2005 (11) TMI 509 - Board - Companies Law

Issues Involved:
1. Validity of the annual return for the year 2003.
2. Appointment of an independent board of directors and chairman.
3. Appointment of an independent chartered accountant for auditing the company's books.
4. Allegations of siphoning funds and investigation into the company's affairs.
5. Restraint on alienating or encumbering the company's properties.
6. Compensation for losses incurred by the company.
7. Restoration of benefits to the petitioner and her children as shareholders.

Detailed Analysis:

Validity of the Annual Return for the Year 2003:
The petitioner claimed that the annual return filed by the second respondent for the year 2003 was fraudulent and fabricated. The petitioner alleged that the second respondent manipulated the company's records to transfer the shares standing in the names of the petitioner and her children to himself and others. The petitioner and her children never transferred the impugned shares, and no consideration was received for these shares. The respondents argued that the petitioner and her children relinquished their rights in the company by acting upon a deed of arrangement and declaration executed in 2002, which was not challenged in any forum. The court found that the petitioner had accepted the benefits under the deed and was bound by its terms, thus failing to prove the annual return's fraudulence.

Appointment of an Independent Board of Directors and Chairman:
The petitioner sought the appointment of an independent board of directors and chairman to manage the company's affairs. However, the court did not address this issue directly, as the primary focus was on the validity of the share transfers and the annual return.

Appointment of an Independent Chartered Accountant:
The petitioner requested an independent chartered accountant to audit the company's books. This relief, along with the investigation into the company's affairs, was not pressed by the petitioner's counsel during oral submissions. Therefore, the court did not consider this request.

Allegations of Siphoning Funds and Investigation into the Company's Affairs:
The petitioner alleged that the second respondent siphoned funds from the company and sought an investigation under Sections 235/237 of the Companies Act, 1956. However, this relief was not pressed by the petitioner's counsel during oral submissions, and the court did not address these allegations.

Restraint on Alienating or Encumbering the Company's Properties:
The petitioner sought to restrain the respondents from alienating or encumbering the company's properties. This issue was not directly addressed by the court, as the primary focus was on the validity of the share transfers and the annual return.

Compensation for Losses Incurred by the Company:
The petitioner requested that the second respondent be directed to make good the loss suffered by the company due to the use of company funds for purchasing and developing immovable properties. This relief was not pressed by the petitioner's counsel during oral submissions, and the court did not consider this request.

Restoration of Benefits to the Petitioner and Her Children as Shareholders:
The petitioner sought the restoration of all benefits to herself and her children as shareholders of the company. The court found that the petitioner and her children had relinquished their rights in the company by acting upon the deed of arrangement and declaration, which they did not challenge in any forum. Therefore, the court concluded that the petitioner and her children were no longer shareholders and were not entitled to any relief claimed in the company petition.

Conclusion:
The court dismissed the company petition, concluding that the petitioner failed to satisfy the requirements of Sections 397/398 of the Companies Act, 1956. The interim injunction granted earlier was vacated. The court found that the petitioner and her children had relinquished their rights in the company by acting upon the deed of arrangement and declaration, which they did not challenge in any forum. Consequently, the petitioner was not entitled to any relief claimed in the company petition.

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