TaxTMI 
TaxTMI 
2010 (5) TMI 920
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.... est, null & void and it is patently illegal and has no effect whatsoever; (b) To set aside the allotment of 22,000 shares to the Respondent No. 2 and 18000 shares to Respondent No. 3 made on 1/9/07 as null & void and not binding on the company and the Petitioner; (c) To cancel the transfer of 100 shares held by the Respondent No. 2 to Respondent No. 3 who is the wife of Respondent No. 2 and rectify the register of members by restoring the name of Respondent No. 2 as member; (d) The appointment of the Respondent No. 3 as Director with effect from 20.3.07 as null and void; (e) To declare that the removal of the Respondent No. 4 Director on behalf of the Petitioner by the Petitioner by Resolution allegedly passed at EOGM held on 18/12/07 as null and void and reinstating him as a Director of the Respondent Company. (f) To award compensation for the wrongful removal as Director to the Respondent No. 4; 2. The facts in brief giving rise to filing of the present petition, as set out, therein are as follows: 2.1 The Petitioner is a Company named as M/s. Unicom Skytech Ltd. registered under the Companies Act on 7/9/1992. 2.2....
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....ithout serving any notice for calling, convening and holding the impugned Board Meeting/EOGM purportedly held on 18/12/2007, whereat an illegal Resolution of his removal was passed ex-parte in his absence without following the provisions of Section 284(2) of the Companies Act, 1956 with ulterior objective of seeking undue advantage and to have entire control over the affairs of the Company. 3. Based on the above allegations, the Petitioner has filed the present petition to bring an end of the alleged acts of oppression and mismanagement by passing appropriate orders, directions and reliefs in exercise of rights and powers conferred upon the CLB, by virtue of provisions contained in Section 402 of the Companies Act, 1956. 4. The Respondent Nos. 1 to 3 appeared and filed their written statement/reply. The Answering Respondents have denied all the allegations relating to alleged acts of oppression and mismanagement in the affairs as set out in the Company Petition and they have justified all the acts stating that the meetings under challenge were held in accordance with the provisions of law with due notice to the Petitioner and the resolutions were validly passed in the interes....
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....estrained from using, issuing, allotting any shares without leave of the Bench until further orders. 8. It is submitted that admittedly, on the said date, the admitted shareholding pattern of the Respondent No. 1 Company was as under:- 9. It is the case of the Petitioner, that when he took the inspection of the records of the Respondent No. 1 Company on 12/12/2013, the Petitioner was shocked to find that some documents were filed by the Respondent Nos. 2 and 3 in the month of October and November, 2013 containing false information thereby reducing the shareholding of the Petitioner from 9500 to zero. To prove this fact, the Petitioner has referred the documents filed alongwith the Application. 10. The Ld. PCS for the Petitioner therefore submits that the Answering Respondents has increased their shareholding by reducing the shareholding of the Petitioner to zero, they have violated the CLB order dated 5/03/2010 and thereby guilty of committing the contempt of court. Hence this application. 11. In reply, the Answering Respondents have stated that due to an inadvertent and bona fide error, the incorrect figure showing the shareholding of the Petitioner as zero in the Annu....
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....ard, New Delhi, rejected the said application on the technical ground that the reliefs sought for are pertaining to Kaizer Finvest Pvt. Ltd. which are not Respondents to petition C.P. No. 91 of 2006 pending in Principal Bench and there is no application to implead them. Thereafter, the present petition was filed on 10/12/2009, which is within the period of 3 years from 4/1/2008 when the acts of oppression and mismanagement came to the notice of the Petitioner for the first time. It is, therefore, contended that there is no delay in filing the petition. To support his contention, the Ld. Counsel for the Petitioner has referred to decision in the case of Harish Kumar Berry Vs. S. Berry's Automotive Udyog P. Ltd. (2005) 64 CLA 274 (Company Law Board), wherein it has been held that the provisions of Limitation Act are not applicable to proceedings before the Company Law Board. It was further held that the acts of oppression and Mismanagement as alleged in the petition are having continuous effect and therefore, the question of the petition being time barred does not arise. 16. Having given my serious thoughts to the contentions advanced by the rival Parties, with respect to the ....
