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2013 (9) TMI 283 - Board - Companies LawOppression and Mismanagement u/s 397 and 398 - Whether Anitha Impex Ltd. was a shareholder of the company - Held that:- Petitioner ceased to be a shareholder of company and it had no locus standi to file the company petition, and the question of restoring its shareholding in the company cannot be adjudicated under section 111 of the Act - The alleged shareholding of petitioner involved complicated questions of facts and law - The evidence tendered by the KSK group raised a suspicion that consideration had passed to petitioner but mere suspicion was not conclusive evidence - If the share transfer was illegal and not supported by consideration, the remedy open to petitioner was to seek appropriate remedies before a civil court - The point was found against the petitioners. Restoration of Shares - Whether the petitioners were entitled to restoration of 24 per cent. of 2,60,000 shares of the Company - Held that:- The Kanunga group has transferred their entire stakes in the company to the KSK group - If at all there was a plea that no consideration was paid, it was for them to sue the KSK group for the unpaid consideration, before a civil court - If at all petitioners were entitled to claim 24 per cent. of the 10,000 shares (2,400 shares), they had to get it established by availing appropriate remedies before a civil court because complicated question of facts were involved in the case - Then it automatically follows that the Kanunga group (petitioners Nos. 1, 2 and 3) had no stakes in the first respondent-company on the date of filing of this petition. They had failed to prove that their names were removed from the register of members of the company without sufficient cause. Accordingly the point is found against the petitioners. Restoration of Directorship - Whether petitioner was entitled to get his directorship restored as per the memorandum of understanding - The terms of the memorandum of understanding were not made part of the articles of association, and directorial complaints were not grounds to invoke powers under sections 397 and 398 of the Act – There was no reason to interfere with the removal of the first petitioner as a director. Liability to Transfer Shares - Whether respondents Nos. 1 and 8 are liable to transfer 40 lakhs shares of respondent No. 1 company to the first petitioner in terms of the memorandum of understanding dated April 3, 2002 – Held that:- The implementation of the memorandum of understanding was incapable of performance - At the same time parties had acted upon some terms of the memorandum of understanding - the remedy available to the petitioners was to approach the civil court for implementation of the memorandum of understanding or seek compensation for breach of the obligations - As already referred to earlier the complaint based on the implementation of the terms of memorandum of understanding was beyond the scope of enquiry by the Company Law Board under sections 397 and 398 of the Companies Act - As rightly pointed out by learned counsel for the respondents the relief in respect of 40 lakhs shares as per the memorandum of understanding was a relief of specific performance or a cause of action for a suit for payment of consideration – court declined to grant any relief in respect of the 40 lakhs shares as per the memorandum of understanding. Even if petitioners Nos. 1 and 2 held 24 per cent. of the shares, the petitioners could have held and owned only 2,400 shares out of 17 lakhs shares as on March 31, 2005 which constituted less than one per cent of the then paid-upcapital - The allotment of shares of the company petition was not disputed by the petitioners in the company petition - Since the petitioners ceased to be the shareholders with effect from August 30, 2006, as per the records maintained, the petitioners had no locus standi to challenge the subsequent allotment made as per the decision of the majority. Increase in Authorized Share Capital - Whether the increase in the authorised share capital from ₹ 50 lakhs and the further allotment of shares beyond ₹ 5 lakhs shares was liable to be annulled, or whether the petitioner should be given the option to subscribe for 24 per cent. of the present capital of the company, as an alternative relief - The hands of the petitioners were not clean enough to sustain a petition against the respondents - Evidently and admittedly they became aware of the happenings in the company as early as in 2006 - the entitlement of 40 lakhs shares and all other claims based on the memorandum of understanding were rendered otiose and that the Kanungas had exited respondent No. 1 by selling their shareholding and relinquishing their directorship in respondent No. 1 - the petitioners did not care to initiate any proceedings before the Company Law Board - There was no explanation for the long delay of more than two years in filing this petition - The petitioners were guilty of unexplained delay, laches, etc. – thus no orders could be passed on ground of equity also. Jurisdiction of CLB – Bar of Limitation - Whether the Company Law Board has jurisdiction to enforce the terms of the memorandum of understanding - Whether the petition was barred by the principles of limitation, acquiescence, laches etc. - Held that:- Breach of contract by a majority shareholder does not amount to oppression of minority shareholders or mismanagement or that the contractual relationship between two individuals does not fall within the purview of sections 397 and 398 - Even if it was to be held that the petitioners still hold 2,400 shares in the company it was not established that the affairs of the company were being conducted in a manner prejudicial to public interest or in a manner oppressive to any members and prejudicial to the interest of the company - It was also not pleaded or established that circumstances exist justifying the winding up of the company and that the winding up would unfairly prejudice the petitioners or the members of the company - The petitioners were not entitled to any reliefs. There can be no judicial intervention in these proceedings to grant the reliefs based on this memorandum of understanding - I would advise both parties to sit across the table and settle the issue on the performance of mutual obligations rather than agitating the ten years old dispute again before the civil court - all the issues were found against the petitioners, the company petition was only to be dismissed - the company petition stands dismissed.
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