C.A. No. 33 of 2005. Case: Gracy Thomas Vs Four Square Estates (P) Ltd. and Ors.. Company Law Board
| Case Number | C.A. No. 33 of 2005 |
| Counsel | For Appellant: Rajesh S. Kutty and For Respondents: Philip Mathew, George Cherian, K.J. Alphones, J. Sivanandaraj and Aparna Vasu |
| Judges | K.K. Balu, Vice-Chairman |
| Issue | Companies Act, 1956 - Section 167 |
| Citation | (2008) 77 CC 271, 83 SCL 404, 2008 (2) CLJ 159, 83 CLA 122, 141 CompCas 770 |
| Judgement Date | October 05, 2007 |
| Court | Company Law Board |
Order:
K.K. Balu, Vice-Chairman, (At Chennai )
This is an application filed under section 167 of the Companies Act, 1956 ("the Act") seeking directions against M/s. Four Square Estates P. Ltd. ("the company") to call for the annual general meetings, by a chairman appointed by this Bench, for the years 1998-99 to 2003-04, in view of the reasons set out therein, in support of which Shri Rajesh S. Kutty, learned counsel submitted as under:
The company incorporated in May, 1995, with the main object of carrying on real estate business is comprised of eight shareholders. Thomas Mathew, one of the shareholders died on October 31, 2002, upon which the shares held by the deceased shareholder devolved on his two children, namely, Shri Suresh Thomas and Suja George being respondents Nos. 2 and 3, with which the total number of shareholders got increased to nine. The applicant, being the widow of (late) Thomas Mathew, is a promoter and subscriber to the memorandum and articles of association of the company and director of the company. Besides the managing director, there are eight directors, which include three non-member directors and Mrs. Asha Varghese, yet another daughter of the deceased Thomas Mathew.
The company neither convened the board meetings nor the annual general meetings since the year 2001 and is not able to function in terms of the memorandum of association. Consequently, the Registrar of Companies was constrained to initiate prosecution proceedings against the company and its managing director for non-compliance with the statutory requirements, leading to imposition of a penalty of Rs. 7,200 on them. Nevertheless, there was no compliance of the relevant provisions of the Act.
By virtue of article 20, the applicant and the first respondent will hold office of directors for life, unless, they resign from directorship. All other directors are bound to retire at the annual general meeting and therefore, except the petitioner and the first respondent, other directors cannot continue as directors without being re-appointed as directors at the annual general meetings. In view of this, the annual general meeting of the company has become absolutely necessary to appoint new directors and carry on the business so as to ensure statutory compliance as per sections 210 and 219 of the Act.
According to respondents Nos. 6 and 7, they have convened, on behalf of the company all the annual general meetings and complied with the statutory requirements till March 31, 2004. However, the annual return for the year 2003-04 has not yet been submitted to the Registrar of Companies. All the copies of notices of annual general meetings, postal certificates, which are contradictory to each other show that such notices and postal certificates are fabricated and forged documents with intent to commit fraud on the company and its shareholders. Any omission to give notice of the meeting to the shareholders prima facie invalidates the meeting, as held in Musselwhite v. C. H. Musselwhite and Son Ltd. [1962] 32 Comp Cas 804 (Ch. D); [1962] 2 WLR 374. The Supreme Court held in M.S. Madhusoodhanan v. Kerala Kaumudi P. Ltd. [2003] 117 Comp Cas 19; [2004] CLC 117, that certificates of posting are notoriously "easily" available and what was seen as a possible but rare occurrences in 1981 is now seen as common. No reliance can, therefore, be placed on the certificates of posting made available by respondents Nos. 6 and 7 more so in view of the strained relationship between the parties. No notice of the annual general meeting or postal receipt for the year 2003-04 has been produced by these respondents. No notice of the annual general meeting as required under section 172(2)(ii) was sent to the legal heirs of (late) Thomas Mathew, including respondents Nos. 2 and 3 and therefore, the meetings do not enjoy any validity in the eyes of law. The Kerala High Court held in:
(a) K. Kunhirama Menon v. State Prosecutor [1971] KLT Sh. Notes 30, that where the company through its officers had actual knowledge of the death of a shareholder, it cannot rely upon a notice addressed to the deceased member. If the person is dead, to their knowledge, notice will have to be issued to the legal representatives and under such circumstances, notice issued to the dead person knowing that he is dead, is not in compliance with section 53(5) of the Act; and
(b) Annamma Kurivilla v. State Bank of Travancore [1971] KLT Sh. Notes. 30, that notice issued by the company to a dead person after the acknowledgment of death without issuing the notices to the legal heirs will not be in compliance with section 53(5) of the Act.
The notice dated May 19, 2003, indicates that the annual general meeting for the year 1998-99 would be conducted at the registered office located at 9D, Katticaran Towers, Katticaran Street, Cochin-628 018 on June 16, 2003, whereas the registered office came to be shifted, without the knowledge or consent of the shareholders, to a new place with effect from June 1, 2003. None of the shareholders say respondents Nos. 6 and 7 could have attended the annual general meeting at the changed venue. The board minutes dated April 26, 2003 and May 19, 2003, clearly show that the registered office was already moved to a new different place. The board of directors decided at the meeting held on May 19, 2003 and May 26, 2003, to convene the adjourned annual general meeting for the year ended March 31, 1999 and March 31, 2000 on June 16, 2003 and June 25, 2003, respectively at the new registered office, but at the same time, the notice dated May 19, 2003, convening the annual general meeting on June 16, 2003 and the notice dated May 26, 2003, indicate that the annual general meeting for the year ended March 31, 2000, was to be held on June 25, 2003 at the old registered office, which evidences the fact of fabrication of records by respondents Nos. 6 and 7. It has been held in Sikkim Bank Ltd. v. R. S. Chowdhury [2000] 102 Comp Cas 387 (Cal), that when an annual general meeting was held at a different place from the place mentioned in the notice and when individual notices were not sent nor any notice of change of the venue was given, the annual general meeting is declared to be invalid and illegal. The notice dated May 19, 2003, convening the adjourned meeting for the year 1998-99 was reportedly sent under certificate of posting, which shows that the same was obtained from a post office which is far away from the new registered office of the company. This is in view of the fact that respondents Nos. 6 and 7 could procure the false certificate from the said post office. The certificate contains the names and addresses of seven members, while the postal rule does not permit more than three addresses in any single certificate of posting. Furthermore, the actual number of articles are not mentioned in the certificate issued by the postal department. The certificate shows that no notice was sent to the Legal heirs of (late) Thomas Mathew.
Item No. 5 of the minutes of the board meeting held on May 26, 2003, relates to convening of the annual general meeting for the year 1999-2000 on June 25, 2003 and Item No. 6 is with regard to shifting of the registered office with effect from June 1, 2003, to a different place. The seventh respondent has been authorised to file Form No. 18 with the Registrar of Companies and the very same seventh respondent issued the notice dated May 26, 2003, calling the annual general meeting for the year 1999-2000, without disclosing the decision to shift the registered office to a new place with effect from June 1, 2003. The board of directors at the meeting held on June 16, 2003, decided to convene the annual general meeting for the year 2000-01 on July 17, 2003, whereas, the notice reportedly sent to the shareholders shows a different date, namely, July 15, 2003. Thus, the shareholders were not sure, whether the annual general meeting was to be held on July 15, 2003...
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