9911796707
TMI Blog2024 (9) TMI 1612X X X X Extracts X X X X X X X X Extracts X X X X ..... . No.27 of 2009, on 10.12.2010. 2. Consequent on abolition of the Company Law Board and establishment of the National Company Law Tribunal, the case has been transferred to this Tribunal and the petition got re-numbered as TP No. 37/HDB/2017. The prayers made in the Amended Petition dated 10.12.2010 are as under: MAIN PRAYERS: "(a) Declare that the acts of the respondents 2 and 3 are prejudicial to the interest of the respondent no.1 Company and are oppressive against the petitioners. (b) Declare that the respondents 2 and 3 have failed in their fiduciary duties towards the respondent no.1 company and direct them to reimburse to the company the amount siphoned by them. (c) Declare the sale of land admeasuring 9 acres 39 guntas (equivalent to 48,279 square yards or 40,367 square yards) at Survey No.146/E and 147/E situated at Thimmapur Village, Kothur Gram Panchayat & Mandal, Mahaboobnagar District, Andhra Pradesh by respondent no.2 and 3 is illegal and without authority and is against the interest of the respondent no.1 company and is oppressive against these petitioners and set aside the sale deed dated 7th February 2007 between the company and the respondent no.29. (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h October 2008./;; (n) Direct immediate recovery of siphoned money together with interest at the rate of 15% p.a. in respect of respondent no.2 and 3 or in the alternative immediately invoke the lien on the shares held by them immediately and forfeit the shares held by the respondents. (o) Order respondents 2, 3 and 4 not to interfere in the affairs of the company, declare that they are oppressors and they mismanaged the affairs of the company; and permanently injunct them from interfering in the day-to-day affairs and management of the company and pass appropriate orders to punish them invoking Schedule XI and section 539 to 544 of the Companies Act, 1956. (p) Punish respondents no.2, 3 and 4 for their continued illegal acts and being accessory to production of fraudulent documents as per provisions of Criminal Procedure Code and also prohibit them from holding any post of Directorship or any office in the respondent no.1 company. (q) To protect the petitioners group, to have at least equal representation in the Board; and in respect of management of affairs of respondent no.1 company, the petitioners shall have at least equal representation (as Managing Director/ Wholetim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 48,279 square yards or 40,367 square yards) at Survey No.146/E and 147/E situated at Thimmapur Village, Kothur Gram Panchayat & Mandal, Mahaboobnagar District, Andhra Pradesh. (b) Direct the respondent no.29 not to alienate or create any encumbrance and not to create any third party interest in the land admeasuring ac. 9-39 guntas (equivalent to 48,279 square yards or 40,367 square yards) at Survey No.146/A, 146/AA, 146/EE, 147/A, 147/AA, 147/EE and 147/U situated at Thimmapur Village, Kothur Village, Kothur Gram Panchayat & Mandal, Mahaboobnagar District, Andhra Pradesh. (c) Freezing the voting rights of illegal allotments of 17,29,000 equity shares made on 19th May 2008 (4,56,000 shares) 10th September 2008 (9,39,000 shares) and 13th October 2008 (3,34,000 shares) and not to create any charge, lien or alienate in any manner in respect of these shares till the disposal of this petition. (d) Order that no rights, bonus, dividends would be declared or distributed in respect of all the above challenged shares without the leave of this bench and not to change the shareholding pattern till the disposal of this petition. (e) Order not to conduct any General Body meeting of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er no.3 is wife of petitioner no.1. 3.3 The petitioners together are holding 13,42,200 (thirteen lakhs forty two thousand and two hundred) equity shares of Rs.10/- each amounting to 29.57% shares of total unchallenged paid up share capital of 45,41,200 equity shares of Rs.10/- each of the respondent-company held by 25 members. A copy of the Annual Returns evidencing the shareholding of the petitioners herein is annexed as ANNEXUE-A2. 3.4 Respondent no.1 is the company in question. Respondents no.2 and 3 are the Directors of the respondent-1 company. Respondents no.4 to 29 are the beneficiaries of the impugned sale transaction. Respondent no.30 is the Registrar of Companies, Hyderabad and respondent no.31 is the Regional Director, Chennai. 3.5 Respondent no.2 (in his individual capacity as well as HUF) and respondent no.3 are holding 25.63% of total paid up capital of respondent no.1-company consisting of 45,41,200 equity shares of Rs.10/- each fully paid up before the impugned allotment. 