- (1.) Leave granted.
(2.) Challenge in this appeal is to the judgment of a Division Bench of the Delhi High Court dismissing the appeal filed by the appellants as not maintainable. Challenge in the appeal was to the judgment of a learned Single Judge of High Court. Two appeals were disposed of by a common order dated 7.2.2005.
(3.) Background facts in a nutshell are as follows: M/s Aar Gee Board Mills was incorporated as private limited company in which two groups hold the shares. One group is led by Girdhar Gopal Gupta (hereinafter referred to as 'Gupta Group ) and other by Guru Charan Dass (hereinafter referred to as 'Garg Group ). The company was incorporated with authorized share capital of Rs. 20 lacs (20,000 equity shares of Rs. 100/- each). At the time of incorporation, the Gupta Group subscribed 1722 equity shares and the Garg Group was allotted 1662 equity shares. The shareholding between the two groups was accordingly in the ratio of 50.9% : 49.1%. This company purchased a sick unit from UPFC in the year 1985 consisting of land at GT Road Industrial Area Ghaziabad measuring 7215 sq. yards along with the plant and machinery. The company operated the aforesaid unit for few years after its purchase. However, in October 1994 this unit had to be closed down. Reasons were stated to be non-installation of water treatment plant for pollution control and non payment of Government dues. Both the groups alleged non cooperation and mis-management against each other. After the closure of the aforesaid unit, disputes arose between the parties. Both the parties referred the matter for arbitration. Three arbitrators were appointed who gave their awards. In the final award given on 18th April, 1998 the arbitrators inter-alia concluded that the aforesaid unit should be divided equally between the two groups. There is some dispute about the terms of reference to the aforesaid arbitrators. Fact remains that although proceedings before the said arbitrators were initiated under the Arbitration Act, 1940 and, therefore, awards were required to be made rule of the Court, but no steps were taken in this behalf by either of the groups. On 20th August, 1998, Garg Group filed the return with the Registrar of Companies informing the Registrar of Companies about the allotment of 9507 equity shares of Rs. 100/- each which was allotted in favour of the members of the Garg Group. It was stated that these allotments were made in the years 1994 and 1995. With the allotment of aforesaid shares in favour of the family members of the Garg group the shareholding pattern changed drastically. The shareholding of the Gupta Group which was hitherto to the extent of 50.9% came down to 13.4% and that of the Garg Group rose to 86.6%. Aggrieved by this and some other acts on the part of the Garg Group, Gupta Group filed CP.65/2001 under Sections 397 and 398 of the Companies Act, 1956 (in short the 'Act ) before the Company Law Board (for short the 'Board ) alleging oppression and mis-management on the part of the Garg Group. Three acts of oppression and mis-management were highlighted which are as under: (a) Illegal allotment of 9507 equity shares as noted above. (b) Appointment of Mr. Parmanand, brother of Mr. Guru Charan Dass Garg as the Additional Director with effect from 20th October, 1994, return in respect of which was also filed with the Registrar of Companies on 20th August, 1998. (c) Removal of Mr. Girdhar Gopal Gupta and Mr. Ram Narain Gupta as directors from the company on 16th September, 1998 without notice of any Board meeting. The Board decided this petition vide order dated 25th March, 2004. As far as issue of allotment of shares is concerned, the Board opined that allotment of 5564 shares to the Garg group was illegal and set aside the same. In so far as allotment of 3943 shares is concerned, benefit of doubt was given to the Garg Group on the ground that this allotment was within the knowledge of the Gupta Group. On the two counts, this petition was decided in favour of the Gupta Group as it is held that appointment of Mr. Parmanand as Additional Director was invalid. Likewise, removal of Mr. Girdhar Gopal Gupta and Mr. Ram Narain Gupta as directors was also held to be illegal. The Gupta group has preferred Co.A.(SB) No. 9/2004 against that portion of the Order whereby allotment of 3943 shares is not disturbed. The Garg Group on the other hand, filed Co. A. (SB) No. 11/2004 in respect of other findings which were returned in favour of the Gupta group. That is how these appeals wee heard together and were disposed of by a common Order. In so far as issue of allotment of shares is concerned, Board in para 12 held as follows: The last point for consideration is the allotment of 9507 equity shares which have been allotted on 25.6.1994, 20.10.1994, 9.1.1995. The respondents have failed to produce notice/minutes of the board meeting in which 9507 shares were allotted. The return of allotment of shares in Form No. 2 has been filed in one lot on 20.8.1998 with the ROC after a delay of 4 years. The respondents have submitted that in the balance sheet signed of 1993-94 by the petitioner indicated application money of Rs. 3,94,320 and accordingly the petitioners were aware of allotment of 9507 shares. It is true that a sum of Rs. 3,94, 320/- has been shown in the balance sheet of 1993-94 which the respondents have allotted further shares of Rs. 5,56,380 for which no explanation has been given. It is also not known whether any money amount to Rs. 5,56,380/- was ever received by the company and how the same has been utilized in the company which was closed down in 1995. The High Court noted that the Board recorded a categorical finding that the respondents in the petition i.e. Garg Group had failed to produce notice/minutes of the Board meeting in which 9507 shares were allotted. It was also recorded that although these shares were allotted in two lots in 1994 and 1995, return of allotment of these shares was filed in one lot on 20th August, 1998 with the Registrar of Companies after a delay of 4 years. However, the allotment of shares to the extent of 3943 shares only was distributed on the ground that the Gupta Group would have the knowledge much earlier but it was not challenged earlier. Accordingly, the Board declared the allotment of 5564 shares as illegal and the same was set aside. Learned Single Judge first referred to this aspect. He noted that the Garg Group had failed to produce any notice or minutes of the Board meetings regarding allotment of shares.;