efn global impex pvt. ltd. dated 18-01-2013

8/10/2019 EFN Global Impex Pvt. Ltd. Dated 18-01-2013

1/21

COMPANY

IAW

BOARD, NEW

DELHI

BENCH

lN THE

MATTER

UNDER

SECTION

3971398 OFTHE

COMPAN|ES

ACT,1956

IN

THE

MATTER

OF:

M/s.EFN

Global

lmpex

Private

Limited

205, Commercial

Arcade,

South

City-1,

Gurgaon-122

001

Ha

rya

na

IN THE

MATTER

OF:

Lieutenant

Sharad

Saxena

D-19,

Ground

Floor,

South

City-1,

Gurgaon-122

@1,

Haryana

AND

vs.

M/s.EFN

Global

lmpex

private

Limited

205,

Commercial

Arcade,

South

City-1,

Gurgaon-122

001

Haryana

Mr.Muneesh

Kumar

Saxena

D-19,

Ground

Floor,

South

City-1,

Gurgaon-122

001,

Haryana

CP

No.1a(ND)/2011

Present:

Shri Dhan

Raj,

Member

Petitioner

Respondent-L

Respondent-2

1.

2.

ffi

Major

General

(Retd.)

Mahendra

Kumar

Saxena,AVSM


2/21

-)

-

Vidya Kutir,

Village

Bhondsi,

Sohna

Road,

Gurgaon-122

001-

Haryana

Brigadier(Retd.)

Saran Prasad

Datta

House

No.

1296,

Sector-17C

Gurgaon-122

001

Haryana

Mr.Janardhanan

Ravesanker

VRR

Complex,

First Floor,

3/28,

Marudhamalai

Main Road,

Vadava

lli,

Coimbatore-64L04t

Tamil

Nadu

Mr.Pradeep Lakhani

House

No.879,

Sector-4O,

Gurgaon-122 001

Haryana

Mr.Uday Chawla

309,

Sector-19,

Pocket 3, Dwarka,

New

Delhi-110

075

Respodent-3

Respondent-4

Respondent-5

Respondent-6

Respondent-7

4.

5.

6.

7.

PRESENT:

PETITIONERS:

1. Shri Rakesh Khanna, Advocate

2. Shri

Udit

Kumar,

Advocate

3. Ms.Arzu Chimmi, Advocate

F'$

-..tlY,-g


3/21

4.

Shri Sharad

Saxena,

Advocate

RESPONDENTS:

5. Shri V.K.Dahiya,

Advocate

ORDER

(Date

offinal

hearing:

13th

December,2OL2l

In

this

case,

petition

has

been

fired

u/s

397/3gg

of

the

companies

Act'

L956

against

the

acts

of

oppression

and

mismanagement

by

the

Respondents. The Respondent company was

incorporated on

Gth

June,

1995 and

is

presently

having

its

registered

office

at

205,

commercial

Arcade,

south

city-1,

Gurgaon-122

001,

Haryana.

The

petitioner

held

equity

shares

amounting

ro

45.13%

of the

issued

and

subscribed

share

capital

of the

company.

However,

it

has

been

alleged

that

due

to

iilegar

acts of

the

Respondents,

the holding

of the

Petitioner

has

been

reduced

to

7.640/o

of

the

issued,

subscribed

and

paid-uo

capital

of the

company.

At

present,

there

are

three

members

in

the

company

ano

thereby,

the

Petitioner

is

more

than

one-tenth

of

the

total

number

of

its

members

and is

therefore

eligible

under

section

399(1)(a)

of

the

companies

Act,

1956

to file

the

Petition.

Initiaily,

the

petitioner

was

appointed

as

Manager

(eA)

in

the

company

by retter

of

appointment

dated

1't

september,

1997

and

thereafter,

on

7th

october,

t997,

the

petitioner

was

appointed

as

a whore-time

Director

of

the

company.

The

petition

contained

the

foilowing

instances

of

oppression

and

mismanagement

as

alleged

by

the

petitioner:_

(i)

To

divest

the

petitioner

of

his

sharehording,

R-2

and

R-3 by

exerting

undue

..

influence

and

famiry

pressure,

got

the

petitioner

to sign

Transfer

Deeds

in

respect

oJ

2349

equity

shares

on

the

pretext

that

the

same

were

required

as

collateral

for

obtaining

loan

from

some

private

financiers

to

fund

the

new projects

of

the

company.

No

such

loan

was

ever

raised

against

the

said

2349

equity

shares

and

no

consideration

wnatsoever

was

paid

to

the

s9


4/21

-

L-t-

Petitioner

and

the

petitioner.

On

3L't

March,

allotted to

R-3

increased

from

even

the

share certificates were

also not returned

back

to

2006,

5,000

equity

shares

at

par

had been

unauthorizedly

and thereby,

Paid-up Share

Capital of the

Company

was

Rs.11.00 lakhs

to Rs.16.00

lakhs.

t

,

(iii)

(iv)

(v)

(vi)

2349

equity shares

taken

from the

Petitioner on

the

pretext,

for

being used

as

collateral

for

obtaining loan from some

private

financiers

were also

illegally

transferred

to

R-3 by misappropriating the documents signed

by

the

Petitioner

on

good-faith.

No

Shareholders' Meeting was

ever

held

for

the

allotment

of

5,000 equity

shares

at

par,

no

shares

were ever allotted to any

existing

shareholders,

no

approval was

sought

from

any existing shareholders

and

the said

transfer

and

allotment

was

in

comolete

breach of the

Articles

of

Association

of

the

Company and against the law.

The

company

issued

1,000

equity

shares

at

par

illegally and unauthorizedly

on

20th

March, 2007

to

R-7

(Shri

Uday Chawla) without holding any

statutory

meeting for such

allotment

or

offering

the shares

to

any

other

existing shareholders or taking

approval

thereof

from them.

5,000

equity

shares

earlier

unauthorizedly

issued at

par

to

R-3

were

transferred

to R-2

and 1,000 equity

shares

earlier

unauthorisedly

issued

to

R-7

were

also

transferred

to

R-2.

