2007 (5) TMI 649 - Board - Companies Law

Summary

Issues Involved:
1. Alleged fraudulent removal of a director.
2. Unauthorized increase in share capital and dilution of petitioners' shareholding.
3. Non-provision of company documents and alleged siphoning of funds.
4. Allegations of false claims and concealment of material facts by the petitioners.
5. Maintainability of the petition under Sections 397 and 398 of the Companies Act, 1956.

Detailed Analysis:

1. Alleged fraudulent removal of a director:
The petitioners contended that Petitioner No. 1 was fraudulently removed from the directorship of the respondent company. They argued that her resignation was forged, as evidenced by her continued participation in company activities post the alleged resignation date. They presented bank statements and cheques signed by her after the purported resignation date as proof. The respondents countered this by submitting both typed and handwritten resignation letters and argued that Petitioner No. 1 resigned due to the bank's threats related to another company, Productive Diagnostics Pvt. Ltd., in which she was involved.

2. Unauthorized increase in share capital and dilution of petitioners' shareholding:
The petitioners alleged that the respondents increased the paid-up share capital without notifying them, reducing their shareholding from 12.94% to 9.1%. They claimed that this was done fraudulently to suppress Petitioner No. 1's influence. The respondents argued that the share allotment was made against share application money received during Petitioner No. 1's tenure and offered to restore the petitioners' original shareholding level.

3. Non-provision of company documents and alleged siphoning of funds:
The petitioners claimed they were not provided with minutes of board meetings or audit reports, which they argued constituted oppression and mismanagement. They also alleged that funds were siphoned off, citing a specific instance where Rs. 10,000 was debited from Petitioner No. 1's account. The respondents countered these claims by pointing out that the petitioners had access to company documents and that the Rs. 10,000 advance was a legitimate transaction.

4. Allegations of false claims and concealment of material facts by the petitioners:
The respondents highlighted several instances where the petitioners made false claims, such as the ownership of properties and the number of cars owned by the company. They also pointed out the petitioners' concealment of the handwritten resignation letter and other material facts. The Board found these objections tenable, noting that the petitioners had not come with clean hands and had concealed crucial information.

5. Maintainability of the petition under Sections 397 and 398 of the Companies Act, 1956:
The respondents argued that the petitioners failed to prove any acts of oppression or mismanagement. They contended that the Company Law Board (CLB) was not the appropriate forum to adjudicate criminal matters like forgery. The Board agreed, stating that the petitioners did not establish a clear case of oppression or mismanagement and had made false statements under oath.

Conclusion:
The Board found that the petitioners did not come with clean hands and had concealed material facts. The petitioners' claims of oppression and mismanagement were unsubstantiated. The petition was dismissed, with the petitioners given the liberty to accept the respondents' offer of settlement or to buy/sell their stake in the company. No order as to costs was made, and all interim orders were vacated.