9911796707
TMI Blog2009 (7) TMI 1354X X X X Extracts X X X X X X X X Extracts X X X X ..... tered office at 61, Defence Colony, Alto De Porvorim, Bardej, Goa-403 521. The main objects of the company is to take the Devasthan Lands on freehold or long-term leasehold basis immediately, to take additional land both private, Konkan Railway and Communicate in the area to ensure a minimum of 450 acres of land under the control of the company and to obtain permissions and clearances required for the development of these lands, etc. 3. In Company Petition No. 61 of 2006 the petitioner has sought (i) forfeiture of shares/change of shareholding of the petitioner to be illegal; (ii) direction to respondent No. 2 to transfer so much of the shares of respondent No. 1 company to the petitioner so that the petitioner may hold 50 per cent, of the total shares of the said company; (iii) direction to respondent No. 2 to provide an access to all the documents, books, accounts, etc., qua respondent No. 1 company to the petitioner at all reasonable times and/or in consonance with the terms and conditions of the memorandum of understanding dated September 2, 2006; (iv) declaration that respondent No. 2 is unfit to be appointed as chairman/director/ managing director of respondent No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 1 company. The petitioner, at present has no existence or role in the functioning of respondent No. 1 company. The petitioner has deliberately concealed the true facts in order to mislead the Company Law Board. It was pointed out that respondent No. 1 company reserves the right to initiate appropriate legal proceedings, if necessary, against the petitioner. 6 . Without prejudice to the preliminary objections, it was further argued that the petition is also liable to be dismissed for misjoinder of parties. The petition has been filed essentially alleging certain acts of oppression and mismanagement by respondent No. 2. Respondent No. 2 against whom the petitioner has made all allegations in the petition is also not a member or a shareholder of respondent No. 1 company and thus, the petition and interim relief could not have been filed and sought against respondent No. 1 company and respondent No. 2 as well. 7. Respondent No. 1's case is that M/s. Crystal Island Park Pvt. Ltd., respondent No. 1, was incorporated in January, 1999 under the provisions of the Companies Act, 1956 with (i) Mark Rodrigues (respondent No. 2); (ii) George Varkey and (iii) Chri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... board of directors of respondent No. 1 company, held on February 17, 2006, in which the petitioner and respondent No. 2 were present, the board agreed to transfer the entire shareholding of the company to M/s. Grandeur. The averment that the petitioner was holder/owner of 50 per cent, of shareholding in respondent No. 1 company is completely false and erroneous. On amalgamation, the shares of respondent No. 1 company were apportioned as under: (a) Respondent No. 2--1,29,030 (86 per cent.) shares of ₹ 100 each. (b) Petitioner--20,970 (14 per cent.) shares of ₹ 100 each. It was argued that it is not open for the petitioner to raise a plea with respect to his earlier shareholding in the present proceedings. Further, in the 43rd meeting of the board of directors of respondent No. 1 company, held on February 22, 2006, it was declared that the petitioner and respondent No. 2 have lodged their transfer notices in favour of M/s. Grandeur. It was argued that having issued the transfer notices, the petitioner is estopped from raising any pleas in contradiction thereto. 9. In the 43rd board meeting, Mr. Prakash Lal Kapur, nominee of M/s. Grande ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 397/ 398 of the Companies Act. If this condition is not complied with, the petition has to be dismissed. To support its contentions respondent No. 1 relied on Gulabrai Kalidas Naik v. Laxmidas Lallubhai Patel [1977] 47 Comp Cas 151 GUJ (paras. 11 and 12) wherein the Hon'ble High Court of Gujarat has held inter alia (page 157 of 47 Comp Cas): Section 41(2) provides that every person other than the subscriber of the memorandum of a company, who agrees in writing to become a member of a company and whose name is entered in its register of members, shall be a member of the company. Section 399(1) provides that the members shown in Sub-clauses (a) and (b) of a company shall have a right to apply under Sections 397 and 398. Section 155 relevant for the purpose reads as under : 155. (1) If-- (a) The name of any person-- (i) is without sufficient cause, entered in the register of members of a company, or (ii) after having been entered in the register, is, without sufficient cause, omitted therefrom, or (b) default is made, or unnecessary delay takes place, in entering on the register the fact of any person having become, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication for rectification. Section 155 thus provides a summary remedy to a person who complains that his name has not been entered or has been wrongly omitted. It also enables the member to complain and seek rectification in respect of the name either wrongly entered or wrongly omitted in respect of some other person. It is true that when complicated question of title arises, it would be open to the company court to direct the parties to a civil suit to establish their title. But it would equally be open to the court having jurisdiction under the Companies Act to decide the question of title to a share, in order to ascertain, whether the person claiming to be a member is in fact a member or not and whether his name has been rightly entered or wrongly omitted. But till the name is entered, it could not be said that he can enjoy the powers of a member conferred by the Companies Act on the members of a company. Now, Section 399(1) provides that members, set out in Clauses (a) and (b) of Sub-section (1) thereof, alone have a right to apply under Sections 397 and 398. Apart from the qualifying number for eligibility to maintain a petition, those who invoke court's jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by themselves, they do not qualify under Section 399 to pursue this petition. 