Company Law Board
Mausumi Bhattacharjee vs Anghaila Housing Pvt. Ltd., Sh. Sudhir ... on 20 May, 2004
Equivalent citations: [2004]54SCL585(CLB)
ORDER
K.C. Ganjwal, Member
1. This petition has been filed under Section 397 and 398 and other applicable provision of the Companies Act, 1956 by Ms Mausumi Bhattacharjee, Chairperson and Managing Director of M/s Anghalis Housing Pvt. Ltd., against above mentioned respondents on 7.7.2003. This case is going on from August, 2003 with number of hearings. The case was finally heard and reserved for orders after hearing the arguments of Learned Counsel of both sides on 5.4.2004. The judgment in this case was being written and had not been pronounced yet. The learned counsel for Respondent No. 3 filed a copy of order dated 17.4.2004 of the High Court, Uttaranchal at Nainital on 23.4.2004 passed in review petition No. 1450 of 2004 in writ petition No. 1224 of 2003 (M/B).
The Hon'ble High court has directed as under: -
"............ By our judgment and order dated 31.12.2003 we have disposed of the writ petition taking note of the fact that the matter is sub-judice before the Company Law Board and in view of the rival claim of the parties it would be in the interest of justice that the matter will be heard by the Company Law Board and after the decision of the Company law Board the appeal No. 78 of 2003 shall be decided.
-- Mr. U.P. Singh, Learned Counsel for the review petitioners submits that Ms. Mausumi Bhattacharjee has resigned and the dispute relating to the genuineness of resignation of Ms. Bhattacharjee is sub-judice in the company petition before the Company Law Board. The said company petition is not maintainable in view of Section 397 and 398 of Companies Act. He relied on the judgment of Hon'ble Supreme Court reported in (2001) 4 SCC pg 420 in the case of Hanuman Prasad Bagri v. Bagress Cereals Pvt. Ltd. and Ors.
2. Basically, it is a question of non-maintainability of the company petition before the Company Law Board. This is open for the review petitioners to raise this objection before the Company Law Board and the company Law Board shall decide the maintainability of the company petition then shall proceed further;
The review petition is disposed of accordingly.........................."
3. The Respondent No. 3 has not filed any application for hearing this matter on the maintainability of the Company Petition No. 70 of 2003. However, Res. No. 1, 3, 4 & 5 as well as intervener at the last stage of the hearing of this petition had argued on the maintainability of this petition during the course of their submissions on the main petition. In view of the directions of Hon'ble High Court, I now proceed to decide the question of maintainability of this petition under the provision of Companies Act, 1956 on the basis of arguments advanced by various Respondents daring final hearings of the case.
4. The Learned Counsels for the Respondent No. 1 (Anghalia Housing Pvt. Ltd.) has filed written submissions also. He has submitted his arguments in two parts namely, (1) on the issue of maintainability of the petition and (2) factual controversy raised by the petitioner. The learned counsel has submitted that for orders to be passed under Section 397 of the Companies Act, 1956 and granting relief against oppression, the petitioner has to satisfactorily make out a case that the affairs of the company are being conducted in a manner oppressive to her and had also that the facts of the case justify the making of winding up orders on the ground that it is just and equitable that the company should be wound up, but invoking of such an order would unfairly prejudice the members. In support to the above submission the Respondent No. 1 has relied on the case of Punjab High Court in the matter of Thakur Hotel (Simla Company Pvt. Ltd.) and the facts relating to judgment read as under:-
"An order under Section 397 of the Companies Act, 1956 granting relief against oppression on the application of some of the members of the company can be made by the court only if the court is satisfied, that the company's affairs are being conducted in a manner oppressive to any member or members, and, secondly, that the facts of the case are such that it would be "just and equitable" to make an order for winding up of the company, but the making of such an order would unfairly prejudice the members. Unless both these conditions are satisfied an order under Section 397 should not be made. The word "oppressive" in this context means unjust, harsh or tyrannical."
