TaxTMI 
TaxTMI 
2009 (7) TMI 1314
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....sed share capital of Rs. 18,00,000 divided into 18,000 equity shares of the value of Rs. 100 each. The main objects of respondent No. 1 company are to carry out the business of running hotels. Counsel for the petitioners pointed out that Shri Prabhjit Singh Johar (petitioner No. 1) who is the younger brother of Shri Amarjit Singh Johar (respondent No. 2) upon the death of their father Shri Surinder Singh Johar in 1961, when he died intestate were aged 13 years and 20 years, respectively. My attention was drawn to the family properties and business which were as under: (i) Residential House at Baghat Barzulla, Srinagar with land measuring 15 kanals approximately (paragraph 4.1 of the memorandum of understanding dated September 27, 1987; (ii) Residential House at 116 -A/D, Gandhi Nagar, Jammu (paragraph 4.2 of the memorandum of understanding dated September 27, 1987); (iii) Land at Gol. Tehsil Jammu near Bank Colony approximately 6 to 7 kanals (Paragraph 4.3 dated September 27,1987); (iv) Land at Gol Gujarat, Jammu approximately 42 kanals (paragraph 4.4 of the memorandum of understanding dated September 27, 1987); (v) Land at Kud approximately 4 kanals (paragraph 4.5 of the memor....
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....e two branches; these were clubbed as group A properties; and (b) properties with respect to which there was no agreement were classified separately as group B properties and consequently it was agreed that they would be owned and managed jointly. As per Clause 6.1 of the 1987 memorandum of understanding, respondent No. 1 was agreed to be managed jointly by the two branches of petitioner No. 1 and respondent No. 2. It was also agreed that respondent No. 1 will continue to be their joint property and responsibility. It was agreed that both of them will operate the bank account jointly. The house at Jammu which was pledged to the financial institutions fell to the share of petitioner No. 1. As a reciprocal measure petitioner No. 1 was required to give up his claim to the house in Srinagar located at Bhagat Barzula which is also the registered office of respondent No. 1 company. It was pointed out that the charge on the house at Jammu still continues, respondent No. 2 has failed to get it released. To substantiate the contentions regarding the claim to these properties, my attention was drawn to (i) GPA dated December 27, 1996; (ii) Relinquishment deed dated December 27, 1996, execu....
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....he authorised capital of respondent No. 1 company from Rs. 18 lakhs to Rs. 35 lakhs. In the annual return of even date petitioner No. 1 and his wife are shown as holding 50 per cent, of the shares in respondent No. 1 which in number is 6,264 and 2,523 shares, respectively. Furthermore, the issued, subscribed and paid -up capital is Rs. 16,62,400 comprising of 16,624 shares of Rs. 100 each. ( 7. ) Further , it was noted that respondent No. 1 convened an extraordinary general meeting on March 22, 1999, at Delhi of which, petitioner No. 1 or his wife had no notice, in which the shareholders which could only be respondent No. 2 and his wife have passed a resolution whereby the authorised capital of respondent No. 1 was increased from Rs. 18 lakhs to Rs. 35 lakhs. ( 8. ) Further , it was noted that in the meeting of the board held on March 23, 1999, additional shares numbering 15,986 were issued (respondent No. 2 10,906 shares and respondent No. 35,430). It was pointed out that along with the reply, the respondents have filed typed copies of minutes of the extraordinary general meeting allegedly held at Srinagar on March 22, 1999. So there two meetings of the same date at two differen....
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....on of removing petitioner No. 1 and his wife stating that they were not interested in the company. Further, petitioner No. 1 could not be removed as a director as he had given personal guarantee and collateral security for the loans taken from SFC and SIDCO. In view of the instability in the affairs of the family because of dislocation from the Valley; and due to litigation with respondent No. 2 group and certain people outside the family who had attempted to usurp the property of the family, petitioner No. 1 was unable to closely monitor the affairs of respondent No. 1 company which admittedly were lying in a dormant state and, with respect to which, respondent No. 2 and his family assured that it was looking after the interest of all concerned including petitioner No. 1 and his family. Inspection revealed that respondent No. 2 had over a period of time carefully manipulated the record of respondent No. 1 company in order to illegally oust petitioner No. 1 and his family from respondent No. 1 company for wrongful gains. On July 31, 2004, petitioner No. 1 made a public advertisement cautioning the public at large. In August, 2004, petitioner No. 1 along with the other shareholders ....
