2007 (9) TMI 699 - Board - Companies Law

Summary

Issues Involved:
1. Rectification of Register of Members
2. Delivery of Share Certificates
3. Declaration of Directorship
4. Removal of a Director
5. Restraining Sale of Immovable Properties
6. Investigation into Affairs of the Company
7. Surcharge on the Second Respondent

Issue-wise Detailed Analysis:

1. Rectification of Register of Members:
The petitioners, holding 20.83% of the paid-up capital, claimed rectification of the register of members for 1025 shares. The respondents argued that the petitioners had transferred their shares in 2005. The Board found discrepancies in the share certificates and transfer deeds, noting the petitioners still held original certificates for 410 shares. The respondents' inconsistent claims regarding the transfer years (1999, 2001, and 2005) and lack of proof for consideration payments led the Board to order the rectification of the register of members, reinstating the petitioners' names for 1015 shares.

2. Delivery of Share Certificates:
The petitioners sought delivery of share certificates for 615 shares. The Board found that the original and new share certificates were held by both petitioners and respondents. The Board ordered the cancellation of both sets of certificates and directed the issuance of fresh certificates to the petitioners.

3. Declaration of Directorship:
The petitioners claimed to be directors of the company. The respondents asserted that the petitioners had resigned in 2001, supported by Form No. 32 and annual returns. The Board noted the petitioners' admission in a power of attorney that they were "earlier directors." The Board concluded that the petitioners were no longer directors and denied their request for a declaration of directorship.

4. Removal of a Director:
The petitioners sought the removal of the second respondent from the office of director and managing director. The Board did not address this issue directly in the order, focusing instead on the broader issues of shareholding and management.

5. Restraining Sale of Immovable Properties:
The petitioners wanted to restrain the company from selling its only remaining land. The Board allowed the sale but directed that the proceeds be used exclusively for the company's purposes, certified by the board of directors.

6. Investigation into Affairs of the Company:
The petitioners alleged mismanagement and sought an investigation. The Board appointed a Chartered Accountant to scrutinize and verify the financial transactions and development expenses, with a report due by 30.11.2007. The report's findings would be binding on all parties.

7. Surcharge on the Second Respondent:
The petitioners sought a surcharge on the second respondent based on the investigation's outcome. The Board directed the second respondent to reimburse any diverted funds found by the Chartered Accountant, with a 10% interest penalty for non-compliance.

Conclusion:
The Board ordered the rectification of the register of members, issuance of fresh share certificates, and a financial audit by a Chartered Accountant. The company was permitted to sell its land under strict conditions, and the second respondent was held accountable for any financial discrepancies. The petitioners' claims of directorship were denied, and the petition was disposed of with specific directions for implementation.