TaxTMI 
TaxTMI 
2013 (9) TMI 655
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....es of the petitioners from the list of shareholders. The main allegation is that R2 to 6 bad illegally and forcefully seized the share certificates and took possession of the company's properties and later on increased the paid-up capital and started filing wrong returns with the RoC from the year 2006 onwards. R7 is A R R S Mega Mall (P.) Ltd. who had purchased the company's property in the year 2008 for a consideration of Rs. 12 crore, illegally according to the petitioners. The ninth respondent is the son of the so-called mediator (R8). R9 has been appointed as auditor of the company by respondents 2 to 6. 10th respondent is Indian Overseas Bank, Salem, which according to the petitioners could explain the financial position of the various accounts and also explain whether any norms prescribed by the Reserve Bank of India has been violated by the respondents. Respondent 11 is Madras Stock Exchange, which according to the petitioner, could explain how the shares of Premier Roller Flour Mills - a listed company -have been purchased by respondents 2 to 6. SEBI is included as respondent 12 to clarify whether the takeover of the company by respondents 2 to 6 was informed to them and w....
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....the petitioners have ceased to be shareholders/directors. Everything was done in collusion with R9 (auditor) who was appointed without obtaining the consent of the earlier auditor. The eighth respondent also committed breach of trust and colluded with R2 to R6 by handing over the documents of the company to the second respondent on the next day of availing the loan. 2.1 On 10th September, 2007, petitioners sent a legal notice offering to repay the loan and requested to return the share certificates and documents of the company. While so, respondents, through their henchmen had forcefully taken possession of the property of the company. Out of fear, petitioners and their relatives signed some blank papers. The petitioners filed criminal OP No. 2844/2007 before the High Court of Madras and the same is pending. In the same year, a company petition CP No.110/2007 was moved before the Company Law Board ('CLB') and during the pendency of the petition, R2 sold company's property (2 acres of prime land worth Rs.36 crore and factory along with machineries) to R7 for a sum of Rs.12 crore. The sale of the property is illegal for want of a special resolution under section 293(1)(a) of the Act....
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....Board by inducting the respondents as directors, and also the resignation of petitioners from the Board. It was further recorded that petitioners have no right, title or interest in respect of the company's properties. The memorandum of compromise specifically details all the transactions from 29th October, 2004 onwards. Rs.6,45,00,000 was paid to the petitioners on 8th April, 2008 and the petitioners confirmed the transfer of shares (86.5 per cent) in favour of the respondents and also agreed to transfer the remaining shares, and consented to the sale of the company's properties to A R R S Mega Mall by the respondents/directors. All the cases pending before the various forums were agreed to be withdrawn. On the basis of the compromise, the suit was disposed on 17th April, 2008 as settled out of court. The petitioners executed a receipt for the amount received by them under the compromise. On 28th April, 2008, the petitioners further executed a full satisfaction receipt-cum-compromise deed detailing the full satisfaction of the compromise, and further recording that the petitioners approve the alienation of the properties of the company to the 7th respondent. CP No.110/2007 filed b....
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....hey are qualified professionals and their names have been unnecessarily dragged into these proceedings and, insinuating allegations have been intentionally made to tarnish their image. All the procedures legally required for takeover of the company have been complied with. Having had the benefit of share transfer consideration for the newly allotted shares, the petitioners cannot turn around and impugn the allotment, which were made by them. No coercion was employed to get the CP No.110/2007 withdrawn. 4. In the counter filed by R7 it has been stated that the promoters of R7 are leading businessmen, running the biggest textile store in Salem. The landed property of R1-company was sold to him by deed of sale dated 3rd January, 2008 and registered on 4th January, 2008 and the resolution passed under section 293(1)(a) by the R1-company on 19th November, 2007, the annual return of the R1-company filed with RoC duly disclosed Mr. C Duraiswamy to the managing director of the company at the relevant point of time. It is pointed out that the purchase of the property of R1 by R7 was a genuine transaction between a third party buyer (R7) and the R1-company, where R7 had no prior relationshi....
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....res transferred from persons who are dead. Regarding the minutes dated 1st November, 2004, it is argued that mere production of loose leaf cannot be taken as evidence according to sections 193 and 194 of the Act. It is argued that the purported minutes had been fabricated out of the signed blank papers obtained by coercion. The alleged collusion is well substantiated from the following proceedings initiated by the 1st petitioner and his group : (i) OS No.312/2007 filed before civil court on 7th March, 2007 ; (ii) written police complaints dated 9th September, 2007; (iii) order dated 21st September, 2007 by the local magistrate directing the police to investigate and report ; (iv) criminal OP No.28441/ 2007 filed before the Madras High Court on 14th September, 2007. 7. Regarding the above proceedings, it is relevant to note that all the civil and criminal cases and also company petitions referred to above were subsequently withdrawn as compromised on 8th April, 2008, as evident from the records produced by the petitioners themselves. Criminal OP was disposed of by directing the police not to interfere in civil disputes. As such, I am of the view that petitioners cannot rely on ....
