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Ms. Varshaben S. Trivedi Versus Shree Sadguru Switch Gears (P.) Ltd. and Others

2013 (6) TMI 839 - COMPANY LAW BOARD MUMBAI

CP No. 80 of 2011 - Dated:- 26-6-2013 - Vimla Yadav, Member For The Appellant : R.T. Rajguroo and Ms. Bindi Vaishnav For The Respondents : M.S. Bhardwaj ORDER Vimla Yadav, Member 1. In this order I am considering Company Petition No. 80 of 2011 filed by the petitioner under sections 397-398 and 284 against the respondents seeking restoration of the petitioner as director of Shree Sadguru Switch Gears (P.) Ltd. (R-1-company); removal of R-2 and R-3 as directors; permission to the petitioner to ap .....

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8377; 4,00,000 divided into 40,000 equity shares of ₹ 10 each. The R-1-company's subscribed and paid-up capital, according to the petitioner is ₹ 3,99,000 in which the petitioner's shareholding is 62.36 per cent and the R-2 holding 2 shares of the Company, R-3 holding 4 shares of the company and R-4 holding 14,920 equity shares hold 0.0050 per cent. 0.0100 per cent, 37.39 per cent, respectively. 2. The petitioner's case is that she has been illegally removed from the dire .....

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nd issue the same to the shareholder has to be considered at a Board meeting only. It was contended that no such Board Meeting was conducted as no Board meeting could be held without her she being a director. She had not received any notice for any such Board meeting. 3. Further, the petitioner's case is that the respondents illegally appointed R-2 and R-3 as directors. When there was no activity in the company, the R-4 even applied for cancellation of sale tax registration there was no nece .....

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of the Act and have made an attempt to rely on false and concocted evidence which is the result of afterthought. 4. The petitioner has contended that after removing her from the directorship of the company there has been siphoning of funds of ₹ 25.57 lakh by respondents through illegal transfer from the account of respondent-company to various firms' account in which the respondents directly/indirectly are interested. Perhaps, with this ultimate and ulterior motive and objectives she h .....

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emoving her from directorship and after appointing other directors, the registered office was shifted from her resident to their residential address by circular resolution as defended by them. There was no notice given of the Board meeting, no quorum was present and while filing Form No. 18 the resolution No. was shown as '00' so there was no authority to file this form and also to sign the same digitally. No resolution copy was attached to the said Form No. 18. For this it is pretended .....

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to the petitioner's allegations regarding shifting of the Registered office of the R-1-company it was contended that the registered office of the company is situated at 10, Sakan Twins Opp. Satellite Center, Vastrapur, Ahmedabad, the fact that the petitioner has stated the address of the registered office of the company, at the said address in the said paragraph and at several places in the petition clearly amounts to the petitioner's admission that the registered office of the company h .....

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y's master data as certified by the RoC as on 3rd January, 2012, the petitioner had conspired with the statutory auditor of the company in illegal increase of the paid-up capital of the company without any payment of share application money and without following legal formalities as per Act. The issue and allotment of 15,000 shares of the company on 5th December, 2007 to petitioner is illegal, null and void, the petitioner is acting in an oppressive manner and is mismanaging the affairs of t .....

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rticles of association of the company. There was no statutory requirement of funds by the company and it was not in the interest of the company, without there being any actual inflow of funds of the allotment money either in cash or in bank account of the company and is done with a view to turn the present respondent majority into hopeless minority and therefore is oppressive to the respondents. It was argued that the books and records of the company in possession of the present petitioner are c .....

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ital of the company without verifying the company's records and finalizing the annual account of the company for the financial year 2007-08 in their own way and in conspiracy with the petitioner, the beneficiary of the increase of paid-up capital, the respondents had sought approval for appointment of new auditor which the company had already appointed in their annual general meeting ('AGM') on 4th September, 2010 on which date the petitioner along with her brother-in-law a retired D .....

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he allotment money on 5th December, 2007 for the allotment of 15,000 shares, the Board of directors of the respondent-company had not passed-a resolution on 5th December, 2007 that the capital of the company would be increased by ₹ 1,50,000 and 15,000 Shares are to be allotted to Smt. Varsha S. Trivedi the petitioner, no notice was issued, the other only Director on Board had not attended the Board meeting so if meeting was held on 5th December, 2007, there was no quorum. 8. It was argued .....

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ive days from the date of deposition of the said requisition. The R-4 first visited the petitioner's residence cum registered office of the company on 25th November, 2009 and gave the copy of notice for convening of Board Meeting on 12th December, 2009 but she refused to sign. So thereafter again under Postal Certificate of posting, posted same notice on same day, i.e., on 25th November, 2009 to inform again to Smt. V.S. Trivedi the petitioner, to convene a Board meeting on 12th December, 20 .....

