AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 525
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....titute the company by handing over all the collections done from the date of its setting up, etc. 2. The company petition was initially filed by late Shri Arun Bhat, who died on August 1, 2016 leaving behind his son, namely, Mr. A. Mayuresh Bhat, who is also director of respondent No. 1-company, as his legal heir. Accordingly, he has filed I. A. No. 19 of 2016 in the petition by, inter alia, seeking to permit to implead himself in the place of his father, and to prosecute the case. Accordingly, the Tribunal vide order dated February 16, 2016 passed in I. A. No. 19 of 2016 permitted him to be impleaded as prayed for. 3. The brief facts of the case, as mentioned the company petition, and discerned from the pleadings of both the parties, which are relevant to the issue in question, are as follows : (1) M/s. Banana County Resort P. Ltd. (hereinafter referred to as respondent No. 1-company) is a private limited company incorporated under the provisions of the Companies Act, 1956 vide Registration No. 08/ 26313 of 2000 on February 1, 2000 having its registered office at Billigadde, Chandguli Village, Yellapur (North Kanara)-581 359, Karnataka. Its authorised share capital ....
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....his son (who is also a director). The resort was constructed and commenced the business with effect from April, 2005. (6) The meeting of the board of directors of the company was held on April 15, 2005 wherein, apart from appointment of new staff members of the company, the following issues were agreed upon : (a) It was agreed that Shri Arun Bhat shall provide list of staff mem bers of Anubhav Tours deputed to Banana County Resort ; (b) Shri M. G. Hebbar being the managing director of the company shall be in charge of administration of the company ; (c) Informing Registrar of Companies about appointment of Dr. Mrs. Sheela Arun Bhat as additional director of the company. (7) The petitioner who was the chairman observed various misman agement and negligent acts in relation to the day-to-day administration of respondent No. 1 as follows : (a) Getting KEB permanent connection for the resort as it has only temporary connection ; (b) Obtaining Tourism Approval Certificate for the resort for claim ing luxury tax exemption ; (c) Obtaining Hotel Licence for the resort which is running without licence for last 10 months ....
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....iled letter on September 1, 2006 listing out the dis crepancy in the term loan, wherein, the company had not complied with number of statutory requirements. It is evident from the said, letter that respondent No. 2 and his associate respondents had totally failed in man aging the affairs of the company which resulted in non-compliance and non-payment of term loan. Respondent No. 2 had written a letter dated October 27, 2006 wherein, it was stated that the company has taken steps to remove Shri Arun Bhat from the post of director of the company. There after, the bank issued "final notice" dated November 1, 2006 and another letter dated November 3, 2006 which makes it clear that the affairs of the company have been mismanaged and the irregularities pointed by the bank have neither been complied nor steps have been taken to furnish the required details. In a letter dated June 21, 2008 Saraswat Co-operative Bank has issued notice to the company as "loan defaulters" and the amount pending is more than Rs. 20 lakhs. (11) The company's bank account with Saraswat Bank, Hubli Branch is being operated by respondent No. 2 with his single signature and this account had been irregu....
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.... Court Judge, Yellapur under Order 39, rules 1 and 2 read with section 151 of the CPC. The hon'ble Judge heard the matter and accepted the sub missions made by the petitioner and issued the order dated April 21, 2007 wherein, it was held that on the basis of prima facie case, it would be appropriate to restrain respondent No. 2 from exercising the authority as managing director of the company pending the disposal of the suit. How ever, the respondent filed an appeal against the above order before the hon'ble High Court of Karnataka, which granted stay on the basis that the issue involved has to be raised before the Company Law Board under the provisions of the Companies Act, 1956. The High Court specifically ordered that proceedings can be commenced before the Company Law Board. 4. The company petition is opposed by respondents Nos. 1 to 5 by filing statement of objections dated August 11, 2009 by, inter alia, contending as follows : (a) It is stated that while the petitioner himself had agreed to procure the necessary materials required for the construction of the resort, he had instead of personally procuring the said materials had outsourced the said work to ....