3.6 It is alleged in the petition that respondents no.2 and 3 have illegally sold different parcels of land as described in paras no.3 and 4 (pages 17, 18 and 19 of the amended memo of petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AORDINARY GENERAL MEETING DATED 24.03.2008 It is further averred in the petition that respondent no.4 was appointed as Director arbitrary and removed the name of petitioner no.1 as Director of the company without following due process under sections 260 and 284 of the Act. Such move was taken by respondents no.2 and 3 with intent to usurp the properties of the respondent-company and to run the affairs of the respondent-company at their whims. Said respondents have filed Form No.23 (ANNEXURE-A9) stating that an extraordinary general meeting was held on 24.03.2008 for various purposes, such as, to remove petitioner no.1 as Director u/s 284, to appoint respondent no.4 as Director and to amend the Articles of Association of the company. However, in fact, no such extraordinary general meeting was held or even if it is assumed that it was held it was not validly held as notice calling for such meeting was not given. 3.11 In the said so called extraordinary general meeting dated 24.03.2008 petitioner no.1 was removed as Director, respondent no.4 was appointed as Director, Articles of Association were amended to facilitate calling general meetings and to facilitate the Board to issue fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.05.2008, 10.09.2008 and 13.10.2008 were held sans notice and such meetings are liable to be declared as void. Consequently all the resolutions allegedly passed are of no consequence and without authority of law. 3.18 It is further alleged that neither balance sheets nor Annual Returns have been filed in time, with an oblique motive to hide the illegal allotment of shares, illegal removal of petitioner no.1 as Director. It is further averred that respondents no.2 and 3 have filed Balance Sheet (ANNEXURE A-12) and Annual Return (ANNEXURE A-2, page 67) for the year ended on 31.03.2007 giving an illusion that Annual General Meeting was held on 29.09.2007 and the accounts and the accounts were adopted at the Board Meeting held on 01.09.2007. It is contended that as a matter of fact the petitioners have never received notice calling Annual General Meeting dated 29.09.2007. 3.19 ALLEGED MINUTES OF BOARD MEETING DATED 04.01.2008. The respondents have fabricated minutes of the alleged Board meeting dated 04.01.2008 projecting that shares of Mr. Kailash Narayan Bhangadiya were transferred to respondent no.2. 3.20 ALLEGED ANNUAL GENERAL MEETINGS DATED 29.09.2007 AND 30.09.2008. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .14 acres was purchased for respondent no.1-company, which was owned by father and brother of respondent no.2. The consideration for such acquisition of land has not been paid so far. It is claimed in the counter that it was respondent no.2 who promoted respondent no.1- company and he along with his associates established the industry, arranged loan, contributed capital, gave personal guarantees in addition to their personal properties including residential building of respondent no.2 as collateral securities in favour of Bank loan borrowed by respondent no.1- company. 4.6 It is submitted in para 8 of the counter that respondent no.3 too gave similar contributions for establishment of respondent no.1-company. In this para the deponent was critical of petitioner no.1 failing to revive personal guarantees. The deponent while giving figures of losses sustained by the respondent-company, has attributed causes of such losses sustained by respondent no.1-company and proceedings faced by respondent no.1- company before DRT, to the adamance of petitioner no.1. The deponent has flatly denied that no action of the respondents amounts to suppression of fact or fraud and invocation of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onent (PARA 7 of the rejoinder). 5.3 In para 9 of the rejoinder the petitioners have assailed the allegation of the respondents that petitioner no.1 has failed sign revival letter. It is submitted that the petitioners have filed application with the Hon'ble DRT (ANNEXURE A- 5, page 120, paras 5.15 and 5.16 of their petition). Relevant portion of the Bank's application was reproduced in this rejoinder. 5.4 In para 9 of the rejoinder the petitioners have vehemently denied the allegation of the respondents that the company was leased out to M/s Padmavathi Ispat at the instance of petitioner no.1. It is alleged in this para that it was respondent no.2, who has unilaterally and without knowledge of the petitioners given respondent no.1- copmany on lease to said M/s Padmavati Ispat. It is submitted that respondent no.1- company despite doing good business had sustained huge losses because of betrayal of the respondents. 