TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 547
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....s no.2 to 8 as null and void as also to declare Form No.2 dated 5.9.12 filed with the Registrar of Companies, Jaipur for giving effect to the share allotment as void ab initio, for declaring the appointment of appellant no. 3 as Director of the Company w.e.f. 6.1.10 and appointment of respondent no.4 as Director w.e.f. 30.9.10 as illegal and for consequential correction in the forms and statutory record corresponding to aforesaid relief, has been allowed. 2. The relevant facts are that the Appellant Company, a company registered under the provisions of the Act, is engaged in the business of manufacture, fabrication, design, engrave, assemble, refine, treat, cut, mine, crush, grind, polish, process, wash, wax import & export and sale of minerals. The subscribed and paid up share capital of the Appellant Company at the time of incorporation was Rs. 1,00,000 divided into 10,000 equity shares of Rs. 10/- each which was held as under: S.No. Name of Shareholder No. of Shares Held 1. Shri Laxmi Narayan Panday 7,500 2. Shri Sanjay Sukhwal 2,500 TOTAL 10,000 The respondent Sanjay Sukhwal was Director of the Appellant Company, however, he was removed....
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.... Appellant no. 2, 3 & 4 herein were mismanaging the affairs of the Company by diverting Company's fund and misusing it for discharging their own liabilities. Apart from that the Company's fund was being debited on account for payment of personal expenses of the Respondents. That apart, it was contended that the Appellants herein had reduced the legitimate unsecured loan to the tune of Rs. 6,13,500/- reflected in the Balance Sheet of the Appellant Company since 2006 onwards given by the first Respondent to the Appellant Company without paying back the same to the first Respondent by way of book entries. 7. The Appellants herein categorically denied that the first Respondent was illegally removed from the Directorship of the Appellant Company w.e.f. 30.9.10. On the contrary, he was removed from Directorship of the Company when he committed fraud and transferred funds and business of the Company in his firm, Sanjay Minerals. The Appellants herein further contended that the first Respondent was removed after serving him proper notice as per law and he did not file any representation or complaint about non receipt of the notice at any point of time. An objection was raised that the fir....
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....e CLB observed that the Form has been digitally signed by the first Respondent only. The contention of the first Respondent that the Company Secretary i.e. the Appellant no.9 herein has misused his digital signature, was not accepted by the CLB. Rather, the CLB arrived at the finding that the first Respondent was aware about allotment of 20000 shares on 2.11.09, however, in respect of the allotment of 60000 shares on 27.8.12 in respect whereof, Form No.2 was signed by the Appellant no.3 herein and no notice of the Board Meeting was given to the first Respondent as he was allegedly removed from the Directorship on 30.9.10 and since there was no quorum in the Board Meeting held on 27.8.12, was treated to be an act oppressive against the Respondent. The removal of the first Respondent from Directorship of the Company was held to be in violation of the provisions of Section 284 & 190 of the Act. The appointment of the Appellant no.3 Mr. Mohit Pandey as the Director of the Company w.e.f. 30.9.10 without the consensus of the first Respondent and in violation of the provisions of the Act was also held illegal. Regarding the appointment of Ms. Rakhi Pandey, the Appellant no.4 herein, as Di....
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....e. Learned counsel submitted that the CLB has failed to consider that a special notice dated 14.8.10 was issued and delivered to the first Respondent as per the mandate of Section 284 of the Act. It is submitted that in case where breach of fiduciary duties are apparent on the part of the Director as also the fact that he had acted against the interest of the Company, the law empowers the Board to remove the Director when the Director being terminated chooses to abstain from participating in the Board meetings even after service of the special notice. Learned counsel submitted that as on 27.8.12, the first Respondent was non-share holder and thus, was not entitled to seek proportionate subscriptions in shares and thus, the Board has seriously erred in holding the issuance of 60000 equity shares on 27.8.12 on the strength of order dated 19.3.14 passed in Company Petition No.8/111/2013. Learned counsel submitted that mere non allotment of shares does not constitute oppression. In support of the contention, learned counsel relied upon a decision of the Supreme Court in the matter of 'Shanti Prasad Jain vs. Kalinga Tubes Ltd.', AIR 1965 SC 1535 and Chatterji Petrochem vs. Haldia Petroc....
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.... 15. It is noticed that before the CLB, the objection raised was that the first respondent herein having transferred his 2,500 shares of book value Rs. 25,000/- in favour of appellant no.2 herein, the petition preferred was not maintainable. The objection raised was not found sustainable by the CLB observing that the issue relating to alleged transfer of 2,500 shares by the first respondent was raised in separate petition bearing no.08/111/2013 wherein the direction to restore said 2,500 shares in the name of first respondent was issued. The appeal preferred by the appellants questioning the legality of the order passed by the CLB already stands rejected by this Court vide order dated 10.10.14 passed in Company Appeal No.2/2014. Thus, order passed by the CLB directing restoration of said 2,500 shares in the name of the first respondent has attained finality. 16. But then, now the objection is raised by the appellant in terms that the allotment of 20,000 shares made on 2.11.09 in favour of Mohit Panday, Smt. Rakhee Panday and Laxmi Narain Panday having been validated by the CLB, after 2.11.09 the subscribed and paid up capital of company stood increased from 10,000 shares to 30,000....
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....rs or they had requisite shareholding in the Company prior to the acts complained of. 18. In view of the discussion above, in the considered opinion of this Court, the petition under Sections 397 and 398 of the Act, preferred before the CLB by the first respondent, who was holding 2,500 shares out of 10,000 shares i.e. the subscribed and paid up capital of the Appellant Company prior to the various acts of oppressions of the Company and majority shareholders complained of, was not liable to be dismissed as not maintainable. 19. Indisputably, there is no evidence on record showing that notice of Extra-ordinary General Meeting held on 9.10.09 was given to the first respondent, wherein the paid up share capital of the Company was increased from Rs. 1 lac to Rs. 3 lac but the Form No.5 was filed with the Registrar of Companies on 12.10.09 under the digital signature of the first respondent. There was nothing on record suggesting that the digital signature of the petitioner was misused and thus, the CLB rightly arrived at the finding that there appears proper acquiescence on the part of the petitioner in respect of the increase of authorised capital of the Company from Rs. 1 lac to Rs....
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.....e.f. 30.9.10 and therefore, no notice of the Board Meeting held on 6.1.10 wherein Shri Mohit Kumar Panday, the appellant no.3 herein, was appointed as Director, was issued to the first respondent. The shareholdings of the first respondent being restored and his removal from the directorship of the Company being found illegal, for parity of the reason i.e. non service of the notice of the meeting held on 6.1.10, has rightly been held invalid for want of quorum. 23. Lastly coming to the increase of share capital from Rs. 3 lacs to Rs. 9 lacs and shares from 30000 to 90000 of Rs. 10/ each, as on 27.8.12, there was no documentary evidence produced on record by the appellants herein showing that the notice of the Board Meeting was given to the first respondent. The first respondent was entitled to offer for allotment of shares proportionately but no such offer was extended to the first respondent. The shares originally held by the first respondent stand restored by the order of the CLB and thus, on account of non allotment of the shares to the first respondent proportionately, his shareholdings in the Company stand considerably reduced. As observed by the CLB, the increased 60,000 sha....