2018 (9) TMI 1608 - Tri - Companies Law

Petition Dismissed Due to Share Forfeiture: Lack of Standing under Companies Act

Mr. C.J. Mathew Versus M/s. Greendot Hotels and Resorts (India) (Pvt.) Ltd. And 3 Ors.

The Tribunal dismissed the petition, ruling that the petitioner was not a member of the company due to the forfeiture of his shares for non-payment. As a ... Rectification of the Register of Members for the purpose of entering the name in 1st Respondent Company's register - forfeiture of shares - Whether or not the petitioner is entitled to get his name entered in the register of the members of the 1st Respondent Company? - Held that:- In the light of the provisions of the Articles of Association of the company and the decision taken by the Board of Directors to forfeit the shares of the Petitioner, it can safely be concluded that the Petitioner is not a member of the 1st Respondent Company as his shares stand forfeited for non-payment of the subscription money. The Petitioner has miserably failed to support his contention for rectification of the Register of Members for the purpose of entering his name in the Register of members of 1st Respondent Company. Though petitioner claims that he has been chairing all the Board Meetings and was in charge of the finance and fund raising matters, but he did not open any account of the 1st Respondent Company with the Bank and even not maintained any record, particularly with the regard to the payment, if any, of subscription money for 25,000 of shares subscribed. Even, he did not file PAS-3 to intimate the RoC of the allotment of shares being made by the Company. The defence of the Petitioner that the Respondents have fabricated all the record relating to the 1st Respondent Company is hollow and therefore, stands rejected. Thus, the issue raised under stands decided against the Petitioner, as he is not legally entitled to seek relief under prayer ‘D' Issues Involved:- Rectification of the Register of Members- Validity of Share Transfer- Legality of Director's Removal- Validity of Share Allotment- Validity of Extraordinary General Meeting- Legality of Registered Office Shifting- Allegations of Fraud and FabricationIssue-wise Detailed Analysis:1. Rectification of the Register of Members:The petitioner sought an order to rectify the Register of Members, claiming he held 25,000 fully paid-up equity shares. The petitioner argued that he had paid the subscription money in cash due to the absence of a company bank account. However, the respondents contended that the petitioner did not provide any proof of payment and failed to produce share certificates. The Tribunal found no evidence to support the petitioner's claim of payment and noted that the petitioner's shares were forfeited for non-payment as per the company's Articles of Association and Board resolutions. Consequently, the petitioner was not entitled to the rectification of the Register of Members.2. Validity of Share Transfer:The petitioner challenged the transfer of 5,000 shares from the 2nd respondent to the 3rd respondent, alleging it was illegal. The respondents countered that the transfer was valid and in accordance with the Articles of Association. The Tribunal did not find sufficient evidence from the petitioner to prove the transfer was invalid.3. Legality of Director's Removal:The petitioner claimed his removal as a director was illegal, asserting he was ousted without proper procedure. The respondents argued that the petitioner vacated his office due to non-attendance of three consecutive Board meetings and non-payment of call money, as per Sections 283(1)(f) and 283(1)(g) of the Companies Act, 1956. The Tribunal upheld the respondents' position, noting the petitioner's failure to attend meetings and pay the subscription money.4. Validity of Share Allotment:The petitioner contested the allotment of 1,00,000 shares to the 2nd and 3rd respondents, claiming it was against the share application money he brought in. The respondents maintained the shares were allotted after increasing the authorized capital in a validly convened EoGM. The Tribunal found no documentary evidence from the petitioner to support his claim and upheld the respondents' actions.5. Validity of Extraordinary General Meeting:The petitioner alleged the EoGM held on 05.02.2011, which increased the authorized capital, was illegal. The respondents provided minutes and notices of the EoGM, demonstrating it was duly convened. The Tribunal accepted the respondents' evidence and dismissed the petitioner's allegations.6. Legality of Registered Office Shifting:The petitioner argued the registered office was shifted without proper Board resolution. The respondents presented minutes of the Board meeting approving the shift. The Tribunal found the respondents' actions were in compliance with the Act and the Articles of Association.7. Allegations of Fraud and Fabrication:The petitioner accused the respondents of filing false returns and manipulating company records. The respondents denied these allegations, asserting the petitioner failed to prove any fraud or fabrication. The Tribunal concluded the petitioner did not substantiate his claims with requisite evidence.Conclusion:The Tribunal dismissed the petition, concluding the petitioner was not a member of the company due to the forfeiture of his shares for non-payment. Consequently, he lacked the locus standi to invoke the provisions of Sections 397 and 398 of the Companies Act, 1956. The findings were limited to the petition and did not affect the petitioner's police complaint. There was no order as to costs.