TaxTMI 
TaxTMI 
2017 (10) TMI 359
X X X X Extracts X X X X
X X X X Extracts X X X X
....lid and illegal and consequently to (i) declare that he has been continuing as a director and managing director without any break; and (ii) direct the Ministry of Corporate Affairs to delete the relevant Form No.32 filed by the Respondents on 18/10/2011. b. To declare that the Respondent No.3 had lost his office on 28th September 2010 being the date of AGM 2010 when his appointment was not regularized. c. To declare the AGM 2010 purportedly held on 26th September 2010 as unauthorised, invalid and illegal and consequently set aside the proceedings thereof. d. To declare the Board Meeting purportedly held on 10th November 2010 and 20th January 2011 and other subsequent board meetings as unauthorized, invalid and illegal and consequently set aside the proceedings thereof. e. To declare the Board Meeting purportedly held on 27th October 2011 and 21st December 2011 as unauthorized, invalid and illegal and consequently set aside the proceedings thereof. f. To declare that the impugned allotment of 40,000 fully paid up equity shares purportedly allotted to Respondents 2, 3 and 4 on 27th October 2011 as oppressive, unfair, fraudulent, invalid, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eclare the Form 32 filed with the Registrar of Companies on 15th November 2012 as illegal, null and void. o. To set aside the allotment of shares purportedly issued to Respondent No.5 on 16th January 2012, 3rd August 2012 and 6th June 2013 and declare the said meetings as illegal, null and void and consequently Form 2 filed with the Registrar of Companies on 18th January 2012, 15th November 2012, 21st January 2014 as illegal, null and void. p. To declare the increase in authorized capital of the Company made in the EGM allegedly held on 24th January 2012 as illegal, null and void and consequently Form 5 filed with the Registrar of Companies on 24th January 2012 as illegal, null and void. q. To declare that the Board Meeting allegedly held on 27th January 2015 with respect to shifting of registered office as invalid and illegal and consequently declare the Form-INC 22 filed on 3rd March 2015 as illegal, null and void. r. To declare that all documents and returns filed by the invalid board of directors constituted by the Respondents with the Registrar of Companies after moving of the Company Petition i.e. 10th January 2012 as illegal, null and void....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is stated that Petitioner is also one of the first and permanent Directors of the Company as per Clause 30 of the Articles of Association of the Company. He is also the Promoter and Managing Director of the Company. He was illegally removed from his Directorship with effect from 20/01/2011 and Form 32 was filed for the same purpose. (g) Respondent No. 2 is a Director of the Company with effect from 08/09/2009. He holds 100 fully paid up Equity Shares of Rs. 10 each constituting 1% of the share capital of the Company. 10,000 fully paid up shares have been allegedly allotted to him on 27th October 2011. This allotment is under challenge. (h) Respondent No. 3 became a Director of the Company 20th February 2010 by virtue of an arrangement made by the Petitioner to meet requirements during his absence from India. The relevant Form 32 was filed on 23rd February 2010. He is continuance as a Director of the Company is under challenge. He is also shown to be having 20,000 [Twenty Thousand Only] equity shares of the Company in the impugned share allotment purportedly made on 27th October 2011. It is also under challenge in this petition. (i) Respondent No. 4 is the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate of AGM. Even assuming the AGM was held on 26th September 2010, he lost his office by operation of law contained in Section 260 of the Companies Act, 1956. Thus effectively from September 2010, or as the case may be, 1st October 2010, the due date for the AGM 2010, there were only 2 directors i.e., Petitioner and Respondent No.2. His continuance as a Director of the Company after the AGM is illegal, null and void. (o) It is alleged that Respondents No.2 and 3 had colluded with each other and filed Form 32 on 18/10/2011 intimating cessation of Directorship of the Petitioner with effect from 20/01/2011. This action of the Respondent Nos.2 and 3 is accentuated by mala fides. This is highly oppressive and unfair act besides being completely invalid and illegal. (p) Since, only Petitioner and Respondent No.2 are Directors of the Company constituting the Board of Directors, without petitioner presence, there cannot be any valid Board meeting to contend that the Petitioner had lost his Directorship due to operation of Section 283(l)(g) of the Companies Act, 1956. Therefore the question of petitioner vacating office does not arise at all. If petitioner should be deemed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e on the part of Respondents 2 and 3 to serve notice on the Petitioner. This is a statutory default as the Petitioner is the majority shareholder and Managing Director of the Company. Thus the share allotment made to Respondents No. 2 to 4 on 27th October 2011 is