| SooperKanoon Citation | sooperkanoon.com/48134 |
| Court | Company Law Board CLB |
| Decided On | Jan-22-2007 |
| Judge | K Balu |
| Reported in | (2007)141CompCas157 |
| Appellant | Sunitha Gupta |
| Respondent | Devendra Gupta and ors. |
Inspite of having performed all the obligations contained in the MOU dated 08.01.2005. the petitioner committed breach of certain terms of the MOU. Thereafter. Sanja} Gupta was constrained to file a suit in C.S. No. 498 of 2005 for specific performance of the MOU dated 08.01.2005 on the file of High Court of Madras. The said suit is pending. The petitioner who was put in possession of Hotel Picnic Plaza, Mylapore, was required to transfer all his shares in the Company. Despite the MOU dated 08.01.2005. the petitioner was creating several hindrances to Sanjay Gupta as well as Sunita Gupta and at the timely intervention of the well wishers, the parties reached yet another arrangement as per the MOU dated 10.10.2005.
Under this MOU dated 10.10.2005 also the petitioner abandoned his rights over the Company and Sanjay Gupta was put in management of the hotel. Pursuant to the MOU dated 10.10.2005. Sanjay Gupta and the petitioner consented for passing an order dated 14.10.2005.
wherein the Company was entrusted to Sanjay Gupta and Hotel Picnic Plaza. Mylapore was entrusted to the petitioner with effect from 15.10.2005 Sanjay Gupta has been in executive management of the Company ever since 15.10.2005 and invested substantial amounts for renovating the hotel and carrying out several works for the beneficial interest of the Company and now the hotel business started yielding substantial profits. Thus, the MOU has been substantially acted upon by the parties. The company petition reached finality by virtue of the MOU. and therefore the company petition has become infructuous and no longer maintainable, as claimed in C.A. No. 181 of 2006. Consequently, the prayer of the petitioner made in C.A. No. 121 of 2006 for appointment of a Commissioner to supervise the affairs of the Company must be declined. Nevertheless, the petitioner preferred an appeal against the consent order dated 14.10.2005 before the High Court of Madras in order to harass Sanjay Gupta & Sunita Gupta. Sanjay Gupta is ready and willing to extend am assistance with regard to Mylapore Hotel business including legal steps required to be taken for termination of the licence in respect of the licenced premises. In view of the fact that (a) rights of the parties have culminated into the MOUs dated 08.01.2005 and 10.10.2005: (b) suit in C.S. No. 498 of 2005 has been filed for specific performance of the MOU dated 08.01.2005: and (c) petitioner has derived benefits under the MOU dated 10.10.2005 and the consent order dated 14.10.2005. the issues raised in the company petition cannot be adjudicated by the CLB. Therefore, the petitioner is liable to transfer all his shares held in the Company. Sanjay Gupta has performed all the obligations under the MOU but the petitioner has failed to transfer the shares. If the company petition is proceeded with the CLB is determining the civil suit pending adjudication before the High Court. Sanjay Gupta is willing to withdraw C.P. No. 57 of 2004 filed by him provided the petitioner discharges his obligations under the MOIL. If Sanjay Gupta succeeds, in the High Court Suit, the company petition (C.P. No. 56 of 2004) will have to be dismissed. In view of this, this Bench may stay all further proceedings in the present company petition, pending disposal of the suit in C.S. No. 498 of 2005 on the file of the High Court of Madras, in the light of the decision in Swagath Marine Products Private Ltd. v. K. Muthusamy (2006) 134 CC 182, as sought in C.A. No. 182 of 2006. Furthermore, the petitioner has filed a civil suit in December 2006 before the High Court of Judicature at Madras (C.S. No. 14 of 2007) for. inter-alia.
appointment of an Advocate-Commissioner to maintain and administer the entire affairs of the hotel business run by the Company and the Hotel Picnic Plaza, Mylapore. which is being contested by Sanjay Gupta and therefore, the application in C.A. No. 121 of 2006 claiming the very same relief for appointment of a Commissioner by the CLB to manage the Company's affairs must be declined.
