2001 (8) TMI 1278 - HC - Companies Law

Court declares share allotment illegal, appoints special officer, and orders new board election.

The court found the issue and allotment of 1,960 shares to be illegal, null, and void due to non-compliance with the Companies Act. It declared Form No. 2 ... Oppression and mismanagement Issues Involved:1. Legality of the issue and allotment of 1,960 shares.2. Validity of Form No. 2 and Form No. 32 filed.3. Injunctions against respondents regarding the shares and company management.4. Appointment of a special officer/administrator/receiver.5. Investigation into the affairs of the company u/s 406 of the Companies Act, 1956.6. Convening an extraordinary general meeting of shareholders.7. Rectification of the Register of Members.8. Removal of directors and supersession of the board.9. Disclosure of company funds diverted to Bhura Private Ltd.10. Inspection of statutory books and records.Summary:1. Legality of the Issue and Allotment of 1,960 Shares:The petitioner sought a declaration that the issue and allotment of 1,960 shares to respondent Nos. 2 (deceased) and 4 were illegal, null, and void. The court found that no board meeting was convened for sanctioning the issue and allotment of shares, no notice was given to petitioner Nos. 1 and 2, and no general meeting was held for approval. The issuance of shares was done without following the provisions of the Companies Act, and no pro-rata offer was made to the petitioners. The court struck down the issuance of shares on these grounds.2. Validity of Form No. 2 and Form No. 32 Filed:The petitioner challenged the validity of Form No. 2 and Form No. 32 filed on 23-10-1989 and 27-11-1989. The court noted that these forms were not in compliance with section 303(2) of the Companies Act and were filed without proper notice or approval. The court declared these forms illegal, null, and void.3. Injunctions Against Respondents:The petitioner sought various injunctions to restrain the respondents from giving effect to the issue and allotment of shares, from representing themselves as directors, and from interfering with the affairs of the company. The court granted these injunctions, preventing the respondents from acting on the disputed shares and from managing the company without proper authority.4. Appointment of a Special Officer/Administrator/Receiver:The petitioner requested the appointment of a special officer/administrator/receiver to manage the company's affairs. The court appointed Mr. Rajat Kumar Ghosh as the special officer, directing him to oversee the company's statutory and other liabilities, manage its day-to-day affairs, and ensure compliance with legal requirements.5. Investigation into the Affairs of the Company u/s 406 of the Companies Act, 1956:The petitioner sought an investigation into the company's affairs and the conduct of respondent Nos. 2 (deceased) to 6. The court did not specifically address this issue in the judgment.6. Convening an Extraordinary General Meeting of Shareholders:The petitioner requested an extraordinary general meeting to elect a lawful board of directors. The court directed the holding of such a meeting, which resulted in the appointment of a new board of directors, including Bhagirath Agarwal and others.7. Rectification of the Register of Members:The petitioner sought rectification of the Register of Members by deleting the names of respondent Nos. 2 (deceased) to 4. The court ordered the rectification of the register in line with its findings on the illegality of the share allotment.8. Removal of Directors and Supersession of the Board:The petitioner requested the removal of respondent Nos. 2 (deceased), 3, and 4 from their positions as directors and the supersession of the board. The court found the removal of Bhagirath from the board illegal due to non-compliance with section 286 of the Companies Act and declared the meetings held for his removal null and void.9. Disclosure of Company Funds Diverted to Bhura Private Ltd.:The petitioner sought disclosure of company funds diverted to Bhura Private Ltd. The court did not specifically address this issue in the judgment.10. Inspection of Statutory Books and Records:The petitioner requested inspection of the company's statutory books and records. The court directed that all statutory books, books of account, and other records be handed over to the newly appointed board of directors and kept at the company's registered office.Conclusion:The court upheld the petitioner's contentions regarding the illegality of the share allotment, the invalidity of Form No. 2 and Form No. 32, and the need for various injunctions. It appointed a special officer to manage the company's affairs and directed the holding of an extraordinary general meeting to elect a new board of directors. The court also ordered the rectification of the Register of Members and the handover of statutory books and records to the new board.