MANU/NC/0116/2016

Equivalent Citation: [2017]136C LA116

IN THE NATIONAL COMPANY LAW TRIBUNAL

PRINCIPAL BENCH, NEW DELHI
C.P. No. 10(ND)/2015
Decided On: 30.11.2016
Appellants: Hardev Singh Akoi and Ors.
Vs.
Respondent: Mr. Rai Bahadur Narain Singh Sugar Mill Ltd. and Ors.
Hon'ble Judges/Coram:
M.M. Kumar, C.J. (President) and S.K. Mohapatra, Member (T)
Counsels:
For Appellant/Petitioner/Plaintiff: Siddharth Yadav and Ajoy Bhushan Kalia, Advocates
For Respondents/Defendant: Abhinav Vashisht, U.K. Chaudhary, Senior Advocates,
Manisha Chaudhary, Wasim Ashraf, Mansumyers Singh, Arun Kathpalia, Samakash
Goyal, Uday Walia, Shailendera Singh and Robin Frey, Advocates
Case Note:
Company - Deadlock - Section 180(1) of Companies Act, 2013 and section
293 of Companies Act, 1956 - Petition filed by majority shareholders
holding 52.56% shares in company, for alleged acts of oppression and
mismanagement by Respondents Nos. 1 to 8 who hold 40.73% share in
company, leading to deadlock in company - Whether it was in interest of
company to give powers to Board of Directors of Respondent 9 Company to
borrow up to 300 crores by exempting requirement of special resolution -
Held, financial statement of company for year 2013-2014 available on
record and relied upon by parties inter alia was relevant - Petitioners had
admitted that company had already availed loan of Rs. 221.23 crores as on
31.03.2014 - On one hand Petitioners seek indulgence to have borrowing
power up to 300 crores without restriction of special resolution whereas on
other side Respondents contend that additional debt in circumstances could
further worsen company's financial conditions which had potential threat of
leading company to bankruptcy - There was no dispute that prevalent debts
of company had already exceeded much above aggregate of its paid-up
capital and free reserves - Accordingly contention of respondent that
burdening already debt ridden company with additional long term debt
would be detrimental to interest of company, and it could not be lightly
brushed away - Section 180 of 2013 Act corresponds to section 293 of
Companies Act, 1956 - Section 293 of 1956 Act applied only to public
companies - However Section 180 of 2013 Act applies to all companies - It
was also seen that section 293 of 1956 Act only required ordinary
resolution to exercise certain powers - Legislature however while amending
provision provided in Section 180 of 2013 Act requirement of special
resolution to exercise those powers - Requirements of Section 180 of
Companies Act, 2013 were mandatory - Board of Directors had no power to
borrow where money to be borrowed together with money already

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 borrowed by company would exceed aggregate of paid-up capital of
company and its free reserves except with consent of company by special
resolution - Requirement of said provision was that directors should so
restrict their borrowings that amount for time being remaining un-
discharged should not exceed limit specified - There has to be exceptionally
very good grounds for waiving such restrictions imposed under provisions of
statute - It was seen that management of company was in hands of
Petitioners with 51% shareholding - Respondents No. 1 to 8 also had vital
stake of about 41% in company - It was also pertinent that company was
closely held family company where both Petitioners and Respondents had
their rightful inheritance and legacy - It was placed that with 50%-50%
partnership, Petitioners and Respondents were successfully running
business The Imperial' hotel at Janpath, New Delhi - Moreover it was
gathered that in year 2009-10 some other business disputes between
parties were amicably settled - In similar way amicable management of
present close family company by both parties should be tried to resolve any
differences - As discussed above Petitioners could not establish that there
had been complete dead lock in functioning of company - In interest of
justice chance was afforded to parties to co-operate with each other in
smooth functioning of company including smooth running of sugar mill - In
facts and for time being, this could not be termed as extreme deadlock case
where in interest of company, 41% shares of minority Respondents should
be forcibly taken away against their will and to coerce them to exit
company - Petition disposed of.[23],[24],[31] and[32]
ORDER
1. The present petition has been filed by majority shareholders holding 52.56%
shares in the company, for the alleged acts of oppression and mismanagement by
Respondents Nos. 1 to 8 who hold 40.73% share in the company, leading to a
deadlock in the company. The following reliefs have been sought u/s. 397 & 398 r/w
Sec. 402 of the Companies Act, 1956:
"(a) Director the Respondents No. 1 to 8/minority shareholders not to
withhold their consent in passing of Agenda/decisions at Board
Meetings/AGM's, taken in the interest of the Company by the Majority
Shareholders
Alternatively
(b) Direct the Respondent Nos. 1 to 8/minority shareholders to sell their
shareholding to the petitioners/majority shareholders at such fair price as
determined by this Hon'ble Board.
(c) Direct appointment of an independent valuer/auditor/accounts(s) to make
a valuation of the shares of Respondent Company.
(d) Any other or such other relief/directions as this Hon'ble Board may deem
fit and proper in the facts and circumstances of the present case."
2 . Brief facts relevant to decide the controversy raised in the present company
petition are that M/s. Rai Bahadur Narain Singh Sugar Mills Ltd. (Respondent No. 9)
was incorporated on 25th November, 1932 under the Indian Companies Act, 1913
with its registered office at 2, Kasturba Gandhi Marg, New Delhi. It is stated that the

