2007 (2) TMI 330 - HC - Companies Law

Summary

Issues Involved:

1. Maintainability of the company petition based on the power of attorney.
2. Perceived perversity and contradiction of facts, evidence, and the agreement dated 19-4-1999 in the Company Law Board's decision.
3. Alleged misplacement of the burden of proof by the Company Law Board.

Issue-wise Detailed Analysis:

1. Maintainability of the Company Petition Based on Power of Attorney:

The appellants questioned the validity of the company petition filed through an attorney, Mr. Kamal Kapoor. The Company Law Board noted the power of attorney was registered and authorized Mr. Kapoor to initiate and conduct legal proceedings against the appellants. Despite a blank date in the photocopy of the power of attorney, the original document was correctly dated and registered, rendering it valid. The respondent confirmed the authorization, and sections 196 to 200 of the Contract Act, 1872, allow retrospective authorizations. Therefore, the power of attorney was deemed valid, and the petition maintainable.

2. Perceived Perversity and Contradiction of Facts, Evidence, and Agreement Dated 19-4-1999:

The Company Law Board found that the respondent and her husband were the initial shareholders and directors of the hospital, which was incorporated on 13-5-1999. The appellants argued that an agreement dated 19-4-1999 stipulated a shareholding arrangement and that the respondent had agreed to disinvest 51% of her shares to the appellants. However, the agreement required disinvestment of shares, which did not occur. The Company Law Board found no evidence of meetings or resolutions for appointing additional directors or increasing share capital. The respondent and her husband were not in India on the alleged dates of these meetings. The appellants failed to produce necessary documents to support their claims. The Board concluded that the appointments and share allotments were invalid due to lack of proper notice to the respondent and her husband. The findings were based on preponderance of evidence, and the court held that the Board's decision was not perverse or unsupported by evidence.

3. Alleged Misplacement of the Burden of Proof by the Company Law Board:

The appellants contended that the burden of proof was wrongly placed on them regarding events prior to their alleged appointment as directors on 15-9-1999. The agreement dated 19-4-1999 indicated that Dr. Ashok Mohan Dwarkadas Motiwala had been involved in the hospital's operations since 1992-94. The appellants were responsible for producing records to support their claims of valid appointments and share allotments. The Supreme Court in Anil Rishi v. Gurbaksh Singh clarified that the burden of proof lies on the party asserting a fact, and shifts as evidence is presented. Given the fiduciary relationship and the appellants' involvement in the hospital's management, they were required to prove the legitimacy of the transactions. The Company Law Board's placement of the burden of proof was upheld as appropriate.

Conclusion:

The High Court dismissed the appeal, affirming the Company Law Board's findings and decisions. The petition was maintainable based on the valid power of attorney. The Board's findings were supported by evidence and not perverse. The burden of proof was correctly placed on the appellants. The appeal was dismissed with costs assessed at Rs. 10,000.