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....ted out that admittedly prior to the extraordinary general meeting, respondent No. 1 had only four (4) shareholders, i.e., respondent No. 2, petitioner No. 1 and their respective wives. Along with the reply of respondents no notice of the extraordinary general meeting has been placed on record. It was contended that there is no meeting held in the eye of law. The self serving decisions by the remaining two shareholders, i.e., respondent No. 2 and respondent No. 3 have been made. It is a settled position of law that principles analogous to Section 81 of the Companies Act, 1956, are applicable even to private limited companies which requires the directors to give notice to existing shareholders to ascertain their desire to invest in the shares of the company so as to maintain parity amongst the shareholders and an equilibrium with respect to the management of the company. Reliance in this regard was placed on the judgment of the Supreme Court in the case of Dale and Carington Invt. P. Ltd. v. P.K. Prathapan : [2004] 122 Comp Cas 161 : [2005] 1 SCC 212 at page No. 233 and contended that it is well -settled that additional shares cannot be issued by the directors for ulterior and impro....
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....t the averments made in the reply. The balance -sheet for the year ended Inarch 31, 1998, ostensibly has been drawn up to show that the directors, namely, Amarjit Singh Johar his wife Kiran Kaur Johar and his son K.S. Johar have lent to respondent No. 1 a sum of Rs. 19,36,661. The entry is contended to be false because as per the extraordinary general meeting dated March 22, 1999 (pages 45 -46 of compilation) K.S. Johar the son of respondent No. 2 was inducted into the company only in March, 1999, to show that a sum of Rs. 3,02,905.55 out of Rs. 19.36 lakhs was owed by respondent No. 1 to him in his capacity as the director on the fact of it a false statement, the board of directors' minutes of September 22,1999, filed by the respondents seem to suggest that he was appointed as additional director by the Board on September 22, 1999, the minutes of September 22, 1999, are therefore fabricated, he was not a director of the company as on March 31, 1998, he had not advanced monies to respondent No. 1 which require conversion into equity and allotment of additional shares in the interest of the company. Further, it was contended that the additional 16,336 shares which are shown to h....
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....s drawn to the air ticket, and the hotel bill. It was reiterated that there is no way that transfer deeds could have been executed on April 11, 2001; (ii) respondent No. 2 in his reply has stated, the quantum, the form or the manner of payment of consideration for obvious reasons was not paid and no transfer deeds were executed by petitioner No. 1; (iii) it was contended that signatures of petitioner No. 1 and his wife Mrs. Satinder Kaur Johar are forged. My attention was drawn to the relinquishment deed dated December 2, 1996 and signatures attested by the bankers at pages 54 to 55 of the rejoinder; (iv) admittedly, Smt. Satinder Kaur Johar was not in Srinagar on April 11, 2001, or even immediately prior to that date as petitioner No. 1 had come to Srinagar along with his son Mr. Jaijit Singh Johar. As a matter of fact on the document of compromise petitioner No. 1 signed as an attorney of his wife, i.e., Smt. Satinder Kaur Johar; (v) there are no distinctive numbers given in the transfer deeds and in certain cases the folio numbers are also incorrect. Further, in the annual return of September 28, 1998, the shareholding of petitioner No. 1 is shown as 6,264 shares whereas in the ....