2. Shri Sirish. learned Counsel opposed the prayer made in C.A. No. 181 of 2006 and C.A. No. 182 of 2006 for the following, among other, reasons; Sunita Gupta has not chosen to file counter to the present company petition for the past more than two years and never seriously contested the proceedings, but is taking time from time to time so as to protract the proceedings. Therefore, the defence of Sunita Gupta which may be taken in the mam petition should be rejected as held in Dunkha Devi Agarwal v. Tara Properties (P) Ltd. Sunita Gupta is not a party to the MOU dated 10.10.2005. which superceded the MOU dated 08.01.2005. The Order of this Bench made on 14.10.2005 came to be passed on the basis of the MOU dated 10.10.2005.
pursuant to which Sanjay Gupta took the management of the Company. At the same time. Sanjay Gupta in connivance with his wife Sunita Gupta played a fraud upon his mother thereby forcing her to enter into a lease and licence agreement with one Shri. Chelladurai. in respect of Hotel Picnic Plaza. Mylapore and therefore, the petitioner is deprived of exercising his control over Hotel Picnic Plaza. Furthermore, the MOU dated 10.10.2005 has not been acted upon and the parties have flouted the terms and conditions of the MOU dated 10.10.2005. The only intention of Sanjay Gupta is to snatch away the business and amass wealth in an illegal manner. Clause 5 of the MOU dealing with withdrawal of the proceedings before the High Court and CLB is subject to clause 4 which stipulates that the land transfer/share transfer/partnership transfer will take effect around April 2006. This has not so far been taken place, in which case the company petition cannot be deemed to have become infructuous. as claimed by Sunita Gupta in the company application (C.A. No. 181 of 2006). By an order dated 05.01.2005. Mr. N. Nadanasabapathy was appointed to manage the affairs of the Company. However, the management of the Company was handed over on 15.10.2005 to Sanjay Gupta pursuant to the order made on 14.10.2005 on the basis of the MOU dated 10.10.2005. Sanjay Gupta failed to adhere to the terms of the MOU dated 10.10.2005 and failed to fulfil the obligations thereby causing immense prejudice to the petitioner. The petitioner could not take physical possession and actual control of Hotel Picnic Plaza, Mylapore, in terms of the MOU. since the licencee namely Shri. Chelladurai is in enjoyment of Hotel Picnic Plaza. At the same time. Sanjay Gupta, after assuming control and management of the Company, is mismanaging its affairs and making unlawful gains to the detriment of the petitioner and other shareholders. In these circumstances, the Commissioner, appointed earlier by the Bench may be entrusted with the management of the Company as prayed in C.A. No. 121 of 2006. The civil suit before the High Court is no way connected with the grievances made in the company petition and therefore, the prayer sought before the CLB is capable of being granted in the present proceedings, in which case the CLB is competent to proceed with the hearing of the company petition, as held in Sporting Pastime India Limited v. Kasthuri & Sons Limited 2006 (4) CTC 397. The Commissioner's report establishes the misappropriation of funds resorted to by Sanjay Gupta. If the prayer made in C.A. No. 182 of 2006 is granted, in favor of Sanjay Gupta, the purpose of C.P. No. 57 of 2004 filed by him will remain achieved, causing immense prejudice to the petitioner herein. By virtue of the order dated 27.07.2006 and the subsequent orders, it has been directed that the company petition will be heard, upon which the arguments of the petitioner have been concluded and Sunita Gupta, therefore, cannot seek for dismissal of the company petition, as having become infructuous. Similarly, the application for stay of the present proceedings pending disposal of the suit in C.S. No. 498 of 2005 is liable to be rejected.
3. I have considered the arguments of learned Counsel. The parties are common in all the applications and the issues raised therein are in relation to affairs of the same Company. In view of this, all the applications were heard together and disposed of by this common order.
The short issue before me is whether the company petition is liable to be dismissed as claimed in C.A. No. 181 of 2006 or stayed, pending disposal of the civil suit in O.S. No. 498 of 2005 on the file of High Court of Madras, in terms of C.A. No. 182 of 2006. in the facts and circumstances of the present case.
It is on record that the petitioner approached the CLB. in December.