oppressive, unauthorized, invalid, illegal, and null and void. This allotment is liable to set aside. Subsequently on 21st December 2011, 2,69,834 shares have been illegally allotted to Respondent No.5. Considering the fact that the Petitioner was kept in the dark with regard to these allotments, one may conclude that the said allotments were made purely with the intention of reducing the majority shareholder to a minority (his shareholding having been reduced from an overwhelming 99% to 3.09%) and to reduce him to the capacity of a mere observer and prevent his active participation in the affairs of the Company. Thus the allotment may be said to be detriment to the welfare of the Company and its shareholders and is null and void. (v) The Petitioner, in exercise of his available rights, as per Article 31 of AOA, had issued to the Company a letter dated 11th November 2011 expressing his intention to appoint five mo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in as a Director only on 20th February 2010. Fourthly the statement that the Respondents could not trace the Petitioner and he did not attend three meetings allegedly held on 20th May 2010, 27th August 2010 and 10th November 2010 is an absolutely false statement. (z) The invalid Board constituted by Respondents No.2 and 3 allegedly conducted Board Meeting dated 16th January 2012 and allotted 180,166 shares of Rs. 10 each to Respondent No.5 which is oppressive and illegal. Further they have increased the share capital of the Company from Rs. 50,00,000/- to Rs. 1,00,00,000/- in the Extraordinary General Meeting allegedly held on 24th January 2012. (aa) Further the said invalid Board constituted by Respondents No.2 and 3, allegedly conducted a board meeting on 3rd August 2012 and allotted 3,30,000 shares of Rs. 10 each to Respondent No.5 and appointed Respondents No.6 and 7 as directors of the Company on 3rd August 2012. There was no board meeting at all on the said date. The Respondents have cooked up records and filed forms with Registrar of Companies. (bb) It is alleged that by virtue of illegal allotment of shares to others, the stake of the Petitioner....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers and that to wind up the same would unfairly prejudice the members though facts would prove that it is just and equitable to wind up the Company. (gg) Hence, the present petition is filed for the relief as mentioned supra. 3. The Company petition is opposed by the Respondent Nos. 1, 2, 3, 4, 5 & 6 by filing their common counter dated 19th December, 2016. The following are their main contentions: (a) It is alleged that company petition, prima facie, is an abuse of process of law, devoid of merits and therefore deserves to be dismissed in limini. Also the company petition is not maintainable as the petitioner is not qualified under the provisions of section 399 of the Act to file a company petition under the provisions of sections 397 & 398 of the Act. The petitioner, who vanished from the company within a period of six months from the date of its incorporation has no locus standi whatsoever to make wild allegations against the present management. All such allegations do not warrant any consideration as the same are false, baseless, wild and against the records. (b) The Petitioner was initially working in a Delhi-based company viz., GS Infocomm Data P....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... petitioner has contributed Rs. 99,000/- only out of total investment close to Rs. 35 lakhs. It is admitted that the petitioner and the second respondent were the only directors till the third respondent was appointed as a director of the first respondent company. The petitioner has admitted that he was very well aware of the appointment of the third respondent as Director. It has also been admitted by the petitioner that third respondent was appointed as a director pursuant to an arrangement made by the petitioner to meet requirements during his absence from India. The petitioner and the second respondent were shareholders till 27/10/2011 when the Board allotted 40,000 equity shares of Rs. 10/- each to the second, third and fourth respondents. (g) It is admitted that petitioner was the Managing Director from the date of incorporation till 20.01.2011, when he ceased to be Director by virtue of not attending three consecutive Board meetings without leave of absence. It is an admitted fact that the petitioner migrated to the UK for employment where his family already resides, and had taken up full-time employment with none other than Duncan Lewis & Co. Solicitors, in the UK,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eeting for the year 2010 was conducted on 20/05/2010, third quarter meeting on 27/08/2010 and the fourth quarter meeting on 10/11/2010. For all the said meetings notices were duly sent to the petitioner, who at that point of time was a Director of first respondent company. Petitioner, who was busy with his employment during that period, did not bother to attend any of the meetings. Since petitioner did not attend three consecutive meetings, without claiming any leave of absence, he is deemed to have vacated his office as per the provisions of section 283(l)(g) of