Company Law Board
Shri Sanjiv Kothari And Mrs. Neelam ... vs Shri Vasant Kumar Chordia, Shri Rajesh ... on 20 December, 2004
Equivalent citations: [2005]61SCL68(CLB)
ORDER
K.C. Ganjwal, Member
1. Mr. Sanjeev Kothari and Ors. have filed this petition under Sections 397, 398 read with Sections 402 and 403 of the Companies Act, 1956 against Mr. Vasant Kumar Chordia (Respondent No. 1, Rajesh Chordia (Respondent No. 2) and M/s Neelachal Plastics Pvt. Ltd. and Ors. (Respondent No. 3). Respondent No. 1 is managing director of Respondent No. 3 company. Respondent No. 2 is the son of respondent No. 1 and is a director and shareholder of the company describing himself as Executive Director. The affairs of the company are directly conducted by Respondent No. 1 and 2.
2. The petitioners together hold 19.6% of the paid up equity share capital of the Respondent No. 3 company as per annual return made upto 22.9.2001. The petitioner No. 1 has been a director of the respondent company from 5.2.1990. The petitioner No. 2 was appointed as a director of the respondent company on 31.8.2002. The respondent No. 3 company is a private limited company within the meaning of Section 3(1)(iii) of the Companies Act, 1956 and incorporated on 27.3.1989 by Registrar of Companies, Orissa. The regd. office of the company is located at Plot No. 1A, Chandaka Nucleus Complex, Sector B, Patia. Bhuvaneshwar in the state of Orissa. The authorized capital of the company is Rs. 50 lakhs consisting of Rs. 5 lakh equity shares of Rs. 10 each. The paid up share capital of the company is Rs. 36, 30,000 consisting of 3,63,000 equity shares of Rs. 10 each. The main object of the company is to carry on the business of manufacturers, processors, stockiest, importers, exporters, dealers and agents in all kinds of polymer products.
3. The learned counsel for petitioner submitted that the respondent No. 3 company was promoted by the families of the petitioners and respondents 1 and 2 to manufacture rigid PVC pipes. The arrangement among the promoters was that the day to day management of respondent No. 3 company would be in the hands of respondent No. 1. Though he would be accountable to the family of the petitioners through the Board of Directors and shareholders in the General Meeting. Accordingly, the petitioners with their relatives and friends invested about Rs. 19.89 lakhs in the equity share capital of the company. In addition, procured a sanction of equity assistance of Rs. 5 lakhs from industrial promotion and investment corporation of Orissa Ltd. and also a term loan of Rs. 79 lakhs from State level financial institutions. The family of the respondents invested to the tune of Rs. 11.39 lakhs towards the equity share capital of the company. The Board of Directors of the company was to consist of one representative of petitioner's family, one representative of respondent family, two representatives of other investors brought by the petitioner and nominee of the financial institution and banks. On 1.9.97, respondent No. 1 sought to induct his son respondent No. 2, as director of the company. Though such induction was not originally contemplated by arrangement among the promoters, respondent No. 1 pleaded that the assistance of his son to enable him to discharge his responsibilities more effectively. It was not realized at that time that this was the first attempt on the part of respondent No. 2 to usurp the control of the company. After the induction of Respondent No. 2, respondent No. 1 became very irregular in conducting Board Meetings and there was no improvement in financial performance of the company after induction of respondent No. 2 for more than 4 years. The information about the affairs of the company was always given with evasive response and the respondent started claiming that the petitioners did not have any right of information since they were in charge of the affairs of the respondent company. In view of the attitude of the respondents, the petitioner No. 1 had reasonable apprehension and doubt that respondent may not alter the shareholding pattern to gain illegal control of the company. The petitioner wrote a letter to Registrar of Companies on 20.8.2002. One of the directors Mr. RJC Newatia requested petitioner No. 1 to convene a Board Meeting of the company at Kolkata on 31.8.2002 to enable the other directors based at Kolkata to attend the Board Meeting. Accordingly, in his capacity as a director of the company, petitioner No. 1 issued a notice convening the Board Meeting on 31.8.2002 at Kolkata. Instead of attending the Board Meeting which was property convened by petitioner, respondent No. 1 wrote back to petitioner unilaterally changing the venue of the Board Meeting to Bhuvaneshwar. It is clear that the intention of the respondent No. 1 was not only to avoid attending a validly convened Board Meeting but to introduce an element of confusion by convening a parallel Board Meeting at Bhuvaneshwar. Immediately on receipt of this letter, petitioner No. 1 informed respondent No. 2 that the Board Meeting already convened at Kolkata would be held as per the notice issued, and requested him to attend the meeting alongwith with the minutes book and attendance register. The Board Meeting convened by petitioner No. 1 was duly held at Kolkata on 31.8.2002 and petitioner No. 2 was appointed as Additional Director and other person as alternate director. These appointments of directors were reported to Registrar of Companies in form No. 32 filed on 2002.