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 company was running its sugar mill until the year 1970. In 1970, the company
suffered huge losses and in the year 1977-1978, the company was declared a sick
industrial unit and was taken over by the Central Government under the Sugar
Undertaking (Taking over of Management) Act 1978. Subsequently in the year 1986,
the Central Government handed over the management of the company to the
shareholders' management and the cumulative loss of Rs. 6.93Crores was converted
into long-term loan to be repaid by the company to the Government over a period of
20 years. Since then, the operation of the company is being looked after by its
Chairman cum Managing Director and the Board of Directors. The management have
increased the crushing capacity of the sugar mill from 1800 TCD in the year 1986 to
8500 TCD in the year 2008. The company has also a power generation plant with a
generating capacity of electricity for 30 MW. The company has also set up a distillery
with a capacity of 60 KLPD by suitably amending the main object clause of
Memorandum of Association of the company and duly registering the altered
Memorandum of Association with Registrar of Companies in November, 2001. It has
been emphasized that power generation and distillery are ancillary to the operation of
the sugar mill and helps to utilize and add value to the by-product of the sugar mill.
3. Respondent No. 9 company is a closely held family company where petitioner No.
1, S. Hardev Singh Akoi and his family possess 32.30% shares. The brother of the
petitioner, S. Jasdev Singh Akoi, Respondent No. 3 and his family possess 32% of
shares in the company. The sister of the petitioner, Bibi Alape Kaur, Respondent No.
7 and her family possess 8.73% of shares. The present petition has been filed by
majority shareholders holding 52.56% shares in the company with a complaint of
acts of oppression and mismanagement allegedly leading to a deadlock in the
company by Respondents No. 1 to 8. These respondents No. 1 to 8 in total hold
40.73% shares in the company.
4 . It is pertinent to state here that Rai Bahadur Singh, the Great Grandfather of
petitioner No. 1, Respondent No. 3 and Respondent No. 7, was the founder director
of Respondent No. 9 Company. The family tree chart of Rai Bahadur Singh is as
under:

5 . It is also relevant to note that Rai Bahadur Narain Singh, and thereafter his son
S.B. Singh and his wife Bibi Rajinder Kaur, apart from having shareholding in the
Respondent No. 9-company, owned various other business and valuable properties

