2001 (11) TMI 1041 - Board - Companies Law

Summary

Issues Involved:
1. Control of the company and composition of the Board.
2. Sale and transfer of 2000 shares held by the company in Surma Valley Stock Ltd.
3. Increase in the paid-up capital of the company by accepting unpaid amounts on 400 shares held by Surma.
4. Issuance of duplicate share certificates.
5. Registration of transfer of 177 shares.

Detailed Analysis:

1. Control of the Company and Composition of the Board:
The petitioners initially filed CP No. 8 of 1998 alleging acts of oppression and mismanagement, focusing on which group of shareholders controlled the majority voting power. The Company Law Board (CLB) directed an Extraordinary General Meeting (EOGM) to elect directors, a decision upheld by the Gauhati High Court. Despite the EOGM results favoring the respondents, the CLB later declared the petitioners' nominees as directors and ordered the board to hand over control, a directive challenged and stayed by the Gauhati High Court. The petitioners argued that the respondents, under the guise of the interim status quo order, took decisions to usurp control, including increasing the paid-up capital and selling shares, thus creating a new majority and oppressing the petitioners.

2. Sale and Transfer of 2000 Shares in Surma Valley Stock Ltd.:
The petitioners contended that the sale of 2000 shares in Surma was engineered to transfer control to unknown persons, thereby affecting the voting rights on 400 shares held by Surma in the company. This sale, they argued, was done without general body approval and aimed at reducing the petitioners' majority to a minority. The respondents justified the sale by stating Surma was dormant and the company needed funds. The CLB found the sale lacked transparency and bona fide intent, noting the non-disclosure of buyers' identities and the consideration amount. The CLB directed the company to disclose the buyers' details and issued show-cause notices to them, indicating potential cancellation of the sale.

3. Increase in Paid-Up Capital by Accepting Unpaid Amounts on 400 Shares:
The petitioners argued that the acceptance of unpaid amounts on 400 shares held by Surma, making them fully paid, was done to increase voting power, violating a restraint order. The CLB noted that there was no evidence of a board resolution calling up the unpaid amount, and the acceptance of money post-restraint order indicated mala fide intent. The CLB found this act oppressive and directed that voting rights on these shares be restricted to their previous paid-up value until the Gauhati High Court's decision.

4. Issuance of Duplicate Share Certificates:
The petitioners alleged that the respondents were issuing duplicate certificates for dormant shares to manipulate voting power. The respondents argued that issuing duplicates was a legitimate duty. The CLB, considering the contentious nature of shareholding, directed the company to hold all requests for duplicate certificates until the Gauhati High Court disposed of the appeal.

5. Registration of Transfer of 177 Shares:
The petitioners complained about the non-registration of 177 shares lodged for transfer since 1998. The respondents claimed the transfer instruments were defective. The CLB directed the company to return the share certificates and transfer instruments to the petitioners for correction and relodgement, ensuring registration within 15 days of proper submission.

Conclusion:
The CLB found the respondents' actions, including the sale of Surma shares and acceptance of unpaid amounts, aimed at creating a new majority and oppressive to the petitioners. The CLB directed remedial actions, including potential cancellation of the Surma share sale, restriction on voting rights of the 400 shares, and holding requests for duplicate certificates, while ensuring proper registration of the 177 shares. The judgment emphasized maintaining the status quo until the Gauhati High Court's final decision.