Company Law Board
Sri Suresh Kumar Rungta vs Roadco (India) Pvt. Ltd. And Ors. on 10 August, 2007
Equivalent citations: (2008)215CTR269, [2008]84SCL407(CLB)
ORDER
Vimala Yadav, Member
1. In this order I am considering Company Petition No. 93 of 2005 filed by Sh. Suresh Kumar Rungta under Sections 397, 398, 402, 409 and 31 of the Companies Act, 1956(hereinafter referred to as 'the Act') alleging certain acts of oppression and mismanagement in the affairs of the R-1 by the respondents. It has been alleged that the conversion of the respondent company from Public Ltd. into Private Ltd. was done by fraudulent means and falsification of records, without notice and consent of the shareholders as prescribed in the Act and false information was filed with the statutory authorities; allotment of 422000 shares on 25.11.2001 and 245000 shares on 14.2.2003 was manipulated by the respondents in order to alter the rights of the shareholders after amalgamation. Prayers include seeking a direction to the Respondent No. 1 to recognize the rights of the shareholders of the Transferee Companies according to the scheme of amalgamation subject to the outcome of the proceedings before the Calcutta High Court and High Court of Rajasthan (Jaipur Bench).
2. The undisputed facts of the case are: M/s Rungta Trojan Chemicals Ltd. was incorporated on 8.12.1994. The registered office of the company was situated at Rungta Hospital Campus, Malviya Nagar, Jaipur. The name of the company was changed to Roadco (India) Limited with effect from 12.7.2004 pursuant to a scheme of amalgamation approved by the Rajasthan High Court. The Registered Office of the company was also changed to T-6, SS Tower, Dhamani Street, Chaura Rasta, Jaipur. The authorized capital of the company was Rs. 1,50,00,000/- comprising of 15,00,000 equity shares of Rs. 10/- each. The issued, subscribed and paid up share capital of the Respondent No. 1 company is Rs. 1,34,62,190/- divided into 13,46,219 fully paid up equity shares of Rs. 10/-. The main objects of the Respondent No. 1 company is to carry on the business of manufacturers, buyers, sellers, exporters, importers of and dealers in all kind of heavy and light chemicals, whether organic, inorganic and organo metallic chemicals including rubber chemicals, leather chemicals, polymer chemicals, synthetic chemicals, water treatment chemicals, metal treatments, detergent and textile chemicals, industrial explosives, petrochemicals, chlorinated paraffin wax phenol and petroleum based products. They are also manufacturers and dealers in all kinds and classes of pigments, varnishes, paints, synthetic paints, and thinners, varnishes, synthetics, resins, enamels, lacquers, distemper, oil chemicals, tannins, tannin extracts, essences, turpentine, plasticizers, oils and lubricants, etc. The petitioner holds 178801 shares (13.28%) in the Respondent No. 1 company.
3. Shri U.K. Chaudhary, Counsel for the respondents raised preliminary objections and argued that the present petition is not maintainable as the present Company Petition is merely a counter blast to the disputes arising in CP No. 37 of 2004 titled as R.P. Rungta v. RMC Med. Ltd. and Ors. wherein the Respondent Nos. 1 and 2 had filed a CP under Sections 397, 398, 402 and 409 of the Companies Act, 1956 against the petitioner and his group Companies for oppression and mismanagement and which is pending adjudication before the Company Law Board. It was contended that the petitioner in this CP carried out various malpractices and fraudulent activities in the affairs of RMC Med. Ltd. It was further pointed out that the Respondent Nos. 1 and 2 also filed petition under Section 397 in various companies, namely, Raja Trade and Credit Pvt. Ltd. (C.P. No. 81/2005); Active Traders Pvt. Ltd. (CP No. 54/2004); Dharni Pharma Pvt. Ltd. (CP No. 84/2005); Amber Commercial Pvt. Ltd. (CP No. 82/2005); Camaro Marketing Pvt. Ltd. (CP No. 83/2005); Camaro Projects Pvt. Ltd. (CP No. 85/2005); Choon Moon Trading and Finance Pvt. Ltd. (CP No. 55/2004). It was contended that the conduct of the petitioner disentitles him from any relief from this Hon'ble Board. The intention of the petitioner is malafide and the petitioner has filed the present petition only with the intention to avenge himself by filing a frivolous petition in which no such single averment in relation to the oppression and mismanagement is made by the petitioner against the respondents. It was argued that a petition under Sections 397 and 398 of the Act cannot be made out a tool to extract money/harass the company and the respondents. The petition under Sections 397 and 398 of the Companies Act, 1956 in order to succeed has to be genuine, bonafide and the petitioner should actually be oppressed in the respondent company. Therefore, it was reiterated that the petitioner is not entitled to any relief from this Board.
