TaxTMI 
TaxTMI 
2009 (7) TMI 788
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....this Company, which was incorporated in the year 1997. The Company carries on with the activities of providing medical and health care facility in the city of Jabalpur and a Hospital is established for the said purpose. The Company as indicated hereinabove was jointly promoted by the three appellants and respondent, who became Directors from the date of incorporation of the Company. It is averred that at the time when the dispute in the present case arose, apart from the appellants and the respondent, there were no other Directors in the Company. The authorized share capital of the Company as on 31-3-2006 was Rs. 25 lakhs consisting of 25,000 shares of Rs. 10 each. The issued share capital was Rs. 10 lakhs comprising of 1 lakh shares of Rs. 10 each. All the shareholders, namely, the appellants and the respondent, have subscribed in equal proportions i.e., 25 per cent each and the shareholding of the Company as on 31-3-2005 was 25,000 shares held by each of them amounting to Rs. 2,50,000 i.e., 25 per cent. Being aggrieved by his deemed cessation as Director of the Company with effect from 31-1-2005 in terms of section 283(1)(g) of the Act, respondent - Sarabjit Singh Mokha filed a p....
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.... letter dated 28-11-2005 he was informed that in spite of serving notices to him, which were sent by post and information communicated to his residence and office, the petitioner had not attended five Board meetings consecutively and, therefore, by operation of law, i.e., section 283(1)(g) of the Act, he ceased to be a Director. According to the company petitioner, it was for the first time that vide letter dated 28-11-2005, he was informed about cessation of his Directorship, in accordance to the statutory provision, holding of the Board meetings and issuance of notice to him. According to the company petitioner, vide notice dated 1-12-2005 when he sought for details of the Board meetings, allegedly not attended by him, he was informed about these proceedings on 28-11-2005, after receiving all the particulars, he had filed the petition. Copies of the communications dated 20-11-2005, 28-11-2005 and 1-12-2005 are filed as Annexures E, F and G to the company petition and the communication dated 18-11-2005 informing the petitioner about cessation as Director with effect from 31-1-2005 is Annexure D. 4. Assailing the action of the respondents/appellants in proceeding to take action ag....
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....t for the Board meeting and the Under Posting Certificates. However, no resolution of the Board of Directors were filed before the Company Law Board, affidavits of certain persons were filed by the company petitioner to show that the notices were never served on him, counter affidavits were filed by the appellants in rebuttal and on the basis of the evidence and material that came on record, by the impugned order dated 19-7-2007, the learned Company Law Board came to the conclusion that the Board meetings, five in number in which the respondent/company petitioner is alleged to have been absent, were held without proper notice to him, sending of notice by UPC is not properly proved and, therefore, treating the company petitioner to be absent, even when notice was not issued, was not proper and the provisions of section 283(1)(g) could not be applied. Further holding that the allocation of further shares made is without proper notice to the respondent/company petitioner, the allocations were made in a Board meeting that was held on 5-7-2005 when the company petitioner was already in jail with effect from 1-7-2005, notice of the meeting in which the allocation took place was not prope....
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....f section 53, the affidavits filed particularly that of one Shri Rajesh Tadas and emphasized that notices sent by postal certificates are deemed to be served on the company petitioner, in spite of the same he did not appear in five consecutive Board meetings, even personal service effected by Shri Tadas were not responded to and there is nothing to indicate that since April 2004, the company petitioner was working for the company and has done any work. It was emphasized by him that in fact he was not available to the civil society and when he did not attend five consecutive meetings, by operation of law his Directorship came to an end. Contending that the Company Law Board approached the entire matter in a very peculiar fashion, adopted a policy of pick and choose in appreciating the documents and evidence, and recorded a perverse finding against the appellants. It was pointed out by Shri Bhave, learned Senior Advocate, that the respondent was not available for doing any work to the Company between May, 2004 to November, 2005, he was absconding and when by filing adequate evidence in the form of postal certificates and affidavit of Shri Tadas, appellants have proved that respondent....
