TMI Blog2005 (6) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... nclosing photocopies of the certificates of posting about which the learned counsel for the petitioners has brought out various infirmities, the respondents have not brought on record any other document as indicated earlier. Therefore, considering all the facts, I declare that the 1st and 3rd petitioners have not ceased to be directors in terms of Section 283(1)(g) of the Act and they continue to be the directors on the Board of Limrose. As far as induction of the respondents 4 and 5 as directors is concerned, Even assuming that the authorised capital was in fact increased in an EOGM actually held on 14th August, 2000, there is nothing on record justifying allotment of further shares. It is a settled law, as has been recently reiterated by the Supreme Court, in Dale Carrington Investment Pvt. Ltd. v. P.K. Prathapan [ 2004 (9) TMI 385 - SUPREME COURT] and Sangram Sinh P. Gaekwad v. Shanta Devi P. Gaekwad [ 2005 (1) TMI 409 - SUPREME COURT] that any allotment of further shares should be for a proper purpose, bonafide and in the interest of the company and cannot be for the purpose of creating a new majority. In the reply filed by the company, no justification has been given for allot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the 3 units of the family. This MOU elaborately deals with the companies and assets of the family. It also contains an arbitration clause enabling the parties to submit to the arbitration of Shri Justice A.M. Ahmedi, former Chief Justice of the Supreme Court of India in case of any difference of opinion on any matter covered in the MOU. Differences having arisen, the arbitration proceeding was initiated which, it is learnt has been stayed by the High court. 2. In this petition, the allegations of the petitioners are that the 2nd respondent being the Chairman of Limrose had made unilateral changes in the structure of Limrose including its directorship and shareholding pattern by forging documents, fabricating the minutes books and by filing fake returns before the Registrar of Companies (ROC). By these acts, according to the petitioners, the 2nd respondent has gained control of Limrose both in terms of shareholding and also on the Board and these acts are oppressive to the petitioners. 3. Shri Choudhary, Sr. Advocate appearing for the petitioners submitted: Originally the petitioners' group collectively held 67% shares in the company while the 2nd respondent group held 33%. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn for the year ended 31.3.2000 which has been signed by one of the petitioner directors, and filed on 21.11.2000, both of them have been shown as directors. This Annual Return also shows the authorized capital as ₹ 1 crore. Even the minutes of the board meeting on 1st Dec. 2000 signed by the 2nd respondent indicates the attendance of the 1st and 2nd petitioners. If according to the 2nd respondent, these two directors had attended a board meeting in Dec. 2000, he cannot claim that the)' had ceased to be directors effective from August, 2000. In terms of Section 164 of the Act, the Annual Return is the prima facie evidence of its contents. Therefore, having shown the 1st and 2nd petitioners as directors in the Annual Report, the 2nd respondent cannot rely on the certificates of postings and Form No. 32. The company being a family company in the nature of quasi partnership, the petitioners have legitimate expectation to continue as directors and could not have been declared to have ceased to be directors on the false ground of not attending requisite number of meetings. As far as increase in the authorized capital is concerned, the same was purportedly approved in an EOGM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercises equitable jurisdiction, once the status quo is restored in respect of Limrose, the petitioners should be directed to entrust the management of Palampur unit to the 2nd respondent. As a waiter of fact, if the petitioners agree for this, the 2nd respondent is even prepared to go for a global settlement of all the disputes. 5. Shri Makkar appearing for the petitioners, in rejoinder, submitted that Palampur unit is under the control of Atlas Cycle Company Ltd. and this company is not before the CLB. Further the Board of Directors of Atlas Cycle Co. Ltd. removed the 2nd respondent as a director and since the petitioners do not represent the Board of Atlas, they cannot make any commitment as sought for by learned counsel for the respondents. As a matter of feet, the learned arbitrator himself in his order dated 4.4.2001 declined to grant this prayer on the ground that the Board of Atlas was not before him. Further the petitioners holding only 24% shares in Atlas cannot give any commitment on behalf of Atlas. 6. I have considered the pleadings and arguments of the counsel. During the proceedings, the respondents filed an application CA 194 of 2004 under Section 8 of the Arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent has been annexed with the petition. In this meeting, the Board if found to have approved the Profit Loss Account for the year ended 31st March, 2000 and the Balance Sheet as on that date and had also resolved payment of 20% dividend. It is also seen that the Board resolved convening the AGM for the year on 30th September. 2000. Further, the petitioners have also filed a copy of the minutes signed by the 2nd respondent of a Board Meeting held on 1st December, 2000 showing the presence of the 1st and 3rd petitioners. There is no denial by the respondents of the veracity of these minutes. In addition, the Annual Report filed with the Registrar of Companies as on 30th September, 2000 indicates that the 1st and 3rd petitioners were in office on that date and this Annual Return has been signed by the 2nd respondent and the 1st petitioner. Thus, the contemporaneous records signed by the 2nd respondent himself indicate that the 1st and 3rd petitioners were directors on 30th September, 2000 and as such they could not have been declared to have ceased as directors on 14.8.2000 and any record contrary to the contents of the Annual Return as on 30.9.2000 has no validity especially since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly I do so. 10. In view of my findings that the 1st and 3rd petitioners could not have be held to have ceased to be directors and that the allotment of shares was made solely with a view to create a new majority, I direct the restoration of status quo as existed before 14th August 2000 in respect of the Board of Directors as well as authorized and paid up capital of the company. These directions will take immediate effect and the records of the company shall be suitably rectified. All returns/documents filed by the company with the ROC in respect of the affairs of the company that are contradictory to the contents of the Annual Return as on 30.9.2000 are declared as null and void and under the authority of this Order, the ROC will ignore/reject all such returns/documents. 11. The learned counsel for the respondents, Shri Ganesh, urged that the 2nd respondent was willing to restore the status quo provided his position in Palanpur Unit is also restored. As rightly pointed out by the learned counsel for the petitioners, such a direction is beyond the scope of the petition and cannot be acceded to. 12. The petition is disposed of in the above terms with no order as to cost. - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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