2000 (2) TMI 849 - Board - Companies Law

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Non-holding of Annual General Meetings (AGMs) and non-presentation of annual accounts.
3. Non-supply of annual reports and falsification of books of account.
4. Diversion of funds to sister companies and violations of various statutory provisions.
5. Dispute over the terms of the sponsorship agreement and the number of shares to be acquired.
6. Non-receipt of notices for Board meetings by the petitioner's nominee directors.
7. Allegations of siphoning of funds by the 2nd respondent.
8. Request for investigation into the affairs of the company.
9. Contempt application for non-compliance with inspection orders.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The petitioner-company, holding 44.70% shares in Regal Industries Ltd., filed the petition under Sections 397/398 of the Companies Act, 1956, alleging acts of oppression and mismanagement. The allegations included non-holding of AGMs, non-presentation of annual accounts, non-supply of annual reports, falsification of books of account, and diversion of funds to sister companies.

2. Non-Holding of AGMs and Non-Presentation of Annual Accounts:
The petitioner alleged that the company did not hold AGMs or present annual accounts. The respondents denied these allegations, stating that all statutory meetings, including AGMs, were conducted regularly, and notices were sent to the petitioner.

3. Non-Supply of Annual Reports and Falsification of Books of Account:
The petitioner claimed non-receipt of annual reports and falsification of books of account. The respondents refuted these claims, asserting compliance with statutory requirements.

4. Diversion of Funds to Sister Companies and Violations of Statutory Provisions:
The petitioner alleged diversion of funds to Khurana Foam Sales and Esteem Capital and Management Services Ltd., both controlled by the 2nd respondent. The respondents argued that trade advances and investments were in accordance with the provisions of the Act and not a diversion of funds.

5. Dispute Over Sponsorship Agreement and Number of Shares:
The dispute centered on whether the petitioner was to invest in 6.75 lakh shares or 12.87 lakh shares as per the sponsorship agreement dated 19 December 1994. The petitioner contended that the agreement was for 6.75 lakh shares, while the respondents claimed it was for 12.87 lakh shares. The Board did not decide on the validity of either agreement, as it was beyond their jurisdiction and both parties had filed civil suits on this matter.

6. Non-Receipt of Notices for Board Meetings:
The petitioner alleged that its nominee directors did not receive notices for Board meetings. The respondents countered that notices were regularly sent, but the nominees did not attend the meetings. The Board directed the company to issue notices for general body meetings by registered post and to send notices for Board meetings with the agenda at least 7 days before the meetings.

7. Allegations of Siphoning of Funds by the 2nd Respondent:
The petitioner alleged that the 2nd respondent siphoned funds for personal use. The respondents denied this, stating that trade advances and investments were legitimate. The Board found no substantial evidence to support the allegation of siphoning and did not take cognizance of it.

8. Request for Investigation into the Affairs of the Company:
The petitioner sought an investigation into the affairs of the company, citing violations of various statutory provisions and mismanagement. The Board noted that proceedings had already been initiated by relevant authorities and further investigation would result in duplication. The Board rejected the prayer for investigation, finding no substantial evidence of mismanagement or statutory violations.

9. Contempt Application for Non-Compliance with Inspection Orders:
The petitioner filed a contempt application against the 2nd respondent for not providing inspection of records despite directions. The Board had already ordered the 2nd respondent to pay Rs. 2,000 to the Legal Aid of Delhi High Court, which he complied with, and no further order was deemed necessary.

Conclusion:
The petition was disposed of with directions to the company to ensure proper notice of meetings to the petitioner and its nominees. The Board rejected the request for an investigation and found no substantial evidence of the alleged mismanagement or statutory violations. No order as to cost was made.

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