TaxTMI 
TaxTMI 
2018 (5) TMI 1571
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....l of the existing shareholders as null and void and not binding on the company to treat those Resolutions has never been passed in the shareholders' Meeting of the company along with consequential relief as your Lordship deem fit and proper in the ends of justice. (iii) To issue necessary direction for regulation of the conduct of the Company's affairs in future along with consequential relief as your Lordships deem fit and proper in the ends of justice" 2. The facts necessary for appreciation of the disputes in the present petition, as are narrated in the petition aforesaid in short are that M/s. Assam Chemical and Pharmaceutical (P) Ltd., is a Private Limited Company incorporated on 13-03-1946 under the erstwhile Companies Act, 1930, subsequently covered under the Companies Act, 1956 (hereinafter referred to as the "Company"). 3. The initial authorized share capital of the company was Rs. 3.00 lacs of 300 nos. of equity shares of Rs. 1,000/- each. The authorized capital of the company had been enhanced from time to time and as on 14-11-2009, the authorized capital of the company was Rs. 5.00 lacs consisting of 5000 equity shares of Rs. 100/- each. 4. The paid-up....
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....derably big amount of money from the coffer of the company which in fact resulted in oppression and mismanagement in running the affairs of the company. 10. When the shareholders of the company came to know about the mismanagement of the company and also about the misappropriation of huge funds of the company by said D. N. Singh (who was arrayed as respondent No.5 in the present petition and would be described hereinafter as R-5 as well) through the aforesaid news reports, they sent a requisition to the company together with a proposal urging the latter to convene an Extraordinary General Meeting (EOGM , in short) of the shareholders at the registered office of the company. 11. Said EOGM was sought to be convened in order to discuss and ascertain the allegations circulated in the newspapers aforesaid and also demanding immediate removal of the then Managing Director of the company (in short, MD) on the ground of his alleged misappropriation of company's funds and also for mismanagement of the affairs of the company. A copy of the requisition No. Nil dated 03-10-2009 was also annexed with the petition as Annexure-G. 12. On receipt of the requisition from the shareholders, R....
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....ated 21.10.2009 proposed the removal of the respondent No.5 from the office of director as well as MD of the company. However, the said order was bad in law-since ---- such an order was passed without giving opportunity to the petitioners to oppose the prayer in Misc. (Arb.) Case No.571/2009, wherein the plaintiffs therein, amongst other sought for the following reliefs: - "(i) Declaring the Resolution No.2 of the notice dated 21-10-2009 is illegal, bad in law and is liable to be set aside; (ii) Restrain the opposite party its men, agents, servants etc. from holding the Extraordinary General Meeting as far as resolution No.2 of the notice dated 21-10-2009 is concerned; (iii) Stay the operation of the resolution No.2 of the notice dated 21-10-2009 (iv) and/or be pleased to pass such other order/orders as to your honour may deem fit and proper." 18. However, the said suit was subsequently dismissed on withdrawal on 01-03-2011 and the injunction order passed on 19-11-2009 stood vacated. 19. The newly constituted Board of Directors filed necessary returns to the Registrar of Companies (ROC), Shillong intimating the latter about the removal of t....
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....ctor of the company and its registered office remains at A. K. Azad Road, Gopinath Nagar, Guwahati 781 016. Such fabricated news items were circulated only to mislead the people dealing with the company and the public, which resulted in serious loss of reputation and goodwill which the company had earned by decades of hard work and labour. 24. Even thereafter, the respondent No.5 had most illegally opened a current account in the name of the company in Industrial Co-operative Bank Ltd, Lakhtokia Branch, S. S. Road, Guwahati - 781 001 and started transacting business of the company through such an account. For such illegal conduct on the part of the respondent No.5, a case was filed and the same is under investigation at this moment. 25. However, the misdeeds resorted to by the respondent No.5 did not stop there, since he had illegally altered the company's records and documents in order to remove Deba Kumar Hazarika and Bhupen Ch. Kalita from the office of the Managing Director and Director of the company respectively. 26. In the meantime, the respondent No.5 tampered the documents in the office of the ROC Shillong and, thereafter illegally and in an unauthorized manner is....
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....ccordance with law. In such a situation, Sri Deba Kumar Hazarika along with 19 others had preferred this present petition before learned CLB, Kolkata alleging oppression as well as mismanagement running the affairs of the company. 32. The learned Counsel for the petitioners has submitted the following decisions in support of the case of petitioners: - 1. Nibro Ltd. v. National Insurance Co. Ltd., AIR 1991 Delhi 25 2. Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla, AIR 1976 SC 565 3. V.P. Rangaraj v. V. B. Gopalakrishnan [1992] 173 Comp Cas 201 (SC) 4. Musselwhite v. C.H. Musselwhite & Son Ltd., [1962] 32 comp. cas. 804 (CD.) 5. Dale & Carrington Investment (P.) Ltd. v. P.K. Prathapan, [2004] 54 SCL 601(SC) 6. Life Insurance Corpn. of India v. Escorts Ltd., [1986] 59 comp.cas. 548 (SC) 33. The notice of the proceeding was served on the respondents. They entered appearance and contested the proceeding alleging several infirmities in petition both factual and legal and therefore, prayed for dismissal of the petition. First, it was alleged that the petition is not maintainable since same persons were arrayed as both....
