9800 equity

shares to himself. Prathapan has challenged these allotments of
shares in favour of Ramanujam as acts of oppression on the part
of Ramanujam, the Chairman and Managing Director of the
company for which he filed a petition under Sections 397 and 398
of the Companies Act before the Company Law Board. A doubt
has been cast about whether the alleged meetings in which
additional Equity shares were allotted to Ramanujam were held
at all. In this behalf the following facts are noticeable:-
(a) The appellants have filed a photocopy of the minutes
of the alleged meeting of the Board of Directors said to
have taken place on 24th October, 1994. As per the
photocopy the minutes appear to be signed by Ramanujam
as Chairman. The presence of Suresh Babu as a Director
of the Company has been shown in the minutes. However,
there is no evidence of presence of Suresh Babu in the said
meeting. Article 36 of the Articles of Association of the
company requires that a notice convening the meetings of
the Board of Directors shall be issued by the Chairman or
by one of the Directors duly authorized by the Board in
this behalf. Suresh Babu filed an affidavit in the
proceedings before the Company Law Board wherein he
has categorically stated that at no point of time he was
involved in the affairs of the company and in running the
business of the company. Further he has stated in the said
affidavit that at no point of time he was informed that he
had been appointed as Director of the company. He had
never received any notice of any Board Meetings nor had

he ever attended any Board meeting. In view of this
categorical denial by Suresh Babu about attending any
meetings of the Board of Directors of the company, it was
incumbent on the part of Ramanujam who was the
Chairman and Managing Director of the company and
was in possession of all the records of the Company, to
place on record a copy of a notice calling a meeting of the
Board of Directors in terms of Article 36. No copy of the
notice intimating Suresh Babu about the meeting of the
Board of Directors and asking him to attend the same, has
been placed on record to show that Suresh Babu was
informed about holding of the meeting in question
Here reference is required to be made to certain other

Articles of the company which are relevant for the
controversy. Article 8 provides that shares of the company
shall be under the control of the Directors who may allot
the same to such applicants as they think desirable of being
admitted to membership of the company. Article 10
provides that allotment of shares "shall exclusively be
vested in the Board of Directors, who may in their absolute
discretion allot such number of shares as they think
proper..." Article 38 requires that the Directors present at
the Board Meeting shall write their names and sign in a
book specially kept for the purpose. Article 4 (iii) prohibits
any invitation to the public to subscribe for any shares or
debentures of the company. The above provisions of the

Articles of Association show that the Board of Directors
have an absolute discretion in the matter of allotment of
shares. But this presupposes that such a decision has to be
taken by the Board of Directors. The decision is taken by
the Board of Directors only in meetings of the Board and
not elsewhere. Ramanujam, the Managing Director
cannot take a decision on his own to allot shares to
himself. If Suresh Babu was present in the meeting, as is
the case of Ramanujam, he must have signed a book
specially kept for recording presence of the Directors at
the Board Meeting in terms of Article 38.Ramanujam
should have been the first person to produce such a book
to show the presence of Suresh Babu at the alleged Board
meeting said to have been held on 24th October, 1994
specially when Suresh Babu was denying his presence at
the meeting. Nothing has been produced. Thus neither a
copy of a notice convening the Board meeting nor the log
book meant to record signatures of Directors attending the
meeting of the Board of Directors were produced. In the
absence of these documents and any other proof to show
that a meeting was held as alleged we are unable to accept
that a meeting of the Board of Directors was held on 24th
October, 1994. If no meeting of the Board of Directors
took place on that date, the question of allotment of shares
to Ramanujam does not arise. We are inclined to believe
that photocopy of the minutes of the alleged meeting dated
24th October, 1994 produced by appellants, is sham and

fabricated. The alleged allotment of additional equity
shares of the company in favour of Ramanujam is,
therefore, wholly unauthorized and invalid and has to be
set aside.
Normally this Court would not have gone into these

questions of fact. However, the learned counsel for the
appellant in the course of his arguments drew our
attention to the various Articles of Association of the
company, which unfortunately neither the Company Law
Board nor the High Court considered. We cannot help
referring to them, particularly in view of the fact that the
Articles of a company are its constituent document and are
binding on the company and its Directors.
The facts on record show that the company was being run
as one man show and Ramanujam was maintaining the
Minutes Book of meetings of Board of Directors only to
comply with the statutory requirement in this behalf. The
minutes were being recorded by him according to his
choice and at his instance. The minutes do not reflect the
actual position. Article 38 mandated that a book should be
maintained to record presence of Directors at meetings of
the Board of Directors. If a book for recording signatures
of Directors attending meetings of the Board of Directors
was not maintained, it was in clear violation of Article 38
of the Articles of Association of the company. The
Company Law Board without going into these relevant

aspects, proceeded on an assumption that a meeting of the
Board of Directors did take place on 24th October, 1994.
This assumption of the Company Law Board is clearly
without any basis.
(b) When no meeting of the Board of Directors of the
company was held on 24th October, 1994, the question of
validity of the meeting does not arise. On the relevant date
Suresh Babu was the only other Director of the company.
He denies having attended any meeting of the Board of
Directors of the company. There is nothing to rebut this
stand of Suresh Babu. In his absence no valid meeting of
the Board of Directors could be held.
(c) For considering this point let us assume that a
meeting of the Board of Directors of the company did take
place as alleged by Ramanujam. First question that arises
is whether the company required additional funds for
which the shares were issued. We have already referred to
Balance Sheets of the company, copies whereof have been
placed on record. Till 31st March, 1993 the Balance
Sheets did not show any investment of substantial amounts
of money in the company. It is the Balance Sheet for the
year ending 31st March, 1994 which for the first time
shows an advance of Rs. 6,86,500/- towards share capital
pending allotment. Nothing has been placed on record to
show that during the financial year 1993-94 i.e. 1st April,
1993 to 31st March, 1994 suddenly need had arisen for a
substantial investment. The company was running a hotel,

the property whereof was owned by the company. No
particular reason for making a major investment has been
shown. Nothing has been shown as to how the amount of
Rs. 6,86,500/- was utilised. It appears that Ramanujam
who was managing the affairs of the company single
handedly, realized that the company had turned around
and the Hotel property had appreciated in terms of its
market value. He started working on a strategy to get
controlling shares in the company. It was in furtherance of
this objective that Ramanujam managed to show the entry
regarding advance against shares in the Balance Sheet as
on 31st March, 1994. For this amount, he allotted equity
shares to himself to gain control of the company. In these
facts it is difficult for us to appreciate that the additional
funds were required by the company. In our view the
finding of the High Court that no funds were needed by the
company is fully justified. The only purpose was to allot
additional shares in the company to himself to gain control
of the company and to achieve this objective, the books of
the company appear to have been manipulated. The High
Court was right in holding that the entire manipulation of
records of the company by Ramanujam was an act of fraud
on his part.
(d) We may also test the alleged act of allotment of

equity shares in favour of Ramanajum from a legal angle.

Could it be said to be a bonafide act in the interest of the
Company on the part of Directors of the Company?
16. In the Needle Industries case (supra) the Board of

Directors had resolved to issue 16000 equity shares of Rs.100/-
each to be offered as rights shares to the existing shareholders in
proportion to the shares held by them. The offer was to be made
by a notice specifying the number of shares to which each
shareholder was entitled to. The notice further said, in case the
offer was not accepted within 16 days from the date on which it
was made, it was to be deemed to have been declined by the
concerned shareholder. The Holding Company held 18990
shares and it was entitled to 9495 rights shares. The Holding
Company could not avail its right to exercise the option for
purchase of rights shares offered to it. As a result the whole of
the Rights Issue consisting of 16000 shares was allotted to the
Indian shareholders. The Holding Company filed a petition
under Sections 397 and 398 of the Companies Act, 1956 in the
High Court. The Single Judge held in favour of the Holding
Company that it had suffered a loss in view of the fact that the
market value of the rights share was Rs. 190/- whereas the shares
were allotted at par i.e. at Rs. 100/-. The grievance of the Holding
Company was that on account of postal delays it failed to receive
the notice containing the offer of rights shares in time, and
therefore, it could not exercise its option to buy the share. On
appeal the Division Bench held that the affairs of Needle
Industries India Ltd. were being conducted in a manner

oppressive to the Holding Company. The Division Bench ordered
winding up of the company. A further appeal to the Court was
allowed mainly on the ground that there was no oppression.
However, a direction was issued that the Indian shareholders pay
an amount equivalent to that by which they unjustifiably
enriched, namely Rs. 90 x 9495 which comes to Rs. 8,54,550/- to
the Holding Company.”
Supreme Court in Shanti Prasad Jain Vs. Kalinga Tube Ltd. AIR 1965 at pg.
1535 wherein at paragraph 13 to 18 it is observed as under:-
13. “We shall first take up the case under Section 397 of the
Act and proceed on the assumption that a case has been made
out to wind up the company on just and equitable grounds. This
is a new provision which came for the first time in the Indian
Companies Act, 1913, as Section 153. That section was based on
Section 210 of the English Companies Act, 1948, which was
introduced therein for the first time. The purpose of
introducing Section 210 in the English Companies Act was to
give an alternative remedy to winding up in case of
mismanagement or oppression. The law always provided for
winding up, in case it was just and equitable to wind up a
company. However, it was being felt for some time that though it
might be just and equitable in view of the manner in which the
affairs of a company were conducted to wind it up, it was not fair
that the company should always be wound up for that reason,

particularly when it was otherwise solvent. That is why Section
210 was introduced in the English Act to provide an alternative
remedy where it was felt that, though a case had been made out
on the ground of just and equitable cause to wind up a company,
it was not in the interest of the shareholders that the company
should be wound up and that it would be better if the company
was allowed to continue under such directions as the court may
consider proper to give. That is the genesis of the introduction
of Section 153C in the 1913 Act and Section 397 in the Act.
14. Section 397 reads thus :
" 397. Application to court Joy relief in cases of oppression.--(1)

Any members of a company who complain that the affairs of the
company are being conducted in a manner oppressive to any
member or members (including any one or more of themselves)
may apply to the court for an order under this section, provided
such members have a right so to apply in virtue of Section 399.
(2) If, on any application under Sub-section (1), the court is of
opinion--
(a) that the company's affairs are being conducted in a manner
oppressive to any member or members; and
(b) that to wind up the company would unfairly prejudice such
member or members, but that otherwise the facts would justify
the making of a winding up order on the ground that it was just
and equitable that the company should be wound up;
the court may, with a view to bringing to an end the matters
complained of, make such order as it thinks fit."

15. It gives a right to members of a company who comply with
the conditions of Section 399 to apply to the court for relief
under Section 402 of the Act or such other reliefs as may be
suitable in the circumstances of the case, if the affairs of a
company are being conducted in a manner oppressive to any
member or members including any one or more of those
applying. The court then has power to make such orders
under Section 397 read with Section 402 as it thinks fit, if it
comes to the conclusion that the affairs of the company are being
conducted in a manner oppressive to any member or members
and that to wind up the company would unfairly prejudice such
member or members, but that otherwise the facts might justify the
making of a winding up order on the ground that it was just and
equitable that the company should be wound up. The law,
however, has not defined what is oppression for purposes of this
section, and it is left to courts to decide on the facts of each case
whether there is such oppression as calls for action under this
section.
16. We may in this connection refer to four cases where the
new Section 210 of the English Act came up for consideration,
namely : Elder v. Eider and Watson, [1952] S.C.49 ; George
Meyer v. Scottish Co-operative Wholesale Society Ltd., [1954]
S.C. 381 ; Scottish Co-operative Wholesale Society Ltd. v. Meyer,
[1958] 3 All E.R. 56; [1959] 29 Comp. Cas. 1 (H.L.) which was
an appeal from Meyer's case, and In re H. R. Harmer Limited,
[1938] 3 All E.R. 689 ; [1959] 29 Comp. Cas 305 (C.A.). Among
the important considerations which have to be kept in view in

determining the scope of Section 210, the following matters were
stressed in Elder's case as summarised at page 394 in Meyer's
case :
" (1) The oppression of which a petitioner complains must relate
to the manner in which the affairs of the company concerned are
being conducted; and the conduct complained of must be such as
to oppress a minority of the members (including the petitioners)
qua shareholders.
(2) It follows that the oppression complained of must be shown
to be brought about by a majority of members exercising as
shareholders a predominant voting power in the conduct of the
company's affairs.
(3) Although the facts relied on by the petitioner may appear to
furnish grounds for the making of a winding up order under the
just and equitable' rules, those facts must be relevant to disclose
also that the making of a winding up order would unfairly
prejudice the minority members qua shareholders.
(4) Although the word 'oppressive' is not defined, it is possible,
by way of illustration, to figure a situation in which majority
shareholders, by an abuse of their predominant voting power, are
' treating the company and its affairs as if they were their own
property ' to the prejudice of the minority shareholders--and in
which just and equitable grounds would exist for the making of a
winding up order . . . but in which the ' alternative remedy '
provided by Section 210 by way of an appropriate order might
well be open to the minority shareholders with a view to bringing
to an end the oppressive conduct of the majority.

(5) The power conferred on the court to grant a remedy in an
appropriate case appears to envisage a reasonably wide
discretion vested in the court in relation to the order sought by a
complainer as the appropriate equitable alternative to a
winding-up order."
17. Meyer's case was between a parent company and a
subsidiary company and it was held that : " (1) when a subsidiary
company is formed with an independent minority of
shareholders, the parent company must, if engaged in the same
class of business, conduct the affairs of the subsidiary, even
though these are in a sense its own, in such a way as to deal fairly
with the subsidiary ; (2) that, if the parent company deliberately
pursues a course calculated to destroy its subsidiary, with
resulting loss to the minority shareholders, this may amount to
oppression within the meaning of Section 210 to ; (3) that the
conduct of a majority shareholder may amount to oppression
notwithstanding the fact that his own shares depreciate in value
pro rata with those of the minority ; and (4) that, even if the
majority shareholder has virtually destroyed the substratum of
the company by his oppressive conduct and it is conceded by all
parties to be just and equitable that the company be wound up,
the oppressed minority may nevertheless be entitled to a remedy
under Section 210. "
18. These observations were approved by the House of Lords in
appeal and it was held that " whenever a subsidiary is formed as
in this case with an independent minority of shareholders, the
parent company must, if it is engaged in the same class of

business, accept as a result of having formed such a subsidiary
an obligation so to conduct what are in a sense its own affairs as
to deal fairly with the subsidiary."
49. The Learned Counsel for the Appellant, cites out the decision of the
Hon’ble High Court of Kerala in K Meenakshi Amma K Vs. Sreerama Vilas
Press and Publications(P) Ltd. & Ors. reported in (1992) 73 Comp Cas 285,
wherein at paragraph 10-13, 15-17 & 19, it is observed as under:
10. “It has to be remembered that the chairman appointed by

the company court was seeking directions in the matter of
conducting the meeting. The company court gave certain
directions for the proper conduct of the meeting. The former
managing director, Sri N. Madhavan Nair, filed Application No.
187 of 1990 to stop the convening of the meeting on the ground
that the notice is not in conformity with sections 171, 173 and
257(1A) of the Companies Act The company court overruled the
objections, found the notice in order and dismissed the
application of the former managing director. He filed an appeal,
M.F.A. No. 333 of 1990. The appeal was dismissed by a Division
Bench of this court observing that it will be open to the appellant
to urge various contentions including the contention regarding
the order in Company Application No. 187 of 1990 in the course
of trial of the main Application No. 253 of 1990. So even though
the company court has found that the notice sent by the chairman
appointed by the company court was not defective, that matter
was left open to be considered by the company court at the final

stage of the main application, viz., Application No. 253 of 1990.
But it has to be noted that the meeting was held as early as on
March 10, 1990, and the period of appointment of the board of
directors and managing director of the company has expired by
efflux of time and an election to a new board of directors and
managing director became necessary.
11. Nevertheless, we feel that we are bound to consider the

correctness of the judgment challenged in this appeal. The
company court, in its order, has extracted in full the notice issued
by the chairman appointed by the company court and we do not
want to repeat it in this judgment. The purpose for which the
meeting is held is clearly stated in the notice. The purpose is for
conducting an election to the board of directors and managing
director of the company. There is no difficulty to hold that the
notice was issued following the provisions contained in the
articles of association and no argument was advanced by counsel
for the appellant stating that the notice is defective on account of
the fact that it has not complied with the provisions contained in
the articles of association.
12. The gravamen of the charge against the notice is that it

has not complied with the provisions contained in section 173 of
the Companies Act. The articles of association provide for the
nature of the notice to be sent to the effect that what has to be
done is to inform the members of the company of the general
nature of the business to be transacted at the meeting. The
learned single judge observed that since there is a specific

provision in the articles of association regarding the notice of a
general meeting where special business is to be transacted,
section 173 of the Companies Act may not apply to the present
case. Further, the company court said that the notice issued
contains all material facts concerning the business that was to be
transacted in the meeting, viz., election of managing director and
directors and that the order to convene the meeting was passed
after hearing all parties and the notice itself was approved by the
company court. It was also pointed out that the meeting was
convened by the chairman appointed by the company court and
not exactly by the company. The intent and purpose of section
173 of the Companies Act is to give directions to the shareholders
in the matter of holding a meeting by the management.
13. In Sitaram Jaipuria v. Banwarilal Jaipuria, AIR 1972 Cal

105, the Calcutta High Court has held that the provisions like
section 173(2) of the Companies Act should not be construed in
a rigid manner and an interpretation should not be made so as
to hamper the conduct of business. The notice has to be section
173 of the Companies Act, the meeting should not be invalidated
on the technical ground that the notice has not complied with the
provisions of section 173 (2) of the Companies Act. The intention
behind the provisions contained in section 173 of the Companies
Act has to be understood in a meaningful manner. Of course, if a
transaction of business has not been sufficiently notified or which
is substantially different from the notification, it would be
invalid. Beyond that on technicalities the meeting should not be

invalidated. It is clear from the notice that the transaction of
business to be carried out in the meeting is the election of the
board of directors and managing director. That was the only
transaction scheduled in the meeting and for which alone the
meeting was called.
15. The provisions contained in section 173 of the Companies

Act making some requirements for a valid notice is to enable the
members to understand and appreciate the nature of the business
or items of business proposed to be considered at the meeting
and make up their mind whether to go to and attend and vote at
the meeting or abstain from voting (see Pearce, Duff and Co.
Ltd., In re, [1960] 3 All ER 222 (Ch D)). We feel that the
requirement of section 173 of the Companies Act is that the
members of the company should be informed truly of the nature
of business to be transacted at the general meeting. Too rigid an
interpretation would not advance the object of the provision
which will only hamper the conduct of business.
16. In this case, it has to be noted that the meeting was called
by the chairman appointed by the company court and all
proceedings were subjected to scrutiny and directions of the
company court. No one can attribute any mala fide motive on the
part of the chairman to cover up or to mislead the members as to
the object and purpose of the meeting. In our view, the learned
single judge has rightly rejected the contention of the appellant
based on section 173(2) of the Companies Act.

