The National Company Law Tribunal, New Delhi Bench, has set aside the allotment of 9.84 lakh equity shares of Neel Padam Builders Pvt. Ltd., holding that the company had recycled its own funds to falsely project a fresh share subscription and illegally dilute the promoters’ majority stake. The Tribunal directed restoration of the company’s shareholding and capital structure to its position prior to November 2009, effectively reinstating promoter control.
The order was passed by Judicial Member Ashok Kumar Bhardwaj and Technical Member Reena Sinha Puri in a long-pending oppression and mismanagement petition filed by promoter-family members Neelamber Agrawal and Meenakshi Agrawal. The petitioners stated that they, along with consenting shareholders, held 82.9% of the equity before two disputed share allotments in 2009, which were allegedly made without notice and reduced them to a minority, enabling Ashok Kumar Agrawal and his associates to assume control.
It was also contended that Ashok Kumar Agrawal’s directorship had ceased due to non-attendance at board meetings, yet he continued to act as a director, reconstituted the board, increased authorised share capital and issued shares without following due process.
The respondents denied the allegations, claiming the petitioners had resigned after committing financial irregularities, including unauthorised withdrawals exceeding ₹3 crore. They maintained that the allotments were backed by valid resolutions and that subscription monies were duly paid.
After examining bank statements and records, the Tribunal rejected the defence. It found that ₹45 lakh was withdrawn from the company’s bank account on November 26 and 27, 2009, and redeposited on December 9, 2009, the very date the second allotment was shown as paid for. The Tribunal held that this demonstrated recycling of the company’s own funds, with no genuine capital infusion.
The Bench observed that the recurring pattern of withdrawal and redeposit showed an artificial trail created to legitimise a premeditated allotment, concluding that the transaction was a sham and liable to be set aside.
The Tribunal also found serious irregularities in the reconstitution of the board, holding that Narendra Singh was never validly appointed as a director and therefore had no authority to file statutory forms or alter the board structure. Consequently, all sale deeds, lease deeds and agreements to sell executed after September 17, 2009 were declared non est in law, having been executed by an unauthorised board.
To determine the full extent of irregularities, the NCLT appointed a forensic auditor to examine transactions during the disputed period. The restored board was permitted to recover land and refund purchasers with 12% interest or, where buyers were bona fide purchasers at fair market value, to revalidate transactions.
Setting aside both disputed allotments aggregating to 9.84 lakh shares, the Tribunal restored the shareholding pattern and management to the pre-November 2009 position and allowed the petition, holding that the acts complained of amounted to oppression and mismanagement.
Appearance:
For Applicant: Advocates Abhishek Anand, Pawan Sharma, and Anuja Shah
Cause Title:
Shri Neelamber Agrawal and Anr. v. Neel Padam Builders Pvt. Ltd. and Ors.
Case No:
Company Petition No. 120/(ND)/2009
Coram:
Judicial Member Ashok Kumar Bhardwaj, Technical Member Reena Sinha Puri
What
