MADHAVI BALLAKUR Vs. KRISHNA REDDY AND ORS.

JUDGEMENT

(1.) THE present application is filed by the applicant who is 3rd respondent to the main CP, seeking various reliefs as prayed in para 7 of the application inter alia praying this Bench to vacate the interim order dated 04.08.2014 passed by this Bench. Shri Udaya Holla, learned senior counsel appeared for the applicant submitted that the company petition filed by the respondents 1 to 5 herein is not maintainable. He submitted that the applicant is aggrieved by thus interim order which is causing irreparable damage to her interest and therefore she humbly requests the Hon'ble Bench to vacate/modify this order immediately, He submitted that the petitioner No. 1 i.e. Mr. Krishna Reddy had approached this Hon'ble Board with unclean hands. The 1st respondent filed CA No. 2/2014 before this Bench and the same has been withdrawn. While withdrawing its petition 1st petitioner submitted before this Hon'ble Board that there is a fair chance of settlement. In fact, the 1st petitioner gave the respondents a notice of withdrawal dated 10.07.2014 received by them on 15.07.2014. He withdrew CA No. 2 of 2014 on 14.07.2014 itself slating before the Hon'ble Court of a fair chance of settlement but in fact he filed a case against the applicant and 2nd respondent of CP No. 37 of 2014 before Special Court for Economic Offences, Bangalore on 11.07.2014. The pleadings of that case are more or less similar to CP No. 37 of 2014. The Hon'ble Board caught unaware of the oblique motives of the petitioners allowed certain interim reliefs. These reliefs have created a situation which is clearly affecting the interest of other shareholders including the applicant. The applicant. Mrs. Madhavi Ballakur has been a shareholder of the company since 2003 The shares were given to her following an MOU with the existing shareholders and the applicant's husband and 1st petitioner. In fact since 2003 she always had more than 10% shares. That post the agreement and payment of consideration amount by applicant and 2nd respondent of CP No. 37 of 2014, certificates were handed over to them. These share certificates bear also signatures of 1st petitioner. The 2nd petitioner had filed a case of fraud with Special Court for Economic Offences. Bangalore on 11.07.2014 with more or less the same pleadings as before this Hon'ble Board the same is nothing but a forum shopping. The applicant No. 1 submits that on one end, the interim relief has been granted to the petitioners in company petition No. 37 of 2014 which basically prevents the applicant from holding the EOGM and her appointment as additional director of the company and on other end 1st petitioner and his son are draining the profits of the company. This is causing serious prejudice to the interest of the applicant. The applicant submits that the relief sought in CP No. 37/2014 were deceitfully and fraudulently crafted. The applicant submits that the 1st petitioner has signed several annual returns on various occasions in past many years acknowledging the shareholding pattern and thus ownership of the applicant. The applicant submits that some of these annual returns were also digitally signed by the 1st petitioner. The applicant submits that as per section 95 of the Companies Act. 2013 which is same as section 164 of the Companies Act. 1956 annual returns are to be treated as prima facie evidence. Section 95 is reproduced below:

(2.) Shri K.V. Satish. learned counsel appeared for the respondents/petitioners submitted that the petition is maintainable and the respondents never disputed the petitioner's holding which is required under section 399 for Tiling a petition under section 397 or 398. He further submitted that the R1 Company was incorporated with petitioner No. 1 and three other persons in the year 1996. The petitioners disputes the purported MOU dated 29.12.2002 on the ground that the MOU was signed only by four shareholders and the remaining shareholders have not signed. The petitioners disputes the very existence of MOU and the signature of the petitioner No. 1 allegedly affixed to the said MOU has been forged. The petition is very much maintainable as per section 399 of the Companies Act. He further submitted that the annual returns for the year 2003 does not reflect any transfer of shares and consequently none of the respondents can claim to be the shareholders. As per article 12 to 23 of the Articles of Association of the R1 Company stringent guidelines have been provided in respect of transfer of shares which is applicable to even transfer of shares between shareholders inter se and also to any outsider. Obtaining of consent of each shareholder of the company is a must for any transfer of shares. Since the petitioners were not aware of any shares allotted in the year 2003 by the company, the petitioner caused an inspection of records of the company in the Registrar of Companies. However no records pertaining to the year 2003 was found in the website of the Ministry of Corporate Affairs. It was further noticed from the annual returns filed by the 2nd respondent to the company petition that the name of the applicant is also inserted in the list of shareholders stated to be holding certain equity shares of the company and that since there was no allotment of shares in favour of the applicant even as per the admission of the 2nd respondent, the 1st petitioner in his capacity as a director of the company issued a notice dated 26.03.2014 by RPAD due to the applicant calling upon her to establish by way of documentary proof as to how she claims to be a shareholder of the company. While so, the applicant sent a notice dated 12.06.2014 to the 1st petitioner requisitioning him to hold the EOGM of the R1 Company to consider for appointment of applicant as a director of the company. The applicant claims that she is holding 13% of the shares. The petitioner replied to the notice and reiterated that no shares have been transferred in favour of the applicant and the applicant failed to furnish any documents establishing transfer if shares in her favour and no share certificates have been produced by her, This Bench granted the interim relief on the prima facie case made out by the petitioners. The interim stay granted by this Bench cannot be vacated and the matter needs to be adjudicated. He further submitted that the petitioners have raised various other issues in the petition and all the issues are needed to be addressed, therefore the applicant has not made out any case seeking vacation of interim order and no case has been made out to dismiss the petition. In support of the case he relied upon the following citations.

