C.P. No. 12(ND)/2013. Case: Eeshwer Singh Vs Milestone Earthcon Private Limited and Ors.. Company Law Board

Case Number:C.P. No. 12(ND)/2013
Party Name:Eeshwer Singh Vs Milestone Earthcon Private Limited and Ors.
Counsel:For Appellant: Saurabh Kalia, Ajay Garg, Mahesh Sharma and Harshit Agarwal, Advocates and For Respondents: Prabha Sharma, K.P. Dubey and Sanjeev Tyagi, Advocates
Judges:B.S.V. Prakash Kumar, Member (J)
Issue:Indian Contract Act, 1872 - Section 54
Judgement Date:July 09, 2015
Court:Company Law Board


B.S.V. Prakash Kumar, Member (J), (New Delhi)

  1. The Petitioner filed this Company Petition against the Respondents alleging that the conduct of R2 & 3 relating to the affairs of R1 company is prejudicial to the interest of the Petitioner holding 50% shareholding in R1 company, hence filed this CP u/s. 397 & 398 r/w 402 of the Companies Act 1956 (herein after referred as ACT) seeking reliefs as prayed in this Petition.

    The averment of the petitioner:

  2. The Petitioner and R2 being close friends, since the Petitioner had exposure to construction work, R2 invited the petitioner to incorporate R1 company to join in the business with equal share in the profit of the business, with this understanding, they incorporated R1 company on 04.08.2008 as initial subscribers and directors of R1 company each holding the subscription of 5000 equity shares of Rs. 10/- each with 50:50 shareholding in the company.

  3. The grievance of the Petitioner is that R2, to sideline the Petitioner from the management and the company, on 27.08.2012, inducted his wife (R3) as director, shifted Registered Office to his residence, procured DIN number to him and his wife so that there would not be any need to file papers through the Petitioner, besides all these, he also created new e-mail ID so that the Petitioner would not be privy to the information. The Petitioner, while even continuing as director of the company, did not receive any notice either to the Board Meeting convened on 06.09.2012, for approval of financial Statement for the year 2011-2012 nor to the AGM convened on 29.09.2012. The Petitioner, who is one out of two directors, says since he had no notice for the Board Meetings dated 27.08.2012 and 06.09.2012, the resolutions passed without notice and without quorum are in violation of section 286 & Section 287 of the Companies Act, 1956 respectively, therefore those resolutions in the meetings dated 27.08.2012 and 06.09.2012 are invalid in the eye of law.

  4. On knowing all these, when the Petitioner put it to R2, he threatened him to leave the company or face the consequences, seeing such a threat come upon him from R2, the Petitioner, on 2.10.2012, signed an agreement called as "Business Separation Agreement" in the presence of four witnesses, to leave the company on payment of Rs. 30,00,000/- without interest in fifteen equal monthly installments for the shares held by the Petitioner. In pursuance of it, the Petitioner submitted resignation from the Directorship of the Company vide resignation letter dated 05.10.2012. Though R2 had not paid any money towards his shares at the time of entering into the agreement, he waited hoping that he would get the money by presentation of cheques on monthly basis, but to the utter dismay of the petitioner, the very first cheque was bounced when it was presented. Then the Petitioner realized that R2 issued post dated cheques to make sure he is out of the company without being paid for his shares and his outstanding dues from the company.

  5. Though the paid up capital of the company was only 1,00,000/- the Petitioner as well as R2 invested unsecured loan by way of payment to creditors of the Company. In August 2008, when the Company was not eligible to take loan, an excavator was purchased in the name of R2 to take the benefit of less down payment and eligibility. Though this excavator was purchased in the name of R2, the installments of the excavator were paid out of funds arranged by the Petitioner directly to the financier namely Magma Leasing limited against the purchase of excavator, which was being used in the business of the Company. Later on, this machinery was sold to the Company at an agreed price and this agreed price was related as unsecured loan in the financial statement of the Company in the name of the petitioner.

  6. The copy of the Ledger Account discloses the outstanding unsecured loan given by the petitioner is shown as below:

  7. The Petitioner submits that Rs. 55,53,601.50/-, out of total unsecured loan from the director belongs to the Petitioner as on 31.03.2012. He also submits that the Petitioner and R2 agreed to take equal salary from the company as directors, in pursuance thereof, the total amount of salary booked in the name of the Petitioner, which is outstanding, as on the date of filing Company Petition is Rs. 6,18,473.94/-...

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