matter of Shashi Prakash Khemka Versus NEPC Micon and others. Referring to this Judgement of Honble Supreme Court, the submission is that the old law as appearing in the matter of Ammonia Supplies Corporation (P) Ltd. Versus Modern Plastic Containers Pvt. Ltd. and others relied on by the NCLT in the Impugned Order, was no more good law.
17. According to the Counsel, the CCDs were converted contrary to the Articles of Association and there was no affirmative consent of the Company Appeal (AT) No.334 of 2018 Appellant for conversion of the CCDs, at the time of Board Meeting, and that the Board Meeting held was without proper quorum and thus, there was no sufficient cause for the Respondent No.2 Company to reflect in the Register of Members that securities had been issued in favour of the Appellant against the conversion of CCDs.
18. Against this, the learned Counsel for Respondents 1, 2, 7 and 8 (Contenting Respondents) supported the Impugned Order. According to the Counsel, the remedy with regard to CCDs for the Appellant was to resort to arbitration. As the Appellant had invoked the pledge, it had become 51% shareholder. The documents referred to and relied on by the Appellant, have been referred by the learned Counsel for Respondents also and it is stated that in view of the Appellant and Respondent No.13 exercising their rights vide communication dated 29th August, 2017 (Page 258) and letters dated 5th September, 2017 (Pages 265 267), the Respondent No.2 proceeded to call for meeting on 26th March, 2018, once the Company Petition filed by Respondent No.1 had been withdrawn and the actions taken were in compliance with the Orders passed by NCLT at the time of withdrawal and thus, Respondent No.2 could not be faulted with and there was sufficient cause for the Respondent No.2 to concert the CCDs into shares in favour of the Appellant.
19. It appears, and the learned Counsel for the Respondents accepted that copy of the Board Resolution dated 26th March, 2018 has not been put on record. The learned Counsel referred to the Memorandum of Company Appeal (AT) No.334 of 2018 Association to say that the Arbitration Act is applicable. The learned Counsel submitted that the Appeal deserved to be dismissed. According to the learned Counsel, the issues raised could not be dealt with and decided under Sections 59 and Section 430 of the Act will not be helpful, for, according to the Counsel, Section 430 applies when the Tribunal is empowered to determine a factor. Under Section 59 of the Act, NCLT was empowered to consider registration and transfer or refusal to transfer of existing shares without sufficient cause but it could not consider, if the same was contrary to the Articles of Association or Investment Agreement which has Arbitration Clause. Certain aspects hardly or not in dispute
20. In this matter, there does not appear to be dispute with regard to the execution of agreements between the parties and the correspondence referred to by the Appellant. Legal proceedings which took place when the Appellant and Respondent No.13 sent communication dated 29th August, 2017 seeking to redeem NCDs and convert CCDs is also not in dispute. There does not appear to be dispute that Respondent No.1 (which as per the Company Petition holds 99.99% shares in Respondent No.2) resorted to litigation by first moving under the Arbitration and Conciliation Act and then filing Company Petitions; taking stay; and subsequently withdrawing the Petitions. In the arguments on the part of contesting Respondents, there is no resistance to the submissions of Appellant regarding facts that after withdrawal of the Company Petitions by Respondent No.1, the Company Appeal (AT) No.334 of 2018 Respondent No.2 proposed to convert the CCDs, which was opposed by the Appellant and Respondent No.13 with even Investor Directors opposing and at the penultimate stage resigning from the Board, but that contesting Respondents still went ahead to convert the CCDs.
21. The main thrust of the arguments of contesting Respondents is that the Petition being under Section 59 of the Act, the NCLT could not go into issues relating to arbitration; the effect of Appellant invoking Insolvency and Bankruptcy proceedings against Respondent No.4; the interpretation of the Investment Agreement and the Articles of Association, which it is argued NCLT found to be contentious issues which the NCLT could not go in, in Petition under Section 59 of the Act.
22. Sub-Section (1) of Section 59 of the Act which Section deals with Rectification of Register of Members reads as under:- (1) If the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company, or the company may appeal in such form as may be prescribed, to the Tribunal, or to a competent court outside India, specified by the Central Government by notification, in respect of foreign members or debenture holders residing outside India, for rectification of the register. Company Appeal (AT) No.334 of 2018 Apparently, a Petitioner will have to prima facie show whether or not the act or omission is without sufficient cause, but the Company, which is in control of the Register of members, will have larger burden and must put on record all evidence to justify the act or omission to show that the act or omission is not without sufficient cause.
