TaxTMI 
TaxTMI 
2018 (5) TMI 1571
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....inding 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 capital of the company was Rs. 300720/- of 3072 nos. of equity shares....
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....d 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-5, the Managing Director of the company, issued notice dated 21-10-2009 convening the....
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....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 the respondent No.5 from the office director /MD of the company as well as the appointment of Deba Kumar Hazarika (petitioner No.....
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....ere 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 issued 1455 Nos. of equity shares of Rs. 100/- each to the respondent No.5 himself and to his associates without consent of all the existing sha....
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....leging 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 petitioners as well as respondents. 34. The respondents also claimed that most of the facts incorporated in the petition were not incorrect, false and misleading. They also contended that the peti....
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.... 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 remaining their rights) are invalid and void ab initio?" 38. While issue Nos. 3, 4 and 5 were answered in favour of the appellants/petitioners, the other issues were remanded to the learned CLB, Kolkata for taking decision thereon in accordance with prescription of law. 39. ....
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....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 false and frivolous litigation against the persons in-charge of management of the respondent company to get them out of management. Since, very basis of the petition was false, the petition under consideration is required to be dismissed on this count alone. 45. The respondents did not disp....
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....d 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 the Board meeting was 3. 52. According to the respondents No.3 and 4, there was an EOGM of the shareholders of the company on 02-03-2010 and in that EOGM, the petitioners No.1 and 2 were removed from their offices and Form 32 in regard to cessation of the petitioners No.1 and 2 as being directors of th....
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....e 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 under Section 397/398, such petition is required to be dismissed at the very threshold. 59. The learned legal representative for respondent Nos. 3 & 4 has submitted the following decisions in support of the various claims, he canvasses before the Bench during the course of arguments: - 1. S.P. Jain v. Kalinga Tubes ....
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....h 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 also their case that the dispute that has been projected through the petition under consideration, does not qualify to be a dispute as contemplated in Section 397/398 of the Act of 1956 Such a contention can be found in Para 3 (ii) and 3 (iv) of the reply. It is also the case of the respondents No.11 and 12 that the disputes in question are in the nature of dictatorial disputes and it is repeatedly held that dictatorial dis....
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....vant 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 the contentions, he advanced before this Bench, the learned counsel for the respondent No.15 too relied on following decisions: - 1. The decision of the Hon'ble Kerala High Court in Palghat Exports (P.) Ltd. (supra) 2. P. Ramkumar (M.F.A. No. 64 of 1993) v. T.V. Chandran 26/05/1993 3. The decision of the Hon'ble Calcutta High Court in Babulal Madhavji Varma v. New Standard Coal Co. (P.) Ltd. [1967] 37 Comp Cas 446 (Cal) 4. Rajasthan ....
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.... 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. Kamal Kumar Dutta, [2006] 129 company case 1 6. M.S.D.C. Radharamanan (supra) 7. Lohia Properties (P.)Ltd. v. Atmaram Kumar, [1993] 4 SCC 6 8. Gujarat State Road Transport Corpn. v. Ramanbhai Prabhatbhai [1987] 3 SCC 234 9. Rajeev Kumar v. State of U. P. 2006 1AWC 34 10. M.C.D. v. State of Delhi AIR 2005 SC 2658 74. I have heard the arguments, advanced by the learned counsel/legal representatives appearing for the party/parties, they represent. It may be stated here that the Hon'ble High Court while rendering the judgment in Comp. Appeal No....
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.... 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 removed by the shareholders in the general meeting of the company and such appointment or removal is done by competent and qualified shareholders who constitute simple majority in the meeting which is summoned to appoint or remove directors. 81. Therefore, even if a director is appointed by shareholders holding 64% of paid-up capital in the company, he can be removed by shareholders holding 28% of paid-up capital in the company-provided-in the meeting which is so summoned to remove such a director, such shareholders constitute majority of the voters who are competent to vote. In other words, the majority sharehol....
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....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. However, such allegations, according to the respondents, are nothing but blatant lie. In that connection, it has been stated that the information aforesaid, was not collected by the concerned newspapers authorities from their own sources. Quite contrary to it, authors of those allegations, which were published in the newspapers were the petitioners No.1 and 10 since they not only fabricated such reports but also furnished such information to the various newspapers for wide publication/circulation so that such newspaper reports could subsequently be made foundation of a proceeding under Section 397/398. Therefore, the very allegation that ....
