2006 (10) TMI 482 - Board - Companies Law

Summary

Issues Involved:
1. Convening of the annual general meeting (AGM) of the Company.
2. Convening of an extraordinary general meeting (EGM) to remove existing directors.
3. Amendment of the company petition.
4. Investigation into the affairs of the Company.
5. Appointment of an alternative valuer.
6. Appointment of a statutory auditor.

Issue-wise Detailed Analysis:

1. Convening of the Annual General Meeting (AGM):
The petitioners filed C.A. No. 44 of 2006 to convene the AGM, arguing that the Company had not audited its accounts for the years ending 31.03.2005 and 31.03.2006 and had not taken steps to convene the AGM. The respondents opposed this, citing a large sum of money owed by the deceased Nanjundaiah to the Company and the need for a probate of his will. The judgment noted that the right of the consenter to vote at the AGM was not an issue in the company petition and therefore, the interim relief sought fell beyond the scope of the final relief. The application in C.A. No. 44 of 2006 was allowed, permitting the Company to convene the AGM for the year ended 31.03.2005.

2. Convening of an Extraordinary General Meeting (EGM) to Remove Existing Directors:
The petitioners filed C.A. No. 70 of 2006 seeking to convene an EGM to remove the existing directors due to alleged acts of oppression and mismanagement. The respondents argued that the meetings were conducted regularly and the refusal to transmit shares was due to discrepancies in the will's signature. The judgment held that the removal of directors at this stage was not permissible and that the practice of granting interim orders which would practically give the final relief sought for by the aggrieved shareholders was disapproved by the Supreme Court. The application was dismissed.

3. Amendment of the Company Petition:
The petitioners filed C.A. No. 71 of 2006 to amend the company petition to include issues related to the transmission of shares, the claim of Rs. 82.47 lakhs, and the right of lien. The respondents opposed this, stating that the amendments were based on a different cause of action and were not within the scope of the original petition. The judgment noted that the proposed amendments were entirely on a different cause of action and that the grievance arose after the filing of the company petition. The prayer for amendment was not permissible under law, and the application was dismissed.

4. Investigation into the Affairs of the Company:
The petitioners filed C.A. No. 72 of 2006 seeking an investigation into the affairs of the Company due to alleged falsification of accounts and a fictitious claim of Rs. 82.47 lakhs. The respondents argued that the allegations were not supported by any material and that the prayer for an investigation was beyond the scope of the lis between the parties. The judgment held that the prayer for an investigation was beyond the scope of the company petition and dismissed the application.

5. Appointment of an Alternative Valuer:
The respondents filed C.A. No. 87 of 2006 seeking the appointment of an alternative valuer after KPMG PEAT MARWICK expressed their inability to undertake the valuation of shares. The petitioners opposed this, stating that the respondents were deliberately misleading the auditors. The judgment noted that the petitioners were not interested in settlement at this stage and dismissed the application.

6. Appointment of a Statutory Auditor:
The respondents filed C.A. No. 88 of 2006 seeking the appointment of a statutory auditor after the previous auditors expressed their unwillingness to continue. The petitioners opposed this, pointing out the respondents' delay in taking action. The judgment allowed the application, permitting the Company to appoint a statutory auditor at the proposed AGM.

Conclusion:
The applications in C.A. No. 44 of 2006 and C.A. No. 88 of 2006 were allowed, permitting the convening of the AGM and the appointment of a statutory auditor. The rest of the applications were dismissed. The judgment emphasized that the interim reliefs sought by the petitioners fell beyond the scope of the final reliefs and were not permissible under law.