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2015 (11) TMI 263 - Board - Companies LawMaintainability of petition under sections 397 & 398 of the Companies Act 1956 - oppression and mismanagement - Held that - It is true that it is undisputable when a proceeding is withdrawn unconditionally, there shall not be any later proceeding on the same cause of action, but when the reliefs are different which cannot be granted in the earlier proceeding, for such reliefs, if any statutory right is conferred on any person to proceed before a special forum for remedying the grievance of a party, then, like Honourable High Court of Madras held in M/s. S.V.T Spinning Mills (P.) Ltd. 2009 (7) TMI 776 - HIGH COURT OF MADRAS that a party is under no obligation to obtain liberty before withdrawal of suit from civil court to approach CLB u/s 397 & 398 of the Act 1956 for it is a statutory right given to a member to avoid oppression and mismanagement against member or the company, which a civil court cannot grant, therefore I, in the backdrop of this factual history, safely conclude that withdrawal of suit without liberty will not make this CP non-maintainable. For having the respondents failed to establish that this petition is not maintainable, on the allegations referred above, hereby decide this issue against the respondents. Whether the petitioner seized to continue as director of the company on an alleged letter dated 14.03.2007 or not ? - Held that - The petitioner being the promoter director of shareholder of the company with a slightly majority shareholding in the company, it could not be assumed that the petitioner resigned from the company as director leaving his shareholding and his guarantees with the company. The petitioner being the elder brother of R2, being a promoter of the company, for still continuing as shareholder of the company, keeping his guarantee with the bank, it could not be construed by any stretch of imagination that the petitioner resigned from the company by submitting a resignation letter dated 10.03.2007. Thus have drawn this inference independent of the Hand Writing Expert opinion filed by the petitioner, therefore, hereby hold that alleged resignation letter used by the R2, to show petitioner resigned from the company as invalid. Whether appointment of R3 as director of R-1 company is oppressive against the petitioner or not ? - Held that - The explanation given by R2 saying they could not file Form 32 because DIN number has not come to the directors, is not believable, therefore, appointing R3, who is not a shareholder in the company as director by shunting the petitioner out of the company, is oppressive and prejudicial to the interest of the petitioner who is admittedly 50% shareholder in the company. It need not be seen whether the petitioner signed on the resolution or not, on seeing the overwhelming evidence disclosing that R2 set up appointment of R3 as director in the company only after the petitioner approached the Bank on 4.3.2009 for requesting the Bank to change mode of operation of the account, for there being no material on record showing R3 as director for more than two years from the date of alleged appointment of R3 as director, and on seeing the Form 32 filed only on 25-3-2009, that is only after the petitoner requested the Bank to change the mode of operation of the Account, this issue is therefore decided against the respondents holding that appointment of R3 as director is oppressive against the petitioner, hence declared it invalid. Whether increased of authorized capital on 28.03.2008 is oppressive against the petitioner or not ? - Held that - As to increase of authorized capital as well as paid-up capital of the company, the petitioner, according to him 57% in the company, according to respondents he has only 50% in between them. Since the petitioner and respondents are not on cordial terms in between them in the year 2008, it could not be assumed that a resolution was passed to make their shareholding in between the petitioner and the second respondent as 50 50. The delay in filing Forms, happens in normal course, it could be considered as delay simplicitor, but if the delay is inordinate and such delay is not properly explained to the satisfaction of this Bench, and if such delayed filings are aimed at causing prejudice to any member of the company, such delay cannot be construed as happened in normal course. Here also Form-5 was filed one year after alleged increase of capital. For the relations in between the petitioner and respondents being strained from 2007 itself, it cannot be said that the petitioner agreed to allow R2 to change the shareholding pattern prejudicial to the interest of the petitioner, therefore, this issue is decided against the respondents. For this allotment being held invalid, the shareholding existing before this increase and allotment, will come into force. Whether R2 to be directed to restore ₹ 91 lacs shown as taken out ? - Held that - Since the siphoning of the funds is not proved, could not say that R2 has siphoned the funds of the company at this juncture. 1 also cannot say that R2 opened those two Bank accounts with a bona fide intention for the growth of the company. When a Bank account is opened in the name of the company without notice to the other shareholder who has, according to him, 50% shareholding, it only reflects that those accounts are opened to handle financial transactions without notice to the other shareholder or director of the company. The counsel of the Respondents relied upon a case in between Ramesh Bhajanlal Thakur v. Seaside Hotel (P.) Ltd. & Ors 1999 (11) TMI 869 - COMPANY LAW BOARD to say that when no particulars are given in support of allegation siphoning the funds of the company, then obviously no relief can be granted, as to this principle, I, on principle, agree no relief can be granted when a petition has come without any details and proof over the allegations of siphoning. To what relief ? - Held that - The company is directed to pay remuneration to the Chartered Accountant, as agreeable to him, because the company is an almost 50 50 company in between the petitioner and R2. For having this Bench decided that the petitioner has not been removed as a director at any point of time, he will continue as director in the company whereas the wife of R2 i.e. R3 will not continue as director because her appointment has already been declared invalid. Since the company is a family company in between the two real brothers, the company s size also not being big, these two real brothers can come together and continue working in the company as before. R1 company is directed to file forms with RoC in compliance of this order within 30 days hereof. This Bench hereby directs the parties to pay to the company if any of them is held as siphoning the funds of the company in the audit report given by the Chartered Accountant. If any objections are there over the Chartered Accountant s audit report, they are at liberty to place their objections before CLB.
