TaxTMI 
TaxTMI 
2020 (6) TMI 652
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.... by the petitioners together constitute more than one-tenth of the total members of respondent No. 1-company and hence satisfies the condition prescribed under section 244 of the Act for maintaining a petition under relevant provisions. 3. The respondent-company, namely, Gurukripa Ayurvedic Heritage P. Ltd., was incorporated on January 31, 2005 under the provisions of the Companies Act, 1956 as a private limited company having its registered office at NP-1/1043A, Peringode P. O, Palakkad-679 535, Kerala. The said company was promoted and incorporated by Mr. K. V. Unnikrishanan and Mr. K. Balagangadharan with the main objects as reflected in clause III(A) of the memorandum of association of the company which is as under : "to establish, run, maintain, operate and to carry on the business of ayurveda centres, ayurveda health clubs, hospitals. Nursing homes and facilities for treatment of patients, or of persons who require treatment and to manufacture, prepare, develop ayurvedic medicines, formulations and products and to undertake research and study in different sciences specially in ayurveda and other connected forms of traditional medication." 4. The first petitione....
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....ing charge as the managing director of the company, respondent No. 2 started all sorts of manipulations, including fabrication of records and accounts. Respondent No. 7, who was the chairman of the company, was working as a clerk in the Peringode Government High School, while also working as a whole-time paid director of the respondent-company, which was against his service rules. In the context of some complaints in this regard from some quarters and apprehending further enquiry in the matter, respondent No. 7 resigned from the board with effect from August 28, 2008 and in his place, his wife respondent No. 6 was appointed as director of the company with effect from April 30, 2009. The appointment of respondent No. 6 was wholly unnecessary, illegal and prompted by partisan selfish interests, prejudicial to the interests of the company and is legally unsustainable. The petitioners had objected to the appointment of respondent No. 6 as a director of the company and she is not a shareholder of the company and a matriculate ; she has absolutely no special knowledge in any field relating to the business carried on by the respondent-company. 7. Respondent No. 2 and his colleagues on ....
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...., 2008 recording the removal of the petitioners from the board of the company is filed as annexure A9. A true copy of Form No. 32 filed by the company before the Registrar of Companies intimating cessation of office of the petitioners as directors of the company for failure to attend three consecutive meetings is filed as annexure A10. The proximity of the dates of the board meetings as shown in (annexure A9) itself betrays the impropriety and illegality of the action taken against the petitioners. The petitioners have also pointed out the discrepancies in the time mentioned in the copy of minutes (annexure 9) and time mentioned in the filings made with the Registrar of Companies (annexure A10), which clearly establish the fabrication of documents. 10. It is submitted that the removal of the petitioners from the board of the company was a fraudulent and unlawful act. The petitioners had attended the board meeting held on June 15, 2008 and had also signed the attendance register. The petitioners further submitted that the resolutions passed at such board meetings without serving notices thereof on the petitioners are non est in law and not binding on the petitioners, liable to be....
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....nd 4.73 per cent., respectively. The above act was done even though there was no need for increase of the capital of the company from Rs. 1,00,000 to Rs. 3,00,000 (annexure A14). Thereafter in its successive annual reports the company started showing the share capital as Rs. 3,00,000 (annexures A15 and A16). The petitioners also claimed that respondents Nos. 2 and 7 have not made any payments to the company towards the price of the additional shares apportioned by them fraudulently, after effecting an illegal and unsustainable increase of capital. After removing petitioners from the board of the respondent-company, respondent No. 2 has been running the company as a proprietary concern. Thus, respondent No. 2 has filed various false and fabricated returns, reports and forms before the Registrar of Companies after the illegal removal of the petitioners from the board of the company. These include resolutions/ returns/forms pertaining to illegal removal of the petitioners as directors by falsely showing that they had vacated office, appointment of respondent No. 6 a director, fixation of remuneration for himself and others, unauthorised increase of capital of the company, allotment of....
