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2024 (9) TMI 1609
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....For a declaration that the alleged amendment to the Articles of Association as illegal, null and void and not binding on the Respondent No. 1 company; 2) For a declaration that the alleged removal/resignation of the Petitioner No. 2 on 30.03.2001 from the board of the Respondent No. 1 as illegal, null and void; 3) For a declaration that the resolutions passed at the Board Meetings/ General Meetings which have been manipulated by the respondents with respect to shareholding/directorship/vesting themselves with authority as illegal null and void and not binding on the Respondent No. 1 company; 4) For a declaration that form 32 dated 01.10.2007, 21.02.2008 and 04.03.2008 before the Registrar of Companies, Hyderabad reflecting the appointment of Respondent No. 2,4 to 9 as Directors as illegal, null and void; 5) Consequently, for a permanent injunction restraining Respondents 2 to 9 from functioning or acting as directors of the first respondent company or holding themselves out as directors of the first respondent company; 6) For declaring the manipulation in the shareholding of the Respondent No. 1 as shown in the Annexure as illegal, null ....
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....areholders and petitioners stated they possess required 1/10th of the paid-up capital of the company for filing of the present petition. The annual return for the year 2007 is filed as proof of shareholding of the petitioners. However, the manner in which the manipulation in the shareholding has been done by the respondents is being challenged in the present petition. iv. It is averred that the Petitioner no. 1 and Respondent no. 3 were founder directors, as shown in the annual returns filed for the financial year 2006. It is alleged that the respondents have manipulated the records to show that the founder directors of the company have resigned and the Respondent no. 5 and 7 have become directors from 2000-2001. It is further averred that the Respondent no. 2 and 3 taking advantage, the statutory record of the Respondent no. 1 company like minutes books, books of accounts, registers etc were manipulated without the knowledge of the Petitioners. v. It is averred that due to the mismanagement done by the respondents in the Respondent no. 1 company effected the functioning of other profit- making group companies and lead to financial crises. It was further averred t....
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....at when the Petitioner no. 1 checked the records at the Registrar of Companies that he was not shown as the Director in the Respondent no. 1 company. There were no resolutions available with the Registrar of Companies in this regard. It is submitted that the resolutions in the 1st respondent company filed with the Registrar of Companies were signed by the Respondent no. 10 as the authorized signatory. It was averred that the Respondent no. 10 and 11 herein are employees of M/s. Sanghi Polyesters Ltd., a group company and they have nothing to do with any of the group companies except M/s. Sanghi Polyesters Ltd. They have been forging the signatures of the petitioners and have been abetting in all the illegal acts of other respondents. x. It was averred that the Respondent no. 2 and 3 manipulated records to show that the Respondent no. 2,4 to 9 had been appointed as Directors in the Respondent no. 1 Company. The petitioners pleaded that the pattern followed by the respondents is that they would successfully manipulate the records to show as though new Directors, who are none other than their own children and their wives, are appointed to the Board. This would result in the r....
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.... of the Respondent no. 1company. Even so the amendment would not have any effect since the Petitioner no. 1 and Respondent no. 2 were the only directors on the board, there is no question of quorum being present only when Respondent no. 2 was present. xv. It is averred that the petitioners prayed for the intervention of the Hon'ble Tribunal to appoint a commissioner to inspect and authenticate the statutory records of the company to identify the extent of manipulations done by the respondents along with other reliefs. They further averred that unless the statutory records are summoned and kept under protection, the respondents could continue to manipulate and this would further prejudice the rights of the petitioners. xvi. In support of the above pleadings, petitioners have relied upon the following documents: 1) Memorandum and Article of Association dated 1983; 2) Appointment of Respondent no. 5 and 7 as Directors (Form no. 32) dated 31-03-2001; 3) Annual Return of the year ending 2003-04 dated 30-09-2004; 4) Resolution vesting executive authority on board dt:01.04.2005 5) Annual Return of the year ending 2005-06 dated....
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....t the company petition was filed by the petitioners 1 and 2 in the Month of June 2008 and at the date of filling of the company petition the total number of shares is 39,390 equity shares of Rs. 100/- each. The authorized share capital as per audited balance sheet 2006-07 is 50,00,000 consisting of 50,000 equity shares of Rs. 100/- each and the paid up and issued share capital is 39,390 consisting of 39,39,000 of Rs. 100/- each. It is averred that based on the annual returns of the financial year 2006-07, the Petitioner No.1 and 2 claims to be the share-holder of Respondent No.1 company and hold only 10 and 2145 shares respectively. That the threshold limit of 1/10th thereof is 39,390 equity shares whereas the Petitioners 1 and 2 together hold 2155 equity shares which is 5.47% of the total issued capital of the 1st Respondent Company. Hence, they do not constitute together 1/10th of the issued share capital making the Petitioners No. 1 and 2 not qualified to file the company petition. It is further averred that the total number of share-holders of the 1st Respondent company is 22 and the thresh hold limit of 1/10th thereof comes to 2.2 whereas the petitioners No. 1 & 2 together are....
