TMI Blog2009 (8) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... s of ₹ 1000/- each. Even at the time when the Company was incorporated the Petitioners had been carrying on a parallel business under the partnership firm by name and style M/s. Shashi Distilleries which had its office at Bangalore. After incorporation, there were some difficulties in transferring the manufacturing license of the firm and therefore the Petitioners did not bother about the affairs of the Company. The 2nd Petitioner had left the country in 1997 to pursue his own business abroad. Therefore, after incorporation, no business could be carried on and the Company remained dormant. While matters stood thus, the 4t h Respondent Mr. M. Ganesan, a close friend of the Petitioners was entrusted with the affairs of the Company and also to comply with the filing of statutory formalities. As per Clause 14 of the Articles of Association of the Company, the Petitioners are the life-time Directors. Therefore, the Petitioners alone formed the Board of Directors of the Company. The 4th Respondent in whom the Petitioners had full crust and confidence had in turn handed over all the papers to the 2nd Respondent and requested him to comply with the statutory formalities to file neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondents started initiating further steps to take full control of the Company to the exclusion of the Petitioners, who were originally the shareholders/Directors of the Company. v. The Respondents have now sought to increase the paid-up capital of the Company to a sum of ₹ 1 lakh, whereby 95 shares of ₹ 1000/-each appears to have been allegedly allotted to the 2nd Respondent. 5 shares have been allotted in favor of the 4th Respondent, In the Balance Sheet for the year ending 31.3.2004, the 2nd and 3rd Respondents have shown the paid-up capital of ₹ 1 lakh without reflecting the shares held by the Petitioners even while subscribing to the Memorandum of Association of the Company. It is pertinent to mention here that the 4lh Respondent addressed a letter dated 5.12.2006 and the same is extracted in Para (e) of the Petition. vi. The 2nd and 3rd Respondents are total strangers to the 1st Respondent Company and they have no semblance of right either as shareholders or as Directors of the Company. They are trespassers who are running the business of the Petitioners from Bangalore and have proceeded to file returns with the Registrar of Companies at Bangalore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prayed this Bench to grant the reliefs as below; (a)For a declaration that the 1st and 2nd Petitioners are the only Directors of the 1st Respondent Company in terms of Clause 14 of the Articles of Association; (b)Set aside the alleged allotment of shares in favor of the 2nd and 3rd Respondents and their associates, if any; (c)For permanent injunction, restraining the 2nd and 3rd Respondents from functioning as Directors of the 1st Respondent Company; (d)For a declaration that the 2nd and 3rd Respondents are neither shareholders nor Directors of the 1st Respondent Company; (e) For a declaration that the 2nd Respondent is not a Director of the 1st Respondent Company; (f)For such or other orders as this Hon'ble Bench may deem fit, just and proper in the circumstances of the case. 4. Shri A. Murali, learned Counsel for the Respondents 1 to 3 filed his detailed counter and submitted that the Company Petition is not maintainable either under law or on facts since they (Petitioners) are not at all shareholders or Members of the Company and as such they are not entitled to maintain this Petition in terms of Section 399 of the Act and hence liable to be dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Directors of the Company and Form No. 32 was filed with the Registrar of Companies depicting the aforesaid changes. It is relevant to point out that the said Form No. 3 2 was signed by the 2nd Petitioner. The copies of the Balance Sheets for the years 1994 to 1999 and 2001 to 2005 produced along with counter showed that the Company was not carrying on any business until the financial year up to 2005. The Annual Returns for the period, ended 1994 to 1998 and 2001 to 2005 have been produced which clearly showed that the Petitioners ceased to be shareholders and Directors of the Company from 1999 and thereafter, the Respondents are shown as shareholders and Directors of the Company. The Annual Returns for the year 2001 10 2004 have been signed by the 4th Respondent. 