Company Law Board
Gracy Thomas vs Four Square Estate Private Limited And ... on 5 October, 2007
Equivalent citations: [2008]141COMPCAS770(CLB), (2008)2COMPLJ159(CLB), [2008]83SCL404(CLB)
ORDER
K.K. Balu, Vice-Chairman
1. This is an application filed under Section 167 of the Companies Act, 1956 ("the Act") seeking directions against M/s Four Square Estates Private Limited ("the Company") to call for the annual general meetings, by a Chairman appointed by this Bench, for the years 1998-1999 to 2003-2004, in view of the reasons set out therein, in support of which Shri Rajesh S. Kutty, learned Counsel submitted as under:
1.1 The Company incorporated in May 1995 with the main object of carrying on real estate business is comprised of eight shareholders. Thomas Mathew, one of the shareholders died on 31.10.2002, upon which the shares held by the deceased shareholder devolved on his two children, namely, Shri Suresh Thomas and Suja George being respondents 2 & 3, with which the total number of shareholders got increased to nine. The applicant, being the widow of (late) Thomas Mathew, is a promoter and subscriber to the memorandum and articles of association of the Company and director of the Company. Besides the managing director, there are eight directors, which include three non-member directors and Mrs. Asha Verghese, yet another daughter of the deceased Thomas Mathew.
1.2 The Company neither convened the board meetings nor the annual general meetings since the year 2001 and is not able to function in terms of the memorandum of association. Consequently, the Registrar of Companies was constrained to initiate prosecution proceedings against the Company and its Managing Director for noncompliance with the statutory requirements, leading to imposition of a penalty of Rs. 7,200/- on them. Nevertheless, there was no compliance of the relevant provisions of the Act.
1.3 By virtue of article 20, the applicant and first respondent will hold office of directors for life, unless, they resign from directorship. All other directors are bound to retire at the annual general meeting and therefore, except the petitioner and first respondent, other directors cannot continue as directors without being re-appointed as directors at the annual general meetings. In view of this, the annual general meeting of the Company has become absolutely necessary to appoint new directors and carry on the business so as to ensure statutory compliance as per Sections 210 and 219 of the Act.
1.4 According to the respondents 6 & 7, they have convened, on behalf of the Company all the annual general meetings and complied with the statutory requirements till 31.03.2004. However, the annual return for the year 2003-2004 has not yet been submitted to the Registrar of Companies. All the copies of notices of annual general meetings, postal certificates, which are contradictory to each other show that such notices and postal certificates are fabricated and forged documents with intent to commit fraud on the Company and its shareholders. Any omission to give notice of the meeting to shareholders prima facie invalidates the meeting, as held in (1962) 2 W.L.R. 374 Mussel White v. C.H. Mussel White & Sons Limited. The Supreme Court held in (2004) CLC 117 M.S. Madhusoodhanam v. Kerala Kaumudi Private Limited that certificates of posting are notoriously "easily" available and what was seen as a possible but rare occurrences in 1981 is now seen as common. No reliance can, therefore, be placed on the certificates of posting made available by the respondents 6 & 7 more so in view of the strained relationship between the parties. No notice of the annual general meeting or postal receipt for the year 2003-2004 has been produced by these respondents. No notice of the annual general meeting as required under Section 172(2)(ii) was sent to the legal heirs of (late) Thomas Mathew, including the respondents 2 & 3, and therefore, the meetings do not enjoy any validity in the eyes of law. The Kerala High Court held in (a) 1971 KLT S.N. 30 K. Kunhirama Menon and Anr. v. State Prosecutor that where the company through its officers had actual knowledge of the death of a shareholder, it cannot rely upon a notice addressed to the deceased member. If the person is dead, to their knowledge, notice will have to be issued to the legal representatives and under such circumstances, notice issued to the dead person knowing that he is dead, is not in compliance with Section 53(5) of the Act; and (b) 1971 KLT S.N. 30 Annamma Kurivilla v. State Bank of Travancore that notice issued by the company to a dead person after the acknowledgment of death without issuing the notices to the legal heirs will not be in compliance with Section 53(5) of the Act.