4. Subsequently, petitioner No. 1 wrote a formal letter on 5.9.2002 to respondent No. 1 seeking inspection of records and visited the Registered Office of the company but respondent No. 1 refused to produce any record for inspection. Another letter was again written on 9.9.2002 enclosing the copy of the minutes passed at the Board Meeting held on31.8.2002 at Kolkata and seeking reimbursement of the expenses incurred at the Board Meeting. In response to this letter, the respondent No. 1 informed him vide letter dated 17.9.2002 that a parallel board meeting was held on 31.8.2002 at Bhuveshwar wherein all items proposed in the original notice were discussed. The perusal of the minutes of the so called parallel meeting held on 31.8.2002 would reveal that all the proposals contained in the notice were rejected. The petitioner No. 1 also wrote to the company requiring that all the notices for the Board and General Meetings should be sent to him by Registered Post as per provisions of Section 53 of 1956 and he also enclosed a cheque of Rs. 2000/- for this purpose. The petitioner also wrote another letter dated 30.8.2002 that any further shares of the company should be issued only in proportion to the existing shareholders and no further issue of shares should be made without getting the same approved by the shareholders.
5. The Learned Counsel for petitioner further submitted that due to avoidance of holding Board Meetings and delaying the annual general meeting, petitioner also wrote a letter dated 7.10.2002 requesting that a Board Meeting should be called. Since there was no response another letter dated 19.10.2000 was written to request to convene the Extra Ordinary General Meeting. The petitioners were dismayed to receive a letter dated 2.11.2002 from respondent No. 1 stating that the holding of petitioner No. 2 was less than 10% of the paid up capital of the company on the date of requisition of the meeting. This came as a surprise as no Board Meeting or General Meeting of the respondent company had been held to issue or allot any additional shares. Later the petitioners on inspection of records of the Registrar of companies discovered that the respondents had filed form No. 32 reporting an alleged allotment of 1 lakh equity shares of Rs. 10 each at a Board Meeting alleged to have been held on 24.9.2002. As already stated the petitioner No. 1 inspite of having deposited requisite funds for service of notice by Registered Post, never received any notice for Board Meeting alleged to have been held on 24.9.2002. The alleged shares have been allotted to M/s PGI Supply and Services Pvt. Ltd. who is a major debtor of the company. The alleged shares claimed to have been allotted on 24.9.2002 by way of three cheques from the said PGL Supply and Services P. Ltd. who are in fact the internal vouchers of the above party showing the payment. The very fact that the internal voucher forms were found in the premises of Respondent No. 3 company points to manipulation, collusion and foul play on the part of respondent. The payment by cheques shown as share application money were in fact the payment against the supplies made by the above party to the respondent company. Apart form 80,000 shares allotted to a debtor company as stated, another 10,000 shares each were alleged to have been allotted to respondent No. 1 and 2 on the same date. The timing of these shares is also significant. The petitioner No. 2 requisition EOGM on 3.10.2002. The reminder was sent on 19.10.2002. The reply of the respondent No. 1 to the petitioner No. 2 is dated 2.11.2002. The Form No. 2 filed with Registrar of Companies showing the alleged allotment of shares on 24.9.2002 was actually filed on 30.10.2002. It is clearly indicates that the entire exercise of depicting the so called allotment of shares was antedated and carried out by respondents with the soul purpose of claiming that the shareholding of petitioner No. 2 in the company was below the requisite prescribed limit under Section 169 of the Companies Act, 1956.
