2017 (3) TMI 824 - Tri - Companies Law

Misuse of position by Directors - misuse of digital signature - Held that - Appears from the record that the respondent nos.2 and 3 were nominees of the holding company in R-1 company, and they misused their position and that the R-1 company has reached to the stage of striking off and they have not disclosed this to the holding company and kept it completely in the dark regarding the affairs of the subsidiary company. It is also clear from the record that the petitioner company is a holding company of R-1 which holds more than 90% shares but does not have any management and control over the R1 company. It is evident that the respondent nos.2,3 and 4 were misusing their position and the company has reached to the stage of being struck off. This is also a clear case of mismanagement by Respondent nos.2 to 4, in R1 company which is a subsidiary company of the petitioner company. Therefore, the petitioner has sought the relief against the subsidiary company for restraining the respondent nos. 2 to 4 from using their digital signature in MCA portal and restraining them to represent themselves as Directors of R-1 company. On the basis of records available, it is clear that the respondent nos.2 to 4 have misused their position and the petitioner company in spite of being holding company of R-1 company is completely kept in dark regarding the affairs of the subsidiary company. Therefore, the Company Petition deserves to be allowed. Company Petition is hereby allowed and the respondent nos. 2,3 and 4 are restrained from representing themselves as Directors of the company and the Registrar of Companies is also directed to delete the names of the respondent nos. 2 to 4 from the Signatory details of MCA portal of R-1 company and further direction is being issued to allow the four Directors nominated by the holding company to file the form no.32/DIR-12 using the digital signature of any of them and to reflect the correct position in the Signatory details of MCA portal by showing the names of all four nominee directors of the holding company. The respondent nos.2,3 and 4 are also being directed to hand over the register, records, returns, books, documents pertaining to the affairs of the company which are in their possession. The respondent nos. 2,3 and 4 are further restrained from dealing with, disposing of, encumbering, alienating and/or transferring the properties, assets, investments of the company in any manner whatsoever.

Issues Involved:
1. Eligibility of the petitioners to file the company petition.
2. Alleged mismanagement and oppression by respondents.
3. Validity of board meetings and appointments of directors.
4. Suppression of facts by petitioners.
5. Relief sought by petitioners regarding the management and control of the subsidiary company.

Detailed Analysis:

1. Eligibility of the Petitioners to File the Company Petition:
The petitioners, Khosla Steel Industries Pvt. Ltd. and Mrs. Neelam Khosla, hold 90.70% of the equity shares in the paid-up capital of the subsidiary company, K. Steel Pvt. Ltd., making them eligible to file the petition under sections 397 and 398 of the Companies Act, 1956. The petitioner no.1 claims to hold 1,54,420 equity shares out of 1,74,190 validly issued, subscribed, and paid-up capital of the subsidiary company, which is equal to 88.65% of the validly issued, subscribed, and paid-up capital of the company. The petitioner no.2 holds 3,570 equity shares, which is equal to 2.05% of the validly issued, subscribed, and paid-up capital of the company.

2. Alleged Mismanagement and Oppression by Respondents:
The petitioners allege that the respondents, Pramod Khosla, Kishore Khosla, and Nitin Khosla, have usurped the management and control of the affairs of both the holding and subsidiary companies. They have allegedly sidelined Mrs. Neelam Khosla and filed annual returns and other documents without her knowledge. The respondents are accused of illegally appointing themselves as directors and managing directors, siphoning off funds, and failing to provide information about the company's affairs to the petitioners. The respondents were also accused of collecting loans in the company's name and not returning them, leading to legal issues and the company being referred to the BIFR and liquidation orders.

3. Validity of Board Meetings and Appointments of Directors:
The petitioners claim that the board meetings held by the respondents after 27th February 2012 are illegal and incorrect. They seek a declaration that the board meetings held by the nominated directors of the holding company are legal and correct. The respondents, however, argue that the cessations of Pramod Khosla, Kishore Khosla, Sarita Khosla, and Veena Khosla from the position of directorship pursuant to the provisions of section 283(1)(g) are bad, null, and void. They also claim that the appointments of Mr. Amit Gupta and Mr. Navin Singh as additional directors on 27th February 2012 were fraudulent and without any meeting of the board or shareholders.

4. Suppression of Facts by Petitioners:
The respondents allege that the petitioners have suppressed the fact that the Hon’ble Company Law Board (CLB) had already passed a final order on 20th March 2014 in C.P. No.216/2012, which declared and adjudicated with finality the disputes raised therein. The order included directions for the family members of the Khosla family to purchase the shares of Bishendar Singh and other companies at a fair market value. The respondents argue that the petitioners have not complied with the order and have filed the instant petition without disclosing the shareholding of the shareholders in the holding company or any board or shareholders' meeting authorizing the petitioners to file the petition.

5. Relief Sought by Petitioners Regarding the Management and Control of the Subsidiary Company:
The petitioners seek a declaration that the board meetings held by the nominated directors of the holding company are legal and correct. They also seek a direction to the Registrar of Companies to allow the four directors nominated by the holding company to file their form no.32 and DIR-12 using the digital signature of any of them and to reflect the correct position in the signatory details of the MCA portal. Additionally, they seek a declaration that the board meetings held by the respondents after 27th February 2012 are illegal and incorrect and a direction to delete the names of the respondents from the signatory details of the MCA portal. The petitioners also seek the submission of all accounts and documents related to the company's operations by the respondents.

Judgment:
The Tribunal allowed the company petition, restraining the respondents from representing themselves as directors of the company. The Registrar of Companies was directed to delete the names of the respondents from the signatory details of the MCA portal and to allow the four directors nominated by the holding company to file form no.32/DIR-12 using their digital signatures. The respondents were also directed to hand over all registers, records, returns, books, and documents pertaining to the company's affairs. The respondents were further restrained from dealing with, disposing of, encumbering, alienating, or transferring the properties, assets, and investments of the company in any manner. No order as to costs was made.

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