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TMI Blog2013 (4) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... y recording the shares issued thereby; ii) To appoint an reputed, independent from of auditors to carry out a special audit of the books of accounts of the Company to ascertain the amount drawn in excess of the remuneration approved and to determine the extent of loss occasioned to the Company as a result of acts of misfeasance and misapplication of funds and properties of the Company. iii) To surcharge each of the Respondents No.2, 3 and 7 for the loss caused by each of them to the Company and to direct them to make good the losses; iv) To recast the accounts of the Company on the basis of findings of the independent audit firm and adopt the revised accounts at a general meeting to be called specifically for the said purpose; v) To declare that Respondents No.2 and 3 have acted in an oppressive manner, contravened their fiduciary duties and in a manner prejudicial to the interests of the Company and to declare that Respondent No.2 and 3 have lost their directorship pursuant to operation of law as they have failed to disclose their interest in relation to several related party transactions; vi) To declare that Respondents No.5 and 6 have not acted in a manner expected of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r redemption in 1997, it has not been redeemed and PNB Cap continued to hold the said preference shares even as of date. 6. The stand of respondents/applicants was, that by virtue of Section 80 of the Companies Act, 1956, the preference shares can be redeemed only out of the profits of the company or out of proceeds of fresh issue of shares for the purpose of redemption. 7. In 2005, the 1st applicant company, being a loss making entity, was unable to redeem the shares in 1997, because it had no profits, nor could it make any fresh issue of shares. 8. Punjab National Bank, being the creditor of the 1st applicant company, advised that the 1st applicant company should pay Rs. 2,00,00,000/- (Rupees Two Crores only) to PNP Capital Market Services Company as loan. The request was accepted and the company paid Rs. 2,00,00,000/- (Rupees Two Crores only) to PNB in 1998-1999 and since then it was accounted as "Loans and Advances" in the books of the 1st applicant company. 9. It was pleaded that perusal of balance sheet of the company shows, that the said preference shares have not been redeemed and are still shown as part of the share capital schedule and the Asset side the sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat too on repeated protests by him. 15. It was pleaded, that respondent no.2 had instructed the accounts department to merge the corporate accounts into the books of hotel accounts only in the year 2011. Therefore, the question whether the preference shares were redeemed or not is basically a fact, that could be derived from records of the company. 16. It was also the case, set up by the appellant, that the petitioner possesses indefeasible right to get 71 Lakh shares, therefore, would be entitled to maintain the petition under Section 399 of the Act. The stand therefore was, that for considering the application under Section 399, if the books of accounts are mechanically examined, then the very purpose of the legislative enactment of Sections 397 and 398 of the Act would stand defeated. 17. It was the case of appellant herein, that in the Board Meeting, which is under challenge in C.A.No.189 of 2012, the respondents have surreptitiously manipulated the entry relating to share application money, as it is highly intriguing to know as to how share application money could be unilaterally transferred to unsecured loan account. Secondly, the company petition seeks a direction to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare capital was required, i.e.1,20,78,700/- (Rupees One Crore Twenty Lakhs Seventy Eight Thousand and Seven Hundred only), whereas the 1st petitioner/appellant was holding 12,00,000 equity shares of Rs. 10/- each, amounting to Rs. 1,20,00,000/- (Rupees One Crore and Twenty Lakhs only), which was less than 1/10th of required paid up share capital. 22. It was also held by the learned Company Law Board, that the appellant was seeking a direction to implement the circular resolution dated 12.03.2012, whereby the Board of Directors had consented to issue and allot 57,14,285 equity shares at an issue price of Rs. 17.50 per share at a face value of Rs. 10/- + premium of Rs. 7.50/- share, therefore, with these shares the appellant fulfills the eligibility under Section 399 of the Companies Act, was not accepted, on the ground, that though paid up share capital of the company was established by producing sufficient material evidence on record, based on information sought from the Registrar of Companies, Tamil Nadu, as independent evidence. 23. It was in response to the letter of the learned Company Law Board, that the balance sheets of the company for the years 2006-2007, 2008-2009 and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Hon'ble Karnataka High Court in Mr. Vijayan Rajes and another vs. M.S. P. Plantations Pvt. Ltd., (2009) 151 CompCas 413 (Kar), wherein it has been held as under: "31. Though the Company Law Board did dismiss the petition, it is not precisely on the ground that the petition itself was not tenable, but only after examining the questions relating to the validity of the redemption process and as a consequence the petitioners being no more members thereafter i.e. On and after 9.3.1996, they ceased to be members and therefore a petition presented under Section 399 of the Act was held not maintainable at the instance of the petitioners. 32. The reasoning given by the Company Law Board does not appeal to us. If the finding is to be that the persons presenting the petition do not qualify for presenting a petition under Section 399 of the Act, no further question arises and the petition was to be dismissed at the threshold. But the Company Law Board has viewed the working of the Section 399 of the Act in the converse way, which is not a proper understanding of the provisions of Section 399. But, on authority, it has been established that for the purpose of examining as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for the appellant, that to maintain petition under Sections 397 and 398, it is always not necessary that the petitioner's name should be in the Register of Members, as the term "Member" appearing in Sections 397 to 399 should be understood in the context in which it is used, therefore, merely because name of petitioner is not entered in the Register of Members qua additional shares to be allotted could not be the ground to reject his petition, as the question whether a person is a member or not depends on the circumstances of each case, which could be proved, if the petition was heard on merit. 35. However, this contention of the learned counsel for the appellant cannot be accepted. It is not the case where the stand is that shares have been allotted to the appellant and his name not entered. It was admitted by the learned counsel for the appellant, that the procedure for allotment was not complete. The letter dated 16.08.2012 on which strong reliance was placed by the learned counsel for the appellant itself showed, that the shares were issued to the appellant only after approval from the AGM and on acceptance of request made to the appellant to waive claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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