TMI Blog2001 (11) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 equity shares which was about 23 per cent of the total share capital of the company. The respondent-company was owning and running a cinema hall known as Sri Rupa Cinema at Contai Distt. Midnapur, West Bengal which was the only property and business of the company. Deepak Kumar Mandal elder brother of the petitioners 1 and 2 was the director incharge from the period 20-5-1990 till his resignation thereafter the first respondent was appointed director incharge with effect from 1-9-1995. Ever since the first respondent took over as director incharge he indulged in acts of gross oppression of the Mondal Group and mismanaged the company. The accounts of the company were not prepared and no AGM was held thereafter. The petitioner No. 1 who was one of the directors of the respondent-company was disassociated from its affairs and was not even given any notice of any Board meetings. The respondent No. 1 purportedly acting on behalf of the company entered into an agreement of licence on 7-8-1995 with the respondent No. 3 for running the cinema on licence basis for a period of 11 months on a paltry monthly premium of ₹ 2,500 only. However, the cinema could not be run due to labour t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed under article 10 of the article of association. The petitioners have alleged that the meeting dated 24-3-1999 was a bogus meeting held on papers only and the first respondent has apparently fabricated the records/documents in regard to the alleged transaction which never took place. Moreover, the consideration allegedly received against the allotment of shares to the third respondent had not been deposited in the bank account of the respondent-company. It was further stated that after 17-7-1998 only the first petitioner and the first respondent constituted the board of directors and, therefore, in the absence of the first petitioner no meeting of the Board could have taken place as the quorum would not be complete. The petitioners further learned that the respondents have made the third respondent who was a rank outsider as director-in-charge and handed over the management of the company to him. On these allegations the petitioners have prayed for cancelling the allotment of the 2000 equity shares made in favour of the third respondent and giving the options to the petitioners and other shareholders to acquire the said shares and further to remove the first and the third resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was stated that the notices were issued to all the shareholders including the Mondal Group by certificate of posting which was the usual mode followed by the company. The respondents denied having received the alleged letter sent by the petitioners dated 3-10-1996 purporting to buy the shares or the letters dated 1-10-1996, 10-10-1996 and 24-10-1996 and it was stated that the said letters were an after thought and were manufactured for the purposes of the present case. It was further stated that the consideration amount of ₹ 2 lakhs against the allotment of shares were taken into account of the company and were utilised for payment to the employees. The allotment of the shares were made in accordance with the resolution passed by the majority of the shareholders and for the benefit of the company. 4. On behalf of the petitioners a rejoinder has been filed denying the allegations made in the counter affidavit and reiterating the averments made in the petition. The alleged EOGM itself has been challenged on the ground that it could not be called as the Board lacked quorum in the absence of the petitioner No. 1. Besides one of the shareholders, namely, Smt. Jharna Bera shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation, hence null and void. 7. In support of his submissions that a case of oppression of the petitioners group by the respondents group who are the majority shareholders have been made out in the facts of the present case, the learned counsel relied on the decision of the Apex Court in the case of Shanti Prasad Jain v. Kalinga Tubes Ltd. AIR 1965 SC 1535 and Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd. AIR 1981 SC 1298 and certain other similar decisions given by the CLB, where somewhat similar questions were involved. The learned counsel for the respondents on the other hand contended that the company was lying closed since the year 1996 to April 1999 due to labour unrest fomented by the petitioner No. 2. The company was in great financial difficulties under the circumstances majority of the shareholders in a duly convened general meeting unanimously decided to increase the authorised capital of the company from 3 lakhs to 5 lakhs and to allot the same to third respondent as none of the other shareholders were in a position or willing to subscribe the said shares. On the other hand the third respondent who had earlier taken the cinema bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursuance of the said decision that the EOGM was held on 24-3-1999 after due notice to the general body of shareholders which was attended by 76.4 per cent of equity shareholders except the shareholders of the Mondal group. In paragraph 17 of the said counter affidavit the allegation that no general meeting of the shareholders took place on 24-3-1999 was denied and it was stated that the same was duly held after serving notice on all shareholdings including the Mondal group under certificate of posting which was the prescribed mode under the articles of association. However, the Mondal group boycotted the meeting due to an ulterior motive. 