TaxTMI 
TaxTMI 
2009 (8) TMI 1228
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....eries. The Petitioners were the only signatories to the Memorandum of Association and were allotted 5 shares of Rs. 1000/- each. Even at the time when the Company was incorporated the Petitioners had been carrying on a parallel business under the partnership firm by name and style M/s. Shashi Distilleries which had its office at Bangalore. After incorporation, there were some difficulties in transferring the manufacturing license of the firm and therefore the Petitioners did not bother about the affairs of the Company. The 2nd Petitioner had left the country in 1997 to pursue his own business abroad. Therefore, after incorporation, no business could be carried on and the Company remained dormant. While matters stood thus, the 4t h Respondent Mr. M. Ganesan, a close friend of the Petitioners was entrusted with the affairs of the Company and also to comply with the filing of statutory formalities. As per Clause 14 of the Articles of Association of the Company, the Petitioners are the life-time Directors. Therefore, the Petitioners alone formed the Board of Directors of the Company. The 4th Respondent in whom the Petitioners had full crust and confidence had in turn handed over all th....
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.... iv. The license was transferred in favor of the Company in the year 2005, Pursuant to the transfer of the license, the 2nd and 3rd Respondents started initiating further steps to take full control of the Company to the exclusion of the Petitioners, who were originally the shareholders/Directors of the Company. v. The Respondents have now sought to increase the paid-up capital of the Company to a sum of Rs. 1 lakh, whereby 95 shares of Rs. 1000/-each appears to have been allegedly allotted to the 2nd Respondent. 5 shares have been allotted in favor of the 4th Respondent, In the Balance Sheet for the year ending 31.3.2004, the 2nd and 3rd Respondents have shown the paid-up capital of Rs. 1 lakh without reflecting the shares held by the Petitioners even while subscribing to the Memorandum of Association of the Company. It is pertinent to mention here that the 4lh Respondent addressed a letter dated 5.12.2006 and the same is extracted in Para (e) of the Petition. vi. The 2nd and 3rd Respondents are total strangers to the 1st Respondent Company and they have no semblance of right either as shareholders or as Directors of the Company. They are trespassers who ar....
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....ed a Police complaint in this regard against the 2nd and 3rd Respondents for committing forgery. 3. In view of the above allegations, the Petitioners prayed this Bench to grant the reliefs as below; (a)For a declaration that the 1st and 2nd Petitioners are the only Directors of the 1st Respondent Company in terms of Clause 14 of the Articles of Association; (b)Set aside the alleged allotment of shares in favor of the 2nd and 3rd Respondents and their associates, if any; (c)For permanent injunction, restraining the 2nd and 3rd Respondents from functioning as Directors of the 1st Respondent Company; (d)For a declaration that the 2nd and 3rd Respondents are neither shareholders nor Directors of the 1st Respondent Company; (e) For a declaration that the 2nd Respondent is not a Director of the 1st Respondent Company; (f)For such or other orders as this Hon'ble Bench may deem fit, just and proper in the circumstances of the case. 4. Shri A. Murali, learned Counsel for the Respondents 1 to 3 filed his detailed counter and submitted that the Company Petition is not maintainable either under law or on facts since they....
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....the Company. The Petitioners had transferred their shareholding in the Company on 5.4.1999 and also resigned from the Board of Directors. The 2nd, 3rd and 4 th Respondents were co-opted as Directors of the Company and Form No. 32 was filed with the Registrar of Companies depicting the aforesaid changes. It is relevant to point out that the said Form No. 3 2 was signed by the 2nd Petitioner. The copies of the Balance Sheets for the years 1994 to 1999 and 2001 to 2005 produced along with counter showed that the Company was not carrying on any business until the financial year up to 2005. The Annual Returns for the period, ended 1994 to 1998 and 2001 to 2005 have been produced which clearly showed that the Petitioners ceased to be shareholders and Directors of the Company from 1999 and thereafter, the Respondents are shown as shareholders and Directors of the Company. The Annual Returns for the year 2001 10 2004 have been signed by the 4th Respondent. 7. He submitted that after taking over control and management of the firm as well as the Company, the 2nd Respondent had taken steps for transfer of the license granted by the Excise Commissioner in favor of the firm. Pursuant to the ....
