2004 (7) TMI 672 - Board - Companies Law

Company petition regarding removal of director - illegal EGM - mismanagement of company funds - dispute over company funds - HELD THAT - After the resignation of Mr. Pandey which is an admitted position only two directors were left and without the presence of the petitioner no Board Meeting was valid. Accordingly all Board Meetings/EGM held by the company without the petitioner are illegal and set aside. The petitioner is restored as director of the company which position he held before the alleged EGM held on 11.2.2002. The refund order received by the petitioner and kept with him of 2, 55, 276 should be immediately deposited within three days in the accounts of the company if not already deposited as per order dated 28.5.2002. There is a dispute and some allegations have been leveled against the company s auditor M/s Kumar Parveen and Associates for working against the interest of the company in connivance with the petitioner. The petitioner being a founder director and having invested a substantial amount in the company feels oppressed I am of the view that petitioner should be given an option in case he desires to go out of the company on return of his investment in shares of the company. In case the petitioner is willing to part with his shares the company/respondent should purchase the shares on valuation to be made by an independent valuer. The valuation will be based on the balance sheet as on 31.3.2001 being the approximate date of the removal of the petitioner from directorship. In case the petitioner decides to go out of the company then on an application made by him a valuer will be appointed by this Board in consultation with both the parties. Thus the petition is allowed.

Summary

Issues involved: Company petition regarding removal of director, illegal EGM, alleged mismanagement, and dispute over company funds.

Summary:
1. The petitioner, a director of the company, filed a petition against the respondent alleging differences between directors, illegal removal of petitioner, and mismanagement of company funds. Allegations include attempts to siphon company funds and improper conduct in meetings.

2. Respondents argue that the company was founded by respondent No. 2, who invested in the company and offered the petitioner a role due to their friendship. Allegations of petitioner's misconduct, undercutting clients, and colluding with a Chartered Accountant to manipulate company affairs are made. Respondent No. 2 was removed as director due to non-attendance and hindrance by the Chartered Accountant.

3. After considering arguments, it was found that the removal of the petitioner as a director was illegal due to lack of quorum in meetings held without the petitioner. The petitioner is reinstated as director. The refund order in possession of the petitioner should be deposited back into the company's accounts.

4. The petitioner is given the option to sell their shares back to the company based on an independent valuation. If the petitioner chooses to exit the company, a valuer will be appointed by the Board.

Judgement: The petition is allowed with no costs awarded.