TMI Blog2001 (8) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... lotment of the said 1960 shares of and in the company in favour of respondents Nos. 2 (deceased) and 4 in the register of members of the company be delivered up to this Hon ble Court so that the same may be cancelled and adjudged void by this Hon ble Court; ( e )Injunction restraining the respondents and each one of them from giving any effect or further effect to the purported issue and allotment of the said 1960 shares of and in the company in favour of respondent Nos. 2 (deceased) to 4 and all the purported registrations thereof in the Register of Members of the company in any manner whatsoever; ( f )Injunction restraining the respondents and each one of them from giving any effect to the said Form No. 2 and Form No. 32 referred to in prayers ( a ) and ( b ) above in any manner whatsoever; ( g )An order of injunction be made directing the respondents and in particular respondent Nos. 2 (deceased) to 5 and the company to rectify the Register of Members of the company by deleting the names of respondent Nos. 2 (deceased) to 4 therefrom in respect of the said 1960 shares of and in the company; ( h )An order of injunction be made directing respondent Nos. 2 (deceased), 3 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the respondents from dealing with, disposing of, encumbering, transferring the assets and properties of the company in any manner whatsoever; ( u )An injunction restraining respondent Nos. 2 (deceased) and 4 from exercising any rights or receiving any benefits in respect of the said 1,960 shares of and in the company; ( v )An order be made directing an investigation into the affairs of the company and of respondent Nos. 2 (deceased) to 6 in particular under section 406 of the Companies Act, 1956 ( the Act ) and Sche-dule XI thereto and all consequential orders be made upon such enquiry as this Hon ble Court may deem fit and proper under the provisions of the Act; ( w )A scheme be framed for future management of the company; ( x )An order be made directing convening and holding of an extraordinary general meeting of the shareholders of the company for the purpose of electing a lawful and valid board of directors after proper rectification of the Register of Members as prayed for hereinabove; ( y )A direction be given by this Hon ble Court to the respondents and each one of them to render a true and faithful account of all secret profits and illegal gains made by the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding to Bhagirath and 600 shares to Chandra Prakash. As a result the shareholding pattern in the company in 1974 was as follows : Tarachand 10 shares Bhagirath 10 + 750 760 shares Dhanka 1,660 shares Chandra Prakash and group 10 + 600 610 shares 3,040 shares 4. On 28-6-1983, a return was submitted to the Registrar of Companies by Bhagirath which showed that a further transfer of shares by Dhanka Devi to Bhagirath and his group and the shareholding in 1983 was as follows : Tarachand 10 shares Dhanka 510 shares Bhagirath and group 760 + 1150 1,910 shares Chandra Prakash 610 shares 3,040 shares 5. On 15-6-1984, Bhagirath filed a return with the Registrar of Companies in respect of the shareholding of the company. The 1984 position showed that Dhanka Devi transferred a further 500 shares to Bhagirath so that the shareholding in 1984 was recorded as follows : Tarachand 10 shares Dhanka 10 shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and from exercising voting rights in respect to the 1,650 transferred shares of Dhanka. 10. On 8-6-1990, Bhagirath filed an application under sections 397 and 398 of the Act (C.P. No. 290 of 1990) against the company, Tarachand, Dhanka, Chandra Prakash and his wife and daughter and his sister Gita. The application was admitted ex parte on 18-6-1990, and an interim order was passed by his lordship Umesh Chandra Banerjee J, directing status quo and also directing that no board meeting should be held. 11. On 11-7-1990, Tarachand filed an affidavit to the application in which he sought to represent himself, Chandra Prakash as well as Dhanka. The proceeding initially culminated in an order dated 20-3-1992, which, according to the appellants, was passed by way of settlement of the disputes between the parties. Bhagirath preferred an appeal from the order dated 20-3-1992. The appeal was allowed on 27-3-1996, and the order dated 20-3-1992 was set aside and the matter remanded back to the trial court for being reconsidered. 