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IN THE HIGH COURT OF JUDICATURE AT MADRAS
G. JAYACHANDRAN, J.
Vasantha Mills Limited, Cheran Towers, Coimbatore – Appellant
Versus
Nandakumar Athappan & Others – Respondent
Comp.Appeal Nos. 5 to 10 of 2016 & C.M.P. Nos. 12006 to 12009, 12839, 12840 of 2016 & 4491, 4496 of 2021
Decided On : 25-05-2021
Companies Act, 1956 - Sections 10F, 397, 398, 402, 403, 634A, 399 - Companies Act, 2013 - Sections 434, 465, 419 - SICA Act, 1985 - Sections 22, 25 – Civil Procedure Code, 1908 - Sections 152, 151, 147, 115, 148 - Oppression and Mis-Management - KCP by misrepresentation induced ORE to enter into Joint Venture Agreement and made ORE to invest Rs -75 crores - Instead of investing company (CEPL) fund for development of and sale of hotels and IT parks as agreed divested fund to discharge liabilities of his subsidiary companies - Minutes of Board meeting were fabricated by KCP to enable siphoning of CEPL fund - Listing out diversion of fund misapplication of company (CEPL) fund and material breach of Joint Venture Agreement was filed by ORE Holding Company - Whether in light of Division Bench order CLB had jurisdiction to order vesting of property of greater value than principal amount decreed and interest thereon –
Finding of the Court: In a matter involving an exit scheme framed under Companies Act one party is eased out from management of Company for a consideration - In such circumstances money invested is not sole criteria for fixing quit pro quo - There are several other factors come into play to ascertain ‘quit pro quo’ to ease out deadlock for smooth exit - Weighing money invested in year at one hand and present value of property at another hand is not fair or equitable test for proportionality - CLB order was accepted by parties without demur except applications filed subsequently for effective implementation of order - To conclude scope of which give right to appeal against decision/order of Company Law Board before High Court is subject to existence of any question of law –
Result: Appeal are dismissed.
JUDGMENT :
(Prayer: Company Appeal has been filed under Section 10F of the Companies Act, 1956 to setaside the order of the Hon’ble Company Law Board, Additional Principal Bench, Chennai dated 30.12.2015 made in C.A.No.2 of 2015 in E.P.No.35 of 2011 in C.P.No.65 of 2005.
Company Appeal has been filed under Section 10F of the Companies Act, 1956 to setaside the order of the Hon’ble Company Law Board, Additional Principal Bench, Chennai dated 30.12.2015 made in C.A.No.2 of 2015 in E.P.No.36 of 2011 in C.P.No.76 of 2005. Â Â Company Appeal has been filed under Section 10F of the Companies Act, 1956 to setaside the order dated 31.12.2015 passed by the Company Law Board, Additional Principal Bench, Chennai in E.P.No.35 of 2011.
Company Appeal has been filed under Section 10F of the Companies Act, 1956 to setaside the order dated 31.12.2015 passed by the Company Law Board, Additional Principal Bench, Chennai in E.P.No.36 of 2011 in C.P.No.76 of 2005.
Company Appeal has been filed under Section 10F of the Companies Act, 1956 to set aside the order dated 31.12.2015 passed by the Company Law Board, Additional Prinicpal Bench, Chennai in E.P.No.36 of 2011 in C.P.No.76 of 2005.
Company Appeal has been filed under Section 10F of the Companies Act, 1956 to set aside the order dated 31.12.2015 passed by the Company Law Board, Additional Principal Bench, Chennai in E.P.No.35 of 2011 in E.P.No.65 of 2005.)
(The case has been heard through Video Conferencing)
Prelude:
1. The root and genesis of these 6 Company Appeals is the two company petitions viz C.P.No.65/2005 and C.P.No.76/2005 filed under Sections 397, 398, 402 and 403 of the Companies Act, 1956, alleging oppression and mis-management in respect of M/s Cheran Enterprises Private Limited Company incorporated on 12/11/2003, under the provisions of Companies Act, 1956.
2. In these batch of Company Appeals, the core dispute is the execution order passed by the Company Law Board in respect of about 25 acres of land (17.15 acres + 7.80 acres) held by Vasantha Mills Limited, one of the subsidiary company of Cheran Enterprises Private Limited.
3. Main parties to the litigation and their interest/claim:
Cheran Enterprises Private Limited (CEPL in short): This company was incorporated on 12/11/2003 with authorised capital of Rs.10 crores. The authorised capital was increased to Rs.28 crores after the share purchase agreement dated 13/01/2004, entered between C.G.Holdings and CEPL. 45% of the shares issued, subscribed and paid up capital of CEPL held by CG Holdings Pvt. Limited. 45% of the share issued, subscribed and paid up capital of CEPL held by ORE Holdings Limited. 10% of the share issued, subscribed and paid up capital of CEPL held by Athappan. In respect of this company, the exit scheme was ordered and executed by CLB. The order passed in the execution petitions is the subject matter of these appeals.
C.G.Holdings Private Limited (˜CG Holdings’ in short): Incorporated on 09/01/2004. K.C.Palanisamy (in short KCP) is the Director and Authorised Signatory of this company. It holds 45% paid up capital in CEPL. To frame an exit scheme C.P.No.65/2005 filed by C.G.Holdings and K.C.Palanisamy.
Cheran Properties Limited (˜CPL’in short): A company promoted by KCP on acquiring the controlling interest in M/s Vasantha Mills Limited. A subsidiary company of CEPL. In this company, CEPL is holding 99.999% of the issued and subscribed capital. M/s Vasantha Mills Limited and M/s CG holdings Private Limited each hold one share. Remaining 4 shares are held by the other companies controlled by KCP.
Vasantha Mills Limited (˜VML’ in short): This company was incorporated in the year 1929. It became a sick and went under the scanner of BIFR in the year 1985. K.C.Palanisamy and his family members presented a scheme of rehabilitation and acquired the assets and liabilities of Vasantha Mills Limited. It is a subsidiary company of CEPL. Pursuant to the Joint Venture Agreement dated 30/01/2004 between KCP, N.Athappan, CG Holdings
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