2006 (8) TMI 650 - SC - Indian Laws

Summary

Issues Involved:
1. Legitimacy of the transfer of 1650 shares by Dankha Devi Agarwal to Bhagirath Agarwal and his wife.
2. Legality of the withdrawal of the suit filed by Dankha Devi Agarwal.
3. Validity of the removal of Bhagirath Agarwal and his wife from the Board of Directors.
4. Legality of the allotment of 1960 shares to Tara Chand Agarwal and Chandra Prakash Agarwal.

Issue-wise Detailed Analysis:

1. Legitimacy of the transfer of 1650 shares by Dankha Devi Agarwal to Bhagirath Agarwal and his wife:
The core issue was whether Dankha Devi Agarwal had genuinely transferred 1650 shares to Bhagirath Agarwal and his wife. The transfer was purportedly done in 1983-84, and returns were filed with the Registrar of Companies on 15th June 1984. However, Dankha Devi Agarwal filed a suit on 6th November 1989, claiming the transfer was fraudulent and sought a declaration that she was the sole owner of the 1660 shares. The court noted that the transfer of shares and subsequent steps taken by Bhagirath Agarwal raised suspicions, especially considering the circumstances under which the suit was withdrawn.

2. Legality of the withdrawal of the suit filed by Dankha Devi Agarwal:
The withdrawal of the suit filed by Dankha Devi Agarwal was contested on the grounds that her signatures were forged. The court observed that the manner in which the suit was withdrawn, including the change of advocate and the ex-parte mentioning of the matter, indicated potential irregularities. The learned Single Judge and the Division Bench did not adequately address these concerns. Consequently, the Supreme Court allowed the appeal, set aside the orders dismissing the application for recalling the withdrawal, and directed a fresh hearing on the matter.

3. Validity of the removal of Bhagirath Agarwal and his wife from the Board of Directors:
The removal of Bhagirath Agarwal and his wife from the Board of Directors was challenged. The court found that the meetings held on 26th October 1989 and 21st November 1989 did not comply with Section 286 of the Companies Act, which mandates proper notice for board meetings. The Single Judge and the Division Bench both held that the removal was illegal due to non-compliance with statutory provisions. The Supreme Court upheld this view, agreeing that the removal was not legally valid.

4. Legality of the allotment of 1960 shares to Tara Chand Agarwal and Chandra Prakash Agarwal:
The allotment of 1960 shares to Tara Chand Agarwal and Chandra Prakash Agarwal was also contested. The court found that the story of notice being given to Bhagirath Agarwal regarding the meeting where the allotment was decided was not credible. Both the Single Judge and the Division Bench concluded that the allotment was unlawful. The Supreme Court affirmed this decision, noting that the facts did not support a different conclusion.

Conclusion:
The Supreme Court allowed the appeal concerning the withdrawal of the suit, directing a fresh hearing on the matter. It upheld the decisions of the Single Judge and the Division Bench regarding the illegality of the removal of Bhagirath Agarwal and his wife from the Board of Directors and the unlawful allotment of 1960 shares. Consequently, the appeal against the removal and share allotment was dismissed, and no further orders were passed under Section 340 of the Code of Criminal Procedure.