- (1.) The Company Petition bearing CP No.8/59/HDB/2017 is filed by Mr. Lanka Venkata Naga Muralidhar against M/s. Vestal Educational Services Pvt. Ltd and 04 others, U/s 59 and 62 of the Companies Act, 2013, by seeking the following reliefs: (a) To declare the respondent company's allotment of shares on 18th December, 2014 fit 31st March, 2015 to the petitioner as null and void and contrary to Section 62 of the Companies Act, 2013; (b) To direct the respondent company to rectify its register in relation to the allotment of shares to the petitioner between 18th December, 2014 a 31st March, 2015; (c) To direct the respondent company to repay the amount due to the petitioner with interest @ 18% p.a.
(2.) Brief facts, leading to the filing present petition, which are relevant to the issue in question, are as follows: 1) M/s. Vestal Educational Services Pvt. Ltd (hereinafter referred to as "Company") was Incorporated as a Private Limited Company on 01.12.2006, under the provisions of the Companies Act, 1956. Its Registered office is situated at Vijaya Building, Door No. 30-15/6/1, Mallela Sri Rama Murthy Street, S.R. Puram, and Vijayawada-520002. 2) The petitioner is one of the shareholders of the Company and he had previously acted as one of its Directors from December 2006 to October 2011. 3) In order to raise funds for establishing infrastructure to run an educational institution, the then Board of Directors of the Company had decided to avail a term loan of Rs. 10,00,00,000/-(Rupees Ten Crores only) from the State Bank of India in 2009. Thereafter, State Bank of India, Industrial Finance Branch, Somajiguda, Hyderabad had sanctioned the said term loan of Rs. 10,00,00,000/-(Rupees Ten Crores only) on 31st March,2009, for which the petitioner stood as one of the personal guarantors. However, the term loan has become a Non-Performing Asset (NPA) in the books of the State Bank of India in the year 2013 because of irregular/ non-payment of the installments. 4) Accordingly, the Company had entered into a compromise (One Time Settlement) . Pursuant to the compromise terms vide SBI, SAMB Branch letter No.611 dated 5th August, 2014, the loan amount was settled for Rs.5,50,00,000/-(Rupees Five Crores and Fifty Lakhs only) out of the total liability of Rs. 7,25,00,0007-(Rupees Seven Crores and Twenty-Five Lakhs only], which was to be paid by the Company in five installments as provided in the sanction letter. 5) However, the Company could not pay as per said settlement. When the Bank was threatening to cancel the OTS, the Directors of the Company had approached the petitioner in November, 2014 and had requested him to lend an amount of Rs. 1,54,00,000/-(Rupees One crore and Fifty Four Lakhs only) so as to enable them to repay the installments liable to be paid to the State Bank of India. Accordingly, the petitioner obliged the request of Directors of the Company, and thus deposited an amount of Rs.1,54,00,000/-(Rupees One crore and Fifty Four Lakhs only) through various remittance on different dates between the last week of December 2014 to March 2015 into the account of M/s. Vestal Education Services Private Ltd. bearing a/c No. 00000030225170247 of State Bank of India, Panduragapuram, Visakhapatnam. 6) The petitioner had sent reminders to the Company and their representatives i for the re-payment of amount lent by him along with interest but the same fell on deaf ears, and the Company had avoided paying the same on one pretext or the other. The petitioner also sent two legal notices on 3rdJune, 2015 and 18thJune, 2015 addressed to the Company and its Directors demanding the payment of amounts as advanced by him, under Section 433 and 434 of the Companies Act, 1956. However, the notice as sent by the petitioner to the registered address of the Company was returned with an endorsement stating 'No such address in this door number H/R/S' by the postal authorities. However, the said notice was also addressed to the Directors of the Company, and it was received by one of the Directors namely Sri. Koruprolu Veera Venkata Subba Rao. Even after the receipt of the said notices, the Company had chosen not to issue any reply with regard to the same. 7) While things stood as such, the petitioner had received a letter from the Company, which furnished latest shareholding pattern in the Company as on 31st March, 2015. On verification of the same with the ROC documents, it was found by the petitioner that the amount of INR 1,54,00,0007-(Rupees One crore and Fifty Four Lakhs only) lent by the petitioner was converted into equity without his knowledge, intimation or authorization, which is in total violation of provisions of the Companies Act, 2013. And these shares were alleged to have been to him without any intimation or authorization or consent letter/share application form. It is stated that the petitioner had not made any request to allot the said shares and the Company had illegally, and with malafide intention to defraud and to avoid payment of the money owed to the petitioner had allotted the impugned shares allotments. 