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2015 (12) TMI 1193 - Board - Companies LawOppression and mismanagement - transmission of shares - Petitioner has sought a declaration to the effect that he is owner and title holder of 7083.8 shares being the successor of the Estate of Mrs. Jayshree Soni who passed away intestate on 31/12/2012 - increasing the authorized share capital of the Respondent No.1 Company - Held that - It is declared that the petitioner is entitled to l/5th share i.e. 7083 shares from the shares left by late Smt. Jayshree Soni. The Company is, therefore, directed to transmit the shares to the Petitioner. The Company is further directed to rectify its Register of Member by entering the name of the Petitioner to the extent of aforesaid 7083 shares of the Respondent No.1 Company. It is declared that the impugned special resolution dated 9/9/2013 passed by the Company thereby increasing the authorized share capital of the Respondent No.1 Company is bad in law, non-est and void and deserves to be set aside. It is set aside accordingly. Consequently, the allotment of further shares made on 23/10/2013 or any time thereafter is also void, bad in law and is accordingly set aside. Appropriate Forms in this regard shall be filed by the Company with the ROC, Gwalior. It is, however, clarified that the company is not precluded from increasing its authorized share capital in accordance with the law and pursuant thereto the Company may allot further shares to all the shareholders including legal heirs of Late Smt. Jayshree Soni as per law. M/s Pathak Anup & Associates, having its address 416, Sliver Arcade, 1, New Palasia, Indore- 452001 Tel 0731-2432837, (Mob; 9425354043) is hereby appointed as a special auditor to conduct audit of the company for the years 2011-12, 2012-13, 2013-14 and 2014-15. In case, it is found that the Respondent Nos. 2 to 5 have diverted/misappropriated the funds of the Company s funds, and the company has suffered any loss the same shall be recovered from their personal resources and be paid back to the Company. The parties are directed to extend their co-operation to the said Auditors. The fees of the said Auditors shall be paid by the Company. The Special Auditors shall submit their report to the Company after completion of the audit within six weeks with effect from the date of receipt of the copy of this order. In future, all the notices to the Petitioner shall be served through R.P.A.D by the Company. The Petitioner shall inform the Company his address on which the notice is to be served within 15 days hereof.Other reliefs sought for by the Petitioner are hereby declined.
Issues Involved:
1. Transmission of Shares and Rectification of Register of Members. 2. Allegations of Oppression and Mismanagement. 3. Legality of Rights Issue and Allotment of Shares. 4. Appointment of Additional Directors. 5. Fabrication of Balance Sheets and Annual Reports. Detailed Analysis: 1. Transmission of Shares and Rectification of Register of Members: The Petitioner sought the transmission of 7083.8 shares from the estate of Mrs. Jayshree Soni and requested the rectification of the register of members to reflect his ownership. The Petitioner argued that despite repeated requests, the Respondents failed to transfer the shares. The Board held that the Petitioner, as a legal heir, was entitled to the shares and directed the company to transmit the shares and rectify the register of members accordingly. The Board dismissed the Respondents' argument that the Petitioner needed to provide a Letter of Administration, Probate, or Succession Certificate, noting that the Articles of Association did not require such documentation in the absence of a will. 2. Allegations of Oppression and Mismanagement: The Petitioner alleged various acts of oppression and mismanagement by the Respondents, including the illegal appointment of directors, the wrongful allotment of shares, and the fabrication of company records. The Board found that the Respondents had committed acts of oppression by refusing to transmit the shares and by issuing shares to themselves to gain control of the company. The Board also found that the Respondents had manipulated company records and appointed directors without following due process. 3. Legality of Rights Issue and Allotment of Shares: The Petitioner contended that the rights issue was conducted without proper notice and was intended to dilute his shareholding. The Board found that the notice for the Extraordinary General Meeting (EOGM) was not validly served on the Petitioner, making the EOGM and the subsequent rights issue illegal and void. The Board held that the reasons provided by the Respondents for the rights issue were unreliable and that the issue was conducted to sideline the Petitioner. Consequently, the Board set aside the special resolution increasing the authorized share capital and the subsequent allotment of shares. 4. Appointment of Additional Directors: The Petitioner argued that the appointment of Respondent Nos. 3 and 4 as additional directors was illegal and done without following due process. The Board noted that the appointments were made with retrospective effect and without proper documentation. Although the Board found the appointments suspicious, it did not set them aside, considering the broader context of the case. 5. Fabrication of Balance Sheets and Annual Reports: The Petitioner alleged that the Respondents had backdated and fabricated balance sheets and annual reports. The Board found evidence of manipulation in the company records and directed the appointment of a special auditor to conduct an audit of the company's accounts for the years 2011-12 to 2014-15. The auditor was tasked with identifying any misappropriation of funds, and any losses to the company were to be recovered from the personal resources of the Respondents. Conclusion: The Board concluded that the Petitioner had successfully established acts of oppression and mismanagement by the Respondents. The Board ordered the transmission of shares to the Petitioner, set aside the illegal rights issue and allotment of shares, and directed a special audit of the company's accounts. The Board dismissed other reliefs sought by the Petitioner and disposed of the petition accordingly.
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