TaxTMI 
TaxTMI 
2008 (2) TMI 921
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....Registrar of Companies in January, 2006 by the Company is null and void; (v)to declare that the circular resolution passed on 16-12-2005, authorising the second respondent as the sole authority to operate the fifth respondent bank account as null and void, illegal, mala fide and oppressive and quash the same; (vi)to order investigation or inspection into the affairs of the Company, fixing responsibilities for various acts of mismanagement by the second respondent and order restoration of all funds received and used by the second respondent and/or his agents, not relating to the business of the Company; (vii)to remove the second respondent from the office of director of the Company for having indulged in acts of oppression and mismanagement; (viii)to direct the Company to buy back shares of second respondent at a fair value to be determined by the Company Law Board and consequently order reduction of the share capital of the Company; (ix)to order initiation of suitable action under section 408 of the Act for breach of trust, misfeasance, misappropriation, frauds, falsification, fraudulent conduct of business of the Company by the respondents 2 to 4; (x)to declare that th....
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....igned by the second respondent, which were paid by HAL and falsely appropriated towards the Company's account. The second respondent not only diverted the funds of the firm to the Company, but also stopped the flow of further orders from HAL to the firm. The purchase order received from Vikram Sarabhai Space Centre, Trivandrum for a value of ₹ 160 lakhs by the firm during September 2005 was subsequently diverted to the Company, without the knowledge of the petitioner. The fourth respondent had incorporated a firm at Mysore and approached the Karnataka State Financial Corporation (KSFC) to take over the partnership firm namely, Legend Designers, due to default in the repayment of the outstanding loan amount, and stealthily got the bid in his favour. The unit and assets of the firm were sold in 2005 and consequently the business of the firm was closed, but the spouse of the petitioner and the second respondent continue to be partners of the firm and is not dissolved. Thus, the second respondent was responsible for closure of the partnership firm, as elaborated in C.A. No. 109 of 2007. u At the instance of the second respondent, the petitioner had mobilised an amount of US $ 1....
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....s without his consent in writing, and the transfer of those shares to the second respondent not being true are prima facie acts of oppression and mismanagement which need to be set aside. The second respondent misused his fiduciary responsibilities as a director to make personal gain out of the funds of the Company. u There was never any formal board or general meeting since incorpo-ration of the Company and no notice of any board or general meeting was ever received by the petitioner. The respondents failed to produce any attendance sheets in respect of the board meetings reportedly conducted prior to 11-8-2004. At the first formal board meeting held on 11-8-2004, the petitioner was introduced to certain persons including the third respondent as additional directors and at the first formal annual general meeting held thereafter on 21-8-2004 at Bangalore some more friends of the second respondent were introduced as shareholders. The shares have been allotted to as many as 7 outsiders, yet the petitioner is not seeking to set aside those allotments. The petitioner did not question the action of the second respondent for induction of additional directors and issue of shares to outs....
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....solution for operation of the bank account solely by the second respondent was defeated, he once again circulated the very same resolution, seeking the approval of the directors, inter alia, for operation of the bank account by sole authority of the second respondent, which was however rejected on 28-12-2005 by the petitioner. u The second respondent while carrying on the day-to-day affairs of the Company, committed serious acts of mismanagement which compelled the petitioner to obtain a search report in October, 2005, revealing the allotment of shares without convening any board meeting, appointment of directors without following due process of law and transfer of unallotted shares, without following the mandatory requirements of law. The approval of accounts for the year ended 31-3-2005 signed by one Shri M.K. Shanmugam, not being a director, needs to be approved once again by the board of directors, and thereafter be submitted before the auditors for their verification. The second respondent had indulged in the financial irregularities as borne out by the statement of accounts obtained from the Company's banker in respect of the Company's operations and the shareholding of the....