12. In these circumstances, the matter has been taken up by me. 13. According to the petitioner, the dispute arose between the parties in connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gally and wrongfully not co-operating with the other members of the board of directors of the company. In these circumstances, the petitioners were constrained to publish an advertisement in the Telegraph dated 11-12-1989 and further by a letter dated 19-12-1989, sought inspection of the statutory books and records of the company from the respondents. The said inspection was denied by the respondents and further they are not allowed access to the office of the company and the petitioner further came to learn from a letter dated 7-12-1989, addressed by the Registrar of Companies, West Bengal, wherefrom it appears that two sets of Form No. 32 had been filed on 25-10-1989, and 27-11-1989, by and on behalf of the company and the said forms were not in compliance with section 303(2). Thereafter, the petitioners caused enquiries into the matter and informed the Registrar of Companies, West Bengal, that none of the petitioners filed any Form No. 32 and further informed that no further appointment of directors of the company could take place as the maximum number of directors of the company as envisaged in the articles of association of the company was five and further the petitioners di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents prejudicially affect the carrying on of the business of the company and further the acts and conduct of the respondents have resulted and are likely to result in the affairs of the company and conduct the manner prejudicially to public interest and/or in a manner of shareholders of the company including the petitioners. 18. According to the petitioners, at present there is a complete deadlock in the board of directors of the company and the disputes between the petitioners and the respondents cannot be resolved in the domestic forum of the company. It is further alleged that the respondents proceeded illegally and wrongfully in changing the nature and character of the shareholding of the company and are also purporting to alter the composition of the board of directors of the company. It is further contended that the annual return of the financial year ended 31-3-1989, the statutory formalities have not been complied with owing to the high-handed attitude adopted by the respondents. The petitioners are being denied their right and shareholders and directors of the company are also unable to assert of their right as shareholders of the company. 19. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by me and on 13-9-1999, the appeal was dismissed. It is pertinent to note that in the said appeal an injunction order was prayed for by the appellant, restraining the Bhagirath and others from giving effect to the resolution passed in the extraordinary general meeting held on September 5, 1998. The said appeal and interim application were dismissed by the Hon ble Division Bench presided over by his lordship S.B. Sinha A.C.J. 27. A special leave petition was filed from the said order of the Hon ble Division Bench. The Hon ble Supreme Court was pleased to grant leave to appeal on 7-2-2000. Leave was granted by the Hon ble Supreme Court of India. It further appears that there was no interim order passed by the Hon ble Supreme Court. 28. Mr. S.B. Mukherjee, the learned senior counsel, appearing on behalf of the petitioner contended that after the dismissal of the suit and further after the order passed by this Hon ble Court in respect of recalling order of such dismissal has also been dismissed. He further contended that no stay has been granted by the Hon ble Supreme Court of India in the matter. Accordingly, the petitioners have a right to exercise their voting right in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in 1990 and Dhanka Devi withdrew her allegations against her son, Bhagirath, in 1995. 33. He further contended that the application filed by the petitioner for holding an extraordinary general meeting of the shareholders of the company and for the purpose of electing a valid board of directors Chandra Prakash did not controvert the statements made by the peti-tioner in the said application. Therefore, at this stage neither Dhanka Devi nor any other respondents can challenge the title of the petitioner in respect of the shares transferred in their favour by their mother Dhanka. Therefore, the respondents cannot challenge the said transfer which does not belong to them. 34. He further relied upon a passage from Bukley on the Companies Acts, 14th edition, volume 1 page 934 which is reproduced hereunder : "And where a transfer through non-observance of formalities has been irregularly, though not invalidly made, lapse of time, coupled with recognition of the transferee as a shareholder, may render the transfer incapable of being impeached." 35. And contended that the transfer of the said shares has not been challenged on the basis of infringement of the articles of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in a subsequent meeting to be held properly. In support of such contention, he relied upon a judgment Parameshwari Prasad Gupta v. Union of India AIR 1973 SC 2389. Accordingly, he submitted that the meetings held on 18-10-1989 and 20-10-1989, are illegal and the business transacted in the said meetings is non est in the eyes of law. 39. He further contended that the alleged meeting of the board of directors for the purpose of removal of Bhagirath from the board of directors is fabricated and is of no effect. Accordingly, he submitted that no effect should be given in respect thereof. 