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2019 (5) TMI 763 - SC - Companies LawOppression and mismanagement - allotment of shares - Declaration, cancellation and mandatory injunction against the requisition under section 169 of the Companies Act - allotment/transfer of shares - Sections 397/398 of the Act - voting rights - sections 286, 300 and 108 of the Companies Act - financial mismanagement or not - HELD THAT:- The Company Law Board as well as the High Court have found that the provision of notice under Section 286 of the Companies Act was not complied with. The High Court has observed that the interested Directors have participated in the meeting. Mr. R.P. Mittal and Mrs. Sarla Mittal were in a fiduciary capacity they could not participate in the decision where shares were transferred to their own group/company. Even if HQRL were a private limited company, the compliance with the provisions of section 300 of the Act was mandatory. The High Court has also observed that there was undervaluation of HQRL shares. The allotment of shares at par to Moral in the meeting on 10.5.2005 and on the same very date, shares of Moral were transferred to Mr. R.P. Mittal @ ₹ 20 per share. Thus, the High Court has opined that these acts in overall factual matrix of the case, were sufficient to conclude that ground under section 397 had been made out. It was improper for the Directors to allot shares to themselves and to the exclusion of Mr. Ashok Mittal in the facts and circumstances of the case and that too without issuance of notice to him. Section 19(2) of the Companies Act provides that nothing in sections 85 to 89 shall apply to a private company unless it is a subsidiary of a public company and this question has to be finally decided whether it is a private or public limited company in the pending civil suit which have been stated to be transferred to NCLT for decision in accordance with law. Otherwise, section 87 provides that notice has to be issued to preference shareholders also for the meeting and they have a right to participate in the meeting. It appears prima facie even if dividend has not been declared. In that case also, preference shareholders shall have a right to vote in the meeting. Section 108 operates independently of section 286 or section 300. The invalidation of meeting is dependent under the provisions of section 108. There was violation of section 108 of the Companies Act. HQRL did not file share certificate along with the duly executed share transfer form as on 10.5.2005, the date of Board resolution. The plea of Mr. R.P. Mittal has been disbelieved that share certificates were returned on 23.6.2003. The High Court has also ordered the proceedings under section 340 Cr.P.C. against Mr. R.P. Mittal for filing an affidavit to the contrary. The High Court has relied on the affidavit of Mr. Vivek Dixit and Mr. Deepak Sudan, the concerned officials of the Indian Overseas Bank. The High Court has found that the share certificates were delivered to Mr. R.P. Mittal not on 23.6.2003 but on 23.6.2005. No doubt about it that there was violation of the provisions of section. Taking into consideration the overall scenario, the impugned order calls for no interference - Appeal disposed off.
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