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TMI Blog2020 (11) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... s in 2011-12 though transfer was effect on May 20, 2015 yet 2 crores partly paid shares of ₹ 10 were issued prior to 2011-12. Absolutely the petitioner cannot have any grievance for conversion of partly paid-up shares in to fully paid-up shares on March 16, 2015. The partly paid-up shares were issued prior to passing of restraining order, then how order dated March 20, 2008 of the Company Law Board is violated. Only conversion of partly paid shares into fully paid shares has taken place after interim order - this is not in violation of any interim order. The applicant is therefore, not entitled to challenge such conversion and the applicant is not entitled to any relief for forfeiture or for cancellation of the shares. The grievance of the applicant is that calling for conversion of partly paid shares into fully paid shares is in contravention of the order passed by the then Company Law Board, whereunder the Company Law Board directed that shareholding to be in status quo. This order dated October 23, 2008. No fresh shares were issued by the company after passing of the interim order. Partly paid shares were issued prior to the interim order. They were only converted into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm among the top five chartered accountant firms of India and re-audit the annual accounts of respondent No. 1 for the financial years 2014-15, 2015-16, 2016-17, and reaudit to complete within 15 days from the date of appointment and further the respondents shall file the reaudited financials with the Ministry of Corporate Affairs. 2. The petitioner has also prayed for interim reliefs that pending hearing and final disposal of the petition, to restrain the respondents from dealing with the equity share capital of respondent No. 1, including but not limited, by way of reduction of share capital, issuance of any securities in the form of rights issue, bonus shares or private placement or avail any loan or borrowings for any purpose whatsoever ; to restrain the respondents from alienating, transferring, selling or otherwise disposing of or dealing with the movables and immovable properties of respondent No. 1, in any manner whatsoever ; to restrain respondent No. 1 from entering into joint venture or any collaboration with any third party in any manner and for any purpose whatsoever ; to direct respondent No. 1 to replace the existing dis-qualified board with new one with at least ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p equity shares of respondent No. 1 from UTI a/c Vecaus-I. On various occasions, the petitioner-company sent all the requisite documents prescribed under the Companies Act, 1956 for transferring and registering 2,40,70,000 fully paid-up equity shares (40.11 per cent. of totally full paid-up share capital of respondent No. 1) purchased from various bankers in the name of the petitioner. However respondent No. 1 failed to transfer and register in favour of the petitioner. (iii) In August 2013, the Company Law Board, Chennai Bench passed an order (annexure D ) in favour of the petitioner directing respondent No. 1 to transfer 2,40,70,000 fully paid-up equity shares in the name of the petitioner and rectify the register of members within a period of 30 days from the date of the order and further the petitioner are entitled to the benefits attached to 2,40,70,000 fully paid-up equity shares including but not limited to dividend and bonus shares. The said order has not been complied with. The petitioner sent various notices to respondent No. 1 for compliance with the order. (iv) In July, 2014, the petitioner filed a company application in Company Petition No. 3 (CH) 13 before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the board of directors of respondent No. 1 have to authorise respondent No. 1, under section 179(3)(a) of the Companies Act, 2013, for converting partly paid-up equity shares into fully paid-up equity shares. Respondent No. 1 has not filed Form MGT-14 with the MCA. Due to non-filing of annual forms with MCA for a period of five years, all the directors of respondent No. 1 are disqualified from holding the office of director. 4.8 It is averred in paragraph 14 of the petition that the petitioner verified the financials for the year ended on March 31, 2015 and found the position relating to conversion of partly paid-up equity shares into fully paid equity shares to be intact. A copy of financials for 2014-15 is at annexure K . 4.9 It is averred in paragraph 15 of the petition that the petitioner issued notice dated March 10, 2017 (annexure L ) to respondent No. 1 for rectification of register of members of respondent No. 1 under section 59 of the Act. However, it is not rectified. 5. Counter dated August 23, 2017 filed by respondents Nos. 1 to 4 5.1 It is submitted that the petitioner is coercing the respondents to buy at exorbitant price, its 2,40,70,000 shares whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1-company has allotted 2,00,00,000 shares much before the purchase of shares by the petitioners, which was issued at the rate of ₹ 10 per share in the form of partly paid equity shares to the promoters and received ₹ 8 crores towards part payment of shares allotted. The petitioner held only 2,40,70,000 which is 30.88 per cent. holding in the issued and paid-up share capital. Respondent No. 1-company on March 16, 2015 had called for payment of the balance amount of partly paid shares. Therefore the said shareholders paid further sum of ₹ 12 crores in addition to the amount of ₹ 8 crores paid for the shares of 2,00,00,000. Whereas the petitioner paid only ₹ 2,69,44,000 for 2,40,70,000 shares. Thus, the petitioner's claim that, it is having share to the extent of 40.11 per cent. is false and devoid of merits (paragraph 4(vi)). 