AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (7) TMI 534
X X X X Extracts X X X X
X X X X Extracts X X X X
....he petitioner and the first respondent were the only shareholders of the company holding 9,800 and 10,200 equity shares of Rs. 10/- each, i.e. 49% and 51 % of the paid-up equity capital of the company respectively till 2008-09. As on 31st March, 2013, the capital structure of the company as per balance sheet is like authorised capital of the company is Rs. 1,70,00,000/- divided into 17,00,000 equity shares of Rs. 10/- each and the issued, called-up subscribed and paid-up capital of the company is Rs. 1,52,00,000/- divided into 15,20,000 equity shares of Rs. 10/- each. The present shareholding of the petitioner is 2,34,800 number of equity shares of Rs. 10/-, which works out to 15.45% of the equity capital of the company. The present shareholding of the respondent No. 2 is 6,60,200 number of shares which is around 52% of the paid-up equity capital of the company. The respondent No. 3, who is the wife of the respondent No. 2, was allotted 1,85,000 number of equity shares of the company during the years 2008-09 to 2012-13. The respondent No. 4, the father of respondent No. 2 is holding 1,15,000 number of equity shares in the capital of the company, which has been allotted during the y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(5,50,000 number of equity shares) and 2011-12 (2,50,000 number of equity shares) to take over the total control of the affairs of the Company. The company has allotted these additional shares without holding any Board meeting and general meeting. The petitioner being one of the first two directors of the Company, has neither received any notice or any Board and general meeting of the Company nor attended any such meeting held for allotment of additional shares. The petitioner has submitted that he has neither received any notice for convening any meeting of the Board and shareholders nor attended any meeting for appointment of Managing Director, Director and allotment of additional shares, which the Respondent No. 2 being the only other director can never hold without a valid Board and General meeting to allot additional shares. The petitioner has received this information from M.C.A. website only. All these illegal activities have been done by the respondent No. 2 without the knowledge of the petitioner, who is one of the directors and shareholders, out of two directors and shareholders of the company. The petitioner has stated in the petition that the company has set up its ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue from sales and services was Rs. 83.63 lakhs whereas cost of production constituted only purchase and transport which came to Rs. 31.70 lakhs. The Company has incurred loss of Rs. 75.26 lakhs which is around 50% of the net worth of the Company for which the present respondent No. 2 is wholly responsible. The petitioner has further stated that the company is filing forms and returns to the concerned authorities duly signed by the respondent No. 2 as Managing Director and the respondent No. 3 as Director, who has been illegally appointed by the respondent No. 2 without any information to the only other Director and shareholder of the Company. The statutory auditors have not reported any irregularities regarding financial transaction, illegal allotment of shares, illegal appointment of directors which is a gross violation of the provisions of the Companies Act, 1956, which is perhaps done in connivance with the Respondents. In the facts and circumstances, the petitioner in this petition has prayed that the additional shares issued by the respondents may be declared as null and void due to the fact that the same has been made without any due notice to the petitioner without complyi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the company in accordance as prescribed under the Companies Act. Regarding the appointment of the respondent No. 3 as the Director and respondent No. 2 as the Managing Director without any valid board or general meeting, the Respondent has replied that resolution to appoint the Respondent No. 3 as a Director and Respondent No. 2 as the Managing Director of the Company was taken in a board meeting held on 24.09.2010, which was duly approved by all the shareholders of the company including the petitioner and his wife in the Annual General Meeting of the company held on 30th September, 2010 which is evident from the forms filed with ROC in such respect. Regarding allotment of additional shares without holding any Board meeting or General Meeting or without serving any notice to the petitioner, which is illegal and unlawful, the Respondent replied that as the company had already taken a loan of Rs. 2.74 crores due to acute financial crunch for setting up of its waste oil processing plant, the Company allotted additional shares to meet up the acute shortage of funds for which the petitioner was also offered for purchase of additional shares but the petitioner cited his inability....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o induct the wife being the respondent No. 5 in the Board of the company as well so that there is equal participation and say from the petitioner also. The Respondent also submitted that the petitioner has never invested any amount in the company, still, the respondent No. 2 is ready and willing to all possible acts together with the petitioner to achieve the goals of the family by taking forward the company and commencing its production which would ensure the benefit of all the family members. The petitioner has filed a Rejoinder. The petitioner has further submitted that due to diversion of working capital fund and cash credit amount, the operation of the company has been adversely affected and the Company has suffered loss. Therefore, the affairs of the Company have been mismanaged since beginning. The petitioner has submitted in the Rejoinder that he was never approached to infuse further capital in the company in proportion to this shareholding and was never given opportunity to take part in any meeting or in the affairs of the company. Above all, the petitioner was verbally threatened by the Respondent No. 2 not to enter inside