CINE SUPPLY CORPORATION P LTD Vs. STATE

JUDGEMENT

(1.) BY means of this petition filed under section 397/398 of the Companies Act, 1956 ('the Act') the petitioners (Mondal Group) has alleged acts of oppression and mismanagement against the respondents and have inter alia sought for cancelling the allotment of 2000 equity shares made in favour of the third respondent and giving the option to the petitioners and other shareholders to acquire the said additional 2000 equity shares of the respondent-company.

(2.) Shorn of unnecessary details the petitioners case is that the respondent company Cine & Supply Corpn. (P.) Ltd. (Respondent 1a) was incorporated as a private limited company on 21-8-1961 initially with a share capital of Rs. 1.50 lakhs which was increased to Rs. 3 lakhs divided into 3000 equity shares of Rs. 100 each in the year 1964. The petitioners group held 708 equity shares which was about 23 per cent of the total share capital of the company. The respondent-company was owning and running a cinema hall known as Sri Rupa Cinema at Contai Distt. Midnapur, West Bengal which was the only property and business of the company. Deepak Kumar Mandal elder brother of the petitioners 1 and 2 was the director incharge from the period 20-5-1990 till his resignation thereafter the first respondent was appointed director incharge with effect from 1 -9-1995. Ever since the first respondent took over as director incharge he indulged in acts of gross oppression of the Mondal Group and mismanaged the company. The accounts of the company were not prepared and no AGM was held thereafter. The petitioner No. 1 who was one of the directors of the respondent-company was disassociated from its affairs and was not even given any notice of any Board meetings. The respondent No. 1 purportedly acting on behalf of the company entered into an agreement of licence on 7-8-1995 with the respondent No. 3 for running the cinema on licence basis for a period of 11 months on a paltry monthly premium of Rs. 2,500 only. However, the cinema could not be run due to labour trouble and a lock-out was declared. Thereafter in the year 1996 an attempt was made by the respondent No. 1 to sell the property of the cinema hall to Hijli Shawmill by transferring the entire equity shares of the company to them. However, the petitioners having come to know protested and made a representation to the bank regarding the illegal decision vide letter 18-9-1996 with the result the said effort failed. Apprehending that the respondents would transfer their shares to outside party the petitioners sent letters dated 1-10-1996, 10-10-1996 and 14-10-1996 inter alia calling upon the first respondent to lift the lock-out and start running the cinema, to call general meeting of the shareholders to discuss and sort out various issues and not to sell any property of the company or the shares to any outside party in contravention of article 10 of articles of association. Despite the said letters the first respondent neither cared to call any AGM or any other general meeting of the shareholders nor made any effort for preparation of the annual accounts of the company. Again by letters dated 9-9-1999 and 14-9-1999 the petitioner warned the first respondent not to transfer the shares in contravention of the article 10 and once again called upon him to prepare the annual accounts and call an AGM or any meeting of the shareholders. A representation on similar lines was made on 18-9-1999 to the ROC, West Bengal. In October/November 1999 the petitioners inspected the record of the company in the office of ROC and were shocked to find that an EOGM of the shareholders was purportedly held on 24-3-1999 wherein a resolution was purportedly passed increasing the share capital of the company from Rs. 3 lakhs to Rs. 5 lakhs and the entire increased equity shares numbering 2000 of Rs. 100 each were not only allotted to the third respondent on 24-3-1999 but he was also appointed as Addl. Director and Form Nos. 2, 5, 23 and 32 were filed on 1-10-1999 in the office of the ROC. According to the petitioners no meeting whatsoever of the shareholders was held on 24-3-1999 and no member of the Mondal Group of shareholders at any stage received any notice of any such meeting in spite of the fact that they were themselves repeatedly requesting for a meeting of the shareholders and also offered to purchase the shares of the company in accordance with the procedure prescribed under article 10 of the article of association. The petitioners have alleged that the meeting dated 24-3-1999 was a bogus meeting held on papers only and the first respondent has apparently fabricated the records/documents in regard to the alleged transaction which never took place. Moreover, the consideration allegedly received against the allotment of shares to the third respondent had not been deposited in the bank account of the respondent-company. It was further stated that after 17-7-1998 only the first petitioner and the first respondent constituted the board of directors and, therefore, in the absence of the first petitioner no meeting of the Board could have taken place as the quorum would not be complete. The petitioners further learned that the respondents have made the third respondent who was a rank outsider as director-in-charge and handed over the management of the company to him. On these allegations the petitioners have prayed for cancelling the allotment of the 2000 equity shares made in favour of the third respondent and giving the options to the petitioners and other shareholders to acquire the said shares and further to remove the first and the third respondent from the post of directors/director in charge and to nominate any other person as director-in-charge to run the affairs of the respondent-company.

(3.) ON behalf of the petitioners a rejoinder has been filed denying the allegations made in the counter affidavit and reiterating the averments made in the petition. The alleged EOGM itself has been challenged on the ground that it could not be called as the Board lacked quorum in the absence of the petitioner No. 1. Besides one of the shareholders, namely, Smt. Jharna Bera shown to have attended the said meeting, was lying bedridden at Calcutta for the last several years, and, therefore, could not have attended the said meeting. Her signature and the minutes have been fabricated. Further since Deepa Roy one of the shareholders holding 3.3 per cent of the shares did not attend the meeting it was incorrect to state that 76.4 per cent of the equity shareholders attended the meeting and the shareholders less than 75 per cent could not have taken the alleged decision to increase the share capital. It was further averred that as per the report of the Chartered Accountants of the company the Bera, Roy and Mukherjee groups in August/September 1999 transferred their shares enbloc in favour of the third respondent which was in contravention of article 10 and as such illegal.