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.... forms, certificates and reports filed on behalf of the first respondent-company after September 25, 2008, i. e., the date of removal of the petitioners from the board of the company, as falsified, fabricated or manipulated. (h) An order directing the first respondent-company to disburse to the petitioners the amounts due to them towards directors' remuneration. (i) An order appointing an independent practising chartered account ant to verify the books of account of the first respondent and ascertain the extent of fraud, manipulation and falsification of books of account perpetrated by respondents Nos. 2 to 7. (j) An order directing the Central Government to carry out an investigation into the affairs of the first respondent-company in the light of the submissions made in this petition. (k) Such other further orders as may be deemed fit by this hon'ble Tribunal Bench on the fact and in the circumstances of the case. Counter filed by the respondents 15. Respondents Nos. 1 and 2 have filed a common counter perusal of which in a nutshell shows that the petitioners stand vacated the office as directors since they have failed to at....
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....bmitted that article 4 and regulation 44 in Table A of the Companies Act, 1956 is applicable by virtue of article 2 of articles of association of the company : "the company may from time to time, by ordinary resolution increase the share capital by such sum, to be divided into shares of such amount, as may be specified in the resolution." By virtue of the above regulation, and also article 2 of the articles of association, the respondent-company at a general meeting increased the share capital beyond the limits prescribed in memorandum of association by an ordinary resolution providing for the issue of new shares. It is further submitted that the share capital referred in article 4 and regulation 44 of Table A to Schedule 1 is the very share capital referred to in the memorandum of association as well as articles of association. In view of this pro vision, it is open to the company to increase the authorised share capital by passing an appropriate ordinary resolution, on passing of such resolution the memorandum of association would automatically stand altered in accordance to the regulation. Thus, an ordinary resolution was passed expressly altering clause V of t....
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....o 5 do not believe that respondent No. 2 and his accomplices might have manipulated the records and/or created false records to make it appear that notices of the subsequent board meetings were duly sent to the petitioners but they failed to turn up for the meetings. At the same time respondents Nos. 3 to 5 are more than happy to see that the petitioners are re-instated as board members. Respondents Nos. 3 to 5 are not privy to any oppression against the petitioners or large scale mismanagement of the affairs of the company as alleged in the petition. 24. Respondents Nos. 6 and 7 have jointly filed their reply to the main petition. Perusal of the averments contained in the said reply shows that the first petitioner resigned from the post of managing director in the month of June, 2008 and subsequently he was removed from the post of director of respondent No. 1-company since he failed to attend 3 consecutive director board meeting of the company hence violated the provisions of articles of association and memorandum of association. The first petitioner was constrained to resign from the post of managing director of respondent No. 1-company since the other directors of the compan....
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....meeting regularly and the respondents stopped sending them notices of the board meetings after the board meeting held on June 15, 2008 is absolutely wrong. The notices of the board meeting were regularly being sent to the first petitioner even after June 15, 2008 by certificate of posting as per the practice. Proof of certificate of posting is filed as annexure R6(a), (b) and (c). 29. They further contended that the allegation that the resolution attached to (annexure 10) stated to have been passed at the board meeting does not find a place in (annexure 9) minutes of the meeting is irrelevant, misleading and incorrect. Annexure 9 clearly shows the decision taken in the board meeting and annexure 10 has nothing but a legally valid reflection of annexure 9 as mandated under the provisions of the Companies Act, 1956. 30. It is further contended by the respondents that O. S. No. 15 of 2010 is preferred before the Subordinate Judge, Ottapalam seeking a decree declaring that the removal of the first petitioner from the board of the company with effect from September 15, 2008 was illegal and further that all the subsequent decision taken by the board after the said date were not bin....
