KAMRUP DEVELOPERS P LTD Vs. DEEPAK LOHIA

JUDGEMENT

(1.) An order dated 31.12.2001 passed by the Company Law Board, Principal Bench, New Delhi in a proceeding registered under sections 397/398 of the Companies Act, at the instance of the respondent No. 1 herein, has been put to challenge in the present appeal filed under section 1 OF of the Companies Act

(2.) It will be convenient to recapitulate the essential facts necessary for disposal of the present appeal by referring to the appellants as the Agarwal Group and the contesting respondents herein as the Lohia Group. The respondent No. 1 herein (referred to as the petitioner) had approached the Company Law Board with an application under sections 397/398 of the Act alleging oppression and mismanagement in the running of the affairs of the appellant company, i.e, M/s Kamrup Developers Private Ltd. According to the petitioner, on the basis of an understanding reached between him and the Agarwal Group, the appellant company was incorporated in the year 1998 with an authorized capital of 5000 equity shares of Rs. 100/- each. The paid up capital of the company consisted of 200 equity shares of Rs.100/- each, out of which the petitioner was allotted 100 shares and the remaining 100 shares were held by one Ashok Kumar Agarwal, respondent No.3 before the Company Law Board (appellant No.2 herein). The second respondent before the Company Law Board, i.e, Shri Bhajanlal Agarwal was the owner of a plot of land, which was allowed to be developed by the appellant company and for the said purpose, the aforesaid second respondent had executed an Irrevocable Power of Attorney in favour of the company in return for a consideration of Rs. 16 lakhs. In addition to the paid up capital of 100 shares each, both the groups contributed Rs.2.5 lakhs each as share application money. The petitioner by himself and through his associates had brought in an additional amount of Rs.2.25 crores to the company either as unsecured loans or as advances against booking of space. The further case of the petitioner is that as he was a permanent resident of Calcutta, the day to day management of the company was entrusted to the third respondent. Sometime, in the month of November, 1999, some discrepancies were noticed in the accounts of the company, which the third respondent could not satisfactorily explain. To settle the aforesaid dispute, an Arbitrator was appointed and a Memorandum of Understanding was reached by and between the parties on 2.5.2000. However, the said Memorandum of Understanding was not honoured by the Agarwal Group and thereafter the Agarwal Group, by fabricating the records maintained by the company, had inducted two Additional Directors belonging to the Agarwal Group thereby reducing the Lohia Group to a minority. The aforesaid actions of the Agarwal Group were contended by the Lohia Group to be in utter breach of the understanding reached between the parties that both the parties were to have equality of representation in the Board of Directors. It was further contended, before the Company Law Board, that on 1.9.1999 allotment of 2600 shares were made in favour of the Agarwal Group whereas 2400 shares were allotted to the Lohia Group. The aforesaid allotment was again made by fabricating and falsifying the company records and the action of the Agarwal Group was again in breach of the understanding reached between the parties that both the sides were to have parity in the share holding of the company. There was a further allegation made before the Company Law Board that the Agarwal Group had not been holding the Annual General Meetings or the Board Meetings of the company. On the aforesaid broad basis, oppression and mismanagement of the company was alleged by the Lohia Group.

(3.) The case projected by the Lohia Group before the Company Law Board was resisted by the Agarwal Group by contending that no understanding was reached between the parties to maintain parity in the share holding or in the representation in the Board of Directors as contended by the Lohia Group. Rather, the understanding was that the Agarwal Group would hold the majority shares. The allotment of shares as well as the induction of two Additional Directors were stated to be pursuant to decisions taken by the Board of Directors, to which the Lohia Group was a party. The allegation of mismanagement in not holding the Board Meetings and the Annual General Meetings was denied. This appears to be broad trend of the case projected by the Agarwal Group before the Company Law Board.