Besides,

2371shares

held

by

R-6

were

also

transferred

to

R-2. Thus,

the shareholding

of

R-2had been

fraudulently

increased

from 3665

shares

to

L2,036

shares

out

of

total subscribed

and

paid-up

17,000

equity shares.

Hence,

R-2 emerged as the ultimate

beneficiary

of all the fraudulent

share

transactions

and

the

percentage

shareholding

of R-2 increased from

33.32o/o to

70.80%

of

the

paid

up

capital

of

the company.

z-*$ti)

:;'try'

\

.-r,


5/21

-s-

(vii)

The

Petitioner

expressed

his desire vide

e-mail

dated

5tn

March,

2007 not

to

continue

in

the

day-to-day

working/employment

after 31.3.2007.

However,

as

stated

in

the

Petition,

the

Petitioner did

not

resign as

Director

of the

Company

and

continued

to

be

a shareholder

of the

company.

However,

a

fraud

and fabricated

resignation

letter

dated

11th

August,2008

in

the name

of the Petitioner

without

the

petitioner's

signature

was

submitted to

the

ROC

fraudulently

showing

that

the Petitioner

had resigned

from

the

Directorship

of

the company.

However,

no

such resignation

was

ever

submitted

by

the

Petitioner.

(viii)

On

16th

December,

2008,

the

Respondents

without

holding

any Statutory

Meeting, fraudulently

altered

the objects

of the

company

by

quoting

fabricated

Special Resolution

dated 1"

December,2008

whereas

no

sucn

Shareholders'

Meeting/EGM

was

convened.

On 23'd

December,

2008,

anothe r

17,210

equity shares

were

again

fraudulently

issued

at

par

to R-2

and thereby,

the

percentage

shareholding

of

R-2

increased

from 70.80%

to 85.489%

of the

paid-up

Capital of

the

com

pa

ny.

Based

on Annual

Return

and

Balance

Sheet

for

the

year

2OO9-10,

the

Petitioner

has

pointed

out

certain instances

of fabrication,

false

representations

and

manipulations

of

accounts

of the

company with

fabricated

and

falsified

figures.

2.

In

the

reply,

the

Respondents

have

stated

that

the

company

is

not

in the

nature

of Partnership

and

there

is

no

provision

in

the Articles

of the company

that

the shareholding

of

the

shareholders

will

remain

in

the

iame

ratio.

Rather,

the

company

not

being

a

public

company,

even

the

provisions

of

Section

g1

of

the

companies

Act,

1955 are

not

applicable

to

the

company

and.there

is

no

need

of

offering

any

further

shares

to

all

the

existing

shareholders..

Filrther,

under the

(ix)

(x)


6/21

-6

Articles

of the

company,

shareholders'

consent

is not

required

for issue

of further

shares

which

can

be

done

only

by

the

Board

of

Directors

and

therefore,

reduction

of

the

Petitioner's

shareholding

in

the

company

cannot

in

any

event

amount

to

oppression

within

the

meaning

of

sections 397

and

399

of

the

companies

Act,

1956.

The

Respondent

has

also

informed

that

in

or about

2007-0g,

there

was

a

settlement

between

the

parties

pursuant

to which

it

was

agreed

that

the

Petitioner

although

will

remain

the

shareholder

in

the

company,

he

will

not

interfere

in

any

manner

in

the

company

and

in

consideration

thereof

he

was

permitted

to

operate

his

own

company

namely,

M/s.Reefknot

Management

Private

Ltd.

which

is in

the

same

field

of as that

of

the

Respondent

company.

with

regard

to

the

transfer

of

shares,

the

Respondents

have

clarified

that

2349

equity

shares

of

Rs.100/-

each

were

sold

by

R-3

to

the

petitioner

at a

nominal

price

of

Re 1/-

per

share

as

gift

to

the

petitioner.

In

regard

to

the

Resolution

for

allotment

of

5,000

equity

shares

to

R-3

passed

on

g.2.2006,

Respondents

have

submitted

that

the

petitioner

had

himself

signed

the

relevant

Resolution

on

13th

February,

2006

itself.

The

Respondents

have also

stated

that

the

petitioner has

suppressed

material

fact

that

he

has

been

secretly

operating

his

own

company

and

the

auditor

of which

is

the

same

person

who

had

also

filed

the intimation

of

most

of

the

resolutions

with

Roc

allegedly passed

without

knowledge

of

the

petitioner.

In

september

2009,

admittedly

the

petitioner

surrendered

Directorship

of

the

Respondent

company,

collected

the

gratuity

and

settled

the

accounts

with

the

Respondent

company.

Thereafter

and till

the filing

of

the

present

petition

i.e.

January,

2011,

the

Respondents

did

not

hear

anything

from

the

petitioner

except

he

sent

a

formal

letter

of

resignation

in

200g.

Further,

the

petitioner

has

now

forged

and

fabricated

the

letters

dated

5th November,

2006,

5th

January,

200g

and

20th

March,

2008

to

cover

up

the

delay

and for

purposes

of

cooking

up entirely

the false

story.


7/21

Further,

the

respondents

have

stated

that

the

petitioner

was

appointed

a

director

of

the

company

merely

because

he

was

younger

brother

of the

R-2. lt

has

been denied

that the

petitioner

was

made

to

sign

the

transfer

deed

on the

false

pretext

as

alleged.

lt

has

also been denied

that

no

consideration

was

paid.

The

sum

of

Rs.2,34,900/-

was

paid

by cash

by R-3

to

the

petitioner

on

1.g.2006.

The

allotment

of 5,000

shares

in favour

of R-3

on

g.2.2006

was

approved

by

the

petitioner

also

which

is

proved

by

his

signature

dated

t3.z.2oo6

on

the minutes

of

meeting

of

8.2.2006.

The

petitioner

did

not

object

at

any time

to

any

allotment

or transfer

of

shares

and

the Respondents

never

received

the alleged

letter

dated

5.1-1.2005.

