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HIGH COURT OF JUDICATURE AT MADRAS
V. RAMASUBRAMANIAN, J.
N.R. Harikumar – Appellant
Versus
WW Apparels (India) Private Limited & Others – Respondents
Company Appeal No. 3 of 2011
Decided On : 16-04-2015
Companies Act, 1956 - Section 397, 398 and 402 - Challenging an order - Public service commission - Share transfer - It appears that one of secured creditors of third respondent company namely HSBC Bank initiated action against the third respondent in England, which resulted in the appointment of the fourth respondent as Joint Administrative Receivers - Joint Administrative Receivers sold all the shares held by the third respondent in the first respondent company to second respondent for just one British Pound Sterling - Upon coming to know of the said act and terming it as an act of oppression and a breach of his pre-emptive rights appellant filed a petition in file of Company Law Board under Sections 397 and 398 of Companies Act - Along with the main petition appellant also took out three interim applications, one for 3 individuals another in for punishing the respondents for not providing copies of statutory records as per order and a third for a declaration that transfer of Registered Office from Coimbatore - The learned counsel for the respondents relied upon printout of a few e-mails. But these e-mails also do not advance the cause of the respondents. In a mail sent to the second respondent requested the second respondent to clarify as to how share transfer could be effected and as to what would be the consideration for transfer - In a mail presumably sent by second respondent as a reply, he had only indicated that fourth respondent had agreed in principle to transfer the Indian operations to the second respondent - But still there is no indication in the said mail that the shares were to be transferred for one British Pound Sterling - Learned counsel for respondents invited my attention to the mails to show that the appellant never exhibited any interest in exercising his preemptive right - On contrary, he allowed things to drift and hence the appellant is not entitled to any relief - In mail dated there is a reference to the shares and shareholding pattern - But there is no reference to the sale or sale consideration - In the mail dated 2 there is no indication about share transfer. In the mail sent by second respondent to the appellant, there is a reference to the transfer of two properties. But there is no reference to share transfer - But in a reply sent by the appellant to the second respondent there is a vague reference to share transfer without any further detail - This statement in the mail cannot be taken to be conclusive. In any case, there is no equity in of second respondent. He is not a person who has bailed out the third respondent when it was in distress, to claim equity in his - He has just paid one GBP for the entire shareholding of the third respondent in first respondent. Therefore, he cannot plead equities - Relying upon the decision of the Supreme Court in it was contended by learned counsel for respondents 3 and 4 that in any case, a single act of transfer of shares cannot constitute oppression and mismanagement - Therefore he contended that ultimate conclusion reached by the Company Law Board cannot be found fault - It is true, that in order to maintain a petition under Sections 397 and 398 of the Companies Act, the acts of oppression complained of, should be a series of acts continuing up to date of filing of the petition - Appeal is allowed
1. This is an appeal filed under Section 10-F of the Companies Act, 1956 challenging an order passed by the Company Law Board, dismissing the petition filed by the appellant under Section 397, 398 and 402 of the Companies Act alleging oppression and mismanagement.
2. I have heard Mr.H.Karthik Seshadri, learned counsel for the appellant, Mrs.Ambili Menon, learned counsel for the respondents 1 and 2 and Mr.Sanjay Kumar, learned counsel for the respondents 3 and 4.
3. The brief facts leading to the filing of the above appeal are:
(i) The appellant herein was carrying on business in partnership and was actually acting as a buying agent of the third respondent. The third respondent is a company incorporated under the laws of England. The first respondent was incorporated in India on 7.8.2002 as a private limited company, with a different name. Thereafter the first respondent company acquired the partnership business of the appellant in November 2002.
(ii) The authorised capital of the first respondent as per the audited balance sheet as on 31.3.2003 was Rs.2 Crores, divided into 20 lakhs shares of Rs.10 each. The issued, called up, subscribed and paid up capital of the first respondent was Rs.64,32,970/-, as on 31.3.2003. But, it rose up to Rs.1,85,87,700/- as on 31.3.2005;
(iii) The first respondent later became a subsidiary of the third respondent. The appellant and the second respondent became its directors;
(iv) It appears that one of the secured creditors of the third respondent company namely HSBC Bank, initiated action against the third respondent in England, which resulted in the appointment of the fourth respondent as Joint Administrative Receivers, on 20.4.2006. The Joint Administrative Receivers sold all the shares held by the third respondent in the first respondent company to the second respondent for just one British Pound Sterling.
(v) Upon coming to know of the said act and terming it as an act of oppression and a breach of his pre-emptive rights, the appellant filed a petition in C.P.No.27 of 2007 on the file of the Company Law Board under Sections 397 and 398 of the Companies Act. Along with the main petition, the appellant also took out three interim applications, one in C.A.No.99 of 2007 for impleading 3 individuals, another in C.A.No.123 of 2007 for punishing the respondents for not providing copies of statutory records as per the order dated 16.04.2007 and a third in C.A.No.135 of 2007 for a declaration that the transfer of the Registered Office from Coimbatore to Tirupur was null and void.
(vi) It appears that on 04.02.2008, the Company Law Board directed the parties to work out the possibility of a settlement. The appellant sought certain details, before he could initiate the talks of settlement. The Company Law Board passed an order on 28.04.2008, directing the respondents to furnish all details by 07.05.2008 and to list the matter for hearing on 19.06.2008 and 20.06.2008 if there was no settlement.
(vii) But no settlement took place and hence the matter came to be adjourned from time to time. When the petition was taken up in 2009, the appellant moved an application in C.A.No.32 of 2009, for an amendment. By an order dated 21.08.2009 passed in the said application, the Company Law Board directed the respondents to furnish the details regarding allotment of shares by 11.09.2009.
(viii) According to the appellant, there was a change of Judicial Member and the case was later posted for hearing on the preliminary issue of maintainability. The issue of maintainability was raised on the ground that what was under challenge was a transfer of shares that took place under the Insolvency Laws of the United Kingdom and that therefore, the Company Law Board in India would not have jurisdiction to deal with the same.
(ix) However, the appellant claims that he argued only the applications for impleading and amendment.
(x) Thereafter the Company Law Board took up the main petition for adjudication and dismissed the same b
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