7. He submitted that after taking over control and management of the firm as well as the Company, the 2nd Respondent had taken steps for transfer of the license granted by the Excise Commissioner in favor of the firm. Pursuant to the application made for such a transfer of license, an advertisement was caused to be published in the Kannada Daily EE , Sanje dated 2.4.3.2004 inviting objections, if any, for such tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27.6.2005 entered into between M/s. Shashi Distilleries represented by the 2nd and 4th Respondent as Partners and Shashi Distilleries Pvt. Ltd. (the 1st Respondent Company) represented by the 2nd and 4th Respondent herein in their capacities as Directors, the business of the firm was transferred to the Company. Thereafter, the firm which was reconstituted by the 2nd and 4th Respondent after the retirement of the Petitioners herein was dissolved under a Deed of Dissolution dated 28.6.2005. 10. He further submitted that at a Meeting of the Board of Directors of the Company, resolutions were inter-alia passed with regard to the takeover of the business of the firm, appointment of the 2nd Respondent as the Managing Director of the Company., etc. A copy of the Minutes of the Meeting of the Board of Directors of the Company held on 27.6.2005, recording the presence of the Directors at the Meeting has also been produced. Accordingly, the business of the firm was taken over and continued by the Company. 11. He submitted that soon after the induction of the 2nd and 4th Respondents as Partners of the said partnership firm, the firm availed loan/credit facilities from City Union Bank, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2006 and 11.09.2006 issued by the 2nd Respondent in his capacity, as Managing Director is filed. 13. He submitted that the 4th Respondent has been attending the Board Meetings and is a party to the various decisions. The copy of the Minutes of the Board Meetings from 5.4.1999 till date together with relevant attendance registers are filed. The 4th Respondent to unsettle the Company and the 2nd Respondent sent a letter dated 20.12.2006 to City Union Bank, Bangalore to freeze the banking operations, but the bank did not act on the said letter after being satisfied with the reply of the Respondents dated 28.12.2006. 14. He submitted that the 2nd Respondent is the majority shareholder of the Company and also its Managing Director and thereby in management and also control of its affairs. The Company Petition has been obviously filed at the behest of the 4th Respondent and the Petitioners are merely his stooges, the petition lacks bona fides and on the face of it contains patent falsehoods and misrepresentations and is prima facie liable to be rejected. The Petition is a product of collusion between the Petitioner and the 4th Respondent. 15. The counsel adverting to the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm No.32 was handed over to the 1st Petitioner for signature and return, which the 1st Petitioner did and the Respondents had no reason to believe they were forged. A false story has been set up at this length of time only to lend colour to the baseless and false case of the Petitioners; v. With regard to the averments in para 4(b), it is vehemently denied that the 2nd and 4th Respondents forged/fabricated documents to be filed with the Registrar of Companies and that in order to cover up the fraud, the 4th Respondent has also been shown as Director is baseless and untenable. The Balance Sheet and Annual Returns produced clearly show that the 4th Respondent is clearly a party to all the transactions of the Company and that he is the signatory to those documents vi. With regard to the averments in para 4(c), it is submitted that they are being false or totally illogical and inconsistent with the documents on record and the sequence of events that have taken place. While it may be true that the license held by the firm would be transferred to the Company, it is meaningless to suggest that after the receipt of consideration to retire from partnership firm, the Petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard Meetings produced would clearly reflect the case. The question of showing the Petitioners as shareholders does not arise because they had already transferred their shareholding way back in the year 1999. The purported letter dated 5.12.2006 of the 4th Respondent is clearly a made-up document to further the collusive interest of the Petitioners and the 4th Respondent. It is extremely difficult to place on record that what the 4th Respondent is now stating in the said letter is true especially after the drag over the last 10 years besides it is rather strange that the Petitioners are now waking up and questioning the affairs of the Company, when admittedly they have not raised a voice for the last more than 10 years; ix. With regard to the averments in para 4(f), it is submitted that the allegation of forgery and fraud is blatantly false and baseless and the Respondents take strong exception to