C.P. No. 54(CH)/2012. Case: A. Jawahar Palaniappan and Ors. Vs Kumudam Publications Pvt. Limited and Ors.. Company Law Board

Case NumberC.P. No. 54(CH)/2012
CounselFor Appellant: Amit Sibal, Sr. Advocate and J. Sivanandraaj, Advocate and For Respondents: S.N. Mookherjee, Sr. Advocate and Pooja M. Saigal, Advocate
JudgesD.R. Deshmukh, J. (Chairman)
IssueCompanies Act, 1956 - Sections 100, 101, 111, 237, 283(i](g), 297, 397, 398, 402, 403, 404, 406, 408; Indian Penal Code 1860, (IPC) - Sections 420, 468, 471
Judgement DateMay 26, 2015
CourtCompany Law Board

Order:

D.R. Deshmukh, J. (Chairman), (New Delhi Bench)

  1. The present petition under sections 111, 397, 398, 402, 403, 404, 406, 408, 237 read with Schedule XI of the Companies Act, 1956 alleges acts of oppression and mismanagement by R-2 to R-4 in Kumudam Publications Pvt. Ltd.

  2. The Kumudam business of printing and publishing was started as business of the Hindu Undivided Family [HUF) with SAP Annamalai Chettiar (SAP) as its Karta in the year 1947. In 1963, vide a partition deed executed between SAP and his son Dr. A. Jawahar Palaniappan (AJP) the business was divided into two parts. The printing business was allotted to AJP (which formed his HUF business) and the publishing business was allotted to SAP (which was SAP's HUF business). In time, both businesses were transferred to incorporated companies. Kumudam Publications Pvt. Ltd. which was SAP's HUF business was incorporated on 31.12.1971 and Kumudam Printers Pvt. Ltd. being AJP's HUF business, was incorporated on 26.06.1972. In the year 1990, P. Varadarajan (PV) was inducted into the Board of the Company as a Director, Subsequently, after the demise of SAP in 1994, his widow A. Kothai (P-2) (AK) was appointed as the Managing Director. AJP was inducted into the Board of the company and made responsible for the editorial division and in so doing given the position of 'Honorary Editor' and PV was put in charge of the finance and administration of the company. Also PV and P. Srinivasan (PS) (R-3) were made one-third shareholders of the company for no consideration, which they transferred to Imprint Tech India Ltd. (R-4 company). It must be noted that both PV and PS as on date, hold no shares in the company. Further, in September 2001, pursuant to a scheme of amalgamation of Kumudam Printers Pvt. Ltd. into Kumudam Publications Pvt. Ltd. (the company) sanctioned by the High court of Madras, the former company was dissolved and its shareholders were allotted shares of the company. AJP thus acquired 3,08,530 shares in the company pursuant to the amalgamation. Eventually in 2003, PV was appointed as the Managing Director of the company while AJP was residing in USA and AK was quite old and not keeping good health.

  3. The company was incorporated as a private limited company on 31.12.1971 with its registered office in Chennai and an authorized share capital of Rs. 5,50,00,000/- divided into 5,50,000 equity shares of Rs. 100/- each. The company is engaged in the business of printing and publication of magazines, periodicals, newspapers and journals in the State of Tamil Nadu. AJP (a U.S. citizen since 1996) is the son and AK is the widow of late SAP. PV and PS are brothers and sons of late PV Parthasarathy (PVP). R-4, i.e. Imprint Tech India Pvt. Ltd. is a company, having its registered office in Chennai, which is promoted by PV who is also its Managing Director.

  4. The shareholding pattern of the company as it stood on 31.03.2011 was as under:-

  5. The very first act of oppression averred by the Petitioner is the amendment to the Articles of Association of the company on 19.03.2003. The amended clauses, being 31(a), 32 and 39(b) provide that Imprint Tech India Ltd. R-4 company shall be entitled to nominate two Directors to the Board of the company and so long as PV is nominated, he shall act as the Chairman of the Board of the company and shall be the Managing Director until he is a Director. Furthermore, he shall be entitled to receive upto 11% of the net profits as remuneration in addition to the monthly remuneration fixed by the Board. In case of equality of votes at a Board Meeting PV shall have a casting vote. The quorum of the Board shall be incomplete without PV.

  6. The Petitioners allege such amendments to the Articles of Association of the company as oppressive being only to serve the interest of R-2. It is also asserted that PV has abused the powers conferred upon him under the amended articles. In furtherance of the said amendments, R-2 has been awarding himself, with increased remuneration since 2003. PV's remuneration has increased from Rs. 21,00,000 in 2003 to Rs. 2,70,72,000/- in 2009 which increase is without any justification and despite the circulation of magazines having fallen considerably and without any corresponding increase in profits. This shows the self-seeking intent of R-2 and his disinterest regarding the benefit of the company. It is noteworthy that all such Board Meetings were attended by AJP and resolutions relating to enhancement of PV's remuneration signed by him. After investigation the Police also filed a final report as no case for forgery of such Board resolutions was made out. Be that as it may, in the Board meeting held on...

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