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 spread out in Delhi and other parts of Northern India. Some of the valuable
properties owned by them are as follows:-
"i) A first class five star hotel by the name of The Imperial' at Janpath, New
Delhi
ii) A piece of land/property situated at block 'B' of the "D" Circus, Connaught
Place, New Delhi admeasuring 1.182 Acres. This piece of land in the heart of
New Delhi comprises of 10 shops, 7 flats and 2 halls.
iii) A piece of land/property in Connaught Place in G Block consisting of 14
shops and 5 flats on about 0.8 acre of land.
iv) House No. 8, Jantar Mantar Road, New Delhi (this property stands
acquired for the purpose of Delhi Metro Rail Corporation)
v) House No. 2, Kasturba Gandhi Marg, New Delhi
vi) House No. 4, Kasturba Gandhi Marg, New Delhi"
6 . It is the case of the petitioner that when the Government of India returned the
management of the sugar mill to the shareholders' management, its machinery had
been ruined and all the senior staff had left the company. It is contended that there
was gross mismanagement by the Government and there was an accumulated loss of
Rs. 6.93 Crores. After taking over of the mill in the year 1986, the entire plant and
machinery had to be replaced and virtually a new beginning was made. It is
contended that the entire mill of the company had to be built up from the scratch.
Petitioner No. 1 being the eldest son of S. Rajdev Singh, has been personally and
directly running and looking after the day to day operation of the sugar mill since the
year 1986 that is, even during the lifetime of S. Rajdev Singh. Petitioner No. 1 had
been appointed as Chairman and Managing Director of the sugar mill as back as in
1990. It is stated that since taking over of the mill, the capacity of the sugar mill has
been increased by five times from 1800 TCD in 1986 to 8500 TCD in the year 2014.
The company has also repaid the entire debts to the Government. It is further
contended that keeping an eye on the viability and profitability of the sugar mill,
highly modern co-generation plant generating 30MW of electricity and a distillery
with a capacity of 60 KLPD were added. The modernization and expansion project of
the company was completed with the help of term loans taken by the company, which
were always repaid back in time without any default. It is argued that the petitioner
No. 1, using his experience and expertise, turned the mill into a profitable venture.
7 . Learned counsel for the petitioner emphasized that the respondent company
requires working capital limits and loans from time to time towards making payment
to farmers against supply of sugarcane. Sugarcane is the basic raw material in the
sugar industry and sugar mills require paying back cane dues of the farmers within
14 days of the supply, as per Government guidelines. However, stock of sugar is sold
after substantial period of time. Besides, selling price of sugar is decided by market
forces but the price of sugarcane is fixed by the State Government without any co-
relation with the price of sugar. As such, depending upon the Government policy, the
sugar mills require working capital limits to buy sugarcane from the farmers. In
addition, term loans are necessary in the enhancement for technical up gradation and
modernization of the industry etc. In the circumstances, the company has to raise
loans from various banks and financial institutions from time to time. These loans are
secured by stocks, movable and immovable assets of the company. Sometimes the

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 lending institutions ask for personal guarantees of major shareholders of the
company. It is alleged that Respondents No. 1, 3 & 7 have never given any personal
guarantee since the year 2007 although the Petitioner No. 1 and other
petitioners/directors have provided personal guarantees to secure the loan. It is the
case of petitioner that since 2007 there has been attempts by the minority groups
comprising Respondent Nos. 1 & 2 as directors and shareholders and respondents
No. 3 to 8 as shareholders, to some-how or the other scuttle the affairs of
Respondent No. 9-Company. It was also pointed out that since the year 2007
Respondent No. 3 and 7 had written to several financial institutions and Government
agencies including RBI to withhold grant of the financial assistance to Respondent 9
Company there by oppressing the Company.
8. The petitioners have placed on record that Respondent No. 9-company has already
availed loan to the tune of Rs. 221,23,05,190/- from various financial institutions and
Government. The details of loans availed by the company as per audited financial
statement as on 31.03.2014 is as under:-

9 . Learned counsel for the petitioner submitted that in the Annual General Meeting
held on 29.09.2005, the shareholders of the company, u/s. 293(1)(a) & (d) of the
Indian Companies Act, 1956 have authorized the Board of Directors of the company
to borrow loans up to a maximum of Rs. 300 Crores whenever required from time to
time.
1 0 . However, with the coming into force the Companies Act 2013 there was a
statutory restriction on the powers of the Board and the new provisions provide for a
special resolution in order to enable the company to borrow loans of such a
magnitudes, obviously such a resolution has to pass by 75% of the vote. It is the
main case of the petitioner that Respondent No. 1 having 40.73% shares, have joined
hands to create deadlock in the company by objecting to all the important agendas
which require approval by way of a special resolution, thereby scuttling the operation
of the company. It is further the case of the petitioner that in order to avail loans and
borrowings, the company has to provide securities and create charge on its assets in
favour of lending institutions which requires passing of special resolution. Learned
counsel emphasized that sugar industry necessarily requires various term loans and
borrowings from various financial institutions in order to survive. It is argued that as
Respondents No. 1 to 8 have joined hands to defeat all special resolutions and
consequently there has been a complete deadlock in the operation of the company as