13. Further, it was contended that the Hon'ble Supreme Court in J. P. Srivastava and Sons Pvt. Ltd. v. Givalior Sugar Co. Ltd. reported in [2004] 122 Comp Cas 696 : AIR 2005 SC 83 has held that (page 716 of 122 Comp Cas): 48. The object of prescribing a qualifying percentage of shares in petitioners and their supporters to file petitions under Sections 397 and 398 is clearly to ensure that frivolous litigation is not indulged in by persons who have no real stake in the company. 14. It was argued that issues relating to the transfer of shares by the petitioner to third parties and its validity are not matters which fall within the jurisdiction of a petition under Section 397/398 and hence are irrelevant. The only relevant issue for maintainability is whether the petitioner was a shareholder as shown in the members' register of respondent No. 1 company as on the date of filing of the petition. The answer being that the petitioner is not shown in the members' register of the company as a shareholder, the petition must fail. 15. Further, without prejudice to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the High Court persuaded by the consideration that there were a few aspects of paramount significance which needed the attention of the Division Bench of the High Court. The fact remains that in the quest for an amicable, and if not so, then at least a reasonable resolution of the dispute, the Division Bench of the High Court as well as this Court have proceeded on an assumption that for the future/the settlement whether mutual or by dictum of the court, shall centre around the compromise proposals . Reliance was also placed on the case of Smt. Ramabai v. Harbilas AIR 1997 MP 90 : wherein it was held that (page 91 of AIR 1997) : Under the order of remand passed by the appellate court, the learned trial court had the limited jurisdiction depending upon the terms of remand order. It could decide the suit only in view of the directions issued by the appellate court . 18. Further, it was argued that the petitioner's reliance on Dinesh Sharma v. Vardaan Agrotech P. Ltd. reported in [2007] 135 Comp Cas 133 (CLB): [2007] 1 Comp LJ 155, Aasia Properties Development Ltd. v. Juhu Beach Resorts Ltd. reported in [2007] 140 Comp Cas 18 (CLB): [2007] 1 Comp LJ 315, S. Var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter 50 per cent, shareholding of reconstituted respondent No. 1. It was argued that such a submission is not only self contradictory per se but defies common sense because; (i) the process for the amalgamation proceedings commenced in 2005, in the 39th meeting chaired by petitioner it was decided to amalgamate. The petition before the High Court was filed on November 24, 2005 and the final order was passed on February 17, 2006. The MoU was therefore, executed towards the fag end of the amalgamation proceedings, after all formalities were completed and only the final order was awaited. Thus, the very stand that MoU was entered into to contemplate amalgamation and thereafter 50 per cent, share to each in respondent No. 1 is completely belied by the true facts and the chronology of the events. The petitioner's claim of 50 per cent, share in respondent No. 1 on the basis of MoU 06 falls flat on it's fact. It was contended that the Company Law Board need look no further. Besides, (ii) in MoU 06 there is no mention of amalgamation, no mention of Crystal Island Park Pvt. Ltd. no mention of Zuari Tiger Aqua Pvt. Ltd. leave alone making these two companies parties as would have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e derailed since the petitioner had suddenly made an about turn and began making false allegations about respondent No. 1 being born out of MoU 06 and that he was entitled for 50 per cent, of respondent No. 1. So much so that a legal notice was issued on behalf of the petitioner calling upon respondent No. 2 for arbitration proceedings. 21. It was argued by counsel for respondent No. 2 that what the petitioner is now asking the court is to interpret MoU 06 to the benefit of the petitioner. The petitioner is also, though obliquely, asking the Company Law Board to allot to him 50 per cent, stake in respondent No. 1. There is no prima facie evidence and not even a slight hint that MoU 06 had anything to do with respondent No. 1. Besides, the Company Law Board cannot be called upon to interpret contracts. It was argued that a private agreement cannot be enforced in a Section 397/398 petition, nor can any alleged breach of the private agreement give rise to any cause of action for relief against oppression and mismanagement. Such jurisdiction lies only with civil courts and in the case of MoU 06 with that of an arbitrator. So much so that the petitioner even initiated such a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... participant during the exercise of issuing and allotting fresh share capital in both the companies as it evident from the NoC's submitted to the High Court, his own presence at the various meetings when the share capitals was raised prior to amalgamation and which meetings incidentally were chaired by him is documented. After amalgamation the shareholding was evolved as a matter of course. 