2006 (8) TMI 648 - Board - Companies Law

Issues Involved:
1. Interference in day-to-day management of the Company.
2. Forcible removal of books of account and statutory records.
3. Usurpation of control and exclusion from management.
4. Convening of general and board meetings.
5. Increase in authorized capital.
6. Allotment of shares.
7. Manipulation of books of account and records.
8. Takeover of immovable properties without valid authority.
9. Denying entry to purchasers of flats.
10. Sale of flats without board authority and misappropriation of proceeds.

Detailed Analysis:

1. Interference in Day-to-Day Management:
The petitioner alleged that respondents 2 and 3 interfered in the day-to-day management of the Company, which was primarily managed by the petitioner until early 1999. The petitioner claimed that the respondents' interference led to disputes and physical violence, resulting in the petitioner being excluded from the Company's management.

2. Forcible Removal of Books of Account and Statutory Records:
The petitioner accused respondents 2 and 3 of forcibly removing the books of account and statutory records, thereby precluding the petitioner from accessing these documents. The respondents, however, contended that the petitioner was in custody of the records but refused to produce them.

3. Usurpation of Control and Exclusion from Management:
The petitioner claimed that respondents 2 and 3 usurped control of the Company, excluding the petitioner and the fourth respondent from management. The respondents argued that the petitioner abandoned the Company due to financial issues and that the second respondent took over management as per an understanding reached in March 1999.

4. Convening of General and Board Meetings:
The petitioner challenged the validity of general and board meetings convened by respondents 2 and 3, alleging that no proper notice was given and that the meetings were not held in accordance with the prescribed procedures. The respondents failed to produce original minutes books to substantiate their claims, leading to the conclusion that these meetings were not validly convened.

5. Increase in Authorized Capital:
The petitioner contested the increase in authorized capital from Rs. 10 lakhs to Rs. 21 lakhs, claiming it was done without proper notice and procedure. The respondents argued that the increase was necessary for the Company's benefit. The Board found that the increase, though irregular, was for the Company's benefit and did not constitute oppression.

6. Allotment of Shares:
The petitioner alleged that the allotment of shares to the third respondent was illegal and aimed at converting the existing majority into a minority. The Board found that while the third respondent brought in funds for share allotment, the petitioner's claim of having paid for shares was unsupported by evidence. The allotment to the third respondent was declared valid, while the allotment to the petitioner was set aside.

7. Manipulation of Books of Account and Records:
The petitioner accused respondents 2 and 3 of manipulating the books of account and records. The Board noted that the balance sheets and statutory returns were not supported by primary documents, making it difficult to establish the validity of these records.

8. Takeover of Immovable Properties Without Valid Authority:
The petitioner claimed that respondents 2 and 3 took over immovable properties of the Company without valid authority. The Board did not find sufficient evidence to substantiate this claim.

9. Denying Entry to Purchasers of Flats:
The petitioner alleged that respondents 2 and 3 denied entry to purchasers of flats constructed and sold by the Company. The Board noted that there were grievances from allottees regarding double allotment of flats, which were partly resolved through intervention and other forums.

10. Sale of Flats Without Board Authority and Misappropriation of Proceeds:
The petitioner accused respondents 2 and 3 of selling flats without board authority and misappropriating the proceeds. The Board found that while some sales were made under the orders of the District Consumer Disputes Redressal Forum, there was no evidence of willful violation of the CLB's orders.

Conclusion:
The Board directed the following:
1. The allotment of 97,300 shares to the petitioner on 03.01.1998 was declared null and void.
2. The issue of shares to the third respondent on 16.04.1998 and 24.12.1999 was declared valid.
3. The members of the Company were allowed to appoint their own directors to manage the Company's affairs, address grievances, and recover outstanding dues.

The company petition and connected applications were disposed of, and all interim orders were vacated.

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