TaxTMI 
TaxTMI 
2018 (5) TMI 734
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....hold 18% of the paid-up capital of the Company. * In order to prosecute the business as per the Memorandum of Association (MOA) of the Company, 3032 sq ft of land has been purchased in the month of June 2000, before the incorporation of the Company. On the incorporation, the P1, one Mr. Mathi. Sozhar and the R3 have been appointed as permanent directors of the Company and the P1 has also been appointed as Managing Director of the Company, who was assisted by her husband. * The Articles of Association (AOA) of the Company does not provide for appointment of directors by the Board of the Company whereas it provides appointment of director by the General meeting. The R2 and R4 were appointed as directors of the Company in the board meeting held on 30.09.2000 for which the board of directors has no locus standi or authority to appoint the directors in violation of the AOA. The illegal appointments of the R2 and R4 as directors led to further litigations. The R2 was appointed as Managing Director in the EGM held on 16.12.2002 and this appointment is null and void as her initial appointment as director itself invalid and not enforceable. Further, in the said EGM no agenda was include....
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....at she was relieved from the said post on 01.05.2002 and for the said letter the R2 to R4 have given a furious reply on 2.11.2002. The P1 again wrote a letter to R2 and R4 which was received by R2 and R4 and returned by R3. The P1 vide her letter dated 05.12.2002 wherein she had narrated all and also the fact that the EGM on 16.12.2002 was convened only for the purpose of authorizing the board to raise funds and to repay the unallotted share money and also to appoint Smt. T. Vembarasi as Managing Director in the place of P1 which would show that the affairs of the company were controlled by the husband of Smt. T. Vembarasi and other persons. * On 10.12.2002 smt. T. Vembarasi was congratulated by some shareholders but they have been issued with legal notice stating that she was not the Managing Director as on 10.12.2002. The caveat notice issued by one of the director and the notices received from the court would also show that the Smt. T. Vembarasi was functioning as Managing Director even before 10.12.2002. * Smt. T. Vembarasi and others have forged the documents to show that an AGM was held on 17.09.2001 and filed the same with the ROC. As per the earlier records Smt. T. Vemb....
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.... Subsequently R3 has purchased the said land in his wife's name for a low price of Rs. 2,54,700/-, whereas the actual value is about Rs. 24 lakhs which is evidenced by a sale deed dated 23.04.2007 regarding another property in the same area. The R3 has also taken a sum of Rs. 1,05,850/- from 30.10.2000 to 30.11.2000 for carrying out survey and subdivision work of the land situated at Tiuchirappalli purchased by the Company in year 2000, but he has not done the survey and subdivision work. It is also the duty of a director when the property has been sold to his wife, it is to be disclosed to the company in terms under section 299 and 300 of the Companies Act, 1956. * The company invested an amount of Rs. 3.5 lakhs in Tea dust dealership, but the R3 carried on the dealership without furnishing any particulars to the Company. Till date the R3 has not furnished any account to the Company and the Company has not received any report from R3 in this regard. * A Sale Deed was entered into on 04.08.2006 and registered by Smt. T. Vembarasi, Managing Director based on a board meeting allegedly conducted on 20.12.2002 and the sale was in favour of the R5 who is the wife of the R3. No notic....
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.... resolutions were passed without any discussion. The husband of the R2 threatened the shareholders and he had informed that they were willing to return the share amount. The request of the shareholders to return their share amount was not considered by the Managing Director and other directors and it was also not addressed in the subsequent board meeting. * According to the Indian Stamp Act the registration charges are to be borne by the purchaser, whereas the sale of prime property of the Company, the registration expenses were borne by the Company and an amount of Rs. 26000/- was booked in the accounts of the Company. Likewise a bore well was sunk in the year 2001 in the land purchased where as it is shown in the accounts of the Company that it was made in the year 2006 and an amount of Rs. 52000/- was booked in the accounts instead of the actual amount of Rs. 26,400/- * The company is functioning in the premises of the firm which was dissolved and an amount of Rs. 1150/- was paid towards rent and out of the total amount, Rs. 6 lakhs was advanced to purchase the land for the company. Though the 7th AGM was convened, no previous general meeting except the EGM was held in the c....
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....any unless there is an express acceptance of any pre-incorporation contract as required under Specific Relief Act, 1963. Pre-incorporated contracts are binding on the persons who make the contracts even though the same may not be binding on the company when it is incorporated unless the company adopts a contract or enters into fresh contract. The cost attributable to the company is Rs. 9.85,400/- plus the registration and stamp duty. Any additional payments that may have been paid from the account of the partnership firm would not necessary bind the R1 company, though it may bind the partners of the firm and even it could not be subject matter of a petition filed under sections 397 and 398 in which the paramount interest of the company is taken care. * It is a settled principle of law that a registered document always get preference over an unregistered document. A registered sale deed will always prevail over an unregistered agreement and section 91 of the Indian Evidence Act, 1972 support the same. The sale consideration was agreed and fixed at Rs. 9,85,400/- . In view of this the allegation that the land was sold for less than the cost of acquisition is not made out. * The b....
