TMI Blog1996 (9) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, and other statutory forms and returns filed subsequent thereto and in the alternative to quash and de-register the statutory Form No. 32, dated April 22, 23, 1992, filed by respondent No. 4. The facts in brief are that Stridewell Leathers Private Limited (hereinafter referred to as "the company") was incorporated in New Delhi on July 28, 1986, with the objects, inter alia , of carrying on the business of manufacturers and dealers in boots, shoes, other footwear in leather, synthetic leather, rubber, synthetic rubber, plastic and allied goods, boots and shoe laces, shoe uppers, saddle harness, travel bags, suitcases, leggings, boot polishes, other accessories, fittings and components. The subscribers to the memorandum of association were Achinta Kumar Bose, an employee of Shaw Wallace (for short "SW"), and one Marur Ganesan Ramachandran, advocate. They were the first directors of the company. The authorised capital of the company was Rs. 1,00,000 divided into 10,000 equity shares of Rs. 10 each. The shareholding of the company immediately after its incorporation was as follows: "Name of shareholder No. of shares 1. Bio-Foods Pvt. Ltd. 8,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.S.K. Eswaran on April 9, 1992, were restrained from entering the erstwhile registered office of petitioner No. 2 company. It may be noticed that the Chhabria family consists of R.D. Chhabria, M.D. Chhabria, M.R. Chhabria and K.R. Chhabria. In April, 1992, disputes arose in the Chhabria family. R.D. Chhabria, M.D. Chhabria and K.R. Chhabria, being the father, uncle and younger brother of M.R. Chhabria were on one side and M.R. Chhabria on the other side. According to the petitioners, K.R. Chhabria, in a bid to gain illegal control of petitioner No. 2 company, purportedly called a meeting of the board of directors in which S.K. Bhattacharya, R.S. Ahluwalia and M.S.K. Eswaran were shown to have allegedly and orally resigned and P.R. Pandaya, H.S. Vohra and Ranjiv Kapur were allegedly appointed as directors of petitioner No. 2 company and on April 22, 23, 1992, statutory Form No. 32 with regard to the changes, alleged to have been made on April 10, 1992, was filed by the K.R. Chhabaria group with the Registrar of Companies, respondent No. 2. The petitioners have alleged that the real board of directors of petitioner No. 2 company was unable to gain its entry in the erstwhile regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents being filed by contending groups of directors the Registrar should take all the documents on record, if the same otherwise are in order and shall inform the contending groups that the documents had been taken on record without prejudice to the rights of the parties and to have settled their respective disputes in a court of competent jurisdiction. The grievance of the petitioners is that although on April 22, 23, illegal board of petitioner No. 2 company, owing allegiance to the K.R. Chhabria group had filed a statutory Form No. 32 while on June 10, 1992, the real board of petitioner No. 2 company through R.S. Ahluwalia had filed another statutory Form No. 32 along with other Forms Nos. 2, 5 and 23 and on August 22, 1992, respondent No. 3, A.K. Jain had written a letter stating that there was a dispute between the contesting groups of directors, yet on October 22, 1992, respondent No. 2, in violation of specific directions contained in circulars dated October 24, 1961, and May 4, 1993, illegally and erroneously took on record and registered the forms of parallel illegal board of directors headed by the K.R. Chhabaria group and illegally failed to register the forms file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On June 24, 1994, the petitioners engaged the services of a professional company secretary and on inspection of the record it was brought to the notice of the petitioners that the documents submitted by the petitioners, after the month of April, 1992, had not been taken on record by the Registrar of Companies. On the other hand on October 22, 1992, the statutory Form No. 32 submitted on April 22, 23, 1992, by the group headed by K.R. Chhabria had been registered by the Registrar of Companies. One more glaring fact, according to the petitioners, which came to their notice on inspection of the record was that on one single day, namely, October 22, 1992, en masse registration of various statutory forms was done by the Registrar, including Form No. 32 filed on April 22, 23, 1992, by the K.R. Chhabria group and also a number of statutory forms filed in 1988, by the undisputed board of directors of petitioner No. 2 company. En masse registration was done mala fide with the sole object to legitimise registration of Form No. 32 filed on April 22, 23, 1992. It is alleged that on October 5, 1994, a letter was written on behalf of petitioner No. 2 company requesting the Registrar to de-regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cent. shares of Gordon Woodroffe Ltd., which are its only valuable assets. It is in order to control the said Gordon Woodroffe Ltd. that the present proceedings have been initiated by the petitioners so as to put on record that the Stridewell, namely, petitioner No. 2 is under the control of the