6. The Learned Counsel further pointed out that it Is significant to note that the cheque for Rs. 200 issued by petitioner No. 1 for sending notices to him by Registered Post were never deposited by the company which clearly indicates that the respondents had no intention whatsoever to sent notices for Board Meetings by Regd. Post as requested by petitioner No. 1. It is significant that R-3 being a private limited company, none of the director is liable to retire by rotation.
7. The Learned Counsel for petitioner further submitted that petitioner No. 1 received a notice dated 27.5.2003 signed by respondent No. 1 by Regd. Post stating that the office of director held by petitioner No. 1 had become vacant w.e.f. 12.5.2003 on account of disqualification specified in clause (g) of sub Section of Section 283 of Companies Act, 1953. Shock by this development petitioner No. 1 wrote a letter dated 6.10.2003 to respondent company pointing out that he received no notice for any Board Meeting despite having requisite funds for receiving notices by Registered, post. A letter was received by petitioner No. 1 dated 22/31.7.2003 from respondent No. 1 stating that proper notices were sent and necessary documents in this regard shall be produced before the appropriate authority. The respondents have filed various documents before Registrar of Companies, Orissa indicating the Board Meeting held on 24.9.2002 annual general meeting held on 30.11.2003 and annual return made upto 29.9.2003. The petitioner submits that no notices have been received by him in respect of any alleged meetings and prayed for setting aside the so called cessation of the directorship of petitioner No. 1 under the provisions of Section 283(1)(g) of the Companies Act, 1956 and declaring the petitioner to be a director of the company. The learned counsel also submitted that so called allotment of 1 lakh equity shares allotted on 24.9.2002 be declared as null and void. By declaring as null and void all meetings of Board of Directors and the shareholders claim to have been held after 31.8.2002 in view of non service of notice to the directors and shareholders. The Learned Counsel also submitted that the meeting of Board of Directors of Respondent No. 3 company held at Kolkata on 31.8.2002 and decisions taken therein be upheld and declared valid. The respondent No. 1 should also be directed to convene the Annual General Meeting of the company in respect of years 2002-2003 by giving proper notice.
8. The Learned Counsel for petitioner further submitted that the respondents have failed to explain as to why it became necessary to allot shares to an outsider when specific request of allotment of shares to the existing shareholders on a proportional basis was already made to the company. There was no mention of existence of any share application money in any of the Board Meetings including the Board Meeting held on 31.8.2002. The respondents have contended that the articles of association do not make it mandatory to issue further shares only to the existing shareholders. However, it is to be noted that shareholding pattern in respect of company has remained stable for over 10 years. The intention of promoters was that the shares of the company should only be with the existing shareholders, if they are willing to have the shares. This is born from the ; provisions of article 11 to 18 of the Articles of Association of the company. When the existing shareholders are not permitted to sold the shares to outsiders without first offering them to other shareholders, h is inconceivable that the Board of Directors is permitted to issue shares to outsiders when the existing shareholders are willing to take up these shares. The Learned Counsel for petitioner submitted that that this Board has consistently held that such issue and allotment of shares to create a new majority is an oppressive act and ought to be struck down. The Learned Counsel relied on following judgments:-
1) Ms. Pushpa Prabhudas Vora v. Voras Exclusive Tools Pvt. Ltd. (2000) 101 Comp Cas 300 (CLB)(2000) 3 Comp LJ 271, to show that in a family company, where there is parity in shareholding, any change in the shareholding, without mutual agreement, is an act of oppression.
