Rajeswara Rao Vittanala, Member - (1.) The present company petition bearing CP No. CP/241/HDB/2017 is filed by C. Chandrasekhar and another U/s. 241(1)(a)(b), 242, 244 of the Companies Act, 2013, against Madukar Koganti and others by seeking the following reliefs: i. To remove Respondents 1 & 2 from the post of Directors of the Respondent No. 12 Company for their detrimental, prejudicial, oppressive, mismanagement and misappropriation acts done against the members, the Respondent No. 12 Company, investors and other directors on the board of the Respondent No. 12 Company. ii. To set aside the sale deed dated 26.09.2016 registered as Document No. 8926 of 2016 with the Sub-Registrar Shadnagar executed by the Respondent No. 1 representing the Respondent No. 12 Company in his favour transferring the schedule-A mentioned property belonging to the Respondent No. 12 Company. iii. To declare the board meeting held on 12.09.2016 as illegal and consequently declare the appointments of Respondents 3 to 10 made by Respondents 1 & 2 as Additional Directors on the board of the Respondent No. 12 Company as illegal, void ab-initio and set aside the same. iv. To declare all the actions done by the Respondents 1 & 2 from the issuance of undated notice, issued for conducting the board meeting on 12.09.2016 till date as illegal, void and not binding either on the Petitioners or other Directors who are on board of Respondent No. 12 Company prior to 12.09.2016. v. To direct the Respondents 1 & 10 to pay the costs of this petition and other proceedings to the Petitioners. vi. Any other order which in the opinion of the Hon'ble Tribunal is just and equitable and deemed fit and proper in the circumstances of the matter on such conditions as may be deemed fit and proper.
(2.) The brief facts of the case, as narrated in the Company petition are as follows: 1) M/s. HMR Infra Projects Private Limited, Respondent No. 12 herein, (which is hereinafter referred to as Company) is a private limited company, incorporated under the provisions of the Companies Act, 1956 with the Registrar of Companies, Andhra Pradesh at Hyderabad with company number U45400AP2007PTC053453 of 2007-2008 by duly obtaining the Certificate of Incorporation dated 04.04.2007. Its authorized share capital is Rs. 25, 00, 000/- divided into 2,50,000 equity shares of Rs. 10/- each. Its registered office is situated at Flat No. 401, Gayatri Enclave, Road No. 7, Sarojini Naidu Nagar, Madhapur, Hyderabad - 500 081. 2) The Petitioners 1 & 2 along with the Respondent No. 1 are the shareholders of the Company by 12 holding 3,000, 3,000 and 4,000 equity shares of Rs. 10/- each respectively, subscribed at the time of the incorporation of the company. The Petitioners 1 & 2 submit that they have the requisite shareholding to maintain this Petition as required U/s. 244 of the Companies Act, 2013. 3) The Respondent No. 1 & 2 are father and son respectively and Directors of the Company. However, Respondent No. 2 is not a shareholder of the Company. The Respondent Nos. 3 to 10 are illegally appointed additional directors on the board of the Respondent No. 12 Company in a alleged meeting of board of directors allegedly said to have been held on 12.09.2016 by the Respondents 1 & 2 herein. 4) The main objects of the Company in brief are to carry out all types of constructions, execution, development, maintenance etc in India elsewhere such as residential and commercial complexes, row houses, independent houses etc. The Company had constructed various prestigious projects like "HMR Bommarillu" near Miyapur Cross Roads, "HMR Delight" at ECIL X Roads, Nagaram, "HMR Classic Ventures" at Women's Co-operative Society, Venkatagiri, Jubilee Hills and "HMR Pride" at Madinaguda. 5) It is stated that constructed flats were sold by the Company at a very competitive and affordable prices to enable many middle class families to avail the opportunity to buy without any hesitation. The entire execution of the projects was done mainly by the Petitioners 1 & 2 herein by playing major roles, like looking after the day to day operations till the final handing over of the entire project, apart from playing important roles in acquiring the lands, designing the projects, getting all the required approvals, statutory permissions, registrations, dealing with the contractors, vendors, marketing the venture. Further, the Petitioner No. 1 was instrumental in taking care of operating the bank account and mobilization of required funds, overseeing the projects and its completion. The Respondent No. 12 Company had earned good reputation and good will in the market due to the hardwork of the Petitioners 1 & 2 herein. 