Company Law Board
Shri Mohinder Singh And Ors. vs Hoshiarpur Express Transport Co. Ltd. ... on 1 June, 2007
Equivalent citations: [2008]141COMPCAS345(CLB), (2008)1COMPLJ501(CLB), [2008]86SCL155(CLB)
ORDER
Vimla Yadav, Member
1. In this order I am considering Company Petition No. 68 of 2001 filed by Shri Mohinder Singh and Ors. under Sections 397, 398, 402 of the Companies Act (hereafter called 'the Act') alleging certain acts of oppression and mismanagement in the affairs of the R-1 by the respondents.
2. The R-1 company namely M/s. Hoshiarpur Express Transport Company Ltd. and Ors. was incorporated in the year 1937. It was established as public limited company limited by shares. This company is now governed by Companies Act, 1956. The Registered Office of the company is situated at 217-L, Model Town, Hoshiarpur (Punjab). Head office is also at Hoshiarpur (Punjab). Initial nominal authorised capital of the company as per the MOA was 7.5 lakhs which was increased to Rs. 30 lakhs, and thereafter in 1992 it was increased tQ 50 lakh after due permission divided into two lakh shares of Rs. 25/- each. The Petitioners are in majority from the time of incorporation.
3. Shri Krishna Kumar, Counsel for the petitioners pointed out that the Petitioner was to control the entire company and also was to manage the affairs of the company as accepted with by the Respondent and confirmed by the Hon'ble High Court of Punjab and Haryana at Chandigarh and as per minutes recorded in this connection from time to time. My attention was drawn to a resolution dated 9.11.1992 to the effect that Sh. Chanchal Singh who was Chairman and Shri. Surjit Singh Mann, General Manager of the company be removed and Sujan Singh Sahota (Petitioner No. 8) be appointed as a Chairman of the Company and Manjit Singh Lali (Petitioner No. 3) as General Manger; on 27.07.1996, the board resolved unanimously that Chairman of the company could be removed in a proper manner by following correct procedure i.e by passing resolution by 2/3rd majority; on 17.08.1996 a meeting of the Board of Directors met and appointed 12 more directors.
4. Further, it was pointed out by the counsel for the petitioners apprehending danger to the public peace due to the dispute between the different fractions of the Company the petitioners filed an application Under Section 145 of the Criminal Procedure Code. The Ld. Magistrate held that 9.11.1992 meeting was a valid meeting and Sujan Singh Sahota was duly elected as a Chairman in the said meeting. The Respondent filed an appeal in the Hon'ble High Court of Punjab and Haryana at Chandigarh against the order passed by the Ld. Magistrate dated 8.12.1993. The Hon'ble High Court remanded it to the Sub Divisional Magistrate to decide the case afresh. The Sub Divisional Magistrate disposed off the matter on 7.7.1999 observing that the meeting dated 9.11.1992 was valid meeting and Sujan Singh Sahota was duly elected as a Chairman. The Respondents filed a Criminal Revision against the order dated 7.07.1999. The Hon'ble High Court dismissed the Criminal Revision filed by the Respondent on 9.09.1999. The Respondents again filed a Criminal Misc. Petition 28420 of 1999 in Criminal Revision No. 1111 of 1999 for seeking clarification of the order dated 7.07.1999 before the Hon'ble High Court of Punjab and Haryana at Chandigarh. The same was again dismissed by the Hon'ble High Court on 20.09.1999. It was contended that the above order had become final and is the order which ought to be given effect to in law and it was pointed out that according to the order dated 20.09.1999, it was abundantly clear that Sh. Sujan Singh Sahota (Petitioner No. 8) was the Chairman and the meeting dated 9.11.1992 was a valid meeting.
