TaxTMI 
TaxTMI 
2006 (8) TMI 648
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....petitioner and the fourth respondent from the management; (d) convening of general and board meetings of the Company; (e) increase of the authorised capital of the Company from Rs. 10 lakhs to 21 lakhs; (f) allotment of shares in favour of the third respondent; (g) manipulation of the books of account and other records; (h) take over of the immovable properties of the Company without any valid authority; (i) denying of entry to the purchasers of flats constructed and sold by the Company; (j) sale of flats promoted by the Company without obtaining authority from the board of directors and misappropriating the sale proceeds thereof. Against this background, the petitioner is claiming the following reliefs; i) to declare that the proceedings of all board meetings and general meetings purportedly held by the respondent Nos. 2 & 3 are null and void; ii) to declare that the allotments impugned in the company petition are illegal and invalid; and iii) to supersede the board of directors of the Company and appoint the petitioner and the fourth respondent as directors of the Company. Shri A.K. Mylsa....
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....y into minority, but no extraordinary general meeting of the members of the Company was held on 21.12.1999 as claimed by the respondents, increasing the authorised capital from Rs. 10 lakhs to Rs. 21 lakhs. No notice was sent to the petitioner as well as the fourth respondent for the alleged extra ordinary general meeting, and they were not present at the meeting approving the increase of the authorised share capital of the Company. The respondents have not followed the prescribed procedure either for the enhancement of the authorised share capital or for the allotment of shares. The respondents have not produced the minutes book of board meeting or the general meeting and no presumption can be drawn in respect of those minutes, copies of which alone have been produced before the Bench. These acts would constitute oppression against the petitioner in his capacity as member. The disputes between the parties arose during 1999 and therefore, reliance may be placed on the statutory returns available prior to the disputed period, which would indicate that the petitioner held 99.8% of the shares and that he was in the management of the Company. * The petitioner and the third res....
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.... of the Company excluding the petitioner from participating in the affairs of the Company; (b) prevented the development and construction of the property in front portion of the premises belonging to the Company; (c) obstructed those persons in whose favour the undivided portions have been sold by the Company from taking possession thereof; and (d) denied the occupants entry to the Hats sold by the Company, thereby preventing the Company from generating revenues from sale of the undivided portion in the aforesaid premises. * The second respondent alienated the flats constructed and sold by the Company unlawfully to enrich himself at the cost of third party bonafide purchasers. The conduct of the respondent Nos. 2 and 3 unfairly prejudiced many members of the public who acquired undivided portions of the land from the Company. This conduct of the respondent Nos. 2 and 3 is highly oppressive and prejudicial to the interest of the Company as well as the public. There is justifiable lack of confidence in relation to the affairs of the Company which will be a ground for winding up under just and equitable clause. However, the order of winding up would cause prejudice to the int....
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.... of directors malafide, the said act must ordinarily be considered to be an act of oppression to such member. * V.G. Sundaraj v. New Theatres Carnatic Talkies Private Limited and Ors.(Judgment dated 18.01.1991 in O.S.A. No. 62 of 1982 on the file of the High Court of Judicature at Madras) - to show that the requisite procedure for rectification must necessarily be followed without which such rectification will not be valid. * Sri A.K. Mylsamy, while arguing the contempt application (CA No. 29 of 2001) submitted that the petitioner has filed, during the pendency of the company petition, an application (C A No. 20 of 2001) for an order of injunction restraining the respondent Nos. 2 & 3 from interfering with construction and sale of undivided portion of the building situated at No. 4A Stringers Road, Vepery, Chennai-600 007 upon which the respondents were restrained from dealing with or negotiating for sale of the property until 18.04.2001 and, thereafter, by an order dated 20.04.2001 the respondents 2 & 3 were restrained from entering into any negotiation or deal with any member of the public for sale of any flat, apart from prohibiting them from carrying on any co....
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..... 3 and 4 were appointed as directors with effect from 09.02.1999, the petitioner and his two sons, who are not parties before the Company Law Board, had resigned from the office of director with effect from 12.02.1999. Thereafter, the petitioner had abandoned the Company and never showed any interest in its affairs in view of his serious financial problems. The petitioner had received advance from the respondent Nos. 5 to 7 aggregating Rs. 91 lakhs and other customers as borne by the balance sheet for the year ended 31.03.1997, which has also been signed by the petitioner. * The petitioner had collected an amount Rs. 204 lakhs from the allottees till February 1999 as borne out by the report of the Commissioner appointed by the Bench and thereafter, further collected an amount of Rs. 268 lakhs, petitioner is, therefore, accountable for these amount collected from the allottees. * The petitioner though collected monies from the allottees failed to deliver the flats and further indulged in second sales of the flats even after vacating the office of director, thereby causing irreparable loss to the genuine purchasers, particulars of which are reflected in the report ....
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....eeds in favour of several of the allottees with ulterior motive to make unlawful gain, which resulted in double sale of the flats namely, the same flat has been sold in favour of more than one allottee. This malafide act of the respondent must be remedied in the interest of the Company. * The balance sheets for the years between 1995-96 and 2000-01 would show construction expenses aggregating Rs. 1.47 crores, whereas the valuers' report would indicate the construction expenses at Rs. 1.23 crores. These expenses towards construction were not personally incurred by the petitioner, but they were met from the funds belonging to the Company. The petitioner has collected monies to the tune of Rs. 204 lakhs prior to 12.02.1999 and thereafter an aggregate amount of Rs. 268 lakhs, out of which a sum of Rs. 45 lakhs have been spent towards construction expenses as could be seen from the statement produced before the Bench. The petitioner failed to account for the balance amount of Rs. 426 lakhs and has not chosen to settle the dues of the respondent Nos. 5 to 7 and other allottees. The second respondent never collected any monies from the allottees, yet he is prepared to meet th....