the Companies Act, 1956. Accordingly, the first respondent company has also filed Form 32 intimating his cessation of office to the Registrar of Companies. Hyderabad as required under the law. In case, the petitioner claims that he has not vacated his office as Director, he needs to first prove as to his arrival in India on the said dates by furnishing the passport with immigration seal. Therefore it is submitted that the vacation of office of petitioner is legal and valid. (j) It is stated that the Board at its meeting held on 27/11/2011 has allotted 10000, 20000 and 10000 shares to second, third and fourth respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent company. The Board thought it fit to allot shares, after the receipt of Rs. 26,98,340/- from the said company. The allegation that the further issue of shares to Swiss company is only to reduce the stake of the petitioner is absolutely ridiculous. The present management has mobilized to raise funds to the tune of Rs. 30 lakhs which would be completely utilized for the business and growth of the first respondent company. Therefore, both the allotments are not at all detrimental to the welfare of the company, and its shareholders as falsely alleged by the petitioner. (m) It is denied that petitioner did not receive any notice calling for board meeting held on 20/5/2010 as petitioner himself has walked out of the Company during March 2010 for taking up full time employment in UK. The Petitioner is only a shareholder holding 9,900 shares and not a Director of the first respondent company. Therefore the question of handing over the statutory registers/documents to the petitioner does not arise. The petitioner may however exercise his rights as a shareholder. The petitioner left the company during March 2010 to take up employment abroad and ceased to be a Director with effec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (b) It is stated that Petitioner and the Respondent No.2 were two Directors of the Company. Respondent No.3 was added as an additional director. Respondent No.3 had lost his Directorship on the due date for this Annual General Meeting [AGM]. Even assuming without admitting that the first AGM was held on 26th September 2010 as alleged by operation of Section 260 of the Companies Act, the Directorship of Respondent No.3 had come to an automatic end because he was not appointed at that AGM. The same position stands good by virtue of the Articles of Association and it cannot be disregarded to suit Respondents. Therefore, effectively from 26th September 2010, there were only two Directors in the Company and they are the Petitioner and the Respondent No.2. As per Clause 35 of the Articles of Association, the quorum for a Board Meeting shall be two Directors. Without the presence of the Petitioner, no Board Meeting could have legally been held. (c) It is contended that the Petitioner was continuously in touch with the Company even when he was in UK until the end of June 2011. Thereafter, when he had come to India, Respondents have been hoodwinking him for about two or t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1956/2013. 6. The Learned Counsels for both the parties have reiterated again all their respective pleadings made in their petition/counter/rejoinder etc. at the time of hearing of the case. They have also filed their written gist of arguments. Since, we have already stated the averments of both the parties, we are not again referring those averments again hereunder. 7. Dr. K.S. Ravichandran, the learned counsel for the petitioner has relied upon the following judgments in support of his case:- (a) Dr. T.M. Paul v. City Hospital (P.) Ltd. [1999] 97 Comp. Cas 216 (Ker.). (b) V. Natarajan v. Nilesh Industrial Products (P.) Ltd. [2003] 41 SCL 237 (CLB). (c) Bhagirath Agarwala v. Tara Properties (P.) Ltd. [2002] 39 SCL 943 (Cal.). (d) Surajmull Nagarmull v. Shew Bhagwan Jalan [1973] ILR 1 Cal 207 (e) Dale & Carrington Investment (P.) Ltd. v. P.K. Prathapan [2004] 54 SCL 601 (SC). (f) Tea Brokers (P.) Ltd. v. Hemendra Prosad Barooah [1998] 5 Comp. LJ 463 (Cal.). g) Capricon Oils Limited and others Vs. Ratan Mohan Sarda and others - Manu/WB/0073/2012. 8. After hearing the parties and perusing the pleadings, the Tribu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nter alia offering six months, which is placed on record. So he had no occasion to discharge his functions as Managing Director of the Company. 