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....e Company Law Board to exercise the jurisdiction vested in Sections 397 and 398, read with Section 402 of the Companies Act? 6. Whether majority shareholders have legal and proprietary right to exercise in appointing and removing Directors to control and manage their Company? 7. Whether shareholders holding 28% of the paid-up capital in the Company has right to remove and appoint Directors, who were removed and appointed by majority shareholders holding 64% of shares? 8. Whether the outsiders other than the existing shareholders of the Company, who were allotted shares on 20-02-2010 and 15-09-2010 were entitled to members of the Company given the prohibition of allotment and transfer of shares to outsiders as per Article 28 of the Articles of Association of the Company? 9. Whether allotment of shares on 20-02-2010 and 15-09-2010 to the minority shareholders holding 28% of shares of the paid-up capital of the Company to the exclusion of majority shareholders including the State of Assam (which is supposed to be holding 25% in the paid-up capital of the Company as per Article 51 of the Articles of Association for all time to come otherwise remainin....
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....ed 09-05-2017 in Comp. Appeal No.3/2014, this Bench required the petitioners to issue advertisement requiring the allottees of 6715 equity shares, to appear before this Bench and to file reply/objection if any, against the prayer made in the petition under consideration. 43. Being so required the respondents No.6 to 15 appeared before this Bench and filed reply to the prayer made in the petition. It may be noticed that during the hearing of the proceeding, the petitioner No.18 wanted her name to be deleted from the cause title of the petition and the same was accepted and as such, her name stands deleted from the cause title of the proceeding as being the petitioner in the present proceeding. 44. The respondent No.3 and 4 having filed reply denied and disputed most of the allegations in the company petition. It has firstly been submitted that the company petition has been founded on malicious reports against the respondent No.5, which were fabricated by none other than the petitioners themselves, particularly petitioner No.1 and petitioner No. 10 and were communicated to various newspapers for circulation so that subsequently, those news reports could be made basis of some fa....
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....ction, it was stated that no casual vacancy did occur in the office of the director of the company on 14.11.2009. In spite of there being no casual vacancy in the office of the directors of the company on 14.11.2009, the petitioner was appointed against a casual vacancy which is said to have occurred on 14.11.2009. 50. Such appointment was illegal since the appointment of petitioner No. 1 as director of the respondent company was made in complete disregard to the directions in Section 284(5) read with section 284(2) of the Act of 1956. Section 284(2) and 284 (5) of the Act of 1956 require the company to circulate special notice among the shareholders of the company well in advance so that the actual stakeholders can deliberate upon the appointment of a person as important as director of the company. 51. It is also the case of the respondents that the appointment of the petitioner No.1 as MD is also illegal since the Board Meeting held on 25-11-2009 did not have requisite for adopting a resolution for appointment of the petitioner No.1 as Managing Director of the company since- on that day- there were only two directors on the Board though as per Article 64 of the AOA, the of ....
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....pital of the company and also to issue fresh shares to the persons/shareholders, who are interested in having such shares offered from the side of the company. But all these were done just to prevent the company from disintegrating Therefore, no offence can be taken either for increase of authorized capital of the company or for the allotment of 6715 Nos. of shares on 20-02-2010 and 15-09-2010. 57. Regarding violation of Article 28 of the AOA in issuing shares to some outsiders on the aforesaid dates, it has been contended that the petitioners themselves became the shareholders of the company not on following the prescription in the AOA but on disregarding such mandate in the AOA. Therefore, the petitioners cannot be allowed to approbate one thing at one point of time and re-approbate same thing at another point of time. 58. Mr. Anjan Kumar Roy, FCS further submits that the present petition was filed with sole motive of illegally usurp the management of the respondent company in disguise of a petition under Section 397/398. In S. P. Jain v Kalinga Tubes case, it has been held that when dominant intention of the petitioner is to grab the management in disguise of a petition un....
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...., before submitting the para-wise reply to CP 992/2011, I say as follows, (i)........... (ii) The petitioners have alleged, inter alia, in CP 992/2011 that the shares allotted to the answering respondents are illegal and liable to be declared as void. The said allegation has been made on the ground that the answering respondents were not existing shareholders at the time of the impugned allotment which allegedly is in violation of Article 28 of the Articles of Association of the Respondent No.3 company. I say that the petitioners themselves were allotted shares when they were not the existing shareholders of the Respondent No.3 Company, which fact has been completely suppressed in CP 992/2011. That the petitioners and the answering respondents are similarly placed, so far as the legality or illegality of their shareholding is concerned, Hence, on the basis of the ground taken by the petitioners, the entire shareholding of the petitioners are also liable to be declared as null and void. Consequently, CP 992/2011 is liable to be dismissed. A Statement showing the allotment and transfer of shares to petitioners has been attached as Exhibit- 4 TO 20." 62. It is als....
