1994 (5) TMI 270 - Board - Companies Law

Summary

Issues Involved:
1. Fabrication of notices and minutes of meetings.
2. Removal of petitioners as directors.
3. Shifting of the registered office.
4. Allotment of additional shares.
5. Misuse of company properties and embroiling the company in litigations.

Summary:

Fabrication of Notices and Minutes of Meetings:
The petitioners alleged that the respondents fabricated notices and minutes of board and general body meetings, creating records to show fictitious meetings. Discrepancies were evident in the minutes of the April 29, 1991 meeting, and the notices for general body meetings contained inconsistencies, such as the notice dated June 17, 1991, which referred to a registered office address that was not applicable until August 1991. The respondents failed to provide convincing explanations for these discrepancies. The court concluded that the board and general body meetings held from April 29, 1991, were not duly convened and declared them invalid.

Removal of Petitioners as Directors:
The petitioners were informed by notices dated February 5, 1992, that they had vacated their office as directors due to non-attendance at three consecutive board meetings. However, the respondents admitted the petitioners' presence at meetings on April 29 and June 17, 1991. The court found that the vacation of office under Section 283(1)(g) of the Companies Act was not substantiated, and conflicting returns regarding the cessation of the petitioners as directors were filed. The court refrained from passing orders on the cessation of office as directors since no relief was sought in this regard.

Shifting of the Registered Office:
The registered office was shifted from New Marine Lines to Peddar Road, and later to Panvel, District Raigarh. The petitioners contended that the shifting was against the company's interest and for the respondents' benefit. The respondents justified the initial shift due to financial constraints but failed to justify the further shift to Panvel, which involved a rental of Rs. 10,000 per month. The court found the shifting to Panvel as an act of mismanagement.

Allotment of Additional Shares:
The petitioners complained about the increase in capital from Rs. 8 lakhs to Rs. 98 lakhs and the allotment of shares exclusively to the respondents without offering them to existing shareholders, violating Article 8 of the articles of association. The court found that the allotment of shares was unauthorized and invalid, as it resulted in the respondents increasing their holding to 98% and reducing the petitioners' holding to 2%.

Misuse of Company Properties and Litigations:
The petitioners alleged that the respondents misused company properties for personal benefits and embroiled the company in litigations. The respondents justified the use of idle space and payment of remuneration to themselves. The court did not find concrete proof of misuse of properties but noted that the litigations were a consequence of transactions entered into by the company before the respondents took over.

Reliefs Granted:
The court ordered that the petitioners' shares be purchased by respondents Nos. 2 and 3 at a value to be determined as per consent terms in Suit No. 2278 of 1992 before the Bombay High Court. The respondents were directed to pay Rs. 80 per share with interest from the date of filing the petition until the actual date of payment. The shares shall not be transferred until the fair value is settled and final payment made. If the respondents fail to comply, the petitioners are entitled to seek further reliefs through an application to the Company Law Board.