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....nt made use of the blank but signed transfer deeds obtained from the petitioner and his family members on the pretext that the shares were required to be pledged with the Technology Development Board (TDB) and KSFC, securing the amounts due to the Company and one of such transfer deeds was illegally used of by the second respondent in a mala fide manner. The petitioner never sold his shares and no consideration was received by him. The share certificate No. 18 comprising of 10000 shares has been pledged in favour of TDB in terms of the communication dated 21-7-2001 and these shares, namely, 14,500 shares could not have been transferred by the petitioner to the second respondent. Hence the claim of the second respondent in respect of 28,500 shares is absolutely false. The second respondent has not paid any consideration for the shares reportedly transferred by the petitioner. The petitioner similarly at the request of the second respondent in good faith had signed blank annual reports, balance sheets and other statutory returns, whereas the second respondent had illegally made use of those blank documents to sub-serve his selfish motives and without authority of law. The balance she....
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.... 2002, 2003 and 2004 respectively, since the amendment would have the effect of due compliance of section 255 of the Act in the subsequent years. The petitioner being one of the promoter directors and having 50 per cent holding and management participation in the Company, cannot be removed from his directorship by a purported member, who holds of less than 3 per cent shares of the Company. The board of the Company cannot be altered by dubious methods without following the due process of law. u The rights of the petitioner have been deprived continuously deliberately and consistently by the respondents which are oppressive and harsh, thereby conducting the affairs of the Company, in a manner prejudicial to the interest of the Company, which would justify the winding up of the Company on just and equitable grounds, but any such order would unfairly prejudice the interest of the Company, being engaged in a profitable business. The petitioner is, therefore, entitled for the alternative remedies under sections 397 and 398 read with section 402 of the Act. u During the pendency of the company petition, the Company came out in September 2006 with a proposal to issue further shares of ....
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....sive ground which would depend on the facts of each case. u Maharashtra Power Development Corpn. Ltd. v. Dabhol Power Co. [2003] 48 SCL 180 (Bom.) to show that a single act of oppression would not ordinarily give rise to a cause of action for filing of a petition under section 397 of the Companies Act. If the effects of a single act are burdensome, wrongful, oppressive and of continuing nature, and the member concerned is deprived of a right and privilege for all time to come in future, then the petition under section 397 of the Act can be filed even in respect of a single act. u Dale & Carrington Investments (P.) Ltd. v. P.K. Prathapan [2004] 54 SCL 601 (SC) to show that the allotment of additional shares must be bona fide and not mala fide to gain control of the Company; must be in the interest of the company and proper and legal procedure must be followed to make the allotment. The entire allotment of shares has to be set aside in the absence of any material to justify issue of further share capital. If the facts on record show that the company was being run as one-man show; the minutes book of meetings of board of directors is maintained only to comply with the statutory re....
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.... show that if the requirements of special notice to be sent to the director under section 284(2) and grant of opportunity to be heard under section 284(3) of the Companies Act, 1956, are not complied with, his removal from the directorship of the company is bad in law and such person must be restored to his original position as director and all subsequent actions taken by the company in this regard are declared as null and void. u Girdhar Gopal Gupta v. AAR Gee Board Mills (P.) Ltd. [2004] 53 SCL 221 (CLB - New Delhi) to show that any removal of directors belonging to one of the two equal groups of the company and appointment of an additional director not in conformity with the procedure laid down in the Act, would result in setting aside such removal of directors, being bad in law. u S. Varadarajan v. Udhayem Leasings & Investments (P.) Ltd. [2005] 62 SCL 315 (CLB - Chennai) to show that the allotment of further shares made for personal gains and with a view to gain advantage against the other shareholders of a closely held company is neither in compliance with the legal requirements nor ensure the fair play and probity in corporate management, resulting in the enhancement of ....