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....iphoning of funds of the respondent No.3 Company as well as the allegations of avoiding payment of tax, resulting in slapping of notice from the side of the concerned authority are also totally baseless. 67. That apart, the respondent No.15 further contended that the allegation of non-payment of entry tax and VAT cannot be a ground for presenting a petition under section 397/398 of the Act of 1956. For ready reference, the relevant part of the reply of the respondent No.15 is reproduced below:- "11 ...... It is also evident that the above CP 992/2011 does not disclose any specific allegation of mismanagement. It would also be pertinent to mention that the said news items raised issues of "entry tax" and Value Added Tax ("VAT", hereinafter). So far as "entry tax" is concerned it was an issue with the entire industry in Assam and not an issue created by Respondent No.5 as alleged. So far as issue of VAT is concerned, those are normal operational issues of a company of the nature and stature of the Respondent No.3 Company. I say that the above issues of "entry tax" and VAT cannot be a ground for making a petition under oppression and mismanagement." 68. In support of th....
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.... the R-5 and none one else, more so, when the petitioners failed to bring on record his legal representative(s) in time. Therefore, this Tribunal is duty-bound to dismiss the proceeding in hand on this count alone. 72. He further contended that since the petitioners are found coming to the court with very dirty hands seeking equitable reliefs therefrom, in the term of the law, laid down in various judgments including the decision in Laxmi Raj Shetty v. State of T. N., Reported in 1988 AIR (SC) 1274, this Bench is duty-bound to dismiss the present proceeding on this count alone, more so, when such a petitioner forfeits his right to have his grievances' heard and decided on merit 73. Mr. A Das, the learned Counsel for respondent Nos. 6 to 10 & 13 and 14 has submitted several decisions to strengthen the contentions, he advanced during the course of arguments. Such are as follows:- 1. Laxmi Raj Shetty v. State of T. N.,AIR 1988 SC 1274 2. Keshrimal Jivji Shah v. Bank of Maharashtra 2004 3 AIIMR 214 3. Hanuman Prasad Bagri (supra) 4. Lourdu Mari David v. Louis Chinnaya Arogiaswamy, 1996 (0) AIJ-SC 15716. 5. Ruby General Hospital Ltd. v.....
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.... MOA and AOA, the shareholders have unquestionable right to appoint or remove the directors of the company. 78. Such right has found legislative recognition in form of Section 255 of the Act of 1956, corresponding section 152 of the Act of 2013. Since the appointment and removal of the directors of the company are governed by statutory provisions in the Companies Act which not only prescribes a mechanism for removal or appointment of the directors but also constitutes a authority to decide dispute(s) arising out of appointment or removal of the directors of the company, it is beyond the competence of the civil court to entertain such matters. Issue No. 6 79. In view of our discussion in issue No.1, it is found that the majority of the shareholders have legal and propriety right to remove or appoint director to control and manage the affairs of the company. Issue No.7 80. This issue relates to the question whether shareholders holding 28% of the paid-up capital in the company has right to remove and appoint Directors who were appointed by majority shareholders holding 64% paid-up capital in the company. We have already found that the directors are appointed and remove....
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....eral grounds and such grounds can be considered under the following heads:- (A) Whether in seeking relief from this Tribunal, the petitioners came with clean hands. (B) Whether the petitioners could bring on record sufficient materials to require this Bench to conclude that the allegations of oppression and mismanagement are established satisfactorily? (C) Whether petition under consideration is allegedly hit by several legal infirmities of extremely serious nature and such legal infirmities, now, unmistakably require this Bench to dismiss the proceeding in hand. (A) 86. In order to bring home the charge that the petitioners in approaching the Tribunal in seeking reliefs under Section 402 of the Act do not come with clean hands the respondents have referred to several allegations. Now, let us see, how far such allegations stand to reason The respondents alleged that in the petition under Section 397/398, the petitioners contended that they came to know about a series of serious illegalities resorted to by the BOD with respondent No. 5 at the head in running the affairs of the company from various newspaper reports which I have alluded to hereinbefore. 87.....
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....il Judge, Guwahati was pleased to pass an order restraining the petitioners from making any discussions on item No.2 in the notice dated 21-10-2009 in the EOGM convened on 14-11-2009 vide order dated 13-11-2009 in Misc. (Arb.) No 571/2009. The said order was immediately conveyed to the company and all office bearers including the petitioners. 91. However, in spite of such injunction, being passed by the Civil Judge, Guwahati and despite such injunction being communicated to the petitioners well in time, the petitioner not only made discussions on item No.2 in the notice dated 21-10-2009 in the EOGM, held on 14-11-2009 but also took a resolution removing the respondent No.5 from the post of the Director/Managing Director of the company. 92. These speak loud and clear that the petitioners had no regard whatsoever to the order passed by Court in exercise of power conferred on it, Said episodes also demonstrates that petitioners coming to this Tribunal with dirty hands- since ....... the one of the important pillars of the present proceeding is the resolution adopted in the EOGM held on 14-11-2009. This itself is a ground for which the present petition is liable to be dismissed. ....
