C.P. No. 24/2006, C.P. Nos. 350 and 351/2006. Case: 1. Nekkala Usha Rani and Ors., 2. K. Srinivasa Reddy Vs Visakha Imagings and Medical (P) Ltd. and Ors.. Company Law Board
| Case Number | C.P. No. 24/2006, C.P. Nos. 350 and 351/2006 |
| Counsel | For Appellant: A.K. Mylsamy and S. Hari Prasad and For Respondents: R.S. Ranjith Kumar, M. Subrathra, P.H. Arvindh Pandian and N.R. Sridharan |
| Judges | K.K. Balu, Vice-Chairman |
| Issue | Companies Act. 1956 - Sections 108, 111, 397, 398, 402, 614 |
| Citation | 148 CompCas 298, 84 CLA 113 |
| Judgement Date | December 31, 2007 |
| Court | Company Law Board |
Order:
K.K. Balu, Vice-Chairman, (At Chennai)
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The first company petition (C.P. No. 24 of 2006) is filed by the petitioners collectively claiming 52.66% of the paid up capital of M/s. Visakha Imaging and Medical Products Limited ("the Company") invoking the jurisdiction of the Company Law Board under Sections 397 and 398 read with Sections 402 of the Companies Act. 1956 ("the Act") on account of certain alleged acts of oppression and mismanagement in the affairs of the Company, and claimed the following reliefs:
a) to declare that the appointment of the respondents 3 and 4 as directors of the Company is null and void;
b) to declare that the allotment of 24820 shares made in favour of the first petitioner and the respondents 2 and 6 to 9 is illegal and null and void:
c) to declare that the transfer of shares effected by the second respondent, in favour of the respondents 3 and 4. being contrary to the articles is invalid:
d) to restore the shareholding pattern of the Company as prevailed prior to the impugned allotment of shares, namely. 30.03.2005: and
e) to direct the second respondent to render accounts and bring back the misappropriated funds of the Company.
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The second company petition (C.P. No. 350 of 2006) has been filed under Section 111 read with Section 108 of the Companies Act. 1956 ("the Act") by Shri K. Srinivasa Reddy. who is the seventh respondent in C.P. No. 24 of 2006. seeking directions against M/s. Visakha Imagings and Medical Private Limited ("the Company") to rectify the register of members by reducing the number of equity shares in the name of the second respondent by 2000 shares: the third respondent by 625 shares and the fourth respondent by 1625 shares, which are impugned by the petitioner for the reasons stated therein.
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The third company petition (C.P. No. 351 of 2006) is under Section 614 of the Companies Act. 1956 ("the Act") by Shri K. Srinivasa Reddy. who is the seventh respondent in C.P. No. 24 of 2006. compelling M/s. Visakha Imagings and Medical Private Limited ("the Company") to file Form No. 32 notifying the Registrar of Companies about the cessation of the second respondent herein as a director of the. Company, with effect from 30.09.2004.
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The parties are common and the contentious issues are arising out of the affairs of the Company and on account of the transfer of shares of the Company and cessation of the office of one of the parties as a director of the Company. Hence with the consent of all the parties these petitions were heard together and are being disposed of by this common order.
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Shri A.K. Mylsamy, learned Counsel, while initiating his arguments, in support of the petitioners (C.P. No. 24 of 2006) submitted:
The Company incorporated in August 2001 with the second petitioner and the second respondent as the subscribers to the memorandum of association, is running the business of medical and clinical laboratories. While the authorized capital of the Company is Rs. 50.00.000/- divided into 50.000 equity shares of Rs. 100/- each, the paid up capital prior to the impugned allotment of shares accounts for Rs. 25.16.000 consisting of 25.160 shares of Rs. 100/- each, which are held by the petitioners and the respondents in the ratio of 52.66% and 47.34% respectively, in terms of the annual return for the year ended 30.09.2004. The petitioners have clearly set out in their legal notice dated 27.03.2006 that they are holding majority of shares of the Company while the respondents are minority shareholders, which has not been disputed by the latter. The respondents 1 and 2 admitted in the main counter that the petitioners with their majority holding brutally forced themselves on the board on the day-to-day management of the Company and further that the second respondent being short of majority in the Company was left with no choice but simply to tow the line with the petitioners. It is. therefore, evident that the petitioners are holding majority shares of 13250 out of 25160 equity shares of the Company. All the petitioners, save the third petitioner and the second respondent are the first directors. The second respondent is the managing director, while the second petitioner is the executive director. The third petitioner has become one of the director in May. 2004.
