Pramerica ASPF Vs Metro Corp Infrastructure Ltd (NCLAT Chennai)
NCLAT Chennai held that if there is any breach of the Terms of Settlement, it cannot be construed as an issue which would fall within the ambit of the definition of `Oppression and Mismanagement’ as defined under the Companies Act, 1956.
Facts- The ‘Petitioner’/’Appellant’ before the Company Law Board, Chennai under Sections 397, 398, 399, 402, 406 & 542 of the Companies Act, 1956 seeking to declare the Meetings of the Board of Directors of the first Respondent Company/M/s. MetroCorp Infrastructure Ltd., held on 02.11.2009, 10.11.2009 & 25.10.2010 as `null & void’ and to declare the `Mortgage Deeds’ dated 10.11.2009, 19.11.2009, 02.11.2010 signed pursuant to the aforesaid Meetings as `null & void’ and ordered for cancellation of the said Deeds of Mortgage.
Conclusion- The scope and objective of Sections 397, 398 & 399 of the Act defining `Oppression and Mismanagement’ does not entail the `Tribunal’ to adjudicate on the issues arising from the facts of the attendant case on hand. Even if there is any breach of the Terms of Settlement, it cannot be construed as an issue which would fall within the ambit of the definition of `Oppression and Mismanagement’ as defined under the ‘Act’.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
1. Challenge in these Appeals viz. TA Nos.71 & 72/2021 (Comp. (AT) Nos. 247 & 248 of 2019) is to the `Impugned Order’ dated 26.07.2019 in C.P. No.07/2013 (T.P. No.43/2016) and C.P. No.09/2015 (T.P. No.71/2016), passed by the NCLT (National Company Law Tribunal, Bengaluru Bench), whereby and whereunder the NCLT has dismissed both the Company Petitions.
2. Facts in brief are that C.P.07/2013 was filed by the `Petitioner’/`Appellant’ herein before the Company Law Board, Chennai under Sections 397, 398, 399, 402, 406 & 542 of the Companies Act, 1956 (hereinafter referred to as the `Act’) seeking to declare the Meetings of the Board of Directors of the first Respondent Company/M/s. MetroCorp Infrastructure Ltd. (hereinafter referred to as `MetroCorp’), held on 02.11.2009, 10.11.2009 & 25.10.2010 as `null & void’ and to declare the `Mortgage Deeds’ dated 10.11.2009, 19.11.2009, 02.11.2010 signed pursuant to the aforesaid Meetings as `null & void’ and ordered for cancellation of the said Deeds of Mortgage. It was also prayed to direct the removal of the second Respondent from the Board of Directors of MetroCorp.
3. P.09/2015 was filed by the `Petitioner’/`Appellant’ herein before the Company Law Board, Chennai seeking to declare the Meetings of the Board of Directors of MetroCorp held on 30.07.2013, 30.08.2013 and 25.09.20 13 as illegal as they were held in violation of Articles 86 & 87 of the Articles of Associations (`AoA’) and further to declare the removal of the nominee Directors of the `Petitioner’ namely Mr. Surender Singh and Mr. Jason Van Hoong and the appointment of new Directors namely Mr. Subhash Banerjee and Mr. D.P Biswas as non-est and illegal. It is also prayed to set aside the increase of the authorized Share Capital of MetroCorp and direct the issuance and allotment of 90,00,000 Equity Shares in favor of the second Respondent as illegal and oppressive to the interest of the `Petitioner’.
4. Succinctly put, facts in brief are that M/s. MetroCorp approached one `Bekman Helix India Consulting Private Ltd.’ (`BHIC’) for funds for development of a `Residential Project’ and BHIC in return approached the `Petitioner’, which is an `Investment Company’, to make a Foreign Direct Investment in the `Real Estate and Infrastructure Business of MetroCorp’. Accordingly, the `Petitioner’/`Appellant’ invested a sum of Rs. 1 10Crs./- by subscribing to Rs.2,20,000/- Compulsory Convertible Debentures (`CCD’) having a face value of Rs.5,000/- each on 25.02.2009. A `Shareholder’s Agreement’, `Put and Call Option Agreement’ and `Cash Management Agreement’ was entered into between the `Petitioner’ and MetroCorp on 12.02.2009 to effectuate the FDI.