2004. invoking the jurisdiction of Sections 397 & 398. on account of a series of alleged acts of oppression and mismanagement in the affairs of the Company at the instance of. among others, his brother, mother and wife, who are the respondents 2, 3 & 5 in the company petition. The parties, with a view to end various disputes and differences entered into a Memorandum, of Understanding, subsequent to filing of the present company petition, on 08.01.2005. whereby Sanjay Gupta was to gain complete control of the Company to the exclusion of the petitioner and in lieu of the Company, the petitioner was to get absolutely the business of Hotel Picnic Plaza. Mylapore. In view of serious disputes raised by the petitioner on the legal validity and enforcibility of the MOU, Sanjay Gupta filed a civil suit in C.S. No. 498 of 2005 on the file of the High Court of Judicature at Madras in May 2005 for specific performance of the MOU dated 08.01.2005, which is pending adjudication.
In the meanwhile, the petitioner and Sanjay Gupta entered into yet another MOU on 10.10.2005, in supercession of the earlier MOU dated 08.01.2005. which culminated into a consent order dated 14.10.2005. as unequivocally admitted by Shri Sirish. learned Counsel appearing for the petitioner. Accordingly, the parties agreed to. interalia. the following: (i) The business of the Picnic Park Hotels Private Limited along with the restaurants therein will be under the management of Sanjay Kumar Gupta with effect from 15.10.2005 at 11:00 a.m. Towards this end. the Commissioner appointed by this Bench will hand over the management of the Picnic Park Hotels Private Limited to Sanjay Kumar Gupta on 15.10.2005 at 11:00 a.m and obtain acknowledgement.: (ii) The business of the Hotel Picnic Plaza along with 30 rooms, licensed bar. restaurant and banquet halls will be under the management of Devendra Gupta, with effect from 15.10.2005 at 11:00 a.m.: (iii) Either of the parties shall not interfere with the business of the other party and shall not create any adverse interest over the respective businesses and rights of the parties: (iv) Devendra Gupta is at liberty to remove his personal belongings kept in the premises of the Picnic Park Hotels Private Limited in the presence of Sanjay Gupta or his authorised representative: (v) The Commissioner will render on account of all receipts and payments on account of the Picnic Park Hotels Private Limited from the date of his assumption of office till date by 24.10.2005.
furnishing copies to both the parties: (vi) The remuneration remaining, if any. of the Commissioner may be appropriated from the funds of the Company. The matter will be reviewed on 31.10.2005 at 10:30 a.m.
It is observed from the records that pursuant to the consent order dated 14.10.2005. Shri V. Nadanasabapathy, Deputy General Manager.
Syndicate Bank. (Retd.), Commissioner, appointed by this Bench and who was put in management of the day-to-day affairs of the Company in terms of the order dated 30.06.2005, handed over the management of the Company on 15.10.2005. to Sanjay Gupta, who has been henceforth in management of the Company. The petitioner removed wooden table, wooden chairs (four), telephone instrument, cash chest, air-conditioner, steel file rack and wooden cupboard from the hotel premises of the Company on 06.11.2005 and handed over the keys of the office room of the Company on the same day to Sanjay Gupta. Shri S. Chelladurai, is reportedly a licencee in respect of a portion of the Hotel Picnic Plaza, Mylapore.
by virtue of the Lease and Licence Agreement dated 01.11.2004 and therefore. Sanjay Gupta handed over to the petitioner (a) duplicate keys of the office room and restaurant in the ground floor of the Hotel Picnic Plaza on 04.11.2005; and (b) duplicate keys of room Nos. 5 to 8 and 10 to 14 at the first floor and duplicate keys of room nos 201 to 220 at the second floor on 05.11.2005. With the handing over of the duplicate keys, the possession of assets, namely. Hotel Picnic Plaza has been given to the petitioner, which is duly acknowledged by him.
These developments are reflected in various minutes of the proceedings of the Bench Officer, in whose presence the petitioner has taken constructive possession of the assets of Hotel Picnic Plaza, Mylapore.
Furthermore, this Bench by an order dated 14.11.2005 empowered the petitioner to collect, interalia, unpaid licence fee from the licencee.
