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TMI Blog2019 (9) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... with Proposed added in bracket. Nothing stops showing a trail from Account to Account. The appellant has not produced any evidence before the NCLT or before this Appellate Tribunal to substantiate his claim that the appellant paid the said amount in cash. Once the person is asserting that he has made payment in cash to 1st respondent, he has also to show how this payment to 1st respondent could be recorded unless it is asserted that he has made this payment to 2nd Respondent or to any other authorised person who has failed to keep the record or he has retained this money on behalf of 1st respondent with himself. He has not asserted nor has produced any record nor he has made payment to 2nd respondent on behalf of 1st respondent especially when there is no bank account in the name of 1st respondent. Interestingly even if we presume that there could be any authorised person to receive the cash on behalf of 1st respondent, that person is also required to be authorised by the appellant or 2nd respondent or by both. As such no record has been placed by appellant to substantiate his claim. We noted that the notice was served on the Respondent regarding non compliance of filing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant was dismissed. BACKGROUND 2. The brief facts of the case are that the appellant (original petitioner) filed Company Petition under Section 397, 398 and 111(4) of the Companies Act, 1956 seeking reliefs against the acts of oppression and mis-management practised by the Respondents by various acts of fraud and fabrication of documents in an effort to remove the appellant from the Membership and Board of the 1st respondent divesting him of his entire investment. a) 1st respondent company was incorporated on 30.6.2008 and the appellant and 2nd respondent are subscribers to the MOA of 1st respondent with each having subscribed to 25000 shares having face value of ₹ 100 per shares. Appellant and 2nd respondent were the promoters and the first directors of the 1st respondent and subscribers to the Memorandum of Association of the 1st respondent. b) Appellant had paid the entire money towards the shares subscribed i.e. a sum of ₹ 25,00,000/-. 1st respondent was functioning in the years between June 2008-December 2010 under the control of appellant and 2nd respondent. c) Certain disputes arose between appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectify the Register of Members accordingly. iii) An order declaring that the removal of the petitioner as director of the 1st respondent by virtue of the Board Resolution dated 22.1.2011 is illegal and void. iv) An order directing the 1st respondent to rectify the Register of members to the effect that the Petitioner is holding 25,000 fully paid up equity shares of the company out of the total authorized capital of ₹ 50,00,000/- before the illegal enhancement of the share capital in violation of the provisions of the Companies Act,1956. v) An order declaring that the appointment of 3rd respondent as Director of the 1st respondent made on 12.7.2008 is illegal and invalid. vi) An order declaring that all decisions taken by the Board of the Company reconstituted after removing the petitioner from the office of director and inducting the 3rd and 4th respondent as directors are invalid, null and void as vitiated by fraud. vii) An order setting aside the allotment of 1,00,000 shares of the 1st respondent company in favour of the 2nd and 3rd respondents purported to have been made on 18.2.2011, and any subsequent transfer of shares by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame in the Register of Members of 1st Respondent Company. Though petitioner claims that he has been chairing all the Board Meetings and was in charge of the finance and fund raising matters, but he did not open any account of the 1st respondent with the Bank and even not maintained any record, particularly with the regard to the payment, if any, of subscription money for 25,000 shares subscribed. Even, he did not file PAS-3 to intimate the RoC of the allotment of shares being made by the Company. The defence of the Petitioner that the Respondents have fabricated all the record relating to the 1st Respondent Company is hollow and therefore, stands rejected. Thus, the issue raised under Para 34 hereinabove stands decided against the Petitioner, as he is not legally entitled to seek relief under prayer D . Therefore, he cannot invoke the provisions of Sections 397 and 398 of the Companies Act,1956, as he was not a shareholder of 1st respondent company at the time of filing the petition. Accordingly, the Petition stands dismissed. However, these findings will have no bearing on the complaint filed by the Petitioner before the Police. There is no order as to costs. CASE O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,00,000/- by way of a cheque dated 20.1.2010 bearing number 04882 (Page 86 of Rejoinder) on behalf of 1st respondent to one Trinity Arcade Pvt Ltd as an advance for purchase of land by 1st respondent. 7. Appellant stated that in terms of Section 36(2) of the Companies Act, 1956, sums due in lieu of subscribed shares are required to be reflected in the balance as debt due to the company. Appellant stated that perusal of the balance sheet of 1st respondent would make it evident that no amount has been reflected as being debt due to 1st respondent against any unpaid amount on shares subscribed in terms of Section 36(2) of Companies Act, 1956. 8. Appellant stated that 2nd and 3rd respondent have sought to forfeit the shares held by appellant in 1st respondent company on the strength of notices dated 26.6.2010, 21.8.2010 and 25.9.2010 (Page 281-283 of Appeal). Appellant further stated that the shares were forfeited in the Board Meeting dated 22.11.2010 (Page 280 of Appeal). Appellant stated that such notices were never issued and served upon the appellant by respondents. Appellant further stated that the shares subscribed by the appellant are fully paid and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-36 that the appellant had not produced any share certificate or even a shred of evidence that he had the means or paid any subscription money in lieu of the shares. Respondents stated that the appellant has not now even attempted to assail the said findings of NCLT Chennai in the impugned order or even bothered to produce or substantiate his claim that he made the said payments in cash to the company. 13. Respondent stated that the appellant made a police complaint dated 16.5.2001 but has wilfully suppressed the fact that the Crime Branch of the CID investigated into the complaint, interrogated all the parties and values various documents and by a Final Closure Report dated 7.6.2016 (Reply Annexure R7/Page 65-89) concluded that there was no record to prove that the appellant paid any money in respect of the shares. 