4. Further, the counsel for the respondents pointed out that as per Company Law Board's order dated 19.7.2006, the petitioner had agreed before this Board that the petitioner shall not press the allegation relating to the Scheme of Amalgamation. It was reiterated that the said statement was made by the counsel for the petitioner and thereafter the Counsel had also stated the same before this Board at the time of final hearing. It was contended that the petitioner in the present petition has made the allegations regarding (i) Conversion of the Respondent Company from Public Limited to Pvt. Ltd.; (ii) Allotment of 245000 shares on 14.2.2003 and allotment of 422000 shares on 25.11.2001; and (iii) scheme of Amalgamation sanctioned by Rajasthan as well as Calcutta High Court. The issue of 'Scheme of Amalgamation' as per the statement of the petitioner is not before this Hon'ble Board. It was pointed out that by making the said statement the petitioner has made the petition infructuous and meaningless. The petitioner by making the said statement for not pressing the merger issue had ,made the issue and allotment of 4,22,000 shares on 25.11.2001 infructuous. It ' was contended that the issue of 4,22,000 shares on 25.11.2001 and merger is conjoint in nature. At the time of merger the share capital of the company also included 4,22,000 shares. The same was in the knowledge of the petitioner at that time and the same cannot be challenged at this stage. Otherwise also, it was argued, the share capital of 422000 was shown to be part of the share capital at the merger and the same was not objected to by the petitioner in 2004. Thereafter, share capital was considered by all the shareholders, creditors, government through Regional Director, Official Liquidator, Registrar of Companies and also by the Hon'ble High Courts. Therefore, the same cannot be challenged at such a belated stage by the petitioner. It was pointed out that the procedure under Section 391/394 of the Act is an elaborate one and the Regional, Director, Official Liquidator, ROC are involved in the same. Therefore, it was argued, the petitioner having consented to the same cannot challenge the allotment of shares at such a belated stage.
5. Further, it was reiterated that pursuant to the order dated 17.10.2003 and 16.1.2003 of respective High Courts of Rajasthan and Calcutta, the respondent company had issued and allotted 2,45,000 shares in the Respondent company and moreover, as per the order of Company Law Board, dated 19.7.2006, the petitioner stated and assured that he did not raise any issue of the merger and hence the same cannot be agitated in this petition.
6. The counsel for the respondents argued that the petitioner wrongfully alleged only one issue in the petition i.e. conversion of the respondent company from Public Ltd. to Private Ltd. without completing the various formalities. There is nothing in the petition except only single allegation, which is also not oppressive against the minority shareholders. It was contended that the question here is as to whether an act in contravention of Taw is per se oppressive. Reliance was placed on the judgment in Needle Industries (I) Ld. v. Needle Industries Newey wherein the Supreme Court has held that "An isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a malafied intention or that such violation was burdensome, harsh and wrongful." Therefore, it was contended that even assuming that the said act is illegal to certain irregularity, the same could not be held to be oppressive in nature. It was argued that how an act of conversion of the Company from a Public Ltd. Company to a Private Ltd. Company can be held to be oppressive. Rather the rights of a member/shareholder in a private company are better protected than in a public company. Section 3(1)(iii) of the Act provides that the rights of shareholders to transfer the shares in a private company are restricted and also there is a restriction on the number of members beyond 50. It was argued that no case of oppression and mismanagement is made out.
