2004 (3) TMI 800 - Board - Companies Law

Summary

Issues:
1. Illegal allotment of equity shares
2. Appointment of additional director
3. Removal of directors without proper procedure
4. Compliance with Companies Act, 1956
5. Time-barred petition

Analysis:

1. Illegal Allotment of Equity Shares:
The petitioners alleged that the respondents illegally allotted 9507 equity shares without proper notice to the petitioners. The allotment significantly reduced the petitioners' shareholding from 50.9% to 13.4%, leading to oppression. The respondents increased the capital when the company was not operational, raising concerns about the utilization of funds. The petitioners also raised issues regarding shares allotted to minors and unexplained share application money.

2. Appointment of Additional Director:
The appointment of respondent No. 4 as an additional director was challenged by the petitioners, citing a lack of proper notice and delay in filing necessary documents. The respondents failed to provide evidence of compliance with the Companies Act, 1956, regarding the appointment process. The lack of documentation raised doubts about the legitimacy of the appointment.

3. Removal of Directors Without Proper Procedure:
The removal of directors, including Shri Giridhar Gopal Gupta and Shri Ram Narain Gupta, was contested by the petitioners for not following the prescribed procedure under the Companies Act, 1956. The respondents failed to produce records or evidence supporting the removal, leading to a conclusion that the removal was not in accordance with the law.

4. Compliance with Companies Act, 1956:
The petitioners argued that the respondent company did not adhere to Section 283(1)(g) of the Companies Act, 1956, regarding the timing of consecutive board meetings. The failure to maintain the required gap between meetings raised concerns about compliance with statutory provisions, further supporting the petitioners' claims of mismanagement and oppression.

5. Time-Barred Petition:
The respondents contended that the petition was time-barred under Article 137 of the Limitation Act, as it was filed more than three years after the company's closure. However, the petitioners argued that the acts of oppression and mismanagement occurred within the permissible timeframe for filing under the Companies Act, 1956. The issue of the petition's timeliness was a point of contention between the parties.

In conclusion, the Company Law Board found merit in the petitioners' claims regarding the illegal allotment of shares, improper appointment of a director, and removal of directors without due process. The Board set aside the actions taken by the respondents, restoring the removed directors to their positions and declaring the allotment of certain shares as illegal. The judgment also allowed either party to buy or sell shares and directed valuation based on the company's status in 1995.