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TMI Blog2013 (9) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... ivided into 34,000 equity shares of ₹ 10 each. (iv) The registered office of the company is lying and situated at Village and Post Office : Dakshin Rasulpur, Hooghly, West Bengal-712 413 and the principle object of the company is to set up cold storage and to store and sell the potato. (v) The petitioner Nos. 1 and 2 are directors of the respondent-company. Respondent Nos. 2 and 4 are also shown as directors of the respondent-company. Respondent No. 4 happens to be the wife of respondent No. 2 and respondent Nos. 3 and 5 are sons of respondent Nos. 2 and 4. Respondent Nos. 15 to 18 are either relative of respondent No. 2 or his nominee, holding the shares of the company for and on behalf of respondent No. 2 in trust. (vi) Even though respondent No. 2 was in control and management of the respondent-company having its cold storage at Dakshin Rasulpur, District -Hooghly, he was not in a position to run such unit profitably and the company was not in a position to pay its several creditors the outstanding dues. (vii) A memorandum of understanding ('MoU') dated 27th January, 2009 was entered into between the petitioner No. 1 and respondent No. 2 in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 28th January, 2009 and the petitioner and his nominee were appointed in the Board of Directors of the company on 5th February, 2009 and they started operating the bank account of the company. The petitioner arranged payment to the secured creditor of the company, viz., Hooghly District Central Co-operative Bank Ltd. for a sum of ₹ 2.40 crore out of the total claim of ₹ 6.10 crore (approximately). The petitioner also arranged payment exceeding ₹ 1 crore for storing purpose in the cold storage unit. (x) respondent No. 2 did not present the cheques drawn by the petitioner aggregating to ₹ 5 lakh, but caused transfer of 6,050 shares of and in the company held by him in favour of petitioner No. 1. (xi) After arranging the fund, the petitioner No. 1 had discharged payment of ₹ 2.40 crore out of outstanding loan of ₹ 6.10 crore to Hooghly District Central Co-operative Bank Ltd. and the petitioner has stated to be in the process of arranging the balance payment. (xii) Respondent No. 2 started acting in violation of the obligation under the MoU dated 27th January, 2009 and did not transfer the balance 82 per cent of the shares of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company have not been finalised deliberately and mischievously by the respondents. (xix) Respondent Nos. 2 to 18 are invading and threatening to invade the right and enjoyment of the property by the petitioners. The petitioners also apprehend that the respondents will deal with the assets and properties of the company in a manner which will make the same unavailable. Also, the respondent Nos. 2 to 18 are likely to change the shareholding ratio of and in the respondent-company. Respondent Nos. 2 to 18 are likely to either sell the shareholding to outsider or to issue and allot capital either to themselves or to outsiders and in any such eventuality, the petitioner will suffer irreparable loss and prejudice which may not be compensated in terms of the money alone. As against the above averments and challenges made by the petitioners, the respondents have submitted the following replies through affidavits which are briefly mentioned as under: (i) The purported MoU dated 27th January, 2009 referred to in the petition is insufficiently stamped and, therefore, inadmissible in evidence and should be impounded by this Hon'ble Board. (ii) The consideration for tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or approval for transfer of the cold storage of the respondent-company to petitioner No. 1 or Sk. Abdul Sabir Associates. Respondent No. 2 came to know about this fact from the certified copy of the proceedings initiated by the said Hooghly District Central Co-operative Bank Ltd. against the respondent-company and Sk. Abdul Sabir Associates. (ix) In the meantime, respondent No. 2 handed over 6,050 equity shares in the company out of 20,050 shares held by him to petitioner No. 1. The purported handing over of shares is prohibited by the AoA of the respondent-company. Due to ill health, respondent No. 2 could not understand the meaning of the terms and conditions of the said MoU. However, the purported transfer is illegal and violative of the AoA of the company and other shareholders are interested to purchase of shares of respondent No. 2 and associates at a fair value. (x) In or about 2nd week of June, 2011, respondent No. 2 has gathered that Sk. Abdul Sabir Associates, the proprietorship firm of the petitioner No. 1 did not repay the loan of the bank and as a result, the bank filed award case against the respondent-company and Sk. Abdul Sabir Associates and ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the meeting of respondent No. 2 with the Chairman of the bank, further time was granted to repay the outstanding dues. The petitioners have stated that they paid ₹ 2.40 crore to bank out of the earnings of the cold storage, but as per the revelations in the accounts, the said amount of ₹ 2.40 crore has been paid out of withdrawal of ₹ 4,98,17,111 which, the petitioner withdrew from the cold storage. Thus, the petitioners siphoned away more than ₹ 2.50 crore out of the earnings of the cold storage till 13th July, 2011. In fact, the net liability of the bank was reduced by ₹ 22 lakh only although ₹ 2.40 crore were stated to have been paid. (xiii) 2 share certificates comprising 6,050 shares out of total 34,000 shares, were made over to the petitioner on his assurance to make payment of ₹ 5 lakh by two cheques, but such payments were never released. Further, the petitioners in their submissions before the hon'ble Board, through their counsel on 2nd August, 2011, have submitted that ₹ 5 lakh were paid in cash, but such statement is also false and untrue. The averments made by the petitioners that the cheques were not encashe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is illegal and reference has been invited to the authority - AIR 1973 SC 2389. (iv) The respondent No. 2 started violating the terms and conditions of the MoU and even though the petitioner is entitled to balance 82 per cent of shares in terms of the MoU, the said transfer has not been made in clear violation of the terms of the MoU. (v) The respondents have contended that the petitioner has filed title suit and so no relief can be granted in a company petition as the same are parallel proceedings. However, the relief sought as per the title suit is different from the relief prayed for in the instant proceeding and the parties to the two