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TMI Blog2009 (9) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... oved/accepted till the matter is disposed of by the Company Law Board. - Co. Petition. NOS. 7, 8, 9, 12, 13 AND 14 OF 2008 - - - Dated:- 10-9-2009 - DEEPAK GUPTA, J. P. Nagesh, Hemant Sharma and Rahul Mahajan for the Petitioner Ms. Jyotsna Rewal Dua for the Objector Sanjeev Kuthiala for the Official Liquidator Sandeep Sharma for the Government of India JUDGMENT Deepak Gupta, J. Briefly stated the facts of the case are that the petitioners M/s. Nu-Line Industries P. Ltd. (hereinafter referred to as "the transferor company No. 1), M/s. Swati Storwel P. Ltd. (hereinafter referred to as "the transferor company No. 2) and M/s. Sturdy Industries Ltd. (hereinafter referred to as "the transferee company") are all companies duly incorporated under the Companies Act, 1956 (hereinafter referred to as "the Act"). The three companies have their headquarters in the State of Himachal Pradesh. The three companies filed petitions under sections 391 and 394 of the Act for sanction of a scheme of amalgamation which provided for amalgamation of the two transferor companies with the transferee company. Directions were sought for by the petitioners in Company Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be interested to attend the meetings. The citations have already been published and heavy expenses incurred in this behalf. Therefore, without commenting on the merits of the application, at this stage the prayer for postponement/cancellation and adjournment of the meeting is rejected. However, in view of the serious allegations made in the application, it is made clear that the proposed scheme shall not be approved/sanctioned under section 394 of the Companies Act, 1956, till this application is disposed of." 6. Consequently, the meetings were conducted by the chairman/alternate chairman appointed by this court. As per the reports of the chairman of the said meetings the shareholders and the creditors of all the three companies in the meetings so held approved the scheme of amalgamation with such modification as this court may deem fit and proper. 7. Thereafter, the companies have filed Company Petitions Nos. 12, 13 and 14 of 2008 for confirmation of the scheme of amalgamation and passing an order sanctioning the scheme of amalgamation. These petitions have been opposed by Shri S. S. Gupta and Ms. Sharda Gupta by filing objections to the company petitions on various grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as contended that Shri Amit Gupta was rightly appointed as director of M/s. Nu-Line Industries and similarly it is submitted that the objectors were removed from the directorship of the two companies after following the due procedure. 11. Rejoinder was filed in which the pleas made in the objections were reiterated. The authority of Mr. Amit Gupta to file company petition on behalf of M/s. Nu-Line Industries was specifically disputed. The removal of Shri S.S. Gupta from M/s. Nu-Line Industries and Ms. Sharda Gupta from M/s. Swati Storwel is alleged to be illegal. It is further alleged that some of the affidavits filed in support of the original petitions are in fact blank but have been shown to have been attested by the notary public and therefore it is contended that, the meetings have not been conducted in accordance with law. 12. The matter was heard in detail on June 25, 2009 and judgment was reserved but while dictating the judgment it transpired that after the judgment was reserved the original petitioners had filed certain documents on July 1, 2009. Therefore, the arguments were re-heard. 13. I have heard Ms. Jyotsna Rewal Dua, learned counsel for the objectors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after, Shri M.L. Gupta and Shri S.S. Gupta, objector No. 1 were the only two directors of M/s. Nu-Line Industries. The petitioners aver that on February 10, 2007, in a meeting of the company held at its registered office, Shri Amit Gupta was appointed as additional director. The objector S.S. Gupta denied this fact. Even when arguments were heard on the previous date it was pointed out that there is nothing on record to show that Shri S. S. Gupta was present on the meeting held on February 10, 2007. The petitioners had annexed a copy of the minutes of the meeting of the board of directors held on February 10, 2007, showing that Amit Gupta was appointed as an additional director. The opening part of the minutes reads as follows : "Minutes of the meeting of the board of directors of the company held on 10th day of February, 2007, at 11. 00 hours at the registered office of the company present 1.Mr. M. L. Gupta - Director 2.Mr. S. S. Gupta - Director" 16. After the arguments were heard the petitioners placed on record another document purporting to be a copy of the proceeding book of the company the opening part of which reads as follows : "Minutes of the meeting of the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mention that the resolution whereby Shri Amit Gupta was purported to be appointed as the director has been allegedly seconded by Shri Rajpal. This is contrary to the other material on record. 21. The objectors have made reference to a large number of documents to show that the shareholding pattern of the company was changed by the majority to garner majority of votes in the meetings. It is pointed out that even as per the reply filed by M/s. Nu-Line Industries on November 5, 2007, before the Company Law Board there were only 13 shareholders up to March 31, 2005, out of whom C.D. Jain, Nathi Kanwani, Deepak Jain and C. M. Gupta have expired. Thereafter, up to March 31, 2006, 55,000 shares are shown to have been purchased by Shri M.L. Gupta, Shri Ramesh Gupta and Arravali Industries. According to the objectors, C.D. Jain, Nathi Kanwani, Deepak Jain and C. M. Gupta had died. S/Shri B.L. Surana, S.L. Nuberia, B.C. Jain and S. S. Gupta would have opposed the merger and therefore the majority would not have been in favour of the merger. In Company Petition No. 8 of 2008 filed before this court the number of shareholders were inflated to 24. The objectors also rely upon another affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the removal of Shri S.S. Gupta and Smt. Sharda Gupta as directors from the two transferor companies was illegal and the procedure prescribed by law was not followed and no valid notices were issued to them before their removal. It has also been alleged that shareholding patterns of both the companies were changed only with a view to get the majority in their favour. 