w w w . L a w y e r S e r v i c e s . i n



Sidharth Gupta v/s Rekha Gupta


Company & Directors' Information:- R SIDHARTH & COMPANY (INDIA) PVT LTD [Strike Off] CIN = U17111WB1991PTC051089

    C.A. No. 29 of 2013, C.P. No. 15(ND) of 2013

    Decided On, 22 January 2014

    At, Company Law Board Principal Bench New Delhi

    By, THE HONOURABLE MR. DHAN RAJ
    By, JUDICIAL MEMBER

    For the Petitioner: Pramod Kumar Singh, Vivek Paul Oriel, Advocates. For the Respondent: N. Kumar, Kaushal Kr. Singh, Advocates.



Judgment Text

In this case the Petition has been filed under Sections 397, 398 read with Section 402 of the Companies Act, 1956 for the alleged acts of oppression and mismanagement on the part of the Respondents and the same is pending for adjudication. In the meantime. the present Company Application has been filed mentioning therein that during the course of first hearing on the issue of interim relief, the Respondents had disclosed before this Hon'ble Board that there Is no asset in the Company and the same was recorded in Order dated 08.02.2013 passed by this Hon'ble Board. Subsequently, in the reply to the Petition, the Respondents have categorically admitted disposal of the immovable asset of the Company without giving any material details of such disposal or filing any documents relating to such transactions. The Applicant (Petitioner) has alleged that such disposal is behind the back of the Petitioner and has been done in the most arbitrary and illegal manner without knowledge and participation of the Petitioner and the asset/property of the Company has been sold off at an artificially depressed price and even below the circle rates prevailing in the area much less the market rates of the property. Consequently, the sale transaction has been done to defraud the Petitioner and deprive him from his valuable individual rights and interests as a shareholder in the Company, Vide this present Application, the Petitioner seeks to amend the Company Petition by adding/ incorporating the necessary prayer for setting aside the alleged and illegal sale of asset/ property of the Company for the proper determination of real question raised to avoid multiplicity of proceedings since fact of said sale was not known to the Petitioner before or at the time of filing the present Petition. Apart from this, the Petitioner also seeks to implead proposed Respondent No 4 (alleged buyer of the asset/property of the Company) as a necessary party since the same is also consequential to the amendment sought herein. Lastly, it has been submitted that the Petitioner shall suffer irreparable loss and injury if amendment and impleadment sought is not allowed. On the other side, the amendment sought shall not cause any prejudice or defeat any right of the Respondents but is necessary for the purpose of determining the real question in controversy and dependent on the present proceedings between the parties.

2. In the reply, the Respondent Advocate stated that the Sale deed dated 26.10.2012 is a registered document transferring/ creating rights and interest in property in favour of a third party for consideration and the relief of setting aside and declaration of such registered document as null and void cannot be granted by any Court or Tribunal including Company Law Board in any summary proceedings. In fact, such jurisdiction is exclusively vested only with the Principal Civil Court of Original Jurisdiction and that too after detailed trial. Further, Respondent Advocate has pleaded that the provisions of Regulation 46 relates to amendment of any defect or error in any proceeding before it whereas the amendment sought by way of the present application is not for any defect or error but for ulterior purposes with malafide intention to change the nature of the case and obtaining order in most clandestine manner by misleading this Hon'ble Board. Further, it is well established law by catena of judgments of the Hon'ble apex court that the inherent powers of the court as is in Regulation 44 could only be invoked for the purposes for which there is no special provisions in the law governing procedure and that too in the interest of justice. Likewise. it is specifically provided in proviso to Order 6 Rule 17 that no amendment in the pleading shall be allowed after the trial has commenced unless the court comes to the conclusion that in spite of due diligence, the party could not have raised the matter before the commencement of trial. However, it is "a matter of record that the sale deed was executed on 26.10.2012 and the Company Petition was filed and came up for mentioning for the first time on 31,01.2013. It has been alleged that by way of present application, the Petitioner is attempting to change the cause of action which is not permitted under Order 6 Rule 17 and seek relief which is alien to the provisions of the Companies Act, 1956. By seeking the proposed' amendment, the Petitioner is not only changing the nature of the case (from Company Petition to Suit for Declaration) but even changing the cause of a on and seeking relief which is not permitted in the Company Petition. Lastly. it as been stated that the present Company Application for impleading Mr. Vijay Kumar Verrna as Respondent No 4 is not maintainable as the Company Petition has been filed under Section 397/398 of the Companies Act. 1956, whereas the said Mr. Vijay Kumar Verma is neither a shareholder nor a Director in the Respondent No 3 Company.

