2012 (11) TMI 453 - Board - Companies Law

Court dismisses Company Petition due to improper filing, false statements, and ineligibility under Companies Act.

The court dismissed Company Petition No. 75(ND)/2012, citing improper signing of the petition, invalid affidavits, and the petitioner's ineligibility ... Signing of pleadings and authorization under Order 6 Rule 14 CPC - Competence of a petitioner under sections 397 and 398 of the Companies Act - Abuse of process and equitable doctrine of coming with clean hands - False affidavits, impersonation and notarisation irregularities - Professional responsibility of law firms and advocates in filing affidavits - Judicial power to dismiss petitions in limine and to impose costsSigning of pleadings and authorization under Order 6 Rule 14 CPC - Whether Company Petition No.75(ND)/2012 was duly signed by a person authorised under Order 6, Rule 14 CPC - HELD THAT: - The Board examined the chronology of signatures, affidavits and notarisation and found that the individual who signed the petition on behalf of P 1, P 3 and P 4, Mr. G.K. Agrawal, was not a duly constituted attorney at the time he signed. The affidavits dated 30/05/2012 were notarised on 08/06/2012 and the POAs in favour of Mr. G.K. Agrawal were notarised only on 08/06/2012 after he had already signed the petition. The authenticated Notary Register indicated that the purported principals were not present before the notary at the relevant time. Consequently, at the time of signing the petition Mr. G.K. Agrawal had no authority to sign as attorney for Mr. Rupak Gupta in his three capacities, and the petition did not comply with the requirement of being signed by a person duly authorised under Order 6 Rule 14 CPC. [Paras 11, 13, 14]Company Petition No.75(ND)/2012 was not duly signed by a person authorised under Order 6 Rule 14 CPC and is therefore improperly constituted.Competence of a petitioner under sections 397 and 398 of the Companies Act - Whether Petitioner No.2 (Mrs. Supriya Gupta) was competent to be a petitioner under sections 397 and 398 - HELD THAT: - The Board held that petitions under sections 397 and 398 can be filed only by a member. Although Mrs. Supriya Gupta signed the petition and was a whole time director, she did not hold any shares and thus was not a member on the date of filing. There was no authorization by the other petitioners enabling her to sign on their behalf. Reliance on authorities permitting signing by an officer or authorized signatory was held inapplicable because the statutory entitlement to maintain a petition under sections 397/398 is confined to members. [Paras 11, 12, 17]Mrs. Supriya Gupta was not a member and therefore not eligible to file the petition; her signature does not validate the petition under sections 397 and 398.False affidavits, impersonation and notarisation irregularities - Whether affidavits sworn and filed in the petition and related applications were false or tainted by impersonation and notarial irregularity - HELD THAT: - The Board found that affidavits filed with C.A. No.313/2012 were sworn and verified by Mr. G.K. Agrawal in the names of Mr. Rupak Gupta and Mrs. Supriya Gupta, while identification and notarisation were defective. An advocate of the law firm certified identification of the deponent despite the deponent impersonating the named petitioners. Notaries attested affidavits without adequate verification; one Notary's register entries and location anomalies further undermined the authenticity. These facts amounted to false affidavits and impersonation, rendering the affidavits notorious and bordering on criminality. [Paras 6, 16, 21, 22]The affidavits were false and tainted by impersonation and notarial irregularity; they cannot be permitted to validate the petition.Abuse of process and equitable doctrine of coming with clean hands - Whether suppression of material facts and false statements amount to abuse of the Board's process warranting dismissal in limine - HELD THAT: - The Board emphasised the equitable nature of its jurisdiction under sections 397 and 398 and the requirement that petitioners approach with clean hands. It found suppression (e.g., mis statements about membership, non disclosure about trust trusteeship and related consequences for maintainability) and false sworn statements were made to procure procedural advantage. Given these suppressions and falsehoods, and the attempt to rectify by filing multiple affidavits, the petition constituted an abuse of process and disentitled the petitioners from equitable relief. [Paras 19, 20, 21]Suppression of material facts and false statements by the petitioners amounted to abuse of process and disentitled them to equitable relief; the petition is liable to be rejected.Professional responsibility of law firms and advocates in filing affidavits - Judicial power to dismiss petitions in limine and to impose costs - Whether the conduct of the law firm, its advocates and the notaries warranted disciplinary directions and imposition of costs - HELD THAT: - The Board found that the law firm and an advocate associated with it acted irresponsibly by preparing incomplete affidavits, failing to verify authorization, and filing tainted affidavits, thereby impeding the court's fact finding role. The notaries' lax notarisation practices exacerbated the misconduct. Exercising its powers, the Board imposed exemplary costs on the law firm, awarded the petitioners liberty to file a fresh properly constituted petition on payment of costs, and directed the Chief Secretary, NCT Delhi to initiate disciplinary action against the notaries and issue instructions to ensure proper notarial identification and signing procedures. [Paras 15, 16, 21, 22]Costs and disciplinary directions were warranted: CA No.392/2012 allowed; C.P. No.75(ND)/2012 dismissed in limine; exemplary costs and administrative directions ordered against the law firm, advocates and notaries, with liberty to file a fresh petition subject to conditions.Final Conclusion: The Board dismissed Company Petition No.75(ND)/2012 in limine as not being duly constituted, allowed the respondents' application, imposed exemplary costs and directed administrative action against the notaries and the law firm; the petitioners were granted liberty to file a properly constituted fresh petition upon payment of directed costs. Issues Involved:1. Whether the Company Petition No. 75(ND)/2012 is properly signed as required by Order 6, Rule 14 of the CPC.2. Whether the affidavits supporting the petition were valid and properly notarized.3. Whether Mrs. Supriya Gupta was eligible to file the petition under Sections 397 and 398 of the Companies Act.4. Whether the petitioners suppressed material facts and made false statements on oath.5. Whether the conduct of the Law Firm and Notaries involved was appropriate.Detailed Analysis:1. Proper Signing of the Petition:The petition must comply with Order 6, Rule 14 of the CPC, which requires that every pleading be signed by the party or a duly authorized representative. The court noted that it is sufficient if one petitioner signs the petition, provided they are authorized. However, in this case, Mrs. Supriya Gupta, who signed the petition, was not a member of the company and thus not eligible to file the petition under Sections 397 and 398. The petition was also signed by Mr. G.K. Agrawal, who was not duly authorized at the time of signing. Therefore, the petition did not meet the requirements of Order 6, Rule 14 CPC.2. Validity of Affidavits:The affidavits supporting the petition were signed and verified on 30th May 2012 but notarized on 8th June 2012. The court found discrepancies in the signatures and noted that the affidavits were not properly notarized. The affidavits were signed by Mr. G.K. Agrawal, impersonating Mr. Rupak Gupta and Mrs. Supriya Gupta, which was identified as false impersonation and improper notarization by the Notary Public Mr. Dipankar Das. The affidavits were thus deemed invalid.3. Eligibility of Mrs. Supriya Gupta:Mrs. Supriya Gupta did not hold any shares in the company and was therefore not a member, making her ineligible to file the petition under Sections 397 and 398. Her signature on the petition was considered inconsequential.4. Suppression of Material Facts and False Statements:The petitioners were found to have suppressed material facts, such as Mrs. Supriya Gupta's lack of shareholding and the true status of the Trust. The affidavits contained false statements, and the petitioners attempted to cover up these lapses with multiple affidavits. The court concluded that the petitioners acted with an intention to gain an advantage through fraudulent means.5. Conduct of the Law Firm and Notaries:The Law Firm representing the petitioners acted irresponsibly by not verifying the compliance with Order 6, Rule 14 CPC before filing the petition. The Notaries involved, Mr. Ashok Kumar and Mr. Dipankar Das, were found to have notarized documents improperly, leading to a recommendation for disciplinary action against them. The court imposed exemplary costs on the Law Firm for its conduct.Conclusion:The court dismissed the Company Petition No. 75(ND)/2012 in limine, finding it was not duly constituted in law. The petitioners were granted liberty to file a properly constituted fresh petition subject to a cost of Rs. 50,000 to be deposited with the High Court Legal Aid Committee, New Delhi. The Law Firm was also fined Rs. 50,000 for its conduct. The Chief Secretary, NCT of Delhi, was directed to initiate disciplinary action against the Notaries involved and to issue instructions to ensure proper notarization practices in the future.