1999 (10) TMI 746 - Board - Companies Law

Summary

Issues Involved:
1. Removal of the petitioner as the managing director.
2. Further issue of shares.
3. Allegations of mismanagement and siphoning off funds.
4. Vacation of office by the petitioner's sons.
5. Amendment of Article 95.
6. Other allegations (e.g., shifting of the registered office).

Summary:

1. Removal of the Petitioner as the Managing Director:
The petitioner alleged that his removal as the managing director was both oppressive and illegal. He claimed that he was ousted despite being a permanent director as per the articles of association. The respondents argued that the petitioner was removed due to his actions against the company's interests, including complaints to various authorities leading to raids. The Board found that the removal was justified and not an act of oppression, as it was done in the company's interest. The legality of the removal was upheld as the provisions of Section 284 were complied with, and notices for the extraordinary general meeting were duly sent.

2. Further Issue of Shares:
The petitioner contended that the issue of 4,445 additional shares was intended to dilute his shareholding. The respondents justified the issuance as necessary for raising additional equity as advised by PICUP. The Board noted that no details were provided about the allotment but allowed the petitioner the option to apply for his entitlement, treating the additional shares as a rights issue.

3. Allegations of Mismanagement and Siphoning Off Funds:
The petitioner accused the second respondent of siphoning off funds, including Rs. 2.3 lakhs from certain invoices and Rs. 51 lakhs under "sundry debtors." The Board found the allegations unsubstantiated and noted that the invoices in question were raised when the petitioner was the managing director. The Board declined to order an investigation due to the lack of concrete evidence.

4. Vacation of Office by the Petitioner's Sons:
The respondents claimed that the petitioner's sons vacated their office as directors u/s 283(1)(g) for not attending three consecutive board meetings. The Board found that the notices for the meetings were duly sent and the provisions of Section 283(1)(g) were correctly applied, leading to the vacation of office by operation of law.

5. Amendment of Article 95:
The petitioner argued that the amendment to Article 95 to provide for the appointment of fifteen directors violated Section 259, which limits the number of directors without Central Government approval. The respondents clarified that the company had not acted on the amended article. The Board noted that the company must seek approval before increasing the number of directors.

6. Other Allegations:
Other allegations, such as the second respondent running the factory and shifting the registered office, were not argued by the petitioner's counsel and were thus not addressed by the Board.

Conclusion:
The Board concluded that the petitioner failed to establish acts of oppression or mismanagement by the respondents. The petition was dismissed, but the Board directed the respondents to expedite the release of the petitioner's personal guarantees given to financial institutions. No order as to costs was made.