9911796707
TMI Blog2024 (9) TMI 1612X X X X Extracts X X X X X X X X Extracts X X X X ..... both the parties and after perusal of the records as mentioned, the petitioner has not pointed out any irregularity in the process of sale and the main contention of the petitioner is about the valuation of the land. The Petitioners have failed to point out any irregularity in the sale of land assets but for the price at which they are sold. As far as the issue of selling properties at lower than market value is concerned, there are no illegality in it since the stamp duty has been paid at applicable valuation and rates. However, the moot question before us is whether this act of selling land at a price lower than the market rate is an act of oppression and mismanagement. Thus it is a common practice that many companies/ individuals take conscious decisions to sell property at a price lower than the market value in view of exigencies and other factors. It is clear from the facts produced before us that Company was in urgent need of funds at that point of time - keeping in view that consent of Petitioner no 1 was also there in fixing the cut off sale price, there are no act of oppression and mismanagement for selling the land parcels at a price lower than market price. Therefore, k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents 2 and 3 are prejudicial to the interest of the respondent no.1 Company and are oppressive against the petitioners. (b) Declare that the respondents 2 and 3 have failed in their fiduciary duties towards the respondent no.1 company and direct them to reimburse to the company the amount siphoned by them. (c) Declare the sale of land admeasuring 9 acres 39 guntas (equivalent to 48,279 square yards or 40,367 square yards) at Survey No.146/E and 147/E situated at Thimmapur Village, Kothur Gram Panchayat Mandal, Mahaboobnagar District, Andhra Pradesh by respondent no.2 and 3 is illegal and without authority and is against the interest of the respondent no.1 company and is oppressive against these petitioners and set aside the sale deed dated 7th February 2007 between the company and the respondent no.29. (d) Declare the sale of land admeasuring 9 acres 39 guntas (equivalent to 48,279 square yards or 40,367 square yards) at Survey No.146/A, 146/AA, 146/EE, 147/A, 147/AA, 147/EE and 147/U situated at Thimmapur Village, Kothur Village, Kothur Gram Panchayat Mandal, Mahaboobnagar District, Andhra Pradesh by respondent no.2 and 3 is illegal and without authority and is against the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sors and they mismanaged the affairs of the company; and permanently injunct them from interfering in the day-to-day affairs and management of the company and pass appropriate orders to punish them invoking Schedule XI and section 539 to 544 of the Companies Act, 1956. (p) Punish respondents no.2, 3 and 4 for their continued illegal acts and being accessory to production of fraudulent documents as per provisions of Criminal Procedure Code and also prohibit them from holding any post of Directorship or any office in the respondent no.1 company. (q) To protect the petitioners group, to have at least equal representation in the Board; and in respect of management of affairs of respondent no.1 company, the petitioners shall have at least equal representation (as Managing Director/ Wholetime Director) in all decisions of the company including but not limited to signing of each and every cheque for and on behalf of the respondent no.1 company and the respondent no.1 company mandatorily to take their consent in all policy decisions, and operations of the company and to this effect amend the Articles of Association of the company. (r) Declare that respondents 2 and 3 as oppressors and wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47/A, 147/AA, 147/EE and 147/U situated at Thimmapur Village, Kothur Village, Kothur Gram Panchayat Mandal, Mahaboobnagar District, Andhra Pradesh. (c) Freezing the voting rights of illegal allotments of 17,29,000 equity shares made on 19th May 2008 (4,56,000 shares) 10th September 2008 (9,39,000 shares) and 13th October 2008 (3,34,000 shares) and not to create any charge, lien or alienate in any manner in respect of these shares till the disposal of this petition. (d) Order that no rights, bonus, dividends would be declared or distributed in respect of all the above challenged shares without the leave of this bench and not to change the shareholding pattern till the disposal of this petition. (e) Order not to conduct any General Body meeting of shareholders till the disposal of this petition. (f) Order all future notices, communications to shareholders particularly to the petitioners hereinafter be given only by way of registered post with acknowledgement due by the first respondent no.1 company. (g) Appoint an independent Administrator to take over the affairs of the respondent no.1 company till the final disposal of this company petition and restrain the respondents from represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company in question. Respondents no.2 and 3 are the Directors of the respondent-1 company. Respondents no.4 to 29 are the beneficiaries of the impugned sale transaction. Respondent no.30 is the Registrar of Companies, Hyderabad and respondent no.31 is the Regional Director, Chennai. 