the same. , The allegations are per-se defamatory and the Respondents reserve the liberty to prosecute the Petitioners both under Civil Law as well as Criminal Law for defamation and damages; x. With regard to the averments in para 4(g), it is submitted that the allegation that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r lawful rights of the shares of the Company, etc., are all false, baseless and untenable. It is submitted that the 2nd Respondent has. ever since the year 1997 been in the management and control of the Company and the 3rd Respondent is a validly appointed Director of the Company. The allegation that the 2nd and 3rd Respondent continued to operate the bank account of the Company under a fraudulent and forged Board resolution is again baseless and untenable. The loan credit facilities of the Company have been secured based on the personal guarantee and collateral security provided/offered by the 2nd Respondent and his wife. The Petitioners have no exposure whatsoever with regard to the banking operations or liabilities of the Company. It is further submitted that the Board of Directors consisting of 2nd, 3rd and 4th Respondents is competent to convene and hold Meetings and pass a valid resolution by a majority thereof. The Petitioners being strangers to the Company cannot seek to question or nullify any resolution of the Board of Directors or shareholders of the Company which are validly passed; xiii. With regard to the averments in para 4(j), it is submitted that the allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to manage and control the affairs of the Company. The Petitioners are guilty of latches and they have had nothing to do with the Company for the last more than 8 to 10 years and the Petition is hopelessly barred by limitation. The Petitioners have not placed any facts to show continuous acts of oppression of the minority by the majority. To say the least they are not even minority, because they are not even shareholders of the Company. The Petition is mala fide, filed in terrorem, in collusion with the 4th Respondent to bring the 2nd Respondent to terms and hence prayed that the Petition be dismissed with exemplary costs in the interest of justice and equity. xv. The learned Counsel relied upon; the following citations: (a) [1977] 47 CC 151 - In the matter of Gu labrai Kalidas Naik Others v Laxmidas Lallubhai Patel Others; (b) [2007] CLJ 298 CLB APB Chennai - In the matter of Ansar Khan Others Vs Fine Core Cables Others - To Show - Transfer of shares - complicated questions and serious controversies of facts cannot be decided by Company Law Board in summary jurisdiction and have to be tested and adjudicated only by the Civil Court whose jurisdiction is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners denied that they are not shareholders or members of the Company. They are the only allottees of the shares of the Company and the first and only Directors of the Company and had not allotted any shares to anyone thereafter. The Petitioners are holding more than 1/10th of the paid-up capital of the Company. Any further allotment of shares purported to have been made as alleged by the Respondents herein are challenged by these Petitioners in the present Petition. Therefore, the Petition is maintainable and the Respondents have not submitted any shred of evidence for the alleged transfer of shares from the Petitioners and the burden of proof is on the Respondents to show as to how they have any semblance of a claim on the Company; (b)The allegation that the authorised, issued, subscribed and paid-up share capital as evidenced by the latest Annual Return of the Company made upto 31,03.2006 as ₹ 1 Crore divided into 10,000 Equity Shares of ₹ 1000/- each are false. Needless to mention that the authorised share capital of the Company is only ₹ 10 lakhs even as on date, as per the records available with the Registrar of Companies; (c)The alleged Form No.32 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from the Petitioners as early as on the date of the Meeting. The Respondents have annexed Annual Returns and Balance Sheets for the years 1994 to 1999 and 2001 to 2005, but have not produced Annual Returns for the year 1999 to 2001 conveniently and the copies of which admittedly are not available with the Registrar of Companies, Karnataka. These Respondents have manipulated the enure records and have forged the signatures of the Petitioners in order to allot shares in their favour, thereby claiming control over the affairs of the Company. (g)In reply to para 8 (e), the payment of ₹ 50 lakhs to the Petitioners upon retirement from the firm has already been explained in the earlier paragraphs. The Petitioners consent was only for the transfer of the licence specifically in favour