J 2018 SCC OnLine NCLT 25414

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2018 SCC OnLine NCLT 25414
In the National Company Law Tribunal†

(BEFORE BIKKI RAVEENDRA BABU, MEMBER (JUDICIAL))
Maif Investments India Pte Ltd. … Petitioner;

Versus
Ind-Barath Power Infra Limited and Others … Respondent.
CP No. 248/59/HDB/2018
Decided on August 29, 2018
Advocates who appeared in this case :
Learned Senior counsel Mr. Niranjan Reddy along with Mr. Lakshmikanth Reddy, Ms.
Namrata Sinha and Mr. Parinaz Vakil present for the Petitioner;
Learned counsel Mr. P. Vikram present for R1. Learned counsel Mr. Yogesh Kumar
Jagia present for R2. Learned counsel Mr. D.V.A.S. Ravi Prasad present for R4.
The Order of the Court was delivered by
BIKKI RAVEENDRA BABU, MEMBER (JUDICIAL):— MAIF Investment India Private
Limited filed this petition U/s. 59 of the Companies Act seeking the following reliefs:—
a. To declare that the board resolution dated 26.03.2018 passed by the erstwhile
Board of Directors of 2nd respondent company (IND-Barath Thermotek Private
Limited) herein after called as IBTPL authorising the conversion of the
compulsory convertible debentures into equity shares of Respondent No. 2 is
ultra vires to Articles of Association of Respondent No. 2 Company and the terms
of the CCDs as set out in schedule 9 Part B of the Investment Agreement as
illegal and void-ab-initio.
b. To declare that the conversions of compulsory convertible debentures is ultra
vires and contrary to the Articles of Association of Respondent No. 2.
c. TO direct the Respondents 5 and 6 to cancel the 9,06,599 equity shares of
Respondent No. 2 credited to the account of the Petitioner pursuant to the illegal
resolution of the Board of Directors is in contravention of the Articles of
Association of Respondent No. 2.
d. To pass orders for rectification of the register of members of Respondent No. 2.
2. On 25.06.2015, an Investment Agreement was entered into between the
petitioner and the Respondent No. 13 together with the promoter group consisting of
Respondent No. 7, Mr. K. Raghu Rama Krishna Raju and Sriba Seabase Pvt. Ltd.
(collectively ‘the Promoters’) and Respondent Nos. 1, 2 and 4. In terms of the
Investment Agreement the Petitioner and the Respondent No. 13 lent a sum of Rs.
780 crores as follows:—
a. The petitioner subscribed to 9,06,599 the investor compulsorily convertible
debentures of Respondent No. 2 (“CCDs”) of Rs. 10 each for an aggregate
consideration of Rs. 99,99,990 and one equity share of Respondent No. 4 at the
price of Rs. 10; and
b. The Respondent No. 13 subscribed to 6,990 the initial Non-Convertible
Debentures of the Respondent No. 2 (“NCDs”) of Rs. 10 Lakhs each for an
aggregate consideration of Rs. 699 crores, and 880 additional NCDs of Rs. 10
Lakh per NCD for an aggregate consideration of Rs. 80 crores.
3. The Investment Agreement inter alia set out the obligations of the parties
thereto and also the events which would constitute an Event of Default under the
Agreement and the consequences thereof (clause 25.2 of the Investment Agreement).
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4. The following would qualify as Events of Default as per the terms of Investment
Agreement:—
a. Delay in the execution of the Project (or any part thereof) beyond the agreed
timeframe set out in the Project Agreements and/or Business Plan (Type 1 Event
of Default).
b. Consummate a merger between Respondent Nos. 2 and 4 upon the request of an
Investor at any time but in any case before the earlier of (A) December 31, 2016
and (B) the completion of the one year from the date of commercial operation of
the second 250 MW unit under the Project (Type 2 Event of Default); and
c. Annual interest payment to the Petitioner and Respondent No. 13, failure of
which would amount to a coupon break event (Type 3 Event of Default).
5. As per Clause 17.8 of the Investment Agreement, the parties including
Respondent No. 2 undertook that it shall adhere to the terms and conditions of the
NCDs and CCDs in all respects and shall redeem the NCDs and convert the CCDs in
accordance with their respective terms. The terms of the CCDs as set out at Schedule
9 Part B of the Investment Agreement specifically provide that the CCDs are to be
converted only at the option and/or election of the CCD holder as follows:
“4.1 Each CCD shall be convertible into Equity Shares (as per the ration
mentioned below). At the election of the holders of such CCD, under the
circumstances specified in Clause 25.4(g), Clause 21.3(b), or under any
circumstances as may be expressly specified under Clause 21 (including the
Schedules referred thereunder) in this regard.”
…
4.4 Conversion Procedure
The CCDs shall be converted, when pursuant to paragraph 4.1, in the following
manner:
i) The Company shall convert the CCDs upon receipt of a written notice
(the “Conversion Notice”) by the CCD holders…” (Emphasis supplied).
6. The aforesaid terms of the Investment Agreement were incorporated in the
Articles of Association of Respondent No. 2, particularly at Articles 65.8 and 77.4 of
Chapter II. On 15.05.2015 the lead lender of Respondent No. 4 had issued a letter
whereby, it approved the proposed modification in the equity structure of Respondent
No. 4 on account of Investment Agreement.
7. On 27.06.2015, a Debenture Trust Deed was executed between Respondent No.
2 and Respondent No. 3 in terms of which Rs. 699 crores and additional amount of Rs.
80 crores was proposed to be raised by way if issue of NCDs and the payment of
discharge of NCDs was to be secured by:—
a. Pledge of 9,500 equity shares held by Respondent No. 1 in Respondent No. 2
representing 51% of its share capital on fully diluted basis;
b. Pledge of 50,57,79,500 equity shares of the Respondent No. 4 representing
48.99% of its share capital on fully diluted basis; and
c. Hypothecation and maintenance of all cash flows of the Respondent No. 4
permitted to be hypothecated under the terms of Financing Agreements.
8. The obligations under the Investment Agreement were secured by a pledge of
shares under the Share Pledge Agreement dated 09.07.2015 entered into between
Respondent Nos. 1, 2 and 4 and the Respondent No. 3 in terms of which Respondent
No. 1 pledged 5,100 equity shares of Respondent No. 2 and Respondent No. 2 pledged
50,57,70,500 equity shares of Respondent No. 4 in favour of Respondent No. 3 for the
benefit of the holders of the said Debentures. The Share Pledge Agreement provided
the rights and remedied available to the pledger including the right of sale of pledged
equity shares on the occurrence on an Enforcement Event under clause 1.1 therein.
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9. Respondent Nos. 1 and 2 issued irrevocable power of attorney in favour of the