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.... 18 lakhs to Rs. 35 lakhs and the allotment of shares to themselves by respondent No. 2 group on March 22, 1999, is illegal firstly, for the reason that no such meeting was ever held and if held no notices of the said meeting were ever sent or placed on record before the Company Law Board by respondent No. 2 group, by virtue of the additional allotment of 16,336 shares and the board meeting dated March 23, 1999, the minutes reveal that the directors proposed to allot shares to non members, however allotment of shares were due to themselves respondent No. 2 and the group, without offering the shares to petitioner No. 1 and his group. Respondent No. 2 group has sought to demonstrate that in March, 1999 the shareholding of petitioner No. 1 group in respondent No. 1 fell to 26.6 per cent. It was pointed out that the hon'ble Supreme Court in the case of M.S. Madhusoodhanan v. Kerala Kaumudi P. Ltd. : [2003] 117 Comp Cas 19 : [2004] 9 SCC 204, has held that there is no presumption that the letters must have reached in due course to the addressee if the letters are addressed and posted by certificate of posting. In this case, there is no mention even in respect of dispatch of the alle....
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....4. ) It was pointed out that the Company Law Board in the case of Dinesh Sharma v. Vardaan Agrotech P. Ltd., [2007] 135 Comp Cas 133, was dealing with a similar issue as raised in the present petition. In that judgment the issue of removing petitioner No. 2 from directorship by taking self cognisance of Section 283(1)(g) although no such board meetings were held by giving any notice/communication to the petitioner was impugned. In that case the petitioners and respondents were holding 50 per cent, share each in the equity of the company, the respondents increased the share capital and reduced the petitioner to an insignificant minority. After considering the objections of the respondents the Company Law Board had held that: "increasing of authorised share capital and allotment of additional shares which is not in the interest of the company is an act of oppression". Further, it was held that: "In my view directorial complaints can be adjudicated by this Board in Section 397/398 proceedings when the petition is a composite petition wherein not only directorial complaints are made but also complaints relating to conversion of majority into minority." Further, it was pointed out th....
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.... of shares impugned in the company petition made for personal gains and with a view to gain advantage against the other shareholders of a closely held company was neither in compliance with the legal requirements (except the allotment on December 11, 2002, though it suffered from an illegality and no proper procedure was followed) nor ensured the fair play and probity in corporate management, resulting in the enhancement of the shareholders of the second respondent, which would constitute an act of oppression. ( 15. ) It was reiterated that the removal of directors and the additional issue of shares having been made only to secure its control over respondent No. 1 and not in the interest of the company and without requisite and valid meetings and transactions which are clearly contrary to law and hence, reliefs as prayed for ought to be granted in the present circumstances. ( 16. ) Replying to the contentions of the respondents that the petition is barred by limitation and/or is not maintainable in view of their contention that it seeks to pursue the petitioner's private interest, it was argued that the contentions are untenable because: (i) Limitation is not applicable to pr....
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....eld that the civil court's jurisdiction will be impliedly barred if the company court (now Company Law Board) comes to the opinion that the court has power under Section 111 to adjudicate the dispute of rectification of register. In the case of Navin Ramji Shah v. Simplex Engineering and Foundry Works P. Ltd., [2007] 136 Comp Cas 770 (CLB), it has been held that in family companies any reduction in the percentage of shareholding irrespective of the quantum of percentage, the affected parties can always allege oppression as his position vis -a -vis other family members gets altered due to non -allotment of shares. It was argued that the contention of the respondents that before filing a petition under Sections 397 and 398 of the Act the petitioners should seek the rectification of register of members under Section 111/111A of the Act is misplaced. In any case, this objection was not taken by the respondents in their reply and therefore cannot be considered by the Company Law Board. It was pointed out that the hon'ble Supreme Court in the case of Dr. J.J. Merchant v. Shrinath Chaturvedi : [2002] 6 SCC 635, while dealing with the proposition under the Consumer Protection Act....
