O R D E R - Company Law Board Mumbai Bench

BEFORE THE COMPANY LAW BOARD,
MUMABI BENCH, AT MUMBAI
PRESENT: SHRI KANTHI NARAHARI, MEMBER
(JUDICIAL)
COMPANAY PETITON NO.1 OF 2008
IN THE MATTER OF THE COMPANIES ACT, 1956 (1 OF
1956)
UNDER SECTIONS 397, 398, 402, 403, 407 & 408
AND
IN THE MATTER OF M/S STORSACK INDIA PVT. LTD.
BETWEEN:
1. Mrs. Rimpal Sanjay Parekh
Residing at A-53, Kalpataru Habitat,
DR. S. S. Rao Road, Parel,
Mumbai – 400 012.
AND
1. M/sStorsack India Pvt. Ltd.,
Having its registered office at
103, Atlanta, Nriman Point,
Mumbai – 400 021.
CP NO.1 of 2008
Storsack
…..Petitioner
1

2. Sanjay Hasmukh Parekh,
Residing at, 112B, Maker Towers,
Cuffe Parade, Mumbai – 400 005.
3. Thomas Noor
Residing at Jugalsrtary,
969469, Winhein Germany.
4. Mr. Oliver Bochme,
Residing at, Kleiststrasses 23, 65187,
Weisbaden Germany.
5. Storsack Gmbh.
Registered in Germany and having its address at
Industries Etrasee,
28-30, 68519 Viernheim,
Germany.
6. Prashant Mawani,
103, Atlanta, Nariman Point,
Mumbai – 400 021. ….Respondents
Present for parties
1. Zal Andhyarjuna, Advocate for Petitioner
2. Rajendra. G. Advocate for Petitioner
3. Amit Sarve , Advocate for Petitioner
4. Vibhav Krishna, Advocate for R1, 2 and 6
5. S. D. Israni , Advocate for R5
6. Satyan Isranai, Advocate for R5
CP NO.1 of 2008
Storsack
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O R D E R
1. The present petition is filed by invoking various provisions of
the Companies Act, 1956 (“The Act”) alleging certain acts of
oppression and mismanagement in the affairs of the R-1 Company
and sought reliefs as prayed in Para 10 of the petition.
2. The brief facts of the case are that the petitioner is lawfully
wedded wife of 2 nd Respondent, got married on 26.10 2001 with a
high hope of starting a new leaf of life. Soon after the marriage
her dreams started shattering and her matrimonial boat started
rocking. It is submitted that in order to discourage the petitioner to
enforce her personal statutory rights and to create a reign of terror
the 2 nd Respondent is arranging to file a divorce proceeding and
thus it is apparent that the 2 nd Respondent is hell-bent to reduce the
role of the petitioner in the 1 st Respondent company and for the
said purpose he will not leave any stone unturned and therefore
continuously engaged in oppressive acts of mismanagement and
illegally attempting to reduce the petitioner’s status in the 1 st
Respondent and thus company is continuously engaged in the
oppressive acts and the affairs of the company are totally
mismanaged. Resources of the 1 st Respondent are being recklessly
and lavishly spent to support amorous life style of 2 nd Respondent.
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It is further submitted that all norms in complying rules,
regulations and the provisions of the Companies Act and so also
the provisions of Memorandum and Articles of Association of 1 st
Respondent Company are thrown to wind. No meeting of Board of
Directors are ever convened, no statutory record of any kind are
maintained. No meeting of the members of the company has taken
place. The 2 nd Respondent has without the knowledge of the
petitioner, without calling any Board Meeting or without calling
meeting of members of 1 st Respondent Company has purportedly
appointed two German Citizens, the Respondent No.3 & No.4
herein as Directors stated to be effective from 06.02.2004. The
petitioner felt that she is being side lined as regards the affairs of
1 st Respondent Company. The respondent No.3 & No.4 has never
attended any meeting of board of directors to the knowledge of the
petitioner, however their appointment being void abintio as much
as no legal formalities has been complied or followed in appointing
Respondent No.3 & 4 as Directors of Respondent No.1 Company.
3. It is stated that the petitioner was also aghast to learn that the
2 nd Respondent has purportedly allotted 4,90,000 shares of Rs.10/-
each of the aggregate value of Rs.49,00,000/- pursuant to the
purported allotment of the shares dated 06.02.2004 is evident by
alleged Form No.2 dated 11.02.2004, certified copy of which is
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obtained by the petitioner on or about 29.09.2007. It is also
evident from Form No.2 that the 2 nd Respondent has allotted
himself 65,000 shares of Rs.10/- each to himself and 4,25,000
shares of Rs.10/- each to M/s Storsack Holding Gmbh, Respondent
No.5 herein. The petitioner further says that form No.2 under
section 75(1) of the Companies Act, 1956 has been filed in the
office of Registrar of Companies by the 2 nd Respondent. The
purported allotment of shares is illegal and void abnitio as much as
the same is done in contravention of the provisions of law. No
meeting of Board of Director is ever held to consider such
allotment, nor there any mandate by the company in the General
Meeting for issuance of such shares. It is submitted that no
meeting of the Board of Directors of the 1 st Respondent Company
is ever called or held and no statutory records of the 1 st Respondent
Company is maintained. The 2 nd Respondent is never appointed as
the Managing Director of the Company and no resolution is ever
passed either of the meeting of the Board of Director or General
Meeting of the members of the 1 st Respondent Company.
4. It is stated that the 2 nd Respondent at the time of
incorporation of the company obtained a signature on a writing
which was meant for opening a bank account. The petitioner
thought that this may be procedural aspect incidental to the
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incorporation formalities. Thereafter it appears that the 1 st
Respondent Company has opened an account with UTI Bank Ltd.
at Nariman Point now known as Axis Bank Ltd. The petitioner has
not signed any papers for obtaining finance nor of herself as
guarantor to any financial assistance availed from any Bank or
Financial Institution. However, the 2 nd respondent solely is
operating the said account and the petitioner has never objected to
the same in good faith. The petitioner further states that the 2 nd
Respondent has grossly misused the funds of the company for his
own cause and heavily spent the funds of 1 st Respondent company
for his extra marital affair. The petitioner states that as a Director
she was paid salary of Rs.30,000/- per month. The 2 nd Respondent
had always prevented her from utilizing the said money which
were being deposited in a joint account exclusively operated by the
2 nd Respondent and funding her maintenance in a poor way by
utilizing the said account.
5. It is stated that one Mr. Prashant Mawani a confident of 2 nd
Respondent working as a Vice President of 1 st Respondent
Company is prompted and encouraged by the 2 nd Respondent in
harassing the petitioner and obstructing the petitioner in attending
the affairs of the company as a Director and issuing directions to
the staff not to obey her as a Director. Further obstructing her
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from entering the office premises and preventing access to any of
the records of the 1 st Respondent Company and indulging into
gross in-subordination. The said Mr. Prashant Mawani amply
encouraged by 2 nd Respondent behaves with the petitioner in a
manner not expected of a gentleman. The petitioner apprehends
that no statutory record of any nature whatsoever seems to have
been maintained at least not to the knowledge of the petitioner.