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....ples of res-judicata and estoppel and is liable to be rejected on this score. 19. On the other side, the Ld. PCS appearing for the Petitioner submits that the Answering Respondents are trying to mislead this Bench, by misinterpreting the provisions of Section 167 of the Act. According to him, the earlier petition filed by the Petitioner under Section 167 of the Act was a petition for direction to the Company by the CLB for holding its AGM. He contended that under Section 167 of the Act, the CLB had no power to enter into the adjudication of the validity of the AGM and therefore, the order passed by the CLB in the said Petition filed under Section 167 of the Act and the order confirmed by the Hon'ble High Court has no bearing on this petition and therefore, it was argued that this objection too is liable to be rejected being devoid of merits. 20. I have considered the rival contentions referred to hereinabove. However, I am not convinced with the submission advanced by the Ld. Counsel for the Answering Respondents that in view of the findings rendered by the Principal Bench, Delhi in its Judgment dated 24/04/2009 passed in the C.P. No. 18 of 2007 filed under Section 167 to....
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....mbay. I am also of the view that the decision referred to by the Ld. Counsel for the Answering Respondents in the case of Bhanu Kumar Jain vs. Archana Kumar and Anr. is not applicable having regard to the facts of this case. In the said decision, the facts are totally different from the facts of the case in hand. This objection is accordingly rejected. 22. The Ld. Counsel appearing for the Answering Respondents next submitted that the Respondent No. 4 is not a shareholder of the Respondent No. 1 Company. According to him, he was merely a Director. According to the Ld. Counsel for the Answering Respondents any grievance in respect of Directorship of the Respondent No. 4 a petition under Sections 397 and 398 of the Act cannot be entertained as held in several decisions and therefore, the challenge of the Petitioner for his removal as a Director is patently untenable. It is, therefore, argued that the Petition suffers from mis-joinder of the Parties and is liable to be dismissed on this ground also. 23. Responding to the above contention, it was argued by the Ld. PCS for the Petitioner that it was for the Petitioner Company to challenge the issue of mis-joinder of the Parties an....
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....appearing for the Answering Respondents is that the Petitioner has not filed any proper authority on behalf of the Petitioner to file the present petition. It is submitted that a company being a juristic person cannot act by itself and is required to act through its Board. The Ld. Counsel submits that as per settled proposition of law, no individual Director unless lawfully authorized by the Board can act on behalf of the company and bind the Company for his acts. He further submits that the Respondent No. 4 has filed the present Company Petition on behalf of the Petitioner Company. Referring the Affidavit filed in support of the Petition by the Respondent No. 4, it is pointed out that it is nowhere stated or disclosed that the Respondent No. 4 was authorized by the Board of Directors of the Petitioner Company and he was as such competent to file the present Company Petition against the Respondents on behalf of the Petitioner. The Ld. Counsel further pointed out that the Respondent No. 4, Mr. Omprakash Jhunjhunwala in para 1 of the said Affidavit has simply mentioned that he has filed the present petition as a Director of the Petitioner Company. Placing reliance upon a decision ren....
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....he alleged Proof of Service dated 31/7/2009, i.e. the alleged receipt of Speed Post dated 31/7/2009 does not have a name of the sender to prove that the alleged document is sent by the Petitioner Company. e) The Proof of Service dated 31/7/2009 shows that the Notice dated 30/7/2009 has been sent to only one Director and not to all the three Directors of the Petitioner Company. 28. The Ld. Counsel for the Answering Respondents further contends that the level of manipulation and fabrication of documents by the Petitioner Company is evident from the fact that in its reply to the Company Application No. 131 of 2013 in renumbered Company Petition No. 44 of 2013 titled as Prabhat Jhunjhunwala Vs. Unicom Skytech Ltd. the Petitioner Company has used postal receipts of another sister company M/s. Unicom Appliances Ltd. as proof of service for the Petitioner Company, which can be seen at page No. 111 of Affidavit for disclosure of additional documents filed on 4/12/2013. 29. Based on the above discrepancies, the Ld. Counsel for the Answering Respondents submitted that the Petitioner Company has fabricated the Notice and Proof of service as well as the resolution allegedly pass....