3.5 Respondent no.2 (in his individual capacity as well as HUF) and respondent no.3 are holding 25.63% of total paid up capital of respondent no.1-company consisting of 45,41,200 equity shares of Rs.10/- each fully paid up before the impugned allotment. 3.6 It is alleged in the petition that respondents no.2 and 3 have illegally sold different parcels of land as described in paras no.3 and 4 (pages 17, 18 and 19 of the amended memo of petition) to respondent no.29, who is the nephew (sister s son) of respondent No.2. One such land admeasuring 9 acres and 39 guntas was sold at a throw away price of Rs.3,99,000/-, which had market value at the relevant time of s.25 lacs per acre. Another land of the same extent also sold at the same price of Rs.3,99,000/- which too had market value of Rs.25 lacs per acre at the time of such alleged illegal disposal. Copies of such sale deeds are annexed at Annexures A-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form No.23 (ANNEXURE-A9) stating that an extraordinary general meeting was held on 24.03.2008 for various purposes, such as, to remove petitioner no.1 as Director u/s 284, to appoint respondent no.4 as Director and to amend the Articles of Association of the company. However, in fact, no such extraordinary general meeting was held or even if it is assumed that it was held it was not validly held as notice calling for such meeting was not given. 3.11 In the said so called extraordinary general meeting dated 24.03.2008 petitioner no.1 was removed as Director, respondent no.4 was appointed as Director, Articles of Association were amended to facilitate calling general meetings and to facilitate the Board to issue further shares. It is averred Article 14 was amended so as to eliminate the need of getting approval of the petitioners to issue shares and by such amendment shares could be issued unilaterally. Such acts of the respondents amount to acts of oppression, it is contended. 3.12 ALLEGED EXTRAORDINARY GENERAL MEETING DATED 19.05.2008 This meeting too is alleged to have been convened without notice to the petitioners. 3.13 Respondents no.2 and 3 have filed From No.23 (ANNEXURE A-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led Balance Sheet (ANNEXURE A-12) and Annual Return (ANNEXURE A-2, page 67) for the year ended on 31.03.2007 giving an illusion that Annual General Meeting was held on 29.09.2007 and the accounts and the accounts were adopted at the Board Meeting held on 01.09.2007. It is contended that as a matter of fact the petitioners have never received notice calling Annual General Meeting dated 29.09.2007. 3.19 ALLEGED MINUTES OF BOARD MEETING DATED 04.01.2008. The respondents have fabricated minutes of the alleged Board meeting dated 04.01.2008 projecting that shares of Mr. Kailash Narayan Bhangadiya were transferred to respondent no.2. 3.20 ALLEGED ANNUAL GENERAL MEETINGS DATED 29.09.2007 AND 30.09.2008. The respondents have prepared Annual Return for the years 2007 and 2008 based on Annual General Meetings held on 29.09.2007 and 24.03.2008/ 30.0.2008, which were never convened. Though the respondents could fabricate purported notices and agenda papers they could not produce acknowledgement receipts signed by the addressees. 3.21 It is averred that though the acts of the respondents are harsh, burdensome and oppressive and situation warrants the winding up of respondent No.1 Company, but d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llateral securities in favour of Bank loan borrowed by respondent no.1- company. 4.6 It is submitted in para 8 of the counter that respondent no.3 too gave similar contributions for establishment of respondent no.1-company. In this para the deponent was critical of petitioner no.1 failing to revive personal guarantees. The deponent while giving figures of losses sustained by the respondent-company, has attributed causes of such losses sustained by respondent no.1-company and proceedings faced by respondent no.1- company before DRT, to the adamance of petitioner no.1. The deponent has flatly denied that no action of the respondents amounts to suppression of fact or fraud and invocation of sections 397 and 398 of the Act is not warranted. 