The petitioner says that even if the records are maintained she has
never been allowed any access thereto nor offered for inspection
despite repeated requests. The petitioner states that the 1 st
Respondent Company is in fact a glorified partnership between the
petitioner and 2 nd Respondent as is evident from the inception of
the company. The petitioner states that the 2 nd Respondent is
conducting the affairs of Respondent No.1 company in violation of
the provisions of the Act, and corporate governance and
continuing to run the Respondent No.1 company as if it is a
proprietary concern of him and also the affairs of the company
contrary to the interest of the 1 st Respondent Company. The
petitioner states that the oppressive acts of the company have been
continuing since the inception of the company as the 2 nd
Respondent took advantage of the matrimonial bond between
herself and 2 nd respondent. The irregular and oppressive acts of 2 nd
Respondent committed in the name of the company came to light
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when the petitioner was mistreated in or about December 2006 and
then in spite of demand the 2 nd Respondent caused 1 st Respondent
company to deny the inspection of the records and interfered with
her right as a shareholder and director of the 1 st respondent
company eventually compelled the petitioner to apply for certified
copies and on perusal of certified copies, the petitioner was
shocked to note that the 2 nd Respondent has attempted to tilt the
balance in favour by appointing Respondent No.3 and Respondent
No.4 as directors and also sought to destabilize the shareholding
pattern by purportedly allotting large number of shares in his
favour and to Respondent No.5 and more particularly alleged
return of allotment dated 11.02.2004 purportedly allotting 65,000
shares of Rs.10/- each to himself and 4,25,000 shares of Rs.10/-
each to respondent No.5 on 06.02.2004 without following due
process of law. The petitioner submits that there are only two
shareholders and two directors and there has not been any meeting
of Board of Directors or meeting of the members of the company.
The petitioner states that the purported letter of allotment dated
11.02.2004 filed in the office of Registrar of Companies vide Form
No.2 seeking to allot 65,000 shares of Rs.10/- each to himself by
respondent No.2 and 4,25,000 shares of Rs.10/- each to the 5 th
Respondent is null and void and the said return of allotment is
declared to be void and respondent No.2 and respondent No.5 are
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required to be injuncted from exercising their right to vote in any
meeting of share holders or directors in respect of those
unauthorizedly allotted shares. The petitioner further says that the
1 st Respondent Company’s affairs are being conducted in a manner
detrimental to the petitioner as a 50% shareholder warranting
winding up of the company. However, such an effort will
prejudice the shareholders, creditors and clients, and it would be
unfair to wind up the company, as much as this Hon’ble Board in
exercise of power under Section 397 & 398 read with section 402
of the Companies Act can remedy the situation and thus winding
up can be avoided.
6. It is stated that though the petitioner is a Promoter Director
and a member of the company no meeting of board of directors
have ever taken place to approve the accounts or any meeting of
the members, to cause any accounts in spite of repeated requests,
no copy of Balance Sheet or Audited accounts have been furnished
to the petitioner in a bid to keep her in dark and to continue the
affairs of the company at the sweet will of 2 nd respondent. The
petitioner also requested the statutory auditor of the company to
provide the Audited Accounts, the said Auditor adopted a hyper
technical approach. Further, it is stated that the 1 st Respondent has
caused a notice of an alleged EOGM to be held on 31.03.2008 at
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10.00 A.M. to consider her removal under Section 284 of the
Companies Act, 1956. The said notice is illegal and not liable to
be implemented on the ground that the alleged requisitionist is not
holding any validly allotted shares and a person sought to be
removed is required to be given a special notice of 14 days
irrespective of any provision of the MOA and AOA of the
company. The person sought to be removed has right to
representation made which has to be circulated among the
members. In view of the back drop of what is stated here in above
the purported EOGM lacks absolute bona fide and is intended to
target the petitioner is illegal and void. In view of the reasons
stated above, the petitioner made out prima facie case to grant the
relief’s as prayed for. The petitioner relied upon the following
decisions:
1. AIR 1992 SC Page 453 In the matter of V. B. Rangaraj Vs.
Gopalakrishnan,. It is held “Transfer of shares contrary to
Articles of Association not bind either on shareholders or on
the Company
2. (1996) Vol.86 Comp. cases (CLB Principal Bench) page 657.
In the matter of M. M. Dua & Ors. Vs. Indian Dairy &
Allied Services Pvt. Ltd. It is held “provision in Article for
preemptive purchase by members in a private company.
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Transfers made without being placed before Board of
Directors, in violation of Articles amount to oppression”.
3. (2008) 86 SCL 155 (CLB New Delhi) In the matter of
Mohinder Singh Vs. Hoshiarpur Express Transport
Company Limited. It is held “Removing Chairman in a
meeting conducted without quorum and without notice is
illegal and without authority”.
7. The respondents have filed a detailed reply and denied the
allegations averments made in the petition. Respondents raised
preliminary objection as to the locus of the petitioner to file the
present petition as she holds only 5000 equity shares in the
Respondent No.1 Company which amounts to only 1% of the total
paid up share capital of the company and as such does not meet the
stipulated requirement for filing petition invoking provisions of
sections 397/398 of the Companies Act, 1956. Further the
respondents raised objection that the petitioner was very much
present in the Board Meeting held on 6 th February 2004 and was
party to the decision to allot 4,25,000 equity shares to the
Respondent No.5 and a further 65,000 equity shares to the
Respondent No.2 and has signed several documents in connection
with the same. The petitioner has suddenly woke up after 4 years
only due to her matrimonial differences with the Respondent No.2
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and as such this petition is hopelessly barred by the laws of
limitation. The Respondents also raised further objection that the
entire petition has no substance whatsoever and is vindictive in
nature as acrimonious matrimonial issues have developed between
the petitioner and respondent No.2. The petitioner is simply
misusing this Hon’ble Company Law Board by indulging in
multifariousness and frivolous litigation and the petition needs to
be dismissed on this ground alone. The Learned Counsel adverting
to the facts submitted that the actual details of the share holding
pattern and the capital of the Respondent No.1 Company is as
under:
8. The Authorized Share Capital of the Company is
Rs.50,00,000/- divided into 5,00,000 equity shares of Rs.10/- each.
The Issued Subscribed and Paid Up Capital is Rs.1,00,000/-
divided into 10,000 equity shares of Rs.10/- each. The Petitioner
holds 5000 equity shares and the Respondent No.2 holds 5000
equity shares. The Company made further allotment of shares on
06.02.2004 to the Respondent No.5 to an extent of 4,25,000 equity
shares and 65,000 equity shares to Respondent No.2. Thus the
entire equity of the company was subscribed and paid as stated
above. The Respondent Company increased its share capital from
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Rs.50,00,000/- to Rs.2,00,00,000/- on 24.05.2006 and the present
share holding of the company is as under:
1. Storsack Holdings Gmbh (Resp.5) 85% 4,25,000 eq.sh
2. Sanjay Parekh (Resp.2) 14% 70,000 eq.sh
3. Rimpal Parekh (Petnr.) 1% 5,000 eq.sh
------------------
5,00,000 eq.sh
==========
9. It is stated that the above shareholding pattern is existing for
more than last four years. The Respondent No.5 holds 85%,
Respondent No.2 holds 14% and the petitioner holds only 1% of
the total paid up share capital of the Respondent Company.
Further it is submitted that, the valid board meetings have been
duly held and the petitioner herself has been present at the said
board meetings and has herself voted in favour of the said
allotment of 4,90,000 equity shares on 06.02.2004 which she is
now disputing after more than 4 years and the same shall be
evident from the correct facts being brought on record by the
Respondents. The Respondent Company was promoted by the
Respondent No.2 and the Respondent No.5 which is also the
holding company. The Respondent No.2 was already in talks with
Respondent Nos.3 and 4 who are the Directors of Respondent No.5
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for creating a joint venture company in India as far back as
October, 2003. The Respondent No.5 wanted to create an Indian
subsidiary with the name Storsack India Pvt. Ltd. (as the name of
the holding company was Storsack Holdings GmbH) and were in
talks with the Respondent No.2 for the completion of the
necessary formalities such as paid up capital, transfer of funds,
joint venture agreement approvals etc. The respondents submit
that there is not a single communication with the petitioner since
she was never concerned with this entire process or operation. It is
further submitted that it was the Respondent No.2 who suggested
the name of his wife, i.e. the petitioner to be the joint subscriber
and first director of the Respondent Company as a mere tool for
convenience since it would make the entire process of
incorporation of the Respondent Company quicker due to both the
subscribers and directors being Indian residents. It is further
submitted that the appointment of the Petitioner as a Director and
Subscriber was more by default rather than merit as she was a mere
housewife. The respondents 3, 4 & 5 naturally agreed and hence,
in that manner the Respondent Company was incorporated. It is
also pertinent to note that there has been absolutely no investment
from the petitioner into the Respondent Company. All the money
which was invested has been from the funds of the Respondent
No.2 from his personal account. It is further submitted that as per
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the Joint Venture Agreement between the Respondent No.2 and the
Respondent No.5, the representatives of Respondent No.5 would
be appointed on the board of the Respondent Company after its
incorporation and shares would be allotted to the Respondent No.5
to give it complete control over the Respondent Company.
