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TMI Blog2004 (10) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... e second respondent from operating the Bank account of the Company. 2. Shri R. Prem Kumar, learned Counsel, while initiating his arguments submitted that the Company was incorporated in October, 2001 by the petitioner and second respondent, each subscribing to 5000 equity shares of ₹ 10/- each, with object of carrying on the business as Clearing and Forwarding agents in Tuticorin. The petitioner and second respondent are the first directors. The second respondent is brother of the third respondent, who is wife of the petitioner. While the petitioner, a qualified Clearing and Forwarding agent was engaged in the conduct and day-to-day affairs, the second respondent was looking after the accounts and administration of the Company. The Company did not possess any licence, but acted on behalf of M/s A.J.D. Cruz and Sons, possessing licence as a Clearing and Forwarding agent, thereby the Company with the expertise of the petitioner being the power of attorney of M/s A.J.D. Cruz and Sons could develop the business achieving a turnover of nearly ₹ 200 lakhs during the period between October 2001 and May 2002. In the meanwhile, the petitioner met with a severe car accident o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Company on 27.05.2002 to remove the petitioner and appoint the third respondent as director is a fabricated document. The Company has not chosen to produce copy of the notice for any other meeting. The petitioner and second respondent holding equally the entire capital of the Company, it is a family Company formed out of mutual trust and confidence among the shareholders. Nevertheless, the second respondent acted in breach of the trust reposed upon him by the petitioner. There is justifiable lack of confidence in the affairs of the Company. There is no probity and fair play in the affairs of the Company. These facts and the circumstances show that there is irreconcilable deadlock among the shareholders of the Company which can be resolved only by intervention of this Bench. Shri Premkumar, learned Counsel, therefore, sought for the reliefs claimed in the company petition. 3. Shri. T.K. Seshadri, learned Counsel appearing for the respondents 1 2 advanced arguments on merits of the company petition notwithstanding the plea that the petitioner is of unsound mind and further that the company petition filed in the name of the petitioner is not maintainable either in law or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting. At the extraordinary general meeting held on 12.08.2002, the authorised capital was increased from ₹ 1,00,000 to ₹ 2,00,000 in pursuance of which at the Board meeting held on 02.09.2002, the Board of directors allotted shares in favour of the second respondent (3,000 shares), third respondent (2,000 shares) M.S. Karl Marz (3,000 shares) and J. Rajathi (2,000 shares). The theory of the petitioner that he holds 50 per cent of the equity shares of the Company is incorrect. There is, therefore, no question of dead-lock in the affairs of the Company. The petitioner has not furnished any particulars showing any act of oppression or mismanagement in the affairs of the Company. The necessary ingredients constituting oppression or mismanagement as required under Section 397 and 398 have not been made out. In these circumstances, the company petition is liable to be dismissed. 4. The third respondent adopted the arguments advanced on behalf of the respondents 1 2. The fourth respondent, being the Company's banker, submitted that they will abide by any order of this Bench. 5. I have considered the pleadings and arguments of learned Counsel. It is on record th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the third respondent was inducted on the Board in the casual vacancy of the petitioner, as borne out by copy of the minutes of the extraordinary general meeting held on 27.05.2002 (page 143 of reply statement of respondents). Against this background, the rival contentions of the parties are being considered. While, according to the petitioner, his removal from the office of director, induction of the third respondent as director, allotment of the impugned shares and diversion of funds and business of the Company to the personal benefit and business of the second respondent would constitute serious acts of oppression and mismanagement in the affairs of the Company, the respondents defended their action, on the ground that every act is in the best interest of the Company and further denied any diversion of funds and business of the Company. According to the respondents, the Board of directors including the petitioner had on 08.04.2002 approved the transfer of 500 equity shares held by the second respondent in favour of the third respondent, in support of which copies of the extracts from the register of members and register of share transfers are made available before this Bench. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said meeting. But the minutes of the Board meeting do not disclose any agenda for the proposed extraordinary general meeting. I find from copy of the notice dated 25.05.2002 on record that the resolution for removal of the petitioner from the office of director as well as for appointment of the third respondent as director was to be considered at the extraordinary general meeting held on 27.05.2002. There is no material to show whether the mandatory requirements as contemplated under Section 284(1) (2) read with Section 190 for removal of any director have been complied with by the Company. At the extraordinary general meeting, while the petitioner was removed by passing an ordinary resolution, as he became incapable of acting under the provisions of Section 284(1) of the Act, the third respondent, his wife was co-opted as director of the Company. It is clear from the explanatory statement forming part of the notice dated 25.05.2002 that the petitioner had suffered severe head injury on account of the accident. The doctors in their report stated that the petitioner cannot act on his own and was incapacitated to do any activities. It is further reported that as per the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led with the Registrar of Companies, in support of the removal of the petitioner and appointment of the third respondent as director, has no legal consequences. Thereafter, at the meeting of Board of directors held on 03.07.2002 the second respondent came to be appointed as the Managing Director with effect from 03.07.2002, which was ratified by the members at the extraordinary general meeting held on 12.08.2002. At the same meeting, the authorised share capital was increased from ₹ 1 lakh to ₹ 2 lakhs, the necessity of such increase, is nowhere justified, save the bald statement of the Chairman reflected in the minutes of the extraordinary general meeting held on 12.08.2002. It is observed that the Board of Directors had on 02.09.2002 allotted 10,000 shares viz., Karl Marz (3000 shares), his wife (2000 shares), both being strangers; second respondent (3000 shares) and third respondent (2000 shares). There is nothing to substantiate the requirements of funds for the Company and the actual receipt of funds into the kitty of the Company, by way of consideration in support of the impugned allotments. The register of members of the Company, reflecting these allotments canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent as Managing Director in July 2002 and the allotment of shares in favour of the respondents and others in exclusion of the petitioner in September, 2002 is oppressive of the petitioner, irrespective of whether these acts are lawful or not. The sequence of events shows that the petitioner, being a promoter director with equal shareholding and in the joint management of the Company, is now out of control and management and his shareholding is reduced. The allegations that the second respondent had fabricated and forged the signature of the petitioner, clearing the consignments from the Customs on behalf of the Company for his personal benefits and diversion of business of the Company, being drastic in nature and without any details no definite conclusion on such financial irregularities could be given, on the basis of prima facie opinion, more so when the respondents have defended these charges and the petitioner failed to discharge the burden of proof establishing such financial irregularities. The petitioner has not furnished any details regarding the clients or orders of the Company diverted to the concern of the second respondent. Admittedly, the power of attorney in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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