Company Petition No. 116 of 2008. Case: Alibante Developments Ltd. Vs Matheran Realty P. Ltd. and Others. Company Law Board
|Company Petition No. 116 of 2008
|Kanthi Narahari (Judicial Member)
|2012 (106) CLA 551, 2011 (168) CompCas 437 (CLB), 2012 (1) CompLJ 614 (CLB)
|October 03, 2011
|Company Law Board
Kanthi Narahari (Judicial Member), (Mumbai Bench)
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 company and sought various reliefs as prayed in paragraph VII of the petition. Shri Kamdar, learned senior counsel appearing for the petitioner narrated the brief facts. He submitted that the respondent-company was incorporated on October 27, 2006 and engaged inter alia in the business of real estate development and trading in properties and transferable development rights. The petitioner and respondent No. 2 were the promoters and shareholders of respondent No. 1 company from its incorporation till July 26, 2007. The petitioner, respondents Nos. 2 and 3 entered into share subscription agreement (SSA) and shareholder agreement (SHA) both dated July 26, 2007 wherein respondent No. 3 being an investment company agreed to invest a sum of Rs. 131,20,00,000 in the company in various instalments. In return, the company agreed to issue and allot 1,25,160 equity shares of class A having face value of Rs. 10 each per share aggregating to a total economic interest of 55 per cent, and voting rights of 44.99 per cent, of the total paid-up share capital of the company. In July, 2007 Mr. M. Fysh, the nominee director of the petitioner in respondent No. 1 company was appointed the Chief Executive Officer (CEO) of the said company. The CEO suggested and began to arrange for external finance for affordable housing development from financial co-investment partners, the World Bank and other related institutions and also began to arrange for credit financing from Japanese and Korean institutions. Respondent No. 3 in contravention of the said SSA and SHA, started to interfere in the day to day affairs and decision making of the company including preventing the company from raising any external finance for its development. Respondent No. 3 forced the company to appoint a local chief operational officer and head of technical. Mr. Fysh, the CEO of the company made several attempts to explain respondents Nos. 2 to 7 the strategies for enhancing shareholder value in the company using external finance. Mr. Fysh had already identified potential investors and suggested to invite the said potential investors for financing the project of the company. Respondents Nos. 2 and 3 did not accept the said strategies. Further, in contravention of the SSA and SHA, respondent No. 3 demanded counter signature rights for any payments to be made by the company and for recruitment of staff by the company. Respondent No. 3 was also interfering in the management and financial decisions of the company. Respondents Nos. 2, 4 to 7 were also accepting the unreasonable demands of respondent No. 3 in contravention of the provisions of the SSA and SHA to the detriment of the interests of the company. As per the SHA and articles of association of the company, the directors appointed by respondent No. 3 were the nonexecutive directors and would not be responsible for the day to day management of the company and the directors appointed by the petitioner and respondent No. 2 would be executive directors and would be responsible for the day to day affairs of the company. Respondents Nos. 2 and 3 being in majority were taking all the decisions of the company without prior information and approval of the petitioner or the CEO of the company. In view of the complete deadlock created by the respondents in functioning the company, therefore the CEO of the company was constrained to resign from his post in February, 2008. In December, 2008 the company agreed to purchase 100 per cent, of the shares of respondent No. 8 as respondent No. 8 was the owner of 100 acres of land in Karjat. It is significant to note that the said purchase of 100 per cent, shares of respondent No. 8 by the company was done keeping in view the assets owned by respondent No. 8, viz. 100 acres of land in Karjat, in the State of Maharashtra.