Accordingly, on 6 th February 2004, a board meeting of the
Respondent No.1 was commenced in which the Petitioner was also
present. As per the Joint Venture Agreement dated 15 th December
2003 to an extent of 4,25,000 Equity Shares were allotted to the
Respondent No.5 and share certificates were also issued in respect
of the same signed by both the petitioner and the Respondent No.2
(A copy of the said share certificate signed by both the Petitioner
and the Respondent No.2 is annexed hereto as Exhibit D). The
requisite Form 2 in respect of the said allotment was filed with the
Registrar of Companies on 17 th February, 2004 itself (A copy of
the said Form 2 is annexed hereto as Exhibit E). Further, as per the
said Joint Venture Agreement, both the Respondent No.3 and
Respondent No.4 were appointed as Directors in the said Board
Meeting dated 6 th February 2004. The requisite form 32 in respect
of the same was filed on 17 th March, 2004.
10. Further, all the funds for acquiring the said 4,25,000 equity
shares were received from the Respondent No.5 by the R1
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Company in February 2004 itself as can be clearly borne out from
the Foreign Inward Remittance Certificate issued by the bank of
the Respondent Company. The Respondent humbly submit that
due to lack of sufficient grounds and evidence, the petitioner has
made a deliberate and calculated attempt to mislead the Hon’ble
Company Law Board by dragging the matrimonial dispute and
making it a subject matter of the petition. The Respondent further
submit that the matrimonial dispute and the allegations of the
petitioner are completely irrelevant and have nothing whatsoever
to do with the Respondent Company and hence cannot be the
subject matter of the petition and she should strictly refrain from
bringing such personal differences in the public domain. It is also
submitted that there are separate divorce proceedings already
underway between the Petitioner and the Respondent No.2. The
petitioner did not raise one single complaint regarding her
shareholding, the directorships of Respondent No.5 nor challenge
the directorships of Respondent 3, 4 and 6, since the date of
incorporation December 2003 till mid 2007. It is not out of place
to mention that the petitioner has filed various false and frivolous
police complaints including one under Section 498A of the IPC as
a result of which the Respondent No.2 was even put into judicial
custody due to the severity of even complaining under the said
provision. The respondents have been duly and diligently holding
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the board meeting and general meetings of the company as is
evidenced from the Minutes of the Board Meeting, the minutes of
the General Meeting and the annual return and annual reports duly
filed with Registrar of Companies. The Respondents reiterate and
submit that the appointment of the respondent Nos.3 and 4 as
Directors of the Respondent Company was made on 6 th February
2004 in a board meeting in which the petitioner was very much
present and that the said appointments were made in accordance
with the Joint Venture Agreement. Respondents 3 and 4 have
always been completely involved in the decision making process
of the Respondent Company since it is a subsidiary of the
Respondent No.5 of which the Respondents 3 and 4 are
representatives. In fact, on few occasions board meetings of the
Respondent Company has also been held in Germany at the office
of the Respondent No.5 which is the holding company of the
Respondent No.1 Company. The respondents reiterate that the
petitioner was appointed as a Director of the Respondent Company
only as a matter of convenience and as she was the wife of the
Respondent No.2, the Respondent No.5 did not foresee any
problem with the same. It is further submitted that right from
incorporation, the Petitioner has been only an Ordinary Director
and has never been involved in the day to day management of the
Respondent Company. The claim of the Petitioner that she was
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being sidelined and never given any notices etc. are completely
false and motivated with motives and mala fide intention. The
Respondent reiterate that the said allotment of the 4,90,000 equity
shares was validly made and the necessary Form 2 was also filed
on 17 th February 2004 itself. In fact, a share certificate had also
been issued to the Respondent No.5 at that very board meeting
dated 6 th February 2004 and it bears the signature of both the
Respondent No2 and the Petitioner. In fact, the lies of the
Petitioner is also evident from the fact that the Petitioner has also
signed the Audited Balance Sheet and Profit/Loss Account of the
Respondent Company for the year ending 31 st March 2004 which
was filed with the Income Tax authorities for the Assessment Year
2004-05, which clearly show the paid up share capital of the
Respondent Company as Rs.50 Lacs and not the Rs.1 Lac as is
being claimed by the petitioner. Hence, the petitioner cannot
suddenly feign ignorance and claim innocence when she was
actually party to all these proceedings.
11. The Respondent No.2 had opened bank account for the
Respondent Company to carry out its day to day operations. There
was never any need to take the signature of the petitioner to
operate the said Bank account since she was never involved in the
day to day affairs and management of the Respondent Company.
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The petitioner never even once bothered to ask the Respondent
No.2 as to how the Respondent Company was being managed or
the state of its affairs. However, since January 2008, she has
started questioning each and every thing only to harass the
Respondent No.2 as a direct fallout of the matrimonial dispute
between the petitioner and the Respondent No.2. The petitioner is
only supposed to attend the board meetings of the Respondent
Company as and when she is called upon to do so. Hence, there is
no question of her attending to any affairs of the Respondent
Company or issuing instructions since she has no authority
whatsoever in that regard. It is further reiterated that the
Respondent No.6 has been associated with the Respondent
Company since incorporation and has been elevated to the status of
Director in 2006. The Respondent No.6 and the Petitioner are on
an equal footing so far as the Respondent Company is concerned
and therefore, the question of insubordination does not arise at all.
The petitioner is simply making wild, value and concocted
allegations about non maintenance of the statutory records,
registers, accounts etc. without producing any evidence to support
her allegations. The Respondents have duly convened and held all
the board and general meetings in due compliance with the
provisions of law as can be evidenced from the documents annexed
to this reply. In fact the respondents submit that the Respondent
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Company has shown substantial growth from the date of
incorporation till date and this is only due to the hard labour and
skill of the Respondent No.2 in running the affairs of the
Respondent Company. The Respondent Company is a profit
making company and has been making continuous profits for the
last 4 years since incorporation. The Respondents reiterate that the
oppressive acts being alleged by the petitioner are all concocted
bunch of lies and a figment of her imagination. She has been
unable to point out even a single instance of oppression of her
rights as a shareholder or mismanagement of affairs of the
Respondent Company. In fact, it is pertinent to note that the
petitioner is blatantly and in utter contempt and disregard for the
law, making one false statement after the other and for this reason
alone the petition needs to be dismissed with costs. The petitioner
has since incorporation of the Respondent Company never
bothered about its affairs and never visited its office except to
attend board meetings. The petitioner had never even asked for or
sought inspection of books and records of the Respondent
Company prior to 2008 and she is put to strict proof thereof to
prove that she was never denied inspection as she is so blatantly
claiming. Further, even in 2008 when she asked for inspection she
was not denied the same. She is simply making false allegations
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with mala fide intentions to further her nefarious designs and
ulterior motives.
12. Further it is submitted that the Respondent Company has
only 5 directors presently viz. Respondents 2, 3, 4 and 6 and Mr.
Vinod Rana. The petitioner has already been removed as a
Director pursuant to the resolution passed by the shareholders in
the Extra-ordinary General Meeting held on 31 st March 2008. It is
pertinent to note here that the Petitioner did not even bother to
attend the said general meeting and vote against her removal.