Respondent No. 3 authorising it to deal with the pledged shares and exercise all its
rights in respect there of.
10. Pursuant to the Investment Agreement, the Petitioner and Respondent No. 13
on July 29 and 30, 2017, in total lent Rs. 780 crores to Respondent No. 2 by way of
subscription of debentures and acquired 1 equity share each in Respondent No. 2 and
Respondent No. 4. The said amount was to be utilized to buyout existing investors and
to complete the Project which was being developed in Orissa.
11. Thereafter, Respondent No. 4 was in need of a bridge loan in order to finance
the completion of Unit 1 of the Project. On 23.12.2016 the Petitioner and Respondent
No. 13, the Promoters and Respondent Nos. 1, 2 and 4 along with one Arkay Energy
Rameswaran Limited entered into a Subscription Agreement in terms of which
Petitioner No. 1 provided a bridge loan for a sum of Rs. 102 crores by subscribing to
10,200,000 optionally convertible debentures (OCDs) of Respondent No. 4 at Rs. 100/
- per OCD in February 2017 for an aggregate consideration of Rs. 102 crores.
12. The Promoters and Respondents 1, 2 and 4 committed contractual breaches
repeatedly which amounted to occurrence of serious Events of Default as defined
under the Investment Agreement that is Type 1 Event of Default; Type 2 Event of
Default and Type 3 Event of Default were triggered.
13. In spite of several reminders issued to Respondent No. 2 had failed to make
interest payments in accordance with the terms of the Investment Agreement.
14. Respondent No. 4 also failed to make payment of interest on the 10,200 OCDs
held by the Petitioner in terms of the Subscription Agreement dated 23.12.2016.
15. Consequently, on 29.08.2017, the Petitioner and the Respondent No. 13
addressed a letter to the Promoters and Respondent Nos. 1, 2 and 4 calling upon them
in terms of the Investment Agreement informing them that on account of occurrence
of Events of Default under the Investment Agreement they became entitled to exercise
voting rights in respect of the securities held by them in Respondents Nos. 2 and 4.
16. On 31.08.2017, the Respondent No. 3 invoked the Power of Attorney granted to
it pursuant to the Share Pledge Agreement and invoked the pledge of 9,500 shares of
Respondent No. 1 in Respondent No. 2 and 50,57,79,500 equity shares of Respondent
No. 1 in Respondent No. 4 but the pledged shares have not been sord and they were
only transferred to de-mat account of Respondent No. 3.
17. On 05.09.2017, the Petitioner and Respondent No. 13 issued letters to the
Promoters and Respondent Nos. 1, 2 and 4 and Arkay Energy Ramaswaram Ltd. calling
upon them to convert the CCDs into equity shares and thereby stating that with effect
from 05.09.2017, the nominees of the Promoters and Respondent No. 1 shall cease to
be the directors of Respondent No. 2 and 4.
18. On 12.09.2017, the Respondent No. 3 addressed a notice in exercise of its
rights under the Debenture Trust Deed, the Share Pledge Agreement and the Powers
of Attorney in its favour, calling upon Respondent No. 2 to convene an EOGM within 21
days to consider converting 906,559 CCDs issued by Respondent No. 2 to the
Petitioner into 906,559 equity shares and o approve removal of persons mentioned
therein as directors of Respondent No. 2.
19. On 26.09.2017, the Joint Lender Forum of Respondent No. 4 was held. The
representatives of Respondent Nos. 1, 2 and 4 failed to attend the said meeting
despite prior notice.
20. In the Joint Lenders Meeting it is concluded that there is apparent disinterest of
the Promoters and Respondent Nos. 1 and 2 and their consistent failure and/or
inability to revive the Project.
21. The Petitioner and the Respondent No. 13, in addition to the bridge loan of Rs.
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102 crores in February 2017 by way of the Subscription Agreement dated 23.12.2016,
had expressed a willingness to infuse additional funding of Rs. 100 crore to enable
Unit II to commence operations and have submitted a detailed proposal for revival.
22. The Promoters and Respondent No. 1 elected to settle its disputes by way of
arbitration and/or invoked arbitration by moving the Hon'ble Bombay High Court
through Commercial Arbitration Petition(L) No. 423 of 2017. But ultimately on
13.10.2017, the Arbitration Petition was mentioned before the Hon'ble Bombay High
Court and sought permission to withdraw with liberty but the Hon'ble High Court
permitted to withdraw without granting liberty.
23. The JLF in its meeting held on 05.10.2017 took a serious view as to the gross
mismanagement of the Project by the Promoters.
24. On 06.10.2017, the Petitioner and the Respondent No. 13 addressed a letter to
the Respondent No. 3 and instructed it to call an EOGM of the shareholders of
Respondent No. 2 to discuss the matters more particularly set out in Annexure A to
the letter as Respondent Nos. 2 has failed to call for the same.
25. On 06.10.2017, Respondent No. 3 issued a Special Notice under Section 115
read with Section 169 of the Companies Act 2013 calling for a general meeting of
Respondent No. 2(a) remove the nominees of the Respondent No. 1 from the board
i.e., Mr. K. Barat, Mr. V. Perraju, Mr. N. Kumaraswamy and Mr. G.A. Raj Kumar as
Directors of Respondent No. 2. (b) Conversion of the CCDs subscribed to by the
Petitioners into equity shares of Respondent No. 2.
26. On 17.10.2017, the Respondent filed two Petitions before the NCLT, Hyderabad
CP No. 235/2017 for a declaration that the notice dated 06.10.2017 issued by the
Respondent No. 3 is illegal and contrary to Articles of Association of Respondent No. 1
and CP No. 243/2017 under section 59 of the Companies Act, 2013 for rectification of
register of members and for a declaration that the transfer of 9,500 shares in the
name of Respondent No. 3 are contrary to the Articles of Respondent No. 1.
27. The NCLT, Hyderabad by its order dated 27.10.2017 stayed the EOGM
scheduled to be held on 01.11.2017 until the next date of hearing i.e., 17.11.2017 at
which time it was extended by consent to 12.12.2017.
28. Thereafter, there was no extension of status quo order.
29. On 06.03.2018 Respondent No. 1 filed a memo in both the Company petitions
CP 235/2017 and CP 243/17 seeking to withdraw the same with a liberty to file afresh.
30. This Tribunal permitted the petitioners in both the CP's to withdraw petitions by
granting liberty to the Petitioner to file fresh Company petition if the Petitioner is
aggrieved by the action of the Respondent.
31. Further, the Hon'ble Tribunal ordered since the restraint order passed by the
Tribunal stands vacated by virtue of disposal of the present Company Petition, the
Respondent No. 1 may conduct the EOGM in accordance with law and also follow
principles of natural Justice.
32. On 17.03.2018, the Respondent No. 2 issued a notice circulating the agenda for
meeting of the Board of Directors scheduled to be held on 26.03.2018. One of the
items of the said meeting was the conversion of 9,06,599 CCDs into equal number of
equity shares vide Investment Agreement dated 25.06.2015.
33. According to the Petitioner and the Respondent No. 13 item No. 3 of the agenda
of the Board meeting dated 26.03.2018 and any action pursuant thereto in respect of
converting the CCDs into equity shares of Respondent No. 2 is in violation of Articles of
Association and the terms under which the CCDs were issued vide Articles 65.8 and
77.4 of the Chapter II.
34. The Petitioner and the Respondent 13 by their letter dated 20.03.2018
informed the Respondent Nos. 1, 2 and 4, the Promoters and Arkay Energy
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Rameshwaram Limited that any unilateral conversion of the CCDs contemplated in the
agenda circulated in the notice of 17.03.2018 would be contrary to the Articles of
Association of Respondent No. 2, the terms and conditions of the CCDs; and the
Investment Agreement dated 25.06.2015.
35. The Petitioner and Respondent No. 13 cautioned the Respondent Nos. 1, 2 and
4 and Arkay Energy Rameswaram Ltd. not to place the agenda item and the Petitioner
is reserving its right to convert the CCDs at such time as it deems fit by issuing a
fresh notice for the same.
36. The Board of Directors of Respondent No. 2 held the meeting on 26.03.2018
and passed the agenda item 3 also i.e., the proposed conversion of CCDs.
37. In the meeting also the nominee Directors of the Petitioners and Respondent
No. 13 presented the letter dated 26.03.2018 to the Board of Directors on behalf of
the Petitioner and Respondent No. 13.
38. Since the Directors of Respondent No. 2 proceed with item 3 of the agenda i.e.,
proposed conversion of CCDs, the nominee directors of the Petitioner and the
Respondent No. 13 submitted their resignation letters and left the Board Meeting.
39. Again on 28.03.2018, the Petitioner and the Respondent addressed another
letter to Respondent Nos. 1, 2 and 4 reiterating their stand.
40. The Petitioner and Respondent No. 13 filed an application under section 425 of
the Companies Act, 2013 read with Section 12 of the Contempt of Courts Act, 1971
stating that the meeting of the Board of Directors of respondent No. 2 held on
26.03.2018 is in blatant violation of the orders passed on 06.03.2018.
41. On 06.04.2018 the Petitioner and the Respondent No. 13 were intimated by
SBI SG Global Securities Services Pvt. Ltd. about the conversion of CCDs into equity
shares and the Petitioner's account had been credited with 9,06,599 equity shares of
Respondent No. 2 as on 06.04.2018.
42. According to the Petitioner and Respondent No. 13 the Board of Directors
meeting on 26.03.2018 for conversion of CCDs was based on a deliberate
misinterpretation of the Order dated 06.03.2018 and it is in violation of the Articles of
Association.
43. The Petitioner without prejudice to his contempt filed this Petition.
44. The Respondent No. 1 filed counter stating that the Petition is not supported by
affidavit prescribed in the NCLT Rules, 2016.
45. This Tribunal has no jurisdiction U/s. 59 of Act to grant the reliefs claimed in
the Petition.
46. The issue raised by the Petitioner in the instant Petition is triable issue required
a detailed trial and interpretation of various agreements executed among the parties
to the Petition.
47. It is stated that even according to the Petitioner the conversion of CCDs into
equity shares as an act of oppression and mismanagement and therefore, the
jurisdiction U/s. 59 cannot be invoked.
48. It is further stated that this Petition is filed for collateral purpose as it is evident
from the fact that the Petitioner had filed multiple Petitions including petition U/s. 7 of
the IB Code vide C No. 192/7/HDB/2018 in respect of Ind-Barath Energy (Utkal)
Limited and Application U/s. 425 of the Companies Act bearing CP No.
179/425/HDB/2018.
49. It is also pleaded that the Petitioner is barred under section 8 of the Arbitration
and Conciliation Act.
50. It is pleaded that the Petitioner is barred by principles of estoppel on accepting
the withdrawal of Petition filed challenging notice issued under section 100(2nd
respondent) of Act seeking convening of EOGM.
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51. It is stated that the reliefs prayed in the petition goes to show that it is filed for
a collateral purpose.
52. It is stated by the 1st Respondent that the sole grievance of the petitioner in
this petition is in relation to the Board Resolution dated 26.03.2018 wherein, a
resolution was passed to convert 9,06,599 CCDs into equity shares in favour of the
Petitioner.
53. According to the Respondent N. 1 the CCDs were converted in accordance with
investment Agreement read with subscription Agreement on election of the Petitioner.
54. Even before the conversion of the CCDs, the Petitioner is a substantial
shareholder of the Respondent No. 2 post invocation of pledge of equity shares which
resulted in holding of 51% equity of Respondent No. 2.
55. The Respondent No. 1 however stated that the Petitioner vide its letter dated
05.09.2017, expressly elected to invoke clauses of Investment Agreement dated
25.06.2015 and called upon Respondent No. 2 to convert CCDs knowingly fully well
that it would result in 100% shareholding with Respondent No. 2 thereby making
them majority shareholders.
56. It is stated that the Petitioner did not take any steps for stopping the recalling
of conversion or invocation of pledge during the pendency of the proceedings in CP
Nos. 235/2017 and CP 243/2017.
57. According to the 1st Respondent it was the case of the petitioner all through
that they have invoked the pledge and became Major Shareholders of the Respondent
No. 2.
58. Even in the Board Meeting dated 26.03.2018 which was convened to give effect
to the conversion of CCDs, the petitioner did not take any steps to withdraw or recall
the Pledge.
59. The Respondent No. 2 filed counter on the same lines on which Respondent No.
1 filed.
60. Basing on the Pleadings and the rival contentions the following points emerge
for determination in this Petition.
i) Whether this Tribunal has got jurisdiction to consider and grant the reliefs prayed
in this Petition while exercising jurisdiction U/s. 59 of the Companies Act, 2013?
ii) Whether the conversion of 9,06,599 CCDs into equity shares in favour of the
Petitioner is in accordance with the Articles of Association and Investment
Agreement the dated 25.06.2015?
iii) Whether Petitioner is entitled for rectification of register of members of
Respondent No. 2?
61. This petition is filed invoking the jurisdiction of this Tribunal U/s. 59 of the
Companies Act, 2013 that corresponds to Sec. 111A of the Companies Act, 1956
inserted by Sec. 30 of Act 22 of 1996 with effect from 20.09.1995 repealing Sec. 155
of the earlier Companies Act.
62. Sec. 59 of the Companies Act 2013 came into force with effect from
12.09.2013.
63. Sec. 59 of the Companies Act reads as under:—
Rectification of Register of members.
(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,
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specified by the Central Government by notification, in respect of foreign