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....ated amongst the shareholders of the company. The violation of mandates in above provisions of law firmly shows that there was an ulterior motive on the part of the petitioners in removing the respondent No.5 from the office of director and MD of the company and such ulterior motive was nothing else but to gain the dominant role in running the affairs of the company. 98. I have analyzed such allegations in the light of the facts brought on record and found that it is true that a special notice is also required for appointment of a new director in place of the resultant vacancy caused for removal of the respondent No.5 before expiry of his term in the office of director of the company. But no such notice was ever circulated amongst the shareholders of the company as required under the law, more particularly Section 284(5) read with section 284 (2) of the Act of 1956. 99. It is worth noting here that during the course of arguments, the learned counsel appearing for the petitioner contended that the petitioner No.1 was not appointed on invoking the provisions of Section 284(5) of the Act of 1956. Rather, he was appointed under some other provisions of the Act, aforesaid. I have ....
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....ussed herein before and what have emerged therefrom, I am of the pinion that in coming to the tribunal by the way of present petition seeking various reliefs, the petitioners, more particularly petitioner No. 1 and petitioner No.10 never came with clean hands. This question is accordingly decided. (B) 105. The respondents have arduously contended that the allegations made in the petition does not disclose even a prima facie case for continuation of the proceeding in hand -much less- such allegations making out a case where the Court needs to conclude that the problems highlighted in the petition disclose a situation which not only justifies the winding up of the company on just and equitable consideration -but also- shows that such winding up would prejudicially affect the petitioners. 106. Such contention was, however, resolutely disputed by the petitioners alleging that they have documented enough materials on record to show that the BOD, piloted mainly by respondent No. 5, had misappropriated the PF fund and also evaded payment of taxes to the concerned authority over a long period of time which are prolific testimonies of respondents mismanaging the affairs of the resp....
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....one can address the above contention, it needs to be ascertained if all the allegations in the petition are directed against the respondent No. 5 and none other. Such a question arises because the respondents all along arduously contend that the allegations, incorporated in the petition, are directed against the respondent No. 5 and the respondent No. 5 only. 112. In order to address such a controversy, I find it necessary to have a look at the petition under consideration. A perusal of the same reveals that in their petition, the petitioners categorically contended that the respondent No. 5 and his cahoots had done series of illegalities/irregularities of enormous proportion in running the affairs of the company. A deeper and closer look at the petition also reveals that the companions of respondent No. 5, more particularly Sri Madhav Das, had allegedly extended all help and cooperation in committing alleged illegalities which resulted in oppression as well as mismanagement in running the affairs of the company. 113. The narration, recorded in various paragraph of the petition, more particularly, paragraph XXIX, XXX and XXXI would make such position clear. Therefore, the con....
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....e that D. N. Singh resigned from the office of MD with effect from 16-02-2011 whereas; the present proceeding was filed 12-10-2011 which clearly shows that on the date of filing of the present proceeding, D.N. Singh was not the MD of the company. There is also no quarrel over the fact that said Sri Madhav Das was appointed as MD of the company with effect from 16-02-2011 and has been working as above even on the date of presentation of petition under consideration and beyond. 116. A perusal of the cause title of the petition again reveals that the MD of the respondent company was arrayed as R-4. When above disclosures are read together with various averments in the petition, more particularly, the averment made in Paragraph XXIX, XXX and XXXI of the petition, it would appear more than clear that the R-4, who is described as MD of the company, in the cause title of the petition, is none other than aforesaid Sri Madhav Das who was alleged to the author of most of the allegations in the petition as well as the documents annexed with the petition, the annexure ZB, ZF, ZG are in particular. Situation being such, it is not correct to say that all the allegations in the petition are di....
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....s; 119. I have found that section 2 (26) of the Act of 1956 clearly states that MD of the company is entrusted with substantial power of management to run the affairs of the company. However, such substantial power of management does not include the power to do administrative acts of a routine nature meaning thereby that the MD is entrusted with the duty of doing important and serious business in managing the affairs of the company. 120. Now, let us see if the charters of the respondent company, they being MOA and AOA, make any provision for appointment of MD of the company. On a perusal of the AOA, it is found that Article 62 of the AOA authorizes the BOD to appoint a director as MD of the company. Record reveals that the Board in exercise of such power, conferred on it under Article 62 appointed D.N. Singh as MD of the respondent company. Therefore, on perusal of the AOA in the light of materials on record, it is found that while the respondent company is the principal in relation to BOD and MD, the BOD and MD are its agent and sub-agent respectively. 121. It is a settled law that the principal is bound by the acts/conducts of the agent and sub-agent so long they are doi....
