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TMI Blog2001 (11) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... ch. This Bench also appointed Shri Justice J.M. Srivastava (Retired) to preside over the meeting that was convened on 29-11-1999. In the EOGM, the respondents had proposed the election of the then 7 directors while the petitioners had proposed election of 6 directors in place of 6 existing directors. In that meeting, according to the report of the Chairman, 6 of the existing directors had been elected. Thereafter, the petitioners filed CA No. 302 of 1999 challenging the result of the election on various grounds. Considering the grounds of challenge, this Bench passed an order on 10-4-2000 setting aside the results of the election and declaring that the directors proposed by the petitioners had been elected as directors of the company. It was also directed that the board of directors of the company should hand over the Board to the directors whom this Bench had declared as elected, within a period of 10 days from the date of receipt of that order. The said order was challenged on an appeal before the Gauhati High Court which passed an interim order on 5-5-2000 directing that the status quo as on that date should be maintained. 2. In the present petition, the petitioners have rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents had disclosed that Surma had already remitted the balance of unpaid money of ₹ 40 per share. The company could not have accepted this amount without any call and even otherwise, by an order dated 26-6-1998, this Bench had restrained the company from increasing its paid up capital. The very purpose of accepting the money, when the restraint order was in force was to increase the voting power of the shares held by Surma. The CLB in its order dated 1 -8-1999 has clearly recorded that the company had not adduced evidence to show that the company was in need of funds and it had also observed that if the paid up capital was increased with a view to gain voting rights, then, such an act is an act of oppression. In view of this, the CLB had restrained the company from increasing the paid up capital till the EOGM as ordered was held. Further it is also doubtful whether the company had received the money from Surma before the restraint order was passed by this Bench on 23-6-1998 since in the affidavit sworn on 21-1-1999 by the respondents as at Page 188 of the petition, this amount is not reflected. It now transpires that on 30-11-1999, i.e., a day after the EOGM was held on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the control of 400 shares in the company, the respondents have further engineered to issue duplicate certificates in respect of many shares, the holders of which are unknown. The company has issued an advertisement on 23-12-2000 stating that in respect of a large number of shares, duplicate certificates have been sought. No details have been furnished as to who are the shareholders who have applied for duplicate certificates especially when substantial shares in the company are dormant. Therefore, the company should be restrained from issuing any duplicate certificates. 7. Summing up his arguments, Shri Sarkar submitted that in the EOGM held on 29-11-1999, the majority of the petitioners had been established and in terms of the later order of this Bench, it is the petitioners' group which should control the Board. However, by virtue of the interim of the Gauhati High Court, the respondents have taken decisions relating to the matters which would completely upset the shareholding position of the parties resulting in the petitioners being reduced to minority. He also pointed out that the oppressive manner in which the respondents are acting is evident from the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be an act of oppression against the petitioners. Further, the company was in need of funds and, therefore, in a Board Meeting held on 19-7-2000, these 2000 shares were sold to 7 individual buyers for valuable consideration. As far as issue of duplicate share certificates are concerned, the company is bound to issue the duplicate certificates as and when a shareholder on valid grounds applies for the same. The contention of the petitioners that many of the shares of the company are dormant and shareholders are not known does not mean that such shares would always remain dormant and no shareholder would like to make it active. Since the company is duty-bound to issue the duplicate certificates, no motive could be attributed to the respondents. In regard to registration of transfer of 177 shares, this Board had observed in its order dated 1-6-1999, that the instruments of transfer were invalid. If so the company cannot act on invalid instruments and as such the petitioners cannot raise any grievance on this score. 10. Summing up his arguments, Shri Ganguly submitted that this petition is nothing but a fraud and a waste of public time. The decisions taken by the Board in the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation the challenge was more towards illegality of the action while in the present petition the petitioners have alleged oppression. Further, in the earlier order, this Board has not given any findings on the allegations to act as res judicata. Therefore, this petition is maintenance notwithstanding the earlier order. 12. As this Board had noted in its order dated 1-6-1999 in CP No. 8 of 1998, the shareholding in the company is so diverse with so many shares being dormant, it was difficult to determine as to who controls majority shares in the company. It was that reason that prompted this Board to order holding of an EOGM which would determine the majority control in the company. In the order dated 10-4-2000, this Board found that the petitioners' group effectively controls more than 50 per cent shares. Even though, this order is under challenge, yet, that finding would continue to prevail till negatived by the High Court. Therefore, if we find that the action of the board of directors has resulted in creating a new majority by the acts complained of in the petition, then, the petitioners would be justified in alleging oppression. 13. As far as the 400 shares held by Sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the 2000 shares held by this company in Surma by which the control of that company has been given up. It clearly exhibits that by increasing the paid up value of the shares held by Surma and handing over the control of Surma by sale of these 2000 shares, the respondents have tried to create a new majority in the company. It is worthwhile noting that the respondents have not furnished any details as to the identity of the 7 persons who had purchased the shares and also the consideration at which the shares were sold. If the justification for the sale of Surma is that it is dormant without having any business activities, unless otherwise there has been some ulterior motive, no one would have purchased the shares of such a dormat company. Non-disclosure of these essential details gives rise to a presumption that the transaction is not a bona fide one and cannot be considered to be for the purposes of raising funds for the company. In this connection, we may beneficially refer to the case of Tracstar Investments Ltd. v. Gordon Woodroffe Ltd. [1996] 87 Comp. Cas. 941 (CLB). In that case, one Shoe Specialty Private Limited (SSPL) held 5,00,000 shares in Gordon Woodroffe Ltd. (GWL). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these shares are not before us due to non disclosure of the names by the respondents, we direct the company to furnish their names and addresses by an affidavit within 15 days from the date of receipt of this order after which notices will be issued to these purchasers to show cause as to why the purchases made by them of these shares should not be cancelled. After issue of notice and receipt of replies from these purchasers, this matter will be further considered. As far as the paid up value of 400 shares in Surma is concerned, since we have found that the same had been done only to increase the voting power and not for any bona fide purposes, the company will not allow voting on the shares beyond ₹ 10 per share till the disposal of the appeal before the Gauhati High Court, whereafter, the Board of the company will take a decision either to retain the paid up value at ₹ 50 or reduce it to ₹ 10 after refunding the balance ₹ 40 and effect reduction in the share capital. 14. Insofar as the registration of 177 shares, since the stand of the respondents is that the transfer instruments are defective, we direct the company to return the share certificates a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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