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 the company is not in a position to raise further loans.
11. It is the case of the petitioners that the agenda item Nos. 6, 8, 9 and 10 were
voted against by respondents in the AGM held on 27.09.2014, which could only be
passed by way of Special Resolutions as mandated by Section 180 of the Companies
Act, 2013. Item 6 was to modify the Articles of Association of the Company
containing regulations in conformity with the Companies Act, 2013. Agenda Nos. 8,
9, & 10 were for enhancing the borrowing limit and to secure the same by creating
charge and corporate guarantee respectively. It is contended that defeating the above
agenda items by Respondents No. 1 to 8 is not only obstructive but destructive of the
affairs of Respondent No. 9-Company.
12. It is pertinent to note here that Mr. Andrea Aftab Pauro (Respondent No. 1) was
inducted as director of the company on 03.09.2005. Respondents No. 3 and 7 were
previously inducted directors of the company. It is stated that the shareholders of the
company did not re-elect them as directors of the company in the year 2009 as they
were working against the interest of the company. Respondent No. 2, Mr. Raidev
Singh Akoi, son of Respondent No. 3 has been inducted as director of the company
with effect from 27.09.2014. It is alleged that the minority shareholders have not
been supportive of diversification, modernization or in the development of the
company.
1 3 . Learned Senior Counsel appearing on behalf of the Respondent 9 Company
referred to the cases of Sangramsinb P. Gaekwad v. Shantadevi P. Gaekwad reported
in MANU/SC/0052/2005 : AIR 2005 SC 809 (Para 187) and M/s. Seth Hotels Pvt. Ltd.
v. Lata Mahinder Kumar Seth reported in (2014) 182 Com Case 491(Delhi) Para 5 and
also Gurpartap Singh v. Vista Hospitality Pvt. Ltd. MANU/DE/2959/2013 : (2014) 186
CompCas 202 (Delhi) Para 21, where in it has been consistently held that in legal
proceedings u/s. 397/398 of Companies Act, 1956 the interest of the company is
always paramount. It is contented that the two barring groups of shareholders being
the Petitioners and the Respondents group ought not be permitted to destroy the
company or to act against the interest of the company. It is pleaded that Respondent
Nos. 1 and 2 along with their families have never been in the day-to-day
management of the company. Rather they have started to dissociation from the
company by complaining to banks and financial institutions and regulating authorities
against borrowings of the company. It is also argued that the respondents have taken
obstructive and destructive attitude towards the company opposing even genuine
decisions.
14. It is argued that the growth and survival of the company could not have been
possible in the absence of term loans and working capital loans availed by the
company. Long term loans are necessary to upgrade and modernize the plant and
machinery to enable enhancement of productivity and overall development of the
company. Besides sugar mill requires working capital to buy sugar cane from the
farmers. The interests of farmers, Workers and their respective families, contractors
and suppliers are also affected. Respondents No. 1 to 8 joined hands to cripple the
financial inflow of Respondent No. 9 Company. Under section 180 of the Companies
Act, 2013 unless the relevant special resolutions are passed the Board of Directors of
the company will not have the power to borrow any money or create charge or
provide corporate guarantee for the purpose of functioning of the company. It is
emphasized that by not allowing these special resolutions to be passed the minority
share holders have blocked the oxygen line of the of the company as no company
especially a sugar mill which is a capital intensive industry, can survive without