23. Undisputedly, the Appellant has had held one share in the Company. Its grievance is regarding making entry in the Register of Members showing another 906599 equity shares treating the same as having been converted from CCDs. As per Section 59, the only question relevant is whether the name of Appellant has been entered regarding shares said to have been issued against CCDs to be without sufficient cause. In this matter although there is Investment Agreement, we will not dwell much on the Agreement as admittedly, the protection sought by the Appellant and Respondent No.13 while entering into the Investment Agreement was translated into amendment of the Articles of Association which clearly has a higher binding nature and protection as the Company as well as all the shareholders including Directors become bound by the same. Relevant Articles of Association
24. If the Articles of Association (Page 594) are seen, the following aspects and relevant Articles require to be noted:-
a) Article 53 gives overriding effect to Articles 53 to 84 of the Amending Articles over the earlier Articles 1 to 52. Article 53.4 deals with Company Appeal (AT) No.334 of 2018 definitions which includes CCD holder to be the Appellant; Company Investor Directors have been defined as in Article 59.1 and Investment Agreement is stated to be the Agreement dated June 25, 2015. Investor CCDs have been defined as 906599 CCDs. Investors Consent is stated to mean the prior written consent of the Investors. Article 54.1 (Page 615) deals with Fundamental Terms which reads as under:- 54.1 It is fundamental term of these Articles that the Investors shall be entitled to realise their investment in the Company in accordance with the terms of these Articles and in particular: (a) NCD Holder shall be entitled to exercise its rights in respect of the Exit Options (and such other rights under these Articles and under applicable Law); (b) the Promoters, the Company and IBEUL shall comply with their obligations under these Articles and applicable Law, including in respect of the Exit Options, the Accrued Return, the Coupon Payment, and the conversion of the CCDs; and (c) the Promoters, the Company and IBEUL shall waive any rights, remedies or claims which they may have in respect of the legal enforceability of the Exit Options or any rights of the Investors hereunder.
b) Article 59.1 (Page 621) under Article 59 - Investor Director is as under:- 59.1 The Board shall at all times comprise a maximum of 5 (five) directors, of whom NCD Holder shall have the right to appoint and maintain in office Company Appeal (AT) No.334 of 2018
2 (two) directors (and to remove from office any director(s) so appointed and to appoint another in the place of the director(s) so removed) (such directors are referred to as the Company Investor Directors or Investor Directors). NCD holder is the Respondent No.13
c) Article 60.2 and Article 60.4 read as follows:- 60.2 The quorum for a meeting of the Board (or committee of the Board) shall be one-third of its total strength (any fraction contained in that one-third being rounded up to one) or two directors (whichever is higher), and shall specifically include at least one of the Company Investor Directors, present throughout the meeting, unless otherwise agreed with the Investors Consent. 60.4 The quorum for a meeting of the shareholders of the Company shall include representatives of the Investors, present throughout the meeting, unless otherwise agreed with the Investors Consent. Without prejudice to Article 0 (Reference: 60.2), no Reserved Matter will be discussed or approved without the presence of a Company Investor Director; unless the Investors Consent in respect of such Reserved Matter has been received prior to the commencement of such meeting. Reserved matters are in Article 62 and relevant portions of 62.1 and 62.2 read as follows:- 62.1 Post Completion, no action or decision (including any steps being commenced or taken for any action or decision) relating to any of the Reserved Matters as set out in Article 62.2 below with respect to the Company and/or IBEUL shall be proposed, Company Appeal (AT) No.334 of 2018 taken or given effect to (whether by the board, any director, any committee, the senior management or the shareholders of IBPIL, or the Company, or IBEUL; or any of the employees, officers, managers of IBPIL, Company or IBEUL) unless the Investors Consent is first obtained. 62.2 The following matters with respect of the Company, the Subsidiary and all subsidiaries investee companies of the Company/IBEUL/Resulting Company shall require Investors Consent: (d) Any change in the authorised, issued, subscribed or paid up equity or preference share capital of the Company and/or IBEUL, or re-organization of the share capital of the Company and/or IBEUL, including any Transfer of any Equity Securities, issuance of new shares or other securities of the Company and/or IBEUL, the issuance of convertible preference shares of debentures or warrants, or grant of any options over its shares by the Company and/or IBEUL or the redemption, retirement or repurchase of any shares or other securities;
d) Article 76.5 relates to Redemption Procedure.