proceedings are not the same and the issues in such proceedings are also different. In view of the same, the company petition cannot be stayed - AIR 1982 Cal. 1984. (vi) As regards the contention of the respondents that the MoU is invalid, it has been submitted that the respondent-company and respondent No. 2 have filed written statement in the recovery proceeding accepting the MoU as revealed from the page Nos. 6 to 25 of supplementary affidavit dated 28th September, 2011. Further, respondent No. 2 has transferred 6,050 shares to pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 5 lakh as per the MoU, it has been stated that the cheques were issued in the name of respondent Nos. 2 and 4, but these have not been encashed by the respondents. The petitioners have shown their willingness to revalidate the cheques in order to issue fresh cheques for the said amount. Therefore, it has been submitted that the ratio of the case relied upon in AIR 1956 (Bom.) 111 has no manner of application to the facts of the case. To sum up, the petition has been stated to be maintainable and the petitioners are entitled to relief as sought for in the petition. 3. Learned counsel of the respondents during the course of the proceedings has made the following submissions and pleadings which are mentioned, in brief, as under: (i) The petitioners are not registered members of the respondent-company. Articles 8, 17 and 18 of the AoA of the company as also section 3 of the Act specifically prohibit transfer of shares to non-members and it is a must for private limited company to restrict to offer shares to outsiders. Unless members hold requisite qualification of shares as provided in section 399 of the Act, no application under sections 397, 398 and 401 can be mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent-company and his entry in the cold storage cannot be denied. (iv) The purported MoU dated 27th January, 2009 is under stamped and is required to be impounded under sections 32 and 33 of the Indian Stamp Act, as applicable to West Bengal. Article 5 of the Stamp Act provides that any agreement for transfer of immovable property has to be by way of registered conveyance of stamp, as provided in article 23 being 6 per cent of the market value of the cold storage which is not less than ₹ 10 crore. 4. Learned counsel of the respondents has raised the following proposition of law arising out in the company petition being CP No. 751/2011: (a) The petition under sections 397, 398 and 401 of the Companies Act cannot be entertained if the petitioners are not members of the respondent-company at all. (b) The issue of specific performance of transfer of shares is not maintainable in a petition under sections 397 and 398 of the Act where remedy is available by filing a suit in appropriate court - Chatterjee Petrochemical (supra). (c) When purported MoU was not executed by the respondent-company, the said MoU is not binding upon the company and therefore, a petition un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all interim orders be vacated. 5. I have considered the above submissions, the pleadings and arguments made on behalf of the petitioners and the respondents. The main challenge brought out in the petition is in respect of non-compliance to the terms and conditions of MoU dated 27th January, 2009 entered into between the petitioner No. 1 and respondent No. 2 in relation to the transfer of the balance shares of 82 per cent of the paid-up capital of the company to petitioner No. 1 after all the obligations cast on the petitioner No. 1 are discharged as per the terms of the MoU like, payment of outstanding liabilities due to the secured creditors and handing over consideration of ₹ 5 lakh by cheques on account of transfer of shares, by petitioner No. 1 to respondent No. 2 and his nominees. There are certain other clauses in the MoU which are also required to be complied with by the concerned parties, as per the terms and conditions of the MoU. The management and control of the cold storage unit belonging to the respondent-company has been already handed over to the petitioners on and from 28th January, 2009 after the execution of the MoU. According to the petitioner, the consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a material change that has taken place in the management or control of the respondent-company on account any alteration in the company's Board of directors or manager or in ownership of its shares or membership or in any other manner whatsoever satisfying the requirements of section 398(l)(b) of the Act. In fact, the main purpose of the petition is to enforce specific performance of the MoU dated 27th January, 2009 entered into between the petitioner No. 1 and respondent No. 2, which is already a subject-matter of a civil suit filed by petitioner No. 1. 8. Learned counsel of the respondents has raised the preliminary issue that whether the petitioners who are not members of the respondent-company can be allowed to lodge petition under sections 397, 398 and 401 of the Act. As per section 399 of the Act, in the case of a company having a share capital not less than 100 members of the company or not less than 1/10th of total number of its members whichever is less or any member or members holding not less than 1/10th of the issued share capital of the company, provided that all the applicant or applicants have paid all calls and other sums due on the shares, are entitled to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he MoU between the involved parties is purely a private dispute and the same cannot be entertained in a petition under section 397/398 of the Act. In this regard, the decision in Chatterjee Petrochemical (supra), has been relied upon by the learned counsel of the respondents which is squarely applicable to' the facts of the present case. Therefore, the petition cannot be entertained on this ground also. 10. The only worthwhile ground raised by the petitioners is removal of the petitioners from directorship of the company vide Board meeting dated 4th July, 2011 for which neither any notice appears to have been received by the petitioners, nor any shareholders' meeting has been conducted for removal of petitioners being the directors of the company, in accordance with the provisions of section 284 of the Act. However, the MoU entered into between the petitioner No. 1 and respondent No. 2 survives only after necessary approval of the bank being the secured creditor of the respondent-company by virtue of which the cold storage unit of the respondent-company is to be transferred to Sk. Abdul Sabir Associates represented by Abdul Sabir and such approval is yet to come from t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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