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2016 (3) TMI 882 - COMPANY LAW BOARD KOLKATA

2016 (3) TMI 882 - COMPANY LAW BOARD KOLKATA - TMI - Oppression and mismanagement - Held that:- It is crystal clear that the Company Petition was filed by the Petitioners/Non-Applicants based on the allegations of acts of oppression and mismanagement on the part of the Respondents and this implies that the Respondent Nos.2 & 3 were not having control over the affairs of the Company. This is further confirmed by the fact that in any annual return, the Respondent Nos.2 & 3 were not shown as Promot .....

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tion of the aforesaid restraint Order so as to facilitate the filing of the annual returns and financial statements by holding AGM to meet the statutory compliances. On the contrary, the Applicant (Respondent No.3) and Petitioner No. 1, without making some Company Application in the pending legal proceedings since 2010 before this Hon'ble Board seeking directions/reliefs as to filing of the financial statements and invocation of Sections 164 and 167 of the Companies Act, 2013, have claimed to be .....

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for three years commencing from 01.04.2014. In view of this legal position, the erstwhile Directors continue to be validly and legally appointed directors and hence, the said Board of Directors is competent to appoint the Advocate by following the provisions of law. As such, in the interest of justice, the prayers made in the instant Company Application are hereby disallowed. - C.A. No.684/2015 in C.P. No,509/2010 - Dated:- 2-11-2015 - Mr. Dhan Raj, J. For The Petitioner : Mr. S.N. Mookherjee, S .....

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Sections 397, 398, 399, 402, 403 & 406 of the Companies Act, 1956, alleging the acts of oppression and mismanagement in the affairs of the Respondent Company, which is pending for adjudication. In the meantime, the Advocate for the Respondent No. 1 Company (Applicant herein) moved the Company Application bearing C.A. No.684/2015 signed by Smt. Vandana Agrawal (the Respondent No.3 herein), Director of the Respondent No. 1 Company, praying for an Order of injunction restraining and/or declarin .....

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ial statements of the Respondent No. 1 Company and its subsidiary Companies for the years 2010-11, 2011-12 and 2012-13. Subsequently, on or about 06.02.2015, a Board Meeting of the Respondent No. 1 Company was held wherein it was recorded that the new Board has been constituted and the required number of Directors were appointed in the Respondent No. 1 Company in terms of Section 167(3) of the said Act. The Respondent No. 1 Company/Applicant Advocate emphasised that any purported appointment of .....

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ing W.P. No.3296/2015 before the Hon'ble Delhi High Court praying for direction upon the Ministry of Corporate Affairs (MCA) to take steps to upload the digital signature of the new Directors of the Respondent No. 1 Company, viz., Mr. Haj Shekhar Agrawal, Mrs, Vandana Agrawal and Mr. Yudhisther Kumar Gauba, on the Portal of the MCA within a time frame. Thereafter, during the course of hearing of the aforesaid Writ Petition on 18.05.2015, some Advocates made an endeavour to represent the Resp .....

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on the letter head of the Respondent No. 1 Company by Mr. Partha Ghosh (Petitioner No. 1), wherefrom it emerged that Mr. Partha Ghosh continues to represent himself as the Managing Director of the Respondent No. 1 Company and also, an admission on his part that "it is a matter of record that the Company has not filed the relevant returns and financial statements" including a declaration that "the Company had taken a conscious decision of not filing of the annual returns or the fi .....

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aulting Directors stood vacated on coming into force of these provisions w.e.f, 01.04.2014. Further, the reasons given by the Petitioner No. 1 (Mr. Partha Ghosh) in the said letter for not filing of annual accounts that the Junior Division of Ld. Alipore Court, Kolkata, vide Order dated 15.12.2010, injuncted the Respondent No. 1 Company from holding any General Meeting and hence, from approving the annual accounts, cannot be a ground for not filing annual accounts, per se, meaning that the Respo .....

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pore Court, without making the other shareholders as parties to the said Suit and also, by taking no steps to pursue the appeal filed by Mr. Partha Ghosh as Managing Director of the Respondent No. 1 Company before the District Court against the injunction. It has been highlighted that the Respondent No. 1 Company had made an application on 03-09.2010 to the Registrar of Companies (ROC), West Bengal, for extension of time of the date of the AGM which was rejected by the ROC on 09-09-2010 and cons .....

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he AGM of the Respondent No. 1 Company not being held, the Petitioner No. 1 had filed the financial statement for the year ended 31.03.2010, along with the Statement of facts and reasons, clearly acknowledging the Respondent No. 1 Company's responsibility to file the financial statement as required under Section 220(3) of the Companies Act, 1956, Therefore, there remains no iota of doubt that the Petitioner No. 1 (Mr. Partha Ghosh) along with other previous Directors vacated their offices an .....

