2017 (9) TMI 324 - HC - Companies Law

Court orders urgent inquiry under Companies Act to address wrongful director inclusion, safeguarding petitioner & ensuring compliance.

Ramesan Maithiyeri Versus Union of India, The Registrar of Companies, Kerala And Lakshadweep And Business India Shares And Insurance Ltd.

The Court directed the Registrar of Companies to conduct an immediate enquiry under Section 234 of the Companies Act, 1956, in response to a petitioner's ... Illegally and wrongfully shown as the Director - Power of Registrar to call for information or explanation - action of the Directors of the Company in including his name as a Director of its Board though he is not the share holder or the Director - deliberate manipulations - Held that:- The submissions made on behalf of respondents 1 and 2 herein, recorded above, would clearly indicate that the allegations of the petitioner that large scale manipulations have been done in the records of the Company appear to be more or less established. It is, therefore, up to the second respondent now to cause such scrutiny and enquiry, as is warranted under the Companies Act and Regulations, to ensure that such mistakes and deliberate manipulations are rectified and unearthed in and from the books and documents of the Company. In such circumstances, direct the second respondent to take immediate action to cause a scrutiny and an enquiry into the statutory books and documents of the Company and to issue such orders as may be warranted for rectification of the same and to follow up with all appropriate action as is warranted under the mandate of law. The exercise as directed herein shall be completed by the second respondent as expeditiously as possible but not later than four months from the date of receipt of a copy of this judgment. Merely because the petitioner's name has been included as a Director in the Company's records between 2005 and 2014, no action will be taken against him in such capacity until such time as the scrutiny and enquiry as ordered herein is completed by the second respondent and any such action, if required, will adhere to the order to be issued by the second respondent after such an exercise. Issues:- Incorrect inclusion of petitioner's name as a Director of a company in annual returns.- Allegations of illegal inclusion and potential liabilities.- Request for action under Section 234 of the Companies Act, 1956.Analysis:1. The petitioner, not a shareholder or Director of a company, found his name listed as a Director in annual returns from 2005 to 2014, raising concerns of irregularity and potential liabilities. His name was removed in 2015 without his request, prompting a writ petition seeking action under Section 234 of the Companies Act, 1956.2. Central Government Counsel confirmed the petitioner's non-association with the company and supported his claims of mysterious inclusion. It was revealed that the petitioner invested in another company, not the one in question, and his investments were allegedly manipulated, leading to the wrongful listing as a Director. Respondents' submissions aligned with the petitioner's allegations, indicating the need for a thorough investigation.3. The Court directed the Registrar of Companies to initiate an immediate enquiry under Section 234 of the Companies Act, 1956, corresponding to Section 206 of the Companies Act, 2013. These provisions empower the Registrar to call for information, conduct inspections, and rectify any irregularities in company records. The second respondent was mandated to scrutinize the company's books, rectify any mistakes, and take necessary actions within four months.4. The Court emphasized that the petitioner would not face any action based solely on the erroneous listing until the investigation was completed. The directive aimed to uncover and rectify any fraudulent activities or misrepresentations in the company's records, ensuring compliance with the law and protecting the petitioner from unwarranted liabilities.5. Overall, the judgment highlighted the importance of regulatory oversight in corporate governance, emphasizing the Registrar's authority to investigate and rectify discrepancies in company records to maintain transparency and accountability within the corporate sector.