Further, as already highlighted herein above the Respondent
Company has three shareholders namely, the Respondent No.5
which holding 85% of the total paid up capital and is the holding
company, Respondent No.2 holding 14% and the Petitioner
holding 1%. There is no prejudice being caused in any manner
whatsoever to the petitioner who is just a 1% shareholder of the
Respondent company. The petitioner has been daily visiting the
registered office of the Respondent Company and has been
threatening the employees of the Respondent Company with
physical and bodily injury, and raising a hue and cry and disturbing
the peace and quiet of the environment. As a result, two
employees have already resigned being unable to bear the tension
and stress and the Respondents apprehend that more employees
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may follow suit. In fact, the petitioner went to the criminal court
and obtained a restrained order against her husband i.e.
Respondent No.2 and on the other hand she herself goes to his
office every day to harass him and his staff. Being apprehensive of
her actions and for the security of the company staff, the
Respondents were constrained to install CC TV cameras.
Respondent No.5 requisitioned an EOGM on 31 st March 2008 for
the removal of the petitioner as director of the Respondent
Company. Despite receipt of proper notice, the petitioner chose
not to attend the EOGM and instead approached the Hon’ble
Company Law Board by filing a petition wherein the Hon’ble
Company Law Board allowed the EOGM to go on and ordered that
all the resolutions were subject to its final decision. As a result,
with effect from 31 st March 2008, the petitioner is no longer
director of the Respondent Company albeit subject to the final
decision of this Hon’ble Company Law Board. The Respondents
reiterate and submit that notices of all meetings were always given
to the petitioner. The Petitioner had in fact attended all the
meetings except those held in Germany. She was never a part of
the day to day affairs of the Respondent Company and therefore
was not concerned with the affairs and hence, the question of
keeping her in the dark did not arise. She has never even once
prior to 2008 asked for copies of any document let alone the
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balance sheet of the Respondent Company and this just shows her
callous attitude. She is asking for all the documents now only with
a premeditated view to create correspondence to use against the
Respondent Company to further her own ulterior motives. It is
further submitted that the Petitioner was paid only a salary of
Rs.30,000/- every month and there were absolutely no perquisites
as is being falsely claimed with a calculated attempt to mislead this
Hon’ble Company Law Board. The statements of the petitioner
regarding preventing her from utilizing her money are completely
untrue and false and she is put to strict proof thereof. In fact, the
petitioner never once wanted to use the money deposited in her
account since the last five years. It is only since things have turned
advantage of any thing she can cling on to. All this while since
2003 the petitioner had no problem with the functioning of the
company or the funds in her account. However, all of a sudden she
has awoken to her remuneration in 2008. This itself is a clinching
fact which tells the tale of deceit of the petitioner. The respondents
further vehemently deny the insinuations and accusation leveled at
the Respondent No.2 of acting in vengeance to harass the
petitioner and put her to strict proof there of.
13. The petitioner was always holding only 1% shares so there
was no question of her shareholding being reduced further. The
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notice from Respondent No.5 was to requisition an EOGM for the
removal of the petitioner as Director since her actions were
becoming more and more prejudicial to the interests of the
Respondent No.5 and the Respondent Company. In fact, when the
petitioner approached the Hon’ble Company Law Board to stop the
said EOGM, she was not allowed to do so and the resolution for
her removal has been passed unanimously, albeit subject to the
final decision of the Hon’ble Company Law Board. Hence, the
Petitioner is no longer Director of the Respondent Company. The
Respondent No.2 further submits that he is ready and willing to
buy out the entire shareholding of the petitioner in the Respondent
Company for a price determined by an independent valuation done
by independent valuers of repute. The EOGM was validly
requisitioned and held and her removal under section 284 is valid
and in fact, the Hon’ble Company Law Board did not even deem it
fit to stay the holdings of the said EOGM and passing of the said
resolution except to state that the resolutions were subject to the
final decision of the Hon’ble Company Law Board. The
respondent submit that it is a fit and proper case for allowing the
implementation of the resolution which was passed unanimously,
as the petitioner is holding only 1% of the shareholding of the
Respondent Company which is a subsidiary of Respondent No.5
and has been acting completely against the interest of the
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25
shareholders and as such is causing severe and grave harm and
injury to the shareholders and the Respondent Company and has
completely lost the faith and trust of the Board and despite having
notice chose neither to respond to requisition for her removal nor
to attend the said EOGM where the resolution for her removal was
passed unopposed. The petitioner was given a special notice as per
law, she chose to completely ignore it and did not choose to
respond to it. The EOGM has been held in consonance with the
Articles of the Respondent Company. It is reiterated that the
Board of the Respondent Company is duly constituted. In the
circumstances, it is a fit and proper case to allow the
implementation of the resolution already passed unanimously for
the removal of the petitioner. In view of the above, the
Respondents 1,2,3,4, and 6 pray to the Hon’ble Company Law
Board as follows:
a) That the issue and allotment of 4,25,000 equity shares to
respondent No.5 made on 6 th February, 2004 be declared as
valid;
b) That the issue and allotment of 65,000 equity shares to
respondent No.2 made on 6 th February 2004, be declared as
valid;
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CP NO.1 of 2008
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c) That the appointments of Respondents 3 and 4 as directors on
6 th February 2004 be declared as valid;
d) That it be declared that the petitioner has been acting against
the interests of the Respondent Company and it share
holders;
e) That the Respondent Company be allowed to act upon the
resolution passed at the Extra Ordinary General Meeting held
on 31 st March, 2008;
f) That the petitioner be directed to sell to the Respondent No.2
her entire shareholding in the Respondent Company for a
price determined by an independent valuation done by
independent valuers of repute.
g) That the petition be dismissed as false vexatious and
frivolous with heavy costs being imposed on the petitioner.
14. In view of the facts and reasons stated above the Respondents
pray this Bench to dismiss the Company Petition as it is devoid of
merits. In support of the case, relied upon a decision reported in
(1950) 20 Comp. cases 179 (SC). In the matter of Nanalal Zaver
& Anr. Vs. Bombay Life Assurance Company Limited & Ors. It
is held “if the directors exercise the power for the benefit of the
company and at the same time, they have a subsidiary motive
which in no way affects the Company or its interest or the existing
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27
shareholders, then the very basis of interference of the Court is
absent, for the Court of equity only intervenes in order to prevent a
breach of trust on the part of the directors and to protect the
cesqui que trust, namely, the Company and possibility the existing
shareholders. If as between the directors and the Company and
the existing shareholders, there is no breach of trust or bad faith,
there can be no occasion for the exercise of the equitable
jurisdiction of the Court.
15. The respondent No.5 also filed counter to the petition and
raised a preliminary objection as to the locus of the petitioner to
file the petition since she holds only 5000 equity shares which
constitute only 1% of the paid up capital of the Company and does
not meet the stipulated requirement for filing of the petition under
Sec.397-398 of the Act. It is submitted that the petitioner was very
much present in the Board Meeting held on 6 th Feb.2004 and was
party to the decision to allot 4,25,000 equity shares to this
respondent and a further 65000 equity shares to the 2 nd Respondent
and signed several documents in connection with the same. The
petitioner filed the present petition due to her matrimonial
differences with the 2 nd Respondent belatedly as such, the petition
is hopelessly barred by the laws of limitation. This respondent
adopted the counter filed by the other respondents. Since this
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CP NO.1 of 2008
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respondent counter also on the same lines of the counter of the
other respondents, hence the same is not brought in, to avoid
repeatence. In support of the arguments the Learned Counsel for
the Respondents No.5 relied upon a decision reported in (2008)
141 Comp.Cases.505 (CLB New Delhi). In the matter of Rahul
Shah & Ors. Vs. AVI Sales Pvt. Ltd. & Ors. It is held
“Petitioners not coming with clean hands and filed after a delay of
three years and no sufficient reasons given for delay, the petition is
liable to be dismissed. Director having knowledge of removal and
allotment of shares and tacit consent by promoters of Company,
the directorial complaints cannot be entertained”.
16. The Bench after careful examination of the pleadings,
documents and citations relied upon by them, framed the issues
and decided the matter by giving detailed reasons to each issue.
The petition was dismissed by an reasoning order dated 30.8.2010.