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.... in some other company i.e., SZF is baseless. viii. It is averred that the Respondent no. 2 to 9 were inducted as directors as per law and the allegations of manipulations are all false. They denied the allegation of manipulation of another group company M/s. Sanghi Textiles Private Limited that have been done on 01.03.2008 is misconceived, the respondents as matter of fact on that day, did not anticipate the death of the their father and in those circumstances Respondent No. 2 and 3 could not preclude the daily routine work of the affairs of the company and the appointment of Respondent No. 9 is one such on 1-3-2008 in usual and routine work of Respondent no. 1 company prior to the death of petitioners father, and Petitioner no. 1 was aware of the said appointment and was done with his consent. They further averred that in Sanghi Textiles Pvt Ltd, Petitioner No. 2 and his wife indulged in all illegal activities by removing directors in the said company from the board by appointing his family members as Board of directors and for the said illegal removal and appointment the matter is pending before this Hon'ble Tribunal in C.P. No 72 of 2008 (T.P. No. 32/HDB/2016). ....
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....) of the Companies Act, 2013 and Section 399(3) of the Companies Act, 1957 for the applicant to file the Company petition for Oppression and mismanagement 'after having obtained consent in writing of the rest' which is a prerequisite for filing a petition and here petitioners non-complied regulations and filed consent in form of affidavits post-dated. 6. In the light of the contest as above, the Points that emerge for consideration by this Tribunal are: (1) Whether the Petitioners have satisfied the pre-condition envisaged under sub sections (1) and (3) of section 399 of the Companies Act, 1956? If the answer is no, whether the company petition is maintainable? (2) Whether amendments made to the Articles of Association and the declarations filed before Registrar of Companies, by the respondents were prejudicial to the interests of public, the 1st respondent company, and the petitioner, amounting to the acts of oppression and mismanagement? 7. We have heard Shri Venkat Vardhan & Shri T. Vijayakumar Reddy, Counsels for Petitioner No. 1, Shri S.Chidambaram, PCS & Shri Yogesh Jagia, Counsel for the Petitioner No. 2, Shri Sharad Sanghi, Counsel for the Respondent....
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....ng been filed by 2 members out of total 25 members the petition is very much maintainable. Ld. Counsel also relied on the judgement of Hon'ble Supreme Court in State of UP and Another Vs Pawar Kumar Tiwari and Others [(2005) 2 SCC 10] where in it was held that, "We do not find fault with any of the two reasonings adopted by the High Court. The rule of rounding off based on logic and common sense is: if part is one-half or more, its value shall be increased to one and if part is less than half then its value shall be ignored. 46.50 should have been rounded off to 47 and not to 46 as has been done. If 47 candidates would have been considered for selection in general category, the respondent was sure to find a place in the list of selected meritorious candidates and hence entitled to appointment." 12. Shri Sharad Sanghi, the Ld. Counsel for the Respondents 3 to 5 would contend that, the above company petition is per se, not maintainable as the petitioners are not qualified under the provisions of section 399 (1) & (3) of the Companies Act 1956, hence the petition is liable to be dismissed as not maintainable. According to the Ld. Counsel, the petitioners neither constitute....
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....udicial to public interest or] in a manner prejudicial to the interests of the company; or (b) that a material change not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors, [or manager], or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, if is likely that the affairs of the company [will be conducted in a manner prejudicial to public interest or]in a manner prejudicial to the interests of the company; may apply to the[Tribunal] for an order under this section, provided such members have a right so to apply in virtue of section 399." Section 399 of Companies Act, 1956: "Right to apply under section 397 or 398:- (1) The following members of a company shall have the right to apply under section 397 or 398:- (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than on....
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....elief to be prayed for and what was the ground to be urged in support of the relief claimed. It is one thing to say that the member who gives consent should have applied his mind to the question before him before giving consent; it is another thing to say that before a member gives hit consent, the actual petition prepared to be filed, must be before him. (Para 7) When the language used is, they should have applied their minds to the question before them, it necessarily implies that the application of the mind was to the particular relief sought to be prayed and the ground on which that relief was sought to be prayed. A mere consent for filing an application under S. 397 or S. 398 or under both, without any particulars, such as the nature of the allegation or complaint to be made in the petition and the nature of the relief sought to be claimed in the petition, cannot be the result of an application of the mind to the question before them and therefore, such a consent cannot be a valid consent. (Para 7) The expression "consent in writing" occurring in S. 399(3) of the Act will have to be read in the context of the provisions contained in S. 399(1). S. 399(1)(a) contemplates not les....