4.7 It is submitted in para 9 that the respondent- company was leased out to Messrs Padmavatahi Ispat at the instance of petitioner no.1, whose brother in law, Shri Bharat Kumar Sontholia was one of the partners of the said firm. Petitioner entered into conspiracy with the said firm and misappropriated assets of respondent no.1-company. It is alleged that petitioner no.1 has taken undue advantage of the hope and trust reposed in him and has misused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the company was leased out to M/s Padmavathi Ispat at the instance of petitioner no.1. It is alleged in this para that it was respondent no.2, who has unilaterally and without knowledge of the petitioners given respondent no.1- copmany on lease to said M/s Padmavati Ispat. It is submitted that respondent no.1- company despite doing good business had sustained huge losses because of betrayal of the respondents. 5.5 On page 32 of the rejoinder it is submitted that the Board Meetings dated 29.09.2007, 28.03.2008 and 19.05.2008 stated to have been held are fictitious. The deponent pleads ignorance of any notice having been received of such meetings. 5.6 On page 35 of the rejoinder it is alleged that what they have received through Registered Post Acknowledgement Due was confirmation letter for income tax rather than Notice to EGM . 5.7 On page 36 of the rejoinder the petitioners relied on para 12 of the counter, which reads as under: .. .. The removal of the first petitioner is due to the reason that a special notice u/s 284 r/w sec.190 of the Companies Ac, 1956 was issued by two of the shareholders and on the basis of the said notice, EGM was held on 24/3/2008 which was informed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has filed Partition Suit being OS No.262 of 2008 before the Rangareddy District Court in March 2008. It is believed by the deponent in the counter that the said institution of the said partition suit led to present proceedings. 6.7 It is denied as factually incorrect that the petitioners together hold 29.57% stake in the capital of respondent no.1-company and 1st Respondent and associates only 25.63%. 6.8 In para 13 of the counter it is stated certain lands were sold to respondent no.29 as per the prevailing market rate relevant at the time of agreement. Even respondent no.29 was required to pay consideration higher than the guideline values because the Government has increased guideline value of lands. The allegation of loss caused to respondent no.1- company due to said transaction is tried to be disproved in para 13 of the counter. 6.9 In para 14 of the counter it is reiterated that the land in question was sold at then prevailing market price and as per the guideline value. It is claimed that the company has been benefited with said sale. It is claimed in this para that respondent no.1- company has been promoted by respondent no.2 and made all contributions by arranging loan, g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 the respondents have gained time for fabricating and manipulating the minutes and the other statutory records to suit their requirements in order to defend their illegal and oppressive actions. The respondents thereby destroyed the Board Meeting Attendance Registers which evidences the dates of Board Meeting and details of the Directors present. 7.2 The respondents have fabricated the notices, falsely claiming that they have been hand delivered. 7.3 With regard to share holding of the respondents it is submitted that the petitioners are holding 13,40,200 shares amounting to 29.57% and respondents No. 2 and 3 along with Jitender Kumar Kedia (HUF) are holding 11,63,800 equity shares amounting to 25.63% before the impugned Allotments made on 19.05.2008, 10.09.2008 and 13.10.2008. (Para 5) 7.4 It is stated that Binjusaria Solvents Private Limited has given loan to respondent No.1 Company and the outstanding due from it as on 18.10.2005 was Rs. 37,54,133/-. The Respondent No.1 Company has to receive an amount of Rs. 36,31,853/- from M/s Binju Metal and Alloy Industries Private Limited. On 18.10.2005 respondent no.1 company has directed M/s Binju Metal and Alloy Industries Private L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion filed by petitioner on 02.05.2023 The petitioners have recapitulated all the allegations and submissions already made in the petition, however they have submitted the summary of acts of oppression and mismanagement which is captured as under: Some acts of oppression and mismanagement are Submitted: 8.1. Fabrication of Statutory Records : i. The CP 27 of 2009 dated 24.03.2009 was listed on 31.03.2009. On 31.03.2009 Hon'ble CLB directed the respondents to produce statutory records to the Bench officer by 15.04.2009. But Respondents did not produce the same. ii. On 15.04.2009 Hon'ble CLB directed produce statutory records by 22.04.2009 for inspection. 22.04.2009 Hon'ble CLB records failure of the respondents regarding compliance of the previous order. Appoints and Advocate Commissioner to authenticate the statutory records and books. The specific observations are: it is observed that the company failed in spite of opportunities awarded by this Bench in terms of the orders dated 31.03.2009 and 15.04.2009 to produce statutory records before the bench. In view of this Shri. Sai Srinivasa Raju, learned chartered accountant is authorized to authenticate the statutory record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued and two separate meetings claims to have conducted one at 11.00 am and the other one at 12.30. This clearly demonstrates the meetings are fabricated. 