2015 (6) TMI 772 - Board - Companies Law

Judge upholds petition under Company Law Board Regulations, dismisses challenges. Allegations ruled premature. Sections 397 & 398 upheld. Order modified.

The judge found the petition maintainable under Company Law Board Regulations, 1991, dismissing the Respondent's challenge. Allegations of suppression of ... Non compliance of the provisions of the Company Law Board Regulations, 1991. - Suppression of the material facts - Incorrect statement in the petition - Held that:- I have considered the submissions and examined the relevant provisions of the Indian Companies Act, 1956 and the Regulations made there under. The present petition is filed under Section 397/398 of the Companies Act, 1956. Section 400 of the Companies Act mandates that the Company Law Board shall give notice of every application made under Section 397/398 of the Act to the Central Government and shall take into consideration representation, if any, made by the Central Government before passing any final order. Record reveals that the CLB itself dispatched the copy of the petition to the Regional Director representing the Central Government on the next day of filing of the petition. Therefore, in my opinion, substantially this provision has already been complied with. With respect to the last ground taken by the Respondents, it was argued by the Ld. PCS appearing for the Respondent that the Petitioner had filed a complaint before the Registrar of Companies on 17/11/2014, which fact he has not disclosed in the petition, and therefore, the Petition deserves to be dismissed. I have considered this objection too. The ROC is an administrative authority. He is not a judicial or quasi-judicial authority. Therefore, non disclosure of a complaint made to him, in my opinion, is not a sufficient ground for dismissal of the petition. Having considered the submissions, in my opinion, the grounds taken by the Respondent No.4 assailing the maintainability of the petition are frivolous, misconceived and not tenable in law. The same are rejected accordingly. - Decided against the appellant.[C.A.No.322/2014] Power to review its own order passed by CLB - In my opinion, the law cited by the Ld. Counsel appearing for the Petitioner is not applicable to the facts of the present case. In the present case the impugned order passed on 20/11/2014 is an ad-interim order, which clearly states that the resolution, if any, that may be passed in the EOGM, shall not be implemented without approval of the CLB. Therefore, reconsideration of such ad-interim order passed by the CLB cannot be said to be reviewing of an order. It amply clear that variation/ modification/recalling of an ad-interim order is not covered within the scope of 'review of an order'. Removal of Director - I have also gone through the Report of the forensic audit submitted by the Applicant-Respondent No.2 in support of his case. Without expressing any opinion at this stage on the authenticity and correctness of the said report, it is suffice to say, at this stage, that the Petitioner has been removed by the majority group of shareholders after following due course of law on the charges of misappropriation and diversion of funds of the Company by the Petitioner to his personal use and benefit which charges are prima facie established by the Forensic Audit Report as is seen from the entries reflected in the statements of accounts filed by the said Respondent alongwith the instant application. Further, the contention of the Petitioner that the Company is in the guise of quasi-partnership is not pleaded in the petition. Creation of charge - In so far as the order restraining the Company from creating any third party charge over the Company's assets is concerned, it is directed that if any loan has been sanctioned/availed by the Company prior to filing of the petition from any bank or financial institution, the Company may create charge in respect of the loan sanctioned/availed. It is, however, clarified that after filing of the petition, if any loan is sanctioned/ disbursed no charge shall be created over the company's assets without prior approval of this Bench. - Decided against the appellant. [C.P.No.105/2014] Issues:1. Maintainability of the petition under Company Law Board Regulations, 1991.2. Allegation of suppression of material facts and relevant documents by the petitioner.3. Existence of a case under sections 397 and 398 of the Companies Act based on the petition's averments.4. Allegation of incorrect statement by the petitioner regarding prior compliance filings.5. Vacation of ad-interim order passed on 20/11/2014 regarding shareholding pattern and director removal.Issue 1 - Maintainability under Company Law Board Regulations, 1991:The Respondent challenged the maintainability of the petition, citing non-compliance with the Company Law Board Regulations, 1991. The Respondent argued that the petition was not served to the relevant authorities as required by law. However, the judge found that the Company Law Board had already dispatched the petition copy to the Central Government, complying with the law. The judge dismissed this objection as not tenable.Issue 2 - Suppression of Material Facts:The Respondent alleged that the Petitioner suppressed material facts and documents. The judge deemed this objection premature, stating that it should be addressed during the final hearing and cannot be a reason for dismissal at the threshold stage.Issue 3 - Case under Sections 397 and 398 of the Companies Act:The Respondent contended that the petition did not establish a case under sections 397 and 398 of the Act. The judge disagreed, noting that the Petitioner, a shareholder with the required qualifications, raised serious complaints of oppression and mismanagement. The judge found this objection devoid of merit and rejected it.Issue 4 - Allegation of Incorrect Statement:The Respondent claimed that the Petitioner made an incorrect statement regarding prior compliance filings. The judge ruled that non-disclosure of a complaint made to the Registrar of Companies is not sufficient grounds for dismissal, as the ROC is an administrative authority, not a judicial one.Issue 5 - Vacation of Ad-Interim Order:Regarding the vacation of the ad-interim order passed on 20/11/2014, the Respondent sought permission to implement a resolution removing the Petitioner as a Director. The judge allowed the resolution's implementation based on allegations of misappropriation by the Petitioner, as supported by a forensic audit report. The judge modified the ad-interim order accordingly, permitting the Company to create charges over assets for pre-petition loans but maintaining status quo on shareholding patterns.This detailed analysis covers the various issues raised in the judgment, addressing each objection and providing the judge's reasoning and decision on each point.