Case: 1. Nukala Nageshwara Rao, 2. Bharat Circuits P. Ltd. Vs 1. Bharat Circuits P. Ltd., 2. Nukala Nageshwara Rao. Company Law Board

Party Name:1. Nukala Nageshwara Rao, 2. Bharat Circuits P. Ltd. Vs 1. Bharat Circuits P. Ltd., 2. Nukala Nageshwara Rao
Judges:K.K. Balu, Vice-Chairman
Issue:Company Law
Citation:[2010] 154 CompCas 26 (CLB)
Judgement Date:August 31, 2009
Court:Company Law Board
 
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Order:

K.K. Balu, Vice-Chairman, (Additional Principal Bench, Chennai)

  1. This Bench by an order dated November 4, 2008, made in C.P. No. 63 of 2006 Nukala Nageswara Rao v. Bharat Circuits P. Ltd. [2009] 148 Comp Cas 341, with a view to bringing to an end the acts complained of in the affairs of M/s. Bharat Circuits P. Ltd. ("the company"), and regulating the conduct of its affairs, directed the petitioner to exit from the company for a total consideration of Rs. 57.50 lakhs together with simple interest at 8 per cent, payable in six instalments by the respondents, the last of which was payable by April 30, 2009, upon which the petitioner shall forward to the respondents, the original share certificates in relation to his equity shares of the company along with signed blank instrument of transfer. The petitioner has come forward with C.A. No. 12 of 2009 for enforcing the aforesaid order, under Section 634A of the Companies Act, 1956 ("the Act"), in view of non-payment of any instalment amount by the second respondent, while the latter is seeking to set aside the Company Law Board's order by reopening the company petition for adjudication of the disputes for the reasons elaborated in C.A. No. 17 of 2009, after condoning a delay of 130 days, as claimed in C.A. No. 16 of 2009, in support of which Shri A.V. Gopala Rao, learned Counsel, submitted as under:

    The respondents have preferred an appeal against the Company Law Board order (Company Appeal No. 33 of 2008) before the High Court of Andhra Pradesh, which is pending adjudication. At this stage, the petitioner cannot exercise pressurising techniques with a mala fide design to corner the respondents for illegal gains.

    The petitioner and his son indulged in writing complaints to the bankers, Registrar of Companies, Reserve Bank of India, police authorities, etc., against the interest of the company, even during the pendency of the present proceedings, which resulted in grave hardship faced by the company. The functioning of the company has become redundant and is incurring losses without any support from the banks, due to prejudicial acts of the petitioner. The petitioner wrote to Punjab National Bank, containing false allegations, which caused undue hardship to the company. Union Bank of India had initially sanctioned a loan of Rs. 3.15 crores, but due to the petitioner's unlawful action, the bank stopped disbursing the sanctioned loan abruptly, except releasing a sum of Rs. 80 lakhs for procuring the machinery. The bank further initiated recovery action against the company for the outstanding dues, forcing it to foreclose the loan amount, with great difficulties, by availing of loans from outsiders at higher rate of interest. The complaint registered by the police authorities (Crime No. 283 of 2008) at the instance of the petitioner against the respondents came to be closed.

    The petitioner, apart from investing in equity shares of the company accounting for Rs. 40,000 extended an unsecured loan of Rs. 13 lakhs only, as reflected in the books of account of the company. The petitioner is taking undue advantage of his meagre shareholding in the company and using the legal machinery as a tool to blackmail the respondents to make unlawful gains. The petitioner is causing all sorts of hurdles, thereby preventing the company from reaching the optimum level of commercial production. The petitioner, appointed as director in May 2006, failed to discharge his functions, but acted detrimental to the interests of the company, which resulted in his removal from the office of director on October 30, 2006, in accordance with due processes of law.

    The Company Law Board passed the final order, without proof of oppression at the instance of the respondents and despite the order dated April 29, 2008, that the matter would be heard on June 10, 2008, since the same was not settled between the parties. The petitioner suppressing the said order harped upon the second respondent's settlement offer of Rs. 57.50 lakhs made on February 15, 2008. The compromise memo filed on July 10, 2008, before the Bench has not been signed by the second respondent or his counsel. It is filed without the knowledge and consent of the second respondent and hence it is not binding on the second respondent and the order passed...

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