26. Ms. Jyotsna Rewal Dua has also alleged that even the affidavits produced before this court in support of the company petitions are false and some of them are blank. 27. Ms. Jyotsna Rewal Dua filed written submissions pointing out with precision the persons whose signatures in the affidavits filed in the court did not tally with the signatures on the ballot papers. An opportunity was given to the petitioners to file counter reply. They have replied to the same and have admitted that in certain cases the signatures on the ballot papers is different from the signatures given in the affidavits. In some of the cases the explanation given is that whereas in the affidavit the person has signed in one language he has signed the ballot paper in some other language. The other explanation given is that in some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. They seem to have been got attested in a mechanical fashion. 30. When a company approaches the court for approval of the scheme of amalgamation it must come to the court with clean hands. It must apprise the court of all facts which are in any way connected even if remotely with the amalgamation. In the present case the petitioners made no reference to the proceedings pending before the Company Law Board as the disputes with the objectors. 31. Shri P. Nagesh appearing for the petitioners has placed reliance on the judgment of the apex court in Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp. Cas. 792 ; [1997] 1 SCC 579, wherein the apex court held as follows (page 818 of 87 Comp Cas) : "In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the company court has clearly got earmarked. The following broad contours of such jurisdiction have emerged : (1) The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by section 391(1)( a ) have been held. (2) That the scheme put up for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. The aforesaid parameters of the scope and ambit of the jurisdiction of the company court which is called upon to sanction a scheme of compromise and arrangement are not exhaustive but only broadly illustrative of the contours of the court's jurisdiction." 32. Reliance is also placed on the judgment of the Bombay High Court in Niulab Equipment Co. P. Ltd., In re [2009] 152 Comp. Cas. 375 ; [2009] 3 Comp. LJ 87, wherein the court held as follows (page 384) : "15. The mere fact of a violation of the provisions of sections 235 to 251 by itself does not invalidate or warrant the court refusing to sanction a scheme of arrangement under sections 391 to 394, including a scheme of amalgamation. It is not every violation of these sections that disentitles a scheme being proposed or sanctioned. It is only those violations which adversely reflect upon or affect the scheme that would persuade the court not to sanction the scheme. That section 391(2) only requires the disclosure of all material facts to the court, establishes this. If it were otherwise, section 391, and in particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levelled by the objectors that Shri S.S. Gupta was not present when Shri Amit Gupta was appointed director of the company. In the first document filed in the court presence of Shri S. S. Gupta is reflected in the minutes itself. When after arguments were first heard another set of documents was filed by the petitioners in which the presence of Shri S.S. Gupta is not recorded but it is recorded "present as per the attendance register". However, no copy of the attendance register has been placed on record. Therefore, the petitioners have prima facie failed to prove the presence of Shri S.S. Gupta at the said meeting. Even assuming that Shri Amit Gupta had been appointed as additional director, he could only continue as such till the next annual general meeting. He is alleged to have been appointed as director in the next annual general meeting on September 29, 2007, when his name was seconded by Shri Rajpal who is shown to be present as one of the shareholders. As already discussed above, Shri Rajpal was not a shareholder on September 29, 2007 and as per the affidavit of Shri Ramesh Gupta he had sold the shares to Rajpal only on December 18, 2007. This casts a doubt on the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any orders that may be passed by the Company Law Board and to render infructuous the orders, if any, passed in favour of the objectors the present petitions for amalgamation have been filed. The creditors and the shareholders had a right to know about these disputes which went to the root of the matter. 38. The petitioners are also guilty of filing the proceedings in a very casual manner. As pointed out above most of the affidavits filed along with the original petitions were verified and attested in a mechanical manner. There is discrepancy between the affidavits and the ballot papers and therefore the possibility of impersonation during the meetings cannot be ruled out. 39. There are a number of shortcomings in the case of the petitioners. Individually each one of them may not have been sufficient to reject the petitions but when we take all of them into consideration it is obvious that there are reasonable grounds to doubt the appointment of Shri Amit Gupta as additional director and later as director of M/s. Nu-Line Industries. This will affect the validity of the petitions and the scheme. The removal of the objectors from the companies is still under challenge before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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