- (1.) This is a petition filed by a group of shareholders/members of the Board of Directors under Sections 397, 398 and 402 of the Companies Act, 1956 alleging oppression of their share holding rights and mismanagement of the affairs of the respondent No. 1 Company. The petitioners aver in their petition that the first respondent company was incorporated as a limited company on 22.3.1996 with the Registrar of Companies, N.C.T. of Delhi and Haryana with an authorized share capital of Rs. 5 crores divided into 50,00,000 equity shares of Rs. 10 each. It is further stated that the main object of the respondent No. 1 Company is to carry on the business of manufacturers and dealers of all kinds of man-made fiber cords and man-made fabrics and also to deal in polyester filament yarn and other like products of all description and kinds. It is further averred by the petitioners that the issued and paid-up equity capital of the respondent No. 1 company at the time of filing of the petition is to the extent of Rs. 3,53,99,500 divided into 35,39,950 fully paid up equity shares of Rs. 10 each. Out of the paid-up capital of the company, it is averred that petitioners No. 1 to 3 holds the following number of equity shares, as detailed below:- In all it aggregates to 3,86,500 equity shares of the total paid-up equity capital of the company corresponding to 10.91% and hence entitled to maintain the petition. In relation to the respondents holding, it is stated by the petitioners that respondents No. 2 & 3, who happen to be the real brothers of petitioner No. 1, and along with their wives hold 36.20% of the total paid-up capital of the company and thereby having a majority stake in the company as compared to the petitioners. The petitioners also aver that petitioners No. 1 & 2 along with respondents No. 2 & 3 comprise the Board of Directors and that in furtherance of its objects, respondent No. 1 company is engaged in the manufacture of HDPE/PP woven sacks at its factory located at 66 -67 Mile Stone, Patti Kalyana, Samalkha, District Panipat, Haryana and that respondent No. 1 company have been availing credit facilities from State Bank of lndia, Panipat Branch securing by way of mortgage, the factory land and building situated as per the details above and also by hypothecation therein of all its movable assets. It is also averred by the petitioners that the directors of the company viz. 1st and 2nd petitioners and respondents No. 2 and 3 have also furnished their personal guarantees with the aforesaid bank and the fact of availing the loan as well as mortgage/hypothecation of the assets of the respondent No. 1 company have been duly recorded by filing requisite forms with the Registrar of Companies, N.C.T. Delhi and Haryana thereby recording the charge over the assets of the company in favour of SBI. The petitioners also aver that the management and control of the first respondent-company was all along with respondent No. 2 and 3 and that in the month of October, 2010 the petitioner received a notice under Section 13(2) of the SARFESI Act recalling the loan in a sum of Rs. 4,16,66,659.32 as due and payable as on 30.09.2010 from SBI. It is contended by the petitioner that the above default with the bank warranting it to issue notice had basically arisen due to the misfeasance and malfeasance in managing the affairs of the respondent No. 1 company and that respondent No. 2 and 3 had been engaged in the diversion of funds of the company by opening a separate bank account with HDFC Bank in A/c. No. 13252560000535 contrary to the understanding between the company and bankers viz. SBI Bank which had provided the credit facilities in the first place. Further, it is also alleged by the petitioners that respondents No. 2 and 3 have surreptitiously and with mala fide intention opened and deposited in the bank account with HDFC Bank Limited situated at Samalkha, Panipat district and that during the period between March, 2010 till June, 2010 an amount of Rs. 1,50,92,145/- belonging to the company had been credited to the said account instead of repaying the credit facilities availed from SBI, all being done without the knowledge of the petitioners. Immediately on coming to know about the surreptitious activity in the above bank account, it is submitted by the petitioners that efforts were taken by them to close the bank account by writing appropriate letters to the branch of the HDFC Bank. It is further averred by the petitioner that not only the respondents have engaged in siphoning of funds from the first respondent company, as described above, they have also engaged in the removal of raw materials from the factory premises as well as stocks of the company namely PP fabric rolls, PP woven waste and rejects of scraps lying in the factory premises. It is also alleged that highly priced computers and other electronic equipment including one