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2017 (11) TMI 889
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.... Hyderabad not to take on record the Form 23 filed by the second Respondent in this regard; b. Setting aside the resolutions alleged to have been passed at the EGM alleged to have been held on 19/03/2007 for non-recognizing the allotment of 84,99,937 shares that were allotted by the first Respondent company on 01/04/2006 and direct the Registrar of Companies, Andhra Pradesh, Hyderabad not to take on record the Form 23 filed by the Second Respondent in this regard; c. Setting aside the illegal allotment of 45,00,000 shares and 84,99,937 shares that were alleged to have been allotted to the Respondent group on 19/03/2007 and 22/04/2006 respectively and direct the Registrar of Companies, Andhra Pradesh, Hyderabad not to take on record the Form 2 filed by the second Respondent in this regard; d. Directing the first Respondent company to rectify the Register of Members, reinstating the names of the Petitioners and to delete the names of the Respondent group with respect to the shares alleged to have been allotted on 22/04/2006 and 19/03/2007; e. Setting aside the illegal appointment of second, third fourth, fifth, ninth, tenth, eleventh and 12th Respo....
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....e state of Andhra Pradesh. The newspaper mainly covered all political issues and it had a reasonable circulation in the state. (4) By virtue of the nature of the business, the second Respondent had the golden opportunity to interact with different people of different sections of the society. As the newspaper was mainly focusing on political issues in the state of Andhra Pradesh the second Respondent had to meet various political leaders of different parties and interact with them for interviews, views and discussions etc. Thus the first Respondent Company was used as a vehicle by the second Respondent to further his personal image which was already on the edifice of 'Sanghi' name. It would not be an exaggeration to say that the family sank huge money in this company mainly to help the second Respondent's political name and career, as till then, he was an unknown person outside the family circle. (5) The second Respondent, who is a boorish braggadocio with, out of the world lifestyle tastes and a mania for authority wanted to become a full time politician and expressed his willingness to the family members, who in turn extended their valuable genuine support and en....
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....irector has- a. Filed form 23 on 10/08/2007 with RoC, A.P., and Hyderabad. In the said Form he has falsely claimed that the shareholders at the Extraordinary General Meeting held on 19.03.2007 have passed resolutions (i) amending capital clause in the Memorandum of Association so as to increase the authorized share capital from Rs. 10.50 crores to Rs. 15 crores (ii) for borrowings under the provisions of Section 293(1) (d) of the Act and (iii) for non-recognition of 20,00,000 shares and 84,99,937 shares that were already allotted by the first Respondent company on 01.03.1998 and 01.04.2006. b. Filed form 5 on 12.04.2007 with RoC, A.P., Hyderabad in which he has made a false statement that the shareholders at the EGM held on 19.03.2007 have passed resolution authorizing increase of authorized share capital from Rs. 10.50 cores to Rs. 15 crores. c. Filed Form 2 on 06.04.2007 with RoC, A.P., Hyderabad Hyderabad, alleging that 84,99*937 shares were allotted to Respondent group by the Board of Directors at its meeting held on 22.04.2006. d. Filed Form 2 on 14.08.2007 with RoC, A.P., Hyderabad Hyderabad, alleging that 45, 00,000 additional shares were ....
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....e second Respondent himself has claimed that the de-recognized shares were factually allotted by the Board. The second Respondent ought to have known that the first Respondent Company is a public limited company, and, therefore, the provisions of section 81 of the Act are applicable to the company. He should have also known that as per clause 57 of the Articles of Association the power to issue additional shares vests with shareholders, and not with the Board of Directors. Therefore, the impugned Forms 5 and 23 are illegal and ultra vires the MOA and AOA of the Company, apart from the Company Act. The second Respondent, in the course of making an attempt to show him as a major shareholder has invented a new concept "non- recognition" of shares for which no provision is available under the present Companies Act, 1956. (9) The second Respondent has also filed Form 2 with RoC, Hyderabad on 06.04.2007 and 14.08.2007 claiming that the first Respondent company has issued additional 84,99,937 shares to Respondent group at the Board meeting held on 22.04.2006 and 45,00,000 shares to second Respondent himself at the Board meeting held on 19.03.2007. The first Respondent Company, be....