e) Article 77.2 relating to Term is as under:- 77.2 Term (a) The term of the CCDs shall be 120 (one hundred and twenty) months from the Completion Date, or such extended term as may be determined by the Board with the prior written consent of the CCD holders (Conversion Due Date). Company Appeal (AT) No.334 of 2018 (b) The holder of the CCDs shall have the option to convert the CCDs, in whole or in part, before the Conversion Due Date in accordance with Article 0 below. The relevant portion of Conversion Procedure is at Article 77.4(d) which is as under:- (d) Conversion Procedure The CCDs shall be converted, when pursuant to Article 0(a), in the following manner:
(i) The Company shall convert the CCDs upon recipe of a written notice (the Conversion Notice) by the CCD holders. The conversion of the CCDs shall be completed within a period of 5 (five) days from the date of receipt of the Conversion Notice.
(ii) Within a period of 5 (five) days from the date of receipt of the Conversion Notice: (A) The Company shall issue and allot to the CCD holders one Equity Share for each CCD converted by them, and shall deliver duly stamped share certificates in respect thereof. (B) The Company shall update its registers of debenture holders and members to record the conversion of the CCDs.
(iii) The Company and the Promoters shall do all such acts and deeds to give effect to the provisions of this Article 0(d), including without limitation, causing any Director nominated by the Promoters to exercise their voting rights in a meeting of the Board to approve the conversion of the CCDs. Company Appeal (AT) No.334 of 2018 Analysis
25. It is apparent from the above Articles that the Appellant and Respondent No.13 had taken sufficient precautions while investing money in the Company, to safeguard their interests. When the Appellant and Respondent No.13 claimed that there was default, and wanted to invoke their rights on 29th August, 2017 and sent the letter (Page 258), the contesting Respondents did not act as per the Articles of Association referred above. The Appellant and Respondent No.13 again sent two letters/Notices dated 5th September, 2017 (as can be seen at Page 265 and 267) clearly calling upon the contesting Respondents to do the needful conversion within a period of 5 days of the issuance of the Notice. They referred to the Investment Agreement in this context (which is part of Articles of Association also). When in spite of the Articles of Association providing right regarding conversion, the contesting Respondents did not act in 5 days as per Articles of Association, the Respondent No.3 issued requisition Notice dated September 12, 2017 (Page 270). The contesting Respondents at such stage resorted to litigation by first rushing to the High Court professing to invoke Section 9 of the Arbitration Act and later on, withdrew the same and filed two Company Petitions and took stay to the EOGM and then after keeping the matter pending, withdrew the Company Petitions also, on 6th March, 2018. Apparently, the contesting Respondents, if they had a grievance that default as contemplated under the Agreement and Articles of Association had not taken place, did not take the litigations to any logical ends. They can hardly say that they had good Company Appeal (AT) No.334 of 2018 case not to act in the prescribed 5 days. They by conduct, declined to accept liability in response to correspondence dated 29th August, 2017 and 5th September, 2017 as was sent by the Appellant and Respondent No.13. We find substance in the argument of the learned Counsel for the Appellant that when after the Appellant had exercised option to seek conversion on 5th September, 2017, the contesting Respondents had not done the needful act within 5 days and the contesting Respondents could not subsequently, purport to act under such exercise of option of the Appellant. There is substance in the argument of the learned Counsel that when there is specific provision made in the Investment Agreement and incorporated in Articles of Association, the period of 5 days had its own value. The learned Counsel rightly submits that the Investor may be in a position to know the financial and other standing of the Company on the particular date when he wants to exercise option but if Respondents by their conduct declined and went into litigation, the investor later, may not be in a position to judge the financial standing and viability of the Company and the Company cannot subsequently turn around and force the conversion on the Investor, claiming that you asked for it. If the Articles of Association prescribe or act to be done in a particular manner, the Company, Directors, shareholders are all bound to do the act in the particular manner prescribed, as Articles of Association is heart and soul of the Company, we find. Company Appeal (AT) No.334 of 2018
26. We also find substance in the submissions of the learned Counsel for the Appellant who pointed out Article 59.1 which makes it mandatory that the Board shall at all times comprise a maximum of 5 Directors of which 2 have to be of the NCD holders and the record shows that when, after withdrawing the Company Petitions by the Respondent No.1, Respondent No.2 proposed to hold Board Meeting for converting the CCDs, the Appellant had opposed and claimed that such meeting could not be held and the CCDs could not be converted. The learned Counsel for the Appellant submitted that in response to the Agenda (Page 400) circulated by the Respondent No.2 so as to hold Board Meeting on 26th March, 2018, the Appellant and Respondent No.13 had both opposed and sent letter (Page - 414) with regard to the Notice dated 17th March, 2018 (sic 2017). It is rightly argued by the learned Counsel for the Appellant that by this communication, the Appellant clearly conveyed to the contesting Respondents that it had withdrawn its option to convert CCDs sent on 5th September, 2017.
