9911796707
TMI Blog2015 (12) TMI 1857X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of the company by investing ₹ 50,000/-. It is also evident from the balance sheet that the contribution to the shares by the petitioner only to the extent of ₹ 50,000/-. The annual returns for the year ended 30.09.2004 reflects the shareholding pattern of the petitioner and the 2nd respondent. The first allotment of shares was made on 05.12.2004 to an extent of 15.000 equity shares of ₹ 10/- each. The respondents have filed Form 2 showing the allotment of shares to the persons as described in form 2. From the perusal of minutes of the Board meeting dated 05.12.2004 it is also evident that the shares have been allotted to an extent of 15,000 equity shares to various persons. The respondents timber contended that the petitioner vide his letter dated 05.12.2004 addressed to the 2nd respondent wherein it is stated that he has no money and requested the respondent to put her money in the company and stated that he in the capacity as Managing Director will give lull support. To establish the fact that the petitioner in the capacity as managing director addressed a letter dated 04.07.2005 to the flat allottees of AIBOC wherein he stated that we wish to state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the Respondents : M. Anant, Advocate. ORDER Kanthi Narahari, Member (J) 1. The company petition was filed by invoking various provisions of the Companies Act, 1956 alleging certain acts of oppression and mismanagement in the affairs of the company and sought various reliefs. The PCS appeared for the petitioner narrated the brief facts of the case. He submitted that the company was incorporated by the petitioner and the 2nd respondent herein and the petitioner was appointed as Managing Director on 01.04.2003 for a period of 5 years. Therefore he is holding the position of managing director till the date of filing of this petition. The 2nd respondent is another director of the R1 Company. The petitioner and the 2nd respondent are holding 5000 shares each in the R1 Company. The authorized share capital of the company is ₹ 5,00,000/- divided into 5000 equity shares of ₹ 10/- each. The paid up share capital of the company is ₹ 1,00,000/- divided into 10,000 equity shares of ₹ 10/- each. M/s. Sri Krishna Tiles Potteries (Madras) Pvt. Ltd. (R11) is the owner of property to an extent of 34.04 acres in Survey No. 227/3, 229/2, 230/1, 230/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ximately including the above said advance for a sum of ₹ 2,54,67,091/- in developing the above project and maintaining the above property. However, due to enormous delay on the part of M/s. Sri Krishna Tiles Potteries (Madras) Pvt. Ltd. Mr. A.R. Santhana Krishnan, and Mrs. Rathika Santhanakrishnan getting the approval for layout, there were delay in constructing the plots and handing over the possession to the purchasers Therefore, the petitioner made refund of a sum of ₹ 21,71,360/- to 47 allottees out of the 146 allottees. Further, a partial refund of ₹ 3,00,000/- made to 4 allottees. The petitioner submits that since the prospective purchasers started demanding the refund of advance money with interest due to the delay in handing over the possession, the petitioner has decided to refund the advance amount received from them along with 6% interest on the payment made by them. The petitioner heard from some of the purchaser that M/s. Sri Krishna Tiles Potteries (Madras) Pvt. Ltd. Mr. A.R. Santhana Krishnan and Mrs. Rathika Santhanakrishnan are also negotiating with them for refunding the advances, sale consideration received from them by the R1 Company. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectfully submits that as on the date of 05.01.2005 only two shareholders and two directors in the company, namely the petitioner and the 2nd respondent. Therefore, as a shareholder and director, I submit that on 05.01.2005 there was no allotment of shares either at the board meeting or at the shareholders meeting. It is a fabricated documents filed by the 2nd respondent at Registrar of Companies, Chennai. It is pertinent to mention here, that the fabricated return of allotment was filed on 08.07.2005 at Registrar of Companies, Chennai. (c) The 2nd respondent filed a false return of allotment of shares dated 20.02.2005 to the extent of 15,000 equity shares of ₹ 10/- each. The petitioner respectfully submits that as on the date of 20.02.2005 only two shareholders and two directors in the company, namely the petitioner and the 2nd respondent. Therefore as a shareholder and director, I submit that on 20.02.2005 there was no allotment of shares either at the board meeting or at the shareholders meeting. It is a fabricated documents filed by the 2nd respondent at Registrar of Companies, Chennai. It is pertinent to mention here, that the fabricated return of allotment was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged board meeting dated 07.07.2005 for removal of the petitioner as managing director. Therefore, there were no validly held meeting and all the alleged decisions taken in the above meetings will become void. Without prejudice to the above contention, it is respectfully submitted