The petitioner by his communication dated 25.11.2005 called upon the licencee on the strength of the orders dated 14.10.2005 & 14.11.2005 to settle the arrears of licence fee and clear Provident Fund. Employees State Insurance and other statutory liabilities, which has been followed by a telegram on 31.01.2006 to fulfil the obligations under the Lease and Licence Agreement. The petitioner sought the intervention of this Bench in May, 2006 for appointment of a. receiver to take possession of the Hotel Picnic Plaza. Mylapore on account of failure of the licencee to honour the commitments under the Lease and Licence Agreement, which was however declined on the ground that petitioner was to take appropriate action in a competent court of law against the licencee to enforce the contractual obligations. Thus, both the petitioner and Sanjay Gupta have acted upon the MOU dated 10.10.2005 in so far as the Company and Hotel Picnic Plaza. Mylapore are concerned.
The MOU containing default clause provides thus "That any other dispute arising in respect of above properties/business premises will be settled among themselves (clause 10). In view of this, the petitioner is free to take appropriate remedial measures on account of the alleged default as envisaged in clause 4 of the MOU dated 10.10.2005. namely non-transfer of the land/share transfer/partnership in April 2006. The petitioner, on the other hand, is not justified in seeking the appointment of a Commissioner to the Company, as urged in C.A. No. l21 of 2006.
It is far from doubt, that the orders dated 14.10.2005 and 14.11.2005 came to be passed with concurrence of the petitioner and Sanjay Gupta in terms of the MOU dated 10.10.2005. At this juncture, the reliefs claimed by the petitioner in the company petition assume relevance, which are as follows: (a) To declare that the Notice dated 03/12/2004 calling for the Board meeting dated 04/12/2004 is null and void.
(b)To declare that any resolution passed on the alleged Board Meeting dated 04/12/2004 as null and void and not binding the First respondent company and the petitioner herein (c) To declare that the respondents 3 to 5 are not directors of the First respondent company (d) For a Permanent Injunction restraining the respondents 2 to 5 from interfering with the management of the first respondent company.
(e) To direct the Second respondent to render true and proper accounts for the amounts taken away by him from September 2004 till date by producing day book, ledger and other account books of the first respondent company (f) To appoint an independent Chairman to preside over all board and other meetings of the company.
(g)To pass such other relief and order as this Hon'ble Tribunal may deem fit and proper on the facts and circumstances of the case and thus render justice, All the above reliefs, save the prayer seeking directions against Sanjay Gupta to render true and proper accounts for the amounts taken away by him since September, 2004, have become infructuous by virtue of the agreement dated 10.10.2005. The right of the petitioner against Sanjay Gupta for rendition of accounts, in my view, shall be deemed to have been waived on account of the MOU dated 10.10.2005 and the consequent consent orders acted upon by the parties to the agreement.
In these circumstances, the decision in Sporting Pastime India Limited v. Kasturi & Sons Limited (supra), wherein (a) an agreement for purchase of shares of the promoter came to be executed prior to filing of the petition before the CLB: and (b) applicability of Section 8 of the Arbitration and Conciliation Act, 1996 was considered, has no application to the facts and circumstances of the present case. The purported non-compliance with the terms of the MOU dated 10.10.2005 by Sanjay Gupta, as urged by the petitioner, can be agitated in C.S. No.498 of 2005. wherein the arrangement between the parties is under serious challenge. Similarly, the validity and enforceability of both the MOUs dated 08.01.2005 and 10.10.2005 are being challenged by the.
petitioner in C.S. No. 14 of 2007. The disputed facts, cause of action and vital documents before the High Court and the CLB being common, any decision by the CLB on the very same contentious issues relating to the arrangement reached between the contesting parties and the alleged breach thereof may result in conflicting decisions, which must, therefore, be avoided by the CLB, as laid down in Swagath Marine Products Private Limited v. K. Muthusamy (supra) In view of my foregoing conclusions, the proceedings of the present company petition must be stayed till disposal of the civil suit in C.S. No. 498 of 2005.
There is. however, no justification either for appointing a Commissioner for management of the day-to-day affairs of the Company.
contrary to the terms of the consent order dated 14.10.2005 as urged by the petitioner in C.A. No. 121 of 2006 or for dismissing the company petition, as claimed by Sunita Gupta in C.A. No. 181 of 2006. Ordered accordingly. With these directions, all the company applications stand disposed of.