FRANCIS CLEETUS Vs. RASHTRA DEEPIKA LTD.

JUDGEMENT

(1.) THE present petition is filed under sections 397 and 398 of the Companies Act 1956 ("the Act") alleging certain acts of oppression and mismanagement in the affairs of respondent No. 1 company by the respondents and sought various reliefs as prayed in paragraph 8 of the petition. Shri Ravichandran, the learned practising company secretary for the petitioners narrated the brief facts of the case. He submitted that petitioner No. 1 is a director of the company with effect from January 10, 2008. He is also the chairman appointed by the board of the company in the board meeting held on September 29, 2009, till the conclusion of the 21st annual general meeting. The board of the company on September 29, 2009, passed a resolution to this effect taking into consideration and in view of the understanding with the board of the company due to the fact that the first petitioner is the largest single shareholder of the company holding 4,15,000 equity shares of Rs. 100 each which represents more than 14 per cent. of the total issued and paid -up share capital of the company. The present board of the company became an illegal board and therefore not entitled to manage the affairs of the company since there is an illegal ouster of respondents Nos. 16 to 18 and with the intrusion of respondents Nos. 7 to 15 claiming themselves as having been appointed by the board of the company as additional directors with effect from January 6, 2011. In fact, respondents Nos. 7 and 8 had already resigned as directors of the company with effect from December 22, 2010 and Form No. 32 to this effect was filed before the Registrar of Companies on December 24, 2010. The tenth respondent was appointed as an additional director of the company by the board in its meeting held on May 28, 2010, under section 260 of the Companies Act, 1956. He could hold the office of additional director only up to the date of the 21st annual general meeting which fell due on September 30, 2010, but got extended by the Registrar of Companies, Kerala under section 166 up to December 31, 2010. His subsequent appointment as additional director of the company on January 6, 2011, is a fraud on the company and its members.

(2.) THE first respondent -company does not have a valid board since the validly appointed members of the board are not allowed to function as directors of the company and the company is now run by certain individuals who, in blatant violation of the Act, usurped the offices of the directors styling themselves as the directors on the board of the company. Form No. 32 to this effect has also been filed before the Registrar of Companies, Kerala containing false information and they are liable to be prosecuted under section 628 of the Act. The second respondent is now illegally acting as the chairman of the company and he has filed Form No. 32 claiming a change in his designation. The post of the chairman is not created under the Act, but the said post in the first respondent -company is a creation by the articles of association of the company. It is to state that so far no resolution has been passed by the board of the company to remove the first petitioner from the post of chairman and therefore the petitioner is entitled to continue till the conclusion of the next annual general meeting of the company as decided by the board in its meeting held on September 29, 2009. The share register of the company is in a state of total mess and disorder and requires extensive rectification. As per the order passed by this hon'ble Bench on December 30, 2008, any allotment of shares or transfer of shares will be subject to the outcome of C.P. No. 69 of 2007. By the said order, the earlier order dated March 25, 2008, made in C.P. No. 69 of 2007 directing the company to maintain the shareholding pattern until further orders, was modified to the above extent. On account of the said order, the first respondent -company could not have enhanced the existing authorised share capital of the company. Even the allotment or transfer was (to be) made subject to the outcome of C.P. No. 69 of 2007, which is still pending before this Bench. However, without seeking permission of this hon'ble Bench and in violation of the order to maintain the shareholding pattern, the authorised share capital of the company was increased from Rs. 20,00,00,000 (rupees twenty crore) consisting of 18,00,000 equity shares of Rs. 100 each and 2,00,000 preference shares of Rs. 100 each to Rs. 30,00,00,000 (rupees thirty crore) consisting of 28,00,000 equity shares of Rs. 100 each and 2,00,000 preference shares of Rs. 100 each by amending the capital clause of the memorandum of association and articles of association of the first respondent -company at the 18th annual general meeting held on March 31, 2008. Even when the authorised equity share capital of the company was Rs. 18,00,00,000 (rupees eighteen crore), the shares were allotted in excess of the said Rs. 18,00,00,000. However, subsequently an amendment was brought in at the 20th annual general meeting of the company held on September 29, 2009, by passing two special resolutions as follows for the purpose of amending the articles of association and memorandum of association:

(3.) THE third respondent, who is an interested director within the meaning of section 287 of the Companies Act, 1956 participated in the said meeting in violation of section 300 of the Companies Act, 1956, without disclosure of his interest in the said contract of appointment as the managing director of the first respondent -company in the said meeting. The third respondent failed to comply with the said requirement and he is liable to be punishable with fine which may extend to Rs. 50,000 as provided under section 299(4) of the Companies Act, 1956.