9-402004(page 258 of petition). It is observed that in board meeting held on 04.01.2008 5,00,000 shares held by Kailash Narayan Bagadia was transferred to R2 (see page 273 of annexure to petition). On 28.04.2007 5,00,000 shares transferred to Kailash Narayan Bangadia but there is no board meeting on that day. On 04.01.2008 Kailash Nayaran Bangadia's shares were transferred to Jitendra Kedia without complying with the provisions of articles. The reply of respondent is untenable in para 31 of their counter ...it is only a case of approval of the transfer of shares which is a ministerial act... Page 8 of the rejoinder, para 3 last few lines, S. K. Rathi falsely claims to have personally delivered to all the shareholders notices of the General Body Meetings also. This clearly shows that the Respondents have completely fabricated and manipulated the records and documents to suit their illegal acts. These are not genuine documents and petitioners are disputing the same. The Respondents may be ordered to produce these disputed do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold at 91 paisa per sq. feet. It is a throw away price and ridiculous price. The Petitioner is willing to acquire the same land at 10 times more than the cost of the sale (page 28 of the Rejoinder). f. Comment of State Bank of India in its application before DRT at para 5.16 (page 120 of the Petition): 5.16. It is further come to light that the ra defendant has deliberately sold part of the mortgaged property i.e., Application `C' schedule property with dishonest intentions in favour of 5th defendant. The 5th defendant is there for impleaded as formal party to avoid possible multifarious litigations. The copies of sale deeds dated 07.02.2007 gathered by the Applicant Bank bearing Document Nos. 2728/2007 and 2729/2007 of SRO Shadnagar are filed herewith as Document Nos. 28 and 29, the said Sale deeds are sham, bogus and created with false recitals of consideration and they are invalid and void as against the mortgage rights of the Bank. Further Bank observes in page 121 of petition as under: 5.17 . the 2nd defendant has been making false representations that he would regularize the accounts and resolve the other issues but he has not taken any positive action and has been drag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accused A-1 to A-17 and remanded them to judicial custody till 17.04.2008 (please refer page 161). The FIR filed by the lessee could be seen at page 164 of annexure to petition. Conduct of R2 who acts against the public interest is demonstrated in page 160: .... On the request of the complaint, the A-I gave his original license with a letter of cancellation duly signed by him with a request not to submit the same to excise department because one bank recovery case was pending in Debt Recovery Tribunal as the whole property is under mortgage with state bank of India and he has to obtain permission from the said bank and also stated that he may lose modvat benefit to his unit iv. At para 16 of the Counter R-2 alleges that the lease was given on the instance of the petitioner, the same was denied at page 41. v. At para 16 of the Counter R-2 further alleges .... After signing of the lease deed, the said M/s. Padmavathi Ispat failed to take possession of the leased out factory... This statement is blatant lie. The previous paragraphs establish that possession was handed over and the lessee was in possession even as late as 30.03.2008. vi. In the fabricated board meeting R2 records that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies Act 1956) to the lc Petitioner whose office was sought to be removed. Section 284(2) special notice not provided. Section 284 (3) not complied. Notice of removal not individually served to the petitioner. Explanatory statement is not attached as mandated under Section 173 not complied with. Hence all the resolutions passed thereat are illegal and non est in law. Even the respondents at their counter at page 222 to 224 had not attached the mandatory documents. In view of the above all the resolutions passed at 24.03.2008 are bad in law. Even it is important to note that the respondents have not produced any evidence of serving the notice for the board meeting held on 22.02.2008 in which the alleged EGM notice was approved. Since no notice was given to Petitioner for the board meeting held on 22.02.2008 the resolution passed thereat including approval of EGM notice are bad at law. (Apex court in Parameshwari prasad Guptas vs. uoi case) c. In page 267 R2 claims that the company has received a special notice on 13.02.2008 signed by one Mrs. Ritu Agarwal. This notice was never served to the petitioner. One of the reasons for special notice is .... I also understand that Mr. Aru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was done with following serious irregularities: Some of the existing shareholders have not been offered any shares at all There is no proportionate offer to the existing shareholders 21 rank outsiders have been bought in as new shareholders (Respondent No. 7 to 27). These persons are cohorts of the Second Respondent This allotment was made after fraudulently/ illegally removing the Petitioner No. 1 from the Directorship of the Respondent No. 1 Company After fraudulently / illegally amending the Articles of Association overlooking shareholders rights Ratio in Dale and Carrington violated) Due to above illegal allotments the percentage of shareholding have come from 29.57% to 21.41%. 