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plication is misconceived and contains false statements and/or averments which have been made without basis and purportedly based on an erroneous factual and legal matrix and also, an abuse of the process of law. Further, the contention of the Applicant Advocate that the Advocate-on-record and/or Counsel appearing on behalf of the Respondent Nos.2 & 3 have been validly authorized to represent the Respondent No. 1 Company, is baseless and misconceived in view of the fact that the purported ap .....

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alified under Section 167(1) read with Section 164(2) of the Companies Act, 2013 for non-filing of the Annual Returns and/or financial statements before the ROC for the financial years 2010-11, 2011-12 & 2012-13, is false and baseless. In fact, the existing Board of Directors has been unable to file the Annual Returns and/or financial statements owing to an Order of the Court preventing the Respondent No. 1 Company from holding the Annual General Meetings. 2.1. Further, in a Writ Petition be .....

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pplication on behalf of the Respondent No. 1 Company. Also, such Writ Petition was moved without any notice or intimation to the Petitioners and also, without impleading the Petitioners or the Respondent No.1 Company, as parties, The Respondent Nos.2 & 3 had approached the Hon'ble High Court at Delhi in an attempt to stealthy validate their wrongful appointment as Directors of the Respondent No. 1 Company, despite the fact that all disputes concerning the Respondent No. 1 Company are pen .....

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lds the appointment of the Respondent Nos.2 & 3 in the main Company Petition as the Directors of the Respondent No. 1 Company, which is in itself a disputed question of fact and law. 3. In the rejoinder-affidavit, the Applicant Advocate has averred that the reply affidavit contains admissions, statements and claims which together constitute acts punishable under Section 167(2) of the Companies Act, 2013, since the said provision states "if a person functions as a Director even when he k .....

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s been contended that the operative portion of the said Order has been omitted from the Annexure attached to the said affidavit, which, inter alia, states "Accordingly, the defendants are hereby restrained, by an order of ad-interim injunction from holding any general meetings of the Respondent Companies till 14.01,2011." Therefore, it is evident that the said Order, which was obtained by perpetrating fraud on the Learned Court, does not in any manner make any reference to any restrict .....

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th Section 220(2) of the Companies Act, 1956. Therefore, such reference to the ROC clearly shows that the Petitioner No. 1 was aware of and has appropriately complied with the statutory requirement of Section 220(2) of the Act for the financial year 2009-10 and hence, now the Petitioners/Non-Applicants cannot take shelter of the Order of Injunction dated 15.12.2010 for the failure to file the Financial Statements for the financial years 2010-11, 2011-12 and 2012-13 and also, non-compliance with .....

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ion being C.A, No.683/2013 connected with C-P. No.859/2010, as under :- 4.1 The instant Company Application has been made in pursuance of the authority conferred on the Applicants by way of a Board Resolution, passed in a purported Board Meeting held on 06.02.2015 to derive the competence to file the instant Application. Further, upon vacation of the office by the Board of Directors of a Company under Section 164 of the Act, an interim Board of Directors can only be appointed under the terms of .....

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e nor are persons in accordance with whose advice/direction the Board of Directors of the Company is accustomed to act in addition, the Respondent Nos.2 & 3 do not have any right to appoint majority of the Directors or to control the management and take decision in the affairs of the Company, either by virtue of their shareholding or management rights or shareholders agreement or voting agreements or in any manner whatsoever. Accordingly, the Respondent Nos.2 & 3 do not exercise control .....

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r filing of unapproved balance sheet is of limited relevance in so far as in absence of suitable machinery to prepare .financial documents, the question of even unapproved balance sheet and/or other financial documents does not and cannot arise. Further, the provision for filing of unapproved balance sheet becomes relevant only when a Company having appointed statutory auditors in its last AGM and having prepared the audited accounts, has been prevented from tabling the same in the AGM by virtue .....

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ncial statements of the Company for three consecutive financial years post coming into effect of the said provision. Further, the existence of a pari materia provision Section 274 of the Companies Act, 1956 is of no relevance since the consequences of the disqualification under Section 274 of the Companies Act, 1956 as provided for in Section 283 of the Companies Act, 1956 are distinct from the consequences of the disqualification under Section 164 of the Companies Act, 2013, as provided in Sect .....

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3 instituted a Writ Petition being W.P. (C) No. 3296/7015, wherein the Applicants admitted that so long as their digital signatures are not uploaded on the MCA Portal, the purported new Board of Directors would remain "totally incapacitated to take any corporate action". However, the said writ petition has been dismissed by the Hon'ble High Court at Delhi, by Order dated 14.09.2015 without any reliefs and hence, the Respondent Nos.2 & 3 are incapable of asserting control over .....

