Rajeswara Rao Vittanala, Member - (1.) The Company Petition bearing C.P. No. 13 of 2013 (hereinafter referred to as Company Petition) was filed by Mrs. Mallina Bharathi Rao, (hereinafter referred as Petitioner) before the then Hon'ble Company Law Board, Chennai Bench, Chennai (CLB) and the same was initially taken up for hearing on 04.03.2013. The case was pending when the constitution of National Company Law Tribunal (NCLT) was notified by the Government of India. Accordingly, the case is transferred to this Bench in July, 2016 as the case relates to the states of Andhra Pradesh and Telangana. Hence, we have taken the case on record of this Bench. The case was initially taken up for hearing by this Bench on 29.07.2015 and subsequently posted it on 19.08.16, 09.09.16, 19.09.16, 07.10.2016, 25.10.2016, 15.11.2016, 29.11.2016, and finally on 15.12.2016. The case stands adjourned due the requests made by one counsel or the other. -Ultimately, it was argued and subsequently filed their written arguments later on.
(2.) The Company Petition was filed under section 111 A, 397 & 398, 402, 405 & other provisions of the Companies Act, 1956 by inter-alia seeking directions as follows: "(a) Direct the Respondents to, either allot or transfer, such number of shares so as to entitle the Petitioner to maintain her percentage shareholding at 2.12% (which was percentage shareholding she held at the time of deletion of her name as a shareholder of the company illegally in the year 1999), upon the receipt of the amount of Rs. 13,65,000/- from the petitioner, being the consideration payable in respect of said shares as per the terms of the respective rights issues made by the company in the years 1991-92, 95-96 and 2004-05; (b) Direct the Respondents to pay the Petitioner all dividends that would have accrued in respect of shares, that forms subject matter of the rights issues during the period 1991-92,95-96 and 2004-05 till date, to which the Petitioner would be entitled had the Petitioner been offered the rights issue in accordance with law and had her name not been deleted from the Register of members in the year 1999, together with interest for such dividends at the rate of 12% compounded annually from the date of payment of the dividend to the other shareholders till the date of effecting actual payment to the Petitioner; (c) Surcharge the Respondents 2 & 3 for the loss caused to the Company on account of the acts of mismanagement and siphoning off funds, acts of oppression perpetrated by Respondent 2 & 3 from 1999 onwards till date, as will be evidenced from the report of an independent auditor who may be appointed by the Hon'ble Bench to investigate into the affairs of the Company from 1999 till date and submit the report thereon before this Hon'ble Bench; (d) To direct the Respondents to pay the cost of the present proceedings to the Petitioner including expenses incurred for obtaining Central Government permission u/s. 399(4); (e) To direct Respondents 2 & 3 to reimburse the Company, amounts to the extent of the entire expenditure of the Company in relation to the proceedings connected with CP No. 7 of 2000 and all further appeals up to Hon'ble Supreme Court in connection therewith and the costs due to the acts of misconduct of Respondents 2 & 3; etc."