6) The Respondent No. 1 herein, even though was one of the Promoter/Director/Shareholder of the Company had been playing very minimal role in either developing the business or supervising the projects or in the overall development of the company. The Respondent No. 1 except helping the Company in procuring the lands at Kotthur, was more of a sleeping partner in the Company in respect of the other projects are concerned. The respondent No. 1 is a part of all the proceedings of the Company and he is also signatory to the annual statements filed by the Company every year. 7) It is stated that in terms of Clause 19(a) of the Articles of Association, the Company should not have less than 2 Directors and should not have more than 12 Directors including alternate, additional, technical and other kinds of Directors. In terms of Clause 20, the Board has the power at any time and from time to time to appoint any other person or persons as additional directors provided the number of Directors and Additional Directors together should not exceed the maximum strength as prescribed under clause 19 of the Memorandum. In terms of the said clause the Company vide its Board meetings dated 28.12.2011, 05.01.2012 and 22.03.2013 had appointed Sri K. Vinay Kumar, Smt. G. Suguna and Sri G. Veerender Das by duly following the procedure prescribed. The total number of Directors on the Board of the Company was six after the appointment of the three new regular Directors. Accordingly, Form No, 32 are filed. 8) It is stated that Respondent No. 2 herein is none other than the son of the 1st Respondent herein, while Smt. G. Suguna is the sister of Petitioner No. 1 and Sri G. Veerender Das is a third party. The new Directors were appointed on Board by the existing Directors to safeguard the amounts invested/extended by them to the Company. 9) It is stated that the majority of Directors were along with the Petitioners 1 & 2 and their group. However, it is alleged that due procedure under law and in utter violation of the provisions of the Companies Act, 2013, the Respondents 1 & 2, with a mala fide intention to illegally take over the entire Board and the Company, had appointed the Respondents 3 to 10 as Additional Directors on the Board of the Company, in an alleged meeting said to have been held on 12.09.2016. The Respondent No. 1 had also uploaded Form No. DIR-12 with the Registrar of Companies in respect of the appointment of the Respondents 3 to 10 as Additional Directors. The total number of Directors on Board, after this alleged illegal appointment is 14, which is in utter violation of clause 19 of the Memorandum. 10) It is stated that Respondent No. 2 had issued notice for Board meeting to be held on 12.09.2016 without a date and the agenda of the meeting does not even make a whisper of appointing Additional Directors on the Board of the Company. There are absolutely no details of the persons alleged to be appointed as Additional Directors mentioned as required under section 161 of the Companies Act, 2013. Again, Respondent No. 2 had issued another notice of Board meeting dated 12.09.2016 by stating that meeting of Board of Directors would be held on 23.09.2016 at 10.30 am at 3rd floor at the Plaza hotel, Balyogi Paryatak Bhavan, Green lands X Road, Near CM Camp Office, Begumpet, Hyderabad -16. There is no mention of either the appointment or the details of the meeting said to have been held on 12.09.2016 pursuant to the earlier undated notice of Board meeting. 11) The Respondent No. 2 had again addressed a letter dated 15.09.2016 to all the Directors, without mentioning the names and addresses of the Directors and without even informing that there were 8 Additional Directors appointed on 12.09.2016, stated that even though the notice for Board meeting dated 12.09.2016 was issued several Directors did not attend the Board meeting and further alleging that the Company had not complied with the various provisions of the Companies Act, 2013, demanded the details of the various projects which the Respondent No. 12 Company was executing and other items listed out in the said letter. 12) The Petitioners submit that the manner in which the meetings of the Board has to be conducted is spelt out in sections 173 to 175 of the Companies Act, 2013. Further, section 161 categorically speaks of the procedure to be followed in appointing Additional Director and Nominee Director. The Respondents 1 & 2 had totally violated these provisions in appointing the Respondents 3 to 10 as Additional Directors on the board of the Respondent No. 12 Company. The Petitioners submit that the 2nd Respondent who is not even a shareholder of the Respondent No. 12 Company cannot issue any requisition to the Respondent No. 12 Company calling for an Extraordinary General Body meeting. Therefore the notice issued by him on 12.09.2016 and 15.09.2016 are in utter violation of the provisions of the Companies Act, 2013. 