members or debenture holders residing outside India, for rectification of the
register.
(2) The Tribunal may, after hearing the parties to the appeal under sub-section
(1) by order, either dismiss the appeal or direct that the transfer or
transmission shall be registered by the company within a period of ten days of
the receipt of the order or direct rectification of the records of the depository
or the register and in the latter case, direct the company to pay damages, if
any, sustained by the party aggrieved.
(3) The provisions of this section shall not restrict the right of a holder of
securities, to transfer such securities and any person acquiring such securities
shall be entitled to voting rights unless the voting rights have been suspended
by an order of the Tribunal.
(4) Where the transfer of securities in contravention of any of the provisions of
the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities
and Exchange Board of India Act, 1992 (15 of 1992) or this Act or any other
law for the time being in force, the Tribunal may, on an application made by
the depository, company, depository participant, the holder of the securities or
the Securities and exchange Board, direct any company or a depository to set
right the contravention and rectify its register or records concerned.
(5) If any default is made in complying with the order of the tribunal under the
section, the company shall be punishable with fine which shall not be less
than one lakh rupees but which may extend to five lakh rupees and every
officer of the company who is in default shall be punishable with
imprisonment for a term which may be extend to one year or with fine which
shall not be less than one lakh rupees but which may extend to three lakh
rupees, or with both.
64. Sec. 59 sub-section (1) gives rise to a cause of action to any member of the
Company or the Company or all the person aggrieved in case if the name of any
person is without sufficient cause entered into the register of members of a company
or after having been entered in the register, omitted therefrom without sufficient
cause.
65. In the case on hand the cause of the Petitioner is that without sufficient cause
its name has been entered into register of members and equity shares of the
Respondent No. 2 Company have been allotted to it as per the intimation given by the
SBI SG Global Securities Private Limited about the conversion of CCDs into equity
shares and the Petitioners account had been credited with 9,06,599 equity shares of
Respondent No. 2 on 06.04.2018.
66. Admittedly on 05.09.2017 the Petitioner and Respondent No. 13 issued letters
to the Promoters and Respondent Nos. 1, 2 and 4 and Arkay Energy Rameswaram
Limited calling upon them to convert the CCDs into equity shares and thereby stating
that with effect from 05.09.2017, the nominees of Promoters and Respondent No. 1
shall cease to be the Directors of Respondent No. 2 and 4.
67. Admittedly on 17.03.2018 the Respondent No. 2 issued notice circulating the
agenda of meeting of the Board of Directors scheduled to be held on 26.03.2018.
Wherein one of the items of the said meeting was the conversion of 9,06,599 CCDs
into equal number of equity shares vide Investment Agreement dated 25.06.2015.
68. It is the case of the Petitioner that item No. 3 of the Board meeting dated
26.03.2018 is in violation of Articles of Association and the terms under which CCDs
were issued vide Article 65.8 and 77.4 of the Chapter II.
69. It is also the case of the Petitioner that on 20.03.2018 Petitioner and
Respondent No. 13 by their letters informed Respondent Nos. 1, 2 and 4, the
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Promoters and Arkay Energy Rameswaram Limited that any unilateral conversion of
the CCDs contemplated in the agenda circulated in the notice of 17.03.2018 be
contrary to the Articles of Association of Respondent No. 2, the terms and conditions of
the CCDs and the Investment Agreement dated 25.06.2015.
70. In spite of it the Board of Directors of Respondent No. 2 Company in their
meeting held on 26.03.2018 passed the agenda item No. 3 i.e., proposed conversion
of CCDs into equity shares of Respondent No. 2 Company.
71. If we turn to the reliefs prayed in the petition they mainly relate to the
declaration that the Board resolution dated 26.03.2018 passed by the erstwhile Board
of directors of the 2nd Respondent Company authorising the conversion of compulsory
convertible debentures into equity shares of Respondent No. 2 is ultra vires to Articles
of Association and the terms of the CCDs of the Investment Agreement as illegal and
void-ab-initio.
72. The petitioner in the petition in page 29 (10.10) stated as follows:—
“The acts and misdeed of the Promoter Group and Respondent Nos. 7 to 12 also
constitute acts of oppression and mismanagement and the Petitioner reserves its
right to file necessary proceedings in relation to the same if and when advised.”
73. The jurisdiction of this Tribunal U/s. 59 is summery in nature. The scope of
enquiry U/s. 59 is made clear in the decision of the Hon'ble Supreme Court in
Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers Pvt. Ltd. reported
in (1998) 7 SCC 105.
74. In that Judgement the Hon'ble Supreme Court held the Court under U/s. 155 of
the Companies Act 1956 has to adjudicate in the facts and circumstances whether the
dispute raised really pertains to rectification or under the grab of rectification
questions of the facts involving contentious issues raised.
75. It is further held in that Judgement that if dispute found to be relating to the
peripheral field of rectification, then the Company Court under Section 155 will have
exclusive jurisdiction and jurisdiction of Civil Court will be impliedly barred. It is also
held that if the finding is otherwise Civil Court's jurisdiction is not excluded.
76. Keeping the said principle in mind we proceed to examine facts and events that
lead to be filing of this Petition.
77. Admittedly on 25.06.2015, The Investment Agreement was entered into
between the Petitioner and Respondent No. 13 together with Promoter group
consisting of Respondent No. 7, Mr. K. Raghu Rama Krishna Raju and Sriba Seabase
Pvt. Ltd. (collectively ‘the Promoters’) and Respondent Nos. 1, 2 and 4.
78. Admittedly, in terms of the Investment Agreement, the Petitioner and
Respondent No. 13 lent a sum of Rs. 780 crores as follows:—
a. The petitioner subscribed to 9,06,599 the investor compulsorily convertible
debentures of Respondent No. 2 (“CCDs”) of Rs. 10 each for an aggregate
consideration of Rs. 99,99,990 and one equity share of Respondent No. 4 at the
price of Rs. 10; and
b. The Respondent No. 13 subscribed to 6,990 the initial Non-Convertible
Debentures of the Respondent No. 2 (“NCDs”) of Rs. 10 Lakhs each for an
aggregate consideration of Rs. 699 crores, and 880 additional NCDs of Rs. 10
Lakh per NCD for an aggregate consideration of Rs. 80 crores.
79. Admittedly, the terms of the Investment Agreement were incorporated in the
Articles of Association of Respondent No. 2 particularly at Article 65.8 and 77.4 of
Chapter II which reads as under:—
65.8 The Company and Promoters shall adhere to the terms and condition of the
NCDs and CCDs in all respects and shall redeem the NCDs and convert the CCDs in
accordance with their respective terms.
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77.4 Conversion
a) Each CCD shall be convertible into Equity Shares (as per the ratio mentioned
below), at the election of the holders of such CCD, under the circumstances
specified in Article 72.4(g), Article 69.3(b), or under any circumstances as
may be expressly specified under Article 69 in this regard.
b) Each CCD, once fully paid, shall be convertible into 1 (one) Equity Share,
without any further p[payments being made by the holder of the CCD;
c) On the occurrence of the Conversion Due Date, the each CCD shall convert into
1 (one) Equity Share, without any further actions required to be taken by the
hold of such CCD.
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 receipt 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 holder one Equity share of
each of CCD converted by them, and shall deliver duly stamped shares
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.
e) In the event the Company undertakes any form of restructuring of its share
capital, including but not limited to (i) consolidation or subdivision or splitting
up of its Equity Securities; (ii) issue of bonus or right shares; (iii) distribution
of scrip dividend; or (iv) other similar occurrences, the number of Equity
Shares that each CCD converts into, shall be adjusted accordingly in a manner
that the holder of the CCDs receive such manner of Equity Shares that they
would have been entitled to receive immediately after the occurrences set out
in the sub paragraphs (i) to (iv) above had the conversion of the CCDs
occurred immediately prior to such occurrences.
80. Even according to the Petitioner, the promoters and Respondent Nos. 1, 2 and 4
committed contractual breaches repeatedly that amount to occurrence of serious
Events of Default as defined under the Investment Agreement that is Type 1 Event of
Default; Type 2 Event of Default and Type 3 Event of Default.
81. Even according to the petitioners in spite of reminders, Respondent No. 2 failed
to make interest payments in accordance with the terms of the Investment
Agreement. Respondent No. 4 failed to make payment of interest on the CCDs held by
the Petitioner in terms of Subscription Agreement dated 23.12.2016.
82. Admittedly, on 29.08.2017, the petitioner and respondent No. 13 addressed
letter to the promoters and Respondent Nos. 1, 2 and 4 informing them that they are
entitled to exercise voting rights in respect of the securities held by them in
Respondent Nos. 2 and 4 on account of Events of Default under the Investment
Agreement.
83. Admittedly, on 31.08.2017, pledge of 9,500 shares of Respondent No. 1 in
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Respondent No. 2 and 50,57,79,500 equity shares of Respondent No. 1 in Respondent

