TMI Blog2017 (10) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ting rather than e-mail. From the above, the intention of Respondents is evident that they wanted to keep the petitioner in dark so that they can take drastic action against him. The petitioner being 50% shareholder of the 1st Respondent Company and also a promoter, his removal as Director of the Company on the ground of causing loss to the Company is totally unsustainable. It is clear that the said allegation was invented with a view to take control of the Company by Respondents No.2 and 3 by removing the petitioner. Thus, all these actions were initiated behind the back of the petitioner. We are of the opinion that the petitioner has made out a case of oppression and mismanagement against Respondents No.2 and 3 and consequently, we pass the following reliefs against Respondents No. 2 and 3 by allowing the petition. (1) By declaring that the meeting held on 24.08.2010 by which Respondent No.3 was appointed as Additional Director as illegal and is therefore, his appointment is set aside; (2) By declaring that the removal of petitioner as Director of the 1st respondent company in the impugned AGM dated 29.12.2010 as illegal and contrary to law and is therefore set aside and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted Director under original articles of Association of the Company. He was also subscriber to the Memorandum of Association along with the petitioner. After 2nd Respondent was inducted as Director, the 3rd Respondent demit the office of Director voluntarily with effect from 1st April 2009. Surprisingly the 3rd Respondent proclaiming himself that, he was Director on the board. Petitioner did not know as to how he became again Director of the Company. The 4th Respondent is the Auditor who assisted initially at the time of formation of the company and obtained DIN and digital signatures not only for Respondents but also to the petitioner. The petitioner has alleged that, the 4th Respondent /Auditor was allowed to handle all the financial and other company affairs, compliance and finance. The petitioner reposed faith and Act, deed, decision and other things which are undertaken by the 4th Respondent. The 4th Respondent had applied for DIN and for Digital signature. The petitioner alleged that, as he was not aware the procedure he was guided by the 4th Respondent. However, the petitioner came to know that, 4th Respondent has given his email address for correspondence to get DIN and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner further alleged that he was not aware whether any shares transferred to Respondent No.3 so as to make him eligible to be appointed as Director. The Petitioner came to know in January, 2011, about the alleged induction of Respondent No.3 as one of the Directors of the company when he approached the Office of Registrar of Companies. It is only stage managed behind the back of the petitioner which is per-se illegal. The petitioner did not receive any notice for the alleged EGM dated 24.08.2010. No notice or E-mail about the proposed EGM on 24.08.2010 was received by him. The Petitioner further alleged that basing on such stage managed report, Form No.32 was filed on 27.10.2010 before the ROC. There was no EGM and it was only a concocted one. The Petitioner would never agree for induction of Respondent No.3 as Director. He had to sign the minutes being the promoter/whole time Director who remained in the Board of Respondent No. 1 Company. The Petitioner alleged that Respondents No.2 and 4 connived together and filed forged extract of minutes. The minutes of the meeting was only fabricated and concocted. They also forged the signature of the petitioner in the extract. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner further questioned about his alleged removal as Director of first respondent Company. The petitioner has seriously questioned Respondents No.2 and 4 about their propaganda that he was no longer the Director. The petitioner has also alleged that Respondents No.2 and 4 have man-handled him for questioning. On enquiry, he came to know that Respondents No.2 to 4 conspired together and clandestinely removed him. He came to know on 07.12.2010 in the alleged Board of Directors meeting, a panchanama was said to have been prepared against him and basing on the Board of Directors meeting, an Extraordinary General Meeting was said to have been held on 29.12.2010. The petitioner alleged that there was no notice to him and that a resolution was allegedly passed in the said Extraordinary General Meeting removing him as Director. It is against the Articles of Association of the Company for removing the promoter whole time Director when loan availed by the Director was pending. The petitioner alleged that vehicle loan was pending. He also alleged that he had also mortgaged his property with the Bank for sanctioning over-draft facility to the Company. The mortgaged debt was discharged on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged that the petitioner placed order at an escalated price. But, subsequently, those transformers failed. Thus, some irregularities are alleged against the petitioner by Respondents No.2 and 3 while purchasing the materials for the Company. The respondents No.2 and 3 have further alleged irregularities committed by the petitioner in the case of payment to Sri Manjunatha Surgicals. It was the practice followed by the Company to inform the Petitioner over phone about the Board meeting. Only the Board meeting was held 24.08.2010 and there was no Extraordinary General Meeting on the said date. The Petitioner was fully aware of the Board meeting held on 24.08.2010. It is alleged that the petitioner was fully aware of the appointment of Respondent No.3 as additional Director of the Company in the Board