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....bout the genuineness of those fictitious dates. It is incomprehensible as to why the company did not send even one notice by registered post to ensure service on the petitioners in a matter involving their cessation as directors. 34. It is also submitted that after manoeuvring illegally enhanced capital, no offer of additional shares was made to the petitioners. The respondents perpetrated further illegalities of allotting the entire additional shares to respondents Nos. 2 and 7 to the exclusion of other members of the company. Therefore, further allotment of shares in favour of respondents Nos. 2 and 7 is non est in law. 35. The induction of respondent No. 6 which was made to compensate for her husband, respondent No. 7 who had to resign to save his skin from departmental disciplinary proceedings was clearly illegal. Further, payment of substantial amounts to her as remuneration for no work done for the company, is still more illegal amounting to misappropriation and siphoning of company funds. 36. In the rejoinder reply to the counter filed by respondents Nos. 6 and 7 it is stated that in annexure 13 the resolution proposing to amend the memorandum of association and art....
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.... of maintainability of the company petition, as the petitioners failed to explain the reasons in detail for delay in filing the petition. Respondents Nos. 6 and 7 in their counter has also raised the question of delay and question of resjudicata and prayed to take this as main issue. Learned counsels have also sighted various judgments as detailed hereunder, in support of their averments regarding delay of filing petition is the sole reason to be considered before going into the allegations raised by the petitioners. Abdul Wahid Abdul Gafor Khatri v. Safe Heights Developers, while dealing with the case the hon'ble High Court of Bombay, inter alia, stated that : "14.... Even otherwise there is no justification for the gross delay in approaching the Company Law Board, and the Company Law Board in the exercise of its discretion has held that the delay was excessive. This exercise of discretion by the Company Law Board ought not to be interfered with by this court in their narrow juris diction under section 10F of the Companies Act, 1956. 15. Therefore, I find nothing wrong in the Company Law Board concluding that on the ground of delay and laches alone, the pe....
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....n before the civil court and this Tribunal are distinct and different. 42. After hearing the averments made by the parties and considering the relevant sections and case law produced, we did not come across any provision stating that company petition under sections 397 and 398 is to be filed within a prescribed time after the cause of action arose. It is also pertinent to note that section 10GE of the Companies Act which speak of limitation is only applicable to appeal made to the Appellate Tribunal. 43. They further averred that even assuming that there was delay in filing the petition, it cannot negate a continues act of oppression and mismanagement by the respondents. To get clarity on this issue, we considered the judgment delivered by the hon'ble Supreme Court in V. S. Krishnan v. Westfort Hi-Tech Hospital Ltd. [2008] 142 Comp Cas 235 (SC) ; [2008] 3 SCC 363 (page 245 of 142 Comp Cas) : "In a number of judgments, this court considered in extenso the scope of sections 397 and 398. The following judgments could be use fully referred to : (a) Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 51 Comp Cas 743 ....
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....edressal under sections 397 and 398 of the Act. Therefore the first issue framed by us that whether the condonation of delay of 4 years is maintainable can be answered affirmatively and can be considered without any iota of doubt. This is also a fit case to consider the continuous acts of oppression and mismanagement against the minority shareholders. In such a situation, delay cannot be held against the aggrieved party to seek redressal. Accordingly, we decide that the petition is maintainable. Issue (ii) 45. As regards to the expulsion of petitioners from the board of directors in the respondent-company on September 25, 2008 learned counsel for the respondents vehemently argued that the petitioners have never raised the issue of non-receipt of notice which was all along sent through "certificate of posting" for earlier board meetings. The first petitioner who has resigned from the managing director in the month of June, 2008 has chosen to raise the issue of non-receipt of notice for board meeting which was never raised earlier which he has attended. They also submitted that sending notice through certificate of posting is allowed as per the Companies Act. Thus, the petition....