5.5 On page 32 of the rejoinder it is submitted that the Board Meetings dated 29.09.2007, 28.03.2008 and 19.05.2008 stated to have been held are fictitious. The deponent pleads ignorance of any notice having been received of such meetings. 5.6 On page 35 of the rejoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has received a sum of Rs.25 lacs for allotment of shares and the company unable to allot shares has refunded Rs.7 lacs and retained the remaining sum without allotting required shares to him. It is alleged that cheque No.306214 dated 23.11.2-006 drawn of SBI, Hyderabad, Mahabubgunj Branch has been signed by petitioner no.1 himself as Director and has misutilised the amount. 6.6 Certain property disputes between the families of petitioner no.1 and respondent no.2 were referred to in the counter in para 3(h). Petitioner no.1 has filed Partition Suit being OS No.262 of 2008 before the Rangareddy District Court in March 2008. It is believed by the deponent in the counter that the said institution of the said partition suit led to present proceedings. 6.7 It is denied as factually incorrect that the petitioners together hold 29.57% stake in the capital of respondent no.1-company and 1st Respondent and associates only 25.63%. 6.8 In para 13 of the counter it is stated certain lands were sold to respondent no.29 as per the prevailing market rate relevant at the time of agreement. Even respondent no.29 was required to pay consideration higher than the guideline values because the Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1956 was issued to him. Postal acknowledgment receipts are annexed at pages no.276 to 283 of the counter filed to the main petition. The petitioners chose not to attend the meeting and resolution dated 24.03.2008 removing petitioner no.1 as director was passed in accordance with law after due compliance of procedure. 7. REJOINDER DATED 16.07.2011: The petitioners filed rejoinder to the reply/counter and submitted that: 7.1 That by wilful disobedience of order of the Hon'ble Company Law Board dated 31.03.2009, 15.04.2009 and 20.04.2009 the respondents have gained time for fabricating and manipulating the minutes and the other statutory records to suit their requirements in order to defend their illegal and oppressive actions. The respondents thereby destroyed the Board Meeting Attendance Registers which evidences the dates of Board Meeting and details of the Directors present. 7.2 The respondents have fabricated the notices, falsely claiming that they have been hand delivered. 7.3 With regard to share holding of the respondents it is submitted that the petitioners are holding 13,40,200 shares amounting to 29.57% and respondents No. 2 and 3 along with Jitender Kumar Kedia (HUF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity to acquire these shares as per the Articles of Association of the Company. The Respondents have neither filed any transfer notice nor documents qua determination of fair price.(Para 29) 7.10 It is further averred that the Petitioners have already stated to the Hon'ble Company Law Board the illegal, fraudulent and oppressive acts of the Respondents with all the necessary evidence, hence the Hon'ble Company Law Board may be please to grant the reliefs as prayed for in the Company Petition. 8. Memo for additional relief and written submission filed by petitioner on 02.05.2023 The petitioners have recapitulated all the allegations and submissions already made in the petition, however they have submitted the summary of acts of oppression and mismanagement which is captured as under: Some acts of oppression and mismanagement are Submitted: 8.1. Fabrication of Statutory Records: i. The CP 27 of 2009 dated 24.03.2009 was listed on 31.03.2009. On 31.03.2009 Hon'ble CLB directed the respondents to produce statutory records to the Bench officer by 15.04.2009. But Respondents did not produce the same. ii. On 15.04.2009 Hon'ble CLB directed produce statutory records by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attendance register but fails to produce the same at the time of inspection. vi. Several serious discrepancies in the statutory records are pointed out: * Board meeting notices claimed have been hand delivered a single person from the year 10.05.2003 to 09.03.2009. In none of the delivery proof of recipient's signature was obtained. This clearly proves all these hand delivery is cooked up story to defend the petition. One could see on the following dates notices have been issued on the same date on that of the board meeting, 26.05.2008 and 29.03.2008. * On a single day two board meeting notices were issued and two separate meetings claims to have conducted one at 11.00 am and the other one at 12.30. This clearly demonstrates the meetings are fabricated. 