8.6. Syphoning of money Manipulation of Balance Sheets. i. Kindly refer Pages 58, 59, 60 and 61 of the Rejoinder, the losses shown by the petitioner are due to misappropriation of funds: ii. The siphoning of funds of the company can be easily established just by pursuing the Balance Sheet filed the Respondent Company. The turnover from sale of Sponge Iron for the year 2006-07 is shown as Rs.3,50,59,325/-(Rupees Three Crores Fifty Lakhs Fifty Nine Thousand Three Hundred and Twenty Five only), however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ordering investigation under section 237 may please be granted on this ground alone. iv. From the above it is very much evident that Respondents 2 and 3 are playing fraud upon the shareholders of Respondent No. 1 by illegally diverting the monies of the Company to their account either by selling the material without actually booking the same. Even assuming, without admitting that the Percentage of Coal Consumption to Turnover from Iron ore Sale has increased to 40% in the year 2006-07 the Turnover from sponge Iron Sale should have been at Rs. 10 Crores (and not 3.5 Crores). From this it is evident the Respondents 2 and 3 have siphoned the money of the Respondent No. 1 Company at least to the tune of about Rs. 6.50 crores; Respondents 2 and 3 who have authenticated the balance sheets have carried out sales without actually booking the sales in the books of account. It is quite obvious that the sales have been affected by way of sale transactions but not accounted for in books / or expenses are inflated. R-2 and R-3 have obviously siphoned the money. Related party transaction Shubam Transoceanic Private Limited (page 40 of the Rejoinder) v. The Petitioners submits that the Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny has received money the same is a benami transaction and the Respondent should be punished for the same. The following are legal requirements for a person to become a member of the company: a. Consent to become a member in writing (share application form). b. In case of the Company Board resolution for authorising the investment in the Respondent No.1 Company. c. Duly Authenticated Memorandum and Articles of Association of that Company. viii. The Petitioners submits that the Respondents have during the year 2007-08 have diverted an amount of Rs. 65,93,102/- as unsecured loans to M/s.Shubam Transoceanic Private Limited, Company in which the Respondent No. 2 and 3 are also the Directors and Shareholders. The Respondents have done with a malafide intentions of misappropriating the funds. The respondent No.1 Company is not in the business of lending. What is a necessity to divert company's money to the group company of Respondents 2 and 3. What are the terms of lending is not known. The reason for not charging interest is quite obvious and against the interest of the other shareholders. 8.7. False statement provided by R2 in CA 20: The perjury committed by the respondent no. 2 Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as share application money pending allotment, should be displayed in the balance sheet. The perusal of the balance sheet would reveal that the same are not reflected in those companies. Hence it is categorically clear R2 representing R1 company in the capacity of Managing Director has made willful false statement under an affidavit that the company has received Rs. 50,00,000/- towards share application money from those two companies. When confronted with this in the counter R2 states simply states that the investments have been received by the company and reflected in its bank statement. vii. R1 Company vehemently states that all shares application monies received from investors are reflected in the bank statements but they have not provided the bank statements to prove their claim. In the only bank statement they have provided in their counter to CA 51 of 2010, reflects only the following; Dated Particulars Amount 20.03.2009 By Clg/31024 25,00,000 05.03.2009 By Clg/31032 15,00,000 05.03.2009 By Clg/31036 10,00,000 viii. One would be shocked to note the negotiable instruments which were are in sequence. Certainly it is impossible to admit that two companies i.e., Dhanvidya Impe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, please refer page 268 of annexure to petition. MD's remuneration increased from Rs. 50,000 to Rs. 2,00,000 per month. iii. No AGM notices were received for the year 2007 -- 2008 (see page 260) on behalf of the petitioner one Mrs. S. K. Rathi acknowledges. iv. For AGM 30.09.2008 Respondents have claimed to have served notice to the petitioners by UCP dated 06.09.2008. 