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....se claim about its circulation of its daily paper without full and proper records and documents to support its false claim. It was afraid that this claim would stand exposed badly if it is allowed/permitted an audit of circulation by ABC. This clearly shows the malafide intention of the Respondent group who year after year mismanaged the first Respondent company. (b) A perusal of the balance sheet as at 31.03.2006 and 31.03.2007 would reveal that the first Respondent company had a huge balance of Rs. 21,78,49,064/- and Rs. 25,65,99,805/- respectively under the Head "Sundry Debtors". The said amounts constitute almost twenty five percent of the turnovers reported in the respective financial years, which is very much abnormal in the industry of this nature. The second Respondent failed to maintain a balance between the turnover and debtors and has allowed the debtors to rise to the level of one fourth of the turnover. Also the reporting of the sundry debtors is not as per the format prescribed under schedule VI to the Act, thereby violating the provisions of section 211 of the act. (c) The second Respondent has also diverted huge amounts through "loans and advances"....
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....nts were presented. (ii) AS-9 : Revenue Recognition- The first Respondent company failed to disclose the revenue recognition policy followed by the company. (iii) S-18: Related Party Disclosures- The financial statements failed to disclose the related parties relationships and transactions between the first Respondent company and its related parties. (h) The illegal acts of the second Respondent did not stop with the Petitioners and first Respondent company but also extended to other entities, where the Petitioners had a huge stake. The sixth Respondent Company is a company registered in the State of Andhra Pradesh. The Petitioners group have huge stake in the sixth Respondent Company through the first Respondent Company. The first Respondent company has entered into few contracts with sixth Respondent company. Third Petitioner and thirteenth Respondent are the Directors of the sixth Respondent Company right from its inception and they are also in charge of the day to day affairs of the sixth Respondent Company. The second Respondent with an ulterior motive of taking control over sixth Respondent company has unauthorizedly filed the foll....
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....the second Respondent who has signed and filed the Forms is no way connected to the sixth Respondent company and its affairs and the Forms have been filed without due compliance of law and procedure. (l) Similarly seventh and eighth Respondents are Companies registered in the state of Andhra Pradesh. In both these companies, the Petitioners Company has entered into few contracts with both the seventh and eighth Respondent companies as well. The second Respondent with an ulterior motive of taking control over both the seventh and eighth Respondent companies has unauthorizedly filed the following Forms with RoC, AP to show that both the Board and the share capital of the seventh and eighth Respondent companies are under his control. (1) Filed Form 32 on 05/06/2008 to show that the second fourth, tenth, eleventh and twelfth Respondents were appointed as Directors of the seventh and eighth Respondent companies w.e.f 30/09/2005. (2) Filed another Form 32 on 05/06/2008 to show that third, fifth and ninth Respondents were appointed as Directors of both the seventh and eighth Respondent companies w.e.f. 01/04/2007. (3) Filed Form 2 on 06/06/2008 to show ....
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....d that the second Respondent has not only been mismanaging the affairs of the first Respondent Company by manipulating records but his acts have resulted in oppression and against the interest of first Respondent company. And the balance of convenience will be against the Petitioners if the Hon'ble Bench does not intervene and pass appropriate interim orders in view of the serious allegations of the oppression. It is further contended that the affairs of the first Respondent Company are being conducted in a manner prejudicial to public interest and members of the Company and is fit to wind up under just and equitable ground but if any such an order is passed, it would unfairly prejudice the interest of members. Therefore, the Tribunal is prayed to interfere in the subject matter by passing appropriate orders as it thinks fit and just as to bring to an end the matters complained in the instant case. 3. Shri. Girish Sanghi, the second Respondent herein, has filed counter/written submissions dated 10th January 2017. The main contents as raised by him are as follows: (1) One of the important qualifications for filing a company petitions U/s 397 and 398 is that that the Peti....
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....ership. He has stated that there was an excellent improvement in the turnover of the Company from 1995 -96 to 2007-08. (5) He has furnished the details of Income Tax d.ues, interest and penalties as detailed below: Name of Statue Nature of Duties Amount(Rs). Period & Forum of Dispute Income Tax Interest 52,600 A.Y. 96-97, ITAT Income Tax Penalty 60,000 A.Y. 96-97, ITAT Income Tax Interest 256,800 A.Y. 99-2000 ITAT Income Tax Penalty 480,000 A.Y. 99-2000 ITAT Income Tax Penalty 14,50,000 A.Y. 2003-04 CIT(A) Interest and Penalties of Rs. 57,600, Rs. 256,800 and Rs. 480,000 were dropped by the ITAT Order dated 19th December, 2007. Penalty and Penalties of Rs. 14,50,000, The Appeal No. 0374/06-07 is still pending with CIT(A) II, Hyderabad. (6) It is stated that the Petitioner are trying irrelevant issues which cannot be termed as mismanagement. In the general course of business, the business executives and General Managers working for the company are given certain powers and Managing Director will have overall superintendence on the affairs of the company. (7) It is asse....
