CP No. 52/2008. Case: Bharat Bhushan Agarwal Vs Jai Mata Foods Ltd.. Company Law Board
| Case Number | CP No. 52/2008 |
| Counsel | For Appellant: Anil K. Agarwal and For Respondents: Suman Doval, Vineet Kumar, Jeevan Sharma and Suman Babbar |
| Judges | B.S.V. Prakash Kumar, Member (J) |
| Issue | Companies Act, 1956 - Sections 108, 108(1), 111A, 155, 155(1)(b), 36, 397, 398, 399; Constitution Of India - Article 136; Securities Contracts Regulation Act, 1956 - Section 22A; State Financial Corporations Act, 1951 - Section 29 |
| Citation | 2014 (122) CLA 119 (CLB) |
| Judgement Date | March 28, 2014 |
| Court | Company Law Board |
Order:
B.S.V. Prakash Kumar, Member (J), (New Delhi Bench)
1. The petitioners moved this Company Petition under sections 111A, 397 and 398 of the Companies Act, 1956 ('the Act') against the respondents on the ground that the respondents 2 to 15 got the petitioners' entire 100 per cent shareholding in R-1-company fraudulently transferred to themselves taking advantage of the blank signed transfer deeds given by the petitioners; that the respondents fraudulently removed the petitioners as directors; that the respondents appointed themselves as directors of the company, that the respondents made an increase in the share capital of the company from Rs. 1 crore to Rs. 2 crore, consequent to the same, allotted shares to themselves, which is oppressive against the interest of the petitioners, therefore sought reliefs:
(i) to declare transfers from the petitioners to the respondents 2-15 invalid,
(ii) to declare Form 32 dated 28th/29th May, 2004, 29th September, 2004 and 4th March, 2005 invalid,
(iii) to declare ARs dated 30th September, 2004, 30th September, 2005, 30th September, 2006, 29th September, 2007 and balance sheets thereto invalid,
(iv) to declare increase of authorised share capital from Rs. 1 crore to Rs. 2 crore invalid,
(v) to declare Board meetings held on or after 17th April, 2004 without participation of the petitioners invalid,
(vi) to direct the respondents to hand over the flour mill to the petitioners and not to interfere in the working of R-1 in any manner,
(vii) to direct the respondents to pay compensation/damages for use of the flour mill at the rate of Rs. 2 lakh per month from the date Punjab Financial Corporation handed over possession to the respondents.
The case in brief is R-1-company was incorporated on 13th August, 1996 as a public limited company with an authorised and paid-up share capital of Rs. 1 crore divided into 10 lakh equity shares of Rs. 10 each. The main object of the company was to establish, install, acquire, own, take on lease and to carry on the business of millers and set up mills for milling wheat, gram, other grains and cereals, dal, basin, maida, atta, suji, paddy, rice and other allied products and to manufacture food related products.
2. R1 was originally promoted in the year 1996 by one Mr. Yash Pal Garg, Mr. Lajpat Rai Jindal and Mr. Rajinder Pal and their family members, consequent to it, they set up a flour mill by taking loan from Punjab Financial Corporation (PFC) and cash credit limits from Punjab National Bank ('PNB'), Sangrur. However, to the misfortune of them, the company soon thereafter went into losses with liabilities, which the promoters could not clear, then, they struck a deal with the petitioners as they agreed to take over the company with its assets and liabilities. In pursuance thereof, the original promoters transferred their 100 per cent shareholding to the petitioners in the months of November and December 2003. By this take over, the petitioners 1 to 4 came in as directors of the company on 11th November, 2003. There was also another agreement with PFC agreeing to clear loan on or before 28th February, 2004. Nevertheless, the old promoters, viz., Rajinder Pal Singla, Mrs. Pushpa Garg and Mr. Ashok Kumar Singla continued as directors of the company as their personal guarantees for the loans taken by the company remained stuck with PFC and PNB. As the mill was lying closed, Punjab Financial Corporation took over the possession of the mill in exercise of the power under section 29 of the State Financial Corporations Act.
3. In the Board meeting held on 29th November, 2003, according to the petitioners, P-1 was given full authority to deal with affairs of the company. With this authority, the petitioners' side opened a current account bearing No. 30001900289 with State Bank of India, Sector 31, Chandigarh, to be operated by P-1 to P-4 jointly and severally.