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....emoving 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. 93. I have considered such submissions having regard to the arguments advanced from the side of the petitioners. Though the petitioners made a feeble attempt to dispute the aforesaid claim, more particularly, the allegation of their being served with the notice, issued from the office of the Principal Civil Judge on 13-11-2009, yet, the materials on record, more particularly, the letter dated 14-11-2009 (Annexure XIII to the reply of respondent Nos. 6 to 10,13, 14), unmistakably demonstrates that the order was duly communicated to the petitioners. 94. In spite of that, they have taken a resolution on item No.2 in total violation of directions of the....
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.... 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 considered such submissions in the light of the statement made in the pleadings and also in the documents annexed therewith. 100. On perusal of those records, more particularly, Annexure - J to the petition, it is found that the petitioner No.1 was appointed as director of the company in the EOGM held on 14-11-2009- not under any other provisions of law-but- under the provision of Section 284(5) of the Act of 1956. Such disclosures again certain to extent shows that the petitioners too did not come to the Court with clean hands. 101. The respondents strenuously contended that the petitioner No.1 and 10 were employees of the company -but they were dismissed from s....
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.... 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 respondent company. In support of such contention, the petitioners have relied on various newspaper reports which were annexed with the petition under consideration. 107. Now, let us see, which sides of the story is correct. On the perusal of record, it is found that the petitioners have heavily relied on the newspaper reports to bring home the allegation of misappropriation of PF Contribution and evasion of taxes. But it is a settled proposition of law that newspaper reports are secondary evidence and therefore, such newspaper reports are inadmissible in law unless such reports get graduated to the status of primary evidence. 108. It is not in dispute that the petitioners did make ....
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....e 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 contention that all the allegations are only against the respondent No. 5, is not correct. For ready reference, paragraph XXXI is reproduced below:- "xxxi. that the respondent No. 5, having mala fide intention and to deceive the other shareholders, resigned from the post of the Managing Director as reflected in the ROC records w.e.f 16/02/2011 and a stranger naming one Sri Madhav Das has been appointed as the Managing Director of the Company by a board Meeting dated 16/02/2011 and ROC records have been tempered showing forged issue of new shares without the knowledge of the other existing Shareholders of the Company. Sri Madhav Das, the stranger, forcible occupying the office of the Managing Dir....
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....nt 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 directed only against the respondent No.5. 117. Even if we assume for the sake of argument for a moment that all the allegations in the petition were targeted at the respondent No. 5 who was MD of the company during most of the time under consideration- yet then --- there are plethora of materials on record to conclude that R-5 as being the MD of the company -conducted affairs of the company- not for himself alone- but -for the other directors as well who were on the board during the time under consideration and therefore, the other directors of the BOD, which was headed by the respondent No. 5 are vicariously liable for the alleged illegal acts/conducts of the MD of the company who was admittedly the R-5 du....
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.... 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 doing their duties in accordance with the terms of employment. In that view of the matter, the respondent company or for that matter, the BOD are also bound by the acts/conducts of MD on the application of principal -agent relationship to them and also in view of vast powers conferred on the MD under Section 2(26) - unless and until --of course--they succeed in disowning those acts/conducts, which are attributed to the MD and which were found to be illegal and beyond the terms of their employment. 122. In our instant case, the other directors of the BOD, headed by D.N. Singh, had never questioned the alleged illegalities committed by R- 5. Quite interestingly, they supported each and every conduct of R-5 which is alleged to be illegal. That ....
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.... 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 and MD as well as the removal of the petitioner No.2 from the post of director of the company, it has been submitted by the respondents that the petitioners had removed the R-5 from the post of the director and MD of the company on the basis of resolution, adopted by some of the shareholders of the company in the EOGM, held on 14-11-2009. 128. But such resolution was totally illegal and non-est in law since such a resolution to remove the R-5 from the post of director and MD of the company was adopted on 14-11-2009 in complete disregard to the lawful direction of the court of law requiring the petitioners not to make any discussion on the item No. 2 in the Notice dated 21-10-2009. Since the very removal of the R-5 from the office of the director and....