1.5 The notice dated 19.05.2003 indicates that the annual general meeting for the year 1998-1999 would be conducted at the registered office located at 9D, Katticaran Towers, Katticaran Street, Cochin - 628 018 on 16.06.2003, whereas the registered office came to be shifted, without the knowledge or consent of the shareholders, to a new place with effect from 01.06.2003. None of the shareholders save respondents 6 & 7 could have attended the annual general meeting at the changed venue. The board minutes dated 26.04.2003 and 19.05.2003 clearly show that the registered office was already moved to a new different place. The board of directors decided at the meeting held on 19.05.2003 and 26.05.2003 to convene the adjourned annual general meeting for the year ended 31.03.1999 and 31.03.2000 on 16.06.2003 and 25.06.2003 respectively at the new registered office, but at the same time, the notice dated 19.05.2003 convening the annual general meeting on 16.06.2003 and the notice dated 26.05.2003 indicate that the annual general meeting for the year ended 31.03.2000 was to be held on 25.06.2003 at the old registered office, which evidence the fact of fabrication of records by the respondents 6 & 7. It has been held in (2000) Vol.102 CC 387 Sikkim Bank Limited v. R.S. Chowdhury that when an annual general meeting was held at a different place from the place mentioned in the notice and when individual notices were not sent nor any notice of change of the venue was given, the annual general meeting is declared to be invalid and illegal. The notice dated 19.05.2003 convening the adjourned meeting for the year 1998-99 was reportedly sent under certificate of posting, which shows that the same was obtained from a post office which is far away from the new registered office of the Company. This is in view of the fact that the respondents 6 & 7 could procure the false certificate from the said post office. The certificate contains the names and addresses of seven members, while the postal rule does not permit more than three addresses in any single certificate of posting. Furthermore, the actual number of articles are not mentioned in the certificate issued by the postal department. The certificate shows that no notice was sent to the legal heirs of (late) Thomas Mathew.
1.6 Item No. 5 of the minutes of board meeting held on 26.05.2003 relates to convening of the annual general meeting for the year 1999-2000 on 25.06.2003 and item No. 6 is with regard to shifting of the registered office with effect from 01.06.2003 to a different place. The seventh respondent has been authorised to file Form No. 18 with the Registrar of Companies and the very same seventh respondent issued the notice dated 26.05.2003 calling the annual general meeting for the year 1999-2000, without disclosing the decision to shift the registered office to a new place with effect from 01.06.2003. The board of directors at the meeting held on 16.06.2003 decided to convene the annual general meeting for the year 2000-2001 on 17.07.2003, whereas, the notice reportedly sent to the shareholders shows a different date, namely, 15.07.2003. Thus, the shareholders were not sure, whether the annual general meeting was to be held on 15.07.2003 or 17.07.2003.
1.7 The respondents 6 & 7, further committed fraud by filing false returns with the Registrar of Companies, as if the annual general meeting for the year 2001-2002 was conducted on 25.07.2003 and the annual general meeting for the year 2002-2003 was conducted on 04.08.2003. The notice dated 23.06.2003 for the annual general meeting for the year 2001-2002 and the notice dated 28.06.2003 for the annual general meeting for the year 2002-2003 could not have been sent under the same cover on 23.06.2003 as per the alleged postal certificate stamped on 23.06.2003. The notice dated 28.06.2003 could not have been sent on 23.06.2003, when no such notice was in existence on 23.06.2003.
1.8 The board minutes dated 26.04.2003 'disclose the shifting of the registered office, though the respondents 6 & 7 contend that the decision to shift the registered office was taken on 26.05.2003 and was given effect from 01.06.2003. Thus, the minutes dated 26.04.2003 were subsequently created without cross reference to the alleged decision of the board taken at the meeting held on 26.05.2003.
