Company Law Board
Housing Development Finance ... vs Mr. Sureshchandra V. Parekh on 5 July, 2002
Equivalent citations: [2002]112COMPCAS650(CLB)
ORDER
C.R. Das, Member
1. M/s Housing Development Finance Corporation Ltd., (herein after referred to as the Petitioner Company) has filed a petition under Section 284(4) of the Companies Act, 1956 against Mr. Sureschandra v. Parekh a shareholder of the Petitioner Company (hereinafter referred to as the Respondent) praying inter alia for the following directions:
(a) Exempt the company from the publication, circulation or reading out at the forthcoming Annual general Meeting scheduled to be held on 25th July 2002, the notice under Section 284 of the Companies Act, 1956 dated 3rd May 2002 of the Respondent as it seeks to abuse the process of law and needless publicity for defamatory matters.
(b) Direct the Respondent not to indulge in future in misuse and abuse of the process of law by serving notice under Section 284 of the Companies Act, 1956 for removal of Mr. Deepak Parekh as Director of the company on the same issue and
(c) Grant such other reliefs as it may deem proper in the matter.
2. In pursuance to the directions issued by this Bench on 31.05.2002, the Respondent has filed his reply. The Petitioner Company has filed its Rejoinder. The Respondent has filed his counter representation also.
3. Hearing in the above mentioned case was held on 1.7.2002 Shri N.L. Bhatia, Practising Company Secretary appearing on behalf of the Petitioner Company, besides reiterating the submissions made in the petition of the Petitioner Company, submitted that the Respondent has been serving notices under Section 284(4) of the Companies Act, 1956 for the removal of Mr. Deepak S. Parekh, Director of the company from the office of the Director of the company year after year since 1998, the details of which are as under:
i. The first notice was served by the Respondent in the year 1998 for the removal of Mr. Deepak S. Parekh which was included in the notice of he AGM dated 6th May 1998. In the said AGM, although the Respondent was present but he did not come forward even to propose the resolution and as there was no proposer or seconder for the resolution, the same was dropped.
ii. In the year 1999, the Respondent again served a notice under Section 284(4) of the Companies Act, 1956 for removal of Mr. Deepak S. Parekh, the same received by Petitioner Company too late, the same was not published. The Respondent also failed to attend the AGM.
iii. In the year 2000, the Respondent served a notice under Section 284(4) of the Companies Act, 1956 for removal of Mr. Deepak S. Parekh and the same was published by the Petitioner Company in Free Press Journal dated 4.7.2000 at Page 7 but the Respondent failed to attend the said AGM, but as there was no proposer or seconder, the resolution was dropped.
iv. In the year 2001, the Respondent served the same notice which was included in the agenda of the meeting held on 17th July 2001. The Respondent failed to attend the said meeting also. The shareholders strongly opposed the resolution contained in the notice and as there was no proposer or seconder, the matter was dropped.
4. Shri N.L. Bhatia, Practising Company Secretary, Authorised Representative for Petitioner Company further submitted that the grievance of the Respondent which has persuaded him to give notice Under Section 284(4) of the Companies Act, 1956 is because of the following reasons:
The Respondent jointly with his wife held the equity shares of Rs. 100/- each under a common Share Certificate. They requested for splitting of the said one share certificate into ten certificates of one share each. The Petitioner Company acceded to the request of splitting. Thereafter, the Respondent filed seven certificates of one share each along with seven transfer deeds requesting for transfer of the shares from their joint names to the single name of the Respondent's wife Nilaben S. Parekh by adopting different names for his wife such as N.S. Parekh, Nila S. Parekh, Nilaben S. Parekh, Nila Parekh, Nilaben Sureshbhai, Nila Sureshbhai and Nilaben S. Parekh. On the perusal of the transfer deeds submitted by the Respondent, it clearly shows that there is only one person adopting different names. But the address, spouse name and the signature in all the transfer deeds are common. The intention of the Respondent in procuring multifolio numbers seemed to be malafide and was with a view to take advantage in future, as and when benefits are announced by the Petitioner Company based on each folio rather than on the number of shares held by each shareholder. The Petitioner Company realising that the transferee in all the transfer deeds is one and the same person, corrections were made in the computer for transfer of 7 shares into one folio bearing No. 51110. Accordingly one share each folio No. 51111 to 51116 was moved into Folio No. 51110. These corrections /changes were all done prior to the approval of transfer of the shares by the concerned authority of the company. The dividend warrants issued by the Petitioner Company for the years 1992-93 and 1993-94 clearly indicate that only one dividend warrant was issued by the Petitioner Company in respect of all the seven certificates in one folio viz. 51110 and the same were encashed by the respondent.