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....provisions of law to file the present petition and hence the objection is liable to be rejected being not tenable. 33. The next point argued by the Ld. Counsel for the Answering Respondents is that the Respondent No. 4 has fabricated the documents and records of the Petitioner Company to suit his convenience and claims. To support his contention, he invited my attention to an e-mail dated 9/06/2007 and submitted that this e-mail is one of the concrete, full proof conclusive and irrefutable evidence to the allegation made by the Petitioner against the Respondent No. 4 of manipulating and fabricating the documents by him for the following reasons:- a) The Respondent No. 2 had filed Company Petition No. 91 of 2006 (since renumbered as C.P. No. 44/2013 and pending before this Hon'ble Bench) titled as Prabhat Jhunjhunwala Vs. Unicom Skytech Ltd. & Anr. wherein M/s. Chandrasekaran Associates was representing Unicom Skytech Ltd. (the Respondent therein and the Petitioner Company herein) in the above mentioned company petition at Principal Bench CLB Delhi and Mr. N.L. Bhatia, Practicing Company Secretary who was representing the Petitioner Company in CLB Mumbai Bench, Mumba....
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....and fair view; that to provide attendance sheet of all, for the Board Meetings and Shareholders meeting. The Ld. Counsel further pointed out that through the said e-mail, it was also advised to take the opinion of Mr. N.L. Bhatia for preparations of the draft minutes and send it to him for the vetting at an early period as Dr. Chandrasekaran was going out of station. 35. Bringing all the aforesaid facts to the notice of the Bench, emerging from the reading the said correspondences, it was argued by Mr. Zal that the Respondent No. 4 has always been indulging in the manipulation and fabrication of the records as an afterthought for the sake of creating tailor made record to suit his interest and therefore, such records cannot be considered as reliable evidence in respect of the alleged meeting dated 10/08/2009. 36. In addition to the above, the Ld. Counsel for the Answering Respondents has attracted my attention to prove the allegation of manipulation and fabrication of record by showing various other documents filed by the Petitioner alongwith Affidavit-in-reply to the Company Application filed in the Company Petition No. 44 of 2013 wherein the Petitioner Company is the Respon....
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....e has filed a criminal complaint against them which is pending in a Criminal Court. The Ld. PCS, therefore, submits that there is no link in the email and the disputed facts of the case in hand, and therefore, the Answering Respondents are not entitled to take any benefit out of it. 39. I have considered the rival submissions and also examined the documents referred to and relied upon by the Ld. Counsel appearing for the Answering Respondents. From a close scrutiny of the notice dated 30/07/2009 purportedly sent by the Petitioner Company to the Respondent No. 2 through R.P.A.D. and U.P.C. for calling, convening and holding the Board Meeting on 10/08/2009, it is proved that the said notice and the proof of service are forged and fabricated as contended by the Ld. Counsel for the Answering Respondents. The discrepancies pointed out by the Ld. Counsel for the Answering Respondents in both the documents makes doubtful the service of the said notice upon the Answering Respondent No. 2. As stated herein before in the preceding paras, in one notice the words U.P.C/R.P.A.D. are appearing while in other notice, the same is missing. Further, the "font size" and the total length of the wri....
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.... of the Ld. Counsel for the Answering Respondents that the correspondence exchanged between the Respondent No. 4 with his Company Secretary through e-mail dated 9/6/2007 is a concrete full proof conclusive and irrefutable evidence to corroborate the fact that the Petitioner has been indulging in manipulating the minutes of the meeting. This is further evident from the perusal of the copy of minutes filed with respect to the AGM purportedly held by the Company in the continuous 7 years in which the mistakes occurred in the copy of the first meeting has been repeated throughout in the copy of the minutes filed for subsequent 7 years of the AGM purportedly held by the Company. This, itself shows that all these documents have been concocted by the Petitioner and the Respondent No. 4 in one go to create false evidence in support of the Petitioner's case. I also subscribe the view of the Ld. Counsel for the Answering Respondents that the purported resolution passed in the alleged Board Meeting held on 10/08/2009 does not specifically authorize the Respondent No. 4 to institute the instant Company Petition on behalf of the Petitioner Company. The Ld. PCS appearing for the Petitioner C....
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....al and administrative affairs of the Petitioner Company. In order to take control of the Petitioner Company, on 28/4/1999, the Respondent No. 4 without knowledge and consent of all directors filed a Form No. 2 showing allotment of additional 50,000 equity shares of the Petitioner Company allotting 39,000 equity shares (i.e. 78% shares) to himself and his wife and allotting only 11,000 shares to Respondent No. 2 (i.e. 22% shares) only. When the matter came to the notice of the Respondent No. 2 in January, 2002 and other family members, the Respondent No. 4 transferred 14,000 equity shares of the Petitioner Company to the Respondent No. 2. 46. According to the Ld. Counsel for the Answering Respondents, once again in January, 2006, in order to take control of the Petitioner Company, the Respondent No. 4 filed a false Criminal Complaint against the Respondent No. 2 stating that the Respondent No. 2 has cheated the Petitioner Company of Rs. 1,03,79,784/- by transferring the said amount in account of M/s. Apna Foods Pvt. Ltd. and took control of the Company by debarring the Respondent No. 2 from day to day affairs of the Petitioner Company. 47. Mr. Zal, Ld. Counsel submitted that t....