5. Further, it was argued that inspite of aforesaid clear position with regard to shareholding and control of the company accepted by the Respondents, the respondents fraudulently and by way of mismanagement and oppression took control of the company illegally and prevented the petitioner from legitimately continuing to be the management and carrying on the business of the company in the normal course. To continue with their illegal control, the respondents passed various illegal resolutions which were not in accordance with law or with proper notice and also sought to allot shares fraudulently by increasing the share capital from 50 lacs to 65 lacs.
6. The counsel for the petitioners specifically challenged the following acts: the Board Meeting of Directors alleged to have been held on 23.08.1996 without notice of the meeting to the petitioners or other members of the company, without having quorum, illegally removing Shri SujanSingh from the Chairmanship of the company without any reasons and appointing Kabul Singh Kalova as the Chairman is illegal and without authority. No notice of removal as a Chairman was given to the Petitioner No. 8. Even during the hearing on merits no arguments have been advanced to substantiate the action of the alleged removal; on 9.09.1996 the AGM was called by an alleged person to be the General Manager without proper notice sent to the petitioners and other members, without any authority, held in an illegal manner in contravention of the provisions of the Companies Act to remove petitioners from directorship of the company; further on 13.07.1998, the authorized capital was enhanced from Rs. 50 lacs to 65 lacs in an illegal AGM held without proper notice sent to the petitioners and other shareholders of the company, in an unauthorized manner shares were allotted to the Respondent No. 3 and his own persons.
7. Further, it has been alleged that the Respondents are guilty of manipulation of record, fabrication of transfer share registered and tampering with the statutory records of the company. My attention was drawn to the following instances:
A. Shri Jhaimal Singh and Mandip Singh had shares to the tune of 1225 and Mandip Singh had shares to the tune of 1172 these shares were illegally and without any authority transferred in the name of Surinder Singh wife of the Respondent No. 3 and his son. He has filed criminal complaint before the police station for this fraud.(Annexure-15 of the petition page at 194). In a petition before the Hon'ble High Court Punjab and Haryana at Chandigarh, the Hon'ble High Court has directed the police to take the appropriate action, against R-3.
B. Again Mr. Amarjit Singh filed a petition against the Respondent No. 3 at Hoshairpur inter alia alleging that his share have been illegally transferred in the name of other persons without any authority.(Annexure - 17 of the petition page at 199) C. Late Shri Chanchal Singh had 1912 shares. These shares have been illegally, without any authority transferred in the name Surinder Singh.
D. Though Rura Ram had expired more then 25 years ago, his shares have been transferred in the name of Harjinder Singh, belonging to the respondent group. Rura Ram was unmarried and died issueless. But the transfer register shows that Mr. Harjinder Singh is legal heir of Rura Ram..
E. Jasbir Kaur Mann (Petitioner No. 20) got shares from Harpal Kaur by way of transfer. The transfer in her name was approved by the previous board of directors R-3 has transferred those 1379 shares illegally in the name of Harjinder Singh.
The counsel for the petitioners argued that the shareholding of the respondent group has been illegally enhanced in this manner by transferring shares of the persons who were to actively associated without even their asking for transfer. It was pointed out that no explanation was given by the respondents with regard to the discrepancies / fraud pointed out by way of above instances. The only technical objection taken was that the said alleged transferees were not parties to the proceedings. As already pointed out the issue was not whether the shareholders, each one of them have raised the issue of transfer but whether the transfer done fraudulently by the present management can be allowed to stand and whether the same would not amount to mismanagement i.e. transfer of shares without valid authority from the transferee.
8. Further, Shri Krishna Kumar, Counsel for the petitioner argued that the company was guilty of issuing tickets without recording the same and thereby pocketing the proceeds of the company without recording thus perpetuating fraudulent acts. My attention was drawn to the interim orders of the CLB whereby it was directed that the company directors will not dispose of any assets of the company and that all collections from the bus operations would be deposited on day to day basis and expenses would be met out of withdrawal from the bank. It was pointed out that the respondents have not complied with this order and the petitioners have filed applications seeking directions to initiate contempt proceedings.
