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2017 (11) TMI 889 - Tri - Companies LawOppression and mismanagement - Misuse of Digital signatures - Control of private key - eligibility of EGM - Held that - Information Technology Act, 2000 and the Rules made there-under have provided enough safeguards and security in order to prevent misuse, tamper/fraudulently use etc of Digital Signature. Since the second Respondent has admittedly in possession of his Digital Signature with all keys and transacting with the same for subsequent transactions, which are convenient to him and his own family members, the allegation of its misuse by his elder brother namely Late Shri Anand Prakash Sanghi (the first Petitioner herein) is totally baseless and un-tenable and the same is hereby out rightly rejected. And the subsequent transactions especially with regard to impugned allotment of shares to the second Petitioner, his own family members and his group are declared as violation of Memorandum and Articles of Association of Respondent No. 1 Company. All these acts constitute acts of oppression and mismanagement as contended by the Petitioners on the part of Respondents. (1) The resolutions alleged to have been passed at the EGMs held on 19.03.2007 for non-recognizing the allotment of 20,00,000 shares that were allotted by the first Respondent Company on 01.03.1998 is hereby set aside with a consequential direction to the Registrar of Companies, Ministry of Corporate Affairs, Hyderabad,Telangana not to take on record the Form No.23 filed by the 2nd Respondent in this regard. (2) The resolutions alleged to have been passed at the EGM, alleged to have been held on 19/03/2007 for non-recognizing the allotment of 84,99,937 shares that were allotted by the first Respondent Company on 01/04/2006 is hereby set aside with a consequential direction to the Registrar of Companies, Ministry of Corporate Affairs, Hyderabad, Telangana, not to take on record the Form 23 filed by the Second Respondent in this regard; (3) The allotment of 45,00,000 shares and 84,99,937 shares that were alleged to have been allotted to the Respondent group on 19/03/2007 and 22/04/2006 respectively are hereby set aside with consequential direction to the Registrar of Companies, Ministry of Corporate Affairs, Hyderabad(Telangana) not to take on record the Forms 2 filed by the second Respondent in this regard; (4) Hereby directed the first Respondent Company to rectify the Register of Members reinstating the names of the Petitioners and to delete the names of the Respondent group with respect to the shares alleged to have been allotted on 22/04/2006 and 19/03/2007; (5) The Registrar of Companies, Ministry of Corporate Affairs, Hyderabad, is hereby directed to take appropriate action(s) to carry out above directions immediately, after receipt of copy of this order and directed the Registry of NCLT to mark a copy of this order to the Registrar of Companies, Hyderabad. (6) The other reliefs, which are prayed in the Company petition, are hereby rejected as Petitioners are not entitled for those reliefs. (7) The Respondent No.1 Company and 2nd Respondent are hereby directed to follow all the extant provisions of Companies Act, 2013 and Memorandum and Articles of Association of the Company and also duly follow the Principles of Natural Justice in running the affairs of the Respondent No.1 Company without any deviation.
Issues Involved:
1. Validity of share allotments made on 1st March 1998 and 1st April 2006. 2. Legality of non-recognition of the aforementioned share allotments. 3. Validity of subsequent share allotments made by the Respondent No. 1 Company. 4. Reliefs entitled to the Petitioners. Issue-Wise Detailed Analysis: 1. Validity of Share Allotments Made on 1st March 1998 and 1st April 2006: The Tribunal examined the allotment of 20,00,000 shares on 1st March 1998 and 84,99,937 shares on 1st April 2006. These allotments were digitally signed by the second Respondent and certified by a Chartered Accountant/Company Secretary. The Tribunal found that the second Respondent's claim of digital signature misuse was unfounded as he did not report any misuse to the authorities. The digital signatures were considered valid, and the allotments were deemed legally valid. 2. Legality of Non-Recognition of the Aforementioned Share Allotments: The Tribunal analyzed the resolutions passed at the EGM on 19th March 2007, which aimed to non-recognize the share allotments of 1998 and 2006. It was found that no notice was given to the Petitioners, violating principles of natural justice. The Tribunal held that there is no provision under the Companies Act or the Memorandum and Articles of Association of the Respondent No. 1 Company to de-recognize shares once allotted. Such actions were deemed illegal and ultra vires. 3. Validity of Subsequent Share Allotments Made by the Respondent No. 1 Company: The Tribunal examined the subsequent allotments of 45,00,000 shares and 84,99,937 shares to the Respondent group on 19th March 2007 and 22nd April 2006, respectively. These allotments were found to be in violation of the Memorandum and Articles of Association and the Companies Act. The Tribunal noted that these allotments were made without notice to the Petitioners, constituting acts of oppression and mismanagement. 4. Reliefs Entitled to the Petitioners: The Tribunal allowed the Company Petition with the following directions: - The resolutions passed at the EGM on 19th March 2007 for non-recognizing the allotments of 20,00,000 shares (1998) and 84,99,937 shares (2006) were set aside. - The subsequent allotments of 45,00,000 shares and 84,99,937 shares to the Respondent group were also set aside. - The first Respondent Company was directed to rectify the Register of Members by reinstating the Petitioners' names and deleting the names of the Respondent group for the shares allotted on 22nd April 2006 and 19th March 2007. - The Registrar of Companies, Hyderabad, was directed to take appropriate actions to carry out the above directions. The Tribunal emphasized that the Respondent No. 1 Company and the second Respondent must follow the extant provisions of the Companies Act, 2013, and the Memorandum and Articles of Association, adhering to the principles of natural justice in running the company's affairs. No costs were awarded.
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