9911796707
TMI Blog2018 (4) TMI 1248X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent Company. The petitioner has not come with clean hands for seeking reliefs under Sections 111, 397, 398, 402, 403, 406, 408, 237 read with Schedule XI of the Companies Act, 1956. Therefore, the petitioner a not entitled to any of the reliefs prayed for. This view is fortified with the ruling given in Sri Kanta Datta Narasimharaja Wadiyar v. Venkateshwar Real Estates (P.) Ltd. [1989 (4) TMI 268 - HIGH COURT OF KARNATAKA] wherein it has been held that one who seeking equitable relief must come with clean hands and good conduct, failing which he would constitute a gross abuse of the process of Court and is not entitled for any relief under Sections 397 & 398 of the Companies Act, 1956 - TCP NO. 81/2016 In CP NO. 98/2011 - - - Dated:- 28-2-2018 - CH. MOHD SHARIEF TARIQ AND MR. K. ANANTHA PADMANABHA SWAMY, JJ. For The Petitioner : Anant Merathia, Counsel For The Respondent : Abraham Markos, Counsel ORDER Ch. Mohd. Sharief Tariq, Judicial Member Under examination is Company Petition No.98/2011, which has been filed under Sections 111, 397, 398, 402, 403, 406, 408, 237 read with Schedule XI of the Companies Act, 1956. There is one Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor the 1st Respondent Company made a fresh allotment of shares during the year, 2002. 6. It has been alleged that, in fact, the 4th Respondent is a Software Engineer employed in IT Company in Chennai and on an assignment she was out of station for more than three years during her tenure as a Director of the 1st Respondent Company. It has been stated by the Petitioner that between 03-04-2002 and 18-07-2007, (the date on which the 2nd Respondent was appointed as Managing Director with effect from 18-07-2007), there were only two Directors viz., Respondent Nos. 3 and 4 (R4 did not acquire 100 qualification shares within 6 months from the date of her appointment). In such circumstances, as to how the Board Meetings were conducted when one of the Directors was out of station for more than three years. From the inception of the Company till December, 2002, the bank account of the Company was jointly operated by two Directors of the Company. However, this practice was discontinued from December, 2002, as the 4th Respondent was continuously out of station and was not involved in the affairs of the Company. The Board of Directors at its meeting held on 14-12-2002, passed a Resolution c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Mrs. Vasantha Kumari, wife of 2nd Respondent and Mr. Kiran Kumar, son of 2nd Respondent were inducted into Board as Directors on 15-01-2008 and both of them resigned from directorship on 04-11-2010. Presently the Respondent Nos. 2 and 3 are the two Directors on the Board, the 2nd Respondent occupied the position as Managing Director of the 1st Respondent Company. 10. The Petitioner claims that apart from investing in the capital of 1st Respondent Company, she also infused money to the tune of ₹ 10.25 Lakhs for its working capital requirements from time to time in the form of Unsecured Loans. This is being confirmed by Indian Overseas Bank, Killipalam Branch, Karamana, Trivandrum, Kerala, vide its letter dated 24-07-2008 and the said loan was repayable on demand. The Petitioner submits that during the year 2007, she was in need of money and had to recall the loan amount from the 1st Respondent Company. But, the 1st Respondent Company failed to repay the amount to the Petitioner. It is alleged by the Petitioner that the 1st Respondent Company all of a sudden stopped providing the Annual Reports to the Petitioner, though notice calling for AGM for the year ending on 31-03- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stop the Respondents from disposing of the assets of the 1st Respondent Company, a Civil Suit has been filed before the Sub-Court, Neyyattinkara, under OS.No.292/2010 on 12-10-2010 and also released a paper advertisement in two newspapers on 16-10-2010 cautioning the public from dealing with the properties of the 1st Respondent Company. But, the Respondents, on 19-10-2010, have illegally sold the property of the 1st Respondent Company for a rock-bottom price of ₹ 27.30 Lakhs, whereas there has been offer for ₹ 75 Lakhs which has been received by her from Mr. Shaji Mohan, who was interested to buy the property of the 1st Respondent Company. The Petitioner alleges that she strongly believes that the Respondents would have siphoned off the monies in the said sale transaction causing irreparable loss to the 1st Respondent Company and to its shareholders. 14. It has been placed on record by the Petitioner that during October 2011, she received a letter dated 20-10-2011 from the 2nd Respondent, wherein it has been alleged that she had diverted funds to the tune of ₹ 8 Lakhs to M/s. Vanika Vaisya Trust, in which the Petitioner s husband is a Treasurer. It was stated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,778/-. The Annual Report for the year 2007-08 is filed with the Petition. 