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TMI Blog2012 (4) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act was filed before the CLB by the respondents No. 1 and 2 namely, Mr. Sanjay Paliwal, son of Mr. B.K. Paliwal and Mr. J.K. Paliwal, father of Mr. Ajay Paliwal. The said petition was registered as Co. Pet. 78/2005. 4. Since the Paliwal family, on the date the petition was filed before the CLB was divided into two groups, the appellants' faction for convenience sake is referred to as Ajay Paliwal faction. The admitted shareholding in the appellant-Paliwal Hotel Company as on 30th September, 2004 was as under:- APPELLANTS (MR. AJAY PALIWAL) GROUP Particulars & Folio in the register of Members Father's/Husband's Name No. of Shares 1. Sh. N.K. Paliwal 205, Adishwa Aptts., 34, Feroz Shah Road Sh. D.S. Paliwal 5100 2. Smt. Kamlesh Paliwal 205, Adishwa Aptts., 34, Feroz Shah Road Sh. N.K. Paliwal 2000 3. Sh. Ram Lal Sharma Village Badkali, Distt. Muzaffarnagar 5 4. Ms. Aditi Paliwal Flat No. 18, North Wing Revera Apartments, Mall Road, New Delhi 8 5. Master Abhishek Paliwal Flat No. 18, North Wing Revera Apartments, Mall Road, New Delhi 8 6. Sh. A.K. Paliwal F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertinent to mention that while it was the Ajay Paliwal faction's case that on 01st December, 2004, 550 shares had been allocated to itself and three additional Directors had been appointed from their faction, the respondents' case was that in the said Board meeting, 4800 shares were allocated to themselves and three additional Directors from their faction had been appointed. 6. The findings rendered by the CLB in the impugned order are reproduced hereinbelow:- "29. Having held that the preliminary objections are not tenable, next I come to the other allegations of the petitioners on merit. I find that the respondents have not been able to refute the same. As regards the petitioners allegation of appointment of R-4,5 and 6 as Directors on 1.12.2004 without complying with the provisions of law and whereby the respondents created a new majority of which, if the petitioners were given due notice to attend the meeting were unlikely to allow the appointment of directors as the same has resulted in an oppression to the majority shareholders, the respondents contention is that the meeting on 1.12.2004 is admitted by the petitioners, the respondents have produced certified copies of Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught. As regards advancing of loan in the year 2002, as pointed out earlier by the petitioners, the advances were given with the consent of all the directors and the respondents have been consistently signing the annual accounts which reflect these loans year after year till 2003-2004. Furthermore, there is no mention of the removal of P-1 in the Directors' Report. In these circumstances it is difficult to rely on the respondents' version and accept it as true. On the other hand P-1 has established that even subsequent to the date on which he is shown to have been removed, he has issued cheques and signed on other documents as Director. 30. As regards the shareholding of the parties there are serious allegations and counter allegations. The respondents allege that P-2 had transferred 5000 shares to R-3 (his son), the transfer is valid in the eyes of law as it was made with due knowledge and concurrence of the petitioner in accordance with mandatory provisions in relation of transfer of shares. The consideration of Rs. 5 lacs for transfer of these shares was paid by R-3 as is reflected in the bank account of P-2. On the other hand, P-2 had taken a strong objection to this pointing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Besides, the petitioners' contentions in this regard cannot be dismissed as these point out that there are discrepancies in the dates of the AGM, in the number of shares and even in respect of the so called transferees of these shares. 