5. Learned Sr. Counsel appearing for the `Appellant’ submitted that in February, 2009, the `Appellant’ invested a sum of Rs.1 10Crs./- vide the aforenoted Agreements and appointed there nominee Directors but without providing any `Notice’ to the `Appellants’ or its nominee Directors and in contravention of the AoA, R-2 & R-3 conducted Board Meetings wherein they approved and executed Mortgages on the Assets of the Company in favor of the fourth Respondent. It is submitted that the Mortgages mentioned MetoCorp Samsara Housing Private Ltd. which is a family owned Company under the direct `control and management’ of R2 & R-3 as the `receiver’ of the Mortgaged Funds.
6. The `Appellant’ has challenged four impugned Board Meetings 11.2009, 10.11.2009 & 25.11.2009, on the ground that no `Notice’ was issued to the `Appellant’ and further despite several directions by the NCLT vide Orders dated 11.12.2018, 10.01.2019, 05.02.2019 & 25.02.2019, the second and third Respondents have failed to provide any documentary evidence of `Notices’ having been served.
7. It is submitted by the Learned Sr. Counsel for the `Appellant’ that the Mortgage Board Meetings were not convened as per the AoA as Article 87(iii) of the AoA states that the quorum for the Board Meetings requires two Directors with at least one Director each from the `Promotors’ and the Appellant. If the quorum is not present within 120 minutes specified for the Board Meetings, it will have to be adjourned for seven days after the original date of the Meeting. If the quorum is not present again in the adjourned Meeting within 30 minutes of the adjourned Meeting, the Meeting will be adjourned to a date not more than five days from the date of the said adjourned Meeting. It is also submitted that, if the quorum is still not present at the second adjourned Meeting, then Article 87(iii) of the AoA will be disregarded; that there was no nominee Director of the Appellant present in any of the Mortgage Board Meetings as required for the quorum. Even if it is assumed that the Appellant’s nominee Directors were absent, despite the service of the `Notice’, from the Mortgage Board Meetings, the AoA requires the Board Meeting to be adjourned as mentioned above. However, the Respondents have not submitted any evidence of the adjourned Meetings or that due process as detailed in the AoA was followed by the Respondents. Further, Article 140 of the AoA states that the R-1 Company will not be bound by any `Resolution’ or `Transactions’ and the `Promotors’ (R-2 and R-3) or the `Appellant’ must not take any action to authorize the R-1 Company to be bound by matters relating to the `consensus matters’ unless either of the following conditions has been fulfilled i.e., a Board Resolution is passed with at least one Director appointed by one of the `Promotors’ and the `Appellant’, or if the transaction has been approved by one of the `Promotors’ and the `Appellant’ at a shareholders Meeting.
8. It is submitted that the creation of the mortgages falls within the ambit of Article 140(i) of AoA thereby, requiring the Respondents to mandatorily obtain the Appellant’s consent through either of the above-mentioned methods. However, the Respondents secretly, without the Appellant’s consent, created the mortgages. The Respondents have remained completely silent about the date of issue of `Notices’ for these above said Board Meetings, the dispatch of `Notices’, and mode of dispatch of `Notices’.
9. It is argued that the charges under the Mortgage Deeds were not registered under Section 125 of the Act; that the audited Balance Sheet of MetroCorp as on 3 1.03.2010 is completely silent about these Mortgages; that these Mortgages were created just after 9 months on 10.11.2009, after the infusion of funds by the `Appellant’; no document on the ICD Agreement are on record to support the Respondents claim that these Mortgages were executed to secure funding for the first Respondent; that R-4 has not placed on record the money trail of payment to MetroCorp Samsara Housing Pvt. Ltd.
10. It is submitted that NCLT has failed to take into account that the documents filed by Respondents are fabricated as it can be seen from the `Notice’ dated 24.06.2013 for convening a Meeting on 30.07.2013 was issued by the second Respondent in his capacity as a Director and on the same date the alleged `Notice’ was issued by Members for convening an EOGM under Section 169(6) of the Act signed by R-2 and addressed to the Board.
11. There were no statutory filings made to the Registrar of Companies (`RoC’) for increase in Share Capital, shares issued to Shareholders, transfer of shares or appointment of new Directors. NCLT has erroneously held that since the `Appellant’ was a majority Shareholder in control of R- 1, R-2 could not have carried out the oppressive Acts as detailed by the `Appellant’. It was not considered by NCLT that if a majority Shareholder is reduced to a minority by oppressive Acts of the Company, the said Act is termed oppressive by themselves. Learned Counsel placed reliance on the following Judgements in support of his submissions:
