2008 (10) TMI 693 - Board - Companies Law

Summary

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Acquisition and sale of properties.
3. Non-rendition and falsification of accounts.
4. Misappropriation of funds from Kuwait operations.
5. Non-compliance with statutory obligations.
6. Preliminary objections on laches, forum shopping, and suppression of facts.

Issue-wise Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The petitioners, holding 50% of the issued and paid-up capital, alleged oppression and mismanagement by respondents 2 to 5. They invoked the jurisdiction of the Company Law Board (CLB) under Sections 397, 398, and 402 of the Companies Act, 1956, seeking reliefs such as orders for the management of the company, supersession of the current board, surcharge for misappropriation, and restoration of immovable properties.

2. Acquisition and Sale of Properties:
The properties in question were intended to be acquired by the company but were fraudulently registered in the name of the second respondent. The properties were later sold by the second respondent during the pendency of the CLB proceedings, which the petitioners claimed was against the interests of the company and its shareholders. The CLB found that the sale was irregular and oppressive, and thus set it aside, ordering the restoration of 1.60 acres of the land to the company.

3. Non-rendition and Falsification of Accounts:
The petitioners accused the respondents of not maintaining proper accounts, failing to convene general and board meetings, and manipulating financial statements. The CLB noted that the accounts for the years 1993 to 2003 were adopted at various annual general meetings, and the petitioners were aware of this. Thus, the petitioners' claims on this issue were found to be ill-founded.

4. Misappropriation of Funds from Kuwait Operations:
The second respondent was responsible for Kuwait operations, which were not accounted for properly. The CLB held that the second respondent must render accounts for the Kuwait operations from 6-9-1991 to 5-11-1993 and directed the statutory auditor to quantify the amounts to be credited to the company's account.

5. Non-compliance with Statutory Obligations:
The petitioners alleged non-compliance with statutory obligations, including the failure to hold annual general meetings and file annual returns. The CLB found that the accounts were adopted at annual general meetings, and the petitioners failed to raise these issues in a timely manner. Therefore, the claims were not upheld.

6. Preliminary Objections on Laches, Forum Shopping, and Suppression of Facts:
The respondents raised preliminary objections, claiming the petitioners were guilty of laches, forum shopping, and suppression of material facts. The CLB found that the petitioners had withdrawn all suits before invoking the CLB's jurisdiction, and thus, the plea of forum shopping or suppression of material facts did not survive. The petitioners were not found guilty of laches as no prejudice was shown to have been suffered by the respondents.

Conclusion:
The CLB ordered the restoration of 1.60 acres of land to the company, directed the second respondent to render accounts for Kuwait operations, and suggested voluntary winding up of the company after meeting all liabilities. The petition was disposed of with no order as to costs, and the interim orders were vacated.