D. RAMKISHORE Vs. VIJAYAWADA SHARE BROKERS LTD.

JUDGEMENT

(1.) THIS appeal is filed, under Section 10F of the Companies Act 1956, by 22 shareholders of the first respondent -company aggrieved by the order of the Company Law Board in C.P. No. 56 of 2002 dated November 10, 2006 (D. Ramkishore v. Vijayawada Share Brokers Ltd., [2007] 140 Comp Cas 180). The appellants herein, 22 in number, holding in excess of one -tenth of the total issued capital, and constituting more than one -tenth of total number of members of the respondent -company, approached the Company Law Board alleging certain acts of oppression and mismanagement in the affairs of the company, at the instance of the second respondent, relating mainly to (a) non -commencement of any activity of the company; (b) debiting personal and fictitious expenditure to the profit and loss account of the company; (c) misappropriating funds of the company by not accounting for the rentals, and other income, in the books of accounts; (d) illegal sale of the company's landed property at a low price and utilizing the difference, of the unaccounted amount, for acquiring shares of other members in order to increase their voting power; (e) illegal removal of the directors and usurpation of the power of management by appointing their kith and kin on the board of directors of the company; (f) misuse of the office equipments for his personal business; (g) illegal writing off of the assets of the company by debiting the profit and loss account; (h) illegal forfeiture and re -issue of shares for personal gain; (i) non -maintenance of the minutes book of the meeting of the board of directors; and (j) non -delivery of the share certificates of the majority shareholders of the company. The petitioners sought the following reliefs from the Company Law Board:

(2.) THE Company Law Board, while rejecting the contentions, however, held that it was immaterial whether or not the petitioners had made out a case under Section 397/398 for grant of any relief to bring to an end the acts complained of, that these and other developments referred to in its order had resulted in a deadlock in the affairs of the company, that the relationship between the shareholders had not been reconcilable in view of several rounds of litigation and that the parties had lost mutual trust and confidence. In exercise of the powers conferred under Section 402, the Company Law Board directed that the company should convene and hold a meeting of its members to elect directors not exceeding five in number, upon which the Board so constituted would appoint one of the directors to be the managing director, that hon'ble justice Mr. P. Ramakrishnam Raju (retd.) would preside over the meeting convened in terms of the order, that he was at liberty to take the services of any practicing company secretary of his choice in the discharge of his functions, that the chairman should work out the entire modalities of convening and holding of a general meeting in consultation with the company, that the chairman of the meeting should forward a report on the proceedings of the general meeting within ten days of conclusion of the meeting, that the board of directors constituted in terms of the order should forthwith replace the existing board and would (a) manage the day -to -day affairs of the company as per the memorandum and articles of association of the company; (b) take necessary steps, for due and proper sale of the landed property belonging to the company, under the supervision of the chairman and distribute the proceedings to all the shareholders according to their holding in the company; (c) deliver share certificates to the members in respect of their holding in the company. The Company Law Board confirmed the sale of 570 sq. yards of the landed property already effected and registered by the company in favour of third party purchasers and held that the remuneration of the chairman and the practicing company secretary should be fixed in consultation with the company and should be borne by the latter. While disposing of the company petition, the Company Law Board observed that the connected applications also stood disposed of accordingly, that all the interim orders were vacated and that liberty was being given to apply to the Company Law Board in case of any difficulty in implementing the order.

(3.) THIS Court, in its order dated April 20, 2007, noted that the advocates commissioner had represented that the total extent of land owned by the company was in three bits of 3,420 square yards, 975 square yards and 350 square yards, that these three bits were separate and distinct with different boundaries and were not contiguous and that it would be proper to sell these extents of land under separate lots. This Court directed the advocates commissioner to effect sale of land under three separate lots, i.e., lot No. 1 consisting of 3,420 square yards, lot No. 2 consisting of 975 square yards and lot No. 3 of 350 square yards, fixing the minimum upset price at Rs. 35 lakhs, Rs. 11 lakhs, and Rs. 4 lakhs respectively, after carrying out publication in "Vaartha" and "Eenadu" main editions; and "Andhra Jyothi" and "Deccan Chronicle" Vijayawada local editions. The advocates commissioner were directed to negotiate with the bidders and, thereafter, file a report before the court in terms of the order passed by the court earlier. On receipt of the report of the advocates commissioner this Court, in its order dated June 11, 2007, accorded them permission to deposit the entire amount received by them, both by way of demand drafts and cash, along with a detailed statement of the amounts received, in the registry of the High Court. On June 26, 2007, this Court took note of the memo of the advocates commissioner wherein they had stated that cash of Rs. 30,000 and demand drafts for Rs. 2,30,50,000 were deposited in the accounts section, of the High Court registry on June 18, 2007. On applications being filed by the unsuccessful bidders seeking refund of the earnest money deposit, paid by them along with the tender form, this Court permitted refund of the earnest money deposit to some of them.