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 availing short and long term loans. Petitioners contended that in the absence of
financial support from Government and financial institutions, the entire life line of the
company gets scuttled, which can have disastrous consequences even leading to
closure of the sugar mill.
15. Shri Choudhury Learned Senior Counsel further submitted that there has been
complete loss of faith, trust and confidence between the minority shareholders
(Respondent group) and majority shareholders (Petitioners group) and therefore they
must separate. It is further contended that the Respondents are minority and
oppressing the Majority Petitioners and have no experience to run the company. In
that view of the matter it is placed that respondents should exit at fair value in the
interest of justice and in the best interest of the company. In support of his
contention learned counsel has relied upon the judgment rendered in the case of
Girdhar Gopal Dalmia v. Bateli Tea Co. Ltd. Reported in (2006)74 CLA 369(CLB).
16. It is seen that Respondents No. 1 and 2 only contested the Company Petition.
They, however, have stated in the written submissions that "Respondent Nos. 1 & 2
represent Respondents No. 1 to 8 (the Respondents') in Company Petition No.
10(ND)/2015 (the 'Company Petition'), and collectively own a sizable 43.20% of the
shareholding in Respondent No. 9 company, a closely held family business
established by their ancestors." Respondents No. 1 and 2 were appointed as directors
of Respondent No. 9-company on 03.09.2005 and on 27.9.2014 respectively.
Respondents No. 1 & 2 have alleged that the present Company Petition has been filed
with an imaginary deadlock scenario with the sole purpose to buy out the
respondents' shareholding in the company and to illegally coerce the respondents to
exit the company.
17. It is the case of the respondents that they have always worked towards the best
interests of the company which is part of their rightful inheritance and legacy. It is
submitted that Respondents No. 3 and 7 and their family members have contributed
greatly to the development and well being of the company. Respondents No. 3 and 7
had given several personal guarantees in the past to various banks to procure loans
for the operation of the company. Besides, they exerted actively in order to gain
control and management of the company from the Central Government and assisted
the company to tide over an exceptionally difficult time. It is further contended that
for several years, the respondents did not insist for any dividend in order to permit
growth of the company.
18. Respondents No. 1 and 2 have alleged that the company is already under heavy
debt and is unable to meet its financial obligations. Accordingly, they are only
exercising their right u/s. 180(1) of Companies Act, 2013 to restrict borrowing by the
company in excess of certain statutory limits in order to prevent the company from
incurring additional indebtedness that could lead to insolvency. It is argued that the
company has already borrowed substantial funds and if the company is burdened
with further debts then that could lead the company to bankruptcy. Accordingly, the
respondents voted against the resolutions at the 2014 AGM, where in it was proposed
to authorize the Board of Directors to incur long term debt up to an aggregate of Rs.
300 Crores. It is also alleged that the debt required is for investment in distillery
project and not for payment to farmers. Respondents have referred to several letters
in support of the contention that distillery project has been carried out despite the
objection of respondents and without proper approval of the shareholders of the
company. It is contended that there has been financial mismanagement of the
company and the respondents are only concerned with the proper management of the

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 company.
1 9 . Learned counsel for the respondents submitted that at the 2014 AGM, the
respondents exercised their statutory rights and refused to vote in favour of
authorizing the Board to incur future long term debt on behalf of the company as
long term debts will exceed the aggregate of the company's paid up capital and free
reserves. It is contended that the decision to exercise the statutory rights by the
respondents was based on well founded concerns regarding incurring huge additional
indebtedness. It is contended that respondents have consistently raised various
concerns regarding the financial mismanagement of the company including
unplanned and ill-timed capital projects undertaken and misuse of the company's
borrowings by the petitioners. It is the stand of the respondents (minority
shareholders) that they opposed the resolutions at agenda items Nos. 6, 8, 9 & 10
proposed in 2014 AGM as they sincerely feel that the company should not be
burdened with further unbearable debts.
2 0 . The respondents have referred to the audited financial statements of the
company for the financial year ending on 31st March, 2014 to show that the
inventory of the company was Rs. 330.42 Crores while the trade payables including
the Farmers' dues were Rs. 158.85 Crores. It is accordingly placed that the company
was able to pay the Farmers' dues and also are paying the same in time. It is alleged
by referring to the said financial statement that the company has increased the short
term borrowing by 48.87 Crores i.e. from 62.74 Crores to 111.61 Crores. That apart,
in the same financial year, the company tripled its long term debt from 38.70 Crores
to Rs. 112.83 Crores and its overall indebtedness increased exorbitantly by 123.62
Crores i.e. from 100.81 Crores to 224.44 Crores. It is further alleged that the
company undertook massive capital projects that are equivalent to 2.5 times the paid
up share capital of the company and this has led to the unfortunate debt spiral where
further debts are taken to service earlier debts. It is emphasized that any additional
debt in these circumstances could further worsen the company's financial conditions
and potentially led the company to bankruptcy.
21. Learned counsel for the respondents argued that despite the aforesaid inordinate
increase in the indebtedness, the suggestion that the company was unable to pay
amounts owed to the Farmers, is clearly misleading. The respondents have relied
upon the letter dated 04.12.2014 from IFCI Limited to establish that indebtedness
was not related towards payment to Farmers but only for the capital expenditure for
the distillery project. Accordingly, they submitted that the contention of the petitioner
that further debt is needed to pay Farmers' dues is clearly misleading.
22. Learned counsel for the respondents further submits that the respondents are
guided by sensible Commercial practices of not burdening the already debt ridden
company and, therefore, they cannot be coerced by the majority shareholders to hand
over a blank cheque of Rs. 300 Crores to the Board. It is also contended that the
respondents, who are minority shareholders, cannot be restrained from voluntarily
exercising their statutory rights u/s. 180(1) of the Companies Act, 2013. Forcing the
minority shareholders to vote in a particular manner is not only against their own
interest but also against the larger interest of the company which could lead to
insolvency for the company. It is stated that this may also take away limited
protection available to the minority shareholders under the law. It is also the
contention of the respondents that the exercise of statutory rights by them in a
manner which is beneficial to the company cannot be considered inequitable and
does not amount to oppression u/s. 397 of the Companies Act, 1956. It is