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....icators (P.) Ltd. [2004] 55 SCL 400 to show that unless the transfer impugned in the company petition is duly approved by its directors, which must be substantiated by production of the minutes of the meeting of the board of directors, approving such transfer or any other document evidencing the same, it cannot be said that the transfer was in compliance with the relevant article and mere pleadings have no evidentiary value. u Smt. Claude-Lila Parulekar v. Sakil Paper (P.) Ltd. [2005] 59 SCL 414 (SC) to show that the provisions of section 108 are mandatory. u Khounish Chowdhury v. Kero Rajendra Monolithics Ltd. [2002] 36 SCL 497 (CLB - New Delhi) to show that appointment of additional directors in the board meeting if not bona fide and in the interest of the company, but done only to gain majority control on the board, must be declared invalid. u M. Moorthy v. Drivers & Conductors Bus Service (P.) Ltd. [1991] 71 Comp. Cas. 136 (Mad.) to show that in the absence of any evidence of showing how one actually became the Managing Director of the Company, such appointment is non est and declared void and illegal. u Gopal Krishnaji Ketkar v. Mahomed Haji Latif [1968] AIR 1413 (SC) ....
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....nts are also due towards sales tax and Central Excise. u Arun Kumar Mohta v. Ganesh Commercial Co. Ltd. [2006] 74 CLA 116 (CLB - New Delhi), Rajesh Patil v. Moonshine Films (P.) Ltd. [2006] 74 CLA 151 to show that in a case of oppression, a member has to specifically plead on five facts - (a) what is the alleged act of oppression; (b) who committed the act of oppression; (c) how it is oppressive; (d) whether it is in the affairs of the company; (e) and whether the company is a party to the commission of the act of oppression. In the present case all the five aspects of oppression stand proved. The acts of oppression in the affairs of the company have been listed in detail highlighting how these are oppressive. u Amar Nath Malhotra v. MCS Ltd. [1993] 76 Comp. Cas. 469 (Delhi) to show that the provisions relating to special notice do not dispense with the requirement of section 188. Resolutions which require special notice do not cease to be resolutions as contemplated by section 188 of the Act. Section 190 read with section 225 neither expressly nor by implication overrides the requirement of section 188 of the Act. Sections 188, 190, 225 and 284 must be read together and if so ....
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....rwal v. Ringtong Tea Co. (P.) Ltd. [1996] 85 Comp. Cas. 289 to show that if any thing is lacking in the petition, it may be made good by the subsequent affidavits and, therefore, it is necessary to consider the entire evidence that has been placed in order to do justice between the competing rights of the parties. The case of justice will not suffer if reliefs are granted after the consideration of all the evidence even though the original plaint was lacking in particulars. The creation of a new majority without allowing the petitioners to participate in the further issue of equity is definitely an oppressive act, especially considering the circumstantial evidence which clearly points out that the factum of issue and allotment of such shares is not beyond doubt. u Mritunjoy Pani v. Narmanda Bala Sasmal AIR 1961 SC 1353 to show that no one can be allowed to benefit from his own wrongful act. u Public Passenger Service Ltd. v. M.A. Khadar AIR 1966 SC 489 to show that the well-know-maxim of equity that "he who comes into equity must come with clean hands", and that the courts should dismiss the applications when the respondents did not come with clean hands must be rejec....
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....s been equal, there is no agreement between the petitioner and the second respondent for equal share holding in the Company. Thereafter, the shareholding came to be changed to fund several large projects of the Company with the full knowledge and concurrence of the petitioner. Hence, the principles of quasi partnership which can be imported into the corporate entity only in limited circumstances and not as a general principle will not apply to the facts of the present case. The second respondent never diverted the flow of orders of HAL from the firm in favour of the Company. The partnership firm came to be closed by reason of the mismanagement of the petitioner, apart from the fact that the petitioner transferred a sum of ₹ 4 lakhs from the firm's account into his wife's account and a further sum of ₹ 80,000 to himself, leading to dishonour of the cheque issued to KSFC, which ultimately resulted in its recalling the loan and the consequent closure and seizure of the unit. KSFC came out with public notices on 17-11-2005, 6-6-2006 and 15-10-2006 auctioning the firm's prop- erty, but the bids were rejected for lack of adequacy and ultimately the property could be sold, pur....