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....inal proceedings launched against the petitioner and the second respondent. The petitioner must refund the entire amounts collected from the allottees and in such an event this respondent will be in a position to reach settlement with the allottees. The balance sheet for the year ended 31.03.2000 shows a loss of Rs. 34.33 lakhs, in which case the expenses of Rs. 31.26 lakhs reportedly incurred by the petitioner for the year ended 31.03.2000 can never be true. These expenses are not reflected in the report of the Commissioner. This establishes the fact that the petitioner could not have constructed the flats, as claimed by him. The petitioner is making such false claim in order to wriggle out of the criminal proceedings pending against him. Shri M. Shreedhar, learned Counsel while opposing the contempt application reiterated that the second respondent was constrained to execute the sale deeds in favour of (i) Savitri Choonilal and Smt. Sarala Sant Kumar (ii) Sant Kumar, on account of the orders passed by the District Consumer Disputes Redressal Forum. Therefore, the respondent has not wilfully violated the order of the CLB, but was compelled to comply with the order of District Cons....
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....he value of unallotted flats which will be given to them and balance, if any, in cash thereby giving up their claim in respect of eleven flats stated hereabove as borne out by the order dated 19.09.2003 of the Bench. In the circumstances, these respondents are seeking to modify the order dated 20.04.2001, thereby permitting the parties to sell the eleven flats agreed to be purchased, as claimed in the company application (C.A. No. 69 of 2006). I have considered the pleadings and arguments of learned Counsel. The issue before me is whether the petitioner is entitled to the reliefs as claimed in the company petition in order to bring to an end the alleged acts of oppression and mismanagement in the affairs of the Company. The rival claims are dependent on the documentary evidence placed before the Bench. While the petitioner is accusing the respondent Nos. 2 and 3 for stealthily removing away the books of account, statutory and other records of the Company, it is contended by the respondents that the petitioner is in custody of the records but refusing to produce them to substantiate his claim being agitated in the present proceedings. It is needless to point out that the contenti....
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.... of statutory forms on record by the ROC, will have no sanctity in regard to the validity of such returns taken on record by him. Though the increase in the capital has not been supported by any primary documents, yet the same is for the benefit of the Company and therefore, any irregularity, while increasing the capital cannot be oppressive. There is, therefore, no necessity to go into the validity or otherwise of the increase in the authorised capital. Form No. 2 dated 23.01.1998 disclosing the allotment of 97,300 shares made on 03.01.1998 in favour of the petitioner has been filed on 23.10.1998 with the Registrar of Companies. Form No. 2 shows that the petitioner has paid Rs. 9,73,000/- by way of cash towards the allotment of shares. There is no material to show whether an amount of Rs. 9,73,000/- has been brought in by the petitioner towards allotment of the shares, purportedly made on 03.01.1998. The balance sheet of the Company for the years ended 31.03.1998 and 31.03.1999 would show that the paid up capital of the Company was only Rs. 27,000/-. The disputed allotment reportedly made on 03.01.1998 in favour of the petitioner is not reflected in any of these balance sheets. Fo....
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....ts of the present case. The petitioner admittedly was in the management of the Company since incorporation till February 1999 when he had resigned from the office of director. There are reportedly several appointments and resignations in the office of director which are only supported by Form No. 32, copies of which are before the Bench. Form No. 32 dated 25.02.1999 filed with the Registrar of Companies on 26.02.1999 reveals that while among others, the petitioner had resigned from the office of director with effect from 12.12.1999, the respondent Nos. 3 and 4 were appointed as directors of the Company. It is observed from Form No. 32 dated nil that the petitioner once again was appointed as director at the board meeting held on 24.12.1999, but this Form No. 32 was filed nearly after a lapse of two years on 04.01.2001. The delay has not been explained by the petitioner. It may further be observed that Form No. 32 notifying the appointment of the petitioner as director has been signed by the fourth respondent, who is the wife of the petitioner. There is no other primary document to substantiate the appointment of the petitioner as director with effect from 24.02.1999. Form No. 32....
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....t and equitable clause. Any such order of winding up of the Company with the stake of some of the allottees remaining unresolved would unfairly prejudice the interest of the Company and such allottees. The main grievances of the respondent Nos. 5 to 7 are that the Company had taken huge amounts by way of loan from Murali Lalchand, since deceased against security of the flats promoted by the Company. In view of the double allotment of the flats by the Company, their interest has been adversely affected and therefore they expressed their preparedness in getting back their monies lent to the Company with interest as undertaken by the Company. It is observed that these respondents have already filed civil suits before the High Court against the petitioner and the respondents herein in respect of their claim, which is being agitated before this Bench. It is further observed that the fifth respondent in the civil. suit namely, C.S.No.557 of 2001 before the High Court of Judicature at Madras has sought for specific performance of the terms of the agreement entered into between the parties namely the Company and the members of Lalchand family, in respect of the very same flats, which ar....