KAMAL KISHOR SINGHANIYA Vs. VIMAL KISHOR SINGHANIYA

JUDGEMENT

(1.) THE present petition is filed by invoking various provisions of the Companies Act, 1956 ("the Act") alleging certain acts of oppression and mismanagement in the affairs of the company and sought various reliefs, more particularly to restore directorship and 150 shares, remove respondent No. 1 from directorship and remove respondent No. 3 from the membership and directorship of the company. Shri Kamal Kishor Singhaniya, appeared in person and narrated the facts. He submitted that Shreeram Packaging P. Ltd. Co., was incorporated on November 13, 1978, with an authorised, subscribed and paid -up capital of Rs. 1,00,000 divided into 1,000 equity shares of Rs. 100 each. The main objects of the company were to manufacture and deal in all types of packing materials, container and boxes. The petitioner and respondent No. 1 were the promoters of the company and it is a family quasi -partnership company. Foundation of the unit was laid by the petitioner who did all the work right from conceiving the idea, to incorporation of the company, arranging finance, erection of plant and machinery, production, marketing, administration and all allied works. Respondent No. 1 was an engineer in Bombay Municipal Corporation and respondent No. 2 was engaged in a private job at Pune. The petitioner and respondents Nos. 1 and 2 have firmly resolved that the unit belongs to the three brothers equally irrespective of their shareholdings. The unit started production on May 22, 1980. Article 18 of the articles of association of the company gives names of first and permanent directors of the company :

(2.) IN 1985, respondent No. 2 resigned his job at Pune and joined the business of the company and this marks the beginning of groupism in the board of directors. Respondent No. 1 also resigned his job in 1993 and started participating actively in the business of the company. Within two years respondents Nos. 1 and 2 understood that they cannot run the business profitably and as such in February, 1996 despite constant and strong opposition from the petitioner, they secretly negotiated the deal and sold out the entire saw mill with licence just for Rs. 5 lakhs and went away. Thus, they acted most arrogantly and irresponsibly and showed absolutely no concern for the security and maintenance of the residual company's property. They sold away as scrap whatever loose items fell into their hands and just walked away or to say abandoned the premises of the company. They even refused to pay the long pending property taxes of the Municipal Corporation. The petitioner requested them to allow him to continue the business in the name of the company even without saw mill but his request was turned down. However, they permitted the petitioner to carry on the business in his individual capacity. The petitioner then started the business of manufacture of wooden packing cases in the name of Triveni Enterprises, a proprietary concern and the business continues till this date. All expenses on security and maintenance of the company's property are paid by the petitioner. All old liabilities left unpaid by the respondents were also paid by the petitioner along with the current bills received in the name of the company for property taxes, water and power charges. During the last 12 years, the petitioner has never received any notices of annual general meetings or board meetings of the company leading him to believe that no such meetings were ever held. All queries of the petitioner were answered in ambiguity by the respondents. In the mean time, the petitioner kept on trying to reach at a suitable compromise with the respondents so that business of the company may be revived. The cause of action arose, around January 15, 2009, when respondent No. 1 visited the premises of the company and shouted to say that the petitioner is no longer a director or shareholder of the company and that the entire property belongs to him and as such should be vacated immediately. On January 20, 2009, respondents Nos. 1 and 2 applied to Maharashtra Industrial Development Corporation and Maharashtra State Electricity Distribution Co. Ltd., Aurangabad for disconnecting the water and power supply to the company permanently. This incident leads the petitioner to take search of the documents filed by the respondents with the Registrar of Companies, Mumbai and the following facts came to light. In Schedule V of fixed assets forming part of balance -sheet of the company as at March 31, 1996, deduction for sale of entire plant and machinery and trolley has been shown but the sale proceeds of the same has not been credited to the profit and loss account of company. Further there is no mention of this transaction in the director's report. The explanation given in the report for the heavy loss of Rs. 3,71,752 on account of white ants and germs is also false. Such acts on the part of respondents Nos. 1 and 2 amount to falsification of accounts and misappropriation of the company's funds. The auditor of the company seems to be fully involved in this Act of fraud. The annual return filed in respect of the annual general meeting held on August 31, 2000, shows September 30, 1995, as the date of ceasing of the directorship of the petitioner. Form 32 filed on January 8, 2002 by respondent No. 1, says that the petitioner has resigned from directorship on December 15, 2001. On the same date, respondent No. 3 was appointed as an additional director on the board. These are contradictor)' and defective documents. In fact, the petitioner has never resigned from the directorship of the company. The annual return filed in respect of the annual general meeting held on July 31, 2003, shows 150 shares held by the petitioner. However, the annual return filed in respect of the annual general meeting held on September 9, 2005, does not reveal name of the petitioner as share holder but gives details of only 850 shares as against 1,000 shares issued by the company. This is a defective document not rectified by the respondents. The annual returns in respect of annual general meetings held on September 30, 2006, September 29, 2007 and September 30, 2008, only shows 3 shareholders and the last annual return reveals respondent No. 1 holding 800 shares, i.e., originally 650 plus 150 shares of the petitioner. This proves, 150 shares held by the petitioner were transferred in favour of respondent No. 1 between September 10, 2005 to September 30, 2006, without the knowledge and consent of the petitioner. The petitioner has not executed any transfer deed nor received any consideration for his 150 shares. This is an act of fraud committed by respondent No. 1 in collusion with respondent No. 3. Respondents Nos. 1 and 2 have sold away the entire plant and machinery with licence in February, 1996, since then the company is not doing any business. Since last more than 10 years, the company has no bank account No., PAN No. and no phone. The company actually stands deserted. The respondents have their own business, two of them are based in Mumbai and they are absolutely not interested in the company except its property. The petitioner has reasons to believe that no board meetings or annual general meeting's were held and that no proper records have been kept. The respondents are handling the affairs of the company recklessly and irresponsibly showing no respect for law and rules and regulations of the company. False and fabricated statements of account and also annual returns are filed with the Registrar of Companies. In view of facts mentioned above the petitioner prayed for grant of reliefs.

