M.K. Shrawat, Member - (1.) These two Petitions, now under consideration, are in the nature of cross-petitions. CP. 36/2014 was filed on 19th May, 2014 before the CLB and CP. 01/2016 was filed on 8th June, 2016 before NCLT. The respective Ld. Representatives have stated that CP. 36/2014 is the main Petition, hence proposed to argue first this CP. BRIEF FACTS & BACKGROUND:-
(2.) The grievance of the Petitioner as emerging from the Petition is summarised below to keep brevity in mind. 2.1 The Respondent No. 1 Company viz. M/s. UBC Engineers Pvt. Ltd. was incorporated on 20th April, 2005, having its Registered Office at Belapur, Navi Mumbai. The main business is to undertake civil construction contracts of Military Engineering Services. The Company is registered as Government Contractor. The authorized shareholding pattern of the Company is stated to be as under:- 2.2 However, the issued, subscribed and paid up shareholding was as under:- 2.3 The Petitioner was given the responsibility as 'Director In-charge - MES Projects". The Petitioner's role and responsibility was to give directions to the Project Managers and to resolve the technical issues. According to the Petitioner, he happened to be the key person to look after the projects, to obtain day-to-day progress report of the projects and also to meet higher officials of the government departments. The other Directors were involved in administration work of the Company. Since the Petitioner was not assigned administrative responsibility, therefore, he has not interfered with the day-to-day affairs of the Company. He had implicit faith in Respondent No. 2 Mr. K.N. Pillai. The allegation is that due to the conduct of R-2 and certain developments the faith was dented. R-2 has consolidated all the powers while the Petitioner was away looking after the projects at various far off sites. R-2 had laid foundation to take over the Company in connivance with his son. The allegation is that with the connivance of Respondent Nos. 3 to 5 the assets of the Company have also been siphoned. The Petitioner was deliberately kept away from the Head Office as well as the management of the Company. However, whenever in town the Petitioner had attended the office and side-by-side also conducted the meetings with Colaba MES Project Manager. The meeting of the Board of Directors was not called regularly. According to the Petitioner, the last Board meeting was conducted on 11th January, 2007. 2.4 The Petitioner has inspected some of the records and shocked to notice that one of the premises was transferred in the name of the Respondent No. 2 without any Board Resolution. The Petitioner was kept in dark and mischievously obtained his signature to transfer the office property on the ground of offering the property for the purpose of security to MES. Later on, the office premises was substituted with a plot of land owned by the Company situated at Dighoda. Once the office premises was released by MES authorities, the Respondent No. 2 has later on mischievously transferred the said premises in his name and the Petitioner was kept in dark. 2.5 The Respondent No. 2 started collecting the rent of the said premises from the Company. The steps were taken without Board Resolution. 2.6 Next allegation is that Four partnership firms were floated by R-2, all having registered office at the address of the Company. The services of the staff were utilized for personal gain and for the work of the firms causing huge loss to R1 Company. The expenses were booked in the accounts of R1 Company. There is an allegation that a huge amount of Rs. 1.50 crore was siphoned from the Company by R2, towards material and labour for the construction of bungalow owned by Respondent No. 2. Respondent No. 2 has constructed his bungalow at Kharghar, Navi Mumbai by misappropriating the funds of the Company. The Petitioner has placed reliance on some of the invoices to demonstrate that although the building material was supplied for the construction of the said bungalow but accounted for in the accounts of the R1 Company. 2.7 The next allegation is that more than Rs. 15 lakhs were siphoned off and used for the alteration work of another bungalow situated in Kochi, owned by the wife of R2. The construction material and the manpower of the R-1 was mis-utilized. 2.8 Further, an allegation is that a loan of 24,10,000/- was given to M/s. Unibuild Engineers, a partnership firm of R2 along with other Respondents i.e. R3 to R5. On the other hand, the Company had taken loans from banks and financial institutions on high rate of interest. The loan was given by R1 to interested Directors without informing the Petitioner. 2.9 An attempt was made to fraudulently replace the name of the Petitioner, therefore, Form No. 20B was submitted to the RoC and in place of the Petitioner the name of the R4 was shown as holder of 9,600 shares of R1 Company. When it was detected the Respondents have rectified the said fault. 2.10 When the Petitioner has objected the alleged mala fide activities the benefits such as salary of Rs. 70,000/- per month and travel allowance, etc. were stopped. The benefits were arbitrarily withdrawn without any notice in advance. 