TMI Blog2017 (11) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... The fact that it has been given effect to is not in dispute through the shares allotted and as seen from the subsequent documents including the correspondence with the bank. Therefore, it is not open to the appellants to contend that it was purely an agreement between the second appellant and the first respondent. Similarly, the transaction is not a pure and simple money transaction. If that is the case, there was no need to remove the Directors and reduced the shares through the meetings conducted without respondents 1 and 2. All these aspects have been considered at length by the Company Law Board. This Court does not find any perversity in the decision arrived at. Having found that the appellants are still holding 51% of the shares and having the company run by the family members, the Company Law Board rightly granted the relief. The appellants could not produce any document to show that due procedure has been followed in conducting the meetings. In fact, as rightly found by the Company Law Board, there was no need for such a meeting at all. There was no consideration passed. Obviously, the attempt was to cripple and curtail the activities of respondents 1 and 2 qua the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers which could be exercised under Sections 397 and 398 of the Act. Thus the powers are circumscribed and controlled by the provisions which clearly indicate that they are of wider import. Section 402 of the Act speaks about the orders that can be passed by the Company Law Board on the applications made under Sections 397 and 398 of the Act. These powers are illustrative in nature without affecting the general power granted under Sections 397 and 398 of the Act. Therefore, when these three provisions are put together and an applicant makes a request, the powers of the Company Law Board become substantial. 6.Wayback in the year 1964, Justice P.N.Bhagwati acting as a Judge of the Gujarat High Court in Mohanlal Ganpatram Vs. Shri Sayaji Jubilee Cotton and Jute Mills Co. Ltd., ((1964) 34 Compcas 777(Guj)) has held as follows: It does not say that a transaction amounting to fraudulent preference may be set aside only if it is effected within three months before the date of the application, or does it contain any words indicating that only transactions amounting to fraudulent preference effected within the said period of three months may be set aside and no others. The provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Others (2012 170 Compcas 93 (Mad)) after taking note of the earlier judgment, was pleased to make the following observation: 132. In 1997(90) Company Cases 1, Division Bench of this Court had an occasion to consider the scheme of the Act pertaining to corporate management of the Companies. Observing that under Sections 398 read with 402 of the Companies Act, power has been conferred upon the Court (Company Law Board) to make such order as it thinks fit, it was held as under: Under section 397 read with section 402 power has been conferred on the court 'to make such orders as it thinks fit if it comes to the conclusion that the affairs of a company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members and that to wind up the company would unfairly prejudice such member or members but that otherwise the facts would justify the making of a winding up order on the groaned that it was just and equitable that the company should be wound up 'with a view to bringing to an end the matters complained of'. Similarly, under section 398 read with section 402 power has been conferred upon the court 'to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood the scope of the relevant provisions, let us go into the factual matrix. The first appellant in Company Appeal No.12 of 2012 was originally incorporated on 28.03.2002 and thereafter changed into a new name with effect from 21.07.2005. It engaged in the business of manufacturing and dealing of ceramic and sanitary ware etc. There are two other allied companies. All these companies were run by the same family. 14.The first appellant got into a financial crisis. According to the party-in-person, it was due to the non-availability of natural gas. This resulted in a memorandum of understanding being entered into between the first appellant represented by the second appellant (party-in-person) and the first respondent. Accordingly, it was executed on 12.11.2007. The terms reduced into writing and not in dispute are as follows: (i)The networth of the company is ₹ 2,95,12,693/- (ii)The land on which the factory is occupying on rental basis, is to be bought by the Company and its value is ₹ 1,23,60,000/- out of which petitioner has to contribute his 49% of the value as his share. (iii)R2 is to make good the net loss by contributing ₹ 90 lakhs. