1994 (5) TMI 268 - Board - Companies Law

Irregular Share Transfer Ruled Violation of Articles, Entitlement Order Issued

The Board found irregular transfer of shares to respondent No. 2 and family in violation of the articles of association, directing the respondents to ... - Issues Involved:1. Irregular transfer of shares.2. Non-allotment of shares.3. Underbilling of sales.4. Falsification of accounts and siphoning off funds.5. Non-maintenance of proper stock records.6. Non-recording of full details of purchase.7. Appointment of relatives in high positions.8. Siphoning off money through manipulation.9. Non-registration of transmission of shares.10. Mismanagement and other miscellaneous allegations.Summary:Irregular Transfer of Shares:The petitioners alleged irregular transfer of shares to respondent No. 2 and his family, violating Article 9 of the articles of association. The Board found that the transfers, which took place on October 5, 1990, December 6, 1990, and December 10, 1990, were not approved by the board and violated the articles. The Board directed the respondents to offer the proportionate entitlement of the 29,650 shares to the present shareholders at the same price.Non-allotment of Shares:The petitioners claimed that there was a failure to allot shares to Shri R.K. Kandhari as agreed in the board meeting on June 29, 1990. The Board concluded that the agreement was to allot 42% of shares to Shri Kandhari and the balance to Shri Aggarwal, but since Aggarwal withdrew, there was no further entitlement for Kandhari to claim 50% of the shares.Underbilling of Sales:The petitioners alleged underbilling of sales to siphon off funds. The Board found that the petitioners failed to provide sufficient evidence to substantiate the claims of underbilling and manipulation of sales prices.Falsification of Accounts and Siphoning off Funds:The petitioners alleged falsification of accounts and siphoning off funds through various means, including manipulation of sales records and transport of goods. The Board found that the petitioners did not provide adequate proof for these allegations, and the respondents' explanations were accepted.Non-maintenance of Proper Stock Records:The petitioners alleged non-maintenance of proper stock records and under-recording of production. The Board found these allegations to be based on surmises without substantial evidence.Non-recording of Full Details of Purchase:The petitioners claimed non-recording of full details of purchases and misuse of unaccounted bags for sales. The Board found no material evidence to support these allegations.Appointment of Relatives in High Positions:The petitioners alleged that respondent No. 2 appointed his relatives in key positions, including a convicted individual. The Board noted that such appointments are the management's prerogative as long as they comply with the Companies Act.Siphoning off Money through Manipulation:The petitioners alleged manipulation in the sale price of chillers and other assets. The Board found no evidence to support these claims.Non-registration of Transmission of Shares:The petitioners alleged non-registration of shares transmitted through a will. The Board noted that the company would not object to the transmission once the will and no objection certificates from other heirs were produced.Mismanagement and Other Miscellaneous Allegations:The petitioners made various other allegations, including misuse of company funds and improper conduct by respondent No. 2. The Board found that most of these allegations lacked substantial evidence and were based on hearsay.Conclusion:The Board provided relief only in respect to the transfer of shares, directing the respondents to offer the proportionate entitlement to the shareholders. The petitioners' other allegations were not substantiated with sufficient evidence, and the Board did not grant further relief. The contempt application was also disposed of with an apology from the respondents' counsel.