6.5 It is averred that, it is true that Mr. Ravi Sanghi and Mr. Girish Sanghi have filed Company Petition No. 26 of 2008 under sections 397 and 398 of the Companies Act, 1956 and in the said petition interim order dated October 23, 2008 was also passed by the Company Law Board, Chennai. But the order presumably does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cause of action arose only after the board meeting dated March 16, 2015 of respondent No. 1, passing an alleged resolution for converting partly paid-up equity shares into fully qualified. The petitioner has its own cause of action which is independent with any right of third parties. Thus, the contention of the respondents that the petitioner is acting at the behest of someone is baseless (paragraph 4). 7.3 It is stated that the contention of the respondents that they hold only 30.88 per cent. is baseless as the petitioner has purchased 2,40,70,000 equity shares in the year 2011-12 and the respondents have converted the partly paid-up equity shares into fully paid-up equity shares on March 16, 2015. The petitioner has not made any exorbitant demand from respondent No. 1. The petitioner reiterated the fact that as on March 16, 2015 the board of respondent No. 1 was disqualified due to non-filing of financials of respondent No. 1 for a period of five years. Therefore, all the resolutions passed on March 16, 2015 are null and void and have no legal effect (paragraph 5). 7.4 It is stated that cognizance of the fact that respondent No. 1 is highly indebted shows that the net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of oppression and mismanagement even though it is prior to purchase date of shares by the petitioner. The petitioner has calculated the book value as per the established principle of accounting. The matter under the Andhra Pradesh Agricultural Land Ceiling Act is still pending before the hon'ble High Court and the last hearing in the said matter was in the year 2012. The petitioner states that the respondents have not provided the actual valuation of the price of the equity shares as on the date of issuing of partly paid-up equity shares and only made a statement that the calculation made by the petitioner is false and based on assumptions and presumptions (paragraph 21). 7.11 It is stated that the petitioner has made a perfect case for appointment of chartered accountant firm among the top five chartered accountants as the conduct of the respondents demand such audit by the chartered accountant firm (paragraph 27). Findings 8. We have heard learned counsel for the petitioner and also learned counsel for respondents Nos. 1 to 4. 9. The petitioner is seeking reliefs that (a) to direct the respondents to rectify the register of members of respondent No. 1-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the company. At last, the company provided financial from 2010-11 to 2014-15. 11. Learned counsel contended that in the year 2003-04, the company issued 2 crores equity shares of ₹ 10 each and called ₹ 2.5 at the time of issue of shares. Thereafter, respondent No. 1 called for call money of the partly paid-up equity shares and thus, converted the partly paid-up shares into fully paid-up shares, which is in contravention of the order passed by the Company Law Board. Thus, learned counsel contended that the conversion is not in accordance with section 179 of the Companies Act, 2013. The board of directors to authorise the company for conversion and further minutes of the board meeting to be communicated to the Registrar of Companies by filing Form MGT-14. Thus, provisions of section 450 of the Companies Act were violated. Therefore, learned counsel is contending that conversion of partly paid-up shares into fully paid-up shares is against the order of the Company Law Board and further it is not in accordance with the procedure prescribed under section 179 of the Companies Act, 2013. Consequently, a direction is sought to the company for rectifying the register of me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 1-company from being proceeding under the SARFAESI Act, 2002, by entering into one-time settlement with the banks. 15. The contention of learned counsel is that the petitioner wanted to sell its shares at an exorbitant rate, but respondents Nos. 2 to 4/promoters declined to purchase. The contention of learned counsel for the respondents is that the petitioner has not only filed this petition but also filed another petition against respondent No. 1-company being Company Petition No. 90/241/HDB/2017 under section 241 of the Companies Act seeking prayer for exit route from respondent No. 1-company. Learned counsel contended that order dated October 23, 2008 in Company Petition No. 26 of 2008 was passed long prior to the petitioner purchased shares from the banks. Order dated October 23, 2008 passed by the Company Law Board is with reference to order dated October 14, 2008 which provides for amicable settlement between the parties. The said order does not apply. The partly paid-up shares were called for conversion into fully paid-up shares for entering into settlement with the banks by virtue of one-time settlement. Learned counsel contended that the provisions of the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called up to ₹ 4 per share and the remaining ₹ 6 was called on March 16, 2015. The transfer in favour of the applicant was effected on May 20, 2015. Conversion of partly paid-up shares into fully paid-up shares by calling the balance was prior to May 20, 2015. 20. Partly paid-up shares were issued in 2003-04, which was long prior to the applicant purchasing the shares of respondent No. 1-company from the banks. The petitioner is aware of the authorised capital of respondent No. 1-company. There is no irregularity in calling for conversion of partly paid shares into fully paid shares, because respondent No. 1-company needed money for payment to the banks to avoid proceedings under the SARFAESI Act, 2002. Partly paid shares were issued prior to the petitioner becoming shareholder of respondent No. 1-company. Even assuming that the petitioner purchased shares in 2011-12 though transfer was effect on May 20, 2015 yet 2 crores partly paid shares of ₹ 10 were issued prior to 2011-12. Absolutely the petitioner cannot have any grievance for conversion of partly paid-up shares in to fully paid-up shares on March 16, 2015. The partly paid-up shares were issued prior to p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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