TaxTMI 
TaxTMI 
TaxTMI 
2007 (5) TMI 671
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....and conveniences; to purchase, take on lease or tenancy or in exchange hire, renew, otherwise acquire and hold any estates or interests and to let or sublet in whole or in part, develop, manage and exploit any lands, buildings, machinery, plant and any real and personal property of any kind; to carry on fabrication jobs such as trusses, purlins, columns, frames and other structurals. The authorised share capital of the company was ₹ 25,00,000 comprising 25,000 equity shares of ₹ 100 each. The petitioners hold 12,250 shares working out to 61.25 per cent of the paid up share capital of the R-1 company. 3. Shri Virender Ganda, the Counsel for the petitioners alleged that the appointment of R-4,5 and 6 as directors was made on 1-12-2004 with effect from 1-3-2005 without complying with the provisions of law; it aims at creating new majority in the Board of Directors; the petitioners admittedly hold more than 60 per cent of the equity shares and, therefore, it was unlikely for them to allow the appointment of Directors as alleged; the appointment deserves to be set aside. 4. As regards the removal of P-1 as Director, Shri Ganda contended that sections 190 and 284 of the Act....
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....Oppression is illegal. 6. Further, the counsel for the petitioners argued that the Annual return dated 30-9-2005 (as per page 93 of the petition) clearly indicates the forgery showing the changes made in the shareholding of Mr. J.K. Paliwal, P-2 (from 5,100 to 0100) and of Mr. Ajay Kumar Paliwal, R-3's (from 3,255 to 8,255) both in words and figures; the transferees are indicated as R-3 and R-5 in para 21, pages 24 and 25 of R-3's reply, whereas the share transfer deed as produced and the Annual Return shows the transferee as R-3 only; no share transfer deed was produced till 31-5-2006 despite repeated insistence by the petitioners; no original share transfer deed has been produced till date; so called certified true copy of share transfer deed by Notary Public which produced across the Board was without any index or supporting affidavit. It suffered from several defects; (i) signatures of petitioner No. 2 are materially different and apparently forged; (ii) there is overwriting on the date of execution and the value of share transfer stamps; (iii) stamp duty was not paid as per law; and (iv) there is no endorsement on behalf of the company on the share transfer deed approving or ....
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....ere is no reply/document/affidavit on record from Respondent No. 3. (iv)The explanation given by Respondent Nos. 2 and 4 cannot be relied upon and that, there is no reply from any of the respondents till date leading to the admission of siphoning off funds. 10. Shri Virender Ganda, Counsel for the petitioners while replying to the respondents' contention regarding defects in verification of this petition pointed out that the contention has been raised without any averment/statement made by any of them in any of the pleadings. The objections have, however, been rectified by filing a supplementary affidavit. (Reliance was placed upon the judgment by the Apex Court in Associated Journals Ltd. v. Mysore Paper Mills Ltd. [2006] 69 SCL 311 . 11. Shri V.N. Sharma, Counsel for the R-1, 2, 4 and 5 argued that the present petition under section 397/398 of the Act, is not maintainable as the Petitioners have failed to show that the affairs of the company are being conducted in a manner oppressive to any member/creditor of the company or there are grounds for the winding up of the company which are just and equitable and the winding up would prejudice the petitioners. On the contrary, it w....
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.... not being shown to the respondents and to the CLB. 13. Responding to the allegation of illegal removal of the P-1 as director of the company, it was contended that the said director was legally removed from the post after complying with the due procedure usually adopted by the company for the said purpose. It was pointed out that the company as per its own practice, evolved for its business affairs and administration thereof never issued any notices for calling board meeting through postal circulation and, accordingly, on the occasion of removal of above named petitioner from the post of directorship of the company no notice through postal means was circulated. However, this factum is duly recorded amidst the contents of minutes of the Board meeting. 14. Further, it was contended that the petitioners have acted to mar the interest of the company, its creditors, shareholders and members besides the General Public at large for the reasons that the petitioners as per their own case have transferred an amount of ₹ 64,50,000 in favour of his nearest relatives (his brother-in-law, sisters and mother-in-law of petitioner No. 1). This unlawful transfer of funds of the company, it ....