24. It was argued by counsel for respondent No. 2 that after receiving his amount of ₹ 1.51 crores and having invested it in Tulip's Hotel or some other private investment which apparently failed, the petitioner got greedy and tried to hold to ransom the respondents by trying to manipulate the intentions of MoU 06. It was pointed out that it is, in fact, the petitioner who is a fraud and having digested or lost the purchase price of his stake in respondent No. 1 is now trying to extort money from respondent No. 2 and/or respondent No. 1, It was argued that it was primarily the duty of the petitioner to satisfy the Company Law Board and explain the overriding documents like the cheque of ₹ 1.51 crores which were paid by the purchasers of respondent No. 1 M/s. Grandeur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which equals to 1,29,030 as at page bracketed and mentioned as allotted as per scheme . This issue of shares is strictly as per the High Court's order. It was pointed out that respondent No. 2 ceased to be a member on April 22, 2006, which is also supported by the share transfer form and the memorandum of transfer of shares. Similarly, the petitioner had held prior to amalgamation a total of 100+5780=5,880 shares. After amalgamation he received 15,090 shares which were thereafter cancelled and by two certificates issued a total of 20,970 shares. This issue of shares was strictly as per the High Court's order. The day he transferred his entire shareholding, i.e., April 22, 2006 he ceased to be a member. His shareholding as on that date is shown to be NIL and he had ceased to be a member. Thus, the issue of maintainability of his petition has been raised, since he is not a shareholder or member, in fact, and as per the statutory register. It is the case of the petitioner that he was the chairman of respondent No. 1 and that Mark Rodrigues could not have chaired any meetings. Attention is drawn to Section 175(1) of the Act which states that unless stipulated in the Articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked. 27. Counsel for respondent No. 2 further argued that the petitioner while pointing out to his original share certificates has objected that Mark Rodrigues has signed his transfer in favour of M/s. Grandeur, this objection is raised by the petitioner purely out of ignorance of the law and procedure. It was pointed out that after the petitioner resigned, he transferred his shares and exited respondent No. 1, Mark Rodrigues was retained for a time by M/s. Grandeur for the smooth transition of change of ownership. Therefore, as an authorised signatory he had signed the memorandum, of transfer behind the share certificate after they were lodged with the company. It was reiterated that all procedures as laid down in Section 108 of the Act were complied with and the petitioner has not proved anything to the contrary. 28. As regards the three signatures on the share certificates, it was explained that while it is true that the board of directors to sign the share certificates, as per the memorandum and articles of the company, only two directors are actually required to sign such share certificates, the intention was therefore, that any two of the three authorised di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the company and were always available for inspection, the petition only states in his main petition that he was denied inspection after he ceased to be a member. 32. Regarding the minutes when the petitioner entered Crystal Island for the first time, respondent No. 2 explained that it is true that Mark Rodrigues has first signed the minutes of meeting but since the minutes were read out in the subsequent meeting which was chaired by the petitioner the appropriate correction was made. When mistakes are made does it mean that corrections cannot be made when pointed out? respondent No. 2 did not keep private or duplicate minutes, the books were in the custody of the company and were always available for inspection. The minutes of proceedings of the board of directors have been kept in accordance with the provisions of Section 193 and the petitioner has not proved anything to the contrary. It was argued by counsel for respondent No. 2 that it is not understood as to how the petitioner has signed over the alleged fudging at that time without objection or demur? Also how do the minutes of meetings support his case of forgery since that minutes of that meeting were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng handwritten over many years, it would be a cause for concern. To raise a doubt of forgery, the petitioner must specifically show for instance how a correction or how a change of date or overwriting or deletion has materially changed the context or has specifically prejudiced the petitioner. Also who has carried out these changes? Merely pointing to corrections and saying here's a correction, there's an overwriting, here are pages whose colour does not match (even though the colour may have faded owing to passage of time or through usage), the other pages or lines do not match, etc., does not lend any credence to the petitioner's allegation of fraud against the respondents. Respondent No. 2 did not hijack the books or maintain private, secret minutes, and the books have always been in the custody of the company and available to the authorised persons. They have been inspected by the High Court in full