UPS costing about Rs. 13 lakhs to Rs. 15 lakhs had been removed by respondent No. 2 and 3. The petitioners allege that respondents No. 2 and 3 are engaged in the asset stripping of the company including its plant and machinery, all purchased at great cost and out of credit facilities made available by the SBI and which was required to be repaid by the first respondent company and for which as stated above, collaterals had been offered by the first respondent company. Since it came to the knowledge of the petitioners that respondents No. 2 and 3 were taking suo motto steps to finalize the financial statements of the company for the year 2009-10, the petitioners on 4.12.2010 caused a notice to be issued to respondents No. 2 and 3 through their advocates with a copy duly forwarded to the statutory auditors of the company. However, no reply was given to the said notice even though the notice sent on 8.12.2010 was acknowledged by the addressee namely respondents No. 2 and 3. The auditors who were also put on notice informed the petitioners, it is averred by them, that he is not in the process of preparing the financial statement for the year 2009-10 since the same according to information has been referred to a Chartered Accountant at Delhi, however without any valid authority either from the Board or from the General Body of the first respondent-company.
(2.) In the circumstances, alarmed by the activities of the respondents No. 2 and 3 in relation to the first respondent company, it is averred by the petitioners that petitioner No. 2 visited the factory of the first respondent company at Samalkha, Panipat and was shocked to find that the entire machinery and stocks of the first respondent company were in the process of being removed. The petitioners further aver that the entire exercise of removal had been recorded in a video as well as photographs have been taken for the purpose of record and that the petitioners have also brought this to the notice of the law enforcing agencies as well as SBI vide letter dated 15.03.2011.
(3.) In view of the above activities of respondents No. 2 and 3 as well as the petitioners having an apprehension that the respondents are likely to dispose of the immovable properties, hamper/dismantle the plant and machinery as well as remove of all stocks and were also contemplating of removing petitioners No. 1 and 2 from the Board of Directors using their majority strength, it is averred by the petitioners that the above petition has been filed seeking for the following reliefs:- (a) To direct the respondents to furnish the up to date accounts in respect of the respondent No. 1 company and further direct the scrutiny of the said accounts by appointing a qualified Auditor/Chartered Accountant; (b) To direct the respondents to furnish the detail of assets belonging to the respondent No. 1 company which the respondent No. 2 and 3 had removed and/or diverted to their own purpose, thereby causing wrongful loss to the respondent No. 1 company and illegal gains to themselves; (c) To pass suitable directions for regulating the conduct of affairs of the respondent No. 1 company to protect the interest of the respondent No. 1 company, its members and creditors; (d) To pass such other order/orders which this Hon'ble Board may deem fit and proper in the facts and circumstances of the present case. In opposition, respondents No. 2 and 3 submit that petitioner No. 1 being a member of the family and despite suffering mentally due to addiction to drugs and in the circumstances as a means of providing livelihood to the family of petitioner No. 1 was made a Director in the first respondent company after its incorporation and since he was not in a position to discharge the duties as a Director, his wife being the second petitioner, was inducted into the Board of the first respondent company as a Director, despite she being a housewife and not qualified to occupy the post of Director. It is further contended by respondents' No. 2 and 3 that based on the repeated requests of the petitioner No. 2, the son of petitioner No. 1 and 2 was provided with certain machinery on loan for the manufacture of lamination sheets again with a view to providing livelihood to the family of the petitioners. Further, from time to time the son of the petitioner even though not being a Director or shareholder of the first respondent-company was allowed access to the factory premises of the first respondent company and also to carry raw materials for the purpose of sustaining the business carried on by him on a sole proprietary basis. The respondents also contend that soon after induction of second petitioner into the board of the company though she was without experience in business started meddling with the affairs of the company to the detriment of the company and its shareholders even though she along with her family members hold