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TMI Blog2009 (7) TMI 1360X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies Act, 1956, alleging that the annual general meeting for 2004-05 had not been convened. On that application, this Board passed an order on December 18, 2006, appointing one Shri Rajeev Ranjan Prasad, advocate, to convene the annual general meeting for the year 2004-05 within 45 days. This annual general meeting was held, even though belatedly due to certain reasons, on April 21, 2007. In that annual general meeting petitioners Nos. 1 to 5 and respondents Nos. 2 and 3 were appointed as directors and respondents Nos. 4, 5 and 6 who came up for re-election were not re-elected. 2. In this back ground, the petitioners have filed this petition dated April 7, 2008, making various allegations that respondents Nos. 2 to 6 had illegally issued 3,000 shares of ₹ 100 each at a premium of ₹ 400 per share to respondents Nos. 9 to 13 and in an allegedly held board meeting on February 5, 2007, they had allegedly appointed the fourth respondent as the managing director and in an allegedly held annual general meeting for the year ended March 31, 2006, on September 21, 2007, respondents Nos. 6 to 8 were allegedly appointed as directors. On the basis of these allegations, the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents Nos. 5, 6, 7 and 8 were allegedly appointed as directors on September 21, 2007. 4. Learned Counsel further submitted : In so far as alleged allotment of impugned shares is concerned, the said allotment has been made only for the purpose of reducing the petitioners from a majority into a minority. Even though, during the hearing, the respondents produced certain documents to show that the company needed funds to clear the dues to farmers who had stored potatoes in the cold storage, yet, there is no such averment in the reply to the petition. No supporting documents regarding payment to farmers have been furnished. The petitioners had specifically alleged in the petition that no details of consideration received for the shares were found in the bank accounts of the company. Since the register of members is with the petitioners, there are no entries that respondents Nos. 9 to 13 have become shareholders. Since according to the respondents, the shares were allotted on March 30, 2007, these allottees could have attended the annual general meeting on April 21, 2007 and defeated all the resolutions proposed by the petitioners. The very fact that these allottees did not atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and the court had taken cognisance of the offence. The respondents also filed a criminal case against the petitioners for removal of all the statutory records from the registered office of the company. In the rejoinder, the petitioners have admitted the diversion of funds to Cameo. It is the respondents who inducted a sum of ₹ 1.07 lakhs on February 11, 2006, for deposit with the Electricity Board for the electricity connection to the cold storage. However, by a letter dated March 7, 2006, the petitioners wrote the Electricity Board not to give electricity connection to the cold storage. The petitioners also made an application before the SDO, Bihar Sharif, against the functioning of the cold storage, due to which the SDO passed an order on February 9, 2007, for attachment of the cold storage and appointed a receiver to return the potatoes to the concerned farmers. Thus, the petitioners have always been acting against the interests of the company, first by diverting/withdrawing funds and thereafter, ensuring that the cold storage did not resume functioning and when it started functioning, got an order of attachment. 6. Learned Counsel further submitted : In so far as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition and also during the hearing, the respondents took a stand that the shares were issued for meeting the liabilities towards payment of compensation to the farmers who had stored their potatoes in the cold storage, yet, no document in this regard had been disclosed. However, in the written submissions, the respondents have enclosed a copy of the notice received from the Patna District Forum dated January 25, 2007, addressed to the company that the petition filed by one Sohrai Prasad and others against the company would come up for hearing on February 13, 2007. They have also annexed a compromise petition signed by 32 persons and by the fourth respondent on behalf of the company with an acknowledgment signed by each of them who have received certain amount. The affidavit accompanying with compromise memo is dated June 6, 2007. They have also filed along with the written submission, statements of account of State Bank of India in the name of the company for the periods from February 10, 2007 to April 19, 2007, indicating the debits towards payment of money to these 32 persons, also showing credit for certain amount purportedly towards consideration for the 3,000 shares. Even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hows that no money has come from the purported allottees of the shares. It is to be noted that the respondents have not furnished the details as to the number of shares allotted to each of respondents Nos. 9 to 13. In view of this, it is not even possible to co-relate the amount credited with the number of shares allotted to any of these respondents. Further, it is also seen that after credit of each cheque, payment had been made to the alleged potato farmers in cash and immediately thereafter another credit appears raising a doubt that the same amount had been rotated. For instance, a sum of ₹ 1.24 lakhs is found to have been deposited on February If. 2007 and on the same date, an amount of about ₹ 1.1 lakh is found to have been paid in cash to the alleged potato growers. On the very next day, i.e., on February 17, 2007, a sum of ₹ 1.24 lakhs is again found to have been deposited and between the seventeenth and twenty-first, a sum of ₹ 1.13 lakhs found to have been paid in cash. On February 22, 2007, two sums of ₹ 1.25 lakhs are found to have been deposited and cash payment is found to have been made on subsequent dates. Similar is the position in oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual general meeting on September 21, 2007, to indicate the increase in the paid-up capital of the company. Therefore, as the facts reveal, no shares could have been allotted before April 21, 2007. After this date also, no share could have been allotted as it is the petitioners who constituted majority on the board after April 21, 2007 and the respondents could not have, on their own, allotted the impugned shares. Thus, the claim of allotment of shares for want of funds appears to be an after thought and as such the allotments deserve to be cancelled. Even though respondents Nos. 9 to 13 are parties to the proceeding, yet, neither have they filed any counter to the petition nor were they represented during the hearing. In other words, in spite of opportunity of hearing given to them, they have chosen not to avail of the same. 12. In view of the fact that the board of the company was validly constituted in the annual general meeting on April 21, 2007, all decisions taken by the respondents including holding of annual general meetings for 2005-06 and for 2006-07 are declared null and void and the decisions taken, including appointment of respondent directors in the allegedly hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the allotment of shares and appointment of managing director/directors. 14. In view of my finding that the allotment of impugned shares deserves to be cancelled, I cancel the allotment of the impugned 3,000 shares. The petitioners have suggested that, with the view to put an end to the long standing disputes among the parties, direction be given to the respondents to sell their shares to the petitioners on a fair value. Such a direction cannot be given in the instant case, as there is nothing on record to identify the shareholders belonging to the respondents group and there is no averment that all the members of that group have been made parties to the proceeding. However, if the respondents group wishes to sell its shares to the petitioners, they are at liberty to express their intention to the petitioners in writing. Once they do so, the same will be binding on the petitioners on a price to be determined by an independent valuer, if need be, appointed by this Board. 15. The petition is disposed of in the above terms, reserving the right to appoint a valuer, if an application is so made after the respondents' group exercises the option, if any, to sell their ..... X X X X Extracts X X X X X X X X Extracts X X X X
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