knowledge of the petitioner. It was argued that the Company Law Board shall straight away ignore all such allegations as mere attempts on the part of the petitioner in order to deflect the attention of the board from evaluating prima facie over riding documentary evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted ₹ 89 lakhs at all although before the Company Law Board he has been making false and malicious statements that he has fulfilled his financial obligations. Thus it was necessary for ZTAPL to raise fresh capital as per the business needs of the company. The shares in the increased equity issued capital were correctly and legally issued which was accepted and consented to by the petitioner as has been verified by the official liquidators report. The board of directors meetings, mainly the 62nd and 63rd meetings of ZTAPL showed the allotment of shares in ZTAPL with the active participation and consent of the petitioner. Counsel placed reliance on case reported in Shiv Nath Rai Bajaj v. Nafabs India Pvt. Ltd. [2002] 108 Comp Cas 642 : [2002] 1 Comp LJ 152 (CLB) wherein it was held that allotment of shares when done for the benefit of company with knowledge of petitioner does not amount to oppression. It was pointed out that MoU 01 was superseded and therefore declared as null and void by MoU 06. Besides, ZTAPL is not party to these proceedings. As regards MoU 06, it was contended that a bare reading of MoU 06 will reveal that it has nothing to do with respondent No. 1. The pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the parties should be asked to approach the correct forum. It was pointed out that the same ratio was adopted in the cases of Honeyrex reported in C.P. No. 60 of 2000, Company Law Board New Delhi decided in Arial 2004 by Shri R. C. Ganjwal and M. Sampath v. A. K.M.N. Cylinders (P.) Ltd. [1999] 98 Comp Cas 777 (CLB); Deepa Goyal v. Nanda Buiders [2002] 1 Comp LJ 414 (CLB) and V.B. Rangaraj v. V.B. Gopalakrishnan [1992] 73 Comp Cas 201 (SC). 3 8 . Counsel for respondent No. 2 placed reliance on the Judgment in N. K. Mohapatra v. State of Orissa [1995] 1 Comp LJ 266 (Ori) : [1999] 96 Comp Cas 49 ORI to show that the parties are to be hold strictly to the pleadings. A new plea cannot be permitted to be raised in the rejoinder affidavit. Further, reliance was placed on Mohta Bros. P. Ltd. v. Calcutta Landing and Shipping Co. Ltd. [1970] 40 Comp Cas 119 (Cal) to state that full particulars must be given by a petitioner in an application of alleged acts of oppression or mismanagement. The vague and uncertain allegations of oppression or mismanagement do not entitle a petitioner to ask the court to embark upon an investigation into the affairs of a company in the hope that as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was to be offered to other shareholder. 40. It was argued that the respondents while making fudged and forged registers of the minutes of the meeting of the board of directors of Crystal Island Park Pvt. Ltd. (respondent No. 1) forgot the important and crucial dates and the petitioner is shown to have been made a new entrant into Crystal Island Park Pvt. Ltd. on February 22, 2002 and on the same date the signatures of the then director of Crystal Island Park Pvt. Ltd. are erased by way of a correction fluid and the signatures of the petitioner are superimposed in the register and he is shown to be the chairman in the said meeting itself. In the following date when the meeting was held, again a whitener has been put on the signature of respondent No. 2 and the signatures of the petitioner have been superimposed as chairman. It has also been brought to the notice of the Company Law Board, the fudging in the said register, overwriting of the said dates and the cutting on various pages which further shows, the trail of crime of fabrication of records done by respondent No. 2 for wrongful gains and to play fraud and deception upon the petitioner. 41. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of developing business opportunities. These earlier companies are now in the process being restructured which includes merger, exit and liquidation, in accordance with new business plan and opportunities. . It was stated that the new company which will be established will have equal shareholding of the two parties at 50 per cent each. It was stated on page 50 that the bank accounts will be opened in New Delhi and Goa which will be controlled by the petitioner. In the second para the role of both the petitioner and respondent No. 2 was demarcated and the third paragraph referred to exploration of arrangements with hotel groups such as Tulip Star with Mr. Ajit Kerkar. On the same page, i.e., page 50 it was further agreed between the petitioner and respondent No. 1 that all financial payments, cheque issued over ₹ 10,000, will be with the written consent of both the parties. On page 51 it was stated in second para that an amount of ₹ 59 lakhs was to be repaid to General Sunit Rodrigues, father of respondent No. 2, within two months from the date of MoU. Besides, this it was stated in paragraph 3 on page 51 this MoU supersedes any and all agreements entered into between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stal Island Park Pvt. Ltd. and by no stretch of imagination could the shareholding of the petitioner have been reduced suo moto except by playing fraud on the petitioner by misusing and misrepresenting to the High Court of Bombay at Goa and by making fraudulent documents, shares, valuations, transfers notices, resignation letters and showing the sale of the entire company for a meager