of the Company and not in the name of any other person or entity as alleged. (h) In reply to para 8 (f) (g) (h), the deed of dissolution dated 28.6.2005 had been manipulated by the 2nd Respondent. The resolution that is sought to be relied upon for the alleged appointment of 2nd Respondent as the Managing Director cannot stand scrutiny in view of the fact that the Respondents have not submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor annexed it as documents in support of their counter. The documents executed with the bank or the correspondence with the Excise Commissioner will not establish that the Respondents have been validly inducted into the Board of the Company. All these documents are pertaining to the partnership firm and not the Company. The Petitioners submit that the retirement from partnership firm cannot per se amount to transfer of shareholding and resignation of Director from the Company. The retirement which took place in 2004 cannot be the basis for the alleged resignation and transfer of shares in 1999. The Respondents have not even mentioned about the payment of any consideration to the Petitioners in 1999 which would show that there was indeed no transfer of shares by the Petitioners and no resignation from the Board of Directors. The consideration paid at the time of retirement from the partnership firm was for the transfer of the business of the firm to the Company. The Petitioners never exited from the Company and had only retired from the firm. It is incorrect to state that the Petitioners had transferred their shareholding to the Respondents in the year 1999 and that the letter dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld indulge in a criminal act that would damage his reputation and also adversely affect the status of the family members. Therefore, the allegation is baseless. The alleged increase in paid-up capital of the Company and allotment of 90 shares of ₹ 1000/- each in 2002-03 to the 2nd Respondent is concerned, there was no money inflow from the 2nd Respondent to the Company towards alleged allotment of shares. The allotment of 90 shares is said to have been made on 4.12.2002 to ensure compliance with the minimum paid up capital requirement as per the Act. The unsecured loan amount stood at ₹ 17.95 lakhs as on 31.3.1995 as per the Books of accounts of the Company and rose to ₹ 18 lakhs as on 31.3.2002. The allotment of 90 shares to the 2nd Respondent is not a valid allotment for the reason that wrong entries were passed converting unsecured loans as share capital and the allotment was not made in accordance with the provisions of Section 292 of the Act. The Board resolution states that the Company received one share application along with remittance for allotment of shares, whereas the Company has not received any money towards share application and it was only through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment of 2nd Respondent as Managing Director at the Board Meeting alleged to have been held on 27.6.2005 and appointment of 3rd Respondent as Director at the Board Meeting alleged to have been held on 11.8.2005 and transfer of shares of 2nd Respondent in favour of 3rd Respondent and 4th Respondent and one Mr.R.Vijay Shankar at the Board Meeting alleged to have been held on 11.8.2005 become invalid as no quorum would have been present with the 2nd Respondent, he being alone present in those Meetings. In view of the above, the 41 Respondent prayed this Bench to allow the Petition. The learned Counsel for the 4th Respondent relied upon the following decisions: - (A) [2004] 121 CC 732 CLB Principal Bench - In the matter of Giridhargopal Gupta Others v. A.A.R. Gee Board Mills Pvt. Ltd Others - Held - that in view of the failure of the Respondents to produce any records to prove that the original Directors were removed by due process of law, the removal' of the two Directors and appointment of new Director were bad in law and not in conformity with the procedures laid down in the Companies Act, 1956. The two Directors were to be restored to their original position. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner on the documents filed with Registrar of Companies cannot be decided in a summary jurisdiction by this Bench. The controversies can be tested and adjudicated upon only by a Civil Court whose jurisdiction in not barred. 