9911796707
TMI Blog2017 (12) TMI 1662X X X X Extracts X X X X X X X X Extracts X X X X ..... of roads and construction of buildings. 2. The Petitioner No. 1 is holding 59000 of shares in the 1st Respondent Company. The Petitioner No.2 is an ex-Director of the 1st Respondent Company and holds 1,000 shares. They together hold 60,000 shares out of the 95,000 issued shares of the 1st Respondent Company as on 31.03.2008, representing 63% of the issued capital of the 1st Respondent Company. Therefore, they fulfil the requirements under Section 399 of the Companies Act, 1956, for filing this Petition. 3. Under challenge is the allotments made on 25.04.2008 and 11.08.2010. Besides this, the Petitioners have challenged the continuation of Respondent No.3 as Director and appointment of Respondent No.4 as Director of the 1st Respondent Company. The shareholding pattern of the 1st Respondent Company as on 30-9-2005 is reproduced as follows:- The above shareholding pattern continued till 31.03.2008. The copies of the Annual Return as on 30.09.2005 and 29.09.2007 are placed on the file and marked as armexure P5. 4. It has been alleged by the Petitioners that the majority capital has been contributed by them but, the majority directors on the Board viz., 2nd and 3rd Respondents resor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. Bindu Paul not being among the first director appointed under the Articles of Association, was a retiring director and was due to retire by rotation at the Annual General Meeting of 2006 and 2008, pursuant to Article 28 of the Articles of Association, which is reproduced below:- "28. i. Except the first directors, the Directors shall be generally appointed by the company only in Annual General Meeting. ii. Subject to the powers of the members to ordinary resolution in any General meeting, the first Directors appointed by virtue of these articles, are not liable to retire by rotation unless they became incapacitated to act as such due to legal, physical, social or medical reasons. iii. The directors appointed by the company in General Meeting shall retire at the second Annual General Meeting immediately following the Meeting in which they are appointed as directors. Such retiring Directors are, however, entitled to be reappointed, unless they cannot be appointed as such for reasons mentioned in (ii) above." 5. It has been stated that Mrs. Bindu Paul was initially appointed by the Board of Director on 02.01.1995 i.e. the date of incorporation of the Company. As an addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd are also against the interests of the 1st Respondent Company. The other allegations suggest that the Respondent Nos. 2 and 3 are involved in siphoning off the money from the accounts of the 1st Respondent Company, and the purported share application money was first syphoned away and then it has been shown in the accounts as the share application money of the 1st Respondent Company. 7. The Counter has been filed by the Respondents wherein the allegations levelled by the Petitioners have been denied. The allotment of shares in question dated 25.04.2008 and 11.08.2010 have been justified along with rights issue. The question has been raised about the consent of the second Petitioner for joining as Petitioner for filing the Petition. 8. The Respondents stated in the Counter that Petitioner No. 2 did not attend Board Meetings held on 10.12.2009, 20.03.2010 and 19.06.2010 though notices were sent to him, as a result Petitioner No. 2 is said to have lost his Directorship due to operation of law with effect from 11.08.2010. It has been stated that the proof of dispatch of notices for the said Board Meetings has been enclosed. 9. The allegations have been made against the Petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose in good faith and the performance of the Company will show the result of such capital augmentation. The delay in filing returns could not establish that the allotments suffer from any infirmity so as to affect their legality or validity. 15. It has been denied that there was no Board Meetings and General Meetings to consider the increase in authorised capital and to approve of offering of equity shares on rights basis at the meeting of Board of Directors which was convened on 31.01.2011 to consider the allotment of shares on rights basis and after the decision of the Board the shares were offered to the shareholders including the Petitioners. 16. It has also been averred in the reply that there is no infirmity in the appointment of Mr. K.M.Mathai, i.e., Respondent No. 4. It has been stated that the alleged transactions had resulted in a profit of Rs. 18 crores is false. In short, the allegations contained in the petition against the Respondents have been denied and the actions under challenge have been justified. The answering Respondents state that the purpose for filing the petition is collateral, i.e., intimidating the Respondents to extract some money. 17. Based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also false. The petitioners in their rejoinder have also rebutted the allegations levelled by the respondents with regard to non¬availability of DIN of Petitioner No.2 and stated that the number was provided, but not used by the respondents. 20. In relation to the issue of maintainability of the petition, the petitioners in their rejoinder stated that the Petitioner No. 2 has sent a consent letter dated 23.2.2011 that has been confirmed by him in his subsequent letter dated 15.03.2011 addressed to the Bench. Therefore, the fact that the said consent letter was received at Cochin on 21.02.2011 is evident from the copy of the postal cover and Track summary which is produced and marked as Annexure P29. Therefore, the allegation regarding the maintainability of the petition has been rebutted. It has also been stated by the petitioners in their rejoinder that Para 4 of the 'Compliance Report' for the year 2009-10 issued by the Practising Company Secretary on 30.08.2010 reads that the Board of Directors duly met 4 (four) times on 20.05.2009, 02.09.2009, 10.10.2009 and 20.03.2009 in respect of which meetings' proper notices were given and the proceedings were properly rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents have fabricated, concocted and falsified the records. 