9. Further, the counsel drawing attention vide C.A. 250 of 2004 placing on record of the fact that inspite of specific directions given by the CLB on 18.8.2003 and on 30.8.2003 to call Mr Inderjit Singh Walia and Mr. Mahinder Singh for the Board meeting, the present management has failed to comply with the order and hence the CLB on 18.3.2004 directed the respondents to comply with the CLB's order dated 18.8.2003 and call Mr. Inderjit Singh Walia and Mahinder Singh for the Board Meetings. Inspite of the aforesaid direction the present management failed to comply with the order and till date have not called Mr. Inderjit Walia to its Board Meeting. It was argued that the fact that there has been deliberate contumacious disregard of the order further shows that the present management should not continue in the office even for a day and not only they should be removed from the office but prosecution could be launched against them.
10. Further, it was pointed out that the respondents were required to comply with the order dated 24.10.2005 passed by this Hon'ble Board within four weeks and to file the reply to the petitioners' affidavit dated 26.05.2006 placing on record the fraud committed by the respondents but inspite of the specific direction no reply has been filed nor the facts contradicted, no attempt has been made to explain the large manipulation carried out. The CLB had specifically directed the respondent to produce the transfer deed; transfer registered evidencing the transfer of shares, which are disputed by the petitioners, the respondents were also required to file affidavit of the transferees shares the consideration paid for the purchase of the share, but, it was pointed out, no compliance has been made..
11. Further, the purported increase in the shareholding of respondents, by the alleged resolution passed on 7.8.1998 was challenged on various grounds including on the ground that there was no valid meeting and notice of the said meeting had not been given to the shareholders and in particular the petitioner's group and also the allotments were malafide for the reason that all the allotment were made by way of fabrication, back dated documents and all allotments were made to the respondents only. It is highly inconceivable, it was argued, that there will not be any other single shareholder who would have opted for purchase of fresh allotments and the allotments were accepted only by the respondents. Share Capital of the company before 98 was Rs. 50 lakhs which was increased to 65 lakhs. It was pointed out that no procedure was followed for allotment. Attempt made was to take control of the company illegally. It was further pointed out that the respondents did not provide any satisfactory reply to Mr. Nesar Ahmed, Commissiner appointed by this Hon'ble Board regarding increase in the share capital and further allotment of shares to the respondents only. It was pointed out that the respondents took as much as 5 times adjournment and still the order giving details of the consideration and production of transfer deeds has not been complied with. On 7.2.2003, Mr. Nesar Ahmed, Practicing Company Secretary was appointed vide order dated 24.12.2002 to verify the membership of the Company by going through all records/returns etc and all facts of the records etc that may be produced by the petitioners/ respondents. His report had highlighted the following:
(a) it was stated at page 5, in para 4, that no signature card is maintained by the Company and nothing was produced before him to verify the signatures of the transferor(s) or the transferee(s); (b) at page 6 in para 9 it was stated that "as per the records of the Respondent Company, Mr. Inderjit Singh Walia, is not a shareholder of the Company, he only holds share certificates containing total 1784 shares alongwith the transfer deeds which are blank and not properly filled; (c) in para 11, it was pointed out that " the increase in the shareholding of the respondents is due to the allotment of fresh 60000 equity shares of the Company vide a Board Resolution passed on 7.8.1998 (copy of the same is attached as Annexure IX (Colly). It is to be noted that all these shares were allotted to the shareholders of the Respondent group and no satisfactory reply was provided by the Respondents as to the compliance of Section 81 of the Companies Act,. 1956 in this regard."; (d) in Para 13, it was further pointed out that "The kind attention of the Hon'ble Company Law Board is hereby drawn that the Petitioners claimed to have the possession of the Minutes Book of the respondent Company for the period prior to the year 1996. The same was also produced before the undersigned for verification but as the same was in the local language of the town (i.e Gurmukhi) and the petitioners failed to provide Hindi or English translation of the same, the same could not be verified.