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....to his credit out of 63 shares. * The Respondent No.8 made an allotment of 20,00,000 equity shares of Rs. 10/- each on 01-03-1998 among Sanghi family members. Accordingly the Applicants No.1 to 4 were allotted 1,2500,000 equity shares of Rs. 10/- each and Form No.2 was also filed by the Respondent No. 8 Company with ROC, Hyderabad. * On 01-04-2006, the Respondent No.8 Company made further allotment of 84,99,937 equity shares of Rs. 10/- each among Sanghi family members out of which the Applicant Nos. 1 to 3 were allotted 5,31,250 equity shares each while the 4th Applicant was allotted 5,31,187 equity shares, total 21,24,946, and the total paid-up share capital of 8th Respondent as on that date was 1.05 crores equity shares of Rs. 10/- each while the Applicants are holding 26,24,946 equity shares of Rs. 10/- each. Hence all the Four Applicants together are holding approximately 25% of equity in the 8th Respondent Company. * They have also relied upon judgment of the Hon'ble Supreme Court passed in Civil Appeal Nos. 10940-10941 of 2014 in Baluram v. P. Chellathangam & ors and another judgement of Apex court in Dale and Carrington Invt. (P.) Ltd. v. P.K. Pra....
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.... Chidambaram, PCS for Respondents and Shri. Giresh Sanghi, second Respondent, party -in -person. 7. (1) The case was initially filed before the then Company Law Board, Chennai on 14th November, 2008. The CLB passed the following interim order dated 14th November, 2008. 'In the meanwhile, considering the apprehension expressed on behalf of Petitioners and in view of serious disputes involved in the Company petition and in the paramount interest of the Company, it is hereby directed that the Respondents will not alienate or sell any of the fixed assets held by the Company without leave of the Bench until further orders. The matter will be heard on 27.11.2008 at 2.30 PM in regard to interim reliefs on account of shareholding pattern and composition of Board of Directors of the Company Accordingly, the case was listed for hearing on 27.11.2008 and passed the following further interim order "In the meanwhile, considering the apprehension expressed on behalf of Petitioners, the Respondents shall maintain status quo in regard (1) to shareholding pattern and (ii) composition of the Board of Directors of the Company until further orders" (2) Upon const....
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....second Respondent and his group leaving the Petitioners group altogether, are valid or not: (4) If so, what is the relief, the Petitioners are entitled for: 11. It is not in dispute that the first Respondent Company was originally registered as a Public Limited Company on 18th December, 1992 with Registrar of Companies, Andhra Pradesh, and Hyderabad bearing the name of "ABK PUBLICATIONS LIMITED". It was subsequently taken over by Sanghi Group represented by the Petitioner and Respondent group by acquiring all the shares that were held by the then management. During February 1998, the name of the first Respondent Company was changed as "AGA PUBLICATIONS LIMITED". The main business of the Company is printing, publishing and circulating books, newspapers, magazines etc. 12. Subsequently, Form-2, pursuant to section 75(1) of the Companies Act, 1956, Return of allotment, was uploaded with Registrar of Companies, vide SRN : A11143922 dated 06.03.2007 by allotting 20,00,000 equity shares at nominal amount per share at Rs. 10-/each by enclosing a list of allottees dated 1st March, 1998. It is stated that entire amount Rs. 2,00,00,000 @ Rs. 10 each was paid. And the list encl....
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....y certified that I have verified the above particulars from the books of account and records of M/s AGA PUBLICATIONS PRIVATE LIMITED and found them to be true and correct. Chartered Accountant or Cost Accountant or Company Secretary (in whole-time practice)" JAYANT PALNIT KAR The above lists consisting of sixteen members, in which all the seven Petitioners along with Girish Sanghi (2nd Respondent), Gaurav Sanghi (3rd Respondent), Alka Sanghi (4th Respondent) & Ashish Sanghi (9th Respondent) apart from others have been allotted equally by allotting 1,25,000 totaling 20,00,000 shares in the Respondent No.1 Company. 13. Another Form No.2 under section 75 (1) of the Companies Act, 1956, Return of allotment, was also uploaded with ROC vide SRN: A 11144185 dated 06.03.2007 by allotting 8,499,937 equity shares @ Rs. 10 each for total amount of Rs. 84,999,370/, which was paid. The list of allottees dated 1st April, 2006 is as follows: AGA PUBLICATIONS LIMITED LIST OF ALLOTTEES DATED 1STAPRIL, 2006 NAME OF ALLOTTEE NO. OF SHARES Shri Anand Prakash Sanghi 4-3-352, Bank Street, Hyderabad 5,31,250 Smt.Anjana Sanghi 4-3-352, Bank Stree....