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....n as a director also. There is no requirement in law that a person must be appointed as director first and managing director subsequently. If a person is appointed as managing director by the company in general meeting, it subsumes within itself the proposition that such person is also appointed as a director. * The purchase of land for the company created litigation in the company and no one will come to purchase the property of a company which is under litigation. The 1st AGM was announced to be conducted on 17.09.2001, however, due to the litigation and for the appointment of directors the same was adjourned to 17.10.2001. This fact is suppressed by the petitioners. * The P1 has filed the statutory report on 31.10.2001 on the basis of receipt and payments and the balance sheets for the year 2001 and 2002 were prepared by the P1. Since the R2 was appointed as Managing Director, the P1 has not cooperated with the R2, therefore the balance sheet for the year ending 31.03.2001 and 31.03.2002 prepared by the P1 were signed by the R2 in the capacity of MD. If there are any manipulations in the balance sheets, the P1 alone would be responsible as they same were prepared on the basi....
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....gnation whereas she has been informed that she should hand over the accounts of the Company and then only her resignation would be accepted. * It was the P1 in order to create confusion in the mind of shareholders set-up some individual shareholders to send greeting letters to the R2 and on the said date the R2 was not the managing director. As the accounts were to be handed over by the P1, the R2 has written letter to the individuals explaining her position which is not bad in law. Since it was informed to the company that the P1 is indulging in filing of suits/petitions, caveat has been filed on behalf of the R2 by an advocate. * The submissions of the P1 that she has prepared a balance sheet with another auditor would show that she has not submitted the entire accounts of the Company and she holds it. The R2 has signed the balance sheets prepared by the P1 in the capacity of MD. Though she has made allegations against the auditor, he has not been made party to the petition. * The Company has not received any notice from the Sale Tax Authorities and the P1 has stated that she has sent the photocopies of the letters to the auditor and has not submitted any proof to that effe....
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....heir self-enrichment. * Section 531A of the Companies Act, 1956 is not applicable to the present petition as the same only would be applicable only when the winding up petition is filed or the company itself passed any resolution for voluntary' winding up. The petitioners cannot invoke section 531A of the Companies Act, 1956 on the premise that there would be a winding up order under section 397. Further section 531A would apply only as against the liquidator not in rem. * The AGM was convened after issuing notices to all the shareholders including the petitioners. But the petitioners have not chosen to attend the meetings. The 7th AGM was convened as per the direction of the CLB and the observer has also filed his report before the Board. The P1 has collected the share application money from the persons and so far she has not clearly stated that to whom the certificates have not been issued. The amount invested in the shares cannot be returned to the shareholders. The shareholders would get back their investment only on transfer of their shares to others or after winding up of the Company, the balance would be distributed to the shareholders. The consideration received from th....
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....ult in repayment. There is no failure of paying the dividend as the same has not been declared so far. Thus the section 274(1)(g) is not applicable to these proceedings and the said prayer is also not supported by any pleadings. * The respondents vehemently opposed the earlier petition on maintainability of the petition and the CLB has ordered the petitioners to file fresh petition with valid consents. However, the petitioners filed the fresh petition including new averments which are absent in the earlier petition. The petitioners have not approached the Tribunal with clean hands and therefore the petition is liable to be dismissed. * The Tribunal is first and foremost a court of equity. Therefore, the person who seeks equity must do equity. The P1 who has consciously abetted the undervaluation of consideration for the sake of avoiding stamp duty, now approaches this Tribunal under different legislation to complain of undervaluation in respect of sale transactions of the company. The learned Counsel for R1, R2 and R4 while reiterating the averments submitted that the petition filed by the petitioners is hit by laches, lacks bona fide and cannot be maintained on merits. The P1....
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....ity, may bar relief. He may not have come with clean hands or might be guilty of delay. * Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises (P.) Ltd. [1991] 72 Comp. Cas. 211 (Kar.) - for the proposition that a person coming to the Tribunal for equitable relief must come with clean hands. 4. The R5 has filed her counter and inter alia stated that she was the bona fide purchaser of the land at Puthukudi south village. The said land was sold to her for almost more than one and one third of its purchase price of the R1. Therefore, there is no loss to the R1 Company. The comparison of price is made with other land which is situated abetting the four way road in the Cuddalore-Nagapattinam highway whereas the land purchased by her is situated 2.50 KM away from the highway. Though the R5 is a bona fide purchaser, she has not been able to put the land in use due to the litigation. She has prayed to dismiss the allegation made against her. 5. The R6 and R7 have filed their counter and inter alia stated that they are the bona fide purchasers of the said land situated at Devedhanam village, Trichy municipality. The title of the said land was not clear and on....