17. Counsel for the appellant submitted before us that the
provision contained in section 257(1A) of the Companies Act has
not been complied with. It is contended that section 257(1A) of
the Companies Act mandates the company to inform its members
of the names of the persons who proposed to stand for election to
the board of directors. In order to understand this submission of
counsel for the appellant, we feel that it is apposite to quote
section 257 of the Companies Act.
“257. Right of persons other than retiring directors to

stand for directorship.— (1) A person who is not a retiring
director shall, subject to the provisions of this Act, be
eligible for appointment to the office of director at any
general meeting, if he or some member intending to
propose him has, not less than fourteen days before the
meeting, left at the office of the company a notice in writing
under his hand signifying his candidature for the office of
director or the intention of such member to propose him as
a candidate for that office, as the case may be, along with
a deposit of five hundred rupees which shall be refunded
to such person or, as the case be, to such member, if the
person succeeds in getting elected as a director.
(1A) The company shall inform its members of the

candidature of a person for the office of director or the
intention of a member to propose such person as a
candidate for that office, by serving individual notices on
the members not less than seven days before the meeting:

Provided that it shall not be necessary for the company to
serve individual notices upon the members as aforesaid if
the company advertises such candidature or intention not
less than seven days before the meeting in at least two
newspapers circulating in the place where the registered
office of the company is located, of which one is published
in the English language and the other in the regional
language of that place.
(2) Sub-section (1) shall not apply to a private

company, unless it is a subsidiary of a public company.”
19. Sub-section (2) of section 257 of the Companies Act makes

it clear that subsection (1) shall not apply to a private company
unless it is a subsidiary of a public company. There is no point in
saying that sub-section (1) is not applicable by virtue of the
provisions contained in sub-section (2) of section 257 of the
Companies Act as far as this company is concerned, but
nevertheless, sub-section (1A) of section 257 of the Companies
Act is applicable to this private company. If such a construction
is adopted, it will lead to manifest absurdity. The learned judge
also found so. We see no error in this interpretation of the
provision. In view of this, we see no merit in the second ground
urged by counsel for the appellant.”
50. The Learned Counsel for the Appellant, relies on the decision of the
Hon’ble High Court of Calcutta in Shalagram Jhajharia Vs. National Co., Ltd.,

& Others reported in (1965) 35 Comp Cas 706, wherein at paragraphs 7, 8, 38,
39, 47 & 69, it is observed as under:
7. “None of the Directors has any interest in the aforesaid

resolution save to the extent that they are members and directors
of the company.
8. Resolution No. 8:— Since the production of wide loom

cloth of the company has been increasing day by day, the
Directors negotiated and finalised an arrangement with Messrs.
Delca International Corporation of Delwara, U.S.A. having their
principal place of business at New York on the terms and
conditions set out in the resolution. The territories of operation
are North America and South America. A Director of Messrs.
B.M.T. Commodity Corporation is also a Director of this
concern. Further an American who has experience for quite a
long number of years in the trade of jute products is also a
Director of Delca International Corporation. As such your
Directors have thought it fit that they would be in a position to
market the products of your company which they have
undertaken, in larger areas. If this arrangement is approved by
the Reserve Bank of India, Messrs. B.M.T. Commodity
Corporation have agreed for termination of their agreement
entered into with your company by mutual consent. Further
Delca International Corporation have agreed to take over all the
outstanding forward contracts entered into between B.M.T.
Commodity Corporation and the Company. The terms fixing the
selling price are reasonable and are being allowed by others in

the trade. The share-holders are requested to give their approval
for this resolution.
38. Section 173(1)(a) provides as follows:—

Section 173(1): “For the purposes of this section—
(a) In the case of an annual general meeting, all business to
be transacted at the meeting shall be deemed special, with the
exception of business relating to (1) the consideration of the
accounts, balance-sheet and the report of the Board of Directors
and Auditors, (ii) the declaration of a dividend, (iii) the
appointment of directors in the place of those retiring, and (iv)
the appointment of, and the fixing of the remuneration of, the
auditors.”
39. Section 173(1)(b) provides that— “in the case of any other
meeting, all business shall be deemed special.”
In this connection section 173(2) may also be set out:— Section

173(2): “Where any items of business to be transacted at the
meeting are deemed to be special as aforesaid, there shall be
annexed to the notice of the meeting statement setting out all
material facts concerning each such item of business, including
in particular the nature of the concern or interest, if any, therein,
of every Director, the Managing Agents, if any, the Secretaries
and Treasurers, if any, and the Manager, if any; Provided that
where any item of special business as aforesaid to be transacted
at a meeting of the company relates to, or affects any other
company, the extent of shareholding interests in that other

company of every Director, the Managing Agent, if any, of the
Secretaries and Treasurers, if any, and the Manager, if any, of
the first mentioned company shall also be set out in the statement
if the extent of such shareholding interest is not less than twenty
per cent, of the paid up share capital of that Company.”
47. The company is a manufacturer of jute goods and products

to wit jute backing cloth and burlap over the width of 100″ as
well as below that figure. The material seems to be used mostly
for the manufacture of carpet and had a large market in U.S.A.
and other parts of the two American Continents. The defendants
2 to 5 are its directors while the plaintiff is a holder of ordinary
shares numbering seventy five whose complaint in the suit is that
the directors have violated mandatory provisions in the Indian
Companies Act of 1960 and purported to appoint sole selling
agents of the company's products disregarding provisions in the
Act as to informing the shareholders of the arrangements entered
into and trying to get the same approved at a general meeting in
violation of the law.
69. The important change to note is that the appointment of a

sole selling agent need not be brought before the company within
six months as under the Act of 1956. The other important
deviation is that there is no express provisions as to what is to
happen if at the general meeting at which the matter is brought
up before the company the share-holders do not expressly
disapprove of the appointment. In my opinion this omission is of
no significance. In such a case under the agreement itself the

appointment would cease to be valid by virtue of the operation of
sub-section (2) of section 294. The net result seems to be that the
period of six months is done away with but the Directors are not
free to make the appointment except on condition that it would
cease to be valid if not approved by the company in a general
meeting. The general meeting was to decide the fate of the
appointment. If it disapproves the same it would cease to be valid
under sub-section 2(A) and if it did not approve of it, it would
cease to be valid by the operation of the agreement itself. It was
argued before us that section 294 was only directory and not
mandatory as no penal provision was attached thereto. I find
myself unable to accept this argument. The words of the Statute
are quite clear in that it prohibits the Directors from entering
into a contract with a sole selling agent without being obliged to
bring the matter of the appointment before the company at the
first general meeting thereafter. The only limitation imposed on
the company's power of appointing a sole selling agent is that the
period of agency must not exceed five years. The clear provision
in the Act that the appointment by the Directors is not to be valid
unless approved by the company in the first general meeting
shows the obligatory nature of the enactment. It is well-known
that the use of the negative language generally leads to the
conclusion that the provision is mandatory. According to Craies
on Statute Law, 6th Edition, page 263 “If the requirements of a
Statute which prescribes the manner in which something is to be
done are expressed in negative language, that is to say, if the
Statute enacts that it shall be done in such a manner and in no

other manner, it has been laid down that those requirements are
in all cases absolute, and that neglect to attend to them will
invalidate the whole proceeding.” In my opinion, it is not
necessary that the Statute should expressly lay down that a thing
is not to be done except in the manner prescribed for it to be held
mandatory in operation. It is sufficient if the Statute shows that
one particular course of action only is to be resorted to.”
Hon’ble High Court of Calcutta, in Bimal Singh Kothari and Anr. Vs. Muir
Mills Co., Ltd., and Ors. reported in (1952) 22 Comp Cas 248 wherein at
paragraph, 14, 22-26 & 39, it is observed as under:
14. “Notice is hereby given that an Extraordinary General

Meeting of the abovenamed Company will be held at the
registered office of the Company, Kanpur, on Monday, the 20th
day of, October, 1947, at 3 P.M. to consider and, if thought fit,
to pass, with or without modification, the following
Resolutions:—
1. (As a Special Resolution)— that the Regulations contained

in the document submitted to this Meeting, and for the purpose
of identification subscribed by the Chairman thereof, be and the
same are hereby approved and that such Regulations be and they
are hereby adopted as the Articles of Association of the Company
in substitution for and to the exclusion of all existing Articles
thereof.

2. (As a Special Resolution)— that Indian Textile Syndicate
Ltd., be appointed Managing Agents of the Company for the
period, at the remuneration, and on the terms contained in the
draft of an agreement, providing for the same, submitted to this
Meeting and signed in the margin by the Chairman of the
Meeting by way of identification, which said agreement be and
the same is hereby approved and that the Directors shall be and
they are hereby authorised to carry the said agreement into effect
as on and from the 1st day of October, 1947, with full liberty,
subject nevertheless to the provisions of the Indian Companies
Act, 1913, to agree to any modification of such agreement before
the same is executed……….”
22. But Mr. Mitter has overlooked a further statement which

occurs in the same paragraph in Mr. Palmer's book:
“And in some cases it may be deemed expedient to send

printed copies of the proposed new Articles with the
Notices. According to the decision of Kekewich, J., in
Normandy v. Ind. Coope & Co (1) [(1908) 1 Ch. 84], the
notice should call attention to any material alterations and
in Baillie v. Oriental Telephone and Electric Co. (2)
[(1915) 1 Ch. 503], the Court of Appeal (in England) Held
that the notice of a proposed resolution to after Articles
involving a large increase in the remuneration of the
Directors was invalid on the ground that the proposed
increase was not fully and frankly disclosed.”

23. In Baillie's case, a shareholder brought an action on
behalf of himself and all the other shareholders of a Company
for a declaration that certain resolutions were not binding on the
ground of insufficient notice of the Meeting at which they were
passed, and for an injunction to restrain the Company and the
Directors from acting upon them. The plaintiff moved for an
interim order. The Court of Appeal held that the notice did not
give a sufficiently full and frank disclosure to the shareholders of
the facts upon which they were asked to vote; and that the
resolutions were invalid and not binding upon the Company.
Baker, J., considered this case in Narayan Lal v. Maneckji Petit
Manufacturing Co. Ltd. (3) [(1931) 33 Bom. L.R. 556] and also
reviewed other English cases. In that case the Directors
convened an Extraordinary General Meeting of the shareholders
to pass the necessary resolution for substitution of a new set of
up-to-date Articles for the old ones and fixing the duration of the
Agency and denning the Agent's power. The Notice convening the
Meeting set out the necessary resolutions and was accompanied
by a Circular, but sufficient particulars regarding important
changes to be effected were not set out. The resolutions were
passed and confirmed. In a suit by a shareholder suing on behalf
of himself and other shareholders for a declaration that the
resolutions Were inoperative on the ground of insufficiency of
notice and for injunction restraining the Directors from acting
upon them, it was held that the notice should have given
sufficiently full and frank disclosure of the facts and the effect of
the resolutions and the agreement, and consequently the

resolutions were inoperative and not binding upon the Company.
The learned Judge observed that if the Directors issued a
Circular in which they referred to certain alterations and said
that the only alterations were with regard to clause “X” of the
Articles of Association, whereas there were equally important
alterations in clause “Y”, it could not be said that the
shareholders had sufficient notice of the alterations in clause
“Y”.
24. In the case before us, the documents referred to in the

clauses of the notice which we have set out above, were not sent
to the shareholders. Mr. Mitter's contention was that that might
be so, but the shareholders had notice that the new Regulations
were lying at the registered office of the company; so it was not
necessary to send the documents to them. According to Counsel
it was quite sufficient to tell them that they could have inspection
of the new Regulations at the registered office of the Company,
and for this contention he relied on Mr. Palmer's observation
which I have already set out.
25. But it should be observed that Mr. Palmer did not say that
it was not necessary to send copies of the proposed Articles with
the Notice. All that he said was that where a large number of
alterations had to be made, it was generally more convenient to
adopt a new set of Articles altogether and that where this course
was adopted, a copy of the new Regulations should lie for
inspection at the registered office of the Company, and the notice
convening the Meeting should state that fact. But nowhere did he

say that it was not necessary to send copies of the new proposed
Regulations with the notices. On the other hand, from the latter
passage which I have quoted, it is clear that the learned author
said that in some cases it was expedient to send printed copies of
the proposed new Articles with the notices and he has cited two
English cases for that proposition. Assuming, however, that Mr.
Palmer's observation supports Mr. Mitter's contention, it may not
be possible for us to adopt that view in India, having regard to
the local conditions and a variety of other considerations that
prevail in India. It will not in all cases be sufficient in India to
leave a copy at the registered office and state that fact in the
notice, inviting the shareholders to inspect the proposed changes
at the registered office. The travelling facilities here are not the
same as in England, neither the country is so small as England.
There are various difficulties that prevent the shareholders from
going to the registered office and having inspection. Besides
whether such a course should be adopted or not depends on the
facts of each case. For example, it may be that the shareholders
of a Company live very near the registered office. In such a case
possibly it would be sufficient to give them notice that the
proposed changes could be inspected at the registered office. But
in a case like the one under our consideration, where there is a
large body of shareholders who reside at great distances from
the registered office of the Company, we do not think it would be
fair on the part of the Company to leave the proposed
Regulations at the registered office and give the shareholders
notice of that fact. In a case like this we entirely agree with Mr.

Palmer that printed copies of the proposed new Articles should
be sent with the notice. In this case that was not done, and
therefore, we take the view that the notice did not disclose fully
and frankly the facts upon which the shareholders were asked to
vote.
26. It is quite possible to argue in this case that the notice in

question was a ‘tricky’ notice, as was said in Kaye v. Croydon
Tramways Co. (4) [(1898) 1 Ch. 358], and in Baillie's case (p.
515) (2) [(1915) 1 Ch. 503]. In this case there is no dispute that
there was a partnership between defendant No. 5 and the two
Nepalese gentlemen. There is no dispute further that they
acquired a very large number of shares in the defendant
Company. There is no dispute that the partners have acquired
and now control the majority of the shares in the two Companies,
namely, the Indian Textile Syndicate Ltd., and the Cotton Textile
Corporation Ltd., one of which companies has been appointed
the Selling Agent of the defendant company. It is quite clear
therefore that the three partners through the said two Companies
have acquired a preponderance of voting power in the defendant
Company and is in a position to divide practically the entire
profit of the Company amongst themselves. On these facts we are
of opinion that it was necessary for the defendant Company to
disclose to the shareholders the controlling interest of the
partners in the two Companies. But that was not done. An
argument is quite plausible that the notice deliberately withheld
material facts from the knowledge of the shareholders including

the plaintiffs and committed fraud on the plaintiffs. In this case it
may be fairly argued that not only there has been a suppression
of true facts, but also a false suggestion. Such an argument, we
cannot say, would be unreasonable.”
52. The Learned Counsel for the Appellant, relies on the decision of the
Hon’ble High Court of Kerala in Mathrubhumi Printing & Publishing Company
vs. Vardhman Publishers Ltd. reported in 1991 SCC OnLine Ker 453, wherein
at paragraphs 37-39 it is observed as under:-
37. “In the light of our finding that there was no proper
lodgement and the transfer has not become effective as against
the company, the transferees cannot be heard to contend for the
position that the company in exercise of the power conferred on
it under section 31 of the Act cannot alter the articles to their
detriment. It should in this connection be remembered that the
right of a shareholder to transfer his shares is always subject to
the provisions in the articles of association as well as section 31
of the Act. The transferee, therefore, cannot have a better right
than-the transferor and, therefore, his right as a transferee until
the transfer becomes effective as against the company will again
be subject to the provisions in the articles of association and the
relevant provisions of the Act. The alterations effected to the
articles of association in exercise of the said power cannot,
therefore, be challenged by the transferee on the ground of mala
fide. The transferees in other words have no manner of right to
challenge the resolution.

38. Now, we shall consider the question as to whether the
transferors have any right other than the one recognised under
sections 397 and 398 read with section 399 to challenge the
resolution amending the articles in a proceeding under section
155. As answer to this question it can be conceded that they have
certain rights which can be called as “individual shareholder's
right”. Such individual shareholder's right pressed into service
in this case by the transferors have been dealt with by the learned
single judge in paragraphs 28, 29 and 30 of the judgment. They
can be formulated thus: The questions that were considered in
this connection are: Whether the notice and explanatory
statement of the extraordinary general meeting are legal and
valid, whether the resolution as passed was materially different
from the resolution as proposed in the notice. The learned single
judge, after considering the various aspects of these questions
and also the relevant provisions contained in sections 171, 172,
173(2) and 189 has found that the notice and explanatory
statement of the extraordinary general meeting were legal and
valid. We shall in this connection reproduce the findings as
regards question No. 1.
“… As such, there was no suppression of any material fact.

The personal concern or interest of the directors in the
special resolution suggested by learned counsel, for the
petitioner is far-fetched. Sub-section (2) of section’ 173
only mentions ‘the nature of the concern or interest, if any’
of every director in the concerned item of business. By the

alteration the power is conferred on the board of directors
as a whole and not on any single director. In any view of
the case the wording of the resolution itself was self-
explanatory which did not require any further explanatory
statement about the powers to be conferred on the board
of directors. Accordingly I hold that the notice and
explanatory statement of the extraordinary general
meeting were legal and valid.”
39. The findings based on which the learned single judge

answered the second question in favour of the company are
extracted hereunder:
“In the resolution as proposed in the notice there were two
clauses in the new article 17. Clause (b) related to
forfeiture of equity shares. The minutes of the
extraordinary general meeting (Annexure R-1(e) to the
counter affidavit on behalf of the first respondent in C.P.
No. 29 of 1989 dated 9th November, 1989), shows that the
alteration as proposed in the notice was proposed, duly
seconded and the chairman said that the formal special
resolution was before the meeting. Subsequently, Dr. N.V.
Krishna Warrier as well as Sri P. Kumaranunni moved
amendments to the special resolution. The amendment
proposed by Sri Kumaranunni was supported by the
transferors of shares as well as Sri P.R. Krishnamoorthy,
Executive Director of the Times of India and Dr. Ram S.
Tarneja, who were allowed to participate in the meeting

on the basis of the powers of attorney in their favour. The
amendment proposed by Sri Kumaranunni was rejected
after putting it to vote. The amendment proposed by Dr.
Krishna Warrier was approved by the general body. The
proposed clause (b) in article 17 was accordingly not
approved. There was also some variation in the wording
of clause (a) by which the board was given absolute
discretion to decline to register the transfer without
assigning any reasons. This was an amendment which was
duly moved in the extraordinary general meeting in which
the petitioners also participated. They cannot now be
heard to say that the resolution as passed was different
from the resolution as proposed in the original notice,
even though the power given to the board to decline to
register transfer without assigning any reasons in its
absolute discretion was not envisaged in the original
proposal.”
Pleas of Respondent No. 1, 11, 13 and 15 & Citations
53. Per Contra, it is the submission of Learned Sr. Counsel for R1, 11, 13 and
15, that by means of an order dated 22.10.2019, the ‘Principal Bench of NCLT,
New Delhi’ had passed an order dated 22.10.2019, whereby and where under it
was mentioned that ‘consequent to order no. PFA/7/2016 dated 21.10.2019 and
letter no A-12023/1/2019-Ad-IV-MCA dated 16.10.2019. The NCLT Bengaluru
Bench is hereby reconstituted in the manner that Bench at Bengaluru will be that

of Shri Rajeswara Rao Vittanalla, Member (Judicial) and further that the
Constitution of the Bench was made as per Section 419(3) of the Companies Act,
2013. As such, the order dated 22.10.2019 of the Principal Bench of ‘National
Company Law Tribunal’, New Delhi was in modification of even number dated
25.07.2019 for 23.10.2019 to 25.10.2019 only’. Added further, the order dated
22.10.2019 had the ‘Approval’ of the President of the ‘National Company Law
Tribunal’, New Delhi.
54. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, takes an
emphatic stand, that the Appellant, had failed to point out any provision of Law,
which prohibits a matter i.e. part heard by the Division Bench of a Court from
being heard further by the single Bench of the said court.
55. Expatiating his submission, the Learned Counsel for Respondents No. 1,
11, 13 and 15 comes out with a stance that the Appellant had not raised any
objection before the Hon’ble Member (Judicial) of the ‘National Company Law
Tribunal’, Bengaluru Bench ‘Hearing’ the Part Heard matter on 25.10.2019,
sitting singly on the said date of ‘Hearing’, nor did he assailed, the same at any
time, thereafter, until the filing of the ‘Appeal’.
56. The Learned Counsel for Respondents No. 1, 11, 13 and 15, takes an
emphatic stand that the Appellant had not objected to the Hon’ble Member

(Judicial) of Bengaluru Bench, hearing the ‘part-heard’ matter on 25.10.2019,
sitting singly either on the said date of hearing, and further the Appellant had not
questioned the same, at any point of time, subsequently, till the ‘filing of the
instant Appeal’.
57. In this connection, the Learned Counsel for the Respondents No. 1, 11, 13
and 15, points out that the ‘Appellant’ had willingly participated in the
proceedings before the ‘Tribunal’, and ‘permitted the proceedings’ to continue,
raising the said issue only after the ‘impugned order’, came to be passed.
58. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, raises a
legal argument, that the ‘Appellant’, had ‘acquiesced,’ to the ‘proceedings of
25.10.2019’, being conducted, in the aforesaid manner, by the ‘Tribunal’, and
hence, the Appellant is now ‘estopped by his conduct’ from challenging the same
before this ‘Tribunal’, and in this regard, he relies, upon the decision of the
Hon’ble Supreme Court in Tamil Nadu Generation and Distribution
Corporation Ltd. Vs. PPN Power Generating Company Pvt. Ltd., reported in
2014 11 SCC, at page 53 wherein at paragraph 47 it is observed as under:-
47. These observations, however, do not in any manner affect

the jurisdiction exercised by the State Commission in the present
matter. It has been rightly pointed out by the respondent that
having filed the written statement in reply to the petition filed by

the respondent, the appellant willingly participated in the
proceedings and invited the findings recorded by the State
Commission. It would be too late in the day, to interfere with the
jurisdiction exercised by the State Commission in these
proceedings
59. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, also places
reliance upon the decision in C.Y. Parthasarathy v. Syndicate of the Mysore
University reported in MANU/KA/0244/1994 wherein at paragraphs 19 to 22, it
is observed as under:-
19. “It is true, that jurisdiction cannot be conferred by

consent, of the parties where it does not otherwise inhere in the
authority concerned; but it is equally true that the High Court
can while exercising its extraordinary and discretionary powers
under Article 226 of the Constitution decline to interfere with an
order of a subordinate authority if it is satisfied that an objection
relating to a defect of procedure or jurisdiction which would
have been and ought to have been raised at the earliest
opportunity was not so raised by the party complaining before it.
The Rule that acquiescence of the party belatedly making a
grievance about the jurisdiction of the subordinate authority
disentitles him to invoke the Writ jurisdiction of the High Court,
does not rest on the foundation that acquiescence, confers
jurisdiction but on the rationale that the High Court will be
justified in refusing to exercise its jurisdiction in favour of a
person who has either by reason of lack of diligence or by design

remained on the fence, allowed the authority to pass an order
and seeing that the same has gone against him turned round to
challenge its competence, to have done so.
20. In any such situation, it would be reasonable to infer that

the party making the grievance about the competence of the
subordinate authority, acted unfairly in not raising the objection
at the very outset; It would also be reasonable to assume that he
did so, deliberately hoping that the final order to be passed by
the authority would be in his favour, but finding it go against him,
he attacks the same as being without jurisdiction. In other words
the person concerned indulges in what may be termed as 'diluted
deception' by keeping quite, when he was, in fairness to all those
concerned with the proceedings before the authority, under an
obligation to speak out. He attempts by his silence to secure a
favourable verdict, which if given, would have buried for ever the
question of competence of the authority to handle the subject
matter. It is this trickery which the Courts have frowned upon by
declining to interfere with the actions of subordinate authorities,
where acquiescence or acceptance of their jurisdiction is
manifested by the facts of a given case.
21. D'Smith in his Book "Judicial Review of Administrative