No. 4 were invoked.
84. Admittedly, on 05.09.2017, the petitioner and Respondent No. 13 issued letters
to the promoters and Respondent Nos. 1, 2 and 4 and Arkay Energy Ramaswaram Ltd.
calling upon them to convert the CCDs into equity shares.
85. On 12.09.2017, the Respondent No. 3 addressed a notice in exercise of its
rights under the Debenture Trust Deed, the Share Pledge Agreement and Power of
Attorney calling upon Respondent No. 2 to convene EOGM within 21 days to consider
and convert all 906,559 CCDs issued by Respondent No. 2 to the Petitioner into
906,559 equity shares and to approve removal of persons mentioned in as directors of
Respondent No. 2.
86. When Respondent No. 2 failed to call EOGM on 06.10.2017, Respondent No. 3
issued a special notice U/s. 115 read with Section 169 of the Companies act 2013,
calling for a General Meeting of Respondent No. 2 for to the purpose of passing
resolutions for the conversion of CCDs subscribed to by the Petitioners into equity
shares of Respondent No. 2.
87. The Respondent No. 2 filed CP No. 235/2017 challenging the notice issued by
Respondent No. 3 for convening Annual General Meeting for the purpose of conversion
of CCDs into equity shares as one of the agenda items. That petition was opposed by
the Respondent No. 3 and Petitioners. Ultimately, CP No. 235/2017 was withdrawn by
the Respondent No. 1.
88. This Tribunal granted permission to Respondent No. 1 to conduct EOGM in
accordance with law and by following principles of natural justice.
89. The grievance of the Petitioner is that Respondent No. 1 and Respondent No. 2
convened the Board meeting stating that it has got the approval from NCLT,
Hyderabad to conduct the Board meeting.
90. The Board meeting scheduled on 26.03.2018 and the notice of said meeting
was given on 17.03.2018.
91. It is at this stage that the Petitioner and Respondent No. 13 took a V turn and
stated that they are not going ahead with the conversions of CCDs into equity and
they will exercise such option at a future date vide letter 20.03.2018.
92. Here it is pertinent to mention that the Petitioners also filed a Petition U/s. 425
of the Companies Act, vide CP 175/425/HDB/2018 for contempt on the ground that
the Board of Directors meeting was called by miss-quoting the Order of the NCLT
dated 06.03.2018 passed in CP 235/2017.
93. Thereafter, Petitioners filed this Petition. Thereafter, the Petitioner also filed CP
(IB) No. 192/7/HDB/2017 U/s. 7 of the IB Code against Ind-Barath Energy (Utkal)
Private Limited i.e., Respondent No. 4 herein with a request to trigger CIRP Process in
respect of Respondent No. 4 herein claiming as a Financial Creditor.
94. The Petitioner himself in the Petition raised several issues relating to the Board
Resolution dated 26.03.2018, wherein, the conversion of CCDs into equity shares of
Respondent No. 2 was passed.
95. One of such contentious issues raised by the Petitioner regarding the Board
meeting dated 26.03.2018 is that such a resolution was passed only to overcome Sec.
29(A) of the IB Code.
96. Sec. 29(A) of the IB Code places certain restrictions on the Corporate Debtor in
case CIRP Process is triggered against Respondent No. 4 herein in C(IB) No.
192/7/HDB/2018.
97. Here itself it is pertinent to note that in the petition filed U/s. 7 the main issue
is whether the Petitioner can still be treated as Financial Creditor, in the light of
invocation of pledge of shares and in view of the conversion of CCDs into equity shares
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of Respondent No. 2 which is the holding Company of Respondent No. 4 herein.