It was pointed out that Mr. Inderjit Singh Walia was the nominee of the Petitioner by the Hon'ble Court's order dated 5.4.2005 on the Board of respondent Company. It was pointed out by the counsel for the petitioners that there is no need to implead Shri Inderjit Singh Walia formally. By Order 10.9.2004 directions were given to attend the meeting of the Board of Director scheduled on 11.9.20004. Inspite of the directions of this Board, no notice of meeting was sent to Shri Inderjit Singh Walia. Sh Inderjit Walia was surprised to learn that the recording in the minutes of the Board meeting held on 11.9.2004 which showed that it was attended by him that even the petitioner Mr. Mohinder Singh and Shri Sujan Singh rejected the share transfer requested by Sh. Inderjit Singh Walia. The statement recorded in the minutes, it was argued, is false and deliberately distorted. The issue of nonregistration of 5271 shares by the respondent Company in the name of Sh. Inderjit Singh Walia, without any valid reason is again an act of oppression and mismanagement. Inspite of directions given by the Hon'ble Chairman of this Hon'ble Board to consider the transfer of the shares of Inderjit Walia, the company failed to effect transfer of the said shares.
12. The counsel for the petitioners reiterated the prayers made in the petition and emphasised that it is a clear case of oppression and mismanagement, and that the fraud on the petitioners is apparent.
13. Ms. Charu Sharma, Counsel for the respondents argued that the present petition is not maintainable as there is no continuous cause of action against the respondent. The respondents have based their case on the meetings relating to the year 1996 and 1998. That the prayer sought by the petitioners relates to grievance of the year 1996 and 1998 and the present petition is filed in the year 2001. Reliance was placed on the decision in Rai Saheb Vishwamitra and Ors. v. Amar Nath Mehrotra and Ors. SCL (59) 854. Further, it was argued that the present petition is also barred by limitation as there is no continuous acts of alleged oppression. However, the petitioner have made desperate attempts to make out a case for themselves by filing subsequent applications. It is submitted that subsequent applications can not be resorted to for making out case. Reliance was placed on the decision in Dr. S. Mangalam Srinivasan v. Mani Forgings P. Ltd. and Ors. 2006(129)- COmpcas-0544- CLB.
14. Further, it was pointed out that the petition under Section 397, 398 and 402 of the Companies Act, 1956 is maintainable only if the conditions and the requirements of Section 399 are properly and consciously compiled with. Consent in writing as contemplated by Sub-section (3) is consent to the filing of a particular petition with particular allegation and for a particular relief under Section 397 or 398 or both. Thus obtaining a consent is a precondition and a substantive matter which goes to the root of the entitlement to file a petition for relief and the validity of the same is to be viewed rigidly, reliance was placed on the decision in Shankar v. South India Concern Ltd. (1997) 1 Comp. LJ 301 at 317 (CLB-PB). It was pointed out that in last page the present petition, signature of the 10 person holding 6161 equity shares of Rs. 25/- each amounting to Rs. 1,54,025/- are allegedly forged. Thus the present petition excluding forged signatures has been filed by 18 person and total capital held by the remaining persons is 5,78,975/- 7,33,000/- 1,54,025/- which is 8.9% of the paid up capital of the company. Consent obtained by misrepresentation is no consent within the meaning of Section 399. It was further argued that the consenting members while giving their consent should have applied their mind to the question before them and should have known what relief had been claimed in the petition. Mere consent to an application under Section 397 and on Section 398 being filed is not enough as held in: (a) Duraiswami M.E. v. Shakti Sugar Ltd. 50 Comp. Cases 154 (Madras); (b) Omni India Ltd. v. Balbir Singh (1989) C.C 903(DCM DB); (c) S.S. Laxminarayanan (SS) v. Mather and Piatt India Ltd. (1997)VOL. 13 Page 229. Further, it was pointed out in the present case, petition got ready on 21.04.2001 and all the petitioner have submitted their affidavit or consent on 21st April 2001 at Chandigarh from the affidavits as attached with the petition clearly shows that some other advocate has specially mentioned that the deponents have signed in his presence. There must be some material with the petition showing that the signatory members were aware or were apprised of the contents of the petition. Consent is a substantive requirement which should be consent of requisite number and not mere signatures but consent means consent after an understanding of facts. It should be apparent from the consent letters sore the same date and proceeded in a uniform style . It is held that this type of consent non application of mind have proceeded as mechanical process a petition was dismissed in Shankar v. South Indian Cocern Ltd.