15. The Petitioner alleges that recently she has received a notice dated 15-11-2011 calling for an EoGM of the 1st Respondent Company on 08-12-2011, to consider the forfeiture of 2,967 equity shares held by the Petitioner towards the recovery of misappropriated amounts of ₹ 8.00 Lakhs together with interest due to the Company. The Petitioner contends that the said notice is absolutely invalid as the resolution proposed to be passed is against the provisions of law and Articles of Association of the Company. The fully paid-up equity shares cannot be forfeited and all the 2,967 shares held by the Petitioner are fully paid-up. The Petitioner further states that even assuming without admitting the fact that the Petitioner owes money to the 1st Respondent Company, the same cannot be adjusted by forfeiting of equity shares that are fully paid up. 16. The Petitioner alleges that the notice dated 15-11-2011 is defective, as no explanatory statement as required under the provisions of Section 173(2) is attached to the notice. The provisions of Section 173(2) are applicable to the 1st Respondent Company b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company and that board meetings were actually conducted during the period from 03-04-2002 to 18-07-2007; v. Directing the first Respondent Company to rectify the register of members giving effect to the deletion of the name of fourth Respondent as a member; vii. Any other order as may be deemed fit by the Hon ble Bench. 18. The counter has been filed by the Respondent No.2 on behalf of all other Respondents. He stated in the counter that being the Chairman and Managing Director of 1st Respondent Company, he is well aware of the case and competent to depose to the same and he is duly authorised by other Respondents. But, there is nothing on record to show that the other Respondents have given the authority to him to file the counter on their behalf. 19. The allegations contained in the Petition are denied as baseless and contrary to the facts. It has been stated by the Respondents that since incorporation of the 1st Respondent Company in the year 1994, the husband of the Petitioner, Mr. S. Valayudhan was looking after the financial affairs of the Company and other related matters. He was the internal auditor of the 1st Respondent Company till 18-10.2007, when the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capital of ₹ 15 Lakhs sanctioned by the 1st Respondent Company had been swindled by the Petitioner and her husband, who had been running the 1st Respondent Company resorting to utter suppression and mismanagement of the affairs of the 1st Respondent Company, as huge sums of money was availed as loan from various financial institutions on behalf of the 1st Respondent Company, which has been used for the personal benefit and gain of the Petitioner and her husband and no repayment was made. The dues of the 1st Respondent Company had been settled by disposing certain assets of the Company by convening AGM on 01-07-2010 after sending due notice to all the shareholders including the Petitioner on 06-06-2010, under certificate of posting. The Petitioner never turned up for the said meeting and the Resolution passed therein is extracted as below:- Resolved to authorise the chairman and Managing Director Sri. S. Ravindranathan Nair and Sri K.K. Vishwanathan Pillai, Shareholder and previous Managing Director of the Company to dispose of in the best interest of the Company, the Company s property in Sy. No. 117/21 of Maranaloor Village, comprising of 60 Cents together with the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . the proposal to take action against the 3rd Respondent also as at the relevant time he was the Managing Director of the company. The Respondents claim that the said action initiated against the said persons based on the specific clause provided in the Articles of Association which is extracted as below:- 8. The company shall have a first and paramount lien and charge on all the shares registered in the name of a member (whether solely or jointly with others) for all amounts due to the Company from him or his estate, either alone or jointly with any other person whether a member or not and whether such amounts are presently payable or not. The company s lien on a share shall extend to all dividends payable thereof. 26. The Respondents in the reply have admitted that the 4th Respondent has vacated her office as a Director w.e.f. 18-10-2007. However, it has been claimed that she still holds the qualifying shares of 200 shares in the 1st Respondent Company. The Respondents have denied the fact pertaining to the investment of an amount of ₹ 10.25 Lakhs in the 1st Respondent Company by the Petitioner, and stated that the money suit is pending consideration before the Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company, it was the 2nd Respondent who was the Managing Director and managing the affairs of the Company. 