32. Furthermore, I find that the respondents have not been able to meet the petitioners' allegations regarding siphoning off of funds approximately to the extent of Rs. 40 lacs. The allegations have been met with bald denial with a stony silence regarding specific entries. Further, the petitioners' allegations that annual accounts, statements filed with the ROC as on 30.6.2005 do not reflect the true state of affairs are also found to be correct in view of the facts that the final accounts could not be prepared in the absence of complete account books and statutory records. Account books for the part period were in the possession of the petitioners and hence the Annual Returns filed with the ROC are incorrect and null and void. 33. In this case I notice that the respondents have breached their fiduciary duties as directors. On the role of Directors, the law is well settled. In some respects, Directors resemble trustees. Equity prohibits a tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quo ante is restored. v. The Annual Accounts of the R-1 company for the year ended 31st March, 2005 including the notice, Directors' Report, Compliance Certificate filed with the ROC are declared null and void. vi. The Annual Return filed with the ROC dated 30.6.2005 is hereby declared null and void. vii. The respondents are directed to restore the amounts siphoned off from the R-1 company's accounts forthwith. viii. The R-1 company is hereby directed to give consequential effects in implementing the directions contained in (i) to (vii) above forthwith." [Emphasis supplied] 7. Mr. Arun Kathpalia, learned counsel for the appellants contended that the factual findings rendered by CLB in the impugned order were contrary to record. 8. Mr. Kathpalia submitted that though there was no challenge to the appointment of three Directors, namely, Mr. Abhishek Paliwal, Mrs. Prakash Wati Paliwal and Mrs. Kamlesh Paliwal on 1st December, 2004 or to the allotment of 550 shares to Mr. Ajay Paliwal faction, yet the CLB in the impugned order had set aside not only the appointment of the aforesaid Directors but also the allocation of said shares. 9. Mr. Kathpalia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission filed by the respondents herein before CLB after the conclusion of arguments. 13. Mr. Kathpalia further contended that the CLB had erroneously set aside the allocation of 4250 shares to Mr. Ajay Paliwal and Mrs. Kamlesh Paliwal on 3rd February, 2005 on the sole ground that the authorised share capital of the appellant-company had been exhausted. 14. Though Mr. Kathpalia admitted that the removal of Mr. Sanjay Paliwal was in violation of Sections 190 and 284 of the Act, he stated that Mr. Sanjay Paliwal was removed because the loan of Rs. 64.50 lacs advanced to his in-laws family had not been returned to the appellant-company. He stated that though there was no dispute with regard to advancement of aforesaid loan, yet CLB while holding his removal to be wrongful, had not even considered it appropriate to direct him to bring back the aforesaid amount. 15. Mr. Kathpalia lastly submitted that the CLB's finding with regard to transfer deed of 5000 shares alleged to have been executed by Mr. J.K. Paliwal in favour of his son Mr. Ajay Paliwal on 1st February, 2005 was erroneous. He stated that the aforesaid transfer deed was neither forged nor fabricated and that the same shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registrar of Companies is reproduced hereinbelow:- "No.Misc/2009-10/paliwal/6913 Date 13/10/09 To, Shri Sanjay Paliwal, Paliwal Hotels (P) Ltd. 32, Ahata Aulia ji, Muzaffar Nagar, Uttar Pradesh. Sub: ROC receipt no. 606762 dated 13.12.2004 Sir, I am directed to refer to your letter dated 10.8.2009 vide which you have asked as to in which company name the receipt no. 606762 dated 13.12.2004 was issued. In this connection it is informed that it is not known that in respect of which company, the receipt no. 606762 dated 13.12.2004 was issued. However, as per records of this office relating to Paliwal Hotels (P) Ltd., it has been noticed that on 13.12.2004, two documents i.e. Form-32 and Form-2 were filed in the name of Paliwal Hotels (P) Ltd. for which an amount of Rs. 500/- + Rs. 500/- were paid vide receipt no. 606742. Hence, it is clear from the above that no document vide receipt no. 606762 dated 13.12.2004 has been filed in the name of M/s. Paliwal Hotels (P) Ltd., Delhi. Yours faithfully Sd/- (ATMA SAH) Asst. Registrar of Companies" [Emphasis supplied] 20. Mr. Mehta pointed out that the counterfoil of receipt no. 606762 had never been produced by the appellants, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visible differences in the signature of Mr. J.K. Paliwal, absence of seal/stamp of appellant-company, overwriting etc. 26. Mr. Mehta stated that the contention of Mr. Ajay Paliwal that 5000 shares had been sold to him as well as to Mrs. Rashmi Paliwal, wife of Mrs. Manish Paliwal by Mr. J.K. Paliwal was contradicted by the transfer form itself. Mr. Mehta referred to the extract of the passbook of Mr. J.K. Paliwal to show that there were number of entries between the father and the son with regard to a sum of Rs. 5 lacs. Therefore, according to him, the CLB rightly concluded that appellants had not been able to relate the entries in the passbook of Mr. J.K. Paliwal with the alleged sale consideration. Mr. Mehta also pointed out that in the annual report dated 30th May, 2005 there were interpolations/over-writings in the holding of Mr. J.K. Paliwal which was artificially reduced from 5100 to '0100' ('5' changed to '0', thus making '5100' to '0100') and the shares of Mr. Ajay Paliwal had been claimed to be 8255 wherein the digit '3' had been converted into '8'. 