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TMI Blog2018 (4) TMI 1248X X X X Extracts X X X X X X X X Extracts X X X X ..... ving 10,000 equity shares of Rs. 100/- each and the issued, subscribed and paid-up capital is Rs. 8,90,000/- having 8,900 equity shares of Rs. 100/- each. 3. The Petitioner is a promoter shareholder of the 1st Respondent Company. The Petitioner occupied the position as a Director of the 1st Respondent Company from 05-12-1994 till 03-04-2002. At the time of filing the Petition, the Petitioner has been holding 2967 equity shares of Rs. 100/- each in the 1st Respondent Company constituting 33.33% of the paid-up capital of the Respondent Company. Therefore, the Petitioner holds more than l/10th of the issued, subscribed and paid-up share capital and is eligible to file this Petition under Section 399 of the Companies Act, 1956. 4. The Respondent Nos. 2 and 3 are the Promoters/Shareholders of the 1st Respondent Company. The 2nd Respondent occupies the position as the Managing Director of the 1st Respondent Company with effect from 18-10-2007 and the 3rd Respondent occupied the position as Chairman cum Managing Director of the 1st Respondent Company from 05-10-1994 to 20-08-2008. The 3rd Respondent got inducted again into the Board of the 1st Respondent Company as a Director on 04-11-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the Petitioner nor did it show any interest in the offer made by the Petitioner. The copy of the said letter dated 11-11-2007 is kept as Annexure. It has further been alleged by the Petitioner that the Company has not filed Form-32 intimating the resignation of the 4th Respondent and the Petitioner is not aware about the status of 4th Respondent in the 1st Respondent Company. However, it has been submitted by the Petitioner that the 4th Respondent was appointed as a Director on 03-04-2002 and ceases to be a Director under the provisions of Section 283(1)(a) of the Companies Act, 1956 with effect from 03-10-2002 i.e., from the end of six month, being the time given to a new Director under Clause 33 of the Articles of Association of the Company for acquiring the qualification shares. 8. For the sake of convenience, the provision of Clause 33 of the Articles of Association is reproduced below:- "33. The qualification of a director shall he holding at least 100 equity shares in the company and the same shall be acquired within six months of becoming a director. The company may also appoint any other person having professional qualifications and experience relevant to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed by the Respondents that the 4th Respondent never attended the Board Meetings and she was not at all aware as to what has been going on in the 1st Respondent Company. The copy of the complaint letter dated 02-07-2008 and the reply of the 1st Respondent Company dated 30-07-2008, and the Reply Letter dated 25-08-2008 sent by RoC to the Petitioner are placed on record. The Petitioner submits that vide letter dated 07-07-2008 she wrote to the 1st Respondent Company demanding repayment of loan, the 1st Respondent Company replied vide its letter dated 28-07-2008, no such loan amount exists, and neither 1st Respondent Company nor the Chairman/Managing Director owe any money to the Petitioner. 12. The Petitioner filed a Civil Suit No. OS. 318/2009 against the 1st Respondent Company before the Sub-Court, Trivandrum, the court on hearing the case, passed a Decree attaching the properties of the 1st Respondent Company. But the attachment was lifted by the said court, after the 1st Respondent Company provided security for Rs. 12.30 Lakhs in the form of Fixed Deposit in favour of the Petitioner. It has been submitted by the Petitioner that after such incident, the Respondents completely s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Directors and no cheque could have been honoured by the bank if the same has been signed by the Petitioner individually. Therefore, the question of issuing a cheque by the Petitioner in favour of a Trust and the bank honouring the said cheque signed by the Petitioner individually, does not arise. The Petitioner in her reply letter dated 04-11-2011 denied all the charges framed by the 2nd Respondent. The Petitioner further alleges that the 2nd Respondent was the Managing Partner of a firm viz., M/s. Associated Business Combines, to which he diverted the funds from 1st Respondent Company. In fact, the said Firm was one of the distributors of the water tanks manufactured by the 1st Respondent Company and on account of supply of products to the said Firm, balance outstanding as Sundry Debtors from the said Firm was to the tune of Rs. 3.42 Lakhs, but in order to escape the liability, the 2nd Respondent dissolved the Firm during May, 2002. This has been confirmed by the 2nd Respondent in the reply letter dated 30-07-2008 to RoC, Kerala and also in Letter dated 06-05-2002. The perusal of the balance sheet as on 31-03-2008 of the 1st Respondent Company would reveal the fact that fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l outcome of the Company Petition and the Respondents were directed not to implement any resolution passed in EoGM on 08-12-2011 regarding 2,967 equity shares held by the Petitioner and restrained the Respondents from filing any documents, returns, forms, report, certificate, balance sheet, statements on behalf of the 1st Respondent Company. The said interim order has been extended by the CLB vide its Order dated 05-01-2012 until further orders. 