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2018 (2) TMI 1988 - HC - Companies LawOppression and mis management - Rights issue of shares - shareholding of the Petitioners had been diluted - no notices were given for the meetings pertaining to the rights issue - shifting of the registered office also no notice for the same is given - appointment and removal of directors - Directorial disputes. HELD THAT - The order of the CLB in the present case can in no circumstances be said to be either perverse based on no evidence or arbitrary. The CLB has analysed the factual and legal position in depth and has arrived at a conclusion on facts that no case of oppression and / of mismanagement has been made out by the Appellants. The rights issue of shares and the service of notices by UPC - HELD THAT - The rights issue was thus obviously contemplated as being the avenue for increasing the funds of the Company and for the growth of the Company. The CLB has recorded a finding of fact (in paragraph 28) that the rights issue was necessary for the growth of the Company and therefore the action of issuing the shares could not be termed as oppressive to the Appellants and/or mismanagement of the affairs of the Company - Pertinently despite being party to the above meetings at no point did the Appellants seek to subscribe to the rights issue and did not even make such enquiries for several years prior to filing the present Petition. The reason for this was clearly because the rights issue which commenced from April 2007 was not of interest to the Appellants as the Appellants had received back the sum loaned by them to the Company to the tune of 73, 00, 000/ . The Appellants had accepted back the loan as they did not desire to partake in the functioning of the Company. The Appellants have no explanation for their having taken back their loan save and except to contend that this was not reflective of their disinterest in the company. In this regard the CLB has arrived at a finding of fact based on the conduct of the Appellants and this finding ought not to be interfered with in exercise of jurisdiction under Section 10 F. As a matter of fact after accepting their loan amounts back in or about March 2007 at no point did the Appellants write a single letter or demand to participate or show any interest in participating in the company until issuance of the show cause notice on 5th November 2007 - even on merits it cannot be said that the rights issue was either oppressive or done behind the back of the Appellants. Shifting of registered office - HELD THAT - Pertinently it is the admitted position that the UPC amount paid was 3/ . It is more than sufficient for service on Appellant Nos.1 and 2; the other Directors and Shareholders being part of the Respondent Group may well have been served by other means they have raised no objection as to service or receipt of the notices. Once again this aspect is purely factual and is being dealt with only in light of the contentions raised by the Appellants. The crucial factor remains that shifting of the Registered Office has caused no prejudice to the Company and is not oppressive in the least. There is nothing to show that the shifting was done to prejudice the Appellants - this contention does not constitute oppression or mismanagement. Directorial disputes - HELD THAT - The Appellants have relied upon an RTI Application of 2012 to contend that no notice was received of the meeting for removal of the Appellants as Directors. It appears from the impugned judgment that this issue of the RTI Reply was not pressed before the CLB. Even otherwise it is pertinent to note that in all the various allegations of not having received notice for various meetings the Appellants have not sought to obtain any RTI on the delivery of notices for all the meetings which are the subject matter of dispute between 2007 and 2010 but have only purported to obtain an RTI for a meeting held in 2011. Be that as it may the Appellants have been removed by resolutions and with appropriate Form 32 s filed to the satisfaction of the ROC. It is nobody s case that the ROC has thereafter raised any objections to the filing of the Forms or indeed to the manner of removal of the Appellants - Further the Company is not under any circumstances either a family company or a closely held quasi partnership in which circumstances potentially directorial disputes may be raised. The judgments relied upon by the Appellants in this regard will have no application to a company such as Respondent No.1. Further it does not appear that this issue of quasi partnership was pressed before the CLB and was not pressed in arguments before this Court. The Appeal ought to be dismissed as it does not give rise to any question of law. The factual findings are strictly matters which were within the province of the CLB. The CLB having exercised its discretion after analysing the evidence before it this Court cannot to replace the discretionary order passed by the CLB with any contrary order - Even otherwise on the findings of delay/laches and unclean hands the present Appeal ought to be dismissed as the CLB has rightly declined to exercise its equitable jurisdiction in favour of the Appellants. Appeal dismissed.
Issues Involved:
1. Dilution of shareholding through rights issue without proper notice. 2. Shifting of the registered office without proper notice. 3. Disputes regarding the appointment and removal of directors. Detailed Analysis: 1. Dilution of Shareholding through Rights Issue: The appellants contended that their shareholding was diluted through a rights issue in 2007 without proper notice. The CLB found that notices for the rights issue were sent under certificate of posting (UPC), which raises a rebuttable presumption of service under Section 53 of the Companies Act, 1956. The appellants failed to rebut this presumption. The CLB also noted that the rights issue was necessary for the growth of the company and was not oppressive. The appellants did not show interest in the rights issue and had accepted repayment of their loan, indicating disinterest in the company's affairs. The High Court upheld the CLB's findings, stating that the rights issue was bona fide and in the company's interest. 2. Shifting of Registered Office: The appellants argued that the registered office was shifted twice without proper notice. The CLB found that notices were sent under UPC and that the shifting did not cause any prejudice to the company or the appellants. The High Court agreed, noting that the jurisdiction of the Registrar of Companies (ROC) remained unchanged and that there was no evidence of oppressive intent or wasteful expenditure. The shifting of the registered office did not constitute oppression or mismanagement. 3. Disputes Regarding Appointment and Removal of Directors: The appellants raised issues about their removal as directors without proper notice. The CLB found that the appellants had been removed through proper resolutions and filings with the ROC. The High Court noted that directorial disputes are beyond the jurisdiction of the CLB under Sections 397 and 398 of the Companies Act, 1956, and that the company was not a family company or a closely held quasi-partnership where such disputes might be relevant. The High Court upheld the CLB's findings, stating that the appellants had not approached the CLB in a timely manner and had acted with unclean hands. Limited Scope of Section 10-F: The High Court emphasized that an appeal under Section 10-F of the Companies Act, 1956, lies only on a question of law. The CLB is the final authority on facts unless the findings are perverse, based on no evidence, or arbitrary. The High Court found that the CLB's judgment was detailed, comprehensive, and based on evidence. The appellants' attempt to treat the proceedings as a first appeal and seek a re-evaluation of facts was impermissible. Delay and Laches: The High Court noted that the appellants had delayed approaching the CLB by nearly four years without a cogent explanation, aside from stating that they had made a representation to the ROC. The CLB rightly rejected this explanation, noting that the reliefs sought could not have been granted by the ROC. The High Court agreed that the delay and laches alone were sufficient grounds to dismiss the petition. Unclean Hands: The CLB found that the appellants had not acted equitably and had suppressed material facts. The appellants had held their own meetings without notice to the respondents and had engaged in various acts of misconduct. The High Court upheld these findings, noting that a party seeking equitable relief must act equitably. Conclusion: The High Court dismissed the appeal, finding no question of law and upholding the CLB's factual findings. The appellants' case was found to be untenable, and no case of oppression or mismanagement was made out. The appellants were ordered to pay costs of ?2 lakhs within four weeks.
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