27. It is apparent on record that when contesting Respondents still wanted to go ahead, the Appellant and Respondent No.13 sent yet another communication dated 26th March, 2018 wherein, inter alia, it was mentioned:- 3.1 Any change to the share capital of IBTPL requires our consent under the terms of the Investment Agreement dated June 25, 2015 in relation to IBTPL (the Investment Agreement) and the Articles of Association of IBTPL. Accordingly, any purported conversion of the Company Appeal (AT) No.334 of 2018 CCDs and issuance of equity shares of IBTPL without our consent is ultra vires IBTPL and the corporate authority of the board of directors of IBTPL. 3.4 Since IBTPL has, due to the actions of its promoters, breached the terms of the agreements with us, we are withdrawing our nominee directors on the Board. Please note we reserve all our rights under the IA and applicable law and will nominate an observer to the Board of Directors of IBTPL in accordance with the Investment Agreement. Not only this, on 26th March, 2018, the Investor Directors did resign from the Board and the Appellant and Respondent No.13 informed the contesting Respondents on 28th March, 2018 (Page 420), inter alia, as follows:-
3. As we had stated in the said Letters, any purported conversion of the compulsory convertible debentures (CCDs) held by us in IBTPL into equity shares is contrary to the terms of the said debentures and the articles of association of the Company.
4. Despite our letters as aforesaid, and despite our nominee directors pointing out the above in the said meeting, you purported to proceed with the meeting to discuss the agenda in relation to the conversion of CCDs which was not only ultra vires the articles of Association but also based on deliberate misinterpretation of the Order dated March 6, 2018 passed by the Honble National Company Law Tribunal, Hyderabad (said Order). Our nominee directors thereupon resigned from the Board.
5. We call upon you to ensure that the CCDs are not converted into equity shares without our prior written consent for the reasons mentioned in our said Letters. Company Appeal (AT) No.334 of 2018
6. Please note that any resolution or decision or action of the board of the Company or the Company to convert the CCDs into equity shares is ultra vires, void and invalid and would amount to contempt of the said Order besides being in direct breach of the articles of association of the Company as also the Investment Agreement dated June 25, 2015, in which case we will proceed under legal advice.
7. We would like to remind the directors of IBTPL of other fiduciary duties which they owe to IBTPL and its shareholders. Acting contrary to the terms of the Articles of Association of IBTPL and contrary to the agreements entered into by IBTPL will render them personally liable for the breach of their fiduciary duties.
28. The record speaks for itself. As on the part of contesting Respondents, they have not even put on record copy of the Board Resolution dated 26th March, 2018 to let the Tribunal know as to how and on what basis they proceeded. The Company cannot hold back material documents and expect the Tribunal to find that the Company had sufficient cause for inserting the concerned shares against the name of the Appellant. The Appellant has sufficiently put on record the evidence to show that the contesting Respondents and, especially, Respondent No.2 Company did not have sufficient cause to enter shares against the name of the Appellant purporting to have been converted from CCDs. We do not find that there are any contentious issues involved as being tried to be projected by the Respondents. Only because the Appellant took separate action against Respondent No.4 under Insolvency and Bankruptcy Code, 2016 with regard to bridge loan relating to OCDs, which related to a bridge Company Appeal (AT) No.334 of 2018 loan, there did not arise any contentious issue for decision in this matter which was clearly different. This has been held even by this Tribunal (by another Honble Bench) in Company Appeal (AT) (Insolvency) No.597/2018 vide Judgement dated 23rd April, 2019, passed recently.