that for any issue of further shares it should be first offered to the existing shareholders as per the Article 8 of the Articles of Association of the company. Further the Hon'ble Supreme Court of India also held in the latest Judgments that though section 81 of Companies Act. 1956 is not applicable to private companies, it should be followed at the time of issue of new shares by the private limited company also. The petitioner submits that no such offer was made at any point of time in all these alleged allotment made by the R1 Company. All the documents filed at Registrar of Companies, Chennai are false and fabricated by the 2nd respondent for her own benefit and for the benefit of her associates. The petitioner reasonably apprehends that above oppressive acts were made against the petitioner with intention to cheat the petitioner and to alienate the 60 grounds of land by violating the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a civil court for the purpose of certain reliefs, and that he has always an alternate remedy without wasting much of the time of this Hon'ble Bench. Further the respondents submit that the petitioner has also stated that he took possession of land to the extent of 308 grounds for developing, which is totally false, and for this purpose alone, he is liable for criminal action and the petition should be dismissed. It is an evidence that the character of the petitioner who is habitual of making such statements without an iota of truth in them. Regarding the agreement dated 24.06.2002 in respect of 60 grounds out of 308 grounds is a blatant lie and there is no such agreement which has been entered into separately for 60 grounds as stated by the petitioner. The annexure to petition in pg 58 to 68 if carefully studied, will reveal that in pg 61 at para 4, it is clearly stated that the facilitator who is the R1 Company is required to identify, locate a person for developing or otherwise acquiring the Schedule B property as a whole or for individual residences or commercial units to be constructed on the property mentioned in Schedule B only. Further the description of Schedule B as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has treated the advance money received from outsiders as his investment. The balance sheet annexed to this counter show only ₹ 5 lakhs as paid up capital, which is very much known, to the petitioner and nowhere a reference about petitioner's investments into this company has been made. It clearly shows that the statements made are a carefully selected for the purpose of making the petition before this Hon'ble Bench and to paint a picture that the respondents have wronged the petitioner. Further the petitioner has stated that an amount of ₹ 24.71 lakhs was refunded by him to the Allottees in his individual capacity. The petitioner has brought in only ₹ 50.000/- to the R1 Company and not a single pie more than that. But he has misled the Hon'ble Bench with the details, so that the petition can be taken for his advantage and craving the mercy of Hon'ble Bench. Further it is very pertinent to note that an amount of ₹ 24.71 lakhs was returned at the time of booking itself since the buyers claimed for the refund for their personal reason. No interest was given at that time. The question of interest along with the payment does not arise and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o attempt to understand his duties as managing director (as he then was) of the company. He remained silent and chose not to do anything because the sole motive was to pile up lot of cases against the company so that his vindictive purpose could be achieved. Instead of attending to the crisis situation, the petitioner only threatened the employees about non availability of funds and that no payment could be made on 10th. The 5th respondent and the 2nd respondent requested the petitioner to arrange for funds or atleast arrange for some urban property as collateral so that they could borrow funds and repay the AIBOC enclave flat Allottees dues which amounted to ₹ 2,29,71,775/- plus ₹ 39,15,470/- interest (Total ₹ 2,68,87,245/-). The petitioner not only expressed his inability to arrange funds but advised the other directors and landowner not to pay the Allottees and thus cheat the public. But the land owners namely R11 Company, 5th respondent and 2nd respondent hail from a very respectable family in Chennai, who immediately brushed aside the suggestions of the petitioner and had taken over the entire burden of repayment to public. The public who invested their hard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the records of the company till date and he was very much present till 07.07.2005 as stated by him in the petition. In fact on 07.07.2005 the petitioner was informed about his removal and the petitioner himself had asked for the letter to be sent to his residence and also through speed post so that it can be recorded. On 11.07.2005 the complaint given by the petitioner before additional Chief Metropolitan Magistrate court is based on false statements and Central Crime Branch. Chennai is dealing with this complaint. The petitioner as already stated (supra), is a habitual offender and deceived public