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....legation that they had increased the authorized capital of the company on 16-09-2010-or-they had allotted further shares on 20-02-2010 and on 15-09-2010 or that they removed the petitioner No1 from the post of director /MD and the petitioner No.2 from the post of director of the company. They also did not dispute the rectification of the documents pertaining to ROC. It is also not their case that they did not open new account in the bank in the name of the company. 126. But they tried to justify each of such allegations contending that the various irregularities/illegalities of enormous proportion, committed by the petitioners, had forced the BOD headed by the R-5, to increase the authorized capital of the company or to allot further shares or to remove the petitioner No1 from the post of director /MD and the petitioner No. 2 from the office of director of the company. They also contended that under compulsion, they had to rectify the records pertaining to ROC or to open new account in the bank in the name of the company but all those acts were done strictly in accordance with the requirements of law. 127. In regard to removal of the petitioner No. 1 from the post of director....
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....itioners -, yet then - such appointment of petitioner No.1 as director of the respondent company on 14-11-2009 was bad and void in law since- such appointment was made in total disregard to the prescriptions in 284(2) and 284 (5) of the Act of 1956. 132. I have considered such submissions from the side of the respondents having regard to materials on record and found that it is true that the petitioners did remove the R- 5 from the office of the director and MD of the company under the resolution adopted on 14-11-2009 -although- under the order dated 13-11-2009, rendered by civil court, in Misc. (Arb.) No.571/2009, they were restrained from doing so. But then, question- is -does such an illegal act on the part of the petitioners empower the respondents too to correct such illegalities on their own? 133. Before addressing the above query, it needs to be remembered that a party to a dispute cannot assume the role of a judge. He needs to leave such a dispute to the jurisdictional judicial authority for adjudication of the same in accordance with law---instead of taking upon himself the duty of adjudicating such a matter- inasmuch as -such a course of action is fraught with dange....
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.... side of the petitioners on 14-11-2009. Unfortunately, the R-5 abandoned the aforesaid proceeding halfway as is evident from the order dated 01-03-2011 in Misc. (J) Case No.590/2009 (in Misc. (Arb.) 571/2009). Such a conduct, in my opinion, makes two things absolutely clear. 138. First, the R-5 did not have a right cause in the aforesaid proceeding to pursue to the last which is why he discarded it midway. Secondly and more importantly, such conduct is also prolific testimony to the fact that R-5 approached the court by way of application aforementioned only to scuttle the democratic process of doing the business of the respondent company in accordance with prescriptions of law. Such revelations, in my opinion, to a great extent nullify the case of the respondents, structured on the claim that the resolution dated 14-11-2009--- being illegal and non-est in law--gives no right whatsoever to P-1 and P-2 to hold their posts in the company even for a moment. 139. Perhaps, that is the reason as to why the Hon'ble High Court too did not take seriously the case of the respondents premised on taking resolution on item No 2 of the notice dated 21-10-2009 in complete disregard to the o....
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....restrained from doing so nor is it bound to disclose its reasons for" 142. The above conclusion of mine draws more and more support, if one views the disputes under consideration from a still different angle. Our discussions hereinbefore, now, firmly show that the petitioner No.1 was appointed as director /MD and petitioner No. 2 was appointed as director of the company by a large section of shareholders of the company and therefore, rightly or wrongly, their appointments, as above, had the patronage of the majority of the shareholders who are held to be the real master as far as appointment/removal of directors of the company is concerned. 143. Therefore, before the removal of those office bearers of the company, at least a sincere attempt ought to have been made from the side of the respondents to associate such shareholders with the process of removal of those two petitioners from their posts. But there is nothing on record to show even remotely that respondents had ever made any effort whatsoever to show that they tried to get those shareholders associated with the process of removal of the P-1 and P-2 from their offices. 144. Instead, they felt secured taking shelter ....
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....rt of their contention that the respondents were forced to increase authorized share capital of the company and were also forced to issue fresh shares on the dates, mentioned above, it has been painstakingly canvassed before me that immediately after illegally usurping the offices of MD and director of the company, the petitioners forced the banker of the company to freeze all the accounts in the name of the company in the bank. 149. Such sudden and unexpected freezing of the accounts of the company in the bank threw the company to a tizzy making it almost impossible for the BOD with the respondent No.5 at the top to carry forward even pretty day-to-day business. In such morbid situations, said BOD was forced to increase authorized share capital of the company and also to issue fresh shares on the dates, mentioned above. Therefore, one cannot find fault for increasing the authorized share capital of the company and also for issuance of fresh shares on 20-02-2010 and 15-09-2010. 150. Unfortunately, such contentions advanced from the side of the respondents carry no weight whosoever. This is because of the fact that had the respondent company been in such dire and dreadful situ....
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....e issued on those days in total disregard to the prescriptions in Article 28 of the AOA. So situated, let us see if there was violation of Article 28 of the AOA in issuance of further shares on the dates stated above. The Article 28 of the AOA runs as follows: - "Save as provided in the Articles or unless all the members for the time being of the Company agree, no shares shall be transferred or issued to a person who is not a member of the Company so long as a member is willing to purchase the same at a fair value" 156. I have already found that issuance of shares on 20-02-2010 as well as the issuance shares on 15-09-2010 and so also issuance of shares to some outsiders on the dates aforesaid are not in dispute. In other words, the allegation of issuance of shares to some outsiders in violation of mandate in Article 28 of the AOA remained unrebutted. 157. But then, the respondents claimed that over the years, it becomes a habit for the company to issue shares to the outsiders, and that too, without the concurrence of all the existence shareholders. The fact that the petitioners themselves were admitted as the shareholders of the Company without following the prescrip....