Action" 3rd edition at pages-372-373 has brought out the
distinction between the two situations namely cases where the
decisions are, void for want of jurisdiction and could be avoided
and others were even though they are void but with which the

Court will not interfere on account of the applicant's conduct.
The Author states thus:-
"A decision made without jurisdiction is void, and it
cannot be validated by the express or implied consent of a
party to the proceedings. It does not always follow,
however, that a party adversely affected by a void decision
will be able to have it set aside. As we have seen, certiorari
and prohibition are, in general, discretionary remedies,
and the conduct of the applicant may have been such as to
disentitle him to a remedy."
"Whether the tribunal lacked jurisdiction is one

question; whether the court, having regard to the
applicant's conduct, ought in its discretion to set
aside the proceedings is another. The confused state
of the present law is due largely to a failure to
recognise that these are two separate questions."
22. He also states in the same Book that a person who
though aware of the defect or lack of jurisdiction does not
raise any objection on that account and acquiesces and
takes a chance of getting a decision in his favour will be
disentitled to a Writ of Certiorari. It is fruitful to reproduce
the following passage from the Book:-
"The right to certiorari or prohibition may be lost
by acquiescence of implied waiver. Acquiescence
means participation in proceedings without taking
objection to the jurisdiction of the tribunal once the

facts giving ground for raising the objection are
fully known. It may take the form of failing to object
to the statutory qualification of a member of the
tribunal, or (exceptionally) appealing to a higher
tribunal against the decision of the tribunal of first
instance without raising the question of
jurisdiction."
60. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, points out
that, in a ‘petition’ filed u/s 241of the Companies Act, 2013 the ‘Petitioner’, must
satisfy, not just qualitative, qualifications, mentioned in Section 244 of the said
Act, 2013, but also the qualitative aspect of the ‘shareholding’ viz., the mode,
method and manner in which the petitioner had acquired shares for the purpose
of maintaining his ‘petition’ and this position was laid down in the context of
Section 399 of the Companies Act, 1956 (now Section 244 of the Act of 2013) in
an unreported order of the Principal Bench of Company Law Board in CP No. 57
of 2004 through an order dated 19.10.2009 in Shri Jodh Raj Laddha & Ors. Vs.
Birla Corporation Ltd. & Ors., as seen, from the order dated 20.04.2011, of the
Hon’ble High Court of Calcutta, in Shri Jodh Raj Laddha & Ors. Vs. Birla
Corporation Ltd. & Ors. APO No. 399 of 2009 and APO 274 of 2009, reported
in MANU/WB/0269/2011(vide paragraph 3) wherein it is observed as under:
3. “In this matter, the Appellants' case has been argued by

Mr. S. B. Mukherjee, Mr. Sudipto Sarkar and Mr. P. S. Sengupta,

learned Counsel whereas on behalf of the Respondents argument
has been advanced mainly by Mr. Anindya Kumar Mitra, Mr. P.
C. Sen, Mr. Pratap Chatterjee, Mr. Abhrajit Mitra and Mr.
Soumen Sen, learned Counsel. In this order, however, I shall
refer to the submissions of the learned Counsel of the respective
parties in a composite manner instead of dealing with their
submissions individually as there are many overlapping points in
their submissions. At the threshold a preliminary objection has
been taken by the learned Counsel appearing for the
Respondents as regards maintainability of the appeal itself. It has
been argued on behalf of the Respondents that the appeal ought
not to be admitted since in the judgment under appeal, the CLB
has come to a finding that the petition is not maintainable and
such finding is based on factual issues. Argument of the
Respondents on this count has been that CLB has come to its
finding that the petition was filed mala fide, and such finding was
finding on fact. Referring to the provisions of Section 10F of the
Act, it has been contended that the appeal should not be admitted
as no appeal lies against a finding on fact under the aforesaid
provision of the Act. In the judgment, (at pages 70-72) it has been
inter alia held:
18. Shri Sarkar argued that as long as the petition has
been filed/supported by 100 members, the question of
qualitative aspect does not arise. He relied on Shaw
Wallace and also on Killick Nixon cases. In Shaw Wallace,
the issue raised was that the Petitioners therein held
insignificant percentage of shares and therefore they could

not maintain the petition when majority shareholders had
no complaint. The qualitative issue never arose. As a
matter of fact it could not have arisen at all in that case.
The Petitioners therein were employees of Shaw Wallace
and the Employees Union had complained to the
Government about the mismanagement in the company.
The government ordered an inspection and on the basis of
the inspection report, while the employee shareholders
filed a petition under Section 387/398, the government
itself filed a petition under Section 408. Since the
Petitioners therein were employees of the company itself,
they had vital interest in ensuring better management in
the company. Further, the petition was essentially a one
under Section 398 and a large number of instances in the
affairs of the company had been alleged as
mismanagement. In so far as the reliance of Shri Sarkar
on Killick Nixon case is concerned, it is to be noted that in
that case, the transferor of the shares whose name
continued in the register of members gave a power of
attorney to the transferees to file a petition under Sections
397/398. A challenge was taken that the transferees, not
being the members, had no personal interest in the affairs
of the company. On this contention the court held "In the
present case, there is nothing in Section 397 Or Section
398 To indicate that any special personal skill, judgment
or quality of a member is required to be used when a
member exercises his right under Section 397 Or Section

398. In a broad sense every person who is required to
exercise any right or privilege is required to apply his
mind. But this does not disable him from appointing an
agent to exercise that right or privilege. In fact, there may
be a number of cases where a person concerned may be
unable to apply his mind, e.g., an illiterate person who is
not aware of the facts or a person who is too ill or infirm
to exercise the power. Such persons are entitled to appoint
an agent to look after their affairs. It is the agent who will
apply his mind to the affairs of his principal and use his
own judgment. Members who are given a right to file a
petition under Sections 397 And 398 can, therefore,
delegate their right to an agent who can exercise that right
on their behalf". In this judgment, the statutory provision
has been examined in facts of that case. While I do agree
that Section 399 does not talk of the quality of a member,
I have explained below as to why the quality of the member
is necessary in a proceeding under Sections 397/398.
19. “In many of the proceedings before this Board,

motive had been questioned, I do not remember that in any
case, the qualitative aspect, as a point of law had been
raised or considered by this Board. Shri Sarkar argued
that there is no statutory provision regarding the
qualitative aspect of a petition. I agree that Section 399
does not deal with the qualitative aspect. Yet, since in a
proceeding under Sections 397/398, this Board exercises

equitable jurisdiction with enormous powers, I am of the
firm view that while examining the eligibility under
Section 399, the qualitative aspect of a member should
also be taken into account. It is more so in case of listed
companies, as with no marketable lot now in force, any
one holding shares could transfer a part of his shares and
create 100 members, and file a petition on flimsy grounds
just to harass the management or for publicity.
20. In the present case, the Petitioners have not denied

any of the facts alleged by the Respondents in regard to
the consenters. Shri Sarkar argued that no court can
enquire as to how the Petitioners got qualification. I would
have given some thought, if the Petitioners had gathered
or collected existing members to meet the qualification.
However in the present case, 109 members were created,
that too, by a single member, who himself had acquired
shares only a few days before he transferred the shares to
the consenters. Thus it is quite obvious that a single
shareholder became 109 shareholders. As a court of
equity, this Board cannot shut its eyes when a person
creates 100 members only to qualify to file a petition under
Sections 397/98. While, as a proposition of law, I do not
want to hold that there should be personal interest for the
Petitioners, yet, in the present case, the consenters do not
have real interests in the affairs of the company as
shareholders, but acquired shares only to lend their

signatures to enable filing of this petition. Shri Datar
relevantly referred to the judgment of the Supreme Court
in Gwalior Sugar (MANU/SC/0927/2004 : 2005 1 SCC
172) case, wherein regarding Section 399, the Supreme
Court has observed "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 it on a
technical requirement". This would show that a petition
under Section 397/398 can be filed only by those, even if
qualified under Section 399, having some real stake in the
company. As I have observed earlier in this paragraph,
from the manner, mode and method of acquisition of
shares, it is clear that the consenters have no real stake or
interests in the company and therefore their fulfilling the
requirements of Section 399 is of no consequence. In other
words, in real sense, considering the equitable nature of

the proceedings under Sections 397/398, it can be held
that the Petitioners cannot maintain the petition”.
and the said order, of the ‘Company Law Board’, was subsequently relied
upon by the Company Law Board in its order dated 29.09.2014 in CP No.
258/2011, in the matter of Rajiv Garg and Ors. Vs. Waxpol Industries Limited
and Ors .(vide paragraph 6), wherein it is observed as under:
6. “Another important aspect which needs to be considered

is the conduct of the petitioners in lodging the instant petition.
The petitioner No. 1 joined the company as management trainee
in the year 1976 and he was elevated to Executive Director of the
company together with respondent No. 2 in 1986. Thus, the
petitioner was very much in know of the development in the
company since 1995 and he preferred not to exercise any legal
rights against rights issue of shares in the year 1995 which
caused prejudice to his interest and he has canvassed the issue
about the said allotment in the instant petition filed on 22nd
March, 2011. He had attempted to justify the same by placing
reliance on the purported assurance given by father of
respondent No. 2 who had since passed away. While on one hand,
petitioners have challenged that the affairs of the company have
been mismanaged, on the other hand, it is an admitted position
that the petitioners have bought shares of the respondent
company from the shareholders just before lodging the petition.
The petitioners have purchased the shares prior to filing of the
petition but not lodged the said shares for registration raises the

presumption that they were purchased merely to meet the
threshold of entitlement for filing the petition. The respondents
have submitted that the petitioners have approached the Board
with unclean hands and their shareholdings are tainted calling
for rejection of the petition. Reliance in this respect has been
placed on M.C. Duraiswami v. Sakthi Sugars Ltd.
[MANU/TN/0529/1978 : [19800 50 Comp. Cas. 154, (Mad)] and
an unreported judgment of Principal Bench, CLB in C.P. No.
57/2004 vide order dated 19.10.2009 in Shri Jodh Raj Laddha &
Ors. v. Birla Corporation Ltd. & Ors., wherein the proposition
has been laid down that quantitative qualification in Section 399
is not the only criteria for determining maintainability but
qualitative aspect of the shares should also be considered.
Relying thereon, the respondents have submitted that the mode
and manner of obtaining consent from other shareholders that
predates the filing of the present petition is proof enough to show
that the petitioners have not satisfied the qualitative requirement
of shareholdings. On the other hand, the petitioners' case is
solely based on the concept of the parties acting as a group and
equal partnership. However, before rendering any opinion, it
will be worthwhile to consider other aspects canvassed before
the Board.”
61. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, proceeds
to make a pertinent mention that the ‘alleged cause of action’ for the Appellant,
filing his petition, making an averment of ‘oppression and mis-management’,

before the Tribunal, at first arose on 19.02.2015 and later, on 10.11.2015,
22.12.2015 and 01.01.2016, respectively and that the Appellant’s shareholding in
the Company, on each of the aforesaid dates was less than 10%. As on
19.02.2015, the Appellant had not even possessed any shareholding in the
Company.
62. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, advances
an argument that if the ‘Appellant’, was really ‘aggrieved’ by the aforesaid acts
of alleged ‘oppression and mis-management’, the ‘Appellant’ should have
immediately approached the then ‘Company Law Board’, on any of the aforesaid
dates, by filing necessary /appropriate ‘petition’, under Section 399(4) of the Act
of 1956. But the Appellant was aware that he had no grounds for claiming the
waiver for maintaining a petition u/s 397 of the Companies Act, 1956 and that,
therefore, his petition would be rejected at the very threshold. Resultantly, the
Appellant, and also through his associate Mr. Kumar Dinesh Sheth, had resorted
to foreign shopping by approaching not justly Hon’ble High Court of Karnataka
in Comp. No. 20/2016, but also the City Civil Court, Bangalore, in filing original
suit bearing OS Nos. 10302/2015 and OS 10303/2015, seeking an ex-parte
injunction against the Respondents without disclosing material facts.
63. According to the Respondents No. 1, 11, 13 and 15, the ‘Appellant’ had
failed in his endeavour to secure the ‘Ex-parte Relief’ before the Hon’ble City

Civil Court in the aforesaid suits and the Appellant had gradually increased its
shareholding 1st Respondent / Company thereby allowing the joint development
transaction to conclude and after obtaining the requisite 10% shareholding had
approached the Company Law Board, to file its earlier CP No. 22/2016, on
21.03.2016 and later, withdrew the said petition on 20.08.2018 and projected CP
No. 486/18 before the Tribunal, in respect of purported acts of ‘oppression and
mismanagement’ that said to have taken place, on the relevant dates, of ‘cause of
action’ mentioned supra.
64. Proceeding further, the learned Counsel for Respondents No. 1, 11, 13 and
15, comes out with a plea, that the ‘Appellant’ had no real interest in the affairs
of the 1st Respondent / Company and he had ‘acquired shareholding’ in the
Company, for the main purpose of maintaining his frivolous petition, that too, in
respect of the events that took place before the Appellant having 10%
shareholding. Although, the Appellant had 10% shares, as on date of filing of his
petition, before the Company Law Board, Tribunal he had not met the qualitative
criteria to sustain his petition, as he had not possessed the requisite shareholding,
at the ‘relevant point of time’, when the alleged ‘cause of action’ arose.
Furthermore, meeting a qualitative criterion is an established fact in equitable
proceedings, under Section 397of the Companies Act, 1956 and Section 241 of
the Act of 2013, the Appellant’s petition, was not maintainable, as held, in the

decision in Kishore Samrite V. State of U.P. and Ors. reported in (2013)2SC C
398, wherein at paragraphs 29, 33-36, it is held as under:
Abuse of the process of Court:

29. Now, we shall deal with the question whether both or any
of the Petitioners in Civil Writ Petition Nos. 111/2011 and
125/2011 are guilty of suppression of material facts, not
approaching the Court with clean hands, and thereby abusing
the process of the Court. Before we dwell upon the facts and
circumstances of the case in hand, let us refer to some case laws
which would help us in dealing with the present situation with
greater precision. The cases of abuse of the process of court and
such allied matters have been arising before the Courts
consistently. This Court has had many occasions where it dealt
with the cases of this kind and it has clearly stated the principles
that would govern the obligations of a litigant while approaching
the court for redressal of any grievance and the consequences of
abuse of the process of court. We may recapitulate and state
some of the principles. It is difficult to state such principles
exhaustively and with such accuracy that would uniformly apply
to a variety of cases. These are:
(i) Courts have, over the centuries, frowned upon litigants

who, with intent to deceive and mislead the Courts, initiated
proceedings without full disclosure of facts and came to the
courts with 'unclean hands'. Courts have held that such litigants
are neither entitled to be heard on the merits of the case nor
entitled to any relief.

(ii) The people, who approach the Court for relief on an ex
parte statement, are under a contract with the court that they
would state the whole case fully and fairly to the court and where
the litigant has broken such faith, the discretion of the court
cannot be exercised in favour of such a litigant.
(iii) The obligation to approach the Court with clean hands is

an absolute obligation and has repeatedly been reiterated by this
Court.
(iv) Quests for personal gains have become so intense that

those involved in litigation do not hesitate to take shelter of
falsehood and misrepresent and suppress facts in the court
proceedings. Materialism, opportunism and malicious intent
have over-shadowed the old ethos of litigative values for small
gains.
(v) A litigant who attempts to pollute the stream of justice or

who touches the pure fountain of justice with tainted hands is not
entitled to any relief, interim or final.
(vi) The Court must ensure that its process is not abused and
in order to prevent abuse of the process the court, it would be
justified even in insisting on furnishing of security and in cases
of serious abuse, the Court would be duty bound to impose heavy
costs.
(vii) Wherever a public interest is invoked, the Court must

examine the petition carefully to ensure that there is genuine

public interest involved. The stream of justice should not be
allowed to be polluted by unscrupulous litigants.
(viii) The Court, especially the Supreme Court, has to maintain

strictest vigilance over the abuse of the process of court and
ordinarily meddlesome bystanders should not be granted "visa".
Many societal pollutants create new problems of unredressed
grievances and the Court should endure to take cases where the
justice of the lis well-justifies it.
[Refer: Dalip Singh v. State of U.P. and Ors.
MANU/SC/1886/2009 : (2010) 2 SCC 114; Amar Singh v. Union
of India and Ors. MANU/SC/0596/2011 : (2011) 7 SCC 69 and
State of Uttaranchal v. Balwant Singh Chaufal and Ors.
MANU/SC/0050/2010 : (2010) 3 SCC 402].
33. The party not approaching the Court with clean hands
would be liable to be nonsuited and such party, who has also
succeeded in polluting the stream of justice by making patently
false statements, cannot claim relief, especially under Article 136
of the Constitution. While approaching the court, a litigant must
state correct facts and come with clean hands. Where such
statement of facts is based on some information, the source of
such information must also be disclosed. Totally misconceived
petition amounts to abuse of the process of the court and such a
litigant is not required to be dealt with lightly, as a petition
containing misleading and inaccurate statement, if filed, to
achieve an ulterior purpose amounts to abuse of the process of
the court. A litigant is bound to make "full and true disclosure of

facts". (Refer: Tilokchand H.B. Motichand and Ors. v. Munshi
and Anr. [MANU/SC/0127/1968: 1969 (1) SCC 110]; A.
Shanmugam v. Ariya Kshatriya Rajakula Vamsathu Madalaya
Nandhavana Paripalanai Sangam and Anr.
[MANU/SC/0336/2012: (2012) 6 SCC 430]; C handra Shashi v.
Anil Kumar Verma [MANU/SC/0558/1995: (1995) 1 SCC 421];
A bhyudya Sanstha v. Union of India and Ors.
[MANU/SC/0612/2011: (2011) 6 SCC 145]; State of Madhya
Pradesh v. Narmada Bachao Andolan and Anr.
[MANU/SC/0599/2011: (2011) 7 SCC 639]; Kalyaneshwari v.
Union of India and Anr. [MANU/SC/0217/2011: (2011) 3 SCC
287)].
34. The person seeking equity must do equity. It is not just the
clean hands, but also clean mind, clean heart and clean objective
that are the equi-fundamentals of judicious litigation. The legal
maxim jure naturae aequum est neminem cum alterius
detrimento et injuria fieri locupletiorem, which means that it is a
law of nature that one should not be enriched by the loss or injury
to another, is the percept for Courts. Wide jurisdiction of the
court should not become a source of abuse of the process of law
by the disgruntled litigant. Careful exercise is also necessary to
ensure that the litigation is genuine, not motivated by extraneous
considerations and imposes an obligation upon the litigant to
disclose the true facts and approach the court with clean hands.
35. No litigant can play 'hide and seek' with the courts or
adopt 'pick and choose'. True facts ought to be disclosed as the