29. The allegations levelled by the Respondents in the Counter against the Petitioner and her husband have been denied. It has specifically been stated that the 3rd Respondent was occupying the position as Chairman and Managing Director till 20-08-2008. Therefore, it is not open to the 3rd Respondent to level such allegations against the husband of the Petitioner. It has also been denied that the statutory record was and is under the custody of the Petitioner and her husband. The Petitioner submits that neither she indulged in any such act before 08-10-2007 nor after the said date. 30. The Petitioner has denied the allegations levelled by the respondent, i.e., repeated demands were made for return of books and documents/records. However, it has been admitted by the petitioner that certain files and records that were brought by the 3rd Respondent to the office of the Petitioner s husband for seeking professional clarifications and advices were for some time kept in the office of the Petitioner s husband, but were personally taken back by the 3rd Respondent, after giving pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be matched with the description of the property shown in the notification. It has been stated in the Rejoinder that the property owned and sold by the 1st Respondent Company is 60 cents of developed commercial land in Resurvey No. 117/21 with constructed area of more than 10,000 Sq. ft, consisting of factory buildings, offices, generator room, staff quarters, security room, well, water ponds, pump house and all other infrastructure facilities for good industry, with 5 meters wide road for lorry ingress and regress. Therefore, when the value of the building and other infrastructure developments are considered it would easily fetch more than ₹ 85 lakhs. Therefore, the 2nd and 3rd Respondents had siphoned a huge amount in this sale transaction, cheating the other shareholders and the 1st Respondent Company. The Petitioner in the Rejoinder stated that in case any such cheque was issued to said Trust viz., M/s. Vanika Vaisya Trust by the Petitioner, they should have raised the issue at the time of finalizing the accounts for the year ending 2007 but they have sent a notice only during the year 2011 which proved that there was no such cheque issued by the Petitioner and the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty. The Petitioner submits that she strongly believes that the Respondents would have siphoned off monies in the said sale transaction causing irreparable loss to the Company and its shareholders. On this issue, the Respondents would contend that the offer for ₹ 75 Lakhs was fake and the dues of the 1st Respondent Company snowballed into a huge sum by 2007 and the Respondent had to settle the same by disposing certain assets of the Company. Therefore, after notice dated 06-06-2010 duly served to all the shareholders, an AGM was convened on 01-07-2010, and it was resolved to sell property in Survey No. 117/21 comprising of 60 cents with factory shed etc., in the best interest of the Company and out of the sale proceeds of ₹ 27.30 Lakhs, an amount of ₹ 25 Lakhs was paid to State Bank of India to settle its claim as One Time Settlement and remaining portion of sale consideration was spent to get the attachment order vacated that was issued in OS No. 318/2009 by Sub-Court, Thiruvananthapuram. In fact, the Petitioner could not establish the fact with any documentary proof that the property in question was of more value than the consideration amounting to ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner did not comply with said notice, then on 15-11-2011 a notice was issued to the shareholders including the Petitioner calling for EoGM on 08-12- 2011. In the said EoGM, 2967 shares of the Petitioner were forfeited under clause 8 of the Articles of Association. The provisions of Clause 8 of the AoA have already been extracted under para 25 hereinabove. The 2nd Respondent was also authorised to initiate action against 3rd Respondent. The reason for taking action against the Petitioner and 3rd Respondent is that during 2001, there were two signatories i.e. Petitioner and 3rd Respondent for operating Bank Account of 1st Respondent Company, and as per the direction of the Petitioner/her husband, 3rd Respondent used to sign 4-5 blank cheque leaves of the cheque book and entrust the same to Petitioner s husband. The Petitioner being the other signatory, easily managed to sign one of the cheques for an amount of ₹ 8 Lakhs and issued in the name of the Trust, which was got en-cashed by the Trust from the bank, as both the signatories have signed the same. It is admitted fact that the Petitioner was inducted into the board on 05-12-1994 and the board consisted of two Directors viz., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1st Respondent Company as extracted above provides for lien over shares for unpaid calls or for any other debt due by the member of the company. It appears from the language used in Para 8 of the AoA that the company has lien on fully paid-up shares. Therefore, the argument of the petitioner that an amount of ₹ 8 lakhs cannot be adjusted by forfeiting of equity shares that are fully paid up, stands rejected. 41. It has been contended by the petitioner that notice dated 15-11-2011 is defective, as no explanatory statement as required under the provisions of Section 173(2) of the Companies Act, 1956 was attached to the notice so the same is invalid, consequently, the meeting is illegal and ultra vires the Articles of Association. The object of enacting Section 173 of the Companies Act, 1956 is that all the facts which have a bearing on the issue on which the shareholders have to form their opinion must be brought to the notice of the shareholders so that they can make an intelligent judgment. In this case the petitioner has received the notice dated, 20-10-2011 issued by 2nd Respondent to refund ₹ 8 Lakhs to the 1st Respondent Company. So the notice 15-11-2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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