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2015 (11) TMI 263 - COMPANY LAW BOARD NEW DELHI

2015 (11) TMI 263 - COMPANY LAW BOARD NEW DELHI - TMI - Maintainability of petition under sections 397 & 398 of the Companies Act 1956 - oppression and mismanagement - Held that:- It is true that it is undisputable when a proceeding is withdrawn unconditionally, there shall not be any later proceeding on the same cause of action, but when the reliefs are different which cannot be granted in the earlier proceeding, for such reliefs, if any statutory right is conferred on any person to proceed bef .....

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backdrop of this factual history, safely conclude that withdrawal of suit without liberty will not make this CP non-maintainable. For having the respondents failed to establish that this petition is not maintainable, on the allegations referred above, hereby decide this issue against the respondents.

Whether the petitioner seized to continue as director of the company on an alleged letter dated 14.03.2007 or not ? - Held that:- The petitioner being the promoter director of shareholde .....

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resignation letter dated 10.03.2007. Thus have drawn this inference independent of the Hand Writing Expert opinion filed by the petitioner, therefore, hereby hold that alleged resignation letter used by the R2, to show petitioner resigned from the company as invalid.

Whether appointment of R3 as director of R-1 company is oppressive against the petitioner or not ? - Held that:- The explanation given by R2 saying they could not file Form 32 because DIN number has not come to the direc .....

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2009 for requesting the Bank to change mode of operation of the account, for there being no material on record showing R3 as director for more than two years from the date of alleged appointment of R3 as director, and on seeing the Form 32 filed only on 25-3-2009, that is only after the petitoner requested the Bank to change the mode of operation of the Account, this issue is therefore decided against the respondents holding that appointment of R3 as director is oppressive against the petitioner .....

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e their shareholding in between the petitioner and the second respondent as 50:50. The delay in filing Forms, happens in normal course, it could be considered as delay simplicitor, but if the delay is inordinate and such delay is not properly explained to the satisfaction of this Bench, and if such delayed filings are aimed at causing prejudice to any member of the company, such delay cannot be construed as happened in normal course. Here also Form-5 was filed one year after alleged increase of .....

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out ? - Held that:- Since the siphoning of the funds is not proved, could not say that R2 has siphoned the funds of the company at this juncture. 1 also cannot say that R2 opened those two Bank accounts with a bona fide intention for the growth of the company. When a Bank account is opened in the name of the company without notice to the other shareholder who has, according to him, 50% shareholding, it only reflects that those accounts are opened to handle financial transactions without notice .....

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of siphoning.

To what relief ? - Held that:- The company is directed to pay remuneration to the Chartered Accountant, as agreeable to him, because the company is an almost 50:50 company in between the petitioner and R2.

For having this Bench decided that the petitioner has not been removed as a director at any point of time, he will continue as director in the company whereas the wife of R2 i.e. R3 will not continue as director because her appointment has already been decl .....

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ions are there over the Chartered Accountant's audit report, they are at liberty to place their objections before CLB. - C. P. NO. 74 (ND) OF 2009 - Dated:- 22-6-2015 - B.S.V. PRAKASH KUMAR, J. For The Petitioner : Shri. U.P. Mathur, Adv. For The Respondent : Shri. Rajath Bhalla, Adv. ORDER The petitioner, eider brother of R2, filed this CP u/s 397, 398 read with 402 of the Companies Act, 1956 against a Company called M/s Notam India Private Limited (R1 Company) and against R2 and his wife (R3), .....

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arkardooma, New Delhi by crediting the balance in those accounts to the current account No. 979 of Rl company maintained in Punjab & Sindh Bank, Link Road, Sahibabad, Ghaziabad; (d) To allow the petitioner and R2 to jointly operate the Current Account No. 979 and FDRs with Punjab & Sindh Bank; (e) To execute sale deeds for sate of shops/flats at company's behalf jointly by the petitioner and respondents; (f) To declare alleged the increase of authorized capital from ₹ 5 lackh t .....

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n/Engg consulting company until February, 1996. He purchased a commercial office space in December 1995 at 70A-215, Chawla Complex, Shakarpur, Vikas Marg, Delhi, and established a sole proprietary concern on 18.03.1996 in the name and style of "NOTAM" to carry on electrical contract works. While this proprietary concern was making good business, the petitioner initially accommodated his brother (R2) in his sole proprietary concern 'NOTAM'. He looked after the needs of his broth .....