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....ecord, is recorded by the Company Law Board and, therefore, interference in the matter is sought for. In sum and substance, the submissions of Shri Bhave can be categorized in the following manner :- (a)Findings of the Company Law Board are perverse and contrary to the evidence and material available on record; (b)The burden of proof is shifted from the company petitioner to the appellants and based on surmises and conjectures, findings are recorded to the effect that the notice of the meetings are not served and the meetings are not at all held; (c)Even though it was never the case of the company petitioner that the Board meetings on the five dates were not held, adverse inference is drawn for not producing the documents pertaining to the meetings held and the finding recorded is that the meetings were not held or that holding of the meetings are not proved. This according to Shri Bhave is a perverse finding and not at all warranted. (d)It was further submitted by Shri Bhave for non-production of accounts showing payment of postage stamps, adverse inference is drawn, which is improper when the under posting certificates were available on record. (e)Accordingly, on the basis o....
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....he presumption drawn is correct. Taking me through the certificate of posting, discrepancies in the same, pointing out defects in the seal and contending that the UPC are fabricated documents, created subsequently only to defend the present proceedings, learned Senior Advocate argued that the holding of the meeting is not proved, service of the notice is also not established and under the provisions of law particularly section 53 and section 283(1)(g), it was for the appellants to establish that they had sent the notice as per requirement of law, it was received by the respondent company petitioner and in spite thereof he has not attended and, therefore, by operation of the provisions of section 283(1)(g), he ceased to be a Member of the Company. Taking me through the notices that are available on record, the agendas for the meeting, the postal certificates and pointing out discrepancies in the agendas, so also the infirmities in the statement of Shri Rajesh Tadas, as indicated in his affidavit available at page 196 of Paper Book No. 2, Shri Ajay Mishra, learned Senior Advocate, argued that service of notice by both personal service and by postal service are not proved, records of ....
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....s is a case where the respondent company petitioner is proceeded against and by operation of law, i.e., section 283(1)(g), it is alleged that he is deemed to have vacated the office. This Court while exercising jurisdiction in an appeal under section 10F of the Act does not deal with questions of fact. It only deals with questions of law involved in an appeal. A question of fact may give rise to a question of law, if the factual assertions made by the parties culminate in a finding of fact, which is perverse or contrary to the material available on record. At the same time if the finding recorded by the competent authority is based on some evidence available on record and is a possible finding that can be arrived at in the given set of circumstances, then the same need not and will not give rise to a question of law. That being so, it is not necessary for the present to refer to each and every factual aspect canvassed at the time of hearing, instead it is more appropriate to deal with the matter by taking note of the statutory provisions, the question with regard to service of notice, for holding of the Board meetings and the findings recorded in this regard by the learned Company ....
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....he giving of notices to him. (2) Where a document is sent by post- (a) service thereof shall be deemed to be effected by properly addressing prepaying and posting a letter containing the document, provided that where a member has intimated to the company in advance that documents should be sent to him under a certificate of posting or by registered post with or without acknowledgement due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the document shall not be deemed to be effected unless it is sent in the manner intimated by the member; and, ******" [Emphasis supplied] 20. The next provisions to be taken note of are sections 193, 194 and 195. Section 193 provides as to how the minutes of the proceedings of general meeting and the meeting of the Board of Directors are to be recorded and the period after conclusion of the meeting within which the minutes are to be recorded, the manner of recording them in the minutes book and entries being made in the same. Section 194 contemplates that minutes of the meeting kept in accordance with the provisions of section 193 shall be evidence of the proceedings recorded therein. It is, ther....
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....ly served on the respondent and in spite of service, he remained absent for five consecutive meetings. This would be the moot question on which the entire decision of this appeal would depend? 24. Apart from the aforesaid question, the question of adverse inference being drawn for not producing the minutes of the meetings has to be taken note of, so also the conduct of the parties and a prudent man's approach to be adopted keeping in view the bona fides of the appellants in proceeding in the matter, as canvassed by Shri P.R. Bhave, learned Senior Advocate, further effect of not sending notice to the Central Government is also to be considered. 25. Section 286 of the Act contemplates that 'notice of every meeting of the Board of Directors of the company shall be given in writing to every director' and the method of service of this notice is contemplated under section 53. Section 53(1) of the Act contemplates that the 'documents may be served by a company on any of its member either personally or by sending by post to him in his registered address'. Sub-section (2) of section 53 pertains to 'drawing of a presumption'. It contemplates that where the document is sent by post, service....
