TaxTMI 
TaxTMI 
2015 (10) TMI 2326
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....bers in the company each holding 100 shares. The shareholding pattern of the 1st respondent company as on the date of incorporation is as follows: Sl. No. Name of the shareholders/subscribers Number of equity shares 1. Sundar Iyer (P1) 100 2. Vanaja Sundar Iyer (P2) 100 3. J. Chandramouli (R2) 100 4. Shobana Chandramouli (R3) 100 5. R.A Ravichandramouli 100 6. Nirmala Ravichandran 100 7. E.Y Rangoonwala 100 Total number of share 700 3. It is submitted that during the incorporation of the 1st respondent company it had an issued and paid up share capital of Rs. 7000/- comprising of 700 shares of Rs. 10/- each, From the date of incorporation and has been regular in filing the relevant documents with the ROC as required under the law till the year 2000. As per the audit report for the year ended 31.03.2010 the 1st respondent had not been engaged in any business activity. The petitioner states that since the year 2000 the respondent company has neither held any board meetings nor any general meetings and also it was irregular in filing the forms with the ROC. The petitioners came to know recently that the 2nd respondent has committed various a....
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....6 sq. yards equivalent to 333.33 sq. metres in total land area of 1196 sq. yards bearing sub-plot no. 8 in Plot no.344 in Survey No. 129/77 on a plot of land admeasuring 1196 sq. yards. situated at Road No. 12, Banjara Hills. Hyderabad. (2) Doc. 390/56 reg. on 16.02.1996 - A premises, I/3rd share being 33.33% of the undivided share of land to the extent of 398.66 sq, yards equivalent to 333.33 sq. metres in total land area of 1196 sq. yards bearing sub-plot no.8 in Plot no.344 in Survey No. 129/77 on a plot of land admeasuring 1196 sq. yards, situated at Road No. 12, Banjara Hills, Hyderabad. (3) Doc. 391/56 reg. on 16.02.1996 - A premises, 1/3rd share being 33.33% of the undivided share of land to the extent of 398.66 sq. yards equivalent to 333.33 sq. metres in total land area of 1196 sq. yards bearing sub-plot no.8 in Plot no.344 in Survey No. 129/77 on a plot of land admeasuring 1196 sq. yards, situated at Road No. 12. Banjara Hills, Hyderabad. 4. Several acts of oppression and mismanagement committed by the 2nd respondent in the 1st respondent company are : (a) Illegal change/transfers in shareholdings: As per the annual return made upto 29,09.2002 filed by the 2nd respond....
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....clearly acted independently and has acted highly detrimental to the interests of the company and its shareholders. The 2nd respondent has committed a serious fraud by aItering the paid up share capital allotment of shares to himself and another selected shareholders to the exclusion of other shareholders i.e. Petitioners, aItering the shareholding pattern etc. thereby misleading the public and also the ROC by filing false documents and acquiring an effective control of the 1st respondent. (c) Illegal removal of the petitioner No.1 as director of the 1st respondent: Apart from illegal allotment of shares, increase in paid up share capital etc the 2nd respondent has removed the 1st petitioner and R.A Ravichandran from the Board who are the only first directors of the R1 Company in addition to the 2nd respondent. There is no resignation by the petitioner No.1 of 1st respondent as director nor any process followed for his removal. This act of vanishing and removing the name of 1st petitioner as a director is by taking advantage of CLSS scheme is nothing but falsification and manipulation of ROC records for illegal personal benefit. Upon inspection of the company's records filed wi....
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....y Bathija Vs. Prashant Properties & Investment Pvt Ltd at pg 219. 3. (2005) 1 SCC 212 in the matter of Dale & Carrington Investment Pvt Ltd Vs. P.K Prathapan Others at para 13, 14, 15, 18 & 19. 4. (1987) CC PG 227 (Calcutta High Court) in the matter of Gluco Series Pvt Ltd & Others. In view of the aforesaid reasons he requested the Bench to allow the petition as prayed for. 6. The respondents 1 to 5 filed a detailed counter to the petition. Shri Peruman Saranyan, learned counsel appeared for the respondents denied the allegations and averments made by the petitioners. He submitted that the 1st respondent company was promoted by the 2nd respondent and one Mr R.A Ravichandran (now deceased). The petitioners along with respondents 2 & 3, Mr R.A. Ravichandran (now deceased). Mrs Nirmala Ravichandran and Mr E.Y Rangoonwala are only the initial seven subscribers to the memorandum of the 1st respondent company. The 1st petitioner viz Mr Sundar Iyer was also one of the initial directors of the 1st respondent company. During 1997-98, Mr R.A Ravichandran and the petitioner resigned as the directors of the 1st respondent company and their shares along with other shareholders were transfer....