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....ries and that they also have no objection whatsoever for transfer of the same in any other name as the 2nd Respondent decides. 9. He submitted that in terms of an agreement dated 27.6.2005 entered into between M/s. Shashi Distilleries represented by the 2nd and 4th Respondent as Partners and Shashi Distilleries Pvt. Ltd. (the 1st Respondent Company) represented by the 2nd and 4th Respondent herein in their capacities as Directors, the business of the firm was transferred to the Company. Thereafter, the firm which was reconstituted by the 2nd and 4th Respondent after the retirement of the Petitioners herein was dissolved under a Deed of Dissolution dated 28.6.2005. 10. He further submitted that at a Meeting of the Board of Directors of the Company, resolutions were inter-alia passed with regard to the takeover of the business of the firm, appointment of the 2nd Respondent as the Managing Director of the Company., etc. A copy of the Minutes of the Meeting of the Board of Directors of the Company held on 27.6.2005, recording the presence of the Directors at the Meeting has also been produced. Accordingly, the business of the firm was taken over and continued by the Company. 1....
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....le containing the transfer deeds executed by the Petitioners selling and transferring their shareholdings to the 2nd and 4th Respondents. Copies of the inter office memo dated 09.09.2006 and 11.09.2006 issued by the 2nd Respondent in his capacity, as Managing Director is filed. 13. He submitted that the 4th Respondent has been attending the Board Meetings and is a party to the various decisions. The copy of the Minutes of the Board Meetings from 5.4.1999 till date together with relevant attendance registers are filed. The 4th Respondent to unsettle the Company and the 2nd Respondent sent a letter dated 20.12.2006 to City Union Bank, Bangalore to freeze the banking operations, but the bank did not act on the said letter after being satisfied with the reply of the Respondents dated 28.12.2006. 14. He submitted that the 2nd Respondent is the majority shareholder of the Company and also its Managing Director and thereby in management and also control of its affairs. The Company Petition has been obviously filed at the behest of the 4th Respondent and the Petitioners are merely his stooges, the petition lacks bona fides and on the face of it contains patent falsehoods an....
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....ies of complying with the statutory formalities; iv. With regard to averments in para 4(1), it is vehemently denied that Form No.32 has been filed with the forged signature of the 2nd Petitioner. The Form No.32 was handed over to the 1st Petitioner for signature and return, which the 1st Petitioner did and the Respondents had no reason to believe they were forged. A false story has been set up at this length of time only to lend colour to the baseless and false case of the Petitioners; v. With regard to the averments in para 4(b), it is vehemently denied that the 2nd and 4th Respondents forged/fabricated documents to be filed with the Registrar of Companies and that in order to cover up the fraud, the 4th Respondent has also been shown as Director is baseless and untenable. The Balance Sheet and Annual Returns produced clearly show that the 4th Respondent is clearly a party to all the transactions of the Company and that he is the signatory to those documents vi. With regard to the averments in para 4(c), it is submitted that they are being false or totally illogical and inconsistent with the documents on record and the sequence of events ....
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....nt to the reconstitution of the firm by the induction of the 2nd and 4th Respondents. It is submitted that the further issue of shares in favour of the 2nd and 3rd Respondents is with the full knowledge of the 4th Respondent and Minutes of the Board Meetings produced would clearly reflect the case. The question of showing the Petitioners as shareholders does not arise because they had already transferred their shareholding way back in the year 1999. The purported letter dated 5.12.2006 of the 4th Respondent is clearly a made-up document to further the collusive interest of the Petitioners and the 4th Respondent. It is extremely difficult to place on record that what the 4th Respondent is now stating in the said letter is true especially after the drag over the last 10 years besides it is rather strange that the Petitioners are now waking up and questioning the affairs of the Company, when admittedly they have not raised a voice for the last more than 10 years; ix. With regard to the averments in para 4(f), it is submitted that the allegation of forgery and fraud is blatantly false and baseless and the Respondents take strong exception to the same. , The all....
