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TMI Blog2003 (11) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany in gross violation of the statutory requirements. 2. Shri Srinivasan Ramasamy, Practicing Chartered Accountant, while initiating his arguments submitted that the Company was incorporated in September 1983 with the main object to carry on the business of manufacturers and sellers of rubber and allied products. The petitioner's father and the second respondent's father are promoters of the Company. The authorised capital of the Company is ₹ 6 lakhs consisting of 600 equity shares of each ₹ 1,000/- and paid-up capital ₹ 1,56,000/- consisting of 156 equity shares of ₹ 1,000/- each. The petitioner together with his family members and relatives hold 56 shares constituting 35.95 per cent and the second respondent with his family members and relatives hold 100 shares of the Company representing 64.1 per cent of paid-up capital of the Company. The petitioner's father, the second respondent's father and the second respondent are subscribers to the Memorandum of Association of the Company subscribing to one share each. The petitioner's father was the Managing Director looking after the affairs of the Company till his demise on 24.06.1990. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company, no details of such allotments are available either with the Company or with Registrar of Companies, Pondicherry. The Board of Directors of the Company had approved transfer of certain shares on 27.08.1990 and also the transmission of certain shares on 27.08.1990 when the petitioner was on the Board of the Company, but there was no Board meeting convened on these dates approving the transfer and transfer of shares and therefore they are not valid. The second respondent used to prepare the balance sheet and profit and loss account of the Company every year and send copies of the same duly certified in the capacity as Chairman. The first petitioner being the Managing Director had never signed the original balance sheet and profit and loss account for the years as at 30.03.1991 to 30.03.1998. The second respondent thereby violated the provisions of Section 215 of the Act, according to which every balance sheet and profit and loss account of the Company should be signed on behalf of the Board by the Managing Director as well as director and in case there is no Managing Director any two of the directors should sign the balance sheet. The appointment of the statutory auditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the second respondent from convening the extraordinary general meeting proposed on 16.11.2001 to remove the petitioner. Similarly, the petitioner's brother has filed a civil suit before the Principal District Munsif Court at Pondicherry against the second respondent challenging the validity of the notice dated 24.10.2001. In both these suits, a prayer has been made for a permanent injunction restraining the second respondent from holding the proposed extraordinary general meeting. However, during pendency of these suits and the Company Petition, the second respondent proceeded with the general body meeting of the members and removed the petitioner from the office of Managing Director, constituting an act of oppression in the affairs of the Company. The second respondent never allowed the petitioner to discharge his functions as Managing Director of the Company, but he has been carrying on day-to-day management of the Company excluding the petitioner from the day-to-day management of the Company, in support of which the petitioner referred to various letters written by the second respondent (Annexure A-1 to A-12). These letters show that the second respondent was all along car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory authorities. The Managing Director is under obligation to convene Board meetings and annual general meetings and comply with the statutory requirements from time to time, which the petitioner failed to carry out the same. There has been no understanding between the petitioner and the second respondent for maintenance of accounts and managing the financial transactions of the Company by the second respondent. Shri Abdul Rahim pointed out that the petitioner was never authorised to sell the landed property acquired by the second respondent. The second respondent never approached the petitioner's mother to sell a portion of the property in favour of the petitioner's mother. The property of the Company can be sold only with sanction of the Board of Directors of the Company and not by either the petitioner or the second respondent. According to the respondents, the Managing Director failed to discharge his duties as envisaged by the Articles of Association of the Company compelling the second respondent to convene an extraordinary general body meeting in the interest of the Company. Accordingly, a notice dated 24.10.2001 was issued to all the members of the Company con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue notice to the members of the Company, wherein the petitioner was removed from the post of Managing Director and one Mr. H.M. Sultan Mohideen was appointed as the Managing Director of the Company. The removal of the petitioner as the Managing Director as well as the appointment of the new Managing Director was duly intimated to the Registrar of Companies by filing form-32 on 23.08.2002. When the petitioner failed to carry on the administration of the Company, there was no other way, but to call for the extraordinary general body meeting in the interest of the Company and accordingly the petitioner was duly removed from the office of the Managing Director of the Company. 4. When the Company failed to repay the dues of PIPDIC, the latter took over the assets of the Company for non-payment of its dues, upon which, the petitioner has filed a civil suit in O.S.No. 420 of 2002 on the file of the Additional District Munsif, Pondicherry for settling the dues and release of the factory. Though the petitioner offered to settle the entire dues by one time payment, he never honoured his commitment. However, the second respondent took the initiative to mobilise funds by sale of the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner and second respondent along with their family members. Thus the management which was in the hands of the father of the petitioner second respondent is now with the petitioner and the second respondent. It is therefore, beyond doubt that the Company is a family company and therefore the principles of partnership are attracted. The petitioner has categorically affirmed in the petition that the second respondent has been the chairman of the Company. The various correspondence produced by the petitioner unequivocally show that the second respondent is functioning as the chairman of the Company. Moreover, the petitioner never took the plea before the High Court in writ W.P.No. 280 of 2003 that the second respondent is not the chairman of the Company. On the other hand, the petitioner who got himself impleaded in WP No. 280 of 2003 only opposed the delivery of possession of assets of the Company to the second respondent on the sole ground that the second respondent may alienate the assets of the Company, depriving the interest of the shareholders of the Company. It is observed from the order dated 09.07.2003 of the High Court, the High Court after recording the undertakin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim and counter claim of the title to the landed property, in the present proceedings and the petitioner. However, the properties belonging to the Company shall be dealt in accordance with the Articles of Association of the Company, according to which, it is only the Board of Directors of the Company which is vested with the powers of selling the assets of the Company, and not with the petitioner or the second respondent exclusively. In regard to the removal of the petitioner from the office of Managing Director of the Company, though we find that he was removed at the extraordinary general body meeting held on 22.08.2002 in the absence of any order of injunction both in OS No. 751 of 2001 on the file of District Munsif Court, Pondicherry and in O.S.No. 6530 of 2001 on the file of the City Civil Judge Court, Chennai, yet, in our view, the removal of the petitioner is oppressive of the minority shareholders, especially when the Company is found to be a family company and always managed by the both groups. The act of the second respondent may be lawful, but is oppressive of the minority shareholders. Hence, applying the principles of partnership to the present case, as has been h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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