TMI Blog2007 (5) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... o ₹ 25,00,000/- comprising 25000 equity shares of ₹ 100/-. The paid up share capital of the company as on 30.9.2004 was ₹ 11,00,000 divided into 11000 equity shares of ₹ 100/- each. The main business of the company is that of Iron and Steel founders alloy and steel makers, steel convectors and to establish steel Re-rolling Mills. The petitioners' hold 47.71% shares in the R-1company, the respondent shareholding is 37.29% and the remaining 14.99% is held by the others. 3. Shri Virender Ganda, Counsel for the petitioners pointed out that the Petitioner along with certain other Shareholders collectively holding 5,249 Equity Shares of ₹ 100 / each, credited as fully paid-up, forming 47.71% of the total share Capital, filed the aforesaid petition and inter-alia challenging Form No. 32 filed with the Registrar of Companies on 28th April, 2004 under the forged signature of Petitioner No. 1 in respect of illegal appointment of (i) Shri. Manish Paliwal (Respondent No. 3) S/o Shri. N K. Paliwal (Respondent No. 2) and (ii) Shri Abishek Paliwal (Respondent No. 4) S/o Shri Ajay Paliwal (Respondent No. 8); illegal and unauthorized Sale of Flat No. 105, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conspiring with other respondents had allegedly attempted to sell and transfer the said Flat to respondent No. 5 and 6 as per the agreement to sell dated 7.7.2005. It was emphasised that the Company (R-1) had never even discussed or contemplated the sale or transfer of the said flat to any one whatsoever and nor had the company authorised any person to take such action on its behalf. It was pointed out that the market value of the purported property has now touched ₹ 1 crore and the rights are purportedly attempted to be transferred at a meager price of ₹ 25,00,000/- vide the purported agreement to sell and purchase dated 7th day of July, 2005. The respondent Nos. 2 to 9 fraudulently and clandestinely attempted to transfer the rights of the company in the said Flat in favour of Respondent Nos. 5 and 6 wife of Respondent Nos. 2 and 8 respectively. The aforesaid agreement, it was argued, was signed by Shri N.K. Paliwal (R-2) on behalf of the Company and was registered with the office of Sub-Registrar Vikas Sadan, New Delhi. Further, it was pointed out that the petitioners then approached R-10, M/s Universal Builders and Contractors and requested them to mark caution aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid lease for the last 7 years, knowing fully well that the lease was executed with Unanimous Consent of all concerned and was considered as in the interest of Company by one and all. The issue now raised by the Respondents clearly appears to be an afterthought and a false alibi. The fact that the Respondents were fully aware of the aforesaid lease and deciding to remain silent for 7 years is clear manifest of their unqualified consent and agreement to the aforesaid lease. In any case, it was argued to justify their own wrongs, they cannot take the shelter of a transaction which happened 7 years ago. 8. Responding to the respondents allegation that the petitioners had committed contempt by flouting the CLB's order dated 9.9.2005 by opening a new bank account at the back of the respondents, the counsel argued that (i) the opening of a new bank account was necessitated on the receipt of a refund of the Income Tax and some other payment which had to be collected and credited to the Company, the main account having been ordered not to be operated. The payment received as aforesaid have been used only to discharge the liabilities of the Company through account payee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 286 have not been complied with as the Petitioners did not receive any notice in writing for the Board meeting of 1st April 2005; The Appointees had not filed their consent / form No. 32 with the office of Registrar Companies. It was further pointed out that Form No. 32, as discovered, was filed with the office of the Registrar of Companies under the forged signature of Petitioner No. 1. My attention was drawn to handwriting expert's (Pt. Ashok Kashyap) report evidencing the forgery It was pointed out that the report of handwriting expert (Mrs. R.K Vij) placed on record by the Respondents suffered from several discrepancies; Documents received (Q1 and Q2) when compared (Marked as 1 to 6 6/1, 7 to 9, 9/1) were not authenticated / verified by the expert neither by signature or initials nor by any rubber stamp, etc; Juxtaposition Chart was not placed on record, which is essential for the purpose of comparison between the Admitted and Disputed Signatures; the two documents were to be compared in a photograph with the same degree of enlargement; the report did not indicate the degree of enlargement used by the expert; the expert had used the two terms variation and differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several transactions took place in the said account without the knowledge and concurrence of the applicant / respondents. It was argued that the bank account was opened unauthorisedly and without taking permission of respondent No. 1 company and no board resolution to authorize the petitioners to open and operate the Bank Account was passed. My attention was drawn to the CLB's order dated 09.09.2005, granting status quo of the fixed assets and also directing that the bank accounts of the company shall not be operated. The said order was passed as a consent order and the respondents thereafter had not operated the bank accounts of the company. However, the petitioners themselves behind the back of the respondents and this Hon'ble Board not only opened a new bank account but also siphoned huge sums of money through the new bank account. Further, forged documents were submitted with the bank including forged extracts of minutes of the Board Meeting, when no board meeting of the company had been held. Further, it was argued that a bare perusal of the documents show even the correspondence address has been shown that of the petitioners and their family members and not the regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the respondents contended that the Petitioners are also guilty of siphoning away the other property in Muzaffarnagar in favour of the near relatives (mother-in-law of the son of the petitioner No. 2) in the year 1999. The Petitioner No. 2 has given the 33 bighas (27000 Sq. yards approximately) situated at Muzzaffarnagar which was the factory land of the Respondent Company on 99 years lease to his near relatives without any knowledge and concurrence of the Respondent No. 1 Company and other Directors. It was argued that the petitioners have leased out the said land at a minimal rate of 2,000/- p.m. without the knowledge and concurrence of the respondents. Further, even the lease rent has not been received by the company, except now in the latest balance sheet of 31.03.2006 when the same was objected by the respondents which clearly shows that the whole purpose of the lease is to siphon of the major property of the Respondent Company and deprive the majority