meeting held on 24.08.2010 and further he was also aware that Respondent No.3 was made permanent Director in the Annual General Meeting held on 30.09.2010 and that the petitioner had also signed in the minutes. There was no Extraordinary General Meeting held on 24.08.2010 and only the Board meeting was held on that day. The Annual General Meeting was held on 30.09.2010. It is stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, this respondent gave his E-mail address to the Registrar of Companies for further correspondence, if any. Similarly, his E-mail ID was also given for securing digital signature and it was also with the prior approval of the petitioner. The E-filings of the company with the Registrar of Companies were being done with the consent of the petitioner and other respondents. It is averred that Respondent No.4, on the advice of petitioner as well as other respondents used to file documents with their digital signatures before the Registrar of Companies. He never gave any advice to the petitioner to sign the documents. The Respondent No.4 was on one occasion decided to invest in the Company. But, due to the dispute between the petitioner and the other respondents, he decided not to invest in the 1st respondent company. The Respondent No.4 further denied at any time, he abused the petitioner. He further stated that he had no role to play in the appointment of Respondent No.3 as Director. The decision was taken by the petitioner and Respondent No.2 in the Board meeting held on 24.08.2010 and necessary instructions were given to this respondent for filing necessary forms with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Research Centre (P.) Ltd. v. Sarabjeet Singh Mokha [2010] 99 SCL 303 (MP) 5. Dale Carrington Investments (P.) Ltd. v. P.K. Prathapan [2004] 54 SCL 601 (SC) 6. LIC of India v. Escort Ltd. [1986] 59 Comp. Cas. 548 (SC) 7. Sunil Kumar v. Punjab Processed Foods (P.) Ltd.. 8. Kobia Pte Limited Vs. Kobian India P. Ltd. 9. Uddhao Dattarao Nagre v. Jijamatha Sugars (P.) Ltd. [CP No. 79 of 2011,dated 22-4-2014] 10. Guru Pratap Singh v. Visa Hospitality 11. Om Prakash v. Delhi Development Authority [PPA No. 3 (Delhi) of 2015, dated 12-5-2016] 12. Sampath Kumar v. Ayyakannu [Civil Appeal No. 5839 of 2002, dated 13-9-2002] 13. Pitchakaran @ Balakrishnan v. Parvathi Ammal [1997] 1 CTC 413 (Mad.) 14. Suman Kundra v. Sanjeev Kundra [MAT Appeal No. 32 (Delhi) of 2009, dated 28-5-2015] 15. Sarthamani v. RC Cheniappan 16. D. Kader Batch Ors. v. Goripalayam 17. Fritiz T.M. Clement v. Sudakaran Nadar [Civil Appeal No. 1777 of 2002, dated 1-3-2002] The learned counsel for respondents No.1 to 3 has filed written arguments and cited the following decisions: 1. Case of Uddhao Dattarao Nagre (supra) 2. M.S. Madhusoodhanan (supra) The Respondent N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted as Director. Counsel would further contend that the proceedings were fabricated taking advantage of his signature on blank letter-head as if a resolution was passed by the Board for appointment of Respondent No.3 as Director. It is the case of petitioner that he never gave any consent for filing Form-32 with the Registrar of Companies, Karnataka at Bangalore recognising the appointment of Respondent No.3 as Director. It is the further case of the petitioner that no notice was issued for convening the alleged Board meeting dated 24.08.2010. So, the sum and substance of the main contention of the learned counsel for the petitioner is that the alleged appointment of Respondent No.3 as Director was done behind back of the petitioner and that Respondent No.3 had never functioned as Director at any time after his alleged appointment. Thus, the contention of petitioner that Respondents No.2 to 4 have indulged in an act of oppression and mismanagement by fabricating or creating documents for the alleged appointment of Respondent No.3 as one more Director of the Company. The contention of Respondents No.1 to 3 that Form-32 was filed with the Registrar of Companies as Annual General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No.3 as Director in the meeting held on 24.08.2010. He has relied on Ex. P-8 at page 59-60 of his petition. Ex.P-11 is the same E-mail which is also relied upon by Respondents No.1 to 3 shown as Annexure-1 to the counter. It is true that the petitioner has first stated in his petition that he was not in Bangalore on 24.08.2010 and he was at Delhi. Now, in the rejoinder, the petitioner has stated that due to confusion of the dates, he has by mistake stated in the main petition that he was not in Bangalore on 24.08.2017 and that he was at Delhi. In the rejoinder, he has admitted that he was in Bangalore on 24.08.2010 and that there was an administrative meeting between him and Respondent No.2 which is a routine event and even the E-mail shows that it was Minutes of the Meeting (MOM). No doubt, the petitioner has filed a separate application seeking deletion of the averments made in the main petition that he was away from Bangalore on 24.08.2010 . However, the said application was not allowed. On the other hand, the petitioner has specifically stated in his rejoinder that he was in Bangalore on 24.08.2010 which is also the case of Respondents No.1 to 3. It is clear that the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken for appointment of Respondent No.3 as Director. We have gone through the E-mail, which is the crux of the case which shows that it is MOM (Meaning Minutes of Meeting). Even otherwise, there are so many items discussed in the said meeting which do find place in the E-mail. But, surprisingly, there is no reference for the appointment of Respondent No.3 as Director. If really such a decision was taken in the Board meeting, then, why it did not find place in the E-mail when other items did find