Court knows law, but not facts. One, who does not come with
candid facts and clean breast cannot hold a writ of the court with
soiled hands. Suppression or concealment of material facts is
impermissible to a litigant or even as a technique of advocacy. In
such cases, the Court is duty bound to discharge rule nisi and
such applicant is required to be dealt with for contempt of court
for abusing the process of the court. K.D. Sharma v. Steel
Authority of India Ltd. and Ors. [MANU/SC/3371/2008: (2008)
12 SCC 481].
36. Another settled canon of administration of justice is that

no litigant should be permitted to misuse the judicial process by
filing frivolous petitions. No litigant has a right to unlimited
drought upon the court time and public money in order to get his
affairs settled in the manner as he wishes. Easy access to justice
should not be used as a licence to file misconceived and frivolous
petitions. (Buddhi Kota Subbarao (Dr.) v. K. Parasaran,
MANU/SC/0678/1996: (1996) 5 SCC 530).”
That apart, the Learned Counsel for R1, 11, 13, and 15, refers to the
decision, in Srikanta Datta Narasimharaja Wadiyar V. Sri Venkateswara Real
Estate Enterprises (Pvt.) Ltd. and Ors., reported in [1991] 72 Comp Cas 211(Kar),
wherein, at paragraph 18, 20, it is mentioned as under:
18. “A consideration of all these legal issues will necessarily

take me to the detailed objections filed by the respondents. But
the question is whether, on the facts of these cases, this court

should go into the objections and determine the issues for
consideration on merits. In my considered view, this petition
could be disposed of on the preliminary issue, viz., whether the
petitioner has filed this petition in good faith in order to work out
his rights within the framework of the Act. It is well-settled that
the relief under sections 397 and 398 of the Act is an equitable
relief which is entirely left to the discretion of the company court.
In the 5th edition of Pennington's Company Law, dealing with
relief from acts of oppression, it is stated (at page 750):
"A petition for relief from oppression under the original
statutory provision would be dismissed if it was not
presented in good faith solely in order to obtain such
relief, and because of the equitable and therefore
discretionary character of the court's jurisdiction under
both the original and the present provision, the
requirement of good faith on the part of the petitioner
undoubtedly continues. Thus, even if the directors or
majority shareholders have been guilty of improper or
irregular conduct, so that there is a prima facie case for
relief, it will be refused if the real purpose of the petitioner
is to obtain payment of a debt owed by the company, or to
force the directors to accept his views as to the way in
which the company's business should be managed; or if
the petitioner has submitted to the conduct complained of
without protest and has acquiesced in the improper
management of the company affairs. Likewise, delay by the
petitioner in initiating proceedings after he must have

realised that he was the victim of a scheme of oppression
or unfair treatment will induce the court to refuse relief,
because this indicates that the petitioner has acquiesced in
the respondents' conduct and that his complaint is,
therefore, not made in good faith."
20. That takes me to the question of good faith of the

petitioner in presenting these company petitions. The
question of good faith has to be tested by the conduct of
the petitioner as reflected not only in the proceedings
before this court but also in the parallel proceedings in the
civil courts and in other civil litigations in other courts”.
Moreover, on behalf of R1, 11, 13 & 15, a reference, is made to the decision
in K.R.S. Mani V. Anugraha Jewellers Ltd. reported in [2005]126 Comp Cas
878(Mad), wherein, the Hon’ble High Court of Madras at paragraphs 14 & 15
has observed he following:
14. “Further, it is seen that the appellants/petitioners have not

approached the Company Law Board with clean hands. Even
though in their company petition under the column 'matters not
previously filed or pending with any other courts' a reference is
made that Original Suit is filed in O.S. No. 945 of 1996 which is
concerned only proceedings of the Annual General Meeting of
the 1st respondent Company held on 4-9-1996 and O.S. No. 788
of 1996 on the file of the Sub Court, Coimbatore, which concerns
only the issue as to the 2nd respondent holding Office as

Managing Director of the 1st respondent. However, the relief
claimed in the said suit is almost identical with the relief claimed
in the Company Petition. It is only when a preliminary objection
is raised about the maintainability of the company petition, the
said suit seems to have been withdrawn later on. Merely because,
the appellants/petitioners have withdrawn the suit on subsequent
date, the same will not absolve them about their conduct in not
approaching the Company Law Board with clean hands. Hence,
we do not agree for the grant of relief the appellants on this score
also.
15. Further, as per the various decisions rendered by this
Court as well as the Supreme Court, it is the duty of the courts to
recognize the Corporate Democracy of a company in managing
its affairs. The court should not restrict the powers of the Board
of Directors and it shall not interfere with the day to day affairs
and management and administration of the company. The
principles laid down in the decisions rendered by this court in
Vivek Goenka v. Manoj Sonthalia [1992] 2 ML J 163; G. Kasturi
v. N. Murali MANU/TN/0075/1990 : [1992] 74 Comp. Cas. 661
(Mad.); and in Nurcombe v. Nurcombe [1983] 3 CL J. 163 (CA),
makes it clear that the appellants/petitioners are not entitled to
the relief as claimed for in the company petition.”
65. The other plea taken on behalf of Respondents No. 1, 11, 13 and 15, is that
for sustaining a ‘petition’, u/s 397, of the Companies Act, 1956, (and now under
section 241 of the Companies Act, 2013), the Petitioner, is to approach a

‘Tribunal’ with clean hands by proving his Bonafides’’. If the Petition is ‘borne
out of malafides’ and ‘unclean’ conduct, the said ‘petition’ ‘will not be
maintainable’, although the allegations of the petitioners, if proved, would
otherwise, make out a case for ‘Oppression’ / ‘Mismanagement’.
that the Appellant, had indulged in forum shopping, by indulging in plurality of
proceedings, suppression of material facts and collusive legal actions with Mr.
Kumar Dinesh Seth, failing to get a favourable outcome or orders in any of the
said proceedings. In fact, the Appellant had initiated the said proceedings based
on the sequence of events mentioned in paragraph 3.1 of the 1st Respondent’s
Reply Affidavit and vide paragraphs 15-18 in Respondent No. 5’s Affidavit
before this Tribunal.
67. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, contends
that the ‘Final Order’ dated 27.11.2019, passed by the ‘Tribunal’, especially with
reference to paragraph 16-18, 23 and 24, will patently and latently, indicate that
the ‘Tribunal’, had considered the aspect of maintainability of the Appellant’s
‘petition’, not on the basis of his conduct, but also the ‘qualitative analysis of his
shareholding’ and came to the right conclusion, that the Appellant, lacked ‘Locus

standi’, at the ‘relevant point of time’, and that the ‘petition’ was ‘not
maintainable’, on the aforesaid grounds.
that the interim order, of the ‘Tribunal’, in IA 360 of 2018 that the ‘Appellant’
had ‘requisite shareholding’, to maintain his ‘petition’, the same, was assailed, in
Company Appeal (AT)/144/2019, and by an order dated 02.08.2019, this
Appellate Tribunal, had permitted the Respondent No. 11 to withdraw its Appeal,
leaving all the contentions and issues to argue before the Tribunal, which may be
decided at the stage of ‘Final Hearing’, uninfluenced by the decision, made in the
‘impugned order’.
69. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, brings to
the notice of this Tribunal, that while passing the final order, on 27.11.2019 in
CP No. 486/2018, the ‘Tribunal’ was required to reconsider the ‘issue of
maintainability’, because of the directions issued by the ‘Appellate Tribunal’ and
the ‘Tribunal’, uninfluenced of its earlier order dated 30.05.2019, rightly had
reconsidered, the ‘question of maintainability’, of the Appellant’s petition, at the
stage of ‘Final Hearing’ coupled with the consideration of matters, touching upon
the merits of the case, including the Appellant’s conduct, and qualitative, analysis

of its shareholding, therefore, no fault, can be found in the Tribunal’s order, as
contended by the Respondents No. 1, 11, 13 and 15’ side.
that there is no infirmity in the ‘Postal Ballot Notice’ dated 10.11.2015, issued by
the 1st Respondent / Company and a mere perusal of the Minutes of the Board
Meeting, of 04.11.2015 the Board had approved, the issuance of ‘Postal Ballot
Notice’, clearly mentioning the reasons for opting for ‘joint development’ of the
property and the said explanation was also contained in the ‘Explanatory
Statement’ enclosed along with the postal ballot notice, as per Section 102 of the
Companies Act, 2013, thus providing the shareholders all the requisite
information in regard to the ‘nature of transaction’ proposed and thereby enabling
them, to make an ‘informed decision’ while voting in favour of the Joint
Development.
that the decisions on commercial details of transactions, proposed to be entered
into by the Company, including the details of contracting party, essentially relate
to the ‘Business of the Company’ and/or a matter of negotiation between the
‘Board of Directors’ of the Company, and third parties, often concerning
‘sensitive information’. As such, there is no mandate, for the Board to disclose

the said information to the shareholders, nor are the shareholders competent to
analyse and determine such matters, as held, in Rajiv Nag V Quality Assurance
Institute (India) Ltd. reported in (2000) 4 Comp LJ385(CLB), wherein at
paragraph 11, it is observed as under:
11. Learned counsel for the petitioner had, however submitted

that as the provisions of Section 173(2) of the Act were
mandatory, it is the explanatory statement which should be given
prominence as the same is supposed to disclose all the material
facts on which the mind of the shareholders has to be made.
Referring to item No. 8 of the explanatory statement quoted
above learned counsel has contended that the said explanation
mentions that, "it is planned to reward the existing shareholders
by way of issue of bonus shares in such ratio as the board of
directors may deem fit". Therefore, according to learned counsel
it is evident from the explanatory statement that the existing
shareholders as on September 1, 1999, were to be rewarded by
the issue of bonus shares, and the petitioner was an existing
shareholder on that date. So far as this submission is concerned
it has to be stated that the explanatory statement is a part of the
notice and cannot be read de hors the same. While it is necessary
that an explanatory statement should be annexed to the notice in
respect of any item of business, which is special, it is not
necessary to include in it the text of the resolution or the draft of
the resolution to be proposed at the meeting. Its purpose is that
the members should be informed of the nature of the business to
be transacted at the general meeting. As held by the Calcutta

High Court in the case of East India Commercial Co. Private Ltd.
v. Raymon Engineering Works Ltd., MANU/WB/0055/1966: AIR
1966 Cal 232, it is not the function of an explanatory statement
to travel beyond the scope of the proposed resolution. Material
facts have to be given but not detailed particulars. Considered in
that light item No. 8 of the explanatory statement if read
harmoniously with the contents of the resolution quoted in
paragraph 8 of the notice, discloses no contradiction in terms.
Existing shareholders will be those members holding equity
shares as per the register of members on the date to be decided
by the board of directors, as indicated in the proposed resolution
quoted in item No. 8 of the notice. It is well settled that provisions
like Section 173(2) of the Act should be understood in a
meaningful manner and not to be construed rigidly so as to
hamper the conduct of business.”
Added further on behalf of R1, 11, 13 & 15, a reference, is made to the
decision in K. Meenakshi Amma V Sreerama Vilas Press and Publications (P.)
Ltd. and Ors. reported in MANU/KE/0087/1991, wherein paragraph 11, it is
observed as under:
11. It has to be remembered that the chairman appointed by

the company court was seeking directions in the matter of
conducting the meeting. The company court gave certain
directions for the proper conduct of the meeting. The former
managing director, Sri N. Madhavan Nair, filed Application No.
187 of 1990 to stop the convening of the meeting on the ground

that the notice is not in conformity with Sections 171 173 and
257(1A) of the Companies Act. The company court overruled the
objections, found the notice in order and dismissed the
application of the former managing director. He filed an appeal,
M. F. A. No. 333 of 1990. The appeal was dismissed by a Division
Bench of this court observing that it will be open to the appellant
to urge various contentions including the contention regarding
the order in Company Application No. 187 of 1990 in the course
of trial of the main Application No. 253 of 1990. So even though
the company court has found that the notice sent by the chairman
appointed by the company court was not defective, that matter
was left open to be considered by the company court at the final
stage of the main application, viz., Application No. 253 of 1990.
But it has to be noted that the meeting was held as early as on
March 10, 1990, and the period of appointment of the board of
directors and managing director of the company has expired by
efflux of time and an election to a new board of directors and
managing director became necessary”.
72. According to the Respondents No. 1, 11, 13 and 15, the Appellant was well
aware that as on 10.11.2015, being the issuance of ‘Postal Ballot Notice’, the 1st
Respondent / Company, was still in the ‘process of collating Bids from the
‘prospective Developers’, for the joint development of its property. Therefore,
the said information could at any event not having, been disclosed to the
shareholders in the aforesaid notice or explanatory statement.

73. That apart, from the facts and documents available on record, according to
the Learned Counsel for the Respondents No. 1, 11, 13 and 15 that as of the date
of issuance of Postal Ballot Notice, there was no intention for R2 to R7, to sell
their shareholding in the 1st Respondent / Company, much less to R12, 13 and 15,
who are total strangers to the 1st Respondent /Company at the said ‘point of time’.
Therefore, there arose no question of disclosing such information in the ‘Postal
Ballot Notice’, of 10.11.2015. In effect, there was no infirmity in the contents of
Postal Ballot Notice nor was any material fact supressed by the 1st Respondent /
Company by issuing notice.
74. According to the Respondents No. 1, 11, 13 and 15, it is not the case of the
Appellant that if the information was made known to him before the Postal Ballot
voting, then he would have voted in a different manner, with a view to prevent
such joint development. But the fact of the matter is that the Appellant had voted
against the Resolution for Joint Development and that the Appellant has
miserably failed to prove as to how he is aggrieved, in his capacity as shareholder
of the 1st Respondent / Company, by the ‘Postal Ballot Notice’ and the alleged
‘non-disclosure of material information’ therein.
75. The Learned Counsel for Respondents No. 1, 11, 13 and 15, points out that
an overwhelming 91.13% of the shareholders of the 1st Respondent / Company,

present and voting, appreciating and understanding the need for entering into a
development, with regard to the Company’s properties to ensure recurring cash
flow took an ‘informed decision’ leading to the Resolution being passed on
22.12.2015, for the benefit of the 1st Respondent / Company and all its
shareholders, including the Minority shareholders. Indeed, not a single
shareholder for the last 8 years, other than the Appellant has approached the
Tribunal or any other Forum, disputing the actions of the 1 st Respondent /
Company or assailing the Joint Development Transaction, by alleging any
infirmity in the ‘Postal Ballot Notice’, ‘all the actions of the Respondents’.
76. The Learned Counsel for the Respondents No. 1, 11, 13 and 15, takes a
forceful stand, that even assuming without admitting that there was any ‘infirmity
or illegality’, in the Postal Notice dated 10.11.2015, as averred by the Appellant,
the law is clear that an isolated instance / single instance will not form a ground
for sustaining an action in respect of an oppression and mismanagement as per
Section 241 of the Companies Act, 2013 or justify passing of any orders u/s 242
of the Companies Act, 2013, as per decision of Hon’ble Supreme Court in Needle
Industries (India) Pvt. Ltd. v. Needle Industries Newey (India) Holdings Ltd. &
Ors. reported in AIR 1981 SC 1298, wherein at paragraph 51 it is observed as
under:.

51. The question sometimes arises as to whether an action in
contravention of law is per se oppressive. It is said, as was done
by one of us, N.H. Bhagwati J. in a decision of the Gujarat High
Court in S.M. Ganpatram v. Sayaji Jubilee Cotton & Jute Mills
Co. [1964] 34 Company Cases 830-31 that "a resolution passed
by the directors may be perfectly legal and yet oppressive, and
conversely a resolution which is in contravention of the law may
be in the interests of the shareholders and the company". On this
question, Lord President Cooper observed in Elder v. Elder
[1952] S.C. 49:
The decisions indicate that conduct which is technically
legal and correct may nevertheless be such as to justify the
application of the 'just and equitable' jurisdiction, and,
conversely, that conduct involving illegality and
contravention of the Act may not suffice to warrant the
remedy of winding up, especially where alternative
remedies are available. Where the 'just and equitable'
jurisdiction has been applied in cases of this type, the
circumstances have always, I think, been such as to
warrant the inference that there has been, at least, an
unfair abuse of powers and an impairment of confidence
in the probity with which the company's affairs are being
conducted, as distinguished from mere resentment on the
part of a minority at being outvoted on some issue of
domestic policy.
Neither the judgment of Bhagwati J. nor the observations in
Elder are capable of the construction that every illegality is per

se oppressive or that the illegality of an action does not bear
upon its oppressiveness. In Elder a complaint was made that
Elder had not received the notice of the Board meeting. It was
held that since it was not shown that any prejudice was
occasioned thereby or that Elder could have bought the shares
had he been present, no complaint of oppression could be
entertained merely on the ground that the failure to give notice
of the Board meeting was an act of illegality. The true position is
that an isolated act, which is contrary to law, may not necessarily
and by itself support the inference that the law was violated with
a mala fide intention or that such violation was burdensome,
harsh and wrongful. But a series of illegal acts following upon
one another can, in the context, lead justifiably to the conclusion
that they are a part of the same transaction, of which the object
is to cause or commit the oppression of persons against whom
those acts are directed. This may usefully be illustrated by
reference to a familiar jurisdiction in which a litigant asks for
the transfer of his case from one Judge to another. An isolated
order passed by a Judge which is contrary to law will not
normally support the inference that he is biassed; but a series of
wrong or illegal orders to the prejudice of a party are generally
accepted as supporting the inference of a reasonable
apprehension that the Judge is biassed and that the party
complaining of the orders will not get justice at his hands.”
that the Appellant, had never pleaded in respect of the Explanatory Statement

enclosed to the ‘Postal Ballot Notice’, purportedly, not being in conformity, with
Section 102 of the Companies Act, 2013, the provisions of the Companies
(Management and Administration) Rules, 2014 and the ‘Secretarial Standards’
are only raised for the first time in the Appellant’s written submissions before this
Tribunal. In this connection, the Learned Counsel for the Respondents No. 1, 11,
13 and 15, points out that the instances of purported oppression and
mismanagement must necessarily be pleaded in the petition and that the matters
not pleaded in the petition cannot be looked into nor considered by the Court or
Tribunal as the case may be, as per decision in Bachhaj Nahar v. Nilima Mandal
and Ors. reported in 2008 (17) SCC 491, wherein at paragraphs 8 to 10, it is
observed as under:
8. “The High Court, in this case, in its obvious zeal to cut

delay and hardship that may ensue by relegating the plaintiffs to
one more round of litigation, has rendered a judgment which
violates several fundamental rules of civil procedure. The rules
breached are:
(i) No amount of evidence can be looked into, upon a

plea which was never put forward in the pleadings. A
question which did arise from the pleadings and which was
not the subject matter of an issue, cannot be decided by the
court.
(ii) A Court cannot make out a case not pleaded. The

court should confine its decision to the question raised in

pleadings. Nor can it grant a relief which is not claimed
and which does not flow from the facts and the cause of
action alleged in the plaint.
(iii) A factual issue cannot be raised or considered for

the first time in a second appeal.
Civil Procedure Code is an elaborate codification of the

principles of natural justice to be applied to civil litigation. The
provisions are so elaborate that many a time, fulfilment of the
procedural requirements of the Code may itself contribute to
delay. But any anxiety to cut the delay or further litigation,
should not be a ground to float the settled fundamental rules of
civil procedure. Be that as it may. We will briefly set out the
reasons for the aforesaid conclusions.
9. The object and purpose of pleadings and issues is to ensure

that the litigants come to trial with all issues clearly defined and
to prevent cases being expanded or grounds being shifted during
trial. Its object is also to ensure that each side is fully alive to the
questions that are likely to be raised or considered so that they
may have an opportunity of placing the relevant evidence
appropriate to the issues before the court for its consideration.
This Court has repeatedly held that the pleadings are meant to
give to each side intimation of the case of the other so that it may
be met, to enable courts to determine what is really at issue
between the parties, and to prevent any deviation from the course
which litigation on particular causes must take.

10. The object of issues is to identify from the pleadings the
questions or points required to be decided by the courts so as to
enable parties to let in evidence thereon. When the facts
necessary to make out a particular claim, or to seek a particular
relief, are not found in the plaint, the court cannot focus the
attention of the parties, or its own attention on that claim or
relief, by framing an appropriate issue. As a result the defendant
does not get an opportunity to place the facts and contentions
necessary to repudiate or challenge such a claim or relief.
Therefore, the court cannot, on finding that the plaintiff has not
made out the case put forth by him, grant some other relief. The
question before a court is not whether there is some material on
the basis of which some relief can be granted. The question is
whether any relief can be granted, when the defendant had no
opportunity to show that the relief proposed by the court could
not be granted. When there is no prayer for a particular relief
and no pleadings to support such a relief, and when defendant
has no opportunity to resist or oppose such a relief, if the court
considers and grants such a relief, it will lead to miscarriage of
justice. Thus it is said that no amount of evidence, on a plea that
is not put forward in the pleadings, can be looked into to grant
any relief.”
Also the Learned Counsel for the R1, 11, 13 & 15, refers to the decision,
in Sangramsingh P. Gaekwad v. Shantadevi P. Gaekwad reported in 2005 11
SCC 314, wherein at paragraph 185, it is observed as under:

185. “The jurisdiction of the Court to grant appropriate relief
under Section 397 of the Companies Act indisputably is of wide
amplitude. It is also beyond any controversy that the court while
exercising its discretion is not bound by the terms contained in
Section 402 of the Companies Act if in a particular fact situation
a further relief or reliefs, as the court may seem fit and proper,
is warranted. (See Bennet Coleman & Co. v. Union of India and
Ors. MANU/MH/0054/1977 and Syed Mahomed Ali v. R.
Sundaramurthy and Ors., MANU/TN/0089/1958 : (1958) 2 MLJ
259.”
Furthermore, in the decision, Akella Lalitha v. Konda Hanumantha Rao
and Anr. reported in 2022 SCC OnLine SC 928, wherein at paragraph 17, it is
observed as under:
17. “In the case of Trojan & Co. Ltd. v. Rm.N.N. Nagappa
Chettiar, this Court considered the issue as to whether relief not
asked for by a party could be granted and that too without having
proper pleadings. The Court held as under:—
“It is well settled that the decision of a case cannot be

based on grounds outside the pleadings of the parties and
it is the case pleaded that has to be found. Without an
amendment of the plaint, the Court was not entitled to
grant the relief not asked for and no prayer was ever made
to amend the plaint so as to incorporate in it an alternative
case.”