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....s group and that the company is not a party or signatory to those documents. The provision to pay interest from the rent collected from the tenants is heavily relied on by the petitioners to argue that the understanding among the parties was that the transaction is only a loan agreement for Rs. 3 crore to be repaid after two years and eleven months. This provision, according to the petitioners, supports their case that there was no takeover of the company not there was any sale of the company's property. According to the petitioners, the validity of the loan agreement and the two sale agreements dated 29th October, 2004 has validity only for two years and, hence, the remedy open to the respondents was to approach the civil court by depositing the balance sale consideration and get the property registered. It is pointed out that the two sale agreements dated 29th October, 2004 were intended as security documents only. The specific argument is that the handing over of the share certificates and the property documents of the company cannot be construed as transfer of shares or sale of company's property. Another argument is that R2 to R6 had unilaterally filed false Form 32 on the nex....
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....ers wonder as to how a reasonable man ought to have agreed to sell the valuable property of the company at Rs. 8 crore. The ratification by the petitioners of all the illegal acts will not give the compromise deed any legality and, hence, not enforceable. Above all the payment of Rs. 5.7 crore on the date of the compromise deed is not sufficient consideration. Of late, petitioners are relying on a criminal complaint filed by them before the Judicial Magistrate and also a criminal OP filed before the High Court of Madras in the year 2011 to argue that they are still prosecuting the alleged coercion and threat practised by the respondents in bringing about the compromise and encashment of the demand drafts. 9. Case Laws cited by respondents * Syed Musharraf Mehdi v. Frontline Soft Ltd. [2007] 75 SCL 329 (CLB-Chennai)....A combined reading of sub-sections (1) and (4) of section 399 would show that the CLB has no option, but to reject an application made under sections 397 and 398 which is not supported by the requisite number of members at the time of filing the application before the CLB. Thus, the requirements of section 399(1) being statutory are not directory i....
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.... lakh as per the schedule indicated in the deed and twenty-three LIC policies in full and final settlement of her claim. Having acted upon the deed of arrangement and having relinquished their interest in the company, she was bound to act in accordance with its various terms and having failed to satisfy the requirement of sections 397 and 398 of the Act she was not entitled to relief. * Vijayan Rajes v. MSP Planatations (P.) Ltd. [1999] 19 SCL 106 (CLB-Chennai) .....Held also, that it was clear that the motive of the first petitioner was to bring pressure on respondent No.2 to transfer his building to petitioner No. 1. It is an established legal position that, when a petition under sections 397 and 398 is filed with a view to achieve some ulterior objective/collateral purpose, such a petition should not be encouraged. * Ramesh Bhajanlal Thakur v. Sea Side Hotel (P) Ltd. [2000] 23 SCL 164 (CLB-New Delhi). The settled principle of law in proceedings under sections 397 and 398 of the Act, is that the relief sought should be to put an end to the acts of oppression/mismanagement and not for any oblique purpose. * Srikanta Datta Nn....
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....ner, the transfer of the shares in question was effected in favour of the second respondent, as borne out from the letter dated 21st July, 1994, of the petitioner. In view of the provisions of section 206A of the Act, the company could not have delivered the bonus share certificates to the petitioner when the transfer of the original shares was pending with the company. The evil suit filed by the petitioner was withdrawn with a certain understanding and the petitioner had executed the transfer instruments both in respect of the original 100 shares as well as 200 bonus shares. As had been noted by the Principal Bench in its order in the petition under section 237(b) filed by the petitioner, the company had taken an enormous precaution in the matter of registration of the transfer of the shares and whatever the company did was with the knowledge and consent of the petitioner. The petitioner having acquiesced, was not stopped from questioning the registration of transfer if he was aggrieved that either he was coerced into entering into an agreement before withdrawal of the suit or the terms of some agreement had not been complied with, it was for him to agitate the same elsewhere and ....
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....ering (P.) Ltd. [2009] 150 Comp Cas 250. (CLB-Chennai)... Oppression and mismanagement-Petition for relief - Purchase of property notified to be acquired - Compensation received from seller - Money received from seller deposited in company account - No misappropriation of funds - Companies Act, 1956, sections 397 and 398. * Oppression and mismanagement - Petition for relief - Transfer of shares - Share transfer form signed by shareholder - Transferor participating in proceedings of Board ratifying transfer - Technical objection that adhesive stamps affixed not cancelled not sustainable - Transfer of shares valid. Heard both sides ; gone through the pleadings and case laws submitted by both sides. The following issues arise for consideration. Issues 10. (a) Whether Premier Roller Flour Mills is a listed company? (b) Whether the petitioners herein are shareholders of the company as on the date of filing this CP? (c) Whether the petitioners herein have made out a case of oppression and mismanagement under sections 397 and 398 of the Act? (d) Whether the petitioners are entitled to any reliefs under section 402(f) of the Act? (e) To what reliefs and costs? Is....