17. Based on the facts and circumstances stated above, the Petitioner submits that, the acts of the Respondents have resulted in oppression to the Petitioner, which are also against the interest of the 1st Respondent Company. The affairs of the 1st Respondent Company are being conducted in a manner prejudicial to the public interest and members of the Company. The 1st Respondent Company is fit to be wound up under just and equitable grounds. But, if any such order is passed, it would unfairly prejudice the interest of the members. Having stated as above, the Petitioner prayed as follows:- i. Setting aside the illegal sale of properties of the first Respondent Company and direct the Respondents to make good the loss suffered by the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent Company, the Petitioner and her husband forcefully refused to hand over possession of the said documents and the Petitioner's husband forged, fabricated documents with the signature of the previous Managing Director i.e. the 3rd Respondent, recording therein that all record and documents pertaining to the 1st Respondent Company were handed over and accepted by him (i.e. 3rd Respondent). On filing a Suit i.e. OS No. 1722/2007 before the Ld. Munsiffs Court at Neyyatinkara, an inspection was carried out at the office premises of the Petitioner's husband by an Advocate Commissioner appointed by the said court, it was found that all books and account and records/documents pertaining to the 1st Respondent Company were found in the office of the Petitioner's husband. The husband of the Petitioner in connivance with the Petitioner suppressed their illegal diversion of money from the company's account for their personal gain, as the 3rd Respondent was Managing Director only for name sake and was totally kept in dark about the affairs of the company. The Petitioner and her husband even forged the signature of the 3rd Respondent to legalize several of their misdeeds. 22. The Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The consideration received on account of the sale of the property was utilised for repayment of loan to the State Bank Travancore, SME Branch, Thrivanthapuram to the extent of Rs. 25 Lakhs as One Time Settlement (OTS), and the rest of the money was used to lift the attachment against the sale of the said property in OS No.318/2009 pending before the Sub-court, Thrivananthapuram. 24. It has been alleged that the Petitioner's husband has sold the adjacent property to the 1st Respondent Company comprising an extent of 1.25 acres on 25-10-2007 for a paltry sum for sum of Rs. 15 Lakhs. The said property had direct main road access unlike the plot in question and going by the logic of the Petitioner, the said transaction is also to be deemed as fraudulent transactions. The Respondents further alleged that the present management was struck in dark regarding the operations of the 1st Respondent Company prior to 2007 and on the enquiries regarding the operations of the 1st Respondent Company prior to 2007, it revealed that apart from various other financial misdeeds, the Petitioner had signed and issued the 1st Respondent's cash credit cheque No.8107 dated 07-12-2001 for Rs. 8 Lakhs to v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank of Travancore, SSI Branch in favour of M/s. Vanika Vysya Education Trust, that was issued by the Petitioner. As per the direction of the Petitioner/her husband, the 3rd Respondent used to sign 4-5 blank cheque leaves of the cheque book and entrust the same to the Petitioner's husband. Since the other signatory was the Petitioner herself, so she could have easily managed it as and when a cheque was required to be issued and en-cashed. Having said so, it has been denied that any funds were deviated or misused by the present management. It has also been asserted by the Respondents in the reply that the notice dated 15-11-2011 issued to the shareholders calling for an EoGM on 08-12-2011 is perfectly in compliance with the provisions contained in section 173(2) of the Companies Act 1956, and there is no violation or suppression of the rights of the Petitioner or any mismanagement of the affairs of the 1st Respondent Company as alleged by the Petitioner. Having stated so, the answering Respondents prayed to dismiss the Petition with costs to the Respondents. 28. The Petitioner has filed the Rejoinder and stated that the 2nd Respondent filed a reply on behalf of the other Respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent alleging fabrication of minutes, withdrawal of amounts from the 1st Respondent Company, the said complaint was forwarded for investigation to Sub Inspector of Police and finally the Court discharged the accused, when no allegation was proved. 31. The Petitioner has denied the allegations levelled by the Respondents in the Counter that the Petitioner and her husband illegally diverted money from Company's funds. The Petitioner also denied the allegations of the Respondents that any loan was taken during 2007-2008, because she being the Director resigned during 2002 and cannot have swindled the loan availed by the Company during 2007. It has further been explained that the allegations of the Respondents is an attempt to justify the reason for the sale of the property, which they sold during the year 2010, which has happened because of mismanagement of the 1st Respondent Company. The Petitioner further states in the Rejoinder that the assets of the Company are being disposed off for repaying the debts of the Company, such a practice is definitely an act of mismanagement that is prejudicial to the interest of the Company. 