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TMI Blog2020 (1) TMI 1407X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 and R4 are enjoying the fruits of the revenues, without providing any material evidence to support their allegation. From the records before us, we have not come across any such allegation of this nature from any other shareholder or director in the last 40 years of existence of Sree Visakh theatre - It was only due to some miscommunication that these were not made available to auditors for verification at that point of time. We have considered both the averments of the counsels in depth. We came to the conclusion that in the absence of credible evidence offered by the petitioners to support their allegation, the petitioners have failed to prove that the Respondent No.2 and 4 have illegally constructed Sree Visakh theatre and enjoying the property at the cost of the Respondent No.1 Company. Merry Land Studio - HELD THAT:- The counsel for the Respondents have clearly mentioned in their counter that the revolutionary technological changes in the mode of film production, eroded its revenue generation prospects. In the absence of credible evidence offered by the petitioner we have no other option except to go with the statement offered by Respondents that they are making payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No.1 Company. Share Transfer - HELD THAT:- The AOA clearly shown that personal representative of a member or beneficiary under the will of a member are entitled for transfer of shares from the company. In the instant case late Subramoniam Shakthidar passed away intestate and his 650 shares transmitted to the legal heirs of the deceased member as per Law of Succession. As the transfer of shares is distinct from the Transmission, in the instant case the company has rightly followed the transmission of shares of the deceased member to the legal heirs - As regards transfer of shares to L. Priyadarsini, we firmly believe that it is the personal and independent decision of Respondent No.7 approved by the Board of Directors as laid down in the AoA. In this issue also, we have no reason to interfere in the matter, as Respondent No. 7 has firmly affirmed in her counter that it is her personal choice to whom the shares are to be transferred. In this case Respondent No.1 company has rightfully transferred the shares as requested by Respondent No.7. Therefore, Respondent No.1 Company cannot be held for the personal choice of the mother of the Petitioners. The petitioners become sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, that the Company was incorporated on 25.04.1949 under the provisions of the Travancore Companies Act, IX of 1114 as a private Limited Company having its registered office at New Theatres Building, P. Subramaniam Road, Thampanoor, Thiruvananthapuram-695014, Kerala. The said company it is averred was promoted and incorporated by one Mr. P Subramoniam (now deceased) and Mr. S. Kumaraswamy with the main objects as reflected in the Memorandum of Association of the Company to the following effect: - To carry on the business of proprietors or managers of theatres, places and halls studios and cinematographic shows and exhibitions both silent and talkie and to permit the company s premises to be used for such other purposes as may seem expedient. To purchase hire or otherwise acquire any photographic and other apparatus in connections with cinematographic shows and exhibitions. To produce Cinematographic films and to let on hire or sell the same To purchase films or take on hire films from other persons and to relet on hire or sell the same. To acquire and undertake the whole or any part of the business, property and liabilities or any person or company carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholding of the Respondent Company and therefore are unaware of the manner in which the shares held by Mr. P Subramoniam were transferred to or acquired by his children. (i.e. Respondent Nos.2to7) 7. Since 1997, the Board of Directors comprise of Respondent Nos.2 to 7 and this board remained unchanged. Therefore, it is a family held company with the legal heirs of Mr. P Subramoniam owning the entire equity holding and board seats of the Respondent No.1 Company between 1978 and 2017, the Respondent Nos. 2 to 7 diluted their direct equity holding in Respondent Company in favour of their family members. Hence there are 29 shareholders in the Respondent No.1 Company. 8. The petitioners acquired 250 equity shares each in the Respondent No.1 Company as a gift from their mother in August 2009. Since the acquisition of shares in the Respondent no.1 Company they were interested in understanding: (i)( The current and historical shareholding pattern of the Respondent No.1 company; (ii) Roles and responsibilities of each of the Respondents; (iii) Operations/revenue model of the Respondent No.1 Company. 9. Thereafter the first cause of concern of the petitioners was that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer of ownership of Sree Visakh Theatre to Respondent Nos.2 and 4, there exist no contractual agreement between the two Theatres to carry the common facilities and spaces. And also, large parts of income generated from the Respondent Company is siphoned off thereby reducing the profit share of the other shareholders. 