TaxTMI 
TaxTMI 
2007 (6) TMI 543
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....g of 10000 equity shares of Rs. 10/- each. The main objects of the respondent company is to undertake and carry on the business in India and elsewhere, buy, sell, resale, service, and to act as agent, broker, stockists, manufacturer's representative, supplier, distributors, wholesellers, dealers, consignment agents, handling agents, consignors, consignees, and of any brand and of all classes, kinds and types of textile and ginning machineries, engineering goods, crop cutting and processing machineries, thrashing machineries, and to deal in all types of parts, accessories, components, devices, tools, fittings, tackles, substances of such machines and to carry on the agency business of all types of machineries of any description, specifications, characteristics, applications land uses. 3. Shri Vibhu Bakru, Counsel for the petitioners argued that it has been held by this Hon'ble Board and various High Courts in a catena of cases that when powers are used merely for an extraneous purpose and not in the interest of the company but to gain control over the affairs of the company the same cannot be upheld. In the instant case the share capital was increased only with a view to ....
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.... was argued that the said act of the Respondents is in violation of Section 163 of the Act. 5. Further, it was argued, that the Respondent No. 1 company has opened new bank accounts in violation of order dated 18th May 2005 and been receiving payments in the said account in violation of the order passed by this Hon'ble Board. My attention was drawn to the Petitioners' application seeking initiation of contempt proceedings against the persons responsible for the same. 6. Furthermore, it was argued that the Respondents with an intention to strip the Respondent No.1 company of its assets and to enrich other entities controlled by them, have been transferring, alienating the funds, assets, plant and machinery, stocks, etc., to the Respondent No.4 company and other entities controlled by them. The quantum of diversion of funds was shown by referring to the bank statement, sales and purchase register, register of contracts and delivery vouchers/challans of the Respondent No.1 and Respondent No.4 companies. It was argued that this Hon'ble Board has held that any payment which is not for the purpose of the business of the company, the concerned directors of the company ar....
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....of the same from August 2002, in terms of his own admission in the Petition. After the issue of shares in favour of Respondent No. 2 and 3, the shareholding of each of the directors was restored to 33.33%. The issue of shares in favour of Respondent No. 2 & Respondent No. 3 was during May 2002. After that more than three years have passed. No objection whatsoever was raised by the Petitioner No. 1 in relation to increase of capital. Now, it was argued, for the reason best known to him, he has raised this untenable issue of illegal share allotment. My attention was drawn to the correspondence which the Petitioner No. 1 has attached to the Petition at pages 73 to 77. In none of those letters, it was pointed out, has he raised the issue of fresh allotment. Accordingly, he has very much consented to the issue of such shares to the respondents. If at all Respondent No. 2 No. 3 were to have ill motive, it was argued, they could have ensured that the Petitioners are reduced to hopeless minority. That shows credibility of the Respondents vis-a-vis Petitioners. It was argued that the allotment was made with the consent of the Petitioner No. 1. 8. As regards the Petitioner's removal a....
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.... baseless allegation, raised by the Petitioners as a retaliatory action against the case filed by the Respondent No. 2 and 3 in Gujarat Courts. In that case, the Respondent No. 2 and 3 have alleged that a sum of Rs. 40 Lacs has been illegally siphoned off by the Petitioner No. 1 from Respondent No. 1 company. The case is sub-judice. The Gujarat Court, after hearing the parties' has directed the bank to keep the amount in Fixed Deposit. The Petitioner No. 1 was, therefore, it was pointed out, not allowed to achieve his ulterior motive. It was admitted that the Respondent No. 4 is very much an associate company of respondent no. 1 company. No business of the Respondent No. 1 company has been diverted to Respondent No. 4 company. Rather it is Respondent No. 4 company that has advanced a sum of Rs. 21.78 Lacs to Respondent No. 1 company. It was pointed out that the contrary, the Petitioner No. 1 himself is running two units by the name of AVI Trading and AVI Engineering Private Limited. He has been diverting the business of the Respondent No. 1 company even while he was a Director of Respondent No. 1 company. The Petitioner No. 1 was removed only because of his lack of probity in f....
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....in the name of AVI Trading and AVI Engineering Private Limited, while he was a Director of Respondent No. 1 company. 12. I have considered the pleadings and the documents filed therewith as well as arguments of the parties. I find that this petition is a counter blast to the R-2 and R-3's filing of cases against the petitioner in the Court in Gujarat alleging illegal siphoning off of Rs. 40 lakhs by the petitioner. The matter, is sub-judice wherein the Court after hearing the parties has directed the bank to keep the amount in fixed deposit. The respondents have raised preliminary objections that the petitioner has not come with clean hands and that there is* delay in filing this petition. It has been argued that the petitioner has given his consent and has also acquiesced to the increase in the shareholding, the petition is not maintainable at the threshold itself. On consideration of the facts and circumstances of the case and the catena of judgments relied upon by the counsels, I find the preliminary objections raised by the respondents the tenable. It is an admitted case that the issue of shares in favour of R-2 and R-3 was made during May 2002, for more than 3 years the....
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....llay its rigour advance the remedy and to relieve against abuse. The court, therefore, exercising equity jurisdiction cannot ignore the well known maxims of equity. Two such maxims are that he who seeks equity must do equity and he who comes into equity must come with clean hands. " In the present petition' the respondents have succeeded in proving the unclean hands of the petitioner. The petitioner himself being a wrong doer is not entitled to any relief and it is settled law that the CLB may refuse to grant relief where the petitioner does not come to the court with clean hands. Thus, I find that the petition is not maintainable even on the basis of the preliminary objections raised in this case. 13. However, considering the case on merits, I find that the respondents are right in contending that the provisions of Section 80(1A) are not applicable to this case and that the removal of the petitioner as director has been as per the compliance with the law. The petitioner was very much aware of his removal, he was served with the notice of EGM on 13.1.2003. However, the petitioner was not removed in the meeting on 13.1.2003 and a fresh notice of Board Meeting was issued on 10....