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....1 would show that they have not been appointed as directors for life. The AGM was actually convened on 17.09.2001 and it was not adjourned to 17.10.2001. Non-mentioning of the adjourned AGM in the documents filed by the respondents with the ROC and the documents obtained from the ROC would show that the AGM on 17.10.2001 has never taken place. The appointment of R2 as Managing Director lacks legs to stand as her term as Director had lapsed. * The statutory report has been prepared and filed only for 6 months and the other accounts are forged and cooked up and filed to suit the convenience of the respondents. It is false that the balance sheet as at 31.03.2001 and 31.03.2002 were prepared by the P1 and they were signed only by the R2 in the capacity of MD, whereas all the documents were prepared and filed by R2 only. * The share application money was collected not only by P1 but also by other directors. Other illegal activities of the respondents had created a situation that further share certificates could not be issued and the money collected and accounts thereon were all handed over to the husband of the R2 on 01.05.2002. * As per the accounts of the partnership firm, out o....
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....from the petitioner's account were treated as part of consideration in the registered deed which is nothing but undisputed fact that the R1 company had accepted the contract. The provisions of Specific Relief Act. 1962 is in support of the stand of the petitioners and not the respondents. * The Respondents harped upon the sections 91 and 92 of the Evidence Act, 1872 to the effect that the consideration mentioned in the registered sale deed alone should be reckoned. The said provisions applied to the parties to the documents viz the R1, Petitioner and New Century Book Houses Private Limited. The Respondents have not denied the existence of the minutes of M/s. Arunodhaya Enteiprises which is third party and not a shareholder in the Company. As such the evidence emanating from the Firm is admissible as evidence in terms of section 99 of the Evidence Act. * The sale of vacant land is covered under the caption "other objects" therefore the contention of the Respondents that the MOA only talks about "Dwelling Units, non-dwelling units which is nothing but sale of buildings and it cannot be construed as sale of vacant land which is not covered under the main objects. When the sale of ....
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....unsel for R1, R2 and R4 submitted that the learned Counsel for the petitioner enlarged the scope of his original arguments and relied further on the following case laws: * Krishi Utpadan Mandi Samiti, Sahaswan v. Bipin Kumar [2004] 2 SSC 282 - for the proposition that it precludes a party from leading evidence contrary to the terms of a written document. Parties who undervalue their document for payment of stamp duty precluded from claiming that their own document does not reflect the correct market value. * Shanti Budhiya Vesta Patel v. Nirmala Jayprakash Tiwari [MANU/SC/0276/2010] - for the proposition that it is a plain and basic rule of pleadings that in order to make out a case of fraud or coercion there must be (a) an express allegations of coercion or fraud and (b) all the material facts in support of such allegations must be laid out in full and with a high degree of precision. In other words, if coercion or fraud is alleged, it must be set with full particulars. * Bishundeo Narain v. Seogeni Rai & Jagernath AIR 1951 SC 280 - for the proposition that general allegations are insufficient even to amount an averment of fraud or which any court ought to take notice howeve....
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....0/- in the said document itself and therefore the allegation that the land has been sold for lesser value is not substantiated. As per the sale deed dated 14.07.2000, the sale consideration was Rs. 9.85,400/- which is the registered value and subsequently the same property was purchased by the R6 and R7 for Rs. 21,22,500/- which is more than the registered value. The learned Counsel for R1, R2 and R4 rightly contended that the registered value of consideration alone has to be taken into consideration and I hold that P1 being the Director of the Company failed to attend her duties in this regard. The case law Krishi Utpadan Mandi Samiti, Sahaswan's case (supra) referred by the learned Counsel for R1 and R2 and R4 squarely applies for this case and therefore I answer the issue No 1 in negative. Issue No.2: The R5 has contended that the land at Pudukudi South Village is situated nearly 2.5 KM inside in a remote village from the National Highway and any stretch of imagination it would not bring the value of land abetting to the National HighWay. The learned Counsel for R1, R2 and R4 has brought to the notice that the survey No's of the land of the Pudukudi South village and the other ....
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....ointed as Managing Director on 16.12.2002, it is deemed that the R2 has also been appointed as Director. It is on record that the P1 herself admitted that R2 has been appointed as Managing Director on 16.12.2002. Article 11 empowers to appoint additional directors for certain period as per Article 9. It is on record that the petitioners have contended that the R2 to R4 were appointed for 3 years and therefore, now they cannot contend that they have not been appointed as directors. R1, R2 and R4 have contended that their position as directors has been regularized in the adjourned AGM held on 17.10.2001. In case the P1 is aggrieved on the said appointment, either she should have approached the company to nullify the said appointment or should have approached any court seeking an order to declare that the appointment of R2 and R4 is null and void. But, instead the petitioners have filed the present petition in the year 2007 and questioning the very appointment of MD made during the year 2002 which is nothing but abuse of process of law. With regard to sale of property, the petitioners contended that the MD is not empowered to sell the property on her own without taking the permission ....