As such the ‘Tribunal’ could not have traversed into the matters, that were
not specifically pleaded by the ‘Appellant’ through his Petition filed under
Section 241 and 242 of the Companies Act, 2013, before the ‘Tribunal’,
especially when the ‘Respondents’ had no opportunity to counter the same.
78. The Learned Counsel for the Respondents No.1, 11, 13 & 15, points out
that the Respondent No.11 was selected as the successful developer for the joint
development transaction through a fair and transparent process, as is evident from
the minutes of the Board Meeting dated 24.11.2015. As a matter of fact, much
after the execution of ‘Joint Development Agreement’ dated 01.01.2016 that
Respondent No.2 to 7 intending to dispose of their shares in 1st Respondent /
Company had entered into share purchase agreement, with the Respondent No.
12,13 & 15 for selling the said shares and in fact, in compliance with the
provisions of the SEBI Regulations, including the (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011 and other related guidelines and
compliances, the Respondent No. 12, 13 & 15 when through the process of open
offer and in reality, the Appellant could himself have participated in the open
offer process and purchased the shares of the Respondent Nos. 2 to 7, which the
Appellant had not resorted to.

79. The Learned Counsel for Respondent No. No.1, 11, 13 & 15, points out
that had the Respondent No. 11, 12, 13 & 15 indeed, intended to take over control
of the company, as alleged, the said ‘Respondents’ could have directly proceeded
to purchase the shares of the Company without going through the process of
submitting a ‘proposal’, for developing the Company’s Hebbal property (that too
a proposal which was more competent than proposals of other Developers),
risking non-selection through such process, entering into the Development
Agreement by incurring stamp duty of over Rs.4.3 Crores, and ultimately risking
the uncertainty of being able to purchase the above shares, given the applicability
of open offer process.
80. The Learned Counsel for Respondent No. 1, 11, 13 & 15, contends that the
matters relating to ‘transfer of shares’ and validity thereof are beyond ambit of
consideration of the ‘Tribunal’, in the teeth of ratio, prescribed, by the Hon’ble
Supreme Court of India in the matter of IFB Agro Industries Limited V.
SICGIL India Limited and Ors. reported in AIR 2023 SC 247, wherein at
paragraph 37, 38, it is observed as under:
37. The position with respect to the SEBI (SAST) Regulations

is similar to that of the SEBI (PIT) Regulations. Regulation 7 of
Chapter III obligates the acquirer of more than 5% shares in a
company to disclose the same to the company and the stock
exchange. This is the prohibition, and non-disclosure is punitive.

Chapter V deals with investigation and action by the Board,
which includes the power of the Board to appoint an
investigating officer (Regulation 38), the issuance of show-cause
notice to the acquirer (Regulation 39), the obligation of the
investigating authority to submit a report at the earliest
(Regulation 41), the duty to supply the report to the acquirer and
give him an opportunity of hearing before passing penal orders
(Regulation 42) and lastly, the powers of the Board to take
action/pass directions under Chapter VI-A and Section 24 of the
SEBI Act (Regulation 44). It is significant to note that Regulation
45 provides for penalties for non-compliance with the said
Regulations. The liability will be in terms of the Regulations and
the SEBI Act. Here again, the SEBI (SAST) Regulation is a
comprehensive scheme providing for inquiry, investigation,
submission of report by the investigating officer, procedural
safeguards in favor of the acquirer, and finally, the restitutionary
order/directions to be passed by the Board. This whole procedure
cannot be short-circuited by making an application Under
Section 111A of the 1956 Act on the ground that there exists
parallel jurisdiction with the SEBI and CLB/Tribunal. The
transaction complained of must suffer scrutiny by the regulator,
and it is only for the regulator to determine a violation of the
provisions of the SEBI Act and the Regulations.
38. Having considered the matter from a different perspective,

we are of the opinion that the Appellant is not justified in
invoking the jurisdiction of the CLB Under Section 111A of the

Act for violation of SEBI Regulations. We are also of the opinion
that the Tribunal committed an error in entertaining and
allowing the company petition filed Under Section 111A of the
1956 Act. Though we are not in agreement with the reasoning
adopted by the Appellate Tribunal in the impugned order, we are
in agreement with its conclusion that the Tribunal exceeded its
jurisdiction and therefore, the Appellate Tribunal was correct in
setting aside the judgment dated 05.07.2017.
81. The Learned Counsel for the Respondent No. 1, 11, 13 & 15, submits that
the ‘Appellant’, before agitating the matter pertaining to share transfer, before the
‘Tribunal’, the ‘Appellant’ had already filed two complaints before the ‘SEBI’
but in ‘vain’. Also the Appellant filed a ‘civil suit’ to disrupt the share acquisition
process, which he subsequently, withdrew, through her ‘undertaking’ before the
Hon’ble High Court of Karnataka, in the Appeal proceedings, and hence, is
‘estopped’, ‘by his conduct’, from re-agitating the same matter, before the
Tribunal, and before this ‘Appellate Tribunal’, especially, in the light of the
decision of Hon’ble Supreme Court of India in Agro Industries Limited
mentioned (supra) and it is pertinent to make a mention that share purchase was
also duly approved by ‘SEBI’.
82. The Learned Counsel for Respondent No. 1, 11, 13 & 15, points out that
as seen from the ‘Annual Report’, of the 1st Respondent / Company, for the

Financial Year 202-23, the 1st Respondent / Company, is engaged in the ‘Business
of products’, solutions and Electronic Contract Manufacturing Service, and that
even as on 31.03.2023, had ‘Annual Turnover, of Rs. 3,334.81 Crores, from the
same, out of which ‘income’ from ‘real estate’, comprises only Rs.534.20 Crores.
Therefore, it is the plea of Respondent No. 1, 11, 13 & 15, that the 1st Respondent
/ Company, owns, another ‘property’ at Electronic City, Bengaluru, which the
Appellant, had not disclosed, before this ‘Tribunal’ and as such, the Appellant’s,
contention, that the said ‘Joint Development Property’, comprises of the entire
‘Assets’ and substratum, of the 1st Respondent / Company, is a misleading and
baseless one.
83. The Learned Counsel for Respondent No. 1, 11, 13 & 15, projects an
argument that the Joint Development transaction complained of by the Appellant,
has resulted in construction / development of a commercial building, of
commercial complex, of which the 1st Respondent / Company once more than 2
lacs sq. ft. and also continues to retain ownership over proportionate undivided
share in the land comprising the said development. Furthermore, through
utilisation officer of such developed property, the company had already garnered
potential, to generate rental revenue of Rs.1.25 crores per month, thereby
fructifying the original intent of the complained transactions.

84. Besides the above, the Learned Counsel for Respondent No. 1, 11, 13 &
15, points out that simultaneous with the execution of Joint Development
Agreement, on 01.01.2016, the 1st Respondent / Company, had received funds to
an extent of Rs. 9 crores, as none-refundable security, which funds the 1st
Respondent / Company, used to resolve its cash crunch and help keep its business
‘afloat’. Hence the allegation that the 1st Respondent / Company has not derived
any benefit from the development and that the said transaction had effectively led
to the winding up of the 1st Respondent / Company is an incorrect one.
85. The Learned Counsel for the Respondent No. 1, 11, 13 & 15 points out that
the aspect of ‘Good Faith’ being a ‘sine qua non’ for maintaining a petition under
Section 241 of the Companies Act, 2013, has to be tested by the Appellant’s
conduct as reflected not only in the proceedings before the ‘Tribunal’ but also in
the parallel proceedings, in the civil courts and in other ‘civil litigations’, in other
‘foras’.
86. The Learned Counsel for the Respondent No. 1, 11, 13 & 15, comes out
to the plea that the Tribunals order dated 27.11.2019, will exhibit that the
‘Tribunal’ had not merely placed reliance on the orders passed in earlier TP.
No.88/2016, but has in fact, independently, assessed the ‘conduct’ and
‘Bonafides’ of the Appellant in numerous proceedings, initiated by him, before

different forums, before approaching the ‘Tribunal’, and hence, no fault or
infirmity can be attributed to the ‘Tribunal’, in this regard.
87. The Learned Counsel for the Respondent No. 1, 11, 13 & 15, points out
that COP No. 20/2016, was filed by the Appellant’s associate Mr. Kumar Dinesh
Seth, the Appellant prior to the passing of the order, by the Hon’ble High Court
of Karnataka, in COP No. 20/2016, had filed an ‘application’, seeking to be
impleaded as a ‘party’ in the said proceedings and specific adverse observations
were made by the Hon’ble High Court, regarding the Bonafides and conduct of
the Appellant (vide paragraph 7 to 9 of the said order) and that the said
observations remained unchallenged by the ‘Appellant’. Moreover, the TP No.
248/2017 was also not withdrawn by Mr. Kumar Dinesh Seth at any point of time,
and ultimately was dismissed along with the Appellants CP No. 486/2018 through
a common order dated 27.11.2019 of the ‘Tribunal’. Therefore, the stand of the
Respondent No. 1, 11, 13 & 15, is that the ‘Tribunal’ is entitled to place reliance
on the earlier order passed in COP No. 20/2016, including the observations made
therein, pertaining to the Appellant’s, ‘Bonafides’.
88. The Learned Counsel for the Respondent No. 1, 11, 13 & 15, points out
that along with Mr. Kumar Dinesh Seth, the ‘Appellant’ had filed Original Suit
No. 10303/ 2015 praying for an injunction ‘reliefs’ against the ‘Respondents’, in

regard to the Joint Development Transaction, and upon failing to obtain any Ex-
parte an interim order against the respondent, latter, ‘suit’ was withdraw, without
seeking any liberty.
89. Apart from the above, the Appellant filed a suit in OS. No. 25572/2016,
before the Civil Court, Mayo Hall Unit, Bangalore, praying for an Ex-parte
interim order of a temporary injunction against the Respondents and the said suit,
was later on withdrawn by the Appellant. Therefore, it is contended on behalf of
the Respondent No. 1, 11, 13 & 15, that the contra stand of the Appellant, that
‘no’ / ‘any suit’, was filed, before the ‘Civil Court’, and that the such ‘suit’, was
filed by the Mr. Kumar Dinesh Seth, is a misleading one.
90. The Learned Counsel for R1, 11, 13 and 15, points out that the Appellant
has not made out any grounds whatsoever depicting that any actions of the
Respondents complained of has in any manner been prejudicial to the
shareholders and further that the actions complained are of the year 2015-16 and
no other shareholder has raised any grievance, in respect of the actions
complained of by the Appellant till date.
91. The Learned Counsel for R1,11,13 and 15, submits that it is the actions of
the Appellant that have been ‘oppressive’ and prejudicial to the interest of the 1st
Respondent / Company. Also that the Appellant, has forced the 1st Respondent /

Company to contest one frivolous litigation after the other for a seven years’
period and being the Chairman and Managing Director of the Embassy Group,
the Appellant is a competitor, who is interested in acquiring the Hebbal Property
of the 1st Respondent / Company for the benefit of the Embassy Group.
92. While rounding up the Learned Counsel for R1, 11, 13 and 15, prays for
dismissal of the instant ‘Appeal’ because of the fact that the ‘Appellant’ had not
set out legally tenable grounds for maintaining the ‘Appeal’.
Evaluation
93. According to the Appellant, the impugned order dated 27.11.2019 passed
by the ‘National Company Law Tribunal’, Bengaluru Bench in CP 20/2016 (TP
No. 248/2017) and CP No. 486/BB/2018 is ‘non-est’ and ‘abinitio’ void 1 besides
being an ‘illegal one’ because of the fact, that the impugned order, was passed by
Hon’ble Member (Judicial) of the ‘Tribunal’, sitting singly, in the absence of the
Hon’ble Member (Technical).
94. It is represented on behalf of the Appellant, that Section 419(3) of the
Companies Act, 2013 categorically, mentions that the powers of the ‘Tribunal’
shall be exercisable by Benches, consisting of two Members(Judicial) and
(Technical) except in the case of Hon’ble President of the ‘Tribunal’ by general
or special order may authorise the Hon’ble Judicial (Member), to singly constitute
the Bench.
95. Conversely, it is the submission of the Learned Counsel for the R1, 11, 13
and 15, that by means of an order dated 22.10.2019, passed by the Tribunal, (in
terms of Section 419(3) of the Act, 2013), the Hon’ble Member (Judicial) of the
Tribunal, was entitled to hear the matter, sitting singly, on the relevant date and
this is evident from the order of the ‘NCLT’, New Delhi dated 22.10.2019(file
No. 10/03/2019-NCLT and in short, the ‘NCLT’, Bengaluru Bench, was
‘Reconstituted’ as ‘Bench at NCLT, Bengaluru’ Shri Rajeswara Rao Vittanalla,
Member (Judicial) and this constitution of the Bench as per Section 419(3) of the
Companies Act, 2013 and this was in modification of order of even no. dated
25.07.2019 for 23.10.2019 to 25.10.2019.
96. The contention of the Learned Counsel for the R1, 11, 13 and 15, is that
the ‘Appellant’, has failed to point out, ‘any provision of Law’ which bars a
matter i.e. part-heard by the Division Bench of a ‘Tribunal’, from being heard
further by the Hon’ble ‘Single Bench’ of the said ‘Tribunal’.
97. It is represented on behalf of the Learned Counsel for the R1, 11, 13 and
15 that the Appellant had not objected to the Hon’ble Member (Judicial) of the
Tribunal, hearing the part heard matter on 25.10.2019 sitting singly, either on the
date of hearing nor the Appellant had challenged the same, at any time, thereafter,
till the filing of the ‘Appeal’.

98. According to the Learned Counsel for the R1, 11, 13 and 15, that the
Appellant had willingly participated in the proceedings before the Tribunal and
allowed the proceedings to continue and is now raising the same, only after the
impugned order came to be passed by the ‘Tribunal’.
99. It is the version of the Learned Counsel for the R1, 11, 13 and 15, that the
Appellant had also acquiesced to the proceedings of 25.10.2019, being conducted
in the Tribunal (the matter being heard by the Hon’ble Member (Judicial) of
Bangalore), now he is estopped from assailing the same before this Appellate
Tribunal.
100. On behalf of the Appellant, a reference, is made to the order of the Hon’ble
Supreme Court dated 20.06.2019, in writ petition (Civil) No. 722 of 2019 in
‘Sonu Cargo Movers (I) Pvt. Ltd. & Ors. Vs. Union of India & Ors.’ wherein it
“The grievance of the petitioners was that their matter was being
heard by a Bench in which there was no technical member.
Today it is pointed out that an order has been issued by the
Ministry of Corporate Affairs appointing the technical members
in the Bench of the National Company Law Tribunal (“NCLT”)
at Ahmedabad.
We therefore, dispose of these petitions with a direction that the
case of the Petitioners be heard by a Bench comprising of a
judicial member and a technical member.”

101. The Learned Counsel for the Appellant’ relies upon the order dated
25.10.2019, of this ‘Tribunal’ in Company Appeal (AT)(Ins.) 971/2019
between Raj Singh Gehlot Vs. Vistra ITCL (India) Ltd. & Ors.(3 Member
Bench) wherein at paragraph 8, it is observed as under:-
“8. We accordingly, set aside the impugned order dated 27th

August, 2019, without extending any opinion on merit of the
claim and counter claim of the parties. The matter is remitted
back to the National Company Law Tribunal Bench III, New
Delhi should be heard by the Division Bench of Hon’ble Member
(Judicial) and Hon’ble Member (Technical) as per the provisions
of the Act and after notice and hearing, the Adjudicating
Authority pass appropriate orders in accordance with law,
uninfluenced by an impugned order dated 27th August, 2019.”
102. The Learned Counsel for the Appellant cites the order of this ‘Tribunal’,
dated 24.08.2020, in Indison Agro Foods Ltd. Vs. Registrar and Ors., wherein it
“After hearing Mr. Abhijeet Sinha, Learned Counsel for the

Appellant for a while, we find that the Appeal has turned
infructuous in as much the matter, in terms of the impugned
order, stood adjourned to 18.08.2020 and that date is over. We
are informed by Learned Counsel representing the Appellant that
the matter is now posted for 27th August, 2020 before a single
bench of the National Company Law Tribunal, Indore Bench of
Ahmadabad. He invites our attention to an order passed by

Hon’ble Apex Court in writ petition No. 722/2019 dated
20.06.2019, wherein the Hon’ble Apex Court, in a case of
identical nature directed it to be heard by a Bench comprising of
a judicial member and a technical member. This appeal is
accordingly disposed of with request to the President, National
Company Law Tribunal, New Delhi to constitute a Bench
comprising of a judicial member and the technical member for
disposal of the matter in hand in conformity with and compliance
with a direction passed by the Hon’ble Apex Court in Writ
Petition No. 722 of 2019.”
103. On behalf of the Learned Counsel for the R1, 11, 13 and 15, a reliance is
placed upon the decision, in Tamilnadu Generation and Distribution
Corporation Ltd. Vs. PPN Power Generating Company Pvt. Ltd. reported in
2014 11 SCC 53 wherein at paragraph 47 it is observed as under:-
“47. These observations, however, do not in any manner affect

the jurisdiction exercised by the State Commission in the present
matter. It has been rightly pointed out by the Respondent that
having filed the written statement in reply to the petition filed by
the Respondent, the Appellant willingly participated in the
proceedings and invited the findings recorded by the State
Commission. It would be too late in the day, to interfere with the
jurisdiction exercised by the State Commission in these
proceedings.”

104. The Learned Counsel for the R1, 11, 13 and 15, adverts to the decision, in
CY Parthasarathy V. Syndicate of Mysore University, reported in
MANU/KA/0244/1994 wherein at paragraph 19 to 22, it is observed as under:-
19. “It is true, that jurisdiction cannot be conferred by

consent, of the parties where it does not otherwise inhere in the
authority concerned; but it is equally true that the High Court
can while exercising its extraordinary and discretionary powers
under Article 226 of the Constitution decline to interfere with an
order of a subordinate authority if it is satisfied that an objection
relating to a defect of procedure or jurisdiction which would
have been and ought to have been raised at the earliest
opportunity was not so raised by the party complaining before it.
The Rule that acquiescence of the party belatedly making a
grievance about the jurisdiction of the subordinate authority
disentitles him to invoke the Writ jurisdiction of the High Court,
does not rest on the foundation that acquiescence, confers
jurisdiction but on the rationale that the High Court will be
justified in refusing to exercise its jurisdiction in favour of a
person who has either by reason of lack of diligence or by design
remained on the fence, allowed the authority to pass an order
and seeing that the same has gone against him turned round to
challenge its competence, to have done so.
20. In any such situation, it would be reasonable to infer that

the party making the grievance about the competence of the
subordinate authority, acted unfairly in not raising the objection

at the very outset; It would also be reasonable to assume that he
did so, deliberately hoping that the final order to be passed by
the authority would be in his favour, but finding it go against him,
he attacks the same as being without jurisdiction. In other words
the person concerned indulges in what may be termed as 'diluted
deception' by keeping quite, when he was, in fairness to all those
concerned with the proceedings before the authority, under an
obligation to speak out. He attempts by his silence to secure a
favourable verdict, which if given, would have buried for ever the
question of competence of the authority to handle the subject
matter. It is this trickery which the Courts have frowned upon by
declining to interfere with the actions of subordinate authorities,
where acquiescence or acceptance of their jurisdiction is
manifested by the facts of a given case.
21. D'Smith in his Book "Judicial Review of Administrative

Action" 3rd edition at pages-372-373 has brought out the
distinction between the two situations namely cases where the
decisions are, void for want of jurisdiction and could be avoided
and others were even though they are void but with which the
Court will not interfere on account of the applicant's conduct.
The Author states thus:-
"A decision made without jurisdiction is void, and it
cannot be validated by the express or implied consent of a
party to the proceedings. It does not always follow,
however, that a party adversely affected by a void decision
will be able to have it set aside. As we have seen, certiorari

and prohibition are, in general, discretionary remedies,
and the conduct of the applicant may have been such as to
disentitle him to a remedy."
"Whether the tribunal lacked jurisdiction is one
question; whether the court, having regard to the
applicant's conduct, ought in its discretion to set
aside the proceedings is another. The confused state
of the present law is due largely to a failure to
recognise that these are two separate questions."
22. He also states in the same Book that a person who

though aware of the defect or lack of jurisdiction does not
raise any objection on that account and acquiesces and
takes a chance of getting a decision in his favour will be
disentitled to a Writ of Certiorari. It is fruitful to reproduce
the following passage from the Book:-
"The right to certiorari or prohibition may be lost
by acquiescence of implied waiver. Acquiescence
means participation in proceedings without taking
objection to the jurisdiction of the tribunal once the
facts giving ground for raising the objection are
fully known. It may take the form of failing to object
to the statutory qualification of a member of the
tribunal, or (exceptionally) appealing to a higher
tribunal against the decision of the tribunal of first
instance without raising the question of
jurisdiction."