1.9 The minutes of the alleged board meeting held on 26.04.2003 and produced by the respondents 6 & 7 show that at an extra ordinary general meeting was to be held on 05.05.2003, to appoint a new statutory auditor of the Company. However, no such extra ordinary general meeting was held on 05.05.2003 and no new auditor was appointed in the place of M/s Venkat & Hari, in accordance with Section 224 & 225 of the Act. The Company did not file any Form No. 23, nor the new auditor filed any Form No. 23 B before the Registrar of Companies, as required under Sections 192 & 224 of the Act. Shri K.C. Tharu has no authority to act as the auditor of the Company. However, the directors' report dated 19.05.2003 shows that the new auditor will be appointed at the ensuing annual general meeting on 16.06.2003. At the same time the notice dated 19.05.2005 convening the annual general meting on 16.06.2003 does not contain any agenda for appointment of auditors. The directors' report dated 19.05.2003 for the year ended 31.03.1999 shows that M/s. K.C. Tharu & Co., Chartered Accountant was to be appointed at the adjourned annual general meting, whereas, the auditors' report dated 19.05.2003 is in relation to the annual accounts for the year ended 31.03.1999. At the same time no notice of the annual general meeting was sent to the auditors, as required under Section 172(3) of the Act. The seventh Respondent in collusion with the sixth respondent filed all the returns relating to the annual general meeting for the year 1998-1999 onwards till the year 2002-2003 on 04.08.2003. Hence, the Company Law Board may order convening of Annual General Meetings of the Company for the years from 1998-1999 to 2003-2004.
2. Shri Philip Mathew, learned Counsel representing the Company submitted:
2.1 By virtue of clause 27 of the articles of association of the Company, the power of the Managing Director, has been delegated to fifth respondent in March, 2003 when the former left India. No annual general or board meetings could be held since the year 2001, on account of non-cooperation of certain directors, namely, Baby Joseph, C. Vinod Babu, Thariam Joseph and Anthia Paul. The auditors of the Company could not prepare the profit and loss account and the balance sheet, since the vouchers and accounts were kept in the custody of Baby Joseph. This resulted in launching of prosecution by the Registrar of Companies against the Company and the Managing Director, who pleaded guilty before the Additional Chief Judicial Magistrate Court, Emakulam. The non-compliance with statutory requirements under Sections 166, 210 & 220 of the act are due to the non-operation among the directors and the faction-fighting which exist at present.
2.2 While the Annual General Meetings for the years from 1998-1999 to 2003-2004 were not held and no notices were received by the petitioner and respondents 2 to 5, the respondents 6 & 7 claim that the Annual General Meetings for all these years were held after notice to the original living shareholders. No notice of the annual general meetings was admittedly sent to the legal heirs of (late) Thomas Mathew, namely, the respondents 2 & 3 as required under Section 172(2)(ii) of the Act. Similarly, no notice of the annual general meeting was sent to the auditors as required under Section 172(2)(iii) of the Act. The registered office of the Company was reportedly shifted with effect from 01.06.2003, but no intimation was ever sent to any of the members.
2.3 The minutes of the board meeting dated 26.04.2003 reveal that the meeting was held at the new registered office of the Company. Nevertheless, the respondents 6 & 7 are not furnished any reason as to why they decided on 26.05.2003 to shift the registered office against with effect from 01.06.2003.
2.4 The minutes of board meeting dated 26.04.2003 show that an extra ordinary general meeting of the Company would be held on 05.05.2003 at the new registered office to appoint an auditor for the Company. However, no notice of any extra ordinary general meeting was sent to the members for the purpose of appointing the auditor of the Company. The directors' report dated 19.05.2003 shows that no new auditors were appointed on 05.05.2003, as claimed by the respondents 6 & 7.