shareholders of their legitimate rights in the Respondent Company. Further the lease received by the respondent company was also deposited in the newly opened Canara bank Account which has also been siphoned off by the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m to their family members i.e. in favour of his brother- in-law and mother-in-law without knowledge and concurrence of the respondents. Further, it was argued that it is a settled law that the conduct of the parties is vital in an adjudication of a matter, and the same is more so relevant, in the present equitable jurisdiction of this Hon'ble Board. It was pointed out that the it has been held by the Hon'ble Karnataka High Court in the matter of Srikant Datta Narasimharaja Wadiyar v. Sri Ventateshwara Real Estate Enterprises P. Limited and Ors (judgment dated 20.04.1989) that the conduct of the parties in not only the present proceedings but also in other proceedings is relevant and to be seen. The High Court has categorically observed: That takes me to the question of good faith of the petitioner in presenting these company petitions. The question of good faith has to be tested by the conduct of the petitioner as reflected not only in the proceedings before this court but also in parallel proceedings in the civil courts and in other civil litigations in other courts. Thus, it was argued that the present petitioner's are not entitled to any relief from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at belated stage. Though the petitioners have now, through a report of the expert, have stated that even the signature of petitioner No. 1 on Form 32 is forged, the Respondents in response to the same have also taken a report of an expert wherein the report of the expert clearly states that the signature on Form 32 is of the petitioner No. 1 only. Therefore, the petitioners were fully aware of the appointment of Respondent No. 3 and 4 as Directors and they cannot resile from the same at this stage Further, it was argued that the said appointment has been made in order to give younger generation of the family a chance in the business of the company. Therefore, the said appointment was made with the consent of all the parties and therefore the Form 32 was signed by the petitioner No. 1 himself. However, he is back tracking at a belated stage as an after thought. Further, it was argued that the report filed by the petitioners and counter report filed by the hand writing expert are not to be relied in a summary jurisdiction of Section 397/398 and the petitioners ought to have filed appropriate proceedings for the same. It was argued that the petitioners' reliance upon the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of the petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of a company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder. 19. I have considered the pleadings and the documents filed therewith as well as the arguments of the parties. I find that the preliminary objections raised by the respondents in this case are not tenable. The respondents have argued that the petitioners have not come with clean hands to the CLB and in this regard their conduct even in other proceedings i.e. in CP No. 78/2005 is also to be noted. It has been pointed out that the petitioners have several times acted against the interest of the R-1, as pointed out in CP No. 78/05 they have transferred an amount of ₹ 64,50,000/- in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs in CP No. 71/05, I find that the petitioners have explained that a separate bank account was opened to take credit for Income Tax refund and some other payments which had to be collected and credited to the company as the same could not be deposited in the bank account which was not to be operated due to CLB's order dated 9.9.2005 whereby status quo with respect to the properties of the company as of date was to be maintained and the bank account of the company was not to be operated, in this respect it was explained by the petitioners that the payments received were utilised for the respondent company by issuing account payee cheques. It is true that the new bank account was frozen by the CLB but the respondents statements in this regard are incorrect and untrue as the CLB's order dated 9.9.2005 pertained to the then existing bank account and not the new bank account opened subsequently. However, this matter raised by way of contempt application No. 320/06 has received due consideration in CP No. 71/05 being disposed off in this order. The petitioners have successfully explained their position and no case of contempt can be made against them. As regards transferring of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to public interest or in a manner oppressive to any member or members: and (b) that to wind up the company would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up . A careful analysis of the above would indicate that it is for this Board to form an opinion that the affairs of the company are being conducted in an oppressive manner and once it forms such an opinion, the just and equitable grounds for winding up of the company become established and this Board has to grant relief in terms of Section 402, if it again forms an opinion that such winding up would prejudicially affect the interest of the members/company. In other words, once this Board gives a finding that acts of oppression have been established, winding up of the company on just and equitable grounds becomes automatic. Shri Sarkar relevantly referred to the unreported judgment of Delhi Court in Prentice Hall case, wherein, the Court has held that once oppression is established, reliefs under Section 402 could be granted. In the present case the petitioners have succeeded in establishing a case that the affairs of the company are being conducted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Road, New Delhi to R-5 (wife of R-8), and R-6 for inadequate consideration of ₹ 25 lakhs which in turn has been repaid to R-7, 8 and 9, the respondents have failed to refute the allegations made in this regard. I find that the petitioners' contentions in this regard are correct and tenable. There was no authorization by the Board of Directors or shareholders to sell off this asset of the respondent No. 1 company, the provisions of Section 293(1)(a) have not been complied with, consideration of ₹ 25 lacs for this flat also appears to be inadequate, the transactions are within the family members of R-2 who has signed the sale documents on behalf of the company without any authority, thus indulging in this sham transaction whereby sale consideration was deposited in the bank on 8.7.2005 and was withdrawn on the same day. In this case I notice that the respondents have breached their fiduciary duties as directors. On the role of Directors, the law is well settled. In some respects, Directors resemble trustees. Equity prohibits a trustee from making any profit by his management, directly or indirectly. It is objectionable to use such power simply or solely for the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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