23. In reply co para 2.1. the 2nd Respondent and the 4th Respondent had acquired shares from 1st Petitioner and 2nd Petitioner and a copy of Annual Return for the year 1999-2000 evidencing the aforesaid transfer which is produced herewith. The 2nd Respondent having acquired the shares from the 1st Petitioner who is an Indian citizen, obtaining the prior approval of RBI did not arise. As already explained in the counter, the 4th Respondent has surreptiously taken certain files containing important documents from the Company's Registered Office including a file containing transfer deeds executed by the Petitioners selling and transferring their shareholding to the 2nd and 4th Respondent. It is denied that the transfers in favour of 2nd Respondent was done in gross violation of provisions of Foreign Exchange Regulations Act (FERA). It is also denied that the Petitioners have not resigned from the Directorship of the Company. The signature found on Form No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed as Additional Director with effect from 31.8.2005. All the relevant documents have been filed. 24. In reply to para 6, that the Form No.32 contains the forged signature of the 2 Petitioner, is denied. The 2nd Respondent has been validly appointed as the Additional Director on 15.2.1999. It is also denied that the 2nd Respondent was not re-appointed as the Director at the next Annual General Meeting. 25. In reply to para 7.1 that the allotment of 9900 shares to the 2nd and 4th Respondent was made without any basis and authority, is totally denied. When the business of the partnership firm was transferred to the Company, all the assets and liabilities of the firm stood transferred to the Company and the 2nd Respondent and 4th Respondent were allotted shares in proportion to their holdings in the partnership firm. It is true that the shares were allotted at the Board Meeti..6 held on 18.1.2006. It is denied that the 4th Respondent did not attend the Board Meeting held on 18.1.2006 and 8.9.2006. The Minutes of the Board Meeting held on 18.1.2006 and Attendance Register evidencing the presence of the 4th Respondent was produced. In the Board Meeting held on 8.9.2006, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubscribers to the Memorandum of Articles of Association as also the first Directors named in the Articles of Association. The main objects of the Company was to take over the business of the Petitioners' firm known as M/s. Shashi Distilleries (hereinafter referred to as the 'firm') as a going concern together with all assets and liabilities. The firm which initially consisted of the Petitioners as the Partners was subsequently reconstituted by inducting Respondent No.2 and Respondent No.4 as Partners. 30. The firm was subsequently reconstituted again and the Petitioners exited from the firm after accepting a consideration of ₹ 50 lakhs vide Reconstitution Deed dated 1.6.1997. Since the main object of the Company was to take over the business of the firm, the Respondent No.2 and Respondent No.3 who were the only Fanners had to be co-opted as Directors in the Company and accordingly they were co-opted and Form No.32 dated 15.02.1999 signed by Petitioner No.2 was filed. 31. The Petitioners sold their shares to Respondent No.2 and Respondent No.4 on 05.04.1999. 1 hey also resigned as Directors which is evidenced by Form No.32 filed with Registrar of Companies, K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the Company. Respondent No.4, who claims that he is neither a Director nor a shareholder should ideally not have any interest in documents which he has sought in the letter. The Respondents produced some proceedings of the Excise Department along with the above Memo, where at page 33, will indicate that there is a record to show that the Petitioners have severed their relations with firm. From this, it would clearly establish that the Petitioners made their exit from the firm and the Company after receiving the consideration and filing of the present Company Petition ex-facie, is voltaface their decision, which is highly unwarranted. 36. It is the case of the Petitioners that they have not sold their shares and that they have not resigned as Directors. The firm stand of the Respondents that the share transfer deeds and the resignations letters belonging to the Petitioners which were in the custody of the Company have been surreptiously removed out of the Company records by someone and knowing this situation, presumably the 4th Respondent joined hands with the Petitioners and have filed the above Company Petition to achieve their dubious intentions is well established. Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners and as to how a caretaker was allowed to run the business. 39. Respondent No.4 had attended several meetings of the Company as a Member/Director and though he has signed several Board Meeting Minutes and accepted Silting Fee towards the same, now claims that he is not well educated and taking advantage of the same, his signatures were obtained on the Company documents illegally, is to cover up his deeds. 