9-402004(page 258 of petition). * It is observed that in board meeting held on 04.01.2008 5,00,000 shares held by Kailash Narayan Bagadia was transferred to R2 (see page 273 of annexure to petition). On 28.04.2007 5,00,000 shares transferred to Kailash Narayan Bangadia but there is no board meeting on that day. On 04.01.2008 Kailash Nayaran Bangadia's shares were transferred to Jitendra Kedia without complying with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whereas even the government value as mentioned above is Rs. 68,000 per acre as mentioned supra page 83 and 101 of the petition. d. The Petitioner never attended the alleged meeting but shown to have been present (see page 265 of annexure to petition) the fact the said lands were sold to R29 who is the nephew of R2 not even mentioned in the resolution. It is important to note this land is mortgaged to State Bank of India without taking prior permission from State Bank of India the land was sold with ill motive by R2 to his own nephew. Important to note that the bank loan was discharged by the company but not by R29. e. The land has been sold at 91 paisa per sq. feet. It is a throw away price and ridiculous price. The Petitioner is willing to acquire the same land at 10 times more than the cost of the sale (page 28 of the Rejoinder). f. Comment of State Bank of India in its application before DRT at para 5.16 (page 120 of the Petition): "5.16. It is further come to light that the ra defendant has deliberately sold part of the mortgaged property i.e., Application `C' schedule property with dishonest intentions in favour of 5th defendant. The 5th defendant is there for im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of Mr. Bharath Kumar. On 30.03.2008 in the evening at about 6.00 PM. I along with co accused persons who worked as security guards in the past with me.... ... have gathered in shadnagar and according the plan we drove in AP 12E/7029 Scorpio and AP AD 9000 Skoda Car along with sticks and iron rods trespassed in the said factory leased out by me and threatened security personal, labourers and other workers and Mr. Bharath Kumar the lessee to kill them and disrupted the work and forced them out in violation of the leased deed then we have encroached upon the property and started out own operations.... iii. On a complaint by the police on 03.04.2008 the Criminal Court remanded accused A-1 to A-17 and remanded them to judicial custody till 17.04.2008 (please refer page 161). The FIR filed by the lessee could be seen at page 164 of annexure to petition. Conduct of R2 who acts against the public interest is demonstrated in page 160: ".... On the request of the complaint, the A-I gave his original license with a letter of cancellation duly signed by him with a request not to submit the same to excise department because one bank recovery case was pending in Debt Recovery Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ached thereto as the general meeting resolving upon the creation thereof shall direct, and if on such directions be given, as the Directors may deem fit and in particular to qualified rights to dividends to and in the distribution of the assets of the Company." This article was replaced with unknown set of articles. Please see page 208(of petition) explanatory statement it is clear that amendment of articles were not circulated in advance to shareholders. It is shocking to note the new set of articles were simply identified by the chairman and not even circulated. This is the gross misuse of provisions of act. b. In the same page 208, no mandatory removal notice was given (including special notice u/s 190 of Companies Act 1956) to the lc Petitioner whose office was sought to be removed. Section 284(2) special notice not provided. Section 284 (3) not complied. Notice of removal not individually served to the petitioner. Explanatory statement is not attached as mandated under Section 173 not complied with. Hence all the resolutions passed thereat are illegal and non est in law. Even the respondents at their counter at page 222 to 224 had not attached the mandatory documents. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectronic means. Hence their claim is false. Please find page 55 of the rejoinder at para 19 last para "...The respondents have changed the allegation in this revised counter wherein they claim that the Form 32 was not filed because the Petitioner No. 1 has not furnished his DIN. The respondents are creating new story to cover-up their earlier claim that they have filed a physical form no. 32 with the registrar of companies." 