Rajeswara Rao Vittanala, Member - (1.) The present Company Petition bearing C.P. No. 10/2014 (TP No. 107/HDB/2016) has been filed by Ultra Seed Tech (India) Private Limited against Victory Marvel Seeds India Private Limited and 15 others, before the then Company Law Board, Chennai, under Sections 397/398 read with Section 402, 403 and Schedule XI and other applicable Provisions of the Companies Act, 1956 by seeking he following reliefs:- a) Lift the corporate veil of the Respondent No. 1, 4 and 9 and declare that all are same and apply the principles of Quasi Partnership to remedy the oppression and mismanagement caused by the Respondents 2, 3, 4, 5, 6, 10 and 12 and direct the Respondents to amend the Articles of Association accordingly. b) Declare that all the Board Meetings and General Body Meetings held after 30-09-2013 are illegal and void and consequently all Resolutions, decisions taken at those Meetings be declared as null and void. Also declare that 9,72,401 Shares allotted to the Respondent No. 4 on 10-01-2013 and 30,00,000 shares allotted on 17-01-2014 as illegal, improper and accordingly set aside those allotments. c) Amend the Articles of Association of the Respondent No. 1 to protect the fabric of quasi partnership concept by incorporating therein that decision on the following matters shall not be taken except with the affirmative vote of the nominee of the Petitioner: i) Increase/alteration of share capital including allotment of shares. ii) Approval of accounts. iii) Appointment/removal of Functional Head and fixing their remuneration. iv) Review of the performance of the Functional heads and re-fixing their remuneration. v) Terms and conditions of (a) supply of foundational seed and (b) provision of corn cob drying and seed conditioning services. vi) Operation of the Bank accounts. vii) Amendment of Articles and Memorandum of Association. viii) Equal representation on the Board of Directors, to both the parties to the MOU referred to herein earlier. ix) Entering into contracts with related parties. d) Direct Respondents not to engage in any activities which are likely to compete with or adversely affect the business interests of the Respondent No. 1. e) Declare that the acts of the Respondents No. 2, 3, 4, 5, 6, 9, 10, 12, 14, 15 & 16 are prejudicial to the interests of the Respondent No. 1 and are oppressive against the Petitioner. f) Declare that the Respondents No. 2 and 3 have failed in their fiduciary duties towards the Respondent No. 1. g) Declare that Respondents No. 2, 3, 5, 6, 10 & 12 cheated the Petitioner and the Respondent No. 1 by siphoning off their funds and assets through illegal and fraudulent methods. h) Appoint an independent auditor to determine the quantum of funds siphoned by the Respondents and direct the Respondents to reimburse to the Respondent No. 1 the amount siphoned by them together with interest and damages or in the alternative immediately invoke the lien on the shares held by them and forfeit the shares held by the respondents. i) Direct Respondents No. 2 & 3 not to interfere in the affairs of the Respondent No. 1; declare that they are oppressors and they mismanaged the affairs of the Respondent No. 1; and permanently injunct them from interfering in the day to day affairs and management of the Respondent No. 1 and pass appropriate orders to punish them. j) Penalize the Respondents for fabricating the books of accounts and making false entries. k) Prosecute the Respondents No. 2, 3, 5, 6, 10 & 12 for the fraud committed by them on the petitioner and the Respondent No. 1. l) Declare that the Respondents are liable for not keeping proper accounts and prosecute them. m) Prosecute the Respondents No. 2, 3, 5, 6, 10 & 12 for falsification of Books, inducing the Petitioner to give credit by false preferences and fraud, for not keeping proper Books of Account, fraudulent conduct of business, for misappropriation of money and property of the Respondent No. 1, misfeasance and breach of trust in relation to the Respondent No. 1 under schedule-XI of the Companies Act 1956. n) Set aside the termination of Seed Processing Agreement between Respondent No. 1 and the Petitioner. o) Direct the Respondent No. 1 not to sell the property without the consent of the petitioner or its nominee. p) Direct action against the Respondents for acts of misfeasance and siphoning of the funds of the Respondent No. 1. q) Appoint an independent Merchant Banker for the purpose of deciding the enterprise valuation taking into consideration the misdeeds perpetrated by the Respondents and for arranging the open market sale of the enterprise. r) Any other consequential, incidental or other orders as this Hon'ble Board may deem fit.