(3.) HEARD the petitioner and the respondent and perused the pleadings, documents filed in their support. After analysing the pleadings the short question felt for consideration is that whether the petitioner is entitled to the relief more particularly restoration of directorship and 150 shares. It is an admitted fact that the petitioner was holding 150 shares and also one of the subscribers to the memorandum and articles of association of the company. The stand of the respondent is that the petitioner ceased to be a member of the company with effect from June 8, 1991, as per the memorandum of settlement signed by the petitioner, the first respondent and the second respondent. As per the terms of settlement the entire unit of Shree -ram Packaging P. Ltd., i.e. the company goes to respondents Nos. 1 and 2 and they will look after the unit entirely. Further, it was recorded that since the petitioner was holding shares worth of Rs. 15,000 in the company, he will be entitled to the facilities at least for a period of five years from June 8, 1986. Clause 8 of the terms of settlement records that "this settlement sets at rest all controversies and all the three brothers are fully satisfied about the settlement. There is no denial of the memorandum of settlement by the petitioner either in the petition or in the rejoinder. Even there is no mention about the memorandum of settlement by the petitioner. The said fact was brought to the notice of this Bench by the respondents duly enclosing the copy of the memorandum of settlement which was termed as "memorandum of settlement reached between Shri K. S. Singhaniya on one hand and Shri V. S. Singhaniya and Shri N. S. Singhaniya on the other hand, this June 8, 1986". Further the respondents heavily relied upon the above memorandum of settlement and stressed that the petitioner was entitled to the facilities as per the said memorandum of settlement for a period of five years which expired on June 8, 1991 and he has nothing to do with the affairs of the company. The first respondent vide his letter dated January 19, 2002, addressed to the petitioner stated that he has removed the petitioner from the directorship because of his illegal acts and demanded refund of Rs. 50,000. Further, respondent No. 1 addressed letter dated June 13, 2003, to the petitioner stating that the petitioner was removed from the directorship and he did not enjoy any status in respect of the company and he is simply a criminal trespasser. Further, it was stated that the agreement/memorandum of settlement dated June 8, 1986, for permitting the petitioner to use small space in lieu of his 15 per cent, share expired on June 8, 1991 and told the petitioner to vacate the premises immediately. The petitioner has not denied the receipt of the said letter. On perusal of the annual returns for the year ended August 31, 2000 and May 31, 2002, filed by the petitioner it shows that the petitioner was director and shareholder holding 150 shares. However, the annual returns for the years 2003, 2005 the name of the petitioner was not shown in the annual returns. Without depending upon the documents filed by the parties I called the information from the Registrar of Companies, Maharashtra, regarding the status of the petitioner in the company. The Registrar of Companies vide his letter dated October 14, 2011, addressed to the Bench Officer stated that the annual return made up to September 30, 2006, of the company, show that the petitioner has transferred 150 shares to respondent No. 1 on March 31, 2006 and enclosed copy of the annual return for the year ended September 30, 2006, at column VI the details of shares and transfers have been given wherefrom it is evident that the transfer of 150 shares by the petitioner in the name of respondent No. 1. The petition filed before this Bench in June, 2009 almost more than 21/2 years from the date of annual returns for the year ended March 31, 2006. There is no challenge to the transfer of shares by the petitioner on any point of time except stating that the transfer of 150 shares in favour of respondent No. 1 between September 10, 2005 to September 30, 2006, without the knowledge and consent of the petitioner and the petitioner has not executed any transfer deed nor received any consideration for his 150 shares. On the other hand the respondents contended that the petitioner ceased to be a member in view of the memorandum of settlement dated June 8, 1986, signed by the petitioner and respondents Nos. 2 and 3 and there is no challenge to the memorandum of settlement. The memorandum of settlement is a private pact amongst the petitioner and the respondents, presumably acted upon by the parties, even though the company was not a party to the agreement and much time has lapsed from the date of memorandum of settlement. It is also the case of the respondents that the shares were transferred to the petitioner being the elder brother without receipt of any money. The annual return is the only document which establishes the shareholding of the members of the company in the absence of other documents, viz., register of members, share certificates. In the present case, the petitioner has not enclosed any share certificates or copy of the register of members to prove his shareholding. The annual return for the year ended September 30, 2006, clearly shows that the petitioner has transferred his 150 shares to respondent No. 1. The petitioner has not challenged the said document. I hold that the petitioner is not a shareholder of the company on transfer of shares to respondent No. 1. The petition is not maintainable on the ground that the petitioner is not a shareholder of the company. Therefore, he is not entitled to any of the reliefs as prayed. With the above the company petition is dismissed. All interim orders stand vacated. No orders as to costs.