5. The learned counsel has further submitted that a past and concluded transactions cannot be set aside in a petition under Section 397 of the Companies Act, 1956 as the petitioner has tried to do so in the instant petition because her letter of resignation dated 1.8.2001 duly considered by the respondent company and subsequently submitted before the Registrar cannot be set aside as prayed for by the petitioner.
6. The Respondent No. 2 has filed his evidence by way of Affidavit and was also present in the Court. He submitted that he stands by his affidavit and there is no mention regarding maintainability of the petition in his affidavit.
7. The Respondent No. 3 submitted his reply that the present petition filed for and. on behalf of Ms. Moushmi Bhattacharjee is not maintainable as she has no locus standi to institute, file and maintain this petition. The petitioner has resigned from the directorship of the Respondent Company on 26.9.2001 at her own will/ voluntarily. The petitioner was aware and fully knew on 26.9.2001 itself that three new directors, Respondent No. 3 to 5 have been appointed as Directors of the company. All theses information were sent to Registrar of Companies and accepted and are available in the office of Registrar of Companies. The petitioner as such by her own act and conduct has estopped/debarred from coming up with the present petition to challenge her own voluntary resignation given by her and also to challenge various other appointments including that of Respondent No. 3 to 5 which were not only initiated/accepted by herself but were facilitated by her and were done at her behest and with her consent and as such the petitioner is estopped and has no locus-standi to file the present petition before the Company Law Board and same is liable to be dismissed summarily on this ground. He has further submitted that the only reason of filing the present petition by the petitioner is the greed and desired to grab the company so that she can usurp the land of the company and appropriate to herself. The petition itself is an abuse of the process of the Court is an instrument of blackmail and is a manifest attempt to usurp to legitimate control of the directors/ management of the Respondent Company. The Respondent No. 3 has further submitted that as director of the Respondent Company alongwith the help from friends and Respondent No. 4&5 made arrangement for engaging Advocates incurring expenses and fought the case before the Hon'ble High Court of Uttaranchal at Nainital and it was after considerable expenses, tile and energy that Hon'ble High Court of Uttaranchal vide order dated 13.6.03 was pleased to stay the order of recall dated 29.5.2003 and observed that the Respondents (the state of Uttaranchal/ Chief Conservator of Forest) and other may consider to file an appeal against the Order dated 21.3.2003 so that the same may not become time barred. The petitioner was nowhere to be seen. She had ceased to be the Director of the company of her own volition in sep. 2001. Later on forest department of Uttaranchal has filed an appeal against the order 21.32003 before the learned District Judge, Dehradun wherein the company was impleaded as a party but since the name of Ms Moushmi Bhattacharjee appeared in the order dated 21.3.2003, the Forest Department impleaded the company through Ms. Moushmi Bhattacharjee. The Respondent No. 3 has further stated that he applied in the Court of District Judge, Dehradun to be impleaded as a party in the aforesaid appeal in his own right as a director of the company also on behalf of the company but the said application was rejected by the District Judge, Dehradun on 6.12.2003 against this order, Hon'ble High Court of Uttaranchal in C.W.P. No. 1224 of 2003 wherein the High Court of Uttaranchal at Nainital observed as under:-
"............... The question involved in this writ petition is as to whether the resignation of Ms Mausumi Bhattacharjee is genuine or not. It is being a question of fact cannot be resolved by way of the writ petition under Article 226/227 of the Constitution of India. The matter is already sub-judice before the Company Law Boar. In view of rival claims of the parties, it will be in the interest of justice that the matter be heard by the Company Law Board first."
Let the matter be decided by the Company Law Board. If any decision of Company Law Board is received, the appeal No. 78 of 2003 shall be decided..........."