27. In rejoinder, Mr. Arun Kathpalia submitted that number of the receipt under which Form Nos. 2 and 32 had been jointly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares allotment has been made on 01st December, 2004, but the second page of the same certified copy shows allotment of shares on 01st September, 2004! It is pertinent to mention that the Registrar of Companies had produced before this Court the original file maintained by it with regard to the appellant company. The said file contains only the Memorandum and Articles of Association of the appellant company as well as its certificate of incorporation. Consequently, this Court is of the opinion that both the parties have failed to prove the minutes of meeting dated 1st December, 2004. Accordingly, the allocation of additional shares and appointment of three additional Directors by both the appellants and respondents are set aside. 30. The Board Meetings dated 3rd February, 2005 and 1st March, 2005 wherein 4250 shares were alleged to have been allocated to Mr. Ajay Paliwal faction and three additional directors had been appointed are set aside on the ground that appellants have failed to prove service of notice of the said Board Meetings upon Mr. Sanjay Paliwal, even though admittedly, on the said dates, he was a director of the appellant company. Non-issuance of notice to Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that admittedly the appellants were in control of all statutory documents and records of the appellant-company by the time said AGM was held. 35. Since learned counsel for the appellants has conceded that the removal of Mr. Sanjay Paliwal from the Board of Directors of appellant-company was illegal, the relief granted by the CLB requires no interference. 36. This Court is also of the opinion that as the loan of Rs. 64.50 lacs advanced by the appellant-company to Mr. Sanjay Paliwal's in-laws are reflected in the balance sheet of the appellant-company duly signed by the appellants, it cannot be said that the said amount has been siphoned off by the respondents. It is pertinent to mention that till date no proceedings have been filed by the appellants for recovery of alleged amount of Rs. 64.50 lacs. In the opinion of this Court, allegation of siphoning off funds by the respondents has been raised by the appellants only to protract the proceedings. 37. This Court is also in agreement with the finding of CLB that alleged transfer deed with regard to transfer of 5000 shares by Mr. J.K. Paliwal to Mr. Ajay Paliwal is a forged and fabricated document. Mr. J.K. Paliwal in his petition f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal form produced by the appellants and this Court is of view that there are significant differences in signatures of Mr. J.K. Paliwal on the transfer deed produced by the appellants. Consequently, the finding of the CLB with regard to this issue requires no interference. 40. Keeping in view the aforesaid discussion, the directions given by the CLB in sub-paras (ii), (iii), (iv), (v), (vi) and (viii) of para 34 of the impugned order are upheld. Instead of directions (i) and (vii) of para 34 of the impugned order, the appellants are directed to restore only the amount of Rs. 7.50 lacs siphoned off from the company's account forthwith. Further, the shareholding of the appellant company shall revert back as it stood as on 30th September, 2004 as mentioned hereinabove. From today the Board of the company shall constitute of two members of the appellant group and two members of the respondent group. In case of any deadlock, the matter in issue shall be referred to the shareholders in a General Meeting. The Board constituted in the above terms shall continue till the next Annual General Meeting. 41. With the aforesaid directions, present appeals stand disposed of, but with no order a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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