7. Further, it was argued that the respondent company has passed the special resolution under Section 31 of the Act on 23.8.2004 for the conversion of the company from Public Ltd. to Pvt, Ltd. However, some bonafide mistakes which were purely clerical and/or technical in nature were committed by the respondent company at the time of passing of the special resolution. Due to those mistakes, the minority shareholders have not been oppressed at. all. Reliance was placed on the judgments in Allilanz Securities Ltd. v. Regal Industries Ltd. (2000) 25 SCL 349 (CLB PB) and Suresh Kumar Sanghi v. Supreme Motors Ltd. (1983) 54 Com. Cases 235.
8. Further, the counsel for the respondents raised preliminary objection on maintainability of the petition on the ground of delay/latches. The allotment of 422000 shares made on 25.11.2001 was challenged in the year 2005. It was contended that the petition is liable to be dismissed on this ground alone.
9. Ms. Priya Kumar, Counsel for the petitioner pointed out that the petitioner is aggrieved by the acts and omissions of the respondents against the petitioner and his group who are shareholders of the Respondent No. 1. The petitioner is also aggrieved by the gross mismanagement of the Respondent No. 1 by the respondents. The primary grievance of the petitioner is the manner in which the Respondent No. 1 company has been converted from a public company to a private limited company without strict compliance with the provisions of the Act. It was argued that in fact the documents of the respondents itself clearly establish that the respondents have indulged in fabrication of documents and ante-dating of documents and have manipulated the process of the conversion of the Respondent No. 1 company to a. private limited company. Further, the counsel for the petitioner pointed out that the respondents have by an alleged meeting and resolution dated 23.8.2004 converted the respondent No. 1 company from a Public Ltd. to a Private Ltd. company. No notice, explanatory statement, proxy forms, etc. were issued for holding any meeting of the shareholders of the respondent No. 1 company on 23.8.2004. In fact, no meeting was held and this was a paper action by the respondents which is established by their own documents. When the petitioner filed the present petition challenging these acts of the respondents, documents were created and were ante-dated. These contentions are proved and established by the documents filed by the respondents themselves. The counsel pointed out that the alleged meeting of the shareholders was dated 23.8.2004. According to the respondents notices alongwith other documents including explanatory statement were issued. Notice of the meeting was not filed by the respondents. A copy of the explanatory statement was filed by the respondents at page 43 of the reply of the respondents. The explanatory statement is dated 13.7.2005 whereas the meeting was allegedly held on 23.8.2004. The respondents in para 5.2 of their reply at page 6 have admitted that the notice was dated 13.7.2005. Therefore, it was argued, the explanatory statement which should have also accompanied the notice is dated 13.7.2005. In the explanatory statement there is no explanation for conversion of the company from a Public Ltd. to a Private Ltd. company. The explanatory statement appears to be only for the change of the name of the company. In any case there is no explanation for either of the two purposes.
10. Furthermore, it was contended by the counsel that the resolution passed at the alleged meeting dated 23.8.2004 filed by the respondents is for change of the name of the company and for addition of the word "private" to the name. Interestingly this resolution has been attested on 10.08.05 one month after the date of the notice and the explanatory statement i.e. 13.7.05 and two months prior to the filing of the present petition i.e. October 2005 whereas the alleged meeting was of 23.8.2004. It was argued that the document has obviously been ante-dated after the filing of the present petition. In the light of the dates of no tee and the explanatory statement, it was pointed out, it is clear that no notice was given to the shareholders especially those belonging to the petitioner and his group for the alleged meeting of 23.8.2004.