M.R. Chhaaria group. After narrating the admitted facts up to April 9, 1992, it is alleged by respondent No. 4 in his reply affidavit that P.R. Pandya, H.S. Vohra and Rajiv Kapur were appointed as additional directors on April 10,1992, and S.K. Bhattacharya, R.S. Ahluwalia and M.S.K. Eswaran resigned from the board of Stridewell with effect from April 10, 1992. The respective Form No. 32 for appointment and resignation of directors was filed on April 23, 1992. It was on April 16, 1992, that A.K. fain, director of Stridewell Pvt. Ltd. had informed S.K. Bhattacharya, R.S. Ahluwalia and M.S.K. Eswaran that their resignations had been accepted by the board of Stridewell with effect from April 10, 1992. As such, after April 10, 1992, petitioner No. 1, S.K. Bhattacharya has nothing to do with Stridewell and he has ceased to be the director of the company and, thus, has no any locus standi to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pvt. Ltd., one B.B. Nandi, claiming to be the director of petitioner No. 2-company filed an application, being Company Application No. 92 of 1992, praying for deletion of the name of the company (petitioner No. 2) from the array of parties. Resignation of the three directors on April 10, 1992, and induction of three more directors on April 10, 1992, and filing of Form No. 32 with the Registrar of Companies was the subject-matter of the said application filed by B.B. Nandi before the Company Law Board, who in his affidavit, filed in support of Company Application No. 92 of 1992, and in his reply affidavit had stated that he had been duly authorised by the board of directors of petitioner No. 2-company. As such S.K. Bhattacharya claiming himself to be the director after April 10, 1992, shall be deemed to have knowledge of the said proceedings and the result thereof. The application of B.B. Nandi was dismissed. C.P. No. 29 of 1992 was also decided. Petitioner No. 1 did not file any appeal against the said order. In fact no appeal was filed against the order of dismissal of the application filed by B.B. Nandi. The petitioner had concealed from this court the fact and in order to dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idavit has been filed to that effect. Petitioner No. 1 filed his reply affidavit in C.P. No. 30 of 1992, long before June 26, 1994. The sudden inspection of record by the petitioner in June, 1994, was, thus, obviously resorted to by him not to ascertain the facts, which otherwise became fully known to him but to afford a ground to explain the delay and laches in filing the instant petition. This conduct on the part of petitioner No. 1 is nothing but an abuse of the process of law and the same would disentitle him to invoke the discretionary jurisdiction of this court. Respondent No. 4 has pleaded that registration of the statutory form by the Registrar of Companies on October 22, 1994, was rightly done. It is alleged that Stridewell is a company belonging to the M.R. Chhabria group and has already been represented by one of the directors of the company. Reply on behalf of respondent No. 2 has been filed on the affidavit of V.S. Galgali, Registrar of Companies. One of the preliminary objections raised is as regards the delay in filing the petition to question the legality and validity of the order passed on October 22, 1992, in taking on record and registering Form No. 32 filed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and merely lay down the guidelines to be considered by the Registrar in ascertaining the situation without divesting him of his discretion in this regard. It is further stated that circular dated May 4, 1993, cannot be relied upon by the petitioner in as much as the same was issued much after Form No. 32 was filed by T.K. Ramaswamy on April 23, 1992, and when it was taken on record. For the same reason for the purpose of the forms submitted by R.S. Ahluwalia the said circular dated May 4, 1993, cannot be relied upon. It is also stated in the affidavit that Form No. 32 was filed by T.K. Ramaswamy, a director of the company well in time within 14 days of the meeting of the board of directors of the company. Therefore, the same was directed to be taken on record and was registered. Dr. A.M. Singhvi, senior advocate, on behalf of the petitioners contended that the Registrar of Companies is merely an administrative authority appointed under section 609 of the Companies Act, who in violation of circulars dated October 24, 1961, issued by the Department of Company Affairs unilaterally, deliberately, arbitrarily, illegally and in gross violation of the principles of natural justice an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he inquiry was for the limited purpose of admissibility of the application filed by B. B. Nandi. Therefore, when the order itself suggests that it was unnecessary for the Company Law Board to go into the question of majority shareholding in Stridewell or dichotomy between shareholders and directors and since Standard Distillery is admittedly one of the members of Shoe Specialities Pvt. Ltd., out of a total membership of four, as per the records, that was satisfying the requirement of section 397 of the Act. As such the said observations as regards the question of majority shareholding of Stridewell is not and cannot be res judicata. It was also contended that in C.P. No. 29 of 1992, none of the directors who are alleged to have resigned on April 10, 1992, were parties and even if it be presumed that the Company Law Board had concluded that the respondents are the real Stridewell, there was no occasion for the respondents to have filed subsequent Company Petition No. 30 of 1993, and to have kept it pending for adjudication before the Company Law Board. The Company Law Board having not expressed any opinion as to who is in control of the affairs of Stridewell the decision in C.P. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate the reasons for which the conclusions were arrived at. Even otherwise dismissal of the S.L.P. by the Supreme Court does not mean or imply confirmation of the findings or reasons or conclusions contained in the order dated May 28, 1993. Learned counsel for the petitioners has also tried to assign reasons for which B.B. Nandi of Stridewell did not file appeal before the Madras High Court against the Company Law Board's order dated May 28, 1993. During the pendency of this petition the final order passed in C.P. No. 30 of 1993, on November 2, 1995, also cannot debar the petitioners from seeking the reliefs, which have been sought in the petition, which are totally independent. The arguments on behalf of respondents Nos. 3 and 4 have been that the undisputed shareholding position shows Bio-Foods as owner of 80 per cent. shares of the company in which admittedly Bio-Foods is controlled by a group of respondents Nos. 3 and 4 and naturally the shareholding control lies with respondents Nos. 3 and 4. It is contended that since the shareholding control is with respondents Nos. 3 and 4, the board of directors could have been altered according to their wishes. Therefore, it is perfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the decision, the Stridewell Company has been represented in all proceedings connected therewith by the respondents group, without any demur or protest from the petitioners. It is also contended that after the judgment was passed in C.P. No. 30 of 1993, the matter stands concluded and no further controversy can be raised. Petitioner No. 1 is making a corporate complaint in the capacity as a director of the company and since it has been held that petitioner No. 1 is not a director after April 10, 1992, he cannot maintain any petition and since the petition was filed during the pendency of C.P. No. 30 of 1993, on the disposal of the said petition, the rationale of the instant petition has gone. Learned counsel for the respondents has also tried to highlight the conduct of the petitioners as well vis-a-vis the proceedings saying that the petitioner obviously waited till the outcome of the judgment in C.P. No. 29 of 1992 (Stridewell Leathers P. Ltd, v. Shoe Specialities P. Ltd. [1996] 1 Comp LJ 426 (CLB)), and filed the writ petition thereafter. The writ petition is conspicuous by the absence of any mention to the decision of the Company Law Board or to the decision of the Madr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roversy arose on and from April 10, 1992, when the K.R. Chhabria group held the board's meeting of the company. Pursuant to decisions taken in the meeting, particulars in Form No. 32 were submitted on April 22, 23, 1992, by respondent No. 4 stating that the resignation of the three directors, including petitioner No. 1 had been accepted and in their place three new directors had been appointed. This Form No. 32 was received on April 23, 1992, in the office of the Assistant Registrar of Companies. It is stated in the affidavit of V.S. Galgali, the Registrar of Companies, that on April 23, 1992, the company filed Form No. 32, dated April 22, 1992, through its director T.K. Ramaswamy. The form was as per the statutory requirement laid down by sub-section (2) of section 303 of the Act, which gave requisite particulars of appointment of S.H. Vohra, P.R. Pandya and Ranjiv Kapur as additional directors of the company with effect from April 10, 1992, being the date of the meeting of the board of directors. The said form also contained the particulars of the changes, namely, acceptance of resignation of R.S. Ahluwalia, M.S.K. Eswaran and S.K. Bhattacharya with effect from the same date. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistrar should merely place them on the company's file and advise the parties concerned to get the dispute settled in a court of law and the court decision intimated to him in due course. In such cases, he should not make any entry on the register maintained in pursuance of section 306 or any other record on the basis of either or both of the contradictory statements. If, however, a return has been received by the Registrar well in time, he should proceed with the formality of recording, registering or filing the return and merely accept the other contradictory return filed with him later. This return must not be recorded, registered or filed in the company's records. In such cases, the Registrar should enquire into the circumstances in which the other return had been submitted and attach the explanation to the return in question in pursuance of section 234(5) of the Act. 3. While acknowledging receipt of documents presented by the contending