2.5 The notice dated 19.05.2003 convening the annual general meeting for the year ended 31.03.1999 would show that the meeting would be conducted on 16.06.2003 at the old registered office of the Company, whereas the registered office of the Company was reportedly shifted with effect from 01.06.2003, without however, intimating the details regarding the shifting of the registered office to any shareholders of the Company, thereby making it impossible for any shareholder to attend the annual general meeting, at the changed venue of the registered office of the Company. No notice was sent to the legal heirs of (late) Thomas Mathew, as reflected in the certificate of posting by the respondents 6 & 7. Similarly, the notice convening the annual general meeting for the year ended 31.03.2000 was sent on 26.05.2003, without however, indicating any change of the venue consequent upon the decision to shift the registered office of the Company. The minutes of the board meeting dated 26.04.2003 clearly show that the board meeting was held at the new registered office of the Company, whereas the registered office of the Company was reportedly shifted only on 01.06.2003 in terms of the decision taken on 26.05.2003. These events show the manipulation of records at the instance of the respondents 6 & 7.
2.6 The specific assertion of the respondents 6 & 7 is that the board of directors of the Company decided to convene the adjourned annual general meeting for the year 2000-2001 on 17.07.2003, whereas the notice convening the said annual general meeting indicates that the meeting could be held on 15.07.2003.
2.7 The notices of the annual general meetings for the years 2001-2002 and 2002-2003 bears the dates 23.06.2003 and 28.06.2003 respectively. Both these notices were reportedly sent under the same envelop as per the postal certificate produced before the Bench. However, the very same postal certificate has been fabricated by correcting the date as 28.06.2003 and produced the same alongwith the counter affidavit filed by the respondents 6 & 7 in C.P. No. 68 of 2005. Thus, the very same postal certificate cannot bear two different dates namely 23.06.2003 and 28.06.2003 for sending the very same notice of the annual general meetings for the years 2001-2002 and 2002-2003.
2.8 The respondents 6 & 7 claim that the annual general meeting for the year 2003-2004 has been duly conducted, but there is no material produced by these respondents showing the dispatch of notice to the shareholders or minutes of the purported annual general meeting.
3. Shri George Cherian, learned Counsel representing the respondents 2 to 4 submitted:
3.1 Shri Thomas Mathew, holding 12500 shares of the Company died on 30.10.2002, leaving behind his widow, son and two daughters. The Company, on a request letter dated 07.11.2002 made by the legal heirs of the deceased Thomas Mathew transmitted on 27.11.2002, 6250 shares in the name of the second respondent and the remaining 6250 shares in favour of the third respondent, being the son and one of the daughters of the deceased Thomas Mathew, thereby, becoming the shareholders of the Company. Mrs. Gracy Thomas, the widow and Asha Varghese, one of the daughters of (late) Thomas Mathew are on the board of the Company. Nevertheless, the respondents 2 & 3 never received any notice of the annual general meeting of the Company as required under 172(i) or Section 172(2)(ii) of the Act despite the fact that they had become the registered shareholders of the Company. Consequently, all annual general meetings held after the death of Thomas Mathew on 30.10.2002 are null and void.
3.2 The annual general meetings for the year 1998-1999 onwards were not conducted. All the notices of the annual general meetings and certificates of posting in respect of the purported annual general meetings are fake records, which belie the claim of the respondents 6 & 7 that the annual general meetings were duly held. The venues of annual general meetings shown in the notices and in certain cases the dates of the meetings found in the notices do not tally.
3.3 The notice dated 19.05.2003 shows that the annual general meeting for the year ended 31.03.1999 would be conducted on 16.06.2003 at the registered office of the company, whereas, the registered office came to be shifted to a different place, with effect from 01.06.2003, without any intimation to any of the shareholders, thereby making it impossible for them to participate in the annual general meeting at the changed venue of the registered office of the Company. The notice dated 26.05.2003 convening the annual general meeting for the year ended 31.03.2003 does not indicate the decision taken on 26.05.2003 to shift the registered office with effect from 01.06.2003.
3.4 The respondents 6 & 7 claim that the annual general meeting for the year 2000-2001 was held on 17.07.2003, but the notice dated 16.06.2003 shows that the annual general meeting was to be held on 15.07.2003, in which case either of the date must be incorrect.