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basis. After 2002-03, day-to-day activities of the company were carried on from its corporate office situated at Flat No. 1303, Nanda Apartments, Kaushambhi, Ghaziabad, U.P. This property was purchased by the petitioner in the year 1998 by including his brother name as power of attorney holder along with him. The business of NOTAM was far higher than R1 Company business before transferring its business into R1 Company. The petitioner, at the cost of his personal business, transferred the assets .....

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r at Kaushambhi, Ghaziabad with the Hank as collateral security. 3. The petitioner, being skilled person with varied experience in the business, looked after the project execution on the site, whereas R2 used to look after the Accounts and Office management, including maintenance of books, statutory record and as to finalization of accounts. Both the petitioner and R2, being directors, used to take remuneration as salary from the Company. First project was completed in 2003 and the other was com .....

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for increase of authorized capital from ₹ 5 lakh to ₹ 10 lakh without any notice to the petitioner. Though meeting was shown as held on 283.2008, R2 did not file Form 5 immediately, he filed it on 02.04.2009 i.e., after more than one year from the date of alleged increase of share capital. 5. The petitioner submits that the shareholding pattern in the Annual Return dated 4-9-2002 was - the petitioner holding 6605 shares i.e., 57%, R2 holding 5,000 shares i.e., 43%. However, in the A .....

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; 2004, the petitioner says they shall be declared invalid. 6. When the relations in between petitioner and R2 have been strained, the petitioner asked R2 to deliver the cheque book of the Company Account with Punjab and Sindh Bank after completion of second project in the year 2009. To which, R2 refused to deliver the cheque book, above this, he misbehaved with his elder brother, petitioner, indeed asked the petitioner to leave the work site for ever. Then suspecting something wrong happening i .....

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ng his brother (P) resigned from the Bank, by issuing a letter of resignation. He was shocked to see those documents showing as the petitioner resigned from the company, as R3, wife of R2, appointed as director, as if a resolution was passed by R2 & R3 on 19-2-2007 changing the signatory slip for bank account operation with Punjab & Sind Bank, and a board resolution on 14.3.2007 signed by R2 & R3 changing the operation of FDR account with Punjab & Sindh Bank. 7. On seeing the let .....

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is own private concern. That the petitioner has never signed or passed any board resolution appointing R2's wife (R3) as director of the company on 19.2.2007, that the Board resolution shown as passed by R2 &R3 changing the Bank signatories of Account 979 maintained with Punjab & Sindh Bank is invalid because R3 has never been appointed as director of the company and she is admittedly not even shareholder of the company. 8. The petitioner came across a Board Resolution dated 10.4.200 .....

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ustomers he is allowed to sell the flats and receive money from the customers, of course, he did it to his best. It is pertinent to note, the date on this resolution is 10.4.2007, whereas the resignation letter dated 14.3.2007 set up by R2 to show the petitioner resigned from the company as director is ante to the Board Resolution dated 10.4.2007. Summing it the petitioner submits that R2 forged the signatures of the petitioner left, right and center without foreseeing that he would fall into hi .....

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dated 14.03.2007 and other issues. He submits that R2, to suit to his convenience, fabricated a Board Resolution on 10.04.2007 showing as if the petitioner continuing as director in the company, subsequent to the alleged resignation set up by R2. When this contention was taken in the petition, respondents in their reply produced another Board Resolution with the same date 10.04.2007, showing as signed by R2 & R3. 10. The petitioner submits that R1 Company, on 04.11.1997, opened Current Accou .....

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d from the company on 14.03.2007. R2 knowing full well, in case, the Bank permits any joint operation of account with Punjab & Sindh Bank, he would have to disclose financial transactions in relation to R1 company, to overreach this, on 25.3.2009, he quietly opened another current Account in the name of the company with a Branch of Bank of Baroda, at Rajendra Nagar, Ghaziabad enabling himself to operate a new account, so that there would not be any hurdle in dealing with the affairs of the c .....