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....ng the period between 11-8-2004 and 21-8-2004. The circular resolution dated 2-12-2005 contained the names of the additional directors along with the petitioner and the second respondent, wherein the petitioner's name is reflected at the end of the resolution. Similarly, the circular resolution No. 1/2005-2006 dated 16-12-2005 confirms the names of other directors, with that of the petitioner at the end of the resolution. Both the resolutions have not been accepted by the petitioner, in token of which he signed against his name. u The third respondent has made the requisite declaration and caused the passing of necessary resolution under section 314 of the Act in regard to his holding of an office of profit in the Company and therefore, the compliance certificate issued as at 11-8-2004 is not violative of the Company Secretaries Act, 1980. u The fourth respondent, a leading industrialist, social worker and common friend of the petitioner and the Second respondent, was allotted shares as early as on 10-9-2001 and the share certificate bearing No. 21 for 6500 shares issued to the fourth respondent dated 10-9-2001 was signed by the petitioner. The fourth respondent paid the consid....
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....by the annual returns filed under the signature of the petitioner. Article 18(b) was duly amended removing the provisions which enabled the first directors holding office for life, pursuant to the stipulation laid down by KSFC while extending credit facilities to the Company in accordance with a special resolution passed at the extraordinary general meeting held on 20-3-2002, to which the petitioner was also a party to the resolution. Even otherwise, any lifetime director can be removed under the provisions of section 284. The search report produced by the petitioner would prove that the articles have been altered by virtue of passing a special resolution at the extraordinary general meeting followed by Form No. 23 dated 20-3-2002 filed with the Registrar of Companies. Therefore, the claim of the petitioner for lifetime directorship is absolutely untenable. u The petitioner surreptitiously obtained from the Company's bank statements running into 54 pages, incurring an amount of ₹ 1,512 which was debited to the Company's account, in spite of which the petitioner was unable to establish any single instance of mismanagement. The statement of accounts does not throw any light o....
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.... dated 2-12-2005 for operation of the bank account in view of the petitioner's written instructions to the bank to stop operation of the bank account by the second respondent. After issuance of the circular resolution, the board felt the need to call for a board meeting on 15-12-2005 to obtain a fresh mandate to operate solely the bank account by the second respondent. However, no business could be transacted at the board meeting on account the behaviour of the petitioner, compelling the board to send a circular resolution in relation to the operation of the bank account which was approved by the majority of directors with the sole exception of the petitioner. The circular resolution dated 16-12-2005 was confirmed on 12-1-2006 by the board of directors of the Company. u The petitioner had transferred his 28500 shares to the second respondent as evidenced from the transfer deed signed by the petitioner. The transfer deed was invalidated since the second respondent misplaced the same. The petitioner owed a large sum of monies to the second respondent and therefore, these shares were given in part repayment of the dues owed by the petitioner to the second respondent. At the board me....
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....equisition under section 169 of the Act. The board of directors at the meeting held on 12-1-2006, pursuant to the request of the fourth respondent, resolved to convene an extraordinary general meeting on 30-1-2006 to remove the petitioner from the office of director. The petitioner was a party to the said decision taken at the board meeting held on 12-1-2006. The notice dated 12-1-2006 convening an extraordinary general meeting of the Company for removal of the petitioner from the office of director sent to him was acknowledged in his communication dated 25-1-2006 addressed to the Company seeking postponement of the proposed meeting on health ground. The Company was in receipt of the request of the petitioner on 28-1-2006 and the succeeding two days being Saturday and Sunday being holidays, the extraordinary general meeting came to be held on 30-1-2006, wherein the members unanimously removed the petitioner duly from the office of director for not answering the charges levelled against him and the petitioner was further intimated of his removal, by the Chairman in his communication dated 9-2-2006, copy of which has been produced before the Bench. Thus, the petitioner was removed af....