Issues Involved:
1. Maintainability of the petition under sections 397 & 398 of the Companies Act, 1956. 2. Validity of the petitioner's resignation as director. 3. Validity of R3's appointment as director. 4. Increase of authorized capital. 5. Alleged siphoning of Rs. 91 lakh by R2. 6. Reliefs to be granted. Issue-wise Detailed Analysis: Issue 1: Maintainability of the petition under sections 397 & 398 of the Companies Act, 1956 The respondents argued that the petition is not maintainable because the petitioner had previously filed a civil suit (OS 818/2009) seeking similar reliefs, which was dismissed without granting interim relief. The petitioner countered that the reliefs sought under sections 397 & 398 are unique and cannot be granted by any other court. The court observed that the civil suit dismissal did not preclude the petitioner from filing the current petition, as the reliefs under sections 397 & 398 are distinct and equitable in nature. The court also noted that the civil suit was dismissed without a final adjudication on the issues, and thus, the petition is maintainable. Issue 2: Validity of the petitioner's resignation as director The petitioner claimed that his alleged resignation letter dated 14.03.2007 was forged by R2. The court found that there was no filing with the Registrar of Companies (RoC) indicating the petitioner's resignation. Additionally, a board resolution dated 10.04.2007, which was submitted by the petitioner, showed him as a director, contradicting the alleged resignation. The court held that the resignation letter was invalid, concluding that the petitioner did not resign from the company. Issue 3: Validity of R3's appointment as director The petitioner alleged that R3's appointment as director was never consented to by him and was therefore invalid. The court observed that R3 was not a shareholder and her appointment was filed with the RoC only after a significant delay of two years, which coincided with the petitioner's actions to change the bank account operations. The court found that the appointment of R3 was oppressive and prejudicial to the petitioner's interests and declared it invalid. Issue 4: Increase of authorized capital The petitioner contended that the increase in authorized capital from Rs. 5 lakh to Rs. 10 lakh was done without his consent and was fraudulent. The court noted the strained relations between the parties and the significant delay in filing the necessary forms with the RoC. The court held that the increase in authorized capital was invalid and that the shareholding pattern existing before the increase would remain in force. Issue 5: Alleged siphoning of Rs. 91 lakh by R2 The petitioner alleged that R2 siphoned Rs. 91 lakh from the company by opening new bank accounts without his knowledge. The court found that while there was no concrete proof of siphoning, the opening of new bank accounts without informing the petitioner indicated mala fide intentions. The court ordered an impartial audit of the company's accounts to determine if any funds were siphoned. Issue 6: Reliefs to be granted The court directed the appointment of a Chartered Accountant to audit the company's accounts and report within 30 days. It also ordered that the petitioner continues as a director, while R3's appointment as director was declared invalid. The company was instructed to comply with the court's order and file the necessary forms with the RoC. The court also directed that any party found to have siphoned funds must repay the company as per the audit report. Conclusion: The petition was disposed of with the court granting the reliefs sought by the petitioner, including the invalidation of his resignation and R3's appointment, the reversal of the unauthorized capital increase, and the ordering of an audit to investigate the alleged siphoning of funds.
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