Karnataka High Court
Siddaramappa Bapurao Patil And Others vs Ratna Cements (Yadwad) Ltd. And Others on 24 July, 1990
Equivalent citations: [1991]70COMPCAS27(KAR), 1990(3)KARLJ75
JUDGMENT Chandrakantraj Urs, J.
1. This appeal is directed against the order made by the company judge in Company Petition No.15 of 1985. The appellants were the petitioners before the company judge. The petition was made under section 398 of the Companies Act.
2. The petitioners pleaded, inter alia, mismanagement of the company, viz., Ratna Cements (Yadwad) Ltd., by its secretary. Respondent NO.2 is the managing director of the company. It is also pleaded that the petitioners had been wrongfully removed from directorship. Another complaint was that the annual general meeting had not been held and that despite demand, statement of accounts for the financial year 1983-84 were not furnished.
3. Respondents Nos.3,7 and 9 are the other group of shareholders who represent 50% of the shareholding in the company. The petitioners group consists of the petitioners and respondent No.8 who represent 50% of the shareholding in the company. It suffices to say that,on the advice of the Industrial Development Bank of India which is one of the premier financial institutions of the country and which has advanced considerable amount of assistance to respondent No.1- company and was impleaded as respondent No.11 subsequent to the filing of the petition, had directed that the shareholders themselves should bring certain amounts in order to get a loan from it and increase production of cement. Pursuant to that, a certain target appears to have been fixed for each member or member of each group to provide the required additional finance out of their own funds. It was on such failure to fulfill the target that it was decided to terminate their directorship at a board meeting held on November 7, 1984. It was also denied that they had not held the annual general meeting nor refused to produce the statement of accounts. On the other hand, they intended that the petitioners,were at all times, aware of the notice of the general meeting which included the statement of accounts for the relevant period as an enclosure and they were also aware of the procedings of the board meeting by which they were removed as directors in accordance with the earlier agreement and as such the petition was frivolous with an intention to create unnecessary application with the management and as such was liable to be dismissed.
4. In any event, though the petition was styled as one made under sections 397 and 398 of the Companies Act,1956, at some stage , the petitioners-appellants before us had given up their claim in so far as it related to section 397 of the Companies Act.
5. We find from the order of the learned company judge that all aspects have been gone into in accordance with the pleadings and all material received in the form of affidavits and enclosures of both parties. On a perusal of such material, he came to the conclusion that there was nothing wrong with the resolution of the board of directors passed at the meeting held on November 7, 1984, removing the petitioners from directorship which letter came to be affirmed at the general meeting held on December 29,1984. In fact, it was in evidence that the petitioners had all been served with the notice of the annual general meeting together with the enclosures. It was also in evidence that the petitioners, appellants before us, had indeed written, soon after receiving the notice, to the Registrar of Companies in Karnataka asking him for postponement of the general meeting and for permission to hold the said meeting in the month of January, 1987. In fact permission was given but the same was withdrawn after respondent No.2 brought to the notice of the Registrar that the meeting had already been held.
6. Sri U. L. Narayana Rao, learned counsel for the appellants, strenuously contended that the ultimate directions given by the court were not in consonance with the findings recorded by the court. But we find it otherwise. In the first place, the petitioner appellants have failed to establish their case of apprehension of mismanagement. In fact, the whole litigation is speculative with the object of putting obstacles in the way of the management.
7. The ultimate directions given by the learned company judge are to be found in paragraphs 23(a) to (g). He directed respondent No.2 to have absolute control over the affairs of the company and also protect the interests of the public who have invested in the company. He further directed reimbursement of the promoters' quota contributed by the friends and relations of the petitioners-appellants and respondent No.8 amounting to Rs.22,17,000. The promoters' quota of petitioners Nos.1 to 4 and respondent NO8 shall be subject to deduction of Rs.10.23 lakhs being amounts drawn by petitioner-appellant No.1 under two separate cheques in sums of Rs.8.5 lakhs and Rs,1.73 lakhs respectively which he collected but did not account for or remit to the company. According to the directions issued in the other paragraphs, each party is required to exercise his option in regard to reimbursement of the amounts contributed and until the parties exercise their options, no immovable property or machinery of the company is liable for disposal without the previous permission of the court thereby securing the interests of the public funds as well as the investment made by the petitioners-appellants. There is also a provisions made for the parties to seek further guidance and directions of this court in case any difficulty arises.
8. In what view of the matter, we do not see any good ground for interfering with the order of the learned company judge which has been the result of a careful consideration of the material placed before him.
9. We have already observed that the complaint itself is frivolous and made with the object of harassing respondents Nos. 2 to 7 particularly respondent No.2, the managing director.
10. Options as required by paragraphs (c) and (e) shall exercised within three months from today.
11. Subject to the above observations, we dismiss this appeal.
12. 1983-84 were not furnished.