CP No. 78/2011. Case: Shri. Jagdishbhai S. Ramani & Others Vs M/s. Sachin Infra Management Limited & Ors.. Company Law Board

Case NumberCP No. 78/2011
CounselFor Appellant: Shri. S. Suriyanarayanan, Advocate, Shri. S. Swaminathan, Practicing Company Secretary and For Respondents: Dr. S.K. Jain, Practicing Company Secretary, Mr. Kamal Agarwal, Chartered Accountant
JudgesVimla Yadav, Member
IssueCompanies Act, 1956 - Sections 169, 173, 25, 284, 397, 398, 399, 399(1), 399(3), 399(4), 81, 81 (1A), 81(1A)
Citation2013 (113) CLA 1 (CLB), 2013 (180) CompCas 212 (CLB)
Judgement DateJanuary 09, 2013
CourtCompany Law Board


Vimla Yadav, Member, (Mumbai Bench)

1. In this order I am considering CP No. 78 of 2011 filed u/s. 397 and 398 of the Companies Act, 1956 (hereinafter referred to as 'the Act') in the matter of M/s. Sachin Infra Management Limited (herein after referred to as the R-I Company). R-I is a company incorporated under section 25 of the Act. With the main object to provide basic infrastructure facilities like water supply, drainage, etc to industrial areas/units. R-I was incorporated on 14th June, 2006 by 9 subscribers (including Petitioner) to the Memorandum and Article of Association as promoters and were the first Directors of R-I. Company Petition No. 78/2011 has been filed by the Petitioner in a representative Capacity based on consents, the Petitioner is holding shares of R-I Company as a nominee of Sachin Industrial Co-operative Society Ltd. which has 50% management control of R-I Company as per Special Resolution dated 10.05.2007. The Petitioner has sought declaration that the EGM scheduled on 30.09.2011 is illegal; the AGM purported to have been held on 18.08.2011 was without the authority of law and a fresh AGM for the year 2011 in compliance with the law be held; declaration that the special resolution under section 81(1A) was passed without following the procedures of law purportedly on 18.08.2011 and direction to the ROC Ahmedabad to nullify the Form 23 filed in this regard; declaration that all the forms filed in the MCA site after 17.08.2011 such as Form 32, Form 25C, Form 2, Form 23 or such other forms filed by the Respondents till the disposal of, this case as illegal and to restore status quo ante; declaration that the allotment of shares purportedly made on 29.08.2011 is illegal and direction to the ROC Ahmedabad to nullify the Form 2 filed in this regard; declaration that the appointment of Managing Director purportedly made on 18.08.2011 is illegal and direction to the ROC Ahmedabad to nullify the Form 23/25C filed in this regard.