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at Rajendra Nagar, Chaziabad leaving a credit balance of ₹ 21, 644/- The petitioner submits that R2 withdrew ₹ 40 lakh in cash on 04.08,2009 from Bank of Baroda situated at Karkardooma Branch, therefore, it is evident that R2 siphoned ₹ 9l lakh from these two accounts and not placed any kind of explanation as to what made him open these accounts and why he withdrew such a huge amount from these two accounts without any explanation. He submits R2 is guilty of misfeasance and bre .....

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further submits that though cause of action in the earlier suit is cause of action in this CP filed u/s 397/398 of the Act 1956, the reliefs sought in this Company Petition being different and in relation to oppression and mismanagement by R2 against the petitioner and the right of remedy available to a member of the company under sections 397 & 398 of the Companies Act 1956 not being available before civil court, the petitioner filed this company petition and withdrew the suit seeking compr .....

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which the customers have taken out the booking money paid by them by cancelling the flats already booked in the last 6 months. 16. The petitioner in fact, around FEB-MARCH 2007, entered into a partnership deed with a company called SOHO Construction Pvt. Limited for development of flats on plot No 171, Gyan Khand -1, Indirapuram, Ghaziabad (UP) expecting huge profits in short period. Since he remained in the illusion that joint venture with SOHO would give high returns, he started investing his .....

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ity leaving the company and R2 to their fate. Though the petitioner left the company when it was in the need of funds, R2 raised funds to the company in the second half of 2007 to start 9/5 project of the company and saved the company from crunch, then this petitioner was nowhere. As was expected, the petitioner was put to losses in the joint venture with SOHO and he could even get back his principle amount which he hurriedly poured in the joint venture leaving the company of their own. Now the .....

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und that the petitioner has not been continuing in the management, so that he could not represent the company, and that the petitioner has not proved that his resignation letter as forged till date of passing the interlocutory orders. 18. For having the petitioner withdrew the suit unconditionally without seeking any liberty from the first court, and for having the ld Judge on 24-8-2009 dismissed the suit without giving any liberty to the petitioner to initiate new proceeding, this CP is hit by .....

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sfer voucher without putting it to R-2, since the company fund was siphoned away by the petitioner, R-2 gave complaint over this issue to SSP, Ghaziabad. Due to this surreptitious transfer made to them, a transfer cheque given to one supplier or the company called Omprakash was bounced, R-2, to keep the company- reputation in the market, R-2 squared up this money to the said Omprakash. Despite all these hurdles from the petitioner, R-2 timely repaid the loan taken from IC1C1 Bank for use of the .....

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use its funds. The petitioner, for being left high and dry in the project with SOHO, started mounting pressure on the respondents by holding out in the market that the properties of R1 Company were in dispute in between the brothers, simultaneously began pressurizing R-2 to take him into the Board, in this background, the Company opened new accounts in the Bank of Baroda. However R-2 was able to persuade the existing customers not to back out from the agreements they had with the company, R-2, .....

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s of R2. To see the project not put to halt, R2, himself raised money and paid it to the customers in January 2006. R2 submits that this petitioner has been unauthorizedly using stilt floor and roof of second floor; plot no KA-14, Kaushambi. Ghaziabad of the company without any permission from the Board of Directors and without paying anything to the company-neither consideration nor rent since November 2004 causing financial loss to the company- The petitioner refused to hear the old parents wh .....

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32 is that no director of the company has DIN number as per provisions of section 253 of the Companies Act, since there is a rule that no director can file forms unless there is DIN number to him, they could not file it in time. 21. R-2 denies the petitioner supporting R-2 financially; in fact, the brothers invested their joint earnings in the company. It is an admitted fact that the petitioner purchased an office at 70 A-215, Chawla complex, Shakarpur, Vikas Marg, Delhi-110092 as an investment, .....

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under sections 397 & 398 of the Companies Act 1956 is maintainable or not. (2) Whether the petitioner seized to continue as director of the company on an alleged letter dated 14.03.2007 or not. (3) Whether appointment of R3 m director of the company is oppressive against the petitioner or not. (4) Whether increased of authorized capital on 28.03.2008 is oppressive against the petitioner or not. (5) Whether R2 to be directed to restore ₹ 91 lakh shown as taken out. (6) To what relief. 2 .....

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iled an interlocutory application, seeking interim reliefs, Ld. Civil Judge, on 21,7.2009, passed A detailed order dismissing the interlocutory application seeking restraint order against R2 & R3 in relation to the business of R1 company. - That the petitioner has not filed any appeal over the said order, therefore, the order passed by the Ld, Civil Judge on 21.72009 has attained finality - That, on seeing no interim relief has been granted to the petitioner in the said Civil Suit; the petit .....