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....fraudulent and unsustainable. The allegation that steps initiated by the 2nd and 3rd Respondent like allotment of further shares, appointment of Directors at the Board Meeting are all in gross violation of the Articles of Association amounts to cheating of the Petitioners of their lawful rights of the shares of the Company, etc., are all false, baseless and untenable. It is submitted that the 2nd Respondent has. ever since the year 1997 been in the management and control of the Company and the 3rd Respondent is a validly appointed Director of the Company. The allegation that the 2nd and 3rd Respondent continued to operate the bank account of the Company under a fraudulent and forged Board resolution is again baseless and untenable. The loan credit facilities of the Company have been secured based on the personal guarantee and collateral security provided/offered by the 2nd Respondent and his wife. The Petitioners have no exposure whatsoever with regard to the banking operations or liabilities of the Company. It is further submitted that the Board of Directors consisting of 2nd, 3rd and 4th Respondents is competent to convene and hold Meetings and pass a valid resolution by a majori....
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.... the 2nd Respondent to come to terms. The Petitioners not being shareholder/ members are not entitled to maintain this Petition. The 2nd and 3rd Respondent are validly appointed Directors of the Company and that the 2nd Respondent has been validly appointed as Managing Director and thereby entitled to manage and control the affairs of the Company. The Petitioners are guilty of latches and they have had nothing to do with the Company for the last more than 8 to 10 years and the Petition is hopelessly barred by limitation. The Petitioners have not placed any facts to show continuous acts of oppression of the minority by the majority. To say the least they are not even minority, because they are not even shareholders of the Company. The Petition is mala fide, filed in terrorem, in collusion with the 4th Respondent to bring the 2nd Respondent to terms and hence prayed that the Petition be dismissed with exemplary costs in the interest of justice and equity. xv. The learned Counsel relied upon; the following citations: (a) [1977] 47 CC 151 - In the matter of Gu labrai Kalidas Naik & Others v Laxmidas Lallubhai Patel & Others; (b) [2007] CLJ 298 CLB APB Chennai....
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....sons, he submitted that it has been done only out of vengeance by the 2nd and 3rd Respondents, since he did not subscribe to their line of action and the various measures taken by them in the affairs of the Company. 17. The Petitioners filed their rejoinder to the counter and submitted as follows: (a)The Petitioners denied that they are not shareholders or members of the Company. They are the only allottees of the shares of the Company and the first and only Directors of the Company and had not allotted any shares to anyone thereafter. The Petitioners are holding more than 1/10th of the paid-up capital of the Company. Any further allotment of shares purported to have been made as alleged by the Respondents herein are challenged by these Petitioners in the present Petition. Therefore, the Petition is maintainable and the Respondents have not submitted any shred of evidence for the alleged transfer of shares from the Petitioners and the burden of proof is on the Respondents to show as to how they have any semblance of a claim on the Company; (b)The allegation that the authorised, issued, subscribed and paid-up share capital as evidenced by the latest Annual Retur....
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....business. (f)The 2nd Respondent having taken over the partnership firm and acquiring 55% stake therein are all false. The Form No. 32 showing the resignation of the Petitioners allegedly signed by the 2nd Petitioner is shown to be filed on 3.8.1999, whereas the Minutes dated 5.4.1999 speaks of resignation letters having been received from the Petitioners as early as on the date of the Meeting. The Respondents have annexed Annual Returns and Balance Sheets for the years 1994 to 1999 and 2001 to 2005, but have not produced Annual Returns for the year 1999 to 2001 conveniently and the copies of which admittedly are not available with the Registrar of Companies, Karnataka. These Respondents have manipulated the enure records and have forged the signatures of the Petitioners in order to allot shares in their favour, thereby claiming control over the affairs of the Company. (g)In reply to para 8 (e), the payment of Rs. 50 lakhs to the Petitioners upon retirement from the firm has already been explained in the earlier paragraphs. The Petitioners consent was only for the transfer of the licence specifically in favour of the Company and not in the name of any other person ....