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ectors. Further, the Court Order dated 15.12.2010 only restrained the Respondent No. 1 Company by an ad-interim injunction on holding the Annual General Meeting till 14.01.2011, but in no way, the said Order restrained the Respondent No. 1 Company in any manner whatsoever to file its financial statements. In addition, the Petitioners/Non-Applicants cannot take the shelter of the aforesaid Order of injunction for its deliberate failure to file the financial statements for the years 2010-11, 2011- .....

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es the fact that the Petitioner No. 1 understood the gravity of the situation and was aware of the fact that the Court Order never restrained the filing of the financial statements and/or Annual Returns of the Respondent No. 1 Company and its subsidiaries. 5.1 It has been further argued that in the Shareholders' Agreement, the Respondent Nos.2 & 3, viz,, Mr. Raj Shekhar Agrawal and Mrs. Vandana Agrawal, are named as Promoters of the Respondent No. 1 Company and as such, they have been gi .....

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mp; 3 satisfy the test of Promoters as per the stated criteria in the said Act and the directors of the Respondent No. 1 Company were rightly appointed in terms of Section 167(3) of the Act. 6. Having considered the Company Application, supplementary Affidavit reply, rejoinder and the arguments (oral and written) of the Advocates of the rival parties, it is observed that the Respondent No.3, viz., Mrs. Vandana Agrawal has moved the present C.A. No.684/2015 on behalf of the Respondent No. 1 Compa .....

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the Respondent Nos.2 & 3 herein, the Advocates claiming to appear for the Respondent No. 1 Company has read out to the Hon'ble Court a letter dated 10.04.2015 signed by the Petitioner No. 1 (Mr. Partha Ghosh), wherefrom it emerged that Mr, Partha Ghosh continues to represent himself as the Managing Director of the Respondent No. 1 Company and also, an admission on his part that the Company has not filed the relevant annual returns and financial statements. However, on or about 06.02.2015 .....

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f the Respondent No. 1 Company is illegal and untenable as no valid reconstitution of the Board of Directors of the Respondent No. 1 Company can take place in view of the fact that the existing management of Company is already in power and discharging its duties. Moreover, the existing Board of Directors has been unable to file the Annual Returns and/or financial statements owing to an Order of the Court preventing the Respondent No. 1 Company from holding the Annual General Meetings. However, t .....

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of injunction dated 1512,2010 on holding of the Annual General Meeting, the Petitioner No. 1 has made a specific reference on 19,01.2011 to the ROC explaining the need to file the Annual Accounts in accordance with Section 220(2) of the Companies Act, 1956 and thus, the statutory requirement was appropriately complied with for the financial year 2009-10. As such, it has been vehemently argued that now the Petitioner No. cannot take shelter of the Order of Injunction dated 15-12.2010 for the fai .....

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ile Section 220 of the Companies Act, 1956 providing for filing of unapproved balance sheet is of limited relevance in so far as in absence of suitable machinery to prepare financial documents, the question of even unapproved balance sheet and/or other financial documents does not and cannot arise. As regards the financial statement for the year 2009-10, it has been stated that the said accounts were already duly prepared and audited, but could not be tabled before the members in the AGM and hen .....

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ming into effect of the said provision. 6.3 The Applicant Advocate has, however, contended that since the erstwhile directors have vacated their offices due to the default in filing the financial statements of the Respondent No. 1 Company and its subsidiary Companies for the financial years 2010-11, 2011-12 & 2012-13 in terms of Section 167(1) of the Companies Act, 2013, no new Advocate-on-record or Counsel on behalf of the Respondent No. 1 Company could be appointed under the authorization .....

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ing or shareholders agreement and as a shareholder, shall have control over the affairs of the Company and thus, by all means, the Respondent Nos.2 & 3 satisfy the test of Promoters and hence, the directors of the Respondent No. 1 Company were rightly appointed in terms of Section 167(3) of the Companies Act, 2013. In this context, the Advocate for the Petitioners/Non-Applicants has extended the argument that upon vacation of the office by the Board of Directors of a Company by reasons of in .....

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nt. Not only this, the Respondent Nos.2 & 3 are not identified as Promoters in any Prospectus nor are identified as such in the Annual Return of the Company. Furthermore, the Respondent Nos.2 & 3 do not have control over the affairs of the Company, either directly or indirectly, whether as a shareholder, Director or otherwise nor are persons in accordance with whose advice/direction the Board of Directors of the Company is accustomed to act and therefore, the Respondent Nos.2 & 3 do .....

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oard of Directors would remain totally incapacitated to take any corporate action and the said writ petition has been dismissed by the Hon'ble High Court at Delhi, by an Order dated 14.09.2015 without any reliefs. 6.4 Under the aforesaid facts and circumstances, it is crystal clear that the Company Petition being C.P. No.509/2010 was filed by the Petitioners/Non-Applicants based on the allegations of acts of oppression and mismanagement on the part of the Respondents and this implies that th .....

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