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....-is found to be a claim wholly without any merit. 161. It is worth remembering here that an act or conduct which is otherwise illegal or unlawful cannot become lawful and legitimate only because of the fact that such illegal act or conduct had been in vague over a long period of time. In that connection it is worth noting what the Hon'ble Allahabad High Court had said in the case of Pradeep Kumar Arora v. State of U. P. 2005 (2) ESC809(All). For ready reference, the relevant part of the judgment is reproduced below: - "71.................Even if, we have passed a wrong Order, we have a right to rectify for mistake, but no litigant has a right to blackmail the Court and therefore, the Court is not bound to pass wrong Order again and again." 162. Further, the plea of the respondents that the petitioners cannot be allowed to question the issuance of shares in violation of Article 28 of the AOA on 20-02-2010 and 15-09-2010- since they too became shareholders of the company only on violating the prescriptions in Article 28 of the AOA- needs to be rejected for reasons more than one. It is true that the petitioners were allowed to become the shareholders of the company with....
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....ticity of which has been not questioned by the respondents, is reproduced below: - SI. No. Name(s) of Shareholders Shares held as on 14-11-2009 ISSUED DURING PENDENCY OF Misc. (Arb.) Case No.571/09 Total Nos. of Shares held Share held as on 20-02-2010 Share held as on 15-09-2010 01. Deep Narayan Singh 220 200 1600 2020 02. Madhab Das 20 200 500 720 03. Rajendra Nath Rajbongshi 75 30 100 205 04. Anup Kumar Deka 30 50 150 230 05. Bimal Sarma 50 200 150 400 06. Tapan Chandra Bhuyan 20 100 300 420 07. Ashim Sarma NIL 50 200 250 08. Rajani Das 75 50 100 275 09. Rabin Kumar Das NIL 50 200 250 10. Kanak Das 20 100 100 220 11. Ajit Deka 75 100 500 675 12. Tilak Chandra Das Nil 50 NIL 50 13. Munindra Haloi NIL 20 50 70 14. Dipak Kalita NIL 20 50 70 15. Sarat Chandra Kalita 05 Nil 10 15 16. Pratul Bhuyan Nil 100 100 200 17. Pranab Das 70....
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....I &C(V)/191/2010/17332 dt 31-3-2011 (2) Letter No. 70/3634 dated 6.4.2011 Sir, With reference to the above mentioned subject I would like to inform you that I had requested the Managing Director of M/s Assam Chemical & Pharmaceutical Pvt. Ltd. to file Form No.32 as I have Been designated as a Govt. Director of the Industry Department, Govt. of Assam which is holding 600 snares (a copy of the letter is enclosed) However, the Director vide their letter No. 70/3634 dated 6-4-2011 has informed that the State Govt.'s 600 equity shares about 6% of the total shares of 9787 and hence filing of Form No. 32 does not arise. (copy of the letter enclosed) The means of increase of total shares from 3072 to 9787 thereby reducing the Govt. share from 25% to 6% is only known to the Company as I have not been invited not aware of any such meeting where the shares have been increased which is in contravention of the Article of Association as well as the Companies Act. 1956. As per the provisions of the Article of Association of M/s Assam Chemical & Pharmaceutical Pvt. Ltd. clause-53 page-15. the shareholding of the Govt. Nominee Director is not at. all bin....
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....ions, I feel inclined to hold that despite state of Assam not being a party to this proceeding, the letters aforesaid cannot be ignored-since-the facts recorded in such letters are found to be in tandem with the allegations incorporated in the company petition -and - since- every bit of information therein has huge bearing in ascertaining the allegations which were hurled at the respondents. 175. Resultantly, the letters aforesaid further fortify my view that the shareholding of State of Assam or for that matter, the shareholdings of the petitioners were reduced in profound violation of the prescription of law and mandates in MOA and AOA, and all those were done only with the object of illegally gaming the control of the management of the company. 176. In view of discussions, made herein before, I have found reasons to decide the Issue No.8 in negative and against the respondents and issue No 9 in affirmative and in favour of the petitioners which I accordingly do. Whether the present proceeding also suffers from several serious legal infirmities as alleged by the respondents? (a) 177. The respondents alleged that the proceeding in hand suffers from several ser....
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.... stale and past claims as alleged by the respondents. 182. Further, I have also found that the authorized capital of the company was increased from Rs. 5 lakhs to Rs. 10 lakhs on 16-09-2010 in violation of the mandates in MOA and AOA. Since the issuance of the shares in violation of the AOA tantamounts to oppression with continuing effect, on the same analogy, it needs to be concluded that the increase of authorized capital in violation of commands in the MOA is equally an oppressive act with continuing effect. Such revelation further fortifies my view that the present proceeding cannot be said to be based on stale and past acts/actions (b) 183. The learned counsel/legal representatives appearing for the respondents categorically claim that relief under Section 402 of the Act of 1956 cannot be made available to the petitioners unless he establishes the three conditions, specified in Section 397 of the Act of 1956. The conditions so referred to in Section 397 are: - (i) The petitioner must establish that the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members, (ii) The....