8.10 Lease of Tipper Please refer Page 267 of petition lease of tipper from R-2 @ 50,000/- per month, No Section 297 prior approval from the Central Government as per Companies Act 1956 obtained. 9. Brief written submission dated 18.05.2023 by respondents 9.1 Main Grievance of the Petitioners:- A. The land of the Company was illegally sold and sought declaration and cancellation of sale deeds dated 07-02-2007. B. allotment of 17,29,000 equity shares made on 19th May, 2008, 10th September, 2008 and 13th October,2008 to the respondents is illegal and sought order to rectify Register of Members. C. Appointment of Respondent No.4 as Director of the Company is made in violation of provisions of the Companies Act, 1956, hence illegal and void ab initio. D. Removal of Petitioner No.1 as Director is against the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment. The Paid up share capital of the Company prior to allotment was 4541200 and after allotment 6270200. These shares were sold as per value at Rs.10/- each. As on the date book value of shares (Capital/ No. of Shares) was minus 5.26 rupees. This amount which was realized from allotment of shares was used solely for the repayment to secured creditors (Bank). This transaction of allotment of shares was authorized by Board of Directors in the meeting. Page 298 to 313 of main Counter. 6. The appointment of the Respondent No.4 as additional director is perfected with all legal requirements and compliances as is evident from the perusal of the record which is compiled in tabular form by the Petitioners after inspection of Company records. Page 261 to 268 of the main Petition. The procedure was followed and in the EGM conducted on 24-03-2008(at page No. 284 285 of Counter) the Respondent No.4 was appointed as director and subsequently he was resigned from the Company because of his preoccupation. 7. The notice of the meeting to consider the request of some of shareholders to remove the Petitioner No.1 was duly sent to the Petitioners by way of Registered Post Acknowledgment due as is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out issuing notices to the directors of the Company. i. The said allegations are false for the reason that till the date of removal of the 1st Petitioner as Director of the Company all notices were served in regular mode adopted by the Company. ii. To substantiate the said allegation the Petitioners fabricated and filed communications dated 23-04-2007 and 09-11-2007 expressing grievance that the Petitioner No.1 is not served notice of Board meetings from 01-08-2006. (Petitioners filed these communications at Page No.8 and 9 OF THE Counter filed in CA No.57). iii. The fabrication and falsity is evident that the Petitioner No.1 having received the notice of Board meeting Scheduled on 22-08-2006 he not only attended the Board Meeting but also signed on the resolution passed on that day.(Page No.1 of CA No. 57). iv. CA 57/2011 was filed by the Respondents to direct the Petitioners to produce notices received by the Petitioners with respect to AGM 2004-08, Board Meetings and notices of EGM held in the said period. v. The said CA was disposed of on 17-11-2016 observing that the PCS appearing for the Respondents/Petitioners not opposed the prayer sought in the application and expressed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntimation of transmission, as the case may be, was delivered to the company. (4) If (a) the name of any person (i) is, without sufficient cause, entered in the register of members of a company, or (ii) after having been entered in the register, is without sufficient cause omitted there from ; or (b) default is made, or unnecessary delay takes place, in entering in the register the fact of any person having become or ceased to be, a member [including a refusal under sub-section (1)], the person aggrieved, or any member of the company, or the company, may apply to the 2 [Tribunal] for rectification of the register. (5) The 2 [Tribunal], while dealing with an appeal preferred under sub- section (2) or an application made under subsection (4) may, after hearing the parties, either dismiss the appeal or reject the application, or by order (a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within ten days of the receipt of the order ; or (b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved. (6) The 3 [Tribunal], while acting under sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company who is in default, shall be punishable with fine which may extend to 7 [five hundred] rupees for every day during which the default continues. (13) Nothing in this section and section 108, 109 or 110 shall prejudice any power