TMI Blog2009 (7) TMI 788X X X X Extracts X X X X X X X X Extracts X X X X ..... indicated that the appellants have decided to allocate the share in its meeting held on 28-5-2005. Service of notice with regard to this meeting is also in the same manner as discussed hereinabove and, therefore, it is not established that the notice is served. That apart, it is clear that the decision with regard to allocation of shares took place on 5-7-2005. If the decision was taken on 5-7-2005, then the respondent who was arrested on 1-7-2005 should have been informed about the same. This was not done. The learned Company Law Board has dealt with this matter in detail, in Paragraphs 14 and 15 of its order, and this Court does not see any perversity or error in the aforesaid finding of the Company Law Board, warranting interference. Considering the totality of the facts and circumstances, this Court is of the considered view that in passing the impugned order the Company Law Board has not committed any error, which warrants interference now in this appeal. - M.A. (COMPANY) NO. 1 OF 2007 - - - Dated:- 17-7-2009 - RAJENDRA MENON, J. P.R. Bhave, R.K. Sanghi and S.A. Khan for the Appellant. Ajay Mishra, Pankaj Dubey and Mrs. Dubey for the Respondent. JU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er pointed out by the company petitioner/respondent that in the communication that took place between the parties, it has been disclosed that from the existing share capital, further 1,50,000 equity shares have been issued and after allocation of these shares, the share percentage of the company petitioner Shri Sarabjit Singh Mokha is reduced from 25 per cent to 10 per cent. Challenge to this allocation of shares was also in the company petition. It was the case of the company petitioner that right from inception of the company in the year 1997, he and the appellants had equal percentage of shares, had loaned equal amount to the company and were functioning as Directors and were getting equal remuneration. The establishment of the Company and the hospital premises was in the leased out building held by the company petitioner and his family, for a consideration of Rs. 1.6 lakhs per month. All the appellants, who were doctors by profession, have given their skill and equipments to the hospital on charge basis and till the date when the dispute arose, they have recovered 90 per cent of the cost. It was further the case of the company petitioner that he had arranged for loans for the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallenge was made to the entire action before the Company Law Board. 5. On notice being issued, the appellants hereinabove filed a joint reply/written statement, refuted the contentions of the company petitioner and came out with a case that since 23-5-2004 when a First Information Report was lodged against the respondent/company petitioner for offences under sections 395, 397 and 120B, he was absconding, he was not available to the civil society for a long period, it was only on 1-7-2005 that he surrendered and thereafter was released on bail on 16-11-2005 when he surfaced. It was the case of the respondent that due to his implication in the criminal case, for a long period right from August-September 2004 up to July 2005 and till his release on bail on 16-11-2005, respondent was not available to the civil society, he was not discharging any functions in connection with the affairs and activities of the company, he was underground, was trying to get anticipatory bail, in which he did not succeed and, therefore, in spite of sending him notices by post, i.e., under certificate of posting (UPC) and by personal service, when he did not attend five consecutive meetings, by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position as Director in the Company. 7. Being aggrieved by the aforesaid order of the Company Law Board, this petition under section 10F of the Act is filed by the three appellants. 8. Shri P.R. Bhave, learned Senior Advocate, assisted by Shri R.K. Sanghi and Shri S.A. Khan, Advocates, took me through various documents that have been filed, which included the notices sent by UPC for the Board meetings, the proceedings of the Board meetings, the affidavits filed, the correspondence between the parties and emphasized that the findings recorded by the Company Law Board in its order dated 19-7-2007 is a perverse finding, contrary to the evidence and material that came on record and, therefore, the appeal under section 10F was maintainable. It was pointed out by Shri Bhave, learned Senior Advocate, that meetings of the Board were held on 1-9-2004, two meetings at 11.00 a.m. and 4.00 p.m. respectively; 14-9-2004, 31-12-2004 and 31-1-2005. For all these five meetings, requisite notices under posting certificate (UPC) were sent to the respondent, but in spite of service by post, the company petitioner/respondent did not attend any of the meetings. 9. For the convenience of hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of law, which can be interfered with exercising jurisdiction under section 10F of the Act. 11. Shri P.R. Bhave, learned Senior Advocate, further argued that the company petitioner in his petition had only come out with a case that no notice with regard to holding of the meetings were served on him. It was never his case that the Board meetings on the five dates, as alleged, were never held. As no allegation with regard to not holding of the meetings were pleaded or canvassed, the appellants herein did not produce the minutes of the Board meeting held on the five dates, however, in a very peculiar manner, it was emphasized by Shri Bhave that the Company Law Board has drawn an adverse inference and has held that even holding of the five Board meetings are not proved. Shri Bhave pointed out that when it was