11. Ms. Priya Kumar, Counsel for the petitioner further argued that the alleged notice has been stated to have been issued and dispatched, by UPC. The notice is for an EGM of Roadco (India) Private Limited to be held on 23.8.2004. On 23.8.2004 there was no company by the name of Roadco (India) Private Limited. The company on that date was Rungta Chemicals Limited/Roadco (India) Limited. As per the respondents it was only on 23.8.2004 that the alleged EGM was held to convert the company, i.e Rungta Chemicals Limited/Roadco (India) Limited to a private limited company and it was only after 23.8.2004 that the company Roadco(India) Private Limited came into existence. Therefore, it was argued, the UPC for the alleged meeting of 23.8.2004 could not have been issued by Roadco (India) Private Limited prior to 23.8.2004. It was.-pointed out that in the company and the ROC records the name of the company has been changed from Rungta Chemicals Ltd. to Roadco (India) Private Limited after the alleged meeting of 23.8.2004. Therefore, there is no scope for any confusion or mistake in stating the name of the company. This is an obvious case of ante-dating the documents for the purpose of filing in the present proceedings.
12. Further, my attention was drawn to the proxy forms. It was argued that these were to establish that the documents have been created and ante-dated for the purpose of the present petition. The proxy form for the alleged meeting of 23.8.2004 for conversion of respondent No. 1 company to a private limited company is on the letter head of the proposed private limited company. The letter head of the proxy form states "Roadco (India) Private Limited". The proxy form of Sh. Pradeep Rungta states that he is a member of "Roadco (India) Private Limited" and that he is appointing a proxy for the EGM of the company to be held on 23.8.2004. Similar proxy forms with identical averments and the letter head of the private limited company were filed by Lalita Rungta and Ramdin Rungta. Contrary to these documents, Mr. Ramdin Rungta and Mrs. Lalita Rungta had given affidavits stating that they had appointed proxies for the meeting of Roadco (India) Limited which was held on 23.8.2004. The affidavit is totally contrary to the documents filed by the respondents themselves.
13. Further, my attention was drawn to the UPC receipt showing Mrs. Sushila Devi Rungta as the successor of Mr. Dinesh Rungta. The contemporaneous Annual Return filed by the company still shows Mr. Dinesh Rungta as the member and shareholder of the respondent No. 1 company. It was argued that according to the respondents as stated in their reply, the Annual Return shows the list of members as per the records of the company and it is only when intimation of the death of a member is received his successors can be mentioned in the Annual Returns of the Company. Therefore, if the Annual Return mentions Mr. Dinesh Rungta as the member, there is no justification for the UPC to show Sushila Devi as successor. Significantly this fact was stated in the present petition and it appears that while ante-dating the documents the fact that Mrs. Dinesh Rungta has passed away was taken into account and Mrs Sushila Devi was shown as his successor. The Annual Return at page 75 of the reply shows Mr. Dinesh Rungta at SI. No. 16 as the member. Incidentally, it was argued, this is the Annual Return filed on 18.11.2004 after correcting the errors in the earlier Annual Return which was filed on 28.7.2004.
14. Ms. Priya Kumar, Counsel for the petitioner further pointed out that the company filed its Annual Return on 28.7.2004 showing a list of 35 members. The alleged meeting for conversion of the company from a public to a private limited company was held on 23.8.2004. Prior to the meeting of 23.8.2004 notices were allegedly issued to the members. This UPC list is of 42 members. Assuming this to be a contemporaneous document i.e. a document prior to the meeting of 23.8.2004, the company knew on that date that the Annual Return filed on 28.7.2004 showing 35 members was incorrect and that there were in fact 42 members. The company, however, did nothing to correct the mistake in the Annual Return while the process of conversion was going on. It is only on 18.11.2004, i.e. after the process of conversion was completed that a revised Annual Return was filed stating that the number of members shareholders is 42 instead of the 35 as stated in the earlier Annual Return. Further, it was pointed out that it has been contended that the Annual Return was corrected as soon as it was realized that there was a mistake, this contention is incorrect as the company waited for the conversion to be completed and it was only in November i.e. after 3 months after the process that the revised Annual Return was filed.