of a private company under its articles to enforce the restrictions contained therein against the right to transfer the shares of such company]. (14) In this section company means a private company and includes a private company which had become a public company by virtue of section 43A of this Act.] 111A. Rectification of register on transfer (1) In this section, unless the context otherwise requires, company means a company other than a company referred to in sub-section (14) of section 111 of this Act. (2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable : [Provided that if a company without sufficient cause refuses to register transfer of shares within two months from the date on which the instrument of transfer or the intimation of transfer, as the case may be, is delivered to the company, the transferee may appeal to the 3 [Tribunal] and it shall direct such co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a manner prejudicial to public interest or in a manner oppressive to any member or members ; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up ; the 1 [Tribunal] may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. 398. Application to [tribunal] for relief in cases of mismanagement (1) Any members of a company who complain (a) that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company ; or (b) that a material change (not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors 2 [***] or manager 3 [***] or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s much below the market price of these plots. The Learned Counsel further submitted that though the Government value was Rs.68,000/- per acre mentioned at page 83 and 401 of the petition in the sale deeds but the company passed a resolution dated 21.10.2006, to sell the land not below Rs.40,000/- per acre. The Learned Counsel further submitted that on the date of sale, this land was mortgaged to State Bank of India, but no permission was obtained from the banker for sale of the property, this is illegal as per law. To substantiate his allegation Learned Counsel referred to the valuation report of M/s.Dhanpathi Rao Associates filed by Applicant through the rejoinder, in which the valuation is shown as Rs,30,00,000/- to Rs.35,00,000/- per acre. The Learned Counsel for the petitioner finally contended that this act of selling land parcels of the Company below market price is prejudicial to the interest of the Company and to give benefit to the Respondent No.29. 15. The Learned Counsel for Petitioner would further submit that in Extra- Ordinary General Meeting (EGM) held on 24.03.2008 resolutions were passed illegally to remove Petitioner No.1 as Director, to appoint respondent no 4 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision making to sell these land assets at the alleged low price. The respondents contended that decision to sell these plots was taken to meet certain exigencies and consequently safeguard the overall interest of the Company at that point of time. Further, as per the accounting entries, the land was sold for a profit and the company also paid tax for the same. The respondent further submits that Petitioner has signed the minutes wherein the minimum sale price was fixed at Rs.40,000/- per acre because the market value as per Government records was Rs.30,300/- per acre at that time . To prove his contention about valuation ,Learned Counsel referred to the letter issued by Sub-Registrar, Shadnagar dated 18.04.2009 filed at page 214 of the Counter . The Respondent did not offer any comment on the valuation report submitted by the Petitioner contending that it was an additional document submitted with the rejoinder without obtaining leave of the Tribunal . The respondents also submitted that the property was sold subject to mortgage and the purchaser was aware of this fact. 20. The counsel for the Respondent summarily rejected the arguments put forth by Petitioners and submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited has given loan to respondent No.1 Company and the outstanding due from it as on 18.10.2005 was Rs. 37,54,133/- and the Respondent No.1 Company was to receive an amount of Rs. 36,31,853/- from M/s Binju Metal and Alloy Industries Private Limited. Therefore, on 18.10.2005 Petitioner no.1 on behalf of the company directed M/s Binju Metal and Alloy Industries Private Limited to pay the outstanding amount directly to Binjusaria Solvents Private Limited against the full and final payment of Rs. 37,54,133 (after deducting a TDS of Rs. 1,22,280/-). 