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....romoters and their shareholding, percentage of shareholding since the year 2003-04, etc. But this letter is not conclusive enough to show that the company is a listed one. Materials produced by the respondents sufficiently establish that the petitioners have been holding out the company as unlisted. In the above circumstances I am of the considered opinion that they are estopped from contending that the respondents have not complied with the SEBI takeover code by offering the shares to the public. Petitioners have been parties to the execution of transfer deeds, party to the Board meetings and resolution for transfer of shares by executing a compromise ratifying the transfer, and receiving consideration and repeatedly acknowledging the validity of transfer. That being the case, the petitioners are estopped from challenging the validity of these transactions, to which they have been consenting parties. Petitioners cannot blow hot and cold and cause prejudice to the respondents as held in M.R Shah (supra). The company is an unlisted one for the purpose of this CP. In, the above circumstances the contention of the petitioners to treat the company as a listed one is bound to fail. This....
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.... (petitioners) had transferred the shares (86.5 per cent) in respect of the above said mill (company) to the 'B' Party (respondents 2 to 6)' {vide loan agreement dated 29th October, 2004 p. 6, vol. IIA). The above terms in the agreement will clinch the issue in favour of the respondents. The subsequent agreement dated 30th October, 2004 further asserted that the petitioners had transferred the shares of the Premier Mills Ltd. company and the documents had been signed by both the parties. Thus, it can safely be concluded that the essential elements of a sale under the Sale of Goods Act has been complied with. The loan agreement dated 29th October, 2004 further provided that they will also execute sale agreements in favour of second respondent in respect of the property of the company. The above two agreements to be registered in the office of the Sub-Registrar and the period of the agreement would be for a period of 2 years and 11 months. On default of the repayment within the above period, this agreement provides that the respondents shall calculate the sale price to the entire lands along with the immovable property at the rate of Rs.550 per sq. feet and, thus, the principal and i....
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.... and petitioners, following which the suit was dismissed "as settled out of court". Memorandum of compromise, memorandum of withdrawal of the suit, decrees and judgment of the court are available at pp. 86 to 98. As per the deed of compromise, including all the payments from 2004, an aggregated amount of Rs. 8 crore was paid to the petitioners herein. As per this deed, the (petitioners categorically ratified and consented that the shares of the company had been transferred in the name of R2 to R4, that the petitioners had resigned the directorship of the company, that the 2nd respondent and his family members had become the directors thereafter, that they have mutually agreed to solve the dispute by receiving a total sum of Rs. 8 crore, that the balance shares of the company also shall be transferred to the second respondent, that they have no objection to the respondents selling the properties to R7, that the agreements dated 29th October, 2004 and 30th October, 2004 stand cancelled, that the cases pending between the parties would be withdrawn, that the petitioners do not have any connection with the properties of the company (vide pp. 86-91 respondents typed set). 15. After the....
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....t will be handed over if traced out. As is evident from the above minutes, (there is a change of management in which the petitioners were replaced by R2 to R6. It was further resolved that the old management will indemnify the new management for any defect in title to shares. 16. The petitioners strongly dispute the genuineness of these documents on me allegation that the original register of minutes is not produced and, hence, not acceptable as a piece of evidence. The impugned minutes contained the signature of the petitioners and other directors. If the minutes were actually not signed by them, the petitioners would have taken steps to get an expert opinion regarding genuineness of their signature in the minutes. But that is not done so. Except posing certain questions, the particulars of the coercion and threat are not forthcoming in the CP. De hors the alleged coercion which is not proven, the transfer of shares stands admitted and again ratified in the year 2008. In the written statement filed in the civil suit, the respondents have mentioned that the shares were transferred for consideration and the transfer was effected on 1st November, 2004. But the petitioners did not ca....
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....atore (vide letter dated 29th April, 2008 - p. 126). Viewed in this background I see no basis for the allegation that the petitioners have signed the transfer forms and the various documents under coercion. The alleged collusion between R2 to R6 and R7 remains as mere plea. There is no believable explanation as to why the petitioners have accepted the consideration (Rs.8 crore) by encashing the demand drafts. If they had signed any of the documents under coercion or threat, they would have abstained from encashing the cheque. At no point of time the petitioners have expressed any intention to deposit the loan amount received by them to show they have been honest in performing the original three agreements. Being a party to the transfer of shares, the petitioners are estopped from challenging the transfer on the ground that it had violated certain statutory provisions under the Act. I am of the considered opinion that challenge against the transfer of shares on the ground of non-compliances of several provisions under the Act, is per se not sustainable. Once the transfer of shares are upheld it automatically follows they are not shareholders of the company on the date of filing of t....