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....ndents were entrusted with compliance of statutory formalities. (l) It is evident from the Advocate Commissioner's Report that neither the transfer deeds nor the resignation letters of the Petitioner were available at the Registered Office. In spite of the undertaking to produce it before the Company Law Board, the Respondents have neither produced the same nor annexed it as documents in support of their counter. The documents executed with the bank or the correspondence with the Excise Commissioner will not establish that the Respondents have been validly inducted into the Board of the Company. All these documents are pertaining to the partnership firm and not the Company. The Petitioners submit that the retirement from partnership firm cannot per se amount to transfer of shareholding and resignation of Director from the Company. The retirement which took place in 2004 cannot be the basis for the alleged resignation and transfer of shares in 1999. The Respondents have not even mentioned about the payment of any consideration to the Petitioners in 1999 which would show that there was indeed no transfer of shares by the Petitioners and no resignation from the Board of D....
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....igned certain documents not realising the full facts of the case. The 2nd Respondent has alleged that certain records including the resignation letters of the Petitioners were stolen by the 4th Respondent and lodged a Police complaint in this regard. It is submitted that the 4th Respondent holds a respectable position in the society by virtue of his experience and age and at no point of time would indulge in a criminal act that would damage his reputation and also adversely affect the status of the family members. Therefore, the allegation is baseless. The alleged increase in paid-up capital of the Company and allotment of 90 shares of Rs. 1000/- each in 2002-03 to the 2nd Respondent is concerned, there was no money inflow from the 2nd Respondent to the Company towards alleged allotment of shares. The allotment of 90 shares is said to have been made on 4.12.2002 to ensure compliance with the minimum paid up capital requirement as per the Act. The unsecured loan amount stood at Rs. 17.95 lakhs as on 31.3.1995 as per the Books of accounts of the Company and rose to Rs. 18 lakhs as on 31.3.2002. The allotment of 90 shares to the 2nd Respondent is not a valid allotment for the reason t....
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.... audited accounts for the year ending 31.3.2006. The 4th Respondent being a Director did not receive any notice for any of the Board Meetings which were alleged to have been held on various dates for which Minutes were submitted and sent to him. The resolutions passed at the Board Meetings are all invalid and illegal and should not be given effect to. The resolutions authorising appointment of 2nd Respondent as Managing Director at the Board Meeting alleged to have been held on 27.6.2005 and appointment of 3rd Respondent as Director at the Board Meeting alleged to have been held on 11.8.2005 and transfer of shares of 2nd Respondent in favour of 3rd Respondent and 4th Respondent and one Mr.R.Vijay Shankar at the Board Meeting alleged to have been held on 11.8.2005 become invalid as no quorum would have been present with the 2nd Respondent, he being alone present in those Meetings. In view of the above, the 41" Respondent prayed this Bench to allow the Petition. The learned Counsel for the 4th Respondent relied upon the following decisions: - (A) [2004] 121 CC 732 CLB Principal Bench - In the matter of Giridhargopal Gupta & Others v. A.A.R. Gee Board Mills Pvt. Ltd & Others ....