105. It is to be borne in mind, that Section 419(3) of the Companies Act, 2013,
enjoins that the ‘powers, of Tribunal’, shall be exercisable by ‘Benches’
consisting of two Members, out of whom, one shall be a ‘Judicial Member’ and
other shall be a ‘Technical Member’. As a matter of fact, the proviso to sub-
section 3 of Section 419 of the Companies Act, 2013 points out that it shall be
competent for the ‘Members of the Tribunal’ authorised in this behalf to function
as a Bench comprising of a single ‘Judicial Member’ and exercise the powers of
‘Tribunal’, in respect of such class of cases or such matters relating to ‘such class’
of cases as the President, may, by general or special order specify.
106. Also, in the second proviso it is mentioned that if at any stage of ‘hearing’
of any such case or matter, it appears to the Member’, that the case or matter is
of such nature / character, that it should be Heard, by a Bench consisting of two
members, the case or matter may be transferred by the President, or as the case
may be, referred to him for transfer to such Bench, as ‘President’, may deem fit.
Hence, considering the importance of issues / controversies / disputes involved
in a case, a ‘single member’, of the Tribunal, may ‘transfer’ or refer the matter to
the President, for hearing by a Bench consisting of two Members or to such Bench
as the President may deem fit.
107. It cannot be gainsaid that the ‘Principal Bench’ of Tribunal, shall be at New
Delhi, whose powers, shall be exercised by ‘Two Members’ it shall be competent

for the Members, authorised in this behalf to function as Bench consisting of a
single Judicial Member, in respect of such class of cases, as ‘President’, may by
‘general’ or ‘special order’ specify.
108. To be noted, the term, ‘Acquiescence’ is nothing more than ‘absolute’ or
‘Positive Waiver’. Further, it amounts to an ‘abandonment of rights’, as per
decision in Govindsa Marotise V. Ismail, reported in AIR 1950 Nag. Pg. 22.
109. A ‘person’ may be precluded by ‘way of his actions’ or ‘conduct’ or
‘silence’ when it is his ‘duty to speak’, from ‘asserting a right’, which he would
have otherwise had. Also, that ‘Estoppel’ is a ‘Principle of justice’ and ‘Equity’.
It is not a ‘cause of action’, and it is ‘not a rule of evidence’ as opined by this
‘Tribunal’.
110. At this juncture, this Tribunal, pertinently points out that the ‘principle of
waiver’, or of ‘Approbation’, and ‘Reprobation’ lies at the ‘root of conduct’,
productive change, of activation and this ‘principle’, is akin to the ‘rule of
‘Constructive’ Res judicata’, as per explanation IV of Section 11 of the Civil
Procedure Code, 1908
111. In so far as, the present case is concerned, although, the ‘plea’, is taken on
behalf of the Appellant, that the impugned order dated 27.11.2019, in CP No.

20/2016 (TP No. 248/2017) and Company Petition No. 486/BB/2018, passed by
the Hon’ble Member (Judicial) of the National Company Law Tribunal,
Bengaluru Bench, is ‘nonest’, ‘illegal’ and ‘’void ab initio’, because of the fact
that Section 419(3) of the Companies Act, 2013, enjoins, that the ‘powers of the
Tribunal’, shall be exercisable by Benches, comprises of ‘Two Members
(‘Judicial’ and ‘Technical’), in case the Hon’ble President by ‘general’ or
‘special’ order may authorise the Hon’ble Member, to singly, constitute the
Bench, this Tribunal, points out, that as per ‘order of NCLT, Delhi dated
22.10.2019’ (vide File No. 10/03/2019-NCLT, New Delhi) consequent to the
Order No. PFA/7/2016 dated 21.10.2019 and letter No. A-12023/1/-Ad-IV-MCA
dated 16.10.2019, the NCLT, Bengaluru Bench was reconstituted with Shri
Rajeshwara Rao Vittanala, Member (Judicial), in terms of Section 419(3) of the
Companies Act, 2013 and in fact, the said order, was in modification of order of
even number dated 25.7.2019 for 23.10.2019 to 25.10.2019 only (which was
issued with the approval of President, NCLT, New Delhi, keeping in mind of a
primordial fact, that there is no provision under the Companies Act, 2013 which
prohibits a matter that was ‘Part Heard’ by the ‘Hon’ble Division Bench of a
Tribunal’ from being Heard, further by the ‘Single Member Bench’ of the said
‘Tribunal’. Also, the ‘Appellant’, had not raised ‘any objection’, to the Hon’ble
Member (Judicial) of NCLT, Bengaluru Bench, sitting singly, in Hearing, the

‘Part Heard’, ‘matter’ on 25.10.2019, also that the ‘Appellant’ had ‘willingly’
participated in the proceedings, before the ‘Tribunal’ ‘without any murmur’, by
his own conduct, the Appellant, is now ‘estopped’, from ‘assailing the ‘impugned
order’, and also tacitly took part in the proceedings, cannot ‘Approbate’ and
‘Reprobate’ because of the fact, he had acquiesced to the ‘proceedings of
25.10.2019 and viewed in that prospective, this ‘Tribunal’ holds that the
‘impugned order’ dated 27.11.2019, in Company Petition No. 20/2016 (TP No.
248/2017) passed by the Hon’ble Member (Judicial) of NCLT, Bengaluru Bench,
sitting singly, cannot be found fault, with because of the fact that Section 419(3)
of the Companies Act, 2013 empowers, the ‘Judicial Member’, of the ‘Tribunal’
to ‘Hear the case’, based on the order dated 22.10.2019 of the NCLT, New Delhi,
which had the ‘Approval’, of ‘President of NCLT’, New Delhi and hence, the
impugned order dated 27.11.2019, passed by the ‘Tribunal’ is not a ‘nonest’,
‘illegal’ and ‘void ab initio’ one and the point, is so answered.
112. As regards the plea of the Appellant that the ‘impugned order’, dated
27.11.2019, in effect, overrides, the earlier order, which categorically held that
the ‘petition’ of the Appellant/Petitioner, is maintainable, the Learned Counsel
for the Appellant points out that the issue of maintainability already got settled
by virtue of the order dated 30.05.2019 in IA 360/2018 and IA 17/2019, the said
order was assailed in Comp. Appeals (AT) No. 144 and 179/2019, by the

Respondents, the Appellate Tribunal had refused to ‘interfere’ with the order
dated 30.05.2019, through an order dated 02.08.2019, and that the Respondents’
had to withdraw the said Appeals.
113. The primary plea of the Appellant, is that the Learned Single Member of
the Bench of the ‘Tribunal’, had effectively over ruled the said order passed by
the Division Bench and upheld by this Tribunal. In effect, the said point
according to the Appellant, vitiates the impugned order of the Tribunal, and
hence, the ‘impugned order’ of the Tribunal, is liable to be set aside.
114. It is represented on behalf of the Appellant, that the matter, was always
Heard, by the Division Bench, constituted by the ‘orders of the President of the
National Company Law Tribunal, New Delhi’ and despite the non-availability of
the Division Bench on 25.10.2019, the matter’ was heard, singly and ‘orders’
were reserved by the Learned Member of the ‘Tribunal’, on very date, when
validly constituted Bench was unavailable. That apart, there was no ‘Bench’ on
25.10.2019 when, the orders were reserved which renders the order dated
27.11.2019 as void, ‘inoperative’ and ‘non-est’ in Law.
115. The Learned Counsel for the Appellant’ refers to the order dated
30.05.2019, in IA 360/2018 and IA 17/2019 filed by the Respondents against the
Appellant / Petitioner, in CP No. 486/BB/2018, the NCLT Bengaluru Bench, at

paragraph 16, had observed that; ‘so far as the filing of the instant Company
Petition is concerned’, the Tribunal is permitted to withdraw the earlier CP No.
22 of 2016 (TP No. 88/2016) with a liberty to file a fresh petition and thus the
instant Company Petition is maintainable and it is required to be decided as per
merits, after hearing both the parties. Admittedly, the Tribunal is competent to
decide the issues raised in CP as jurisdiction of Civil Courts is ousted by the
provisions of the Companies Act, 2013”.
116. The Learned Counsel for the Appellant, adverts to the order dated
02.08.2019, in Company Appeal (AT) 144 and 179 of 2018 wherein this Tribunal,
had passed the following order wherein at paragraph 2 and 3, it is observed as
under:-
“2. Dr. U.K. Chaudhary, Ld. Sr. Counsel appearing on behalf

of 1st Respondent submits that Respondent has 19.83% of total
shareholding as on the date of filing of the petition and further
submits that he has no objection if the Appeal is allowed to be
withdrawn for immediate decision pending before the Tribunal.
3. In the facts and circumstances, we allow the Appellant to

withdraw the Appeal leaving all the contentions and issues to
argue before the Tribunal which may be decided at the stage of
final hearing uninfluenced by the decision made in the impugned
order”.

117. Contending contra, it is the submission of the Learned Counsel for the R1,
11, 13 and 15, the ‘Tribunal’, uninfluenced of its earlier order dated 30.05.2019,
had rightly considered the question of maintainability of the ‘Appellant’s
petition’, at the stage of Final Hearing, along with consideration of matters,
touching upon the merits of the case, including the ‘Appellant’s conduct’, and
‘qualitative analysis’, of his shareholding. Hence, the Appellant’s submission’
that having held the ‘petition’, being not maintainable the Tribunal’s findings on
merits of the matter were allegedly ‘prejudged’ and ‘prejudicial’ is a baseless and
a reckless one.
118. Because of the fact that the ‘Appellate Tribunal’, in Company Appeal (AT)
144 and 179 of 2018 on 02.08.2019 had permitted the Respondent No. 11 to
withdraw its Appeal, leaving all the contentions and issues to argue before the
‘Tribunal’, which may be decided, at the stage of Final Hearing, uninfluenced by
the decision, made in the impugned order and viewed in that perspective, the
‘Tribunal’, while passing the final order on 27.11.2019 in CP 486/2018, was
perforced to reconsider the ‘Issue of Maintainability’ in terms of the directions
issued by this ‘Appellate Tribunal’ and as a logical corollary, the ‘Tribunal’ had
given a ‘Relook’ by considering the question of maintainability of the Appellant’s
petition, at the stage of ‘Final Hearing’, along with other matters being
considered, covering the merits of the main case (including the Appellant’s

conduct and qualitative analysis of its shareholding), which in the considered
opinion, of this Tribunal, cannot be construed, in any manner, that the impugned
order passed by the ‘Tribunal’ in the order dated order dated 27.11.2019 in
Company Petition No. 20/2016(TP No. 248/2017) and the Company Petition No.
486/BB/2018, effectively, ‘over rides’, the earlier order passed by the Tribunal in
IA 360/2018 and 17/2019, dated 30.05.2019, wherein it was held, that the Petition
of the Appellant, was held to be maintainable and accordingly, this ‘Tribunal’,
turns down the ‘plea of the Appellant’, as it is ‘unworthy of acceptance’. Also,
when the Tribunal, passes a ‘Final Order’ in the main ‘Company Petition’, the
‘interim order’ passed by it, will lose its ‘sanctity’, and pales into insignificance
as opined by this Tribunal.
119. In regard to the stand of the ‘Appellant’, that the ‘Tribunal’, through its
order dated 27.11.2019, had erroneously dismissed the company petition no.
486/BB/2018 resting upon the ground that the shareholding at the time of accrual
of cause of action will be decisive of the maintainability of the petition, this
Tribunal points out that it is the Appellant’s plea that the Appellant’s holding
19.83% shareholding at the time of filing of the petition could have maintained
the underlying petition as per ‘Law’ and that the ‘Tribunal’ had erred in holding,
that the ‘shareholding’, at the time of ‘accrual of cause of action’ will be
‘determinative’ of the ‘maintainability of the petition’ and consequently, had

wrongly held that the Appellant at the relevant point of time, was having less than
10% ‘shareholding’, at the relevant point of time, could not have maintained the
‘petition.
120. The Learned Counsel for the R1, 11, 13 and 15, takes a ‘plea’, that the
‘purported cause of action’, in preferring the ‘petition’, in respect of the allegation
of oppression and mis-management before the ‘Tribunal’ arose on 19.02.2015
and later, on 10.11.2015, 22.12.2015 and on 01.12.2015, respectively in reality,
the Appellant’s ‘shareholding’ in the Company, on each of the aforesaid dates
was below 10% and indeed, as on 19.02.2015 the Appellant ‘did not possess any
shareholding’ in the Company.
121. A perusal of Annexure R1 (vide volume 1 of the 1st Respondent’s paper
Book vide Dy. No. 17435 dated 03.01.2020) in respect of the Appellant’s ‘share
movement’ (consolidated) (Annexure R1) shows that the Appellant, on
19.02.2016 had 9.56% and 30.09.2016 possessed 19.83% of shareholding also in
the order dated 30.05.2019 in IA No.360/2018 and IA No.17/2019 in CP
No.486/2018 at paragraph 18, the ‘Tribunal’, had observed that the ‘Applicants’
/ ‘Respondents’ had admitted in their pleading by contending that the
Respondent/Petitioner, hold 10.32% of total ‘paid up share capital’, even at them
of filing, earlier CP No.22/2016, and not it stands at 19.83%. Therefore, we are

of the view that the Respondent/Petitioner holds the required percentage as per
law to maintain the main Company Petition. As per law, litigation cannot be
thrown at threshold without going into the merits of the case’.
122. In this regard, it is pertinently pointed out, by this Tribunal, that the
Appellant, after securing the 10% shareholding, had approached, the then
‘Company Law Board’ by preferring CP No. 22/2016, on 21.03.2016 and later,
withdrew the said company petition on 20.08.2018 and projected the CP No.
486/2018 before the National Company Law Tribunal, Bengaluru Bench,
pertaining to the purported action of ‘oppression and mismanagement’ which
took place on the relevant dates.
123. A cursory perusal of the impugned order dated 27.11.2019 passed by the
‘Tribunal’, shows that in Company Petition No. 486/BB/2018 at paragraph 13(3)
to (7) it was mentioned that:
(3) It is settled that as on 10.11.2015, Mr. Jitendra Virwani,

the Petitioner admittedly was in possession of only 3.51%
shareholding in the Respondent No.1 Company. Hence, the
Petitioner is not entitled for any discretionary interim relief in
the present petition.
(4) That the Respondent No.11 M/s. Umiya Builders &
Developers, is engaged in the business activities such as Real
Estate Development, sales, marketing and property management

is the Sole Proprietary concern of Mr. Aniruddha Mehta, the
Respondent No. 13 herein. Further, the Respondent No. 13 along
with Respondent No.15 Mrs. Gauri Mehta and Umiya Holding
Private Limited, a sister concern of Umiya Group have
purchased the shares of the promoters of the Respondent No.1
Company vide a Share Purchase Agreement dated 19.05.2016
after completion of all the procedures, approvals, formalities as
per the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011 and other related guidelines and compliances,
and accordingly the Respondent No.13 & 15 became the
members of the Board of Directors of the Respondent No.2
Company with effect from 08.08.2016.
(5) The Petitioner was continuously perusing his grievance
before the Hon'ble Civil Court till he acquired requisite 10%
share holdings in the Respondent No.1 Company and thereafter
also continued to accumulate the shares in the open market. After
completing the accumulation of 10% shareholding, the
Petitioner Mr. Jitendra Virwani also approached erstwhile
Hon'ble CLB in C.P.No.22/2016 under section 397 of the
Companies Act, asking for the nullification of the Resolution
dated 22.12.2015, and the Joint Development Agreement dated
01.01.2016, along with prayer for certain interim reliefs. It is
pertinent to note that the Hon'ble CLB vide its order dated
29.03.2016 has refused to grant any interim reliefs. Further, it is
pertinent to note that the Hon'ble High Court vide its detailed
order dated 28.04.2016 was pleased vacate the order of status
quo vide its detailed order dated 28.04.2016 with specific

observation regarding the conduct of the Petitioner herein and
Mr. Kumar Dinesh Seth against the Respondent No.1 Company
and its activities for joint development of its properties.
(6) It is contended that in order to invoke the provisions of

section 241 & 242, a person should have requisite number of
shareholding in the Company on the date when alleged acts of
oppression and mismanagement are complained of. In the instant
case, cause of action or alleged acts of oppression and
mismanagement were occurred on 22.12.2015 & 01.01.2016 and
as stated above as on that dates, the Petitioner had only 4.12%
& 4.27% shareholding respectively in the Respondent No.1
Company and hence, on this ground alone, the instant petition
under Section 241 and 242 of the Companies Act, 2013 fails and
liable to be rejected as not maintainable.
(7) The Petitioner being a minority shareholder at that point

of time, if really was aggrieved by the actions of the Respondents,
nothing prevented him from seeking relaxation or waive off of the
mandatory requirements under section 244 (1) (a) & (b) to
enable him to invoke the jurisdiction of this Tribunal under
section 241 at that relevant point of time itself.
124. In this connection, this Tribunal relevantly points out that although Section
399 of the Companies Act, 1956 does not deal with the ‘qualitative’ aspect, but
the Hon’ble High Court of Calcutta in the decision Jodh Raj Laddha and Ors.
V. Birla Corporation Limited & Ors. reported in MANU/WB/0269/2011 at

paragraphs 3(19) had clearly observed that “……while examining the eligibility
under Section 399, the qualitative aspect of a member should also be taken into
account etc.”. More importantly, this Tribunal, points out that, the National
Company Law Tribunal, Bengaluru Bench exercises equitable power with wide
powers and it cannot be said that the ‘qualitative’ aspect of a Member, is not to
be seen / examined by the ‘Tribunal’, at the time of filing of the Company Petition
by a person concerned, seeking necessary relief.
125. Viewed in the above real perspective, this Tribunal, is of the ‘cocksure’
considered opinion, that although, the ‘Appellant’, held 10% as on date of filing
of the CP No.486/2018, on 06.09.2018, but in respect of the events, that took
place, before the ‘Appellant’, held 10% shareholding, then, it is held by this
Tribunal, that he had not fulfilled the qualitative ‘criteria’, to sustain the
‘Company Petition’, in as much as, he had not possessed, the ‘requisites shares’,
at the particular point of time, when the ‘purported’ ‘cause of action’ arose. As
such, it is, ‘safely’ and ‘securdly’ concluded by this Tribunal, that the Appellant’s
/ Petitioner’s petition, in CP No. 486/2018, on the file of National Company Law
Tribunal, Bengaluru Bench, on the date of filing of the petition, (on 06.09.2018),
is, perfectly, ‘maintainable’, but he is precluded, from adverting, to the ‘events’,
which took place, ‘before he possessed / acquired, 10% shareholding in the
Company’.