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. He reiterated that the first respondent was only a joint venture partner as per the memorandum of understanding and not otherwise. 19.When the dispute inter se was going on, the second appellant and others did two things. The Annual General meeting was held on 30.09.2008 apparently without notice to the respondents. The notice of the Annual General Meeting was purportedly approved at a Board meeting held on 04.09.2008. The names of respondents 1 and 2 were dropped as Directors with effect from 30.09.2008. However, Form No.32 was filed only on 26.06.2009. 20.The Extraordinary General Meeting was also held on 05.01.2009 authorizing the increase of capital from ₹ 3.20 crores to ₹ 5.20 crores. Form No.5 has been filed again belatedly on 01.04.2009. The articles of association have also been amended and Form No.23 has been filed on 28.03.2009. There was nothing to indicate the service of notice on the respondents. Resultantly, on 13.03.2009, 20 lakhs shares were issued to the sister concerns who were arrayed as Respondents 8 and 9 before the Company Law Board. There was no consideration for the allotment of shares. Apparently, the consideration as sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral Meeting did not contain a proposal for alteration. Two different set of documents were issued. Thus the Extraordinary General Meeting held was invalid. 24.Coming to 20 lakhs equity shares issued to the sister concerns, the Company Law Board was pleased to hold that there was absolutely no material that it was supported by consideration besides done without notice to respondents 1 and 2. By such a clandestine and unilateral act, the stake of respondents 1 and 2 got reduced from 49% to 30% in one stroke. Having found that the sale consideration having been parted with, it was held that steps should be taken to get the sale deed registered in the name of the company as the objection was only on the inability to do registration for want of money to pay the stamp duty. 25.A factual finding has been given that there was no action taken on the part of the first respondent to take control of the company or in getting back the investment. Incidentally, it was held that considering the admitted fact that money being infused into the company and in view of the subsequent development, the case of the respondents deserves to be considered in the affirmative. On the question of conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugabasav Vs. Shree Renuka Sugars Ltd., ((2002) 110 Compcas 371) (vii)Radhe Shyam Tulsian and Others Vs. Panchmuky Investments Ltd., ((2003) 113 Compcas 298) (viii)S.B.P.Anand Mohan Vs. Graphic Impressions (Madras) Limited and Others ((2004) 120 Compcas 265) (ix)P.Natarajan Vs. Central Government and Others ((2004) 119 Compcas 41) (x)Sangramsinh P.Gaekwad and Others Vs.Shantadevi P.Gaekwad (dead) through LRs and Others ((2005) 123 Compcas 566(SC)) (xi)Ramesh Chand Goyal and another Vs. Himalaya Communications Ltd. and another ((2006) 129 Compcas 297) (xii)Westfort Hitech Hospital Ltd., and another Vs. V.S.Krishna and Others ((2007) 137 Compcas 151) (xiii)V.S.Krishna Vs. M/s.Westfort Hitech Hospital Ltd., ((2008) 3 SCC 363) (xiv)Sachin Bansal Vs. Accent Shoes (P) Ltd., ((2009) 150 Compcas 319) (xv)C.G.Holdings Private Limited and Others Vs. Cheran Enterprises Private Limited and Others ((2010) 159 Compcas 266) 28.The learned senior counsel appearing for respondents 1 and 2 would submit that the appeals are not maintainable as there is no compliance of Section 10F of the Act. A factual adjudication is not permissible before this Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares and having the company run by the family members, the Company Law Board rightly granted the relief. The appellants could not produce any document to show that due procedure has been followed in conducting the meetings. In fact, as rightly found by the Company Law Board, there was no need for such a meeting at all. There was no consideration passed. Obviously, the attempt was to cripple and curtail the activities of respondents 1 and 2 qua the company. 30.The findings have been rendered only on facts. When such is the position, as rightly submitted by the learned senior counsel for the respondents, appeal is liable to be dismissed for want of existence of a question of law. When once the appellants are unable to frame a question of law and convince the Court of its existence, the appeal becomes not maintainable. In other words, this Court can go into the appeals only on satisfying the existence of question of law and thereafter answers it. In such view of the matter, this Court does not find any question of law involved, warranting interference. 31.The decisions relied upon by the appellants are not applicable to the case on hand. The Company Law Board, in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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