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TMI Blog1999 (10) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... ner together with members of his group held 25.45 per cent, shares in the company and the second respondent with members of his group held 59.55 per cent. shares. According to him, the petitioner had been the managing director of the company right from incorporation of the company in 1987, and in breach of mutual confidence and trust, the second respondent started sidelining the petitioner from exercising his powers as the managing director. With a view to completely excluding the petitioner from the company, the second respondent removed all the records of the company kept in the house of the petitioner which was originally the registered office of the company to his own house. From a legal notice issued by Union Bank of India to the directors of the company, the petitioner noticed that four new directors had been appointed without any authority of the board or general body. The respondents, in their reply, have averred that in an extraordinary general meeting held on February 28, 1998, the petitioner was removed as the managing director and that four new directors were appointed. Mathur submitted that the petitioner never received any notice for the extraordinary general meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is own directors, two sons of the petitioner who were on the board, are reported to have vacated the office of director in terms of Section 283(1)(g) of the Act. He submitted that the respondents have not given any details regarding the dates of the board meetings, which these directors did not attend, for the purpose of invoking the provisions of Section 283(l)(g). 3. He further stated that besides the above acts of oppression, the second respondent is guilty of mismanaging the affairs of the company including siphoning off funds of the company. As per Section 215 of the Act, the balance-sheet of a company has to be signed by the managing director, if any. However, without observing this statutory requirement by requiring the petitioner to sign the balance sheet, the same for the year ended March 31, 1997, was signed by two other directors. Therefore, the adoption of the accounts by the general body is irregular. Referring to para. 7.7 of the petition and annexure D to the petition, he stated that by two invoices with the same serial number 282, products of the company were sent to two different parties, which shows that there is irregular and questionable dispatch of goods. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any which resulted in raids by these authorities. Such raids had affected the reputation of the company. In view of the conduct of the petitioner, the shareholders of the company decided to remove him from the office of the managing director and accordingly requisitioned an extraordinary general meeting. In the extraordinary general meeting held on February 28, 1998, the general body passed a unanimous resolution removing him as the managing director. Therefore according to him when the shareholders have exercised their democratic rights for the benefit of the company, such exercise of right cannot be termed as an act of oppression. He further submitted, referring to the reports of the authorities that had conducted the raids, as enclosed with the additional documents, that all these authorities have given clean chits to the company as they had not found anything wrong. 6. In regard to the legality of the extraordinary general meeting, referring to pages 1-8 of the additional documents filed on September 22, 1999, wherein photostat copies of the certificates of posting have been enclosed, he contended that notices for the extraordinary general meeting were sent to all the shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel pointed out that these invoices are seen to have been raised when the petitioner was the managing director of the company and the same have been authenticated by him. He also stated that the customers to whom products of the company were alleged to have been sent as per invoices at pages 41-42 of the petition have informed the company that they have not received any goods in respect of those supplies. In view of this, learned counsel submitted that these invoices are fabricated ones just for the sake of implicating the second respondent in these proceedings with unfounded allegations. 9. He further stated that the company has been very prompt in repaying instalments of loan taken from UPFC and PICUP and these two institutions have sent certificates to this effect, copies of which are at pages 81-82 of the additional documents. Therefore, the allegations of the petitioner that the second respondent has been guilty of non-repayment of dues to the financial institutions and as such the second respondent has been mismanaging the affairs of the company is baseless. In regard to the amendment to the article, he submitted that the company has not appointed fifteen directors on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idka Motor Co. Ltd. [1996] 89 Taxmann 362 ; (1997) 1 Comp LJ 268, 285 CLB). In this case, even though the company is a public company, nevertheless, it is family company with two identifiable groups of shareholders and as per article 40, the petitioner, as also the first directors, are not liable for retirement by rotation. In other words, all are permanent directors and, therefore, it1 one is removed from the management, then he is justified in claiming that his removal is an act of oppression. However, such removal could be considered as an act of oppression only if it is established that the same was done either with a mala fide intention or with some ulterior motive. In this case, it has been established that the petitioner had acted against the interest of the company by writing complaints to various Government authorities resulting in their conducting raids on the company. No doubt, these authorities have given a clean chit to the company, yet, such raids do affect the reputation of the company justifying the shareholders to view the act of the petitioner as prejudicial to the interest of the company. The normal test to examine whether there is oppression or not, is to find o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dated January 20, 1998, and that the company had sent a copy of the same to the petitioner on February 4, 1998, (page 29). By a letter dated February 23, 1998, at page 30, a reminder was sent to him asking him to send his response to the notice. The counsel for the petitioner has not questioned the authenticity of these documents. Therefore, we find that the provisions of Section 284 have been complied with. In view of our findings as above, the question of declaring the proceedings of the extraordinary general meeting or the removal of the petitioner as the managing director, as null and void, being oppressive or illegal does not arise. 14. In regard to the alleged vacation of office by the two sons of the petitioner, viz., A. K. Mittal and P. K. Mittal, according to the company, they had vacated the office of director with effect from May 4, 1998, in terms of Section 283(1)(g) on May 4, 1998. During arguments, counsel for the respondents, referring to pages 23-25 of the additional documents, wherein copies of the notices for the board meetings on February 3, 1998, February 27, 1998 and March 31, 1998, have been enclosed, submitted that these directors did not attend these me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company would allot shares. W close this issue by giving the option to the petitioner to apply for his entitlement on the basis that the additional shares of 4,445 would be treated as a rights issue. 16. In regard to the allegation at para. 7.7 of the petition that the amount of ₹ 2.3 lakhs receivable for the supplies made to certain parties has been siphoned off by the second respondent, we are satisfied with the arguments of counsel for the respondents in this regard. The same is the position with regard to the alleged pocketing of ₹ 51 lakhs under sundry debtors . The main argument in this regard by Mathur was that the auditors of the company had not obtained confirmation letters from these sundry debtors and, therefore, the apprehension is that the money should have been collected by the respondents. However strong one's suspicion or apprehension be, in the absence of any iota of proof substantiating such suspicion or apprehension, we cannot take cognisance of the same. Mathur pleaded for investigation into this matter, which we feel, cannot be ordered without proper material as it would only amount to a roving inquiry without any basis. 17. In regard ..... X X X X Extracts X X X X X X X X Extracts X X X X
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