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....o 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 danger of enormous size and dimension which could even throw the entire society to a great turmoil and chaos. 134. In the setting of the disputes herein, one would also do well to remember the time tested adage which proclaims that one who tries to correct one wrong with another wrong, in fact, unknowingly invites wrong with more devastation. However, unfortunately, the respondents were hell bent in repeating unfailingly what the adage, aforesaid explicitly forbids to do---since---instead of rushing to the authority concerned complaining such illegalities and also seeking appropriate relief therefrom, the respondents took upon themselves the job of correcting the aforesaid alleged illegalities by adopting reverse resolutions on 02-03-2010 which, as stated above, are ....
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....ctured 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 order of the court rendered on 13-11-2009 in Misc. (Arb.) No.2009 under which the R-5 stood removed from the post of director and MD of the company---which is well evident from the judgment dated 09-05-2016 in Com. Appl.03/2014.The relevant part thereof is reproduced below: - "In any case on withdrawal of the civil suit, the injunction order automatically stood vacated on 01-03-2011. Therefore, there was no bar at all for the Company Law Board to examine the grievance raised by the appellants in the company petition on merit." (para 23) 140. It is worth noting here that following the decision of Hon'ble Apex Court in Life Insurance Corporation of India v. Escorts Ltd. AIR 1986 SC 1370 the learned CLB, Chennai, in case of N. Thirumurthy v. Sree Pavithra Steel (P) Ltd., repor....
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....ts 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 under the plea that since the very act of removing R-5 from the post of director and MD in violation of the order of the court is illegal and non-est in law, therefore, such a resolution was wholly incompetent to oust R-5 from the posts, he held on 14-11-2009 and consequently, all the appointments, subsequent to the removal of the R-5, are equally and non-est in law. Sadly, enough, such a plea is already held to be wholly unequal to the task of taking the wind out of the sail of petitioners. Our foregoing discussion makes such position absolutely clear. 145. Viewed from this angle, it would appear clear that in the removal of the P-l and P-2 from their posts, the respondents paid no respect whatsoever to the laws/rules and procedures dealing with appointment and removal of the directors and therefore,....
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....ioned 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 situation, it ought to have run for cover and knock the doors of the concerned authority, legally competent to address the grievances of the respondents, occasioned by sudden and abrupt freeze of the accounts in the name of the company. 151. Surprisingly enough, instead of rushing to the appropriate authority, they took the extreme steps in the form of increase of authorized capital of the company and also to issue fresh shares to the persons some of whom were strangers to the company on the dates of issuance of such shares although some of those fortunate allottees were existing shareholders too. Such revelations, however, become tell tale testimonies of increasing the authorized capital of the company and so also the issuance of further shares on 20-02-2010 and 15-09-2010 most illegally and most unlawfully. 152. T....
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....f 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 prescriptions in Article 28 makes such a conclusion inevitable. Such practice, according to respondents, has diluted the conditions, enumerated in the Article 28 of the AOA, to the extent of securing the consents of all the existing shareholders before issuance of shares to the outsiders. 158. The respondents also contended that since the petitioners themselves became the shareholders of the Company only on violating the provisions of aforesaid Articles, therefore, now, it does not lie in their mouth to contend that the issuance of shares in violation of Article 28 is illegal and therefore, same is unsustainable in law. This is because of the fact that a person cannot be allowed to approbate one thing at one stage and reapprobate the same thing at another stage. 159. It is true that a person cannot be allowed to approbate and reapprobate sa....
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.... 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 without following the mandate of the Article 28. 163. But then, record reveals that such allotments were made in distant past. The various charts, annexed with the replies from the side of the respondents, make it very clear. However, till date, no one-- who could have questioned such allotments -had initiated any proceeding questioning the allotment of shares to the petitioners in violation of mandate in Article 28. Such a revelation only serves to show that the persons who were entitled to question such allotments of shares to the petitioners chose not to rake up such issue in time. 164. Rather, they chose to sleep over the same for a pretty long period of time. Therefore, such a matter cannot be allowed to be agitated after the elapse of such a long period, and that too, in a proceeding which was initiated- not by the respondents -but- by the petitioners in....