98. The next issue raised by the Petitioner in respect of the impugned Board
resolution dated 26.03.2018 is, it is violative of Article of Association and it is violative
of Investment Agreement.
99. The next contentious issue raised by the Respondents 1, 2 and 4 is that in view
of the Arbitration clause in the Investment Agreement this petition is not maintainable
without invoking Arbitration.
100. In this context it may be pertinent to mention here that the Petitioner herein
in CP No. 235/2017 invoked the issue of Arbitration by filing a Petition U/s. 8.
101. Of course it is stated that it was opposed by the Respondents 1 and 2 herein
in CP No. 235/2017. That means in CP No. 235/2017 Petitioners herein took a stand
that the CP No. 235/2017 is not maintainable without invoking Arbitration.
102. Where as the Respondents 1 and 2 herein in CP No. 235/2017 took a stand
that the issue involved therein was not arbitral and therefore referring to Arbitration is
not necessary. But here in this petition both the parties are taking a diametrically
opposite stand.
103. It is a fact that Respondents did not file the Petition U/s. 8 of the Arbitration
and conciliation Act making a request to refer the matter to Arbitration Tribunal as per
the terms of the Investment Agreement.
104. On this aspect learned counsel appearing for the Respondent relying upon the
decision of the Sharad P. Jagtiani v. Edelweiss Securities Limited of Delhi High Court
decided on 03.03.2014 reported in 2014 Indlaw DEL 965 : 2014 (208) DLT 487,
contended that when it is mentioned in the written statement referring to the
Arbitration Agreement it is not necessary that a separate Petition U/s. 8(2) of the Act
needs to be filed. This is also a contentious issue. It require elaborate examination of
the provisions of the Arbitration Act and case law on the point.
105. The next issue raised by the respondent is that the Petitioner and the
Respondent No. 3 having elected to have conversion of CCDs into equity shares of
Respondent No. 2 choose to go back on their election which is not provided in the
Articles of Association or in the Investment Agreement.
106. The issue raised by the Petitioner is that before the conversion of CCDs into
equity shares when the Petitioner wrote back to the Respondents 1 and 2 by a letter
dated 28.03.2018 asking them not to place agenda item No. 3 of the Board meeting
dated 26.03.2018 relating to conversion of CCDs into equity shares, the conversion is
illegal. Basing on the provisions of the Contract Act relating to proposal offer and
acceptance. These are all the contentious issues.
107. Unless and until all these issues are answered it is not at all possible to give a
finding as to the validity or otherwise of the Board resolution dated 26.03.2018,
wherein the conversion of CCDs into equity shares of Respondent No. 2 were made.
108. Therefore, while exercising summery the jurisdiction U/s. 59 of the Companies
Act, I am afraid that the scope cannot permit to go into all the above said contentious
issues raised in this Petition except examining to the extent whether there is any
sufficient cause to enter the names of the Petitioner in the register of members of
Respondent No. 2 Company.
109. In view of the above said discussion it can only be said that this Tribunal has
no jurisdiction to decide all the contentious issues raised in this Petition while
exercising jurisdiction U/s. 59 of the Companies Act except to examine whether there
is sufficient cause to enter Petitioner as shareholder of R2 in the Register of members.
110. However, it is left open to the Petitioner to invoke the jurisdiction of this
Tribunal either U/s. 241 or if so advised by going to the Arbitration on the contentious
issue.
-----------------------------------------------------------------------------------------------------------------------------------------------------------
111. Points 1 and 2 are ordered accordingly.