price of ₹ 8.5 crores when the valuation even according to the bare reading of the letter dated January 18, 2006 makes the project cost of the construction to be of over ₹ 25 crores, while the valuation for the land is far exceeding. It was pointed out that this fact is also borne out from the letter of M/s. Chopra Marketing Pvt. Ltd. dated May 9, 2006 only in part equity of the company and which significantly quadruple the valuation of the project if not more. 46. Further, it was argued that the respondents with a view to fortify their false and fabricated case that the petitioner had sold off his shareholding to M/s. Grandeur filed a letter of the petitioner wherein he had accepted ₹ 1.51 crores on March 2, 2006. This letter does not in any way show that the petitioner acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office are mentioned. The petitioner also pointed out during the course of arguments to the various other entries in the minutes book of the company which go to show that there was a well calculated fraud played upon the petitioner and in such glaring cases the Company Law Board has categorical jurisdiction to entertain the petitioner and pass suitable order for the protection of the rights of the party who has been wronged and oppressed. 48. Counsel for the petitioner drew my attention to a notice dated May 8, 2006 sent by the petitioner detailing therein the entire understanding between the parties and in response in which the petitioner had simply alleged regarding the reduction of his shareholding by respondent No. 2. A response was received from respondent No. 2 through his counsel dated May 22, 2006 where, nowhere in the entire reply, was it ever suggested that the company had been sold to M/s. Grandeur Real Estate Pvt. Ltd. or that there was nothing left for the petitioner to claim. It was argued that this fact further fortifies the allegations and contentions of the petitioner that the fraud was envisaged by respondent No. 2 in collusion with M/s. Grandeur and in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any-oppression and mismanagement-oppression-petition-maintainability-if shareholding of petitioners is reduced below 10 per cent, on account of further issue of shares, and, if issue of further shares is also challenged in the petition, then, the petition will not be dismissed as not maintainable in terms of Section 399 of the Act, instead, allegations relating to issue of further shares would be examined first as to whether the same is an oppressive act and, if it is found to be so, then only other allegations in the petition would be examined on the facts, petitioners plea that the respondents had very cleverly proceeded to make a mala fide and intentional change in shareholding could not be refuted by respondent-petitioners . Further, in the case of Aasia Properties Development Ltd. v. Jnhu Beach Resorts Ltd. [2007] 140 Comp Cas 18 : [2007] 1 Comp LJ 315 (CLB) it was held that : Company-oppression and mismanagement-oppression-fraud-fraud means cheating or deceiving a person to this injury and it aims at the disadvantage of anotherlikewise, to defraud means to deprive one of his some rights, interests in or of property by deceitful devices on the facts, petitioner, though, had f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p Cas 115 (GUJ). No composite petition is required in a case of fraud of the magnitude as conceived and implemented by respondent No. 2 in collusion with M/s. Grandeur and the petitioner is lucky that he is alive as it could have been, that he could have been eliminated altogether by respondent No. 2 and M/s. Grandeur, they being ultra powerful, resourceful and companies dealing with arms and ammunition and having dubious connections which is now apparent. 50. Furthermore, counsel for the petitioner pointed out that in fact, in the present case, respondent No. 2 had filed various documents as annexures wherein he has shown the presence of the petitioner on certain important meetings of the respondent-company, but when the minutes were scrutinised and brought to the knowledge of the Company Law Board, it categorically showed overwriting of the dates and fudging of the records which is even evident from the documents/pages filed as the annexures wherein the meetings have been shown to be held on September 15, 2005 and then again on September 17, 2005 and September 20, 2005 and the tirade of fraud finally culminated into a resolution dated September 17, 2005 wherein valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, the only grievance of the appellant being that the issue of maintainability of the C.P. was decided without permitting the respondents to file their written synopsis. Respondent No. 1 did not file any appeal against the Company Law Board's order. The Hon'ble High Court of Bombay at Goa vide its order dated March 3, 2009 has required the Company Law Board to first decide the issue of maintainability of the C.P. Subsequent to the Hon'ble High Court's order respondent No. 2 filed its Company Application No. 201 of 2009 on April 15, 2009, relying and referring to his preliminary objections as contained in his counter affidavit to the C.P., challenging the maintainability of the C. P, Further opportunities of hearing were provided to the parties to hear and decide the issue of maintainability of the C.P. The Company Law Board's orders dated September 26, 2008, November 11, 2008, March 12, 2009 and April 2, 2009 in this matter read as under: ORDER DATED SEPTEMBER 26, 2008 Despite repeated opportunities given to respondent No. 1 and respondent No. 2 to file reply