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esolution by circulation was passed by majority Board members in the evening on 20th February, 2010 whereby the Registered Office of the company was shifted from 5, Jaynagar Society, Kankaria Road, Maninagar. Ahmedabad 28 to 10, Sakan Twins, Opp. Satellite Center Nehrupark, Vastrapur, Ahmedabad-15 and Smt. Jayshree J. Vyas director of the company and Shri. S.R. Sanghvi whole-time practicing company secretary were authorised to file the necessary Form 18 with the office of the RoC. A copy of the .....

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s "00" in the Forms 18 and 32. 10. It was argued that on receiving the requisition on 7th April, 2010 a resolution by circulation was passed by the Board of directors of the company for convening an EGM on 24th April, 2010 that the petitioner be removed from the director of the company, the petitioner was also sent the Resolution by Circulation but she Refused to sign or acknowledge the same. Since the resolution of Board was passed by circulation there was no questioning of quorum bei .....

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urned back. The postal cover which were sent to 5. Jaynagar Society, Maninagar, Ahmedabad-28 address were returned back with postal remark dated 10th April, 2010 as 'LEFT' and whereas postal covers of 8, Shivalik bungalow, Anandnagar Satellite. Ahmedabad-15 address were delivered. The petitioner got notice copy of the notice of EGM but chose not to attend the meeting. The Board by passing a resolution by circulation on 7th April, 2010 decided to convene the EGM of members of the company .....

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ards their respective outstanding dues which were already reflected in the books of the company and also in the Balance sheets of the company. Till 19th February, 2010 the petitioner was looking after business of the company and all these creditors had supplied goods or otherwise became the creditors of the company during the period during which the petitioner was managing the affairs of the company. All these payments were made by Account payee cheques and duly accounted for in the books of acc .....

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order on the ground that it is just and equitable to do so but that as such an order would unfairly prejudice the interest of the petitioning members, it is not advisable to wind up the company. In order to bring the case within the purview of section 397 of the Act, the petitioner must make out a case that a stage had reached for winding up the company on just and equitable grounds. 13. Relying upon the case of Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp Cas 351, it was contended th .....

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k of confidence but the lack of confidence must arise out of lack of probity or fair dealing as a shareholder. In the present case, it is noted that the petitioner has succeeded in making out a case under sections 397 and 398 of the Act. The respondents' Company Application No. 203 on maintainability of this company petition already stands disposed off by the CLB vide an earlier order dated 19th November, 2012. 15. It is noted that the respondents who stand in reply to this company petition .....

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usiness in the R-1-company for a long time, in September 2007 even assets of the R-1-company have been sold off, it is the case of both the petitioner as well as the respondents that there is no possibility of carrying on any business. In such a scenario, the petitioner's contention that after removing her as a director, the respondents proceeded to appoint R-2 and R-3 as directors illegally without there being any requirement to do so and without following the due procedure is found tenable .....

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contention regarding non-receipt of notice for any Board meeting in this regard is found to be tenable. It is also noted that the petitioner, due to apprehension of threat to her life did not attend the EGM for which she had the notice but could not represent her case in such an inconvenient situation. Section 284 applies to all companies, including private companies. The right given by section 284 is the statutory right which cannot be taken away by the memorandum, articles or any contract or .....

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procedural requirements stipulated in the section. But compliance with those requirements and justifying the removal as valid cannot be a deterring factor to ascertain whether the removal, though in conformity with law, is fair or unfair to the minority shareholder, because in perhaps a vast number of cases, the removal is likely to be motivated by an improper purpose or mala fides and hence oppressive to the minority, especially in a quasi-partnership type of company. The test of fairness rath .....

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f of injunction. To remove a director under section 284, certain essential requirements are to be followed. Noncompliance of these requirements would render the resolution passed in the general meeting invalid as in the present case. The petitioner has succeeded in making out a case of illegal removal from directorship. The respondents have no answer to the petitioner's contention that there was no Board meeting held, without her no Board could be held as she was the only other director in t .....

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te. 18. The respondents contentions that the company petition is not maintainable as no case of winding up of the R-1-company has been pleaded is also not tenable. Whether there is justification for winding up of the company on just and equitable grounds under section 397 could be considered by the CLB only after going through the merits of the case and not at the outset. The onus of forming the opinion is on the CLB on the facts of a particular case. The formation of an opinion cannot be made a .....

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t and equitable to wind up the company but if winding up which is an alternative to the petition under section 397-398 shall be prejudicial to the interest of the petitioner and not in the interest of the company/public interest, CLB may refuse to order winding up of the company. Section 397 read with sections 433(1) and section 434(2) makes it clear that a court will not proceed to wind up a company merely because it is just and equitable to do so, particularly in circumstances where the occasi .....

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