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....filed with the permission of the CLB and cannot be taken on record. Further, it is a settled law that once the affidavits have been found to be defective, then in such a case the filing of the subsequent affidavits cannot cure the defect and the petition is liable to be dismissed. Therefore, in the above facts and circumstances the present petition is liable to be dismissed on this ground alone; (iv)Otherwise also the supplementary affidavits are liable to be ignored as they also suffer from various discrepancies. It was pointed out that the stamp papers for filing the supplementary affidavits have also been purchased and sworn-in Delhi. However, the deponents signing the affidavits are residents of Uttar Pradesh and it is presumed that the said affidavits have been signed in Uttar Pradesh and not in Delhi. It was pointed out that if the said affidavits have been signed in Uttar Pradesh, then the stamp paper could not have been purchased in Delhi and similarly the affidavits could not have been sworn-in Delhi. Thus the affidavits are invalid. Further, the affidavits also do not state that the deponents are present in Delhi at the time of signing of the affidavits; (v)The supple....
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.... for the reasons best known to them. However, it is presumed that the said article has been omitted/concealed due to the fact that since the petitioners were very well aware that the additional directors appointed by the respondent No. 1 company are in consonance with the articles of association and they cannot challenge the appointment on the ground that the said appointment are in violation of the Articles of Association. The respondents have subsequently filed the correct affidavit duly certified by the Registrar of Companies to show the correct articles of association of the respondent No. 1 company. Therefore, the petitioners are guilty of suppression and are not entitled to seek any equitable relief from this Hon'ble Board and the present petition is liable to be dismissed on this ground alone. 19. Raising further preliminary objections, Shri Chaudhary argued that the petitioners have filed the present petition, inter alia, seeking various reliefs under equitable jurisdiction of this Hon'ble Board. However, the conduct of the petitioners disentitles them from seeking any relief from this Hon'ble Board, petitioner No. 1 has at several times acted against the interest of the r....
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....e merits of the case. 21. Coming to the arguments on merits, Shri Chaudhary pointed out that the petitioners are guilty of forgery of various documents filed before this Hon'ble Board. The allotment of shares and appointment of directors is valid because (i) it is an admitted case of the petitioners that their was a Board Meeting of the respondent No. 1 company on 1-12-2004, however, the petitioners have shown an allotment of 4,800 shares and appointment of additional directors of their group on 1-12-2004, the petitioners have filed a Form 32 and Form 2 for the decisions taken on 1-12-2004 along with the receipt of filing with the Registrar of Companies, on the other hand the respondent No. 3 has also filed the Form 32 for the appointment of additional directors and Form 2 for the allotment of 550 shares on 1-12-2004, the copies of forms filed by the respondents are the certified copies of the correct Form 32 and Form 2 as obtained from the Registrar of Companies and a bare perusal of the forms clearly shows that the forms filed by the respondents are the correct forms and there is no Form filed by the petitioners. Further, it was argued that it is evident from the various forms i....
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....ages 24-25, para 21 and pass book of petitioner No. 2 at pages 32-34 of reply of respondent No. 3 refer). Further, the said money was thereafter utilized by the petitioner No. 2 by way of an investment in Bhagwati Castings Private Limited, Kolkata. (Averments at pages 6-7 and letter from Bhagwati Castings at page 35 of the reply of respondent No. 3 refer); (b) Transfer deed was duly signed and executed by the petitioner No. 2 in favour of respondent No. 3 and all formalities for transfer including signatures, witnesses, date and stamp duty were duly completed; (c) Board of Directors of the company duly considered the transfer of shares and confirmed the said transfer; (d) The respondents in order to verify the authenticity of signatures of the petitioner No. 2 on the transfer deed have obtained an opinion dated 11-9-2006 of handwriting expert namely Mrs. R.K. Vig by showing the signatures of Mr. J.K. Paliwal on transfer deed and also on the affidavit of company petition No. 78/2005 and also on various other documents. On comparison of the documents the handwriting expert in her opinion has clearly stated that the signatures on the transfer deed are that of Mr. J.K. Paliwal only and....
