2012 (2) TMI 629 - HC - Companies Law

Summary

Issues Involved:

1. Cancellation of the allotment of 1340 additional shares.
2. Declaration of the appointment of the Appellants as directors as null and void.
3. Restoration of the Respondents' directorship.
4. Rectification of the register of members and refund of consideration for canceled shares.
5. Protection of Sri Ajeet Singh Puri from exclusion from company management.
6. Operation of bank accounts and notice for board meetings.
7. Validity of the Company Law Board's findings and jurisdiction under Section 10-F of the Companies Act.

Summary:

1. Cancellation of the Allotment of 1340 Additional Shares:
The Company Law Board found that the appellants, including Sri Ajeet Singh Puri, acted in a highly oppressive manner towards the Respondents by allotting 1340 shares to gain majority control. The Board ordered the cancellation of these shares and rectification of the register of members, restoring the shareholding as it prevailed before 31.03.2007.

2. Declaration of the Appointment of the Appellants as Directors as Null and Void:
The Company Law Board declared the appointment of the Appellants as directors null and void. It was observed that the appointment was made without proper notice and was intended to gain control over the company, which was deemed oppressive.

3. Restoration of the Respondents' Directorship:
The Company Law Board restored the directorship of the Respondents, finding their removal to be oppressive and aimed at concentrating managerial powers within Sri Ajeet Singh Puri.

4. Rectification of the Register of Members and Refund of Consideration for Canceled Shares:
The Board ordered rectification of the register of members and refund of the consideration paid for the canceled shares, ensuring that the shareholding structure was restored to its state before the disputed allotment.

5. Protection of Sri Ajeet Singh Puri from Exclusion from Company Management:
The Company Law Board protected Sri Ajeet Singh Puri from being excluded from the management of the company, allowing him to discharge his functions as before 31.03.2007.

6. Operation of Bank Accounts and Notice for Board Meetings:
The Board stipulated that bank accounts be operated jointly by either of the Respondents and Sri Ajeet Singh Puri to prevent allegations of siphoning of funds. It also required five days' notice along with the agenda to be circulated amongst the directors for board meetings.

7. Validity of the Company Law Board's Findings and Jurisdiction under Section 10-F of the Companies Act:
The High Court upheld the findings of the Company Law Board, stating that the findings were not perverse or arbitrary. The scope of appeal u/s 10-F is limited to questions of law, and the High Court found no reason to interfere with the Board's decision. The Court reiterated that oppression could be made out where conduct is harsh, burdensome, wrong, mala fide, or for a collateral purpose, even if legally permissible.

The appeal was dismissed with costs, affirming the Company Law Board's order.