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....fer deed in respect of any shares of the Company stands falsified. u The Company, during the pendency of the main petition, came out with an offer on 15-9-2006 in favour of all the shareholders to issue further 45440 equity shares of ₹ 10 each on rights basis, at a premium of ₹ 35 per equity share aggregating ₹ 20,44,800 in the ratio of sixteen equity shares for every hundred equity shares, towards capital expenditure, acquisition of fixed assets, generator and repayment of the outstanding dues to the financial institutions. When the Company has received share application money from all the shareholders except the petitioner, his wife and another small shareholder. This Bench by an order dated 22-11-2006 granted further time to the petitioner to subscribe to the rights shares till 25-11-2006. The petitioner was only raising queries, but failed to subscribe to the shares within the stipulated time, and therefore, the board of directors of the Company have allotted the rights shares to other shareholders of the Company as per the letter of offer in accordance with their entitlement. Accordingly, 45440 shares were issued to as many as ten shareholders, realising an....
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....oner). u Venture Graphics (P.) Ltd. [2005] 57 SCL 141 (CLB - Chennai) to show that mere illegal, invalid or irregular acts by themselves, unless they are oppressive to any shareholder or prejudicial to interests of the company or to public interest, cannot support a petition under section 397. u G. Govindaraj v. Venture Graphics (P.) Ltd.'s case (supra) to show that section 193 of the Companies Act prescribes the procedure for recording minutes of all the proceedings of every general meeting or board of directors or committee of the board, failure of which attracts penalty. Section 194 of the Act states that minutes of the meeting kept in accordance with the provisions of section 193 of the Companies Act shall be evidence of the proceedings recorded therein. Section 195 relates to the presumption to be drawn where the minutes are duly drawn and signed, in accordance with section 193. The minutes hence are prima facie evidence on the conduct of the meeting and resolutions passed therein. When the resolution properly recorded and filed with the Registrar, the burden of proof as regards the challenge to the meeting is on those who are alleging the contents to be not true. u Kilp....
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....these reliefs are discretionary reliefs. They will be granted only to persons who approach the court with a clean record and in good faith. 6. I have considered the elaborate arguments advanced by learned Counsel for the parties. The main issue for consideration is whether the petitioner has made out a case of oppression and mismanagement in the affairs of the Company, at the hands of the respondents, thereby entitling him for the discretionary reliefs, in terms of the prayer made in the main petition. The rival claims revolve around (i) shareholding; (ii) non-convening of board or general meetings and non-sending of notices to board or general meetings; (iii) appointment of the second respondent as Chairman and Managing Director and fixation of his remuneration; (iv) appointment of additional directors; (v) operation of the bank account solely by the second respondent; (vi) financial irregularities at the instance of the second respondent; (vii) diversion of funds as well as business orders of the partnership firm to the Company; (viii) allotment of shares to outsiders; (ix) impugned transfers, namely, 15000 shares of MJR and 28500 shares of the petitioner in favour of the second....
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....of shares as on 30-9-2002 30-9-2003 30-9-2005 1. Shri B.V. Reddy 77,500 98,500 98,500 (Petitioner) 2. Smt. Uma Reddy 12,500 17,500 17,500 (wife of petitioner) 3. Shri E. Ranga Reddy 77,500 98,500 113,500 (second respondent) 4. Smt. E. Jaya Reddy 12,500 17,500 17,500 (wile of second respondent) It is observed that as at 30-9-2002 the petitioner and the second respondent held each 77500 equity shares, which came to be increased to 98500 shares as at 30-9-2003, over which there are no differences between the parties. While it was so, the shareholding of the second respondent got enhanced to 113500 as at 30-9-2005, by virtue of the impugned transfer of 15000 shares by MJR in favour of the second respondent, which was purportedly approved on 28-1-2005 at the meeting of the board of directors of the Company. The holding of the petitioner came down from 98500 shares to 70000 shares on account of the alleged transfer of 28500 shares approved at the board meeting of 12-1-2006 in favour of the second respondent, which is under sections challenge, in the present proceedings. If the disputed transfers, namely, 15000 shares by MJR to the second respon-dent and 28500 ....
