TMI Blog2006 (10) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting held on 04.10.2004 and 28.01.2005 respectively are void, illegal and inoperative. (ii) to remove the respondents 2 3 from the office of director and the second respondent from the office of managing director of the Company. (iii) to restrain the respondents 2 3 from holding any board meeting and general meeting and further from operating any bank account of the Company. (iv) to investigate into the affairs of the Company. (v) to freeze the voting rights of the respondents 2 3 in respect of the shares held by them in the Company. (vi) to take appropriate action under Section 406 of the Act against the respondents 2 3 for breach of trust, misfeasance, misappropriation and falsification of records of the Company. (vii) to give effect to the transfer of 4815 shares of the Company, in the name of the second petitioner, in terms of the resolution dated 04.10.2004 of the board of directors and (viii) to declare that the annul return made upto 30.09.2004 and other returns filed by the Company with effect from December 2004 with the Registrar of Companies are null and void. 2. Sri M.S. Sivasankaran, learned Authorised Representative, while initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares out of 4815 shares were transferred in the name of the respondents 2 3. But the original minutes dated 30.09.2004 did not contain any approval for the transfer of 3088 shares in their favour which came to be unauthorisedly substituted at a later point of time. When the second petitioner by his letter dated 04.02.2005 questioned the transfer of shares in favour of the second respondent there has been no response whatsoever from him. The board of directors never approved the transfer of shares in favour of the second respondent at the board meeting held on 30.09.2004. The minutes presently produced by the second respondent containing the resolution in relation to the approval for the transfer of shares in the name of the second respondent are concocted and fabricated. The minutes of the annual general meeting dated 30.09.2004 produced for authentication before the Commissioner are different from the minutes of the general meeting signed by the then Chairman of the meeting. Though, the meeting was convened on 30.09.2004 at 9.00 AM, the minutes show that the meeting was held at 12.30 PM. The signature of the then Chairman contained in the minutes of the annual general meeting pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * In the meanwhile the petitioners came to know that they were removed from the office of director at the extra ordinary general meeting purportedly held on 28.01.2005 and that the third respondent was inducted on the board of directors of the Company. The petitioners never received any notice for the alleged extra-ordinary general meeting. The meeting without notice to the petitioners is not valid and the resolutions passed at the meeting are not binding on the petitioners. The extra ordinary general meeting was reportedly convened pursuant to the notices dated 29.11.2004 and 01.12.2004 sent under Section 284 of the Act by Aejaz Mehamood and Nasrulla Shariff respectively. The notice of Aejaz Mehmood does not indicate the number of shares held by him. The register of members shows that only Aejoj Ahmed holding 30 shares representing 0.37% of the share capital of the Company is a member of the Company. The said notice refers to one N. Shariff and it is not known whether N. Shariff is a shareholder of the Company. This notice deifeats the provisions of Section 169, 173 and 188 of the Act. The notice of Nasrulla Shariff is dated 01.12.2004 but he is not at all a shareholder of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2005. When the petitioners reiterated their stand in their communication dated 19.02.2005 that the alleged removal from the office of director without complying with the requirements of Section 284 is bad in law, the banker never responded at any point of time. Thereafter, the petitioners were constrained to file a civil suit seeking an order of injunction restraining the respondents 2 3 from operating the bank account maintained in the name of the Company. However, this civil suit has been withdrawn by the petitioners after approaching the CLB for appropriate reliefs in this behalf. * No board meeting or general meeting was ever held after the board meeting of 04.10.2004 and the petitioners did not receive any notice for any of the meetings purportedly held subsequent to 04.10.2004. Any meeting without notice to the members or the directors as the case may be cannot be valid. The minutes of the board meeting purportedly held on 20.12.2004, 09.02.2005, 31.03.2005, 30.06.2005, 29.07.2005 and 31.08.2005 are fabricated documents. Though, the petitioners continue to be directors they did not receive any notice for any of the meetings held on the aforesaid dates. The notices have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made use of; and (c) meetings held without proper notice are not validly held and proceedings of such meetings are illegal. * Gautam Kapur and Ors. v. Limrose Engineering Works Private Limited and Ors. (2005) Vol.128 CC 237 to show that production of copies of the board meetings is absolutely necessary to establish the holding of the board meetings of the company. * Navin R. Shah and Ors. v. Simshah Estates and Trading Company Private Limited and Ors. (2005) Vol. 128 CC 55 to show that production of attendance register is necessary to establish the holding of any meeting of a company, in the