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.... by the parties, defeating the purpose and object of summary proceedings prescribed by Section 397 & 398. The complicated questions of facts and serious controversies involved in the present Petition necessitate a regular investigation and therefore, the contentious issues regarding the transfer of shares to Respondent No. 2 and Respondent No.4 and the genuineness of the signature of the 2nd Petitioner on the documents filed with Registrar of Companies cannot be decided in a summary jurisdiction by this Bench. The controversies can be tested and adjudicated upon only by a Civil Court whose jurisdiction in not barred. 23. In reply co para 2.1. the 2nd Respondent and the 4th Respondent had acquired shares from 1st Petitioner and 2nd Petitioner and a copy of Annual Return for the year 1999-2000 evidencing the aforesaid transfer which is produced herewith. The 2nd Respondent having acquired the shares from the 1st Petitioner who is an Indian citizen, obtaining the prior approval of RBI did not arise. As already explained in the counter, the 4th Respondent has surreptiously taken certain files containing important documents from the Company's Registered Office including a file co....
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.... the Directors of the Company, the 3rd Respondent had to resign as a Director and hence resigned on 1.4.2005. When the Board Meeting was held on 11.8.2005 the notice was given to the 4lh Respondent, who has acknowledged the receipt of the same, attended the Board Meeting and also signed the Attendance Register. The Issue of appointment of 3rd Respondent was considered again and was re-appointed as Additional Director with effect from 31.8.2005. All the relevant documents have been filed. 24. In reply to para 6, that the Form No.32 contains the forged signature of the 2 Petitioner, is denied. The 2nd Respondent has been validly appointed as the Additional Director on 15.2.1999. It is also denied that the 2nd Respondent was not re-appointed as the Director at the next Annual General Meeting. 25. In reply to para 7.1 that the allotment of 9900 shares to the 2nd and 4th Respondent was made without any basis and authority, is totally denied. When the business of the partnership firm was transferred to the Company, all the assets and liabilities of the firm stood transferred to the Company and the 2nd Respondent and 4th Respondent were allotted shares in proportion to their holding....
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....ble under Section 399 of the Companies Act, 1956? (g)What relief? Before proceeding to give the findings for the above issues, it is pertinent and essential to briefly set out the background position resulting in the filing of the petition, based on the records submitted by Counsel of the Petitioners as well as the Respondents as under: 29. The Company was incorporated on 09.12.1993 with the Petitioners as the subscribers to the Memorandum of Articles of Association as also the first Directors named in the Articles of Association. The main objects of the Company was to take over the business of the Petitioners' firm known as M/s. Shashi Distilleries (hereinafter referred to as the 'firm') as a going concern together with all assets and liabilities. The firm which initially consisted of the Petitioners as the Partners was subsequently reconstituted by inducting Respondent No.2 and Respondent No.4 as Partners. 30. The firm was subsequently reconstituted again and the Petitioners exited from the firm after accepting a consideration of Rs. 50 lakhs vide Reconstitution Deed dated 1.6.1997. Since the main object of the Company was to take over the business o....
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....e of the Petitioners since the Petitioner had received a sum of Rs. 50 lakhs towards exiting from the firm and hence did not have-any claim on the firm. 35. The learned Counsel for the Respondents produced certain document vide Memo dated 30.04.2009. As at S.No.3 of the aforesaid Memo which is at page 23, is a letter issued by Respondent No.4 to Respondent No.2, where he has sought certain important documents related to the Company. Respondent No.4, who claims that he is neither a Director nor a shareholder should ideally not have any interest in documents which he has sought in the letter. The Respondents produced some proceedings of the Excise Department along with the above Memo, where at page 33, will indicate that there is a record to show that the Petitioners have severed their relations with firm. From this, it would clearly establish that the Petitioners made their exit from the firm and the Company after receiving the consideration and filing of the present Company Petition ex-facie, is voltaface their decision, which is highly unwarranted. 36. It is the case of the Petitioners that they have not sold their shares and that they have not resigned as Directors. The fir....
