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TMI Blog2010 (9) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... training respondents Nos. 2 and 3 from altering the shareholding of respondent No. 1 company and to allot the shares of Rs. 16.05 lakhs to the petitioners. 2. The petitioners are the shareholders/directors of respondent No. 1 company ; the first petitioner is the husband of the second petitioner, third petitioner is the son of petitioners Nos. 2 and 3, at present the first petitioner is the chairperson of respondent No. 1 company. Respondent No. 2 is the father of respondent No. 3 and managing director of respondent No. 1 company ; respondent No. 3 is the director of respondent No. 1 company ; whereas respondent No. 4 to respondent No. 6 are shareholders of respondent No. 1 company and respondent No. 7 is the auditor of respondent No. 1 company. 3. The brief facts of the petition : respondent No. 1 company was incorporated on June 6, 1996, under the name and style of M/s. Pollen Laboratories P. Ltd. Since the first petitioner and the second respondent purchased the same in auction held by the honourable High Court, Calcutta, they changed it to its present name called M/s. Quality Allen Pharma P. Ltd., on March 13, 2002, with its registered office at Allen Estate, Krishnapur Road, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held company owned by respondent No. 2 and his family members. In the event of the second respondent's company emerged as a successful bidder, 50 per cent. shares of the company worth 16,000 fully paid-up would be transferred to the first petitioner by respondent No. 2. Upon the sale being confirmed, the said company be owned and managed on a 50 : 50 basis. The investment required for acquisition in auction be made on a 50 : 50 basis. It is agreed that the petitioner initially meet all the legal and incidental expenses, which is tentatively expected to be Rs. 15 lakhs for the purpose of acquiring and getting peaceful possession of the assets of the company in liquidation. In the event of their success in bidding, they will make all endeavours to run the factory as a going concern and to manufacture pharmaceuticals in a profitable manner in the interest of both of them. 7. Soon after they entered into the agreement, they made a bid and the same was confirmed in favour of M/s. Pollen Laboratories P. Ltd. Thereafter, in the process of change of the board of the company, the first and the third petitioners along with respondent No. 2 and respondent No. 3 were appointed as direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding on a fifty-fifty basis. As to the legal expenses, respondent No. 2 and respondent No. 3 stated that they already paid money to whatever bills that were placed before the company. Since bills were produced for Rs. 1,66,000 towards legal expenses, the company having paid Rs. 1,50,000 to one of the employees of the third petitioner, i.e., Asit Roy, the company need not allot any further shares to the petitioners' group unless money was paid for such allotment. The petitioners stated they noticed the respondents misappropriating the funds of the company without even holding any board meetings of the company. Apart from this, the respondents called for an annual general meeting without giving 21 days' clear notice prior to holding the annual general meeting. Since the annual general meeting was called by non-complying with the provisions of the Companies Act, the petitioners prayed for declaring the annual general meeting held as invalid and the resolutions thereat as invalid. Since the petitioners being aggrieved of these acts, they filed a civil suit before the Civil Court, Senior Division, Alipur, to declare the annual general meeting as invalid and other reliefs, in pursuanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,50,000 through Mr. Asit Roy as because the first petitioner is not even familiar to the said Asit Roy. 11. The petitioners' counsel argued that respondent No. 2 and respondent No. 3 committed breach in carrying out the understanding on a fifty-fifty basis between the petitioners' group and the respondents' group by allotting 3,000 shares more to their group to gain control and management of the company. It is very much present in annexure P2 about the proposal of the petitioners' meeting legal and incidental expenses in getting possession of the assets of the company in liquidation by spending Rs. 15 lakhs, thereby duty is cast upon the respondents to adjust the legal expenses incurred by the petitioners towards proportionate allotment of shares. He further argued that the respondents violated the provisions of law in holding of annual general meeting ; thereby the seventh annual general meeting of the company is to be declared as invalid. The petitioners' counsel further stated that the first petitioner moved several criminal cases against respondent No. 2 and respondent No. 3 for them having committed fraud in the company. They are still pending before the criminal court at A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person as a member ; here the memorandum of understanding was entered into between the first petitioner and the second respondent before the petitioners became members of the company. However, being a small company, it came into existence in the form of quasi-partnership firm, the understanding arrived at before the incorporation of the company to protect the interest of the members could be taken as a background to know as to any oppression and mismanagement perpetrated against the petitioners by the respondents. It does not mean that the petitioners are entitled to the reliefs without placing material to establish violation of the understanding arrived at between the parties. The first petitioner canvassed the point of estimation of legal expenses as Rs. 15 lakhs in annexure P2 as proof to state that he is entitled to proportionate shares to the estimated Rs. 15 lakhs. However, one should not forget that pre-estimation clause in annexure P2 would not be proof of incurring Rs. 16,00,000 towards legal expenses, because such clause will not waive the duty of placing receipts of payments said to have been made towards the legal expenses. The petitioners failed to place at least detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the clause in the memorandum of understanding, the petitioners cannot say that the shares are to be allotted as an adjustment to the purported legal expenses. Of course, the petitioner failed to place the bills for Rs. 16 lakhs. On any of these counts, the petitioners are not entitled for any allotment as an adjustment without disclosing the bills to that effect. In view of these reasons, non-allotment of shares on 50 : 50 basis, when share application money is not paid, does not tantamount to oppression and mismanagement. 17. As to holding of the annual general meeting, the petitioners themselves admitted that the annual general meeting notice was sent 21 days before holding the annual general meeting. Thereby, it cannot be said as violation simply because they received notices of annual general meeting beyond 21 days before holding annual general meeting. Even if any violation is presumed, unless and until prejudice is caused to the petitioners by holding annual general meeting in violation of the provisions, it cannot be called as oppression and mismanagement. In fact, the annual general meeting was held on November 22, 2003, to which petitioners Nos. 1 and 2 attended, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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