9. It is noteworthy that the respondents have not produced any evidence in support of their stand by producing/annexing even a single postal certificate evidencing the sending of the notice to the shareholders as alleged. Though it is alleged in the counter affidavit that the EOGM was held in pursuance of the decision of board of directors neither the minutes of the said Board meeting nor any particulars regarding the date on which it was held or how the petitioner No. 1 who was the only other director was served with the notice or whether he p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under postal certificate thereby rebutting the presumption. The onus, therefore, was on the respondents who have failed to discharge the burden by not only failing to produce the postal by failing to produce any other proof like relevant extract from the despatch register or any other record. Similarly the respondents have failed to produce the postal certificate or any other evidence in respect of the Board meeting by which the EOGM was allegedly called to consider the increase in the authorised capital. The Supreme Court has held in the case of Parmeshwari Prasad Gupta v. Union of India AIR 1973 SC 2389 if notice was not given to even one of the directors the resolution passed in such a Board meeting is not valid. There is another aspect of the matter. In the counter affidavit affirmed by one Harisadan Bhattacharya claiming to be the constituted Attorney of the respondents it has been stated that the notice of the Board meeting as well as the EOGM were duly sent. The power of attorney, however, had not been filed despite the point been specifically taken by the petitioners in the rejoinder affidavit to the effect that the person affirming the counter affidavit was not duly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing had been sent to the petitioners, certain businesses other than notified had also been transacted. Therefore, there is full justification in the petitioners complaint taken in the alternative that this meeting had not been properly held and the decisions taken thereat are invalid. 12. On behalf of the petitioners it has been further contended that in fact no general meeting took place on 24-3-1999 and the minutes of the alleged meeting are fabricated, as one of the shareholders Smt. Jharna Bera who is alleged to have participated in that meeting was lying bedridden at Calcutta for the past several years and, therefore, could not have attended the meeting or signed her attendance. We are of the view that as the petitioners have failed to substantiate the said allegation and from the material on record before us, we are unable to hold that the meeting was not held or the minutes were fabricated. It is noteworthy that none of the shareholders who are alleged to have attended the meeting have come forward to deny his/her presence in that meeting and on the contrary they had acted on the resolution passed therein and accepted the 3rd respondent as a shareholder. Subsequently, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the transfer of shares. Even the respondents had not indicated in their reply any information relating to the transfer of shares. By an application dated 30-5-2000 (CA No. 128 of 2000), the petitioners brought on record, the matter relating to the transfer, on the basis of a letter from B. Roy Choudhary Associates, Chartered Accountants stating that 1787 shares held by the families of Shri Bera, Shri Roy and Shri Mukherjee had transferred their shares to the 3rd respondent during the months of August and September 1999. In that application, however, they have not sought for rectification of the register of members and instead they have only sought for certain interim relief in regard to the management of the affairs of the company. The prayer relating to rectification of the register of members was made orally on the ground that the provisions of article 10 of the articles of association of the company had been violated. 15. While the respondents admit transfer of shares to the 3rd respondent, yet, according to them the transfer is in accordance with article 10 of the company. According to the petitioners, they had written to the company various letters expressing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in and give notice in the manner aforesaid or if through no default of the retiring member the purchase of any share in respect of which such last mentioned notice has been given shall not be completed within three months from the service of such notice the retiring member shall at any time within three (3) months thereafter be at liberty to sell and transfer the shares comprised in the sale notice (or such of them as shall not have been sold to a purchasing member) to any person and at any price. (e )The instrument of transfer of shares shall be executed both by the transferor and the transferee and transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof. (f)Any share transferred in contravention of the above regulations share be forfeited to the company and the forfeited share may be sold or otherwise disposed of at the option of the directors. (g )Shares transferred by a member to his or her legal heirs, father, mother, brother, sister, son and heir adopted according to the Hindu Law, daughter, husband or wife as the case may be, shall not require previous approval of the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l financial difficulties and that the transferee was financially sound to revive the company, the Bench held that in transferring the shares to an outsider, the three sisters had not acted in an oppressive manner and had done so in the interest of the company. The same decision is applicable in the present case also, as the facts reveal that till the 3rd respondent took over the company, the cinema hall was not functioning for nearly 3 years due to financial crunch. 17. Even though we have held that neither the allotment of shares nor the transfer of shares could be considered to be an act of oppression against the petitioners, the same was based on the facts of this case that the company was in financial difficulties and the other shareholders had acted in the interest of the company in allotting and transferring the shares. However, if we take into consideration the nature of the company in which there were 4 identifiable group of shareholders whose share-holdings had remained the same from 1964, in all fairness, the willingness of the petitioners holding 23 per cent shares in the company, in regard to the revival of the company should have been ascertained before handing over ..... X X X X Extracts X X X X X X X X Extracts X X X X
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