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....a proceeding. Unless the reliefs, sought for, are accurately and appropriately described in the petition, the Bench may refuse to grant any relief -even if- the petitioners succeed in showing some illegalities having been committed by the respondents in running the affairs of the company during the period under consideration. 189. In support of such contention, it has been submitted that the reliefs, prayed for in the petition under consideration are so unclear, so indistinct and so vague that it would not be possible for the Bench to grant any relief there under --even if--this Bench- for one reason or other--- wants to extend some reliefs to the petitioners in this proceeding. This shortcoming alone---in the facts and circumstances of the proceeding in hand---now---requires this Bench to reject the entire petition---argues Mr. A.K. Roy, the learned legal representative appearing for the respondent Nos.3 & 4. 190. The respondents have found some other fault in seeking reliefs in the proceeding in hand. In that regard, it is being pointed out that if one reads the cause title of the present proceeding, he would find that the proceeding under consideration is a proceeding only....
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.... If necessary, the court would rise to the occasion and would mould the relief(s) depending on the demand of the situations. 195. Such decisions were founded on the principle that the technicalities of law must not be allowed to cost the cause of justice--provided--the proceeding is otherwise tenable in law as well as on facts. Since the petitioners have successfully proved the allegations of oppression and mismanagement in the present proceeding, the above infirmities in describing the reliefs, sought for in the present proceeding, in my opinion, cannot be allowed to overthrow the proceeding under consideration. (d) 196. The respondents had attacked the petition under consideration alleging that the present proceeding is not maintainable in view of pendency of Title Suit No.302 of 2010, now, pending before the Civil Court at Guwahati and such an argument was founded oh the contention that the subject matters in the suit before the Civil Court and the subject matters in the present proceeding are fundamentally one and same. However, said argument was strongly disputed by the petitioners alleging that matters in dispute in the present proceeding and matters in dispute in th....
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....y's contribution to the Provident Fund authorities--to -- unauthorized increase of authorized capital of the company, from unauthorized issuance of shares -to -removal of Directors/Managing Director of the company, from fabrication of false documents to facilitate the illegal occupation of the various posts of the company by respondent No.5 and his associates etc. But then, the subject matter before the Civil Court is whether the judgment and decree in T.S.No.04/2010 was obtained by R-5 on playing fraud on the court. 202. Though the resolution dated 14-11-2009 in some way or other had some connection with the dispute in T.S.No.302/2010 -yet-- only for such connection of resolution dated 14-11-2009 with the T.S.No.302/2010, it cannot be said that the dispute under consideration before this Bench in this proceeding and dispute before the Civil Court in T.S.No.302/2010 are one and same. In other words, despite some matters in both those proceeding being common, it cannot be said subject matters in both the proceeding are very identical. Being so, I have no difficulty in rejecting the allegation that present proceeding is not maintainable in view of pendency of T.S.No.302/2010. 2....
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.... exit option to any one of the two warring parties, namely, the father or the son. In such an event, at least the company will not be put to any more dispute or hardship. The just and equitable clause contained in Section 402(g) is too wide to find a solution to the long dispute that the father and son have had for more than a decade. This will at least alleviate the sufferings of the company, if not the sufferings of the individuals behind the company. Once this is done, at least a portion of the dispute pending before the Civil Court will get terminated and a possible solution for the resolution of the civil dispute may appear in the distant horizon. 76. If looked at from the above angle, it would be clear that the issues directly and substantially arising for consideration before both forums cannot be said to be the same. As a matter of fact, the whole purpose of Sections 397 and 398 rend with Section 402 is to put an end to acts of oppression and mismanagement, so that the smooth running of the company is ensured. The purpose of Section 402 is not to put an end to the dispute between individuals, but to keep the company insulated from such individual disputes. The focu....
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.... death of respondent No.5, the present proceeding stood abated as alleged by the respondents. Such a question arose before the Hon'ble Allahabad High Court in the case of J.K. Investment Trust Ltd. v. Muir Mills Co. Ltd. [1962] 32 Comp Case 93. In such a proceeding, a petition under Section 397/398 of the Companies Act 1956 was filed against the Company and 7 others seeking various reliefs including removal of some directors from their office. Respondent No.5 therein, however, died during the pendency of the proceeding. 210-211. Thereafter, a petition was filed for bringing on record as many as 5 (five) persons who are said to be personal heirs and legal representatives of the respondent No.5 therein. Such application was oppose to by the proposed heirs and they did so mainly on the ground that cause of action giving rise to the petition did not survive on the death of deceased predecessor. Therefore, there is no question of heirs of respondent No.5 being impleaded as party respondents in the aforesaid proceeding. Being faced with such situation, the Hon'ble Allahabad High Court framed as many as 3 questions one of which runs as follows: - "Whether in a proceeding like ....