13) It is stated that the Respondents 1 and 2 with a mala fide intention to take over the management of the Company had fabricated the appointments of the Respondent 3 to 10 as Additional Directors without there being any notice, agenda or meeting in this regard and had uploaded these illegal appointments with the Registrar of Companies. Hence, the appointment of the Respondents 3 to 10 as Additional Directors on the board of the Company on 12.09.2016 is deemed to be illegal and ab-initio void. 14) It is stated that notices for the alleged Board meeting to be conducted on 12.09.2016 had returned to the Company's address, even the one which were addressed to Respondents 1 and 2 themselves. In the absence of service on Respondents 1 and 2 itself, they could not have conducted any meeting. In any event, as there were only 3 shareholders in the Company and without the other 2 shareholders being present in the meeting, a serious decision of appointing Additional Directors cannot be transacted or approved, much less without a proper notice and agenda, which would be detrimental to the interest of the other shareholders. Hence the appointment of the Respondents 3 to 10 by the Respondents 1 and 2 is absolutely illegal, arbitrary and in utter violation of the provisions of the Companies Act, 2013 and the Memorandum of Association and Articles of Association of the Company. 15) It is stated that challenging the illegal action and appointments made by the Respondents 1 & 2 herein, the Company had filed O.S. No. 1525 of 2016 before the Hon'ble Principal Senior Civil Judge, Ranga Reddy District at L.B. Nagar and the Learned Judge was pleased to grant interim injunction in I.A. No. 981 of 2016 on 29.09.2016. Thereafter the Learned Judge was pleased to dismiss the I.A. on the ground of jurisdiction. 16) It is stated that entire action of the Respondents 1 & 2 in appointing the Respondents 3 to 10 is wholly illegal. There are only two Directors who were present on 12.09.2016 as per the copy of the resolution filed by the Respondents herein in the said suit and being a chairman the Respondent No. 1 cannot propose and vote in favour of the proposal. A chairman always has a deciding vote in the event of tie or a casting vote to decide the resolution and does not have the right to propose and vote. 17) It is further stated that the Respondent No. 2 had issued yet another notice dated 26.10.2016 U/s. 173(3) of the Companies Act, 2013 to all the Directors informing that a board meeting would be held on 03.11.2016 at 10.00 am, once again at the hotel Plaza. The Petitioners 1 & 2 and other Directors vide letter dated 31.10.2016, while taking serious objections to the manner in which the notices were addressed, the meetings were conducted, informed all the directors that the meeting sought to be held on 03.11.2016 has to be cancelled and the fresh meeting of the Directors has to be held by following due procedure under law as stated in the said letter. 18) It is stated that the Respondents 1 & 2 had sent a reply dated 08.11.2016 to the letter dated 31.10.2016 using the company letter head with different email id and different layout, stating that the letter dated 31.10.2016 was received by them at 12.30 pm much after the board meeting was concluded and that for the first time had raised false allegations against the other four directors of the Company and had further stated that the business of the Company is being conducted as per law. The Petitioners further submit that in furtherance of the illegal acts of taking over the Respondent No. 12 Company, the Respondents 1 & 2 had initially made a representation to the Respondent No. 11 requesting to change the authorized signatory for operation of the bank account of the Respondent No. 12 Company on 15.10.2016. Further, even before the banker could take a decision on the representation so made, they had submitted another representation to the Respondent No. 11 Banker requesting the bank to freeze the account of the Respondent No. 12 Company. Upon coming to know about the same, the Petitioners 1 & 2 herein along with other Directors had submitted a detailed letter dated 18.10.2016 requesting the Respondent No. 11 Bank not to act upon the letters submitted by the Respondents 1 & 2 herein and allow them to continue with the earlier arrangement. The petitioners through their counsel had also got issued a detailed notice to the Respondent No. 11 herein (Chief Manager, Axis Bank) on 31.10.2016 explaining the complete facts and circumstances and requested the Respondent No. 11 not to allow any further operations in the account of the Respondent No. 12 Company till further orders are received from the Hon'ble Courts. 19) The Petitioners further submit that the Respondent No. 1 herein had also without any authority, power or resolution and without informing the other shareholders, directors had illegally and high handed executed a registered sale deed on 26.09.2016 representing the Respondent No. 12 Company as Director and transferred the land belonging to the Company to his personal name. The said act is highly illegal, arbitrary and an act of cheating apart from serious act of misappropriation, mismanagement of the Company's property. 20) It is stated that apart from purchasing the schedule mentioned land in favour of the Respondent No. 12 Company, individually the directors have also purchased various extents of lands surrounding this land, with an intention to develop the same as one lot and promote the same through the Company for the benefit of all concerned. The Respondent No. 1 in order to make a wrongful loss to the Company, other directors and shareholder and also to make a wrongful gain to himself, had got this fraudulent transfer done without the consent and approval of the other Persons/Directors/Shareholders of the Company. 