who invested funds in his Visudha Finance , the cases of which are pending against him with EOW, and similarly a matter on Sai High Value properties is pending with CCB. The petitioner had made statement hiding all the background about himself before this Hon'ble Bench and the respondent deems it fit to place these facts about the conduct of the petitioner before this Hon'ble Bench. The filing of returns with the Registrar of Companies has nothing to do with filing a caveat as it is only for protection so that the petitioner does not take any ex parte order against the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther with the 2nd respondent, further, the petitioner also cannot state that he had partial knowledge of the happenings at the board meeting where only he and 2nd respondent were present and that he is aware only about the appointment as managing director but not about the revocation of the powers to him to deal with any of the agreements that were entered into earlier. Further it is pertinent to place before this Hon'ble Bench that the petitioner in the first board meeting had appointed himself as managing director for a period of one year (copies of minutes enclosed) dated 14.06.2002 enclosed as annexure-2. This will prove that the company has no habit of sending notices of Board meetings and maintenance of attendance sheets since incorporation. The petitioner has referred to Article 8 of the Articles of Association whereas he has conveniently not referred to Article 5, which is above Article 8. According to Article 5, shares shall be under the control and disposal of the directors who may allot the same to such persons on such terms and conditions and at such terms either at a premium or otherwise, fully or partly paid up, at the discretion of the directors, Plain reading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consent of the petitioner. Sufficient proof is enclosed herewith to show that it was he who had again brought them with the concurrence of 2nd respondent, letter addressed to postal authorities dated 29.10.2004 authorising the new directors to receive post on behalf of the R1 Company itself will testify the consent of the petitioner for the appointment of the directors (Annexure-5). Further a documentary proof from the Bank of self-withdrawal by the petitioner of cheques which were signed by both petitioner and 2nd respondent and en-cashed with the bank on same date will prove the presence of the petitioner at the board meeting dated 27.10.2004. The respondents submit that the petitioners have not established any act of oppression and mismanagement and none of the acts complained in the petition amounts to any act of oppression or mismanagement and hence the company's affairs are not being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members and there is no just and equitable ground for winding up the company and hence the petition is liable to be dismissed with costs. 5. The 11th respondent filed counter to the petition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After analysing the pleadings the only issues which are felt for consideration and need to be determined are (1) Whether the Board resolution passed on 27.10.2004 duly appointing two new directors is legal and valid? (2) Whether the allotment of shares made on 05.12.2004 to the extent of 15,000 equity shares, 05.01.2005 to the extent of 10,000 equity shares and on 20.02.2005 to the extent of 15,000 equity shares are legal and valid? (3) Whether the Board resolution passed on 07.07.2005 for the removal of petitioner as MP is legal and valid? (4) To what relief? 7. Now I deal with the issue No. 1: The R1 Company was incorporated on 14.06.2002. The petitioner and the 2nd respondent are only the subscribers to the Memorandum duly subscribing 5000 shares each. As per the articles the petitioner and the 2nd respondent are only the first directors of the R1 Company, Clause 32 of the articles specifically states that the petitioner and the 2nd respondent shall become the first directors of the company and hold office for life, unless they voluntarily retire or resign. As per clause 33 of the Articles the affairs of the company shall be managed by the Board of directors of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Mr. S. Natarajan, to receive all postal covers, registered post and tapals on behalf of the company. There is endorsement from the Sub Post Master Office on 29.10.2004. The said letter is extracted hereunder: October 29, 2004 To The Post Master Greams Road, Chennai 600 006 Dear Sir, Sub: Authorization to receive Postal covers - Reg. With reference to the above, we hereby authorize Mr. S. Ramaswamy and/or Mr. S. Natarajan Directors of the company to receive all postal covers, registered post and tapals on behalf of the company. This is for your information records. Yours truly. For SAI SRI KRISHNA PROPERTIES FACILITAORS P. LTD. M. Vishwanathan (Managing Director) From the said letter it is crystal clear that the petitioner was present in the Board meeting dated 27.10.2004 and he is party to the decisions including appointment of two directors on the Board of the R1 Company, therefore the petitioner is acquiesced to all the decisions