TaxTMI 
TaxTMI 
TaxTMI 
2017 (4) TMI 1253
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....ach other and intended to start an enterprise of their own. The Petitioner was thereafter, introduced to the R-4 through another co-employee being Mr. Rajesh Jha, the husband of R-3. In the course of discussions between the petitioner, the R-2 and 4 along with the said Mr. Rajesh Jha it was decided that they would start a partnership firm with equal shares for Petitioner and the R-2 and 4. It was also decided that all of them would have an immediate,, veto on any action or business to be undertaken by the said firm. The aforesaid model was however altered due to business exigencies and it was decided to form a company instead of partnership while still operating on the partnership principles pre-decided between them and M/s. Prowess International Private Limited (hereinafter referred to as R-1 Company) was incorporated on 07/03/2005 under the provisions of the Companies Act, 1956 having its registered office at A-18, 6th Phase, Adityapur Industrial Area, Gamaria, Jamshedpur-828108, Jharkhand. The Petitioner, R-2 and R-4 incorporated R-1 Company in 2005 with a paid up capital of Rs. 3,00,000/- with equal shareholding and on the understanding that each would have equal say in the run....
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....dents No. 2 and 3 have focused themselves on negating the involvement of the petitioner from the management and as a result the R-1 Company has suffered economic losses resulting in erosion of value of shareholders' investment. Every attempt of the Petitioner to object to the decisions was portrayed as his disregard and disrespect for the board and the members thereof. The objections made by the Petitioner at various board meetings have either been incorrectly noted or not noted at all. Further, instances of financial impropriety by employees of the R-1 Company to R-2 and R-3 have fallen on deaf ears and no action has been initiated due to personal bias in favour of such persons. In the said Petition, it is alleged that the R-2 and R-3 insisted upon provision of inputs for a magazine in the English language only when the Petitioner had submitted his content in Hindi. The Ld. Counsel submitted that on 31/03/2013, a meeting of the Petitioner and R-2 and 3 took place. The R-2 circulated only the first page of the minutes of such meeting and it recorded that, the Petitioner's functional areas would be design, production, purchase and commercial. The R-2's functional areas ....
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....R-2 and R-3 started pressurizing the Petitioner to sign certain papers whereby the authority to operate the bank account would be shared with R-3 as well. The Petitioner had already objected to this at the board meeting held on 18/12/2013. The Petitioner sent a letter to the Punjab National Bank in this regard asking the said bank not to permit any changes in the authorized signatories on account of the dispute between the Petitioner and R-2 & R-3 on 30/01/2014. It is further alleged that as decisions were being taken by R-2 & R-3 in collusion with each other, the Petitioner was over ruled in a meeting dated 15/02/2014 in respect of the change of the bank signatories. The main concern of the petitioner was that the R-3 does not possess the experience or qualifications to handle the accounts and finance of a company of the size of the R-1 and therefore the board should not undertake the material changes. Further as the disputes between the Petitioner on one hand and R-2 and R-3 on the other hand are escalating on a day to day basis, the Petitioner fears that the bank account would be used for personal enrichment by R-2 and R-3. The Petitioner further wishes to state that the overdra....
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....by reason of the deteriorating relationship between the shareholders. Ld. Counsel for the Petitioner also submitted that there is also a serious apprehension that R-2 and R-3 will act wrongfully and illegally in a manner so as to reduce the shareholding of the Petitioner who is in effect majority shareholders of the R-1 Company. The Respondents will take wrongful and illegal steps to change the constitution of the board of directors of the R-1 Company so as to usurp control of the R-1 Company. It is necessary that this Hon'ble Bench should be pleased to pass order of injunction restraining the respondents from altering or changing in any manner the shareholding of the R-1 Company and the constitution of the board of directors of the R-1 Company. It is also submitted in the Petition that around December, 2013 the Petitioner sent a letter to R-2 and R-3 indicating therein his displeasure at the false accusations leveled against him. The Petitioner further indicated that the disagreements between him and R-2 & R-3 have forced him to reconsider his ability to work further with R-2 & R-3. It is also submitted that the Petitioner at no stage expressed his desire to resign from the b....
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....be a conduct which lacks in probity, conduct which is unfair to and which causes prejudice to the petitioner in the exercise of his legal and proprietary rights as a member. He submitted that the instant case is not maintainable under the aforesaid sections before the Hon'ble Bench as none of his legal and proprietary rights have been infringed by any overt or covert act of any of the directors/shareholders. It is also submitted that the Petitioner failed to establish any case of oppression and mismanagement as mandated under Section 397 & 398 of Companies Act, 1956 through this Petition and the same is a sham or cloak and the Petitioner has fraudulently tried to mislead this Hon'ble forum by false, frivolous and vexatious allegations against the Respondents stating that his executive powers are being infringed and oppressive conducts are being carried against the Petitioner. In the said Company Application it is further submitted that the investment in 'ELINA' has not been done out of the funds of the R-1 Company but is done in the individual capacity of R-2 and R-3. The company named ELINA was formed by R-2 and R-3 in their individual capacity and R-1 has nothing ....
