TMI Blog2005 (7) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited who is claiming that they are affected parties by virtue of the impugned orders in the aforesaid two appeals passed by the Company Law Board in the aforesaid two Company Petitions. All the parties have agreed before me that the decision in the case of one of the Company Appeal would decide all the company appeals as the facts of that case are materially identical in both the said company petitions. Some of the brief facts in the background of which the present appeals arise are briefly enumerated are as under : 2. The appellant company namely Simshah Estates is a private limited company which was incorporated some time on or about 29-10-1984. The authorised capital of the company was Rs. 10,00,000 consisting of 8,000 equity shares of Rs. 100 each and 1 per cent redeemable preference shares of Rs. 100 each and 1,000, 2 per cent redeemable preference shares of Rs. 100 each together aggregating to 2,00,000. Out of the aforesaid 8,000 equity shares of Rs. 10 each are issued and fully paid of. The basic object of the company was to carry on business of developing and dealing in properties and to purchase, acquire, sell, dispose off and deal in movable and immovable prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion were altered by the company. It is his case that he was given no notice of any such meeting for passing resolution of reclassifying the shares or for alteration of the Memorandum and Articles of Association of the company. It is his case that he was holding 51.53 per cent of the share capital of the company and was infact a majority shareholder and without his consent the aforesaid resolutions were passed. It is further case of the respondent No. 1 that 1,500 shares were allotted to a company known as Complex Trading Private Limited which is infact-owned and controlled by the respondent group and by allotting the said shares the shareholding of the petitioners which is 51.53 per cent is diluted and he has been made a minority shareholder. 4. It is his further case that the aforesaid facts were discovered after inspecting the records of the company on 21/22-12-1998 and thereafter he has filed the said petition before the Company Law Board. In the said petition before the Company Law Board the respondent Nos. 1 to 3 have challenged the resolution passed in the 14th Annual General Meeting converting the preference shares into equity share capital and amendment of the Articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the records of the company and unlawfully and illegally passing various resolutions behind the back of the respondent Nos. 1 to 3 herein. 7. On these rival allegations the parties were heard by the Company Law Board and the Company Law Board by its order dated 21-10-2004 held that the board meeting held on 1-9-1998 and 20-11-1998 and passing of a resolution of allotment of 1,500 equity shares as well as amendment to the Memorandum and Articles of Association are null, void and illegal. It was further held that the issue of allotment of 1,500 equity shares to M/s. Complex Trading Private Limited is also null and void and the same stands cancelled. The Company Law Board has further while passing the aforesaid order held that if either of the parties are willing to part with their shares then the other party can purchase the said shares on valuation to be made by an independent valuer, and the valuation of assets of the company will be made as on 31-3-1998. In the mean time there shall be status quo with regard to properties of the company being movable and immovable properties. With the aforesaid directions the said company petitions were disposed of by the Company Law Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act. ( ii )Whether the Company Law Board was justified in nullifying the allotment of shares in favour of Complex Trading in view of the fact that admittedly the Complex Trading Private Limited were not a party to the company petition and were not heard by the Board and, therefore, no order could have been passed affecting their rights in the said allotment of shares? 9. Learned counsel appearing for Complex Trading in support of his Company Appeal has also raised identical question of law as question ( b ) above and has challenged the said order passed by the Company Law Board and has contended that the said order suffers from gross irregularities and illegality and, therefore, the said order is required to be set aside. 10. Learned counsel Mr. Kapadia in support of his contentions has contended that for the Company Law Board to assume a jurisdiction and pass orders under sections 397 and 398 it is necessary first to come to the conclusion or give a finding that there is an oppression of the respondent Nos. 1 to 3 group of shareholders or there is a mismanagement in the affairs of the company. Learned counsel has contended that in the entire order dated 21-10-2004 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having regard to the exigencies of the situation and the court must arrive at a conclusion upon analyzing the materials brought on record that the affairs of the company were such that it would be just and equitable to order winding up thereof and that the majority acting through the board of directors by reason of abusing their dominant position had oppressed the minority shareholders. The conduct, thus, complained of must be such so as to oppress a minority of the members including the petitioners vis-a-vis the shareholders which a fortiori must be an act of the majority. Furthermore, the fact situation obtaining in the case must enable the court to invoke just and equitable rules even if a case has been made out for winding up for passing an order of winding of the company but such winding up order would be unfair to the minority members." (p. 570) 12. On perusal of the order of the Company Law Board it is clear that there is no finding specifically arrived at by analysing the evidence and/or material to hold that there is an oppression of the respondent Nos. 1 to 3 and/or mismanagement in the appellant company so as to call for exercise of jurisdiction under sections 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible to permit the said resolution to operate and the benefit of the same can be permitted to flow in favour of Complex Trading Private Limited. I am also not inclined to permit the said resolution to operate merely on technical ground that Complex Trading Private Limited is not heard by the Company Law Board. Prima facie it is obvious that the said resolution is totally fraudulent and could not have been passed so as to vitally affect the rights of the respondent Nos. 1 to 3 and switch him over from a majority shareholder to the minority shareholder. The matter is required to be heard again by the Company Law Board and at such a hearing the Complex Trading Private Limited ought to be heard to the extent of validity of the said resolution under which the allotment of shares is effected in their favour. 15. Under the aforesaid circumstances I am of the opinion that the following order should be passed in the interest of justice between the parties : ( i )Both the orders passed by the Company Law Board are hereby set aside and the matter is remanded back to the Company Law Board for hearing afresh. The Company Law Board shall give notice to Complex Trading Private Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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