8.5. ILLEGAL THREE ALLOTMENTS i. Three illegal allotments made on 19.05.2008, 10.09.2008 and 13.10.2008 appears to have allotted 4,56,000 shares, 9,39,000 shares and 3,34,000 shares (para 12, page 27 to 34 of the petition). Form 2s at page 214 to 226 of annexure to petition. As mentioned in para 21, the said allotment was done with following serious irregularities: * Some of the existing shareholders have not been offered any shares at all * There is no proportionate offer to the existing shareholders * 21 rank outsiders have been bought in as new shareholders (Respondent No. 7 to 27). These persons are cohorts of the Second Respondent * This allotment was made after fraudulently/ illegally removing the Petitioner No. 1 from the Directorship of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matching revenue. It is further submitted that the above table also depicts the total expenditure during against the turnover from sale of sponge iron for the year 2004-05 is 99%, for the year 2005-06 it is 116% and for the year 2007-08 it stands at 102% where for the year 2006-07 it is strangely at 261% under no circumstances the total expenditure in a year can be 261% whereas the total expenditure for all other years stood around 99% to 116%. No prudent man will incur continues cash losses over years. The only explanation is that obviously during 2006-07 actual production of Sponge Iron and Sale are not accounted for in the Books of Accounts. Obviously manipulations have occurred. A further thorough investigation is required. Ex- facie the Balance Sheets does not reflect the true and fair view of the company. Hence the prayer at page 46, para (y), that is ordering investigation under section 237 may please be granted on this ground alone. iv. From the above it is very much evident that Respondents 2 and 3 are playing fraud upon the shareholders of Respondent No. 1 by illegally diverting the monies of the Company to their account either by selling the material without actually b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at they have brought in Rs. 9 crores upto 31.03.2010 either by themselves or through their associates. In this regard it is pertinent to bring to the kind notice of this Hon'ble Tribunal that the Respondents have earlier filed on Company Application No. 20/ 2010 wherein the Respondents have sought to allot shares to themselves and their associates which includes M/s. Yankee Management Services Private Limited and- M/s. Dhavidhya Impex Private Limited the Petitioners have with documentary evidence proved that the claim of the receipt of money by the Respondents from these entities as false; after that the Respondents did not press for CA 20. The Company Application No. 20 of 2010 and counter to the Application may be read as part and parcel of this submission (see page 75 to 100 of counter to Company Application No.20 of 2010). Even if it is assumed that the company has received money the same is a benami transaction and the Respondent should be punished for the same. The following are legal requirements for a person to become a member of the company: a. Consent to become a member in writing (share application form). b. In case of the Company Board resolution for authorising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' of R1 Company and its Managing Director i.e., R2 in the Company Petition. v. It is humbly submitted that the company already have 47 shareholders. If the Company Application 20/2010 is permitted the number of shareholders would be 57. The company being a private company this allotment would be ultra vires its articles and also contrary to the companies Act. vi. The above alleged two share applicants are corporate entities, perusal of their balance sheet, that was available at for public information at the MCA web site reveals, that these investments of Rs. 25,00,000/- each in Yankee Management Services Private limited and Dhanvidya Impex (P) Ltd, does not contain these investments in their balance sheets as on 31.03.2009, copies are available with annexure to CA 51 of 2010. If the statement of R2 is true then the investments of 25,00,000/- each in those companies should have been reflected as share application money pending allotment, should be displayed in the balance sheet. The perusal of the balance sheet would reveal that the same are not reflected in those companies. Hence it is categorically clear R2 representing R1 company in the capacity of Managing Director has m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejoinder). e. Binjusaria solvents Allegations by the Respondents are false, completely replied in page 17 para e of the rejoinder. The balance sheet of the company is signed by R2 himself for the year 2005-06. f. R2 in the habit of obtaining signatures on the blank papers: R2's father's advertisement (page 21 para 8) that R2 has fraudulently obtained signatures on blank papers, stamp papers and dis owns himself with any such documents. He also advertised in this regard on 22.07.2009 in Swathantra Vartha at page 20 and 21 of the annexure to rejoinder. This clearly shows the conduct of R2. 