parties at the same or nearly the same time and of the documents presented by the other contending party later after those presented by the first party have been recorded, registered or filed earlier, the Registrar should indicate that acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely take them on record and advise the parties to get the dispute settled in a court of law and should not make any entry in the register maintained in pursuance of section 306 or any other record. The Registrar did not follow either of the courses, which were open to him as per the instructions contained in the circular. Admittedly knowledge as regards the dispute was acquired on receipt of letter dated August 22, 1992, some time in August/September, 1992, but much prior to the date on which action was taken on October 22, 1992. The third part of the circular says that if a return has been received by the Registrar well in time, he should proceed with the formality of recording and registering or filing the return and merely to accept the other contradictory returns filed with him later. The contradictory return must not be recorded, registered or filed in the company's record. In such a case, the Registrar should inquire into the circumstances in which the other (contradictory) return had been filed. The Registrar appears to have resorted to this part of the instructions contained in the circular, i.e. , the return filed first in point of time, namely, on April 23, 1992, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.P. No. 30 of 1993, though the same is under challenge, the question is of an academic nature. We are not concerned at this stage about the implication of the decision in C.P. No. 29 of 1992, and C.P. No. 30 of 1993, in view of the narrow controversy. In case there has been any omission on the part of the Registrar, whether deliberate or otherwise, in not adhering strictly to the guidelines as contained in the circular dated October 24, 1961, the Registrar being merely an administrative authority, his action in merely taking on record and registering Form No. 32 submitted by the K.R. Chhabria group will not and cannot prejudice the right of petitioner No. 1 or those directors, whose resignation is stated to have been accepted or that of B.B. Nandi in any of the proceedings. Non-adhering to the guidelines also will not nullify the acts of respondent No. 2. Obviously irrespective of the action of respondent No. 2 it would have been open for them to point out before the competent authorities in all appropriate proceedings the fact of non-adherence by respondent No. 2 to the guidelines contained in circular and establish their rights independently that they still continue to be the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay. The board minutes submitted by the respondents show that all the meetings were held only at the headquarters of SWC at Calcutta. This evidently establishes that the respondents had been holding parallel meetings claiming to be continuing as directors of Stridewell. It is also evident that the parallel board has prepared new stationery, minutes books, etc., to establish their genuineness. We also note that though the removal of the directors on April 10, 1992, is questioned, so far they do not seem to have raised any protest in this regard, In view of these we hold that the board meetings evidenced by the petitioners are genuine and as such this application submitted by Shri B.B. Nandi, in his individual capacity cannot be entertained. Even otherwise, the main petition can stand on its own since Standard is admittedly one of the members of SSPL out of a total membership of four as per records at present thus satisfying the requirements of section 399 of the Companies Act. We, therefore, feel that it is unnecessary for us to go into the question of majority shareholding in "Stridewell" or dichotomy between shareholders and the directors etc. in that company. The material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .P. No. 29 of 1992, or by the Supreme Court on an SLP filed thereafter. Thus, the position as it stands today is that the board constituted by the petitioners group is the valid and legitimate board. Under these circumstances, we do not consider it necessary to look into the allegations made in this petition against the decisions of the board of directors constituted by the respondents' group and as such we dispose of this petition without any direction." The Company Law Board is the authority competent to take decisions on the affairs of the company. No doubt the order passed in C.P. No. 30 of 1993, is the subject-matter of appeal, but for the purpose of the present petition, suffice it to observe that the mere acceptance and registration of Form No. 32 by the Registrar could not have prejudiced the case of the petitioners in any proceedings before the competent authorities, since, as observed above, acceptance of the form by the Registrar is only a ministerial act. The Registrar is only an administrative authority appointed under section 609 of the Act. He is neither a court, nor an adjudicating authority. By having accepted Form No. 32 filed on April 23, 1992, filed on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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