5. In the year 1994, the Petitioner Company announced Preferential Issue of shares of HDFC Bank Ltd to the shareholders of Petitioner Company based on the number of shares held in one folio. The shareholder of the Petitioner Company who was holding shares between 1 - 10 shares was entitled for 100 shares of HDFC Bank Ltd. According to the said scheme, the Petitioner Company offered allotment of 100 shares to the Respondent's wife for 7 shares held by her in folio No. 51110. For non allotment of 700 share of M/s HDFC Bank Ltd, the Respondent has been agitating in various courts forum as per the details given below:-
1. The Respondent jointly with his wife filed a complaint before the Consumer Dispute Redressal Forum, Ahmedabad being complaint No. 1260 of 1994. The said Forum, while dismissing the said complaint, held that the complainant is not entitled to get seven application forms each of 100 shares.
ii. The Respondent filed another complaint before the Consumer Disputes Redressal Forum, Ahmedabad being complaint No. 1261 of 1994 filed in his own name. The forum while dismissing the appeal held that the complaint is devoid of any merits and hence it deserves to be dismissed. The Respondent preferred an appeal against the aforesaid order before the Consumer Dispute Redressal Commission, Gujarat State, Ahmedabad being the appeal No. 445 of 1997. As the Respondent withdrew the said appeal, the commission accordingly dismissed the appeal for want of prosecution with no order as to cost.
iii. The Respondent alongwith his wife filed another complaint before the Consumer Disputes Redressal Commission, Gujarat State, Ahmedabad being complaint No. 29 of 1999. The commission dismissed the said complaint holding that all prayers are vague and fantastic.
6. Shri N.L. Bhatia, Authorised Representative of the Petitioner Company further submitted that besides the above cases, the Respondent also moved the City Civil Court, Ahmedabad and H'ble High Court of Gujarat for adjournment of the AGM's of the Petitioner Company viz.:-
The Respondent filed suit No. 3235 of 1998 before the City Civil Court, Ahmedabad seeking an injunction on convening the 21st Meeting of the company held on 10.07.1998. The said suit was dismissed.
The Respondent filed another suit No CS 2187 of 1999 seeking interim injunction against the Petitioner Company from holding its 22nd AGM on 9.07.99. The said suit was also dismissed observing that "It transpires that the ultimate goal of the plaintiff is to restrain the management of the defendant company from holding the AGM. How the valuable rights of the plaintiff are go into to be protected if the AGM is not permitted to be held."
7. The Respondent filed another suit being No. CS 2554 of 2000 seeking injunction for holding the 23rd AGM. In the said suit the Court observed that "the relief sought for vide the present notice in my opinion are vague, incapable of being granted, unsupported by any documentary evidence and the extensive and voluminous documentary evidence, in my opinion has absolute no bearing on the present suit as well as notice of the motion."
8. In a suit No. 3629 of 2000 filed by the Respondent in City Civil Court, Ahmedabad seeking injunction against the petitioner company from holding AGM for the year 2000, the Court did not grant any relief.
9. Shri N.L. Bhatia also submitted that since the Respondent alongwith his wife had sought to deceive the Petitioner Company to procedure multiple folio numbers in order to extract an undue advantage from the Petitioner Company in violation of Section 68A of the Companies Act, 1956 for application in fictitious names, the Petitioner Company has filed criminal complaint against the Respondent being CC NO 26/MISC of 2001 in the 8th Court of the Additional Chief Metropolitan Magistrate, Mumbai. The Respondent has preferred an appeal before the High Court, Mumbai against the said criminal complaint alleging that there was no prima facie case against the accused and that the proceedings before the Magistrate be quashed. The H'ble High Court refused to intervene in the matter and reminder the matter to the Trial Court with a direction that the application of the Respondent be heard and decided with in a period of three months from 30th March 2002. Accordingly, the learned Magistrate after taking written and oral submissions dismissed the application of the Respondent on 9.05.2002. The matter stands fixed for hearing on 27.07.2002.
