Case: Desh Cam Technological Resources P. Ltd. and Ors. Vs Rajendra Keshwani and Ors.. Company Law Board
| Judges | Vimla Yadav, Member |
| Issue | Company Laws |
| Citation | [2009] 150 CompCas 123 (CLB) |
| Judgement Date | April 13, 2009 |
| Court | Company Law Board |
Order:
Vimla Yadav, Member
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In this order I am considering Company Application No. 379 of 2008 filed in Company Petition No. 118 of 2006 filed by the applicants (respondent No. 1 company M/s. Desh Cam Technological Resources P. Ltd. and Others) against the respondents (petitioners, Shri Rajendra Keshwani and Others) under regulation 44 of the Company Law Board Regulations, 1991, in terms of Section 399 of the Act challenging the maintainability of the Company Petition No. 118 of 2006. The Company Petition No. 118 of 2006 was filed by Shri Rajendra Keshwani and Others (the petitioners) against M/s. Desh Cam Technological Resources P. Ltd. and Others (the respondents) under Sections 397 and 398 of the Companies Act, 1956, alleging oppression and mismanagement.
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M/s. Desh Cam Technological Resources P. Ltd. (respondent No. 1) was incorporated on February 28, 2003, having its registered office at Shriji Avenue, Jetalpur Road, Baroda. The nominal capital of the company as on March 31, 2005, was Rs. 2,00,00,000 divided into 20,00,000 equity shares of Rs. 10 each. The issued, subscribed and paid-up capital of the company as on March 31, 2005, was Rs. 1,60,79,500 divided into 16,07,950 equity shares of Rs. 10 each with the main business of manufacturing, erecting, buying, selling, reselling, exchanging, assembling, importing, exporting, improving, distributing, hiring, designing, developing or otherwise and dealing in electrical and mechanical machines and equipments like transformers, motors, generators, etc., and hardware materials and machinery and equipments of all kinds and types manually operated or working with electricity, petroleum, solar system, steam and gas.
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The petitioners in this case have sought issuing of suitable directions for regulating the conduct of the affairs of the company in future; removing the present board of directors of the company; ordering an investigation into the affairs of the company to fix liability of the respondents, all or any of them in respect to mismanagement and/or negligence and/or misappropriation and the consequent loss that may have been caused to the company by the respondents; for auditing the accounts of the company for the period from April 1, 2005, till date; and to issue proper direction and orders requiring the respondents (Deshmukh group) not to take any other steps in regard to the 8,03,975 equity shares of the first respondent-company transferred in favour of the petitioners (Keshwani group) as per the shareholders' agreement.
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The applicants' case is that the petitioners in Company Petition No. 118 of 2006 do not fulfil the requisite criteria under Section 399 to maintain this petition under Sections 397 and 398 of the Act. Counsel for the applicants/ respondents pointed out that the petitioners are not shareholders of the respondent-company and thus have no locus standi to initiate and/or continue the instant proceedings.
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It is the applicants' case that admittedly, on the date of filing of the petition the petitioners were not holding a single share leave aside 10 per cent. shareholding or one tenth of the membership in the respondent-company in terms of shareholders' agreement. In the petition it is admitted by the petitioners that the shares issued to them were cancelled by the respondent-company vide undated letters. In view of the cancellation of the shares, the petitioners have ceased to hold a single share in the company, and since the petitioners are not holding the requisite shares, the present petition under Sections 397 and 398 is not maintainable and thus, liable to be dismissed at the very threshold.
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Further, it was argued that the provisions of Section 399 of the Act are mandatory in nature, the jurisdiction under Sections 397 and 398 cannot be invoked by the shareholders holding together less than 10 per cent. of the issued shares of the company or one-tenth of the members in the company. Further, it was argued that Sections 397 and 398 of the Act pre-suppose that the petitioners are holding 10 per cent. shares and/or are 10 per cent. member of the company. In the event, the petitioners do not hold any shares or are not members of the company they cannot maintain the petition. It was pointed out that the petitioners have filed the instant petition with the sole objective of instigating unnecessary litigation so that the respondents succumb to the undue demands of the petitioners by way of filing false criminal cases causing harassment to the respondents, therefore, the present petition is nothing but a gross abuse of the process of law and hence liable to be dismissed with heavy costs.
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It was argued that in view of the cancellation of the shares, the petitioners were not holding any shares on the date of filing of the petition. In such a situation, the petitioners being aggrieved of the action of the respondents ought to have initiated proceedings for declaring the action of the respondents being illegal and set aside of the same. The petitioners having failed to do so cannot by way of the petition under Sections 397 and 398 question the oppression and mismanagement by the respondents. Further, the petitioners have not challenged the action of the respondent-company whereby it has cancelled the shares of the petitioners. Thus, the undated letter by which the respondent had...
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