absence of which the decisions taken at such a meeting will be null and void * Kobian Private Limited v. Kobian India Private Limited and Ors. (2005) Vol. 126 CC 675 to show that in the event of any document on the records of the Registrar- of Companies is under dispute, certified copy of such a disputed document does not carry any evidentiary value. * Capt. Manmohan Singh Kohli v. Venture India Properties Private Limited and Ors. (2005) Vol 123 CC 198 to show that the requirement of special notice to the director under Section 284(2) and grant of opportunity to be heard under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * M.S. Kumanan and Anr. v. S.S.M. Processing Mills Limited and Ors. (2004) Vol. 122 CC 504 to show that one cannot claim title to the shares on the basis of mere entries in the Annual Returns of the company, especially when the Annual Returns could not conclusively prove title to the shares. * S. Rehana Rao and Anr. v. Balaji Fabricators Private Limited and Ors. (2004) Vol.122 CC 804 to show that the transfer of shares must be substantiated by production of the minutes of the meeting of the board of directors approving such transfer and that mere pleadings would have no any evidentiary value in this behalf. * Cardiff Chemicals Limited v. Fortune Bio-tech Limited and Anr. (2005) Vol. 126 CC 275 to show that burden of proving delivery of shares certificates after registering the transfer to the transferee is upon the company. * Donald Stummer and Ors. v. Maharashtra Power Development Corporation and Ors. (2003) Vol. 117 CC 506 to show that even a single act may be an act of oppression if its effect is of a continuous nature and the member concerned is deprived of his rights and privileges all time to come in future. * Praful M. Patel v. Wonderweld Electrodes Private Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption under Section 195 is also not available. * Uma Pathak and Anr. v. Eurasian Choice International Private Limited and Ors. (2004) Vol.122 CC 922 to show that when the shares are issued with the sole object of creating a new majority and the action of the board of directors is not only in breach of the fiduciary responsibilities but also a grave act of oppression against the existing majority, such acts will be set aside by the Court. * Cine and Supply Corporation Private Limited., In re Palak Kumar Mondal and Ors. v. Satyabrata Jana and Ors. (2003) Vol. 115 CC 481 to show that when minority share holders complain of lack of notice to extra ordinary general meeting, burden of proof lies on the majority to prove service of notice in the absence of which the minority share holders are entitled to seek relief from oppression under Section 397 of the Act. * Lt. Cdr D.K. Chatterji v. Rapti Supertronics Private Limited and Anr. (2003) Vol. 114 CC 265 to show that the provisions relating to quorum for meetings are mandatory and consequently the resolutions if any passed at a meeting where there is a quorum would be ipso-facto void. * Rohit Churamani v. Disha Research and M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the meeting were signed by the first petitioner, the annexure was signed by the outgoing directors and not by the first petitioner. At the continued meeting of the board of directors on 04.10.2004, the transactions relating to administration, authorisation and operation of the bank account were approved. However, while drafting the minutes, the first petitioner clandestinely fabricated the minutes and recorded as if the transfer of 4815 shares was approved in the name of the second petitioner for an amount of ₹ 48.15 lakhs and got the minutes certified by a Practicing Company Secretary. The petitioners, by questionable means, joined hands to grab the control and management of the Company, without making any payment by way of consideration to the transferors for the impugned shares. * The petitioners should have paid the entire sale consideration of ₹ 48.15 lakhs, by 04.10.2004, failing which the transfer of shares ought to be made as and when payment made and as per the conditions laid down in the articles of association of the Company. Even otherwise, the transfer deeds could not have been lodged and never lodged on the same day namely, 04.10.2004, on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... choose to attend the meeting, wherein they were duly removed from the office of director. Further, convening of the extra-ordinary general meeting was decided at the board meeting held on 20.12.2004, to which the petitioners were parties and therefore they were quite aware of the meeting of 28.01.2005. The petitioners attended the board meeting, but did not sign the attendance sheet. However, their presence is borne out by the return journey air tickets, copies of which have been produced before this Bench. The petitioners were removed at the extra-ordinary general meeting after due compliance with the statutory requirements of Section 284 of the Act and the third respondent was appointed as a director of the Company, upon which necessary Form No. 32 was filed with the Registrar of Companies. Consequent to cessation of office as director by the petitioners with effect from 28.01.2005, no notice was sent to them for the subsequent board meetings. The appointment of the third respondent, who happens to be the wife of the third respondent, is not barred by law. * After removal of the petitioners from directorship, they made consistent efforts for stalling the operation of the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder. * Surinder Singh Bindra v. Hindustan