14. Respondents stated that Income Tax Department, Kochi vide letter dated 24.2.2014 (Page 90, Annexure R-8 of Reply) intimated the deputy Superintendent of Police Kaloor that the Income Tax Return filed by the appellant during the period i.e. Assessment Years 2006-07 to 2010-11 is ₹ 2141860/- (Total 5 years) and a sum of ₹ 152547/- has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting or AGM of 1st respondent. Respondent further stated that the appellant only attended the Board Meeting on 12.7.2008 (Page 176-178 of appeal) in which Mrs Bindu Paul, 3rd respondent, was a special invitee and was appointed as an Additional Director. Respondent stated that in the said Meeting it is recorded that the appellant informed that he is making arrangements for the payment of subscription amount of ₹ 25 lakhs. 20. Respondent stated that the appellant was one of the subscribers of the 1st respondent is not denied. 21. Respondent stated that in the Board Meeting dated 16th August, 2008 (Page 275 of Appeal) it was resolved to transfer 5000 shares of 2nd Respondent to 3rd Respondent and the said transfer was in accordance with the provisions of Articles 29 and 33 of the Articles of Association of 1st Respondent (Page No.138-139 of Appeal). Respondent stated that since the appellant had not made any payments in respect of his shares, therefore, the appellant has no voting rights as per Section 87 of the Companies Act, 1956. 22. Respondent stated that appellant had in fact subscribed to 25000 equity shares of ₹ 100/- each, aggregating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 25,00,000/-. Appellant argued that as the 1st respondent did not have any bank account, therefore, the appellant paid the amount ₹ 25,00,000/- in cash for purchasing 25000 shares of ₹ 100/- each and his name was entered in the Register of Members of 1st respondent and necessary entries were passed in the books of accounts of 1st respondent. Appellant argued that 2nd respondent was not having sufficient funds, therefore, he did not bring in his share of the capital and had, as a matter of fact, borrowed funds from the Appellant. Appellant argued that he being a subscriber to the Memorandum of Association of the 1st respondent company, therefore, the appellant is a subscriber within the meaning of Section 41(1) of the Companies Act, 1956. 28. Learned counsel appearing on behalf of Respondents argued that it is not denied that the appellant is subscriber to the MOA of 1st respondent. Learned counsel also argued that the appellant alongwith 2nd respondent were promoters/directors of the company. Learned counsel for the respondents argued that the appellant has argued that he had made payment of ₹ 1,13,00,000/- towards the subscription of 25000 shares in 1s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 provides as under:- 244. Right to apply under Section 241-(1) The following members of a company shall have the right to apply under Section 241, namely:- (a) In the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whoever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares; (Emphasis given) (b) Xxx In case the person is a defaulter in payment of subscription to capital or any sum due against him, he will be denied the benefit of this Section. It is also not disputed that the appellant and 2nd respondent are promoter and director of 1st respondent. We note that the appellant is a retired Officer of Income Tax Department, he is very well aware of the law of the land in financial matters. The stand taken by the appellant is that 1st respondent was not having any bank account, therefore, he paid the amount in cash to 1st respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or to any other authorised person who has failed to keep the record or he has retained this money on behalf of 1st respondent with himself. He has not asserted nor has produced any record nor he has made payment to 2nd respondent on behalf of 1st respondent especially when there is no bank account in the name of 1st respondent. Interestingly even if we presume that there could be any authorised person to receive the cash on behalf of 1st respondent, that person is also required to be authorised by the appellant or 2nd respondent or by both. As such no record has been placed by appellant to substantiate his claim. 30. Learned counsel appearing on behalf of the Appellant argued that the NCLT has failed to appreciate that the appellant had brought in money towards the 25000 shares subscribed by him in the MOA. Learned counsel for the appellant has drawn out attention to his Bank Account maintained with Catholia Syrian Bank at Page No.517 of the Appeal and argued that he had incurred expenses of ₹ 108247/- for issuance a draft in the name of Pay Accounts Officer MCA and also showed copy of the Challan dated 23.6.2008 (Page 451- 453) and argued that the said amount wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application under Section 397 of Act is possible only, if Petitioner is able to prove that he has made all payments and is not a shareholder in default of payments of dues. Once we are convinced that there is no adequate proof that the person has paid its money against the shares allotted and is in default, it is immaterial whether the shares have been rightly or wrongly forfeited or he cannot take benefit under Section 397 of the Act. 36. Learned counsel for the appellant argued that the appointment of 3rd respondent as a director is not valid and is based on forged documents, and as such, the forfeiture of the appellant s shares are invalid for lack of quorum. No notice of the Meeting appointing 3rd respondent as director was ever issued to the appellant. 37. Learned counsel for the Respondent argued that 3rd Respondent was appointed as director in the Board Meeting held on 12th July, 2008 in which the appellant was also present. Learned counsel for the Respondent further argued that this is the only meeting that has been attended by the appellant. Appellant has not attended any other Meeting. Learned counsel for the Respondent further argued that the presence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for not filing the return. However, it will be an exercise to justify the abandonment of his duties by the appellant. However, when the notice was received by the respondent, they immediately filed the returns and the appellant has not been able to prove whether these are false and fabricated returns. CONCLUSION 42. On hearing the parties and perusing the record, we have come to conclusion that the appellant, being an ex-Civil Officer, who is very well aware of law of the land, has argued that he has paid a huge amount in cash to become shareholder of that such company which has no Bank Account but is not able to prove the same before the NCLT and before this Appellate Tribunal that such amount has been paid in cash. Further no share certificate is with him. He has not produced his Bank Statement to establish that he had such a huge cash on a particular date. He has not shown his Asset and Liabilities Statement which he used to file when he was in Government employment. Looking into his past background it can be safely stated that he should be well aware of the law of the land and knew well compliances to be made. The appellant and 2nd respondent have been t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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