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.... and produced before the Bench by the petitioner. The search report discloses inter alia the annual return dated 25-10-1999, balance sheet of 31-3-1999, Form No. 5 together with copy of minutes of the extract of the general meeting for increasing the capital from 15 lakhs to 65 lakhs, annual return dated 29-9-2001, balance sheet of 31-3-2001, annual return dated 30-9-2002, balance sheet of 31-3-2002, annual return dated 30-9-2003 and balance sheet of 31-3-2003, none of which is disputed by the petitioner in his complaint dated 11-11-2005 made to the Registrar of Companies. This would clearly show that the Company has been convening the board as well as general meetings periodically in discharge of its statutory obligations, and therefore, the blanket charges of the petitioner that the Company never held any board or general meetings prior to 11-8-2004 are devoid of any merit. Hence, non-production of the attendance sheets for the board meetings conducted prior to August, 2004 is not fatal. I do not either see any bona fides on the part of the petitioner in accusing belatedly the second respondent of not having convened any board or general meetings during the period between the yea....
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....-2005, 3-12-2005 and 26-12-2005 addressed by the petitioner to the second respondent, copies of which are before the Bench, are found to have been endorsed in favour of among others, directors of the Company. The circular resolution dated 16-12-2005 empowering the Chairman and Managing Director of the Company to operate solely the bank account, which has not been accepted by the petitioner in terms of his endorsement, does contain the names of all the directors of the Company including the petitioner, the second respondent, Dr. S. Sivakumaraswamy, Shri M.K. Shanmugam, Shri K.S. Shetty and Shri P.V. Menon. The subsequent board meetings held on 28-1-2005, 30-9-2005, 15-12-2005 and 12-1-2006 were attended by other directors along with the petitioner and the second respondent. But the petitioner never chose to challenge either the appointment of directors or their competence to discharge the duties as directors, at any of those meetings. At the same time, the petitioner, by his conduct affirmed that the board consisted of a number of directors other than the petitioner and the second respondent. The present threat of the petitioner on the appoint- ment of directors is deliberate and co....
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....siders, have never been challenged by the petitioner but at this stage expressed his grievances on such allotments, without, however, giving any details regarding the names of allottees, number of shares allotted, date of allotment of shares, etc. The annual return for the period ended 30-9-2002, discloses the allotment of shares in favour of the fourth respondent (6500 shares), Smt. Amba (6500 shares), M.K. Shanmugam (6000 shares), MJR (15000 shares) and Dr. K.C.N. Reddy (3000 shares). The names of these sharehold-ers and their shareholding continue to appear in the annual return for the period ended 30-9-2003 and 30-9-2005, except that the name of MJR as well as his shareholding is not reflected in the annual return for the period ending 30-9-2005. The annual return for the year ended 30-9-2003 speaks of inter-alia, the allotment of shares in favour of Smt. Geetha Sridhar (6500 shares), Shri Raj Siddarth (6500 shares) and Chandrasekhar Reddy (5000 shares). The shareholding of these members does also appear in the annual report for the year ended 30-9-2005. It is also relevant to point out that the petitioner is a party to the relevant annual returns, copies of which are on record....
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....the petitioner, cannot arise in a section 397/398 proceeding. In this background, the charges relating to diversion of business of the partnership firm having already come to an end, for the aforesaid reason, require no order for any remedial measures. Furthermore, there is no scope under section 397/398 to agitate the grievances on account of diversion of the funds or business of the partnership firm to the Company, especially when such grievances are not in relation to the affairs of the Company. It may be observed that in order to attract the provisions of section 397/398, one of the essential requirements as found necessary in Arun Kumar Mohta's case (supra) is that the complaint must necessarily be in relation to the affairs of the Company. Any complaint against the second respondent in the affairs of the partnership firm cannot be entertained by the CLB. The foreign remittance of US$ 1092 is found to be made by the second respondent on account of purchase of a laptop for the Company as evidenced by an invoice dated 14-11-2004, a fax copy of which made available before the Bench, has not been repudiated by the petitioner and, therefore, his claim that the foreign remittance wa....