Upon its dismissal all the interim orders vacated and also disposed
off all the applications pending as on that date. The petitioner
preferred an appeal before the High Court of Bombay against the
order of this Bench dated 30.8.2010. The High Court by its order
dated 21.12.2011, set aside the order passed in CP 1 of 2008 and
restored to the file of the CLB and directed to decide the petition
on merits in accordance with law within a period of 3 months from
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the date of receipt of copy of the order. The CLB received the
copy of the High Court order on 6.1.2012 and sent notices to the
parties on 11.1.2012 intimating them the date and time of hearing
of the petition i.e. on 23.1.2012 at 2.30 P.M. On that date of
hearing, the counsel appeared on behalf of the petitioner sought
adjournment of the matter and at his request the matter is posted
on 13 th February 2012 at 2.30 P.M. for hearing. On that date the
petitioner filed two applications one being CA 20 of 2012 seeking
directions to the respondents to maintain status quo and allow the
petitioner to continue as director of R1 company and direct the
respondents to pay salary of Rs.30,000/- per month. The other
application being CA No.21 of 2012 whereby she prayed this
Bench to allow the petitioner to place on record the documents
along with the list of annexures enclosed to the application. The
petitioner insisted this Bench to grant reliefs as prayed in CA
No.20 of 2012 and CA No.21 of 2012. Having no other option I
was compelled to direct the respondents to file counter to those
applications within 2 days and the CA’s are posted on 20.2.2012 at
2.30 P.M for hearing. The CA’s were heard and the following
order is passed only in CA No.20 of 2012 and the full text of order
is reproduced here under:
i) “The Hon’ble High Court by its order dated 21.12.2011
which was received by this Bench on 6 th January, 2012 directed
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the CLB, to dispose of the petition afresh within a period of 3
months from the date of receipt of copy of that order. The Bench
taken up the matter along with application being CA No.78 of
2010 for disposal as directed. The petitioner filed two applications
being CA No.20 of 2012 whereby she sought directions to the
respondents to maintain status-quo and allow the petitioner to
continue as director of R1 company and direct the respondents to
pay salary of Rs.30,000/- per month. The other application being
CA No.21 of 2012 whereby she prayed this Bench to allow the
petitioner to place on record the documents along with the list of
annexures enclosed to the application. The petitioner insisted this
Bench to grant reliefs as prayed in CA No.20 of 2012 and insisted
this Bench to allow the CA No.21 of 2012.
ii) The respondents filed replies to both the applications. In
view of the pressure brought on me I have no other alternative but
to take up the applications for hearing and dispose off the same
before deciding the petition and CA No.78 of 2010. Now, I am
dealing with CA No.20 of 2012. The counsel for the petitioner
narrated the facts. It is stated that the CA No.20 of 2012 is filed
under section 309 of the Companies Act, 1956 for the interim relief
in respect of remuneration payable to director i.e. the petitioner
together with perquisites. The advocates stated that the CLB by
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order dated 9.4.2008 directed the respondents to maintain status-
quo with regard to continuation as director including the payment
of salary to the petitioner. The respondents have deliberately
failed and neglected to comply with the above order. The CLB
dismissed the CP on 30.8.2010. The petitioner filed an appeal
against the order before the High Court. The High Court set aside
the order of CLB and remanded the CP for fresh hearing on merits.
Since the company petition had been restored for fresh
consideration the interim relief prayed in the said CP be allowed.
iii) The respondents filed reply to the CA and stated that the High
Court vide its order dated 21.12.2011 has directed the CLB to
consider the petition afresh on merits and after giving opportunity
to the petitioner to substantiate her challenge based on additional
documents on the basis of application taken out. Therefore, the
order is clear that the petitioner can urge the petition on merits
afresh and can rely upon the additional documents as stated in her
application dated 23.6.2010. In view of the parameters of the
hearing on the basis of the documents produced under application
dated 23.6.2010 only to be heard. Any attempt on behalf of the
petitioner shall be an attempt to misrepresent, misinterpret the
order of High Court and shall tentamount to a disobedience and
contemptuous conduct and shall render the petitioner liable for
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contempt. The entitlement of the salary at the interim stage is
unjustified since the earlier order of status-quo passed by the CLB
has merged into the final order of the CLB dated 30.8.2010 and
therefore there is no basis for claiming revival of the directions for
status-quo. The petitioner has been guilty of having misuse her
position and the conduct of the petitioner is blame worthy. Even
otherwise the petitioner has not come to the court with clean hands
and the present proceedings are not filed bonafide and as such is
false, frivolous and bogus. It is settled law that personal disputes
of the family members cannot be made the subject matter of the
proceedings under oppression and mismanagement. The petitioner
is not entitled to any reliefs.
iv) Heard the advocates appeared for the parties. Before dealing
with the crux of the issue it is necessitated for me to say, that the
parties are in habit of blaming the CLB for their lapses. Therefore,
to be careful and cautious, I intend to record that the number of
pages filed by the petitioner and the respondents in their
applications/petitions. The CA No.20 of 2012 consists of 6 pages.
The reply filed by the respondents 1 and 2 consists of 12 pages.
Except those, no other paper is available or filed to consider the
said application. It is made clear to the parties that only those
papers which have been mentioned herein above will be taken into
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CP NO.1 of 2008
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consideration while deciding the application. If any documents
filed subsequently in this application cannot be taken into
consideration. If the parties filed any papers with anti dated after
disposal of this application to blame the CLB, the CLB is not
responsible for the same. It appears that the intention of the parties
is not to oblige the order of the High Court but to fix the CLB in
contempt by filing various applications to delay the hearing. The
Bench after hearing the parties elaborately dismissed the CP No.1
of 2008 on 30.8.2010 by passing a detailed order and vacated all
the interim orders and disposed of all the company applications, if
any pending as on that date. While deciding the petition it is one
of the issue framed by this Bench is with regard to the removal of
petitioner in an EOGM held on 31.3.2008 pursuant to the alleged
requisition dated 6.03.2008 is valid or not. The relevant portion of
the findings of the order is extracted herein: “I do not find any
irregularities or illegality in conducting the meetings. Moreover
the appointment or removal of directors is the wisdom of the share
holders. The CLB will not interfere in the internal affairs of the
company unless and until if it is found that there is violation of
articles of the company and the law”. The issue was accordingly
answered and hold that there is no illegality in removing the
petitioner as director. When the petition was dismissed all the
interim orders stand vacated and the petitioner has not made any
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34
application after vacating the order seeking to continue the interim
orders at least to the extent of payment of remuneration/salary
though she is not a director. It is seen that, from the date of
dismissal of the petition till its restoration, the petitioner has not
made any application seeking payment of salary. The Hon’ble
High Court directed this Bench to proceed on the basis of the
application for production of additional documents and the
petitioner can rely on those documents in support of her
contention. The High Court set aside the order of this Bench dated
30.8.2010 and directed the CLB to consider the petition afresh on
merits and in accordance with law after giving an opportunity to
the petitioner to substantiate her challenge based on the additional
documents. In view of the directions of the High Court this Bench
has to dispose off the petition on merits and taking into
consideration the additional documents filed by the petitioner.
Pending disposal of the petition, granting any interim relief would
be pre determining the issues in favour of the petitioner and
completely holding the balance of convenience in favour of the
petitioner without adjudicating the matter. On dismissal of the CP,
the petitioner ceased to be a director of the company. The present
application is filed by invoking section 309 of the Companies Act,
1956, which deals with the remuneration of directors. As per the
above provision of law the remuneration of director shall be
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CP NO.1 of 2008
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35
determined in accordance with the provisions of section 198 and
section 309 of the Act, or the articles of the company or by a
special resolution if the articles so required in case the director
continues to hold office. When the director cease to hold office the
payment of remuneration would not arise. In the present case, this
Bench hold the removal of the petitioner as legal, therefore, the
petitioner ceased to be a director and the payment of remuneration
does not arise unless the removal of the petitioner is set aside.
