K. Anantha Padmanabha Swamy, Member - (1.) Under consideration is a petition filed under sections 397, 398, 247 402, and of the Companies Act, 1956 alleging various acts of oppression and mis-management in the affairs of M/s. Chandra Royal Inn Private Limited (the Company) and the petitioner has also sought the following reliefs against the Respondents. (1) Declare that acts of Respondent No. 2 as fraud, deceit and oppressive to the shareholders of the company in general and the petitioner in particulars and constitute acts of mismanagement. (2) Declare that the default committed to statutory authorities in the name of the 1st Respondent company would not in any manner bind the petitioner. (3) Declare that the respondent No. 2 is unfit to act as directors of the 1st Respondent company by reason of their conduct, disabled themselves from acting as directors of the company and they are unfit to continue as directors in the best interest of the company and to remove them from the office of the director and appoint such other person or persons as this Hon'ble Board may deem fit. (4) Direct the respondent No. 2 to compensate the company for the loss caused to the company due to their oppressive acts and mismanagement of the company's assets by assessing the quantum of damage through a committee of independent officers appointed by this Hon'ble Board. (5) Declare that the acts of the respondent 2 quay the 1st Respondent does not bind the petitioner in his capacity as director of the 1st Respondent. (6) Direct the R2 to vacate the officer of the 1st respondent and return all the books and records of the 1st Respondent Company. (7) Order and direct Respondent No. 2 & 3 to bear the cost of these proceedings and pass such further or other orders as this Hon'ble Board may deem fit and necessary in the facts and circumstances of the case to put an end to the acts of oppression and mismanagement by Respondent 2 & 3. The petition was filed before the erstwhile Company Law Board in CP No. 25/2015 and consequent upon constitution of the National Company Law Tribunal, the said petition was transferred to this Tribunal and renumbered as TCP No. 164 of 2016.
(2.) The brief averments made in the petition are that: • The Company was incorporated on 17/09/2009 in the State of Tamil Nadu as a private company limited by shares and the subscribers to the Memorandum were the 1st petitioner and one Mr. M. Govindaraj and both were holding equal shares in the Company. Subsequently, Mr. M. Govindaraj has transferred his entire shares to the R2 and after the said transfer the petitioner and the R2 were holding the shares equally as 50:50. On 13.11.2013, 1% of shares have been transferred to the R2 by the petitioner and as such on the date of filing of the petition the holding between the petitioner and the R2 is 49% and 51% respectively. • The petitioner is having landed property at Velankanni and he wanted to build a Hotel in it and therefore incorporated the 1st Respondent Company along with one Mr. M. Govindaraj. • The R2 was brought in the place of Mr. M. Govindaraj with a fond hope that he would extend all his expertise for the development of the hotel project. The R2 has advised the petitioner to obtain bank loans instead of infusing funds by the petitioner and the R2. The petitioner has accepted the proposal for availing loan from R3 with whom the R2 is having a good relationship in his other business activities. • The R3 has sanctioned two terms loans of Rs. 275 lacs and Rs. 134 lacs on 23.01.2012 and 22.11.2013 for setting up a 2 star hotel in the landed property of the petitioner at Velankanni. The petitioner at the instance of R2 has executed a lease deed in favour of the Company for 20 years with permission to construct the Hotel Project in his landed property for purpose of availing said loans from the R3. The R3 has created security charge over the leasehold rights held by the Company in addition to the collateral security given by the petitioner of his immovable properties such as land admeasuring 1 acre 51 cents and another property admeasuring 10890 sq ft together with all buildings and structures thereon. Apart from the said securities, R3 has also obtained irrevocable and unconditional personal guarantee from the petitioner and the R2. • The petitioner insisted R2 equally to provide collateral, however, the R2, with a malafide intention, convinced the petitioner that the R3 would accept the property situated at Velankanni only. The R2 had also coerced the petitioner to transfer 1% of the shares at the time of signing documents for availing 2nd term loan and the same was transferred to him. The R2 has also promised the petitioner that he would obtain "no Installment period" for one year from the R3, however, no such sanction was granted by the R3. • After availing the 2nd term loan, R2 started compelling the petitioner to register the undivided share of the landed property wherein the hotel was constructed for which the petitioner refused. When R2 tried to stall the construction activities, the petitioner was forced to infuse funds by himself for the construction of hotel. • The hotel was inaugurated on 14.04.2014. Later R2 got appointed a person one Mr. David as Operational Manager in the hotel. R2 has also got another person appointed as operational manager at the cost of Company. • It is mentioned that the cheque signing authority was held jointly by both of them, R2 has been in the habit of refusing to sign cheques even for routine payments. • When the Company failed to pay the installments to R3, a notice was issued by R3 to the Company dated 20.01.2015 demanding to pay the entire loan amount of Rs. 4,25,39,736/- together with interest. There upon the petitioner assured the payment of loan amount to R3 in due course. • The R2 in his personal capacity addressed a letter dated 12.03.2015 to the R3 wherein he has made a false statement that the petitioner had offered to sell his properties. On knowing this the petitioner approached the R3 and clarified the issues. Thereafter R2 started pressurising the petitioner for transfer of landed property to him or to pay Rs. 5 crores to resolve the entire issues. • It is mentioned that R2 has invested only less than Rs. 2 crores and he is demanding Rs. 5 crores or transfer all the immovable property worth more than Rs. 5 crores. It would show the malafide intention of the R2. • Further the R2 has not cooperated and avoided signing forms to be filed with the Commercial Tax authorities knowing fully well that non compliance would lead to deregistration and closure of the Hotel. Learned Counsel for the petitioner while reiterating the above averments, has submitted that the R2 is not cooperating in the affairs of the Company and his intention is only to grab the properties of the petitioner and the Hotel.