only 10.91% of the share capital of the company and the rest being held by respondents No. 2 and 3 along with other family members. Despite these serious provocations from and on the part of the petitioner No. 2 and her son, the respondents taking into consideration the addiction of their brother did not enforce their writ vehemently and in fact contrary to the allegations made in the petition, it was the second petitioner even though in minority was oppressing the other shareholders in majority namely the respondents and other family members. It is further contended by the respondents that in relation to financial statements for the year 2008-09, the petitioner No. 2 along with petitioner No. 1 signed the financial statement of the company which clearly proves that she has not been kept away from the affairs of the company as alleged by the petitioners in the petition. In relation to the subsequent year i.e. for 2009-10, as the registered office of the company was situated at the residential address of the 1st and 2nd petitioners and as they were preventing access to books of accounts, the respondents were not in a position to finalize the accounts for the said year. In view of the constant interference in the financial affairs of the company one such instance being the closure of HDFC Bank Ltd. Account, despite the petitioners being in the know of the things as SBI was appropriating all the cash inflows towards penal interest thereby crippling its working capital and running and also coupled with a massive storm which completely incapacitated the factory being operated and also made the accounts of the respondent No. 1 company as a non-performing asset in relation to the bankers namely SBI due to lack of production and sale. Efforts for revival and restructuring was made only with the full participation of the petitioners as is evident from the letter dated 15.06.2010 and resolution of the Board on 30.07.2010 and restructuring of the credit facilities and their repayment was initiated and also exclusively worked out by the petitioners. Respondents No. 2 and 3 it is contended was also taking efforts to transfer the credit facilities offered by SBI to HDFC bank. However, it was effectively scuttled due to the correspondence sent by the second petitioner under her hand. It is also contended that the petitioner along with her son had removed raw materials from the factory premises in July, 2010 which is evident from the documents furnished along with the reply statements and hence the allegation of siphoning off materials by the respondents No. 2 and 3 is absolutely a falsehood and is made only for a self-serving purpose. The above actions of the petitioner, it is further contended, coupled with the correspondence being sent to the bankers be it SBI or HDFC bank, totally made bankers discomfited in relation to the first respondent company and hence extension of financial facilities even if they were inclined to such a course of action was nullified. Thus, the petitioners with their minority holdings were virtually creating an impasse in relation to the affairs of the company and seriously undermining the revival and restructuring efforts of the company as well as the interest of the majority shareholders. The actions of the petitioners were neither conducive to the welfare of the family as the petitioner No. 1 and 2 along with respondents 2 and 3 had given their personal guarantees and any contemplated distress action which the bankers namely SBI would have taken against the assets of the company would have only prejudiced the interest of the family as well as the company. In the circumstances, taking into consideration of the then prevalent financial position of the first respondent-company, it was decided to dispose of the immovable property of the company on as is where is basis to offset the liabilities with SBI and to this effect resolutions of both the Board and General Meeting were passed at the registered office of the company the same also being the residence of the petitioners No. 1 and 2 and in the full know of both of them on 17.03.2011, and subsequently based on the basis of EOGM resolution, an agreement to sell was also entered into for the sale of the factory property situated at Samalkha, Panipat District, Haryana for a sum of Rs. 5.95 crores with M/s. Aero Industries, the fourth respondent herein. In fact, it is submitted by respondents No. 2 and 3 that in order to stave off the bankers from their threatened notice under SARFESI Act, the advance paid by the said Aero Industries in a sum of Rs. 1.95 crores on 24.1.2011 in order to establish their bona fide in relation to the purchase of property was also paid by the company to the bankers which induced the bankers to go for one time settlement. All the above facts as per the contention of the respondents were fully known to the petitioners as the