9911796707
TMI Blog2017 (9) TMI 1331X X X X Extracts X X X X X X X X Extracts X X X X ..... Company was produced and marked as Annexure-A/1. The authorised share capital of the Company is Rs. 1,00,000/- divided into 1000 equity shares of Rs. 100/- each. The main objects of the Company is to manufacture, import, export, purchase and sell LPG stoves and other appliances in all kinds of varieties and forms. The petitioner has stated that he is a Director of the Respondent No.1 Company and also a shareholder holding 10 equity shares of the Respondent No.1 Company. The petitioner and Respondent No.2 are the only shareholders of the Company and they were the only two Directors of the 1st Respondent Company till 20.05.2013, when the Respondent No.2 illegally and without following any procedure contemplated under the Companies Act, 1956, appointed five persons as the Additional Directors of the Company. It is alleged that Respondent No.2, is the Managing Director of the Company and the Registered Office of the Company is situated at the residence of Respondent No.2. The Respondent No.2 holds 990 equity shares of the Company. It is alleged that Respondent No.2 has transferred a part of his shareholding illegally to his wife. It is stated that prior to 07.12.1993, the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 2010 and July, 2013. The learned counsel for petitioner would state that he has made payments towards cost/value of the industrial shed allotted by KSSIDC and also towards cost/value of adjoining open area/land in front of the industrial shed on different occasions for different purposes. The petitioner would state that he has also made payments towards deposit to the Electricity Board for sanction of power by way of Bank Transfer, etc. The petitioner would also state that he has funded a sum of Rs. 8,28,000/- by way of Cheques for the Company through Respondent No.2 to deposit in the City Civil Court, Bangalore, to get the sale deed of the Industrial shed allotted by KSSIDC registered in the name of the Company. Since, the entire records, books of account and registered of the company are in the possession of Respondent No.2 as the registered office of the 1st respondent Company is in the same address as his residence. The petitioner is neither able to look into the said records of the Company nor has been provided by Respondent No.2 for inspection. The petitioner, in good faith was expecting the Respondent No.2 to transfer 95% shares and to streamline the affairs of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /6. The petitioner contended that doubting/suspecting the acts of the Respondent No.2, the petitioner, after inspecting the records of the 1st Respondent Company with the ROC, he has obtained copies of the documents submitted by Respondent No.2 pertaining to the illegal appointment of additional directors and he was also shocked to know that his signature has been forged in the document submitted. The petitioner alleged that in the light of the developments, he has issued notices to the KSSIDC informing them of the differences between him and Respondent No.2 and requested them not to register the absolute sale deed in respect of the industrial land and building allotted to the Company. The petitioner would state that after the issuance of legal notice and the reply received from Respondent No.2, the Respondent No.2 approached the petitioner for an amicable settlement and pursuant to the same, the petitioner had exchanged a draft Memorandum of Understanding, according to which 49% shareholding would be allotted to the petitioner and 51% to the Respondent No.2 and after the said shareholdings are registered, the company to approach the KSSIDC for execution of Absolute Sale Deed pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aware that the he holds only 10 shares constituting only 1% of the total shareholding and the Respondent No.2 holds the rest of the shares, i.e., 990 equity shares or 99% shareholding. The petitioner is also aware that the Respondent No.2 has transferred 450 shares in favour of his wife retaining the balance 540 shares with himself. The Respondents would state that at no time, the number of Directors of the Company was reduced below 2. On 07.12.1993, at the time when the petitioner was appointed as Director, the two Directors who had only 5 shares each had resigned and hence their shareholdings were transferred to the petitioner to enable the petitioner to hold the qualification shares and become a Director as per Article 19 of the Articles of Association of the Company. The respondents have denied that the 1st Respondent Company was desperately in need of one more Director and were looking for one more member and a Director to keep the legal minimum and also for working capital of the Company. The company was not at all functioning and no business activities were taking place. Hence, there was no need for any member as Director and the working capital for the company. The factory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents stated that the petitioner prepares the MoU himself, setting out terms of settlement (Annexures-A/7 and A/8). This shows his attempts to pressurise the respondents to settle his alleged claims. The respondents also state that sec. 260 of Companies Act, 1956, contemplates that the additional Directors cease to hold office as Directors unless reappointed at the next Annual general Meeting. All the Additional Directors excluding Smt. Geetha Kumari ceased to be Directors as the other Directors did hold the qualification shares and therefore, they could not be reappointed. A copy of the resolution of the AGM is annexed as Annexure-R/3. The petitioner has filed rejoinder along with annexures. The averments in the rejoinder are nothing but repetition of the facts mentioned in the petition. The petitioner is the Director-cum-shareholder of the 1st Respondent Company. He has filed this petition under section 237 of Companies Act, 1956 with a simple prayer to order investigation into the affairs of 1st Respondent Company. Admittedly, he is having 1% of the total shareholding of Respondent No.1 Company. The remaining 99% of the shareholding is held by Respondent No.2. In other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Companies Act, 1956, corresponding to Section 213 of Companies Act, 2013. The contention of the petitioner that he was promised allotment of 95% of the shareholding to become shareholder and Director in the Company provided he had to invest some amount in the Company. Accepting the offer, the petitioner became member and Director of the Company by taking 1% shares. His contention is that there was dispute between the Managing Director and his brother-in-law V.J. Ramesh in respect of the management of Respondent No.1 Company and that Respondent No.2 had promised to increase his shareholding after