to the petitioner's affidavit giving chronology of events, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n April 29, 2009 at 10.30 a.m. During the course of hearing, on pending request of the petitioner, respondent No. 1-company had produced the following statutory records and the documents ((i), (iii) to (ix) in original and (ii) only a notarised copy)): (i) Two registers being the minute books of respondent No. 1 (witheffect from January 27, 1999 to February 22, 2006 and then carried over to the next register up to April 22, 2006). (ii) Resignation letter from Mr. Ashok Chawla (this was contended tonot in original) (iii) Transfer letter from Mr. Ashok Chawla, the petitioner (iv) Share Certificate Folio No. 004 for 18,030 shares (v) Share Certificate Folio No. 004 for 2,940 shares (vi) Share Certificate Folio No. 1 for 1,19,969 shares (vii) Share Certificate Folio No. 001 for 1 share (viii) Share Certificate Folio No. 001 for 7,060 shares (ix) Register of members containing 1 page to serial No. 178. On scrutiny of these, the petitioner pointed out that the two registers of minutes of meeting of Crystal Island Park Ltd. were forged and fabricated entirely, with a view to gain unlawfully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads though purported to be of the same date were different, showing that the same were fabricated and the signature of the petitioner were allegedly implanted on them. Further, it was pointed out from the reverse side of the share certificate that it was evident that there were no signature of the petitioner for transfer of the shares on the reverse side. Similarly, the share certificates were issued only on February 22, 2006, which fortified the contention of the petitioner, that there were no share certificate issued to the petitioner for the alleged amalgamation. Further, the petitioner pointed out that the register of members of respondent No. 1 was also fudged and fabricated by the respondents. My attention was drawn to several anomalies in the number of shares issued and transferred besides there being cuttings and over writings which brought about the issuance of the fresh shares in favour of respondent No. 1. Considering the facts and circumstances of prima facie evidence of fabrication and manipulation, the petitioner's prayer regarding retaining these documents in the safe custody of the Company Law Board was also granted, in the interest of justice passing the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares 8. Register of members containing 1 page to Serial No. 178 and pointing out the discrepancies therein by allegedly fabricating the entries and insisting that the record be taken in safe-custody. B. O. to give certified copies of these documents/record and also put his stamp and signature on these and keep in safe custody. Respondents seek adjournment to reply on this to the matter on May 13, 2009 at 10:30 am. adjourned to May 13, 2009 at 10:30 am. Parties to submit written synopsis also on that date. 53. Respondent No. 1's case is that the petitioner has misled the court by not disclosing the fact that the entire shareholding of the respondent No. 1 company has been acquired by M/s. Grandeur, the holding company as is evident from the annual return; respondent No. 1 company, i.e., M/s. Crystal Island Park Pvt. Ltd. is 100 per cent, subsidiary of M/s. Grandeur; the petitioner has suppressed the fact that he sold all his shares of respondent No. 1 company against receipt of the agreed consideration paid in full and final settlement for the transfer of the said shares and for which the share transfer deeds were duly executed and handed over to the Grandeu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, it was an existing company in 1999, it did not come into being in 2006; the petitioner's grievance is with respondent No. 2, respondent No. 2 may have some connection but whatever arrangements respondent No. 2 and the petitioner had, respondent No. 1 has nothing to do with it; the petitioner does not have the requisite qualification under Section 399 of the Act; it is not a composite petition; Section 111 is not mentioned in the C.P.; there is no prayer for rectification of register; on the day he asked for amalgamation his shareholding in ZTPL was not 50 per cent.; had it been 50 per cent, it would have been explained in the MoU of 2006; fresh pleadings cannot be considered it not being within the scope of remand proceedings. 54. Respondent No. 2's case is that the very stand that MoU was entered 54 into to contemplate amalgamation and thereafter 50 per cent, share each of respondent No. 1 is completely belied by the true facts and the chronology of the events; the petitioner's claim of 50 per cent, share in respondent No. 1 on the basis of MoU 06 falls flat on it's facts; the petitioner is also, though obliquely, asking the Company Law Board to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re no new-pleadings. The petitioner has been permitted to file affidavits regarding the prima facie manipulation and fabrication in the statutory records and documents (all in original except serial No. (ii)) produced in the course of hearing, the statutory records and the documents are already in the safe custody of the Company Law Board till the final disposal of the C. P. 56. As regards the preliminary objection on maintainability of this petition in view of the necessary qualification under Section 399 of the Act, it is correct that in order to maintain a petition under Sections 397 and 398 the petitioner(s) should hold, either 10 per cent, or more shares of subscribed capital or should constitute 10 per cent, or more of total members in the company. In this regard my attention was drawn to the provisions of Section 399 of the Companies Act, 1956. A bare reading and perusal of the provisions of Section 399(1) of the Companies Act would show that: (a) in the case of a company having a share capital, members constituting not less than 100 members of the company or not less than 1/10th of total number of its members whichever is less or members' holding not less than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive in the said petition, the maintainability of the petition would be decided after determining the validity of the issue of allotment. 