(3.) Heard the learned counsel appeared for the respective parties analysed the pleadings and documents. The only point for consideration is whether the petition is maintainable and any case is made out to vacate the interim order. The respondents herein have filed the petition under various provisions of the Companies Act, 1956 alleging various acts of oppression and mismanagement in the affairs of the company and sought various main and interim reliefs. The main reliefs which are sought in the petition are seeking declaration that the allotment of 3,50,000 equity shares made in favour of respondent No. 2 i.e. Arun Ballaku by utilising the unsecured loan given to the company by the petitioners 2 to 5 as null and void. Also seeking directions to set aside the allotment of 5,70,000 equity shares made on 14.09.2010 as null and void. Further sought declaration that the holding of 38,612 equity shares in the name of respondent No. 2 i.e. Arun Ballaku by way of transfer of shares as null and void. Also sought declaration that the holding of 1,13,078 equity shares in the name of the petitioner by way of transfer as null and void. Also sought direction seeking rectification of register of members to reflect the original shareholding of the petitioners aggregating to 2,78,800. Also sought declaration that the annual returns filed by the 2nd respondent on behalf of the company for the years 2006 -2011 and any other documents mentioning the names of respondents 2 to 9 as shareholders as false and incorrect. Also sought direction to the 2nd respondent to restore the sum of Rs. 57 lakhs illegally appropriated by him from the unsecured loan account and share application money account of the company towards allotment of 5,70,000 shares along with interest @ 24% per annum. Further sought directions from the Bench to remove the 2nd respondent from the post of director of the company in view of various acts such as breach of Trust, fraud and misfeasance committed. Apart from the main reliefs the petitioners by way of interim relief (e) of para IX sought direction to restrain the applicant herein from holding any EOGM seeking her appointment as a director of the company in terms of the requisition dated 12.06.2004. The petition was mentioned on 04.08.2014. this Bench granted the above interim relief and the same was extended until further orders on 11.08.2014. Thus the interim order of this Bench dated 04.08.2014 and extended on 11.08.2014 is continuing. From the Memorandum and Articles it is evident that the 1st petitioner namely, M. Krishna Reddy is one of the subscribers to the memorandum and subscribed 100 equity shares. It is an admitted fact that the 1st petitioner is a promoter of the company. At the time of incorporation the authorised capital of the company was Rs. 30 lakhs divided into 3,00,000 equity shares and the authorised capital was increased to Rs. 1 crore w.e.f. 16.08.2010 divided into 10,00,000 equity shares and the paid up capital of the company is Rs. 84,58,000/ - divided into 8,45,800 equity shares of Rs. 10/ - each - It is also contended that the 1st petitioner is one of the promoter director and the petitioners put together hold over 99% of the equity shares of the company. It is an admitted fact that 2nd respondent to CP was appointed as director w.e.f. 31.03.2003. It is also contended that the said respondent provided a sum of Rs. 7,75,000/ - which was treated as unsecured loan in his name and he has not made any other investment in the company. The grievances of the petitioners are that the 2nd respondent is not cooperating with the petitioner and not discharging his functions as director though he is a joint secretary to the accounts. The petitioners contended that the allotment of shares in the year 1997 and before 31.03.2003 the 1st petitioner was holding 2,31,000 shares, the 2nd petitioner holding 8,770, the 3rd petitioner holds 10,000 equity shares, the 4th petitioner holds 15,000 shares and the 5th petitioner holds 10,000 equity shares. It is submitted that the petitioners put together were holding 2,75,800 equity shares prior to 31.03.2003. The petitioners further contended that the R1 Company received an amount of Rs. 2,42,000/ - from P5 on 31.03.2003 and no shares have been allotted to P5. Further it is alleged that an amount of Rs. 52,46,075/ - was lying to the account of the petitioners reflected in the balance sheet since 1997 -1998. It is alleged that the respondents have appropriated an amount of Rs. 54,58,000/ - (Rs. 52,46,079/ - + Rs. 2,42,000/ -) and the same has been appropriated towards allotment of shares to the extent of 5,70 lakhs equity shares allotted during the year 2010 -2011. It is contended that the said amount has been illegally appropriated towards allotment of shares by the applicant/respondent and there is no consent from the petitioners to such allotment. It is contended that the said art of the 2nd respondent is an absolute fraud and breach of trust played not only against the petitioners but also against the company. It is contended that though the balance sheet as at 31.03.2011 has been signed by the 1st petitioner, he had done it in good faith without noticing the reduction in unsecured loans. It is contended that the balance sheet as at 31.03.2011 was brought to the registered office of the company by the 2nd respondent for signature and as the 1st petitioner did not suspect the motive of the 2nd respondent, he affixed his signature to the same. After the said illegal act committed by the respondent, the company has not filed the subsequent balance sheet for the year ending 31.03.2011 onwards. It is contended that the 2nd respondent stopped visiting the