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....company and altering memorandum and articles of association of respondent No. 1 company without the knowledge of the petitioners. The resolution of the extraordinary general meeting dated March 22, 1999, was placed before the Registrar of Companies and the petitioner challenged the same after inspecting the Registrar of Companies's records. The minutes of the alleged board meeting held on March 23, 1999, wrongly mentioned as March 22, 2009, was not to the knowledge of the petitioners at the time of filing of the petition and the said minutes were filed by the respondent along with the reply for the first time. The petitioners, therefore, had no occasion to challenge the board meeting dated March 23, 1999. It was argued that the increase in share capital from Rs. 18,00,000 to Rs. 35,00,000 is, therefore, illegal and non est and further the allotment of 16,336 shares to the respondent on March 23, 1999, is also illegal and mala fide; (e) it was argued that as far as the requirement of the funds as stated by the respondents is concerned no company would increase its shares capital to meet day -to -day expenses as alleged by the respondents, the share capital is increased to meet t....
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....ners were shown to have transferred their shares to the respondents is also incorrect as is evident from the air ticket produced by the petitioner besides a documentary evidence to show that the documents of the hotel, airlines and the credit card payments, the petitioners were not in Srinagar on April 11, 2001. It was argued that the shares transfer cannot be presumed in law in the present case as the respondent in the control of the company were also in possession of the share certificate of the petitioners, the transfer of shares has been falsely shown in the records of the company. Only the annual return filed before the Registrar of Companies shows the change in the shareholding pattern. The shareholders in a private limited company will not be in a position to know how the shareholding patterns have changed unless the minutes showing the transfer made available to them. Further, it was argued that the question of moving the civil court does not arise as prima facie on the basis of records available. Regarding petitioner No. 1 and petitioner No. 2's cessation as director it was argued that the respondents are aware about the address of the petitioners and the respondents....
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....ct the one -time settlement scheme was only initiated by petitioner No. 1 and accordingly he deposited a sum of Rs. 6 lakhs being 20 per cent, of the agreed amount of Rs. 30 lakhs under the scheme. Respondent No. 2 volunteered to deposit Rs. 6 lakhs only after petitioner No. 1 had paid the sum of Rs. 6 lakhs. It was contended that the allegation made by the respondent that the petitioners never care to attend to the loans of the company is false and incorrect. Similarly, the payment due to Jammu and Kashmir SIDCO, when one -time settlement scheme was floated on December 1, 2008, it was the petitioner who deposited a sum of 3.96 lakhs on December 15, 2008. Thereafter a letter dated December 16, 2008, was issued by the Jammu and Kashmir SIDCO addressing to petitioner No. 1 as promoter director of the company and accepting amount of Rs. 3.96 lakhs towards 10 per cent, of the principle outstanding amount. Thereafter, petitioner No. 1 paid two more instalment in the month of February and March, 2009. It is only thereafter that respondent No. 2 paid the balance 50 per cent, of the total outstanding amount to the Jammu and Kashmir SIDCO. This, it was argued, proves of respondent No. 2 acc....
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....r 26/27, 1987, specifically provided that the petitioner and respondent are jointly to run respondent No. 1 company. The petitioners were not even called upon by the respondents in the reply that there were further minutes of the meetings held after the memorandum of understanding was signed between the petitioners and respondents on September 26/27, 1987. ( 20. ) It was explained by counsel for the petitioner that the petitioners are not seeking to enforce the family settlement dated September 26/27, 1987. The family settlement was referred to by the petitioner only to show that the intention of the family members was to have respondent No. 1 company is in joint control. As mentioned in the memorandum of understanding the hotel business was not split. The respondents are, therefore, wrong in ascertaining that the petitioners are seeking to enforce the agreement/memorandum of understandings dated September 26/27, 1987. It was pointed out that the judgment of Vinod Kumar Mittal v. Kaveri Lime Industries Ltd., [2000] 100 Comp Cas 66 (CLB), does not apply to the facts of the case. In that case, the petitioners were active in attending the board meetings. However, in the present cas....