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....ly as additional director and director by creating false DIN No. The appointment is an act of fraud on the company and its directors, Mr. K. Krishnaswamy fraudulently appointed Mr. A.V.M. Sundaram as Director. The appointment of director is an act of fraud on the company and its directors. Mr. K. Krishnaswamy having privy to the meetings and the documents had committed a fraud by making an illegal allotment of shares of 49900 to himself. The value of the said shares is around Rs. 2 crores. For this purpose Mr. K. Krishnaswamy has used the digital signature of the 2nd respondent which was created afresh on 05.08.2013. Mr. K. Krishnaswamy had forged a letter purporting to be issued by Mr. A.V.M Sundaram to Mr. K. Krishnaswamy consenting to apply for a post of Additional Director of the 1st respondent company. Immediately on coming to know the above facts, the 1st respondent company has taken necessary action in removing Mr K. Krishnaswamy and Mr A.V.M Sundaram from the Board of the 1st respondent company by passing necessary resolutions in the EGM held on 29.08.2013 by the 1st respondent company. The relevant Form 32 and along with the said resolution has been filed with ROC. The 1st....
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....a director and not a managing director. But it is false to state that 2nd respondent has filed various forms thereby changing the composition of the Board and shareholding pattern of the company without due notice to any of the petitioners, directors or shareholders of the company. It is submitted that since the petitioners are not the present directors/shareholders of the 1st respondent company no notices were served upon them. The 1st respondent company is taking necessary steps to compounding of offence for violation of sections 12, 45 and 433 of the Companies Act, 1956. The respondents submit that it is the 1st respondent company which has filed Form 2 showing allotment of 49,300 shares on 15.05.2010 to the 2nd respondent and thereby the paid up share capital of the 1st respondent company was increased from Rs. 7000/- to Rs. 5 lakhs. The increased amounts have been duly credited in the accounts of the 1st respondent company. The respondents submit that further issue of shares of the 1st respondent company has been done in accordance with section 81 of the Companies Act, 1956. The necessary special resolutions have been duly passed by the 1st respondent company in accordance wit....
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....am's and Mr K. Krishnaswamy's name has been mentioned as directors. However on subsequent page their names did not appear. These pages have been signed by Mr. Sundar Iyer and Mrs. Vanaja Sundar. They should have taken note of the mention of Mr A.V.M Sundaram and Mr K. Krishnaswamy (Company Secretary and Employee respectively of Twenty First Century Management Services Ltd.). It is highly impossible in the corporate world to be a silent spectator to such a glaring act. The respondents further submits that since, second filing is not permitted by the Ministry of Corporate Affairs, the respondents undertake to rectify the mistakes in the future in the annual returns to be filed by the 1st respondent company. All other allegations and averments are all invented only for the purpose of the petition and put the petitioners to strict proof of the same. The 1st respondent company has not received any loan amount from M/s. Twenty First Century Management Services Ltd. for developing properties at Hyderabad and as such the question of repayment of loan does not arise. It is immaterial to state that M/s. Twenty First Century Management Services Ltd. has paid wealth tax of Rs. 2,15,364....
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....luding dry or wet land, housing plots buildings and lease hold properties. The company was not carrying any business activities. However, the Company purchased a immovable property on 15.02.1996 by way of three registered sale deeds in Hyderabad. The petitioners have filed the copies of the sale deeds along with the petition. From the perusal of all the sale deeds, it is evident that the 1st respondent was represented by its Director. Mr. J.C. Mouli, the 2nd respondent herein. It is the case of the respondents that there are no business activities except the said immovable property standing in the name of the Rl Company. Further the respondents contended that the petitioners transferred their shares in favour of the 2nd and 3rd respondents and the 1st petitioner resigned as director from the R1 Company way back in 1997-1998. However, it was stated that in the annual return filed after 2010, it has been inadvertently mentioned that the 1st petitioner and 2nd respondent herein were holding 350 shares each. The respondents vehemently contended that the CP is barred by limitation and is an abuse of process of law with an intention to grab the property of the company. It is contended th....
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....pany consisting 700 shares of Rs. 10/- each to be restored with seven initial subscribers. According to the petitioners, it is a continuing cause of action is utterly false. The petitioners failed to establish that what prevented them to ventilate their grievance when the 1st petitioner ceases to be a director and the petitioners transferred their shares. If the petitioners were of the opinion that they have not transferred the shares and the 1st petitioner had not resigned from the Board of Directors, they could have approached the proper forum for redressal of their grievances. The petitioners maintained a stoic silence for almost all more than 15 years. Moreover, the petitioners in their petition at Para 6 stated that the petitioners came to know recently that the 2nd respondent has committed various acts of manipulations and oppression and mismanagement which led to the petitioners to suspect about the 2nd respondent acts and deeds in managing the affairs of the Rl Company. In their own admission, the petitioners have expressly stated that the acts committed by the 2 respondent recently meaning thereby the petitioners all these years never bothered about the affairs of the Comp....