3.5 It is on record that the notice of the annual general meeting for the year 2001-2002 convening the meeting on 25.07.2003 and the notice dated 28.06.2003 of the annual general meeting for the year 2002-2003 convening the meeting on 04.08.2003, were reportedly sent on 23.06.2003 under the same cover and the postal certificate dated 23.06.2003. The notice dated 28.06.2003 could never be sent on 23.06.2003. Thus, both notices and the certificates of posting are fabricated documents.
3.6 The Company never appointed M/s K.C. Tharu & Co., as the auditors of the Company in the place of Venkit and Hari, who are the auditors of the Company and the appointment of M/s K.C. Tharu & Co. is illegal.
4. Shri K.J. Alphones, learned Counsel, representing the fifth respondent, while adopting le arguments made on behalf of the respondents 1 to 4 submitted:
4.1 The respondents 6 & 7 failed to serve notice of the annual general meetings on the legal heirs of (late) Thomas Mathew, in violation of Section 172(2)(ii) of the Act, which has been admitted by the respondents 6 & 7 in their counter filed to the petitioner. Hence, all annual general meetings must be set aside. No notice was either sent as required under Section 172(2)(iii) to the auditor of the Company for the annual general meting for the year ended 31.03.2000, as evidenced from the certificate of posting issued by the postal department on 26.05.2005. The Directors' report dated 19.05.2003 for the year ended 31.03.1999 shows that no auditor was appointed. The auditor was neither appointed at the adjourned annual general meting held on 16.06.2003. All minutes of the annual general meetings are fake ones.
5. Shri J. Sivanandaraj, learned Counsel for the respondents 6 & 7 opposed the company application on the following grounds:
5.1 The applicant in collusion with fifth respondent has filed the present application falsely alleging that no annual general meetings were held between 1998-1999 and 2003-2004. The applicant suppressing crucial facts has approached this Bench with unclean hands. The applicant and fifth respondent have also filed a suit in O.S. No. 521 of 2004 before the Sub-Court, Ernakulam against these respondents, wherein details of the adjourned annual general meetings have been set out by the latter. The present application has been filed subsequent to the filing of the civil suit and therefore, the petitioner cannot at this stage plead ignorance of these annual general meetings, which were duly held.
5.2 The fourth respondent was the managing director of the Company, which was functioning smoothly without any problem until 02.07.1999 complying with all its statutory obligations. Thereafter, the fourth respondent left India, as he was involved in a number of criminal cases and never returned to India till date. The Company stopped functioning on account of the absence of the Managing Director and the difference of opinion, which arose among other directors of the Company. Consequently, no annual general meetings were held during the period between 1998-1999 and 2003-2004.
5.3 The registered office of the Company was functioning at 9D, Kattikkaram Street, Cochin-18, which was owned by the fourth respondent. The registered office building was sold by the fourth respondent to a third party compelling these respondents to shift the registered office to Kannarkkat, Panamppilly Nagar, Cochin-36, by passing necessary resolution on 26.05.2003 by the board of directors with prior notice to all the directors, which was followed by Form No. 18 filed before the Registrar of Companies.
5.4 The Managing Director was not available and the Company was not functioning since the year 2000. Therefore, these directors along with two other directors decided and initiated, with a view to ensure the interest of the Company, the following course of action:
(i) decided on 19.05.2003 to convene the adjourned annual general meeting for the year ended 31.03.1999 on 16.06.2003 to consider and adopt the accounts for the year ended 31.03.1999;
(ii) approved the balance sheet, report of the auditors and report of the directors, for the year ended 31.03.1999 at the annual general meeting held on 16.06.2003, after sending notices to all the shareholders. The registered office was shifted with effect from 01.06.2003, whereas, the annual general meeting notice was issued on 19.05.2003 before the actual shift of the registered office had taken place, using the letterhead with the address of the old registered office. However, by oversight, the notice of annual general meeting did not specify the new registered office address. I lad the shareholders attended the meeting at the old registered office, they would have known the change of the registered office, but never even attempted to attend the meeting, but are raising frivolous grounds challenging the genuiness of the notices and other records.