3. The Petitioner Advocate filed the Rejoinder on 10.07.2013 stating therein that this Hon'ble Board has the necessary powers to call for the production of documents necessary for the adjudication of the matter in dispute. Further, it has been emphasised that the Petitioner has categorically stated the reasons for requiring the evidence/ information as the basic contention of the Petitioner is that the property of the Company has been sold without his knowledge and without the participation of the Petitioner who is the only other shareholder and Director in the Company. Under these circumstances, the Respondent No 1 could not have dealt with the property without the active participation of the Petitioner. In fact. the Respondent has failed to provide even the basic details as to the price at which the sale has been made, the date of the decision to dispose of the property, the need for disposing of the property and the necessity to dispose of the property. Consequently, the Respondents cannot take the benefit of their own wrong and avoid placing on record the documents for the sale of the property. It has also been contended that any meeting of Directors and shareholders without the participation of the Petitioner is null and void. It has been alleged that the Respondent No 3 is misinterpreting the facts and is completely avoiding the fact that the Respondents have without following the process of law and also, with a malafide intention of causing wrongful loss and harm to the Petitioner had disposed of the property of the company without there being any cogent cause. Further, the averments of making payment of Rs. 11 lakhs for 10.000 equity shares of Rs. 10/- each and disposing of the property in October 2012 is yet another attempt by the Respondents to misinterpret the facts. The Petitioner Advocate has also stated that the Petitioners have not assailed the tact of purchasing the equity shares but the sale of the property which has been siphoned of by showing a sham and nominal transaction in respect of the sale. The Petitioner Advocate has clearly denied that the Petitioner has under his power/possession/custody of all the relevant documents and being in such a position has not filed the same before this Hon'ble Board, Not only this, the Petitioner was not even having digital signatures which is essential for filing of any document with the Registrar of Companies and he was also not a signatory to the bank accounts being maintained by the Company.

4. The Petitioner Advocate argued that the Petitioner came to know about the sale of the property in question only during the course of proceedings. As a matter of fact, the alleged sale of property in question through sale deed dated 26.10.2012 is sham and nominal transaction at the first place and same has a continuing effect as it is a part of course of oppressive and prejudicial act/ conduct of the Respondent. In regard to the claim of the Respondent that the sale of the property of the Company was finalised some time in May-June 2012, it has been pleaded that neither any specific date has been given nor any Agreement to Sell has been placed on record to show such finalisation of sale. Apart form this. it has been alleged that without receiving any earnest money from the buyer, the keys and possession were handed over to the buyer 6 months prior to receiving of payment. Besides, it has also been alleged that the Respondents have made a contrary document in the shape of Resolution of the Board dated 18.10.2012 whereby Respondent No 2 was authorised to finalise the terms and conditions with the Buyer and if this Resolution is believed to be true, then how come the stamp duty was paid on '6.10.2012 by the proposed impleaded party i.e. buyer Shri Vijay Verma. In support of his contention, the Petitioner Advocate has cited the case of Das Lagerwey Windturbine Ltd. and Mr. A. Vellayan v. Cynosure Investments Pvt. Ltd. (2004, 122 Compcas 721 CLB) in which this Hon'ble Board held that

"The question of either striking out or adding a party to a proceeding to enable the Judicial Authority to effectually and completely adjudicate upon and settle the issues involved must be considered in the light of the principles of the provisions of Order 1 Rule 10 (2) of the Civil Procedure Code, 1908. The Apex Court in Municipal Corporation of Greater Bombay (Supra), while considering the question of impleadment of a party laid down, the following essential requirements

A necessary party is one without whom no order can be made effectively. A proper party is one in whose absence an effective order can be made. but whose presence is necessary for a complete and final decision on the question involved in the proceeding.

A party must be directly or legally interested in the subject matter of the litigation. i.e. he can say that the litigation may lead to a result, which will affect him legally that is by curtailing his legal rights.

Keeping the above tests in mind, the application of the Respondents No 5 & 6 shall be decided The main issue under dispute is that the Respondent No 2,3 and 4 committed fraud in connivance with the Respondents 5 & 6, thereby the assets. profits. business etc. belonging to the first Respondent Company where smuggled away in favour of third parties, ultimately reducing the Company to be a defunct company."

Further to this, the Hon'ble Supreme Court in Vidhur Impex and Traders Pvt Ltd v. Tosh Apartments Pvt Ltd 2012 (8) SCC 384 had laid down the broad principles governing the disposal of application for impleadment as under :

"Para 36 : Though there is apparent conflict in the observations made in some of the aforementioned judgements, the broad principles which should govern disposal of an application for impeladment are :

a. The Court can, at any stage of the proceedings, either on an application made by the parties or otherwise, direct impleadment of any person as party. who ought to have been joined as Plaintiff or Defendant or whose presence before the Court is necessary for effective and complete adjudication of the issues involved in the Suit.

b. A necessary party is the person who ought to be joined as party to the Suit and in whose absence an effective decree cannot be passed by the Court.

c. A proper party is a person whose presence would enable the Court to completely, effectively and properly adjudicate upon all matters and issues, though he may not be a person in favour of or against whom a decree is to be made.

d. If a person is not found to be a proper or necessary party, the Court does not have the jurisdiction to order his impleadment against the wishes of the Plaintiff.

e. Ina Suit for specific performance, the Court can order impleadment of a purchaser whose conduct is above board, and who files Application for being joined as party within reasonable time of his acquiring knowledge about the pending litigation."