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....khs by way of 'customer transfer' from MJR to the account of the Company. This message evidencing the transfer of funds does not specify the purpose of such remittance and it cannot, therefore, conclusively be said that the amounts were remitted by MJR by way of loan in favour of the Company, as claimed by the petitioner. The RBI by its communication bearing No. EC.BG.FID No. 4763/21-6-01/2001-02, dated 13-12-2001 advised the Company "to submit the Non-Repatriation Undertaking (NRU-a copy enclosed for ready reference) from the NRI for the amount invested in your company against allotment of 15000 equity shares. Further, you are advised to confirm about the excess amount to be refunded or to keep in the share application money account of the Company", in response to which MJR is found to have submitted the following non-repatriation undertaking :- "In consideration of the Reserve Bank of India having agreed to permit me/us to invest an amount of ₹ 4,60,000 (Rupees Four lakhs sixty thousand only) in M/s. Legend Technologies (India) Pvt. Ltd.I/We, Mr. Jithender Reddy Mandapati, son of Mr. Latchi Reddy Mandapati, Residing at 960, Fairway Drive, Apt # 4, Napervill....
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....facie establish the investment of MJR towards share capital of the Company, the consequent allotment of 15000 shares in his favour by the Company and the subsequent transfer of 15000 shares by the MJR to the second respondent, pursuant to the application made before the RBI for transfer of shares, which is reportedly not a legal requirement. The complaint that the instrument of transfer executed in favour of the second respondent is not in compliance with the mandatory provisions of section 108(1A) of the Act, cannot successfully be made in a section 397/398 proceeding in which case, the decision in Smt. Claude-Lila Parulekar's case (supra), on the mandatory requirement of section 108 will have no application to the present facts. The transfer of 28500 shares in favour of the second respondent is yet another issue to be resolved in the light of the rival claims of the parties. The transfer deed in respect of those shares, is said to have been executed on 11-6-2002 by the petitioner, whereas the share certificate No. 044 comprising of 4500 shares in the name of the petitioner, came to be issued only on 30-9-2002, long after execution of the disputed instrument of transfer. Similarl....
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....count by the second respondent would categorically establish the passing of resolution at the board meeting held on 11-8-2004 authorising the second respondent solely to operate the bank account in the name of the Company, in the absence of which, such an instruction would not have flown from the petitioner. The protest made against the sole operation of the bank account, led to authorising the second respondent to operate the bank account solely by means of a circular resolution No. 1 /2005-06 dated 16-12-2005, by the directors nomely, the second respondent, Dr. Sivakumaraswamy, Shri M.K. Shanmugam and Shri P.V. Menon. The petitioner however, has not approved this circular resolution. The minutes of the board meeting dated 12-1-2006 would reveal that the resolution circulated among the directors on 16-12-2005 was placed before the board for giving fresh mandate to the bank. The board noticed that except the petitioner all other directors approved the circular resolution and as a taken of their approval, signed individually on the aforesaid resolution. The board confirmed the same and it was taken on record by it. The petitioner having attended the board meeting on 12-1-2006, which....
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.... report as at 17-10-2005 disclosing Form No. 23 dated 20-3-2002 on deletion of clause 18(b) and registration of document by the Registrar of Companies on 3-4-2002, has not been disputed by the petitioner. But on the other hand, the petitioner, in his communication dated 11-1-2005 requested the Registrar of Companies not to take on record or register the documents filed alter 1-8-2004. This would conclusively establish that the petitioner has not challenged any of the documents filed before the Registrar of Companies by the Company prior to 1-8-2004. The petitioner cannot successfully challenge the action of the Company, initiated in March 2002, for deleting the relevant clause of article 18(b). Furthermore, it is a settled proposition of law that permanent directors can be removed in strict compliance with the provisions of section 284 of the Act as held in Tarlok Chand Khanna's case (supra), save those are built into the section itself, and, therefore, the deletion of clause 18(b) of the articles of associa-tion by itself cannot constitute an act of oppression in the affairs of the Company, notwithstanding the fact that such deletion of the article is not found reflected in the no....
