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2016 (6) TMI 138 - KARNATAKA HIGH COURT

2016 (6) TMI 138 - KARNATAKA HIGH COURT - TMI - Appointment of auditor - Held that:- There is no material produced on record to contend that the appellant herein-original respondent No.3 and his group are having no confidence in the statutory auditor. No material is produced to show that the statutory auditor was appointed by the original petitioners No.1 and 2 still act or that the auditor is acting as per the directions of petitioners No.1 and 2. However, at the same time confidence in the enq .....

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oners No.1 and 2 and respondent No.3 will be the joint signatories of the bank account of respondent No.1-Company and such shall be required for incurring expenses on behalf of the Company, excluding the routine expenses for payment of salary of the staff and for payment of any statutory dues of the Company. In case of routine expenses such as payment of salary of the staff and statutory dues, signature of any of the two persons from amongst the aforesaid three shall be sufficient for the operat .....

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nies shall assign the work to such auditor, failing which, within a period of two weeks therefrom the Registrar of Companies shall exercise his power for nominating the auditor as referred to herein above.

It is observed that, if within a period of two weeks, original petitioners No.1 and 2 as well as original respondent No.3 give a common name of any auditor, the Registrar of Companies shall assign the work to such auditor, failing which, within a period of two weeks therefrom the Re .....

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sed of the company petition. 2. We have heard Mr.Perikal K. Arjun, learned counsel for the appellants and Mr.Vivek Holla, learned counsel appearing for the main contesting party-respondents No.2 and 3 i.e., the original petitioners No.1 and 2 who are appearing on caveat. 3. Learned counsel for the appellants contended that original petitioner No.1 had resigned and thereafter a meeting was held and various decisions were taken including that of permanent directorship and affirmative vote. The all .....

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1% shareholding and appellant No.2 is having 33% shareholding then also the CLB ought not to have permitted original petitioners No.1 and 2 and respondent No.3 to sign and issue the cheque(s) with signature of two for operation of the Bank accounts of respondent No.1-Company. He submitted that if such a direction is allowed to operate the original petitioners No.1 and 2 will manage the affairs of the company as per their desire and there will be complete exclusion in participation of the group r .....

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auditor other than the statutory auditor. He submitted that if the learned counsel appearing on caveat for original petitioners No.1 and 2 agrees to a name of a chartered accountant, such chartered accountant can be entrusted with the audit work. He submitted that the Court may issue appropriate direction to any other authority to give such work of the auditor for examination, but in any case, he should not be the statutory auditor of the Company. 4. Whereas Mr.Vivek Holla, learned counsel appe .....

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the administration. However, he fairly submitted that if this Court is inclined to alter the mode of operation, limiting to routine expenses of salary of the staff and statutory dues and for other such operations with regard to the requirement made for the signature of original petitioners No.1 an d 2 as well as of original respondent No.3, his client would have no objection. On the aspect of appointment of auditor for examination of the allegation of misappropriation of money, he has submitted .....

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aving 33% shareholding. If a question is considered in the context of majority and minority group, one can say that the original petitioners No.1 and 2 were having majority as against original respondents No.2 and 3 were in a minority. The discussion made by the CLB shows that though respondent Nos.2 and 3 were in minority, the group of original petitioners No.1 and 2 who were in majority were oppressed for being compelled to sign the resignation and also compelled to sign other resolutions of t .....

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nor it can be said to be perverse exercise of its discretion. At this stage, we may reiterate that the CLB has issued the following directions: (a) The appointment of the Respondents No.4 to 10 was bad in law and hence, declared null and void; (b) The Resolutions for the removal/resignation of the Petitioner No.1 and Respondents No.2 & 3 were bad in law and the same are declared null and void and thus , the Petitioners No.1 & 2 and Respondent No.3 each having 33% shareholding to act as w .....

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the Respondent No.1 Company so that any two of them may sign and issue the cheque(s); (f) The Petitioners as well as the Respondents will desi st from writing letters to the Banks and other authoriti es against the interest of the company and hence, will co- operate with each other for the proper and efficient working of the Respondent Company; (g) The Respondent No.1 Company will make necessary correction or alteration in its statutory records and returns filed with Registrar of Companies withi .....

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that of a Civil Court. If one is having a majority in the shareholding pattern etc., he would not abandon the right in favour of the minority, nor would he create a situation which would result into putting himself into a minority position. When one is in a majority, he, in normal circumstances, would not agree for the amendment in the Articles/Resolutions for prejudicing the interest of the majority. By applying reasonable prudence, in our view, the CLB could have issued appropriate directions. .....

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.(e) is concerned. It is true that by direction No.(e) situation may be created for operation of the bank account by original petitioners No.1 and 2 only and respondent No.3-the appellant herein may be kept away from the Management in spite of the fact that he is having 33% shareholding but at the same time, original respondent No.3 cannot be permitted to create a situation of statement in paying the routine expenses for the operation of the Company. In the circumstances, we find that direction .....

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account shall not be made for incurring such other expenses. 7. As such, there is no material produced on record to contend that the appellant herein-original respondent No.3 and his group are having no confidence in the statutory auditor. No material is produced to show that the statutory auditor was appointed by the original petitioners No.1 and 2 still act or that the auditor is acting as per the directions of petitioners No.1 and 2. However, at the same time confidence in the enquiry for ex .....

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