M/S. Indo-Asian News Channel (P) Ltd. & M.V. Nikesh Kumar Meleth Veedu & Mrs. Rani Varghese v. A.K. Mansoor & The South Indian Bank Ltd.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN** **& THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **FRIDAY, THE 19TH DAY OF AUGUST 2016/28TH SRAVANA, 1938** **Co.Appeal.No. 11 of 2015 ()** **---------------------------AGAINST THE INTERIM ORDER DATED 5.11.2015 OF THE COMPANY LAW BOARD, CHENNAI IN CP.60/2015** ## **APPELLANTS/RESPONDENTS 1 TO 3 IN CP:-:** **--------------------------------------------------** **1. M/S.INDO-ASIAN NEWS CHANNEL (P) LTD. HAVING ITS REGISTERED OFFICE AT REPORTER STUDIO COMPLEX, HMT COLONY, KALAMASSERY, KOCHI - 683 503, KERALA.** **2. MR.M.V.NIKESH KUMAR MELETH VEEDU, BURNASSERI POST, KANNUR - 670 013, KERALA.** ## **3. MRS.RANI VARGHESE** - **MELETH VEEDU, BURNASSERI POST, KANNUR - 670 013, KERALA.** **BY ADVS.SRI.JOSEPH KODIANTHARA (SR.) SRI.V.ABRAHAM MARKOS SRI.BINU MATHEW SRI.TOM THOMAS (KAKKUZHIYIL) SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SRI.NOBY THOMAS CYRIAC** ## **RESPONDENTS/PETITIONER IN C.P./4TH RESPONDENT IN C.P.:-:** **----------------------------------------------------------------------** ## **1. MR.A.K.MANSOOR** **CHATHUNTAKAYIL HOUSE, PUTHUMANASSERY, PAVARATTY P.O. - 680 507, THRISSUR, KERALA.** ## **2. THE SOUTH INDIAN BANK LTD.** **ELIAS CHAMBER, BANERJEE ROAD, ERNAKULAM - 682 018, KERALA.** **R1 BY ADV. SRI.M.GOPIKRISHNAN NAMBIAR R1 BY ADV. SRI.P.GOPINATH R1 BY ADV. SRI.P.BENNY THOMAS R1 BY ADV. SRI.K.JOHN MATHAI R1 BY ADV. SRI.JOSON MANAVALAN R1 BY ADV. SRI.KURYAN THOMAS R2 BY SRI.K.K.JOHN,SC,SOUTH INDIAN BANK** **THIS COMPANY APPEAL HAVING BEEN FINALLY HEARD ON 19-08-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **Co.Appeal.No. 11 of 2015** ## **APPENDIX** ## **APPELLANTS' ANNEXURES:** **ANNEXURE-A: COPY OF THE ORDER DATED 30.3.2015 OF THE COMPANY LAW BOARD IN THE EARLIER CP NO.29/2014.** **ANNEXURE-B: COPY OF CP 60/2015 DATED 5.8.2015 WITHOUT ANNEXURES. ANNEXURE-C: COPY OF THE REPLY DATED 27.10.2015 FILED BY THE APPELLANTS. ANNEXURE-D: COPY OF THE INTERIM ORDER DATED 5.11.2015 IN CP 60/2015 PASSED BY THE CLB, CHENNAI.** ## **RESPONDENTS' ANNEXURES: NIL** **/TRUE COPY/** ## **P.A. TO JUDGE** ## **VPV** ## **P.N.RAVINDRAN & A.MUHAMED MUSTAQUE, JJ. =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= Company Appeal No.11 of 2015** ## **=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= Dated this the 19[th] day of August, 2016** ## **JUDGMENT** ## _**P.N.Ravindran, J.**_ This appeal arises from the interim order passed by the Company Law Board, Chennai on 5.11.2015 in C.P.No.60 of 2015, a petition filed by the first respondent herein under sections 397, 398, 402, 403 and 406 of the Companies Act, 1956 and sections 58, 59, 210 and 213 of the Companies Act, 2013. The appellants are respondents 1 to 3 and the second respondent is the fourth respondent therein. The brief facts of the case are as follows: 2. The first respondent is admittedly a shareholder in the first appellant company. It is not in dispute that he holds 25.51% share in the first appellant company. It is also not in dispute that he has invested the sum of Rs.7,97,91,865/- in the first appellant company. On the allegation that the affairs of the company are being mismanaged and there has been a siphoning off of funds, the first respondent filed C.P.No.60 of 2015 praying for the following reliefs: **Company Appeal No.11 of 2015** **-:2:-** ## _“_ _**Final Reliefs** :_ _In view of the foregoing the Petitioners pray that the Hon'ble Company Law Board may be pleased to pass suitable orders:_ _1. For a declaration that the affairs of the Company are being conducted by Respondents 2 and 3 in a manner oppressive to the Petitioner, and pass such orders as this Hon'ble Board may deem fit to bring to an end the matters complained of in this petition;_ _2. Setting aside the illegal allotment of 1,43,619 shares of Rs.100/- each, & 24,133 shares of Rs.100/- each allegedly allotted on 31.03.2012 & 31.12.2012 respectively at a premium of Rs.650/- to the Petitioner and the illegal allotment of 50,000 shares of Rs.100/each allegedly allotted on 28.03.2012 at par to the 2[nd] respondent as also the 85000 shares which are transferred to the second respondent from other shareholders, as being in gross violation of the Articles of Association