Notice

for

the meeting

of

board

of directors

in which

allotment

of

1,000

shares

to

Mr.uday

chawla

was

approved

and

all

other

such

meetings,

was

given

to

the

petitioner

by

hand

delivery

but

he

did

not

attend

the meetings.

The

petitioner

ceased

to

be

director

in

september,

2007

itself

when

he surrendered

the

directorship

as

per

the

settlement

and

collected

his

gratuity

and

finally

settled

all

the

accounts

with

the

company

as a

director.

The

petitioner

delivered

a

confirmation

resignation

letter

dated

11.9.2009

duly

signed

by him

to

the

Respondents.

3.

In

the

Rejoinder,

the

petitioner

has

denied

that the

respondent

company

was

ever

in

nature

of

partnership

or

that

there

are no

provisions

in

the

Articles

of

the

Respondent

company

that

require

offering

further

shares

to

all the

existing

shareholders

in

case

of

any

further

or fresh

issue

of

shares

of the

Respondent

as

alleged.

lt

has

also

been

denied

that

the

shareholders,

consent

is

not required

for

issuance

of further

shares

or

that

such

further

issuance

of

shares

can

be

done

oy

the

Board

of

Directors

without

any

approval

or consent

from

the

existing

shareholders

of

the

Respondent

company.

Further,

the

petitioner

submitted

that

in

terms

of Article 9

of the

Articres

of

Association

of

the

Respondent

company,

further

issuance

of

shares

shall

first

be

made

to the

existing

shareholders

and

only

upon

the refusal,

the

shares

will

be

issued

to

the

outsiders.

rt

has

arso

been

submitted

that

the

Board

of

Directors

of

the Respondent

company

by issuing

5'000

fresh

shares

on

10.3.2006

to R-3

and

then

again,

by

issuing

1,000

fresh

shares

on

2O.3.ZOO7

to

R-7

have

clearly

and

blatantly

Wrth-malafide

intentions

violated

Article

9 of

the Articles

of

Association

of

the

Respondeni

Company

as

no

)l

j.-;l


8/21

>l-

offer

was

ever

made

to

the

petitioner

for

the fresh

issuance

of shares.

The

Petitioner

further

submitted

that

the

Board

of

Directors

of

the

Respondent

company

has

acted

in

a

blatantly

fraudulent,

clandestine

and

illegal

manner

to

dilute the

shareholding

of

the

petitioner

and

6000

fresh

shares

were

issued

in

an

illegal

and

unauthorized

manner

to R-3

and

R-7

and

were

subsequenfly

transferred

on

4tn

october,2ooT

to

R-2. In

addition,

the

petitioner

has

denied

that

there

was

any

alleged

settlement

of

agreement

whatsoever

at

anv

time

between

the

Petitioner

and

Respondent

regarding

incorporation

or operation

of

any

company

or

organization

by

the

petitioner.

Rather,

the

petitioner

left

the

day-to-day

employment

of

the

Respondent

company

in

March,

2oo7

in view

of

the

fraudulent

action

and

mismanagement

of

the

Respondent

company

by

the

Respondents.

But,

the

Petitioner

continued

to

be a Director

and

shareholder

of

the

Respondent

company.

Apart

from

this,

the

petitioner

has

denied

that

M/s.Reefknot

Management

pvt.

Ltd.

promoted

by the

petitioner

is a

competitor

of the Respondent

company.

The

petitioner

has clarified

that

M/s.Reefknot

Management

Pvt.

Ltd.

was

promoted

by the

petitioner

and was

incorporated

on

L4th

May, 2007

and

operates

in

the field

of

sports

commentary

and Management

Consultancy

whereas

the

Respondent

Company

operates

in the field

of

euality

Assurance

Inspection and

Audit

services

and

manufacture

of

packaged beverages

and

packaged

water.

It

has been

denied

that

the

petitioner

received

any

shares

as a

gift

from

R-3.

The

Petitioner

has

submitted

that in

2002, the

petitioner

purchased

2,349

shares

of the Respondent

company

from

Respondent

-3

at mutually

agreed

price

of Rs.2349/-

based

on the

loss

making

history

of the

Respondent

Company

and

additionally

based

on

the financial

and

material

support

provided

by the

Petitioner

from

time

to time

to R-3

being

father of

the

petitioner

to

our domestic

expenses

and household

expenses.

Further,

the

purchase

of

2349 shares

was

completely

bona-fide

and

duly

recorded

in

the

records

and register

of the

company including

the share

transfer

form.

Further,

the

petitioner

has denied

that R-3

at any

time whatsoever purchased

2,349

shares back

from

the

petitioner

at

a

price

of

Rs.2,34,900/-

or

that the

petitioner

received

any cash from

R-3 in

respect of

such sale

of

the said

2,349

shares

as

alleged. The

petitioner

submitted


9/21

-

1-

that

the said

2,349

shares

were fraudulently

transferred

in

200G from

petitioner

to

R-3.

The

petitioner

has

also

submitted

that the

Respondents

fraudulently

claim

that

the

above

said

alleged

transfer

of

2,349 shares

from

the

petitioner

to

R-3

was

approved

in

the

meeting

of

Board

of

Directors allegedly

held

on 31.3.2006 but the

respondents

have

not filed

the

original minutes

of

the

said

Board

meeting

and

neither

have

the

respondents

shown

the

original

minutes

of the

said Board

meeting

to the

Petitioner

during

inspection

of records.

The

petitioner

has

also

denied

that

he

was

provided

by hand

or

by

any other means

any notices

to any

meeting

of

the

Board

of Directors

wherein

the

allotment

of 1,000

shares

to R-7

was

approved

as alleged.

4.

While

arguing

the matter,

the

petitioner

Advocate

submitted

that

the

Respondent

company

is

not

a

Quasi-Pa

rtnersh

ip

and

the

petitioner

has

not

claimed

status

of

Quasi-Partner.