8. He further submitted that the present petition is a malafide act of the petitioner with ulterior objective to grab the control of the company and also to usurp its asset i.e. the land which was left by the forefathers of the Respondent No. 2 namely Sh. Sudhir Gupta. The present petition has been filed by the petitioner Under Section 397/398/399 of the Companies Act, 1956, alleging that her resignation dated 26.9.2001 is forged and that she is having 72% of the shareholding of the company. This is wholly incorrect. She ceased to be the directors of the company vide her resignation voluntarily given on 26.9.2001. Sh. Sudhir Gupta continued to be the director of the company and the answering Respondent has been appointed as Director by Sh. Sudhir Gupta, who allotted 4604 equity shares to Respondent No. 3 to 5. With her resignation, Ms. Maushmi Bhattacharjee cut off all her relations with the company and Sh. Sudhir Gupta validity appointed Respondent No. 3 as Director of the company. It was also submitted by Respondent No. 3 that it is incorrect that petitioner is the director of the company holding 72% of shares of the company. The petitioner holds 500 equity shares in the name of the associates and the petitioner is not eligible to file the present petition as she is not a member of the company and has no locus standi to institute and file the present petition Under Section 397 of the Companies Act, 1956. Respondent No. 3 also alleged that Sh. Sudhir Gupta Respondent No. 2 never resigned from the directorship of the company on 4.10.99 and there were no question of fulfilling the vacancy of Sh. Sudhir Gupta and appointment of Sh. Apurba Sharma in his place. The petitioner is not entitled to any relief Under Section 397/398 of the Companies Act, 1956 on facts or in law and the petition is liable to be dismissed with special cost.
9. Regarding Respondent No. 4, the petitioner had filed copy of the hand written letter of Sh. Ram Saran Singh dated 25.7.2003 alongwith a letter of service under which a copy of petition had been sent to him by speed post on 1.8.2003 by the petitioner. He did not participate in the proceedings and as such there are no averments regarding maintainability of the petition by him.
10. Respondent No. 5 Ms Kusum Lata submitted that the petition filed by the petitioner under Section 397 & 398 of the Companies Act, 1956 is utterly misconceived and bad in law and fails to make any case. The petitioner is not entitled to any of the reliefs claimed in the said petition. It is submitted that Sections 397, 398 are invoked only when the affairs of the company are conducted in a manner oppressive to any member or is prejudicial to public interest. Since the object of the Respondent Company's business is only one particular land dial is in litigation with the Govt. of Uttaranchal and the company is not carrying on any business whatsoever, there are no affairs that are being conducted as such. In the absence of carrying of any business or conduct of any affairs whatsoever, which is preliminary condition for invoking Sections 397 & 398, there cannot be any oppression as envisaged in the said sections. Therefore, the petition should be rejected on this very ground. Section 397 & 398 of the Companies Act, 1956 under which the relief is sought by the petitioner, is essentially an action against the management of the company by the prejudiced members of the company. Respondent No. 5 has submitted that since as per the petitioner she is the one who is in charge of the management of the Respondent company and if, there is any oppression or mismanagement in the conduct of affairs of the company, it is on the part of the petitioner and not on the part of Respondents. Therefore, if there has to be an action under the said section then it has to be against the petitioner and not by the petitioner. Section 397 & 398 of the Companies Act, 1956 have been enacted to afford protection to the prejudiced members of the company and does not in any way create provisions to enable the management of the company to agitate any matter and for furthering their ulterior objectives. The sole motive of the petitioner is to grab the assets of the Respondents Company by sidelining the Respondent including the answering Respondent who is a Director of the Company. Hence the petition is liable to be rejected. Petitioner has approached to this Board for setting aside the Form No. 32, form No. 2 and Form No. 18 etc. which is not within the ambit of powers conferred by law on the Company Law Board under Section 397 & 398. As per the averments of Respondent No. 5, it is also pointed out that the petitioner has chosen the option to exclude Mr. Apurba Sharma from being impleaded since the petitioner never wanted that any action be taken by this Board against the Company Law Board against the management of the company. The petitioner had alleged that she has chosen not to impleade Sh. Apruba Sharma who, assuming without admitting is the only director on the Board of Directors. It is further submitted none of the allegations made in the petition constitute oppression or mismanagement as envisaged in Section 397 & 398 of the Companies Act 1956. The petition has been filed by the petitioner with the ulterior motive of removing validity elected Directors of the Respondent Company from its Board of Directors on untenable grounds under the garb of alleging oppression or mismanagement under Section 397 & 398 of the Companies Act, 1956. Oppression of which the petitioner complains must relate to the manner in which the affairs of the company are being conducted and the conduct complained of must oppress the right of the petitioner as a shareholder and not as a Director. It is abundantly clear that none of the allegation as made out in the petition satisfy the said condition and petition is liable to be dismissed on this ground.