of the first Respondent company and consequentially rectify the register of members of the 1[st] Respondent Company deleting the number of shares from the respective folios;_ _3. Consequently direct the first Respondent company to allot shares to the Petitioner and Respondents 2 and 3 in proportion to their investment and in accordance with the current valuation of the first Respondent company;_ _4. Appoint an independent auditor to audit the books of accounts of the first Respondent and submit a detailed report on the manner in which the monies invested in the share capital have been siphoned/misused by Respondents No.2 and 3, and in particular the huge expenses shown in the balance sheet and the profit & loss accounts for the years 2011, 2012 and 2013;_ _5. Direct an investigation into the affairs of the Company and to surcharge Respondents No.2 & 3 with mismanaging the affairs by siphoning the amounts from the first Respondent company;_ _6. To supersede the Board of Directors of the Company consisting of Respondents 2 & 3 and appoint independent directors to manage the affairs of the Company;_ _7. Direct amendment to the Articles of Association of the First Respondent Company for adopting the system of proportional representation on the Board of Directors of the Company;_ **Company Appeal No.11 of 2015** **-:3:-** _8. Directing the Respondents No.2 & 3 to bring back the sum of Rs.10,07,19,450/- that were diverted from the 1[st] Respondent Company and siphoned off by the Respondents through their acts of mismanagement;_ _9. Any other order as may be deemed fit by the Hon'ble Bench.”_ ## He had also prayed for the following interim reliefs: ## “ **Interim reliefs sought** : In view of the foregoing, the Petitioners pray for the following interim orders, pending disposal of this petition: _1. That the 1[st] Respondent Company be directed to maintain status quo with regard to shareholding pattern of the 1[st] Respondent company;_ _2. That the Respondents, their men, servants, representatives and agents be restrained from alienating, transferring, disposing off or otherwise deal with any of the movable and immovable properties of the 1[st] Respondent company, other than in the normal course of business and not to create any encumbrances on any such property;_ _3. That the Respondents herein be restrained from availing any further loans, Overdraft facility, etc. from Banks or Financial Institutions excepting under appropriate orders/leave that is granted by this Hon'ble Board;_ _4. That the Respondents be directed not to call for any board meeting and general body meeting without the approval of this Hon'ble Bench;_ _5. That the Respondents be restrained from filing any documents, returns, forms, report, certificate, balance sheet, statements on behalf of the 1[st] Respondent company without the leave of this Hon'ble Bench;_ _6. Direct the Registrar of Companies, Ernakulam, to file a report with regard to various forms/returns filed on behalf of 1[st] Respondent company;_ _7. Any other order as may be deemed fit by the Hon'ble Bench.”_ 3. The company petition was instituted in the first week of August, 2015. An ad interim order was not granted on 18.8.2015 **Company Appeal No.11 of 2015** ## **-:4:-** when the company petition was mentioned. The Company Law Board however directed the respondents in the company petition to file counter affidavit within a period of two weeks and to serve copies on the other side. A reply dated 27.10.2015 was accordingly filed in answer to the averments and allegations in the company petition. The company petition was thereafter taken up on 2.11.2015. On that day it was adjourned to 5.11.2015 so as to enable the learned counsel appearing for respondents 1 to 3 to get instructions on interim relief No.3 prayed for in the company petition. The first respondent had in interim relief No.3 prayed for an order restraining the respondents in the company petition from availing further loans/overdraft facility, etc. from banks and financial institutions except under appropriate orders/leave granted by the Company Law Board. When the company petition came up for consideration on 5.11.2015, after considering the rival submissions, the Company Law Board passed the impugned order, the operative portion of which reads as follows: _“3. After hearing the respective counsel, I am not going into the