Further,

the

petitioner

discovered

the

first

unauthorized

allotment

(5000

shares)

and

illegal

transfer

(2349

shares)

in

November,

2006

and raised

objection

to

the

company.

The

Respondent

issueo

shares

without

approval

of existing

shareholders

in

blatant violation

of Article

9 of

the

Articles

of

Association

of

the company.

After

manv

months

of

negotiation

between

the

promoters who were

family

members,

the

Board

of

Directors

in

its

meeting

dated

7th

May,

2008

resolved

to

cancer

and

reverse

all

snare

transactions,

allotments

and

transfers

made

after

30.9.2005

and

as

per

the Board

Resolution

therein,

the

Petitioner

as

Director

in

May,

200g

submitted

Form-32

to

Roc.

However,

instead

of

reversing

the

fraudulent

share

transactions,

the

Respondents

stopped

sending

Notices

to

petitioner

after

May,

200g and

delayed

finalization

of

accounts

and

annual

returns

of

the

company

by over

a

year.

To

avoid

suspicion,

the

company

continued

to

pay

Director's

perks

to

petitioner

till

November,

2009.

The Petitioner

suspecting

foul-play

directly

approached

the

Roc

in

December,

2010

and

Roc

provided

certified

records

of the

company

to

the

Petitioner

on 6th

January,

zot .

Then,

the

petitioner

filed

the

petition

in

cLB

within

6

weeks

of discovering

the

fraudulent

actions

through

Roc

records.

Apart

from

this,

the

petitioner

advocate

has

mentioned

that

there

are

several

judgments

to show

that Limitation

Act

is

not

applicable

to

cases

under section


10/21

-

lt\ z

acts

of

oppression

and

mismanagement

are

(i)

(ii)

(iii)

B:

397/398

especially

when

the

continuous

in

natu

re.

The

petitioner

advocate

has

put

both the

arguments

allegation-wise

as

u

noer:-

A:

Transfer

of

Shares:

on

31"

March,

2006,

2349

shares

of

petitioner

were

fraudurentry

transferred

to

R-3.

on

this

date,

there

was

no

share

Transfer

Deed

in

existence

and

therefore,

this

share

transfer

was

completely

illegal

and

fraudulent.

The

Respondents

have

not

produced

any Transfer

Deed

dated

on

or

before

31.3.200G

in

respect

of this

share

transfer.

To

cover

up

this

illegal

transfer

of 2349

shares,

the

Respondents

after

4

months

obtained

a signed

Transfer

Deed

from

the

petitioner

on

the

pretext

of collateral

for

loan.

The

signed

rransfer

Deed

dated

1't

August,

2008

is

not

registered,

the

revenue

stamps

are

not

cancelled

and

the

said

transfer

deed

cannot

be held

valid

for

share

transfers

conducted

on

31.3.2006

which

is

four

morrths

before

the date

of Transfer

Deed.

The Petitioner

never

sold

these

2349

shares

to R-3

and

therefore,

there

is

no

question

of making

any

profit.

The

petitioner

has

never

received

any

compensation

of

Rs.100/- per

share

as

falsely

alleged

by

the

Respondents.

The

Respondents

have

not

produced

any

evidence

whatsoever

of or

anv

receipt

showing

this

alleged

payment.

Allotment

of

Shares:

There

was

no

Employee

Stock

Option

(ESOp)

system

in

the company.

All

shares

were

duly

purchased

and

were

not

given

as

ESOp.

The

petitioner

did not

receive

preferential

treatment

or

any

gifts.

R-3

never

issued

any

shares

to

petitioner.

On

1't

March

2OOO,

the

petitioner

was

issued

1305

shares

against

purchase

by

the

then

MD

of

the

Company

(Col.V.K.Talwar)

who

is

not

related

to

the

petitioner.

(i)

(ii)

-*

':'.

.

.

rt

;r


11/21

C:

1l

-

Subsequently,

on

10th

February,

2002,

the

petitioner

duly

purchased

2349

shares

from

R-3.

(iii)

The

petitioner

has

submitted

comprehensive

documentary

evidence

in

the form of

statutory

returns

of

the

company obtained

from

the

Roc,

to

show

that

the

Respondents

conducted

unauthorized

share

allotment

and

transfer

without

hording

any

shareholders,

meeting

and

Board

meeting

and

in

comprete

vioration

of Articre

9

of

the

Articles

of

Association

of the

company.

(i)

Petitioner

ceased

day-to-day

employment

in the

company

on

30th

June'

2007

and

thereafter, petitioner

continued

as

Director

of the

company.

(ii)

Petitioner

received

sarary

dues

for

day-to-day

emproyment

in

the

company

till 30th

June,

2007

and duly

signed

a receipt

for

the

same.

(iii)

After

30th

June,

2007,

petitioner

continued

as

Director

of the

company

and

there

is

ample

documentary

evidence

on

record

in

support

of

this

fact.

petitioner

as

Director

attended

AGM

on

29.9.2007

and

submitted

Form-32

to

ROC

in May,

200g.

(iv)

The

company

as

per

provisions

of

Article

2O(b)

of

the

Articles

of

Association

continued

to

pay

Directorship

perks

to

the

petitioner

till

November,

2009.

(v)

Petitioner's

emair

dated

12th

Aprir,

2007

is redundant

to

the

present

petitioner

as

it

was

superseded

by

the

events

that

foilowed

after

April-2007.

(vi)

The

alleged

resignation

letter

dated

11th

August,

20Og

with

,,Sd/:,

i,an

outright

forgery

as

the

petitioner

never

submitted

any

such

resignation

letter

to

any

person,

(vii)

Respondents

submitted

another

forged

retter

dated

11th

August,

2008

to

the

cLB

which

is

compretery

differed

from

the

retter

they

earlier

submitted

to the

Registrar

of

Companies.

{viii)

In

Mis

ication

No.299/2OtL

dated

31.5.2011.,

Gurgoan

police

in

closure

report

dated

3'd

May,

2011

has

clearlv

stated

that

no


12/21

theft

took

place

in

the

company,

no

document

was

stolen

and

that

the

theft

complaint

against

the

petitioner

was

farse.