40. The report of the Advocate Commissioner appointed during the proceedings also confirms that right from 05.04.1999, the Petitioners were not holding any shares at all. The Respondents also vehemently disputed the Petitioners status as shareholders and hence cannot maintain the Company Petition as required under Section 399 of the Companies Act, 1956 as held by the Gujarat High Court In Re: Gulabrai Kalidas Naik and Others, wherein it is clearly held that when the title to the shares is disputed, the Company Law Board cannot entertain a Petition for the relief under section 397/398 in the absence of rectification of Registers being sought. It is further held in the same case that till the name of the person claiming to be a Member is entered in the Register of Membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2005 evidencing the lake over of the assets of the firm, by the Company, which was signed by Respondents No.2 4, respectively. 45. Respondent No.4 in his additional counter has stated that the Annual Return for the years 2000-01, 2001-02, 2002-03, 2003-04 signed along with Respondent No.2 since the Respondent No.2 was in total control affairs of the Respondent No. 1 Company and he obtained the signatures of Respondent No.4 with a mala fide intention and misrepresented the facts and contents. The stand of Respondent No.4 is that he did not acquire any shares from the Petitioners and he did not sign any transfer deed requesting for transfer of shares as stipulated under Section 108 of the Act. The 1st counter which was filed by Respondent No.4 does not contain any of these allegations. However, in the additional counter he has made all the allegations for reasons best known to him. 46. The Respondent No.4 having signed all the documents along with Respondent No.2 and participated in Board Meetings and having received the Sitting Fee has turned around and taken a different stand which is highly deplorable. In this regard a beneficial reference of this Bench is drawn from [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners incorporated a Private Limited Company in the name and style of M/s. Shashi. Distilleries Pvt. Ltd., on 09.12.1993 and the main objects of this Company as per Article (A) 1b of the Memorandum of Association was to take over the said firm as a going concern with all or any of assets liabilities of the said business including pending contracts and service personnel. The Petitioners are the only subscribers to the Memorandum with 5 shares each. Though, the Company was incorporated, it was not carrying on its business till 2004, when the distillery licence standing in the name of partnership firm was transferred in its name. The partnership firm had commenced and was carrying out the business of distillery after obtaining the requisite licence from the Excise Commissioner, Government of Karnataka. While so, there was a reconstitution of partnership which was executed on 1.6.1997 b etween. the Petitioners as continuing partners and Mr. N. Ganesan, the Respondent No.4 herein and Mr. R, Jayavelu, Respondent No.2 herein as incoming partners. The reconstituted document was signed by all the 4 partners. As per Clause 9 of this deed, Respondent No.2 and Respondent No.4 were shown as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as shareholders and Directors of t he Company and were signed by Respondent No. 2 and Respondent No. 4, wherein the list of details of shares, Respondent No. 2 and Respondent No. 4 were shown as holding 5 shares each. In the Balance Sheet for the year 1999-2000 the share capital has been shown as ₹ 10 crores and the same also was signed by Respondent No.2 Respondent No.4. In the Annual Returns filed thereafter for the years 2001 2002, the Respondents were shown as Directors of the Company and Respondent No.2 Respondent No.4 were shown as shareholders of the Company. The Annual Return for the year 2003, the Respondent No.2 share holding pattern was shown as 95 and the Respondent No.4 shares was shown as 5 after increase further allotment of shares in a Board meeting held on 04.12.2002 and Form No.2 dated 04.12.2002 was also filed with Registrar of Companies. The Annual Return for the year 2004 remained the same and the same was signed by Respondent No.2 and Respondent No. 4. The Annual Return for the year 2005, there was a slight change in the shareholding pattern in which Respondent No. 2 held 61 Equity Shares and Respondent No. 4 held 35 Equity Shares and Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioners are ceased to be shareholders and Directors of the Company as on the date of the petition. Consequently, the claim of the Petitioners that they had convened Board meeting on 14.12.2006 in which eight persons were inducted as Directors of the Company and allotment of further shares cannot be sustained and any filings of returns thereto are set aside as null and void, 52. Issue No.