Report by Umang Kanwat

According to the legal dictionary, an appeal memorandum explains the grounds on which it is desired and why a court hearing has been requested. When the parties to the proceedings are unhappy with the orders or decisions made by the tribunal, they may appeal to the national company law appellate tribunal. This is mentioned in Section 421 of the 2013 Companies Act. The present case of Regal Machine Tools Private … vs Mrs Kaushy Lal & Ors revolves around the same.


M/s. Regal Enterprises, a sole proprietorship business owned by Mr S.M. Mohan Lal, received a one-acre parcel of land bearing Plot No. 39, Bommasandra Industrial Area, Attibele, Hobli, Ankal Taluk, Bangalore, measuring 3948 square metres in exchange for paying a portion of the consideration. The aforementioned allotment was initially given on a “lease basis” for a period of 11 years, and after that, a Sale Deed was to be executed subject to the satisfaction of further requirements. The Balance Payment was to be made after 11 years, it is further noted.

In order to convert the company from a sole “Proprietorship Concern” to a “Private Limited Company” with the name and designation of “M/s. Regal Machine Tools Private Limited,” Mr S.M. Mohanlal had to hold 51% of the company’s “Shares” until the end of the 11-year lease period. This request was granted by KIADB. It is alleged that the Appellants had asked KIADB to execute the Sale Deed and that KIADB had informed them that the Sale Deed would only be done if the Original Allottee, Mr SM Mohanlal, maintained a 51% shareholding, but the Appellants received no answer to their request.


The Appellant’s learned counsel claimed that the Respondents made the offer to buy 2,243 “Equity Shares” for Rs. 53,83,200/-, and the abovementioned consideration amount was given to the appellant by check as part of an MoU on July 1, 2011, but it was never presented and was given back to the respondent. Therefore, no deal has ever been reached to buy 2,243 “Equity Shares.”


The Supplementary Agreement that the Appellant had recorded, according to the Respondents, was never ever signed. The Schedule Property was assigned for the purpose of constructing and operating an industrial unit for a period of 11 years, failing which the Sale Deed could not be performed in their favour. This is also important to note. A review of the documentation shows that there is no documentary proof that any transfer of shares was made with the approval of the Respondent or the legal heirs of Late Shri S.M. Mohan Lal, as shown by the pertinent Minutes of the Board Meeting or any other key documents.


The basic goal of the Memorandum of Understanding, it was stated, was for KIADB to allot land in the company’s name and for a check to be written in exchange for shares to be issued, but the same was subject to conditions. No transaction by the Company may be engaged in that would effectively reduce the Shareholding of the Respondents below 51% without the consent of the Respondents, who currently own 51% of the shares.

The Tribunal was of the sincere opinion that the Appellants had violated the Company’s Articles of Association and had not come before the Tribunal with clean hands. This is worth repeating. The well-reasoned order of the National Company Law Tribunal is dismissed as a result because the Tribunal finds no illegality or flaw in it, and the costs of the court are borne by each side separately.


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