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TMI Blog2019 (6) TMI 1487X X X X Extracts X X X X X X X X Extracts X X X X ..... f the first respondent-company from 3,40,000 shares to 7,90,000 shares on December 30, 2011 is illegal and void? - HELD THAT:- o reasonable explanation is forth coming from the respondents for increasing the authorised share capital of the company, there cannot be any requirement of the bank on the basis of which the respondents have increased the authorised capital as is contended, that too without following the due process of law. The respondent/directors of the first respondent-company were obliged to do as part of their duty to act in good faith and make full disclosure to the shareholders regarding the affairs of the company - in the case on hand the directors/respondents failed in their duty to send proper notice of the sixth annual general meeting and offer to the petitioners for subscribing the shares. Further, the share allotments made on December 30, 2011 in favour of the fifth respondent, his two sons and wife, i. e., tenth, eleventh and twelfth respondents respectively seem to have been made by the respondents for creating a new majority due to which the existing shareholders were reduced to minimal position. This is in breach of fiduciary duty and constitutes an act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. (iii) Declare all annual returns/balance-sheets, forms and records filed on behalf of the company for the financial years 2011 to present, including Form 32 inducting the twelfth respondent as director to be invalid and not binding on the company. (iv) Surcharge respondents Nos. 5, 6 and 12 to the extent of losses caused to the company due to breach of their fiduciary duty and for various acts of misappropriation and fraud as detailed in the petition. (v) Pass such further or other orders as the hon'ble Bench may deem fit and proper in the circumstances of the case and render jus tice. 3. The petitioners state that the first respondent-company bearing Registration No. U28122TN2005PTC055993 was incorporated under the Companies Act, 1956 vide certificate of incorporation dated April 1, 2005 issued by the Deputy Registrar of Companies, Chennai. The registered office of the first respondent-company is situated in Chennai, Tamil Nadu. The initial subscribers to the memorandum of the company were the petitioners and respondents Nos. 2 to 8. 4. The authorized capital of the company as per the latest annual returns is ₹ 10,000,000 divided into 1,000,000 equity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verted into an incorporated company. Believing the representation of the second respondent, the family members agreed and the partnership firm was converted into a private limited company, viz., Thangam Metal Cans P. Ltd., on April 25, 2004. The capital standing to the credit of the partners was converted into shares and they were allotted shares to the extent in the company in proportion. The shareholdings of the different parties at the time of incorporation are as follows : Sl. No. Name, address, description and occupation of the subscribers No. of equity shares taken by each subscriber (1) Mr. L. Balaji, 10,000 S/o. R. Lenin No. 605, T. H. Road, Chennai-81. Business age-39 (2) Mr. R. Kanagavel, 22,500 S/o. A. Rathinasamy Nadar, No. 40 Muthusamy Street, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Business age-20 (9) Mr. R. Krishna Kumar, 12,500 S/o. R. Srinivasan, No. 40 Muthusamy Street, Virudhunagar, Business age-20 Total 1,00,000 10. The petitioners state that upon the resignation of the third and fourth respondents as per annual general meeting held on July 7, 2007 the authorized share capital of 1,00,000 shares was subsequently increased to 3,40,000 shares and proportionately divided among the promoter share-holders as follows : Sl. No. Name, address, description and occupation of the subscribers No. of equity shares -taken by each subscriber (1) Mr. L. Balaji, 35,000 S/o. R. Lenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Business age-20 (8) M. Ramkumar, 50,000 S/o. L. Balaji (9) Mr. Athithya Kumar, 50,000 S/o. L. Balaji (10) Mr. S. Dakshna Kumar, 50,000 S/o. L. Saravanan (11) Mrs. L. Desigasigamani, 27,500 W/o. R. Lenin Total 3,40,000 11. It is submitted that for three years the petitioners did not get any notice regarding the affairs of the company or any annual general meeting. It is stated that from 2011, no annual general meeting has been convened for the company and no dividend was paid to the petitioners. The petitioners state that after having developed suspicion of the intentions of respondents Nos. 5 and 6, the petitioners caused inspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners complain about increase of authorized capital which happened in 2011 and 2012 and the petition has been filed long after the event. This is an isolated transaction and the petitioners do not make any other allegation of oppression or mismanagement and the petition is therefore not maintainable. 