8) It is alleged that impugned allotments were an afterthought, after the petitioner started demanding repayment of his money as evidenced by the fact that the Company filed its statements/return of allotment (PAS 3) to the Registrar of Companies only on 3rd July, 2015 vide SRN S38474375 and S38474326, which was way beyond the stipulated time period of 30 days stated in Rule 12 of Companies (Prospectus and Allotment of Securities) Rules, 2014. 9) It is stated that as soon as the Petitioner came to know of this alleged allotments, he immediately filed a complaint with the Registrar of Companies (ROC) Hyderabad on 12th August,2015 seeking Redressal of the grievance. The Company vide its letter dated 6th January, 2016 addressed to the Deputy Registrar of Companies had perfunctorily replied to the petitioner's complaint stating that the allotment has been done on 18th December, 2014 as per the provisions of the Companies Act, 2013 Section 62(1) (a) (i) of the Companies Act, 2013 reads as follows:- "The offer shall be made by notice specifying the number of shares offered and limiting a time not less than fifteen days and not exceeding thirty days from the offer within which the offer, if not accepted, shall be deemed to have been declined". It is stated that the Company had neither made any offer dated 18th December, 2014 nor had issued any notice to that effect to the petitioner or any of the shareholders of the company. The respondent company had also not filed any postal acknowledgments along with the reply to substantiate the purported letter of offer dated 18th December, 2014 being made. Section 62 (2) of the Companies Act, 2013 clearly mandates that the notice referred under Section 62(1) (a) (i) shall be dispatched through registered post or speed post or through electronic post to all the existing shareholders at least before the opening of the issue. The Company had also failed to file the necessary proof along with the reply filed with the Registrar of Companies. This clearly shows that the purported letter of offer dated 18th December,2014 itself is an afterthought, which was created after the petitioner issued legal notices dated 10.06.2015 and 18.06.2015 to the Company demanding payment of Rs. 1,54,00,000/- (Rupees One crore and Fifty Four Lakhs only) which was given to the company as a loan exclusively to honor the Compromise (One Time Settlement) entered into with State Bank of India, SAM branch since the Petitioner was also a Personal Guarantor to the above said loan. 10) It is stated that Section 62 of the Companies Act, 2013 mandates acceptance to the purported Letter of Offer made by the Company. It is asserted that the petitioner has not given such acceptance and the Company has also failed to file any such proof of acceptance by the petitioner in its reply filed with the ROC. 11) It is stated that the petitioner transferred money to the Operating Account of the Company, and not to any special account opened for receiving the amounts relating to purported Rights Issue. Therefore, the contention of the Company that the petitioner transferred the money for the purported rights issue is totally baseless. It is alleged that purported offer and the issuance of shares were done by the Company only to change the loan given by the petitioner to the Company as shares, so as to deny the petitioner his legitimate right to claim back the monies as advanced by him.
(3.) The Company petition is opposed by Respondent No.1 by filing a counter dated 10th August, 2017 through Mrs. KVVL.Kumari, Director of the Company. The following are their main contentions: 1) The present Company Petition is not maintainable either in law or on facts, for the reason that the Petitioner herein being one of the Promoters and initial Directors and Subscribers to the Memorandum of Articles of Association of the Company cannot snub the other Co-Shareholders and Directors on the Board by filing frivolous and fictitious Petitions, which act amounts to abuse of Process of Law. 2) It is stated that the petitioner has not brought out circumstances under which he has lent a sum of Rs.1.54 Crores to the Company. The petitioner has not produced any Loan Agreement or obtained any Documentary Evidence including that of the Promissory Notes from Company to establish that impugned transaction is a Loan Transaction. And the allegations made by Petitioner are very vague and not supported with any' cogent reasons. 