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TMI Blog2009 (2) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the controversy we do not consider this to be a fit case where any interference under article 136 of the Constitution is called for. - CIVIL APPEAL NO. 601 OF 2009 - - - Dated:- 2-2-2009 - DR. ARIJIT PASAYAT, P. SATHASIVAM AND AFTAB ALAM, JJ. U.K. Chaudhary, Saurabh, Vikram Mehta and Vikas Mehta for the Appellant. R. Venkataramani, Vinay Kumar Garg, Ms. V. Vijaya Lakshmi, Algo Joseph and Brijesh Kr. Gupta for the Respondent. JUDGMENT Dr. Arijit Pasayat, J. - Leave granted. 2. The challenge in this appeal is to the judgment of a Division Bench of the Delhi High Court dismissing the appeal filed by the appellants as not maintainable. The challenge in the appeal was to the judgment of a learned Single Judge of the High Court. Two appeals were disposed of by a common order dated February 7, 2005. 3. The background facts in a nutshell are as follows : M/s. Aar Gee Board Mills was incorporated as a private limited company in which two groups hold the shares. One group is led by Girdhar Gopal Gupta (hereinafter referred to as "Gupta group") and other "by Guru Charan Dass Garg (hereinafter referred to as "Garg group"). The company was incorpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and 398 of the Companies Act, 1956 (in short "the Act") before the Company Law Board (for short "the Board") alleging oppression and mismanagement on the part of the Garg group. Three acts of oppression and mismanagement were highlighted which are as under : ( a )Illegal allotment of 9,507 equity shares as noted above. ( b )Appointment of Mr. Parmanand, brother of Mr. Guru Charan Dass Garg as the additional director with effect from 20-10-1994, return in respect of which was also filed with the Registrar of Companies on 20-8-1998. ( c )Removal of Mr. Girdhar Gopal Gupta and Mr. Ram Narain Gupta as directors from the company on 16-9-1998, without notice of any board meeting. 8. The Board decided this petition vide order dated 25-3-2004 [ Aar Gee Board Mills (P.) Ltd. s ( supra )]. As far as issue of allotment of shares is concerned, the Board opined that allotment of 5,564 shares to the Garg group was illegal and set aside the same. Insofar as allotment of 3,943 shares is concerned, the benefit of doubt was given to the Garg group on the ground that this allotment was within the knowledge of the Gupta group. 9. On the two counts, this petition was decided in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged earlier. Accordingly, the Board declared the allotment of 5,564 shares as illegal and the same was set aside. The learned Single Judge first referred to this aspect. He noted that the Garg group had failed to produce any notice or minutes of the board meetings regarding allotment of shares. 13. Learned counsel appearing for the Garg group did not dispute this position before the learned Single Judge at the time of arguments. His only argument was that the records of the company were in possession of that Gupta group and therefore his client could not produce the records to the aforesaid effect. 14. The learned Single Judge noted that there was some controversy about the possession of the company s records. Though learned counsel appearing for the Gupta group referred to the final award of the arbitrators wherein it has been recorded that some records were in the possession of the Garg group, yet the High Court did not go into this aspect because categorical submission of the Gupta group in the petition was that there was no notice of allotment of shares and there was no decision of the board of directors to allot the shares. The allegations were not traversed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares have to be under the control of the board and the board has the power to allot or dispose of the same. The same reads as follows : "The shares be under the control of the board who may allot or otherwise dispose of the same to such persons on such terms and conditions and at such time as the board may think fit but subject to the articles herein contained and also to the restrictions mentioned in the foregoing clause 2 hereof." 19. The concurrent finding is that no notice of the board meeting was given and no board s meeting was held in respect of allotment of shares. The said finding has not been under challenge by the respondents and it has become final. It is, therefore, submitted that two different yardsticks cannot be applied for 5,564 shares and 3,943 shares. In essence, it is submitted that the courts below have erred in giving the benefit of doubt in respect of 3,943 shares merely because a sum of Rs. 3,94,320 were shown as share application money in the balance-sheet as on 31-3-1994. It is submitted that records are not in the possession of the appellants and have been categorically found to be in the possession of the respondents. It is also submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stallation of an effluent treatment plant in view of the directions of this Court. The quorum under the articles of association was two directors as per clause 33 of the articles of association. Two persons were present in the meeting. The board of directors allotted 3,943 equity shares when the requisite quorum of two directors of the respondent group was there. In the meetings held on 25-6-1994, 20-10-1994 and 9-1-1995, at the registered office as per clause 33 of the articles of association as well as under section 287 of the Act. The auditor was appointed under section 224 and power of attorney was signed by appellant No. 1 on 4-9-1995, for which a meeting was held and the balance-sheet as on 31-3-1995, was audited by the auditor on 4-9-1995, under section 215 of the Act. Significantly, no mala fides have been imputed on the part of the auditor and no allegations of fraud or mala fide intention were imputed upon the respondents before the Board, learned Single Judge and not even before this Court. 22. There is no dispute that the balance-sheet as on 31-3-1994, was duly signed by appellant No. 1 and share application money amounting to Rs. 3,94,320 was reflected as share ..... X X X X Extracts X X X X X X X X Extracts X X X X
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