TMI Blog2013 (9) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... utta Edition - Publication was notice to all and is good service. Consideration of Accounts – The sum had been directed to be paid on the basis of no explanation given by the appellant in respect thereof, which was ex-facie incorrect as the appellants did take the plea of the audited accounts which had not been assailed and that sums had been spent on account of Travel expense of AKM and the mother - The expense borne to meet statutory requirement had also been given and in not appreciating evidence in this respect, CLB could not reach the conclusion of misappropriation and the said findings with regard to reimbursement cannot be upheld. The existence of the company continued the statutory requirements had to be complied with and for such purposes staff on job-work basis was maintained - CLB based on its reasonings in respect of misappropriation from sale of plant and machinery had reached the conclusion of siphoning of funds in respect of expenses and liabilities - This evidences non-application of mind - If the basis of the demand does not exist to grant such sums will be contrary to the tenets of all law. Allotment of Shares - Even after receipt of the notice, if respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant No. 2 (PKM), (iii) Increase in share-holding was without notice. The said allegations are baseless. AKM and his son had absented themselves from 3 consecutive meetings of the Board and therefore under Section 283 of the 1956 Act called for their removal. Notices of the meeting was sent to the respondent No. 1 and his son at the last known address mentioned in the share-holder s register maintained with the company by hand which was the practice of the company even during the life time of Sriratan Mohta. It was also sent to New Friends Colony, New Delhi the present address of AKM and his son. Publication was also made on 12th August, 2004 in the Financial Express Calcutta. Therefore all steps were taken by the company and it cannot be said by the respondent AKM that no notice was served on him or he was not aware of the meeting held on 20.8.2004. The notices were sent under certificate of posting and although the appellants wanted to bring the record of service of notice of meeting by a sur-rejoinder before delivery of judgment but the same was not allowed although the CLB has made a discussion on the mode of service but without taking the sur-rejoinder on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were received and earnest money deposited. On inspection some offerers were not interested in continuing with their offer, therefore the earnest money had to be returned, such return was by cheque. Details of the sums received, accepted and returned was explained in the objection filed by the company and PKM before the CLB but without considering the same the order dated 30.3.2006 was passed. From the balance sheet for the year ended 31.3.2001 the depreciated value of the plant and machinery will appear and the figure taken by the respondent AKM is not based on the figure shown in the balance sheet but is an imaginary figure and without any basis. The loss reflected in the Balance Sheet of 2004 is also reflected in the Balance Sheet of 2000. The CLB also did not verify the basis of the figure given by the respondent AKM. Mere allegation of misappropriation will not warrant an order, misappropriation needs to be proved as held in 40 Company Cases 119 and AIR (1962) Calcutta 127 and the direction of CLB to make payment is perverse as in the absence of evidence or proof of misappropriation the appellant No. 2 PKM could not have been called upon to pay sums. The company had stopped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed. No such form has been annexed. Only Form 23 has been filed. There has been non-compliance of Sections 75 and 192 of the Companies Act. Dilution of shareholding is oppressive. The increase in share capital by the respondent Nos. 3 to 6 as directors, allotment of 15000 shares to the appellant No. 2 PKM and allotment of 50 shares each to the original respondent Nos. 3 to 9 so also removal of the respondent No. 1 AKM and his son from the Board of Directors are oppressive to AKM. As there was no notice given the respondent No. 1 could not attend the meeting. In case notice was issued there was no reason to abstain from attending the meeting. No evidence of service of notice was produced in the objection filed to meet the allegation of non-service. After 1.2.2006 a sur-rejoinder was sought to be filed when the matter had been reserved for judgment and written submission filed on 11th February, 2006 and the impugned order was passed on 30th March, 2006. By virtue of Rule 6 of the Company Court Rules, the Code of Civil Procedure and Order 8 Rules 3, 4 and 5 of the Code have been made applicable. Service of notice is a point of substance and the same ought to have been specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital and allotment of shares to the appellant No. 2 PKM and removal of AKM as a director. The liabilities have been created after 2000. In 1999 the company had stopped functioning. Rs. 4.10 lacs was spent on preparation of a report for a proposed ethanol project which did not fructify. No steps have been taken in respect of the Miajan Lane property by G.D. Kothari. Similarly no step has been taken in respect of the registered office of the appellant company. The appellant No. 2 PKM was in control and management of the appellant company and created fictitious liability on the ground of loans given to the company. In view of the aforesaid the order under appeal is justified and calls for no interference. Having considered the submissions of the parties although the hearing was completed and judgment reserved an opportunity ought to have been given by the CLB to the appellants to file its sur-rejoinder. From the copy disclosed in these proceedings, it appears that not only an attempt was made to serve a copy of the notice of the meeting held on 20th August, 2004 by hand which was the usual practice followed by the company but that such notice was also accepted on behalf of the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ought to have called for each required piece of evidence viz., bills, vouchers and receipts and in not doing so has acted with perversity. The respondent AKM has not challenged the authority of the appellant No.2 PKM to sell the plants and machinery. The allegation made is of siphoning of funds. The details of sales realisation till 31.10.2003 was disclosed by the appellant No. 2 PKM and when the sums received in cash and cheque is totalled, it aggregates to the total sale value. In fact the sums that remained in the till of the company was 7,12,395/- as will appear from the statement of account till 31st December, 2003 enclosed in the letter dated 6.4.2004 on which CLB has based its decision. Therefore to allege manipulation more so when the appellant No. 2 PKM has given details of payments received besides the enclosure to the letter dated 6.4.2004, CLB ought to have considered the same and in not doing so CLB has acted contrary to the powers vested in it. In fact on the conclusion reached in respect of sale of plant and machinery, it has been held by the CLB that there has been no explanation of the other expense incurred. This ex-facie is an incorrect finding as it evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to allotment of shares. The shareholders of the company are members of the Mohta family or their associates. There is no outsider who is a shareholder. Being a private limited company the company was in the nature of a quasi-partnership. CLB has also accepted the company to be quasipartnership in nature, therefore Section 81 of the Companies Act would not apply but this would not permit misuse of power for personal gains or ulterior motive. The respondent AKM has alleged that the increase in share capital and allotment of additional shares amounts to mismanaging the affairs of the company and is prejudicial to the interest of the company with an intent to marginalise the respondent AKM and strip the company of its assets to the benefit of the appellant PKM. A notice dated 15.5.2004 was issued for holding an AGM on 15th June, 2004 wherein the business to be transacted was set-out. The explanatory statement under Section 173(2) of the 1956 Act was also enclosed with the notice. On 15.6.2004 according to the respondent AKM the share capital was increased and the Board was authorized to offer equity shares on right basis. As the shares were allotted at the meeting held on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on but as submitted by the appellant PKM sold his share in the Miajan Lane property to 3rd parties. This aspect ought to have been considered by the CLB. All that the CLB has said in its order dated 30.3.2006 about the Family Settlement is that the Family Settlement is a different matter . The CLB failed to consider that in the event all the parties had complied with the Family Settlement the company would have been sold and the proceeds divided amongst its heirs. Therefore it appears that the acts of the respondent AKM created a situation which made it impossible to sell the company and to only meet the statutory requirements of a shell company expenses had to be borne by the company which had become defunct since 1999. To do so finance was required which was raised by the company by increasing its share capital by allotment of shares. The respondent AKM did not apply for additional shares inspite of notice and cannot blame the appellant PKM for shares allotted. Section 397 of the Companies Act empowers the filing of an application thereunder in cases of oppression before the Tribunal viz. the CLB, and the Tribunal may pass orders so as to bring an end to the matters compla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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