TaxTMI 
TaxTMI 
2017 (6) TMI 26
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....ies Act, 1956. The Petitioners have 51% shareholding in the Respondent Company which was hitherto undisputed until the increase in the authorised share capital of the company which was done in the meeting held on 28th March, 2014. The first shareholders of the Respondent Company were R2 and R14, who became shareholders along with their other associates in the Respondent Company. However, R12 and R18 to R21 were never the shareholders of the company. The Petitioners who are the Dhanuka Group and the Respondents who are the Anil Singhania Group entered into a shareholders' agreement to start a joint venture company on 1st October, 2007 to start the joint venture company in the nature of a partnership where both the groups will have equal representation in the Board of Directors and will have 50:50 shareholding in the company. In pursuance of the agreement, the authorised capital of the company was also increased from Rs. 1 Crore to Rs. 2 Crores. R2 and R14 insisted on managing the day to day affairs of the company and therefore entered into a separate agreement with the company on 22nd October, 2007, for getting an extra share in profits. At a later point of time when the shareho....
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....ave denied access to the Petitioners the books and records of the Company. The Petitioners contended that the Petitioners are carrying on the business of retail trade of readymade garments, property leasing and other businesses of like nature, and prior thereto was also known as Mayur Sales Pvt. Ltd.. The Petitioners contend that they had entered into an agreement with the Respondents to start a joint venture company. The Respondents and the Petitioners had agreed to sell, license, market and distribute the products of the company by causing the company to become a joint venture company wherein both the parties would have equal representation on the Board of Directors and have 50% shareholding each in the company. As a consequence, a shareholder's agreement was entered into on the 1st October, 2007 and the authorised capital of the company was then increased from Rs. 1 Crore to Rs. 2 Crores whereby the Petitioners came to hold 50% of the paid up share capital of the company by way of allotment of fresh shares of the company. The Petitioners contended that the day to day management of the affairs of the company and its administration was entrusted to R2 and R14. A further agre....
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....or an extension of 3 more months. The Respondents group allegedly failed to keep their commitment under the agreement dated May 11, 2013 even in the extended period and the conditional agreement therefore came to an end. The Petitioners then filed a suit for appropriate reliefs before the Honourable High Court at Calcutta being C. S. No. 365 of 2014 for enforcing their rights as creditors of the company against the Respondents. The petitioners contend that the respondents have committed illegal acts unbeknownst to the petitioners which are oppressive to the interest of the company and its shareholders. The Petitioners contended that to enforce their rights as a shareholder in the company as a consequence of the 11th May, 2013 agreement ending, the Petitioners requested for an EOGM to the respondents on 20th August, 2014 which was not heeded. Subsequently, the Petitioners through a notice dated 12th September, 2014 called for an EOGM be held on the 4th October, 2014, to which the Respondents sent a letter to the Petitioners stating that they had filed a petition against them under oppression and mismanagement whereby they were seeking to appoint or remove directors from the Board a....
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....other shareholders for purchase of such shares. Further it was also contended that no decision on the fair value of such shares was made or any notice expressing any intention of transfer was given to the Petitioners. The Petitioner further contends that R18 was appointed as an additional director of the company on 15th July, 2014 and R19, R20 and R21 were appointed as additional directors of the company on 26th July, 2014. However, in either of the cases the Petitioners, despite being the majority shareholders of the company, were never notified about any of the meetings or participated in any voting or resolutions passed for appointing R18 to R21 as additional directors of the company. Further the Petitioners allege that in a meeting of 28th March, 2014 which was not notified to the Petitioner, the authorised share capital of the company was increased from Rs. 2 Crores to Rs. 2 Crores 10 Lakhs which prejudiced the rights and interests of the petitioners and to illegally increase the shareholding of the respondents by allotting shares in their names or in the names of the entities controlled by the respondents. The Petitioners therefore contend that the respondents are responsible....
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....ect to the provisions of Indian Arbitration Act, 1940". The Respondents also contended that the shareholder's agreement as had been entered into on the 1st October, 2007 between the Petitioners and the Respondents that contained various provisions relating to running of the affairs, business and management of the company including various provisions regarding shareholding of the company, specifically provided that "all disputes and differences between the parties hereto shall be referred to Arbitration and the same shall be deemed to be a reference within the meaning of Arbitration and Conciliation Act, 1996, and that Courts at Kolkata alone shall have jurisdiction to entertain and try all actions, suits and proceedings arisen of these presents." The Respondents contend that the Petitioners entered into an agreement with the other respondents on 11th May, 2013, whereby the company was also a party to it. In the agreement, according to the Respondents, the petitioners have expressed their intention to quit from the shareholding and management of the company and also to waive-off the amount advanced by them to the company, on receipt of the sum of Rs. 2 Crores as specified in the....
