Yogendra Pal Jain & Anr vs South Eastern Carriers Pvt Ltd

Rohit Kapoor, Member (Judicial)

The court convened by video conference today.

The Company Petition No. 42/KB/2016 is a Company Petition filed by Mr. Yogendra Pal Jain and Usha Kiran Jain, being the Petitioners, under Section 235, 397, 398, 399, 402, 406 and 407 of the Companies Act, 1956 against South Eastern Carriers Private Limited and Ors., being the Respondents.

The contention of the Applicants is that the Respondent No. 1 Co. namely South Eastern Carriers Pvt. Ltd. was started in the year 1974 by Late Shri Ram Kumar Gupta as Managing Director along with his son a) Shri Ravindra Kumar Gupta (Respondent no. 2 ) the whole time Director b) his son-in-law Shri Yogendra Pal Jain (the Petitioner No. 1) the Whole Time Director c) and his younger son Mr. Arun Gupta the whole time Director ( the Respondent No. 5 ). Thus, this company was and has always been a purely family owned company.

The Applicants contend that in 2003, the Founder late Shri Ram Kumar Gupta expired and after passing away of Mr. Ram Kumar Gupta, his elder son Ravindra Kumar Gupta took over as the Chairman, his son in law , the Petitioner No. 1 Yogendra Pal Jain took over as the Managing Director, his younger son Arun Gupta the Respondent No. 5 as the whole time Director . Later on Tanmay Gupta, the son of Ravindra Kumar Gupta and Siddhartha Jain ( Respondent No. 9) the son of the Petitioner No. 1 were also inducted as the Whole Time Directors.

It is contended that the Shareholding pattern of the Co. has been :

a) Ravindra Kumar Gupta and his immediate family : 40%;

b) Arun Gupta ( the respondent 5 ) and his immediate family : 40%;

c) Yogendra Pal Jain ( the petitioner No. 1 ) and his immediate family: 20%

It is further contended that in 2005, Petitioner No. 1 became the Managing Director of the company. Sometime during 20l4 - 2015 Shri Ravindra Gupta became the extreme case of Alzheimer and thus was totally incapacitated. Though on paper he continued to be the Chairman of the Respondent No. 1 co. but de facto his son Mr. Tanmay Gupta replaced him.

According to the Ld. Counsel for Petitioner No. 1, upon this development, the Respondent No. 5 Mr. Arun Gupta (the younger brother of Ravindra Kumar Gupta) and Tanmay Gupta (the son of Ravindra Kumar Gupta) both wanted to be the Managing Director/s of the Respondent No. I Company and wanted to hold the reign of the Respondent No. 1 Company instead of the Petitioner No. l. on the plea that the families of both of them held 80% against the Petitioner No. l's 20%. In order to achieve this end, both of them entered into an unholy alliance and entered into the memorandum of Understanding dated 23rd March, 2016 in order to totally nullify the Authority of the Petitioner No. 1. In consequence of this development early in year 2016, the Respondent No. 1 company at the behest of the Respondent No. 2 and Respondent No. 5 issued a notice for holding an Extra Ordinary General Meeting to oust and/or remove the petitioner No. 1 and his son being the Respondent No. 9 as Managing Director and Director of the Respondent No. 1 company. Pursuant to this notice the petitioners filed the CP No. 42/KB/2016 under Sections 235, 397, 398, 402, 406 and 407 of the Companies Act, 1956. When the petition was heard on 3rd May, 2016 the Hon’ble Company Law Board (CLB) passed an interim order thereby directing the Respondent No. 1 to maintain status quo as to the shareholding and further restraining the Respondent No. 1 company from removing the petitioner No. 1 and the Respondent no. 5 as Managing Director and the Director of the Respondent. No. 1 Company till the final disposal of the Petition CP 42/KB/2016.

The Ld. Counsel on behalf of Petitioner No. 1 submits that even after the CLB order dated 3rd May, 2016 was passed, Respondent No. 5 forcibly and violently barred the entry of Petitioner No. 1 and Respondent no. 9 to the premises of the head office of the Respondent No. 1 Company and also removed the official email ID's of both of them since 2016. Then the Petitioner No. 1 and the Respondent No. 9 were removed as Managing Director and Director respectively by the Respondent no. 5 from the Respondent No. 1 company with effect from June 6, 2017 on purely cooked up charges and forged records of the Board Meetings with impunity despite being the above Order of the Hon'ble CLB and Hon’ble NCLT being operative.

Thereafter, Petitioner No.1 filed CA 453/2016 for oppression and mismanagement by Respondents No. 2 to 7. On 18.08.2016, this Tribunal directed to allow Petitioner No.1 and Respondent No. 9 to have access to swipe card in order to enter Respondent No.1 Company and their email ids were activated and that Petitioner No.1 and Respondent No. 9 to get similar salaries as other directors.

Thereafter, Petitioner No.1 filed CA 165/2018 (and contempt application 487 of 2017). On 1.10.2019, this Tribunal ordered the appointment of Mr. DC Agarwal as special officer to investigate the position of the business and to supervise the conduct of the business. National Company Law Tribunal further ordered that the 1st Board of Director meeting shall be conducted within 15 days from date of special officer assuming charge and to submit his report on all claims and current state of affairs of Respondent No. 1 Company within 60 days. It was also ordered that the Company Law Board’s decision dated 3.05.2016 and this Tribunal decision dated 18.08.2016 will remain in force till further orders. However, no specific direction for reinstatement of Petitioner No.1 and Respondent No. 9 as directors was given.