never the case of the respondent company petitioner that the meetings were not held, a finding recorded in this regard is wholly unwarranted and perverse. Referring to the affidavits of Shri Tadas and two other persons, i.e., Elvin Thomas and Shri Satyendra Thakur, available on record, Shri Bhave tried to build up an argument to canvass his point that a perverse finding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various criminal activities and is a mischievous person and by assuming certain things, the Company Law Board has recorded a finding, which is impermissible. ( f )It was thus argued by Shri Bhave, learned Senior Advocate, that an approach with regard to conduct of a prudent man in the facts and circumstances should have been adopted for seeing as to whether sending of the notice by UPC was a correct step or not. ( g )Referring to section 400 of the Act, and contending that notice to the Central Government is necessary, this statutory provision is violated and placing reliance on a judgment of the Bombay High Court, in the case of Bilasrai Joharmal ( supra ), it was argued that the mandatory provisions having been violated, the company petition was liable to be dismissed. Accordingly, Shri Bhave, learned Senior Advocate, summed up his argument by contending that in the totality of the facts and circumstances, a perverse finding is recorded by the Company Law Board against the appellants, which cannot be sustained. 13. Shri Ajay Mishra, learned Senior Advocate, assisted by Shri Pankaj Dubey and Mrs. Dubey, Advocates, referred to the provisions of sections 53, 193(1), 194 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with law and has recorded an appropriate finding based on due appreciation of the evidence and material that came on record Shri Ajay Mishra, learned Senior Advocate, refuted each and every contention put forth by Shri Bhave. It was further argued by learned Senior Advocate that the share allocation made reducing the share capital of the company petitioner was also effected without proper notice and, therefore, the Company Law Board has not committed any error in interfering with the matter. 14. As far as non-compliance of section 400 is concerned, it was argued by learned Senior Advocate that the compliance has to be made by the Company Law Board, which is not made a party in these proceedings and, therefore, the said ground cannot be raised at this stage. That apart, if the Company Law Board has committed any breach, the company petitioner/respondent herein cannot suffer for the same. Accordingly placing reliance on the following judgments : Gopal Krishnaji Ketkar v. Mohammed Haji Latif AIR 1968 SC 1413; J.P. Srivastava Sons (Rampur) (P.) Ltd. v. Gwalior Sugar Co. Ltd. 2000 CLC 1792 (MP); Commissioner of Customs v. Virgo Steels [2002] 4 SCC 316 and Kama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order on any question of law arising out of such an order . It is, therefore, clear that an appeal contemplated under section 10F is not an appeal on fact. The appeal is only on a "question of law" and, therefore, it can be safely construed that a finding of fact recorded by the Company Law Board is final and against such a finding no appeal lies. Under law the jurisdiction of this Court in an appeal under section 10F is confined only to determination of any substantial question of law and, therefore, a finding of fact arrived at cannot be reversed by this Court until and unless it is apparent from the face of the record that the finding, even on factual aspects, is erroneous or perverse to such an extent that the same could not be arrived at in the given set of circumstances. It is keeping in view the aforesaid limited jurisdiction conferred to this Court that the matter has to be proceed with and considered. 19. It would be appropriate now to refer to the statutory provisions which are applicable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplates that where the proceedings of any general meeting of the company or of any meeting of its Board of Directors or committees of the Board have been kept in accordance with section 193 then until and unless the contrary is proved, the meeting shall be deemed to have been called and held and all proceedings to have been duly taken place in the manner as indicated and valid. 21. Section 283 contemplates a provision pertaining to vacation of office by a Director. This section indicates various eventualities, which would result in vacation of office by a Director and as far as the present case is concerned sub-section (1)( g ), which is relevant, reads as under : "283. Vacation of office by directors. (1) The office of a director shall become vacant if ****** ( g )he absents himself from three consecutive meetings of the Board of Directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board; ****** " According to the aforesaid provision, if a director absents himself for three consecutive meetings of the Board of Directors or from all the meetings of the Board for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tending the meetings were sent Under Posting Certificate (UPC) to the respondent/company petitioner. The five meetings in which the respondent was absent are alleged to have been held on 1-9-2004 (two meetings); 14-9-2004, 31-12-2004 and 31-1-2005. The first notice for the meeting, which was to be held on 1-9-2004, at 11.00 a.m., is dated 25-8-2004 and is at page 187 of Paper Book No. 2. The agenda for the meeting is also indicated therein and the UPC for the same is at page 186. Similarly, the notice for the second meeting to be held on 1-9-2004 at 4.00 p.m. is at page 188 and the UPC is at page 189. At page 190 is the notice for the meeting to be held on 14-9-2009 and the UPC is at page 191. Similarly, at Pages 192 and 194 are the notices for the meetings to be held on 31-12-2004 and 31-1-2005 and the UPC are at pages 191 and 193 respectively. 