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....to alter the memorandum in absence of the consent of the Petitioner's vote, as a special resolution is required for the same. Therefore, the said alteration of the Memorandum of Association has been done in violation of the procedure mentioned under Companies Act, 1956. There is no mention of the approval of an amended Memorandum of Association that reflects the increase in authorized share capital. The increase of authorized share capital on 28th March, 2014 which was done without serving any notice to the Petitioners, has not been done according to the procedure established by the Companies Act, 1956. In the case of Hindustan Co-operative Insurance Society Ltd., In re [1961] 31 Comp. Cas. 193 (Cal.), it was observed that the shareholders were left completely in the dark, because no annual general meeting was called, with no information regarding the manner in which the affairs of the company were being conducted, while those men who purported to act as directors dealt with the company's money in any fashion they liked and prejudicial to the interest of the company. It was held that these acts of the respondent who had the majority backing no doubt amounted to oppression ....
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....ection 397/398 proceeding in an endeavour to put an end to the acts complained of, and to ensure that these allegations do not recur in future, directed the company to issue notices for the general body meetings by registered post at the company's cost to the petitioner. Also, the CLB further directed that as far as Board meetings were concerned, till such time the petitioner had its nominees on the Board, notices for Board meetings together with agenda were to be sent to these nominees at least 7 days before the dates of the meetings. Therefore, omission to give notice of meeting was held to be oppression. Not sending notices to shareholders/directors and passing resolutions thereat is held oppressive to members and constitute mismanagement of Companies. In the case of London School of Electronics Ltd., In re [1985] BCLC 273, it was observed that the diversion of a business opportunity from one company to another company controlled by a director of the former and who was a majority shareholder of that company was held to be oppressive because it deprived the 25% minority shareholders of the profits which was attributable to that opportunity. Moreover, allotment of shares by....
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....mbers therein may amount to oppression, and also amount to violation of the Articles of Association. Moreover, in the case of Radhe Shyam Tulsian v. Panchmukhi Investments Ltd. [2002] 35 SCL 849 (CLB); Micromeritics Engineers (P.) Ltd. v. S. Munusamy [2005] 58 SCL 301 (Mad.), it has been observed that irregular appointment of director on the strength of irregular allotment of shares is an act of oppression: In the case of Smt. Hema Singh v. ANC Construction (P.) Ltd. [2013] 119 SCL 34 (CLB - New Delhi)(Mag.), it was observed that illegal appointment and removal of directors, allotment of shares and manipulation of accounts, amounts to oppression and mismanagement in affairs of company. Among other things, the petitioner-promoter director alleged oppression and mismanagement in affairs of company on grounds of illegal appointment of additional directors, illegal allotment of shares to certain directors of respondent group, manipulation of accounts, misappropriation of funds and refusal to allow inspection of statutory records to petitioner. The CLB held that since respondents failed to meet contentions of petitioner, they were guilty of oppression and mismanagement in affairs of t....
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.... as directors was done in the Board of Company. The Petitioner contends that they received no notice for the board meetings held on 15th July, 2014 and 26th July, 2014. Also the Petitioner contends that no promoter director can be appointed in a board meeting and that only an additional director could have been appointed at such board meetings. The same has been annexed as Form DIR 12 of R18, R19, R20, R21 at Pages 186, 197, 209 and 211, respectively, which were allegedly filed illegally by R5 to R8 under their digital signatures. Therefore, such appointments of R18 to R21, are invalid and directed to be reversed. The Petitioners have also contended that the authorized share capital of the Company had been illegally and wrongfully increased by the Respondents. The alleged increase in the authorized share capital was done to increase the capital from 20 Lakhs equity shares to Lakhs equity shares in a meeting held on 28th March 2014 of which no notice was served upon the Petitioners. The Petitioners have alleged that the Form SH7 was filed on 22nd September, 2014 whereas the compliance certificate issued by the Company Secretary of the Company says that no Extraordinary General Meet....
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....y provisions of the Companies Act, 1956. Also the transfer of shares to R12, who was a non-member, in a meeting which was not notified to the Petitioner and the transfer was not even approved in a Board meeting by the Board of Directors, is an invalid transfer. Since it can be seen that there is a clear deadlock in the management of the affairs of the Company, and the fact that at an earlier point of time the Petitioner had sought for an exit option pursuant to which the agreement of 11th May, 2013 was made and which was to come into effect from the 1st April 2013, which the Respondents had failed to honour, the Petitioners are hereby being given an option to exit the Company. In the case of M.S.D.C. Radharamanan v. M.S.D. Chandrasekara Raja [2008] 83 SCL 451 (SC), it was recorded that there could be a method of valuation whereby at the first instance, one of the parties to the dispute shall purchase the shares of the petitioners, within six months from the date of finalisation of such valuation and on his failure to do so, the other party shall purchase the shares of the other within six months thereafter. In the event both the alternatives failed the purchase of shares of eithe....