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.... Accountant or Company Secretary (in whole-time practice)" Jayant Palnit Kar The above list consisting of Sixteen total members, in which all the Petitioners arid the Girish Sanghi (2nd Respondent), Gaurav Sanghi (3rd Respondent), Alka Sanghi (4th Respondent) fit Ashish Sanghi (9th Respondent) are allotted 5,31,250 (except Alok Singh, who was allotted 5,31,187) shares each and the total number of shares allotted are 84,99,937 for total amount of Rs. 84,999,3707- @ Rs. 10 per shares and this was paid. 14. In the light of above two Forms filed, it is relevant to examine Form No.23 pursuant to section 192 of Companies Act, 1956 filed by the 2nd Respondent along with minutes of Extraordinary General Meeting (EGM) of the Company held on 19th March, 2007. It is relevant to extract Paras-5 & 6 minutes of said meeting": "5.THE FACTUAL SHARE ALLOTMENT LIST OF 01-03-1998 ARE AS UNDER: "RESOLVED THAT statement showing allotment of 20,00,000 Equity Shares of Rs. 10/- each to the names, addresses and number of shares allotted pursuant to the Board Resolution dated 1st March, 1998, which was E-filed along with Form No.2, without the proper authorization of the Board....
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....4 3 Sudhir Sanghi 9 29-09-1994 4 Smt.Usha Sanghi 9 29-09-1994 5 Ravi Sanghi 9 29-09-1994 6 Gireesh Kumar Sanghi 9 29-09-1994 10,00,000 01-03-1998 14,99,937 22-04-2006 7 Smt. Alka Sanghi 9 29-09-1994 5,00,000 01-03-1998 30,00,000 22-04-2006 8 Gaurav Sanghi 5,00,000 01-03-1998 30,00,000 22-04-2006 9 Ms.Aarti Sanghi 10,00,000 22-04-2006 TOTAL 105,00,000 15. As per the reply of second Respondent dated 10th July, 2017, it is not the case of second Respondent that he has lost his digital signature or he has lodged any complaint with any authorities for misuse of his signature. But his only un- tenable contention is that he has given his digital signature to his elder brother, who has mis-used the signature. In the absence of any proof that his signature is misused by his elder brother, it is not at all tenable of such allegation. Moreover, all the allotments made subsequently are exclusively to family of second Respondent and few others. The way the....
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....ronic signature or electronic authentication technique shall be considered reliable if- (a) the signature creation data or the authentication data are, within the context in which they are used, linked to the signatory or, as the case may be, the authenticator and to no other person; (b) the signature creation data or the authentication data were, at the time of signing, under the control of the signatory or, as the case may be, the authenticator and of no other person; (c) any alteration to the electronic signature made after affixing such signature is detectable; (d) any alteration to the information made after its authentication by electronic signature is detectable; and (e) it fulfils such other conditions which may be prescribed. (3) The Central Government may prescribe the procedure for the purpose of ascertaining whether electronic signature is that of the person by whom it is purported to have been affixed or authenticated. (4) The Central Government may, by notification in the Official Gazette, add to or omit any electronic signature or electronic authentication technique and the procedure for affixing such sig....
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....g of any form, application or any other document with any office, authority, body or agency owned or controlled by the appropriate Government in a particular manner; (b) the issue or grant of any licence, permit, sanction or approval by whatever name called in a particular manner; (c) the receipt or payment of money in a particular manner, then, notwithstanding anything contained in other law for the time being in force, such requirement shall be deemed to have been satisfied if such filing issue, grant, receipt or payment, as the case may be, is effected by means of such electronic form as may be prescribed by the appropriate Government. (2) The appropriate Government may, for the purpose of sub-section (1), by rules, prescribe- (a) the manner and format in which such electronic records shall be filed, created or issued; (b) the manner or method of payment of any fee or charges for filing, creation or issue any electronic record under clause (a). Section 4 to 42 deals with dues of subscribers and these sections extracted below: "Section-40: Generating key pair:- Where any Digital Signature Certificate, the pub....