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..... Sarat Chandra Kalita 05 Nil 10 15 16. Pratul Bhuyan Nil 100 100 200 17. Pranab Das 70 Nil 300 370 18. Kalyan Kumar Das 150 100 100 350 19. Amiya Kalita Nil 20 Nil 20 20. Joydeep Bhuyan 10 15 Nil 25 21. Tilak Deka Nil Nil 500 500 22. Dinesh Das Nil Nil 250 250 820 1445 5260 7535 169. A bare perusal of the chart above, unmistakably demonstrates how ruthlessly the requirements of law as well as the prescription in Article 28 of the AOA were thrown to the wind in allotment of new shares to some existing shareholders as well as to outsiders on 20-02-2010 and on 15-09-2010. Such unbelievably partisan allotments of new shares to some existing shareholders and outsiders on the aforesaid dates speak nothing else but company being run in accordance with the whims and fancies of BOD which was piloted by the respondent No. 5. 170. Such tales once again become more and more proof to the fact that the main motive of the respondents in increasing the authorized capital of the company as well as in allotting new shares to some existing shareholders and new persons on 20-02-2010 and 15-09-2010, was to gain majority, albeit, ille....
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.... Industry Department. Govt, of Assam is holding 6 % shares in the said company. But, all of a sudden, without the knowledge of the Govt. Nominee Director, the said shareholding is reduced to 6%. Furthermore, under no circumstances the existing shareholdings of the Industry Department, Govt, of Assam cannot be reduced from 20% to 6% without the consent/knowledge of the Govt. Nominee Director. As such, the Managing Director of M/s Assam Chemical & Pharmaceutical Pvt. Ltd. may be directed to regularize the filing of FRM -32 in the name of Sri Bipul Das as Govt, nominee. Yours faithfully, [BIPUL DAS) Joint Director (Extn) 0/0 the Commissioner of Industries & Commerce, Assam, Guwahati-21" 172. However, the respondents claimed that such letters cannot be looked into in the present proceeding -since-- state of Assam is not a party in the proceeding under consideration. However, such an argument is liable to be rejected being found unsustainable in law. It is true that the Govt, of Assam is not a party to this proceeding. But then, there are enough materials on record to show that the Govt. of Assam, being the shareholder, of the company, took active interest in the affairs of c....
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....re alluded to hereinbefore. Since the respondents have questioned the maintainability of present proceeding on various grounds, I propose to consider such allegations one after another and the allegation that this proceeding is premised on past and past actions alone which cannot provide the fulcrum of a proceeding under Section 397/398 is first taken up for consideration. 178. The respondents strenuously argued that the allegations, incorporated in the petition under consideration took place well before 2010 but the instant proceeding was filed only on 12-10-2011. More importantly, all those allegations in the petition are past acts or actions without having any continuous effect and, therefore, in terms of law laid down in Section 397/398, the past conducts/acts cannot be made the basis of a proceeding under section 397/398 of the Act of 1956. 179. Such contention was disputed by the learned counsel for the petitioners who claim that though the alleged illegal acts/conducts, incorporated in the petition occurred prior to 2010 ---yet---almost all those alleged illegal acts carry continuing effect and as such, the argument to the effect that all the allegations in the petition ar....
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....he petitioner must also establish that winding up of the company would affect adversely the petitioner. 184. According to the respondents, the petitioners had completely failed to make out those conditions, so specified in section 397 in the case under consideration. However, such contentions, on the part of respondents, were disputed by the learned counsel appearing for the petitioners arguing that there are enough materials on the record which overwhelmingly demonstrate that all the requirements of section 397 of the Act stands fulfilled in letter and spirit in the present proceeding. 185. I have considered such submissions having regard to the materials on record as well as laws holding the field. On making such an exercise, it is found that the materials produced from the side of petitioners have empathetically established that the subject matters herein are the disputes between the two sets of directors---or---for that matter -between two sets of shareholders. 186. But then, disputes, aforesaid, are so damaging and harmful that such disputes have dragged again and again two sets of directors---nay---two sets of shareholders or for that matter, the company itself to various ....
