Rajeswara Rao Vittanala, Member - (1.) The Company Application bearing No. 2/167/2014 was initially filed in the then Hon'ble Company Law Board, Chennai. Upon the constitution of NCLT Bench, at Hyderabad for the States of Andhra Pradesh and Telangana, the case was transferred to this Bench as it falls under the jurisdiction of this Bench. The case is re-numbered as TP No. 152/HDB/2016.
(2.) The Company Application was filed by IJM (India) Infrastructure Limited (herein after referred to as the applicant/IJMII), under sections 167 of the Companies Act, 1956 by inter-alia seeking a direction to excuse it for default in holding 9th Annual General Meeting (AGM) and, to direct the first respondent company (Swarnandhra IJMII Integrated Township Development Company Private Limited (SITCO) to hold its 9th AGM on a suitable date within 30 days from the date of the receipt the copy of the order without prejudice to the rights or otherwise of APHB and the applicant under the DSA or under any Law; to direct that one member of the company present in person or by proxy shall be deemed to constitute a meeting with other incidental directions as deem fit by the Board.
(3.) The brief facts as set out in the company application basing on the material papers filed in support by the applicant are as follows: a) The applicant company was formed and registered under the Companies Act, 1956. The Respondent No. 1 Company known as Swarnandhra IJMII Integrated Township Development Company Private Limited, which is referred to as SITCO herein after for brevity, was incorporated on 25th March, 2003 with CIN No. U70102AP2003PTC40715 with the Authorised Capital of 10 crores divided into 1,00,00,000 equity shares of Rs. 10/- each. The main object of the Company is to carry on the business of development of integrated township and housing projects etc. The AP Housing Board (Respondent No. 2) has come into existence w.e.f. 01.07.1960 under the Andhra Pradesh Housing Board Act, 1956. b) The Applicant Company and second Respondent had jointly promoted SITCO as joint sector company, in which Applicant Company and second Respondent hold equity shares in the ratio of 51% and 49 % respectively for the purpose of developing integrated Townships and allied construction and development works. Further, the Applicant and the second respondent entered into a Development & Shareholders' Agreement (DSA) on 04-11-2003 and also a supplemental agreement to the said DSA dated 07-04-2011. c) SITCO is also executing another joint venture project at Kukatpally, R.R. District in the state of Telangana. SITCO was offered to purchase additional parcel of land admeasuring about 35.05 acres for developing a project consisting of residential and commercial space in the land. APHB had selected SITCO and, issued letter of award on 31.12.2005 and, subsequently entered into a development agreement dated 08-02-2006. d) Due to certain differences/disputes between APHB and IJMII, who are only two shareholders in SITCO, the annual accounts of SITCO for the financial years ended 31st March, 2012 and 31st March, 2013 could not be approved by the Board of Directors of SITCO as the nominee Directors of APHB had raised few queries in respect of certain expenditure. The queried expenditure related to the financial years prior to the financial years 2011-12. It is stated all through the financial years from the inception of SITCO and up to the year 2010-11, the annual accounts of SITCO had been audited by Internationally reputed firm of auditors and, they used to be approved/adopted by the Board meetings, where the nominee Directors of APHB were duly to be present and those proceedings also used to be filed with the Registrar of Companies. It is also further stated at no point of time, the nominee Directors of APHB had raised any objection(s) The 9th Annual General Meeting of the first Respondent Company was held on 28th September, 2012 at 5.45 PM at the office of A.P. Housing Board, Gruhakalpa, Nampally, Hyderabad. Mr. Karikal Valaven, IAS, as Chairman, B. Rajgopala Rao, representing APHB and D. Sreenivasa Rao IJMII were present. During this meeting, by ordinary resolutions, Mr. Teo Teik Thiam was re-appointed as Director of the Company and Karikal Valaven was appointed as Director of the Company. And by Special Resolution, M/s. BSR & Associates, Chartered Accountants were re-appointed as Auditors of the Company to hold office from the conclusion of this meeting until the conclusion of next AGM of the Company. However, due to the objection raised by nominee Director of APHB, the meeting was adjourned sine die for adoption of the annual Accounts for the financial year ended 31st March, 2012. e) Subsequently, adjourned 9th AGM was held on 30th September, 2014 at 12.00 noon at the Registered office of the Company. Since no nominee from APHB was present at the meeting, this meeting was also dissolved. f) Subsequently, the APHB had appointed M/s. T.R. Chadha & Co, Chartered Accountants, on 09-04-2013 to conduct an audit of the books of SITCO from its inception. The special audit report of M/s. T.R. Chada & Co was made available to SITCO on 02nd June, 2014. The APHB was reluctant to depute its nominee Director for conducting the Board/AGM for approval/adoption of annual accounts for the financial years 2011-12, though it made several attempts to convince them. g) The SITCO had given proper notice of 14 days to the APHB, in terms of sub-clause (ii) 5.1.7 of the DSA and Article 137 of the Articles of Association of