merits of the allegations made in the petition at this point of time. However the Bench intends to protect the interest of the company and its shareholders. It is an admitted fact that the object of the R1 Company is to carry on the business of producing, acquiring, broadcasting and distribution of television and radio programmes for news telecast, entertainment etc. from the nature of business activities of the_ **Company Appeal No.11 of 2015** ## **-:5:-** _R1 Company, the company may need finances to run the company and in my view there cannot be any blanket stay from availing financial assistance/loans from the banks and financial institutions. However the R1 Company is restrained from availing loans/financial assistance from individuals and private persons. In view of the aforesaid reasons and keeping in view of the paramount interest of the company and its shareholders, I hereby pass the following interim orders:_ - _(i) There shall be a status quo in respect of shareholding patterns of the R1 Company as on 28.10.2015 until further orders._ - _(ii) The respondents are hereby restrained from availing loans from individuals and private persons._ - _(iii) The respondents shall intimate to the petitioner regarding rising of any funds, obtaining loans from the banks and financial institutions._ - _(iv) The respondents shall furnish the statement of accounts to the petitioner for the month of October i.e. from 01.10.2015 to 31.10.2015 on or before 14.11.2015. Further the respondents are hereby directed to furnish the statement of accounts of the R1 Company to the petitioner on fortnightly basis commencing from 01.11.2015.”_ 4. We heard Sri.Joseph Kodianthara, learned Senior Advocate appearing for the appellants, Sri.P.Gopinath Menon, learned counsel appearing for the first respondent and Sri.K.K.John, learned counsel appearing for the second respondent. We have also taken note of the submission made by Sri.P.Gopinath Menon, learned counsel appearing for the first respondent, relying on the decision of the Apex Court in **Purnima** **Manthena and Another v. Renuka Datla and Others** [2016 (1) SCC 237] that as no decision on the issues raised has been arrived at, the instant appeal is not maintainable. 5. The materials on record disclose that the appellants **Company Appeal No.11 of 2015** ## **-:6:-** herein who are respondents 1 to 3 in the company petition had filed a reply statement in answer to the averments and allegations in the company petition. At the time of the hearing on 5.11.2015, the respondents in the company petition had placed their pleadings on record and served copies thereof on the petitioner in the company petition. The impugned order discloses that the learned counsel appearing on either side had addressed arguments at length on the various points in issue. However, without going into the merits of the rival contentions the impugned order was passed on the premise that it is intended to protect the interests of the company and its shareholders. The Company Law Board had even while passing the impugned order taken note of the fact that having regard to the nature of activity conducted by the first appellant it may need finances to run its business and therefore, there cannot be a blanket stay in the matter of availing loans and financial assistance from banks and financial institutions. The tribunal has not in the impugned order arrived at a finding that the petitioner before it has made out a prima facie case of oppression and mismanagement or that the petitioner in the company petition has made out a prima facie case as regards the siphoning off of funds of the company by those in charge of the affairs of the **Company Appeal No.11 of 2015** ## **-:7:-** company. In short, the Company Law Board has not entered a finding though prima facie that its interference by way of interim orders as prayed for or as granted is called for. Though it was contended before us that the impugned order does not decide any of the issues raised and therefore, this appeal is not maintainable, the very decision of the Apex Court relied on by the learned counsel for the first respondent states that an omission to record a finding even on a conscious scrutiny of the materials bearing on the issues involved in a given case may be termed to be a question of law. It was held that a question of law would arise if the decision has been arrived at disregarding relevant materials. We are therefore of the considered opinion that the appellants are entitled to challenge the impugned order on the ground that the Company Law Board has failed to record a finding though prima facie on the various points raised by the parties. In such circumstances, we overrule the contention of the learned counsel for the first respondent that the instant appeal is not maintainable. 