the factory premises failing which to face cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er came to be 15.45% of the equity capital of the Company and that of R2 is 52% of the paid-up equity capital of the Company. The Petitioner and R2 were the promoter directors of the Company. The Petitioner has contended that the Petitioner being one of the first two directors of the Company had neither received any notice of the Board meeting, Annual General Meeting nor attended any Board Meeting and Annual General Meeting of the Company that was convened to decide on appointment of R2 as the managing director and R3 as the director of the Company. The Petitioners contended that the aforementioned was done in absence of any valid board meeting. In the Form No. 32 which was filed during the year 2010-11 for the appointment/change in directors as has been enclosed in Annexure- A4 of the main Petition lays down:- "Chhaya Kar bearing DIN 03226020 was appointed as an executive director in designation, and in the category of promoter on the 24th September, 2010", and "Mr. Dhananjaya Kar bearing DIN 02661943 was appointed as a managing director in designation, and in the category of promoter on the 24th September, 2010". The Board of Directors at the time of incorporation of the Comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eholding pattern that stood after the increase in the authorized share capital of the Company, R2's shareholding reduced from 51% to 43.8%, Petitioner's shareholding reduced from 49% to 32.61%, R3's shareholding became 10.42%, R4's shareholding became 3.47% and R5's shareholding became 10.42%. However, over a period of time in 2010-11, 2011-12 and 2012-13 all the Respondents were issued further shares excluding the Petitioner owing to which the Petitioner's shareholding reduced to 15.15% of the shareholding in the Company. The purported further issue of capital was done at various AGMs held in each year during 2009-10, 2010-11 and 2011-12, for which the Petitioner was never notified about and R2 being the only other shareholder at the time of the first allotment of further issue of capital, could not have validly held a Board or a general meeting to allot the additional shares in absence of the Petitioner. The aforementioned is reflected in the annual returns filed by R1 for the years 2008-09, 2009-10, and 2010-11 as indicated on Annexure-A5 (Series) at pages 62 to 84 of the main Company Petition. The Petitioner also contended that the information could on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as been annexed as Annexure-A7 at page 94 of the main Petition and lays down:- "In reference to the loan accounts, we are sorry to inform you that in spite of our various reminders and personal contacts you have failed to regularize the subject A/Cs and our higher authorities have viewed it serious. The A/Cs are highly irregular and no sale proceeds have been routed through the A/Cs and the irregularities are rising high and if the situation will continue it will turn to NPA very soon. Then and there serious action will betaken as per the instruction of our Higher Authohty. Therefore you are advised to regularize the A/Cs within one month time and restrain us not to act for unfavourable situations." The aforementioned letter clearly indicates mismanagement of funds done at the instance of the Respondents who have failed to comply with the conditions of the bank vis-a-vis the loan accounts. In addition to the aforementioned, according to the contentions of the Petitioner, the Petitioner had at an earlier point of time through a letter dated 21st October, 2010 had requested clarification from R1 regarding the irregularities and the illegalities that had arisen in the Company by vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Companies Act, 1956, the Respondents were supposed to hold Annual General Meeting but had not been so held for the years 2007, 2008, 2009 and 2010. Moreover, according to the Petitioner, the Respondents have failed to comply with Section 210 of the Companies Act, 1956, whereby the Board of Directors of the Company shall lay before the Company at every Annual General Meeting of the Company a balance sheet and the profit and loss account for that financial year. Additionally under Section 215(2) and Section 159, the balance sheet and profit and loss account and the annual return, should be signed on behalf of the Board by two directors of the Company, respectively. The Petitioner contended that through his letter he had mentioned that neither of the aforementioned statutory compliances had been fulfilled. And no annual general meetings were held and neither were any notices given for holding such annual general meeting. Moreover, the Petitioner also wrote that the Company had not held any Board Meeting for giving notice for holding the Extraordinary general meeting either. The Respondents have failed to reply to any of the aforementioned contentions of the letter of the Petitioner ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....failed to serve upon notices to the Petitioner regarding the same. Additionally, the Respondents have denied access to the Petitioner into the factory premises and have not regularized the Company's account maintained with the Punjab National Bank and defaults in payment of dues against the loans sanctioned by The Punjab National Bank, are apparent, which indicates towards acts of mismanagement. Further the Petitioner has also contended that the statutory auditors appointed by the Respondents for the Company have not reported any qualification on the operation and financial transaction of the Company, or about related party transaction, illegal allotment of shares, illegal appointment of directors and gross violation of the provisions of the Companies Act, 1956. In the light of the case of Capricorn Oils Ltd. v. Ratan Mohan Sarda [2012] 113 SCL 395/21 (Cal.), where the majority was turned into minority by management group by allotting shares to its own people without calling meeting or offering corresponding shares to promoter's group or other shareholders, such an act was held as an act of oppression. The CLB held that the issue of further shares by one group of sharehol....