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....e is acting as a director are not independent but dependent on each other. It was also clarified that the house of petitioner No. 1 in Jammu is mortgaged to SFC as a collateral for the loans obtained by the company. The public advertisement on July 31, 2004, was issued to place the correct perspective in respect of the land on which the hotel is situated to protect the innocent general public. It was pointed out that the contents of the advertisement would indicate that it was issued in general public interest. ( 23. ) Counsel for the respondents argued that the petition is not maintainable for non -compliance of Section 399; the petitioners are admittedly not members of the company, which is a condition precedent to file the petition under Sections 397 and 398 and are therefore, not eligible to file this petition; as per serial No. 27 the petitioner III to the Company Law Board Regulations, 1991, the petitioner is required to produce the documentary evidence in proof of eligibility and status of the petitioner with the voting power held and is required to be enclosed to the petition under Sections 397 and 398 of the Act, the said documentary evidence has not been enclosed. Furthe....
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....tements about the number of shares held: (i) at paragraph 11, page 15 of the rejoinder - number of shares mentioned is "7,837"; (ii) at paragraph 1, page 9 of the rejoinder - 50 per cent, i.e., "8787" is the number of shares; (iii) at paragraph 28, page 33, "... have invested at least Rs. 8,78,700...constituting almost 50 per cent...." The use of word "atleast" by the petitioners reflects their confusing state of mind about their investment. Further, it was argued that 50 per cent, shareholders should presumably have been aware of the financial status of the company including the long outstanding dues: (i) Jammu and Kashmir State Industrial Development Corporation Ltd. (SIDCO) original loan of Rs. 40,00,000 currently at Rs. 8,00,00,000 approximately. As per the documents filed by the petitioners themselves the company was declared as defaulter by SIDCO, (ii) Jammu and Kashmir State Financial Corporation (SFC) original loan of Rs. 30,00,000, currently at Rs. 8,00,00,000 approximately, SFC also declared the company as defaulter and a public notice was issued in August 2003, (iii) Union Bank of India's Rs. 50,00,000 (original loan of Rs. 13,50,000 with interest), but the petitio....
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....ported or communicated to the company. ( 27. ) It was argued that the petitioners have withheld the material documents and suppression of material facts and information: (a) the petitioners have heavily relied on the memorandum of understanding dated September 26/27, 1987, which, is an integral part and parcel of the further minutes of meetings held on June 24, 1989 and December 19, 1996. They have not come with clean hands, they have withheld such material documents; (b) the original share certificates along with the relevant share transfer deeds were handed over to the respondents; (c) the monetary consideration had been received by them in lieu of their shareholding sold to respondents Nos. 2 and 3. My attention was drawn to (i) the minutes of the meeting held on June 24, 1989; (if) the memorandum of understanding dated December 19, 1996, and (iii) the hand written notes/correspondence particularly pages 12 -18, 20 -49 more particularly pages 17 and 18 of the additional affidavit and it was contended that the memorandum of understanding dated December 19, 1996, was the final document in respect of the family settlement evidencing the conclusion of all pending issues. ( 28. ) F....
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.... 153 in the resolution dated June 11, 1983, would not mean that the minutes are filed as it is had there been manipulations, respondent No. 2 would have filled in those blanks and only then filed the same" and it was contended that the minor mistakes and errors in the minutes will have to be viewed in that perspective and do not support the petitioners' claim anyway. ( 30. ) Further , it was argued that in the event of any contravention/omission, if any, by a company in compliance of law, there are regulatory authorities to look into the same and the petitioners have no right to interfere. The authorised share capital of the company was increased by the company in an extraordinary general meeting held on March 22, 1999, as per notice the special resolutions were passed to: (a) Increase of authorised share capital to Rs. 35,00,000, (b) Alteration of Clause V of MoA in respect of the aforesaid enhancement, (c) Alteration of Clause IV of the articles of association in respect of the aforesaid enhancement, and (d) Appointment of Mr. Kanwaljit Singh Johar as director. The allotment of shares has been made in the said extraordinary general meeting. Drawing my attention to prayer c a....