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....opriate and profitable at this stage to refer to a judgment of the Supreme Court on the question. In the case of M.S. Madhusoodhanan v. Kerala Kaumadi (P.) Ltd. [2004] 9 SCC 204, the matter has been dealt with. In the said case also, notice to a director was sent by UPC and apart from producing the postal certificates, a delivery book was adduced as evidence to contend that the notice was served on the personal assistant of the director. Both these pieces of evidence adduced i.e., UPC and delivery book along with affidavit of the personal assistant Mohan Raj was discarded by the Supreme Court and the matter has been dealt with in Paragraph 115 onwards in the following manner : "115. As far as the certificate of posting is concerned, it is not explained why it does not record the dispatch of notices to any other shareholder. When the relationship between the parties was already so embittered, proof of service of notice by certificate of posting must be viewed with suspicion. Judicial notice has been taken that certificates of posting are notoriously "easily" available. What was seen as a possible but rare occurrence in 1981 ( L.M.S. Ummu Saleema v. B.B. Gujaral [1981] 3 SCC 317 : A....
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....d v. Union of India AIR 1962 SC 1052, at page 1060, Paragraph 18. They are rules of evidence which attempt to assist the judicial mind in the matter of weighing the probative or persuasive force or certain facts proved in relation to other facts presumed or inferred (ibid). Sometimes a discretion is left with the Court either to raise a presumption or not as in section 114 of the Evidence Act. On other occasions, no such discretion is given to the Court so that when a certain set of facts are proved, the Court is bound to raise the prescribed presumption. But that is all. The presumption may be rebutted. 120. While construing section 28B of the U.P. Sales Tax Act which, inter alia, provides that if a transit pass is not produced at the checkpost on entry and at the point of exit, "it shall be presumed that the goods carried thereby have been sold within the State" [Emphasis supplied], the contention that the phrase "it shall be presumed that" meant that "it shall be conclusively held" was negatived. After referring to section 4 of the Evidence Act, it was held by this Court in (M/s. Sodhi Transport Co. v. State of U.P. AIR 1986 SC 1099, at page 1105) : "The words "shall presume"....
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....ion which the Court must raise provided the basic facts namely the due posting of the document is proved, the onus being on the addressee to show that the document referred to in the certificate of posting was not received by him. 124. In the present case, the certificate of posting is suspect. Assuming that such suspicion is unfounded, it does not in any event amount to conclusive proof of service of the notice on Madhusoodhanan or on any of the other addressees mentioned in the certificate as held by the Division Bench. Except for producing the dispatch register and the certificate of posting, no one on behalf of the respondents came forward to vouch that they had personally sent the notice through the post to Madhusoodhanan and his group Madhusoodhanan had written two letters contemporaneously dated 4-8-1986 and 8-8-1986 (Ex.P-24 and Ex.P.35) to Srinivasan, the General Manager of Kerala Kaumudi and to Madhavi complaining that he was not receiving any mail at all. These letters were admittedly received but not replied to by the respondents. It is also apparent from a perusal of those letters that Madhusoodhanan had no knowledge whatsoever of the notice for application for allotm....
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.... fact with regard to dispatch of notice to the respondent for the meetings to be held. The question as to whether presumption of dispatch or receipt of a letter sent under certificate of posting could be drawn or not would depend upon the facts and circumstances of each case. The presumption can be drawn and the same can be held as proof of dispatch of notice if it could be seen that the notice was sent after prepaying the postage stamps, the person who has effected the dispatch should come forth and say that he has dispatched the notices by going to the post-office and had paid for the requisite stamps. The presumption has to be drawn based on the evidence that comes on record. When the principle evidence regarding posting of the notice, i.e., the dispatch register of the company, the books of account showing expenses incurred for posting of the letter, the person who has posted the letter are not filed nor any affidavit of the person dispatching the notice filed, then the presumption under section 53(2) cannot be drawn. Until and unless the primary evidence in the nature of dispatch register, account books, affidavit of the person who dispatched the notices are not tendered, the ....