2) S.T. Ganapathy Mudaliar v. S.G. Pandurangan (1999) 96 Comp. Cas 919 (CLB), to show that family members having equal shareholding, additional issue of shares to one shareholder alone without any need for additional funds so as to give the shareholder undue advantage is invalid.
3) Satish Chandra Sanwalka v. Tinplate Dealers Association P. Ltd. (2001) 107 Comp. Cas 98 (CLB); (2001) 3 Comp LJ 284, to show that additional issue of shares to one of the two groups of shareholders in a private company is invalid. Directions issued to the respondents for resumption of party in the shareholding.
4) Mrs. Senthamarai Munisamy v. Microparticle Engineers P. Ltd. (2001) 105 Comp Cas 526 (CLB), to show that further issue of capital without generation of funds for the company which merely results in conversion of majority shareholders into minority constitutes an act of oppression.
5) Puneet Goel v. Khelgaon Resorts Ltd. (2001) 2 Comp LJ 488 (CLB), to show that where there is a further issue of shares without any jurisdiction for the same, but only to convert the petitioner into a minority, the same constitutes a grave act of oppression.
9. Learned Counsel also mentioned that reporting the vacation of office as Director by the petitioner No. 1 under Section 283(1)(g) without giving proper notice for the board meetings has also been held oppressive in the following cases:
1. V. Natarajan v. Nilesh Industrial Products (Petition) Ltd. and Ors. 2002-(052)-CLA-0149-CLB.
2. S.T. Ganapathy Mudaliar v. S.G. Pandurangan (1999) 96 Comp Cas 919; (1999) 1 Comp LJ 350 (CLB).
3. S. Ajit Singh and Anr. v. Dss Enterprises (Petition) Ltd. and Ors. 2001-004)-CLJ-0421-CLB.
10. Regarding respondents objection that the consent of petitioner No. 2 for filing of the petition is not proper consent, since the said petitioner was not aware of the contents of the petition, the Learned Counsel for petitioner submitted that petitioner No. 2 is the wife of petitioner No. 1 and further the said petitioner has been the signatory to the rejoinder to the reply to the petition. Hence it cannot be contended that proper consent of petitioner No. 2 had not been obtained. The Learned Counsel for petitioner also relied on the following judgement of Supreme Court pressing his point not sending proper notice of Board Meetings is oppressive and service by certificate of posting cannot be taken as a proof and is doubtful proposition. M.S. Madhusoodan and Anr. v. Kerala Kaumudi P. Ltd. and Ors. 2003-(117)COMPCAS-0019-SC:-
"When the relationship between the parties was already so embittered, proof of service of notice by certificate of posting must be viewed with suspicion. Judicial notice has been taken that certificates of posting are notoriously "easily" available. What was seen as a possible but rare occurrence in 1981 (Mst. L.M.S. Ummu Saleema v. B.B. Gujral (1981) 3 SCC 317 ((1983) 53 Comp. Cas 312 (SC) is now seen as common."
11. The Learned Counsel in reply for respondents submitted that the petition has been filed with malafidely and oblique motive to harass the respondents. The petitioners have played fraud upon the respondent No. 3 company by unauthonsedly and illegally convening and holding parallel Board Meeting of Directors in Kolkata on 31.8.2002 and making an attempt to illegally induct the petitioner No. 2 and another person as directors in the Board of Directors of the respondent company. When the respondent came to know of this illegal and unauthorised convening of the meeting of the Board, a proper notice was issued keeping the same agenda and same date as desired by the petitioner so that a proper meeting be held at the registered office of the company, where Board Meetings are normally held. The proposals were placed before the Board and the same were rejected in a duly convened Board Meeting. The petitioner did not attend the Board Meeting and filed false documents with Registrar of Companies and also trying to illegally take over the management of the respondent No. 3 company. The petitioners have leveled baseless and frivolous allegations of oppression and mismanagement just to malign the image of respondents. The petitioners have made bald and vague submissions in the petition about the financial mismanagement and oppression by the management. The petitioners have not produced any evidence or any document to substantiate their submissions.
