TaxTMI 
TaxTMI 
2014 (7) TMI 224
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.... and proceed in accordance with law to decide the future course of action. (d) to pass an order thereby suspending the present BOD for taking any further action in the company without convening the General Body meeting. 2. From the perusal of the record, it is revealed that the C.P was mentioned on 21/05/2012 before the then Ld. Member who after hearing the Parties Counsel passed the following order:- "C.P No. 42/2012 mentioned. Respondents to file reply with eight weeks. Rejoinder within eight weeks thereafter. Respondents to show to the Petitioner as to when and where AGM/EOGM was held wherein the decision to go ahead with the rights issue was taken, further the R-I Company is also required to show cause as to how the prescribed period of 45 days as per the AOA Company has been given to the shareholder for the issue to be open for that period. The R-I Company is also required to respond to the Petitioner's communication dated 17/05/2012 and if the requisite information / documents required by the Petitioner to satisfy the procedural aspect of the Right's issue offer are not satisfied within three days, the R-I Com....
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....; (iv) If the Appellant proceeds to allot shares which are unsubscribed, then that action of the appellant will be subject to the further orders of the Court'. 4. It further appears that on 4/07/2012 the Appeal was heard by the Hon'ble Mr. Justice S.J. Kathawala who passed the following order: "1. Heard the Learned Advocates appearing for the parties. The order passed by the CLB dated 21/05/2012 is set aside. The Advocates appearing for the Respondents submit that they are in principle satisfied with the allotment or the right shares in their favour. However if they have any objection to the allotment of the shares in the category of 'Others', they shall raise the same before the CLB by way of fresh proceedings in the pending Petition. 2. Company Appeal (Lodging) No. 26/2012 is accordingly disposed of." 5. Thereafter, the matter was heard from time to time. On 16/04/2013 the above captioned Company Application came to be filed whereby the Petitioners have sought the following reliefs:- a. to pass an order declaring that diversion ....
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....re removed in the EOGM held on 31/08/2012 and new directors have been nominated/appointed. Hence this application. 9. Mr. Vinay Kumar Agarwalla, Mr. Ranadip Mitra and Mr. Biplab Das who were the directors of the company at the relevant time, appeared and file their reply. They denied all the allegations with respect to siphoning off/ diversion of its funds collected under the rights issue to the partnership firm. In their explanation, they have stated that the then Board of directors have not indulged in any action prejudicial to the interest of the company. It is averred that the Company's funds have been invested in the partnership concern being M/s. Genesis Financials, a partnership firm having its registered office at 603 Central Plaza, Sixth Floor, 2/6 Sarat Bose Road, Kolkata - 20, as the latter was considered a profitable proposition. It is further pleaded that the business decisions taken by the Company or the wisdom of the Board of Directors involved in making such decisions cannot be interfered with or questioned by the shareholders of the Company and this Hon'ble Board in a petition under Sections 397 and 398 of the Act is not entitled to pass any order revers....
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....espondents No.5 and 6 were removed from the Board of Directors on 31/08/2012. 9.5 The Respondents also filed a Supplementary Affidavit. Based on the above pleas, they have sought dismissal of the Company Application. 10. After hearing the Ld. Counsel appearing for both the Parties, I disposed off the C.P. on 28/05/2013. The relevant extract of the said order is as follows:- ".............. 10. I, therefore, direct the Respondent Nos. 2 to 6 herein in this application to immediately deposit the funds of the rights issued in a Nationalized Bank in a Fixed Deposit Scheme in the name of the company earning maximum rate of interest. In the event, they fall to do so; the Petitioners shall be entitled to take appropriate criminal and civil action as provided under law. In addition to above, the Respondents shall also be liable for the consequences for committing disobedience of the order in accordance with law. 11. C.A. is disposed off accordingly." 11. Being aggrieved by this order, the Respondents preferred an appeal being Appeal (L) No. 53 of 2013 by which the Hon'ble High Court vide order ....
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.... that the appellants have acted bona fide while investing the amount in the partnership firm. Thus from the rival contentions, it appears that the Company Law Board has sidestepped the main issue between parties as to whether the act of investment of the amount in the present partnership firm by the appellants was bona fide or not. The contentions which have been referred to above have also not been considered. The conclusion regarding the rate of interest appears to have been recorded by the Board on its own, without there being any argument to the effect. 6. In the circumstances, it will be appropriate if the impugned order dated 28th May, 2013 is set aside and the Company Law Board is directed to hear the Company Application No. 263 of 2012 in the light of what is recorded above." 12. I have heard the Ld. Counsel appearing for both the Parties and perused the record. I may like to add here that after conclusion of the arguments, the Parties were allowed a week's time to file their respective written submissions. The Petitioner has filed the written arguments. However, the Respondents did not prefer to file the written arguments. 13. Opening ....
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....holders/Applicants to the said partnership firm. The Ld. Counsel further pointed out that in the said partnership firm, son of one of the erstwhile director is also partner and hence the mala fide on the part of Respondent Nos.2 to 6 is apparent on the fact of it. He, therefore, contended that the Respondents may be directed to refund the said amount to the company. 16. On the other side, it was argued on behalf of the Respondents that the Company has 40% share in the partnership firm and hence, it cannot be said that the investment made by the Respondents in the partnership firm in any manner is prejudicial to the company and its shareholders. It is further argued that in past there have been a similar practice to invest the funds of the company in a partnership firm considering the interest of the company. 17. I have considered the rival submissions. Admittedly, the scheme of rights issue was brought for the purpose of discharging the liabilities of the Company and to improve its net-worth. There is nothing on record to show that the liabilities of the Company stands discharge or its net-worth has improved by making investment/utilization of the rights fund by the then Dire....