Further, it was pointed out that on 03.06.2002 the respondent through their advocate Sh. Virender Kumar Gupta received a copy of minutes filed by the petitioner counsel Sh. Krishan Kant, Advocate in a civil suit titled Hoshiarpur Express Transport Company and Ors. v. Shri Manjit Singh Lali and Ors.. It was pointed out that the signatures of the petitioners in the said minute book are different from that of the affidavit of the petitioner before this Hon'ble Bench.
15. Ms. Charu Sharma, Counsel for the respondents argued that there are no allegations of oppression of the Petitioners. That the petitioners have miserably failed to show that the acts of respondents are oppressive against them. Their grievance if any, is qua director and not qua shareholders. Reliance was placed on the decision in N.K. Moha patra v. State of Orissa 1999 (96 Company cases) 49
16. Further, it was argued that the increase in Shareholding was bonafide and in the interest of the Company. The company issued further capital of Rs. 15 lacs in the year 1998 and the respondents deliberately for the reasons best known to them did not ask for shares in their favour and have deliberately with malafide intention raised this issue now in the year 2001. Reliance was placed on the decision in Om Prakash Gupta and Ors. v. Hicks Thermometers India Limited and Anr. 1999 (33) CLA 0461 CLB.
17. Responding to the allegations made of illegal transfer of shares of persons whose instances were given the Counsel replied as under: (a) As regards shares of Jhalam Singh amounting to 1225 shares and his son Mandeep Singh amounting to 1172 shares have been illegally transferred, it was replied that the Matter has been dealt by Hon'ble High Court of Punjab & Haryana; (b) As regards Complaint of Sh. Amarjeet Singh of illegal transferred in the year 1991, it was replied that these shares already transferred in 1989 and the present management as per the petition it self came and existence in the year 1996. Further, the petition of the Sh. Amarjeet Singh on 17.5.2001; (c) As regards 1912 Shares of Mr. Chanchal Singh, it was replied that these shares are still in the name of Mr. Chanchal Singh; (d) 1379 shares of Mrs. Harpal Singh, it was replied that Enquiry was conducted vide enquiry No. 656/A/PD/1466/99F. In fact Mrs. Jasbir Kaur has sold these shares to Mr. Harjinder Singh; (e) As regards share in the name of Mr. Harjinder Singh have been illegally transferred from Mr. Ganga Ram who died, it was replied that matter has been investigated by Police vide enquiry No. 360/SSP/30/4/99F; (f) As regards Vague allegation of illegal transfer. Nonspecific instance, it was replied that denied as being wrong; (g) As regards appointment of Harbhajan Singh Chanchal on 17.8.1996 as he was allotted shares on the same date, it was replied that Harbhajan Singh Chanchal was appointed as Director on 9.9.1996 and not 17.8.1996.
18. It was further argued that though the allegation is vague and without evidence about mis-appropriation of assets or improper use of assets but it is worth mentioning that after the vacation of office by the petitioner there has been no misappropriation.