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....us of proving the fact that the notice was sent was on the company, consequently the appellants herein, and in the facts and circumstances of the case, company have failed to discharge this onus by adducing cogent, legal and admissible evidence. Accordingly, a finding has to be recorded to the effect that sending of the notice for the five Board meeting and its service on the respondent is not proved. 32. Section 53 of the Act also provides for personal service of the notice. It would, therefore, be appropriate to consider at this stage as to whether appellants have proved service of notice on the company petitioner by personal service. For the purpose of establishing personal service, it is the case of the appellants that Shri Rajesh Tadas, an employee of the company had gone to the residence of the company petitioner and he had met some family members, who refused to accept the notice. The affidavit of the said person Shri Rajesh Tadas is available at page 196 of Paper Book No. 2. The affidavit consists of five paragraphs. It is very small and for the sake of convenience, the entire affidavit is reproduced hereinbelow : "1. That I am an employee of the Marble City Hospital and ....
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....hri Tadas was also sent on the same date for serving notice by hand. The same can be explained by contending that it was a precautionary measure adopted by the company, and, therefore, there is nothing wrong if such a procedure was followed, but if Shri Rajesh Tadas had really gone to serve the notice, then his affidavit should have been more specific and certain other particulars were also required to be mentioned therein, which are lacking and due to which, the facts indicated in the affidavit becomes doubtful. Some of the facts which should have found place in the affidavit and which are not available are as to who instructed Shri Rajesh Tadas to go and serve the notices personally on the company petitioner. Shri Rajesh Tadas does not disclose as to under whose instructions he had gone to serve the notice personally to the company petitioner; he also does not identify or produced the notices, which were carried by him for service on the dates mentioned in Paragraphs 3 and 4, of his affidavit. Copies of notices carried by him are not part of his affidavit. He does not say that the notices available at pages 187, 188, 190, 192 and 194 are the notices, which were carried by him for....
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....ich lay heavily on them under law and, therefore, this Court have no hesitation in holding that the action taken against the company petitioner is without proper notice to him, without informing him as to when the Board meetings are to be held and in the absence of notice, his removal on the ground of cessation by operation of law cannot be sustained and in so holding the Company Law Board has not committed any error. 35. Shri P.R. Bhave, learned senior Advocate, during the course of hearing had tried to emphasize that the company petitioner was not available to the civil society for a long period, he was absconding, evading arrest in the criminal case and, therefore, it was tried to be emphasized that the notices were deliberately not received by him or that service of notices should be deemed. To this submission Shri Ajay Mishra, learned senior Advocate, referred to various sale-deeds said to have been executed by the company petitioner during the same period in connection with his other business activities and tried to submit that the company petitioner was very well available and was discharging his routine business activities. Be it as it may, when the provisions of the Act p....
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....e minutes have been maintained in accordance with the requirement of section 193. In the present case, appellants were proposing to remove the company petitioner from the post of Board of director on the ground that he has not attended five consecutive meetings of the Board. If the meetings of the Board were held and if the company petitioner was absent from these meetings, then even in the absence of allegations being made, it was incumbent upon the appellants herein to produce the minutes of the Board meeting maintained in accordance to the statutory requirement and show that the Board meetings were held, minutes are drawn and the company petitioner is shown to be not present. The minutes of the Board meeting, which are to be kept in accordance to the requirement of section 193 are statutory documents maintained by the company in the day-to-day discharge of its functions and the same can very well be produced to show that the meetings of the Board were held after complying with all legal formalities. The minutes of the Board meeting were not produced before the Company Law Board and in this proceedings (appeal) before this Court also what is produced is only a photocopy of the pr....
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....n be held that non-issuance of notice under section 400 in the present proceedings is fatal to such an extent that the entire proceedings stand vitiated. 40. Even though by placing reliance on the judgment in the case of Bilasrai Joharmal (supra), Shri P.R. Bhave, learned senior Advocate, contended that issuance of notice to the Central Government was necessary, but there is nothing in the said judgment to indicate that non-issuance of notice would render the entire proceedings to be null and void. When the provision is to be complied with by the Company Law Board, the company petitioner cannot be made to suffer for non-compliance. In the said judgment, there is nothing to indicate that non-compliance of this provision renders the entire proceeding vitiated. On the contrary, the principles which had weighed with the law-makers for incorporating section 400 would indicate that the provision was incorporated for protecting the interest of minority shareholders or a class of members in minority, who have interest in a company and to safeguard their rights and interest, the provision for notice to the Central Government is incorporated. Considera- tion of the representation contemplat....