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....cation of identity of a passenger by the airlines on a particular ticket. Since the petitioners are not in possession of the original share certificates admitted in the petition and the same were handed over to the respondents along with the relevant share transfer deeds after receiving due consideration and the transfer of shares have been duly registered in the records of the company as evidenced by the public documents available in the Registrar of Companies's records, the share transfers are presumed to have been effected as per law. In the case of any grievance, the petitioners, if so desire, may move a civil court which may consider and decide the matter on merits. These issues can not be adjudicated upon in the summary proceedings before the Company Law Board where the matter can be examined prima facie on the basis of records available and not on the extraneous documents requiring examination/cross -examination of witnesses and particularly when matter relates to complicated issues, disputed questions of facts, etc. My attention was drawn to the preliminary objections, i.e., (i) Section 111/111A have not been invoked; and (ii) there has been inordinate delay and laches.....
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....claim of notices having been sent, whereas in this case no such claim has been made by the respondents. Paragraphs 61 and 62 from the said judgment, reiterating its views expressed earlier in Vinod Kumar Mittal v. Kaveri Lime Industries Ltd., [2000] 100 Comp Cas 66 (CLB), itself supports the respondent's claim, i.e., (page 634 of 109 Comp Cas): ...we also note that the petitioners seem to have abandoned their interest in the company. In the proceedings under Section 397/ 398, the conduct of the parties is a relevant consideration. From a perusal of the board minutes and the minutes of the general body meetings, we find that the petitioners were active in attending the board meeting as well as general body meetings earlier. Being 50 per cent, shareholders and having equal representation in the board, if their claim is that they had not attended any board meetings after the middle of 1996 for want of notice, there is nothing on record to show that they had at any time raised the issue with the respondent directors. Being business persons, they should be aware of the statutory provisions relating to holding of board meetings and general body meetings. Under these circumstances....
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.... Ltd. : [2008] 82 CLA 234 : [2009] 148 Comp Cas 496 (CLB); Ved Prakash v. Iron Traders P. Ltd. : [1961] 31 Comp Cas 122 (Punj); M. Gomathinayagam Pillai v. Sri Manthiramurthi High School Committee, Tirunelveli, [1963] 33 Comp Cas 346 (Mad) and A.N. Somasundaram v. Dr. Reddy's Laboratories Ltd. : [2008] 142 Comp Cas 472 (CLB) : [2008] 83 CLA 398. ( 36. ) I have considered the pleadings, the annexures thereto, the arguments and the case laws cited by the parties in the facts and circumstances of this case. It is noted that the petitioners' case is that in this closely held company which is in the nature of quasi -partnership and which has been non -functional due to the disturbed conditions in Srinagar and wherein the petitioner and his group held equal shares amounting to 50 per cent, along with his brother and his group, respondent No. 2 and his group giving assurances to the petitioners that since the company is not functional the interest of the petitioner and his group would be taken care of, took the management of the company exclusively in their hands at the back of the petitioners, removing them from management and reducing the petitioners' shareholding to 26.6 p....
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....ondents Nos. 2 and 3 and signed the requisite forms and documents in this regard as per the statutory provisions and procedure, they have further not disclosed that they have willingly after receiving monetary consideration handed over the share certificates to respondents Nos. 2 and 3 in respect of the shares sold by them; the petitioners have failed to make out any case for grant of relief under Sections 397 and 398 of the Act, or for that matter under Section 402, 403, 406 or 408 of the Act; the present petition is clearly barred by limitation from their own showing of the petitioners, the petitioners have never attended any board meeting of annual general meeting/extraordinary general meeting, this itself is a statutory ground for removal of the petitioners from directorship under Section 283(1)(g) of the Act, the petitioners of their own admission were removed from the directorship of the company in 1988, all the requisite forms and returns as statutorily required were filed with the Registrar of Companies; the petitioners have failed to give a specific reason as to why they waited for six years to inspect the documents with the Registrar of Companies and discover that they ha....