13. Similarly, the Merry Land studio is a film making and record studio a common property included in the common asset is in a dilapidated state due to lack of maintenance provided by Respondent Nos. 2 to 7. No profit or loss statement pertaining to this studio have been made available to the minority shareholders, in fact it is used exclusively to run Respondent No.2 s private businesses of tele serial shooting, production and dubbing. Also, neither Respondent No.2 nor his private companies are paying any rent for utilising the studio for their personal use. This allegation is strengthened by the statement recorded in the minutes of annual general meeting of the Respondent Company dated 29.09.2012 whereby one of the shareholders levelled a similar allegation against Respondent No.2. The annual General Meeting minutes of 29.09.2012 establishes that a claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lve Lakhs Only) to one of the Directors, which is not declared by the Director as a related party transaction. 19. It is also stated that the remuneration for the Board of Directors by way of a Board Resolution unilaterally increased their salaries from ₹50,240/- to ₹1,00,000/- per month without any basis. Therefore, imparting high remuneration to Directors reduces the dividend payable to the shareholders. 20. The petitioners also stated that the restriction on the transfer of shares, as provided under the Articles of Association is as under: No transfer of any shares in the capital of the company to any person not already a member of the company or personal representative of a member or beneficiary under the will of a member shall be made of recognised by the company. The directors may without assigning any reason decline to give their sanction to any transfer and may suspend the registration of transfers during the fourteen days immediately preceding the ordinary general meeting in each year One of the shareholders of the Respondent Company, Subramanian Shakthidar holding 650 shares passed away on 15.05.2015. Later the Board of Directors despite the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Company; e. Directing Respondent No.2 and 4 to render accounts of Sree Visakh Theatre with effect from 04.10.1978; f. Appointing a commissioner/ investigator to investigate the affairs of the Respondent Company including but not limited to determination of the fixed assets of the Respondent Company and submit a report with regard to affairs and operations of Respondent Company. g. Directing the Respondents to [provide the petitioners access to the registered office and all assets of the Respondent company including but not limited to providing access to inspect all statutory and other legal and financial records of the Respondent Company; h. Declaring that the meeting of the Board of Directors held on 11.03.2016 and resolution passed therein with respect to transfer of 600 shares of Respondent No.7 to L. Priyadarshini as invalid; i. Declaring as null and void and setting aside all share transfer of 650 shares from Late. Mr. Subramaniam shakthidar to Remya Nandini and Mrs. Rajkumari Kylas on 29.09.2015; j. Directing the Respondents or the Reconstituted Board to comply with all provisions of the companies Act,2013 and the Articles of Association; k. Pass such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: FINANCIAL YEAR TOTAL REVENUE INCLUDING OTHER INCOME IN Rs. PROFITS IN RS. DIVIDEND DECLARED 2012-2013 5,07,25,909/- 42,15,993/- 150% 2013-2014 4,27,52,248/- 44,06,832/- 150% 2014-2015 4,84,29,899/- 60,15,0900/- 180% 2015-2016 9,53,39,516/- 1,53,08,080/- 200% 2016-2017 10,47,19,694/- 2,73,37,343/- 200% The Respondents further averred that overwhelming majority of shareholders have full confidence in the manner in which Board of Directors conduct the affairs of the Company. The petitioners being 7.5% shareholders and that too from 2009 is making bald allegations without any piece of evidence. The petitioners never made serious efforts to examine the documents as a shareholder as prescribed under the Law. No Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the allegations made are unsubstantiated. Notices for all the AGM in all the years mentioned herein have been sent to the petitioners in the address as provided to the Registered office of the Company. And notice for the AGM held on 28.09.2016 was delivered to the Petitioner No.2 to her address provided to the Registered office of the Company, it is not the case of the petitioners that they did not present in the AGM. The sanction of loan amount to one of the Directors in the financial year 2015-2016 is evident from the minutes of the Board Meeting and reflected in the financial statements of the company. The salary arrangement was increased to ₹ 40,000/- per month in 2017 from ₹ 30,000/- per month in 2013, apart from other allowances for travelling, medical etc. 26. The Respondents further contented that the transfer of shares of Subramaniom Sakthidhar to his legal heirs under law of succession as he died intestate, and also the transfer of shares by Respondent No.7 was personal and independent decision, therefore, the said transfer cannot be challenged in a petition under Section 240 to 242. Further the Respondent company on receipt of valid share transfer appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able properties since they were not provided with the same. It is also stated that signing the attendance register does not prove that notices were sent in compliance with the provisions of the Companies Act. Again, it is submitted that participating in the AGM does not vitiate the fact that no notice was received by the petitioner No.2. Further the Respondents have failed to respond to the averment that the letter dated 08.10.2016 was refused by the Respondent Company. 