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 emphasized that the Tribunal should not exercise powers to cause the minority
shareholder to act in a manner which will be detrimental to the interest of the
company.
23. A perusal of various contentions of the parties reveals that the main issue raised
in this petition is as to whether it is in the interest of the company to give powers to
the Board of Directors of the Respondent 9 Company to borrow up to 300 crores by
exempting the requirement of special resolution. In this connection the financial
statement of the company for the year 2013-2014 available on record and relied upon
by the parties inter alia is relevant. The petitioners have admitted that the company
has already availed a loan of Rs. 221.23 crores as on 31.03.2014 as detailed at Para
8 above. On one hand the Petitioners seek indulgence to have borrowing power up to
300 crores without restriction of special resolution whereas on the other side
Respondents contend that additional debt in the circumstances could further worsen
the company's financial conditions which has potential threat of leading the company
to bankruptcy.
24. There is no technical/expert opinion on record on the present financial condition
of the company. However there is no dispute that the prevalent debts of the company
have already exceeded much above the aggregate of its paid-up capital and free
reserves. Accordingly the contention of the respondent that burdening the already
debt ridden company with additional long term debt would be detrimental to the
interest of the company, and it cannot be lightly brushed away. The respondents have
referred to the said financial statement of the company for the year 2013-14 to show
that the company has increased the short term borrowing by 48.87 Crores i.e. from
62.74 Crores to 111.61 Crores and the long term debt in the same financial year has
been tripled alarmingly from 38.70 Crores to Rs. 112.83 Crores and its overall
indebtedness has increased exorbitantly by 123.62 Crores i.e. from 100.81 Crores to
224.44 Crores. It is pertinent to mention here that the Authorized Capital of the
company is Rupees twenty crores only.
25. Section 180 of the Companies Act envisages that:
"180. Restrictions on powers of Board
(1) The Board of Directors of a company shall exercise the following powers
only with the consent of the company by a special resolution, namely:-
(a) to sell, lease or otherwise dispose of the whole or substantially
the whole of the undertaking of the company or where the company
owns more than one undertaking, of the whole or substantially the
whole of any of such undertakings.
Explanation.-For the purposes of this clause,-
(i) "undertaking" shall mean an undertaking in which the investment
of the company exceeds twenty per cent, of its net worth as per the
audited balance sheet of the preceding financial year or an
undertaking which generates twenty per cent, of the total income of
the company during the previous financial year;
(ii) the expression "substantially the whole of the undertaking" in
any financial year shall mean twenty per cent, or more of the value
of the undertaking as per the audited balance sheet of the preceding

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 financial year;
(b) to invest otherwise in trust securities the amount of compensation
received by it as a result of any merger or amalgamation;
(c) to borrow money, where the money to be borrowed, together with the
money already borrowed by the company will exceed aggregate of its paid-
up share capital and free reserves, apart from temporary loans obtained from
the company's bankers in the ordinary course of business: Provided that the
acceptance by a banking company, in the ordinary course of its business, of
deposits of money from the public, repayable on demand or otherwise, and
withdrawal by cheque, draft, order or otherwise, shall not be deemed to be a
borrowing of monies by the banking company within the meaning of this
clause.
Explanation.-For the purposes of this clause, the expression "temporary
loans" means loans repayable on demand or within six months from the date
of the loan such as short-term, cash credit arrangements, the discounting of
bills and the issue of other short-term loans of a seasonal character, but
does not include loans raised for the purpose of financial expenditure of a
capital nature;
(d) to remit, or give time for the repayment of, any debt due from a director.
(2) Every special resolution passed by the company in general meeting in
relation to the exercise of the powers referred to in clause (c) of sub-section
(1) shall specify the total amount up to which monies may be borrowed by
the Board of Directors.
(3) Nothing contained in clause (a) of sub-section (1) shall affect-
(a) the title of a buyer or other person who buys or takes on lease
any property, investment or undertaking as is referred to in that
clause, in good faith; or
(b) the sale or lease of any property of the company where the
ordinary business of the company consists of, or comprises, such
selling or leasing.
(4) Any special resolution passed by the company consenting to the
transaction as is referred to in clause (a) of sub-section (1) may stipulate
such conditions as may be specified in such resolution, including conditions
regarding the use, disposal or investment of the sale proceeds which may
result from the transactions:
Provided that this sub-section shall not be deemed to authorise the
company to effect any reduction in its capital except in accordance
with the provisions contained in this Act.
(5) No debt incurred by the company in excess of the limit imposed by
clause (c) of sub-section (1) shall be valid or effectual, unless the lender
proves that he advanced the loan in good faith and without knowledge that
the limit imposed by that clause had been exceeded."
26. Section 180 of 2013 Act corresponds to section 293 of the Companies Act, 1956.