23. The Petitioners in their rejoinder rebutted the contentions of the respondents about their being financially weak, the petitioners stated that they are financially stable and capable of bringing in additional capital to the company as and when needed. The company has grown with the majority capital brought in by the petitioner and the respondents want to take undue advantage by reducing the petitioners' shareholding from majority to a minority by making allotments in their favour clandestinely. It has further been averred in the rejoinder that filing of annual accounts were delayed deliberately by the respondents to manipulate the records and incorporate therein false statement of claim on the application money pending allotment that was brought in by second respondent to the tune of Rs. 7 lakhs. It has been alleged by the Petitioners in the rejoinder that huge diversion of funds from the company is the real secret behind the 2nd and 3rd respondents in investing huge money in the share capital of the company and against which shares have been clandestinely allotted, as a large quantities totalling a sum of cash Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears to be dubious, suspicious and afterthought. In reply, the Respondents would contend that the notice of Board Meetings dated 25.04.2010 was dispatched. However, there is no proof of service of the notice as there is no mention of the serial number of the meeting, time of the meeting and full address of the venue of the meeting. Further, the notes on the items of the agenda is also missing. Therefore, the notice dated 11.04.2008 is held insufficient and invalid. Similarly, the Respondents would contend that the notice has also been dispatched on 31.07.2010 for Board Meeting held on 11.08.2010. There is no proof of service. Moreover, the notice has not been addressed to 2nd Respondent, instead it is addressed to 'all directors' and no notes have been attached with the notice pertaining to the items of agenda. Further, the notices dated 11.04.2008 and 31.07.2010 in relation to the Board Meetings dated 25.04.2008 and 11.08.2010 are stated to have been sent under 'certificate of posting'. The notices sent under 'certificate of posting' cannot be relied upon. In Marble City Hospital and Research Centre (P.) Ltd. v. Sarabjeet Singh Mokha reported in (2010) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y this, it is an admitted fact that the returns pertaining to the share allotments in question have been filed belatedly. The non-filing of the returns or statements, well in time, amounts to the denial of right to the shareholders as they were not getting necessary information in time about the affairs and management of the Company. Therefore, it is an oppressive act and reveals mismanagement in the affairs of the 1st Respondent Company. This view is fortified by the ruling given in Harshad Bhai B. Patel v. Bhagirath Construction Co. (P.) Ltd. [2013] 117 CLA 52 (CLB). 29. The share allotments made on 25.04.2008 and 11.08.2010 in favour of the Respondent Nos. 2 and 3 and further issues of capital seem to have been made by the Respondents for creating a new majority due to which the existing majority shareholders were reduced to minority position. This is in breach of fiduciary duty and constitutes an act of gross oppression. In this connection, reliance is placed upon the case of Uma Pathak v. Eurasian Choice International (P.) Ltd. [2004] 122 comp case 922. The actions of the Respondents with regard to increase of capital and issue of shares are solely with a view to gain control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny director by passing any ordinary resolution in any general meeting the first Directors appointed by virtue of these articles are not liable to retire by rotation unless they become incapacitated to act as such due to legal, physical, social or medical reasons. iii. The Directors appointed by the Company in General meeting shall retire at the second Annual General Meeting immediately following the Meeting in which they are appointed as directors. Such retiring Directors are, however, entitled to be re-appointed, unless they cannot be appointed as such for reasons mentioned in (ii) above." 32. In fact, Mrs. Hindu Paul was initially appointed as additional Director by the Board as on 2.01.1995 i.e. the date of incorporation of the 1st Respondent Company. She was due to retire and seek re¬appointment at the Annual General Meeting (AGM) of 1996. As per the article 28 (iii) of the Articles of Association mentioned above, she was to retire at every 3rd AGM commencing from AGM 1996. But, as per notices of the AGM 2006 and 2008 filed by the 1st Respondent Company, she has not retired by rotation and did not seek re-appointment. So her continuance in office as Director is illegal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Articles of Association of the 1st Respondent Company. This also renders the share allotments made on 25.04.2008 and 11.08.2010 as illegal and null and void. This view is fortified by the ruling given in Murari Mohan Kajriwal v. Shree Hanuman Cotton Mills Ltd. [2014] 123 SCL, 341/41 taxmann.com 191 (CLB - New Delhi). Thus, the Board Meetings held without quorum as required by the Articles of Association of the 1st Respondent Company are bad in law and the appointments of additional Directors at such Board Meeting was also bad in law, as that failed to satisfy the test required by law as has been laid down in Murari Mohan's case (supra). 33. In relation to the issue No. (iii), the Petitioners would contend that the appointment of Mr. K. A. Mathai as Director was purportedly made by the Board on 22.01.2011 and not in Annual General Meeting. So, the said appointment is also in violation of Article 28(i) of the Articles of Association of the 1st Respondent Company. This appointment is not made as an additional Director under Article 23 of the Articles of Association as evidenced by the fact that in the return of appointment (Form No.32), the designation of the appointee is shown a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
