2010 (9) TMI 921 - Board - Companies Law

Issues Involved:
1. Allotment of 4,94,95,000 equity shares.
2. Charge creation under a deed of hypothecation.
3. Appointment of Mr. Ajit Chintaman Bhagwat as director.
4. Change of registered office of the company.
5. Removal of Mr. Sridhar Reddy Kanumuru as director.
6. Allotment of 500 shares to Mr. Bhagwat.

Detailed Analysis:

1. Allotment of 4,94,95,000 Equity Shares:
The petitioners alleged that the allotment of 4,94,95,000 equity shares made by the second respondent on 1-1-2009 was illegal. The petitioners argued that the board meeting where this allotment was approved was not validly convened, as one of the directors claimed to be present had denied his attendance. Additionally, the shares were allotted to respondent Nos. 2 and 3 and their nominees without proper consideration reflected in the company's books or bank statements. The judgment declared this allotment null and void, directing the company to rectify its register of members by deleting the said shares.

2. Charge Creation Under a Deed of Hypothecation:
The petitioners contended that the charge created by respondent No. 2 in favor of respondent No. 3 under a deed of hypothecation dated 14-2-2009 was illegal. This charge was based on false and fictitious documents, including promissory notes and a letter of intent, which were created without the knowledge of the board of directors. The judgment declared the charge illegal and ordered that it does not subsist.

3. Appointment of Mr. Ajit Chintaman Bhagwat as Director:
The petitioners challenged the board resolution dated 12-6-2009, appointing Mr. Ajit Chintaman Bhagwat as a director, arguing that the meeting where this resolution was passed was not validly convened as no notice was served to the petitioners. The judgment declared this resolution and the consequent Form No. 32 as null and void.

4. Change of Registered Office of the Company:
The petitioners disputed the board resolution dated 12-6-2009, changing the registered office of the company, stating that the meeting was not validly convened. The judgment declared this resolution and the consequent Form No. 18 as null and void.

5. Removal of Mr. Sridhar Reddy Kanumuru as Director:
The petitioners argued that the board resolution dated 18-9-2009, removing Mr. Sridhar Reddy Kanumuru as a director, was invalid as there was no valid board meeting held and no resignation letter was provided. The judgment declared this resolution and the consequent Form No. 32 as null and void.

6. Allotment of 500 Shares to Mr. Bhagwat:
The petitioners contended that the board resolution dated 30-9-2009, allotting 500 shares to Mr. Bhagwat, was in violation of the interim order to maintain the status quo. The judgment declared this resolution and the consequent Form No. 2 as null and void.

Conclusion:
The judgment concluded that the petitioners had made a case of oppression and mismanagement. The respondents were provided ample opportunities to present their case but chose to remain ex parte. The judgment invoked the powers under sections 397, 398, and 402 of the Companies Act, 1956, to bring an end to the acts complained of, without any cost. The Registrar of Companies, Andhra Pradesh, Hyderabad, was directed to take appropriate action in respect of the declared orders.

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