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.... the Respondent No. 4 dishonestly and fraudulently received huge amounts from Mr. Ashok Rao from his personal accounts, thereby committing misappropriation of the funds. In addition he has also committed theft by breaking open the cabin of the Respondent No. 2 and stole various company records of the company. (b) Criminal Complaint No. 15/I & R/2008 (21/Misc/2008) in Metropolitan Magistrate's 18th Court at Girgaum, Mumbai, in which the charge against the Respondent No. 4 is that Mr. Ashok Rao and Sanjay Shetty in connivance with the Respondent No. 4 have stored unauthorized material in the godown of the Respondent No. 1 Company. (c) Criminal Complaint No. 69/SW/2008 in the Metropolitan Magistrate's 18th Court at Girgaum, Mumbai, in which the charge framed against the Respondent No. 4 is that he dishonestly forged cheque bearing No. 048896 claiming himself Director of the company and withdrew the amount maintained with the Indian Bank without any proper authority. (d) Criminal Complaint No. 79/SW/2008 in which he has been charged for committing forgery with dishonest and fraudulent intention by issuing cheque No. 048894 and withdrawing a sum of Rs.....
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....rring the decisions in the case of Mrs. Rashmi Sheth vs. Till Soil Farms Pvt. Ltd. Ors. (1992) 9 CLA 89 (CLB), it was argued that the reliefs sought for by the Petitioner on the ground of oppression and mismanagement in the present petition is much wider in scope and therefore, the decision in the Courts in the criminal cases for some relief does not bar the right of the Petitioner to seek these reliefs. 53. I have considered the rival contentions. There is no dispute with the law as laid down in the case of Mrs. Rashmi Sheth (Supra) wherein it has been held that the decisions of the courts in the criminal cases for some reliefs does not bar the right of the Petitioner to seek reliefs under Section 397/398 of the Act on the ground of acts of oppression and mismanagement. However, here the question is as to whether it was the duty of the Petitioner to disclose and produce all the relevant facts and documents on record alongwith the petition and whether the Petitioner has suppressed the facts sand documents deliberately. Further, a pertinent question that arise for examination by the CLB is as to the conduct and action of Respondent No. 4, which according to the Respondents are pa....
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....herein cannot be cured nor the lacuna filled up by other evidence oral or documentary. (See In re Bengal Luxmi Cotton Mills Ltd. (1965) 35 Comp Cas 187 (Cal))." (ii) S.P. Chengalvaraya Naidu vs. Jagannath AIR 1994 SC 853, the Hon'ble Supreme Court has held: A litigant, who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court as well as on the opposite Party." (Emphasis supplied.) (iii) The above principle has been reiterated in a recent judgment of the Supreme Court in the case of Dalip Singh v. State of U.P. (2010) 2 SCC 114 wherein it is inter alia held: "1. ... it is now well established that a litigant, who attempts to pollute the stream of justice or who touches the pure fountain of justice with tainted hands, is not entitled to any relief, interim or final." 55. In facts and circumstances mentioned above, I have come to the conclusion that the Petitioner has suppressed with mala fide intention material and vital facts and documents del....
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....onal Director was filed on 23/11/2007 by the Respondent No. 2 after the delay of 7 months for which no convincing explanation has been offered by the Answering Respondents for such inordinate delay. It is, therefore, contended that the said transfer of shares has been made illegally with an oblique motive to ensure presence of quorum in the General Body Meeting and marginalization of the Petitioner in such general meetings and therefore the same is void, non-est and constitutes an act of oppression towards the Petitioner Company and thus, liable to be set aside. 58. The Ld. PCS representing the Petitioner has also challenged the appointment of Respondent No. 3 as invalid, ultra-vires and non-est on the ground that no notice was served upon the Petitioner, in respect of the meeting held by the Company where she was allegedly appointed as a director. The Ld. PCS has further pointed out the following major discrepancies in the forms/returns filed by the Respondents to substantiate the allegations of the Petitioner that the documents filed in relation to the appointment of the Respondent No. 3 as a Director are fabricated and in fact she was appointed at the back of the Petitioner w....