29. Even regarding arbitration, when we asked the learned Counsel for the contesting Respondents, he did not show any Article of Association relating to the arbitration. He referred to Clause 29.1 of the Investment Agreement (Page 130 @ 186) which reads as under:- 29.1 Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Mumbai in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (SIAC Rules) in force at the date of applying for arbitration, which rules are deemed to be incorporated by reference in this Agreement.
30. In the Articles of Association, this does not appear to have reflected. The learned Counsel for the contesting Respondents referred to Memorandum of Association (Page 500) in which, Clause 40 is as under:-
40. To refer all questions, disputes or differences arising between the company and any other person whosoever (other than a Director of the Company) in connections with or in respect of any matter relating to the business or affairs of the company to arbitration in such manner and upon such terms as the company and such other person may mutually agree upon in each case, and such reference to arbitration may be in accordance with the provisions of the Indian Arbitration Act or the Rules of the Company Appeal (AT) No.334 of 2018 International Chamber of Commerce relating to arbitration or otherwise. Clause 40 as mentioned above, is not part of Articles of Association but is part of the Memorandum of Association which is dated 4th December, 2014 (which is before the Investment Agreement dated 25th June, 2015). The Clause apparently shows that matters relating to business or affairs of the company can go to arbitration in such manner and upon such terms as the company and such other person may mutually agree. Thus, it is only an enabling Clause which would be subject to the Agreement to be entered into with such other person. If we come back to Clause 29(1) of the Investment Agreement as referred above, in this matter, we are not dealing with the questions whether the Appellant rightly invoked the Agreement or not. We are concerned with the question of entry made in Register of Members. Whether there was sufficient cause or not to enter name is matter which only NCLT can decide under Section 59 of the Act. Change of law under Companies Act, 2013
31. The contesting Respondents have relied on Judgement in the matter of Ammonia Supplies Corporation (P) Ltd. Versus Modern Plastic Containers Pvt. Ltd. and others reported in 1998 7 SCC 105 and the learned NCLT has also referred to this Judgement of the Honble Supreme Court so as to state that there are contentious issues and they cannot be looked into under Section 59 Petition of the Act. This Tribunal had the Company Appeal (AT) No.334 of 2018 occasion of considering Section 59 in the changed context of the Companies Act, 2013 coming into force in the matter of Smiti Golyan & Ors. Vs. Nulon India Limited & Ors. reported in MANU/NL/0118/2019. We had observed in that Judgement as under:-
21. In para 31 of the Judgement in the matter of Ammonia Supplies portions of which we have reproduced above, the Honble Supreme Court had observed that there was nothing under the Companies Act expressly barring the jurisdiction of the Civil Court and thus mandated that the Court should examine whether prima facie what is said is a complicated question or not. The earlier Section 10 GB of the companies Act, 1956 relating to Civil Court not to have jurisdiction, does not appear to have been enforced but the position has now changed with coming into force of Companies Act, 2013 and Section
430 of the Act providing that Civil Court would not have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act. Under the new Companies Act - Section 59, it is for the NCLT to consider if the name of any person is without sufficient cause entered or omitted from the register of members of a company. Recently in the matter of Shahi Prakash Khemka (Dead) Through LRs. and Another Versus NEPC Micon (Now called NEPC India Ltd.) and Others Civil Appeal Nos.1965 1966 of 2014 decided on 8th January, 2019 2019 SCC OnLine 223, the Honble Supreme Court of India dealt with disputes which were before the Honble Supreme Court relating to exercise of power under Section 111-A of the Companies Act, 1956 (relating to rectification of register on transfer) and noticed above Judgement in the matter of Ammonia Supplies. It was observed:- Learned counsel for the appellants has drawn our attention to the view expressed in Ammonia Supplies Corporation (P) Ltd. vs. Modern Plastic Containers Pvt. Ltd. and Others (1998) 7 SCC 105, to canvass the proposition that while examining the Company Appeal (AT) No.334 of 2018 scope of Section 155 (the predecessor to Section 111), a view was taken that the power was fairly wide, but in case of a serious dispute as to title, the matter could be relegated to a civil suit. The submission of the learned counsel is that the subsequent legal developments to the impugned order have a direct effect on the present case as the Companies Act, 2013 has been amended which provides for the power of rectification of the Register under Section 59 of the said Act. Learned counsel has also drawn our attention to Section 430 of the Act, which reads as under:-