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....any in place of respondent No. 2. (b) Increase the petitioner's shareholding in respondent No. 1-company. (c) Appoint the petitioner's wife Smt. Sheela Bhat as additional director of respondent No. 1-company. In this regard, it is stated that respondent No. 2 was already appointed as the chairman of respondent No. 1-company at the board meeting held on February 3, 2000 in which the petitioner had participated and had appended his signature next to his name. (e) It is stated that as per the memorandum of understanding entered into between the petitioner and respondent No. 2 individually, the peti tioner was supposed to give regular business to respondent No. 1-company. On the contrary, that his intention was not to promote the business of respondent No. 1-company but to make profits for his own organiza tion. It is stated that the petitioner had without obtaining prior approval from the board of directors of respondent No. 1-company has unautho risedly filed Form 32 in respect of appointment of his wife Smt. Sheela Bhat as additional director of respondent No. 1-company with the Registrar of Companies, Bangalore. During the 5th annual gene....
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.... other hand, it is the petitioner, who being a minority shareholder and director was not co-operating with the other directors in running the day-to-day affairs of respondent No. 1-company. The balance-sheet for the year ended 2006-07 and 2007-08 shows that respondent No. 1-company had substantial profits only due to the efforts of respondent No. 2 since the petitioner did not give any business to respondent No. 1 for a period of three months and had siphoned off of the funds of respondent No. 1-com pany to his personal account and also failed to remit the business proceeds into the loan account of the company. (j) It is stated that neither the petitioner nor his son Shri Mayuresh Bhat used to attend the board meeting/annual general meetings/extraor dinary general meeting as and when notice of the same were issued to them, and they used to give flimsy excuse to the effect that they are fre quently travelling and that they are not in a position to attend the meeting. Thus, these acts clearly goes to prove that the petitioner is more concerned about the development and welfare of only his company, viz., Anubhav Holidays and he is not bothered about respondent No. 1-company. ....
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....ted could not be ascertained as the books are not being maintained properly as pointed out by the CA in his report to the Company Law Board. (b) Appointing additional director, without consulting the petitioner is objectionable, while the instant petition is pending, would amount to oppression and the duration of such appointment would not change the nature of the oppressive act. Further, it is stated that Shri Venkataramani has been appointed as additional director during 2016 when Shri Arun Bhat was critically ill and had been under continuous treatment and hos pitalisation leading to his death on August 1, 2016. (c) It is also stated that the respondent has created a company by name "Malenadu Holidays" and named his wife the proprietor of the said company in order to create a smoke screen to hide his misdeeds. The peti tioner submits that the said company is a sham and has been created so that the funds can be diverted from the respondent-company. It is stated that the diversion of business through Malenadu Holidays owned by respondent No. 2 clearly shows that the respondents should not be allowed to buy the shares or get the benefit of a share valuation done. ....
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....ioner has violated the terms of the memorandum of understanding by not giving business to respondent No. 1-company. (c) It is stated that the investigation report submitted by M/s. N. Nithyananda and Co., chartered accountants, appointed by this hon'ble Bench, with mutual consent of the parties, has been disputed by both the petitioner as well as the respondents. It is also stated that on a cursory glance of the investigative report provided by the chartered accountants does not show any irregularity or misappropriation of funds as alleged by the petitioner in his petition. The original petitioner late Shri Arun Bhat, who had filed the petition, has not come with clean hands and suppressed material facts and is guilty of misappropriation of funds. (d) The legal heir Shri Mayuresh Bhat, who is the son of late Shri Arun Bhat, is not interested in the day-to-day affairs of respondent No. 1- company, and this is proved by the fact that he has not attended any single board meeting since the date of incorporation of the company, and in fact, he is disqualified to continue as director as stipulated in the provisions of Companies Act, 1956 and the Companies Act, 2013.....
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...., vendors, customers, and any other dispute under Central/State Legislations or on any other account. The petitioner has contributed total amount of Rs. 1,34,97,401 whereas Sri Mayuresh Bhat has contributed of Rs. 1,57,900 to respondent No. 1-company. Therefore, it is prima facie is concluded that the affairs of the company, are more or less satisfactorily being conducted, and there cannot be any conclusive evidence of any possibility diversion of funds of respondent No. 1- company. However, the conclusion of report was disputed by both the parties by pointing out various discrepancies in the report. 12. It is a settled position of law that the acts of oppression and mismanagement should not only be existing at the time of filing company petition, they should also being continuous harsh and burdensome leading to the conclusion that the directors action lack in probity and those grounds should justify winding up of the company under the just and equitable clause. The main company petition is filed by Mr. Arun Bhat, by making various allegations as per his knowledge and sufferings at the hands of directors of the company. However, unfortunately, the original petitioner (Mr. Arun B....