a place. The contention of learned counsel for Respondents No.1 to 3 that the appointment of Respondent No.3 was also approved in the Annual General meeting held on 30.09.2010. Respondents No.1 to 3 wanted to support the appointment of Respondent No.3 as Director through the alleged Annual General Meeting held on 30.09.2010. The contention of the petitioner that there was no Annual General Meeting held on 30.09.2010 as contended by Respondents No.1 to 3. The minutes of the alleged Annual General Meeting is fabricated taking advantage of his signature on,a blank company letterhead which was obtained to meet any urgency in connection with the affairs of the Company with the Government d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No.3 was appointed as Additional Director. Then, the only conclusion that could be arrived at that the signature of the petitioner obtained on a blank letterhead was utilised to show as if there was Board meeting on 24.08.2010 in which the petitioner had participated and consented for the appointment of Respondent No.3 as Director. The alleged Board meeting and appointment of Respondent No.3 is nothing, but a concocted and created version. Regarding the AGM held on 30.09.2010, it is the case of the petitioner that there was no notice to him for convening the AGM on 30.09.2010 and he never attended the alleged AGM on 30.09.2010 and his digital signature was misused in filing Form-32. On the other hand, the respondents contend that the petitioner was present in the AGM held on 30.09.2010 and he has also signed in the resolution passed in the AGM. But, there is no proof filed by the respondents to show that the petitioner was present in the meeting and he was a party to the resolution said to have been passed regularising the appointment of Respondent No.3 as Director. It is very clear that prior to 30.09.2010, the correspondences between Respondent No.2 and the petitioner were t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the share capital. The contention of the petitioner that Respondents No.2 to 4 decided to marginalise him by diluting his shareholding behind his back. Respondents No.2 and 3 have decided to dilute his shareholding first by illegally inducting Respondent No.3 as Director and then by increasing the share capital by allotting shares to Respondents No.2 and 3. The contention of the petitioner is that the notice of Board meeting allegedly held on 07.12.2010 calling for EGM was issued behind was back. The said notice was not served on him. No E-mail was sent to him about the alleged Board meeting dated 07.12.2010. Surprisingly, on the said date, i.e., on 07.12.2010, the petitioner alleged that he received one E-mail from Respondent No.2 informing about the appointment of one new staff member for which he has sent his objection. The petitioner also contended that the alleged EGM dated 29.12.2010 is a stage managed one and no such meeting was ever held on that day. The petitioner has stated in the said AGM, the share capital of the Company was supposed to have been increased from ₹ 1,00,000/- to ₹ 10,00,000/- comprising of 1 lakh equity shares of ₹ 10/-, wherein 22, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company was taken up. He was also the promoter of the Company. It is not the case of the Respondents that the petitioner refused to purchase the shares. On the other hand, the Respondents contended that the petitioner did not offer to purchase the shares even though he was intimated of the same. They also contend that the petitioner did not attend the Board meeting held on 07.12.2010 and he was also issued the offer letter dated 07.12.2010 for purchase of shares. The Respondents contended that the notice was sent to the petitioner by Certificate of posting dated 08.12.2010. It is marked as Annexure-7 to the counter. Whereas, petitioner disputed that he was served with any offer notice. The learned counsel for the petitioner contended that there was no prior exercise before going for rights issue. There was no valuation of the first respondent Company circulated to the shareholders. There was also no information that the shares were to be issued basing on such valuation. So, issuing of shares at ₹ 10/- per share is nothing but a clandestine affair. The petitioner contended that no notice was served on him about the Board meeting said to have been held on 07.12.2017 and he nev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons for the resolution proposed to be moved at the meeting. For are the reasons for the resolutions subject to judicial review. It is true that under Section 173(2) of the Companies Act, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting including, in particular, the nature of the concern or the interest, if any, therein, of every director, the managing agent if any, the secretaries and treasurers, if any, and the manager, if any. This is a duty cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. It does not require the shareholders calling a meeting to disclose the reasons for the resolutions which they propose to move at the meeting. Thus, the learned counsel for petitioner has contended that there was no notice to the petitioner for the alleged Board meeting dated 06.12.2010. There was no notice of EGM dated 07.12.2010. The contention of learned counsel that there was no necessity to increase the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and thereafter the Board shall proceed to issue and allot shares on the same terms to one it may deem fit. (2) The issue of further capital shall rank pari passu with the equity capital in respect of payment of calls, forfeiture, lien, surrender, transfer and transmission, voting rights, dividends and repayment of capital on winding up. There is no proof filed by Respondents No.1 to 3 that they have