57. The requirement of share qualification is relevant and material for maintaining the petition. Even though a subscriber to the memorandum is a member in terms of Section 41 of the Act but without the consideration for. the shares he cannot be treated as a member for the purposes of Section 399 of the Act. A reading of the section would indicate that only a member can apply provided all calls and other sums due on the shares held have been paid. Section 399 not only specifies that there should not be any pending dues on the calls made, it also provides that no other sum should also be due on the shares. The prima facie evidence to the shares could be either the share certificate or even the register of members. However, even in the absence of share certificates or entry in the register of members, if a person could establish that certain shares have been allotted to him, then, for the purposes of Section 399 of the Companies Act, 1956, he could be treated as a member. It is settled law that a shareholder could establish allotment of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a shareholder. In Banford Investment Ltd. v. Magadh Spun Pipe Ltd. [1998] 93 Comp Cas 685 (CLB) : [1998] 3 Comp LJ 509, the Company Law Board has prescribed certain tests to determine whether a person is a member of a company or not. One of the tests prescribed is whether the company has treated a person as a member. In the present case, the petitioner had been treated, as a member of the company. 61. Though in a case of application by the general public, failure to allot shares could not be questioned, in the circumstances of this case where the petitioner has not been given the requisite shareholding in respondent No. 1 company stands on a different footing. It is settled law that if persons who wish to file a petition under Sections 397/398 are not shown as members rightly or wrongly, they must have the register rectified before they can bring a petition. The percentage holding of a member can be brought down, normally, in two ways. One is omitting his name from the register of members in respect of certain shares, on allotment of further shares, either excluding him from further allotment or by allotting shares to others in a higher proportion. Omission of name may a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But, till the name is entered, it could not be said that he can enjoy the powers of a member conferred by the Act on the members of a company. The prerequisite for invoking jurisdiction under Sections 397/398, which has been statutorily provided for in Section 399(1), is that the complaint must come forth from a member. One has to be a member before he can complain of oppression as a member of the company. If the petitioner's title to the membership is in dispute and they have to seek relief under Section 155 for getting their names placed on the register of members to clothe themselves with the rights of members, it would be improper, till that dispute is settled, to permit such persons to maintain a petition under Sections 397 and 398. If the petitioners' petition under Section 155 fails, obviously, they cannot maintain a petition under Section 397 and 398 because they are not members. Prima facie, reading these sections together, it becomes clear that in order to acquire the status of a member of a company, name of the person seeking to be a member must be entered in the register of members, and only then the acquires the status of a member of a company. It is obligator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of share certificates or entry in the register of members, if a person could establish that certain shares have been allotted to him, then, for the purposes of Section 399 of the Companies Act, 1956, he could be treated as a member. The Company Law Board has the jurisdiction to consider the petitioner's entitlement to become a member. The Company Law Board can go into the question whether the petitioner is eligible or qualified to become member of the company and whether default has been committed by the company in entering their names in the register of members. This jurisdiction is a discretionary and equitable jurisdiction. The provisions contained in Sections 397 to 409 of the Act constitute a code by themselves and are not subject to other provisions of the Act; the Company Law Board has wide powers under Section 402 of the Act including the power to give directions contrary to other provisions in the Act; the only limitation on the power that Company Law Board could exercise under Section 408 of the Act is that there must be a nexus between the complaint made and the reliefs granted; the statutory provisions contained in Sections 397, 398, 402 and 403 of the Act c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholders in respondent No. 1 company. There are allegations of respondent No. 2's collusion with respondent No. 1 in an endeavour to