112. Coming to the relief of rectification prayed by the Petitioner so long as the
Board Resolution dated 26.03.2018 is there, in other words unless and until Board
Resolution dated 26.03.2018 is declared invalid, the action of the 2nd Respondent
Company in mentioning the names of the Petitioners as equity shareholders in the
register of 2nd Respondent Company cannot be ordered to be rectified.
113. While exercising the jurisdiction U/s. 59 of the Companies Act this Tribunal
has to see whether there is sufficient cause to mention the names of the Petitioner in
the register of 2nd Respondent Company on account of conversion.
114. The process for conversion is initiated by the Petitioner by writing a letter
dated 05.09.2017, not stopping there, Respondent No. 3 choose to issue a notice to
convene EOGM to consider the conversion of CCDs into equity shares at the instance of
Petitioner and Respondent No. 13.
115. Not stopping there on 06.10.2017, the petitioner and Respondent No. 13
addressed a letter to Respondent No. 3 and instructed it to call EOGM of shareholders
to discuss the matters more particularly set out in Annexure-A of the letter, as
Respondent No. 2 has failed to call for the same.
116. Basing upon the same letter, on 06.10.2017 the Respondent No. 3 issued a
special notice U/s. 115 read with Section 169 of the Companies Act calling for a
General Meeting of the Respondent No. 2 for the purpose of conversion of CCDs
subscribed by the Petitioners into the equity shares of Respondent No. 2.
117. When the Respondent No. 1 and 2 challenged the special notice issued for
convening of EOGM, the Petitioner opposed the same.
118. This Tribunal vide its order dated 06.03.2018 clearly held that Respondent No.
1 may conduct EOGM in accordance with law and follow principles of natural Justice.
119. In the absence of CP No. 235/2017 and with the vacation of the Stay Order
Respondent No. 1 is supposed to act on the notice dated 06.10.2017 issued by
Respondent No. 3 for calling of EOGM.
120. But Respondent No. 1 called for a Board Meeting on 26.03.2018 for conversion
of CCDs held by the Petitioner into equity shares of Respondent No. 2.
121. As soon as notice is issued on 17.03.2018, on 20.03.2018 Petitioner asked
Respondent No. 2 not to go ahead with the conversion of CCDs and reserved its right
to have a request to convert CCDs into equity shares at a later point of time by issuing
a fresh notice.
122. The Articles of Association says that the right of election is given to the
Petitioner only once to ask for conversion of CCDs into equity when events of default
occurred as per the terms of Investment Agreement dated 25.06.2015.
123. When once election has been made by the Petitioner and when such election
is kept alive till they received the notice dated 17.03.2018 for the Board of Directors
meeting scheduled to be held on 26.03.2018 and basing on Resolution of the Board
Meeting, Respondent No. 2 converted CCDs into equity shares, it cannot be said that
without sufficient cause, the Respondent No. 2 converted the CCDs into equity shares
and shown the names of the Petitioner as equity shareholders of Respondent No. 2
company.
124. The challenge to the Board Resolution is not within the scope of enquiry U/s.
59 of the Companies act, 2013. Therefore, the relief for rectification of Register of
members prayed by the Petitioner cannot be granted.
125. Learned counsel appearing for the Petitioner contended that the request for
conversion of CCDs into equity shares shall be carried out within 5 days as per the
Articles of Association but the same has not been done by the Respondents 1 and 2
and therefore, they are not entitled to call for a Board of Directors Meeting on
-----------------------------------------------------------------------------------------------------------------------------------------------------------
26.03.2018 for the purpose of conversion of CCDs into equity shares.