registered office of the company and never came forward to rectify said illegalities. It is also contended that the 2nd respondent had prepared a letter dated 25.10.2013 as if written by the 1st petitioner and addressed to the 2nd respondent, handed over the same and insisted the 1st petitioner to sign the same by stating that the same is a formal letter with regard to the KIADB land issue and the 1st petitioner can just sign it is contended that the 1st petitioner refused to sign the letter and the 2nd respondent insisted the petitioner that if the petitioner pays a sum of Rs. 7.5 crores he will exit the company. The petitioners contended that after the said incident the company is in a deadlock situation. The petitioners also contended that the name of the applicant is inserted in the list of shareholders and no shares have been transferred in her name. The petitioner disputes the MOU. The learned senior counsel for the applicant contended that the applicant is a shareholder of the company and her name reflects in the annual returns filed by the company. The respondents have filed a set of photocopy of the annual returns for the years 30.09.2005, 30.09.2006 and 29.09.2007. From the perusal of annexure to the annual returns the names of the petitioner and the applicant have been mentioned. The learned senior counsel for the respondents submitted that the annual returns is a public document and it establishes that the applicant is a shareholder and has right to issue notice calling requisition. In support of his stand the learned senior counsel relied upon various decisions. On the other hand the learned counsel for the petitioner submitted that there is no transfer of shares to the applicant and the applicant has not produced the documentary proof in respect of her shareholding. Further he contended that the respondents have appropriated the amount of the company by allotting shares which is illegal. He was relying upon the articles of the company whereby article prohibits the transfer shares to a non member of the company. He contended that the applicant relied upon the MOU which the learned counsel for the petitioner disputed. The applicant filed photocopy of the alleged MOU dated 29.12.2002 wherein certain groups have been mentioned as transferors and certain individuals and associates as transferee. At the moment I am not going into the validity of the MOU. However a bare perusal of the MOU the name of the applicant is not appeared in the transferee. However. Arun Ballakur (2nd respondent) & Associates name is mentioned as transferee under the caption of the transferee. The petitioners also dispute the filing of annual return and the same has been challenged in the petition. In brief the petitioners have alleged that the respondents have made false statement in the returns, forged the signature of petitioner no. 1. misappropriation of Rs. 52,46,079/ - and allotment of shares as illegal. As stated supra the petitioners have alleged various acts of oppression and mismanagement and sought the reliefs as stated therein. In view of the issues. I am of the opinion that the petition cannot be dismissed at threshold without conducting a detailed enquiry. Looking at the nature of reliefs sought by the petitioners a detailed enquiry is necessary to decide the issues. Even taking into account the total number of members of the company as 18, the petitioners 5 in number can maintain the petition. Also the petition is maintainable even taking into consideration the respondents' contention that the petitioners put together hold 35% as admitted by them in their counter affidavit at para (e). Keeping open all the issues to be decided after a detailed enquiry, I am of the view that the petition is maintainable. No specific grounds have been made out seeking vacation of interim order. Further the applicant has sought multiple prayers in a single application the same is not maintainable as per the CLB Regulations. The application is liable to be dismissed even on that ground. It is not out of place to mention that this Bench in its order dated 04.08.2014 recorded the statement made by the learned counsel for the petitioner stating that the 2nd respondent i.e. Mr. Arun Ballakur is not attending the office and the petitioner has to visit the 2nd respondent's residence every time to take the signatures on the cheques. It is also recorded that the 2nd respondent is not cooperating in signing the cheques. The Bench advised the 2nd respondent to cooperate with the petitioner in signing the cheques for the payment of salaries of the employees, statutory dues, suppliers and any other expenditure to meet day to day requirements of the company. Further the Bench in its order dated 11.08.2014 recorded the submissions made by the learned senior counsel for the respondents that the 2nd respondent will sign the cheques and cooperate with the petitioner in smooth functioning of the company. From the above, I am of the view that it is a clear case of lack of cooperation on part of the 2nd respondent i.e. Arun Bhallakur with the petitioner in smooth functioning of the company. In such a situation a duty cast upon the CLB to regulate the affairs of the company without prejudice to the generality of the powers of this Bench under section 397 and 398 of the Act, The citations relied upon by the learned senior counsel for the applicant is in relation to dealing with the main Issues. Since, I am not going into the merits of the case at this stage, the citations relied upon by the learned senior counsel will be considered when the main issues are decided. Accordingly, the CA No. 3/2014 is dismissed. The CP is posted on 08.07.2015 at 10.30 AM.