Since the petition has been remanded to this Bench, this Bench will
consider the arguments of the petitioner and before deciding the
legality of the petitioner being director or not, in my opinion, the
payment of remuneration does not arise. Irrespective of the above,
the conduct of the parties is blame worthy. From the reply of the
respondents it is on the record that they are making contemptuous
statements at para 3. The relevant portion is extracted hereunder:
“In addition thereto it is the duty of this Hon’ble Court to ensure
that the order dated 21.12.2011 passed by High Court, Bombay is
followed in its entirety and is not subject to the interpretation,
misinterpretation and distortions by this Hon’ble Court. It is
beyond the power of this Hon’ble Court to enlarge the scope of the
order and what is permitted therein. The order of the High Court
dated 21.12.2011 being self explanatory, this Hon’ble Court
cannot be permitted to go beyond the said order. Any such
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CP NO.1 of 2008
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36
permission shall be illegal and beyond the jurisdiction of this
Hon’ble Court”. The said statements by the respondents in their
affidavit is clearly dictating the terms to this Bench. It is highly
condemnable. The CLB being a quasi-judicial body discharging
the powers as vested in the Companies Act, is functioning
completely impartial without fear or favour and abided by the
principle of natural justice and the law. However, some parties
like in these proceedings trying to blame the institution is
unwarranted. Even though the parties attempt to make the
contemptuous statement the Bench will function impartially
without fear or favour. In view of the above, the petitioner is not
entitled to the reliefs hence the CA liable to be dismissed.
Accordingly, the CA No.20 of 2012 is dismissed. However, CA
No.21 of 2012 will be heard along with main petition on 12 th
March 2012 at 10.30 A.M.”
17. The High Court by its order dated 21.12.2011 specifically
directed this Bench to “consider the petition afresh on merits and
in accordance with law after giving an opportunity to the
appellant-petitioner to substantiate her challenge based on the
additional documents”. Further the High Court directed at para
10 which reads as “in the light of the agreed position before me,
the Company Law Board should proceed on the basis that the
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CP NO.1 of 2008
Storsack
37
application for production of additional documents has been
granted by this court and that the appellant-petitioner can rely on
those documents in support of her contentions and allegations in
the main petition”. In view of the directions, the petitioner and the
respondents were given opportunity to substantiate their case and
accordingly ample opportunity was given to them to hear the
matter on 23.1.2012, 13.2.2012, 20.2.2012 and on 12.3.2012.
However, one Mr. Rajendra G. advocate representing the petitioner
sought adjournment on 12.3.2012. The Bench refused to grant
adjournment on the reason that the matter has to be disposed off in
compliance of the directions of the High Court. The Bench is of
the view that the petitioner intentionally attempting to delay the
matter without any sufficient reason and also filed various
applications. It was made clear to the parties that sufficient time
was granted to the parties and no more time will be granted and the
matter will be reserved for orders. Accordingly the matter was
reserved for orders. It is high time to mention that the petitioner
instead of assisting the CLB to comply the order of the High
Court, tried to delay the same by filing various applications which
itself is evident that she has least respect towards this Bench. The
petitioner had placed the following citations in support of her case.
viz. i) (2012) 18 Taxmann.com 40 (Delhi) In the matter of Ajay
Paliwal Vs. Sanjay Paliwal at para 39 it is held. “Further this Court
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38
has compared the original admitted signatures of Mr. J. K. Paliwal
on the company petition filed before CLB as well as on the
aforesaid statement recorded by this Court on 16.9.2008 with the
original form produced by the appellants and this court is of the
view that there are significant differences in signatures of Mr. J. K.
Paliwal on the transfer deed produced by the appellant.
Constantly, the finding of the CLB with regard to this issue
requires no interference. ii) (2010) 104 SCL 401 (Punjab &
Haryana) In the matter of Jiwan Mehta Vs. EMM Bros. Forgings
(P) Ltd. iii) (2005) 1 SCC 212 In the matter of Dale & Carrington
Investment (P) Ltd. & another Vs. P.K. Prathapan & Ors. It was
held “A company is a juristic person and it acts through its
directors who are collectively referred to as the Board of directors.
An individual director has no power to act on behalf of a company
of which he is a director unless by some resolution of the Board of
directors of the company specific power is given to him/her.
18. After careful examination of pleadings, documents, citations
and CA No.78 of 2010 along with documents and CA No.21 of
2012 along with documents and citations relied upon by the
respective counsel, the following issues are felt for consideration
and the same need to be addressed:
i. Whether the petition is maintainable?
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CP NO.1 of 2008
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39
ii. Whether allotment of 4,25,000 shares of Rs.10/- each to the
Respondent No.5 and 65,000 shares of Rs.10/- each to the
Respondent No.2 is valid?
iii. Whether removal of petitioner in an EOGM held on 31.3.2008
pursuant to the alleged requisition dt.6.3.2008 is valid?
iv. Whether appointment of Respondents 3, 4, & 6 as directors of
R1 Company is valid?
v. Whether any acts of oppression and mismanagement made out
by the petitioner?
vi. Even after taking into consideration the CA No.78 of 2010
along with the additional documents whether the petitioner has
made out any case either on oppression or mismanagement?
vii. Whether the documents filed along with CA No.21 of 2012
will have any bearing on the petition?
viii. To what relief:
Now I deal with the issue No.i):
The Respondents raised a preliminary objection that the petition is
not maintainable since she holds 1% of the total paid up share
capital of the Company. Admittedly, the petitioner holds only
5000 shares in the R1 Company which amounts to only 1% of the
paid up share capital. However, the petitioner is challenging to the
further allotment of shares in this petition, hence, the petition is
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CP NO.1 of 2008
Storsack
40
maintainable. The CLB in several cases hold that when there is
challenge to the further allotment of shares in the petition, even if
the petitioner does not fulfill the criteria as enumerated under
Sec.399 of the Act, is maintainable. I hold that the petition is
maintainable. Hence, the issue is answered accordingly.
Now I deal with the issue No.ii):
The R1 Company was incorporated on 4 th December 2003. Prior
to incorporation the 2 nd Respondent corresponded with the
representative of the R5 Company vide e-mail dated 28 th October,
2003 wherein the R2 put the proposal to start working together and
incorporate a company in the name of Storsack India Limited in
India. There are several e-mail correspondences between the 2 nd
respondent and the representatives of the R5 Company. The R5
and the R2 have entered a shareholders’ agreement dated 15 th
December 2003 just after incorporation of the R1 Company. As
per the shareholders’ agreement, the R1 company being
established inter alia to manufacture, sale and carry on the business
flexible intermediate bulk containers and container liners and allied
products and the parties to this agreement agreed to become
shareholders of the new company on the terms and conditions
contained in that agreement. The R1 Company is represented by
Respondent No.2 and R5 Company is represented by R3 for all the
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CP NO.1 of 2008
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41
purposes in respect of the affairs of the Company. Thus, it is clear
from the shareholders’ agreement that the Respondent No.5 will
become a shareholder in the R1 Company. The Article ‘4’ of the
shareholders’ agreement deals with the issue of shares. As per the
said article, the shareholding pattern of the R1 Company will be as
under:
a) 85% of the initially issued and paid up share capital of the
R1 Company shall be subscribed and held by R5 for cash
at par.
b) Balance 15% of the initially issued and paid up sharre
capital of the R1 Company shall be subscribed and held by
R2 and his associates for cash at par.
Thus, it is clear from the shareholders’ agreement that 85% of the
initially issued and paid up share capital shall be subscribed by the
R5 and the balance 15% of the initially issued and paid up share
capital shall be subscribed by the R2 and his associates. As per the
Memorandum and Articles of the R1 Company, the authorized
share capital is Rs.50 lacs divided into 5,00,000 equity shares of
Rs.10/- each. The paid up share capital of the R1 company is
Rs.1,00,000/- divided into 10,000 equity shares. To incorporate a
private company minimum two persons are required, therefore the
2 nd respondent and the petitioner initially subscribed to the
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CP NO.1 of 2008
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42
Memorandum and was allotted 5,000 equity shares of Rs.10/- each.