(2.) The Company Petition was transferred to this Bench of NCLT in the month of June, 2016 as the case relates to present State of Telangana. Hence, it was listed on various dates before this Tribunal viz., 01.08.2016, 23.08.2016, 20.09.2016, 19.10.2016, 17.11.2016, 29.12.2016, 01.02.2017, 23.02.2016, 16.03.2007 and 17.04.2017. It was adjourned on the above dates at the instance of one party or the other, due to various reasons including possibility of settlement of issue in question. Mr. Kamendra Narayan Mishra (Second Respondents herein) is personally present on 16.03.2017 and 17.04.2017 to apprise the Bench about his efforts to resolve the issue. Ultimately, the parties agreed to dispose of case with directions instead of keep it pending.
(3.) Brief of facts of case, which are relevant to the present case, are as follows:- i) M/s. Victory Marvel Seeds Private Limited (hereinafter referred to as Respondents No. 1 Company) was incorporated on 24th December, 2008 (CIN No. UD1403AP2008PTC062336) by Mr. Krishan Kumar and Mr. Ashok Kumar with an Authorised Share Capital of Rs. 5,00,000/- divided into 50,000 Equity Shares of Rs. 10/- each. The Promoters subscribed to 10,000 Equity Shares of Rs. 10/- each. The Company and its promoters entered into an Agreement on 11th December 2009, wherein it was agreed that 51% of the issued, subscribed and paid up capital of Rs. 1,00,000/- divided into 10,000 equity shares of Rs. 10/- each would be held by the Profarm Seed India Private Limited and 49% by the original subscribers. ii) Chennai Seeds & Oil Private Limited was promoted by Mr. Parvathaneni Murali Krishna and Ms. Khorshed Shapoor Chennai and their family members. The Petitioner Company was incorporated on 18th day of February, 1988 under the Companies Act 1956 (No. 1 of 1956) and the name of the Company was changed to Ultra-Seedtech (India) Private Limited. The Fresh Certificate of Incorporation consequent upon change of Name was issued by the Registrar of Companies, Andhra Pradesh on 21st day of December 2010. iii) Mr. P. Murali Krishna is a Gold Medalist (in May 1974 CA Final) and a Fellow Member of the Institute of Chartered Accountants of India. He is also a Fellow Member of the Institute of Company Secretaries of India, Worked for HMM Limited (presently GSK), a Multinational from 1975 to 1982-joined as Management Accountant and worked in various capacities as a part of the Management Team including the Lead role for Diary Development around Rajahmundry, Andhra Pradesh. Started practicing as Chartered Accountant in Hyderabad in 1982, agriculture being his passion promoted the Petitioner Company in the year 1988, enrolled as an Advocate on the Roll of the Bar Council of the State of Andhra Pradesh in the year 1995 by surrendering the Certificate of Practice as Chartered Accountant. The Petitioner is a pioneer in establishment of Seed Conditioning Plants and introduced the innovative technology of corn cob drying through Producer Gas. The Petitioner has been working on post-harvesting technologies and established Corn Cob Drying Units in multiple locations in the maize hybrid seed production areas viz., West Godavari and Khammam Districts of Andhra Pradesh. The Petitioner Company is promoted by said Mr. P. Murali Krishna, the professional Chartered Accountant presently practicing as an Advocate, who is fascinated on Agriculture. iv) It is stated that the Petitioner Company has set up seed conditioning plants and corn cob drying plants and as over 25 years of experience in post-harvesting seed technically. v) Mr. Kamendra Narayan Mishra (Respondent No. 2 herein) as a plant breeder trained by pioneer now part of Dupont having experience in developing the foundation seed required. The production of Hybrid seeds, he promoted Respondent No. 4 for Respondents No. 1 Company. vi) Despite Respondent No. 4 becoming major shareholder in Respondent No. 1 Company, it is suffered huge losses. The petitioner company perceived synergy in partnering over Respondent No. 4, which has the strength of supplying the foundation still and signed MOU dated 22nd April 2007. The perusal to this MOU, LLP (Respondent No. 7) was formed for production of Hybrid seeds required by Respondent No. 1 and hived off, its production operates to Respondent No. 7. Respondent No. 8 was formed for research in crops other than Maize and rice in which Respondent No. 4 is engaged and the Petitioner Company has infused the required funds for survival as well as stabilization of Respondent No. 1. The essence of its MOU is that Petitioner and Respondent No. 4 will contribute 49:51 both by way of equity and debts with clear distinction between supply/service credit and the cash contribution. However the contrary to the spirit of the understanding of the said MOU, Respondent No. 2 by misusing his position did not comply with MOU. When the above discrepancies for pointed out by the Petitioner, the Respondent No. 2 abruptly decided to terminate the understanding between the Petitioner No. 1 and respondent No. 4. However