RAM PARSHOTAM MITTAL & ORS. versus HOTEL QUEEN ROAD PVT. LTD. & ORS.

Citation: [2019] 7 S.C.R. 976 · Decided: 10-05-2019 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Disposed off

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 7 S.C.R.
RAM PARSHOTAM MITTAL & ORS.
v.
HOTEL QUEEN ROAD PVT. LTD. & ORS.
(Civil Appeal No. 3934 of 2017)
MAY 10, 2019
[ARUN MISHRA AND INDIRA BANERJEE, JJ.]
Companies Act, 1956 – ss. 286, 300 and 108 & ss.19(2), 85,
87(2)(b),169(4), 397 and 398 – Government of India took policy
decision on 5.7.02 to disinvest its shares in the Indian Tourism
Development Corporation (ITDC) which owns various hotel
properties; one of them being Indraprastha Hotel – In terms of an
approved scheme of Arrangement of Demerger the  said hotel was
transferred to the Respondent No.1-HQRL, created as a Special
Purpose Vehicle to enable disinvestment – Government of India
invited bids for sale of shares in HQRL – Appellant No.3-Moral
Trading & Investment Ltd. was the successful bidder –  Appellant
No.1-‘RPM’, his wife-appellant no.2 who held the controlling interest
in Moral, and the Respondent No.3-‘AM’, younger brother of the
Appellant No.1 were appointed regular Directors of HQRL – HQRL
approved the issuance of 23,65,000 redeemable preference shares
to the Respondent No.2-Hillcrest – HQRL filed civil suit being CS
(OS) 992 of 2005 before the High Court inter alia seeking injunction
against Hillcrest from proceeding with proposed resolutions of
EOGM – Three resolutions dtd. 27.7.04, 7.1.05 and 10.5.05 passed
allotting/transferring shares in favour of ‘RPM’, his wife and Moral
– Challenged by Hillcrest and ‘AM’ before the Company Law Board
(CLB) u/ss.397, 398 alleging oppression and mis-management of
HQRL by the RPM Group inter alia on the ground that no notice was
issued to ‘AM’ who was, at the material time, a Director – Petition
dismissed – Hillcrest filed suit being CS (OS) No.1832/08 in High
Court for declaration that it had voting rights in HQRL in view of
the Resolution dtd. 30.09.02– High Court allowed CoA (SB) 4/2006
of Hillcrest and cancelled the allotment and transfers made by three
resolution on the grounds that Hillcrest had voting rights and there
was breach of ss.286, 300 and 108 and set aside the order of the
CLB – High Court also recorded suo motu proceedings u/s.340,
   [2019] 7 S.C.R. 976
976
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Cr.PC against ‘RPM’ – On appeal, held: Two civil suits are pending
consideration; one being OS No.992/2005 filed by HQRL; other
Suit No.1832/2008 seeking declaration that HQRL had become a
limited company by virtue of the resolution passed on 30.9.02 –
Matter travelled to Supreme Court in the matter of grant of injunction
which was decided in Ram Parshottam Mittal v. Hillcrest Realty –
Supreme Court without meaning to decide the issue finally prima
facie observed that HQRL had altered its status and had become a
public company – It was also observed significantly as this issue
has to be decided in the two pending suits, it would not be proper
for Supreme Court to dwell into the question further – It has not
been disputed that no notice u/s.286 was given to ‘AM’, the Director
when impugned resolutions were passed – Impugned resolutions
are unfair to ‘AM’ – Even otherwise the absence of the notice is
enough to invalidate the same as mandated by s.286 – It was
improper for the Directors to allot shares to themselves and to the
exclusion of ‘AM’ and that too without issuance of notice to him –
s.108 operates independently of s.286 or s.300 – Invalidation of
meeting is dependent under the provisions of s.108 – There was
violation of s.108 – HQRL did not file share certificate along with
the duly executed share transfer form as on 10.5.05, the date of
Board resolution – Plea of ‘RPM’ was disbelieved that share
certificates were returned on 23.6.03 – High Court ordered the
proceedings u/s.340 Cr.P.C. against ‘RPM’ for filing an affidavit to
the contrary – In the fact and circumstances of the case, taking into
consideration the overall scenario, impugned order not interfered
with – However, direction to prosecute appellant no.1, ‘RPM’ in the
facts of the case, set aside.
Disposing of the appeals, the Court
HELD: 1.1 It is a common ground that two civil suits are
pending consideration; one being OS No.992/2005 filed by HQRL
for injunction to restrain Hillcrest Realty from proceeding with
the proposed resolutions of EOGM and from exercising voting
rights therein; the other Suit No.1832/2008 seeking declaration
that HQRL had become a limited company by virtue of the
resolution passed on 30.9.2002. The matter travelled to Supreme
Court in the matter of grant of injunction which w

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