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....therefore, the requirements of Section 399(1) should be construed as mandatory. The word "shall" used therein is considered to be imperative in nature and it has to be interpreted as mandatory having regard to the text and context of the statute irrespective of the fact whether any prejudice is caused. In terms of Section 399 of the Act the members fulfilling the requirements thereof have the right to allege oppression and mismanagement in the affairs of the company and can file petition in terms of the said sections. In view of the aforesaid unambiguous provisions of the Act, the petitioners are required to satisfy the Company Law Board that the petitioners individually or together hold the requisite percentage of shares in the company. It is the requirement of law that the petition under Sections 397 and 398 has to accompany documentary evidence in proof of eligibility and status of petitioners that the voting power held by each of them is as per provisions of Section 399 of the Act. The petitioners have to meet the requirement under Section 399 either in terms of the number/percentage of shares or in terms of the number of shareholders. Further, it has been held in a number of c....
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....he petition and the same were handed over to the respondents along with the relevant share transfer deeds after receiving due consideration and the transfer of shares have been duly registered in the records of the company as evidenced by the public documents available in the Registrar of Companies's records, the share transfers are presumed to have been effected as per law fails. It was only when the respondents filed their reply and the minutes did the petitioners became aware of the alleged board meeting dated April 11, 2001, wherein the alleged transfer of shares from the petitioners to the respondents is shown. Further, in the annual return of September 28, 1998, the shareholding of petitioner No. 1 is shown at 6,264 shares whereas as per the transfer deed, petitioner No. 1 is shown to have transferred 5,314 shares. It is not explained anywhere as to why there is a difference of 950 shares. As per the respondents' own case, then, the balance 950 shares are still with petitioner No. 1 and he is entitled to file the petition as a shareholder. In the case of Ammonia Supplies Corporation P. Ltd. v. Modern Plastic Containers P. Ltd. : [1998] 94 Comp Cas 310 : [1998] 7 SCC 1....
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....suffers from massive delays and laches (the actions challenged pertain to (a) enhancement of share capital on March 22, 1999, (b) deletion of the petitioners' name from the list of directors on March 22, 1999, and (c) transfer of the petitioners' shares on April 11, 2001, as per the annual return filed on November 28, 2002 and general meeting held on September 30, 2002, but the petition was filed during August, 2004) and that there is no explanation given nor any application for condonation of delay has been filed, as per the petitioners, even the Registrar of Companies's record was inspected on February 13, 2004 and thereafter, there is still an unexplained delay of more than six months, it is true that the Company Law Board is not a court for the purpose of the Limitation Act and as such the limitation under article 137 of the Limitation Act, 1963, does not apply to the proceedings before the Company Law Board, however, this does not preclude the Company Law Board from rejecting/dismissing petitions on account of delay/laches in appropriate cases. Delay and laches do apply which start from the date of knowledge. The doctrine of laches is based on equitable considerati....
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....on of the family settlement, the petitioners have admittedly neither obtained any leave of absence nor have they ever communicated any change in address, they ceased to be directors by operation of law under Section 283(1)(g) of the Act, the provisions of Section 283(1)(g) of the Act will operate, whether or not any resolution to this effect had been passed, the board resolution dated September 1, 1998 and the resolution passed in an annual general meeting held on September 28,1998, are, therefore, irrelevant and of no consequence as the petitioners have admittedly not attended any board meeting of the company nor have they obtained any leave of absence, Form No. 32 was accordingly filed rightly for cessation as directors and not for "removal as directors". It has been further argued that the petitioners had shown a callous attitude and no concern for respondent No. 1 company totally distancing themselves from the affairs of the company. It has been further contended that the company is required necessarily to comply with Section 285 of the Act. As per the scheme of Section 283(1)(g), a director absenting himself from three consecutive meetings of the board of directors or from all....
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....at the case S. Ajit Singh v. DSS Enterprises P. Ltd., [2001] 4 CLJ 421 : : [2002] 109 Comp Cas 597 (CLB), does not apply are not tenable in the facts and circumstances of this case. The respondents' claim of having nurtured the company when the petitioners had not taken any interest in the affairs of the company is not made out in this case as was in the case of S. Ajit Singh, [2001] 4 Comp. LJ 421 : : [2002] 109 Comp Cas 597 (CLB) (though it is true that the respondents in this case have not claimed having sent the notices through UPC). Instead the petitioners were made to stay out in good faith with their collateral securities continuing. The respondent's further contention that the petitioner vacated his office by operation of law provided in Section 283(1)(g) of the Act, fails in view of non service of proper notice. The respondents are aware about the address of the petitioners and the respondents have admitted that there was no business in the company and, therefore, the question of holding any board meeting does not arise, the notices were falsely shown as having been sent to the registered office of the company which was lying closed since 1989. The notices were eit....
