9911796707
TMI Blog2009 (2) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... cent shares and that since establishment of an educational institution would require huge funds, the second respondent would manage funds from his own source of income and loans raised on the strength of his borrowing capacity and that the petitioner would be given sweat equity of 50 per cent. In line with the understanding, the companies were incorporated on April 20, 2005, with the petitioner and the second respondent being the signatories to the memorandum with both of them as the first directors. In board meeting held on April 25, 2005, each of them was allotted 5,000 shares of ₹ 10 on both of them paying the consideration. In addition, the petitioner also invested a sum of ₹ 12 lakhs as unsecured loan in Adityesh. The petitioner took all the steps to locate the land, preparation of architectural plan, etc., and the business of Adityesh started in December, 2005. The petitioner was in charge of administration, marketing, recruitment, etc. Since the companies needed funds, a term loan of ₹ 10 crores was taken from Bharat Co-operative Bank, Mumbai, jointly by both the companies mortgaging the properties of the companies. The understanding was that the companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner has sought for a declaration that the appointment of the fourth respondent as an additional director in both the companies as null and void, for a declaration that the proceedings in the extraordinary general meetings allegedly held on March 21, 2007, as null and void and also for a declaration that the letters of offer for additional shares as also null and void including that of shifting of the registered offices. 3. Shri Vijay Kumar, advocate, for the petitioner submitted : Both the companies were incorporated in the nature of quasi partnership with the understanding of equal shareholding and equality in management. The further understanding was that as a reward for the services rendered by the husband of the petitioner-a chartered accountant-in assisting the second respondent to successfully establish and run an educational institution in Goregaon in Bombay, the second respondent had agreed that the petitioner would only invest ₹ 50,000 each in both the companies while he would bring in all funds to set up educational institutions for both the companies and that the petitioner would be in management. The said understanding has been breached by appointing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t himself is the nominee of the third respondent and the fourth respondent is a mere employee of the third respondent. 6. In so far as the issue of increase of authorised share capital is concerned, in both the companies, according to the respondents, the authorised capital was increased to ₹ 5 crores and ₹ 4 crores in the extraordinary general meetings held on March 21, 2007 and in spite of notices dated March 12, 2007, the petitioner did not attend these meetings. The grievance of the petitioner is that she never received any notice. The respondents have claimed that the notices were sent through couriers and were received by the peon of the petitioner, namely, Satyawan Dalvi. The said Dalvi has filed an affidavit denying receipt of the notices. Further, the increase is also in violation of Section 189 of the Act as for alteration in the articles, special resolution is necessary. Therefore, altering the articles by an ordinary resolution is invalid. Further, even for the board meeting dated March 22, 2007, in which the decision to offer rights shares, the petitioner did not receive any notice. Therefore, the petitioner did not accept the letter of offer as her cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section. In the present case for the extraordinary general meetings the petitioner was not given notices and therefore the decisions taken thereat is invalid. 9. Shri Jethmalani, advocate appearing for the respondents, submitted : The petitioner has been shifting her stand from time to time. In the petition she has asserted that it was her husband who assisted the second respondent in setting up the educational institution at Goregaon and Vadodara and in the rejoinder she has stated that her husband has nothing to do with the affairs of the company. Neither the petitioner nor her husband, being a chartered accountant, has any qualification or experience to run and manage an educational institution nor they have provided any know how. In the petition there is no mention at all about the Trust but in the rejoinder she has stated that the second respondent was to invest in the Trust and that the Trust will pay rent to the company. Her allegation in the rejoinder is that the liquidity problem of the company was due to the failure of the Trust to pay the lease rental and that she had advised the second respondent to bring in money into the Trust to enable the Trust to pay the rent. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to the companies to the new registered office except a few statutory records which were assured to be handed over after the recovery of the petitioner's husband from illness. However, the petitioner has not done so till now. Since the registered offices were shifted with the consent and knowledge of the petitioner and for the benefit of the company, the petitioner cannot impugn the said shifting. 11. In so far as the allegation relating to appointment of the fourth respondent as a director is concerned, the fourth respondent is the nominee of the third respondent which has provided huge funds to the company. Therefore at the instance of the third respondent, its nominee was appointed as a director in the board meeting held on May 5, 2005, which was attended by the petitioner. It was in that meeting, transfer of 5,000 shares held by the third respondent was approved for registration for transfer. In the petition, the petitioner herself has stated that 5,000 shares were transferred to the third respondent. If it is so, then, she cannot dispute her attendance in that meeting. Since the company is a private company, appointment of directors is governed by Section 265(2) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowing ₹ 10 crores from Bharat Co-operative Bank and a copy of the said resolution signed by both the petitioner and the second respondent, was also furnished to the bank. Again in a board meeting held on September 2, 2006, which was attended by the petitioner and the fourth respondent, the annual accounts were approved. The petitioner is not disputing the approval of the annual accounts. Again in a board meeting held on October 1, 2006, which was again attended by the fourth respondent, approval was given to open a bank account with HDFC Bank to be operated jointly by the petitioner and the second respondent and a certified copy of the same was jointly signed by both of them and furnished to the bank. Thereafter, the petitioner did not attend further meetings. Having consented to the appointment of the fourth respondent as a director and having attended board meetings participated by the fourth respondent in which crucial decisions, like, opening of bank account, borrowing of money, etc., were taken, only the basis that Form No. 32 was filed later and that the name of the fourth respondent did not appear either in the annual report or in the income-tax