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....n to a copy of the Bank Statement of Respondent No. 1 Company from 1-4-2004 to 31-3-2005. Further, it was argued by Shri Chaudhary that on the contrary no consideration money for allotment of shares on 1-12-2004 by the petitioner to their group came into the company. Therefore, it was argued that it does not lie in the mouth of the Petitioner to state that the allotment of 4,250 shares on 3-2-2005 was invalid. 24. Further, the counsel for the respondents pointed out that the assertions regarding being in possession of the Account Books up to February, 2005 is also a false story as no books whatsoever have been produced before this Hon'ble Board. On the other hand on the application moved by the respondents to inspect the statutory books which were in the possession of the Petitioners, the petitioners reply was that the entire Statutory and other records were available at the Registered office of the company till the dispute arose and on receipt of the application for inspection the premises was searched and the record was found missing. It was pointed out that even at the time of inspection of the records of the other company, i.e., Paliwal Steels Limited CP 71/2005 under the orde....
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....e petitioner No. 1 had also manipulated the bank operations of the respondent No. 1 company. Therefore, it was argued, the removal of Petitioner No. 1 as a Director was legal and valid. 26. Considering the facts and circumstances of the case as well as the pleadings and the documents filed therewith I find that the petitioners' case is that the R-4, 5 and 6 were appointed Directors on 1-12-2004 without compliance with the provisions of the Act with an oblique motive of reducing the majority shareholders representation on the Board to acquire control on the affairs of the R-1; illegal removal of the P-1 as a director representing majority shareholders holding more than 60 per cent shares without holding any AGM (the respondents themselves are not sure about the date of the AGM) no formal notice having been sent, reason for removal being shown as advancing of loan to relatives in the year 2002 with the consent of the then Directors and the same having been consistently reflected in the Annual Accounts signed by the respondents up to 2003-04, no mentioning of this reason in the impugned notice for the AGM, no mention of this reason in the Directors' Report; on 1-12-2004 as per para 9....
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....her, the consent letters filed by the petitioners for filing the petition are irregular, invalid as have been signed without application of mind, are similar and hence nullity in the eyes of law; furthermore, the petitioners have not come with clean hands, they have suppressed material facts, have deliberately omitted article 6 from the Articles of Association, they have several times acted against the interest of the R-1 - they have transferred an amount of ₹ 64,50,000 in favour of their nearest relatives who have now wilfully refused to confirm the receipt of the said amount, then the petitioners' conduct in the proceedings in another matter which is under consideration in CP No. 71/05 is to be noted, they have opened a separate bank account without the knowledge of the respondents and without the permission of the CLB, the account has been frozen now, a contempt petition in this regard is pending, the petitioners have illegally transferred the R-1's land in favour of P-1's brother-in-law and mother-in-law without the knowledge and concurrence of the respondents; on merits, the respondents' case is that the Board Meeting on 1-12-2004 is admitted by the petitioners, R-4, 5 a....
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....ceedings under section 397/398 of the Act. The Court exercising equity jurisdiction cannot ignore the well known maxims of equity. Two such maxims are that he who seeks equity must do equity and he who comes into equity must come with clean hands. The circumstances of this case have been such that the father has turned against the son. Both the parties have endeavoured to get control of assets as well as shares in the R-1. As regards the conduct of the petitioners, the respondents have raked up old issues which they had already waived and acquiesced by their conduct in the past, instances given are of loan given to relatives in the year 2002 which has been questioned now when the petitioners filed CP No. 78/05. This issue has been raked up now by the respondents while giving their counter to the CP No. 78/05, the respondents have no such complaint or CP pending on this issue prior to filing of CP No. 78/05 or CP No. 71/05 of the petitioners. In this petition R-1 had not chosen to file its counter initially. For the first time Shri Sharma indicated that he was to represent R-1 also (when the petitioners had raised an objection to the R-1's paying fee to the counsel without him repre....