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....ion 37 extract below: Section 37: Suspension of Digital Signature Certificate:- (1) Subject to the provisions of sub-section (2), the Certifying Authority which has issued a Digital Signature Certificate may suspend such Digital Signature Certificate. (a) on receipt of a request to that effect from (i) the subscriber listed in the Digital Signature Certificate; or (ii) any person duly authorized to act on behalf of that subscriber; (b) if it is of opinion that he Digital Signature Certificate should be suspended in public interest. (2) A Digital Signature Certificate shall not be suspended for a period exceeding fifteen days unless the subscriber has been given an opportunity of being heard in the matter. (3) On suspension of a Digital Signature Certificate under this section, the Certifying Authority shall communicate the same to the subscriber." 17. In the light of above provisions of the IT Act, it is to be examined whether the allegations made by the 2nd Respondent that the Digital Signature was misused by the Petitioners is tenable or not. Admittedly, the digital signature of the 2nd Respondent was also....
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....ter flouting all norms of law. Unfortunately, the first Petitioner, who is the elder brother of the second Respondent, died on 02.03.2015, while the present case is pending. However, the second Respondent is bent upon to prosecute the present case 18. It is not in dispute that no notice has been given to the Petitioners, who are holding substantial shares in the Company as mentioned above. Principles of natural justice demands that a notice should be given even to any person, whose rights, accrued rightly or wrongly, are going to be deprived. Even as per the notice dated 15.02.2007, it is admitted that the allotment of shares were made on 01.03.1998 and 01.04.06. As stated by the learned Senior counsel for the Petitioner, there is no provision under law or under the Memorandum and Articles of Association of Respondent No. 1 Company to de-recognize the shares, once allotted and it amounts to reduction of share capital, which require to follow a lengthy procedure The contention of the 2nd Respondent that his Digital Signature was misused by the 1st Petitioner is not at all tenable in the light of the Digital Signature held by the 2nd Respondent is still under the custody of 2nd Re....
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.... unlawful use of Electronic Signature Certificate u/s 74 of the Act, which is extracted below for ready reference: "Section 74: Publication of fraudulent purpose :- Whoever knowingly creates, publishes or otherwise makes available a [Electronic Signature] Certificate for any fraudulent or unlawful purpose shall be published with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both." Comments: If any person knowingly creates, publishes or otherwise makes available an Electronic Signature Certificate for any fraudulent or unlawful purpose, he shall be punished with imprisonment up to two years, or with fine up to one lakh rupees, or with both." Rule 28 & 29 of Information and Technology (Certifying Authorities) Rules, 2000 deals with compromising and revoked of Digital Signature Certificate. Rules 28 & 29 reads as under: Rule-28: Compromise of Digital Signature Certificate: Digital Signature Certificate in operational use that become compromised shall be revoked in accordance with the procedure defined in the Certification Practice Statement of Certifying Au....
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.... of CP) was uploaded vide SRN A11144185, dated 06.03.2007 by duly paying for Form PAS-3 by remitting an amount of Rs. 3500/- on 06.03.2007 through Punjab National Bank and same was also duly certified by the Jayant Palnit Kar, Chartered Accountant/Company Secretary as extracted supra. In addition, there are no provisions that exists either in the Companies Act or in the Memorandum and Articles of Association of R1 Company (AGA Publication) to cancel allotted shares. It is also not in dispute that there was no notice issued to the Petitioners for the subsequent EGMs held from 19th March, 2007 onwards, which is not only in violation of principles of natural justice but it is also against the Companies Act, 1956/2013 and the provisions of the Memorandum and Articles of Association of R1 Company (AGA Publications Limited). Therefore, all the subsequent meetings held from 19.03.2007 onwards and decisions taken during those meetings are declared to be illegal and no rights would accrue to the Respondents by virtue of those allotments. 21. The contention of second Respondent that the Petitioners do not hold any shares at all in the Respondent No. 1 Company is not all tenable, and it is....
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....beyond the scope of litigation, as rightly contended by the second Respondent in his Counter/written submissions dated 10th January 2017. The second Respondent has every right to continue as Managing Director of Respondent No. 1 Company and to run its affairs in accordance with provisions of Company law and Memorandum and Articles of Association of the Company. 24. In order to avoid multiplicity of litigation and as there would not be change in the nature of pleadings of the Company petition, CA No. 131 of 2017 filed by Ravi Sanghi and 3 others by seeking to implead them as Petitioners No. 8 to 11 deserves to be allowed and thus their names are arrayed as such. 25. Therefore, I am of the considered opinion that it is a fit to exercise powers conferred on this Tribunal under sections 397 and 398, 402,and 406 and read with Schedule 11 of Companies Act, 1956 R/w Sections 241/242 of Companies Act, 2013. 26. For the aforesaid reasons, the Company Petition bearing CP No.71 of 2008 (TP No.29/HDB/2016) deserves to be allowed. Accordingly, the Company Petition is allowed with the following directions. (1) The resolutions alleged to have been passed at the EGMs held on 19.0....