(b): As per the narration given above, the Respondent No.2 and Respondent No.4 had joined as partners in the erstwhile firm which was reconstituted. It is also clear that the Respondent No.2 Respondent No. 4 are parties to various documents filed with the Registrar of Companies and also to the Board Meetings, General Meetings and also signed the proceedings and attendance s heets. The main object of the Company was to take over a going concern - M/s . Shashi Distilleries, the partnership firm and its existing business of manufacture and sale of Indian made liquor. After taking over the control and management of the firm, the 2nd Respondent took steps for transfer of licence granted by the Excise Commissioner in favour of the respondent No. 1 since the business was continued to be carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company. Even prior to the said event the Petitioner No.2 had given a General Power of Attorney nominating the Petitioner No. 1 to act on his behalf for executing all or any of the deeds, acts, things. The Petitioner No.2 in the said General Power of Attorney had stated that he intends to retire from the firm in full and final settlement of claims, rights, share-in capital, profits and good will, share in the assets, etc., in the firm, from Mr. R. Jayavelu (Respondent No.2 herein) and or any other continuing partner and to give a valid receipt/discharge for the same which will be fully binding on him, along with his attorney Mr. P.L.G. Manu (Petitioner No. 1 herein). Upon the General Power of Attorney, the Petitioner No. 1 in an affidavit dated 8.10.2004 duly signed and identified by one Mr.Sampathkumar, Advocate had stated at Para 2, the relevant portion is extracted herein. I submit that myself and Mr.Joseph Tharakan have retired from the aforesaid firm on 8.10.2004. I submit that I am the Power of Attorney of Mr.Joseph Tharakan and according to the instructions of Mr.Joseph Tharakan, I have retired from the said firm on behalf of Mr. Joseph Tharakan also Pursuant to this ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the Company. Subsequent to the signing of the said agreement, a resolution was passed to dissolve the said partnership firm M/s. Shashi Distilleries. In pursuance of the said resolution, a deed of dissolution of partnership was executed and signed on 28.6.2005 by and amongst the continuing Partners of the firm and resolved to dissolve the firm w.e.f. 30.06.2005. As stated supra, the Petitioners were only shareholders and Directors till 5.4.1999 in the Respondent No. 1 Company, but continued as partners in the firm till they retired, i.e. with effect from 8.10.2004 on receiving the consideration amount of ₹ 25 lakhs each. Thereafter, the Respondents are the only continuing partners of the firm. As stated supra, the Petitioners through their counsel have already addressed a letter dated 13.12.2004 to the Excise Commissioner wherein they had expressed their no objection in the transfer of the distillery licence held in the name of the partnership firm to that of the Company. The Excise Commissioner accordingly granted conversion of the distillery licence in favour of M/s. Shashi Distilleries Pvt. Ltd., on 07.06.2005. The Petitioners thus ceased to be partners of the firm w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Respondent No. 2 Respondent No.4 as incoming partners. After the retirement, the partnership firm was reconstituted with Respondent No. 2 Respondent No. 4 as the continuing partners of the firm and subsequently this partnership firm was also dissolved paving the way for the running of the distillery business by the Company. The Petitioners having not raised any objection all along from 1999 onwards in the affairs of the Company and 2004 onwards in the partnership firm, but alleging oppression mismanagement and approaching this Bench in the year 2006 I find it is only a volta-facie the decisions already taken by them i.e exiting from the Company and retiring from the partnership firm. Hence the above facts clearly demonstrate that the Petitioners have approached this Bench after lapse of several years. 54. Issue No.