19. It was further pointed out that there are various litigations between the parties. The petitioner have been getting support from Sh. Inderjeet Singh Walia and his brother Sh. Pramjeet Singh Walia against whom the following cases are pending. The company has been dragged into unnecessary litigation all this was being done under the guidance of Inderjit Singh Walia who is none other than the Proprietor of the Walia Transport Company Phagwara, a competitive business entity on their failure to get Manjit Singh Lalli and others arrested by the police or through the courts to facilitate their control of the management of the Company, on Inderjit Singh Walia resorted to the use of criminal force to achieve his object. My attention was drawn to the following instances of pending criminal cases registered or filed against Inderjit Singh Walia and on some of his hench-men. (a) F.I.R. No. 10 dated 9-1-2000 P.S. City Hoshiarpur Under Section 149-452-448-342-506/149 I.P.C. and up's 25/27 Arms Act for attempting to take forcible possession of the office of the Company. Inderjit Walia is one of the accused; (b)FIR No. 98 dated 13.8.2000 P.S. Balachaur Under Section 382 IPC regarding snatching of Bus No. PB-07-H-1385 of the Company, Paramjit Singh Walia, real brother of Inderjit Walia is one of the accused, Manjit Singh Lalli has taken the bus on Supardari through the court; (c)FIR No. 271 dated 17.8.2000 P.S. Ludhiana Under Section 382 I.P.C. regarding snatching Bus No. PB-07-F-7685 of the Company. Inderjit Singh Walia is one of the accused. The bus has since been taken on Sapurdari by Manjit Singh Lalli from the court; (d) FIR No. 136 dated 1.9.2000 P.S. City Phagwara Under Section 148-382-342-506/149 I.P.C. while taking away Bus No. PB-7585 of the Company.lnderjit Singh Walia is one of the accused. The bus has been taken on Supurdari by Harbhajan Singh Chahal one of the Directors of the present Management under the orders of the court; (e)FIR No. 125 dated 13.9.2000 P.S. Carhshankar Under Section 395 IPC while committing dacoity and taking away Bus No. PB-07-F-4885 of the company. lnderjit Singh Walia is one of the accused. Manjit Singh Lalli has taken the bus on Sapurdari from the court; (f) FIR No. 176 dated 7.11.2000 P.S. City Phagwara Under Section 148-364-379/149 regarding assaulting of some workers of the Company. lnderjit Singh Walia is one of the accused; (g) FIR No. 34 dated 12.03.2001 Under Section 148-382-506/149 I.P.C. P.S. Phagwara regarding snatching Bus No. PB-07-H-7085 of the company. lnderjit Singh Walia is one of the accused. This bus has not yet been recovered; (h) FIR No. 146 dated 13.9.2001 P.S. City Phagwara Under Section 148-186-353-427-149 I.P.C. for assaulting police party while investigating case FIR No. 10 dated 9.1.2000 P.S. City Hoshiarpur. lnderjit Walia is one of the accused; (i) FIR No. 219 dated 13.10.2001, P.S. Sirhind Under Section 148-382-341/149 I.P.C. while snatching Bus No. PB-07-H-6985 of the Company. lnderjit Singh Walia is one of the accused. The bus has not been recovered so far.(j) FIR No. 234 dated 4.12.2001 P.S. City Hoshiarpur Under Section 420-511 IPC regarding issuance of a false pamphlet with regard to some of the buses of the company for giving on hire to the public. lnderjit Singh Walia is sole accused; (k) FIR No. 309 dated 30.12.2001 P.S. Banga Under Section 379 I.P.C. for committing theft of Bus No. PB-07-H-2885 of the company. lnderjit Singh Walia is one of the accused, the bus has not so far been recovered; (1) A complaint for offences Under Section 465-468-473-I.P.C. filed by Manjit Singh Lalli against lnderjit Singh Walia for issuing false notice as Genral Manager of the Hoshiarpur Express Coy Ltd. Hoshiarpur and using a counterfoil seal is pending trial in the court of C.J.M. Hoshiparur and is fixed for 24.9.2002; (m) FIR No. 196 dated 6.9.2000 P.S. Sadar Hoshiarpur was registered Under Section 304-A I.P.C. relating to Bus No. PB-07-H-8535 of the Company. Inderjit Walia procured custody of the bus on Sapurdari. Later on Sapurdari was cancelled and it was ordered to be released in favour of Manjit Singh Lalli which order was maintained right upto the High Court. Criminal Revision No. 580 of 2001 connects. The bus is still with Inderjit Walia (n) Proceeding Under Section 145 Cr. P.C. were got initiated by the police between partner Sujan Singh, a disgruntled share holder and Paranjit Singh, a brother of Inderjit Singh Walia on one hand and Manjit Singh Lalli and Kabal Singh Kaloa on the other hand. The S.D.M. Hoshiarpur was pleased to dispose of the said proceedings vide his order dated 16.2.2000 and dropped the proceedings as the parties were already on litigation before the civil court. The civil court had dismissed the application for the issuance of the interim stay as mentioned in para No. 2 above;