return, the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assertion of the petitioner that since the company had taken a loan of ₹ 10 crores from Bharat Co-operative Bank, the company was not in need of funds. Even though the company had availed of a loan of ₹ 9.92 crores from the bank, yet, to meet the capital and the operating expenses, the third respondent had brought in ₹ 381.63 lakhs in Adityesh and ₹ 19.75 lakhs in Vatsalesh as on date. Even for raising the loan from the bank the second respondent had to give corporate guarantees of his associate companies along with his personal guarantee. In addition, after the rights shares were issued, the third respondent had subscribed to ₹ 1.75 crores in Adityesh and ₹ 1.4 crores in Vatsalesh. Likewise, the second respondent had subscribed to ₹ 75 lakhs and ₹ 60 lakhs, respectively, in these two companies. The investment of the petitioner in share capital of the two companies is only ₹ 50,000 each besides giving a loan of ₹ 12 lakhs to Adityesh. Therefore, the allotment of rights shares was on account of financial requirements of the companies and not with any ulterior motive as alleged by the petitioner. 13. In so far as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a valuation or in the alternative prepared to refund the unsecured loan of ₹ 12 lakhs and also the amount invested in the share capital with a reasonable rate of interest. In so far as the suggestion of counsel for the petitioner that the petitioner is prepared to purchase the shares of the respondents is concerned, the same is not acceptable to the second respondent as he and the third respondent had nurtured the company so far by bringing in huge funds and such an order would be highly prejudicial to their interests. 15. He relied on the following cases : Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad, wherein the Supreme Court held that it is the interest of the company which is paramount in moulding relief in a petition under Section 397/398. In the present case the petitioner does not have any experience in running an educational institution while the second respondent has extensive experience and as such notwithstanding the huge financial commitment of the second respondent, it would not be in the interest of the companies to hand over them to the petitioner. In S. Labh Singh v. Paneser Mech. Works P. Ltd. [1987] 61 Comp Cas 618, the Punjab and Haryana High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner is claiming that in both the companies the understanding was that she would have 50 per cent shareholding without any investment other than the initial ₹ 50,000 each. Further, in neither of the petitions, any mention had been made about Aditya Trust about which allegations were made only in the rejoinders. Even though in both the petitions, her stand has been that the understanding was that the second respondent would bring in required funds into both these companies, in the rejoinder her stand is that the understanding was that the second respondent would bring in funds into the Trust for payment towards running of the school. 18. The main allegation relate to the appointment of the fourth respondent as a director and the extraordinary general meeting resolutions approving the proposal to increase the authorised share capital which was followed by offer of rights shares. In so far as the appointment of the fourth respondent as a director is concerned, the petitioner alleges fabrication of the minutes dated May 5, 2005, in which, according to the respondents, the fourth respondent was appointed as a director. For her allegation that the fourth respondent was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the bank. Therefore, in so far as this allegation is concerned, I find that the same has not been established. 19. In so far as notices for extraordinary general meetings are concerned in Westfort Hi-Tech Hospital Ltd. case, the Supreme Court has held that if the company has placed materials to substantiate that notices had been given, then statutory presumption under Section 53 will apply, though the said act is rebuttable and that the burden to rebut the statutory presumption is on the person who alleges that notices have not been received. In the present case the respondents have not only produced receipts from couriers evidencing the dispatch of notices to the petitioner, they have also produced copies of receipts signed by the servant of the petitioner acknowledging the receipt of the notices. If, according to the petitioner, relying on the affidavit of her servant that he had not received the notices, she should have taken up the matter with the couriers. As far as the company is concerned it has established that notices were sent through couriers. Therefore, as far as this allegation that extraordinary general meetings have been held without notices to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans. Since the respondents are even now are willing and ready to allot rights shares to the petitioner and since I find that the company has full justification to increase its share capital, this allegation relating to issue of rights shares cannot be considered to be oppressive to the petitioner. 21. In so far as the shifting of registered office is concerned, it appears that the regular procedure for shifting of registered offices does not seem to have been followed. According to the respondent the shifting was done with the knowledge and consent of the petitioner. As long as the shifting of the registered offices was in the interest of the company, even if proper procedure are not followed the same cannot be considered to be an oppressive act. More so, when the petitioner has not claimed the said act to be oppressive to her. 22. Considering the facts and circumstances in both the petitions in totality, I find that the petitioner has not been able to establish any of the allegations. All her allegations have been based on the alleged understanding that she would get 50 per cent sweat equity shares without any investment and that there would be only two directors of the boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase she is unable/unwilling to invest, she is at liberty to part ways from the companies. The fact is that she has invested only ₹ 50,000 towards share capital in each of the two companies and has also given an unsecured loan of ₹ 12 lakhs to Adityesh. Normally, in case of parting of ways, valuation is made. However, in the present case such a valuation will not be to the advantage of the petitioner as her shareholding has come down drastically due to allotment of further shares on a rights basis, which allotment, I have held to be in the interests of the companies. Taking into consideration the fact that she was associated with both the companies right from the beginning as a subscriber to the memorandum, I am of the view that, in equity, she should be entitled to adequate compensation for going out of the companies. Since Adityesh is already in business and since the petitioner has also given an unsecured loan of ₹ 12 lakhs to Adityesh, I determine that the value of 5,000 shares held by her should be taken as ₹ 10 lakhs. In so far as Vatsalesh is concerned, the company has not commenced business and therefore I determine the value of her holding of 5,000 s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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