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withdrawn by 18.8.2009, it was indeed dismissed as withdrawn only on 24.8.2009, therefore R2 says that the petitioner indulged in giving false statement to the court and obtained an order, therefore he shall be prosecuted for perjury, hence CA under section 340 Cr P C has been moved. - That R2, for having the petitioner concealed the facts from the Company Law Board and obtained orders by making false statement, submits that this CP shall be dismissed on this ground alone. - That the petitioner .....

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. M. Palanisami [(2009) 95 SCL Pg 112 Madras] to say that CP filed u/s 397 & 398 of the Act 1956 cannot be dismissed on the ground earlier proceeding was dismissed as withdrawn without liberty to prosecute on the same cause of action, because the reliefs that can be granted under section 397 & 398 proceeding cannot be granted by any other court except by Company Law Board under these sections. 26. The petitioner also relied upon Gautam Kapur & Ors. Vs. Limrose Engineering Works (P) L .....

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9 passed by Ld. Civil Judge, it appears that the petitioner claimed that he had been running the company as MD of it, therefore, he had sought restraint order against R2 & R3 continuing as directors of the company for they had been doing various acts affecting the affairs of the company and interest of the petitioner. On which, Ld. Civil Judge has not granted temporary injunction against R2 & R3 from functioning as directors on two grounds - one, the petitioner did not place any proof ti .....

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g alleged resignation as forged has been foreclosed. He has only observed that till date of passing the order on 21.7.2009, the petitioner has not placed proof to prove the letter of resignation as forgery, therefore no interim restraint order could be passed. Not only that. Civil Court held that R2 & R3 shall provide all the details of sales in the company, therefore, it cannot be said that Ld. Civil Judge has gone into every issue raised in this case and decided the issues in favor of the .....

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forum itself will not take away the rights of first respondent if the same are available and conferred on him under the provisions of the Companies Act, 1956, especially for approaching a forum viz. the Company Law Hoard complaining about the oppression and mismanagement u/s 397 & 398 of the Act, That being the statutory right available to a shareholder or member of the company, in my considered view, it does not require any leave to be granted by the Civil Court............." 30. Here .....

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ot a final order; no decision has been taken on any of the issues which arc subject-matter of the Company Petition. It was only said that the petitioner has not placed any material to prima facie believe that R2 & R3 forged the signature of the petitioner on the alleged resignation letter dated 14,3.2007. 31. A prima facie view cannot be taken as adjudication over any issue pending before a Court of Law. It is true, if an issue is decided and if an order is passed akin to the adjudication as .....

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be taken up in the main hearing. Normally in an allegation like forgery, it could only be decided when that issue is put to trial. Therefore, in consideration of these facte, I do not find any merit in the argument of the counsel of R2 & R3 saying it is hit by Res Judicata or even by forum shopping. 32. Before discussing over filing the Company Petition without permission when Suit was withdrawn, I must place Sub-Rule 4 of Rule 1 Order 23 of CPC here: "Sub-Rule (4) Where the Plaintiff- .....

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matter or such part of it. Before applying this doctrine, one has to see whether the claim in the previous suit and in the later proceedings is one and the same or not and it is also to be seen whether the jurisdiction exercisable by the Courts is one and the same or not. I agree, if the party seeks the relief on the same subject, then such issue cannot be re-agitated in the later proceedings unless permission is sought as envisaged under sub-rule 4 of Rule 1 of Order 23, CPC. Here, the petition .....

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f DIN number, it could not be assumed that Form 32 showing the petitioner resigned from the company, was not filed for want of authority. If CLB can take a decision over any issue and safely conclude an issue, without touching the issue of forgery, then Company Law Board can very well take a decision over the said issue. When an issue is decided, the party will not be entitled to take up other grounds in the later proceedings to adjudicate thy issue already adjudicated. When an issue is not deci .....

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ourt can safely decide the point ignoring the allegation of forgery. Here, in this case, one - it is a case u/s 397 & 398, where normally issues are decided on equity and two - his resignation is detachable from the allegation of forgery, then such on issue could be decided ignoring the allegation of forgery. 34. According to Companies Act, as and when any director is removed or ceases to continue as director or appointed as director, there is a mandate under the Companies Act to file it bef .....

