TMI Blog2004 (5) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by them in favour of the 1st petitioner and the 2nd respondent, some shares in their own name and some shares in the name of the HUF formed by them separately. Thus, the company became a family company of Veds. The petitioner and the 2nd respondent are brothers, the petitioner being the elder. From September, 1992 to September, 2001, the Board of Directors consisted of the 1st petitioner, 2nd respondent, 3rd respondent and one Nitish Hans Raj Ved. As in September, 2001, the issued and paid up share capital of the company consisted of 602 shares of ₹ 1000/- each of which the petitioners held 317 (as claimed by them) shares constituting 52.66% share in the company. The petitioners have complained that further shares to the extent of 426 shares of ₹ 1000/- each were issued to the son of the 2nd respondent i.e. the 4th respondent without the knowledge and consent of the petitioners and that he had also been inducted into the Board as a whole time director and that the petitioners are alleged to have vacated their office in terms of Section 283(1)(g) of the Act effective from 5th April, 2002. These acts, according to the petitioners, constitute acts of oppression against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epeated requests. For instance the company has filed annual returns for the year 200-2001 stating that the AGM for that year was held on 30th September, 2001 for which the petitioners did not receive any notice. Further, that day being a Sunday, the meeting could not have been held on that day. It is in that meeting that the 4th respondent was allegedly appointed as a whole time director. By these acts, the respondents have acted in a manner oppressive to the petitioners. 4. Continuing his arguments, Shri Athavale submitted; There has been a gross financial mismanagement in the company. Even though the factory of the company remained closed and no business was being conducted by the company, the 2nd respondent unilaterally increased his remuneration as a director as is evident from annual report for the year 2000-2001. The 2nd respondent had leased out the property in the form of premises owned by the company to one M/S Neha Synthetics in 1993. Even though the company is entitled to receive the lease rentals, respondents 2 to 4 have been directly receiving the lease rentals and have been misappropriating the same. A perusal of the bank statement of the company at Annexure A-11 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the petitioners are baseless. There was a family arrangement by which various entities between the family were divided between the 1st petitioner and the 2nd respondent. The company that is being managed by the petitioners is heavily losing and that is the reason why the petitioners are aggrieved against the respondents and filed this petition. They have not come with clean hands. The petitioners were not in majority as claimed by them. They held/hold only 273 shares and not 317 shares as claimed by them. The 1st petitioner holds 10 shares in his personal capacity and 148 shares as Karta of H.G. Ved HUF. The 2nd petitioner holds 115 shares. The 1st petitioner claims additional 44 shares held by S.G. Ved HUF purportedly transferred to him on 10th May, 2001. The purported transfer is non est and fraudulent because from the records of the company it is seen that no Board Meeting was held on 10th May, 2001 and that no transfer deeds regarding the purported transfer are available with the company nor the fact of transfer is recorded in the register of members. Therefore, it is a fraudulent transfer. The 3rd respondent in his capacity as a karta of SG HUF has already filed a criminal c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 15000/- as against ₹ 50,000/- as per the earlier lease deed. It was done by the 1st petitioner when he had ceased to be a director of the company. In regard to the allegation regarding remuneration to the 2nd respondent, he was drawing a remuneration of ₹ 54000/- per annum from the year 1991. After a lapse of about 10 years, his remuneration was increased to ₹ 72000/- taking into consideration the increase in cost of living and as such no undue benefit has been extended to the 2nd respondent. All the allegations relating to siphoning of funds are baseless. The rentals from M/S Neha Synthetics were either received by cheques and duly deposited in the bank account or have been adjusted against the deposits given by M/S Neha Synthetics. The cash withdrawal from the bank account related to payment to various parties and for payment of gratuity to workers on their termination at the time of closure of the factory and these facts were always known to the petitioners. The apprehension that due to failure of Neha Synthetics to clear the excise duty dues, the premises of the company would be confiscated, no longer survives as on an application made by the company, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In spite of the allegations made by the petitioners regarding cash withdrawals, the respondents have not furnished any details justifying such huge withdrawals which according to the petitioners is of the order of ₹ 55 lacs. It is true that the lease rentals in respect of the lease given to the son of the 1st petitioner was reduced from ₹ 50,000/- to ₹ 15000/-. It was done only because the company was not giving any power supply which had to be arranged separately by the lessee. The minutes of Board Meetings produced by the respondents are all fabricated. The petitioners have not produced copies of the entire minutes of, the meeting on 25th August, 2001. The part minutes of that meeting enclosed with the reply, is purportedly signed by the 2nd respondent as the Chairman of the meeting. However, the Directors' report dated 25th August, 2001 has been signed by the 1st petitioner as the Chairman. This itself would show fabrication of Board minutes. No decision that future Board Meetings would be held on 5th of the 1st month of every quarter was taken in that meeting. Even otherwise, issue of notices for Board Meetings is statutorily required in terms of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the company. The third option was that there could be a physical division of the company in the ratio of 55:45. In response to that letter, the respondents sought for certain information from the petitioners indicating therein that the said information was necessary to determine the value of the shares. Accordingly, by another letter dated 27th December, 2002, the petitioners had furnished the required information. However, nothing came out of this exercise. Thereafter a few hearings had to be adjourned at the request of the respondents. In the hearing held on 27.11.2003, the 4th respondent who was present in person made a statement that the respondents were interested in a global settlement and not in an isolated settlement in regard to the company alone. However, the petitioners were not agreeable for a global settlement and as such the matter was heard on merits. 9. The main complaint of the petitioners relate to the allotment of further shares. Normally, further shares are allotted either for mobilizing funds for the company or for meeting either statutory requirements or requirements of financial institutions. In allotment of shares, the directors are in a fiduciary po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 283(1)(g) of the Act does not stand on a strong footing. In the reply, they have enclosed a part of the minutes of the meeting held on 25th August, 2001 in which the alleged decision to fix the date of Board Meeting on 5th of the first month of every quarter was taken. These minutes are found to have been signed by the 2nd respondent as Chairman. The petitioners have relevantly pointed out that on the same day, the annual report has been signed by the 1st petitioner as Chairman. This aspect has not been clarified by the respondents giving a rise to a doubt about the genuineness of the minutes. Further, in terms of Section 264(1) of the Act, notices have to be issued for the Board Meetings, which according to the respondents, were issued in spite of the decision taken on 25.8.2001. They have not given any proof of dispatch of notices to the petitioners. If, as decided the Board Meetings are to be held only on the 5th of the first month of every quarter, it has not been explained as to how a Board Meeting was held on 26th June, 2002 wherein the Board had recorded about the vacation of office by the two petitioners effective from 5th April, 2002. In the Board Meeting held on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounts, the petitioners cannot allege that the respondents had overstated the expenditure and thus have siphoned of the funds. In a number of cases, this Board has held that a party to a decision cannot, later on challenge the same either as oppressive or acts of mismanagement. The assertion of the petitioners that the respondents have siphoned of above 55 lakhs is not supported by any, details. From the Annual accounts for the years 1999-2000 and 2000-2001, I find that the company has earned an income by way of processing charges of about ₹ 8.18 lakhs during the first year and about 1.45 lakhs during the second year. If it so, there has to be some expenditure and the same is reflected in the accounts. Therefore the petitioners cannot allege that by showing expenditure, the respondents have siphoned of funds of the company. 14. There is a dispute about the shareholding of the 1st petitioner with regard to 44 shares claimed to have been transferred by S.G. Ved HUF to the 1st petitioner. The respondents have taken a stand that the transfer was not approved in any Board Meeting and the share transfer forms are also not available with the company. IN the rejoinder, the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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