2012 (8) TMI 792 - HC - Companies Law

Appeal against dismissal of company petition by CLB on a preliminary issue of non-maintainability of the petition - petitioner did not qualify for relief either u/s 111 or for an order u/s 402 on the premises as available u/s 397 or 398 - petitioner did not fulfil the requisite qualification of holding a minimum of 10% of the shareholding of the company in terms of Section 399 - name of petitioner company not mentioned in shareholder Register - Held that - It is observed that suit had been filed by petitioner for recovery of the funds, and petitioner had in fact at one point of time made an offer to the other shareholders of the company to take back his shares. Impugned Petition did not make much headway before the Company Law Board for want of company petitioner having commensurate qualification and that being the factual position and not much in dispute, we do not find any occasion to interfere with the order of the Company Law Board dismissing the company petition on preliminary issue.

Summary

Issues:
- Appeal under Section 10F of the Companies Act dismissed by the Company Law Board on the maintainability of the company petition.
- Question of law regarding the justification of not depicting the appellant's name in the register of shareholders.
- Applications for dispensation of filing a paper book, direction on states quo, temporary injunction, and stay.

Analysis:
1. The appellant filed an appeal under Section 10F of the Companies Act after the Company Law Board dismissed the company petition on the grounds of maintainability. The Board found that the petitioner did not meet the qualification criteria under Sections 111, 235, 397, 398, and 402 of the Companies Act, specifically noting the lack of a minimum 10% shareholding as required by Section 399, resulting in the dismissal of the petition.

2. The main question of law raised in the appeal was whether the respondent-company was justified in not including the appellant's name in the register of shareholders due to the appellant filing a civil suit for recovery of the share amount. The appellant argued that the Company Law Board erred in its decision and sought a remand for fresh consideration.

3. Various applications were filed, including for dispensation of filing a paper book, direction on states quo, temporary injunction, and stay. The appellant's counsel argued for dispensation of the paper book, which was granted at the appellant's risk and cost.

4. The respondent, represented by the second respondent, contended that the appellant's conduct hindered the company from recognizing him as a shareholder despite an agreement among shareholders. The respondent suggested that if the appellant withdrew the recovery suit, the company would recognize him as a shareholder of 35 shares.

5. The Court noted that the appellant's petition lacked merit before the Company Law Board due to the insufficient qualification criteria. The Board's decision to dismiss the petition was upheld, emphasizing that the appellant's entitlement to 35 shares did not meet the threshold for Sections 397 or 398 petitions.

6. Despite the dismissal of the company petition, the Court clarified that the company could still register the appellant as a holder of 35 shares. The appellant was advised to pursue his efforts for recovery in the civil court, with the appeal ultimately being dismissed, subject to the observations made.

This comprehensive analysis covers the issues and the detailed judgment provided by the Karnataka High Court in this case.