PRAFUL M PATEL Vs. WONDERWELD ELECTRODES PVT LTD

JUDGEMENT

(1.) After hearing the learned Counsel for the appellant, we adjourned the case for a short while to await arrival of the learned Counsel for the respondents. Unfortunately, none appears for the respondents and under such circumstances, we proceed ex parte against the respondents.

(2.) Present is an appeal under Section-10(F) of the Companies Act, 1956 whereunder the order dated 18th September, 2001 passed by the Company Law Board, Principal Bench, New Delhi, in C.P.No.28 of 1999, has been impugned on the ground of non-application of mind, illegal approach and perverse findings. The short facts leading to the present appeal are that the appellant and his associates, who were holding 60% of the majority in M/s.Wonderweld Electrodes Pvt. Ltd., a Company registered under the provisions of the Indian Companies Act, 1956 and having its Registered Office at Plot No.902, GIDC Industrial Estate, Ankleshwar, Gujarat, were converted into minority. The allegations were that the appellant and his group were holding majority of 60% shares, but, by a clandestine preferential allotment of additional shares, the appellant and his group was reduced to minority. The appellant moved an application before the Company Law Board under Section 397/398 of the Act with a prayer that the said allotment be cancelled and the position of the parties be restored. It appears that the parties were properly represented before the Board and after hearing the parties, the Board, by its order dated 18th September, 2001, directed the appellant to sell their shareholding to the respondent-Directors and also observed that several persons belonging to the appellant's group be given option to go out of the Company and if such an option is exercised by them, such exercise would be binding upon the respondent-Company. It was, however, also directed that the appellant's group shall sell their shares to the respondents' group on the valuation to be made by an independent valuer.

(3.) Ms.Amrita Thakore, learned Counsel for the appellant, submits that from perusal of paragraphs 5 and 6, it would clearly appear that the Board had recorded a finding in favour of the appellant and his group; that in an illegal manner, their majority was converted into minority and despite this finding, a premium has been added in favour of those, who have played a fraud by converting the appellant and his group into minority. It is further submitted that the manner, in which the shares were allotted in favour of the minority to bring them into majority, would show that it was all illegal and contrary to law. She submits that in the present set of circumstances, the Board was obliged to cancel the allotment made by the minority in their own favour and the Board could not direct the majority holders, holding the shares, to sell their shares and walk out of the Company.