(d): The Petitioners in their Petition at Para 4 (a), (b), ( f), g) contend that the Respondent No. 2 Respondent No. 3 forged the documents and falsificated/fabricated the statutory records viz: Form No. 32 with the Registrar of Companies reflecting the Respondent No.2, Respondent No. 3, Respondent No. 4 as Directors of the Respondent No. 1 Company and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision of FERA was applicable by which the permission of RBI was required for giving effect to any transfer of shares from non-resident to resident and no such approval of RBI was obtained for effective transfer and, therefore, the Respondent No.2 claimed that the Petitioner No.2 had transferred his shareholding is false and in violation of FERA. The claim of further allotment of shares as made out by Respondent Nos. 1 to 3 are false and based on fabricated documents and, therefore, the Petitioners are the only shareholders of the Company. The averments made in the Petition that the Petitioner No.2 left India in the year 1997 and the transfer of shares took place in the year 1999. The Petitioner No.2 contend that since he was abroad, any transfer of shares is not valid in his absence and it is violation of FERA Regulations and to substantiate his claim, he has produced photocopy of his Passport. The Company was incorporated in the year 1993. The address of the subscribers to the Memorandum had been shown as address in India. A copy of the Passport submitted by the 2nd Petitioner evidenced that he resided in abroad since 1997. However, documentary evidence had been shown for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made out by Respondent Nos. 1 to 3 are false and based on fabricated documents and, therefore, the Petitioners are the only shareholders of the Company. The Respondent No.4 also submitted that there were no meetings of Directors in 1999 approving any transfer of shares by the Petitioners to the Respondents and the Petitioners are the shareholders and Directors of the Company ever since the date of incorporation, the Respondent No.4 also contended that he had not bought any shares from the Petitioners and had not paid any consideration for the same. On perusal of the records submitted by the parties prove that the Respondent No. 4 had attenued various Board meetings and General Meetings and signed attendance sheets of various Board Meetings of the Company. The Respondent No.4 also signed various Annual Returns, Balance Sheets of the Company during the period. None of the above had been controverted by the Respondent No. 4. In these circumstances, the stand of the Respondent No. 4 cannot be taken to be correct. The Respondents 1 to 3 contend that the shares were transferred by the Petitioners and the same was approved at the Board meeting held in the year 1999. The respondents are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affairs of the Company It may be observed that in order to attract the provisions of section 397/398, one of the essential requirements as found necessary in Arun Kumar Mohta v. Ganesh Commercial Co, Ltd, [2006] 134 CC 500(CLB) is that the complaint must necessarily be in relation to the affairs of the Company. Any complaint against the second Respondent in the affairs of the partnership firm cannot be entertained by the Company Law Board. In the present case, there is no dispute that the Respondent No. 1 company was incorporated to take over as a going concern an existing business of the registered partnership firm. After the Petitioners exist from the Company, the license of the firm was transferred to the Company and in view of the transfer the partnership firm itself got dissolved. The facts of the ease in the above judgement and the facts of the present case are totally different. Hence, the above judgement relied upon by the Petitioner is of no relevance to the facts of the present case. (ii) Shri A.Murali, learned Counsel for the Respondents 1 to 3 relied upon the judgement in the matter of Gulab Rai Kalidas Naik Ors. The Gujarat High Court has held that the pre-requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by letting in oral and documentary evidence. I do follow the above judgment which is squarely applicable to the facts of the present case. (iii) Shri P.H. Arvindh Pandian, learned Counsel relied upon the judgements as stated supra are not relevant to the present facts of the case. Where the judgements relied upon by the learned Counsel are in relation to removal of Directors, by invoking the provisions of the Companies Act. In the present case, the Petitioners themselves resigned and quit the Company. Hence, the judgements are not applicable to the present facts of the case. The Petitioners have not produced any share certificates to demonstrate that they are members of the Company as on the date of Petition. The Petitioners have not shown copy of Register of Members of the company thereby proving their holdings in the Company. It-is the of the Petitioners that they have not sold their shares in the Company. -If this contention is true, nothing prevented the Petitioner s to file the original share certificates for perusal by this' Bench. 1 he Annual Returns filed by the Company as stated supra shows that the Petitioners do not hold any shares in the Company ever since-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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