This

indicates

that

the

alleged

signed

resignation

letter

dated

11th

August,

200g

is

still

in

possession

of

the

Respondent

company.

Despite

Order

dated

27rh

Aprll,

2011

by

the

Hon,ble

Board,

the

Respondents

have

failed

to

produce

alleged

signed

resignation

letter

dated

11.8.2008.

The

petitioner

advocate

has

cited

the

case

of Incablenet

rhirupathi

(p)

ttd,

wherein

cLB Principal

Bench

held

that

it is

well

settled

that

the

transfer

of

shares

is

liable

to be

set

aside

for

non-compriance

with

the

procedure

contemprated

under

the

articles

of

association

in

regard

to

the transfer

form.

rf

the

instrument

is

not

properly

executed

or

the

stamp

affixed

to

the

instrument

is

not

effectively

cancelled

before

execution

or

at

reast

at

the

time

of

execution,

the

said

instrument

must

be

deemed

to

be

unstamped

and

therefore,

the

rodging

of

such

an

instrument

with

the

company

was

not

within

the

meaning

of

section

1og(1)

of

the

Act.

with

regard

to

allotment

of

shares,

the

petitioner

advocate

mentioned

the

case

of

Eurasion

choice International

(p)

ttd.

and

others

wherein

cLB,

principal

Bench,

New

Deihi

has observed

that

it

is

settled

law

that

while

issuing

further

shares

the Board

of Directors

discharge

their

fiduciary

responsibilities.

lf

the

shares

are

issued

with

the

sole

object

of

creating

a

new

majority

or

with

the

view

to

convert

a majority

into

a

minority

then

the

action

of

the

Board

is

not

onry

in

breach

of

the

fiduciary

responsibilities

but

also

a

grave

act

of

oppression

against

the

existing.

Further,

while

it

is

the

prerogative

of

the

Board

to

allot

shares,

the

power

should

be

exercised

in

the

interest

of

the

company

and

not

for

any

ulterior

purpose.

rn

another

case

of

Udhayam

Leasings

and

Investments

(p)

Ltd.

and

others,

CLB,

Additional

principal

Bench,

chennai

helci

that

it is

well

settled

that

the

directors

are

in

a

fiduciary

position

vis-d-vis

the

company

and

must

exercise

their

power

with

utmost good

faith

for the

benefit

as

well

as interest

of

the

company

and

exercise

fair

play

in

action

in

corporate

management

and

fufiher

must

act

bona

fide

in

further

allotment

of

shares.

Though

it

is

the

prerogative

of

the board

to

allot

shares,

it

is

not

that

law

has

given

absolute

liberty

to

the

",4.\

,;

(ix)

,

,.,


13/21

-

t3

-

directors

at

private

limited

companies

to

deal

with

their

shareholders

in

any

manner

as they

wish.

with

regard

to

the

issue

of

additional

shares,

the

responsibility

of

the

directors

towards

the

members

becomes

more

onerous

in

a

private

company.

Though section

81

of

the

Companies

Act which contains certain

requirements

in

the

matter

of issue

of further

share

capital

by a

company

does

not

apply

to

private

limited

companies,

the

directors

in

private

limited

companies

are

expected

to make

a disclosure

to

the

shareholders

of

such

a company

wnen

further

shares

are being

issued.

Any

issue

of

shares

solely

to

gain

control

over

the

company

is

not

permissible.

Even

in the

case

of Dale

& carrington

lnvestment (p)

Ltd.

vs.p.K.prathapan

and

others,

Hon'bre

supreme

court

herd

that

private

rimited

companies

are

normally

closely

held.

This

brings

in

considerations

akin

to

those

applied

in

cases

of

partnership

where

partners

owe

a

duty

to

act

with

utmost

good

faith

towards

each

other.

Acts

of

directors

in

such

a

company

are

required

to

be listed

on

a

much

finer

scale

in

order

to

rure

out misuse

of

power

for

personar

gains

or

ulterior

motives.

Though

sec.g1

does

not

appry,

due

to

the

fiduciary

duty,

owed

to

issue

shares

for

a

proper

purpose.

The

directors

in

a

private

rimiteo

company

are

expected

to

make

a

disclosure

to

shareholders

in

respect

of

issue

of

further

shares.

Even

though

the

pre-emptive

common

raw

right

of

a

sharehorder

to

'

participate

in

further

issue

of

shares

cannot

be found

for

sure

in

India

in

light

of

Section

81,

the

test

to

be

appried

to

see

whether

shares

were

issued

bona

fide

and

for

the

benefit

of

the

company,

would

import

such

considerations

in

case

of

private

limited

companies

under

Indian

Law.

The

existence

of right

to

issue

snares

to

one

Director

may

technicaily

be

there,

but

the

question

whether

the

right

has

been

exercised

bona

fide

and in

the

interests

of

the

company

has

to

be

considered

on

the

facts

of

each

case

and

if

it

is

found

that

it

is

not

so.

such

allotment

is

liable

to

be

set

aside.

6.

The

Respondent

advocate

has

arso

furnished

argument

on

the

major

three

issues

as

under:-


14/21

---tq-

(A)

Transfer

of

Shares:

The

Respondent

Advocate

argued

that

the

petitioner

has

admitted

that

with

regard

to

2349

shares,

he

has

signed

Transfer

Deeds.

Further,

the

petitioner

was aware

of transfer

of

2349

equity

shares

in

the

month

of october,

2006

and

there

is no

prayer

in

the

Petition

for rectification

of the

Register

of

Members.

Further,

the

Respondent

Advocate

submitted

that

the

petitioner

himself

has

sought

to

explain

the

delay

by

stating

that he

had

written

letters

and

that

the

company

had not

addressed

his

grievances.

In this

regard,

the

petitioner

has

claimed

to have

sent

the following

letters:-

(a)

Letter

dated

5.11.2006-

being

Annexure

p-r4

at

page

201-

ofthe

petition.

