TaxTMI 
TaxTMI 
2019 (2) TMI 1047
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....der dated 7th December, 2017. 2. The brief facts of the case are that the 2nd and 3rd respondent filed Company Petition No.24/2011 before the Company Law Board, Chennai Bench, Chennai under the provisions of Sections 307, 398, 402, 111,237, 220, 260, 291 and 292 and other relevant provisions of the Companies Act, 1956. After the establishment of the NCLT in 2016, the company petition was transferred to NCLT and renumbered as TCP No.67/2016. 3. 1st respondent company was incorporated on 2.1.1995 with 1st appellant, 2nd appellant, 3rd respondent and Susha Deny as promoters. Prior to 2005, Susha Denny had transferred her shares to 3rd respondent who later transferred 59000 shares to 2nd respondent on 21.2.2005. As per the Annual Return as on 30.09.2005 the share holding pattern of the first respondent is as under (Page 13) Name No. of shares (Rs.10 each) Percentage Status in the appeal K.J. Paul 25000 26% 1st appellant Bindu Paul 10000 11% 2nd appellant P.M. Johny 59000 62% 2nd respondent K.P. Augustine 1000 1% 3rd respondent The above share holding pattern continued upto 31.03.2008 and constituted the base shareholding. As per the above shareholding pattern....
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....earing the parties the NCLT passed the impugned order dated 7th December, 2017, relevant portion of which is as under:- "The allotments of shares i.e. 5,05,000 in favour of Respondent Nos. 2 and 3 made on 25.04.2008 and 11.08.2010 are declared illegal, and the same stand set aside. The Board Meetings purportedly held on 25.4.2008 and 11.8.2010 are not tenable in the eye of law, the same are declared as illegal and all decisions taken there at are set aside. The EOGMs dated 22.01.2011 and rights offer dated 01.02.2011 are declared illegal, null and void and hence, are set aside. The continuance of Respondent No.3 and appointment of Respondent No.4 are declared as illegal, null and void, and hence, set aside. The 1st Petitioner is appointed as Managing Director of 1st respondent company and Mr. K.J. Paul is removed from the position of Managing Director, but he shall perform the duties as Director of the 1st respondent company. Consequently, the said Board of Directors is directed to rectify the Register of Members by restoring the shareholding patter as on 30.09.2005 as shown under para 6(a) of the Petition. Keeping in view the totality of circumstances and intentio....
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....t. 3rd respondent even did not intimate 1st respondent that he was going to Australia. The appellants stated that 3rd respondent has never been in the management of the company. 9. The appellant stated that 2nd respondent has not attended any AGM of the company and nor has 2nd respondent made any enquiry with regard to the convening, conducting and holding of any AGM. The appellant stated that 3rd respondent was aware of what was happening in the company till 2008 and in spite of the matter alleged, made no enquiries till January, 2011. The appellant further stated that before filing of petition no complaint had been made by 2nd and 3rd respondent about not receiving any notices for any general meetings of the company or by 3rd respondent of not receiving any board meeting of the company or not having knowledge of the same. 10. The appellant stated that the NCLT has not given reasons for giving first option to 2nd and 3rd respondent. The appellant stated that there is no evidence on record to show that the company would benefit if 2nd and 3rd respondents are put in management. However, it is stated that it is an admitted fact that under the management of appellant the company has....
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....llotment of 25th April, 2008 was made. 14. The appellant stated that mere lack of notice could not result in the allotment made on 11.8.2010 being set aside. The appellants stated that the 1st respondent was in need of funds and such funds have been utilised by 1st respondent. The appellants reiterated that there is no finding that 1st respondent was not in need of funds when such issue and allotment was made. 15. The appellant stated that the order requiring 2nd appellant not to continue as a director of the 1st respondent cannot be sustained. The appellant stated that if, however, the reasoning in the impugned order to the effect that because 2nd appellant was not a director on 25th April, 2008 and 11th August, 2010 when shares were allotted would result in such allotment being invalid then in that event, the transfers of shares from Susha Denny to 3rd respondent in 2001 and transfer of 59000 shares by 3rd respondent to 2nd respondent on 21.2.2005 would also be struck down as 3rd respondent and 2nd appellant had been appointed directors on 2nd January, 1995 itself and thereafter had never faced the General Body of shareholders and were not first directors. The appellant stated ....