15. The counsel for the petitioner argued that as per the proviso to Section 31(1) of the Act, an alteration in the Articles which has the effect of conversion of a public company into a private company shall have effect only after the approval of the Central Government. In the wisdom of the legislature, such a conversion was of great importance and, therefore, it required the scrutiny and approval of the Central Government. In the present case, the company submitted the requisite Form 1 B stating that the company had 35 members and all 35 were present at the time of the meeting and all 35 voted in favour of the resolution. This declaration is false on both the accounts. To begin with as has been stated above the company had 42 members whereas before the Central Government the declaration was only of 35 members. Out of these 35 members Mr. Mangat (Mangtu) Ram Agarwal died somewhere in 1999 to 2000. Therefore, it was argued, he could not have attended the alleged meeting of 23.8.2004. The name of Mr. Mangat (Mangtu) Ram Agarwai appears at SI. No. 9 at page 62 of the reply of the respondents. Even as per the respondents themselves, only 15 members attended the alleged meeting. The attendance sheet of the alleged meeting has been filed by the respondents. Therefore, the declaration before the Central Government is completely false and misleading thereby defeating the mandate of proviso to Section 31(1). The respondents have admitted that incorrect declarations have been made before the Central Government.
16. It was further argued by the counsel that assuming without admitting that the Company had in fact issued notice by UPC the addresses mentioned were at variance with the documents of the company itself. One such instance is of Mr. Ram Avtar Poddar. His address in the Annual Return is totally different from the address in the UPC. Other instances were also given.
17. The counsel for the petitioner argued that the respondents have been manipulating the share capital of the respondent No. 1 company to suit their own designs of reducing the petitioner and his group to a minority. The grievance of the petitioner was that the shares were issued on 25.11.2001 to 8 companies without making a similar offer to the other shareholders. As a result the share holding of the other shareholders was diluted and the interest of the petitioner and his group in the issuance of shares after amalgamation of the companies was grossly prejudiced. It was pointed out by the counsel that the only explanation given is that share application money of these 8 companies had been lying with the respondent No. 1 company and accordingly shares were issued to them. It was contended that share application money of others was also lying with the respondent No. 1 company, however, none of them had been offered or issued any shares. The whole aim and purpose of issuing shares to this select group of 8 companies was to increase the share holding of Mr. R.P. Rungta and his group in anticipation of the proposed amalgamation in the respondent No. 1 company of certain other companies.
18. The counsel for the petitioner pointed out that the respondents had not dealt with any of the submissions on behalf of the petitioner relating to the documents filed by the respondents. These submissions were made in the written rejoinder as also at the time of arguments. However, no mention much less an explanation was made by the respondents during oral arguments or even otherwise. Therefore, the submissions on the part of the petitioner challenging the conversion of the company from a public to a private limited company stand proved before this Hon'ble Board. The submissions relating to the manipulation of the documents, creation of documents and their ante-dating stands admitted.
19. It was argued that the respondents in their arguments have only come up with two contentions. Firstly the contention of the respondent was that the share holding of the petitioner was negligible and probably even lesser than 10%. Since the share holding of the petitioner is nowhere near 25%, therefore the petitioner is in no position to block a special resolution of the respondent No. 1 company and, therefore, his objections cannot be considered. These contentions, it was argued, are not sustainable in law. To begin with the admitted position is that today the share holding of the petitioner alone is 13.28%. This has been admitted by the respondents. Significantly the pleadings do not state any objection to the present petition on the ground that the petitioner has a share holding less than 10%. In addition to his individual share holding of 13.28% his friends and family members have a share holding which will be more than 30%. It was argued that in any case the petition before this Hon'ble Board is maintainable by a shareholder or group having 10% share holding and in the event that the petitioner is able to make out a case, the relief cannot be denied on the ground that their share holding is not enough to block a special resolution. The jurisdiction of this Hon'ble Board under Sections 397 and 398 of the Act is based on statutory provisions which cast a responsibility to correct instances of oppression and mismanagement and not be a mere spectator in the event the petitioner is less than 25% but is more than 10%. The jurisdiction of this Hon'ble Board is to correct instances of oppression and mismanagement both by majority and minority and cannot be diluted by submissions like that made by the respondents.