126. The Petitioner in its wisdom thought of taking equity shares in the place of
CCDs, perhaps thinking that it is in its interest.
127. If the same wisdom continues for petitioner and if conversion is advantageous
to the Petitioner and in case Respondent 1 and 2 did not take steps for conversion of
CCDs into equity shares within 5 days would the Petitioner remain silent without
exercising the right given to the Petitioner to enforce its election for conversion of
CCDs into equities. In fact the petitioner tried to exercise its right to conversion.
128. The time limit of 5 days is given to the Company to convert the CCDs into
equities without delaying the process and without taking any other steps to the
detriment of the investors who would like to take equity in the place of CCD.
129. In case if the Company did not convert the CCDs into equity within five days
no right is expressly or impliedly given to the Petitioner to revoke the election.
130. On the other hand the right is given to the Petitioner to enforce the election of
CCDs into equity shares. In the case on hand after the Joint Lenders Forum Meetings,
the Petitioner came to know that the net worth of the Respondent 1 and 2 Company is
completely eroded and the petitioner thought of going back on their request for
conversion of CCDs into equity.
131. Such course of action whether permissible under the provisions of the
Companies Act is a substantial question of law that require determination by
exercising a wider jurisdiction than the jurisdiction provided U/s. 59 of the Companies
Act.
132. In case the Company is going well in terms of Finance and its share has got
considerable value which is equivalent to the amount in default that includes interest,
even then the Petitioner can put forward an argument that within 5 days conversion
did not take place and therefore the Petitioner is not entitled for conversion.
133. Mere non-conversion of CCDs into equity shares within 5 days from the date of
election will not automatically disentitle the investors to have their right for conversion
enforced and it does not give right to investor to go back on the election made by it.
134. Therefore, it can be said that the non-conversion of CCDs into equities within
5 days after the Petitioner elected for conversion is not in accordance with the Articles
of Association, but it gives the Petitioner only right to enforce conversion but not any
other right. There is no merit in the argument that defaulters will convert CCDs into
equity to get rid of crores of Rupees of debt; since it is only on election of investor
CCD can be converted to equity.
135. Learned Counsel appearing for the Petitioner relying upon decision of the
Hon'ble Punjab and Haryana Court reported in (1984) 56 CompCas 194 (P&H) in C No.
123 of 1973 in Amrit Kaur Puri v. Kapurthala Flour, Oil and General Mills Co. P. ltd.
Contended that in a petition U/s. 59 of the Companies Act this Tribunal can go into the
aspect of whether the transfer of shares are legal and valid and in accordance with the
relevant Articles of Association.
136. In that case the issues involved are whether the transfer of 100 shares by
Rangbir Singh, respondent No. 5, in favour of Smt. Raj Rani and Smt. Usha Rani,
Respondent Nos. 2 and 3 respectively and further the transfer of aforesaid 100 shares
by Smt. Raj Rani and Smt. Usha Rani, Respondent Nos. 2 and 3 in favour of Prakash
Chand Aggarwal was valid and in accordance with the Articles of Association of the
Company.
137. Hon'ble Punjab and Haryana Court considered the Articles of Association and
gave a finding depending upon the facts of the case.
138. There is no dispute about the proposition of law that when there is transfer of
shares it has to be seen whether such transfers have been made in accordance with
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the Articles of Association or not?

