ABANI BHUSAN BHATTACHARYA Vs. ERICSSON INDIA P LTD

JUDGEMENT

(1.) SHRI A. B. Bhattacharya, 52, Krishna Vihar, 15, Sarat Chatterjee Avenue, Calcutta-700 029, has filed this petition on October 27, 1997, under Section 111(4)(a)(ii) and (7)(b) of the Companies Act, 1956 (hereinafter called "the Act"), 'against Ericsson India Private Limited, 25, Community Centre, First Floor, East of Kailash, New Delhi-110 065 (hereinafter called "the company"), and two other respondents who are the managing director and the director, respectively. According to the petition, the petitioner was one of the founder members of the company incorporated in 1971 and has subscribed and acquired 200 equity- shares of Rs. 100 each and is the holder of the relevant share certificates dated October 22, 1971. According to the petition, the petitioner was the first managing director of the company continuously for five years since incorporation and was working director for further one year after which he was removed from the office of the director, through clever manipulation by the respondents. The complaint of the petitioner is that through a board meeting in 1980, respondents Nos. 2 and 3 resolved to issue 200 duplicate shares against his share certificate, to publish in the newspapers about the issue of the duplicate shares and to state that the company will not recognise any transfer in respect of the original 200 shares owned by the petitioner. The duplicate shares were purported to be issued pursuant to the provisions of Articles 42 and 35 of the articles of association of the company. According to the petitioner, even as per the articles, a valid sale notice in writing is necessary in order to transfer the shares or to issue duplicate shares. There is no scope for omitting or dropping the names of the petitioner from the register of members without his consent. The company cannot override the articles and defraud its members or shareholders. It is further stated that according to Section 108 of the Act, it is mandatory to fulfil the conditions prescribed therein before transfer of any shares, namely :

(2.) It is further stated that as per the annual returns as on June 28, 1978, the petitioner's name is appearing with a holding of 200 shares but in the next annual return as on June 29, 1979, it is shown that these shares have been "forfeited" as per Article 42 of the articles of association of the company. The shares could not have been forfeited as they are fully paid and as such the return is false and incorrect. Thereafter, in 1980, a public notice as referred to already, was given by the company consequent to a board meeting held on May 5, 6, 1980. According to the petitioner, this notice has caused public defamation and resulted in denial of rights of the petitioner and employment opportunity commensurate with his high qualifications and wide experience. The petition also narrates in detail the entries in the register of members with regard to the acquisition and transfer of the shares.

(3.) APART from the above preliminary objections, on the merits, it is admitted that the petitioner was holding 200 equity shares which were transferred under Article 42 to respondent No. 2. It was denied that the respondent was a managing director. It was the proposal of the petitioner himself that he should be relieved and respondent No. 2 should be appointed as managing director at the board meeting held on December 2, 1976. The minutes copies were also enclosed. The petitioner, however, was appointed as whole-time director for one year with effect from January 1, 1977. As regards the issue of duplicate shares Article 37 empowers the board to do so. Further, Article 42 contains a deeming provision with regard to sale notice by a member ceasing to be a director. As such there is no necessity of sale notice in writing. It is further stated that under Articles 35, 37 and 42, the company is entitled to restrict the transfer of shares being a private company under Section 3(1)(iii)(a) of the Act. The reply, therefore, prayed that in view of the above, the petition should be dismissed with costs.