(iii) decided on 26.05.2003 to convene the adjourned annual general meeting for the year ended 31.03.2000, on 25.06.2003 to consider and adopt the accounts for the year ended 31.03.2000;
(iv) held the adjourned annual general meeting for the year ended 31.03.2000 on 25.06.2003, after due notice to all the shareholders approving the balance sheet, reports of the auditors and directors for the year ended 31.03.2000;
(v) decided on 16.06.2003 to convene the adjourned annual general meeting of the Company for the period ended 31.03.2001 on 15.07.2003;
(vi) held the adjourned annual general meeting for the period ended 31.03.2001 on 15.07.2003, after serving notice upon the shareholders and approved the annual return, balance sheet and auditors report for the year ended 31.03.2001;
(vii) convened the annual general meetings for the years ended 31.03.2002 and 31.03.2003 after sending notices to all the shareholders on 25.07.2003 and 04.08.2003 and approved the annual reports and balance sheets for the years ended 31.03.2002 and 31.03.2003 respectively;
(viii) submitted the annual reports and balance sheets of the Company for the years from 1998-1999 to 2002-2003, in terms of the receipts dated 19.09.2003 issued by the Registrar of Companies and produced before the Bench, thereby complying with all the statutory obligations till 31.03.2003;
(ix) convened the annual general meeting for the year 2003-2004, but the annual return has not yet been submitted to the Registrar of Companies;
(x) specifically pleaded in the civil suit filed by the applicant and fifth respondent in O.S. No. 521 of 2004, that after giving notice to the shareholders and the directors under certificates of posting, annual general meetings were convened for the years 1999-2000; 2000-2001; 2001-2002 and 2002-2003 and subsequently annual returns, balance sheets of these years were submitted to the Registrar of Companies for and on behalf of the Company and are reflected in the records of the Registrar of Companies. The suit is still pending.
5.5 All the notices of the annual general meetings sent to the members at their residential address under certificates of posting shall be deemed to be sufficient and valid. In the event of non-receipt of notice by any member or any accidental omission to give notice, the same will not invalidate the proceedings in view of Section 172(3) of the Act, as held in Maharaja Exports v. Apparels Export Promotion Council (1986) 60 CC 353. No notice was sent to Thomas Mathew, since he expired on 30.10.2002. Nevertheless, notice was sent to his wife, being the petitioner herein who is the mother of the respondents 2 & 3 but she did not choose to attend any of the meetings.
5.6 These respondents cannot be held responsible for the alleged mistakes committed by the postal department, on account of issue of the certificate of posting carrying more than three addresses. The certificates of posting were obtained from a post office which is far away from the new registered office of the Company, for which there is no bar to use any particular post office.
5.7 In regard to the irregularities on account of appointment of the auditors, the board of directors already decided that K.C. Tharu would be the new statutory auditors and the formalities have been completed. The board in consultation with K.C. Tharu finalized the accounts. The directors and shareholders are almost one and the same and therefore, any approval at the annual general meeting was a mere formality. Non-sending of notice of the annual general meeting to the auditors, being an accidental omission, cannot invalidate the proceedings, as envisaged in Section 172(3) of the Act.
6. I have considered the pleadings and arguments of learned Counsel for the parties. The short issue before me is whether the applicant is entitled for the reliefs in terms of Section 167 of the Act, in the facts of the present case.