2.11 The Petitioner has received Notice of EOGM to be held on 29th April, 2014 with the Agenda to remove the Petitioner from the Board of Directors. The Notices or letters were deliberately despatched belatedly or backdated so that the Petitioner could not have time to reply or react. Thereupon, the salary of the driver of the Petitioner was also stopped. The Petitioner has narrated few instances that a letter dated 1st April, 2014 was despatched on 4th April, 2014 which was delivered on 8th April, 2014. Likewise, a letter dated 7th April, 2014 was despatched on 10th April, 2014 and received by the Petitioner on 12th April, 2014. Those Notices were only facades to removes the Petitioner from the Company without affording a chance to clarify his position. As per the provisions of the Companies Act, 21 days' prior Notice is mandatory for holding AGM which was not observed by the Respondents. 2.12 The Company had never distributed divided and the profits were retained for the purpose of the business. The Petitioner was told lies by the Respondents that the dividends would be declared when the Company would become financially strong. 2.13 The Petitioner has sought certain clarification and also demanded inspection of the accounts, however, refused. The documents were forged by the Respondents. He was abruptly removed from the 'Kochi Project' and R2 had taken over the charge. The ulterior motive was to carry out alteration work-at the bungalow of his wife in Kochi by using the funds of the Company. 2.14 The next allegation is that the bungalow at Navi Mumbai of Respondent No. 2 was constructed by using the money of the Company. The invoices of building material were raised in the name of the Company, but used for the construction of bungalow. ARGUMENTS from PETITIONER'S side:-
(3.) From the side of the Petitioner, Ld. Advocate Mr. Bidan Chandran appeared and argued at length that all the other Directors have joined hands and illegally removed the Petitioner. He has pleaded that malpractice was committed by the Respondents. He has pleaded that being in minority the Petitioner was oppressed. Also the affairs of the Company were mismanaged. To corroborate the allegations, attention was drawn on one of the invoices (No. 116) of 'Bharat Buildcom' of Rs. 36,527/- dated 31st January, 2014 which was issued in the name of R1 Company but the site mentioned was 'Kharghar'. Ld. Counsel has, therefore, tried to convey that the building material was not supplied at the address of the office, but it was supplied for the personal use of R2. On identical manner another invoice (No. 98) of 15th December, 2013 of f36,527/- is also placed on record. The building material was delivered at Kharghar. According to the argument no building material was required at the office of the company and there was no repair work, even then there were invoices of Nirmal Agencies dated 2nd April, 2014 for PVC pipeline, PVC bend, etc., etc. totalling Rs. 71,367/- accounted for in the books of the Company. All that building material of Nirmal Agency was also delivered at Kharghar. 3.1 Ld. Counsel has drawn attention on a letter dated 1st April, 2014 addressed to the Petitioner written by Mr. K.N. Pillai in the capacity of Managing Director informing the cancellation of remuneration and cancellation of benefits of a Director. It was pointed-out that the reasons given were incorrect and not legally sustainable in the eyes of law such as non-attending the office, non-cooperation, not looking after regional office at Kochi, responsibility of losses of 'Kochi Project', etc. According to the Ld. Representative, all these allegations were baseless because the Petitioner was not expected to be present at the head office since he was assigned to look after the 'Kochi Project'. A Notice for his removal was dated 7th April, 2014 and the date of Board meeting at the office of the Company was also scheduled for 7th April, 2014. However, the EOGM was later on deferred to 29th April, 2014 with the Agenda to remove the Petitioner from the directorship. There were no systematic dates of meeting because vide one explanatory statement u/s. 173 of the Companies Act, 1956 dated 7th April, 2014 it was resolved that the Petitioner was removed from the directorship from 1st April, 2014. The Petitioner has given a detailed reply to Company on 22nd April, 2014 explaining his position but overlooked. In the said letter, the Petitioner has explicitly indicated several discrepancies in the accounts of the Company. Ld. Counsel has concluded that this is a clear case of oppression of one of the directors/shareholders and mismanagement of the Company. Since it is a case of oppression and mismanagement, therefore, an Order should be passed to disqualify the Directors from the Respondent No. 1 Company and a Receiver should be appointed to manage the business of the Company. The constitution of the Board should also be changed and Respondent No. 1 Company be directed to purchase the shares of R2 and R3. 3.2 The Ld. Counsel of the Petitioner has placed reliance on the decision of Life Insurance Corporation of India v. Escorts Limited, 1986 1 SCC 264 for the legal proposition that a duty is casted upon the management to disclose in an explanatory note all material facts relating to the Resolution coming up for General Meeting to enable the shareholders to form a judgment. The Petitioner as a Director was removed without assigning due reasons and also without explaining to- the shareholders. The removal was illegal and bad in law. 3.3 One more Case Law is cited viz. S.P. Chengalvaraya Naidu (Dead) by LRS v. Jagannath (Dead) by LRS and Others, 1994 1 SCC 1 Civil Appeal No. 994 of 1972 - decided on October 27, 1993, for the legal proposition that on the ground of fraud, even if a decree is obtained by non-disclosure of true facts, such decree is liable to be set aside. Therefore, the argument is that the Respondent No. 2 has created personal assets by playing fraud on the Petitioner and the Respondent No. 1 Company. ARGUMENTS from RESPONDENTS's side:-;