the final settlement of the dispute. It is the case of the petitioner that with the above understanding, he became the Member and Director of the Company. He was inducted as Director on 07.12.1993 and the minimum share qualification to become a Director as per Article 19 of the Articles of Association of the Company is 10 equity shares. It is his case that he has invested from time to time an amount of Rs. 43,09,879/- and that Respondent No.2 had invested only Rs. 1,45,046/-. The burden is now on the petitioner to establish the ground on which the Tribunal can order investigation under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also seeking a similar relief for ordering investigation into the affairs of the Company. This relief is also prayed in the civil Suit. The plaint copy in OS No. 1154/2014 is filed and it is marked as Annexure-A/8. It is therefore, necessary to refer to prayer No.1. The prayer No.1 is with regard to the auditing of the books of account by the Chartered Accountant. Here in this petition, the petitioner is also praying for same relief of investigation into the affairs of the Company. The petitioner had not made any whisper in the petition that the business of the Company was being carried out with the intent to defraud its creditors, members or any other persons or it was being done for any fraudulent or unlawful purpose. The petitioner, the Respondent No.2 and his wife are the only members of the Company. It is the specific case of the Respondents that the Company is not doing any business. There was some litigation between Respondent No.2 and his brother-in-law. A shed was allotted by KSSIDC and there was default in payment of instalments. It is the case of Respondent No.2 that KSSIDC officials have locked the premises and only after the payment of money, the locks were opened. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the respondents are able to establish that the business of Chrome Electroplating is being carried out in the 1st Respondent Company premises. To this, the Respondent No.2 has relied on a letter dated 22.09.2015, issued by the KSPCB to Respondent No.2. The Respondent No.2 has filed an application with the KSPCB for further information. The KSPCB has given the necessary information giving closure intimation for running Chrome Electroplating activity. The closure notice dated 18.08.2015 is filed. The Inspection Report of the Environmental Officers is also filed. The contention of the learned counsel for Respondent No.2 is that a show-cause notice was received from KSPCB as the premises was illegally been utilized for Electroplating industry. On his request, the KSPCB has furnished the information under the RTI Act and the same is filed. We have seen the report furnished by the KSPCB which goes to show that Respondent No.1 Company premises was being used for Chrome Electroplating business and the permission from the KSPCB was not obtained. It is evident that the petitioner is running his Electroplating business in the Respondent No.1 Company premises without any authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent No.2 is that there is a qualification for a person to become Director, i.e., he/she must possess a minimum of 10 equity shares as per Article 19 of the Articles of Association of the Company. Those who are appointed as Additional Directors though, initially not holding the requisite shares, but, they can acquire within 2 months. It is the case of Respondent No.2 that Mrs. Anju Haridas and others have not acquired the shares to qualify as Director and therefore, they ceased to be Directors by operation of law. It is true that Article 19 of Articles of Association provides for requisite share qualification for a person to become Director. Those who fail to acquire the requisite shareholding within two months, they cease to be the Directors. Admittedly, Mrs. Anju Haridas did not secure the requisite shares, whereas, in the case of Smt. Geetha Kumari, Respondent No.2 has transferred the shares. She has acquired the shareholding within the time prescribed. So, the contention of Respondent No.2 can be accepted that the petitioner gave consent for appointment of Smt. Geetha Kumari as Director on quid pro quo basis. Since Mrs. Anju Haridas failed to get the requisite shareholding, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the petitioner is that he had no access to the books of account of the Company as the Registered Office of the Company is located in the house of Respondent No.2. In this connection, the petitioner has moved the erstwhile Company Law Board for a direction for production of books. It is contended that the Respondent No.2 has already produced the attendance register, minutes book for the Board meeting and shareholders meeting for the year 2013. The contention of the learned counsel for Respondents is that the Company is not at all doing any business. The financial statements are being filed for the last 20 years which were all signed by the petitioner. Thus, the petitioner was aware that no business activity is carried out by the Company. It is not in dispute that the Company is not doing any business and the Company is filing the balance sheet showing "Nil" business. Where is the question of fabrication of the books of account of the Company when it is not doing any business. The Company is possessing one big shed in the land allotted by KSSIDC. It is the case of Respondent No.2 that the petitioner is unauthorisedly doing the business of manufacturing paper cups and late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequence. The petitioner has alleged that he has spent nearly Rs. 43,09,879/-. It is his contention that he has paid Rs. 3,24,700/- to KSSIDC and Rs. 4,30,000/- to creditors and Rs. 1,20,240 towards electricity connection and Rs. 88,122/- to electrical panel board for getting 65HP connection. It is the contention of Respondent No.2 that the petitioner might have incurred this expenditure for running his own business of electroplating industry, manufacture of paper cups, etc., and he was not authorised to do such business in the Company. It is very clear from the report of KSPCB that Electroplating business was being done in the premises. It is not the object of the Company. It goes without saying that the expenditure incurred for obtaining power connection was done only with a view to do his unauthorised business in the Company premises. The Respondents cannot be held responsible for the same. Thus, the petitioner had utterly failed to establish any of the clauses of Section 237(b) of Companies Act, 1956 corresponding to Section 213 of Companies Act, 2013 to order for any investigation into the affairs of the Company as no business is carried out by the Company. Thus, the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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