2009 (5) TMI 972 - Board - Companies Law

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Validity of the power of attorney.
3. Legality of the board and general meetings held on May 18, 2006.
4. Legality of the increase in authorized share capital and allotment of shares.
5. Shifting of the registered office.
6. Compliance with statutory notice requirements.
7. Representation on the board of directors.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The petitioner alleged that the respondents engaged in acts of oppression and mismanagement, including amending the registered address of the company without notice, increasing the authorized share capital, and allotting shares to gain majority control. The petitioner contended that these actions were taken without proper notice or intimation, violating the law and Articles of Association (AoA).

2. Validity of the Power of Attorney:
The respondents challenged the validity of the power of attorney held by Mrs. Pushpa Bansal, claiming it was merely attested by a notary public and thus defective. The Board found that the power of attorney was valid, noting certification by the notary public and a register maintained in the jail showing the notary's visit. The Board dismissed the preliminary objections, holding that the power of attorney was sufficient to confer authority to institute the petition.

3. Legality of the Board and General Meetings Held on May 18, 2006:
The petitioner argued that the meetings were held without proper notice and in violation of statutory requirements. The statutory notice for the extraordinary general meeting was given only eight days prior, against the requirement of 21 days' clear notice as per Section 171 of the Companies Act. The Board found that no proper notice was served, and the resolutions passed at these meetings were illegal and invalid.

4. Legality of the Increase in Authorized Share Capital and Allotment of Shares:
The petitioner contended that the increase in authorized share capital and subsequent allotment of shares to respondent No. 4 were done with mala fide intent to usurp control of the company. The Board found that the increase in capital was not for bona fide needs but for extending undue benefit to one individual. The allotment of shares to respondent No. 4 was declared illegal and canceled.

5. Shifting of the Registered Office:
The petitioner argued that the registered office was shifted with mala fide intent. The Board found that the shifting of the registered office was done without proper notice and was illegal. The registered office was ordered to be restored to its original location.

6. Compliance with Statutory Notice Requirements:
The Board noted that the company failed to comply with statutory notice requirements for meetings. The certificate of posting provided by the respondents was found to be unreliable, and no corroborative evidence such as a dispatch register or books of account was produced. The Board held that the meetings held without proper notice were invalid.

7. Representation on the Board of Directors:
The petitioner argued that the respondents appointed their sympathizers to the board and excluded the petitioner's group from management. The Board found that the respondents' actions were burdensome and oppressive, and ordered equal representation for the petitioner's group on the board.

Conclusion:
The Company Law Board found in favor of the petitioner, holding that the actions of the respondents were oppressive and constituted mismanagement. The resolutions passed at the board and general meetings on May 18, 2006, were declared illegal and set aside. The allotment of shares to respondent No. 4 was canceled, and the registered office was ordered to be restored to its original location. The petitioner's group was granted equal representation on the board, and the bank accounts of the company were to be operated with joint signatures from both groups. The petition was disposed of with no order as to costs.

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