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 Section 293 of the 1956 Act applied only to public companies. However Section 180
of the 2013 Act applies to all companies. It is also seen that section 293 of the 1956
Act only required ordinary resolution to exercise certain powers. The legislature
however while amending the provision provided in Section 180 of the 2013 Act the
requirement of special resolution to exercise those powers. The requirements of
Section 180 of the Companies Act, 2013 are mandatory. The Board of Directors has
no power to borrow where the money to be borrowed together with money already
borrowed by the company will exceed the aggregate of the paid-up capital of the
company and its free reserves (apart from temporary loans as provided) except with
the consent of the company by a special resolution. The requirement of the said
provision is that the directors shall so restrict their borrowings that the amount for
the time being remaining undischarged shall not exceed the limit specified. There has
to be exceptionally very good grounds for waiving such restrictions imposed under
the provisions of a statute.
2 7 . The petitioners and respondent No. 9-company have contended that by not
allowing these special resolutions to be passed in the AGM of 2014, the respondent
minority share holders have blocked the oxygen line of the of the company as no
company especially a sugar mill which is a capital intensive industry, can survive
without availing short and long term loans. It is however seen from record that the
company had disbursed dividends to its shareholders in the year 2007-2008 (10%),
2008-2009 (50%), 2009-2010 (55%), 2010-2011 (5%), 2011-2012 (22.50%) and
also declared and distributed Bonus equity Shares in the year 2009-2010 to its
shareholders. The company has also declared dividend @ 10% to its shareholders
from the profitability recently as on 31.03.2016. Petitioners have stated in their
written submission that the distillery unit of the company has contributed
significantly in the revenue generation of the company. In the financial year which
ended 31.03.2016, the company has sold distillery products including Ethanol worth
about Rs. 39.11 crores which contributes about profit of 6.55 crores to the company.
In the light of above scenario it is difficult to conclude that there has been a complete
deadlock in the functioning of the company. There is no dispute that on a previous
occasion erstwhile CLB had allowed the company to avail certain borrowings by
exempting passing of special resolution. In case of such eventuality the company can
approach this tribunal for any such requirement which has been unduly objected and
obstructed.
2 8 . In the present petition no specific relief has been sought in respect of
requirement of any particular loan. The petition mainly intent to give a general
financial power to the 'Board' to borrow up to 300 crores by exempting statutory
provisions (section 180) pertaining to special resolution. The prayer is neither
specific nor is based on any report of financial expert. In such complex fiscal
evaluation the court has to apply the doctrine of restraint.
2 9 . During argument learned counsel for respondent fairly submitted that
respondents are very much concerned about the interest of farmers, workers and in
the development of the company. We hope objections, if any, should be based on
genuine reasons for the benefit of the company and not for the sake of raising
objections alone. Respondents should note that hundreds of employees and their
family's livelihood depend upon the health and welfare of the sugar mill. The
company also supports as a source of livelihood to thousands of farmers who sell
their sugar cane to the sugar mill. Closure of the mill will affect many families who in
some way or the other, are connected with the sugar mill. 51% stake of petitioners
as well 41% stake of respondents in the company will also be adversely affected.

