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TMI Blog2016 (6) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... of the issued share capital of the Company, and the further fact that he was managing the affairs of the Company as its Managing Director are not in dispute, the burden is heavily upon the respondents to prove that the appellant ceased to be a share holder of the said Company on account of the alleged transfer of his entire shareholding to the 4th respondent and vacated the office of the Director of the Company, as provided under Section 283(1)(a) of the Act. Though the respondents would contend that, the alleged share transfer was with the approval of the Board of Directors of the 1st respondent Company, none of the documents produced along with Annex. A9 counter filed before the CLB or the additional affidavit filed before this Court would indicate any such approval/sanction. In such circumstances, we find no reason to sustain the finding in Annex. A12 order of the CLB that appellant ceased to be a shareholder of the 1st respondent Company and hence he has no locus standi to file the Company Petition. The question as to the locus standi of the appellant to maintain the Company Petition requires fresh consideration with reference to the original minutes of the meetings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d other consequential reliefs. 2. The Company Law Board (hereinafter referred to as 'the CLB') by Annex. A12 order dated 20.11.2015 dismissed C.P. No. 100 of 2011 as not maintainable, on a finding that the appellant ceased to be a shareholder of the 1st respondent Company, on transfer of his shares to the 4th respondent and as such he has no locus standi to file Company Petition before the CLB. The reasoning of the CLB, as contained in Para. 8 of Annex. A12 order, reads thus; 8. The petitioner has not denied the transfer of shares to the 4th respondent nor disputed the signatures on the share transfer forms. However at para 6(viii) it is stated that he was merely coerced by the 4th respondent along with few other persons with a threat to his life and bodily harm, to transfer the shares held by him in the R1 Company to the 4th respondent. Further it is stated that he was coerced to sign a share transfer form which was first signed by the 2nd respondent as the 1st holder and the petitioner was forced to sign it as a 2nd holder. There is no record to show that what legal action the petitioner has taken if he was threatened to sign the share transfer form and transfer th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Going by the averments in the Company Petition, M/s. Meezan Realtors Pvt. Ltd. (hereinafter referred to as the 1st respondent Company) was incorporated on 23.8.2003, vide Annex. A1 certificate of registration, with the appellant and one Mr. Salahuddin Nalakath as its first Directors. The authorised capital of the Company was ₹ 1,00,000/- divided into 1,000 equity shares of ₹ 100/- each and that, the appellant holds 500 equity shares of ₹ 100/- each, equivalent to 50% of the issued share capital. Article 29 of the Articles of Association of the 1st respondent Company prescribes holding of at least 5 equity shares as qualification shares for continuing as a Director and that such shares shall be acquired within a period of two months from the date of their appointment. Mr. Salahuddin Nalakath failed to pay the share subscription money in respect of the equity shares agreed to be subscribed, within the time prescribed under Section 270 of the Act, and thus vacated his office as Director on 5.11.2003, under the provisions of Section 283(1)(a) of the Act. Annex. A3 is Form No. 32 regarding cessation of office of Mr. Salahuddin Nalakath. Soon after the incorporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invalid and erroneous. In sub-para (i) to (xii) of Para. 6(b) of the Company Petition, the appellant has stated in detail the alleged oppressive tactics and acts of mismanagement in the affairs of the 1st respondent Company. It was in such circumstances, the appellant approached the CLB in C.P. No. 100 of 2011, seeking various reliefs. 9. Before the CLB, the respondents filed Annex. A9 counter. According to the respondents, the appellant had transferred his entire shareholding to the extent of 1000 shares, by executing Annex. B1 share transfer form on 27.4.2011, in favour of the 4th respondent. Having thus divested his entire shareholding, the appellant ceased to be a member of the 1st respondent Company and hence he has no locus standi to maintain the Company Petition before the CLB. The respondents have also denied the alleged acts of oppression and mismanagement in the affairs of the 1st respondent Company. 10. The respondents contended that, the Board of Directors of the 1st respondent Company at its meeting held on 28.5.2011 considered and approved the transfer of shares to the extent of 330 shares each held by the 4th respondent, to and in favour of the 2nd and 3rd resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of that process. 13. The respondents contended that, at the Board meeting held on 9.8.2011, the 3rd and 4th respondents have been made additional Directors of the 1st respondent Company. Later, they were confirmed as Directors of the Company in the General Meeting of the 1st respondent Company held on 30.9.2011, as evident from Annex. B5 resolution. The appellant raised the issue of threat to life, etc., only in the Company Petition which was filed before the CLB in December, 2011. He did not find it proper to approach the Police authorities to file a complaint if he was indeed threatened with death or bodily harm. According to the respondents, since the entire shareholding of the appellant stood transferred in favour of others, with effect form 27.4.2011, he did not hold necessary qualification shares (5 shares) as required under Article 29 of the Articles of Association of the 1st respondent Company. Hence his office stood automatically vacated in terms of Section 283(1)(a) of the Act, without any act or deed or thing on the part of the Company or its Directors. 