(3.) The brief facts as set out in the Company Petition are follows:- "(a) Gowthami Solvent Oils Limited (herein after referred to as Company) was incorporated under the provisions of the Companies Act, 1956 as a Private Limited Company with Registration No. 1699 of 1973-74 on 22nd day of March, 1974. The Company became a Public Limited Company on 28.08.2009. The Authorised Share Capital of the Company is Rs. 4,00,00,000/- (Rupees Four Crores Only) consisting of 3,98,000 (Three Lakhs Ninety Eight Thousand) equity shares of Rs. 100/- each and 2,000 (Two Thousand) preference shares of Rs. 100/- each and the subscribed and paid up capital is Rs. 2,64,00,000/- (Rupees Two Crores Sixty Four Lakhs Only) consisting of 2,64,000 (Two Lakhs Sixty Four Thousand Only) of equity shares of Rs. 100/-. (b) The Petitioner subscribed for 350 (Three hundred fifty) equity shares of Rs. 100/- each during 1974 by paying a total amount of Rs. 35,000/- and got allotted same vide share certificate No. 2 dated 28.12.74 with distinctive numbers from 501 to 850. The total shareholding in the Company is 2.120% during 1974-91: 1992-95 1.060% from 1996 onwards 0.265%. The address noted for the above certificates is at Undrajavaram. However, the address of the Petitioner was changed from Undrajavaram to Nandamuru in Krishna District, then to Machlipatnam in Krishna District; and then to Tanuku in West Godavari District, and again to Hyderabad and finally to Peddapuram in East Godavari District where she is presently residing. The Petitioner has changed the above residences due to her husband's nature of job. All the changes of addresses were duly in intimated. (c) The Company is under the control of two groups of shareholders, and almost the entire share capital of the Company is between them. The first group comprises of Chairman Sh. B. Subba Rao and his two brothers Sh. Srimannarayana, Joint Managing Director, and Sh. BVSN Prasad, Director, and their family members. This group hold almost 57% of the share capital. The other group comprises of Sh. M. Ramachandra Rao, Managing Director (MD), (Respondent No. 2) Sh. M. Venkat Rayudu, Whole Time Director (WTD) (who is son of MD) and their respective family members. This group hold around 38% of the Share capital in the Company. During the company's first year of operation Sh. M. Ramachandra Rao (Respondent No. 2) was the only shareholder from his family, and no other members of his family were either members or directors in the Company, and his shareholding then was Rs. 55,000/- (Rupees fifty five thousand) out of total share capital of Rs. 16,50,000/- (Rupees Sixteen Lakhs Fifty Thousand) i.e. initially he held an aggregate of only 3.33% of shareholding in the company. Later on, his entire family and group shareholding was increased to around 38% of the total paid up share capital of the Company. (d) The 2nd Respondent (MD) is also the father-in-law of the 3rd Respondent, who is a Joint Managing Director of the Company. These two controlling groups have been acting in collusion with each other in perpetuating the management and control over the Company, and are slowly ousting all the minority shareholders including the petitioner by illegal means. (e) The husband of the Petitioner Sh. Narasimha Rao, is also related to the 2nd Respondent being his elder brother's son. The Petitioner subscribed the shares of the Company in the year 1974 at the behest of the 2nd Respondent, and she has contributed to the Company at the initial stage. (f) During 1974, the shareholding percentage of the Petitioner was 2.12% and thereafter it came down to around 0.625% out of the total share capital of Rs. 1.32 Crores. The Petitioner's shareholding was reduced due to the oppressive acts of the Respondent No. 2 in not offering rights issue in the year 1991-92. The Petitioner handed over an amount of Rs. 35,000/- (Rupees Thirty five thousand) to the 2nd Respondent through her husband, which was duly acknowledged by the 2nd Respondent for the said offer. However, the 2nd Respondent returned the said money to the Petitioner on the false ground that the Company had withdrawn the rights issues all together. When it was enquired with the 2nd Respondent about the return of the money, the 2nd Respondent assured the husband of the Petitioner that he would inform the Petitioner as and when the Company would come up with rights issue in future. Later, the Petitioner came to know, through other source, that the Company had not withdrawn the rights issue as stated by the 2nd Respondent, and on the contrary, those shares were subscribed by the 2nd Respondent himself behind her back. In the meanwhile, the Petitioner has shifted her address to Machalipatnam from Nandamuru and the change of address was duly informed to the Company and she used to take correspondence from the Company as well. (g) The Petitioner again came to know through the Annual Report received by her with Hyderabad address by post that another rights issue was issued in the year 1995 