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2006 (8) TMI 586 - COMPANY LAW BOARDOppression and mismanagement - manipulation of records and converting the company into a Shell Company - removal from directorship by appointing new directors - violation of the proper and legal procedure prescribed - gained control of the company and siphoned off funds - misappropriated the funds of the company and has damaged and delayed the project of the company - HELD THAT:- All the observations, show that the conduct of the respondents is burdensome and oppressive to the petitioners and prejudicial to the interest of the company. From the narration of the events, the only conclusion that I can come to is that the respondents have not been able to refute the charges of oppression and mismanagement in the affairs of the company, and, therefore, the petition deserves to be allowed. Relief to be granted depends on the facts of a particular case. The facts of the present case are so manifestly against respondents that two opinions are not possible on the aspect of relief. Relief has to be granted in the present case to undo the advantage gained by the respondents through their manipulations. To safeguard the interest of the financial institutions who chose to fund such a prestigious project in the interest of the country and to do substantial justice between the parties, I order as follows: I. The resolutions of the R-1 company removing the P-1 and the P-2 from directorship and appointing R-3, R-4, R-5 and R-6 as additional directors are hereby declared as null and void and status quo ante is restored. II. Since nothing has been placed on record to show the need of the company for further investment and hence need for allotment of additional shares, I hold the action of increase in the share capital and allotment of additional shares to be totally malafide, only motive being to gain control of company, hence increase in the share capital and allotment of additional shares is hereby set aside. III. To safeguard the interest of financial institutions namely, the Technology Development Board, Department of Science and Technology, Ministry of Science and Technology, Technology Bhawan; Ministry of Food Processing Industries, Panchsheel Bhawan, August Kranti Marg, and the Bank of India, New Delhi Corporate Bhawan Banking Branch, 37, Shaheed Bhagat Singh Marg, (Near Shivaji Stadium) - these organizations are hereby directed to nominate one director each on the Board of the R-1 company with immediate effect. Such nominee directors would continue to be on the Board of the R-1 company till the funds advanced by these organizations are recovered/repaid. The minimum quorum for Board Meetings would comprise two directors one out of which must be from one of these financial institutions. IV. The Board of Directors constituted in compliance of this order at III above, in its first meeting to be held within one month of this order shall appoint auditors and order special audit to audit the accounts of the R-1 company from its inception till date within a period of three months from the date of this order. Such audited accounts must be made available to the Ministry of Company Affairs, New Delhi, to the Registrar of Companies, New Delhi; to the Regional Director, Kanpur and to the financial institutions forthwith. The R-l company shall pay audit fees @ ₹ 50,000/- for each accounting year. With the above directions, I dispose of this petition.
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