(b)

Letter

dated

15.1.2008,

being

Annexure

p-r7

atpage2oT

ofthe

petition.

(c)

Letter

dated

20th

March,

2008, being

Annexure

p-19

at

page

213

of

the

Petition.

Respondent

Advocate

stated

that

all

the

three letters

have

been disputed

none

of the letters

have

any

responses

and despite

the

respondent

disputing

the

letter,

the Petitioner

has

been

unable

to show

the

mode

of

service

and

having

failed

to

prove

the letter

in

any

manner

the

same

are

liable

to

be rejected

out

rightly.

However,

in

any view,

the

letters

written

by

the

petitioner

do not

extend

limitation

in

its

favour

as limitation

can

only

be extended

by

acknowledgement.

There

being no

acknowledgement

of

the Respondent,

the

claim

of

the

petitioner

is

barred

by

limitation.

(B)

Allotment

of

Shares:

The Petitioner

has

no

right

to

assail

the

allotment

of

shares

at

the

discretion

of

the Board

of Directors

as

per

Article

6 of

the Article

of Association

of

the

Company. The

Petitioner

also could not

claim anV

entitlement as

Section 81

of the

Companies

Act,

1956

does

not

apply

to

the

Respondent

Company

and

more

importantly

it has

been

past

practice

of

the

Company

not

to offer share on

right

basis, which is

evident

from

the

fact

that the

petitioner

himself

was

o{fered

1,305 shares

vide letter

dated

1.3.2000

without

offering the

said

shares to

the


15/21

-tJ-

other

shareholders.

The

Petitioner's

contention

that

further

allotment

was

required

to

be

done on right

basis

is

misconceived

and liable

to

be

rejected.

lt

is

also relevant

to

state that

additional

allotment

of

shares was

done

for

bona fide

need

of

the

Company

as

was

required

by

the

Rajasthan Financial

Corporation.

Second

schedule

to the

Loan

Agreement

(Clause

1)

clearly states

that

,,the

company

shall

have raised

its

paid

up

and subscribed

capital to

the extent

of

Rs.34.21

lakhs

and

IFUL

Rs.11

lakhs

before

first disbursement

of |oan.........,,Thus,

even the need

for

capital

of

the company

cannot be

disputed

as

the

company

was implementing

the

project

for

setting

up

FMCG

plant

at Bhiwadi,

Alwar,

and

Rajasthan.

The Petitioner

is

seeking

to object

to

the

loan

agreement

being

placed

on record.

However,

it

is

submitted

that

the

said evidence

relate

to

financial

institution

and

its

authenticity

obviously

cannot

be

doubted.

The

Petitioner

has

made

various grievances

regarding

certain

errors

in

the

compliance

certificate.

Hon'ble

supreme

court

of

India

in

the

case

of

,,Needle

Industries

(lndia)

Holding

Ltd.

& ors."

1981

(51)

company

cases

743

at

pages

777-782

has

held

that "technically

illegal

decision

do

not constitute

oppression

or

warrant

the remedy

under

section

397

& 399.

The

Hon'ble

court further

held

that

it

is

not

enough

to

show

any

illegality.

lt

must

further

be shown

that

the

conduct

of

the majority

shareholders

was

oppressive

to the

minority

as memoers

and

this requires

that

events

have

to

be considered

not

in isolation

but

as

a

oart

of

consecutive

story.

There

must

be

continuous

acts

on

the

part

of the

majority

shareholders,

continuing

up

to the

date

of

petition,

showing

that

the

affairs

of

the

company

were

being

conducted

in

a

manner

oppressive

to

some

part

of

the

members.

The

conduct

must

be

burdensome,

harsh

and wrongful

and mere

lack

of confidence

between

the

majority

shareholders

and

the

minority

shareholders

would

not

be enough

unless

the

lack

of

confidence springs

from

oppression

of

a

minority

by a

majority

in

the

management

of

the

company's

affairs,

and

sucn

oppression

must

involve

at least

an

element

of

lack

of

probity

or

far

dealing

to

a

member

in

the

matter

of his

proprietary

rights

as

a

shareholders.

The

Petitioner

had

in

fact

severed

his

relations

with

the

Respondent

company

as he

was

keen

to

start

his

own

company

and

had

incorporated

the


16/21

-

t4

-

Company

by the name

of

"Reefknot

Management

private

Ltd"

The Memoranoum

_,

of Association

also indicate

that the

object of the

company include

main

object

of

rule/quality

management

(Object

N.1),

which is

similar

to the business

being

conducted

by the

Company.

Thus,

effectively

the

Petitioner

wanted

to

start

parallel

business

to the

Respondent

company and thus

cannot obviously

continue

in the Respondent

Company

being

placed

as

a competitor.

(C)

Resisnation

from

the Directorship:-

The

Respondent

Advocate

submitted that the record

of

the company

indicate

the letter

of resignation

which

had word

"Sd/-"which

had been

uploaded

with

record

of ROC.

The said

letter

of

resignation is contended

to be forged

as

the original

letter

dated 11.8.2008 bearing

actual

signature of

the

petitioner

is

not

available on record.

Further,

Respondent

Advocate

argued that the

petitioner

had

resigned

from

the

company

and his

letter

of resignation

dated

5.3.2007 is

already on record wherein

the

petitioner

expressly

states

that

he

would

not be

working for

M/s.EFN

and

further

enquired to

know

whether he would

continue

as

a

Director

which is

being argued

on behalf of the

petitioner

that

the

said

letter

was

only for resignation

as

an employee

and not as a Director. In response

to the

letter, the

petitioner

was requested

to

continue

for further

period

from

t.4.2O07

to

30th

June, 2007.

Admittedly,

the request for him

to continue till

30th June, 2007

was accepted

and this is also clearly

evidenced by

clearance

of

his dues,

for full

and final

settlement to show

the vouchers. Letter

dated

12th

April,

2007

filed

by

the Respondents

as annexure to

Application dated 27.3.2072

also leaves no room

for

any doubt

that

the

petitioner

wanted

to

severe his connection

with the

company and which he indisputably

did

as there

has

been

no

correspondence and

no interaction between the Petitioner

and

the

company

for

at

least

past

three

years

prior

to

filing

of

the

petition.