6. As regards the merits, as stated earlier, a reading of the impugned order itself discloses that the Company Law Board has not gone into the merits of the rival contentions. The very order itself states that the Company Law Board has not gone into the **Company Appeal No.11 of 2015** ## **-:8:-** merits of the rival contentions. In our considered opinion, unless the Company Law Board applies its mind to the rival contentions, in the light of the materials on record, an interim order as prayed for could not have been passed. In such circumstances, notwithstanding the fact that an interim order as prayed for has not been passed, we are of the opinion that even the impugned order could not have been passed. The Company Law Board could have passed the impugned order only after considering the rival contentions and after forming a prima facie opinion that the applicant before it has made out a case warranting the grant of an interim order. Such an exercise has not been undertaken in the case on hand. It is evident from the materials before us that it was without adverting into the merits of the rival contentions that the impugned order was passed. We are therefore of the considered opinion that the impugned order is liable to be set aside. In that view of the matter, we are not expressing any opinion on the efficacy or legality of the interim order passed by the Company Law Board to the effect that the company shall furnish statement of accounts on a fortnightly basis to the petitioner before the Company Law Board. 7. During the course of hearing, it was brought to our notice **Company Appeal No.11 of 2015** ## **-:9:-** that though a National Company Law Tribunal has started functioning at Delhi, the bench at Chennai has not yet commenced sitting and therefore, as matters now obtain, the petitioner in the company petition is not in a position to move the National Company Law Tribunal for appropriate interim orders or to have the prayer for interim relief reconsidered. As the principal bench of the National Company Law Tribunal is holding regular sitting at New Delhi, we are of the opinion that the petitioner in the company petition can move the principal bench to have the prayer for interim relief considered. However, even while taking such a view, we are of the opinion that in order to enable the petitioner before the company petition to move the principal bench of the National Company Law Tribunal at New Delhi for appropriate interim reliefs, his interests should be protected by passing an order to the effect that the status quo as on today as regards the shareholding pattern of the first appellant company, should be maintained for a period of six weeks from today. Having regard to the submissions made by the learned counsel for the first respondent, we also deem it appropriate to restrain the appellants from availing loans from individuals (resident as well as nonresident Indians) during the said period of six weeks. We make it **Company Appeal No.11 of 2015** ## **-:10:-** clear that we have not expressed any opinion on the merits of the rival contentions and that we have interfered with the impugned order only for the reason that the Company Law Board has not applied its mind to the rival contentions. We accordingly allow the appeal and set aside the impugned order, reserving liberty with the petitioner to move the principal bench of the National Company Law Tribunal to have the prayer for interim relief reconsidered. In order to enable the petitioner before the Company Law Board to move the principal bench for appropriate interim reliefs, we deem it appropriate to restrain the first appellant company from availing loans from individuals (resident as well as non-resident Indians) and from altering the shareholding pattern of the company for a period of six weeks. ## Sd/- **P.N.RAVINDRAN JUDGE** Sd/- ## **A.MUHAMED MUSTAQUE JUDGE** /true copy/ P.A. To Judge ## **vpv**