2009 (3) TMI 1043 - Board - Companies Law

Issues Involved:
1. Alleged acts of oppression and mismanagement.
2. Validity of the transfer of shares to the third respondent.
3. Validity of the petitioner's removal as a director.
4. Appointment of the third respondent as a director.
5. Rectification of the register of members.
6. Division of assets and liabilities of the company.

Detailed Analysis:

1. Alleged Acts of Oppression and Mismanagement:
The petitioner claimed 50% of the issued and paid-up capital of the company and alleged acts of oppression and mismanagement by the second respondent. The petitioner argued that the second respondent neither convened board meetings nor issued notices for such meetings and unlawfully removed the petitioner from the office of director using a forged resignation letter. The petitioner also alleged that the second respondent neglected his obligations, leading to the company's financial distress and eventual closure.

2. Validity of the Transfer of Shares to the Third Respondent:
The petitioner contended that the share transfer form dated September 12, 2003, was forged. The form had several discrepancies, such as incorrect initials, upside-down rubber stamps, and misspelled company names. The petitioner argued that no consideration was paid for the transfer and that the third respondent did not provide proof of payment. The respondents claimed that the petitioner had transferred his shares to settle a debt with the third respondent, who had repaid the amount to the legal heirs of a deceased creditor. However, the court found no material evidence supporting the approval of the transfer or the payment of consideration.

3. Validity of the Petitioner's Removal as a Director:
The petitioner argued that the resignation letter dated September 12, 2003, was forged. The court compared the disputed signatures with the petitioner's admitted signatures and found significant differences. The court also noted the absence of board meeting minutes approving the resignation. Consequently, the court declared the resignation letter forged and set aside the petitioner's cessation from the office of director.

4. Appointment of the Third Respondent as a Director:
The court found no material evidence supporting the appointment of the third respondent as a director. The respondents failed to produce board meeting minutes or any primary evidence of such an appointment. The court set aside the appointment of the third respondent as a director, citing the lack of proper documentation and the reliance on a forged resignation letter.

5. Rectification of the Register of Members:
The court declared the impugned transfer of shares in favor of the third respondent null and void due to the forged share transfer form. The company was directed to rectify the register of members by substituting the petitioner's name in place of the third respondent. The court emphasized that the relief of rectification could be granted under Sections 397 and 398 read with Section 402, without the need to invoke Section 111.

6. Division of Assets and Liabilities of the Company:
The court noted the irreconcilable differences between the petitioner and the second respondent, which resulted in a deadlock situation. Given the valuable property owned by the company, the court directed both parties to quote a competitive price for each share in sealed covers. The party quoting the higher price would have the first option to buy the shares of the other party. The court reserved the right to issue appropriate directions for the exit of either party from the company and ensured that the company's immovable property would not be alienated without written concurrence from both parties.

Conclusion:
The court found that the petitioner's claims of forgery and mismanagement were substantiated. The transfer of shares and the petitioner's removal as a director were declared null and void. The court directed the rectification of the register of members and outlined a procedure for resolving the deadlock between the petitioner and the second respondent. The company petition was disposed of with specific directions for the exit of either party from the company.

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