2008 (3) TMI 750 - Board - Companies Law

Summary

Issues Involved:
1. Maintainability of the company petition u/s 397, 398, 399, 402, and 403 of the Companies Act, 1956.
2. Validity of consents obtained from members for filing the petition.
3. Compliance with Section 399 requirements.

Summary:

Issue 1: Maintainability of the Company Petition
The Chamber filed an application questioning the maintainability of the company petition for not meeting the requirements of Section 399 of the Companies Act, 1956. The petitioners needed the consent of not less than one-fifth of the total number of members to apply u/s 397 and 398. As per the Chamber, the total number of members was 1809, but 388 members admitted after 30.09.2006 were under challenge, reducing the count to 1421. Therefore, 284 consents were required, but the petitioners had only 242 valid consents out of the 318 obtained, failing to meet the requirement.

Issue 2: Validity of Consents
The Chamber argued that 76 consents were invalid due to multiple consents by the same persons, non-members signing, variance in signatures, unsigned consents, and consents by members admitted after 30.09.2006. The petitioners contended that the consents were proper and in consonance with statutory provisions. However, the Board found discrepancies, including 4 members admitted after 30.09.2006, 21 non-members, multiple consents by 4 members, and 2 unsigned consents, reducing the valid consents to 286. Additionally, 23 members denied giving consent, and 21 signatures varied from specimen signatures, further reducing valid consents to 242.

Issue 3: Compliance with Section 399 Requirements
The Board emphasized that Section 399 stipulates minimum qualifications for members to apply u/s 397/398, requiring one-fifth of the total members' consent. The petitioners failed to meet this requirement with only 242 valid consents. The Board scrutinized the consent letters and found that many consents were obtained without members applying their minds or understanding the petition's contents, rendering them invalid. The Supreme Court's decision in J.P. Srivastava & Sons (P) Ltd. v. Gwalior Sugar Co. Ltd. was cited, confirming that the requirement of consent letters is directory, not mandatory. However, the petitioners still failed to meet the numerical requirement of Section 399.

Conclusion:
The company petition was dismissed for not meeting the requirements of Section 399 of the Companies Act, 1956. All interim orders were vacated, and the connected company application was disposed of.