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.... them a duty to act on behalf of a company with utmost good faith, utmost care and skill and due diligence and in the interest of the company they represent. They have a duty to make full and honest disclosure to the shareholders regarding all important matters relating to the company. It follows that in the matter of issue of additional shares the directors owe a fiduciary duty to issue shares for a proper purpose. This duty is owed by them to the shareholders of the company. Therefore, even though Section 81 of the Companies Act, 1956, which contains certain requirements in the matter of issue of further share capital by a company does not apply to private limited companies, the directors in a private limited company are expected to make a disclosure to the shareholders of such a company when further shares are being issued. This requirement flows from their duty to act in good faith and make full disclosure to the shareholders regarding the affairs of a company. The acts of the directors in a private limited company are required to be tested on a much finer scale in order to rule out any misuse of power for personal gains or ulterior motives. In the present case it is noted that....
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....n the Registrar of Companies's record, and another one filed along with the reply by the respondents. The meeting at page 45 is alleged to have been held at Vasant Kunj, Delhi and the meeting at page 49 is held at Srinagar. The minutes are totally contradictory. The reasons for increasing the capital are vague and contradictory. In one minute it is stated that increase in capital is for construction purpose, but in the reply, it is mentioned that it is being done at the instance of SFC and in the written arguments it is mentioned that it is done for making payment of the day -to -day expenses. It is noted that additional shares were issued only for the purpose of usurping complete control and management of the affairs of the company and/or for defeating the interest of the existing shareholders, i.e., petitioner No. 1's group, the additional documents filed by respondent No. 2 on November 20, 2007, are fabricated, false and have been created only to cause further delay, confusion and mislead the Company Law Board. No relevance of the documents has been explained. The documents filed do not support the averments made in the reply. The balance -sheet for the year ended March ....
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.... future it would be construed that the affairs of the company are being conducted in a manner oppressive to any member or members, as laid down in Section 397 of the Act. It has been held in the case of Dinesh Sharma v. Vardaan Agrotech P. Ltd. : [2007] 135 Comp Cas 133 (CLB), that increasing of authorised share capital and allotment of additional shares which is not in the interest of the company is an act of oppression. The directors in a company cannot exercise powers for extraneous purposes like maintenance or acquisition of control over affairs of the company. When powers are used merely for an extraneous purpose like maintenance or acquisition of control over the affairs of the company, the same cannot be upheld. In this case, neither was the allotment of additional shares in favour of respondents bona fide nor was it in the interest of the company nor was a proper and legal procedure followed to make the allotment. The motive for the allotment was mala fide. The impugned allotment of additional shares done with the sole object of gaining control of company by becoming a majority shareholder was clearly an act of oppression on the part of the respondents. More so, as the meet....
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....of law is that when a person seeks equity he must come with clean hands. In the present case the instances of unclean hands of the respondents are with respect to the affairs of the company and even otherwise the instances of unclean hands are enumerated. A careful analysis of Section 397 would show that once oppression is established, the winding up on just and equitable grounds would be automatic and this board has to only form an opinion that such winding up would not be in the interests of the company/shareholders and accordingly, to mould relief with the view to put an end to the matters complained of. ( 43. ) The entire action of the respondents of removal from directorship and issue of additional shares was only to oust the petitioner and his wife from the company to illegally gain control and management of the company and is indisputably amenable to the jurisdiction of the Company Law Board. The petitioners are not seeking to enforce the family settlement dated September 26/27, 1987. The family settlement was referred to by the petitioners only to show that the intention of the family members was to have respondent No. 1 company in joint control. As mentioned in th....