9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2005 (6) TMI 565 - Board - Companies LawOppression and Mismanagement - allotment of additional shares - fabricating the minutes books and by filing fake returns before the Registrar of Companies (ROC) - removal of directors in terms of Section 283(1)(g) of the Companies Act 1956 (the Act) - HELD THAT - There is no denial by the respondents of the veracity of the minutes. In addition the Annual Report filed with the Registrar of Companies as on 30th September 2000 indicates that the 1st and 3rd petitioners were in office on that date and this Annual Return has been signed by the 2nd respondent and the 1st petitioner. Thus the contemporaneous records signed by the 2nd respondent himself indicate that the 1st and 3rd petitioners were directors on 30th September 2000 and as such they could not have been declared to have ceased as directors on 14.8.2000 and any record contrary to the contents of the Annual Return as on 30.9.2000 has no validity especially since other than enclosing photocopies of the certificates of posting about which the learned counsel for the petitioners has brought out various infirmities the respondents have not brought on record any other document as indicated earlier. Therefore considering all the facts I declare that the 1st and 3rd petitioners have not ceased to be directors in terms of Section 283(1)(g) of the Act and they continue to be the directors on the Board of Limrose. As far as induction of the respondents 4 and 5 as directors is concerned Even assuming that the authorised capital was in fact increased in an EOGM actually held on 14th August 2000 there is nothing on record justifying allotment of further shares. It is a settled law as has been recently reiterated by the Supreme Court in Dale Carrington Investment Pvt. Ltd. v. P.K. Prathapan 2004 (9) TMI 385 - SUPREME COURT and Sangram Sinh P. Gaekwad v. Shanta Devi P. Gaekwad 2005 (1) TMI 409 - SUPREME COURT that any allotment of further shares should be for a proper purpose bonafide and in the interest of the company and cannot be for the purpose of creating a new majority. In the reply filed by the company no justification has been given for allotment of further shares which has resulted in creation of a absolute majority in favour of the 2nd respondent s group. Therefore the purported allotment deserves to be cancelled and accordingly I do so. In view of my findings that the 1st and 3rd petitioners could not have be held to have ceased to be directors and that the allotment of shares was made solely with a view to create a new majority I direct the restoration of status quo as existed before 14th August 2000 in respect of the Board of Directors as well as authorized and paid up capital of the company. These directions will take immediate effect and the records of the company shall be suitably rectified. All returns/documents filed by the company with the ROC in respect of the affairs of the company that are contradictory to the contents of the Annual Return as on 30.9.2000 are declared as null and void and under the authority of this Order the ROC will ignore/reject all such returns/documents. The learned counsel for the respondents Shri Ganesh urged that the 2nd respondent was willing to restore the status quo provided his position in Palanpur Unit is also restored. As rightly pointed out by the learned counsel for the petitioners such a direction is beyond the scope of the petition and cannot be acceded to. The petition is disposed of in the above terms with no order as to cost.
Issues Involved:
1. Alleged unilateral changes in directorship and shareholding pattern by the 2nd respondent. 2. Legitimacy of cessation of directorship of the 1st and 3rd petitioners. 3. Validity of the appointment of the 4th and 5th respondents as directors. 4. Legitimacy of the increase in authorized capital and subsequent allotment of additional shares. 5. Restoration of status quo in the company affairs. Detailed Analysis: 1. Alleged Unilateral Changes in Directorship and Shareholding Pattern: The petitioners alleged that the 2nd respondent, acting as Chairman, made unilateral changes in the structure of Limrose Engineering Works Private Ltd., including its directorship and shareholding pattern. These changes were allegedly made by forging documents, fabricating the minutes books, and filing fake returns before the Registrar of Companies (ROC). The petitioners claimed these actions allowed the 2nd respondent to gain control of Limrose, which they argued was oppressive. 2. Legitimacy of Cessation of Directorship of the 1st and 3rd Petitioners: The petitioners contended that they were falsely declared to have ceased to be directors under Section 283(1)(g) of the Companies Act, 1956. They argued that they never received notices for the board meetings they were accused of missing. The respondents, on the other hand, produced certificates of posting to establish that notices were sent. However, the court found various infirmities in these certificates and noted that the respondents failed to produce minutes of the alleged board meetings. Additionally, contemporaneous records indicated that the 1st and 3rd petitioners were still acting as directors well after the date they were purported to have ceased. Thus, the court declared that the 1st and 3rd petitioners had not ceased to be directors and continued to hold their positions. 3. Validity of the Appointment of the 4th and 5th Respondents as Directors: The 4th and 5th respondents were allegedly appointed as additional directors on 14th August 2000, as indicated by Form No. 32 filed with the ROC. However, the Annual Report as on 30th September 2000 did not reflect their directorship. The court held that the contents of the Annual Report would prevail, thereby declaring that the 4th and 5th respondents were not validly appointed as directors. 4. Legitimacy of the Increase in Authorized Capital and Subsequent Allotment of Additional Shares: The authorized capital of the company was purportedly increased in an EOGM held on 14th August 2000. However, the Annual Return as on 30th September 2000 indicated the authorized capital remained at Rs. 1 crore, contradicting the alleged increase to Rs. 2.25 crores. The court found no justification for the allotment of additional shares, which resulted in creating a new majority favoring the 2nd respondent's group. Citing Supreme Court precedents, the court emphasized that any allotment of further shares should be for a proper purpose, bona fide, and in the interest of the company. The court concluded that the allotment was made solely to create a new majority and canceled the purported allotment. 5. Restoration of Status Quo in the Company Affairs: The court directed the restoration of the status quo as existed before 14th August 2000 regarding the Board of Directors and the authorized and paid-up capital of the company. The company records were to be rectified accordingly, and all returns/documents filed with the ROC that contradicted the Annual Return as on 30th September 2000 were declared null and void. The ROC was instructed to ignore/reject such returns/documents. Additional Considerations: The respondents' counsel suggested restoring the status quo provided the petitioners restored the 2nd respondent's position in the Palanpur Unit. However, the court found this request beyond the scope of the petition and declined to accede to it. Conclusion: The petition was disposed of with the court directing the restoration of the status quo as existed before 14th August 2000, with no order as to costs.
|