8.9 Other mismanagement acts: i. Loan to Shubam Transoceanic Private Limited - 65,93,102 (page 40 of the rejoinder and annexure 58 and 65 to the rejoinder). This is a related party transaction where in R2 and R3 are directors of the company. For this transaction no approval of board has been obtained. ii. Huge salary increase to R2, please refer page 268 of annexure to petition. MD's remuneration increased from Rs. 50,000 to Rs. 2,00,000 per month. iii. No AGM notices were received for the year 2007 -- 2008 (see page 260) on behalf of the petitioner one Mrs. S. K. Rathi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence and/or proof is filed by the Petitioners. 4. Declaration of sale deeds as illegal and for cancellation of the said sale deeds the jurisdiction is elsewhere not by way of present proceedings. Even otherwise, the Petitioners failed to prove any illegalities in execution of the sale deeds. The Petitioner No.1 was part of the decision taken to sell the assets to safe guard the interest of the Company and to meet certain exigencies and he signed the minutes wherein the minimum sale price is also fixed. Perusal of the sale deeds would reflect that the sale consideration was fixed at Rs.40,000/- and as on the date of sale the market value as per the government records was Rs. 30,300/- per acre (The letter issued by the Sub-Registrar Shadnagar dated 18-04-2009 at Page No. 214 of the Counter). 5. In the year 2008 the company has allotted certain shares to individuals who had made an application in writing along with advance cheque which received in accounts before allotment. The Paid up share capital of the Company prior to allotment was 4541200 and after allotment 6270200. These shares were sold as per value at Rs.10/- each. As on the date book value of shares (Capital/ No. of Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the CC account Cheques maintained in SBI. Hand writing expert report in page No. 6 to 23 in counter filed in CA No. 19/2010, specially page 21 and 23. Further the Company has also initiated criminal proceedings against the Petitioner No.1 for committing forgery and the copy of FIR is at Page No. 1 to 5 of the Counter in CA No. 19/2010. 9. The amendments to the MOA were made with the consent of shareholders. The notices of EGM were sent to the Petitioners. Page No. 276 to 283. 10. Meeting dated 19-05-2008 was Board of Directors Meetings but not EGM as falsely claimed by the Petitioners and by the said date the Petitioner No.1 was already removed and seized to be a Director of the Company. Page 298 to 303 of the main Counter. 11. So far as remaining reliefs sought and grievances made, no iota of proof and/or evidence is placed on record by the Petitioners. A. Grievance of the Petitioners is that various decisions were taken with respect to the functioning of the Company without issuing notices to the directors of the Company. i. The said allegations are false for the reason that till the date of removal of the 1st Petitioner as Director of the Company all notices were ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company, it shall, within two months from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. (2) The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may appeal to the 2 [Tribunal] against any refusal of the company to register the transfer or transmission, or against any failure on its part within the period referred to in sub-section (1), either to register the transfer or transmission or to send notice of its refusal to register the same. (3) An appeal under sub-section (2) shall be made within two months of the receipt of the notice of such refusal or, where no notice has been sent by the company, with in four months from the date on which the instrument of transfer, or the intimation of transmission, as the case may be, was delivered to the company. (4) If - (a) the name of any person - (i) is, without sufficient cause, entered in the regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be made by a petition in writing and shall be accompanied by such fee as may be prescribed. (11) In the case of a private company which is not a subsidiary of a public company, where the right to any shares or interest of a member in, or debentures of, the company is transmitted by a sale thereof held by a Court or other public authority, the provisions of sub-sections (4) to (7) shall apply as if the company were a public company : Provided that the 6 [Tribunal] may, in lieu of an order under sub-section (5), pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid, within such time as may be allowed for the purpose by the order, on payment to the purchaser of the price paid by him therefor or such other sum as the 6 [Tribunal] may determine to be a reasonable compensation for the right in all the circumstances of the case. (12) If default is made in complying with any of the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 7 [five hundred] rupees for every day duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 5 [Tribunal]. (6) Notwithstanding anything contained in this section, any further transfer, during the pendency of the application with the 5 [Tribunal], of shares or debentures shall entitle the transferee to voting rights unless the voting rights in respect of such transferee have also been suspended. (7) The provisions of sub-sections (5), (7), (9), (10) and (12) of section 111 shall, so far as may be, apply to the proceedings before the 1 [Tribunal] under this section as they apply to the proceedings under that section]. 