Fasteners Private Limited (1990) 69 Com 718, 726 (Del) to show that Section 398 comes into place when there is actual mismanagement or apprehension of mismanagement of the affairs of the company. * Clive Mills Co. Ltd., Re (1964) 34 Com Cases 731 (Cal) to show that general and vague allegations of misappropriation of funds, mismanagement or other improper conduct in the management of the company's affairs do not justify the Court in making any such order on such allegations. * Thakur Paper Mills Ltd. In Re 1975 Tax LR 1656 (Pat) to show that any changes in the control and managemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Gupta v. Union of India. There is no material on record to establish that the respondents have complied with the requirements of Section 286 before convening and holding the purported board meeting, approving the transfer of shares in favour of the respondents 2 3. It is observed that the regulations contained in Table 'A' of the first schedule of the Act shall apply to the Company and regulation 71 stipulates that every director present at any meeting of the board or of a committee thereof shall sign his name in a book to be kept for that purpose. This requirement is conspicuously absent in the instant case and the respondents failed to establish that the second petitioner attended the board meeting purportedly held on 30.09.2004 in which event any decision at such meeting will be null and void as held in Navin R. Shah and Ors. v. Simshah Estates and Trading Company Private Limited and Ors. (2005) Vol. 128 CC 55. (supra). According to the petitioners, they had acquired 4815 shares from the outgoing directors for a consideration of ₹ 48.15 lakhs which shall consist of (a) payment made to Unique Enterprises (Rs. 4,00,000/-) (b) payment by the first petitioner (Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, defeating the purpose and object of the summary procedure prescribed by Section 397/398. It is of course not mandatory that whenever allegations of fabrication of records are made, the parties should be relegated to a civil suit. However, the complicated questions of facts and serious controversies involved in the present petition necessitate a regular investigation and therefore, the contentious issues regarding the genuineness of purchase of shares by the petitioners or the respondents 2 3 cannot be decided in a summary jurisdiction by this Board at this stage, but such controversies can be tested and adjudicated upon only by a civil court whose jurisdiction is not barred in the light of the decision in CDS Financial Services (Mauritius) Limited v. BPL Communications Limited and Ors. (supra). In this background, none of the parties can claim title to the shares on the basis of mere entries in the annual returns of the Company, since the annual returns could not conclusively prove title to the shares, as held in M.S. Kumanan and Anr. v. S.S.M. Processing Mills Limited and Ors. (supra). In view of the complexity of the issues and in the absence of transferors being parties to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yond doubt that mere production of the courier consignment notes cannot amount to conclusive proof of service of copies the requisitions and notice of the meeting on the petitioners, satisfying the requirements of Section 172. Section provides that notice of every meeting shall be given, among others, to every member of the company whose name appears on its register of members. The provisions of Section 172 are mandatory and must strictly be complied with, non-compliance of which invalidates the resolutions passed at such meeting. Any meeting held without proper notice is not validly held and proceedings of such a meeting is illegal, as held in Micromeritics Engineers Private Limited and Ors. v. S. Munuswamy (supra). The respondents failed to prove service of notice of the extraordinary general meeting on the petitioners and therefore, they are entitled to seek relief from oppression, as held in Cine and Supply Corporation Private Limited., In re Palak Kumar Mondal and Ors. v. Satyagrata Jana and Ors. (supra). Mere knowledge of the meeting would not tantamount to service of notice in terms of Section 172 of the Act. It is, therefore, immaterial whether the convening of the annual g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view to assume exclusive control of the Company, it can be agitated under Section 397 and therefore the decision in Thakur Paper Mills Limited, In Re, (supra) will be of little assistance to the respondents. The illegal termination of directorship of the petitioners coupled with the irregular appointment of the third respondent as a director, with the sole object of usurping full control of the Company in association with her husband, being the second respondent would result in bringing material change in management under Section 398 and shall appropriately be remedied. Form No. 32 on the records of the Registrar of Companies, disclosing the removal of the petitioners from directorship and the appointment of the third respondent as a director, which are found to be irregular does not carry any evidentiary value, as held in Kobian Private Limited v. Kobian India Private Limited and Ors. (supra). These facts of the present case would demonstrate that there is lack of probity in the conduct of the affairs of the Company by the respondents that the petitioners can no longer have confidence in the respondents, warranty winding up of the Company on just and equitable grounds which wou ..... 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