15. The respondents have stated that the issuance of further shares has been done in accordance with law. The company allotted the shares on December 30, 2011 as per the requirement of City Bank and the company needed further equity capital. The petitioners knew and were offered proportionate shares and the petitioners refused to subscribe to the same and therefore, the second relief is not maintainable and in any event it is vague. As regards reliefs Nos. 3 and 4, they are not supported by any evidence whatsoever and are not capable of being granted. The respondents contended that the petitioners have not made out a case for winding up of the company on just and equitable grounds and therefore, the petition is not maintainable. 16. The respondents have stated in their reply that the partners thought it fit to convert the firm into a private limited company and were advised to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, a member of the company agreed to subscribe to the additional shares and issued a cheque No. 761001, dated December 27, 2011 drawn on UCO Bank. The said amount was also duly credited to the account of the first respondent-company. The fifth respondent, viz., L. Balaji, had already brought in ₹ 6,00,000 towards future allotment of shares as required by the bank as early as 2007 and the said amount has been shown as opening balance under the share application account. The fifth respondent brought in a further sum of ₹ 10,00,000 on December 27, 2011 by cheque No. 761865 drawn on UCO Bank and the said amount was duly credited to the account of the first respondent-company. The shares remained unsubscribed and therefore on December 30, 2011 after the banking hours, the shares were allotted to the following four persons, the particulars of whom are as follows : Name of the allottee Name of equity shares Issue price L. Balaji 1,50,000 shares 15,00,000 B. Ramkumar 1,00,000 shares 10,00,000 B. Adith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners have denied that notice of the sixth annual general meeting along with the accounts and balance-sheet were sent to the petitioners on August 30, 2011. What was sent to petitioners was only an inland letter weighing 10 gms, containing notice of the annual general meeting typed on the same, with no agenda with respect to any allotment of shares. No accounts or documents could have been enclosed to the said notice because it was an inland letter to which there can be no enclosures. The averment that the company also forwarded a letter dated August 30, 2011 to the petitioners offering their proportionate shares in the further issue are denied as false and baseless. No such letter was ever received by the petitioners and no acknowledgment for the same has been produced by the respondents. In fact, in letter dated February 6, 2015 respondent No. 5, while replying to a notice from the first petitioner, stated that the letter of offer was sent along with the notice of the sixth annual general meeting. It is stated that the fifth respondent has exposed himself totally by making these false averments and producing false records and it is clear that the alleged allotments made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs is wrongful act which has the recurring effect on the rights of the petitioners, who are the shareholders. In view of it, the act complained of is not an isolated act, therefore, the petition is not barred by the law of the limitation and maintainable. 28. In relation to issue No. (ii), the petitioners would contend that for three years they did not get any notice regarding the affairs of the company or any annual general meeting and no dividend was paid to the petitioners and the shareholdings of the petitioners have been diluted heavily that too without any intimation by increasing the share capital of the company to 7,90,000 shares from the year 2012 and allotting the same without any valid reason to the fifth respondent, his two sons and wife, i. e., tenth, eleventh and twelfth respondents respectively. On the other hand the respondents would contend that the company allotted the shares on December 30, 2011 as per the requirement of City Bank and the company needed further equity capital and the petitioners knew and were offered proportionate shares and the petitioners refused to subscribe to the same and therefore, the second relief is not maintainable and in any event i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nection, reliance is placed upon the case of Uma Pathak v. Eurasian Choice International P. Ltd. reported in [2004] 122 Comp Cas 922 (CLB). 31. Moreover, the claim of the respondents that the notices of subsequent annual general meetings were served to the petitioners do not justify the increase of the authorised capital of the company and allotment of the shares in favour of the fifth respondent, his two sons and wife, i. e., tenth, eleventh and twelfth respondents respectively. However, the acknowledgments placed on file as proof of sending notices cannot be relied upon without corroboration of services of notice, when there is no collateral evidence like dispatch register showing payment of postage stamps and account books. On this issue, the company courts did not even rely upon the postal certificates . In Marble City Hospital and Research Centre P. Ltd. v. Sarabjeet Singh Mokha reported in [2010] 155 Comp Cas 13 (MP), the hon'ble High Court of Madhya Pradesh held mere filing of postal certificate did not corroborate services of notice, when there is no collateral evidence like dispatch register showing payment of postage stamps and account books, etc. In M. S. Madhu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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