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this letter need not be taken into consideration to say that the petitioner resigned as a director from the company. Therefore, for there is enough evidence to believe that the petitioner continuing as a director without even taking the plea of forgery of resignation letter and resolutions if any into consideration, this Bench has decided this issue in favour of the petitioner ignoring the plea of forgery taken by the petitioner. 36. As to application filed u/s 340 CrPC alleging that the petiti .....

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Section 195 of IPC. For having R2 not mentioned in his application u/s 340 CrPC that the petitioner gave a statement on oath that earlier proceeding was withdrawn on the date CP was mentioned before this Court of Law, therefore, an observation of Presiding Officer cannot be deemed as statement given by the party on oath before Court of Law. Whenever Section 340 CPC is invoked, Courts will take every care to find out whether any statement is there from the party on oath which can be considered as .....

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f CLB on 18.8.2009, not upon a statement given by the petitioner. Therefore, I have not found any merit in the application filed u/s 340 CrPC. Hence this application is hereby dismissed. 37. The counsel of the Respondents relied upon a case in between K.R.S. Mani & Ors v. Anugraha Jewellers Ltd & Ors. [Comp Cas Vol 126 page 878 (Madras High Court) to say that if earlier proceeding on identical issues pending before civil court is withdrawn only on seeing the preliminary objection raised .....

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the petitioner withdrew suits on seeing the objection raised on maintainability by the adverse party, the petitioner conduct is said as he approached CLB with unclean hands. But in the given case, the petitioner had already moved application for withdrawal of civil suit on 11-8-2009, and then filed this CP on 12-8-2009, indeed moved this CP on 18-8-2009. That civil suit came for hearing on withdrawal of suit on 24-8-2009 and on the same day, that suit was dismissed as withdrawn. The only ground .....

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y after filing withdrawal application, not on the objection raised by the Respondents. 39. The counsel of the Respondents relied upon a case in between Jacob Cherian v. K.N. Cherian & Ors [Vol. 43 1973 (Madras High Court)] to say it would be abuse of process of the court to allow a person to drag to court the company and those in charge of affairs of the company by filing a petition u/s 397 &398 of the Act 1956 after withdrawing a petition on the same allegations. 40. It is true that it .....

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btain liberty before withdrawal of suit from civil court to approach CLB u/s 397 & 398 of the Act 1956 for it is a statutory right given to a member to avoid oppression and mismanagement against member or the company, which a civil court cannot grant, therefore I, in the backdrop of this factual history, safely conclude that withdrawal of suit without liberty will not make this CP non-maintainable. 41. The counsel of the Respondents relied upon a case in between Upadhyay & Co. v. State o .....

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ssue on the anvil of equity, at times though act is legal, still it may be held not right, at times though act is not in compliance of any provision of law, still it may be held right, it all depends on whether, by this act, any member or company put to prejudice or not. Moreover the reliefs that can be granted by CLB u/s 397 & 398 cannot be granted by Civil Court. May be for this reason alone, in M/s S.V.T Spinning Mills Pvt. Ltd. case supra, Honourable Madras High Court held that for initi .....

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therefore the reasoning given for distinguishing Upadhyay & Co. (supra) is applicable to this case also. The counsel of the Respondents also relied upon Pradip Kumar Sengupta & Ors v. Titan Engineering Co. Pvt. Ltd & Ors [(1998) 94 CLB 825] to say the same point raised in Upadhyay & Co. (supra). 43. For having the respondents failed to establish that this petition is not maintainable, on the allegations referred above, I hereby decide this issue against the respondents. Issue 2: .....

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al Estate, they in fact purchased two plots to construct apartments and sell them. They completed one project in the year 2006, thereafter it appears, differences arose between these two brothers, the result is the petitioner was shown as resigned from the company as director from 14.03.2007. The petitioner has submitted that he was looking after the construction work, his brother used to look after accounts of the company, whereby there was no occasion for him to go through the accounts of the .....

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it is nowhere shown the petitioner ceased to continue as director of the company. The petitioner filed a Board Resolution dated 10.04.2007, showing the petitioner also signed as a director, had he been ceased to continue as director from 14.03.2007, there could not have been any resolution on 10.04.2007, showing the petitioner as director of the company. To beat this argument, R2 produced another Board Resolution of the same day 10.04.2007, signed by R2 & R3 at Page No. 194 of the reply. Th .....