11. During the course of hearing, application on behalf of three applicants namely Sh. Sanjay Daksha, Sh. Safiur Rehman and Sh. Binod Rajhans had been filed they have also filed their reply with affidavits stating that the applicants are sole shareholders of the M/s Anghaila Housing Pvt. Ltd and they are holding the entire equities of the Respondent Company. Accordingly they were allowed to make their averment as intervenes. In their averments they have submitted that the present collusive petition filed by the petitioner is collusive without impleading namely Sh. Sanjay Daksha, Sh. Safiur Rehman and Sh. Binod Rajhans as Respondents. They also submitted that they are the sole shareholder of the company having an authorized capital of the company is Rs. 5 lakh divided into 5000 share of Rs. 100 each which is fully subscribed. The Respondents have sold their respective number of shares and they produced the photocopies of the shares certificates.
12. Intervener submitted that the petition itself has inherent defects to the extent of sufficiency of the pleading of locus or the documents required to be produced to maintain a proceeding Under Section 397 & 398. They have also submitted that the record of the proceeding produced by the petitioner categorically established that the petitioner has committed a fraud against this court and the respondents therefore the present petition is not maintainable. Further the Respondents have produced admissible documents alongwith the affidavit. The inspection of the original documents was given to the opposite party as well during the course of the proceeding, Therefore respondents are raising dispute just to out the jurisdiction of court are baseless and malicious contentions. It was further submit that the petitioner has further attempted to mislead this board that in view of the order of Uttaranchal High Court, the matter can be adjudicated upon. It was submitted that there is no such order, on the face of it. Accordingly the petition may be dismissed with exemplary cost in favor of the interveners.
13. From the above averments, made by Respondents during the course of final hearing of the petition in question, the Respondents have submitted that the petition is not maintainable under Section 397 & 398 of the Companies Act, 1956. The provisions of these two sections are as under:-
397Application to (Tribunal) for relief in cases of oppression- (1) Any member of a company who complain that the affairs of the company (sic) being conducted in a manner prejudicial to public interest or ) in a manner oppressive to any member or members (including any one or more of themselves) may apply to the (Tribunal) for an order under this section, provided such members have a right so to apply in virtue of Section 399.
(2) If, on any application under Sub-section (1), the Court is of opinion-
(a) That the company's affairs (are being conducted in a manner prejudicial to public interest or ) in a manner oppressive to any member or members; and
(b) That to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up, the (Tribunal) may, with a view to bringing to an end the matters complained of, make such order as it thinks lit.398
Application to (Tribunal) for relief in cases of mismanagement
1. Any Members of a company who complain-
(a) that the affairs of the company (are being conducted in a manner prejudicial to public interest or) in a manner prejudicial to the interests of the company ; or
(b) that a material change not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors, (or manager) or in the ownership of the company's shares or if it has no shares capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company (will be conducted in a manner prejudicial of public interest or) in a manner prejudicial to the interest of the company, may apply to the (Tribunal) for an order under this section, provided such members have a right so to apply in virtue of Section 399.
(2) If, on any application under Sub-section (j), the (Tribunal) is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the (Tribunal) may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit.
14. Both the sections provide that a member of a company who has a right so to apply in virtue of Section 399 of the Companies Act, 1956 can only be entertained. The provisions of Section 399 are given below:-
399Right to apply under Sections of 397 and 398- (1) the following members of a company shall have the right to apply under section 397 or 398-
(a) in the case of a company having a share capital, not less than one hundred members of the company or not less than on tenth of the total number of its members, whichever is less or any members or members holding not less than one-tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares;
(b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.
2. For the purposes of Sub-section 1, where any shares or shares are held by two or more persons jointly, they shall be counted only as one member.