20. Coming to the second contention of the respondents that the issuance of additional share capital could not be gone into by this Board since the amalgamation has proceeded on the basis of the share capital and the respective High Courts have endorsed the share holding, the counsel for the petitioner argued that this contention is not reflected in the pleadings of the respondents. In fact after the order of 19.7.2006, when this Hon'ble Board permitted the respondents to file a reply without dealing with the issues which according to them was covered by the proceedings before the High Courts, the respondents went ahead and replied to the contentions relating to issuance of share capital in paras 5.20 to 5.25 at pages 12 to 14 of the reply. Significantly, paras 5.26 to 5.50 have not been replied to in terms of the liberty of this Hon'ble Board by order dated 19.7.2006 on the ground of only paras 5.26 to 5.50 being covered by the amalgamation proceedings before the High Courts. Further, it was pointed out that the understanding of the respondents that paras 5.20 to 5.25 were not covered by amalgamation proceeding is correct since the High Court has not explored the legality of issuance of shares. It was argued that in the event that this Hon'ble Board considers that the issuance of share capital was wrongly made, that adjudication would then be placed before the respective High Courts for modification of the amalgamation orders. The High Courts in their amalgamation proceedings would not be examining issues of oppression and mismanagement resulting from manipulated issuance of share capital.
21. Further, the counsel for the petitioner contended that the irregularities and manipulations in the process of amalgamation of various companies with the respondent No. 1 company as was stated in paras 5.26 to 5.50 was made only for the purpose of making a complete disclosure and stating before this Hon'ble Board the manner in which the respondent No. 1 company is being run by the respondents. The grievance relating to amalgamation is being agitated before the respective High Courts and it was never the intention of the petitioner to re-open the amalgamation proceedings before this Hon'ble Board. A statement to this effect was made in the order of 19.7.2006 and similar submissions were made on V affidavit by the petitioner in reply to the application of the respondents for stay of the present proceedings.
22. Ms. Priya Kumar, Counsel for the petitioner placed reliance on the ratio of the case of Mr. Dinesh Sharma and Anr. v. Vardaan Agrotech Private Limited and Ors. (2007 (1) Company Law Journal 155 (CLB) the applicability of which. to the present case has not been refuted.
23. I have considered the pleadings and the documents filed therewith as well as the oral and written arguments of the parties. The counsel for the Respondents has raised preliminary objections contending that the present petition is not maintainable as the petitioner has not come with clean hands and C.P. No. 93/05 is only a counterblast to the disputes arising in C.P. No. 37/04 wherein various malpractices and fraudulent activities in the affairs of RNC Med Ltd. have been alleged. Besides, it was pointed out, Respondent No. 1 & Respondent No. 2 have also filed several other petitions against the Petitioner wherein relief sought are yet to be granted by the Company Law Board. The Respondents have contended that the Petitioner is trying to avenge himself and the petition does not contain a single averment in relation to the oppression and mismanagement through this frivolous petition which is a malafide attempt, disentitling him to claim any relief from the Company Law Board. It has been reiterated that the only allegation which remains in the petition is that of the conversion of Public limited company into Private limited company since the Petitioner has already given up part of the petition stating that the issue of scheme of amalgamation is not before this Hon'ble Board and thus by such a statement which has been reiterated by the counsel for the petitioner at the time of final hearing before the Company Law Board, the petition has become infractuous and meaningless. The Respondents' argument is that since the Petitioner is not pressing the merger issue, the issue and allotment of 4,22,000 shares on 25.11.2001 also become infractuous, as at the time of merger the share capital of company also included 4,22,000 shares.. Further, it has been contended that the same was in the knowledge of the Petitioner at that time and that issue cannot be challenged at this stage. The share capital of 4,22,000 was shown to be part of the share capital at the merger and the same was not objected to by the Petitioner in 2004. Besides, the counsel raised another preliminary objection on maintainability of the petition on the ground of delay/latches pointing out that the allotment of 422000 shares made on 25.11.2001 was challenged in the year 2005 and the petition is liable to be dismissed on this ground alone. On considering the contentions of the parties I find that C.P. No. 93/05 cannot be dismissed at the threshold on the basis of preliminary objections raised by the Respondents as the objections are not tenable. It is true that there are several other company petitions pending with the Company Law Board wherein the Petitioner has been made a Respondent. The proceedings in the Company Petitions are pending. This petition cannot be dismissed on this ground that other proceedings are pending against the petitioner before the Company Law Board. For every petition under Sections 397 and 398 of the Act, the maintainability has to be proved as per the provisions of the Act and the principles of natural justice which guide the Company Law Board in the exercise of its powers and the discharge of its functions under the Act or any other law. As regards the Respondents' preliminary objection that there is delay in agitating the issue and allotment of shares on 25.11.2001 which was challenged in the year 2005, it is noticed that merger scheme has been approved by the Rajasthan and Calcutta High Courts, the paid up capital of the company on the date of merger stands and the capital issued also cannot be challenged, the Petitioner has himself acquiesced to the share allotment in this regard and to that extend the prayer in the petition has already been given up whereby the Respondents' preliminary objection in respect of delay becomes infractuous. Hence, this preliminary objection also cannot be entertained.