5. The Advocate for Respondents No 1 & 3 extended the arguments that at the time of notice on the Petition on 08.02.2013, the Respondents had informed t is Hon'ble Board that there is no asset or property in the Respondent No 3 Company and on notice of the Petition, the Respondents have filed their reply to the Company Petition on 08.03.2013 and rejoinder thereon was filed by the Petitioner on 05.04.2013 wherein the Petitioner filed even copies of certified true copy of the documents of title of property of Respondent No 3 as obtained from the office of Sub Registrar of Assurances which demonstrate that the copies were applied on 30.10.2012. At the time of application for certified copy of documents before the office of Sub Registrar of Assurances, the property bearing No 402, Chanana Complex, Hardhyan Singh Road, Karol Bagh, New Delhi-110005 already stood transferred from the Respondent No 3 company to a third outside party for consideration through valid and registered sale deed dated 26.10.2012 in the office and records of Sub Registrar of Assurances. Here. it is pertinent to point out that the record of Sub Registrar of Assurance was inspected by the Petitioner on 30.10.2012 before making the application for certified copy of title and therefore. the Petitioner was well aware of the fact on 30.10.2012 itself that the property of the company was sold and transferred through registered sale deed and is no longer in the name of the Respondent No 3 Company.

It has also been argued that Mr. Vijay Kumar Verma is neither a shareholder nor a director of the Respondent No 3 company and is not connected with the Respondent No 3 company or other Respondents in any manner. In fact, he is an outsider having entered into an independent sole isolated contract with the Respondent No 3 company and has purchased the property through a registered sale deed dated 26.10.2012 against lawful consideration in accordance with the provisions of Indian Registration Act and Indian Stamp Act i.e. much prior to the filing of the Petition and as such his contract with the Company is a past and concluded transaction even prior to filing of Petition. Vide the present Company Application, the Petitioner is indirectly seeking relief of declaration/ cancellation of registered sale deed which cannot be done without complete trial and evidence as prescribed under the Code of Cyril Procedure, Further, by seeking proposed amendment, the Petitioner is not only changing the nature of the case (from Company Petition to Suit for Declaration) but even changing the cause of action and seeking relief which is not permitted in the Company Petition under Section 397/398 of the Companies Act, 1956. Lastly, it has been argued that it is admitted case of the Petitioner himself that the Respondent No 3 is a dormant company having no business and for purpose of oppression and mismanagement there must be some activity in the Company -

6. Having considered the averments made in the Company Petition, Company Application, reply, rejoinder and arguments (oral and written), it is observed that the Respondent No 3 is a dormant company without any business activities and only major transaction carried out in the company relates to sale of property to Shri Vijay Kumar Verma vide sale deed dated 26.10.2012. There is no pleading on record as to what business purpose was to be served out of the proceeds received on sale of the property by the Company. Further, in the absence of business activities. the appointment of Respondent No 2 as Director enhances suspicion in regard to the sale of the property as to whether the said sale was really in the interest of the company. On one side, the Petitioner Advocate has alleged that the sale of the property was done behind the back of the Petitioner, in most arbitrary and illegal manner, without the knowledge and participation of the Petitioner. and the assets/property of the Company has been sold of at an artificially depressed price and even below the circle rate prevailing in the area much less the rate of property. On the other side, there is no pleading as to the business activities taken up by the Company after getting sale proceeds. All this indicates that the property of the company has been

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sold perhaps to extend some financial gains to the buyer. Under these facts and circumstances, it is viewed that the buyer of the property be given opportunity to explain his position and thereby, the allegation of defrauding the Petitioner may be looked into It is also relevant to note that certainly, the sale deed dated 26.10.2012 is a registered document transferring/creating rights and interests in property in favour of third party for consideration and icy the interest of justice, the proposed Respondent, Shri Vijay Kumar Verma, is a necessary and proper party to clarify/ explain his position especially the consideration for the property and purchase of Stamp Duty prior to passing of the Board Resolution. The ratio as decided in the case of Vidhur lmpex and Traders Pvt Ltd v. Tosh Apartments Pvt Ltd 2012 (8) SCC 384 is very relevant and the same is reproduced below? The Court can, at any stage of the proceedings, either on an application made by the parties or otherwise, direct impleadment of any person as party, who ought to have been joined as Plaintiff or Defendant or whose presence before the Court is necessary for effective and complete adjudication of the issues involved in the Suit'. In view of the observation and legal position stated supra, I am of the considered view that the proposed Respondent, Shri Vijay Kumar Verma, is a necessary and proper party in the present proceedings and hence, the prayers for impleading of Shri Vijay Kumar Verma. S/O Shri Harikrishan, Resident of DDA Plot No 208, Site No 1, Shankar Road, New Rajinder Nagar, New Delhi - 110 060, as Respondent No 4 and amendment in the Company Petition, are hereby allowed. 7. The Company Application No 29/2013 is disposed of accordingly 8. No Order as to cost.
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