397. Application to [Tribunal] for relief in cases of oppression (1) Any members of a company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members (including any one or more of themselves) may apply to the [Tribunal] for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1), the [Tribunal] is of opinion- (a) that the company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment of R3 / Mrs Anita kedia as Director (d) Illegal payment of remuneration to R2 and R3 (e ) illegal lease of company factory to M/s Padmavati Ispat (f) financial irregularities and ( g) illegal allotment of shares to respondents R5 to R28 on 19.05.2008, 10.09.2008 and 13.10.2008. 13. We have heard Ld PCS Shri Radha Krishna, for petitioner and Ld Sr.Counsel Shri A.Venkatesh along with Shri Hari Krishna and Shri Mayur Mundra for respondents and perused the documents submitted in the case. Point 1: Whether the acts or conduct of respondents are prejudicial and oppressive to the petitioners or /and whether the affairs of the Company are being conducted in a manner prejudicial to the interests of the Company as alleged by petitioners ? Submissions made by both sides and our findings and observations on various issues of oppression and mismanagement as alleged by petitioners are as under: SUBMISSIONS 14. The Learned Counsel for the Petitioner would submit that two parcels of land each measuring Ac.9.39 guntas were sold on 07.02.2007 to Respondent No.29 at a consideration of Rs.3,99,000/- for each plot which is much below the market price of these plots. The Learned Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner further submitted that R3 was illegally appointed as director w.e.f 19.05.2008 and remuneration of Rs 25000 pm and Rs 50000 pm were fixed for R3 and R4 in the Board Meeting dated 19.05.2008 to get undue benefits to the respondents at the cost of the Company. 18. The counsel for the petitioners would submit that all these acts are prejudicial to the interest of petitioners and the company and therefore to be treated as acts of oppression and mismanagement by the respondents. 19. The Learned Counsel for the Respondent contended that petitioners have failed to prove any illegalities in the execution of the sale deeds and the only point raised is that it has been sold at a low price. The respondents submitted that the guideline value at the time of entering into the sale agreement on 15-12-2006 was Rs 30,300/- whereas when the sale deed was put to registration on 07.02.2007 , the guideline value increased to Rs 67000/ , with the result , balance stamp duty was paid by the parties. The Ld counsel further submitted that Petitioners can not challenge this decision at this stage as Petitioner No.1 was also part of the decision making to sell these land assets at the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector was taken up in view of the special notice dated 13.02.2008 from two of the shareholders under Section 284 read with Section 190 of the Companies Act, 1956 seeking his removal from directorship. The respondent contended that Petitioner was appointed as Director in the year 2004 i.e., after 9 years of the incorporation of the Company. He was neither a promoter nor First director of the Company and he acted against the interest of the Company which necessitated his removal from the Directorship of the Company within the period of 4 years of his joining in the Company. Ld counsel further submitted that petitioner no.1 acting in connivance with One of the customers, viz. Messrs Binju Metal and Alloy Industries Pvt Ltd, siphoned of an amount of Rs.36,31,853/- to another company, named Binjusaria Solvents Pvt Ltd. Ld counsel for respondents alleged that petitioner no.1 has forged the signature of respondent no.2 on few cheques of the Company and an F.I.R. has been filed for fraud and forgery in this respect . To this allegation of counsel of the respondents , the counsel for the petitioner replied that Binjusaria Solvents Private Limited has given loan to respondent No.1 Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Bank of India on the properties under sale , has also been mentioned in the sale deeds. 