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not be believed for many reasons, one R2 has not brought it to the notice of RoC that the petitioner ceased to continue as director in the company. 45. The petitioner filed a resolution copy saying that R2 set up a resolution dated 10th April, 2007, signed by him, showing the petitioner also signed on the same resolution as director of the company, though the petitioner filed this Board resolution saying that it was signed by R2, he has not taken any steps to show that Board Resolution was not s .....

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me up with a pleading that he was shown as a director even on 10.04.2007, he set up another Board Resolution shown as signed by him and his wife. I have not taken the Hand Writing Expert opinion filed by the petitioner into consideration to say that R2 forged the signatures of the petitioner. R2 has not challenged the board resolution dated 10.04.2007 conferring power upon himself to sell the flats and receive cash, which is subsequent to the alleged letter of resignation of the petitioner dated .....

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ination that the petitioner resigned from the company by submitting a resignation letter dated 10.03.2007. I have drawn this inference independent of the Hand Writing Expert opinion filed by the petitioner, therefore, I hereby hold that alleged resignation letter used by the R2, to show petitioner resigned from the company as invalid. Issue 3 - Whether appointment of R3 as director of R-1 company is oppressive against the petitioner or not ? 46. On the allegation made by the petitioner that R3 h .....

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with 50% shareholding in the company. He has also given personal guarantees to take loan for the company. It is not said anywhere that this petitioner entered into an agreement with second respondent to take exit from the company by giving opportunity to second respondent to run it solely on his own. 48. A person who has 50% shareholding, when his guarantees are lying with the company, no prudent man will come out of the management allowing another 50% shareholder to run the company at the whim .....

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the petitioner withdrew ₹ 1,25,000/- from the account of the company as his salary on 3.3.2009. By that time he withdrew this money Bank had no information that R2 & R3 alone continuing as directors of the company. Therefore Bank had not raised any objection to the petitioner withdrawing this money from the Bank. That means, no resolution copy was given to the Bank saying that R2's wife was appointed on the consent of the petitioner. This has come to the light of the petitioner onl .....

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the petitioner passed a resolution appointing R3 as director in the company, what prevented him from filing Form 32 before ROC until the petitioner had approached the Bank for withdrawal of ₹ 1,25,000/- from the bank. The explanation given by R2 saying they could not file Form 32 because DIN number has not come to the directors, is not believable, therefore, appointing R3, who is not a shareholder in the company as director by shunting the petitioner out of the company, is oppressive and p .....

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te of alleged appointment of R3 as director, and on seeing the Form 32 filed only on 25-3-2009, that is only after the petitoner requested the Bank to change the mode of operation of the Account, this issue is therefore decided against the respondents holding that appointment of R3 as director is oppressive against the petitioner, hence declared it invalid. Issue 4: Whether increased of authorized capital on 28.03.2008 is oppressive against the petitioner or not ? 49. As to increase of authorize .....

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but if the delay is inordinate and such delay is not properly explained to the satisfaction of this Bench, and if such delayed filings are aimed at causing prejudice to any member of the company, such delay cannot be construed as happened in normal course. Here also Form-5 was filed one year after alleged increase of capital. For the relations in between the petitioner and respondents being strained from 2007 itself, it cannot be said that the petitioner agreed to allow R2 to change the sharehol .....

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ed two other Bank accounts in the name of the company and continuing Bank operations over the funds of the company in those two Banks without notice to the petitioner, an inference could be drawn that the respondents opened those accounts with a mala fide intention to deal with the affairs of the company behind the back of the petitioner. Since the siphoning of the funds is not proved, I could not say that R2 has siphoned the funds of the company at this juncture. 1 also cannot say that R2 opene .....

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[(2000) Vol. 100 CLB 117] to say that when no particulars are given in support of allegation siphoning the funds of the company, then obviously no relief can be granted, as to this principle, I, on principle, agree no relief can be granted when a petition has come without any details and proof over the allegations of siphoning. Issue 6: To what relief ? 52. Since R2 has not been dealing with the affairs of the company keeping the petitioner in dark for a long time, I believe that an impartial a .....

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