oust the petitioner from the shareholding and management of respondent No. 1. It is also not questioned that subsequent to the Hon'ble Bombay High Court at Goa's order dated February 17, 2006 Zuari was duly merged with respondent No. 1 company and thereafter, the shares of respondent No. 1 were apportioned amongst the shareholders of respondent No. 1 company and M/s. Zuari (respondent No. 2 was given 86 per cent, shares and the petitioner was given 14 per cent, shares of ₹ 100 each). The petitioner and respondent No. 2 are no longer shown as shareholders in respondent No. 1 company. It has been contended that having lodged their transfer notices the petitioner is estopped in law from raising any pleas in contradiction thereto, it amounts to challenging the scheme of amalgamation sanctioned by High Court, these pleas are not tenable in the facts and circumstances of the case. In the face of prima facie case of fabrication and manipulation, as categorically pointed out by the petitioner, which remains unrebutted, no credence can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. What sort of compliance of the provisions of Section 108 of the Act is this? It is not explained. The petitioner's case is that the share certificates in respondent No. 1 were not given to him. He did not execute the share transfer forms and did not have any shares in his custody which could be delivered to M/s. Grandeur who are allegedly shown as having lodged the same with respondent No. 1 company for endorsement in accordance with the provisions of Section 108. It is noted that share certificates were signed by the consultant on the Companies Act and secretarial matters, it has been explained that he was authorised by the company and no separate resolution of the board of directors was required, whereas at least two directors are required to sign the share certificates, still it is claimed that there are no irregularities or illegality rather the respondents ask as to why did the petitioner not inspect the books earlier? It is not understood as to how could he inspect the books earlier when he could not have access to them. The contention that the petitioner was aware, he cannot challenge now is not tenable in view of the fact of non-accessibility of the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondents. The receipt does not mention that it is towards consideration for shares. For the receipt of ₹ 1.51 crores it was rightly contended that the mannerism of the address, the date and precision of all details required to be given intra-office are mentioned. It appears that the petitioner had signed blank papers in good faith. His resignation letter has no date. Moreover, the telephone number on the letter of resignation attached on page 46 of the C.A. No. 325 of 2006 by respondent No. 1 mentions about a telephone number of the/petitioner which had ceased to exist about 8 years prior to the alleged date of his resignation, allegedly it is a calculated conspiracy of fraud and forgery done by the respondents. The resignation letter and the transfer notice were allegedly of February 22, 2006, in such eventuality both the letter-heads would have been of same type, however, on perusal of the said document, it was further borne out that the telephone number on the transfer notice belonged to the petitioner but had changed over ten years back. The Company Law Board has categorical jurisdiction to entertain the petition and pass suitable order for the protection of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing in the minutes as if the petitioner and respondent No. 2 decided to sell off their shareholding to respondent No. 1 company. An urgent meeting is shown on February 22, 2006 wherein amalgamation of the company is shown to have been approved besides new shares are caused to have been issued, resignation of the petitioner is sought to be approved, sale of shareholding of the petitioner is sought to be shown in favour of Grandeur Real Estate Pvt. Ltd., account of the company is taken over to be operated exclusively by respondent No. 2. Even the sale of shares of the petitioner is delegated to respondent No. 2, he being the signatory of the allegedly fabricated minutes dated February 22, 2006. There are no signatures, of the petitioner on the reverse side for transfer of shares. The authorisation slip for transfer of share is also signed on behalf of the petitioner by respondent No. 2 himself. Then, it is not understood that if the shareholding of the petitioner had been reduced, then in the petition in the court and in the amalgamation order no consideration was shown as paid on February 22, 2006 to the petitioner for the transfer of his shareholding to M/s. Grandeur. It appears t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including respondent judicata. The Hon'ble Supreme Court has held in the case of S.P. Chengalvamya Naidu v. Jagannath [1994] 1 SCC 1 that (page 5) : The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Propertygrabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court process a convenient lever to retain the illegal-gains indefinitely. We have no hesitation to say that a person, who's case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation. 74. I find that the petitioner has succeeded in making out a prima facie case of collusion and connivance between respondent No. 1 and respondent No. 2 in ousting him from the shareholding and management of respondent No. 1 company. Fraud vitiates all acts including the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X
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