Corporate records and procedural compliance determine validity of director removals, appointments, and share allotments.

Corporate acts changing directorship or share capital require proper notice, contemporaneous minutes, and compliance with the governing procedure under the Companies Act, 1956. Where the record does not prove valid meetings or reliable filing of documents, removal of directors and appointment of an additional director cannot be sustained. In share allotment disputes, the allotment is supportable only to the extent backed by admitted application money and adequate documentary proof; the unexplained balance is liable to be treated as invalid. The commentary therefore illustrates that inadequate corporate records can invalidate board actions and partially unravel an allotment.

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Issues: (i) Whether the removal of two directors and the appointment of an additional director were valid when the record did not show proper notice, minutes, or compliance with the statutory procedure; (ii) Whether the allotment of the newly issued shares was valid in full, in part, or liable to be set aside for want of proof of due process and explanation of the allotment.

Issue (i): Whether the removal of two directors and the appointment of an additional director were valid when the record did not show proper notice, minutes, or compliance with the statutory procedure.

Analysis: The corporate records produced did not establish that the petitioners had received proper notice of the meetings said to have effected their removal. The material placed on record also did not satisfactorily prove the holding of meetings in accordance with the Companies Act, 1956, or the filing of timely and reliable records supporting the appointment of the additional director. In the absence of dependable contemporaneous documentation, the challenged board actions could not be accepted as having been taken in accordance with law.

Conclusion: The removal of the two directors was invalid and was set aside, and the additional director's appointment was not upheld.

Issue (ii): Whether the allotment of the newly issued shares was valid in full, in part, or liable to be set aside for want of proof of due process and explanation of the allotment.

Analysis: The respondents failed to produce convincing notice and minutes of the meetings at which the shares were allegedly allotted, and the return of allotment was filed belatedly. Although part of the share application money was shown in the balance sheet signed by the petitioner, the remaining allotment was unsupported by a satisfactory explanation of receipt and utilisation of funds. On that basis, only the portion linked to admitted application money could be sustained, while the balance lacked adequate justification.

Conclusion: The allotment was upheld only to the extent of 3,943 shares and the remaining 5,564 shares were declared illegal and set aside.

Final Conclusion: The petition succeeded in part: the impugned removal of directors was annulled, the allotment was sustained only to a limited extent, and the parties were left to work out their shareholding position through valuation and buy-sell arrangements.

Ratio Decidendi: Corporate acts altering directorship or capital structure must be supported by proper notice, contemporaneous minutes, and compliance with the governing procedure; absent such proof, the impugned action is liable to be treated as invalid.

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