The second respondent using his position as managing director manoeuvred and created documents by recording the proceedings as if the impugned allotment of 24820 equity shares has taken place at the board meeting on 30.03.2005: appointed the respondents 3 and 4 at the board meeting on 15.11.2005 as directors of the Company and transferred his shares stealthily to the respondents 3 and 4. without the authority of the board of directors of the Company. Similarly, the annual general meeting for the year 2004-2005 was convened, without issuing proper notice and hence such meeting is null and void. The allotment of 24820 shares in favour of the first petitioner and the respondents 2 and 6 to 9 is contrary to Clause 33(g) read with Clause 3 of the articles of association of the Company and without prior approval of the board of directors. No board meeting was held on 30.03.2005 allotting any shares nor received any notice of the alleged board meeting and the signature contained in the purported board minutes are forged. Any convening of the board meeting without due notice in terms of Section 286 is illegal and void-ab-initio. The board minutes dated 30.03.2005 do not specify the time of the board meeting. The certificate of posting and copy of the notice dated 21.03.2005 convening the board meeting on 30.03.2005. produced by the respondents are fabricated documents and it is not safe to rely merely upon such certificate of posting. The Company has not produced any document showing any expenses incurred in connection with sending notices of the board meetings held on 30.03.2005. The manipulated board minutes would show that State Bank of India called upon the Company to raise equity capital by modification, thereby bringing additional funds, to sanction a term loan of Rs. 180 lakhs in view of the fact that the existing term loan and term loan working capital are on higher side. The request letter of the Company dated 01.11.2004 on which SB1 sanctioned additional term loan facilities has not been produced by the respondents. The bank did not advise the Company to convert the unsecured loans into equity, by which the bank did not get any benefit by way of additional funds brought in by the allottees. The bank would be interested in bringing only additional monies and not in simply converting the unsecured loans into equity. The impugned allotment of shares, as per the statement reportedly produced before the board is not for the benefit of the Company. But no such statement of unsecured creditors has been produced before the Bench. The second respondent has contributed a sum of Rs. 1.25 crores towards unsecured loans, without prior sanction of the board of directors of the Company. While there are reportedly 27 shareholders advancing unsecured loans to the Company, loans advanced by the second respondent and his associates alone were converted into capital, and no offer was made to the other existing shareholders, thereby the second respondent acted in breach of his fiduciary duties. The respondents 2 and. 6 were the major beneficiaries on account of the impugned allotments. The second respondent allotted the disputed shares with ulterior motive of converting the petitioners from majority into minority shareholders and gaining control over the Company, which are oppressive, causing enormous prejudice to the petitioners and cannot be justified merely on the ground the respondents group offered their personal guarantee and properties as security in favour of the bank. This would show that the second respondent failed to act in good faith. The respondents 8 and 9 though strangers and held no shares were allotted shares by the Company. The allotment of 2190 shares in favour of the first petitioner was neither with her consent nor was she intimated of the said allotment. No share certificates have been issued to any shareholder by the Company. The board minutes dated 30.03.2005 would reveal that the petitioners 1 to 3 were present at the meeting, whereas they never participated in the proceedings of the board meeting. The fourth petitioner did not seek for leave of absence, as shown in the disputed board minutes. The attendance sheet for the board meeting of 30.03.2005 would indicate that the second petitioner neither signed it nor attended the board meeting. The signature of the first petitioner contained in attendance sheet is forged and never signed by her. All the names of the directors appearing in the relevant attendance sheet are not found in the minutes of the board meeting dated 30.03.2005 which does not even disclose the time of the board meeting purportedly held on 30.03.2005. Whenever, the spouse of the first petitioner had signed the board minutes it was done for and on behalf of the first petitioner and similarly the spouse of the second petitioner signed for the petitioners 2 and 4 being his wife and mother respectively. There was no need for the spouse of the first petitioner to forge her signature in the board minutes dated 30.03.2005. The respondents are relying on the circumstantial evidence to prove the allotment by producing TDS certificate. The report of the Forensic Science Department clearly shows that the board minutes dated 30.03.2005 and 14.11.2005 do not contain the signatures of the first petitioner. Thus, it is established that the first petitioner did not attend these board meetings and her signatures in those minutes have been forged. The petitioners having majority shares and majority on the board prior to 30.03.2005. would not have allowed the impugned allotment of shares, converting themselves into minority shareholders. The balance sheet and the auditors' report...
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