2006 (6) TMI 518 - Board - Companies Law

Summary

Issues Involved:
1. Allegations of mismanagement and oppression under Sections 397 and 398 of the Companies Act.
2. Non-filing of statutory returns and financial documents.
3. Financial and legal liabilities including tax demands and penalties.
4. Validity and procedural compliance of the rejoinder filed by the petitioner.

Detailed Analysis:

Allegations of Mismanagement and Oppression:
The petitioner, holding a majority of shares in the Company, alleged mismanagement by the Respondents, who are her sons and directors of the Company. She claimed that the Company was not being managed properly, citing various legal actions and penalties against the Company. The Respondents denied these allegations, asserting that the petitioner had ulterior motives and had never raised any objections before filing the petition. They argued that the petitioner and Respondent No. 5, who supported her, had not approached the Board with clean hands.

Non-filing of Statutory Returns and Financial Documents:
The petitioner highlighted that the Company failed to file its Balance Sheets and Annual Returns for three consecutive years, which is a violation of the Companies Act. The Respondents admitted the delay but stated that these documents were eventually filed in 2002. The Registrar of Companies confirmed that no prosecution was contemplated against the Company for this delay. The judgment noted that although non-filing of statutory returns is a violation, it does not constitute grounds for action under Sections 397/398 of the Companies Act.

Financial and Legal Liabilities:
The petitioner cited various financial and legal issues, including unpaid dues to the State Electricity Board, tax demands, and penalties from statutory authorities like the Commissioner of Central Excise and the Ministry of Commerce. The Respondents countered that these were routine demands and that the Company had challenged them before the appropriate authorities. The judgment concluded that these issues, being under appeal, do not justify action under Sections 397/398.

Validity and Procedural Compliance of the Rejoinder:
The Respondents argued that the rejoinder filed by the petitioner should not be considered as it was not affirmed before a Notary Public, as required by Regulation 23 of the CLB Regulations. The petitioner contended that her signature was attested by the Indian High Commission at Sharjah. The judgment held that since the rejoinder was not affirmed by affidavit either at Sharjah or in India, it could not be accepted as a proper rejoinder.

Conclusion:
The judgment concluded that the petitioner failed to establish grounds for action under Sections 397/398 of the Companies Act. The issues raised, including non-filing of statutory returns and financial liabilities, were either resolved or under appeal and did not amount to mismanagement or oppression. The petition was dismissed, and no costs were ordered. The judgment emphasized that the petitioner, holding majority shares, had alternative remedies available, such as calling for an Extraordinary General Meeting or applying to the CLB to convene an AGM, which she did not pursue.