32. It has also been explained by the Petitioner in the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feiture of 2,967 equity shares held by the Petitioner towards recovery of the misappropriated amounts of Rs. 8 lakhs together with interest stated to be due to the company is illegal. The notice dated 15-11-2011 is defective as no explanatory statement as required under the provisions of section 173(2) of the Companies Act, 1956 was attached to the notice. Therefore, the notice is invalid. Consequently, the meeting is illegal and ultra vires the Articles of Association. 35. Based on the above grounds, the Petitioner submits that a clear case of oppression and mismanagement is made out against the Respondents and prayed to grant all the reliefs sought in the Petition. 36. Based on the pleading of the parties, the following issues are framed:- (i) Whether 60 cents of land under Resurvey No. 117/21 owned by 1st Respondent Company has been sold by the Respondents on 19-10-2010 illegally for rock bottom price of Rs. 27.30 Lakhs? (ii) Whether the Petitioner and her husband along with Respondent No. 3, diverted funds pertaining to 1st Respondent Company to the tune of Rs. 8 Lakhs by issuing 1st Respondents' cash credit cheque No.8107 dated 07-12-2001 to Vanika Vaisya Trust? (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will not amount to oppression or mismanagement. Moreover, a single act of financial mismanagement does not have continuous effect which is necessary for grant of relief under Sections 397 and 398, though the same could cause a short term diminution in share value. Therefore, in the light of the principle laid down in these cases, the decision taken by the shareholders for sale of the property in question appears to be in the best interest of the 1st Respondent Company. (Issue-ii & iii) 38. These issues are interlinked, so are taken together. On these issues the Respondents have submitted that the Petitioner had signed and issued 1st Respondent Company's Cash Credit Cheque No.8107 dated, 07-12-2001 for Rs. 8 Lakhs to Vanika Vaisya Trust ( in short Trust) in which the husband of the Petitioner was Treasurer. There was no board resolution authorising such payment, and the 1st Respondent Company had absolutely no dealings with the said Trust. The Petitioner would contend that in case any such Cheque was issued to the Trust, the Respondents should have raised the issue at the time of finalising the account for the year ending 2007, and the mere fact that the Respondents have sent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this context Para 8 of the Articles of Association of the 1st Respondent company may be referred to which provides for first and paramount lien and charge on all the shares registered in the name of a member (whether solely or jointly with others) for all amounts due to the Company from him. Para No 8 of the Articles of Association of the 1st Respondent Company is again reproduced for the sake of convenience as follows :- "8. The company shall have a first and paramount lien and charge on all the shares registered in the name of a member (whether solely or jointly with others) for all amounts due to the Company from him or his estate, either alone or jointly with any other person whether a member or not and whether such amounts are presently payable or not. The company's lien on a share shall extend to all dividends payable thereof." (emphasis is supplied). It is well settled principle of law that a lien is the right to retain possession of a thing until a claim is satisfied. In the case of a company lien on a share means that the member would not be permitted to transfer his shares unless he pays his debt to the company. The articles generally provide that the company shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting should not be invalidated on the technical ground that the notice has not complied with section 173(2) of the Companies Act. The court further observed that 'if the shareholder is aware of the material facts pertaining to the transaction to be carried out at the meeting, he cannot reasonably complain of any insufficiency of notice'. Thus, the decision taken in the light of para 8 of the Articles of Association by the majority of the shareholders of the 1st Respondent in EoGM held on 08-12-2011 does not appear to have been suffering from any illegality. 42. The sole object of filing the petition by the petitioner is to stop the forfeiture of 2,967 shares held by her in the 1st Respondent Company, and the petitioner did not refund Rs. 8 Lakhs paid to Vanika Vaisya Trust through Cheque No.8107 dated, 07-12-2001 from the accounts 1st Respondent Company. Thus the petitioner has not come with clean hands for seeking reliefs under Sections 111, 397, 398, 402, 403, 406, 408, 237 read with Schedule XI of the Companies Act, 1956. Therefore, the petitioner a not entitled to any of the reliefs prayed for. This view is fortified with the ruling given in Sri Kanta Datta Narasimharaja Wadiy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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