12. The Learned Counsel for respondent further submitted that the petitioner have not come to this Board with clean hand. The petitioners have indulged themselves in "forum shopping" by approaching various courts including the civil courts by asking for the same/identical prayers and the interim application filed by the petitioners have already been dismissed by the Learned Civil Judge, Senior Division, Bhuvaneshwar. The petitioners have also filed criminal complains and the enquiry report submitted by the police in the said complaint reveals that the dispute is civil in nature. The petition is liable to be dismissed on this ground itself as multiplicity of proceedings and confliction of jurisdiction is not encouraged by this Board. The Learned Counsel for respondent relied on the case of Sardar Iqbal Singh v. Sardar Gurbaksh Singh (2000) 24 HCL 526 (CLB), wherein it is observed that CLB has taking consistent stand to avoid conflicting decisions on common issues, that the proceedings have been initiated in Civil Court before filing the petition before the CLB on issues covered in the petition, CLB would either stay proceedings or dismiss the proceedings unless earlier proceedings are withdrawn.
13. The Learned Counsel for respondent also submitted that the petition is not maintainable and liable to be rejected at the threshold without going into the merits of the case. The petitioners have alleged that they are holding 19.56% of shareholding of the respondent No. 3 Company. As a matter of fact the petitioners together arc holding 15.32% shareholding of respondent No. 3 Company. Even otherwise the aforesaid petition has been filed and signed by the petitioner No. 1 alone who is alleged to be holding 7.16% of the shareholding of the respondent No. 3 Company. The petitioner No. 2 is holding 12.4% of the shareholding of the respondent company. It is evident form the petition that petitioner No. 1 alone has signed the petition and petitioner No. 2 has neither sign the petition nor has sign the power of attorney or valid to petitioner No. 1 to do any acts on her behalf to allow her to be made a party to the petition. Thus the petition filed by the petitioner does not comply with the conditions set out in Section 399 of the Companies Act. The petitioner No. 2 has not signed the petition and only field an affidavit (page 204 of the petition). Perusing the said affidavit it is clear it is neither a clear consent nor a attorney to make petitioner No. 2 as one of the party in the petition. It is well settled law in consent contemplated under Section 399 of the act that it is an intelligent consent, and must be given for the purpose of making a particular allegation in the petition and for the purpose of claiming particular relief. The Learned Counsel for respondent relied on the judgement of Rajasthan High Court in the matter titled E.S. Nanavati v. Jaipur Metals and Electricals Ltd. and Ors:
(1 (1990) 69 CC 769). In the matter of M.C. Duraiswami v. Sakthi Sugars Ltd. (1980) 50 CC 154). Madras High Court has held that "consent in writing contemplated in Section 399(3), is a consent to a particular petition with a particular allegation and for a particular relief under Section 397 and 398 of the Companies Act, 1956. There cannot be a blanket consent. Consent required should obviously be in writing and should give the impression to a reasonable mind that the consenters have applied their mind and gave the consent for a particular relief under Section 397/398. The petitioner No. 2 has neither signed the petition nor has given the power of attorney to petitioner No. 1 to do any acts on her behalf to allow her to be made the party to the petition. As the petitioner No. 1 is holding less than 10% shares, the petition is liable to be dismissed on this ground.