7. This Bench, on the present application of the applicant, by an order dated 30.05.2005, directed the Company, which was willing to abide by any order which may be passed in this behalf, to convene the annual general meeting for the years between 2000-2001 & 2004-2005 and further issued consequential directions in relation to holding and conducting the meetings. The respondents 6 & 7 aggrieved on account of the order dated 30.05.2005, preferred an appeal before the High Court of Kerala at Ernakulam in Company Appeal No. 11 of 2005 contending, inter-alia, that they were not made parties to the proceedings before the CLB and further that they could not, therefore, place all the relevant records to show that the annual general meetings were in fact already held and consequently, the direction of the CLB was based on a misrepresentation of this actual position. The High Court, after considering the rival submissions made on behalf of the contesting parties, by its order dated 01.12.2005, remitted back the matter to the CLB for fresh consideration by affording an opportunity to the respondents 6 & 7 herein and enter into a finding as to whether there was any valid meeting held during the relevant period in question. In pursuance of the order 01.12.2005 of the High Court, the respondents 2 to 7 have been impleaded to the present company application, wherein, while the applicant and respondents 2 to 5 are contending that no annual general meetings of the Company have ever been held for the period between 1998-1999 and 2004-2005, the respondents 6 & 7 forcibly contend that the annual general meetings for all these financial years have been duly held in compliance with the statutory requirements.
8. According to the applicant, supported by respondents 2 to 5, all the copies of the notices of the purported annual general meetings, certificates of posting, being contradictory to each other are fabricated by the respondents 6 & 7 with a view to commit fraud on the Company and its shareholders. The notice dated 19.05.2003 would show that the annual general meeting for the year 1998-1999 was to be held on 16.06.2003 at the old registered office of the Company, whereas, the registered office already came to be shifted, without any notice to any of the shareholders, to a different place with effect from 01.06.2003. The board of directors had resolved on 16.06.2003 to convene the annual general meeting for the year 2000-2001 on 17.07.2003, whereas, the notice dated 16.06.2003 convening the annual general meeting would show a different date, namely, 15.07.2003. The notices dated 23.06.2003 and 28.06.2003 convening the annual general meetings for the years 2001-2002 and 2002-2003 on 25.07.2003 & 04.08.2003 respectively could not have been sent on 23.06.2003 as per the alleged postal certificate stamped on 23.06.2003, produced by the respondents 6 & 7.
9. The respondents 6 & 7 categorically contended that the annual general meetings for the years ended 31.03.1999, 31.03.2000, 31.03.2001, 31.03.2002 and 31.03.2003 were held, after due notice to all the shareholders under certificates of posting on 16.06.2003, 25.06.2003, 15.07.2003, 25.07.2003 and 04.08.2003 respectively and further that the annual reports as well as the balance sheets of the Company for all these financial years have been submitted before the Registrar of Companies as reflected in the receipts dated 19.09.2003 issued by the latter, thereby duly complying with the statutory requirements.
10. The contentious issue before me is whether there was any valid annual general meeting of the Company held during the period between 1998-1999 and 2003-2004. In this connection, the civil suit in O.S. No. 521 of 2004 filed before the Court of Sub-Ordinate Judge, Ernakulam, by the Company represented through the fifth respondent and the applicant herein against, among others, the respondents 6 & 7 for a decree declaring that a sale deed executed by the respondents 6 & 7 in respect of the immovable property belonging to the company, in favour of a third party, being the fourth defendant in the civil suit, is not binding on the Company and that the sale deed executed on 06.01.2004 is inoperative, fraudulent and null & void. The applicant and the fifth respondent herein, being the plaintiffs in the suit have specifically pleaded that there were differences of opinion among some of the directors of the Company and it could not function smoothly for some time. The board meetings were not be held, due to non-cooperation of certain directors, since the year 2001 and there was also default under Section 166 of the Companies Act in convening the annual general meetings, which resulted in criminal prosecution initiated by the Registrar of Companies against the Company and its managing director, who however, pleaded guilty and paid a fine of Rs. 7,200/- on 23.04.2004. The respondents 6 & 7 in reply have categorically contended as under:
The plaintiffs, as stated in the plaint if they are very much in the interested in the affairs of the company, they could have convey either Board Meeting or Annual General Meeting of Extra Ordinary Annual General Meeting in order to save the company or to get over from the prosecution initiated by the ROC. As Sri K.M. Varghese and other plaintiff did not show any interest in the affairs of the company, these defendants along with other directors of the company, for the purpose of saving the company and also to get out of the prosecutions initiated by the Registrar of Companies, requested then Managing Director to convey either board meeting or annual general meetings. However as Shri KM. Varghese failed to convey the meetings, these defendants along with other directors conveyed the board meeting on 26.4.2003. In the said meeting the board of directors has designated the lsl defendant to contact Sri K.M. Varghese and other directors for setting the accounts and ROC formalities for the last 4 years. The defendants No. 1 had issued notice for the next board meeting to all other directors under certificate of posting to their address available in the company records. It is understood that KM. Varghese left India and presently in Dubai and his Dubai address are not known to these defendants. Further the 1st defendant had contacted KM. Varghese over telephone and informed the steps taken by them. Then Sri K.M. Varghese has agreed that all the steps taken by the defendants are appreciable and also informed that he will obeyed with all the decisions to be taken by the Board of Directors for the upcoming of the company. Shri K.M. Varghese has also informed the defendant that he and his wife are not in a position to come down to India as there are number of criminal cases and no bailable warrants are pending against them. There after, the board of directors remaining over here have conveyed and Annual General Meeting, Extra Ordinary Annual General Meetings and board meetings etc. to fulfill the ROC requirements. It is pertinent to point out that all these meetings were conveyed only after giving due notices to other directors of the company and on 19.9.2003 these defendants have submitted annual returns for years 1999-2000, 2000-2001, 2001-2002 & 2002-2003, balance sheets for the above said years before the ROC. If the agent of Shri K.M. Varghese has pleaded guilty before the Addl. Chief Judicial Magistrate Court (EO) Ernakulam, in ST. 121/2004 & 122/04 and remitted fine as alleged by them in the plaint, it is without the knowledge of the Board and for which these defendants or the company are not responsible. All the formalities complied by these defendants are reflected in the ROC records.
11. The suit is for the purpose of setting aside the sale of immovable properties owned by the Company for the reasons set out therein, wherein the issue whether there was any valid meeting during the period between 1998-1999 and 2003-2004 is also raised by the contesting parties. The civil court will conduct trial by examining witnesses before adjudicating the disputes involved in the suit, which shall include the validity of various annual general meetings purportedly held during the period between 1998-1999 and 2003-2004, after considering the various infirmities pointed out by the applicant in the present proceedings. In this background, any finding of this Bench on the validity of the annual general meetings, may result in a conflict of decisions, which shall however, be avoided in the interest of justice. The suit is admittedly prior in point of time and therefore, the contesting parties are at liberty to put forth the rival submissions made in the present proceedings, before the civil court, in relation to the annual general meetings in dispute, shifting of the registered office, appointment of a new auditor of the Company etc., which are already found to have been dealt with by the respondents 6 & 7 in their written statement filed in O.S. No. 521 of 2004. It is relevant to point out that the applicant as well as the Company are found guilty of suppression of all these material facts before the Company Law Board, which mislead the Bench in directing the Company to convene the meetings in terms of the order dated 30.05.2005.
12. By virtue of Section 167 of the Act, if default is made in holding an annual general meeting by a company in accordance with Section 166, the CLB may direct the calling of the annual general meeting. This section explicitly provides that the CLB may exercise the power only if there is a default committed in holding annual general meeting, as envisaged in Section 166. In the present case, whether the Company has defaulted in holding the annual general meetings for the period between 1998-1999 and 2003-2004 itself is under serious dispute, which however does not fall within the scope of Section 167. This section does not empower the Company Law Board to adjudicate any dispute regarding the validity of any annual general meeting, but merely direct the calling of the meeting in the event of default in this regard. In view of this, the CLB cannot exercise the power under Section 167 unless and until the validity of the annual general meetings purportedly held during the disputed period is adjudicated by the civil court in the pending suit, upon which the applicant is at liberty to apply before the CLB for appropriate directions in terms of Section 167 of the Act. I am not, therefore, inclined to make any order on the prayer made by the applicant in directing the Company to convene the annual general meeting for the years between 1998-1999 and 2003-2004. Ordered Accordingly.