From the Authorized Capital, the company can further allot
4,90,000 equity shares. As per Article 5 of the Articles of
Association of the R1 company, the shares will be under the
control of the Board who may allot or otherwise dispose off the
same or any of them to such persons, in such proportion and on
such terms and conditions and either at a premium or at a par
subject to the provisions of Sec.79 of the Act at discount and at
such times as they may think fit and proper. Thus it is clear from
the articles of association, that the remaining un-allotted shares
will be under the control of the Board. As per the share holders’
agreement 85% of the issued and paid up share capital shall be
subscribed by the Respondent No.5 and the balance 15% shall be
subscribed by R2 and his associates. As per the terms and
conditions of the agreement the Respondent No.1 company allotted
4,25,000 shares to the R5 and 65,000 shares to R2 on 6.2.2004 and
filed form 2 regarding return of allotment pursuant to Sec.75(1) of
the Act with the ROC showing allotment of the said shares. With
the said allotment of shares, the Company exhausted its paid up
capital. To complete the formalities, the Respondent No.1
Company issued share certificate to the R5 and it was signed by
the petitioner and 2 nd Respondent along with the other signatory. It
is also evident that the Company also received consideration on its
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CP NO.1 of 2008
Storsack
43
allotment of shares to the respective parties. Moreover, the
allotment of shares pertains to the year of 2004 and the petitioner is
party to the said allotment and the company filed its returns for the
year 2005, 2006, 2007 and the balance sheet as at 31.3.2004 which
was signed by the petitioner showing the share capital and the
shareholding pattern i.e. R5 holds 4,25,000 shares, R2 holds
70,000 shares and the petitioner holds 5,000 shares. The petitioner
being director is aware of the acts done by the company.
Moreover, the acts pertain to the year 2004 and approaching this
Bench in the year 2008 is belated and no cause of action shown by
the petitioner. Further, having party to all the acts the petitioner
cannot claim her ignorance and cannot volte face to mould the
situation to her convenience. The petitioner is acquisioned to the
acts. From the pleadings it is also clear that there are serious
matrimonial difference between the petitioner and the R2. The
Company being a legal entity will run by the Board of Directors
who shall in a fiduciary duty to run the company in the best
interest of the company and its shareholders and public at large.
The family disputes should not be brought into the company’s
affairs and the company should not be made a battle ground to
settle their scores. From the letters it appears that the petitioner is
addressing her letters to the Company from the year 2008 onwards
only. There is no single document to show that the petitioner
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CP NO.1 of 2008
Storsack
44
ventilated her grievance immediately after the allotment of shares
to the Respondent 5 & 2 or appointment of Respondents 3, 4 & 6
as directors. Moreover, the petitioner’s counsel vide his letter
dated 25.2.2008 stated that his client was aghast to learn that
4,25,000 shares were allotted to the R5 in the year 2004. The
allegations, grievances of the petitioner is that the allotment of
shares to the Respondents 5 and 2 is illegal, does not substantiate
and is devoid of any merit and relied upon the citation of the Apex
Court in the matter of Dale & Carrington. The Hon’ble Apex
Court hold that in the matter of issue of shares, directors owe a
fiduciary duty to the share holders of the company to issue shares
for a proper purpose. In the present case the petitioner was the
party to the meetings in which the allotment of shares was taken
place. Further, all it has been done I accordance with the
Memorandum of understanding/Agreement. Moreover, as stated
supra, the petitioner has not raised any objection with regard to
allotment of shares for quite a longer time. Therefore, this Bench
is of the firm view that the allotment of shares is done in
accordance with law and there is no illegality found. Further, it is
not the case of the petitioner that the Company has not received
consideration from the parties and thereby the company was put to
loss. In view of the reasons stated supra there is no substance in
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CP NO.1 of 2008
Storsack
45
the allegations of the petitioner and the same are negated.
Accordingly the issue is answered.
Now I deal with the issue No.iii):
As per the Memorandum and Articles the petitioner is the 1 st
director of the company. It is the contention of the respondents
that the petitioner is merely an ordinary director of the company
and she has no other function or capacity in the company since its
incorporation. It is also contended that the petitioner is only
supposed to attend the Board Meetings as and when she is called
upon to do so. It is a fact that the Respondent No.5 issued
requisition letter dated March 6, 2008 under Sec. 284(2) read with
Section 190 of the Companies Act, intending to move an ordinary
resolution to remove the petitioner from the office of the director
on the ground that various illegal and malicious acts being done by
the petitioner as a result of which the business of the company is
badly affected and seriously jeopardized its future profitability and
existence. On receipt of the notice by the Company, the company
issued notice dated 14 th March, 2008 calling EOGM on 31 st March
2008 to remove the petitioner. The petitioner vide her letter dated
14 th March, 2008 stated that she will attend the meeting under
protest to mark her presence. From the perusal of correspondence
it appears that there is no illegality in conducting the meeting after
due notice to the parties. The R5 being 85% shareholder has right
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CP NO.1 of 2008
Storsack
46
to call EOGM to transact the business to remove the petitioner.
The petitioner was given opportunity to make her representation. I
do not find any irregularity or illegality in conducting the meeting.
Moreover, the appointment or removal of director is the wisdom of
the shareholders. The CLB will not interfere in internal affairs of
the company unless and until it is found that there is violation of
Articles of the Company and the law. Therefore, the Bench will
not interfere with the removal of the petitioner which is done in
accordance with law. The petitioner by virtue of order of this
Bench is continuing as director and is being paid the remuneration.
It is already made clear that there is no illegality in removing the
petitioner. Therefore, I hold that the petitioner ceased to be a
director w.e.f. 31.3.2008 and not entitled to any remuneration.
Hence, the company can act accordingly. The issue is answered in
view of the above.
Now I deal with the issue No.iv):
The contention of the petitioner is that the 2 nd respondent
appointed Respondents 3 & 4 as Directors w.e.f. 6.2.2004 without
her knowledge and filed form 32 dated 9.2.2004. In the
shareholders’ agreement dated 15 th December 2003 at Article 7.02
it is agreed that the Board of Directors of the R1 Company shall be
Respondents 3 & 4 representing R5 Company and Respondent
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CP NO.1 of 2008
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No.2 representing R1 Company. Further, at Article 7.10, it is
made clear that the Respondent No.2 will be the Managing
Director of the R1 Company. Pursuant to the shareholders’
agreement the R1 company appointed two directors i.e.
Respondent No.3 & 4 on its Board and filed Form 32 on 9.2.2004
showing their appointment w.e.f. 6.2.2004. Further, in all the
annual returns, the respondents 3 & 4 names have been mentioned
as directors appointed w.e.f. 6.2.2004 being foreign nationals. I do
not find any illegality in appointing the Respondents 3 & 4 as
directors, moreover those appointments have taken place in the
year 2004 and the petitioner was also a director all along till her
removal, now cannot make out any case on the basis of the events
developed subsequently. So far as the appointment of Respondent
No.6 as director is concerned it is submitted by the respondents
that he has been associated with the company since its
incorporation and has been elevated to the status of director in the
year 2006. The petitioner has not made any substantial ground to
prove illegality in appointment of R6. In absence of any evidence
or violation of Articles or law, this Bench will not interfere in the
appointment of directors. Hence, the issue is answered
accordingly.
Now I deal with issue No.v):
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From the narration of facts in the petition, it is clear that all the
incidents are pre-marriage and post-marriage events and the
disputes between the petitioner and the 2 nd Respondent with
respect to their marital relations and which led to various Court
cases. All these incidents, events are personal in nature. Further,
the allegations made in respect of the affairs of the R1 company
viz. illegal allotment of shares to Respondent No.5 & 2 and illegal
appointment of directors and her removal from the post of director,
have been dealt in preceding issues. The petitioner has not made
out any specific acts of oppression and mismanagement with
sufficient evidence and supporting documents in the affairs of the
R1 Company by the 2 nd Respondent or any other respondents.