20. Further, the counsel for the respondents argued that the interim orders passed from time to time in this petition are not final orders. Reliance was placed on the decision in . State and Ors. v. N.M.T. Joy Immaculate para 8. It was further pointed out that the question of registering shares of Sh. Inderjeet Singh does not arise reference was made to an affidavit filed by the respondent in compliance with the Hon'ble Company Law Board on 1.11.2003. It was argued that where, on the other hand, a person is of such a character as to throw the company into confusion and if he is not a desirable one, then the Board of directors will be acting in the best interests of the company in refusing to register the shares in his name and such a reason is a valid reason. Reliance was placed on the decision in E.M. Muthappa Chettiar v. Salem Rajendra Mills Ltd. (1955) 25 Com Cases 283: and where the membership of any person making the application is disputed, the application cannot be admitted unless the applicant is prima facie entitled to membership or his right to membership is indisputable or unchallengeable reliance was placed on the decision in Gulabrai Kalidas Naik v. Lakshmidas Lallubhai Patel (1977) 47 Com Cases 151 (Guj.)
21. I have considered the pleadings and the documents filed therewith as well as the arguments of the parties. I find that the preliminary objections raised in this case are not tenable. The respondents have pointed out that the consent letters filed in the present petition are defective. Further, it has been pointed out that signatures of some of the petitioners have been forged as the same do not tally with the signature card of the respondent company. In the backdrop of allegations and counter allegations in this petition as well as the acts of oppression and mismanagement which the petitioners have made out successfully to do substantial justice between the parties, preference cannot be given to technical defects when pitted against substantial justice. The respondents' contention that the alleged acts of oppression and mismanagement took place in 1996, 1998 whereas the petition has been filed in the year 2001 and hence there is delay in filing the petition is also not tenable in view of the fact that it is a settled position that the Limitation Act does not apply to this quasi judicial functioning of this Court which exercises equitable jurisdiction under Section 10E(5) of the Act. However, latches are applicable. In the present petition I do not find that there are any latches in filing the Company Petition under Section 397 and 398 of the Act. The petitioners have been continuously challenging the acts of oppression and mismanagement in one forum or the other and have not shown any lack of due diligence in pursuing the matters. The respondents' preliminary objection that if the shares of the petitioners totalling to 154025 in respect of whom the signatures have been allegedly forged are excluded from the shareholding of the petitioners totalling to 7,33,000 then the petitioners' shareholding totals upto only 5,78,975 which works to only 8.9% and hence this petition is not maintainable for not fulfilling the eligibility criterion as laid down in the provisions of Section 399 of the Act, is also not tenable. This Board has always taken the view that if shareholding of the petitioners is reduced below 10% on account of further issue of shares and if the issue of further shares is also challenged in the petition, then, the petition will not be dismissed as not maintainable in terms of Section 399. Instead, the allegation relating to the issue of further shares would be examined first as to whether the same is an oppressive act and if it is found to be so, then only other allegations in the petition would be examined. In the present petition it has been alleged that that the allotment of 60,000 equity shares as per the resolution dated 7.8.1998 only to the respondents' R-3 and his group, is illegal and deserves to be set aside and further that 5271 shares presented by Shri Inderjit Singh Walia for registration are pending for registration for a long time. In view of these circumstances, I do not find that this is a fit case which can be dismissed at the threshold itself on account of the preliminary objections raised.