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....1 SCC 172], it was held that: "the object of prescribing a qualifying percentage of shares in the petitioners and their supporters to file petitions under Sections 397 and 398 is clearly to ensure that frivolous litigation is not indulged in by persons who have no real stake in the company. However, it is of interest that the English Companies Act contains no such limitation. What is required in these matters is a broad common- sense approach. If the court is satisfied that the petitioners represent a body of shareholders holding the requisite percentage, it can assume that the involvement of the company in litigation is not lightly done and that it should pass orders to end the matters complained of and not reject it on a technical requirement. Substance must take precedence over form. Of course, there are some rules which are vital and go to the root of the matter which cannot be broken. There are others where non-compliance may be condoned or dispensed with. In the latter case, the rule is merely directory provided there is substantial compliance with the rules read as a whole and no prejudice is caused." "Section 399 of the Act has replaced Section 153-C (3) o....
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....the issued share capital of the Company at the time of filing the company petition, also on 20.03.2023 have filed the consent affidavits of 4 shareholders of the 1st respondent, namely, Mrs. Alka Sanghi, Aarthi Sanghi, Gaurav Sanghi and Aashish Sanghi, which were merely taken on record subject to the objection if any of the respondents but not under the liberty/direction dated 14/03/2023 of this Tribunal, as contented by the petitioners in their written submission. 21. Needless to say, that, the purpose behind the consent affidavits is to "overcome" the pre-condition under Sub- clause (a) of Section 399. The language, in sub-section 3 of section 399, 'having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them', engaged by the Legislature, makes it abundantly clear that the written consent is a condition precedent for maintaining a petition under section 397 of the Companies Act 1956. 22. Indisputably, in the pleadings of the company petition it has been specifically asserted that the 'consent affidavits of other shareholders' have been filed as Annexure, to the company petition, which plea however later turned out....
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....Hence, we hold that the sub-section (3) of Section 399 of the Act, remains unsatisfied. 24. Ld. Counsel further contended that even if the consent affidavits are not considered yet, before the illegal alteration of share ratio by the respondents 2&3 the total strength of the 1st respondent being 22 members and the present petition having been filed by 2 members out of total 22 members the petition is very much maintainable, by applying the rule of rounding off. 25. We shall, therefore proceed to examine the above plea of the petitioners that, even without the consent letters of the four shareholders, supra, the company petition whether is maintainable? According to the averments in the petition the authorised Share Capital of the First Respondent Company as on 31-03-2007 is Rs.50,00,000, divided into 50,000 equity shares of Rs. 100/- each. The Issued, Subscribed and paid-up capital of the company is Rs. 39,39,000/- consisting of 39,390 shares of Rs. 100/- each consisting of 22 shareholders. If 1/10th number of 22 members is computed it would come to 2.2. However, relying on the ruling of the Hon'ble Supreme Court of India, in State of UP and Another Vs Pawar Kumar Tiwari and ....
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....pondents as pleaded in the petition, have to be tested in the following undeniable factual back drop: (i) The business operations of the first respondent and its plant was totally closed within a year after filing of present Company Petition, i.e. between 2009- 2010, thus, making the status of the first respondent company as on today defunct; (ii) The 1st petitioner filing I.A. No.1142 of 2019 seeking for his transposition as respondent stating that a settlement has been arrived at among himself, the first petitioner and the deceased 2nd Respondent Anand Sanghi, lastly, long passage of time and passing away of the 2nd respondent Anand Sanghi. 28. Learned Counsel Mr. Yogesh Jagiya, for the 2nd petitioner who alone is pursuing this Company petition, would contend that the Board Meetings and general meetings which have been held and Form 32 reflecting appointments of Respondent no. 2 to 9 before Registrar of Companies on 01.10.2007, 21.02.2008 and 04.03.2008 are illegal and therefore are liable to be declared as null and void. 29. It is pertinent to state that the 1st petitioner Ravi Sanghi had sought transposition of himself as one of the respondents and there....
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....it was stated as follows: "It would be thus, quite strange for the petitioner to allege that he has not been receiving any notice of the meeting of AGM and in case he 7 CP No.185/Chd/Pb/ 2018 challenges his removal as a Director and remained silent for a period of 9 years. The filing of the statutory documents with the Registrar of Companies comes within the public domain and would be considered a public notice to all and sundry for the purposes of counting the period of limitation for filing the petition." 34. As can be seen from the pleadings except the, ipse dixit, of the 2nd petitioner no record worth relying and supports the plea of illegal conduct of meeting has been pleaded. Therefore, we hold that the challenge supra, is not only hopelessly barred by limitation, besides the same is devoid of any merit or substance, hence cannot be construed as an act of oppression and mismanagement. 35. Learned Counsel for the 2nd petitioner, further contended that the deceased 2nd respondent Anand Sanghi and the 3rd respondent Sudheer Sanghi, have manipulated and amended the Articles of Association of 1st respondent, in order to illegally gain control of the affairs of the 1....