UNION OF INDIA Vs. GWALIOR POLYPIPES LTD.

JUDGEMENT

(1.) THE present petition is filed by the Union of India by invoking various provisions of the Companies Act, 1956 ('the Act') alleging certain acts of oppression and mismanagement in the affairs of respondent No. 1 -company and sought declaration that the meeting of the Board of directors held on 27th August, 2003, be held invalid and all the decisions taken thereat are null and void and also sought directions to respondent Nos. 2 and 3 to repay the monies advanced to several entities as stated in paragraph 6.5 and refund all the amounts drawn by them towards remuneration and handover the books of account and records and possession of the assets of the company. Shri M S Bhardwaj, learned counsel appearing for the petitioner narrated the brief facts. He submitted that the company was promoted by Shri Harish K Sahu (respondent No. 6), Mrs. Dr. Devila H. Sahu (respondent No. 7), Mrs. Rajesh Kumar, Mrs. Mithlesh K Sanghi, Mr. Devendra Kumar, Shri Bhushan and Mr. Virendra Kumar Gupta, who were subscribers to the memorandum and articles of association of the company. In the meeting held on 29th October, 1982, respondent Nos. 2, 3, 6 and 7 have been appointed as directors of the company. The authorised capital of the company at the time of incorporation was Rs. 25,00,000 and the same was increased to Rs. 1,50,00,000 on 5th August, 1985 and further increased to Rs. 10 crore on 10th September, 1992. The shares of the company were listed on the stock exchanges at Mumbai, Delhi and Indore. The company established its Unit -1 at Malanpur (MP), and Unit No. 2 at IP Industrial Area, Kota (Rajasthan) to manufacture Rigid and HDPE Corrugated PVC pipes and fittings. At the relevant time the company was managed by the Board of directors, viz., Shri Harish K Sahu (respondent No. 6) appointed as the managing director effective from 19th October, 1982; (ii) Shri Sanil P Sahu (respondent No. 2) appointed as the whole -time director; (iii) Shri Anil P Sahu (respondent No. 3) appointed as the director; and (iv) Mrs. Dr. Devila H Sahu (respondent No. 7) appointed as director from 29th October, 1982. Shri Sanil P Sahu (respondent No. 2) a chartered accountant and whole -time director was in -charge of finance, accounts and banking and had authority to operate banking accounts under his single signature apart from factory administration. Shri Anil P Sahu (respondent No. 3), a chartered accountant, was handling import -export, taxation, share transfer and other related matters of the company and was authorised to operate banking account under his single signature. While so a Board meeting was held on 27th August, 2003, attended by respondent Nos. 2 and 3. No other director attended the said meeting. No notice convening this meeting appears to have been given to the other directors. In the alleged Board meeting (a) Mr. Sudhir Awasthi (respondent No. 4) and Mr. Naresh Mangal (respondent No. 5) were appointed as additional directors, (b) it was resolved to file Form 32 stating that Mr. Harish K Sahu (respondent No. 6), the managing director has ceased to be a director in terms of section 283(1)(f) for non -payment of calls in arrears of Rs. 4,19,900, (c) it was resolved to file Form 32 stating that Mrs. Dr. Devila H Sahu (respondent No. 7), ceased to be a director in terms of section 283(1)(f) for non -payment of calls in arrears of Rs. 5,00,100, (d) Mr. Anil P Sahu was appointed as the managing director of the company for a period of 3 years with effect from 27th August, 2003, on a remuneration of Rs. 40,000 -5000 -50,000 per month with perquisites and authority was given for filing Form 25C with the Registrar of Companies ('RoC').

(2.) UPON inspection of the affairs of the company, the report of the inspecting officer, envisages the following issues which are prima facie detrimental to the interest of the company, its shareholder and public, therefore, require to take appropriate steps to regulate the affairs of the company in accordance with law.

(3.) IT is submitted that Shri Harish K Sahu (respondent No. 6) on whose false and frivolous complaint, the RoC, Gwalior initiated proceedings against respondent No. 1 and which has culminated in filing of the present petition, was not removed as director and as managing director as alleged. Respondent Nos. 6 and 7 had vacated their office as directors under section 283(1)(f) of the Act and ceased to be director of the company by operation of law. Respondent No. 6 was the managing director of the company till 6th August, 2003 and during his tenure as the managing director he himself had entered into transactions with some entities and advanced loans by issuing cheque on behalf of the company. Respondent No. 6 being the managing director and responsible for the day -to -day conduct and management of the affairs of the company took all decisions himself; and respondent Nos. 2 and 3 being his younger brothers had obeyed respondent No. 6 as they had full faith in him as their elder brother. During the course of inspection under section 209A of the Act, the petitioner has raised several queries on various alleged violations and sought replies from respondent No. 6 (old Board) and from respondent Nos. 2 and 3 (new Board). Respondent No. 6 gave false replies and agreed with the findings of the inspecting officer's report. It is denied that respondent No. 2 has ceased to be a director and has vacated his office on 4th August, 2003, for contravention of the provisions of sections 295 and 299 of the Act, as alleged. The petitioner has deliberately suppressed the true and correct facts about loan of over Rs. 17.12 lakh to Central India Sulphonators and a loan of over Rs. 11.05 lakh to Vishwa Extrusions (P.) Ltd., which were allegedly given by Sanil P Sahu (respondent No. 2) without informing the Board of directors of the company and resulted into default under sections 295 and 299 of the Act. The true facts about the transactions with the abovementioned firm/company are as under :