Having failed to establish the grounds for oppression and
mismanagement the petition is liable to be dismissed. Accordingly
the issue is answered.
Now I deal with the Issue No.vi:)
The petitioner filed CA No.78 of 2010 under Regulation 23, 24
and 47 of the CLB Regulations 1991 sought directions to the
respondents to produce the proof of issuing the notices of the
Board meetings and also the attendance register to show that the
petitioner was present in the Board meeting. Regarding the Board
meeting the issue was dealt in detail in issue No.iii supra. The
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respondents have not filed any counter to CA No.78 of 2010 in
spite of the fact that this application has to be dealt with by this
Bench in accordance with the directions of the High Court. Even in
absence of the reply, this Bench decided to deal with the issue on
the basis of documents available on record. The main grievance of
the petitioner is that the R1 Company has caused issuance of notice
of an alleged EOGM to be held on 31.3.2008 to consider her
removal under section 284 of the Companies Act. It is contended
that the notice was illegal and not liable to be implemented in view
of the reason that a special notice is required to be given
irrespective of the clauses in the articles. The petitioner during the
course of argument relied upon various citations on that point. The
stand of the respondent is that the R5 requisition on EOGM on
31.3.2008 for the removal of the petitioner. It was further
contended that in spite of receipt of proper notice, the petitioner
did not attend the EOGM and approached the CLB by filing the
company petition. The CLB allowed the EOGM to go on,
however, the resolutions passed therein are subject to the final
decision. It was contended that the resolution was passed to
remove the petitioner from the board w.e.f. 31.3.2008, however,
she continued as director pursuant to the directions of the CLB.
The CLB in its findings to the above issue is that the requisition by
the respondent No.5 under section 284(2) read with section 190 of
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the Act to remove the petitioner from the office of the director on
the ground that various illegal and malicious acts being done by
the petitioner as a result of which the business of the company is
badly affected and seriously jeopardized its future profitability and
existence. It was observed that the petitioner vide her letter dated
14.3.2008 stated that she will attend the meeting under protest to
mark her presence. From the letter it is clear that she received the
notice and she is aware of the calling of the EOGM to remove the
petitioner. When she herself addressed a letter to the company
now seeking to rely and asking the respondents to produce the
proof of notices and other attendance register is completely
unwarranted. It is completely an after thought. It is a relevant
occasion to mention that the present application is filed on the
concluding day of the hearing of the petition. When the counsel
for the petitioner insisted upon this bench to hear the application
and pressurized the bench to take up the documents. The
respondents vehemently opposed the mentioning of the application
itself. When the bench made clear that at this point of time, there
is no question of entertaining any application or documents, if the
same is allowed, it will be delaying the matter. Even the counsel
appeared for the petitioner did not insist the bench to pass order on
the application to enable them to prefer appeal. In the final order,
this bench made it clear that all the applications stand disposed off,
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meaning thereby there is no application pending as on the date of
dismissal of the petition. The petitioner in the instant application
filed some documents viz. FIR and English translated copy and
some documents pertains to Institute of Graphology and letters
from Power Transmission Ltd. and other letters which are not at all
visible and readable. The petitioner also filed some minutes of the
Board meeting which were already there on the record. By this
application the petitioner tried to establish that there is a forgery in
share certificate issued to Respondent No.5. In so far as forgery
and fabrication is concerned, the same is under investigation and
the concerned authorities will investigate and the further course of
action would be taken by those authorities in accordance with law.
Therefore, this bench cannot intrude and encroach upon the
domain of the other authorities, moreover this bench does not have
the jurisdiction to enquire into those allegations of fraud and
forgery. This bench has not left any issues to be determined and
the petitioner has not made any case even on this issue.
Accordingly the issue is answered.
Now I deal with the Issue No.vii):
The petitioner filed CA No.21 of 2012 on 9.2.2012 praying this
Bench to allow the petitioner to place on record the documents
listed along with the application. The respondents have filed reply
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to the application and stated that the present application is contrary
to and in defiance of the Order of High Court. It is stated that the
petitioner is habituated to distortion and misrepresentation of the
correct fact as also the pleadings as also all that transpired in court.
It is contended that even though the petitioner had urged their
application dated 23.6.2010 i.e. application being CA No.78 of
2010, however in the higher court it was sought to be urged that
the application dated 23.6.2010 was not even permitted to be urged
and merely remained on the file of the Court. It is stated that the
High Court vide its Order dated 21.12.2011 fixed the scope of
adjudication of the present petition i.e. hearing of the petition on
merits and on the basis of CA dated 23.6.2010 only. The
respondents stated that the documents which are sought to produce
as additional documents, are already a part of record of this Bench
in the pleadings in the petition. The documents which are filed
along with the CA are the certificates from the company wherein it
was shown the percentage of the share holding and the salary paid
to the petitioner. The Form 16 which is filed showing the salary
paid to the petitioner from 01.4.2009 to 31.3.2010. By filing these
documents along with CA No.21 of 2012 the petitioner not able to
make out any case either on oppression or mismangement. In the
application it is contended that the High Court was pleased to
observe and hold that once the allegations were of oppression and
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mismanagement and the reliefs sought were of a nature seeking to
rectify the affairs of the company in question, then all the more
would it be in the interest of justice that the order under challenge
is set aside and the CLB consider the petition afresh on merits and
in accordance with law after giving an opportunity to the petitioner
to substantiate her challenge based on additional document. It is
once again reiterated that after receipt of copy of the High Court,
an full opportunity was given to the petitioner to put forth her case
on the basis of additional documents and also on the facts of the
case. Instead, availing the opportunity, the petitioner filed two
fresh applications and insisted and pressurized this Bench to pass
orders on those applications. From the filing of those applications,
it is an intention to blame this bench by delaying the matter. The
documents which filed along with this application is taken on
record and made clear that those documents will not have any
bearing on the facts of the case and will not have any influence on
the findings of the case. Therefore, the issue is answered
accordingly.
Now I deal with the Issue No.viii):
The precedents cited by the petitioner including the recent one will
not be of much assistance to the facts of the present case.
Moreover, the R5 cited a judgement supra in the matter of Rahul
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Shah & Others wherein CLB held that “though the provisions of
the Limitation Act do not apply to the proceedings of the quasi
judicial authority but latches would apply.” In the very same
judgement it is also held that ‘Directors having knowledge of
removal and allotment of shares, tacit consent by promoters of
Company held “directorial complaints cannot be entertained.
Further it is a settled proposition of law that the conduct of the
parties is a relevant factor to the considered in the equitable
proceedings under Sec.397/398 of the act”. In the present case
also as held supra the petitioner being party to the allotment of
shares and signed the share certificates, now cannot claim
ignorance and approaching this Bench alleging the acts as illegal
cannot be entertained. A beneficial reference is drawn from the
judgement in Srikanta Datta Narsimharaja Wadiyar Vs. Sri
Venkateshwara Real Estate Enterprises Pvt. Ltd. wherein it was
held that the petitioner seeking equitable relief must come with
clean hands and good conduct failing which the petitioner would
constitute a gross abuse of the process of the Court and the
petitioner is not entitled for any relief under Sec.397/398 of the
Act. From the sequence of events this Bench is of the view that
the petitioner has not come to this Bench with clean hands. It is
unequivocally an vengeance act against the 2 nd respondent, the
reason being the unresolved matrimonial and personal disputes. In
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view of the reasons stated above the petitioner is not entitled to any
relief. The petition is miserably failed and liable to be dismissed.
Hence the CP is dismissed. All the interim orders stand vacated
and all the Company Applications including CA No.78 of 2010
and CA No.21 of 2012 stand disposed off in terms of above
findings. .
Dated this the 16 th March 2012.
.
(KANTHI NARAHARI)
MEMEBR
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