2010 (5) TMI 920 - Board - Companies Law

Summary

Issues Involved:
1. Illegal transfer of shares.
2. Illegal appointment of a director.
3. Increase in authorized share capital.
4. Allotment of additional shares.
5. Removal of a director.
6. Maintainability of the petition.

Analysis of the Judgment:

1. Illegal Transfer of Shares:
The petitioner alleged that the transfer of 100 shares by Respondent No. 2 to Respondent No. 3 on 21/03/2007 was illegal and done without notice or consent of the petitioner, violating the Articles of Association. The court found discrepancies in the documents provided by the respondents, indicating that the transfer was not conducted properly and was intended to manipulate control within the company.

2. Illegal Appointment of a Director:
The petitioner argued that the appointment of Respondent No. 3 as an additional director on 21/03/2007 was done without notice to the petitioner. The court noted inconsistencies in the dates of appointment in various forms and returns, suggesting that the appointment was not validly conducted. The court concluded that the appointment was made clandestinely and without proper notice.

3. Increase in Authorized Share Capital:
The petitioner contended that the increase in authorized share capital from Rs. 1,00,000 to Rs. 5,00,000 on 20/08/2007 was done without following due process and without notice. The court found that the documents provided by the respondents were fabricated, and the increase in share capital was not conducted in accordance with the law. The court held that the increase was invalid.

4. Allotment of Additional Shares:
The petitioner alleged that the allotment of 40,000 additional shares to Respondent Nos. 2 and 3 on 01/09/2007 was done without notice, reducing the petitioner's shareholding from 95% to 19%. The court found that the notices for the meetings were not properly served, and the allotment was made with the intent to marginalize the petitioner. The court held that the allotment was illegal and constituted an act of oppression.

5. Removal of a Director:
The petitioner claimed that the removal of Respondent No. 4 as a director on 18/12/2007 was illegal as no special notice under Section 284 of the Companies Act was served. The court found that the removal was done without proper notice and in violation of the statutory provisions. The court held that the removal was invalid and constituted an act of oppression.

6. Maintainability of the Petition:
The respondents argued that the petition was barred by limitation, res judicata, and estoppel, and was filed without proper authority. The court rejected these objections, noting that the acts of oppression and mismanagement were continuing and the petition was filed within a reasonable time after the petitioner became aware of the acts. The court also found that the petition was filed with proper authority, despite discrepancies in the documents.

Conclusion:
The court dismissed the petition on the grounds that the petitioner had approached the court with unclean hands, having fabricated documents and suppressed material facts. The court held that both parties were guilty of misconduct and had failed to act in the best interest of the company. The court directed that all interim orders remain in force until 26/06/2014 to allow the petitioner to appeal the judgment.