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TMI Blog2011 (8) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... n is not maintainable inasmuch as the petitioners are not shareholders of the company and are not qualified to maintain the present petition, the company has an authorised capital of Rs. 2 crore divided into 1,99,000 equity shares of Rs. 100 each and 10,000 equity shares of Rs. 10 each, the petitioners have claimed to be shareholders of 1000 equity shares, this statement is wholly misconceived. It was pointed out that the petitioners have not made any payment towards the alleged allotment as the records maintained by the company would show nor have they been issued any share certificate in respect of the said 1000 shares. Apart from making a bald statement that they are holding 1000 shares no details of the payments, copies of any resolution, share certificates or any document whatsoever has been produced. 3. Further, it was argued that the petitioners' contentions that the P1 and P2 were appointed as additional directors with effect from 20th October, 2006, is also false, as the Board of the company had never approved or appointed the P1 and 2 as directors. The contention has been strongly refuted in the representation made by the company to the Registrar of Companies ('RoC'), De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be dismissed also on the ground that the petitioners have come with unclean hands and the filing of the present petition is an abuse of the process of court. The petition is liable to be dismissed on the ground that no cause of action has been made out for reliefs under sections 397 and 398 of the Act. 7. The respondents/petitioners' to CA No. 518/2007 case is that the petitioners are the shareholders of the respondent-company No. 1 and they constitute more than 1/10th of the total number of members of the respondent-company besides holding 50 per cent equity share capital of respondent No. 1-company prior to the unlawful act of the respondents of increasing the paid-up capital. Form 2 dated, 5th April, 2006 and 10th April, 2006 were relied upon. It was stated that both the forms have been digitally signed by Shri Pawan Sharma, R2. Both the forms have been certified as true and correct by a chartered accountant in whole-time practice, namely, Shri Vikas Katyal clearly stating that he has verified the particulars as stated in Form 2 from the books of account and the records of R1-company and found them to be true and correct. The list of allottees to whom the shares were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2007-08 along with a list of investments as on 31st March, 2007. The list of investments clearly indicates that Shri Balraj Malhotra held 300 shares of Rs. 100 each, Shri Binny Malhotra held 300 shares of Rs. 100 each and Shri Arjun Malhotra held 400 shares of Rs. 100 each in R1-company as on 31st March, 2007. Based on these documents, it was contended that the amount was brought in cash by the petitioner, and the shares were allotted to them on 5th April, 2006 and 10th April, 2006 and all these shares were duly reflected in their income-tax returns. It was argued that these documents leave no doubt that the shares were allotted to the petitioners and the register of members have been manipulated by the respondents later on. To support their contentions that the register of members is susceptible to manipulations reliance was placed on the case of Satish Chand Sanwalka v. Tinplate Dealers Association (P.) Ltd. [1998] 93 Comp Cas 70/16 SCL 172 (CLB-New Delhi). Further the respondents/petitioners placed reliance on the case of Ms. Rashmi Seth v. Chemon (India) (P.) Ltd. [1995] 82 Comp. Cas. 563 (CLB) wherein it was held that - "We had carefully considered all the argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain a petition under section 397/398, the requisite qualification as prescribed in section 399 of the Act is mandatory. It is correct that the Act provides that in order to maintain a petition under sections 397 and 398 the petitioner(s) should hold either 10 per cent or more shares of subscribed capital or should constitute 10 per cent or more of total members in the company. A bare reading and perusal of the provisions of section 399(1) of the Act would show that "(a) in the case of a company having a share capital, members constituting not less than 100 members of the company or not less than 1/10th of total number of its members whichever is less or members' holding not less than l/10th of the issued share capital of the company shall have right to apply under section 397 or 398 of the Act". The requirement of share qualification is relevant and material for maintaining the petition. Even though a subscriber to the memorandum is a member in terms of section 41 of the Act, but without the consideration for the shares he cannot be treated as a member for the purposes of section 399 of the Act. A reading of the section would indicate that only a member can apply provided all call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if the said issue/allotment is the very act which is challenged as "oppressive" in the said petition, the maintainability of the petition would be decided after determining the validity of the issue of allotment. The prima facie evidence to the shares could be either the share certificate or even the register of members. However, even in the absence of share certificates or entry in the register of members, if a person could establish that certain shares have been allotted to him, then, for the purposes of section 399 of the Act, he could be treated as a member. It is now the accepted position that the qualification under section 399 is met not only by a petitioner (or petitioners) whose name is, to fact, on the register of members of the concerned company but also by persons whose names may not be on the register but who are entitled to have their names on the register. It is settled law that a shareholder could establish allotment of shares not only by the register of members of the company, but also by the statutory returns and documents maintained and filed by the company, it is not open to the company to contend that the petitioner has not complied with the requirements of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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