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....f the view that there is a small delay in that case, however, it was held that "it depends upon the case to case". In the present case the facts are different and therefore, the said citation will not support the present case. On the other hand, the learned Counsel for the respondents relied upon the judgment of the Hon'ble High Court of Madras in the matter of Anugraha Jewellers Ltd. (supra), wherein the Hon'ble High Court held that the person seeking relief must come with clean hands and conduct must not be tainted. In Bharamgouda Adgouda Patil (supra) is of the view that the conduct of the petitioner is relevant. Further, it was held that the petitioners had not come with clean hands before the CLB which exercises equitable jurisdiction there was no explanation for diversion of funds to the petitioners sister concerns. The petitioner failed to make out a case for winding up of the Company or that the conduct of the respondents was harsh, burdensome and wrongful. Procedural defects or irregularities could not be held to be oppressive to the petitioners. In the present case, the petitioners have not come to this Bench with clean hands. The filing of this petition is appear....
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.... to this Bench with unclean hands. Further there is no continuous cause of action in the petition. Accordingly, the issue is answered against the petitioners. 11. Now I deal with issue No. (ii) For filing a petition before this Bench, the petitioners have to establish a prima facie case of oppression or mismanagement in the affairs of the Company. As stated in issue No (i) supra, the company is having only one property i.e. at Hyderabad and do not have any other business activities. The petitioners in their petition have alleged mainly with regard to the transfer of shares, illegal allotment of shares and illegal removal of the 1st petitioner. It is reiterated that the petitioners were the shareholders of the RI Company, however, the petitioners have transferred their shares to the respondents and exited the company. The petitioners have at no point of time ventilated their grievances with regard to transfer of shares. Further, the petitioners allege with regard to allotment of shares exclusively to the 2nd Respondent. The Respondents contended that 49300 shares were allotted to the 2nd respondent on 15.05.2010 and filed Form No.2 showing the allotment of said shares. It is also....
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....re being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members. Therefore, the petitioners have to establish a prima facie case that the affairs of the company are being conducted to the prejudicial to the public interest or in a manner oppressive to any member. When the petitioners are exited from the company way back in the year 1997-98 and filing the present petition by invoking jurisdiction of this Bench under Section 397/398, alleging purported acts of oppression and mismanagement is concerned. I am of the view that the petition is an abuse of process of law for more than one reason that when the petitioners have exited the Company, there cannot be any acts of oppression against petitioners. In so far as mismanagement is concerned, when there is no business activities in the company there cannot be any allegation of mismanagement in the affairs of the Company. Section 397 specifically provides that any member of a company who complains that the affairs of the Company are being conducted in a manner oppressive to any member or members, further, clause (a) of sub-section (l) of Section 397 specifically mentions that the Compa....
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....d equitable cause for winding up the company, though that must be shown as preliminary to the application of Section 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation, but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders continuing upto the date of petition showing that the affairs of the Company were being conducted in a manner oppressive to some part of members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the tack of confidence sprints from oppression of a minority by a majority in the management of the company's affairs and such oppression must involve at least an element of lack of probity or fair dealing to a member in the mailer of his proprietary rights as a shareholder. It is in the light of these principles that we have to consider the facts in this case with reference to section 397". 14. In the present case the petitioners have failed to establish that ....
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.... para 24 of the judgment the Hon'ble Supreme Court held that "Further, it was held that if a member who holds the majority of shares in a company is reduced to the position of minority shareholders in the company by any act of the company or by its Board of Directors mala fide, the said act must ordinarily he considered to be an act of oppression to the said member. The member who holds the majority of shares in the company is entitled by virtue of the majority to control, manage and run the affairs of the company. This is a benefit or advantage which the member enjoys and is entitled to enjoy in accordance with the provisions of company law in the matter of administration of the affairs of the company by electing his own men to the board of directors of the company." 16. Further the learned Counsel for the petitioner relied upon the judgment of the Bombay High Court in the matter of Sanjay Bathija reported in (2008) 141 CC 216. The said judgment is not applicable to the facts of the present case on the ground that the said judgment is related to the rectification of register of members and not decided on the acts of oppression and mismanagement. The other judgments relied upo....
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.... making of a winding-up order on the just and equitable principle, but that such an order would unfairly prejudice the applicant before the CLB." Para 141 "As was discussed by this Court in Needle Industries Case, unwise, inefficient or careless conduct of a Director cannot give rise to claim for relief under Section 397 of the Act. For relief under this section, the applicant could have to prove that the conduct of the majority of the shareholders lacked probity and was unfair so as to cause prejudice to the applicant in exercising his legal and proprietary rights as a shareholder. This, in fact, is the golden thread of the various decisions in relation to petitions under Sections 397,398 and 402 of the above Act. All the various decisions cited by the learned Counsel for the various parties are ad idem on this issue and applying the said principles, each complaint under Section 397 will have to be judged on its own merit for the CLB to arrive at a conclusion as to whether the ingredients of Section 397 when satisfied and pass appropriate orders thereafter", Para 142 "As has been indicated in some of the cases cited, the language of Section 397 suggests that the oppressive manne....