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2026 Supreme(Online)(NCLAT) 450
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Yogesh Khanna, Member (Judicial)
Peerless General Finance Investment Co Ltd – Appellant
Versus
Bhagwati Developers Pvt Ltd – Respondent
Company Appeal (AT) No.121 of 2022|Company Appeal (AT) No.123 of 2022|Company Appeal (AT) No.124 of 2022
Important Points
Subject
Company Law - Oppression and Mismanagement
Act Referred
Companies Act, 2013: S.62(1)(a), S.241, S.242, S.52(1)(c)
Securities Contracts (Regulation) Act, 1956: S.16(1)
Company (Court) Rules 1959: S.Form No. 43, S.Form No. 44
MRTP Act, 1959
Residuary Non-Banking Companies (Reserve Bank) Directions, 1987
Headnote
(B) Company petitions - Maintainability post-substitution - Prior judicial history allowed continuance but required proving oppressive conduct afresh; unamended pleadings accusing substitutes preclude relief. (Paras 11-15, 61)
(C) Securities Contracts (Regulation) Act, 1956 - Violations not cognizable under Sections 397-398; jurisdiction lies with regulatory authority. (Para 60)
Facts of the case:
Company petition filed in 1991 challenging 1987-88 private placement of 30,000 shares at par and sale of 15,626 shares as oppressive, alleging round-tripping via company loans, nexus with directors, undervaluation despite market value ~Rs.2000/share, and regulatory violations. Original petitioners withdrew; respondent substituted per court orders without substantive amendments. Tribunal allowed petition after 31 years, cancelling allotments.
Findings of Court:
Impugned order set aside; no oppression/mismanagement proved. Respondent estopped; transactions validly approved with participation/consent.
Issues: (a) Legality of private placement without pro-rata offer, valuation, detailed disclosure; (b) Section 77 violation via indirect funding for self-share purchase; (c) Knowledge/estoppel of substituted petitioner; (d) Maintainability sans amended pleadings; (e) Limitation/continuing wrong.
Ratio Decidendi: Consenting parties estopped from impugning approved allotments post-participation and benefit; Section 77 requires strict proof of purpose-linked financial assistance, not inferred from unrelated prior loans; unamended petitions cannot sustain relief against self-accused parties; commercial decisions immune unless lacking probity.
Result: Appeals allowed; impugned order set aside.
For the Respondents:Mr Jishnu Saha, Sr Advocate, Mr Farandees, Mr Divesh, Ms Neha Nagori, Mr. Farazanees, Mr Farazanees
| Table of Content |
|---|
| 1. factual background of share issuance and disputes (Para 1 , 2 , 3 , 4 , 5 , 6 , 7) |
| 2. procedural history and petition maintainability (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15) |
| 3. estoppel by consent and participation (Para 16 , 17 , 18 , 44 , 45 , 61) |
| 4. validity of private share placement and valuation (Para 19 , 23 , 24 , 25 , 27 , 28 , 29 , 46 , 47 , 48) |
| 5. scope of nclt relief and financial scrutiny (Para 21 , 22) |
| 6. section 77 violation via round-tripping loans (Para 26 , 31 , 32 , 50 , 51 , 52 , 53 , 54 , 55) |
| 7. share purchase financing and securities act compliance (Para 37 , 38 , 39 , 40 , 41 , 42 , 56 , 57 , 58 , 59 , 60) |
| 8. appeals allowed, impugned order set aside (Para 62 , 63) |
JUDGEMENT
JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)
Company Appeal (AT) No’s 121, 123 and 124 of 2022 have been filed against common impugned order dated 18.07.2022 passed in C.P. No. 222 of 1991 by Ld. NCLT, Kolkata. Vide the impugned order, the petition under Section 397-398 of the Companies Act, 1956 was allowed after more than 31 years of its institution by passing various directions.
2. Before coming to the contentions raised it would be appropriate to state about the issues involved and the findings given in the impugned order qua such issues
3. The issues for consideration before the Ld. NCLT were as follows:-
a) whether the issuance of 30,000 equity shares by private placement was wrongful and illegal;
b) whether purchase made by Respondent Nos. 26 and other Respondents of 15,626 shares of Respondent No.1 company was bad in law and could not have been done;
c) limitation.
4. Qua (c) viz. limitation the Ld. NCLT had stated the Original Petitioners had no knowledge of the purported issue/allotment of shares till October, 1990 and the notice dated 25.11.1987 of the AGM of PGFI/appellant was not received by the original petitioners and they relied upon the Director’s Report dated 1988 to say they never knew the names of the allottees; and it was not shown the petitioners were aware of these fact, at any time prior to three years from date of the filing of the petition and the acts of oppression and mismanagement, if are continuing, then the company petition cannot be brushed set aside.
5. For (a) and (b) above, we need to look to certain dates before we proceed further with the matter.
6. On 30th October, 1987 a Board Meeting of the appellant company was held wherein a Resolution was passed to issue 30000 shares @ Rs.100/- each in a private sale. Mr. P. Lodha participated in the Meeting and was a party to such resolution. Admittedly a notice dated 25.11.1987 was then issued for holding of AGM on 30th December, 1987. In the said AGM dated 30.12.1987, the participants, including Mr. P. Lodha and M/s Bhagwati Developers Pvt Ltd., (earlier known as M/s Lodha Services Pvt. Ltd.) voted in favour of resolution for issuance of 30000 shares @ Rs.100/- each, in private sale.
7. On 02.02.1988 another Meeting was held and the Share Transfer Committee was given an authority to allot such 30000 shares; and to receive applications by private negotiations, as the Committee may deem fit in terms of the Resolution passed on 30th December, 1987. It allotted these shares on 26.04.1988 to various person. Admittedly, Mr. P. Lodha was present in the said Meeting dated 02.02.1988 and the Resolution was passed with his consent as he never raised any objection to such allotment. Reference was also made to the Minutes of Meeting dated 30th December, 1987 wherein Mr. Sunil Jain appeared on behalf of M/s Lodha Service Pvt Ltd viz Respondent No. 1 herein and one Mr. P.K. Jain appeared on behalf of Mr. P. Lodha wherein resolution was passed to issue 30000 equity shares @ Rs.100/- each, for an aggregate value of Rs.30 lakh for cash at par, payable in full on application by private placement to such person and in such manner as the Board may deem fit. The proxy form of appointment of Mr. P.K. Jain for Mr. P. Lodha to vote in the AGM of dt. 30th December, 1987 is annexed
