JAYANT PATEL, J. : - - (1.) The main O.J. Appeal is directed against the judgment and order dated 10.12.2008 passed by the Company Law Board, Principal Bench, New Delhi [hereinafter referred to as 'CLB'] in Company Petition No. 79 of 2007 whereby the Board passed a detailed order, the operative portion of which reads as under : - "13. There are allegations and counter allegations. Considering the allegations of siphoning off of funds by the petitioners which remain uncontroverted, I hereby direct the R -1 Company to appoint an independent auditor to ascertain the amount siphoned off between the period 1.4.06 to 13.3.07, the amount so ascertained shall be deposited back by the petitioners into the account of the respondent Company within two months of such audit. If the petitioners fail to deposit the ascertained amount within the prescribed period, the respondents shall be at liberty to buy the shares of the petitioners at the value to be ascertained by an independent valuer for the purpose to be appointed by the parties' consent. 14. Considering the facts and circumstances of this case, to do substantial justice between the parties and to regular the conduct of the Company's affairs in future, I hereby order as under : - I. The illegal increase in the share capital and thereafter illegal issue and allotment of 40,000 shares to the respondents is hereby declared null and void and status quo ante as on 11.12.06 is hereby restored. The R -1 Company's authorised capital shall stand restored to as on 11.12.06 and same with the shareholding as on 11.12.06. All resolutions passed and statements filed with the ROC in this respect subsequent to 11.12.06 are hereby declared as null and void and stand cancelled. II. P -1 and P -2 shall continue to be the directors in the Company, their illegal removal is hereby declared as null and void. III. R -4 is hereby directed to allow operation of the Bank Accounts of the R -1 Company as it existed prior to 11.12.06. IV. The respondents are hereby directed to restore excess dividend received to the account of the respondent Company to be distributed as per shareholding as on 11.12.06." i. The relevant facts leading to the filing of the present appeal, which are as under : - Facts upto the stage of CLB :
(2.) On 13.03.1984, Sugam Construction Pvt. Limited [hereinafter referred to as 'the Company'] was incorporated under the provisions of the Companies Act [hereinafter referred to as 'the Act'] having its registered office at 4th floor, Arun Complex, Behind C.U. Shah College, Ashram Road, Ahmedabad with the main object of carrying on business of builders and contractors. The promoters of the Company were Shri Ushakant Naranbhai Patel and Shri Naresh P. Modi. The authorized share capital of the Company was Rs.5,00,000/ - divided into 1000 equity shares of Rs.100/ - each and 4000 unclassified shares of Rs.100/ - each and 4000 unclassified shares of Rs.100/ - each. On 11.04.1984, at the first meeting of the Company, Shri Bhailalbhai Bababhai Patel and Shri Surendra C. Patel were appointed as Directors. At that time, Bhailalbhai was doing business at Delhi in the name and style of Nicolian India Pvt. Ltd. and he had his own office at Delhi. Shri Pradip Shringarpure, who had been working with the Company for a long period, was appointed as a Director of the Company on 21.05.1990. One Shri Arun Shantilal Patel was also appointed as a Director of the Company on 16.01.1996. On 18.05.1996, Shri Naresh Modi and Shri Surendra C Patel resigned from the Board of Directors, and Shri Rahul Bhailalbhai Patel was appointed as a Director. On 12.08.1997, the authorized capital was increased from Rs.5,00,000/ - to Rs.10,00,000/ - divided into 8000 equity shares of Rs.100/ - each and 2000 preference shares of Rs.100/ - each. Somewhere in 2001, Bhailalbhai Patel allowed the Company to use his office at Delhi, without charging any rent. On 28.04.2003, Dipen Patel was appointed as a Director of the Company. On 05.08.2003, Shri Arun Patel ceased to be a Director of the Company. To understand the situation well, the above particulars are mentioned herebelow in a tabulated form as under : - As far as the holdings are concerned, Ushakant Naranbhai Patel along with his friends, relatives and associates held 4310 Equity Shares representing 53.88% of the voting rights of the Company whereas Bhailalbhai Bababhai Patel with his friends, relatives and associates and Pradeep G. Shrigarpure held 3690 equity shares representing 46.12% of the voting rights of the Company. Thus, Bhailalbhai Bababhai Patel with his friends, relatives and associates and Pradeep G. Shrigarpure were not holding majority voting power in the Company. Ushakant Naranbhai Patel was in charge of Gujarat operations of the Company whereas Bhailalbhai Bababhai Patel was in charge of Delhi operations of the Company and Pradeep G. Shrigarpure was in charge of Mumbai operations of the Company. In 2001, the respondent Company opened an account with State Bank of Saurashtra, Connaught Place, New Delhi.
(3.) Dispute arose between the Directors of the Company. Directors of the Company were divided into factions and to put the facts more clearly, it would be appropriate to state that two factions emerged, which may be called as (i) Ushakant faction and (ii). Bhailalbhai faction. Allegations and counter allegations were made by the factions against each other. Ushakant faction alleged that the Delhi and Mumbai operations were incurring heavy losses in business, reputation and goodwill of the Company whereas only Gujarat operations were making profits. Bhailalbhai faction alleged that Ushakant faction withdrew large sum of money from the account of the Company during the years 2006 and 2007. Bhailalbhai suspected mismanagement, diversion and siphoning off of the funds of the Company by Ushakant faction and therefore, somewhere in the middle of October 2006, Bhailalbhai Bababhai Patel shifted to Ahmedabad Till Bhailalbhai shifted his operations to Ahmedabad, the Bank account of the Company at Ahmedabad was operated by any one from Shri Ushakant Patel, Dipen Patel and Bhailalbhai Patel.;