TaxTMI 
TaxTMI 
2004 (10) TMI 619
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.... of respondent No. 1 company is to purchase, acquired, sell, dispose of and deal movable and immovable of all kinds etc. 2. The Learned Counsel for the petitioner submitted that the petitioners are shareholders of the respondent No. 1 company holding together a total of 4123 shares constituting 51,53% of the fully paid up capital of the respondent company and are entitled to file this petition under Section 397/398 of the Companies Act, 1956. The petitioner No. 1 is one of the directors of the respondent No. 1 company holding 251 shares, the petitioner No. 2 holds 655 shares and petitioner No. 3 holds 3250 shares. The respondent No. 1 company is having its Regd. Office at Mumbai and the respondent No. 2 is the cousin brother of petitioner No. 1. The respondent No. 3 is the wife of respondent No. 2. The respondent No. 6 is the brother of petitioner No. 1. The respondent No. 4 is the son of respondent No. 6. The respondent No. 5 is a company owned and managed by respondent No. 6 The respondent No. 7 is the petitioner's uncle (father's brother). The respondent No. 9 is the son of respondent No. 7. The respondent No. 8 is a trust under the management and control of responden....
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.... needs to be set aside by this Board being bad, illegal and unlawful as no notice of any Board Meeting approving reclassification of preference shares (equity shares was received by the petitioners who were majority shareholders.) The inspection taken on 21.12.98 of the respondent No. 1 company revealed that after 10.3.98, no Board Meeting was held. Similarly, no notice of alleged Annual General Meeting purported to be held on 30.9.98 was received by petitioners and unlawful allotment of 1,500 shares and reclassification unused 2000 shares was approved in this meeting. No special resolution amending the Memorandum and Articles of Association would have been passed without the consult of petitioner who hold 53.53% of the paid up share capital of the respondent No. 1 company. Even ordinary resolution for reclassification of capital under Section 106 of the Companies Act, 1956 cannot be passed without the consent of the petitioners who are the majority shareholders. No annual general meetings were held and only certified copy of the resolution attached to Form No. 23 was available and no minutes of the meeting allegedly held on 30.9.98 were available when the inspection was undertaken....
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.... to the petitioner including that of AGM of 30.9.1998 and the Board Meeting held on 20.11.1998. No proof of services has been given. The forms filed before ROC are dated 2.12.1998 whereas they were filed on 18.12.98. Similarly, no settlement agreement relating to the respondent had been placed on record by the respondent. Accordingly the meetings held without notices are bad in law and void Under Sections 285, 286 and 287 of the Companies Act, 1956. An allotment of shares at a meeting on which, notice was not given to all the directors, which had the effect of converting the majority shareholder into minority is null and void. The Learned Counsel relied on the following judgement to press above points; a. Parameshwari Prasad Gupta v. Union of India (1974 (44) CC1), wherein it is held that the meetings of the Board of Directors, of which notice had not been given to one of the director and at which the directors was not present, that meeting of the Board of Directors was held invalid. b. Kuldip Singh Dhillon v. Paragaon Utility Financiers Pvt. Ltd. (l988(64) CC 19 (Petition & Hon'ble Supreme Court), wherein it is held that the resolution passed by Board of Dire....
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....ever arrived between the parties which are in dispute in CP No. 21/02 and CP No. 11/03 before mis Board. The dispute in the present petition arose from the illegal, unlawful and oppressive action of the respondents. The Learned Counsel for petitioner denied that the petitioner has ever agreed that the control of respondent No. 1 company would remain with respondent No. 7 and its group are that the reclassification of shares was done as alleged by the respondents. The petitioners have also denied that there was an agreement that the petitioner will give and transfer shares of Simplex Engg. and Foundry Works P. Ltd to the group of respondent No. 7. The settlement of other companies of the group has no connection whatsoever with the present position and is totally irrelevant and there was no oral or written agreement in regard to these companies. The respondent No. 2 to 7 are guilty of conspiring with each other and deliberately failed and neglected to give notices of Board Meetings, AGM and EGM etc to the petitioner. These acts and omissions of the respondents and particularly of respondent No. 7 constitute an act of oppression and mismanagement of the company. There learned counsel ....
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....Bombay where he was shown present but he was in Bhillai. Rest of the Board Meetings AGM/EGM were not attended by the petitioner as he has not served nor received any notice for the same. It was also submitted by the Learned Counsel for the petitioner that Minute book of the Board Meeting had been fabricated and additions in the Minutes have been done which is quite clear from the perusal of the relevant pages of the paper book filed on 9.2.2004 at the time of arguments. It was also mentioned that the attendance register was not produced at the time of inspection by the petitioner. The respondents be restrained from acting as directors of the company. The allotment of 1500 equity shares of Rs. 100 to M/s Complex Trading Ltd be declared as null and void. The delinquent be put to terms of damages for their illegal and unlawful indulgence in the affairs of the company. Relying on the judgement of the Hon'ble Supreme Court in the matter Bennet Paulman v. Union of India (1977) (47) CC 92 MUMBAI) and powers conferred under Section 402 of the Companies Act, 1956 and in the interest of justice it was prayed that till the final order if not in the favour of the petitioner, the status-quo....