126. According to the Learned Counsel for the Appellant, the ‘Tribunal’, had
committed an error, in not considering that the Notice dated 10.11.2015 and the
‘Special Resolution’ dated 22.12.2015 as ‘void’, inoperative’ and ‘nonest’ in the
‘eye of Law’.
127. In this connection the Learned Counsel for the Appellant points out that
the ‘Genesis’, of the whole series of acts of ‘oppression and mismanagement’ lies
in the ‘illegal’ and unlawful acts of the ‘Board of Directors’, in a ‘purported
meeting’ that the took place on 19.02.2015, and that the management, knew the
‘sale’ and ‘disposal’ of the entire undertaking 1st Respondent / company was
beyond its competence and is prohibited by Section 180 of the Companies Act,
2013, read with the Section 179 of the said Act and to save itself from the
‘rigours’ of the aforesaid provisions, the management brought the idea of a
possible ‘Joint Venture Agreement’, to dispose of the entire undertaking /
substratum of the company in favour of an unknown person, ‘with no material
information to the shareholders’ for the first time by the Board, on 04.11.2015
while completely changing the Agenda, as was countenanced in the ‘Meeting of
the Board’ dated 19.02.2015.
128. The Learned Counsel for the Appellant, proceeds to point out that at a
purported ‘Board Meeting’, that took place, on 04.11.2015, another decision was
taken, to dispose of, the entire undertaking/substratum of the company, in favour

of unknown person, ‘with no material information to the shareholders’ and put
up the proposal of a ‘Joint Venture Agreement’, for development, of the entire
land of the 1st Respondent /Company, through Postal Ballot, vide notice dated
10.11.2015 and in fact, the Board Resolution, dated 19.02.2015 was passed for
disposal /sale of the property, and not for execution of ‘Joint Venture Agreement’.
Moreover, it did not authorise, Respondent No.2 & 5 to enter into a Joint Venture
Agreement and that the Tribunal, had committed an error in not declaring the
notice dated 10.11.2015, the explanatory note attached thereto and the consequent
resolution passed by the shareholder on 22.12.2015, as invalid, non-operative and
nonest, on account of statutorily non-compliance, insufficient information and
‘opaque’ in rendering the resolution passed in sequel thereto, as legally and
statutorily invalid. Advancing his argument, of the Learned Counsel for the
Appellant, contents that a special resolution is void and nonest in the eye of Law,
as there was ‘No Authority’, to issue Notice dated, 10.11.2015, as neither any
date for meeting was fixed nor a draft notice, Agenda or Explanatory statement
was approved by the Board in violation of secretarial standards which are
mandatory under Section 118 of the Companies Act.
129. The Learned Counsel for the Appellant, contends that, it has no disclosure
of any name, as to with, whom the ‘Joint Venture’ was to be entered into and no
terms and conditions of joint venture particularly, ‘price’ and other monetary

consideration/terms, Development of Area and Benefits to the company, were
placed before the Board or the Shareholders, as an individual cannot be authorised
to approve the said terms. As such, the ‘notice’, is ‘ineffective’ and void, and
further it does not permit Application of mind, by the shareholders, whose
Approval, is required. Indeed, the majority shareholders were ‘devoid of any
information’. Besides, this, the purported ‘Explanatory Statement’, does not
disclose any material or relevant information and hence, the alleged notice, is an
illegal and void one. Moreover, the purported Joint Development Agreement’
was ever placed before the ‘shareholders’ and ‘blanket approval’ was sought.
130. According to the Appellant, the impugned ‘Ballot notice’ was not issued,
or circulated, as per Rule 15, 20, 22 of the Companies (Management and
administration) Rules, 2014. As a matter of fact, ‘voting’ via postal ballot was not
conducted as per Rule 21, of the Companies (Management and Administration)
Rules, 2014 which obligates that two scrutinisers should remain present during
the time, when voting takes place. Rule 21, further stipulates that the votes shall
be counted by two scrutinisers and Report to be submitted to the Chairperson of
the Meeting, shall be counter-signed by both the scrutinisers.
131. Repelling the submissions of the Learned Counsel for the Appellant, the
Learned Counsel for R1, 11, 13 & 15 contends that the ‘Board’, as per the Minutes
of its Meeting on 04.1.2015, had approved the issuance of Postal Ballot notice,

(vide page 710 of Appeal Paper Book, Vol. –V, of the Appellant), clearly
explaining the reasons for entering into Joint Venture / Joint Development
Arrangement and further, the said ‘Explanation’ was mentioned in the
Explanatory, statement enclosed with the ‘postal ballot notice’, in terms of
Section 102 of the Act (vide Annexure-6, page 714, Vol-V, of Appellant’s Paper
Book, thus, providing to shareholders, the requisite information in regard to the
nature of the transactions proposed and thereby enabled them, to make an
informed a decision, while voting in favour of joint development.
132. The clear cut stand of the R1, 11, 13 & 15 is that the ‘determinations’, in
respect of ‘commercial details’, proposed to be entered into by the ‘Company’,
including the details of the contracting party, essentially, relate to the Business of
the Company and these are all matters of negotiations between the ‘Board of
Directors’ of the Company, and third parties, concerning, ‘sensitive information’.
133. The Learned Counsel for R1, 11, 13 & 15, points out that there is no
requirement for the ‘Board’, to disclose the ‘information’ to its shareholders’, and
in fact, ‘shareholders’ are ‘not competent to delve into and determine’ these
matters’. Moreover, Section 173(2) of the Companies Act, 1956 (similar to
Section 102 of the Companies Act, 2013) ought to be understood in a ‘meaningful
manner’ and not to be construed rigidly, so as to hamper the Conduct of the

Business. As such, the Postal ‘Ballot Notice’ and the enclosed Explanatory
statement, were complied with, as per requirement of Section 102 of the
Companies Act, 2013.
134. It is pointed out by this Tribunal, that any Resolution passed without fairly
disclosing the ‘facts and information’, will be ‘void’ as per decision, in Kaye vs
Croyden Tranways Co. (1898) 1 CH 358. Also that, in respect of the allotment
of the fact of 30,55,329 shares, to the 2nd Respondent, for surplus of medical
equipment, was actually known to the petitioner, failure to give an ‘Explanatory’,
along with Notice, the ‘Company Law Board’ held that the ‘Meeting’ and the
‘Resolutions’ would make no difference passed on 16.09.2006 and therefore,
would not become void for want of ‘Explanatory’ statement with Notice as per
decision in Sajal Dutta V. Ruby General Hospital Ltd., reported in (2010) 194
Comp. Cas. 16 (CLB).
135. It is to be remembered that Section 102 of the Companies Act, 2013 (173
(8) of the 1956 Act.) is ‘Mandatory’, and not ‘Directory’. Further, if a
‘shareholder’ was ‘aware of facts, relating to Resolution’, later on, he cannot
complain of ‘insufficiency’ of notice, or irregularity. Such a shareholder if he is
present, in a ‘Meeting’, must point out to the ‘Chairman’ of the ‘Meeting’, about
such an irregularity, before, the Meeting’, proceeds with the ‘Agenda’.

136. The intention of Section 102 of the Companies Act, 2013, is to enable the
‘shareholders’, to take an Informed Decision, in respect of each ‘item of
business’, to be transacted and in case, ‘any Director’, ‘Manager’ or Key
Managerial personal is interested in any item, he ought not to participate in
deliberation or in a ‘decision process’, when such item being considered in the
‘Meeting’. It is just necessary to ‘Annexe’ ‘A Statement’ of Material Facts, of
‘items of special Business’ along with Notice of Meeting.
137. At this stage, this Tribunal, ongoing through the Minutes of the Board
Meeting of the Directors of 1st Respondent / MRO-Tech Limited dated
04.11.2015 and also looking into the ‘Postal Ballot Notice’ and the enclosed
‘Explanatory statement’, is of the considered view’ that in respect of the Business
of the Company, the shareholders cannot take a call or any decision in the matter
and it is for the Board of Directors of the Company, to have talks / negotiations
with parties concerned and in any event, the ‘Postal Ballot Notice’ and the
enclosed ‘Explanatory statement’, are fulfilling the requirements of Section 102
‘statement to be annexed to Notice’. As such, the ‘contra plea’, taken on behalf
of the Appellant, is not acceded to by this Tribunal.
138. In this connection, this Tribunal, points out that the Appellant, in his
‘Reply’ dated 09.12.2015 (for the e-mail dated 18.11.2015 (DP ID & Client ID:
IN302-15) addressed to him as a shareholder of MRO-Tech Limited) had stated

that, ‘as a shareholder of the Company’, this notice does not allow him to
exercise, any informed choice, while participating in the voting etc. and in fact,
the Appellant, had mentioned that he had not received the physical copy of the
‘Notice’ or the ‘Postal Ballot’ form and was not provided with the password,
which was required for participating in the ‘e-voting’.
139. At this stage, this Tribunal, points out that the Reply, dated 09.12.2015
(while responding to the e-mail dated 18.11.2015), was furnished by the
Appellant, which indicates, that the Appellant, was in the ‘know of thing’, as on
10.11.2015, being the date of issuance of the ‘Postal Ballot Notice’, and further
that the 1st Respondent/ Company, was in the process of collating, the information
from ‘prospective developers’, in respect of the ‘Joint Development’ of its
property. In any event, the ‘information’, cannot be ‘’parted’ or shared’, with the
‘shareholders’, either in the aforesaid ‘Notice’, or ‘Explanatory Statement’ as
opined by this ‘Tribunal’.
140. In so far as, the plea pertaining to the non-mentioning, in the ‘Postal Ballot
Notice’, of the intention of the R2 to R7, to sell the shares, in the 1st Respondent
Company to the R12, 13 & 15, taken on behalf of the Appellant, it is pointed out
by this Tribunal, that as on the date of issuance of ‘Postal Ballot Notice’, there
was no intention on R2 to R7’s or R12, 13 & 15 part, to sell their ‘shares’ on the
1st Respondent Company, and the averment made in the absence of any

intimation, falling back upon ‘assumptions’ cannot hold water. Looking at from
any angle, there is, no requirement on the part of Appellant, to assume things, in
his own manner. Viewed in this background, there is no requirement, to part with
information, in respect of the ‘Postal Ballot Notice’, of 10.11.2021. Resultantly,
the non-disclosure of the contents of ‘Postal Ballot Notice’, cannot be termed as
an ‘irregularity’ or any legal ‘infirmity’, as opined by this Tribunal.
141. It is relevantly pointed out by the Tribunal, 91.13% of the shareholder / 1st
Respondent Company, being present, and ‘voted for’, had realised, the
requirement for entering into a development, in regard to the Company’s property
with a view to enable the recurring cash flow, finally took an informed decision,
which culminated, in passing a Resolution, dated 22.12.2015 benefitting the ‘1st
Respondent / Company’ and all its ‘majority’ and ‘minority’ shareholders.
142. The Learned Counsel for the Appellant, points out that the whole series of
acts of ‘Oppression and Mismanagement’ lies, in the illegal, and unlawful acts,
of the ‘Board of Directors’ in a purported meeting, that took place on 19.02.2015.
But the’ Management’ knew that ‘sale and disposal’ of the ‘whole undertaking’
of the 1st Respondent / Company, was beyond its competence and is prohibited
by Section 180 of the Companies Act, 2013, read with Section 179 of the
Companies Act, 2013 and to save itself, from the rigours of the above mentioned
provisions, the management, brought the idea of a possible Joint Venture

Agreement, to dispose of the entire undertaking/substratum of the Company in
favour of unknown person with no material information to the shareholders for
the first time by the Board on 04.11.2015 while completely changing the agenda
as was countenanced in the meeting of Board dated 19.02.2015.
143. In this regard, this Tribunal, points out that the 1st Respondent / Company
in its Reply, to Company Appeal (AT) (CH) No. 363/2019 at paragraph 4.2 had
averred as under:

144. According to the 1st Respondent / Company, after the passing of the Board
Resolution, the ‘Appellant’, got in touch with the management of Respondent /
Company and expressed a desire, to purchase the Company’s property is Hebbal.
Further, due to the low price offered by the Appellant and certain other
considerations, the management of the Company had not sold its ‘Hebbal
property’ and that apart, the ‘Appellant’ was not a shareholder in the Respondent
/ Company at the time of offering to purchase the ‘Hebbal property’. Later, on
the Appellant offered to purchase the ‘Hebbal property’ was turned down, he
began to ‘acquire’ the shares of the 1st Respondent / Company, through open
market transactions, only from 13.09.2015 and had come to own about 31.6%
shareholding (5,90,675 shares) by 02.10.2015.
145. Also that, according to the 1st Respondent / Company, in the ‘Board
Meeting’ that took place on 04.11.2015, it was decided that the company should
explore the possibility of a ‘Joint Venture Agreement’ with a reputed Business
House for Joint Development / Lease / Sale of Company’s properties or any part
thereof and the following ‘Board Resolution’ was passed:
“RESOLVED THAT subject to the approval of the Shareholders

as envisaged under Section 180(1)(a) of the Companies Act, 2013
and in continuation of the deliberations held earlier in the Board
Meeting on 19th February, 2015, and in order to meet the fund
needs, approval be and is hereby accorded to enter in to suitable

Joint Venture Agreement with any reputed Business House to be
finalized after careful negotiation on all the terms and conditions
and that such Arrangement may include development of the
properties of the Company in any manner including, but not
limited to, the Company acting as Joint Developer along with the
Business House or lease or sell, or dispose off, the whole or
substantially whole or part of the undertakings of the Company,
wherever, along with the appurtenants thereto.
RESOLVED FURTHER THAT in terms of Sections 180
and 110 of the Companies Act, 2013 read with the applicable
Rules thereto, approval of the Shareholders be sought for the
above proposal by way of Special Resolution through Postal
Ballot.”
146. According to the Learned Counsel for the R1, 11, 13 and 15, the 11th
Respondents, was selected as the Successful Developer, for the ‘Joint
Development transaction’ through a ‘fair and transparent process’, as seen, from
the Minutes of the Board Meeting, dated 24.11.2015.
147. In reality, a mere glance of the ‘Minutes of the 4th Meeting for the Financial
year, 2015-16 of the Board of Directors / MRO-Tech Limited, that took place on
24.12.2015 at 9:30 a.m. at the registered office of the Company at Bellary Road,
Hebbal Bangalore, indicates that the ‘Board’ had noted, and took on record of the
Minutes of the Previous Audit Committee meeting that took on 04.11.2015 and
also that the Board had reviewed the Scrutinisers Report dated 22.12.2015

furnished by the Scrutinizers appointed for the purpose of ‘Postal Ballot’ and it
was informed that due notification of these results was made to the stock
exchanges. As a matter of fact, the ‘Board’ had noted that the Resolution
Proposed was passed with the requisite ‘majority’.
148. According, to the 1st Respondent / Company Shareholders approved by the
requisite majority through the Postal Ballot the proposal, as per the scrutinizer’s
report dated 22.12.2015. Further, in the interregnum, the Company, had
commenced, discussed, with prominent builders, in India, for the development of
property, situated at Hebbal, Bangalore. In fact, the ‘Management’, took the view
that the shareholders of the Company, are disqualified for participation, in the
development project to avoid the conflict of interest, which is in line with
‘Corporate Governance’, followed hitherto.
149. Added further, the 1st Respondent / Company had not invited the ‘Embassy
Group’, since, its Chairman and Managing Director, Mr. Jitu Virmani, had
655538, shares, and RBD Shelters LLPs, since its Managing Partners, Mr. Austin
Roach, Mrs. Hilma Road, had 110350 shares & 957 Shares respectively, as on
06.11.2015, the ‘cutoff’ date considered for issue of Postal Ballot Notice to the
shareholders.

150. According to the Learned Counsel for the R1, 11, 13 and 15, after the
execution of the ‘Joint Development Agreement’ dated 01.01.2016, R2 to R7,
with a view to the dispose of a shares in the 1st Respondent / Company, entered
into a Share Purchase Agreement with the R12, 13 & 15 for filling the shares and
the R12, 13 & 15 undertook the process of ‘open offers’ and that the ‘Appellant’
could have taken part, in the ‘Open Offer Process’ and purchased the ‘shares’ of
the R2 to R7, but the ‘Appellant’, had not resorted to such a ‘course of action’.
151. The Learned Counsel for the R1, 11, 13 and 15, points out that the
allegations of the ‘Appellant’, that the ‘selling’ of entire shareholding by the
erstwhile promoters to the R12, 13 & 15 and after entering into the ‘Development
Agreement’, was a ‘subterfuge’ and part of purported devious scheme, are
emanating, out of pure ‘conjuncture’ and ‘surmises’, without any material
brought forth in support of such allegations, by the ‘Appellant’.
152. The Learned Counsel for R1, 11, 13 and 15 refers to the judgment of the
Hon’ble Supreme Court in IFB Agro Industries Limited V. SICGIL India
Limited and Ors. (vide Civil Appeal No. 2030/2019 dated 04.01.2023), wherein
at paragraph 37 & 38, it was observed, that ‘such actions’, ‘which fall’ within the
jurisdiction of ‘SEBI’ and the ‘National Company Law Tribunal’ cannot under

Section 59 of the Companies Act, 2013 cannot exercise, a parallel jurisdiction,
with ‘SEBI’, for addressing the ‘breach’ of ‘SEBI Regulations’.
153. The Learned Counsel for R1, 11, 13 and 15 points out that the Appellant
had filed two complaints, before SEBI, before agitating the issue of share transfer,
before the Tribunal, but they proved ‘futile’. In regard to the share acquisition
process, being disrupted, the Appellant, filed a civil suit, and later he withdrew
the same through an undertaking, before the Hon’ble High Court of Karnataka,
in the ‘Appeal’ proceeding (vide Annexure R7, Pg. 85 and 93 of R1’s ‘Appeal’
paper book, Vol.-1). Also that, as per R1, 11, 13 & 15 version is that such ‘share
purchase,’ was approved duly by the ‘SEBI’.
154. It is projected on the side of R1, 11, 13 & 15, that the ‘Joint Development
Transaction’, as averred by the Appellant had culminated, in construction /
development of a commercial building, of a commercial complex of which, the
1st Respondent / Company owns more than Rs.2 lakhs sq. ft. and continues to
retain ownership, in respect of ‘proportionate undivided shares’, in the Land
comprising the said development, and through the utilisation of its share, of such
developed property, the 1st Respondent / Company, had garnered potential, to
generate rental revenue, of Rs.1.25 Cr. per month, and thereby fructifying, the
original intention, of the ‘complained transaction’.

155. Besides the above, the simultaneous with the execution of Joint
Development Agreement, on 01.01.2016, the 1st Respondent / Company had
received funds to extent of Rs. 9 cr. as non-refundable security deposit, which
funds the 1st Respondent / Company used to resolve the cash crunch and help
keep in its business afloat and profitable. Therefore, the averment that 1st
Respondent / Company has not received any benefit from the Joint Development
and that the said transaction affectively let to the winding up of the 1st Respondent
/ Company is an incorrect one as contended on behalf of R1, 11, 13 & 15.
156. It must borne in mind, that a mere irregularity, or any infirmity, or any
illegality on the part of a ‘Company’, in its governance relating to its affairs, that
will not be characterised as a harsh or burdensome one and in any event, a petition
for an ‘oppression’ and ‘mismanagement’ will not lie before a ‘Tribunal’.
157. As far as the present case is concerned the ‘Postal Ballot Notice’, dated
10.11.2015, issued by the 1st Respondent / Company along with its ‘Explanatory
statement’, satisfies the ingredient of Section 102 of the Companies Act, 2013
and further, that the 91.13% of the shareholders of the 1st Respondent / Company
who were present, and voted, appreciated and understood the requirement for
entering into a development, in regard to the company’s properties with a view
to enable the company to have a recurrence of cash flow and ultimately passed

the resolution 12.12.2015 , in benefiting the 1st Respondent / Company and its
shareholders (inclusive of majority/minority shareholders). In the instant case, the
Appellant, had ‘voted’ against the Resolution, for ‘Joint Development’. Viewed
in that prospective, without any haziness, this Tribunal, holds, that the ‘Notice
dated 10.11.2015, and the ‘Special Resolution’ dated 22.12.2015, are just, fair
and valid one, in the eye of Law and the point is so answered.
158. Coming to the aspect of the plea of the Appellant, that the ‘decision’, to
enter into a ‘Joint Venture Agreement’ and ‘Joint Development Agreement’ dated
01.01.2016, was in negation, of the ‘Memorandum’ of Association, of the
Company, and violative of ‘Fiduciary Duties of ‘Directors’ of the Company. This
tribunal pertinently points out that the 1st Respondent / Company had invited,
leading Land Developers, in Bengaluru, to make the best possible offers,
commensurate, with the total area of land, offer of constructed area to the
‘Landlord’, ‘FAR’, ‘'adopted’, advance Amount, ‘Rental Value’, and offer
validity period and on this aspect, numerous rounds of negotiations, took place,
between the 1st Respondent / Company, and the aspiring Developers, and as a
matter of fact, the 1st Respondent / Company had received proposals from victory
infrastructure, Umiya Builders & Developers (Respondent No.11 herein),
‘Brigade Group’, ‘Puravankara’, and ‘Salarpuria’ & ‘Sattva Group’ for the ‘Joint
Development’ of the aforesaid properties, of the Respondent No.1 / Company and

in fact, the majority of the shareholders viz. 91.13% of the shareholders of the 1st
Respondent / Company, (consequent to the issuance of ‘Postal Ballot’ dated
12.11.2015, and voting thereto), had voted in favour of entering into Joint
Development of the properties, and resting upon the ‘majority, consent of the
shareholders’ a ‘Special Resolution’ was passed on 22.12.2015, authorising the
‘Board of Directors’, to enter into a ‘Joint Venture’ with reputed ‘Business
House’ to develop the properties, of the 1st Respondent / Company.
159. It comes to be known, that the ‘Board of Directors’, of the 1st Respondent
/ Company after ‘shortlisting’, (in respect of the various proposals received
thereto) and made complete assessment of the prospective developers, had passed
the Resolution, in its Board Meeting, that took place on 24.12.2015, to execute a
‘Development Agreement’ with ‘M/s Umiya Builders’ and ‘Developers’, (11th
Respondent) for the ‘Joint Development’ of the 1st Respondent / Company’s
property, ‘Hebbal’.
160. According to the R1, 11, 13 & 15, ‘M/s Umiya Builders’ and ‘Developers’
possesses the ‘Technical’ and ‘Financial’ capability to finish any project, being
undertaken by it, including the development project under issue. Also that, it is
brought to the notice of this Tribunal, but ‘‘M/s Umiya Builders’, had
successfully completed ‘sixteen construction projects’ and further seven

construction projects, (commercial and residential) are going on Bengaluru and
Goa.
161. It is the version of the R1, 11, 13 & 15, that the 1st Respondent / Company
had entered into a Registered Development Agreement, with 11th Respondent
(‘M/s Umiya Builders and Developers’) on 01.01.2016, in respect of the ‘Joint
Development’ of the Property at ‘Hebbal’ whereby and where under. It was
agreed that the 1st Respondent / Company would provide the above said property
to the 11th Respondent for the purpose of development, and ‘M/s Umiya Builders
and Developers’ would at its expense, construct a ‘Multi Storey Commercial
Complex’, thereon, comprising of Lower Basement, Upper Basement, Ground
floor plus 12th Floors.
162. On behalf of R1, 11, 13 & 15, it is pointed out before this Tribunal, that a
‘Power of Attorney’, document, was executed by the 1st Respondent / Company,
to and in favour of ‘M/s Umiya Builders and Developers’, to facilitate the
development of its property, as aforesaid in the manner has prescribed in the
‘Joined Development Agreement’. Further, the 11th Respondent had paid, the
‘non-refundable deposit of Rs.9 crores, by means of a Supplementary Agreement,
dated 04.01.2016 (Registered one), and Registration cost of Rs.434,16,22/- was

incurred, in regard to the ‘Registration of Development and Supplement
Agreement’.
163. According to the R1, 11, 13 & 15, the 11th Respondent / ‘M/s Umiya
Builders and Developers’, being the ‘Sole Proprietary concern’ of the 13th
Respondent (Mr. Aniruddha Mehta) and that the 13th Respondent together with
the 15th Respondent (Ms. Gauri Mehta and Umiya Holding Pvt. Ltd. / sister
concern of Umiya Group) had purchased the shares of the promoters of the 1st
Respondent / Company as per Share Purchase Agreement dated 19.05.2016, after
fulfilling all the procedures, formalities and approval, in terms of the ‘SEBI’
Regulations, 2011 etc. Thus, the 13th and 15th Respondents, became the ‘Members
of the Board of Directors’ of the 2nd Respondent / Company, from 08.08.2016.
164. It is projected on the side of R1, 11, 13 & 15, that the Appellant / Petitioner
began, acquiring the shares of the 1st Respondent / Company from 30.09.2015 in
the open market, and he made a halt, in regard to the acquiring of shares after he
had reached the accumulation, of 19.83% shareholding, on 30.09.2016. In this
connection, it is brought to the notice of this Tribunal, that the Appellant /
Petitioner, (within a year) had increased a ‘shareholding’ from 3.16% (5,90,675
shares) on 30.09.2015 to 19.83% (37,04,684 shares) on 30.09.2016, by acquiring
in the open market. Also that the current shareholding pattern of the Promoter and

