2009 (9) TMI 584 - HC - Companies Law

Scheme of amalgamation - Held that - There are a number of shortcomings in the case of the petitioners. Individually each one of them may not have been sufficient to reject the petitions but when we take all of them into consideration it is obvious that there are reasonable grounds to doubt the appointment of Shri Amit Gupta as additional director and later as director of M/s. Nu-Line Industries. This will affect the validity of the petitions and the scheme. The removal of the objectors from the companies is still under challenge before the Company Law Board. The documents filed by the petitioners are contrary to each other. The petitioners withheld material facts from the court and later have filed documents which makes it apparent that they are trying to mislead the court. They have treated the proceedings in a very casual fashion. When all these factors are viewed cumulatively it is apparent that the petitioners are not entitled to any relief. Keeping in view all the facts stated above, the scheme of amalgamation as presented by the petitioners cannot be approved/accepted till the matter is disposed of by the Company Law Board.

Issues Involved:

1. Validity of the appointment of Shri Amit Gupta as director.
2. Allegations of illegal removal of directors.
3. Allegations of improper change in shareholding patterns.
4. Allegations of withholding material information from the court.
5. Allegations of false affidavits and procedural irregularities in meetings.

Issue-wise Detailed Analysis:

1. Validity of the appointment of Shri Amit Gupta as director:

The court examined whether Shri Amit Gupta was properly appointed as the additional director of M/s. Nu-Line Industries. It was alleged that the appointment was made without a proper board meeting, and the objector, Shri S.S. Gupta, was not present at the meeting. The court noted discrepancies in the documents filed by the petitioners, such as the absence of an attendance register to confirm Shri S.S. Gupta's presence. Additionally, the court found that the appointment of Amit Gupta as a director in the AGM held on September 29, 2007, was questionable because one of the shareholders, Shri Rajpal, who seconded the resolution, was not a shareholder at that time. The court concluded that there were reasonable grounds to doubt the validity of Amit Gupta's appointment, impacting the legitimacy of the petitions and the scheme.

2. Allegations of illegal removal of directors:

The objectors alleged that Shri S.S. Gupta and Smt. Sharda Gupta were illegally removed from the directorship of the two transferor companies without following due process. The court noted that these allegations were pending before the Company Law Board and that the removal of directors went to the root of the case, as it could affect the validity of the petitions for amalgamation. The court emphasized that the petitioners did not disclose these disputes to the court, which was material information.

3. Allegations of improper change in shareholding patterns:

The objectors contended that the shareholding patterns of the companies were changed to garner a majority in favor of the petitioners. The court observed that there were significant changes in the shareholding patterns after disputes arose, and there were discrepancies in the documents related to the transfer of shares. For instance, the court found that the presence of Shri Rajpal in the AGM on September 29, 2007, was dubious as he only became a shareholder on December 18, 2007. This raised doubts about the authenticity of the resolutions and the overall scheme.

4. Allegations of withholding material information from the court:

The court found that the petitioners withheld material information regarding the ongoing disputes before the Company Law Board and the removal of directors. The court emphasized that when a company approaches the court for approval of an amalgamation scheme, it must come with clean hands and disclose all relevant facts. The petitioners' failure to disclose these disputes was seen as an attempt to mislead the court and the shareholders.

5. Allegations of false affidavits and procedural irregularities in meetings:

The objectors pointed out discrepancies between the signatures on the affidavits and the ballot papers, suggesting possible impersonation. The court noted that many affidavits were verified and attested in a mechanical manner, with some lacking dates or proper verification. The court also found that the petitioners treated the proceedings in a casual fashion, filing documents that were inconsistent and misleading. This undermined the credibility of the petitioners and the validity of the meetings held to approve the scheme.

Conclusion:

The court concluded that there were multiple shortcomings in the petitioners' case, including doubts about the appointment of Amit Gupta, illegal removal of directors, improper changes in shareholding, withholding of material information, and procedural irregularities. These factors collectively led the court to dismiss the petitions for the scheme of amalgamation with costs assessed at Rs. 50,000, to be deposited with the H.P. Legal Services Authority. The court emphasized that the petitioners had tried to mislead the court at every stage of the proceedings.

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