14. The learned counsel further submitted that the allegation that the petitioner No. 1 was illegally reported to have ceased to be a director of the respondent No. 3 company, it is submitted that petitioner No. 1 ceased to be director with effect from 12.5.2003 since he vacated his office of directorship as per the provisions of Section 283 (1)(g) of the Companies Act, 1956. It is submitted that ever since the incorporation of respondent company till the month of 2002 notices of the Board Meeting were given by hand to the directors placed in Bhuveshwar and by ordinary post to directors based in Kolkata. However, since the petitioner No. 1 unilaterally held illegal Board Meeting dated 31.8.2002 at Kolkata and his proposal to induct his wife i.e. petitioner No. 2 as additional director of the company, was rejected by duly convened Board Meeting of the Board of directors of the respondent No. 3 company at Bhuvaneshwar, the petitioner No. 1 in Sep.' 2002 started complaining of non receipt of notices of Board Meetings. Thereafter the notices used to be sent to him by Regd. AD post or under postal certificate. Copies of the notices sent to petitioner No. 1 by the respondent company alongwith proof of service have already been placed on record. It is pertinent to mention that no other director has complained of non receipt of the notices right from the date of incorporation of the respondent company. It is pertinent to mention that Article 58 of the Articles of Association read with Section 53 of the Companies Act, 1956 relates to sending of notices for the general meetings to the members of the company and the option of getting notices by registered post is available to members (shareholders) of the company. It does not apply to the notices to the directors by Registered Post of meetings of Board of Directors, as such meetings can be held even at a very short notice. Therefore, the cheque of Rs. 200 of the petitioner was not encashed by the company. It is further submitted that the notices and agenda of the Board Meeting dated 24.9.2002 was sent to petitioner No. 1 and he was very much aware that the company is applying for extension of time for holding annual general meeting as the accounts of the company could not be finalised in time. The petitioner had written a letter on 27.9.2002 to Registrar of Companies Cuttack (hat extension of time asked by the respondent company for holding Annual General Meeting may not be allowed. The petitioner No. 1 on one hand pleads having not received any notice for the Board Meeting held on 24.9.2002 and on other hand writes to Registrar of Companies Cuttack on 27.9.2002 referring to the request of the company for extension of time for holding Annual General Meeting. This amply proves that petitioner No. 1 was having full knowledge of Board Meeting on 24.9.2002. The petitioner No. 1 had received the proper notice for Board Meeting but he willfully abstained from the Board Meeting on 24.9.2002 to make the false and malafide claims. The petitioner abstained himself from consecutive meetings of Board of Directors held on 24.9.02, 23.11.02, 23.11.02, 29.3.03 and 12.05.2003 without obtaining leave of absence from the Board and he vacated the office from the directorship of the company w.e.f. 12.5.2003 as per provisions of Section 283(1)(g) of the Companies Act, 1956 and a Board resolution was passed in the Board Meeting on 12.5.03. The petitioner No. 1 deliberately failed to attend Board Meetings despite service of due and proper notices which cannot constitute oppression in view of the judgement of the Hon'ble Supreme Court and Kolkata High Court in Hanuman Prasad Bagri and Ors. v. Bagress Cereals (Petition) Ltd. (AIR) 2001 SC 141.) In this case the Hon'ble Supreme Court has held that termination of directorship of petitioner would not entitle such a person to ask for winding up of the company on just and equitable grounds as there is an appropriate remedy lies by way of company suit.