SITCO, to convene a Board meeting on 01.08.2014. However, the nominees Directors of APHB were not present for the meeting and, thus the meeting was adjourned to 08.08.2014 at 11.30 am at the registered office of SITCO. In terms of sub-clause (iii) of Clause 5.1.7 of DSA, the quorum for Board meetings shall be at least one (1) Director (or his alternate Director), appointed each by the APHB and the applicant, being present in person. If no quorum is present within thirty (30) minutes of the appointed time, the meeting shall stand adjourned to the same day, time and place on the following week. At such adjourned meeting, the quorum shall be constituted by at least two Directors present. A notice of adjourned Board meeting was also given to all the Directors. As per clause 3.1.7(iii), two Directors present at the Board meeting constitute quorum and, the subject specifically stated in the notice for original meeting can be transacted at the adjourned meeting. Accordingly, the Board of Directors of SITCO proceeded with transacting the business as per the specific agenda attached to the notice of the Board meeting issued vide SITCO letter dated 16-07-2014. So the adjourned 55th Meeting of Board of Directors of SITCO was held at the Registered Office of the Company, on Friday, 8th August 2014 at 11.30 a.m. h) During the above meeting, two Directors namely Sri D. Sreenivasa Rao and Sri Harjeet Singh were present and D. Srinivasa Rao took the chair and, transacted the business. Leave was granted to Mr. Karikal Valaven, IAS and Mr. B. Rajagopala Rao as they were not present at the meeting. By discussing the serious consequences like imposition of fine and imprisonment as per the provisions of the Companies Act, 1956 and 2013, for failing to conduct Board Meetings and AGM, the Board approved the Annual Accounts of the Company for the Financial Year 2011-12 without prejudice to the rights of shareholders with an observation that it would not affect or jeopardize the interests of APHB and the disputes, if any, can be resolved subsequently to the mutual satisfaction in due course. It was also resolved that the adjourned 9th Annual General Meeting held on 28th September, 2012 , should be convened at the Registered office of the Company at 12.00 noon on Tuesday, 30th September, 2014 to transact the business in the draft relating to the financial year 2011-12. i) Accordingly, the said adjourned meeting was held on 30th September, 2014 at 12.00 noon. Mr. D. Srinivasa Rao, Mr. Harjeet Singh nominated Directors and Mr. Tan Klan Choon, representing shareholder of IJM were present .Since no representative from other share holder holding 49% share capital (APHB) were present, and there was no quorum, the meeting stood dissolved. j) The second respondent (APHB) addressed a letter bearing No. 13306/audit/pc/2013 dated 28-07-2014 to the SITCO by informing that, meeting of Board of Directors for approval of the financial statements for the year 2011-12 can be conducted only upon receipt of remarks as sought by the APHB, upon compliance by SITCO of the directions given by the board of APHB and also on fresh appointment of board members by the Government of Telangana consequent to the bifurcation of the State of Andhra Pradesh. In response to the above letter, the SITCO vide its letter No. SITCO/CSLD/2014/8 dated 05.08.2014 explained the APHB the necessity of approval of financial statements at least for the financial year 2011-12 and requested them to co-operate for the same. In response to this, the APHB addressed a letter No. 13307/SITCO/BM/AE/PC/2012 dated 10.10.2014 to the first respondent by inter-alia informing that due to difficulties being faced by it due to bifurcation of state, the APHB nominees may not be able to either attend Board meetings or Share-holders meetings until fresh nomination of Board of Members by the Government of Telangana. k) In the above circumstances, the applicant states that they have no other alternative except to approach this Tribunal by seeking a direction to convene the afore said AGM and they could not approach early on the ground since, they at all time, hoped that differences/disputes would be resolved amicably between them. l) It is further, stated that as per Section 164 of the Companies Act, 2013 and 167 of the Companies Act, 1956, if the annual accounts of any company are not filed with the Registrar of Companies for a continuous period of three years, it would result in serious non-compliance of the provisions of the Companies Act, 1956 and the Companies Act, 2013 which could lead to disqualification of the Directors and vacation of their office in addition to being punished with levy of penalties including imprisonment. In the circumstances, they could not conduct AGM for the subsequent years also. They further stated that the failure of the SITCO to comply with the provisions of Companies Act, 1956 would be detrimental to the interest of SITCO and its Directors. In the circumstances it is stated that the intervention of CLB is essential in the interest of justice. m) They relied upon the judgment of Hon'ble Madras High Court rendered in Nungambakkam Dhanarakshaka Saswatha Nidhi Limited Versus Registrar of Companies, 1972 42 CompCas 632 and the judgment of Hon'ble Calcutta High court in Coal Marketing Co. of India Private Limited, 1967 37 CompCas 720. However, on reading these cases, the ratio decided in these cases are hardly come to the rescue of the applicant herein except some observation made by the Hon'ble High courts.;