On March 20, 2007 a board meeting of the company was held, wherein the petitioner's nominee director was also present. At the said meeting it was agreed by the board to pursue the projects at Karjat and Kasara and expansion of land acquisition as per the SHA with the funds of the company. After the said board meeting, respondents Nos. 2, 4 to 7 had not given any notice to the petitioner for any of the board meetings of the company (except the meeting held on June 19, 2008) and respondent No. 8 which is evidently a breach of clause 4.2(b) of SHA and clause 28(b) of the memorandum and articles of association of the company. The petitioner vide its email dated September 18, 2008 sent on September 22 2008 requested respondents Nos. 2, 4 to 7 to provide the full corporate information of the company and respondent No. 8 and also all proposed board meetings to be held or any meetings held after the board meeting of March 20, 2008. In spite of the said request, respondents Nos. 4 to 7 failed to provide any details. The petitioner is given to understand that the board meeting was called on September 26 2008 to approve the audited accounts of the company and respondent No. 8, but no proper notice or information was given to the petitioner's nominee director. It was deliberate attempt on the part of respondents Nos. 2, 4 to 7 to restrain the petitioner's nominee director from attending the said board meeting with relevant and material information and to ensure that respondents Nos. 2, 4 to 7 approve the accounts of the company and respondent No. 8. However, the petitioner came to know about the said meeting and Mr. Fysh attended the said meeting via teleconference. At the said meeting, the petitioner's nominee director was informed that the investment agreement dated April 2, 2008 had been executed between respondents Nos. 3 and 8 wherein respondent No. 3 had directly invested some money in respondent No. 8. The petitioner's nominee director also requested the company to provide the minutes of all the board meetings held after March 20, 2008 and also a copy of the purported investment agreement entered into between respondents Nos. 3 and 8, neither of which has been provided despite being material subject-matter of the business of the meeting.
It is further submitted that as per the articles of association of the respondent-company, the notice of all the board meetings should be given to all the directors of the company. The petitioner therefore states that respondents Nos. 2, 4 to 7 contravened the provisions of the articles of association of the company. The minutes of the board meeting held on September 26, 2008, mentions that the petitioner's nominee director attended the said meeting by telecom. In the said meeting the audited profit and loss account, balance-sheet of the company and the auditor's report were approved. No proper notice or information of the said meeting was served upon the petitioner or its nominee director. However, the petitioner came to know about the said meeting and the petitioner's nominee director attended the said meeting via teleconference. The agenda and information of the meeting was not provided to the petitioner. After repeated requests to respondents Nos. 4 to 7 by the petitioner, the said purported investment agreement was forwarded to the petitioner for the first time on September 30, 2008. The said agreement was never approved by the petitioner and respondents Nos. 2 to 7 and deliberately concealed the said agreement from the petitioner with an intention to dilute the holding of the petitioner in the company and respondent No. 8, respondents Nos. 2 to 7 had deliberately not obtained any approval of the said agreement from the petitioner. Respondent No. 3 without the consent and approval of the petitioner subscribed directly to the shares of respondent No. 8. The petitioner is given to understand that the board meeting of respondent No. 8 was called on April 2, 2008 wherein in furtherance of the said investment agreement, respondent No. 3 was issued 476 class A shares (voting shares) and 19,99,524 class B (non-voting shares but are given preferential rights on liquidation) of respondent No. 8 aggregating to 32.24 per cent, of the total equity shares of respondent No. 8. At the said neeting the board approved and adopted new articles of association without any reference or authorisation of respondent No. 1 or the directors and shareholders of respondent No. 1. The petitioner was never informed about the said meeting nor was any approval or consent taken from the petitioner for adopting the new articles of association of respondent No. 8. By an e-mail of October 1, 2008, the petitioner was informed by the respondents that a purported board meeting of the company was held on September 6, 2008 and the annual general meeting of the company was held on September 29, 2008. The consent of the petitioner was sought by the respondents for holding the annual general meeting at a short notice, i.e., in a period less than the statutory notice provided by the provisions of the said Act. It is significant to note that the petitioner was kept completely in dark about the said annual general meeting and only a post-facto information was provided. The minutes of the said annual general meeting held on September 29, 2008, respondents Nos. 2, 5 to 7 have falsely recorded that the petitioner's representative director, Mr. Max Fysh was present by telecom. This is completely false as the said director did not attend the said the annual general meeting by telecom or otherwise. Vide e-mail dated November 28, 2008 the director of the petitioner was given a notice that a meeting of the board of directors of the company would be held on December 15, 2008 at the corporate office at 10.00 a.m. and all the directors were requested to attend the meeting in person. The agenda and the note on item No. 3 of the agenda...
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