24. Considering the oral and written arguments of the parties as well as the facts and circumstances of the case, I find that the Respondents have not been able to refute the Petitioner's allegation that the public limited company has been converted into a private limited company without following the due procedure as provided in the Act and the conversion has been done by antedating and fabricating the documents illegally and malafidely at the back of the petitioner who holds "V' 13.28% shares in the Respondent No. 1 Company. The counsel for the Petitioner has also objected to the written arguments of the respondents as some of the arguments made in the written rejoinder were not made in the pleadings and oral arguments. It has been reiterated by M.S. Priya Kumar, counsel for the Petitioner, that no mention much less an explanation was made by the Respondents during oral arguments or even otherwise regarding the Petitioner's case of illegal and malafide conversion of public limited company into a private limited company, even the Respondents' pleadings have not dealt with any of the submissions on behalf of the Petitioner relating to the documents filed by the Respondents. The Petitioner's contentions are found to be correct. The counsel for the Respondents has tried to make this a case of certain irregularities in conversion and it has been contended that irregularities per se cannot be held to be oppressive in nature. It has been argued that how an act of conversion of the company from a public limited company to a private limited company can be held to be oppressive, rather the rights of a member/shareholder in a private company are better protected than in a public company and moreover the rights of shareholders in transferring the shares in a private company are restricted and also there is a restriction on a number of members beyond 50. I find that the respondents' contention is not correct in view of the specific instances given by the petitioner pointing out the antedating and fabrication of the documents with regard to the conversion of the public limited company to a private limited company. The Petitioner's contention in this regard remains uncontroverted. The Respondents have avoided the issue by reiterating their contentions on the maintainability of the petition and making reliance on the fact of amalgamation scheme of group companies of the petitioner and the respondents. I find that the allegations made by the Petitioner are factually correct. As per the Respondents the meeting and the resolution for conversion of Respondent No. 1 Company from a public limited company to a AM private limited company was made on 23.8.2004. 'The petitioner has contended that no notice, explanatory statement, proxy forms, etc. were issued for holding any meeting of the shareholder of the Respondent No. 1 Company on 23.8.2004 and in fact no meeting was held and the entire exercise was only a paper action by the Respondents which the Petitioner has proved by the documents furnished by the Respondents. As pointed out above the explanatory statement is dated 13.7.2005 whereas the meeting was allegedly held on 23.8.2004. Further, the explanatory statement should have accompanied the notice for the meeting on 23.8.2004. The notice is also dated 13.7.2005 and in the explanatory statement there is no explanation for conversion of a company from a public limited company to a private limited company. Furthermore, the resolution passed at the alleged meeting dated 23.8.2004 filed by the Respondents is for change of the name of the company and for addition of the word 'private' to the name but the resolution is dated 10.8.2005 which is one month after the date of the notice and the explanatory statement dated 13.7.2005 which is two months prior to the filing of the C.P. No. 93/2005, obviously prove the petitioner's case that the meeting was antedated.
