2007 (1) TMI 614 - Board - Companies Law

Summary

Issues Involved:
1. Determination of whether the appellants are shareholders of the respondent company.
2. Consideration of the issue of limitation.
3. Examination of the validity and authenticity of the company's records and documents.
4. Evaluation of the conduct of the parties involved.

Issue-Wise Analysis:

1. Determination of Shareholding:
The Hon'ble Delhi High Court remanded the matter to the Company Law Board (CLB) to decide if the appellants are shareholders of the respondent company, M/s V.K. Kapoor and Associates Pvt. Ltd. The petitioners argued that the Annual Accounts and lists of shareholding filed with the Income Tax Department for the financial years 1987-88 to 1993-94 showed that they held 250 shares. These documents were signed by two directors, including respondent No. 2, Mr. V.K. Kapoor. The respondents did not dispute these signatures. The petitioners provided further evidence, including an affidavit from Shri Vijay Sehgal, another promoter-director, confirming the petitioners' shareholding. The respondents failed to produce any share certificates or allotment letters, and no contemporaneous returns regarding share allotments were filed with the Registrar of Companies (ROC). The CLB concluded that the petitioners were indeed shareholders based on the corroborative evidence and the lack of refutation from the respondents.

2. Issue of Limitation:
The respondents argued that the petition was barred by limitation, claiming that the matter from 1988 was raised only in 2003. However, the CLB found that the cause of action arose on 1.8.2000 when the respondents filed Annual Returns and other documents with the ROC under the Amnesty Scheme. The petitioners became aware of this on 27.12.2001. The petition was filed on 17.3.2003, within the prescribed period of limitation. The CLB emphasized that equity does not fix a specific time limit but considers the circumstances of each case. There was no negligence, inaction, or lack of bona fide imputable to the petitioners.

3. Validity and Authenticity of Records:
The petitioners argued that the Annual Returns filed by the company on 1.8.2000 were fraudulent, lacking the required signatures of two directors and containing altered shareholding lists. The balance sheets and auditors' reports for the period 1987-88 to 1993-94 also lacked signatures. The respondents' failure to produce the original Register of Members and the discrepancies between documents filed with the Income Tax Department and the ROC suggested fraud. The CLB found that the documents filed with the ROC were defective and had no evidentiary value, supporting the petitioners' case of altered records to remove their names.

4. Conduct of the Parties:
The respondents argued that the petitioners' conduct over the past 18 years was suspicious, claiming shareholding based on a list filed with the Income Tax Department in 1988. However, the CLB found that it was the respondents' conduct that required scrutiny. The respondents' failure to maintain statutory records and their submission of defective documents indicated malafide intentions. The CLB emphasized that the conduct of parties is a relevant factor in equitable proceedings under Sections 397/398 of the Companies Act. The respondents could not take advantage of their own wrongs.

Conclusion:
The CLB concluded that the petitioners are shareholders of the respondent company and allowed Company Petition No. 69/2003. The petitioners were entitled to relief sought at items 1 and 2 of their petition. No order as to cost was made.