2010 (6) TMI 666 - Board - Companies Law

Petitioner permitted to convene meeting despite quorum issue, citing deadlock and fraud

Ranjeet Kumar Mishra Versus Chinnmastika Estates (P.) Ltd.

The court allowed the petitioner to call an extraordinary general meeting despite the absence of quorum, citing the deadlock caused by the other ... Meetings and proceedings - Power of Company Law Board to order meeting to be called Issues Involved:1. Impracticability of calling an extraordinary general meeting.2. Alleged fraudulent appointment of additional directors.3. Dispute over the transfer of shares.4. Allegations of siphoning off funds and changing the office location.5. Validity of calling an extraordinary general meeting during pendency of the petition.Detailed Analysis:1. Impracticability of Calling an Extraordinary General Meeting:The petitioner, holding 50% shares and being a director, alleged that it was impracticable to call an extraordinary general meeting due to the absence of the other shareholder, Mr. Mukhiya. Despite attempts to hold annual general meetings in 2007 and 2008, the meetings were adjourned due to the absence of Mr. Mukhiya, creating a deadlock. The petitioner sought a direction under section 186 of the Companies Act, 1956, to call an extraordinary general meeting to proceed with the company's affairs, including the removal of fraudulently appointed additional directors.2. Alleged Fraudulent Appointment of Additional Directors:The petitioner claimed that the second respondent fraudulently appointed two of her relatives as additional directors by forging his signature on the resolution minutes. This appointment was made without the petitioner's knowledge, and he only discovered it after reviewing records from the Registrar of Companies. The second respondent countered that the petitioner consented to these appointments to have a police complaint against him withdrawn, but this claim was not substantiated with original documentation. The court found the petitioner's claim of forgery plausible due to the lack of original evidence from the second respondent.3. Dispute Over the Transfer of Shares:The second respondent asserted that she held 50% of the company's shares, having acquired them from Mr. Mukhiya, who resigned as director in 2005. However, the petitioner disputed this transfer, stating that no board meeting was held to approve it, nor was it reflected in the company's annual return. The court noted the absence of any proof of share transfer in favor of the second respondent and concluded that Mr. Mukhiya remained a 50% shareholder until at least January 18, 2010, as per the Registrar of Companies' records.4. Allegations of Siphoning Off Funds and Changing the Office Location:The second respondent accused the petitioner of siphoning off company funds and changing the registered office location without notice. The petitioner denied these allegations, explaining that the office location change was due to the landlord's actions. He also highlighted his efforts in successfully completing a significant project for the company. The court did not find sufficient evidence to support the second respondent's allegations.5. Validity of Calling an Extraordinary General Meeting During Pendency of the Petition:The second respondent argued that the petition should be dismissed because the petitioner called an extraordinary general meeting on January 22, 2010, while the petition was pending. The court rejected this argument, clarifying that the notice for the meeting was issued following a court order on December 16, 2009, and was not contrary to the law.Conclusion:The court concluded that the petitioner was entitled to call an extraordinary general meeting despite the absence of quorum, due to the deadlock created by Mr. Mukhiya's absence and the second respondent's fraudulent actions. The petition was allowed, directing the petitioner to call, hold, and conduct the extraordinary general meeting within four weeks of receiving the order.