(3.) The Rl and R2 have filed counter statement. The brief averments of the counter are that: • The R2 is a pioneering industrialist having global operation in the engineering sector whereas the petitioner is a small business man at Velankanni running a restaurant under the name and style of "Chandra Restaurant". The petitioner had envisaged a plan to construct a hotel in his landed property and incorporate a Company. The petitioner being a small business man is not an Income Tax assesse and do not have any expertise to construct a star rating hotel. Therefore the petitioner has approached the R2 through Mr. M. Govindaraj and sought help to raise funds and to manage and run the Company. • The petitioner fully aware that funds to the tune of Rs. 7 crores would be required for the entire project, intentionally for the purposes of luring and enticing the R2 into the project, has misrepresented and undervalued the same. • The R2 has invested to the tune of Rs. 2,35,01,730/- in the Company from the year 2011. The R2 not only invested his personal money but also arranged funds through private financiers and the same is being repaid by the R2 only. The petitioner has not invested any money in the Company except offering his land. The funds to the tune of Rs. 6.45 crore which includes the loan availed from the R3 was sourced by the R2. • It is mentioned that the petitioner is resident of Velankanni where the hotel is situated, whereas the R2 is a resident of Chennai, therefore, the day to day affairs of the Company are being looked after by the petitioner and R2 was only supervising the affairs of the Company from Chennai. • It was the petitioner who has undervalued the cost of the Company and therefore the Company has to avail the 2nd term loan from the R3. Besides the loans, the R2 has invested more than Rs. 2 crores in the Company and therefore the share holding of the petitioner was proportionately increased and the submission that the petitioner was coerced to transfer 1% of shares in the company to the R2 is far from truth. • The petitioner has approached this Tribunal with unclean hands. The petitioner who has executed all the documents now cannot claim that he was never interested in securing loans through R2. • The petitioner has not applied his mind properly in so far as the understanding of the loan transaction is concerned since the R3 was willing to grant loan only for the purpose of hotel business of the Company and hence, primarily insisted on providing security for the loan to the Company. Since, the hotel was constructed on the property of the petitioner, it was given as security for the loan availed from the R3 and more over it was the pet project of the petitioner and R2 was roped in for the purpose of infusing funds as the petitioner had no source of money to complete the project. • The R2 has never compelled to register any property in his name or transfer of the business. The R2 has only assisted the petitioner for the betterment of the Company and the petitioner is continuously making false statements. • The appointments of staff in the Company were done by both the petitioner and R2. The petitioner did not want any person to report to the R2. Subsequently, one Mr. Shangy Rajkumar was appointed and he has asked not to report to the business operations to R2, which proves that the business is being conducting individually by the petitioner. . • Even after filing this petition, R2 was signing the cheques till the month of April 2015. The petitioner was unable to pay the installments to the R3 and the R2 was only paying the installments. The petitioner wanted the R2 to continue to pay the installments of the loan availed from the R3 and when the R2 could not support such payments after a period of time, the petitioner has agitated and filed the present petition. • The petitioner while managing the affairs of the hotel collected huge sums of money in cash from the guests and not shown in the accounts the Company. Further various taxes were not paid to the concerned authorities. The petitioner has drawn huge amounts from the accounts of Rl for his personal use. The R2 neither used nor enjoyed any income of the Company. By submitting the above, the learned Counsel for Rl and R2 prayed for dismissal of the petition.;