15. The Learned Counsel for respondent further submitted that it is denied that there was any illegal allotment of 1 lakh shares including 80,000 equity shares to a debtor against money towards sale proceedings and another 20000 equity shares to the respondent No. 1 and 2 to fraudulently change the shareholding pattern. The correct position is that respondent No. 3 company had received share application money, details of which are as under-
1. PGL Supply and Services P. Ltd. 11.4.02 2,75,000 80,000 of Rs. 10/-each 18.4.02 2,70,000 23.5.02 2,50,000 23.5.02 5,000
2. V.K. Chordia 11.5.02 1,00,000 10,000 of Rs. 10/-each
3. Rajesh Chordia 11.5.02 1,00,000 10,000 of Rs. 10/- each
16. It is submitted that the Board of directors in their meeting on 24.9.2002, notice of which was given to all directors, resolved to allot fully paid up equity shares against the share application money lying received by the company and accordingly, proceeded to allot the shares as mentioned above. The return of allotment was made on 24.9.2002 and form No. 2 was filed with the Registrar of Companies Cuttack on 30.10.2002. The shares had been allotted against the share application money received by the respondent company. It is pertinent to mention that M/s PGL Supply and Services P. Ltd. is the exclusive distributor of the products of the company for the state of Orissa since 1990. The amount of Rs. 8 lakhs received from M/s PGL Supply and Services P. Ltd. was received as share application money and not against money due to sale proceeds and this an be. verified" with the fact that outstanding dues from M/s PGL Supply and Services P. Ltd. has not been affected on the respective dates of payment of share application money. In his letter to Registrar of Companies on 27.9.2002 written by petitioner No. 1 clearly indicates that he was aware of this Board Meeting and the resolution passed therein interalia extension of period of holding Annual General Meeting for the year 2002 and to allot equity shares against application money received As the petitioner No. 1 was not in a position to block the resolutions in the above matters, he willfully abstained from the Board Meetings on 24.9.2002 to make the false and malafide claim of having no knowledge of the said Board Meeting. But the letter of the petitioner No. 1 to Registrar of Companies Cuttack on 27.9.2002 exposed him fully.
17. The learned counsel for respondent further stated that the petitioner No. 2 was not entitled to requisition the extra ordinary general meeting as per provisions of Section 169 of the Companies Act. as the petitioner No. 2 was holding less man 10% of the paid up capital of the company as on the date of making the alleged requisition. It is denied that the petitioner No. 2 was a holder of 12.40% of equity share capital and was entitled to requisition an extra ordinary general meeting. It is submitted and denied that as per provisions of Section 169 of the Companies Act, the Board was obliged to convene the meeting as requisitioned, failing which, the requisitionist herself was entitled to convene the meeting. The requisition letter dated 3.10.2002 and the modified requisition letter dated 19.10.2002 sent by petitioner No. 2 were not valid, as such, there was no need to call the meeting to discuss the same.
18. The respondents also placed on record the financial data for the last 4 years which clearly shows the adverse impact of the false and baseless allegations of the petitioners on the financial health of the respondents. It was due to non availability of working capital assistance as a result of illegal, irresponsible acts of the petitioner that the company lost order, Orissa Govt. to the tune of Rs. 250 lakhs and 300 lakhs during the year 2002-03 and 2003-04 respectively:-
Year Turnover(Lac Rs.) Loss incurred Lac Rs.)
2000-01 389.69 19.03(audited)
(Results before illegal acts of the petitioners)
2001-02 411.65 17.32 (audited)(Results after
illegal acts of the petitioners.)
2002-03 180.98 67.39 (audited) -do-
2003-04 153.40 70.00 (estimated) -do-
19. The Learned Counsel for respondent submitted that the petitioner has not approached this Board with clean hands but to fulfill their oblique motives and they are working against the interest of the company with malafide actions. Thus the present petition is liable to be dismissed.
20.1 have considered the pleadings and arguments of Learned Counsel of both sides. There are only three issues which need to be looked into.:
1. The Board Meeting called by the petitioner at Kolkata on 31.8.2002 and the Board Meeting called at Bhuvaneshwar by the company.
2. The second question is issuance of due and proper notices to the petitioner before he vacated his office as director in terms of Section 283(1) (g) of the Companies Act, 1956.