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.... quite clear. 191. However, when one looks at the reliefs, sought for, the relief No.1 in particular, he would also find that though the cause title of the petition did not give any inkling about it being a petition under section u/s 111 of the Act -yet-the petitioners had prayed, of course, quite vaguely a relief which can be made available only in a proceeding under section 111 of the Act of 1956-and that too- when the petitioners thereto had paid the required fees therefor which is, unfortunately, not the case in the present proceeding. This is one more reason as to why the present petition needs to be overthrown. 192. Before addressing aforesaid allegations, I find it necessary to have a look at the reliefs, sought for, in the present proceeding. On considering the reliefs, sought for, in the present petition alongside the various averments, made in different parts of the petition, including the cause title thereof, it is found that it is true that there are some infirmities in the petition in describing the provisions of law under which the present petition was filed. It is equally true that there are some shortcomings in describing the reliefs, sought for, in the proceeding....
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....nt carries conviction. It may be stated here that on being removed from the Office of the director and MD of the company, the R-5 had approached Civil Court by way of T.S.No.04/2010 seeking, amongst other things, a decree declaring the resolution dated 14-11-2009 under which the R-5 stood removed from the Offices aforesaid was null and void. In that suit, respondent company was the only defendant. In due course, said suit was decreed on admission vide judgment and decree dated 26-10-2010. 198. Subsequently, the petitioner Nos.1 & 7 instituted another suit questioning the legality/propriety of the judgment and decree rendered in T.S.No.04/2010 alleging that the decree in T.S.No.04/2010 was a nullity in law since said decree was rendered in complete violation of the various rules and procedures holding the field. Equally importantly, such decree was rendered in violation of the principle of natural justice too. Such a suit was registered as T.S.No.302/2010 and now awaits adjudication. 199. According to the respondents, the very basis of the present proceeding is the resolution, adopted in EOGM held on 14-11-2009 under which the R-5 was removed from the post of director and MD of th....
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.... invoking the power, conferred on it under Section 402 of the Act of 1956, But then, the Civil Court is wholly incompetent to grant such reliefs in the suit pending before it. Such revelation is one more proof of T.S.No.302/2010 having no bearing on the maintainability of the proceeding under consideration. 204. The question whether the matter before the CLB in a proceeding under Section 397/398 and the matter before the Civil Court can be one and same, and if so, whether the proceeding before the CLB is required to be stayed had come up for consideration in M.S.D. Chandrasekar Raja v. Jayabharath Textiles Pvt. Ltd And Radha Ramanan, v. Jayabharath Textiles (P.) Ltd. [2013] 181 Comp Cas 472 (Mad). On considering the various laws holding the field, Hon'ble Madras High Court came to the conclusions which are as follows: "74. A careful perusal of the parties who are before the Company Law Board as well as the Civil Court and a comparison of the reliefs sought both before the Civil Court and before the Company Law Board would show that some of the reliefs sought before both forums, as between the same parties, overlap a little. For instance, before the Civil Court, the son is seekin....
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....ssues arising directly and substantially before the Civil Court and the Company Law Board cannot be said to be the same, so as to warrant a stay of the proceedings." 205. The above decision of Hon'ble Madras High Court in M.S.D. Chandrasekar Raja (supra) leaves no manner of doubt that the present proceeding is maintainable despite pendency of a title suit before the Civil Court and in spite of some matters herein is incidentally connected with matter before the Civil Court in T.S.No.302/2010. (e) 206. The respondents urged the Bench to dismiss the company petition alleging that the present proceeding cannot be allowed to continue after the death of R-5 who admittedly died during the pendency of the present proceeding, more so, when such facts were within the knowledge of the petitioners. Since the petitioners did not take any step in time to substitute the R-5 with his legal representative(s), the present petition stood abated on the expiry of the period, so prescribed under the law for bringing the LRs of the deceased respondents on record. 207. Such contentions were opposed to by the petitioners alleging that argument on this score was structured more on surmise than on law--....
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....ed that the intention of the Legislature in enacting the sub-section was to arm the Court with full powers if it was of opinion that the situation mentioned in Sub-section (1) of Section 398 had arisen. But the powers so widely conferred could be utilized only to bring to an end the situation which had already arisen or to prevent the matter complained of or apprehended continuing in future. If the section stood alone it could not be possible under its provisions to enforce some past liability of a director which may have arisen on account of his act, omission or negligence. That is why it became necessary to enact Section 406 and to provide in it that even in relation to an application under Section 397 or 398, Sections 539 to 544, both inclusive, shall apply in the form set forth in Schedule XI. As the special excludes the general, this necessarily implies that if in proceedings under Section 397 or 398, it becomes necessary to enforce the past liability of a director recourse must be had to the provisions of Sections 539 to 544 in their amended form and without having recourse to those sections it is not possible under the general powers of Section 398 to enforce that liability.....
