2010 (10) TMI 1195 - HC - Companies Law

Summary

Issues Involved:
1. Transfer of shares.
2. Issuance of duplicate share certificates.
3. Removal of the first appellant as managing director.
4. Increase of share capital.
5. Allegations of mismanagement and fraud.

Detailed Analysis:

1. Transfer of Shares:
The appellants claimed that the sixth respondent had transferred 3,880 shares to them, but the Company Law Board (CLB) found no evidence to support this claim. The appellants relied on photocopies of share transfer deeds, but the originals were not produced. The CLB noted inconsistencies in the appellants' claims and found that the sixth respondent had remained ex parte in the proceedings. The CLB also pointed out that the appellants did not mention the loss of share certificates in earlier suits and only raised this issue later.

2. Issuance of Duplicate Share Certificates:
The appellants requested duplicate share certificates for the 3,880 shares they claimed to have lost. However, the CLB found no proof that the shares had been transferred to the appellants in the first place. The CLB emphasized that the appellants had not provided tangible evidence of the transfer or the loss of the share certificates. The delay in reporting the loss to the police further weakened their case.

3. Removal of the First Appellant as Managing Director:
The appellants argued that the removal of the first appellant as managing director was not in accordance with Section 284 of the Companies Act, 1956. The CLB found that the first appellant had failed to acquire the required qualification shares within two months of his appointment, as mandated by Section 270(1) of the Act. Consequently, the first appellant automatically lost his position as managing director. The CLB also noted that the first appellant had not attended any board meetings after 18th May 1995.

4. Increase of Share Capital:
The appellants contended that the increase in share capital was done to exclude them from the company's affairs. The CLB found no evidence of oppression or mismanagement in the increase of share capital. The CLB held that the remaining directors were entitled to enhance the authorized share capital, and this action could not be considered oppressive or indicative of mismanagement.

5. Allegations of Mismanagement and Fraud:
The appellants alleged mismanagement and fraud by the respondents. The CLB dismissed these allegations, finding no evidence to support claims of fraud or cheating. The CLB noted that the criminal complaint filed by the first appellant against the second respondent had been dismissed. The CLB also found that the appellants had not provided consistent evidence regarding the transfer of shares or the loss of share certificates.

Conclusion:
The CLB's decision was based on a thorough examination of the evidence and found that the appellants had not substantiated their claims. The High Court upheld the CLB's findings, noting that the appellants had taken inconsistent stands and failed to provide tangible evidence for their claims. The appeal was dismissed, and the CLB's order was affirmed. The court emphasized that the jurisdiction under Section 10F of the Companies Act is limited to questions of law, and there was no question of law arising from the CLB's order that warranted interference.