21) The Petitioners submit that taking advantage of the dismissal of the I.A. by the Civil Court on the ground of jurisdiction, the Respondents 1 & 2 are continuing to mismanage the Respondent No. 12 Company, fabricate resolutions, and other documents to suit their illegal, dishonest motive and intention to make unjust enrichment at the cost of the Respondent No. 12 Company and other shareholders. The acts of the Respondents herein are not only oppressive but is also a total mismanagement of the affairs of the Company, which is detrimental to the interest of the shareholders, customers, the business of the Respondent No. 12 Company and the future prospects of the Company. Respondents 1 & 2 as Additional Directors on the board of the Respondent No. 12 Company as illegal, void ab-initio and set aside the same.
(3.) The Respondent No. 1 has filed counter dated 21st April, 2017 by opposing the instant Company petition. The following are his main contentions: a) The Respondent No. 3 to 10 have been inducted on Board duly following the procedure as contemplated under the provisions of the new companies act. However, respondents 9 & 10 have tendered their resignations as Directors of the Company w.e.f. 3.11.2016 as they could not continue as such, vide then-separate letters dated 3.11.2016. b) It is alleged that the first petitioner have sold the flats without accounting for to the company. i. HMR Pride Project at Madinaguda ii. All the above flats were sold by 1st petitioner and the amounts totaling to Rs. 1,15,00,000/- (Rupees One Crore Fifteen Lakhs Only) have been misappropriated. iii. Similarly, the 1st petitioner and another Director Veerander Das have sold the following flats of HMR Classic at Venkatagiri, Jubilee Hills, Hyderabad. All the above flats were sold by 1st petitioner and another Director Veerander Das and the amounts totalling to Rs. 3,50,00,000/- (Rupees Three Crore Fifty Lakhs Only) have been misappropriated. The said amount has not been accounted for by the 1st petitioner. So they have jointly misappropriated an amount of about Rs. 4,65,00,000/- (Rupees Four Crores Sixty Five Lakhs Only. c) It is stated that the Company was incorporated in the year 2007, under the then prevailing Companies act 1956. Clauses of the Articles of Association including 19(a) have been drafted and submitted in accordance with the provisions of the then provisions of The Companies Act 1956. With the entire companies act being overhauled by virtue of the Companies Act 2013 and Section 149 of the new act mandates a minimum number of Directors at 2 and maximum number of Directors at 15, in case of a private limited company. So the impugned appointment of Directors is within purview of Companies Act, 2013 and it is strictly in accordance with law. Moreover, Section 6 of the new act overrides the memorandum and articles of association on commencement of the new act. So the allegation made by the petitioners in this regard is not tenable. d) It is stated that the Company is due an amount of about Rs. 60,77,729/- to the 1st respondent and it is not being paid since all funds of the Company under the custody of the other Directors, who were not co-operating. So, the Company had no other option than to set off the unsecured loan together for the land admeasuring 6 Acres 8.5 Guntas worth about Rs. 52,00,000/-. There is nothing wrong in the said acts of the respondent as the other Directors were in the process of creating some third party rights over the land and knock off the same without settling the account of the 1st respondent. And this land was purchased in the name of the Company by the 1st respondent as suggested by the other two Directors. However, the other two Directors thereafter had purchased the lands surrounding the subject land on their own names instead of the Company's name and thus cheated the 1st respondent on that count also. e) It is asserted that the second Respondent had intimated the convening of Board meeting scheduled to be held on 12th September, 2016 by duly intimating the venue and time of meeting. And the notice has been received by the petitioners as well as other Directors. However, they intentionally absent for the fear of coming to light of their siphoning of funds of the Company. It is stated that there is an agenda mentioned in the notice in question, as item 3 of particulars of notice by stating to critically review operations and management of the Company. f) It is alleged that the petitioner suppressed the information regarding filing of OS No. 15 of 2017 on the file of District Judge; Mahabubnagar and injunction orders dated 17.03.17, in the present Company Petition and obtained similar interim orders. g) It is also stated that the respondent No. 1 has filed a criminal complaint against the petitioners and others for siphoning of funds of the Company, before Madhapur PS vide FIR (Cr. No. 605 of 2016 dated 18.10.16 and a charge sheet was also filed on 27.03.17 before the Competent Court, after investigation of the case by the Police.;