22. The respondents rejected the allegation of petitioners and submitted that the respondent- company was leased out to Messrs Padmavatahi Ispat at the instance of petitioner no.1, whose brother in law, Shri Bharat Kumar Sontholia was one of the partners of the said firm. Petitioner entered into conspiracy with the said firm and misappropriated assets of respondent no.1-company. The respondents further submitted that advance amount of Rs 2.00 crores was returned to the lessee, since the lessee failed to act as per terms and conditions of the lease. Respondents clarified that lease deed 15.12.2007 registered as Doc No 1961 of 2007 was cance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lakhs per acre. Further, in the same very report , it is mentioned in bold letters that: But this land has no approach either physically or on record and also this is bounded by railway land and assigned land. Finally the valuer has assigned Rs.4.32 Crores as a realizable value of the property under valuation which is 22.45 Acres and possibly this land under alleged sale transaction is included in that . We are not inclined to rely on the valuation report filed by petitioner in view of the facts that first of all the valuation report was filed without seeking any permission from the Tribunal , secondly the valuation report contains many caveats in it and also it is not exactly for the same properties under dispute. We have also perused the resolution dated 21.10.2006 which is regarding authorization to dispose of the said land of the Company and find that this resolution authorizes Mr. Jitendra Kumar Kedia, Managing Director to negotiate and sell the above mentioned lands, execute and register the documents in favour of the prospective buyer for a price not below the market price of Rs.40,000/- per acre. We do not find any objection raised by petitioner no 1 about this alleged sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we find that the shareholders have enunciated following reasons for removal of the Petitioner from the Company. i. The Petitioner No.1 has been propagating against the Company and its Managing Director before the banker and in the market. ii. Though the Company is under severe financial crisis, but the Petitioner is insisting for refund of its unsecured loan. iii. The Petitioner No.1 declined to sign the guarantee revival letters which resulted in the bank filing recovery application before the DRT. 31. We perused proof of dispatch dated 23.02.2008 of notices of Extra- Ordinary General Meeting (EGM) to the petitioners and proof of acknowledgment dated 27.02.2008 of serving the notice of Extra- Ordinary General Meeting (EGM) and observe that the notice of meeting dated 22.02.2008 was dispatched on 23.02.2008 and acknowledged by petitioners on 27.02.2008. From this record, we can clearly make out that the notices for Extra-Ordinary General Meeting (EGM) was very much served on the petitioners and the contention of the petitioners that the acknowledgement filed pertains to some other letter pertaining to income tax issue cannot be accepted. 32. The main contention of the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion and mismanagement. In the light of the above discussion we decide that acts or conduct of respondents are not prejudicial and oppressive to the petitioners and affairs of the Company are also not being conducted in a manner prejudicial to the interests of the Company. Accordingly, the Point No1 is decided. Point 2: Whether the alleged allotment of 17,29,000 equity shares made on 19th May 2008, 10th September 2008 and 13th October 2008 to the respondents is illegal and void ab initio and thus necessitate the need for rectification of Register of Members? 36. The petitioner further submitted that respondents on 19.05.2008, 10.09.2008 and 13.10.2008 by passing Board resolutions on the said dates have irregularly allotted 466000, 939000 and 334000 shares respectively to themselves without offering shares to petitioners . The petitioners further submits that share application money of Rs 18.00 lacs is still lying with the Company. 37. The respondents counsel agreed that in total 1729000 shares were allotted to various respondents on 19.05.2008, 10.09.2008 and 13.10.2008 after following due process of law . Since, first petitioner was not director on any of the above dates as such h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal . 81. (1) Where at any time after the expiry of two years from the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares, then, -- (a) Such further shares shall be offered to the persons who, at the date of the offer, are holders of equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid-up on these shares at that date; (b) to (d) ... (1A) (2) ... (3) Nothing in this section shall apply (a) to a private company or (b) In view of the above, we decide that the alleged allotment of 17,29,000 equity shares made on 19th May 2008, 10th September 2008 and 13 th October 2008 to the respondents is not illegal and void ab initio and thus does not necessitate any need for rectification of Register of Members. Accordingly, the point no 2 is decided. 39. Therefore, in the light of our discussions and findings on the points above, we are of the firm view that present petition being devoid of any merit or substance is liable to be di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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