14. The respondents contended further that, the decisions taken at the General Meeting of the Company on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer form and transfer the shares to the 4th respondent; the transfer of shares held by the appellant to the 4th respondent is shown in the annual returns of the 1st respondent Company for the year 30.9.2011; etc. In view of the aforesaid reasons, the CLB concluded that, the transfer of shares by the appellant to the 4th respondent is legal and valid, and the appellant, who ceased to be a shareholder of the 1st respondent Company, has no locus standi to file such a petition. 17. Along with the Company Appeal the appellant produced certain additional documents, which do not form part of the Company Petition filed before the CLB. Instead of producing the additional documents along with an application under Order XLI Rule 27 of the Code of Civil Procedure, 1908, those documents are marked as Annexures and produced along with the memorandum of appeal, as if it forms part of the proceedings before the CLB. Going by the provisions under Order XLI Rule 27 of the CPC, additional documents can be accepted only if due diligence is established, despite which the appellant could not produce the same before the CLB. No explanation is forthcoming from the appellant in this regard. During th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any was also held on 27.4.2011, wherein a decision was taken to induct Mr. Salahuddin Nalakath as a Director of the 1st respondent Company, as reflected in Annex. R1(d) minutes. The learned counsel contended further that, the said appointment of Mr. Salahuddin Nalakath was for filling up the casual vacancy in the Board of Directors of the 1st respondent Company, resulted on account of the 'disqualification' incurred by the appellant under Section 283(1)(a) of the Act. 21. As borne out from the pleadings and materials on record, the fact that the 1st respondent Company was incorporated on 23.8.2003 with the appellant and one Mr. Salahuddin Nalakath as its Directors is not in dispute. It is also not in dispute that, the appellant had subscribed 500 equity shares, out of the authorised share capital of ₹ 1,00,000/- of the 1st respondent Company divided into 1,000 equity shares of ₹ 100/- each. As such, the appellant was holding equity shares equivalent to 50% of the issued share capital of the 1st respondent Company. The fact that, the appellant was the Managing Director of the Company is also not in dispute. 22. The case put forward by the respondents in Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore this Court on 16.3.2016, the stand now taken by the respondents is that, in the meeting of the Board of Directors of Meezan Jewellers Ltd. held on 27.4.2011 a decision has been taken to transfer all the shares held by the appellant in the 1st respondent Company in favour of the 4th respondent, who had been authorised to take over the management of all associate Companies of 'Meezan Group'. Annexure R1(a) is the minutes of said meeting of the Board of Directors of Meezan Jewellers Ltd. held on 27.4.2011. 25. It is trite law that, a Company incorporated under the provisions of the Companies Act is a separate legal entity distinct from its individual shareholders or Directors. A Company is a juristic person and has an existence independent from that of the shareholders and it is the Company which owns its assets and not the shareholders. Therefore, Meezan Realtors Pvt. Ltd. (the 1st respondent Company) and Meezan Jewellers Ltd. are two juristic persons entirely distinct from its shareholders or Directors. In that view of the matter, any decision taken in the meeting of the Board of Directors of Meezan Jewellers Ltd. on 27.4.2011, as reflected in Annex. R1(a) minutes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Section 193 shall be evidence of the proceedings recorded therein. Section 195 of the Act provides further that, where minutes of the proceedings of any general meeting of the Company or of any meeting of its Board of Directors or of a committee of the Board have been kept in accordance with the provisions of Section 193, then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and in particular, all appointments of directors or liquidators made at the meeting shall be deemed to be valid. 29. In Madhusoodhanan v. Kerala Kaumudi (P) Ltd. (2004 (9) SCC 204) the Apex Court held that, under Section 194 of the Companies Act, 1956, minutes of meetings kept in accordance with the provisions of Section 193 shall be evidence of the proceedings recorded therein and, unless the contrary is proved, it shall be presumed under Section 195 that the meeting of the Board of Directors was duly called and held and all proceedings thereat to have duly taken place. 30. A conjoint reading of Sections 194 and 195 of the Act along with Section 193, makes it explicitly clear that, in order to trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional affidavit filed before this Court would indicate any such approval/sanction. In such circumstances, we find no reason to sustain the finding in Annex. A12 order of the CLB that appellant ceased to be a shareholder of the 1st respondent Company and hence he has no locus standi to file the Company Petition. The question as to the locus standi of the appellant to maintain the Company Petition requires fresh consideration with reference to the original minutes of the meetings of the Board of Directors of the 1st respondent Company and other statutory records. As the Company Law Board stands dissolved with effect from 1.6.2016, on the constitution of the National Company Law Tribunal, by virtue of the provisions under sub-section (1) of Section 466 of the Companies Act, 2013, such exercise shall be undertaken by the National Company Law Tribunal, Chennai Bench. 33. The learned counsel for the respondents advanced arguments on the maintainability of the Company Petition on the ground that the jurisdiction of the CLB is only summary in nature. The learned counsel has also argued that, the provisions under sub-section (1A) of Section 108 of the Act is only directory in nature a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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