10. The Authorised Representative of the Petitioner Company has drawn attention to the term fictitious as contained in Law of Lexicon page 849 "where a man calls himself by a name which is not his name, he is telling a false hood, " Shri N.L. Bhatia also invited my attention to the report of the working group on Multiple Applications appointed by the Securities and Exchange Board of India to recommended method to tackle the menance of multiple applications and made recommendations for modifications in market practices. One of the recommendation is "with a view to curb this practice the group decides that disclosure of the full names in the application forms should be made compulsory to investors to facilitate easy detection of multiple applications. Para 2.1.3.
states that applicants would be required to make a declaration in the application form that they made multiple applications.
11. The Authorised Representative drew my attention to the order of the Principal Bench New Delhi in C P Nos. 51/2001 decided on 21.09.2001 in the case of M/s Dabur India Ltd. v/s Anil Kumar Podar wherein the Bench held that "By virtue of Section 284(4), the company Law Board has powers to direct a company not to circulate the notice for removal of a director if its is convinced that the provisions of this section are being abused."
12. Shri Bhatia finally submitted that since the notice dated May 3, 2002 submitted under Section 284(4) of the Companies Act, 1956, the Respondent seeks to abuse the process of law and needless publicity for defamatory matter, it is prayed that the Petitioner Company may be exempted from the publication, circulation or reading out at the forthcoming AGM scheduled to be held on 25.07.2002.
13. Shri Sureshchandra V. Parekh, Respondent present in person at the time of hearing, while reiterating the submissions made in his reply and counter representation admitted that he has been serving notice under Section 284 and 190 of the Companies Act, 1956 for inclusion of a resolution for removal of Mr. Deepak S. Parekh as a Director of the Petitioner Company since the year 1998. In this connection he submits that he has these served notices on the Petitioner Company in order to protect his right as a shareholder of the company and not for redressal of his grievances. He also submits that at the time of AGM in respect of the financial year 1998, although he was present but he did not move the said resolution because of writing the word in the notice "incorrect and have been made with malafide intentions." which was defamatory to his status. According to the Respondent by using the word malafide, the management of the Petitioner Company wanted to remove his from the membership and hence he did not propose the said resolution. In regard to notice Under Section 284 given by the Respondent in respect of 23th AGM of the company which was held on 11.07.2000 and also published in the Free Press Journal dated 4.07.2000 the Respondent submitted that since his mother was seriously ill, as such he could not attend the said AGM.
14. The Respondent in his reply has submitted that he, from time to time, has made several complaints against the Petitioner Company in various forum and courts for doing wrongful acts and various other irregularities committed by the Petitioner Company. He admits that he might have been defeated on some of the issues but it does not mean that the Petitioner Company should be allowed to go on misrepresenting the fact before the different authorities and commit various violations of the Companies Act, 1956 viz. Section 628, 205, 284 111, 173 and Unregistered Trust Rules & Regulations.
15. The Respondent further submitted he had sent 8 share certificates along with 8 transfer deeds to the Petitioner Company for transferring the same from their own names as transferors to the name of the transferee and not seven share certificates as indicated by the Petitioner Company in para 8 of its petition. However, in 7 transfer deeds due to inadvertence, the Respondent failed to write the name of the joint holders. Even if the share certificates were sent with different transfer deeds to get different folios, there was no hiding or cheating intended as there is no provision in the Act which prohibits to hold more than one folio in the same name. The Petitioner Company in its petition has admitted that allotment of 7 different folios was due to the mistake of data entry operator and the same was however corrected from the verification of the details given in the transfer deeds. The rectification carried out by the Petitioner Company in the Register of Members was without following prescribed procedure, rules and regulations of the Companies Act 1956. The Respondent further submitted that the contention of the Petitioner Company that for 7 share certificates it allotted one folio is misleading as in July 1993 he received seven Balance Sheets each for the said seven folios which were allotted to him. The Respondent further submitted that the Petitioner Company has with held his six share certificate since 11.09.94 by unlawful means. He also submitted that by the allotment of 7 different folios, he was entitled for 700 shares of M/s HDFC Bank Ltd., which were allotted by the company on preferential basis in the year 1994 but by allotment of one folio bearing No. 51110 in respect of 7 share certificates, he is a loser of 600 shares.