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....ary general meeting of the Company thereby avoiding the embargo contained in section 169. Sub-section (2) of section 284 stipulates that special notice shall be required of any resolution to remove a director under this section. (In view of this, when any special notice is required of a resolution, notice of the intention to move the resolution, as contemplated in section 190(1), shall be given to the company not less than 14 days before the meeting at which it is to be moved, exclusive of the day on which the notice is served or deemed to be served and the day of the meeting. These sections must be read together, in order to know the intention of the Legislature, as held in Amar Nath Malhotra's case (supra). At the board meeting held on 12-1-2006, the directors resolved to convene an extraordinary general meeting on 30-1-2006 for removing the petitioner from the post of director of the Company. It is found that the Company has on 12-1-2006 informed the petitioner regarding the special notice of a resolution received from the fourth respondent for removal of the petitioner from the office of director at the extraordinary general meeting held on 30-1-2006. The special notice dated 2....
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....iled with the Registrar of Companies, recording the cessation of this directorship. These events would clearly indicate that the directors present at the board meeting held on 12-1-2006 succumbed to the pressure exerted by the fourth respondent to fix the date of the extraordinary general meeting as per his dictates, and sacrificed the interest of the petitioner, irrespective of the merits of the charges levelled against him, thereby declining adequate opportunity to the petitioner for answering the charges levelled against him. While the board of directors considered the convenience of the fourth respondent having miniscule 6500 shares, they did not even deem it appropriate to entertain the request of the petitioner for postponement of the meeting on medical grounds. The justification on the part of the Company that it had received the request of the petitioner for postponement of the meeting only on 28-1-2006 and that the succeeding two days being holidays, the extraordinary general meeting was held on 30-1-2006 has not been brought to the notice of the petitioner and may be an after thought, as brought out by the subsequent developments. This Bench is not questioning the collect....
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....ers relating to the Company, on account of the blind faith reportedly reposed in the second respondent. The petitioner even though carried out a search of charges of the Company from the records of the Registrar of Companies as early as in October 2005, he never raised the plea of blank signature affixed to the records of the Company at any point of time till initiation of the present proceedings before the CLB and therefore no credentials can be attached to such belated contentions raised by the petitioner. The petitioner does not hesitate to be in the joint management, while the respondents have no objection for the petitioner continuing to be a shareholder but not as a director of the Company. Nevertheless, the petitioner with a view to sever his business connection, thereby ending the on going disputes with the respondents offered either to sell his shares for a consideration of ₹ 3.5 crores or purchase the shares of the respondents for the very same amount on the basis of the prevailing market value of the landed property owned by the Company, which is not acceptable to the respondents mainly on the ground that - (a) the land has been allotted by Government of Karnataka....
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....he facts of that case, the removal of the petitioner though found to be oppressive, his restoration to the office of director would not be meaningful, in view of the majority control of the management in the hands of the respondents and at best the petitioner could only be a mute spectator, without any effective participation in the affairs of the Company. If on the other hand, the petitioner is directed to sell his shares, it would amount to rewarding the oppressors namely, the respon-dents, which is not the objective of section 397/398. In these circum-stances, the equity would warrant the exit process to be thrown open to both the parties, under the supervision of the CLB, without giving option to any specific group of shareholders. Towards this end, the group quoting its price higher than one quoted by the other group shall have the first option to buy the shares of the other group, thereby giving equal opportunity to both the groups to acquire the shares of each other, which would simultaneously bring to an end the matters complained of in the company petition. This course of action would be in the interest of the Company and its shareholders. In view of my foregoing conclusi....