4. Since there was a proposal to make payment towards OTS, first petitioner, as mentioned in the agreement, gave ten lakh rupees as unsecured loan to the company to pay it to PFC as part payment of OTS amount. Despite R-1-company made such payment, PFC did not handover the possession of the company. However, PFC sent a letter on 27th February, 2004 intimating that the Corporation was prepared to revive the OTS provided a further amount of 15.50 lakh rupees along with 16 post-dated cheques of Rs. 1,97,400 each for the balance principal amount to be paid. As these petitioners failed in making payments as stated by PFC, these petitioners approached the respondents in the month of March 2004 to sell R1-company, accordingly a deal was struck to sell the company at 75 lakh including the loans payable to PFC and PNB and 5 lakh to 100 per cent shares held by the petitioners. As per the understanding between the petitioners, original promoters, respondents 1 to 4, the petitioners, over a period in between April to June 2004, executed transfer deeds for 100 per cent shares on consideration, gave resignation letters for directorship of them to R-1-company. As per understanding, the respondents cleared the OTS amount, other dues and statutory liabilities. Thereafter, to meet the needs of the company, the respondents raised the authorised share capital from one crore to two crore, allotted nine lakh shares to themselves as they have become holders of 100 per cent shareholding in the company. The petitioners and original promoters together finally executed settlement deed dated 19th October, 2004 reiterating that they received the money paid as unsecured loan to the company and dispute regarding consideration to sale of shares as mentioned in letter dated 6th September, 2004 sent by the petitioner to the respondents has now been settled, no claim shall be made against each other.
5. In the backdrop of this, the case set up by the petitioners is the respondents handed over photocopies of three Bank drafts dated 6th May, 2004 for the total amount of Rs. 15.50 lakh drawn in favour of PFC agreeing to clear instalment payments. To which, the petitioner say they agreed to transfer only 47 per cent of the total shareholding of the company to R-2 and R-3 at a price of Rs. 2 per share. As PFC, through its letter dated 26th May, 2004, accepted the request of the company and directed the company to deposit all Bank drafts by 27th May, 2004 positively. To make the respondents pay the dues of the corporation, the petitioners executed share transfer forms, resignation letters and handed over the same to the respondents at the time when they deposited drafts with PFC on 29th May, 2004. On realisation of these drafts, the PFC released the possession of the flour mill of the company to the respondents.
6. The petitioners say that they executed and signed blank transfer deeds in good faith and trust for transfer of 47 per cent shares of the company for consideration of Rs. 9.40 lakh to the petitioners, but not 100 per cent shareholding of the company at the rate 50 paisa to each share as indicated by the respondents. The petitioners say that they came to know that 75.29 per cent of their shareholding was shown as transferred to the respondents, only when one Mr. Ashok Kumar, an employee of R2 and 3, came to the petitioners on 5th July, 2004 and took the signatures of the petitioners for transfer of the remaining 24.71 per cent shares of the company along with receipts for 100 per cent shares. The petitioners submit that it is shocking news to them as share value was shown as 50 paisa instead of Rs. 2 per share as agreed before.
7. The allegation of the petitioners is that these transfers were shown without convening or holding any Board meeting on 28th May, 2004 and without the knowledge or consent of the petitioners. They submit that they refused to transfer 24.71 per cent of shares and they cancelled the deal and called upon the respondents to return their transfer deeds, share certificates, forms signed in blank and all other documents.
8. The petitioners say that they inspected the documents of the company at the office of the Registrar of Companies, Jalandhar on 28th July, 2004 and found that the respondents filed Form 32 dated 28th May, 2004 and 29th May, 2004 with the Registrar of Companies ('RoC') showing the resignations of petitioner Nos. 1 to 4 and appointment of respondent Nos. 2 to 5 as directors. The petitioners submit that the respondent did not hold any Board meeting on 28th May, 2004 and simply managed original promoter Mr. Ashok Kumar Singla sign upon Form 32 along with additional directors R-4 and R-5 in another Form 32. They also falsely showed resignation of P-3 and P-4 from the directorship of the company with effect from 29th May, 2004. Thereby they submit that no Board meeting was held on 28th May, 2004 and 29th May, 2004. The petitioners, thus, say Form 32 and all documents relating thereto are false and fabricated by the respondents. First and second petitioners were again appointed as directors of the company with effect from 31st July, 2004 whereas P-3 and P-4 were not re-appointed as directors because P-5 and P-8 had already been appointed as directors in the Board meeting held on 10th May, 2004. When the petitioners inquired from the State Bank of India, they came to know R-2 had given a letter dated 27th April, 2004 to the Bank stating that R-2, R-3, R-4 and R-5 had been appointed as directors of the company, which was not within the notice of the petitioners. The petitioners wrote a letter on 29th May, 2004 to the respondents mentioning all the misdeeds the respondents did as mentioned above warning them to face the consequences, or the deal-cancellation letter dated 6th September, 2004 written by the petitioners would continue to be effective. On 21st September, 2004, petitioner-1 even wrote a letter to the RoC, Jalandhur intimating the RoC about the cancellation of sale of shares through the letter dated 6th September, 2004. On seeing the letter written by...
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