DEEPAK LOHIA Vs. KAMRUP DEVELOPERS PRIVATE LIMITED

JUDGEMENT

(1.) THE main complaints of the petitioner in regard to the affairs of Kamrup Developers Pvt. Ltd. ("the company") are that there has been a creation of a new majority by issue of further shares, change in the composition of the board of directors by which equality in the board has been disturbed and that there has been mismanagement in the affairs of the company.

(2.) Sri Mookherjee, advocate for the petitioner submitted : This company was incorporated in February 1998, with an authorized capital of 5,000 equity shares of Rs. 100 each. The paid up capital was 200 equity shares of Rs. 100 each of which the petitioner held 100 shares and the third respondent, the balance 100 shares. Both were the only directors of the company. The second respondent is the father of the third and fourth respondents. The second respondent is the owner of a piece of land in Guwahati. He and his two sons desired to develop the said land by demolishing the then existing structure and to construct a new building comprising shops, flats and offices on ownership basis. Therefore, with a view to develop this project, the second and third respondents arrived at an understanding with the petitioner to establish two companies--one for promoting the project and another for dealing in supply of cement and agency for elevators. The understanding further provided both the groups will have equal shareholding and also equal representation on the board of these two companies. Accordingly, the respondent-company was incorporated in 1998. In terms of the understanding, an agreement was executed between the company and the second respondent. As per this agreement, the company was authorized to develop the land owned by the second respondent and he was to execute an irrevocable power of attorney empowering the company to convey the said land in full or part with further power to construct shops, flats etc. The company was to pay a sum of Rs. 16 lakhs as consideration to the second respondent. It also provided for termination of the agreement in the case of breach of any of the terms of agreement. In terms of this agreement, the second respondent executed an irrevocable general power of attorney in favour of the company providing that the petitioner and the third respondent as nominees of the company were to act on the power of attorney. In addition to the share capital for 100 shares each, the petitioner group and Aggarwal group each contributed Rs. 2.5 lakhs as share application money. In addition, the petitioner by himself and through his own companies provided a sum of Rs. 2.25 crores either as unsecured loan bearing interest or as advance against booking of space.

(3.) HE further submitted : After having revoked the power of attorney, to gain absolute control over the company, the respondents have manipulated the records of the company to show that further shares have been issued by which the petitioner has been converted from an equal shareholder to a minority shareholder and two more directors have also been appointed by which the majority in the board also has been taken over by the respondents. The board has allegedly allotted shares worth Rs. 2.3 lakhs to the petitioner and shares worth Rs. 2.5 lakhs to the respondents' group. After the purported allotment the respondent group holds 2,600 shares against the petitioner group holding 2,400 shares. Thus, this allotment has straightway converted the petitioner from an equal shareholder to a minority and a new majority has been created. This allotment is nothing but a fabrication as is evident from the fact that Form No. 2 in respect of the allotment was filed with the RoC only on July 13, 2000, that is, after the date of MoU even though the allotment was allegedly made on September 1, 1999. These allotments are purported to have been against the share application money of Rs. 2.5 lakhs each in the name of the petitioner and the third respondent. The petitioner never attended the board meeting on September 1, 1999, when the allotment was purportedly made and the respondents have not produced any evidence to show that either any notice for this meeting was issued or this meeting was attended by the petitioner. Even though the respondents contend that on September 2, 1999 (annexure R-1), the company had written to the petitioner and others about the allotment of shares, none from the petitioner side had received the same and as such, these letters as well as the copy of the certificate of posting in connection therewith are fabricated. The respondents, with a view to gain majority, as explicitly admitted at page 12 of the reply of the third respondent that he was to have majority, have fabricated this allotment. This fabrication is also evident from the fact that in all the letters of the petitioner to the respondents written after the date of alleged allotment, he had pointed out the equality in the shareholding which was never denied by the respondents. Even in the letter of the second respondent dated September 17, 2000, he had not mentioned about the minority status of the petitioner. The minutes of the board meeting dated September 1, 1999, in which the presence of the petitioner is shown is nothing but a fabrication inasmuch as the petitioner would have never agreed for reducing himself voluntarily to that of a minority after having invested over a sum of Rs. 2 crores. Even assuming that the allotment was made on September 1, 1999, as claimed by the respondents, the sole purpose of the allotment was only with a view to gain control of the company by disturbing the equality in the shareholding as evident from the fact that the minutes of the meeting do not indicate the need for the allotment. In Piercy v. S. Mills and Co. Ltd. [1920] 1 Ch 77 it has been held that the directors of a company are not entitled to use their power of issuing the shares merely for the purpose of maintaining the control. Therefore either the allotment should be cancelled or the allotment be equalized.