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....been working as above till the date of filing of the present petition and beyond. In view of our foregoing discussion, therefore it needs to be concluded that on the death of R-5, this preceding cannot be dismissed, as prayed for by the respondents. (f) 215. The respondents have forcefully contended that the disputes which have been projected through the petition under consideration are nothing but directorial disputes and therefore, such disputes cannot form the substratum of a proceeding under section 397/398 of the Act. The aggrieved party, if any, may approach civil court seeking appropriate relief. In that connection, my attention has been drawn to the observation made by Hon'ble High Court in Comp Appl. No.03/2014. It is worth noting that Hon'ble High Court in Comp Appl. No.03/2014 opined that the dispute in the company petition is in the nature of a directorial dispute. 216. A close examination of the same from various angles would, however, reveal that disputes herein did not remain a directorial disputes simpliciter. It travelled far beyond the parameters of simple directorial disputes -since -there are enough materials on record to show that such disputes had gone to s....
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....ition. Law does allow a person to file a composite petition -but then- he is to pay separate fees for each of such reliefs. However, in the present proceeding, the petitioners had paid fees for relief qua accusation u/s 397/398 of the Act. He paid no fees in respect of relief u/s 111 of the Act of 1956 which is fatal-according to the respondents. 221. It may be stated here that it is no longer res Integra that non-payment of fees cannot be made a ground to reject a suit. When it is found that no fee was paid in respect of some reliefs, sought for, the court is to realize such fees before granting the relief, sought for. On application of such a principle to this proceeding, it is found that it would be entirely inappropriate to dismiss the present proceeding only for non-payment of fee in respect of relief under Section 111, if the proceeding under consideration is otherwise found tenable in law. (h) 222. The respondents, particularly the respondent Nos .3 and 4 further contended that the purported Board Meeting held on 25-11-2009 in which the P-1 was appointed as MD of the company, was invalid in law--- since--- the Board did not have the requisite quorum to appoint P-l as MD o....
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....apital of the Government of Assam comes down to 25%, it would automatically be divested to have any representative in the BOD. In my opinion, what such an Article says is that in such an eventuality, the State of Assam could not have two nominee directors in the Board meaning thereby that even if the paid-up capital of the Government of Assam comes down to 25%, it would still retain is right to have one nominee director in the Board. 227. Therefore, even if, one considers that Mr. Sarat Ch. Kalita had no locus standi to remain present in the Board Meeting held on 25-11-2009, there were 3 other directors, competent to be present in the board meeting aforesaid, they being P-1, P-2 and Mr. Bipul Das (Govt. nominee) and therefore, any resolution adopted in such a meeting cannot be called into question for being adopted in violation of the conditions in Article 64 of the AOA. Resultantly, the above allegation too cannot escape being found unsustainable in law. 228. One may note here that the respondents had also claimed that the appointment of the petitioner No.1 on 14.11.2009 was illegal since such appointment was done in complete violation of direction in 284(5) read with 284(2) of ....
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....f coming to the court with dirty hands. However, when one compares the illegalities committed by the parties hereto, he would find that the hands of the respondents are more soiled than that of the petitioners. 232. Our forgoing discussion has made such position absolutely clear and therefore, same needs no further restatement here. Suffice it to say, the very act of R-5 in rushing to the court seeking an injunction order to foil the holding of EOGM of the shareholders, called on l4.11.2009, (which is considered to be extremely essential for corporate democracy) had triggered a series of serious acts and counteracts, initiated by the parties hereto, which unfortunately almost threw the company out of gear. 233. Most importantly, the illegalities committed by the respondents were so huge and enormous that such illegalities reduced shareholders with 64% shareholding in the company to hopeless minority on 15.09.2010 and all these were done in complete disregard to the prescription of law as well as inviolable directions in MOA and AOA. What is equally important to note is that in such illegal exercise of powers, the respondents had changed the composition of BOD in such a way that t....