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TMI Blog2015 (9) TMI 1451X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel for the respondent that the objections of the appellant were motivated and malafide and stem out of malice because of his removal as a statutory auditor. A Chartered Accountant by profession, such actions on the part of the appellant are in utmost bad faith. For this reason, apart from the appeal being devoid of legal merit, the appellant deserves to be burdened with heavy costs at ₹ 50,000/- to the contesting respondent. The appellant shall additionally deposit ₹ 25,000/- as costs with the Delhi High Court Legal Services Committee for burdening this court with this malafide mischievous appeal. These costs shall be deposited within four weeks from today. - CO.APP.No.51/2013 - - - Dated:- 3-9-2015 - MS. GITA MITTAL AND MR. I.S. MEHTA For The Appellant : Dr. Manmohan Sharma and Mr. Anurag Pratap, Advs. For The Respondent : Mr. Alok Agarwal, Mr. Sanjeev Singh and Ms. Pramanshi, Advs. GITA MITTAL, J. 1. The instant case manifests the difficulties which a peeved statutory auditor can create for a company, if he is removed from his office. Having knowledge of all intricate details about the working of the company, he can misuse the same and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Chadha, a shareholder was rendered disqualified from continuing as the statutory auditor of the respondent no.1. 10. Here we enter into the realm of disputes between the parties to the present litigation. At this stage, the appellant‟s son, Mr. Raman Chadha, started claiming that he had purchased the eight shares of the respondent no.1 from his father on the 9th of April 2001. Mr. Raman Chadha claimed that he had sent a transfer deed on the 9th of April 2001 along with the eight shares of the company held in the name of his father Shri H.K. Chadha, allegedly seeking transfer thereof in his name in the share register. The respondent no. 1 company staunchly refuted this contention. 11. It appears that premised on this claim of having sought transfer of the eight shares into his name, Shri Raman Chadha, son of the appellant, filed a petition under Section 111 of the Companies Act before the Company Law Board seeking rectification in the shareholder register of the respondent no. 1 company asserting that the eight shares stood transferred to him. This petition was dismissed by the Company Law Board by a detailed order dated 9th September, 2011, inter alia holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ima facie evidence remains unrebutted, uncontroverted. (Emphasis by us) 12. It is contended by Mr. Alok Agarwal, learned counsel for respondent no.1, that the claim through his son Shri Raman Chadha and the petition was really a desperate attempt on the part of the appellant to continue to function as a statutory auditor of the company. 13. We also note that Shri Raman Chadha‟s appeal in this court assailing the order dated 9th September, 2011 was dismissed by the learned Company Judge on the 2nd of February 2012 holding thus : In fact, the Share Certificate as well as the Share Transfer Form relied upon by Mr. Chawla, learned counsel for appellant do not bear any transfer number, ledger folio number as well as stamp/seal of the company. Even with regard to the non-production of the original Share Transfer Register, the respondent company has given a legally valid explanation. Moreover, this Court has also perused the annual returns filed contemporaneously in accordance with the statutory provisions by the previous management of the respondent company with the Registrar of Companies for the year 2002, 2003, 2004 and 2005. The certified co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due process. 19. The scheme of merger was granted approval in the meetings of the shareholders, secured creditors and unsecured creditors of the transferor and transferee company on the 12th of May 2011. 20. It appears that at this stage, an application being Co.App.No.909/2011 was filed in the first motion petition by Shri H.K. Chadha, the appellant seeking impleadment as well as stay or the cancellation of the meetings of the shareholders. This application was disposed of by the court by an order dated 18th May, 2011 noting that the meeting of the shareholders had already been held on the 12th of May 2011. The appellant was given opportunity to raise objections at the second motion stage to the proposed merger as well as to forward his objections to the Regional Director as well as Registrar of Companies for their consideration. 21. It is noteworthy that the learned Company Judge had noted that there were no secured creditors of the transferee company and inasmuch as the shareholders and unsecured creditors of the transferee company had already conveyed their consent to the merger, dispensation was granted for holding their meetings. 22. The second motion petitions un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with the statutory compliance. Shri H.K. Chadha, the appellant does not dispute this position. No complaint or objection is pointed out to the working of the company. 28. Dr. Manmohan Sharma, learned counsel for the appellant submits that the appellant had filed a writ petition in this court being W.P.(C)No.4058/2010 making the following prayers : 1. Direct the Respondent No.1 and 2 to initiate promptly legal action against the Respondent No.4, as may be required under the provisions of Companies Act and report the action taken to this Hon ble Court. 2. direct the Respondents No.2 not to take on record the profit and loss accounts and the balance sheets which were shown as duly adopted by the shareholders of Respondent No.4 its AGM held on 30th July, 2007. 3. direct the Respondents No.2 to get the profit and loss accounts and balances sheets duly audited from the petitioner for its financial year 2005, 2006 and onwards till the conclusion of the AGMs of the Respondents No.4 held on 29.09.2004 and 30.09.2005. 4. declare the AGM of Respondents No.4 held on 30th July, 2007 and all its decisions as null and void for not serving the mandatory notice to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for 2004 and 2005. Suddenly after two years on 09.10.2006, appellant issued a qualified audit report. Pertinently, on 31.10.2005, complete ownership management and control of respondent company stood transferred from Narang Group to Phenil. Thus Auditor was unhappy with the change and hence the malicious report. Considered in paragraph 17 to 20 at page 27. B Respondents have not complied with mandatory proviso of Section 391(2) which requires depiction of their latest financial position before the Court. Ground is extremely vague and general in nature. In any case all updated balance sheets were filed before the Company Court. Ground general. Yet the impugned order in its entire body deals specifically about accounts and returns. C Complaints were made to MCA with regard to AGMS purportedly not held. Further, that AGM s of 2004 and 2005 of Basti cannot be taken as concluded. Therefore, as AGMs not concluded therefore, the Appellant should be taken to have continued as Auditor till date Fictitious complaints were made. Inspections were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition to the stock exchange at least one month before presenting the scheme under Sections 391 and 394 of the Act and that the failure of the stock exchange to respond would not prevent the scheme from being approved. The learned Single Judge has extracted from the judicial precedent relied upon as well. 36. The appellant does not challenge the findings returned by the learned Single Judge. 37. So far as the exercise of jurisdiction by the Company Board under Sections 391 and 394 of the Act is concerned, we also rely upon the enunciation of the applicable principles by the Supreme Court of India in the judgment reported at (1997) 1 SCC 579, Miheer H. Mafatlal v. Mafatlal Industries Ltd. wherein the court held as follows : 29. ... 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme on that ground as it would otherwise amount to 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. 38. The learned Company Judge has relied upon the above enunciation of law and found that the objections of the appellant were devoid of any merit. It was also noted that no other objection has been received and consequently, the proposed scheme was accepted. 39. As noted above, the Regional Director has pointed out that statutory violations by Basti Sugar Mills Ltd. stand compounded in accordance with law. Despite opportunity by court order, Shri H.K. Chadha submitted no further objections to the Regional Director or to the Official Liquidator. These offices appear to have examined the merger proposal and not objected to the same. They do not assail the order dated 20th February, 2013 of the learned Company Judge approving the same. No illegality in the impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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