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....tion and made it appear as if the Petitioners are no more Directors. It is not possible to believe the story as the Company of this nature could not have been entrusted to strangers particularly when the Petitioners and Respondents themselves were in the distillery business. No documents have been produced by the Petitioner to demonstrate to how the Company of such a nature was managed during the absence of the Petitioners and as to how a caretaker was allowed to run the business. 39. Respondent No.4 had attended several meetings of the Company as a Member/Director and though he has signed several Board Meeting Minutes and accepted Silting Fee towards the same, now claims that he is not well educated and taking advantage of the same, his signatures were obtained on the Company documents illegally, is to cover up his deeds. 40. The report of the Advocate Commissioner appointed during the proceedings also confirms that right from 05.04.1999, the Petitioners were not holding any shares at all. The Respondents also vehemently disputed the Petitioners status as shareholders and hence cannot maintain the Company Petition as required under Section 399 of the Companies Act, 1956 as h....
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.... part of the Petitioners regarding their exit from the firm would reveal that they had no role to play when it came to the transfer of the licence of the firm in the name of the Company. For the transfer of Excise licence from the firm to the Company, it is necessary that the Partners in the firm should also be the only shareholders/Directors of the Company. Respondents produced a copy of take over agreement dated 27.6.2005 evidencing the lake over of the assets of the firm, by the Company, which was signed by Respondents No.2 & 4, respectively. 45. Respondent No.4 in his additional counter has stated that the Annual Return for the years 2000-01, 2001-02, 2002-03, 2003-04 signed along with Respondent No.2 since the Respondent No.2 was in total control affairs of the Respondent No. 1 Company and he obtained the signatures of Respondent No.4 with a mala fide intention and misrepresented the facts and contents. The stand of Respondent No.4 is that he did not acquire any shares from the Petitioners and he did not sign any transfer deed requesting for transfer of shares as stipulated under Section 108 of the Act. The 1st counter which was filed by Respondent No.4 does not contain any....
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....a partnership deed dated 03.05.1993 for formation of a firm under the name and style M/s. Shashi Distilleres, for carrying on the business of manufacture, prepare, blend, distill, bottle malt and grained liquors of all types such as Whisky, Brandy, Rum, Gin, Vodka, Arrack, Beer and all other alcoholic substances. The Petitioners are only the two partners holding 50% stake each in profit and loss. Thereafter, the Petitioners incorporated a Private Limited Company in the name and style of M/s. Shashi. Distilleries Pvt. Ltd., on 09.12.1993 and the main objects of this Company as per Article "(A) 1b" of the Memorandum of Association was to take over the said firm as a going concern with all or any of assets & liabilities of the said business including pending contracts and service personnel. The Petitioners are the only subscribers to the Memorandum with 5 shares each. Though, the Company was incorporated, it was not carrying on its business till 2004, when the distillery licence standing in the name of partnership firm was transferred in its name. The partnership firm had commenced and was carrying out the business of distillery after obtaining the requisite licence from the Excise Co....
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....were shown as shareholders and Directors of the Company and they only signed the Annual Returns. The Annual Returns filed for the year 1999 shows that the Petitioners have transferred their shares to the Respondent No. 2 and Respondent No.4. The Annual Returns were signed by the Respondent No. 2 and Respondent No. 3. In the Annual Returns filed in 2000, Respondent No. 2, Respondent No. 3 and Respondent No. 4 were shown as shareholders and Directors of t he Company and were signed by Respondent No. 2 and Respondent No. 4, wherein the list of details of shares, Respondent No. 2 and Respondent No. 4 were shown as holding 5 shares each. In the Balance Sheet for the year 1999-2000 the share capital has been shown as Rs. 10 crores and the same also was signed by Respondent No.2 & Respondent No.4. In the Annual Returns filed thereafter for the years 2001 & 2002, the Respondents were shown as Directors of the Company and Respondent No.2 & Respondent No.4 were shown as shareholders of the Company. The Annual Return for the year 2003, the Respondent No.2 share holding pattern was shown as 95 and the Respondent No.4 shares was shown as 5 after increase & further allotment of shares in a Board....