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....at respondents had never ever objected to the aforesaid lease deed in 1999 for the last seven years, the respondents were fully aware of the transaction and decision was taken unanimously with the consent of all concerned in the interest of the company by one and all. Agitating this matter now after seven years after giving unqualified consent and agreement to the aforesaid lease taking shelter in this transaction is only an afterthought and a false alibi to justify their own wrongs. As regards the respondents contention that the petitioners directorial complaints cannot be entrained in a petition under section 397/398 of the Act, the respondents are very well aware that it is a composite company petition wherein several continuous acts of oppression and mismanagement have been alleged. Allegation regarding directorial removal is only one of such allegations, making of this directorial complaint in this petition cannot disentitle the petitioners from attracting the provisions of sections 397 and 398 of the Act. As regards the respondents' contention that the petitioners reliance on the CLB's decision in Giridhar Gopal Dalmia v. Bateli Tea Co. Ltd. [2007] 73 SCL 84 (Delhi) is mispla....
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....p of the company on just and equitable grounds becomes automatic, in this case. But, however, winding up would be prejudicial to the petitioners' interests safeguard of which had been prayed for in this petition. 28. As I said there are allegations and counter allegations in this case, the petitioners have also complained of the unclean hands of the respondents in other proceedings in C.P. No. 71/05 against M/s. Paliwal Steels Ltd. alleging that the respondents have transferred Flat No. 105 in Golf Apartment for allegedly inadequate consideration at the back of the petitioners. I find that the petitioners' contentions in this regard are correct and tenable. There was no authorization by the Board of Directors or shareholders to sell off this asset of the respondent No. 1 company, the provisions of section 293(1)(a) have not been complied with, consideration of ₹ 25 lakhs for this flat also appears to be inadequate, the transactions are within the family members of R-2 who has signed the sale documents on behalf of the company without any authority, thus indulging in this sham transaction whereby sale consideration was deposited in the bank on 8-7-2005 and was withdrawn on th....
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.... petitioner No. 1 for the reason that a loan of ₹ 64.50 lakhs was given to the relatives in the year 2002 this action also has not been justified by the respondents and the allegations stand unrefuted. The respondents' contentions are not borne out from the records. The petitioners admittedly hold more than 60 per cent shares. By removing P-1 their representation on the Board is reduced and this action is oppressive besides being irregular and illegal. It has not been in compliance with the provisions of sections 190 and 284 of the Act. If the AGM had been held it was unlikely that P-1 would have allowed removal. The circumstances that the respondents themselves are not sure of the date of AGM whether it was 13-5-2005 or 30-5-2005 only indicate falsification and fabrication of record. Besides, the R-3 has admitted that notice was sent by ordinary post. He is silent about sending notices to the shareholders. Other respondents have admitted in their reply that formal notices were not sent only oral communication was made. Thus it is admitted position that no proper notice as per provisions of section 284 of the Act has been given. There is obvious violation of section 284 of th....
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....ew of the several discrepancies pointed out in the expert's report by the petitioners. There is no endorsement on the certified share transfer deeds produced before me approving or rejecting the share transfers. The petitioners' contention regarding non-payment of stamp duty on the alleged transfers is also found to be correct. The respondents have not been able to relate the sale consideration as allegedly reflected in the bank pass book of P-2. The bank pass book reflects several other entries as well. Further, it is not understood as to how a letter dated 7-3-2005 of Bhagwati Castings Pvt. Ltd., Calcutta addressed to P-2 of Muzaffarnagar could reach him the same day making it probable to acknowledge a receipt of cheques dated 7-3-2005 on the same day. 31. As regards allotment of 4,250 shares by the respondents for which Form No. 2 was also filed with the ROC and certified copy obtained to claim genuineness of the transaction, the petitioners' contentions in this regard are found to be correct and true. No further allotment of shares could take place without increasing the authorised share capital which stood exhausted as on that date. Besides, the Return in Form No. 2 is patent....