2. In CA 187/2011 (filed: on the day when the CP was mentioned on 26.09.2011 but CA was not mentioned) the Respondent raised objections to the Maintainability of the CP u/s. 399 of the Act. On 06.02.2012 the CLB ordered that the CA 187 shall be heard along with the CP. The Respondents contended that a Petition u/s. 397-398 of the Act is maintainable if it is filed by shareholders qualifying the test provided u/s. 399 of the Act. The Petitioner who owned 11000 shares of R-I [constituting 5.65% of the Capital of R-I] is not entitled to maintain the petition. It was pointed out that the Petitioner has attached purported consent affidavits allegedly executed by 26 shareholders [22 are the Companies and 4 are individuals/partnership] of R-I and has claimed that he alongwith the said 26 purported consenting shareholders holds 35000 shares of R-I [constituting 24% equity] and, therefore, petition is maintainable. The Respondents' contention is that consent affidavits are false and bogus, signed by one partner without the authority of partnership firm. It was alleged that the defects in the consent affidavits establish that there was no board meeting of said companies and the Petitioner colluded with their individual directors and prepared all documents in his office and, therefore, same are ineligible for the purpose of calculating maintainability of petition u/s. 399 of the Act. It was pointed out that: (i). Purported board resolution of 22 consenting shareholder companies shows same date and time of board meeting and attendance of one director on two or more places which is practically impossible. While preparing them, the Petitioner overlooked the said discrepancy which goes to the root of the matter. (ii). Purported board resolutions neither bear the rubber stamps of respective companies nor used their official letterhead but same were prepared in the office of the Petitioner on plain papers at one time. The purported consenting shareholder companies had accepted notice of AGM and EOGM by affixing rubber stamp so there is no question of not using official letterhead and rubber stamp while issuing certified true copy of board resolution to authorise one director to execute consent affidavit. (iii). Purported affidavits show blank space for the name of director who is allegedly authorised by Board for the same and were filled manually which also establish that same were not prepared in the office of respective purported consenting shareholder companies but prepared in the office of Petitioner. Had there been a proper Board meeting of purported consenting shareholder companies there is no reason for keeping the space blank for the name of director, (iv). In the purported consent affidavits the authorised director alleged only one act of oppression 'not received notice of AGM' against series of allegation of the Petitioner in the petition. Notices of AGM/EOGM were acknowledged by respective consenting shareholder companies by putting their respective rubber stamp. (v). Two directors of R-I are also directors of two purported consenting shareholder companies and had attended Board meeting dated 21st June 2011. Petitioner has alleged that board meeting notice was not received by directors, he himself had also attended Board Meeting and submitted dissent note dated 18th June 2011 on receipt of Board meeting notice dated 15th June 2011. (vi). Neither of the purported consenting shareholder companies filed any complaint about any deficiency in the services rendered by R-I nor any objection about other functions were made though Petitioner had made series of allegations. It is clear that there was no Board Meeting respective consenting companies and one director of the said companies has colluded with Petitioner and prepared false and bogus board resolution, same cannot be relied. (vii). After 12th October, 2010 till the date of filing of present petition on 17th September, 2011, R-I has neither assigned any business to third party nor obtained any new contract, therefore, there cannot be any allegation of mismanagement or oppression of R-I. (viii). While giving the alleged consent by the respective consenting companies (if it is presumed that the consents were genuinely given by the Board of Directors in their Meeting). They have not been aware of the allegations made by the Petitioner in the petition which shows complete non application of mind by the alleged consenting shareholder companies and, therefore, also the said consents are invalid for the purpose of calculating maintainability u/s. 399 of the Companies Act, 1956. It was pointed out that the Petitioner has failed to bring on record confirmation of the respective companies that Board resolution submitted by the petitioner along with the petition were correct minutes of the proceedings of Board Meeting held at their office. So there is no document on record which can confirm validity of the minutes prepared in the office of the Petitioner. Reliance was placed on the case law in Mohanlal Mittal V/s. Universal wires Limited (1983) 53 Comp Cas 36 CAL; K.N. Shankarnarayanan And... V/s. Shree Consultations and Services (1994) 80 Comp Cas 558 Mad; B.P. Jeevan Reddy and B.L. Hansaria AIR 1994 SC 2258.

3. The Counsel for the Respondents further contended that the Petitioner has admitted the legal position that a petition u/s. 397-398 can only be filed in the case of a section 25 company if the company is not carrying out its charitable objects in a proper manner and that the shareholders of a section 25 company have no proprietary interest in a company which can be challenged. It was pointed out that it is the petitioner's own case that till 12th October, 2010 R-I was doing well in providing of infrastructural facilities under his chairmanship. It is only a vague allegation against R-2 (not against R-I) that he along with his associates has been doing various activities against the interest of the company. Neither there is any specific allegation in the body of the petition and documents supporting the same nor there is any legal submission in the petition. Prior to filing of the present petition none of the purported consenting shareholding companies have ever raised any objection about the deficiency in the services provided by R-I by submitting any letter and or raising the issue during the Board Meeting. Referring to the letter dated 22nd March, 2012 read out by the Petitioner narrating that GIDC has pointed out the deficiency in respect of payment of dues, it was explained that the details of the outstanding demand of Rs. 4,87,01,833/- show that it is for 2007-2008, 2008-2009 and 2009-2010, the period when the petitioner was the chairman of R-I so there was no mismanagement or the oppression of R-I. As regards the Order passed by Hon'ble Gujarat High Court during 20/12/2007 making allegations about one Mr. Champalal Chopra during 2008, it was explained that Mr. Champalal Chopra is not a party to the proceedings and, therefore, no allegation can be made against him and secondly the High Court Order was passed during 2007, the petitioner was chairman of R-I from September 2008 till 12th October, 2010 and he has not raised any objection of any nature when he was the chairman. My attention was drawn to a letter dated 9th July, 2012 wherein GIDC appreciated the services rendered by the R-I from 4th May, 2007 till the date of the letter for smooth handling of Sachin Water Supply Scheme. Reliance was placed on the decision of Hon'ble Madras High Court in Mohanlal Sastry V/s. Swadharma Swarajya Sangha (1995) 83 Comp Cases 272 (Mad.) which has laid down the law that a Petition u/s. 397-398 is not maintainable in case of company registered u/s. 25 of the Companies Act, 1956. Further reliance was placed on the case law in Aeal Ameen V/s. Ilayangudi Muslim Educational Association (2009) 93 CLA (89) CLB. It was contended that the Petitioner has not been able to show as to how the ratio decided by the reported...

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