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....is regard. The Respondent No.4 having been a signatory in the Returns filed with the ROC cannot take a volta facie to join the Petitioners. In these circumstances, the onus of proof lies on the part of the Petitioners only. This aspect not having been proved the claim of fabrication, forgery cannot be made as a ground for oppression and mismanagement of the affairs of the company. In view of the above, I hold that the Petitioners are ceased to be shareholders and Directors of the Company as on the date of the petition. Consequently, the claim of the Petitioners that they had convened Board meeting on 14.12.2006 in which eight persons were inducted as Directors of the Company and allotment of further shares cannot be sustained and any filings of returns thereto are set aside as null and void, 52. Issue No.(b): As per the narration given above, the Respondent No.2 and Respondent No.4 had joined as partners in the erstwhile firm which was reconstituted. It is also clear that the Respondent No.2 & Respondent No. 4 are parties to various documents filed with the Registrar of Companies and also to the Board Meetings, General Meetings and also signed the proceedings and attendance s he....
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.....L. G. Manu and Mr. Joseph Tharakan filed vakalat and also a memo stating that they have no objection for the conversion of the distillery licence of the firm M/s. Shashi Distilleries, Bangalore in favour of the Pvt. Ltd. Co., viz: M/s. Shashi Distilleries Pvt. Ltd., Bangalore. From these proceedings, it is clear that the Petitioners had no objection for the conversion of the distillery licence from the firm to the Company. Even prior to the said event the Petitioner No.2 had given a General Power of Attorney nominating the Petitioner No. 1 to act on his behalf for executing all or any of the deeds, acts, things. The Petitioner No.2 in the said General Power of Attorney had stated that he intends to retire from the firm in full and final settlement of claims, rights, share-in capital, profits and good will, share in the assets, etc., in the firm, from Mr. R. Jayavelu (Respondent No.2 herein) and or any other continuing partner and to give a valid receipt/discharge for the same which will be fully binding on him, along with his attorney Mr. P.L.G. Manu (Petitioner No. 1 herein). Upon the General Power of Attorney, the Petitioner No. 1 in an affidavit dated 8.10.2004 duly signed and ....
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.... M/s. Shashi Distilleries and to affix the common seal of the Company thereon. Pursuant to the said resolution, an agreement was executed among the partners wherein it was decided to convert its business of running the distillery business and bottling of liquor from the partnership firm into that of an incorporated Company i.e. 1st Respondent herein by formally effecting a takeover of business as a going concern to the Company. Subsequent to the signing of the said agreement, a resolution was passed to dissolve the said partnership firm M/s. Shashi Distilleries. In pursuance of the said resolution, a deed of dissolution of partnership was executed and signed on 28.6.2005 by and amongst the continuing Partners of the firm and resolved to dissolve the firm w.e.f. 30.06.2005. As stated supra, the Petitioners were only shareholders and Directors till 5.4.1999 in the Respondent No. 1 Company, but continued as partners in the firm till they retired, i.e. with effect from 8.10.2004 on receiving the consideration amount of Rs. 25 lakhs each. Thereafter, the Respondents are the only continuing partners of the firm. As stated supra, the Petitioners through their counsel have already addresse....
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..... 4 and also resigned from the Board of Directors. However, the Petitioners continued to be Partners in the partnership firm, but later they also retired from the firm on receiving the consideration of Rs. 25 lakhs each and expressed their no objection for conversion of the distillery licence to the Company and also informed their willingness for reconstituting the partnership linn by inducting Respondent No. 2 & Respondent No.4 as incoming partners. After the retirement, the partnership firm was reconstituted with Respondent No. 2 & Respondent No. 4 as the continuing partners of the firm and subsequently this partnership firm was also dissolved paving the way for the running of the distillery business by the Company. The Petitioners having not raised any objection all along from 1999 onwards in the affairs of the Company and 2004 onwards in the partnership firm, but alleging oppression & mismanagement and approaching this Bench in the year 2006 I find it is only a volta-facie the decisions already taken by them i.e exiting from the Company and retiring from the partnership firm. Hence the above facts clearly demonstrate that the Petitioners have approached this Bench after lapse o....