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....an afterthought only after the appellants received the letters dated 1.1.2011 and 12.1.2011 from respondents inquiring about non-receipt of financial statements and notices regarding Board Meetings and AGM'S. The respondents further stated that the postal stamp of filmmaker Satyajit Ray was only released by the Postal Department on 1.3.2009, thus could not have been utilised on the certificate of posting purported to be dated 11.4.2008 (Annexure R-1A and R-1B, Pages 37 to 38). 19. The respondents further stated that the Form 2 for the said share allocation dated 25.4.2008 was filed before the ROC after 26 months on 25.6.2010 (Annexure R-7, Page 47) in violation of Section 75(1) of Companies Act, 1956. The appellants illegally allotted shares to themselves and forged Minutes of Board Meeting dated 25.4.2008 to legitimize this share allocation. 20. The respondents further submitted that the Board Meetings dated 25.4.2008 and 11.8.2010 were convened, for the sake of arguments, as the continuance of 2nd appellant as a director of 1st respondent. It is stated that the said Board Meetings are invalid for lack of quorum as only 1st appellant was validly present in the said Board Meeting....
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....on ledger of the appellants does not match with the Bank statement of 1st respondent. 25. The respondents submitted that when they inquired about non-receipt and non-filing of financial statements and Board Meetings Minutes, the appellants have immediately unloaded several documents with ROC (Annexure R-15, Page 150) including Annual Returns for FY ending 2006 to 2010 which show that all these documents were forged and filed together belatedly. 26. We have heard the learned counsel for both the parties and perused the record. 27. The first issue argued by the Learned counsel for appellant is that the respondents were not interested in running of the 1st respondent and only in 2011 with mala fide intentions to extort money from the appellants filed the company petition before the Tribunal in 2011. 28. Learned counsel for the respondents argued that the respondents were shocked and surprised when they observed after their letter dated 1.1.2011 and 12.1.2011 that 2 illegal share allotments had been purportedly shown to have taken place on 25.4.2008 and 11.8.2010. The respondents further argued that the appellants filed the annual accounts and annual returns for the years ranging f....
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....d 2.9.2009 (Annexure 11D Page 104) were issued from the same Edapally Post Office which is far away from the registered office of 1st respondent when regular, nearby Post Office was there and bears the same postal stamp of filmmaker Satyajit Ray. Learned counsel for the respondents further argued that the postal stamp of filmmaker Satyajit Ray was only released by the Post Department on 1.3.2009, thus could not have been used on the certificate of posting purported to be dated 11.4.2008 (Annexure R-1A and AnnexureR-1B, Page 37 and 38). Learned counsel for the respondents further argued that the Form 2 for the said share allocation dated 25.4.2008 was filed with ROC after 26 months on 25.6.2010(Annexure R-7 Pages 47 to 49). 32. We have seen the letter dated 7.11.2012 (Annexure R-1B, Page 38) issued by the Department of Posts, India thereby intimating that "Department of Post has released stamp on Satyajit Ray (Denomination -300P as part of 10th Definitive series stamp release on 01.03.2009". This establishes that the proof of certificate of posting filed by the appellants is a fabricated one and cannot be accepted. It puts serious question mark on the bona fides of the Appellants. ....
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....d 2008 filed by 1st respondent, she has not retired by rotation and did not seek re-appointment. Therefore, her continuance in office as Director is illegal and invalid. It is noted that the remedy of Section would be dealing with the matter which are normally to be done by the Board on which no application for oppression and mismanagement can be made. Hence the plea of ignoring Section 290 of Act is devoid of any logic. We are in agreement with the NCLT on this issue. 36. The other issue raised by the appellants that the orders setting aside appointment of 3rd appellant (original 4th respondent) is erroneous. The appellants argued that Article 28 of the Articles of Association of 1st respondent does not say that every appointment of a director has to be appointed at an Annual General Meeting. The appellants further argued that there is no requirement that a director appointed at a Board Meeting has to be described as an additional director in the form filed with the ROC. 37. Learned counsel appearing on before of 2nd and 3rd respondent argued that 3rd appellant was appointed as a Director of 1st respondent at the Board Meeting dated 22.1.2011. Learned counsel further argued that....
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.... MSDC Radharamanan Vs MSD Chandrasekara Raja and another (2008) 6 Supreme Court Cases 750 which held as under: "xxxx But, the jurisdiction of the CLB to pass any other or further order in the interest of the company, if it is of the opinion that the same would protect the interest of the company, must be held to be existing and the CLB is not powerless in this regard." 41. On the question of relief, reliefs depend on a particular facts of the case. Such an order should not amount to rewarding the wrong doers and penalise the oppressed party. NCLT, seeing the totality of circumstances, interest of the company and the intention of the parties, has rightly given first opportunity for purchase of shares of appellants to 2nd and 3rd respondent failing which the appellant shall purchase the shares of the respondents. We are of the considered opinion that where the option to purchase the shares is given to the existing management to avoid prejudice to the interest of the respondent (original petitioners) for various reasons such as diversion of funds/siphoning of funds etc then valuation is done on the date of filing of the company petition. On the other hand, where the first option t....