2008 (4) TMI 827 - Board - Companies Law

Summary

Issues Involved:
1. Maintainability of the company petition.
2. Legality of the transfer of 23,200 shares to the petitioner.
3. Petitioner's entitlement to reliefs u/s 397 and 398 of the Companies Act, 1956.

Summary:

1. Maintainability of the Company Petition:
The petitioner, claiming 40% of the paid-up capital of M/s. Mansani Constructions Private Limited, invoked the jurisdiction of the Company Law Board (CLB) for reliefs u/s 397 and 398 of the Companies Act, 1956, alleging acts of oppression and mismanagement. The petitioner's standing as a shareholder was challenged by the respondents, asserting that the petitioner was never a shareholder and that the board minutes dated 23.01.2007, which purportedly approved the transfer of 23,200 shares to the petitioner, were fabricated.

2. Legality of the Transfer of 23,200 Shares:
The petitioner claimed to have acquired 23,200 shares through transfers approved by the board on 23.01.2007. However, the respondents contested the validity of these transfers, arguing that the board minutes were fabricated and that the petitioner did not produce original share certificates or evidence of payment for the shares. The CLB scrutinized the articles of association and found that the essential requirements for the transfer of shares, such as the majority board's agreement, fair value payment, written notice of transfer, and determination of fair value, were not met. Consequently, the acquisition of shares by the petitioner was deemed non-compliant with the articles of association and thus invalid.

3. Petitioner's Entitlement to Reliefs u/s 397 and 398:
Given the invalidity of the share transfers, the petitioner could not claim to be a shareholder and, therefore, had no standing to seek reliefs u/s 397 and 398. The CLB noted inconsistencies in the petitioner's claims, including the absence of any mention of shareholding in police complaints and the lack of original share certificates. As a result, the company petition was dismissed for want of locus standi, and the interim order dated 24.12.2007 was vacated.

Conclusion:
The CLB dismissed the company petition due to the petitioner's failure to establish valid shareholding, thereby lacking the locus standi to seek reliefs u/s 397 and 398 of the Companies Act, 1956. The application for impleadment of Smt. S. Swetha was also dismissed, and the interim order was vacated.