31. The Petitioners again stated that the Respondents have once again responded vaguely to the averments of the petitioners. The mere fact that the petitioners have access to the minutes of the AGM dated 29.02.2012 does not prove that they had access to the statutory registers maintain by the company registers as is their right. It is also submitted the Respondents have curiously filed the financial statements of the years ending 2015 and 2017 and have failed to furnish the financial statements of the year 2016. 32. It is also submitted by the petitioners that the Respondents have admitted that they have refused to record the objection to the transfer of shares to Ms. L Priyadarshini in the meeting dated 29.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... las and yet they have not been impleaded as parties to the petition. Thus, the petition deserves to be dismissed for non-joinder of necessary and proper parties. 36. The main issue in the instant petition is regarding the transfer of 600 shares held by Respondent No.7 in February 2016 and the Board of Directors approved the transfer in accordance with the Articles of Association in a meeting held on 11.03.2016, as there is no beneficial interest in the shares held by the Respondent No.7. in any case it is also not the case of the petitioners that such interest has been notified either in accordance with the relevant provisions of the Companies Act 1956 or the Companies Act 2013. 37. The following are the reply to the allegation raised by the petitioners against the Respondent No.6: The Petitioner alleged that the Respondent No.3 to 7 colluded with Respondent No.2 and acceded to all the decisions made by the Respondent No.2. However, in another paragraph the petitioners are seen to state that the actions and decisions of the respondents No.2 could not be challenged by Respondent Nos. 3 to 7 and or any shareholders, which is nothing but self-contradictory. The Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d transfer of shares done violates AoA of the Respondent No.1 Company? 41. To arrive at a decision on the above points, we have considered the following issues raised by the Petitioners in their averments: 1. IN REGARD TO SREE VISAKH THEATRE: We have gone through the records and the counter in detail and observed that Sree Visakh Theatre was constructed during the period 1976-1978 by Respondent Nos.2 and 4. The Petitioners became shareholders of the Respondent No.1 Company in the year 2009, long after Sree Visakh Theatre was constructed. From the Records before us it is observed that Sree Visakh theatre run by R2 and R4 as a partnership firm approved by the Board of Directors of the R1 Company and ratified by the AGM. The Petitioners alleged that the revenues of Sree Visakh theatre are not being recorded in the Respondent No.1 Company, and R2 and R4 are enjoying the fruits of the revenues, without providing any material evidence to support their allegation. From the records before us, we have not come across any such allegation of this nature from any other shareholder or director in the last 40 years of existence of Sree Visakh theatre. We are unable to understand th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e businesses run by Respondent Nos.8 to 10 are being operated without any contractual agreement and no lease or license payments are received by the Respondent No.1 Company. In this also, no documentary evidence was produced by petitioners to prove their allegation. The Counsel for the Respondents stated that the allegation is completely false and that the R8 to R10 are not using the Sree Kumar theatre facilities for their personal businesses. Further, the counsel for the respondents also stated that Saran Creations is a serial production house and its shooting and other activities are held in different locations. Respondent No.9 is not connected to Visakh Outdoors, which is actually owned by Respondent No.2. Respondent No.10 is not in occupation of any part of Sree Kumar theatre. In this issue also, we have not come across any allegation on this count from any quarter in the Respondent No1 Company. In all the above three issues allegations raised by the petitioners are not supported by any documentary evidence. Under such circumstances, we cannot decide that there is oppression and mismanagement in the Respondent Company against minority shareholders, as alleged. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contravention of AoA. And 600 shares transferred from Respondent No.7 to L. Priyadarshini without any approval by the Board of Directors of the Respondent No.1 Company and resolution pertaining to such transfer was never tabled for approval at the meeting of the Board of Directors on 11.03.2016. According to the AoA, the transfer of shares should be as under: No transfer of any shares in the capital of the company to any person not already a member of the company or personal representative of a member or beneficiary under the will of a member shall be made of recognised by the company. The directors may without assigning any reason decline to give their sanction to any transfer and may suspend the registration of transfers during the fourteen days immediately preceding the ordinary general meeting in each year On a plain reading of the AOA clearly shown that personal representative of a member or beneficiary under the will of a member are entitled for transfer of shares from the company. In the instant case late Subramoniam Shakthidar passed away intestate and his 650 shares transmitted to the legal heirs of the deceased member as per Law of Succession. As the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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