27. According' to the Respondents, the Respondent No. 1 was changed from public limited company to a private limited company after the alleged meeting of 23.8.2004. But, as pointed out by the petitioner, it is noticed that the notice of the meeting was given by the Respondent No. 1 as a private limited company and similar is the position regarding UPCs which show receipt as private limited company. Same is the situation regarding the proxy forms wherein the letterhead of the proxy form shows the Respondent company as "Roadco(India) Private Ltd." even before conversion. This is proved by Sh. Pradeep Rungta's proxy form stating that he is a Member of "Roadco (India) Pvt. Ltd" and that he is appointing a proxy for the EGM of the company to be held on 23.8.2004. Similar proxy forms with identical averments and letterhead of private limited company were filed by the Respondents in respect of Ms Lalita Rungta and Ramdeen Rungta. Their affidavits are totally contrary to the documents filed by the Respondents themselves. Furthermore, the discrepancies in the annual return filed by the company have also not been satisfactorily explained by the Respondents. While antedating the documents the Respondents lost track of the fact that on the date of filing the annual return Sh. Dinesh Rungta was still shown as a Member whereas UPC receipt showed Ms Susila Devi Rungta, his successor after his death. Similar is the situation of the regarding the number of Members. The annual return on 28.7.2004 showed a list of 35 members and the alleged meeting for conversion of the company from a public limited company to a private limited company was allegedly held on 23.8.2004. The UPC list is of 42 members. The respondents showed all 35 members to be present in the meeting in person without realizing that out of these 35 members Mr. Mangat (Mangtu) Ram Aggrawal had died during 1999-2000 and he could not have attended the alleged meeting of 23.8.2004. However, the Respondents have themselves admitted that only 15 members attended the alleged meeting. All these contradictions prove that the declaration filed before the Central Government showing all 35 members present in the meeting was completely false and misleading. This defeats the mandate of the proviso to Section 31(1) of the Act. The meeting was allegedly held on 23.8.2004 but the notice and the explanatory statement as admitted by the Respondents are dated 13.7.2005 which is subsequent to the holding of the meeting. The Explanatory Statement does not mention the change in the name of the company. These are not mere irregularities. In the present case, it is not an isolated act which is only contrary to law and is simply irregular and may per se not amount to oppression as envisaged in the case of Needle Industries (Supra). The instances given by the petitioner are. not merely those of irregularities but are the ones which prove fabrication of documents by antedating the alleged meeting and the proceeding to convert public limited company into a private limited company. And all this has been done at the back of the petitioner, who holds 13.28% shares in the company. Conversion in the manner as pointed out above reveals not only mismanagement of the affairs of the company but also oppression to the shareholders and its creditors and such an act is prejudicial to public interest as well. Subsequent to the scheme of amalgamation approved by the Hon'ble High Court the respondent company was converted into a private limited company by fraudulent means and falsification of records without notice and consent of the shareholders as prescribed in the Act. False information was filed with the statutory authorities by manipulation of notices to the shareholder and directors. The respondents' acts have not only been illegal but also fraudulent. They have resorted to falsification of records by antedating the documents and the statutory authorities were duped by furnishing fabricated documents with malafide intention by manipulation of the process of conversion. Such state of affairs not only reveals mismanagement in the affairs of the company but establishes the act of oppression of the minority as alleged by the petitioner. The shareholders, the creditors, the Govt. through the Regional Director, the Registrar of Companies and other concerned authorities have been taken for a ride vide this abuse of process of law. Such a gross misuse of process of law cannot be brushed aside and ignored.
28. To do substantial justice between the parties and to uphold proper compliance to the provisions of the Act, I hereby set aside the conversion of the Respondent No. 1 Company to a private limited company. The alleged meeting dated 23.8.2004 and the resolution passed therein are declared null and void.
29. With the above directions, I dispose of the petition vacating all interim orders. No. order as to cost.