11. The 2nd Respondent has produced the copies of notices and also the minutes of meetings of Board of Directors held on various dates. The relevant meetings, which are necessary to the present case are only adverted to in the present Judgment. The 1st Notice given to the Petitioner is dated 26.04.2010 by communicating that the meeting of the Board of Directors would be held at Registered Office of the R1 Company on 10.05.2010 at 11 AM. The minutes of the meeting were also enclosed to the notice, wherein, while transacting the other business, the absence of the petitioner without leave was also recorded. Another notice dated 11.05.2010 was given to the Petitioner by communicating that the meeting of the Board of Directors would be held at Registered Office of the R1 Company on 20.05.2010 at 11 AM. The minutes of the meeting were also enclosed to the notice, wherein while transacting the other business, the absence of the petitioner without leave was also recorded. Another notice dated 17.08.2010 was given to the Petitioner by communicati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....011 at the company registered office @ 3.30 PM to discuss on termination of the Duncan Lewis contract, financial crisis and payment of employees salaries for the coming months and to discuss future of the company". Another notice was also sent to the petitioner for the EOGM to be held on 24.01.2012 for consideration of the proposal to increase the authorized share capital of the Company from the present Rs. 50,00,000/- to Rs. 1,00,00,000/- subject to the directions of the CLB on the question of allotment of shares to the Petitioner to give him majority shares if he is willing to invest, and if he is not willing then the shareholders have to discuss on the other shareholders and their willingness to invest as the funds are essential for meeting the salary and other monthly expenses liability for the month of December, 2012. 12. The record produced on behalf of Company clearly shows that the Petitioner was given proper notices to all the meetings held by the Company from time to time. However, he did not attend them for the reasons best known to him. It is not in dispute that the petitioner did not attend the meetings of the Board of Directors as discussed supra, which deprived....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ook after the needs of Company. Unfortunately, he has abdicated all his responsibilities towards the Company, and after returning to India, he started raising several disputes against the very so called his Baby Company, which it is stated that it is functioning in effective manner by giving employment to so many person. 15. By no stretch of imagination, increasing of Authorized Share Capital of a Company in question can be called as oppressive, fraudulent, illegal and malicious acts of Respondents As stated supra, the impugned increasing of Authorized share capital was done in accordance with Articles of Association of the Company and extant provisions of Companies Act, 1956/2013. Moreover, the Company has offered the newly created shares to the petitioner, and he can purchase those shares so as to retain his majority shareholders status in the Company. However, he is not interested to participate in the affairs of the Company. Since, the impugned allotment of shares are made in accordance with Articles of Association of the Company duly following principles of natural justice, the petitioner, in fact is not entitled to maintain the present petition. It is true that a petition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tor". Article 32 of R1 Company gives the right to the board to co-opt a Director. (5) The petitioner rightly claimed that R1 Company has more than 30 lakhs of expenditure per month and prudence will tell that it is not possible to run a Company with more than 100 employees for a long time without any assets to pledge or without any bank loan and with only Rs. 1 lakh share capital. (6) The petitioner has filed this petition only for harassing the management of R1 Company, and thereby avenging M/s Duncan Lewis solicitors. The petitioner was terminated by M/s Duncan Lewis solicitors due to his own bad behaviour after about one year of service. (7) The petitioner claimed that he is a postgraduate in commerce and Business management. The Deputy Registrar (Examinations) of Andhra University had confirmed way back in 2012 itself stated that his M.Com and M.B.A. are not genuine. However, the petitioner did not respond to this proof in his rejoinder or changed his claim in his amended petition. This shows petitioner's nature and character. (8) The seriousness of the petitioner on this petition can be seen from the fact that in the last 36 months he ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the Petitioner had vanished from the Company from the date of incorporation is again borne out of mala fides. It does not lie in the mouth of these unscrupulous Respondents, who had entered this Company, through grossly unfair and illegal manner to speak about the Petitioner in any manner whatsoever. They are third rated people, whether they are in India or abroad. It is a serious matter that petitioner, by possessing fake qualification certificates, is approaching Tribunal seeking equitable relief by making so many baseless allegations and also working abroad. Any way, we leave it to the concerned authorities to take appropriate action for the said fake certificates of the petitioner. 18. So far as the enhancement of the Authorised share capital of the Company is concerned, the petitioner was given due notice of the all the meetings during EGMs. After giving due notice only, the impugned allotment of shares consecutively was done and the same cannot be found fault with. The petitioner utterly failed to substantiate various material allegations made in the Company Petition. The Petitioner still has not shown any interest in running the affairs of the Company, except mak....