3. The third question is allotment additional 1 lakh shares.
21. As regards first issue of convening Board of Directors meeting at Kolkata by the petitioner on 31.8.2002, it is seen from the records that the petitioner convened the meeting of Board of Directors at Kolkata on 31.8.2002 on the request of one of the directors Mr. R.K. Newatia. On receipt of this notice, the Managing" Director of the company called a Board Meeting at Bhuvaneshwar at the Regd. Office of the company, where meetings are generally held. In the first place, if the petitioner No. 1 as director wanted to convene a Board Meeting for some urgent issues, he should have requested the Managing Director of the company to do so. At the same time, when the Managing Director had convened the meeting for the same issues on the same date at the Registered Office of the company, there was no reason as to why the petitioner should not have attended the meeting and convened a parallel meeting. If such a situation is allowed to exist, each director would call a meeting at same time at different stations. It would have been different matter if the Managing Director of the respondent' company would have refused to convene meeting of Board of Directors, then such a step perhaps could be justified. In the circumstances, I have no doubt that the Board Meeting convened by the petitioner No. 1 at Kolkata was illegal. I declare the said meeting as null and void.
22. Regarding the second question of petitioner No. 1 vacating his office of directorship under the provisions of 283(1)(g) for not attending three consecutive meetings of the Board of Director inspite due notices issued to him, the respondents have stated that the notices were issued to him under certificate of posting and under the provisions of Section 53 of the Companies Act, such service shall be deemed to be affected. However, the circumstances of the case is indicate that the petitioner No. 1 sent a cheque of Rs. 200 to the respondent company requesting that all notices for all meetings be sent to him by Registered Post. There is no cogent reason given by the respondent for not adhering to his request. At the same time the Supreme Court in the judgment in the case of M.S. Madhusoodan and Anr. v. Kerala Kaumudi Pvt. Ltd. and Ors. 2003-(117)COMPCAS-0019-SC wherein the Supreme Court has held that judicial notice has been taken that certificates of postings are notoriously "easily" available. In such circumstances, when the relationship between the parties was so embittered and when the specific request had been made by the petitioner to send him the Board notices through registered post, the service through certificate of posting cannot be taken as a conclusive proof of service. When the registered office of the respondent company is located at Bhuvaneshwar, the certificates of posting are that of "Puri" Post Office. Accordingly, it is doubtful that proper service of Board Meetings had been effected for the reasons given above. May be that the petitioner was aware of the Board Meeting held on 24.09.2002 as suggested by the respondent that he had written a letter to Registrar of Companies on 27.09.2002 indicating the Board Resolutions passed in the meeting but the service of notice for other meetings of the Board of Directors is doubtful and certificate of postings cannot be relied as proof of service. Accordingly, I direct that petitioner No. 1 should be taken back as director with immediate effect. All notices for Board Meetings should be sent to the petitioner by registered post in future.
23. Coming to the last question of allotment of 4 lakh shares, I do not find any justification in the argument of the petitioner that this has been wrongly done but to the extent that the petitioner was not given option to purchase the shares if he so desired alongwith other two directors, moreso when petitioner No. 1 had already written to the company that he is willing to purchase the shares if so offered. As the respondent company has allotted 10,000 shares each to both directors, it would be appropriate that the company offers 10000 shares to the petitioner. The company should ascertain in writing the willingness of the petitioners to subscribe to 10000 additional shares. In case he expresses his willingness to accept the same, it should be allotted to the petitioner and consequently, the authorized capital of the company will stand increased to that extent. The offer should be made within 30 days by registered post from the date of this order and the petitioner should respond together with necessary remittance of money within 15 days from the date of receipt of offer. In case, the petitioner does not respond within the stipulated time, the offer will lapse.
24. To end the dispute, I am of the view that petitioner being minority shareholder should be given liberty to sell his shares and go out of the respondent company on return of his investments in the shares, as be feels oppressed by the majority shareholders. In case the petitioner is willing to part with his shares, then the respondent should purchase the shares on the valuation to be made by an independent valuer. The valuation will be based on the balance sheet of the respondent company as on 31.3.2002. In case the petitioner desires to go out of the company, then on an application made by him, a suitable valuer will be appointed by this Board in consultation with both the parties.
25. With the above directions, the petition is disposed of. There are no orders as to cost.