3) It is contented that the petition is filed in month of December, 2016, that is nearly 1 Vi years from the date of allotment i.e. December, 2014. So Petition lacks bonafides, and thus it is liable to be rejected at the threshold without going into merits of the case and the Petitioner in abusing the process of Law. 4) It is stated that the Company is engaged in the Business of Establishment of Schools and Colleges at various Places in the State of Andhra Pradesh with its Registered Office at Vijayawada. In pursuit of its Business, the Company is running School and thereby imparting Quality Education to the Students. The Business of the Company cannot be equated with that of the Commercial Business being run by the other Companies. It is carrying on the Business, with a sole object to uplift the Society and thereby to contribute its share to achieve the Mission of Cent Percent Literacy and as such, the present Petition needs to be adjudicated keeping in view the cascading effect on the Company and its Student running in large number. 5) It is stated that in the Course of Business of the Company and also in order to impart quality Education to its Students and to develop necessary Infrastructure Facilities in the School, it has approached the State Bank of India, IFB Branch, Raj Bhavan Road, and Hyderabad for availing the Term Loan to the tune of Rs.10.00 Crores. And in terms of the Term Loan Sanction letter, the Promoters are under obligation to provide necessary Personal Guarantees and to provide Securities in the form of Immovable Properties towards Security for Repayment of Term Loan. Accordingly, the Petitioner had offered his Personal Properties held through one of his Companies namely M/s. Annapuma Gardens Pvt Limited, Hyderabad viz., (1) Land Admeasuring 390 Sq.Yards situated in D.No.121, 122 of Ward No.13, Behind SBI, Sri VenkateswaraSwamy Temple Street, Gudur, Nellore r District (2) 50% Share in a Land Admeasuring 700 Sq.Yards situated in 48/1, 2, 3, 8P, 9, 10P, 11P, 49 and 125/5, 6, 7 of Gantlam Village, Denkada Mandal, Vizianagaram District (3) 50% Share in and another Land Admeasuring Ac.2.00 situated in Sy.No.807/5 & 806 of Vallaure Village, Pedapadu Mandal, West Godavari District and (4) 25% Share in another Land Admeasuring AC.1.20 Cents situated in Sy.No.806 of Vallum Village, Pedapadu Mandal, West Godavari District. (for short "Properties Offered as Security by the Petitioner") towards Security for Repayment of Loan in favor of SBI. 6) It is further submitted that due to Continuous and unabated Agitation against the Bifurcation of the State of Andhra Pradesh from the Year 2010 onwards, the Admissions into School being run by the Company has come down drastically, and such situation had continued for more than 4 Years. Most of the Students coming from Neighboring States have migrated to some other States due to continuous Agitation and as such, the Company was not able to pay the Installments in time resulting in Loan taken by the First Respondent Company declared Non-Performing Asset by Lending Bank besides taking necessary Steps to initiate Legal Proceedings in terms of SARFAESI Act. The Lending Bank has also filed an Original Application before the Debt Recovery Tribunal at Hyderabad, in which, the Petitioner is also one of the Respondents therein. In order to save the Educational Institution and also to avoid distress Sale of Immovable Properties offered as Security for repayment of Bank Loan by all the Promoters in respect of their respective Properties, as aforesaid, the Promoters of the First Respondent Company have decided to Compromise with the Lending Bank resulting in Bank agreeing to settle the Loan Account under the Scheme of One Time Settlement (OTS) at Rs.5.50 Crores payable in 4 Installments by the First Respondent Company herein. 7) It is further submitted that the Board of Directors of the Company in its meeting held on 18th December, 2014 has decided to make equity call to all the Existing Shareholders for Subscription of shares on Right Issue basis to meet the Funds requirement of OTS payable to the Bank with a view to save the Educational Institution being developed by the Company and to get rid of the Loan and offered 85,00,000 equity shares at nominal value of Rs.10 each at par on proportionate basis. 8) It is stated all the Promoters of the Company including the Petitioner herein have brought their respective Amounts to save the Educational Institution being run by the Company and in that process, the Petitioner herein in order to save his Immovable Properties worth Crores of Rupees agreed to bring in the necessary Funds enabling the Company to pay the Bank dues. In the process, several deliberations and discussions held among the existing Shareholders of the Company wherein, it was categorically agreed that each of the Promoter shall bring in their proportion of the amounts into the Company and in consideration thereto, the Company shall Issue further Share Capital to the existing Shareholders in terms of Section 62 of the Companies Act, 2013. In the light of above understanding, the Petitioner had invested a sum of Rs.1.54 Crores in the Company. Other Shareholders of the Company have also brought their respective amounts into the Company. Accordingly, the Company paid the entire amount towards repayment of Loan to the Lending Bank. It is stated that since the existing Shareholders have agreed for Issuance of Additional Share Capital, the procedure prescribed for Issuance of Additional Share Capital does not arise. 