S.Balasubramanian, - (1.) THE allegation of the petitioner in this petition, filed under Sections 111 and 113 of the Companies Act, 1956 ("the Act"), is that M/s. Happy Valley Tea Company Private Limited ("the company"), after allotment of 16,000 equity shares to the petitioner, did not hand over the share certificate/s in respect of these shares and has, thereafter, illegally cancelled the allotment and as such, the company should be directed to restore the allotment and deliver the share certificate in respect of these shares.
(2.) A summary of the petition is : The petitioner was appointed as an agent for the company in September, 2000, authorizing him to sell and/or encourage for sale, of tea manufactured/to be manufactured by the company on a fee of Rs. 15,000/-per month. At the behest of the directors of the company, the petitioner also advanced, at various times, a sum of money aggregating to Rs. 11.00 lakhs to the company with an interest @ 24% per annum. Since the directors of the company expressed their desire that the petitioner should become a shareholder, he applied for 16,000 equity shares of Rs. 10/- each at a premium of Rs. 2/- per share. He remitted Rs. 1,92,000/- as consideration in various installments in the months of February/March, 2001. The company has acknowledged all these payments by money receipts indicating clearly that the same was advanced against allotment of equity shares. By a letter dated 15.3.01, the company informed the petitioner that in a Board meeting held on 8.3.2001, the Board had decided to enhance the issued equity shares of the company from 52,000 equity shares to 70,000 equity shares and that the enhanced equity shares would be issued to the petitioner or his nominee. It was also indicated in that communication that the company was convening an Extra-Ordinary General Meeting (EOGM) for getting the shareholders approval for increasing the issued capital and for the approval of the draft resolution for allotment of 18,000 equity shares to the petitioner. The company also filed Form No.2 on 8.3.02 indicating that 16,000 equity shares had been allotted to the petitioner on 25.2.02. Since the petitioner had not received the relevant share certificates, he made enquiries from time to time and also wrote to the company by a letter dated 12.4.03. The petitioner caused an inspection of the records of the company in the office of the Registrar of Companies, West Bengal (ROC) and from the Annual Return made upto 30.9.02, filed on 19.2.03, he found that his name had not been included as a member of the company. Since the petitioner did not receive any reply to the legal notice issued to the company on 20.9.03 he has filed this petition for a declaration that the petitioner is having a right, title and interest in respect of 16,000 equity shares of the company and also for rectification of the register of members to include his name as a shareholder in respect of these chares and also to pass on all benefits to the him like dividend etc. in respect of these shares including delivery of relevant share certificate/s. In the reply, the company has admitted the fact that the directors of the company had requested the petitioner to provide funds to tide over the temporary financial crisis of the company and also the fact that he had lent about Rs. 11.00 lakhs. It has. also admitted that the company received Rs. 1.92 lakhs for allotment of shares to the petitioner subject to approval of the shareholders. In the letter dated 15.3.01, it was specifically mentioned that the allotment of shares to the petitioner would be subject to the approval of the shareholders in an EOGM. The company also filed Form No. 2 with the ROC indicating the allotment of shares to the petitioner with the clear understanding that the allotment would be subject to shareholders approval and the petitioner was fully aware of the same. In the General Meeting held on 30.9.02, after due deliberation, the shareholders decided that the petitioner did not qualify for acquiring any share of the company due to his nefarious activities and ill motive and declined to allot shares to him. By a letter dated 4.10.02 (Annexure-6), the same was communicated to the petitioner. In view of this, the company filed a Form 32 canceling the allotment. Accordingly, the company has sought for dismissal of the petition.
(3.) SHRI Mukherjee, appearing for the petitioner, submitted that every fact averred in the petition had been admitted by the respondent including receipt of consideration for the equity shares and allotment of shares in the board meeting held on 8.3.01 and subsequent filing of Form No. 2. In terms of Article 4, shares are at the disposal of the directors and they have the power to allot shares on such terms and conditions and by exercising this power, the board had allotted the shares to the petitioner and the question of obtaining consent of general body thereafter does not arise. The company has no power to cancel the allotment which would not only result in reduction of share capital for which procedures as per the Companies Act has to be followed, it cannot remove the name of the petitioner from the register of Members without the approval of CLB In re. Calcutta Stock Exchange Association Ltd. AIR 1957 Cal. 438. In view this legal position, there is no question of filing a Form No.2 canceling allotment already made. Therefore, the prayers sought for should be granted and the petitioner should be declared to be the shareholder of 16,000 equity shares and accordingly, the name of the petitioner should be put in the register of members and the relevant share certificates should be ordered to be delivered to the petitioner.;