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.... of records made in the Petition. 55. Issue No.(e) ; The contentions of the Petitioners are that they hold the shares in the Company and they are the only shareholders of the Company. It is also contended that right from 1997, Petitioner No.2 was residing abroad and no transfer deed was signed by him for transferring any such holding. Simultaneously, they also contended that during 1999, the provision of FERA was applicable by which the permission of RBI was required for giving effect to any transfer of shares from non-resident to resident and no such approval of RBI was obtained for effective transfer and, therefore, the Respondent No.2 claimed that the Petitioner No.2 had transferred his shareholding is false and in violation of FERA. The claim of further allotment of shares as made out by Respondent Nos. 1 to 3 are false and based on fabricated documents and, therefore, the Petitioners are the only shareholders of the Company. The averments made in the Petition that the Petitioner No.2 left India in the year 1997 and the transfer of shares took place in the year 1999. The Petitioner No.2 contend that since he was abroad, any transfer of shares is not valid in his absence and ....
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....on of FERA was applicable by which the permission of RBI was required for giving effect to any transfer of shares from non-resident to resident and no such approval of RBI was obtained for effective transfer and, therefore, the Respondent No.2's claim that the Petitioner No. 2 had transferred his shareholding is false and in violation of FERA. The claim of further allotment of shares as made out by Respondent Nos. 1 to 3 are false and based on fabricated documents and, therefore, the Petitioners are the only shareholders of the Company. The Respondent No.4 also submitted that there were no meetings of Directors in 1999 approving any transfer of shares by the Petitioners to the Respondents and the Petitioners are the shareholders and Directors of the Company ever since the date of incorporation, the Respondent No.4 also contended that he had not bought any shares from the Petitioners and had not paid any consideration for the same. On perusal of the records submitted by the parties prove that the Respondent No. 4 had attenued various Board meetings and General Meetings and signed attendance sheets of various Board Meetings of the Company. The Respondent No.4 also signed vario....
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....of no assistance to the Petitioners. The learned Counsel relied upon the judgement of this Bench in In re: B.V. Reddy,(at page 118) wherein, this Bench is of the view that " furthermore, there is no scope under section 397/398 to agitate the grievances on account of diversion of the funds or business of the partnership firm to the Company, especially when such grievances are not in relation to the affairs of the Company It may be observed that in order to attract the provisions of section 397/398, one of the essential requirements as found necessary in Arun Kumar Mohta v. Ganesh Commercial Co, Ltd, [2006] 134 CC 500(CLB) is that the complaint must necessarily be in relation to the affairs of the Company. Any complaint against the second Respondent in the affairs of the partnership firm cannot be entertained by the Company Law Board. In the present case, there is no dispute that the Respondent No. 1 company was incorporated to take over as a going concern an existing business of the registered partnership firm. After the Petitioners exist from the Company, the license of the firm was transferred to the Company and in view of the transfer the partnership firm itself got dissolved. Th....
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....r section 10 of Companies Act. The jurisdiction of the Civil Court is not barred where disputed Questions of fact arise, for instance, where disputes relate to allegations of mis-representation, fraud, failure to furnish details, dishonest or malafide intention, suppression of material facts, removal of plaintiff; fr om position of director by resolution etc. Disputes which can be decided by Civil Court by letting in oral and documentary evidence." I do follow the above judgment which is squarely applicable to the facts of the present case. (iii) Shri P.H. Arvindh Pandian, learned Counsel relied upon the judgements as stated supra are not relevant to the present facts of the case. Where the judgements relied upon by the learned Counsel are in relation to removal of Directors, by invoking the provisions of the Companies Act. In the present case, the Petitioners themselves resigned and quit the Company. Hence, the judgements are not applicable to the present facts of the case. The Petitioners have not produced any share certificates to demonstrate that they are members of the Company as on the date of Petition. The Petitioners have not shown copy of Register of Members of....