C.P. No. 23 of 2011. Case: Najmuddin R. Meghani Vs M. Square Caterers & Hospitality (P.) Ltd. and Others. Company Law Board

Case NumberC.P. No. 23 of 2011
CounselFor Appellant: A.G. Shaikh and For Respondents: Kunjal Dalal
JudgesKanthi Narahari, Member (J)
IssueCompanies Act, 1956 - Sections 111, 2(27), 266D, 3(1)(iii), 397, 398, 399, 399(1), 399(1)(a), 41, 41(2)
Judgement DateFebruary 17, 2012
CourtCompany Law Board


Kanthi Narahari, Member (J), (Mumbai Bench)

1. The present petition is filed by invoking the provisions of sections 111, 397, 398 and 399 of the Companies Act, 1956 ('the Act'), praying this Bench to rectify the register of members by entering the details of equity shares subscribed by the petitioner and set aside the removal of petitioner from the Board of directors and declare that he never cease to be director and investigate into the affairs of the R1-company and freeze the bank account of the R1-company operated by respondents 2 and 3. Shri A.G. Shaikh, learned PCS appearing for the petitioner submitted that the petitioner is one of the three subscribers to the memorandum and articles of association of the company and also one of the three permanent directors of the company and that he subscribed to 2,500 equity shares in the company until the fraudulent usurpation of the same by respondent Nos. 1 to 3 against his name vide the annual return as at 31st December 2008. The petitioner is accordingly entitled to file this petition in terms of section 399 of the Act as he is holding 25 per cent of the issued and paid-up capital of the company from its date of incorporation. The petitioner and respondents 2 and 3 incorporated the respondent No. 1-company as first subscribers to the memorandum and articles of association and subscribed to 2,500, 3,750 and 3,750 equity shares, respectively. They also were the first directors of the respondent No. 1-company vide article 23 of the articles of association of the company. The petitioner was so instrumental in the formation of the company that the e-mail ID of the company was also that of his professional ID and the company was actually his brain child. It was shocking for the petitioner to realise that the company's first annual general meeting ('AGM') was held on 31st December 2008 as is evident from the Form 20B filed by the company on the MCA Portal behind his back and no intimation for the alleged meeting or the notice was issued to him. It was further shocking to find out that the shares he subscribed as one of the promoters of the company were missing from the annual return attached to the said Form 20B and the other two directors and respondent Nos. 2 and 3 usurped his shareholding in the company. When the promoters subscribed as promoter to the memorandum of association and articles of association, the position was as under for the first 10,000 equity shares in the company upon formation:

The petitioner was surprised to see that in the said annual return attached to the said Form 20B the position of shareholding was depicted as under:

Thus, the respondents 2 and 3 shareholding comes to 10,000 equity shares of Rs. 10 each, however, it was not mentioned anywhere in the return how the above two respondents came to got hold of further shares and what happened to the shares deemed to have been issued to the petitioner as promoter. It may be clearly inferred at the cost of the shares of the petitioner (which seemed to have been divided into two equal part among the respondent Nos. 2 and 3) the respondents have unduly caught hold of the shares. Had the shares been transferred, it would have been so mentioned in the said annual return that the petitioner's shares were transferred to the respondents inasmuch as in column No. VI of the said annual returns which is kept blank.

2. The main purpose of formation of this company in the name and style of M Square Caterers & Hospitality (P.) Ltd. was to run the affairs of the another company, namely, Chogame Hotels (P.) Ltd. who is proprietor of Royal Park Club Resort at Magdalla, Surat-Dumas Road, Surat in a better and professional way. The respondents gave confidence to the petitioner that they can run the affairs of the said company in a better and professional way and, hence, the said new company in the nature of quasi-partnership was created on 30th June, 2007. Since the aim of the company was to help and run another company in which the petitioner and his family members had deep interest...

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