taken in the Board meetings, Admittedly the company is having four directors. Therefore the petitioner now cannot contend that he has not aware of the above Board meeting which is completely blatant li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so evident that the shares have been allotted to an extent of 15,000 equity shares to various persons. The respondents timber contended that the petitioner vide his letter dated 05.12.2004 addressed to the 2nd respondent wherein it is stated that he has no money and requested the respondent to put her money in the company and stated that he in the capacity as Managing Director will give lull support. The Following of the extract of the letter of the petitioner dated 05.12.2004. From Mr. M. Viswanathan Managing Director To Mrs. Radhika Santhanakrishnan Director of Sai. Sri Krishna Properties Facilitators Pvt. Ltd. Chennai Madam, Refer OUT meetings on discussion of funds requirement. I have no money. I request you to put your money for emergency. Whatever the money you have already given to the company you can treat it in any manner you want. However, as a managing director of the company 1 will try to give my full support to you. Yours truly. (Viswanathan) From the above letter the intention of the petitioner is very clear that he is not in a position to bring the money into the company and has given his consent to the respondent to act in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company does not apply to private limited companies, the directors in a private limited company are expected to make a disclosure to the shareholders of such a company when further shares are being issued. This requirement flows from their duly to act in good faith and make full disclosure to the shareholders regarding affairs of a company . As stated supra in the present case there are only two shareholders prior to the first allotment of shares. The petitioner himself vide his letter dated 05.12.2004 addressed to the company expressed his inability to bring money and stated that he has no money. Further he referred to the discussions taken place regarding the requirement of funds. Therefore the company has complied with the clauses of the articles in respect of allotment of shares. Further the company has made full disclosure to the shareholder i.e. the petitioner regarding the allotment of shares and the petitioner being the managing director is well aware of the affairs of the company. To establish the fact that the petitioner in the capacity as managing director addressed a letter dated 04.07.2005 to the flat allottees of AIBOC wherein he stated that we wish to state th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a duly to make full and honest disclosure to the shareholders regarding all important matters relating to the company . The petitioner is not only a shareholder but was continuing as managing director of the company. As held by the Hon'ble Supreme Court herein above, the petitioner was a party to the decision and acted on behalf of the company in a fiduciary capacity. It is the duty of the director to make full and honest disclosure to the shareholders regarding all important matters relating to the affairs of the company, Admittedly prior to first allotment, the company has only two shareholders and two directors i.e. the petitioner and the 2nd respondent. The petitioner is aware of all the acts and he is party to the acts and given his consent according to which the company has taken its decisions in its best interest. In view of the aforesaid reasons the allotment of shares made by the company are legal and valid. Accordingly, the issue is answered. 9. Now I deal with the issue No. 3: The grievance of the petitioner is that he was continuing as managing director of the R1 Company and he was allegedly removed from the post of managing director in a Board meeting held o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l elements and history sheeters, which is totally detrimental to interest of the company and its stake holders . The Board has unanimously resolved that in pursuant to Regulation 42 of AOA of the company, the office of the managing director occupied by Mr. M. Viswanathan be and is hereby terminated but shall continue as director of the company. The clause 42 of the Articles of Association is extracted hereunder for better appreciation: Subject to the provisions or the Companies Act, 1956 the directors may from time to time appoint one or more of their body to the office of the Chairman. Vice Chairman, Managing Director or directors in charge for such period and terms and with such power at such remuneration (whether by way of salary or commission or participation in profits or partly in one way or partly in another) as they think fit and may remove or dismiss him/her or them from office and appoint another or other in his her or their place or places His/Her their office shall be liable to determination ipso facto of he/she/they cease from an cause to be a director of the company. The Board may from time to time entrust to and confer upon a managing director or whole time di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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