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....ever served upon the Petitioner. The Ld. Counsel submits that from the perusal of the minutes of the EOGM purportedly held on 20/08/2007, it may be seen that the minutes do not indicate that any resolution was passed for increase in the share capital. Further, inviting my attention to the documents filed by the Answering Respondents, the Ld. Counsel submits that the following discrepancies may be seen in the records/documents which substantiate the allegations levelled by the Petitioner with respect to the fabrication of record. (a) The Respondents have enclosed a copy of under postal certificate (U.P.C.) dated 20/07/2007 for Board Meeting allegedly held on 27/07/2007 as Annexure 'E' of their Sur-Rejoinder. However, the Respondents did not enclose the copy of the notice. The said U.P.C. also has been enclosed with their Application dated 15/04/2013. Originally, it was not enclosed with their said Reply filed on 13/05/2010. From the said notice, it is apparent that there was no item in the agenda to be passed at the EOGM that was to be held on 20/08/2007 for appointment of the Respondent No. 3 as regular director. (b) To show the service of notice upon the ....
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....0] 95 CLA 415 (CLB) - 61. In addition to the above, referring the aforesaid case laws, it was argued that once increase in the share capital of the Company is held to be invalid, subsequent allotment of shares will also be invalid as held in the case of Martin Castelino (Supra) and T.V. Raju Naidu (supra). 62. The next accusation made by the Petitioner alleging the act of oppression and mismanagement in the affairs of the Company is the illegal allotment of 40,000 shares of Rs. 10/- each exclusively to the Respondent No. 2 and 3 resulting in reducing the shareholding of the Petitioner from 95% to 19% with effect from 1/09/2007. The Ld. Counsel submits that no notice for the Board meeting allegedly held on 1/09/2007 whereat the allotment of shares was purportedly made was given to the Respondent No. 4. The Ld. Counsel further pointed out the discrepancies in the documents filed by the Respondents in this regard as follows:- (a) The Respondents have enclosed copy of notice with U.P.C. dated 13/08/2007 for Board Meeting allegedly held on 20/08/2007 to consider the increase in Paid-up Capital of the Application dated 15/04/2013 by Respondents. In the said U.P.C., there i....
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....dents filed Form No. 32 showing the removal of the Respondent No. 4 as a Director w.e.f. 18/12/2007. According to him, the Respondents have not served any special notice under Section 284 of the Act, upon the Respondent No. 4. Further, no notice of EOGM purportedly held on 18/12/2007 was ever served upon the Petitioner. Besides this, Respondent No. 4 did not receive any notice for Board Meeting at which special notice was considered and notice for EOGM on 18/12/2007 was approved. The Ld. Counsel again pointed out the discrepancies in the documents filed by the Respondents to substantiate his aforesaid allegations as follows:- (i) In the Resolution for removal of Respondent No. 4 as director enclosed alongwith the Petition, only consent to remove Respondent No. 4 has been given and not that he has been removed. (ii) It is the case of the Answering Respondents that they had served the notice through U.P.C. upon the Respondent No. 4, whereas Respondent No. 4 did not receive the Special Notice under Section 284(2) dated 01/12/2007. (iii) The alleged Special Notice has been forwarded by the Answering Respondents on 03/12/2007 without consideration of the same/....
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....sel, all the aforesaid decisions were taken by adopting due course of law and statutory returns have been filed in accordance with the provisions of the companies Act, 1956 and therefore, these actions do not amount as an acts of oppression and mismanagement in the affairs of the Respondent No. 1 Company. 68. From the aforesaid contentions, the question that arises for my consideration as to whether the Respondent No. 4 in the capacity of a Director of the Petitioner Company was served with a valid notice in respect of the Board Meetings/EOGMs under challenge. Admittedly, the notice was served upon the Petitioner through U.P.C. The Petitioner Company through Respondent No. 4 has categorically denied having received such notice. As held in the case of M.S. Madhusoodhanan (Supra), it is a trite law that the notice sent under U.P.C. to a party cannot be said as valid service unless the sender of the notice comes forward with reliable corroborative evidence to prove the fact that the notice was delivered to the addressee. In my view, in this case, the Respondents have failed to produce any reliable evidence to prove the service of notice upon the Petitioner as required by law. No di....