A

person's

claim

to

be

a

Director

of

the

company

must effectively show

that

he

did

take

action as

a

Director. lt

can

hardly

be expected that a

person

who

is a

Director

would not attend

any

Board meeting

nor

take any action and

yet

conveniently file a

petition

as

later claiming himself to

be a Director.


17/21

-

t7

-

The Resoondent

advocate

further

stated

that

in Dr.Mrs.Nirmal

Thakkar

Vs.

Blue

Bird

Enterprises

(2oL2l

L72 Company

cases

28

(CtB),

the

Hon'be

court

held

that

there

was

no formal

meeting

and

even

assuming

that

no

notices

were sent

and

there

was no

reliable

proof

of service

and

that

the leave

of action

should

be

normally

given

to

a

Director.

The

Hon'ble

Board

stated

that the

removal

of the

Petitioner

in that

case

under Section

2S3(iXg)

was

not

correct,

but

nonetheless

proceeded

to

hold that

just

an equitable

provision

did

not

entitle

the

petition

to

disregard

the obligation,

she

had agreed

to when

entering

the

Company

and

the

Petitioner being

Director, being

a

business

person

should

have

aware

of

the

statutory

provision

of

holding

Board Meeting

and General

Body

Meeting

and

she

should

have insisted on

that and

the

Court cannot

dispense

her from

it'

Thus,

although

the

Court

in the

present

case

agreed

that

the

Petitioner

Company's

affairs

were being conducted

in

a

manner which

was

not

legal

i.e. no

notices were

being

sent, no meetings

were being

held and there

was

further

issue

of capital

to

the

majority

shareholders.

The Hon'ble Court

nonetheless

proceeded

to

decline

the

relief to the

Petitioner with

regard

to

further

allotment of

shares as

it was

held

that

the Petitioner

had

not

been

diligent and

had failed

to

discharge

her

obligation

as a

Director

and

thus abandoned

the

company

and

cannot

complain of

being

excluded.

6.

With regard

to the

issue

of

non-maintainability on

account

of

limitation,

it

is

pertinent

to

mention that the

plea

of

limitation

is

a mixed

question

of law

and

fact. Unless

it

becomes

apparent

from

a

reading of the company

petition

that

it

is

barred by

limitation,

the

petition

could

not

be

rejected

under

Order

7, rule 11-(d)

of the

Coe of

Civil

Procedure, 1908. The Company Law

Board is

not

a Court

for

the

purpose

of

Limitation Act, 1953 and

the

limitation

under Article 137

of

the

Limitation Act,

1963 does

not

apply

to

proceedings

before

the Board.

Delay and

laches apply and start

from the

date

of

knowledge. As

per

the

petitioner,

the

petitioner

held 4964 equity

shares

amounting to

45.t3% of the

issued and

subscribed share

capital of the company and

due to

illegal

acts

of the

Respondent

.

challenged

in

the

Petition, the holding of

the

petitioner

has

been illegally

diluted

and

in

terms of

annual

return for the

year

2009-10,

the

petitioner

is

found

to

hold

a

total

number

of

2615 equity

shares

amounting

to7.640/o

of

the

subscribed

and


18/21

-,R-

paid

up

capital.

The company being

a

private

and

family

ownedrthe

issues of

dilution

of the

shareholding

and

removal

of

directorship

would

have been

deliberated

for

amicable

settlement.

Furtherrthe

resoondent

filed

annual return

as

on

30th

September,

2009

belatedly

in

june,

20L0

and thereby,the

petitioner

could

get

certified

copy

of

records

from

ROC

in 2011 and

the

fact

about

dilution

of

the

shareholding came

to

his notice

when

he

examined

these

certified

copies

of

documents.

The

petition

was

filed

on 24tn

February,2OtI and hence.there

appeari

no inordinate delay

in filing

the

petition.

Moreover,

there were three

members

including the

petitioner

in

the company

at

the time

when the

petitioner

held

4954

equity

shares.

Hence,

the

petitioner

was

more than one tenth

of

the total

number of

members of the company.

In

view of this, the

petition

is considered

to

be

maintainable.

7.

I have

gone

through the

allegations

leveled in Company

petition,

reply filed

by

the

respondents, rejoinder submitted

by

the

petitioner,

arguments

and

case

laws

cited

by advocates

of

both the

sides

i.e.

petitioner

and

respondents.

Having

perused

the correspondence

and documents

placed

on

record,

it is

observed

that

the

petitioner

resigned as employee in

March, 2007 and

took

money as

final

settlement

of

the

employment

of the

company.

However,

the

petitioner

attended

Annual General

Meeting

held

on

29th

September,2OOT

as

Director

and

submitted

Form-32

to ROC

in May, 2008.

Further,

as

per

the

provisions

of

Article

20(b)

of the

Articles

of

Association, the

company

paid perks

to the

petitioner

as

Director

till

November,

2009.

Even,

the

respondents

have

admitted

that the

petitioner

was continuing

as Director

till August,

2008.

The resignation

letter

dated

11th

August,

2008

is

not

signed by

the

petitioner.

On

the contrary,

the

word

"Sd/-"

has

been

typed

in

place

of

signature.

The

original

letter

of

resignation

dated

11st

August,2008

with

full

signature

could

not be

produced

by

the

respondents.

In view of this,

Form-32

filed

with

ROC

for

removal

of the

petitioner

as

Director

does

not carry

legal support

of documents

such

as

duly

signed letter

of

resignation

and

also.racceptance

of

resignation

by the

Board of

Directors

through

passing

necessary

resolution.

Under

these

circumstances,

there appear-6

oppression

against

the

petitioner

as

he

was illegally

removed

from the

Directorship.