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....ns 10. The Learned Counsel for respondent further submitted that it will be observed that the petition and all the interim applications are frivolous and nothing but an attempt to extract some additional benefits to which the petitioners are not entitled. The petitioners are wrongfully objecting to reclassification and subsequent allotment of shares which the petitioner No. 1 himself had done earlier. As far as back on 20.10.84 the respondent No. 1 company was incorporated with an authorized share capital of Rs. 2 lakhs and the promoters and shareholders of respondent No. 1 company were Heralal B. Shall, Arvind K. Shah, Moolchand R. Shah and Naveen R. Shah at the time of incorporation of the company, the issued and paid up share capital was four shares of Rs. l00/- each allotted to these four promoters. The day to day affairs of respondent No. 1 company including the legal matters and various aspects relating to statutory compliance of the respondent company were being handled and attended to substantially by petitioner No. 1 who has shifted his residence to Mumbai in 1993. The other three directors of respondent No. 1 company were residing in Bhillai now the State of Chattisgar....
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....ification of the shares, a majority of the increased share capital was allotted to Navin Shah (HUF) of which the petitioner No. 1 is the Karta and Manager. It was thus be observed that in fact the petitioner No. 1 who himself was major beneficiary of the aforesaid decisions. The petitioner No. 1 has manipulated their affairs to give upper qued majority in the shareholdings to his group by allotting 3250 shares on 7.10.95 to petitioner N0.3 being the HUF of petitioner No. 1. The petitioner No. 1 thereafter transfer the said 3250 shares from the name of petitioner No. 3 to the name of petitioner No. 2 thereby giving the petitioner No. 1 and 2 together a consolidated shareholding of 55.9% in the total authorized share capital of the company. 11. The counsel for respondent also submitted that pursuant to the decision dated 30.9.1998 of the General Body Meeting and in the normal course of its business, the respondent company filed the necessary prescribed forms with the Registrar of Companies alongwith necessary late filing fee. The petitioner No. 1 had been regularly attending the office of the respondent company and involving himself in the affairs and business of the company and h....
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.... name of petitioner No. 2 being the wife of petitioner No. 1. The allotted by petitioner No. 1 to petitioner No. 3 were in a manner i.e. identical to the decision taken by the respondent company on 20.11.98. The petitioner has not brought out these facts in a family run concern. It is denied that the total shareholding of the petitioner in the respondent No. 1 company allegedly constitutes 51.53% of the total fully paid up share capital of respondent No. 1 company and the petitioners have committed forgery on oath. Respondent No. 1 company is a family run concern and at all times has been functioning as such and that the petitioner No. 1, being a family member is also actively involved in the day to day affairs of the respondent company. On account of internal family disputes that had been raised by the petitioners with rest of the family members who are shareholders in the respondent company, the petitioners are now seeking to cook up a false and untrue story by invoking and challenging the decision taken as far as back in 1998 which was in the presence and with full knowledge and consent of the petitioners for the past several years. In order to settle this course in the familly ....
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....ed that it is pertinent to note that since the respondent company is a family run concern, the notices of the meetings of the respondent company had been served by hand delivery and had been the practice for the past several decades and which have even followed by the petitioner No. 1 himself. As such, the notice of 14th Annual General Meeting of the respondent company was duly and validly served and the petitioner was present in the said meeting. It is denied that the resolution passed by the respondent company in its 14th Annual General Meeting held on 30.9.98 are bad in law or that reliance cannot be placed on the same. It was further submitted that mere was no malafide intention or illegality in the conversion of the share capital of the respondent company, which was done in accordance with the provisions of law and in the very knowledge of the petitioners. The petitioners never opted for the shares of the respondent company when they were well aware of the decisions taken on 30.9.98 and the petitioners have suddenly waken up after four years and are seeking to challenge and overturn a decision taken with the knowledge of the petitioners as far back as 1998. The relevant forms ....
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....nts filed CA No. 254/04 on 13.9.04 when the judgement was being written. The respondent submitted that the petitioner had filed an affidavit dated 22.7.04 in rejoinder to the counter affidavit filed by respondent No. 7, who is also the Chairman and Director of the respondent company. Since the said affidavit disclosed fresh facts and documents, it so transpired that the petitioner, on their own showing, had been misleading this Board by filing false affidavit on oath and suppressing the material facts. The affidavit under reply has disclosed astonishing facts making it imperative for respondent to file this affidavit. It has been contention of the respondents all along that books both statutory and otherwise of the respondent company were being looked after by petitioner No. 1 and the same were in possession of the petitioner. It is submitted that some statutory documents and records of the company were still with the petitioner illegally. The fact has now become true from the documents now filed by the petitioners alongwith their affidavit dated 22.7.2004 which includes the share transfer form which shows transfer of 805 shares by Mrs. Chandri and Shah petitioner No. 2 wife of pet....
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....e of classification of the capital and the issue of shares to the company and owned and controlled by them has reduced the petitioners shareholding from majority of 51.53% to minority of 42.75% without giving the notice and agenda to the petitioner of the concerned Board Meeting and the meeting of the shareholders. The petitioners have argued that the inspection taken by them on 21.12.98 revealed that after 10.3.98, no Board Meeting was held by the Board of Directors of the company. 21. It appears that the Board Meetings were held on 01.09.98 and 20.11.98 and a resolution of allotment of 1500 equity shares was made. This resolution of allotment of 1500 equity shares as well as amendment to the memorandum and articles of association was approved in the AGM on 30.09.98 and in the Board Meeting held on 01.09.98 and 20.11.98. The petitioner has filed affidavit with certified true copy of the passport duly notarized and submitted that he was out of India traveling from 11.8.1998 to 4.9.1998 and he could not have attended the Board Meeting held on 1.9.98 when he had been shown present in this meeting in the Minutes. Accordingly, he has been shown present for AGM on 30.9.98, 30.9.99 an....