25. We further observe that the market value of the property is shown as Rs.68,000/- per acre (Rupees Six Lakhs Seventy Eight Thousand and Five Hundred only) in the sale deeds for the purpose of calculating applicable stamp duty. 26. We also perused the market value certificate issued by Sub-Registrar, Shadnagar on 18.04.2009, the scanned copy of which is reproduced as under: 27. In view of the written and oral submission made by both the parties and after perusal of the records as mentioned above, we are of the view that petitioner has not pointed out any irregularity in the process of sale and the main contention of the petitioner is about the valuation of the land. The valuation report which has been filed by the Petitioner with the rejoinder without seeking any permission from the Tribunal cannot be relied fully as it makes a general remark, that through enquiry, it is revealed that a rate of Rs.30,00,000/- to Rs.35,00,000/- per acre is prevailing for land having Kacha approach in this area and the lands abutting the BT road being quoted at Rs.45 Lakhs per acre. Further, in the same v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o SBI) and admittedly the properties which are not clear and marketable will fetch a price lower than the market value. In the above backdrop and keeping in view that consent of Petitioner no 1 was also there in fixing the cut off sale price , we do not find any act of oppression and mismanagement for selling the land parcels at a price lower than market price. Therefore, keeping in view the aforesaid facts, we do not find any act of oppression and mismanagement in the sale of two land parcels as aforesaid by the Company to Respondent No.29. 29. We have perused the notice dated 22.02.2008 (filed as Annexure-XXXI with the Counter) of Extra-Ordinary General Meeting (EGM) and find that notice has been issued and 2nd paragraph of the notice clearly states that "in terms of Section 284 read with 190 of the Companies Act, 1956, representation received from two shareholders are also forwarded herewith which are special notices for passing resolution under Section 284 of the Companies Act, 1956". 30. On careful perusal of the said notices from the shareholders (filed as Annexure XXXII & XXXIII) for removal of Petitioner No.1 from the Directorship of the Company, we find that the sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. Since, we consider that meeting was conducted in accordance with law , hence all the decisions taken in the meeting i.e Changing the name of the company from Kedia Alloys Private Limited to Om Shakti Iron Private Limited, amendment in the Articles of Association importantly shifting the power to allot shares from shareholders to BOD, removal of petitioner no1 as director and appointment of R4 as Director and consequently put to actions cannot be treated as acts of oppression and mismanagement by the respondents. 34. We find merit in the submissions made by respondents that though lease deed was signed to lease out the company to Messrs Padmavatahi Ispat but it was never put into action and ultimately the said lease deed was cancelled and advance lease rent was returned to lessee , therefore this can not be an act of oppression and mismanagement. 35. The petitioners have simply alleged that appointment of R3 and payment of remuneration to the Directors is an act of oppression and mismanagement but has not given any justification or evidence for the same. Therefore, we decide that merely on the basis of allegation these acts can not be treated as acts of oppression and mismana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11.2-006 drawn on SBI, Hyderabad, Mahabubgunj Branch signed by petitioner no.1 himself as Director and thus remaining unsecured loan is Rs 18.00 lacs which is claimed to be the share application money. Counsel would submit that it is nothing but misrepresentation of facts . Our findings : 38. We find that Company (R1) amended its Article of association in EGM dated 24.03.2008 , shifting the power to allot shares from shareholders to BOD . Accordingly, total 1729000 shares were allotted to various respondents on 19.05.2008, 10.09.2008 and 13.10.2008 through the Board Meetings on said dates. The main contention of the petitioners is that these shares have been issued without any offer to them , being existing shareholders and therefore these allotments of shares are irregular and deserve cancellation and reluctantly rectification of register. We have carefully perused section 81 of Companies Act, 1956 and find that subsection 3 of said section 81 which deals with further issue of capital clearly says that this condition shall not apply to a private company. The relevant portion of the same is reproduced hereunder: SECTION 81 - Further issue of capital. Further issue of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X
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