430. Civil court not to have jurisdiction.- No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate. The effect of the aforesaid provision is that in matters in respect of which power has been conferred on the NCLT, the jurisdiction of the civil court is completely barred. It is not in dispute that were a dispute to arise today, the civil suit remedy would be completely barred and the power would be vested with the Company Appeal (AT) No.334 of 2018 National Company Law Tribunal (NCLT) under Section 59 of the said Act. We are conscious of the fact that in the present case, the cause of action has arisen at a stage prior to this enactment. However, we are of the view that relegating the parties to civil suit now would not be the appropriate remedy, especially considering the manner in which Section
430 of the Act is widely worded. We are thus of the opinion that in view of the subsequent developments, the appropriate course of action would be to relegate the appellants to remedy before the NCLT under the Companies Act, 2013. [Emphasis supplied] It is apparent that now even otherwise, exclusive jurisdiction with regard to Section 59 is of the NCLT. NCLT would now clearly have jurisdiction to deal with rectification and all questions including incidental and peripheral questions raised with regard to rectification for the purpose of deciding legality of the rectification. What could earlier be looked into to see if prima facie made out can now be considered if proved to justify rectification even if it was to be said to be complicated question.
32. We have already mentioned that the learned Counsel for the Appellant has relied on the above Judgement of Honble Supreme Court in the matter of Shashi Prakash Khemka Versus NEPC Micon and others. For above reasons, we are of the view that with change of law now under Section 59 of the Act, NCLT can deal with rectification and all questions including incidental and peripheral questions raised with regard to rectification for the purpose of deciding legality of the rectification. NCLT which exercises widest possible powers in a matter under Section 241, 242 Company Appeal (AT) No.334 of 2018 of the Act; which even otherwise is expected to always keep interest of the Company in forefront, cannot be treated as unequipped only because the Petition is under Section 59 of the Act. In the present matter, firstly, we are of the view that there were really no complex questions involved and even if it was to be said that there were any complex questions, the same had to be decided by the NCLT and in Appeal, this Tribunal is bound to consider whether or not entry made in the Register of Members could be upheld.
33. When we look at the facts of the present matter and the concerned documents and developments, it is apparent that for the Board of Directors to take a decision, Article 59.1 and 60.2 required presence of the Company Investor Directors and there could not be quorum unless one of the two Company Investor Directors remains present throughout the meeting. It is clear that Board of Directors could not on their own have taken any decision with regard to the conversion. In the context of Article 62.1 read with Section 62.2, conversion of CCDs was reserved matter which also required change in the subscribed or paid-up equity and this could not be done without Investors consent, which as per Articles 59.1 meant prior written consent. In fact, in present matter, leave apart consent, there was recorded opposition. We reject the argument made in Appeal by the Counsel for contesting Respondents that conversion was only a ministerial act. Had it been so, these Respondents would not have called the Board Meeting with agenda in the first place. There is no substance in the Company Appeal (AT) No.334 of 2018 arguments of the contesting Respondents that Section 59 could not be resorted to if the effect would be reduction in capital under Section 66 of the Act. Contesting Respondents who have held back the copy of Resolution of the Board of Directors dated 26th March, 2018, cannot be heard on this count without they first showing justification as to how they entered disputed shares against the name of Appellant in the Register of Members. Again, even if a Resolution was taken by Promoter Directors on their own, in the face of facts of the matter and Articles of Association, the same would be and has to be termed as illegal.
34. For such reasons, we are unable to maintain the Impugned Judgement and we set aside the same. We direct cancellation of entry of the name of Appellant in the Register of Members of Respondent No.2 showing 906599 equity shares purported to have been credited on the basis of conversion of 906599 CCDs standing in the name of the Appellant. Appeal is allowed accordingly. No Orders as to costs. [Justice A.I.S. Cheema] Member (Judicial) [Balvinder Singh] Member (Technical) /rs/nn