26. During the course of hearing, on behalf of the respondent certain discrepancies were tried to be pointed out in the posting certificates at page 189 and the difference in the agendas and mistakes committed in the agendas to contend that these would indicate that the documents are fabricated. For the present, this Court does not deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troversy at hand on the basis of the certificates produced before us, as it is not difficult to get such postal seals at any point of time. " 116. Despite this ground reality and on a misinterpretation of the provisions of section 53, the Appellate Court came to the indefensible conclusion that, "evidence regarding dispatch of a communication under certificate of posting attracts the irrebuttable statutory presumption under section 53(2)(b) that the notice had been duly served", that "it is not open now to project a plea of absence of service of notice and a substantiation thereof by evidence" and that even if it were proved that the notice did not reach the addressee, the evidence could not be "formally accepted and formally acted upon by the Court" such contrary evidence "being necked ( sic ) out at the threshold". 117. This Court in Ummu Saleema s case ( supra ) said that a certificate of posting might lead to a presumption if the letter was addressed and was posted, that it, and in due course, reached the addressee : " But, that is only a permissible and not an inevitable presumption. Neither section 16 nor section 114 of the Evidence Act compels the Court to draw a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e., "shall presume" are being used in the Indian judicial lore for over a century to convey that they lay down a rebuttable presumption in respect of matters with reference to which they are used and we should expect that the U.P. Legislature also has used them in the same sense in which Indian Courts have understood them over a long period and not as laying down a rule of conclusive proof. In fact these presumptions are not peculiar to the Evidence Act. They are generally used wherever facts are to be ascertained by the judicial process". 121. It was, accordingly, held that the words "shall presume" contained in section 28B of the U.P. Sales Tax Act only require the authorities concerned to raise a rebuttable presumption that the goods must have been sold in the State if the transit pass is not handed over at the checkpost at point of exit and that it was open to the transporter to still prove that the goods had been disposed of in a different way. ( See also Syed Akbar v. State of Karnataka AIR 1979 SC 1848; State of Madras v. Vaidyanatha AIR 1958 SC 61). 122. Raising of a presumption, therefore, does not by itself amount to proof. The result of a mandatory requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining his control over Kerala Kaumudi, would have risked losing such control by abstaining from applying for the additional shares." [Emphasis supplied] 28. A perusal of the aforesaid principle laid down by the Supreme Court clearly indicates that raising of a presumption contemplated under section 53(2) does not by itself amounts to conclusive proof. If the facts of the present case are analyzed in the backdrop of the aforesaid legal principle, it would be seen that in the present case except for filing the postal certificates and the letters, the only piece of evidence with regard to service of notice is an affidavit of one Shri Rajesh Tadas, who is said to have personally gone to the residence of the company petitioner for serving the notice. The said aspect of the matter with regard to personal service shall be dealt with separately. 29. For the present, the question of service through UPC is being considered. For service of notice by UPC the only evidence adduced is the postal certificates. Other supporting documents/evidences like the dispatch register, the proof with regard to postage stamp affixed or the affidavit of the person concerned, who had actually gone to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st after fulfilling the requisite formalities as detailed hereinabove that a presumption under section 53 can be drawn. In the present case, there is no evidence regarding posting of the letter or documenting its posting or affixing adequate stamps. In the absence of the aforesaid facts being established, this Court does not deem it appropriate to draw the presumption and hold the postal certificates to be proof of sending the notice to the respondent. 30. Even though by placing reliance on the judgment of Parmanand Choudhary ( supra ) Shri Bhave, learned Senior Advocate, had tried to emphasize that the notices have been dispatched, but keeping in view the law laid down by the Supreme Court in the case of M.S. Madhusoodhanan ( supra ), this Court cannot record a finding to the effect that notices in question were dispatched to the company petitioner. In this regard, the principles laid down by the Madras High Court in the case of Microparticle Engineers (P.) Ltd. v. Mrs. Senthamarai Munusamy [2003] 116 Comp. Cas. 465; by the Punjab and Haryana High Court, in the case of Bhankerpur Simbhaoli Beverages (P.) Ltd. v. Sarabhjit Singh [1996] 86 Comp. Cas. 842 , may be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany since August 2003. 3. That I personally went to the house of Mr. Sarabjeet Singh Mokha, the petitioner in this case on 25-8-2004, 8-9-2004, 23-12-2004 and 24-1-2005 to serve the notice of Board meetings. 4. That the notice of cessation dated 4-2-2005 and share offer letter dated 30-4-2005 was also given to me by the Company for personal by hand service on Mr. Sarabjeet Singh Mokha, and I personally went to the serve the same on Sarabjeet Singh Mokha. 