the respondent No. 2 and 4 could not repay the amounts advanced by Petitioner Company to Respondent No. 1 for its revival as committed. vii) However the petitioner company to support Respondent No. 1 Company both by injecting cash and extending credits for the survival of Respondent No. 1. Company, which again resulted into another MOU Dated 5th November 2012. During this period, the Respondent No. 2 instead of supporting Respondent No. 1 Company went to his Country (USA) and spent most of the time there. So the Petitioner Company has struggled a lot during this period for revival to Respondent No. 1 Company. On his return from USA, Respondent No. 2 suggested to improve the contents of said MOU dated 5th November 2012 and accordingly respondent No. 8 was formed and memorandum of compromise and restructuring agreement of victory Marvel seeds was signed on 10th December 2012. viii) In pursuance to the above MOU share capital was increased to Rs. 2 Crores and the Petitioner Company infused further funds of Rs. 98,00,000/- towards 49% of the share capital in R-1 Company. It has further infused an amount of Rs. 55,03,000/- towards interest bearing loans to satisfy the working capital requirement of Respondent No. 1 as its 49% obligation towards interest bearing loans. The facts on record and actions of Petitioner Company and the Respondent No. 4 has established in unequivocal terms the true nature of relation between Petitioner 1 and Respondent No. 4 which is of Quasi-Partnership. After meeting all its obligations as per the said MOU, Petitioner's nominee was inducted as Additional Director of Respondent No. 1 Company to protect its interest. ix) With the efforts of Petitioner Company, Respondent No. 1 Company has become self sufficient by March 2013. It is alleged that Respondent No. 2 started revealing his true colours by forming R-9 Company (M/s. Profarm Plant Sciences Private limited). Despite the clear understanding that bank accounts would be operated jointly with Petitioner No. 1, Respondent No. 2 has unilaterally instructed the other respondents not to implement this decision and consequently declared on 8th June 2013 that this decision would not be implemented. It is further alleged that Board Meetings were conducted at the Whims and fancies of R2 and deliberations of the Board policy recorded by the R-2. It is further alleged that abusive and aggressive attitude as exhibited by the R-2 at the management Committee Meeting held on 8th June 2013. Respondent No. 2 virtually let loose the Functional Heads and made them hostile by showing undue favours to them at the cost of the Respondent No. 1 Company and the Petitioner. x) The Respondent No. 2 and Respondents No. 3 have imposed their decision of parting ways at the Board Meeting held on 9th August 2013 by adopting illegal and improper methods after investing substantial amounts and the resources for revival of Company. The Petitioner Company expressed its willingness to exit from Respondent No. 1 Company, on the condition of repayment of all dues along with the return of equity based on enterprise valuation of Respondent No. 1 Company by an independent reputed professional. Even to this proposal the Respondent No. 2 indulged in various oppressive and mismanagement activities like removing the petitioner' nominee as director without due legal process, conducting illegal board meetings, changing the auditor and replacing with another without due process approving the manipulated balance sheet and conducting AGM without due process. The Petitioner claimed that it has invested Rs. 7 Crores, apart from its efforts and time in Respondent No. 1 Company for its revival but the Company was kept out of the operations and management of Respondent No. 1 Company by using states of Respondent No. 2 and his associate in Respondent No. 1. xi) It is contended that Respondent No. 2 has also resorted to increase authorised capital of Respondent No. 1 Company and allowed substantial shares to himself during January 2014 by reducing the shareholding of Petitioner Company from 49% to less than 25%. It is contended that these actions are illegal and improper and they are against the principles of Quasi-partnership. In addition to this, the Respondent No. 2 & 3 with the connivance of other Respondents have been siphoning off the funds of Respondent No. 1 Company either directly or indirectly. xii) It is contended that Respondent No. 2 & 3 are citizens of USA having control over the affairs of Respondent No. 1 Company, and they have no assets in India. The value of partnership is irretrievably destroyed by the evil designs of the Respondents No. 2, 3, 5, 6, 10 & 12. It is further alleged that Respondents have resorted to various illegal, improper and deceitful action including allotment of shares of Rs. 3.00 crores to Respondent No. 4 without a single Rupees coming into the kitty of the Respondent No. 1 Company. The above circumstances, forced the petitioner to file the present company petition by seeking relies as mentioned above.;