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 There is public interest involved in the running of the sugar mill and there can be
smooth functioning of the mill with responsible participation of its shareholders.
Government loans given to sugar mills at a reasonably lower rate of interest and any
concession to sugar mill should be availed in the interest of the company. Besides as
submitted during hearing the parties shall not act against the interest of the farmers
and workers.
30. It is also a case of the Petitioners that there has been oppression by respondents
since the year 2007. Petitioners contend that Respondents No. 1, 3 & 7 have never
given any personal guarantee since the year 2007 although the Petitioner No. 1 and
other petitioners/directors have provided personal guarantees to secure the loan. It is
further submitted that since 2007 there has been attempts by the minority groups
comprising Respondents No. 1 & 2 as directors and shareholders and respondents
Nos. 3 to 8 as shareholders, to some-how or the other scuttle the affairs of
Respondent No. 9 Company. It was also pointed out that since the year 2007
Respondents No. 3 and 7 had written to several financial institutions and Government
agencies including RBI to withhold granting financial assistance to Respondent 9
Company there by oppressing the Company. In this connection it is seen that some
allegations/correspondence made by Respondent No. 3 and 7 in the year 2007,
without its continuous follow up, cannot constitute a basis of oppression as on date.
As regards personal guarantee it is seen from the order of Delhi High Court dated
20.03.2007 passed in Civil Suit No. CS(OS) No. 575/2007 that Petitioners themselves
had suggested before the High Court that the respondents should not be required to
give personal guarantees. It is also the case of the respondent that in the year 2009-
10, all other disputes between the parties were amicably settled. A perusal of the
petition reveals that there is nothing about any alleged oppression during the long
period from 2009 to 2013. It is accordingly contended that a single isolated act is
insufficient to make out a case of oppression u/s. 397 of the Companies Act, 1956
and in order to obtain reliefs u/s. 397, 398 and 402 of the Companies Act, 1956,
continuous acts of oppression and mismanagement purported by respondents over a
period of time have to be established which has not been claimed in the present
matter. In support of the contention, Respondents have relied upon the case of
Palghat Exports v. TV Ramachandran MANU/KE/0078/1993 : (1994) 79 CompCas
213(Ker) and the case of S Gaekwad v. Shantadevi Gaekwad MANU/SC/0052/2005 :
(2005) 11 SCC 314 (Paras 182-185). It is also the case of respondents that the
minority shareholders cannot be restrained from voluntarily exercising their statutory
rights u/s. 180(1) of the Companies Act, 2013. Under the law the shareholders have
voting rights. The law also provides certain protections to the minority shareholders.
The exercise of statutory rights by respondents normally cannot be considered
inequitable and oppressive u/s. 397 of the Companies Act, 1956 more so where it has
been explained that exercise of such powers are intended to protect the interest of
the company. The agenda items in question were voted against by Respondents as
Company has already borrowed substantial funds and that any additional debt in the
circumstances could further worsen the company's financial conditions. Prima facie
the stand of the Respondents that the company should not be burdened with further
unbearable debts cannot be totally ignored. It is reiterated that no specific reason
along with materials including expert report in support requirement of additional
borrowing upto Rs. 300 Crores, has been placed on record by the Petitioners.
31. With regard to the alternate relief sought for pertaining to purchase of shares of
respondent Nos. 1 to 8 against their will, by the petitioners, it is seen that the
management of the company is in the hands of the petitioners with 51%
shareholding. Respondents No. 1 to 8 also have vital stake of about 41% in the

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 company. It is also pertinent that the company is a closely held family company
where both petitioners and the respondents have their rightful inheritance and legacy.
It was placed that with 50%-50% partnership, petitioners and respondents are
successfully running the business of The Imperial' hotel at Janpath, New Delhi.
Moreover it is gathered that in the year 2009-10 some other business disputes
between the parties were amicably settled. In a similar way amicable management of
the present close family company by both the parties should be tried to resolve any
differences. As discussed above the petitioners could not establish that there has
been a complete dead lock in the functioning of the company. In the interest of
justice a chance is afforded to the parties to co-operate with each other in the
smooth functioning of the company including the smooth running of the sugar mill.
In the facts and for the time being, this cannot be termed as an extreme deadlock
case where in the interest of the company, 41% shares of the minority respondents
should be forcibly taken away against their will and to coerce them to exit the
company.
32. In view of the aforesaid discussion the company petition is disposed of with the
following directions:
"i. The respondents shall not send any communication to financial
institutions without first obtaining permission from the Board of Directors
because it may erode the goodwill and reputation of the respondent
company.
ii. The prayer of the petitioners to grant them blanket permission to raise
loan by relaxing the requirement of special resolution as per the provisions
of section 180 of 2013 Act is not acceptable as we do not feel persuaded
after looking into the financial condition of the respondent company and the
material on record.
iii. The petitioners and the Respondents are closely related family and there
is every likelihood of exploring amicable settlement as the parties have been
successfully running other business. The litigation should be last option in
such like cases."
We dispose of the petition in the above terms.
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