Promoter Group is (53.89% shareholding in the company) and also the General
Public including the Appellant / Petitioner (46.11% shareholding in the
Company).
165. According to the R1, 11, 13 & 15, the reason for the Appellant / Petitioner
acquiring shares, is only to have a say, in the affairs of the 1st Respondent /
Company, and to harass, the Respondents, and to stall the development of the
property, of the Company.
166. It cannot be gainsaid, that the original ‘Memorandum of Association’, of
1st Respondent / MRO-Tech Reality Ltd. / Company deals with Part-III(B) under
the caption objects incidental ancillary to the main objects and enjoins B(2) ‘to
enter into partnership or into any arrangement with any person or firm or
Company whose objects of the Company’. Indeed, clause 24 points out ‘to sell or
let out on hire all or any of the property of the Company, whether moveable or
immovable including all and every description of apparatus or appliances, and to
hold, use, cultivate, work, manage, improve, carry on and develop the
undertaking, land and immovable and movable properties and assets of any kind
of the Company or any part thereof.
167. Moreover, another Ballot Notice dated 09.02.2016, was issued, in terms of
Section 110 of the Companies Act, 2013, to the Members of the Company, among

other things, proposing to alter the ‘name of the Company’, from ‘MRO Tech
Ltd.’ to ‘MRO-Tech Reality Ltd.’ to alter the Memorandum of Association’ of
Company, including its main ‘objects’. A Report, dated 19.03.2016 was filed by
the scrutiniser, whereby it was declared, that the ‘Proposed Resolutions’ were
passed with the requisite majority and based on the scrutinised report, the
‘Chairman’ proceeded with the ‘Resolution’ by altering the name of the Company
and altering the objects, suitably, as per his Report dated 19.03.201.
168. It is brought to the Notice of this ‘Appellate Tribunal’, that the Tribunal
(NCLT) had not interfered with the ‘Development Agreement’ because it was
conclusive, viz., the project was completed without any interference.
169. In the light of detailed forgoing’s, on a careful consideration of respective
contentions advanced on either side, this ‘Tribunal’, comes to an ‘inescapable and
irresistible’ that the joint transaction, had culminated in the ‘construction /
development of a commercial building of a commercial complex’ and that ‘just
on a transparent process, was undertaken, in regard to the selection of the ‘11th
Respondent’ as ‘Successful Developer’, for the ‘Joined Development,
transaction, as seen from the Minutes of the Board Meeting, dated 24.11.2015
(vide pg. 293, Vol.-II of the Appeal Paper Book). Viewed in this background, the
contra plea, taken on behalf of the Appellant, that the determination, to enter into

‘Joint Venture Agreement’ and ‘Joint Development Agreement’ dated
01.01.2016 were in breach of ‘Memorandum of Association’ of a Company, and
against the ‘Fiduciary’ duties of Directors, are not acceded to, by this ‘Tribunal’
and the point is so answered.
170. Dealing with the plea of the Appellant, that the ‘Tribunal’, went wrong, in
not holding that ‘invalid’, ‘illegal’ and ‘malafide’ transfer of the entire
shareholding of R2 to R10, constituting 39.66% in favour of R12 & 13 was an
‘oppressive’ one, the submission of the Learned Counsel for the Appellant, is that
after the ‘transfer of land’, by way of ‘Joint Venture’ to the 12th Respondent, the
execution of a ‘Share Purchase Agreement’ dated 19.05.2016, by R2 to R7,
transferring entire promoter shareholding , in favour of R12 & 13, thereby
effecting, an ‘entire change of control’, within a period of 5 months, of alienating
the whole substratum of the 1st Respondent / Company and further that among
the numerous acts, of ‘oppression’ and ‘mismanagement’, the worst act of
‘Oppression’ and ‘Mismanagement’, against the interest of shareholders and
prejudicial to public interest was illegal and unlawful transfer of promoter
shareholding by R2 & 5 along with the relatives etc., it is pointed out on behalf
of R1, 11, 13 & 15, that after the execution of Joint Development Agreement
dated 01.01.2016, R2 to R7, to dispose of their shares, in the 1st Respondent /
Company had entered into a Share Purchase Agreement, with the R12, 13 & 15

for selling the said shares and R12, 13 & 15, had undergone the ‘process of open
offer’ by satisfying the requirements of ‘SEBI Regulations’, (inclusive of the
‘substantial Acquisition of Shares’ and Takeovers, Regulations, 2011) and other
related ‘Guidelines’.
171. Before this Tribunal, the 5th Respondent, by way of ‘objections’, in the
instant ‘Appeal’, had mentioned that the ‘Transfer of shares’, by the promoters,
under the ‘Share Purchase Agreement’, dated 19.05.2016, was as per ‘Law’ and
was followed by the ‘mandatory’, ‘public offer’ as per ‘SEBI Takeover Code and
Regulations’. More specifically, it is brought to the notice, of this Tribunal, on
behalf of R1, 11, 13 & 15, that such ‘share purchase’ was duly ‘approved’ by the
‘SEBI’. Furthermore, according to R5, 2 to 4, 6 to 10, 17 & 19, the said ‘Transfer
of Shares’, is not an act of ‘oppression’ and ‘mismanagement’ against the
‘shareholders’ of the ‘1st Respondent / Company’, because of the candid fact that
subsequent to ‘Transfer of Shares’ the Appellant / Petitioner, went on purchasing
the shares of the 1st Respondent / Company from ‘open market’. In fact, the
Appellant’s ‘shareholding’ in the Company as on 19.05.2016, was 10.34% and
today, his shareholding is 19.83%.
172. When there is a violation, of ‘SEBI Regulations’, a ‘Member’ of a
‘Company’ cannot ask for, ‘Rectification of Register’, although, the ‘Company’,
itself, can apply for such ‘Rectification’.

173. Under the ‘Companies Act, 2013’, a Member of a Company, is not one of
them, competent, to prefer an ‘Application’, for ‘Rectification’. (i) ‘Any
Depositary’, (ii) ‘The Company’, (iii) ‘The Depositary Participant’, (iv) ‘The
Holder of Securities’ and / or the ‘Securities and Exchange Board of India’, can
seek for ‘Rectification’ of ‘Register’.
174. In granting the Application for ‘Rectification’, it is necessary, to determine
other issues concerning ‘complicated’, ‘questions of Law and Fact’, and ‘disputed
questions of title’, right etc. then the ‘Company Court’ / ‘Tribunal’ may direct the
parties to get their disputes, decided by the ‘Competent Civil Court’, in a Trial,
in appropriate proceedings as the case may be.
175. At this juncture, this Tribunal, pertinently points out that, the Appellant,
had filed ‘two complaints’ before SEBI, in relation the ‘Share Transfer Issue’, but
it proved ‘futile’. Also, this Tribunal, on a meticulous rumination, of respective
contentions, advanced, on either side, holds, that in regard to the ‘controversies’
/ ‘disputes’, relating to the ‘Transfer of shares’, which fall within the ambit of
SEBI jurisdiction, the ‘National Company Law Tribunal’, is ‘not the Competent
Fora’, to go into the aspects of ‘purported breach’ of ‘SEBI Regulations’.
Looking at from any angle, this Tribunal comes to a consequent conclusion the
Appellant the transfer of shares by the ‘promoters’, as per ‘Share Purchase

Agreement’ dated 19.05.2016 executed by R2 to 4 transferring their promoter
shareholding, constituting 39.66% in favour of R12, 13 & 15 is ‘not an invalid’,
‘illegal’ and ‘malafide transfer’ of the entire shareholding of R2 to 10 and in any
event, such ‘Transfer of Shares’, cannot be construed, to be an act of ‘oppression’
and ‘mismanagement’ in the ‘Eye of Law’ and the point is accordingly answered.
176. It is pointed out by this Tribunal, that under Section 241 of the Companies
Act, 2013, a remedy, is available to a ‘minority shareholder’ against an act of
‘oppression’, by the majority, shareholders, by their continuous acts. It has no
application for redressal of ‘grievances’ and ‘wrong acts’ of management of the
Company, as per decision Suresh Kumar Sanghi v. Supreme Motors Ltd., 1983,
54 Comp.cas 235 (Del).
177. A shareholder, who claims relief under Section 397, 398 of the Companies
Act, 1956 (now Section 41, 242 under the Companies Act, 2013) must satisfy the
Court / Tribunal, that he is a ‘shareholder’ of a company, by means of allotment
of Shares, in his favour, which is evidenced not only by the Register of Members,
but also, by the ‘Statutory Returns’ and ‘Documents’, maintained by the
Company. Also that, the jurisdiction of a ‘Tribunal’, under Section 241 of the
Companies Act, 2013 is an ‘equitable jurisdiction’ and governed by ‘Regulations’
framed under ‘Law’ and ‘Principles of Natural Justice’, in the ‘earnest opinion’,
of this ‘Tribunal’.

178. The ‘onus’, to establish ‘Membership’ is on the Petitioner, and it is up to
him to prove, that he is a Member, of a Company, ‘on the day’ of filing of petition.
When he is not a Member of Company, he cannot allege ‘Oppression’, to invoke,
Section 241 of the Companies Act, 2013, against the Company, as opined, by this
‘Tribunal’.
179. There is ‘no straight jacket cast iron formula’, specified, to define the
‘term’, ‘oppression’ and ‘mismanagement’. A ‘single act’ may not be enough for
the grant of relief of ‘oppression’, and ‘continuous course, of oppressive code of
conduct’, on the part of the ‘Majority Shareholder’, is very much necessary.
180. In respect of the Appellant / Petitioner, in CP No. 22/2016, when the ‘cause
of action’ had arisen, to enable him, to commence the litigation, in February,
2015, in terms of the ‘consolidated’ shares movement statement filed by the
Respondent, showed, that the Appellant / Petitioner, as on 02.10.2015 was
possessing 590695 shares (3.16%), which by efflux of time, rose to 9.65% as on
26.02.2016 and later, increase to 10.34% onwards.
181. It is significantly pointed out by this Tribunal, that in CP No. 22/2016 (TP
No. 8/2016), filed before the then, Company Law Board, Chennai (under Sections
379, 398, 40, 403, 406 of the Companies, Act, 1956), was preferred on
21.03.2016. The Appellant / Petitioner had averred, that he was the ‘shareholder’

of the Company by possessing 19,32,596 shares, equal to 10.34% of the paid up
share capital.
182. When the Appellant / Petitioner filed CP No. 486/BB/2018, on 06.09.2018,
he averred that, he holds, 37,05,684, Equity Shares of Rs.5/- each, amounting to
19.83%, of the ‘paid up share capital’. The Appellant, withdrew his former
petition, in CP No. 22/2016, on 20.08.2016 and filed CP No. 486/2018 before the
NCLT, Bengaluru Bench, in regard to the purported acts of ‘oppression’ and
‘mismanagement’ that took place, on the specific dates of ‘cause of action’ that
had ‘arisen’.
183. The ingredients of Section 242 of the Companies Act, 2013 has ‘no
application’, whatsoever, for redressal of ‘grievances of wrong acts’, of the
management of a company. A mere, ‘illegal’ or invalid acts would not be termed
as acts of ‘oppression’.
184. It is relevantly pointed out by this Tribunal, that the term, ‘shareholder’,
for the purpose of Section 241 of the Companies Act, 2013, is to be understood
in widest import, to ‘include persons’, ‘whose names’, are not ‘borne’, on the
Register of Members, but who have an ‘indefensible’ right, to ‘shares’, as per
decision in Shree Balaji Textile Mills (P) Ltd. v. Ashok Kaule reported in (1989)
66 Comp. cas. 654 (Kar).

185. A ‘petition’ ought not to be dismissed, at the initial level, because no
ground of ‘oppression’ and ‘mismanagement’ is made out. Also, that Section 241
of the Companies Act, 2013, is available, to protect the interest of ‘shareholders’
if their, interest, rights, are ‘unfairly’, and malafide dealt with, to cause
‘prejudice’.
186. As far as the plea, of the Appellant, that the ‘Tribunal’ had placed reliance
on ‘orders’ relating to earlier litigations, to find out the Appellant’s conduct, this
Tribunal, relevantly, points out, that the NCLT (Tribunal) in the order dated
27.11.2019, had not only looked into the orders, granted in earlier TP No. 88/2016
but also, separately / independently, took into consideration of the Appellant’s
‘bonafide’, in preferring, various proceedings, before numerous forums, before
approaching it, and that the ‘Tribunal’ is well within the ambit, ‘to look into the
same’, with its ‘inherent powers’, in the earnest opinion of this Tribunal.
187. Furthermore, the ‘Tribunal’ is within its powers, to look into the earlier
order passed in COP No. 20/2016 and the observations made, to ascertain the
bonafides of the ‘Appellant’, and there is no fetter, in Law, in this regard. Besides
this, the observations, made in COP No. 20/2016, made by the Hon’ble High
Court of Karnataka in regard to the conduct and bonafide of the Appellant, were
not assailed before the earlier forum. Apart from that, TP No. 248/2017 was not

withdrawn by Mr. Kumar Dinesh Seth and ultimately, it was dismissed along with
Appellant’s CP No. 486/2018, through an order dated 27.11.2019. Looking at
from all these angles, ‘no fault’ can be attributed to the ‘Tribunal’s role, in taking
in to account of the Erstwhile legal proceedings, to find out the Appellant’s
conduct, as held by this ‘Tribunal’.
188. Be that as it may, in the light of qualitative, and quantitative, detailed
discussions, keeping in mind, that the ‘onus of proof’, in proving the ‘affairs of
the Company’, were / are being, ‘conducted in a manner prejudicial or oppressive
to ‘any Members’, or against the ‘public interest’ / or in any way, ‘prejudicial’,
to the interest of the Company etc. and this Tribunal, ongoing through the
impugned order dated 27.11.2019 passed by the NCLT, Bengaluru Bench in CP
No. 486/BB/2018, comes to a consequent conclusion, that the Appellant /
Petitioner has not established to the subjective satisfaction of this ‘Tribunal’, that
‘affairs of the Company’, are conducted, in ‘any manner prejudicial’ or
‘oppressive’ either to the Appellant, or other ‘shareholders’ / stakeholders.
Viewed in that prospective, the ‘ultimate conclusion’, arrived at by the NCLT,
Bengaluru Bench, in dismissing the CP No. 486/BB/2018 through its order dated
27.11.2019, without costs is free from any legal flaws. Accordingly, the instant
‘Appeal’ fails.

Disposition
189. In fine, the TA (AT) No. 94/2021 (Company Appeal (AT) No.363/2019)
is dismissed, of course, for the reasons assigned by this ‘Tribunal’ in this
‘Appeal’, No costs. The connected pending IA(s) No. 4295/2019 (for status quo),
4296/2019 (for Exemption), 517/2023 (for stay) are closed.
[Justice M. Venugopal]
Member (Judicial)
[Shreesha Merla]
Member (Technical)
4th October, 2023
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NATIONAL COMPANY LAW APPELLATE TRIBUNAL

TA (AT) No. 94/2021

IN THE MATTER OF:

Through Power of Attorney Holder

1. MRO – Tek Reality Limited

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 1 of 225

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 2 of 225

13. Mr. Anirudha Bhanuprasad Mehta

14. Sudhir Kumar Hasija

15. Gauri Anirudha Mehta

16. Mohan Subramanium

17. M. Venkatachala Sampath Kumar

18. Sudipto Gupta

19. Barun Pandey

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 3 of 225

20. Serious Fraud Investigation Office

21. The Registrar of Companies – Karnataka

For Respondents : Mr. P.H. Arvindh Pandian, Senior Advocate

Justice M. Venugopal, Member (Judicial):

(AT) 363 of 2019) in CP No. 486/BB/2018 as an ‘aggrieved person’, in respect

Tribunal’ Bengaluru Bench.

impugned order dated 27.11.2019 in CP No. 20/2016 (TP No.248/2017) and CP

No. 486/BB/2018 at paragraph No. 21 to 25 had observed the following: -

“21. It is on record that in pursuant to the Special Resolution

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 5 of 225

Parameter Ummiya BRIGADE DIFFERENCE

Deposit Rs.9 Crs. Rs.10 Crs. (Rs. 1 Cr.)

Estimated Rs. 60 Rs.80 (Rs.20)

Estimated Rs. 152 lacs Rs.144 Lacs Rs.8 Lacs

Estimated Rs.10000 Rs.12000 (Rs.2000)

Estimated Rs.250 Crs. Rs.216 Crs. Rs.34 Crs.

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 6 of 225

Therefore, the impugned Development Agreement cannot

22. So far as the issue of sale Purchase Agreement dated 19 th

23. It is to be pointed out here that any member of a Company

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 7 of 225

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 8 of 225

24. In order to seek relief(s) under Sections 241/242 of the

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 9 of 225

25. It is also to be stated here that the Tribunal has perused

248/2017) & C.P. No. 486/2018’, but without costs.

(AT) No. 363/2019 in CP No.486/BB/2018) submits that the ‘Tribunal’, had

erroneously, dismissed the ‘Company Petition’ of the Appellant, primarily and

substantially on the ground, that the Appellant, despite possessing 19.83%

underlying petition, against the Respondents.

committed an ‘error’, in coming to the conclusion that the ‘shareholding’ at the

time of accruing of ‘cause of action’, would be determinative, of the

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 10 of 225

as the underlying petition against the ‘Appellant’ herein.

‘maintainability’ was already settled by the ‘Tribunal’, in IA 360/2018 and IA

17/2019 of 30.05.2019. In this connection, on behalf of the Appellant, it is

sheet, as on 31.03.2015 was having a positive network with reserves and

surpluses, to an extent of INR, 11,17,38,040. But the Respondents, in ‘collusion’

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 11 of 225

fraud, the Board of Directors of the1st Respondent /Company, in breach of the

shareholding of the Promoters in the 1st Respondent / Company. It is the

TA No. 94/2021 in Comp App (AT)(CH) No. 363/2019 12 of 225

2013 and read with Section 179 of the said Act.

venture agreement, to dispose of the entire undertaking / substratum of the