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....her alleged that not only the other director Ajay Shukla visited the Works but was also present during the said meeting of Prowess with AML Works. The Petitioner failed to explain that in what capacity Ajay Shukla was attending the meeting. In February 2014, the Petitioner has visited various Consultants/Customers in Delhi and Kolkata with his Co-Director Ajay Shukla in Enteco Engineers Pvt. Ltd. a company pursuing the similar business as Prowess between 10th to 13th February, 2014 and the Petitioner distributed the brouchure of Enteco also. The Respondents Counsel further submitted that there was no approval of the same visits in the Board guidelines and the Petitioner categorically failed to provide any satisfactory explanations in this regard and later on the same day a mail was received that the Petitioner was on an official tour. The Petitioner was requested to stop such kind of irresponsible and unprofessional acts which are against the interest of the R-1 Company and the R-1 Company will not bear any expenses for such visits by the Petitioner. A copy of the mail dated 08/04/2014 is also annexed to this Application as Annexure-E. He further submitted that after Respondents c....
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....warding a copy of their quote, to one of their customer, to his another company and on getting this information, the company Enteco Engineers Pvt. Ltd. in which Petitioner is also a Promoter Director, quoted Rs. 57,60,000/- which is practically 7 lakhs lesser that the price quoted by the R-1 Company, i.e. Rs. 64,60,000/-. In the said Supplementary Affidavit the Respondents also enclosed copies of forwarded mails that include the quotation of respondents along with other mails chronologically as per date. On 28/07/2014, the Respondents have filed their reply to the OP. No. 71/2014 by way of an Affidavit, denying and disputing each and every allegation and/or contention contained in the said Petition save what are matters of record. At para No. 6 of the said reply it is specifically denied that the Petitioner and Respondents decided that they would start a partnership firm with equal shares for Petitioner and the Respondent Nos. 2 and 4. Further, it was denied and disputed that the decision to form a partnership firm was altered due to business exigencies and it was decided to form a company instead. Ld. Counsel for the Respondents further submitted that at the beginning it was deci....
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....etitioner prayed this Bench to direct the Respondents No. 1, 2 and 3 not to carry out any financial transaction without the prior written approval of the Petitioner and make him a signatory on all the bank accounts of the R-1 Company. In reply to the CA No. 871/2014 the Ld. Counsel for the Respondents filed the reply on 16/09/2014 and submitted that as per the decided case of Hon'ble Supreme Court under 397 & 398 of Oppression and Mismanagement, there must be continuous acts on the part of the majority shareholders, continuing up to the date of Petition and acts/matters taking place after the application under Section 397 & 398 is filed, cannot be considered. Hence no subsequent facts can be placed after filing the Petition and therefore all the averments made in sub paras of para 2 of the said C.A. are invalid and requires no consideration of the same. With further reference thereto he submitted that the CA No. 871/2014 has been filed based on the facts subsequent to filing of the Petition rendering the whole of the C.A. as such as invalid and not tenable in law. He further denied and disputed the allegation made in sub-para (h) of Para-2 of the said C.A. It is submitted that....
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....mpany Law jurisprudence, forcing the majority shareholders to propose his removal from the position of the director. In Para 12 of the said Supplementary Affidavit it is submitted that the Petitioner clandestinely filed CP No. 71 of 2014 and procured an ex-parte order dated 13/05/2014 by misleading the Hon'ble Bench. It is further submitted in Para 13 of the said Supplementary Affidavit that the Petitioner having obtained that ex-parte order continues with his sinister attempt to turn the R-1 Company into a husk by diverting all the business of the R-1 Company to his own company by reason of his access to all the information of the R-1 Company i.e. books of accounts, purchase and sales register, contracts, tender & bid papers, drawing and designs and other documents with vital information of the R-1 Company for being a director of the R-1 Company and passing the same to Mr. Ajay Shukla, the other director of his own company. In Para-14 of the said Affidavit it is submitted that all the three directors of the R-1 Company has been paid equal remuneration. Copies of last two months remuneration paid to all three directors are enclosed and marked as Annexure-A. It is also submitted....
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....en overruled in a meeting dated 15/02/2014 in respect of change of bank signatories. This clearly proves that the petitioner was present in a board meeting and mere overruling of a decision of the petitioner by the majority of the directors, do not constitute an act of oppression and mismanagement. The petitioner has stated that the proposal of R-2 to invest in a company namely ELINA was rejected by the petitioner and consequently, it was decided that the R-2 & R-3 would invest in the company in their individual capacity. Since this is the basis on the objection of the petitioner and since the petitioner has no stake in ELINA, it could not be said that investment in the company by R-2 & R-3, can be termed as an act of oppression and mismanagement. It has also been stated by the petitioner that the property belonging to the children of the petitioner has been mortgaged to secure overdraft facilities for the R-1 company, therefore the petitioner will suffer prejudice if the valuation of the petitioner's stake is decreased and his voting rights reduced. Apprehension about siphoning off funds/stake of the company by the R-2 & R-3 have also been expressed as in spite of various re....
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....and quoted a price 54,72,000.00 on 11/03/2014. The respondents have claimed that the petitioner claims in his reply that the same order was refused to R-1 Company is a fraudulent claim. The respondents have given further instances regarding the petitioner wherein M/s. Entico Engineering Private Limited have competed with the R-1 Company in some other projects for some other tenders also. The respondents further stated that when the petitioner refused to respond to the valuation report and continued his misconduct of diverting corporate opportunity of the R-1 Company. When it written the petitioner to file a damage suit and the petitioner immediately came to the CLB and got an ex-parte ad-interim order dated 13/05/2014. The respondents have also stated that due to deficiency of corporate opportunities, the turnover of the R-1 company has come down from R. 80.88 crores in 2012-13 to Rs. 37.60 crores in 2013-14 and Rs. 23.86 crores in 2014-15. The petitioner being a director in the R-1 company has fiduciary duty to protect the interest of the company. By participating and collaborating with another company competed with the R-1 company is a clear failure of his fiduciary duties and t....