16. In regard to payment of dividend, the Respondent submitted that he had not encashed all dividend warrants sent by the Petitioner Company in singly folio. He might have enchased dividend warrants but the same cannot prevent him from challenging the violation committed in regard to the rectification of the Register of Members.
17. In view of the foregoing, the Respondent prayed that prayer of the Petitioner Company for not publishing the notice as required under Section 284(4) of the Companies Act, 1956 may not be acceded to by this Bench on the ground that the Petitioner Company is devoid of facts, misrepresentation, suppression of material facts and abuse of process of law and hence the same is liable to be rejected.
18. I have gone through the Petition of the Petitioner Company, the submissions made by the Authorised Representative of Petitioner Company and also the submissions made by the Respondent present in person at the time of hearing. By virtue of Section 284(4) of the Companies Act, 1956, the Company Law Board has the powers to direct a company not to circulate the notice for removal of a director if it is convinced that the provision of this section are being abused. In the present case, it is observed that the Respondent has been giving notices under Section 284(4) of Companies Act, 1956 to the Petitioner Company and the Petitioner Company has also published the said notices i.e. one in the newspapers and on two occasions in the Notices convening the AGM, but the Respondent failed to move the said Resolution in the AGM of the company. The Respondent at time of hearing submitted that the Petitioner Company has violated the various provisions of the Companies Act, 1956 and requested for action against the company and its directors. For violations of various provisions of Companies Act, 1956, the Company Law Board is not the appropriate forum, for which he may move before the appropriate authority to take such action as may be advised. The real grievance of the Respondent seems to be non - allotment of 600 Equity shares of M/s HDFC Bank Ltd which were allotted by the Petitioner Company in the year 1994 on preferential basis and for which the Respondent requested the Petitioner Company to allot seven folios in respect of 7 share certificates but the Petitioner Company allotted only one folio which viz. 51110.
19. The issue relating to issue of multiple applications and allotment of shares thereafter is not before me. Further it appears that on several occasions there were no proposer or seconder of the resolution pursuant to the notice issued by the Petitioner Company. Further it appears that in the multiple proceedings launched by the Respondent, there is not a single judgment in his favour.
20. I have considered all the documents filed by the rival parties and their arguments an submissions in the hearing. The limited point for consideration before me is whether the Respondent is resorting to abuse the provision of Section 284 to secure needless publicity for defamatory matter. The issue whether the Respondent is entitled for 700 shares of HDFC Bank Limited has been considered by the District Consumer Forum, Ahmedabad and dismissed. The Respondent's appeal against the said order once dismissed by the State Consumer Redressal Commission has been restored but not decided. Therefore, the said issue is not for consideration before me.
21. It is clear that the Petitioner has published notice given by the Respondent year after year since 1998, the contention of the Respondent that the Petitioner should publish full facts of his case in the Notice/Explanatory Statement convening the AGM's is not correct. The Petitioner is liable to publish only material facts in the Explanatory Statement.
22. The conduct of the Respondent in not even raising to propose the resolution for removal of the Director on some flimsy grounds even when present at the AGM only demonstrates that his intention to issue notice for removal of Shri Deepak S. Parekh year after year since 1998 is nothing but abuse of the provisions of Section 284 of the Act. I consider it to be a fit case to exercise the powers under Section 284(4) and accordingly direct that the Petitioner Company need not place the proposal to remove Shri. Deepak S. Parekh, Director of the company as contained in the Notice dated 03.05.2002 of the Respondent before the AGM of the Petitioner Company scheduled to be held on 25th July 2002. Since the Petitioner Company has not published the said notice in the newspaper, the Petitioner Company M/s Housing Development Corporation of India Ltd. is hereby directed not to circulate the said Notice to Members.
23. The petition is disposed off accordingly.