5. That each time when I went to serve, the notices/letters, to the house of Mr. Sarabjeet Singh Mokha, he was not available and his family members refused to receive or acknowledge the same. Therefore, personal service could not be effected." 33. A perusal of the affidavit would indicate that Shri Rajesh Tadas on oath says that he is an employee of the company, he is working since August, 2003 and he personally went to the house of the company petitioner on 25-8-2004, 8-9-2004. 23-12-2004 and 24-1-2005 to serve notice of Board meetings. He also went to serve the notice of cessation dated 4-2-2005 and the letter dated 30-4-2005. Thereafter, he states that each time he went to serve the notices/letters, company petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y he did not make any endorsement with regard to the particulars of the family members to whom he tried to effect service and who refused or did not acknowledge the same, no other witness is shown in whose presence, the service was tried to be effected. That apart, finally Shri Tadas does not say as to what was the action taken by him after the notices remained unserved, to whom he returned the notices, to whom he reported the matter about refusal to accept the notice and how the matter was returned back to the competent authority of the company along with his report. His affidavit is silent on all these vital aspects, is vague and does not disclose the aforesaid factual aspects of the matter. If all these discrepancies are evaluated cumula-tively, it can be construed that the appellants herein have failed to prove service of notice on the company petitioner by post or personally through Shri Rajesh Tadas. 34. Apart from the aforesaid, it is seen from the notices available on record that the notices are addressed to four directors, three of the directors are the appellants herein and the fourth director is the company petitioner, who is removed. All the four are subscribers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntemplates service of notice before a Board meeting to a member entitled to attend such meeting and when the law contemplates a procedure for service of notice, then without service of notice and intimation of the meeting being proved in accordance to law, no presumption can be drawn merely because the company petitioner was involved in some criminal case or was absconding or on the ground that he was not available to the civil society. 36. Having held so, this company appeal could be very well dismissed on this ground alone, but as serious arguments were advanced during the course of hearing by Shri P.R. Bhave, learned senior Advocate, with regard to the fact that adverse inference is drawn on the ground that minutes of the Board meetings are not produced. Shri Bhave, learned senior Advocate, had argued that the company petitioner never challenged holding of the meetings nor was it his case that the Board meetings were not held and, therefore, it was argued that the findings recorded by the Company Law Board to the effect that the appellants have not proved holding of the meeting is a perverse finding. 37. In this regard, this Court is of the considered view that when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory prescriptions made for its maintenance under section 193. Before this Court also, the proceedings of the Board meetings are not produced in its original. What is produced is a certified true copy, which does not bear the signature of any person, but is certified as true by the Chairman of the company. The documents are typed copies, containing loose sheets and the same does not indicate that they are maintained in accordance to the requirement of section 193. When the appellants contended that they were acting bona fidely and had no mala fide intentions, it is not known as to why the original records of the Board meeting were kept away in these proceedings when they would have thrown much light on the bona fides of the appellants. However, having held that the appellants have miserably failed to establish issuance of proper notice and service of notice with regard to holding of the Board meetings, this Court does not deem it necessary now to go into the question of records of the Board meeting not being produced in the proceedings before the Company Law Board and in this appeal but sees no error in the finding recorded by the Company Law Board in this regard. 38. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the views of the Central Government in order to protect the right of the unrepresented minority shareholders, whose interest is to be seen in a proceedings pertaining to winding up of a company or other matters where public interest is involved. There is nothing under law to indicate that non-compliance with the aforesaid provision renders the proceeding vitiated in all cases, even when no public interest or right of any other member of the company, unrepresented, is involved. (Ref.: C.R. Datta on The Company Law, Sixth Edition 2008; pages 5700 to 5702). 41. As the question of allotment of shares is also done without proper notice to the company petitioner, the finding recorded by the learned Company Law Board with regard to allocation of shares also does not warrant any interference. For the purpose of allocation of shares, it is alleged that the offer was made on 30-4-2003 and in this offer it is indicated that the appellants have decided to allocate the share in its meeting held on 28-5-2005. Service of notice with regard to this meeting is also in the same manner as discussed hereinabove and, therefore, it is not established that the notice is served. That apart, it is c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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