(1.) A reference has been received from the Central Government under Section 408(1) of the Companies Act, 1956, in the matter of Urban Improvement Co. Pvt. Ltd. (hereinafter referred to as "the company") seeking an order of the Company Law Board (hereinafter referred to as "the CLB") for appointment of five directors for a period of three years for the reasons stated in the reference.
(2.) The facts of the case are that the company was incorporated in 1963 with the main object of development of residential colonies. A colony with an area of about 434 acres, named "Greenfield Colony" situated in district Faridabad, was to be developed by the company. The company is a closely held one with only nine shareholders. Even though a large number of plots had been booked and advance taken from public, there was no worthwhile progress and in view of the charges of mismanagement and misfeasance against the board of directors, the Company Law Board, for the first time, approved the appointment of Government directors on the board of the company in the year 1976. Thereafter, on subsequent reference from the Government, the Company Law Board has been ordering appointment of Government directors periodically and the last such order was issued on June 11, 1991, authorising appointment of four persons as Government directors with effect from June 21, 1991. In view of the fact that the term of appointment was coming to an end on June 20, 1994, the instant reference was made by the Central Government to the Company Law Board on April 6, 1994.
This reference was considered by us on June 6, 1994, and considering that notices had to be issued to all the concerned parties and as the term of directors was coming to an end shortly, as an interim measure, we directed the Central Government to appoint not more than four directors from June 22, 1994, for a period not exceeding three months and fixed the hearing for August 22, 1994, to consider the reference in detail. However, this hearing was postponed to September 2, 1994, when S/Sri Ashok Advani and Rajiv Mehta, advocates appearing on behalf of the shareholders requested for time to file the replies to the reference and accordingly time was granted to them to file their replies by September 15, 1994, and continuation of Government directors was allowed for a further period of six months with effect from September 22, 1994. The matter was heard on November 29, 1994, when Sri K. Vasdev, advocate, for the shareholders again prayed for time to file the replies of the shareholders and also he undertook to file the replies by December 14, 1994. The prayer was granted and the case was fixed for hearing on February 6, 1995, with 9 stipulation that no further time would be granted to file replies.
(3.) THE matter was heard on February 6, 1995, as scheduled. Not only had the shareholders failed to file their replies but none-represented them during the hearing. We heard the submissions made by Shri R. N. Vaswani, Under Secretary, Department of Company Affairs, Shri Jagdish Singh, vice-president, plot-holders association, Sri Selvaraj, Government appointed chairman of the company and Sri Wadhwani, advocate, on behalf of the company.;