22. Coming to the merits of the case, I find that there are allegations and counter allegations in this petition. The petitioners and respondents are engaged in multifarious litigation before the Civil Courts, including the High Courts and Criminal Courts. The respondents have not denied, rather have maintained a stony silence regarding the resolution dated 9.11.1992 whereby P-8 was appointed as Chairman of the Company and P-3 was appointed as General Manager of the Company. This order was challenged before the SDM, Hoshiarpur, was remanded back to the SDM Hoshiarpur, the Criminal Revision filed was dismissed by the Hon'ble High Court of Punjab and Haryana and even the Criminal misllaneous petition filed before the Hon'ble High Court was dismissed making the order dated 20.9.1999 final. The order dated 20.9.1999 made it abundantly clear that Shri Sujan Singh Sahota i.e P-8 was a Chairman and the meeting dated 9.11.1992 was a valid meeting. However, the respondents held an AGM on 9.9.1996 unauthorisedly without giving any notice to the petitioners and other shareholders of the respondent company and without compliance of the provisions of the Act. Further, it is noticed that P-8 was removed as Chairman by the Board of Directors Meeting alleged to have been held on 23.8.1996 without notice of removal as a Chairman given to the P-8 at any point of time. No documentary evidence or any other proof was produced during the hearing despite opportunities given to the respondents. The Board of Directors did not even have the requisite quorum for conducting the alleged meeting on 23.8.1996. The removal of P-8 as Chairman being illegal is declared as null and void. Furthermore, I find that the AGM alleged to have been held on 13.7.1998 raising the authorized share capital from Rs. 50 lakhs to Rs. 65 lakhs is also in contravention of the provisions of the Act. It was held without proper notices having been sent to the petitioners and other shareholders of the company. The allotment of shares to R-3 and his group is also found to be illegal. The respondents' contention that the petitioners deliberately did not ask for shares and this issue has been raised now in 2001 is not tenable. The Local Commissioner appointed in this case has also pointed out in his report dated 31.3.2003 that the increase in shareholding has not been explained. It is not found to be for a proper purpose and that no satisfactory explanation has been given for allotment of 60,000 shares to R-3 and his group. There has been no compliance to the provisions of Section 81 of the Act. It is noticed that this allotment has been done in the face of status quo ordered by the CLB. The petitioners have filed a contempt petition in this regard for flouting of CLB's orders. Furthermore, it is noticed that the petitioners' allegations regarding manipulation of record is also found to be correct. The respondents have not been able to meet the allegations regarding acts of oppression and mismanagement in this case.
23. In view of the foregoing, to do substantial justice between the parties, I hereby order as follows:
i. The resolution regarding removal of P-8 as Chairman and P-3 as General Manager is hereby set aside. Status quo ante is restored. P-8 is restored as Chairman of R-1 company and P-1 is restored as General Manager of the company, ii. The Board of Directors meeting alleged to have been held on 23.8.1996 and the AGM held on 9.9.1996 are hereby set aside and declared as null and void. Status quo ante is restored, iii. The increase in the share capital from Rs. 50 lakhs to Rs. 65 lakhs is held to be illegal and is hereby set aside.The issue and allotment of 60,000 shares to the R-3's group made by resolution dated 7.8.1998 is hereby set aside and declared as null and void. Status quo ante is restored, iv. The R-1 company is hereby directed to give consequential effects in implementing the directions contained (i) to (iii) above forthwith.
24. With the above directions, the company petition No. 68 of 2001 stands allowed. All interim orders stand vacated. All CAs stand disposed of. No order as to cost.