without notice to her. When the Company did not furnish any satisfactory explanation about its illegal issue of right shares, the Petitioner then has filed a Petition in Andhra Pradesh State Consumer Dispute Redressal Commission, vide OP No. 76 of 1997 with respect to her last opportunities to participate in the right issues for the years 1991-92 and 1995-96. However, the State Consumer Forum dismissed her complaint for lack of jurisdiction on 29.11.1999 and only CLB is having jurisdiction over the issue. However, mischievously, the Company rectified its register of Members of a Company by deleting her name as a shareholder and sent her draft for Rs. 2,33,332/- (Rupees Two Lakhs Thirty Three Thousand Three Hundred and Thirty Two) towards return of capital, pursuant to a resolution stated to have been passed on 30.11.1999. (h) The Petitioner then had filed CP No. 7 of 2000 before Company Law Board, under section 111 of Companies Act, 1956 challenging the deletion of her name from the Register of Members of the Company. Since the very existence of petitioner was ousted from the Company, that the petitioner was filed only for deletion of her name by reserving her right to agitate her for rights shares vide para No. 12 of the above Company Petition. The CLB, ultimately, allowed the said CP No. 7 of 2000 on 20.09.2000 with a cost of Rs. 2,500/- (Rupees two thousand five hundred) by directing the Company to restore the Applicants name in the Register of Members of the Company, within 30 days. (i) Aggrieved by the said order, the Respondents filed an appeal before the Hon'ble High Court of AP and also the Hon'ble Supreme Court. However, the order of the CLB was finally confirmed by the Hon'ble Supreme Court. The Petitioner was illegally removed from the Register of Shareholders of the Company for a period of twelve years from the year 1999. As the Petitioner was not a member, she could not make any complaint against illegally depriving of her rights issue prior to 1999 i.e. 1st rights issue in the year 1991-92 and 2nd rights issue in the year 1995-96. It is also stated that the Company filed an affidavit in CMP No. 10988 of 2001 in LPA 207/2001 by undertaking that any bonus or right shares in respect of her 350 shares can be provisionally allotted to 2nd Respondent during the pendency of appeal and same would not be alienated, in order to safeguard the interest of the Petitioner, they would be allotted as per the final result of the case. (j) In pursuance to the direction of the CLB, ultimately, the membership of the Petitioner was restored to the extent of 350 shares, and paid dividend of Rs. 1,21,750 for the period during 2000-11, and interest was also paid @ 12% compounding annually. The Company has also paid the penalty of Rs. 2500/- as directed by the CLB. The Petitioner has also sought various AGM notices for the period 2000-2011 and also reminded them about the Petitioners rights/bonus issues entitlement after 2001. The Petitioner vide letter dated 20.11.2011 demanded for three rights issues by enclosing a demand draft dated 19.11.2011 for Rs. 13,65,000/-. However the same was illegally rejected on the ground that the Company's General Manager has retired from the service long time back. (k) The Petitioner claimed for all three rights issues immediately after restoring her as a shareholder in December, 2011 in accordance with the directions of CLB. (l) The Petitioner contented that she was deprived all her rights as shareholder during the period of litigation. It is also stated that Petitioner, vide letter dated 08.12.2011 has sought for transfer of shares to her name from the second Respondent to whom the rights shares were provisionally allotted during the pendency of appeal before the Hon'ble High Court. The Company has also returned a cheque for Rs. 1,40,000/- towards 1:1 rights issues of 2004-2005 at a premium of Rs. 300 per share for 350 shares. (m) The Petitioner has got the permission of the Central Government to file an application under section 397/398 before CLB vide proceedings dated 19.11.2012. (n) The Petitioner contents that removing her name from the Registrar of Companies and forcing her to approach different Courts is not only pre-judicial and oppressive to her interest as a shareholder of the Company. The Respondents have enhanced their shareholding by depriving the rights issue to the Petitioner. The conduct of the Respondent No. 2 & 3 is clearly oppressive and they have committed gross acts of mismanagement. The management have conducted one emergency Board of Directors Meeting just one hour prior to the Scheduled Annual General Meeting for taking a decision of not allowing her husband to participate in the AGM's meeting as a proxy. (o) In the above circumstance, the Petitioners claim that there are ample grounds exists for winding up the Company, but it would prejudicially effect the Petitioner's interest as a shareholder and the Company itself, and thus prayed the Tribunal to render justice by suitable orders.";