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....or the petitioners argued that the petitioners were removed as directors on September 25, 2008. He mentioned that no notice was received by the petitioners regarding board meeting held on June 22, 2008, July 12, 2008, August 2, 2008 and September 15, 2009. Learned counsel also mentioned that there is no evidence of service of notice to the petitioners. He further contended that the proximity of dates of board meetings speak volumes about genuineness of those fictitious dates. He also averred that it is incomprehensible as the company did not send one notice through registered post of the meeting as the matter involving the cessation of the directors. To substantiate his arguments learned counsel cited various judgments which are quoted hereunder : In Tarlok Chand Khanna v. Raj Kumar Kapoor [1983] 54 Comp Cas 12 (Delhi), the hon'ble Delhi high court held that (page 27) : "It has often been pointed out that though the requirement of the Companies Act is satisfied by posting a communication under certificate of posting, service by this mode is the easiest stand for anyone to take at any time and it is not a sheer coincidence that in practically all controversial ....
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....CC 407, the hon'ble Supreme Court held that (page 416) : "A certificate of posting obtained by a sender is not comparable to a receipt for sending a communication by registered post. When a let ter is sent by registered post, a receipt with serial number is issued and a record is maintained by the Post Office. But when a mere certificate of posting is sought, no record is maintained by the Post Office either about the receipt of the letter or the certificate issued. The ease with which such certificates can be procured by affixing ante-dated seal with the connivance of any employee of the Post Office is a matter of concern. The Department of Posts may have to evolve some procedure whereby a record in regard to the issuance of certificates is regularly maintained showing a serial number, date, sender's name and addressee's name to avoid misuse. In the absence of such a record, a certificate of posting may be of very little assistance, where the dispatch of such communications is disputed or denied as in this case. Be that as it may." The above judgments clearly pointed out that "certificate of posting" is of little assistance where serious allegations a....
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....also contended that in the case of amendment and alteration of share capital prescribed in the memorandum of association of the respondent-company does not require any special resolution especially under section 94 of the Act. Counsel of the respondents cited the following case law in regarding to the increase of share capital : Miheer Hemant Mafatlal v. Mafatlal Industries Ltd. [1987] SCC Bom 470 : "16. A plain reading of article 62 shows that the article does not specify that the increase in the share capital is to be effected by any particular type of resolution, namely, whether this could be done by an ordinary resolution or by a special resolution. In this connection reference may be made to the observations in Palmer's Company Law, Twenty-Third edition, at page 747 in paragraph 56-04. This paragraph is under the heading 'Ordinary Resolutions', and the relevant observations run thus : Where it is provided that 'the company in general meeting may' do some act, this means that an ordinary resolution is required to be passed. There is no definition in the Acts of 'ordinary resolution'. It means a resolution which requires a simple ....
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.... in his own favour. The facts of the case do not pose any difficulty particularly for the reason that the managing director has neither placed on record anything to justify issue of further share capital nor it has been shown that proper procedure was followed in allotting the additional share capital. The conclusion is inevitable that neither the allotment of additional shares in favour of Ramanujam was bona fide nor it was in the interest of the company nor a proper and legal procedure was followed to make the allotment. The motive for the allotment was mala fide, the only motive being to gain control of the company. Therefore, in our view, the entire allotment of shares to Ramanujam has to be set aside. Even the Company Law Board found that the allotment of additional shares by Ramanujam to himself was an act of oppression on his part. The Company Law Board drew this conclusion solely for the reason that no offer had been made to the majority shareholders regarding issue of further share capital. The High Court accepted the finding of oppression. However, it placed it on a much broader base by taking into consideration various other factors. The High Court's finding....
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....ndent-company issued notice for increase of share capital by altering both articles of association and memorandum of association of the company by clubbing together in a single resolution and the same has been notified under special business. When an agenda item notified under special business the resolution also has to be passed as a special resolution, even though, the same may not be required under the Act. Further, alteration of articles of association and memorandum of association cannot be clubbed together in one resolution, as the resolutions to be passed in each case is different as per the Act. We therefore, tend to agree with the petitioner's contention that increase of authorised share capital of the respondent-company was not done according to Companies Act, which itself is illegal. The respondent-company has also not mentioned the purpose for which the increase in share capital is being done except mentioning that the company need funds, which is very vague. 51. As regard to the other question in the increase of share capital of the respondent-company is that whether the apportionment of share capital between respondents Nos. 2 and 7 amounts to oppressi....