2009 (8) TMI 1228 - Board - Companies Law

Issues Involved:
1. Whether the Petitioners continued to be shareholders in the Respondent No. 1 Company as on the date of the Petition.
2. Whether the Respondents are the shareholders and Directors, and from what date they continued to be shareholders and Directors of the Respondent No. 1 Company.
3. When did the Petitioners approach this Bench for relief.
4. Whether this Bench has any powers under Section 397/398 to go into the issues relating to fraud, forgery, and fabrication of records.
5. Whether there are any violations under FERA.
6. Whether the Company Petition is maintainable under Section 399 of the Companies Act, 1956.
7. What relief should be granted.

Analysis:

Issue 1: Whether the Petitioners continued to be shareholders in the Respondent No. 1 Company as on the date of the Petition.
The Petitioners were initially subscribers to the Memorandum of Articles of Association and first Directors of the Company, which was incorporated on 09.12.1993. However, the Petitioners transferred their shareholding to Respondent No.2 and Respondent No.4 on 05.04.1999 and resigned as Directors, evidenced by Form No.32 filed with the Registrar of Companies. The Advocate Commissioner's report confirmed that the Petitioners ceased to be shareholders from 05.04.1999. Consequently, the Petitioners were not shareholders or Directors at the time of filing the petition.

Issue 2: Whether the Respondents are the shareholders and Directors, and from what date they continued to be shareholders and Directors of the Respondent No. 1 Company.
Respondent Nos.2 and 4 were inducted as partners in the firm and later became shareholders and Directors of the Company. The Petitioners transferred their shares and resigned, making Respondent Nos.2 and 4 shareholders and Directors from 05.04.1999. Respondent No.3 was later co-opted as a Director and allotted shares, as evidenced by Board Minutes and Annual Returns.

Issue 3: When did the Petitioners approach this Bench for relief.
The Petitioners approached the Bench in 2006, alleging oppression and mismanagement. However, they had not raised any issues regarding their status as shareholders or Directors since their exit in 1999, indicating a significant delay in seeking relief.

Issue 4: Whether this Bench has any powers under Section 397/398 to go into the issues relating to fraud, forgery, and fabrication of records.
The Bench does not have the power to adjudicate issues of fraud, forgery, and fabrication of records under Sections 397/398, as these are summary proceedings. Such issues require detailed investigation and can only be resolved by a Civil Court through oral and documentary evidence.

Issue 5: Whether there are any violations under FERA.
The Petitioners alleged that the transfer of shares violated FERA, as the Petitioner No.2 was abroad, and no RBI approval was obtained. However, the Petitioners did not provide evidence of informing the RBI about the change in status or seeking permission to hold shares. The general exemption under FERA for non-repatriation category transfers applies, and the allegations of FERA violations were found to be unfounded.

Issue 6: Whether the Company Petition is maintainable under Section 399 of the Companies Act, 1956.
The Petitioners failed to prove their shareholding in the Company as required under Section 399. They did not provide share certificates or evidence of their names in the Register of Members. The Advocate Commissioner's report and Annual Returns confirmed that the Petitioners were not shareholders since 1999. Therefore, the petition is not maintainable.

Issue 7: What relief should be granted.
Given that the Petitioners are not shareholders as per Section 399 and the allegations of fraud and forgery cannot be adjudicated in this forum, the Company Petition is dismissed as not maintainable. All interim orders stand vacated, and no costs are awarded.

Conclusion:
The Company Petition is dismissed as not maintainable under Section 399 of the Companies Act, 1956. The Petitioners failed to prove their shareholding and the Bench lacks jurisdiction to adjudicate issues of fraud and forgery. All interim orders are vacated, and no costs are awarded.

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