2009 (6) TMI 1018 - Board - Companies Law

Issues Involved:
1. Allegations of oppression and mismanagement under Sections 397, 398, 402, 403, and 406 of the Companies Act, 1956.
2. Validity of board meetings and resolutions.
3. Legality of the removal of the petitioner from directorship.
4. Increase in authorized share capital and allotment of shares.
5. Appointment of additional directors.
6. Shifting of the registered office.
7. Allegations of siphoning off funds by the petitioner.
8. Maintainability of the company petition.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement:
The petitioner alleged oppression and mismanagement by respondents Nos. 2 and 3, claiming that they had taken control of the company without valid authority and had acted with mala fide intentions to usurp the management of the company.

2. Validity of Board Meetings and Resolutions:
The petitioner contended that no valid board meetings were held, and no notices were served regarding these meetings. The respondents failed to provide conclusive proof of service of notices, relying solely on certificates of posting, which the court found insufficient. The court emphasized that the onus to prove service rests on the sender, and meetings held without notice to all directors are invalid.

3. Legality of the Removal of the Petitioner from Directorship:
The petitioner argued that his removal from directorship was illegal and without notice, purportedly under Section 283(1)(g) for not attending three consecutive board meetings, which were never held. The court found the removal arbitrary and capricious, lacking proper notice and evidence of the meetings.

4. Increase in Authorized Share Capital and Allotment of Shares:
The petitioner claimed that the increase in authorized share capital from Rs. 5 lakhs to Rs. 10 lakhs and the subsequent allotment of shares to respondents Nos. 2 and 3 were done without his knowledge and were aimed at diluting his shareholding. The court found these actions to be acts of oppression, as they were conducted without proper purpose and without following due procedure. The increase in share capital and the allotment of shares were set aside, restoring the status quo ante.

5. Appointment of Additional Directors:
The petitioner challenged the appointment of respondents Nos. 5 to 9 as additional directors, arguing that these appointments were made without proper notice and with the intention to reduce his representation on the board. The court found these appointments to be illegal and acts of oppression, setting them aside and restoring the status quo ante.

6. Shifting of the Registered Office:
The petitioner contended that the shifting of the registered office was done unilaterally and illegally, with the intention to prevent him from attending board meetings. The court found the resolution for shifting the registered office and the filing of Form No. 18 with the Registrar of Companies to be null and void.

7. Allegations of Siphoning Off Funds by the Petitioner:
The respondents alleged that the petitioner had siphoned off funds from the company, amounting to over Rs. 4 crores, and had not rendered any accounts for the same. The court noted that the petitioner had failed to provide satisfactory explanations for the alleged siphoning off of funds and had not come with clean hands, losing his moral and legal rights.

8. Maintainability of the Company Petition:
The respondents challenged the maintainability of the company petition, pointing out defects in the supporting affidavit. The court, however, focused on substantial justice and did not dismiss the petition on technical grounds.

Conclusion:
The court found that the actions of the respondents constituted acts of oppression and mismanagement. The increase in authorized share capital, allotment of shares, and appointment of additional directors were set aside, restoring the status quo ante. The court also directed an investigation into the siphoning off of funds by the petitioner and ordered the petitioner to bring back the siphoned-off amounts. The petition was disposed of in these terms, and all interim orders were vacated.

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