Company Petition Dismissed for Lack of Locus & Membership Qualification

Ram Gopal Patwari Versus Patwari Exports (P.) Ltd.

Ram Gopal Patwari Versus Patwari Exports (P.) Ltd. - [2010] 160 COMP. CAS. 116 (CLB), [2010] 98 CLA 136 (CLB) Issues Involved:
1. Maintainability of the Company Petition (CP) No. 88 of 2007.
2. Compliance with section 399 of the Companies Act, 1956.
3. Allegations of oppression and mismanagement.
4. Eligibility of petitioners to maintain the CP.
5. Consideration of evidence and documents.
6. Allegations of fraudulent cessation of membership and directorship.
7. Application of the Limitation Act to the proceedings before the Company Law Board (CLB).

Issue-wise Detailed Analysis:

1. Maintainability of the Company Petition (CP) No. 88 of 2007:
The CLB initially dismissed CP No. 88 of 2007 as not maintainable. The High Court of Calcutta remanded the matter back to the CLB, emphasizing that the documents relied upon by the respondents were not made available to the petitioners. The CLB was requested to hear the company's application afresh within eight weeks, conditional upon the petitioners depositing a sum of Rs. 1 lakh.

2. Compliance with section 399 of the Companies Act, 1956:
The applicant/respondent argued that the petitioners did not meet the necessary qualifications under section 399 to maintain the CP under sections 397 and 398. The petitioners claimed to hold 14,500 equity shares, constituting 19.33% of the share capital, but failed to produce sufficient evidence to establish their shareholding at the time of filing the petition. The shares were allegedly transferred to Suwidha Viniyog Co. (P.) Ltd. in 1989 and 1991, and the petitioners did not hold the requisite shares as per the company's records.

3. Allegations of Oppression and Mismanagement:
The petitioners alleged wrongful and fraudulent cessation of membership and directorship, diversion of company funds, misappropriation, non-compliance with statutory formalities, and erosion of the company's net worth. These allegations were to be examined only if the petitioners had the locus to maintain the petition, which they failed to establish.

4. Eligibility of Petitioners to Maintain the CP:
The petitioners did not provide sufficient evidence to prove their eligibility under section 399. The only document annexed to the CP was a part of an old annual return. The CLB concluded that the petitioners did not hold the requisite shareholding and thus could not maintain the petition. The petitioners' claim that they were entitled to have their names on the register of members was not substantiated.

5. Consideration of Evidence and Documents:
The respondents produced original share certificates, the register of members, and the resignation letter of P-1 to support their case. The petitioners did not produce any substantial evidence to counter these documents. The additional documents filed by the petitioners, including income-tax returns and balance sheets, were deemed irrelevant and self-supporting without proper verification and authentication.

6. Allegations of Fraudulent Cessation of Membership and Directorship:
The petitioners' allegations of fraudulent cessation of membership and directorship, diversion of funds, and misappropriation were not considered due to their failure to establish locus. The CLB emphasized that these issues could only be examined if the petitioners had the requisite membership qualification under section 399.

7. Application of the Limitation Act to the Proceedings Before the CLB:
The CLB held that the Limitation Act does not apply to its proceedings, but delay and latches do apply, starting from the date of knowledge. The petitioners admitted to being shareholders only up to 1993, and the alleged transfer of shares took place more than 17 years ago. The petitioners showed gross inaction and negligence, and there was no justification for condonation of delay.

Conclusion:
The CLB allowed Company Application No. 357/2007, dismissing Company Petition No. 88/2007 as non-maintainable due to the petitioners' failure to prove their locus and requisite membership qualification under section 399. The applicant was entitled to receive the sum of Rs. 1 lakh deposited by the petitioners, along with accrued interest.