2007 (10) TMI 676 - Board - Companies Law

Summary

Issues Involved:
1. Deletion from the array of parties and vacation of the Company Law Board's order.
2. Referral of parties to arbitration.
3. Impleadment of new parties.
4. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Deletion from the array of parties and vacation of the Company Law Board's order:
The R-3 (Sh. Anandrao Gaekwar) sought deletion from the array of parties and vacation of the Company Law Board's order dated 2.8.2007. The petitioner argued that R-3 was a necessary party due to his involvement in the Tripartite Agreement dated 18.6.1998 and the development agreement concerning the land on perpetual lease with R-3. The petitioner had paid Rs. 5 lakhs to R-3, and the dispute involved the development project on R-3's land. The Company Law Board found that R-3 was a necessary party for effective adjudication and dismissed R-3's application for non-impleadment.

2. Referral of parties to arbitration:
R-1 (M/s Unique Construction Pvt. Ltd.) and R-2 (Sh. Rajesh Kumar Jain) filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking to refer the parties to arbitration. The petitioner objected, arguing that the respondents had already submitted to the jurisdiction of the Company Law Board by filing their reply to the C.P. No. 111/07. The Company Law Board found that the application under Section 8 was not filed in accordance with the mandatory requirements and that the allegations of oppression and mismanagement could not be adjudicated without reference to the Articles of the company. The Board held that the matter could not be referred to arbitration and dismissed the application.

3. Impleadment of new parties:
The petitioner's application (C.A. No. 433/07) seeking to amend the memo of parties was dismissed as not pressed.

4. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956:
The petitioner alleged that the authorized share capital of the company was illegally raised, and shares were illegally allotted to R-2 and his relatives, reducing the petitioner's shareholding to a minority. The petitioner sought the allotment of shares to be declared null and void, the removal of the petitioner and his family from directorship to be declared null and void, and an audited statement of accounts of the project property. The Company Law Board found that the respondents had not provided adequate notice or offer for the allotment of shares, which was in violation of the Articles of the company. The Board set aside the allotment of shares made on 24.11.2003, 14.7.2005, and 27.7.2005, declaring them null and void, and restored the status quo ante. However, the Board did not grant relief regarding the removal of directors or the audited statement of accounts, as these issues were related to the MOU/Agreement before the Arbitrator.

Conclusion:
The Company Law Board dismissed R-3's application for deletion from the array of parties, rejected the application for referring the matter to arbitration, dismissed the petitioner's application for impleadment of new parties, and set aside the illegal allotment of shares while denying relief on directorial and financial matters related to the MOU/Agreement. All interim orders were vacated, and no costs were awarded.