139. In the case on hand the Investment Agreement which is incorporated in the
Articles of Association gives a right of election to ask for conversion of CCDs into
equity shares when an event of default occurred as per the terms of Investment
Agreement dated 25.06.2015. Such election has been made by the Petitioner.
140. Therefore, the conversion of CCDs into equity shares is not in derogation of
Articles of Association or the terms of Investment Agreement. In that view of the
matter only it is concluded that there is a sufficient cause for mentioning the names of
the Petitioners as shareholders of Respondent No. 2 Company on account of
conversion.
141. Learned Counsel appearing for the Petitioner relied upon the another decision
of Supreme Court of India reported in AIR 1961 SC 1669 : (1961) 31 Comp Cas 387
in Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala.
142. The above said Judgement was rendered by the Hon'ble Supreme Court while
considering the scope of Sec. 38 of the Companies Act 1913 against the Judgement of
the Hon'ble High Court, wherein the Hon'ble High Court rejected the petitions holding
that in summary proceedings under section 38, controversial questions of law and fact
could not be tried and allowed the appeal.
143. But in the Judgement in Ammonia Supplies Corporation (P) Ltd. v. Modern
Plastic Containers Pvt. Ltd., the Hon'ble Supreme Court of India clearly held that under
the grab of rectification of registrar of entries in the register of members question of
fact involving contentious issues cannot be raised.
144. Here in case on hand the manner in which the Petitioner kept quite till
20.03.2018 in respect of election for conversion of CCDs into equity shares and several
issues that crop up in this petition and the fact that the Petitioner filed the Petition
U/s. 7 of the IB Code against Respondent No. 4 herein would go to show that this
Petition is not a mere petition seeking rectification of entries in the register of
members but it has got other collateral purposes namely, triggering Corporate
Insolvency Resolution Process in respect of Respondent No. 4.
145. Therefore, this Tribunal is of the considered view that such contentious issues
cannot be decided while exercising jurisdiction U/s. 59 of the Companies Act.
146. In the result, Petition is dismissed. There is no Orders as to costs.
———
† Hyderabad Bench
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Page 1 Thursday, January 05, 2023

2018 SCC OnLine NCLT 25414

In the National Company Law Tribunal†

Maif Investments India Pte Ltd. … Petitioner;

9. Respondent Nos. 1 and 2 issued irrevocable power of attorney in favour of the

specified by the Central Government by notification, in respect of foreign

Respondent No. 2 and 50,57,79,500 equity shares of Respondent No. 1 in Respondent

of Respondent No. 2 which is the holding Company of Respondent No. 4 herein.

111. Points 1 and 2 are ordered accordingly.

26.03.2018 for the purpose of conversion of CCDs into equity shares.

the Articles of Association or not?

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