19/21

._t?_

In

regard to the transfer

and

allotment of

shares,

Article

9

of

the Articles of

Association

is

very relevant

as

Section

81 of

the

Companies Act is not

applicable

to the respondents, being

a

private

limited

company.

As

per

Article 9,

no

transfer

of

shares

shall

be

registered

unless

a

proper

instrument

of

transfer duly

stamped

and

executed

by

or on behalf of

the

transferer

and

by

or

on

behalf of the

transferee

has

been delivered

to

the company

together

with

the

certificate

or

if

no

such

certificate

is

in

existence,

the

letter of allotment

of

the shares.

Each

signature

to

such

transfer shall

be

duly attested

by

the

signature, of one credible

witness

who

shall

add

his

address and occupation. Further,

issue of shares shall

first

be made

to the existing shareholders

and

only on their

refusal,

the

shares

will

be issued

to the outsiders. The alleged

illegal

transfer

of

2349

shares

need to be

examined

in

the

context

of the

aforesaid

Article 9

of

the

Articles

of

Association

and Section 108

of the

Companies

Act, 1956..

As

per

annual

return, made

on 30th

September,

2006, 2349

shares

of

the

petitioner

were transferred on 31't March,

2006

wherein the respondents

could not

produce

any

Transfer

Deeds on

the date

or before

31"

March,

2006

for

the transfer of shares. This

indicates that

the

said

transfer of shares

was

not

duly supported

by

the

legal documents

of

Transfer

Deed and

the Share

Certificates

in

original.

This is

evidenced

from the

petition

that

the

respondenis

after

4 months

obtained

signed Transfer Deed

from

the

petitioner

on

the

pretext

of

collateral for

loan and.,the

signed

Transfer

Deed

dated

1't

August,

2006 is

not

regis ,ered

and

the

revenue

stamps are not cancelled.

Over

and

above,

the respondentil?&

produced

any evidence

or

any receipt

showing

the

payment

as consideration for

these shares.

Thus,

the

transfer of 2349

shares

of

the

petitioner

in favour

of

Respondent

No.3

does not

fulfill

the requirement of

Article

9 of

the

Articles of Association and

also the

orovisions

of

Section L08 of

the

Companies

Act,

1956.

So

far the

allotment of

further

shares are concerned,

it

is

seen

that

the

petitioner

list

with the following allotment of

shares:-

(i)

On 31't March, 2006,

5OO0 equity shares were allotted

to Respondent

No.3

(Shri

Mahender

Kumar

Saxena);


20/21

.-zo-

On

20'n

March,

2007,

L000

equity

shares

were allotted

to

R-7

(Shri

Uday

Chawla);

On

23'd December,

2008, t7,zt}

equity

shares

were

issued

at

par

to

R-2

(Shri

Munish

Kumar Saxena).

With regard to

the

aforesaid

allotment

of shares,

there

appear

technical

lapses

of not

passing

requisite

resolution

and absence of offer to

existing

shareholders. The

Respondent

Company

is a

private

limited company and

therefore,

reliance

may

be

laid

on the observation

and dec&ion

of

Hon'ble

Supreme

Court

in

the

case

of Dale & Carrin6on

Investment

(P)

Ltd.

Vs.

P.K.Prathapan

and

Ors.

In

this

case,

it was

viewed that

the

Directors

in

a

private

limited

company are expected

to

make

a

disclosure

to the

shareholders in

respect

of

issue

of further

shares.

Even

though

the

pre-emptive

common law right

of

a

shareholder to

participate

in

further

issue

of

shares

cannot be

found

for

sure

in

India in

light

of Section 81,

the test

to be applied

to

see

whether shares

were

issued

bona-fide

and

for the

benefit

of

the company, would import such

considerations

in

case of

private

limited companies under

Indian Law.

The

existence

of

right

to issue shares

to one

Director

may

technically

be

there,

but the

question

whetherthe

right

has

been

exercised

bona-fide

and

in the interest ofthe

company

has

to

be

considered

on

the

facts of

each case

and

if it

is found

that it

is

not

so,

such

allotment

is

liable

to

be

set aside.

Further, another case of Eurasion

Choice

Internatioanl

(P)

Ltd. and Others is also

important

to

be

mentioned.

ln

this

case,

it

was also

observed that if the

shares

are issued with the sole

object of

creating

a

new majority

or

with

the

view to convert

a

majority

into

a minority,

then

the action of

the

Board is not only

in breach of the fiduciary

responsibilities

but also

a

grave

act of oppression

against

the

excising. While it is

prerogative

of

the

Board

to

allot

shares,

the

power

should

be exercised

in

the

interest

of

the

company

and not

for

any ulterior

purpose.

ln

the

instant

case,

the company

was

required

to

borrow money

from

Rajasthan

Financial

Corporation to

meet

its

business

requirements and the company was

required to increase the

paid

up

capital to

meet

the

condition

as

stipulated

in

the

loan

agreement.

Further, the

allotments

were made to existing shareholders

and outsiders

in

the

interest

of

the company

and

thereby,

no

new

majority

could

be

created.

(ii)

(iii

)


21/21

-

-7."

-

Elb

In

view

of

the

foregoing,

it

is

held

that-

(a)

Removal

of the

petitioner

is

declared

as

illegal

and

thereby,

the

petitioner

is

restored

as

Director in

the

company

and

Form-32

filed

with

Roc

for

his

removal

as

director

be

treated

as

null and void,

(b)Transfer

of

2349 shares

of

the

petitioner

to

R-3 is

hereby

declared

as null

and

void

and annual

return

showing

such

transfer

of shares

be

treated

as

null and

void.

(c)

Allotments

of shares

made

by

the

company

as

alleged in

the

petition

are

declared

legal

and valid.

The

Company Petition and

CA,

if

any,

are

disposed

of

accordingly.

Interim

Stay,

if any, is

hereby

vacated.

No

Order

as

to cost.

--t.

//"

Place:

New

Delhi

Dated:

18-01-2013

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efn global impex pvt. ltd. dated 18-01-2013

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