Accordingly, COMP. APPL. 1584/KB/2019, being an application under Section 235, 397, 398, 399, 4O2, 406 and 407 of the Companies Act, 1956 has been filed on 7.11.2019 by Mr. Yogendra Pal Jain and Usha Kiran Jain, being the Petitioners in CP No. 42/KB/2016 seeking the following reliefs:

a) Directions be given to the Respondent No. 1 to reinstate the Petitioner No. 1 and Respondent No. 9 as the directors of the Respondent No. 1 Company immediately;

b) Directions be given to the Special Officer appointed by the Hon'ble Tribunal to file necessary forms with the Registrar of Charges regarding induction of Petitioner No. 1 and Respondent No. 9 as directors of the said Respondent No. I company;

c) Directions be given to the Respondent No. 1 to remove the additional Directors appointed by the Respondent No. 5;

Additionally, the Petitioners have filed COMP. APPL. 122/KB/2021 being an application under Section 235, 397, 398, 399, 402, 406 and 407 of the Companies Act, 1956 on 16.07.2021,, hereby seeking the following reliefs:

a) Pass necessary orders declaring Form DIR 12 dated 6th June, 20l7 filed by the Respondent No. 5 on behalf of the Respondent Company as null and void and directing the Respondent No. 10 to correct and/or modify their records disclosing the names of the Petitioner No. 1 and Respondent No. 9 as Managing Director and the Director of the Company.

b) Pass necessary orders declaring the appointment of additional directors subsequent to removal of the petitioner No. 1 and the Respondent No. 9 as the Directors of the respondent Company as null and void and thereby directing the Respondent No. 10 to correct and/or modify their records by removing the names of the additional directors.

c) Pass necessary orders declaring the meeting dated 6th June, 2Ol7 held, by Respondent No. 5 for removal of the petitioner No.1 and Respondent No. 9 from the Respondent Company and the appointment of additional directors in the Respondent No. 1 as null and void and as well as declare all further board meetings held of the respondent Company as null and void.

Heard the Ld. Counsel for the Petitioners and the Ld. Counsel for the Respondents and perused the record.

Section 196 of the Companies Act, 2013 provides for the appointment of Managing Director, Whole- Time Director or Manager. The provision of section 196(3) is produced hereinafter:

“(3) No company shall appoint or continue the employment of any person as managing director, whole-time director or manager who —

(a) is below the age of twenty-one years or has attained the age of seventy years: Provided that appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person;

1[Provided further that where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made.]

(b) is an undischarged insolvent or has at any time been adjudged as an insolvent;

(c) has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or

(d) has at any time been convicted by a court of an offence and sentenced for a period of more than six months.”

The Ld. Counsel for the Petitioners has relied on the judgement in the matter of Sridhar Sundararajan vs. Ultramarine & Pigments Limited [NOTICE OF MOTION (L) NO. 434 OF 2015 in SUIT (L) NO. 146 OF 2015], wherein it was held that:

“ Correctly read, therefore, Section 196(3) does not operate to interrupt the appointment of any Director made prior to the coming into force of the 2013 Act, even in a case where the Managing Director crosses the age of 70 years during the term of his appointment; and it also does not interrupt the appointment of a Managing Director appointed after 1st April 2014 where at the date of such appointment or re-appointment the Managing Director was below the age of 70 years but crossed that age during his tenure. There is no mid-tenure cessation of Managing Directorship as a result of Section 196(3)(a). All that Section 196(3)(a) does is to sound a note of caution in the public interest and to demand from the company a special resolution when a person who has already crossed the age of 70 at the date is proposed to be appointed or re-appointed. The word 'continue', therefore, must be read contextually”

The instant application has been filed by One Shri Yogendra pal, and Smt. Usha Kiran Jain. Petitioner No. 2 was never a director of the Company. Admittedly at present, the age of the petitioner No. 1 is beyond 70 years and he has mentioned his age as 78 years in the record available before us.

The applicant seeks to place reliance on the above referred judgment with a view to drive home the point that notwithstanding the age as provided in Section 196(3) of Companies Act, 2013, he is entitled to the relief prayed for by him in the present application. We have considered the judgment of the Hon’ble High Court relied upon by the Ld. Counsel appearing for Petitioner No. 1. It is an admitted position in this Company Application No. 112 (KB) 2021 that even though petitioner No. 1 became the Managing Director in 2005, he is not currently holding the position of managing director or director. Therefore, on this score, the judgment referred by the Ld. Counsel for the petitioner No. 1 is not applicable in the present case as it is not the case of the petitioner No. 1 that he continues uninterruptedly as managing director as on the date of coming into force of Section 196 (3) of Companies Act, 2013.

Therefore, the relief prayed by the petitioner No. 1 cannot be granted by this Adjudicating Authority in view of the legal position stated hereinabove and hence we find that we have no option except to dismiss COMP. APPL. 1584/KB/2019 as not maintainable.

In view of the findings arrived at by us in COMP. APPL. 1584/KB/2019 hereinabove the COMP APPL. 112/KB/2019 as a necessary consequence is also liable to be dismissed.

For the foregoing reasons, CP No. 42/KB/2016 is also not maintainable and the same is dismissed along with all the connected IAs.

The registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

Certified Copy of this order may be issues, if applied for, upon compliance of all requisite formalities.