2009 (7) TMI 1354 - Board - Companies Law

Summary

Issues Involved:
1. Maintainability of Company Petition No. 61 of 2006.
2. Allegations of oppression and mismanagement.
3. Validity of share transfer and ownership.
4. Jurisdiction of the Company Law Board (CLB).

Detailed Analysis:

1. Maintainability of Company Petition No. 61 of 2006:
The primary issue was whether the petitioner had the requisite qualification under Section 399 of the Companies Act, 1956, to maintain the petition under Sections 397 and 398. The respondents argued that the petitioner was neither a "member" nor a "shareholder" of the company as per statutory requirements. The petitioner contended that he was a shareholder and that his shares were fraudulently transferred. The CLB noted that the petitioner had been treated as a member by the company and held shares, although these were allegedly transferred. The CLB concluded that the petitioner had the requisite qualification under Section 399, as there was a prima facie case of fraud and manipulation in the transfer of shares.

2. Allegations of Oppression and Mismanagement:
The petitioner alleged several acts of oppression and mismanagement, including the illegal forfeiture of his shares, denial of access to company documents, and fraudulent manipulation of records. The respondents countered that the petitioner had sold his shares and resigned from the company. The CLB found that there were significant discrepancies and evidence of forgery in the company's records, including manipulated minutes of meetings and fabricated documents. The CLB held that the petitioner had made a prima facie case of oppression and mismanagement.

3. Validity of Share Transfer and Ownership:
The petitioner claimed that his shares were fraudulently transferred without his consent. The respondents argued that the petitioner had transferred his shares and received consideration. The CLB noted that the share transfer forms and resignation letters appeared to be fabricated, with discrepancies in dates and signatures. The CLB found that the petitioner's shares were transferred without proper authorization and that the consideration shown was inadequate. The CLB held that the petitioner's claim to shares could be adjudicated under Section 397/398 of the Act.

4. Jurisdiction of the Company Law Board (CLB):
The respondents argued that the CLB had no jurisdiction to entertain the petition as the disputes were inter se between the petitioner and respondent No. 2, who were not members of the company. The CLB, however, held that it had jurisdiction to adjudicate the petitioner's entitlement to become a member and to address issues of oppression and mismanagement. The CLB emphasized that the provisions of Sections 397 to 409 of the Act constitute a code by themselves and confer wide powers on the CLB, including the power to give directions contrary to other provisions in the Act.

Conclusion:
The CLB dismissed Company Applications Nos. 325 of 2006 and 201 of 2009, holding that the petitioner had the requisite qualification under Section 399 to maintain the petition under Section 397/398. The CLB found a prima facie case of fraud, cheating, and manipulation in the company's records and held that the petitioner's claim to shares could be adjudicated under the said sections. The company petition was scheduled for further hearing on August 19, 2009.