discharged the obligations laid down in Article 5 of the Articles of Association of the Company. There is also no proof filed by them that the procedure prescribed in Article 5 was followed. Therefore, the Rights Issue is to be declared as void. It goes to establish that everything was done behind the back of the petitioner, just to dilute his shareholding. Therefore, the enhancement of share capital by issuing 90,000 shares and allotting the same between Respondent Nos. 2 and 3 is liable to be set aside as illegal and null and void. The contention of the petitioner that he was the promoter and 50% shareholder of the Company. The contention of the petitioner that behind his back and without any intimation and without following the procedure prescribed, he was said to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad. In this connection, Respondents No.1 to 3 have filed certain documents along with written arguments pertaining to the bills raised in the name of Sri Sai Ram Enterprises. There is nothing on record to substantiate the contention of respondents that the petitioner has placed orders with Sri Sai Ram Enterprises at exorbitant rates and thereby caused loss to the Company. There is no E-mail communication to the petitioner by Respondents No.1 to 3 at any point of time that he has caused loss to the Company by purchasing material from Sri Sai Ram Enterprises at higher rates than the market prices. Had it been really true that the petitioner has actually caused loss to the Company by favouring Sri Sai Ram Enterprises, then, there should have been some correspondence between the Respondents and the petitioner over the alleged issue. As we have stated earlier that there was no information to the petitioner at least seeking his explanation for the alleged loss caused to the Company. It is important to note that the respondents have relied on a special notice issued to the Company dated 06.12.2010 marked as Annexure-8 to the written arguments. This is a notice said to have been given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shareholding was increased. The petitioner was not informed about the Board meeting dated 02.12.2010 or EGM on 06.12.2010 and there were no E-mail communications to the petitioner. It is very surprising that on 06.12.2010 and the alleged EGM, a special notice was given by Respondent No.2 to the 1st Respondent Company for removal of petitioner as Director and that a Board meeting was held on 07.12.2010 for discussing about the alleged anti company activities of the petitioner. There was no E-mail communication to the petitioner about the alleged Board meeting on 07.12.2010. It is again surprising to note that on the very same day, offer letter was given to the petitioner to purchase rights issue proportionate to his holding. It is the case of the petitioner that he had been to Coimbatore in connection with the Company's work on 29.12.2010, the day on which the AGM was supposedly held for his removal as Director. When the petitioner was away, the alleged AGM was said to have been conducted on 29.12.2010. If the petitioner was really aware of the AGM which was convened to remove him as Director, then, he would not have planned to go to Coimbatore. This itself, shows that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Respondent No.4 that they are all connected to the internal management of the Company and that he acted on the consent given by the petitioner in filing the proper form with the Registrar of Companies. He has filed the written arguments and contended that the 3rd party cannot use the digital signature of the holder. It is the case of the petitioner that the digital signature was available in the Company. There is every possibility for any person who has access to the Company to utilise the digital signature of the petitioner to his advantage. Though the petitioner has alleged that Respondent No.4 was hand in glove with Respondent No.2, but, the same is not substantiated. Respondent No.4 has admitted that he has applied for incorporation of the Company as well for securing the digital signatures and he has given his E-mail ID for correspondences. It is his case that he never misused the digital signature of the petitioner. The burden is now on the petitioner to substantiate allegation against Respondent No.4 that he intentionally helped Respondent No.2 by using his digital signature in the matter of filing documents before the ROC, Karnataka at Bangalore. The Respondent No.4 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere postal certificate about service. The learned counsel has further relied on the decision of the Hon'ble Apex Court in the case of Dale Carrington Invt. (P.) Ltd.. The head note in the said judgment reads as under: Companies Act, 1956 - Allotment of Shares - Oppression on Minority Shareholders - Validity of allotment of equity shares of the Company in favour of Respondent, whereby he becomes a majority shareholder and the Petitioner and his wife are reduced to minority shareholders - The principle deducted from cases is that when powers are used merely for an extraneous purpose like maintenance or acquisition of control over the affairs of the company, the same cannot be upheld - propriety of issue of additional share capital by the Managing Director in his own favour - The facts of the case do not pose any difficulty particularly for the reason that the Managing Director has neither placed on record anything to justify issue of further share capital nor it has been shown that proper procedure was followed in allotting the additional share capital. Conclusion is inevitable that neither the allotment of additional shares in favour of Respondent No.3 was bona fide nor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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