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.... Court too concurred with the finding of the Hon'ble Allahabad High Court in the case of J.K. Investment Trust Ltd. (supra). Such decisions leave no manner of doubt that in a proceeding under Section 397/ 398, it is not permissible to implead the heirs of legal representative of deceased Director and to continue the proceeding against them. 213. It is worth noting that the Hon'ble Andhra Pradesh High Court in case of Nalam Satya Prasad Rao v. Vinipamula Lakshmi Dara Sihma Sastri [1991] 70 com cas 303 also held that on the death of one of the respondents, a petition under Section 397/398 cannot be dismissed-provided----that other persons who allegedly perpetuated oppression on the petitioners, in league with deceased respondent are already on record. In the aforesaid proceeding, the alleged oppressive acts were directed-not only-against the deceased Managing Director -but also- against his wife and sons, who were already on record on the date of death of the deceased respondent. In such a scenario, it was held that petition under sections 397 and 398 was maintainable. 214. Coming back to our case, it is found that one Sri Madhav Das, who seemed to have been arrayed as responde....
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.... New Delhi in Suresh Kumar Sanghi v. Supreme Motors Ltd, [1983] 54 Comp.cas 235 (Delhi). In Suresh Kumar Sanghi (supra), CLB, Delhi held that where serious infighting among the directors of the company caused serious prejudice to the company and its stakeholders, the provisions of section 398 of the Act of 1956 were attracted. Similar view was taken in the case of Sishu Nath Ranjan Das v. Bhola Nath Paper House Ltd. [1983] 53 Comp Cas 883. In the face of such revelations, I am to conclude that the disputes under consideration no longer remains a directorial dispute as alleged by the respondents. 219. In Kumar Tekriwal v. Unique Construction (P.) Ltd. reported in (2009) 147 Com. Cas 737, it has been held that a directorial complaint can be subject matter of a proceeding under Section 397/398 of the Act of 1956 provided the company in question is a company in the nature of quasi-partnership In the present proceeding, there are enough materials to conclude that the company herein is a company in the nature of quasi partnership. In that view of the matter, the present proceeding is maintainable even if one assumes for the sake of argument that the disputes in question are a director....
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....rd Meeting as director of the company. In that connection, my attention has been drawn to the Article 51 which says that the Government of Assam as long as holds not less than 25 % of the paid-up capital of the company, it would be entitled to have 2 nominee directors in the BOD. 224. Since on 25.11.2009, its paid-up capital in the company was less than 25%, the Govt. of Assam cannot have any nominee director in BOD of the company which means that Mr. Bipul Das (Purported to be Govt. Nominee) had no legal right to remain present at the Board Meeting, held on 25.11.2009. In respect of Mr. Sarat Ch. Kalita, it was submitted that on 25.11.2009, he was not all a director of the respondent company. 225. However, such an argument is founded neither on law nor on fact. We have already found that the respondents had most illegally brought down the shareholding of the Government of Assam from 25% to 6% which was bitterly criticized by the Government of Assam in its letter dated 31.03.2010 (A-ZB) at page 276) and letter dated 11.05.2010 (A-ZB at page 280). Since the shareholding of the Government of Assam was illegally brought down 6%, such illegal reduction in the shareholding of the ....
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....ondents have relied on series of judgments in support of their respective case. I have considered such decisions in the light of materials on record and found that some of the decisions, relied on by the respendents, to some extent support some of their contentions qua infirmities in the case of petitioners, such as, the petitioners coming to the court with somewhat dirty hands or some parts of their case their case being based hearsay evidence etc. 230A. But then, the infirmities, so pointed out by the respondents running in the petitioners' case get slips to total insignificance when one compares such infirmities with the illegalities committed by the respondents in running the affairs of the company. Therefore, such infirmities on their own could cause no serious harm to the case of the petitioners. However, most of the decisions, relied on from the side of respondents, could hardly advance the cause which respondents tried to propound in the present proceeding case. Therefore, in the facts and circumstances of the present case, in my considered opinion, such decisions could not turn the table in favor of the respondents. 231. Now, the question is whether or not the petiti....
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....pital of respondent company from 5000 to 10000 is declared illegal, null and void. (e) Issuances of further shares to some existing shareholders and outsiders on 15.09.2010 and on any other dates, if any, subsequent thereto, are also declared illegal, null and void. (f) The resolutions adopted in the EOGMs, held on 14.11.2009, Board meeting 25.11.2009, are restored. (g) The shareholdings of the shareholders/members in the respondent company as it was on 14.11.2009 are restored. (h) The respondent company shall normally function from its registered office. (i) All the actions, taken by the BOD, headed by Petitioner No.1 are declared valid and stand protected. (j) All the actions, taken by the BOD, headed by R-5 and R-4, to the extent they are inconsistent with the actions, taken by the BOD, headed by the Petitioner No.1 or to the directions, rendered hereinabove, are declared invalid and bad in law. (k) However, the declarations, aforesaid, would not in any way affect the transactions, which the BOD, headed by R-5 and R-4 may have entered into with third party. (l) In view of aforesaid directions, the ROC, Shill....