3. Where any members of a company are entitled to make an application in virtue of Sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.
4. The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorize any member or members of the company to apply to the (Tribunal) under Section 397 or 398, notwithstanding that the requirements of Clause (a) or Clause (b), as the case may be, of Sub-section (1) are not fulfilled.
5. The Central Government may, before authorizing any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the (Tribunal) dealing with the application may order such member or members to pay to any. other person or persons who are parties to the application.
In order to maintain or succeed to the petition filed under Section 397-398 of the Companies Act, 1956, the member has to satisfy the provisions of Section 399 mentioned above. In order to examine as to whether the applicant is entitled under Section 399 or not, the main reliefs/complaints made by the petitioner in the petition has to be seen. The reliefs sought by the petitioner are briefly as under: -
1. Purported illegal removal/ resignation of the petitioner from the office. of directors of the company.
2. Alleged illegal appointment of Respondents No. 3 to 5 as Directors of the company.
3. Purported allotment of 4604 equity shares of Rs.100 each to Respondents 3 to 5.
4. Alleged shifting of Registered Office from 54 Vidyut Nikunj Apartment, 112, Patparganj, Delhi 92 to B-4 Hauz Khas, New Delhi.
15. The other reliefs/complaints are not significant. The above complaints alleging removal of directorship and purported issue of 4602 shares to Respondents No. 3 to 5 are two major issues in the petition. To examine the first issue the petitioner has stated that she was shocked to learn that Sh. Sudhir Gupta Respondent No. 2 has fraudulently forged her signature on the letter of her resignation and filed the same in the office of Registrar of Companies, NCT of Delhi and Haryana, New Delhi on 16.5.2002 to show that she ceased to be Director of company w.e.f. 26.9.2001. She has submitted that he was not a Director of respondent company on that day since he ceased to be the director of company on 4.10.1999. The copy of the form No. 32 filed by Sh. Sudhir Gupta with, Registrar of Companies also indicates the appointment of three directors in AGM w.e.f. 26.9.2001. Sh. Sudhir Gupta, Respondent No. 2 who was director in the company alongwith the petitioner has filed an affidavit, a copy of which was taken on record and Sh Sudhir Gupta was also present in the Court and affirmed that he stands by his affidavit. In the affidavit filed by him he has declared that he has .ceased to be the director of company on 4.10.99. He has no connection whatsoever with the affairs of the company. He has further submitted in his affidavit that form No. 32 dated 16.5.2002 may be cancelled and declared null and void as he has not filed any such form with the Registrar of Companies. These averments have to be examined on the basis of the facts but for the purpose of eligibility Under Section 399 of the Companies Act, 1956 the petitioner has approached the Company Law Board as a shareholder in terms of under Section 397 & 398 of the Companies Act, 1956 and not as a Director. The petitioner Shareholding is not disputed by any of Respondent except the intervener-2 i.e. Sh. Sanjay Daksha who has made some complaints of authorizing the share capital on the basis of allotment of shares during 1993-95 and thereby impacting the issue and allotment of shares to the petitioner and also to Res. No. 3. It is observed that as early as in the year 2000 when the form No. 2 dated 17.11.2000 was filed with the Registrar of Companies, she was holding 1680 shares out of total 3226 shares which is more than 10% in any case even if the subsequently shares purported to allotted to her in 2001-03 to the tune of 650 & 500 shares respectively are not taken into account.
16. In the light of the above discussion and the submission made by the learned counsel for petitioner and respondents, 1 find that the petitioner Ms. Masumi Bhattacharjee was holding more than 10% shares of the company as on 17.11.2000 and this makes her eligible/entitled to make a petition Under Section 397 & 398 before this Board. I, accordingly, reject the arguments advanced by respondents and hold that the petition No. 70 of 2003 is maintainable under the provision of section 399 of the Companies Act, 1956, A separate order shall be pronounced in due course on the basis of the pleadings and arguments advanced by Learned Counsel of both sides on merit keeping in view of the directions of the Hon'ble High Court of Uttaranchal and the law and facts of the case.