40. He further contended that there is no explanation that has been given by the board of directors for issuance of new 1960 shares. He further submitted that no particulars have been furnished in respect of the transaction in connection with the said 1960 shares. There is no reflection in the account how the money has been paid and if at all paid how such funds were utilised by the company. There is no reason that has been given why the fresh shares were not issued and/or allowed in favour of Bhagirath or Dhanka although, according to him, if such shares were issued, the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition. According to him, the grounds of challenge principally are that no notice of any meeting or otherwise had ever been given to Bhagirath by the company in regard to such issue of shares. 43. He further contended that the board meeting could not be held in view of the order passed by this Hon ble Court at the instance of the petitioner. No steps were taken by Bhagirath, until the death of Tarachand. He further contended that since the appeal is pending before the Hon ble Supreme Court, this petition should not be disposed of at this stage. 44. Mr. Chatterjee further submitted that the order was passed on 18-12-1998, and the special officer was directed to ascertain as to what were statutory and other liabilities and also running expenses of the company and further it was directed that the special officer will find out which of those liabilities would be made first, further, to find out as to what funds, if any, were lying with the company. Although the said order is still subsisting, no step is being taken by the petitioners. 45. He further contended that the extraordinary general meeting held by the special officer has also been challenged in this Hon ble Court an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 49. He further contended that Tarachand died on 18-3-1995, and Bhagirath thereafter took steps to withdraw the suit being Suit No. 874 of 1989. 50. He further submitted that respondent No. 3 had never authorised or instructed any advocate to withdraw the said suit. He further submitted that since special leave to appeal has been granted by the Hon ble Supreme Court of India by an order dated 7-2-2000, the order of dismissal of the suit for non-prosecution has lost its finality and will not operate as res judicata between the parties. He further relied upon a judgment in S.P.A. Annamalay Chetty v. B.A. Thornhill , AIR 1931 PC 263, and submitted that proper course for the Court would be to adjourn the action pending the decision of the appeal before the Hon ble Supreme Court. 51. He further contended that if this Hon ble Court proceeds on the basis that respondent No. 3 has ceased to be the owner of the 1,650 shares only by virtue of the alleged withdrawal of Suit No. 874 of 1989, the special leave petition would become infructuous. Alternatively, if it is held that the said suit being No. 874 of 1989 has been dismissed as withdrawn and such dismissal order has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of shares. Therefore, in my opinion this Court is bound to take the shareholding as it was standing after such transfer. 57. I further do not have any hesitation to accept the contention of Mr. Mukherjee, the learned senior advocate appearing on behalf of the petitioner, that the removal of the petitioners Bhagirath from the board of directors is illegal, inter alia, on the ground that the meetings of the company held on 26-10-1989, and 21-11-1989, were without complying with the provision of section 286 and, therefore, steps taken in violation of such provisions of the Companies Act, in my opinion, will render the meeting illegal and the business transacted therein should be declared as null and void. 58. It further appears that the respondents themselves admitted that the meetings were held after giving verbal notices to the two sons. Therefore, there cannot be any hesitation to hold that no formalities for issuance of notice in writing were followed. 59. It further appears that the 1,960 shares of the said company were issued only for the purpose of retaining control over the company without following the provisions of the Act. It further appears from the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agarwal; ( d )Shyam Agarwal; ( e )Anita Goel. 62. In my opinion, effect should be given to the said resolution passed in the said extraordinary general meeting held pursuant to the order passed by the Hon ble Division Bench and the said board of directors are directed to take the following steps : ( a )To convene and hold the annual general meeting for the year ended 31-3-2001 by 30-9-2001. ( b )Steps to be taken to the cause of the audit of the books of account of the company for the year ended 31-3-2001, for which purpose, P.C. Agarwal Co. is appointed as the chartered accountants, who will hold office till the conclusion of the next annual general meeting. ( c )Holding of annual general meeting of the company for the years ended 31-3-1989 to 31-3-2001, are dispensed with. The filing of the accounts of the company for the said period. The filing of the annual return of the company is also dispensed with. 63. The delay and/or default in holding the annual general meeting is condoned since the company was restrained by an order of the Court from holding any board meeting or general meeting during the pendency of these proceedings. 64. The Board of Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X
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