9) It is stated that the Shareholding Pattern of the Company before Issuance of Additional Share Capital as on 18th April, 2014 is as under: SHARE HOLDING DETAILS AS ON 30.06.2009 So the Petitioner held 9.51% Share in the Company at the time of availing of Bank Loan, and as such he cannot claim to be Outsider 10) It is stated that in accordance with the Provisions of Section 62 and any other applicable provision(s) , if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) , read with the Companies (Share Capital and Debenture) Rues, 2014, the Board of directors in its Meeting held on 24th January, 2015 issued and allotted 46,69,222 Equity Shares of Face Value of Rs.10/-each at par, on proportionate basis against total amount received from the Shareholders including the Petitioner , who has subscribed the Right Issue and remitted Share Application/Subscription Money in the Bank account of the Company through RTGS pursuant to offer Letter dated 18th December, 2014. 11) It is stated that unsubscribed portion of right issue was again subscribed by some of the willing Shareholders including the Petitioner and remitted the Share Application money in the Bank Account of the Company through RTGS. The Board of Directors of the Company in its Meeting held on 31st March, 2015 Issued and allotted 37,56,011 Equity Shares of Rs.10/- each at par in accordance with the provisions of Section 62(3) and any other applicable provision(s) , if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) , read with the Companies (Share Capital, and Debenture) Rules, 2014. 12) It is stated that Post allotment of Shares on 24th January, 2015 and also on 31st March, 2015, the Shareholding of each of the Shareholders of the Company including the Petitioner herein is as under: 13) It is stated that shareholding percentage of the Complainant has been increased from 1.64% to 12.14%, and is more than to the 9.51% held by him as on 30th June, 2009 at the Time of availing the Term Loan for the Project. 14) It is stated that Board of Directors of the Company, in pursuant to the applicable provisions of Companies Act 2013, has offered, issued and allotted the Shares to its willing/existing Shareholders and has issued the necessary Share Certificates to all eligible Shareholders including the Petitioner herein in compliance with the Provisions of the Companies Act 2013 and necessary entries have been made in the Register of Members of the Company. 15) It is stated that Company, due to inadvertence, could not file the Return of Allotment in specified form PAS-3 in respect of 46,69,222 and 37,56,011 Equity Shares within time before the Registrar of Companies, Andhra Pradesh. However, the same was filed with the ROC on 3rd June, 2015 with Additional Fees and thus, the Company has complied with all applicable Provisions of the Companies Act. It is asserted that Equity Shares have been offered, Issued, and allotted to the willing Shareholders, after due compliance with the Applicable Provisions of the Companies Act 2013, and there is no default committed by the Company regarding the allotment of Equity Shares to all the Existing Shareholders including the Petitioner herein. 16) Therefore, it is summed up that the amount in question paid by the petitioner cannot be treated as Debt as several disputed Questions of facts involved in the present Company Petition.. The Petitioner is also holding Shares through his Companies namely (a) M/s. Annapurna Gardens Pvt Limited (b) M/s. Lastaki Management Consultants Pvt Limited who have filed winding up Petitions, under Section 433 and 434 of the Companies Act, vide C.P.No.237 of 2015 and C.P.No.239 of 2015, respectively before the Hon'ble High Court, and those are pending disposal even without admitting them, before the Court. And the Company is contesting those petitions. 17) So far as issuance of Mandatory Notice, as required under Section 62 (2) of the Companies Act, 2013, is concerned, it is stated that in view collective decision taken at the meeting of the Board of Directors of Company and the Petitioner has voluntarily remitted the amounts in question, there is no need to obtain specific consent from the Petitioner herein. It is an intention to snub the other Directors/Promoters of the First Respondent Company by abusing the Provisions of the Companies Act.;