above arrangement with the bankers effectively lifted the threat of invocation of the personal guarantees against the family members and also solved the repayment of outstanding liabilities of the company in an expeditious manner vis-a-vis with the bankers, namely SBI. Based on the above contentions, it was submitted by the respondents that the petition as filed by the petitioners is nothing but an abuse of the process of law and hence must be dismissed. The above reply of the respondents' No. 2 and 3 seems to have been filed before the predecessor of this Tribunal, namely, CLB on 5.7.2011. Subsequent to the filing of the reply, as according to the petitioners fresh facts had emerged, they had filed an application for amendments, under the erstwhile Regulation 46 read with Regulation 44 of the Company Law Board Regulations, 1991 and other relevant provisions, seeking an amendment of the petition and also the inclusion of following additional reliefs. (e) Restrain the respondent No. 2 and 3 from removing plant, machinery, equipment, raw materials, stocks, furniture and fixtures and other movable assets belonging to the respondent No. 1 company from the premises of the respondent No. 1 company situated at - 66 - 67 Mile Stone, Patti Kalyana, Samalkha, District Panipat, Haryana during the pendency of the present petition. (f) To appoint a Receiver and/or Court Officer to take over all the statutory records of the respondent No. 1 company including its accounts, cheque books, bill books, inward and outward registers. And to prepare an inventory of all the articles lying in the aforesaid premises of the respondent No. 1 company and to take over the control and management of the affairs of the respondent No. 1 company including its land, factory building, plant and machinery and to perform all statutory duties by taking suitable action in relation to the affairs of the respondent No. 1 company during the pendency of the present petition. (g) Declare the Board meeting held on 2nd Nov., 2010 thereby approving the appointment of Sh. Sumit Poddar S/o. Sh. Prahlad Poddar and Sh. Anil Kumar Poddar, S/o. Sh. Jagdish Rai Poddar as Executive Directors of the respondent No. 1 company as null and void. (h) Declare the Form - 18 deposited with the Registrar of Companies on 5th April, 2011 thereby changing the address of the registered office of the respondent No. 1 company from "KU-160, Pitampura, Delhi-110034" to "A-4/18, first Floor, Shiv Mandir Mohalla, Main Rithala Road, Badli Village, Delhi-110042" as null and void; (i) Declare the agreement to sell dt. 7th March, 2011 executed with one 'Aero Industries', Gurudwara Road, Opp. Post Office, 2168, Karol Bagh, New Delhi to sell the land of the respondent No. 1 company existing at 66/67 Mile Stone, G.T. Road, Village Patti Kalyana, Samalkha, Distt. Panipat, Haryana (Khewat No. 775, Killa No. 167/10-1(4-0) and Khewat No. 471, Killa No. 167/17(8-0), Khewat No. 703, Killa No. 167/10-1(4-0) and Khewat No. 775 Killa No. 167/18/2(4-0) as null and void; (j) Declare the Board meeting held on 10th Dec., 2010 thereby authorizing Mr. Prahlad Kumar Poddar to discuss with prospective buyers for outright sale or transfer the land of the respondent No. 1 company existing at 66/67 Mile Stone, G.T. Road, Village Patti Kalyana, Samalkha, Distt. Panipat, Haryana as null and void; (k) Declare ordinary resolution passed in the Extra Ordinary General Meeting of the Members dt. 17th March, 2011 whereby consent of the respondent No. 1 company was accorded to the board of directors to sell the land of the respondent No. 1 company existing at 66/67 Mile Stone, G.T. Road, Village Patti Kalyana, Samalkha, Distt. Panipat, Haryana to the aforesaid M/s. Aero Industries as null and void; (l) Direct the respondent No. 2 and 3 to immediately cease and desist from doing any act in respect of the business affairs of the respondent No. 1 company which are oppressive to the petitioners and as such violate their rights; (m) Direct the respondents from operating all the bank accounts of the respondent No. 1 company; (n) That the Hon'ble Company Law Board be pleased to order that present Board of Directors of the respondent No. 1 company stands suspended; (o) Frame a scheme of Management, administration and control of the affairs of the company on such terms and conditions as this Company Law Board may deem fit and proper; (p) Direct that the Board Meetings and General Meetings shall be held in strict compliance of the law and notices in respect of all the Board Meetings and General Meetings shall be served on petitioners through Speed Post A.D.; (q) Declare that all the resolutions passed in the Board Meetings and/or General Meetings in the absence of the petitioners to be void and of no effect; (r) Reconstitute the Board of Directors of the respondent No. 1 and appoint independent Directors/Managing Director/Chairman.;