TAPAS SINHA ROY Vs. LINKMEN SERVICES PVT. LTD.

JUDGEMENT

(1.) IN this order I am considering Company Petition No. 21 of 2006 filed under Sections 111, 397,398,401 and 402 of the Companies Act, 1956 (hereinafter referred to as 'the Act') wherein the petitioners have made prayers to direct the respondents to cancel, rescind and/or withdraw the purported Special Resolution dated 9.7.2004, purporting to amend the Articles of Association inserting the Clause of forfeiture illegally/to set aside the oppressive amended clause in the Articles of Association; direct the respondents to cancel, rescind and/or withdraw the Special Resolution dated 28.5.2005 of forfeiting the shares of the petitioners Nos. 1 to 17; declare that the purported forfeiture of the shares held by the petitioners Nos. 1 to 17 are bad, illegal and null and void; direct a special investigation of the audit for the purpose of ascertaining the actual accounts of the company and for rendition of accounts by the respondent Nos. 2 to 6; direct the auditors to determine the quantum of loss incurred by the company on account of misfeasance and malfeasance of the respondent Nos. 2 to 6 and consequently direct the said respondents to reimburse the losses caused by them to the first respondent company together with interest. The petitioners have also prayed for the appointment of an administrator/Chairperson for holding AGMs of the respondent No. 1 company.

(2.) THE undisputed facts of the case are: The Respondent No. 1 namely, Linkmen Services Pvt. Ltd. incorporated on 4.6.1998 having its Regd. Office at D/7/1, Bangur Avenue, Salt Lake Town, Kolkata -700055 is a private limited Company formed by the local cable TV Operators as shareholders thereof. The company was incorporated to carry on the business of distribution of Satellite signals to the cable T.V. Operators and also to carry on the business controlling and managing the aforesaid distribution of satellite signal; to carry on the business of distribution of Internet connection; producing and telecasting telefilms and also telecasting advertisement; sale, lease, hire, maintenance and repairs of electrical and electronic equipment; software development and marketing of software; to carry on the business of courier and communication of message through E -mail, Internet and other electronic media, etc. The company as an MCR (Master Control Room) sells cable TV signals to the local cable operators who are also the shareholders of the company. The company buys signals from MSO (Multi System Operators), who in turn buy signals from the Channel Owner (Zee, Star, BBC, etc). Channel owners have uplinks and they throw their signals to the Satellite wherefrom they are beamed down to the earth. Channel owners provide decoders to Multi Service Operator(s) (MSOs) who 'buy' such signals from the channel owners. MSO gives connection to Master Control Room(s) (MCRs) who 'buy' such decoded signals from MSO. MCRs then in turn give connections to Cable Operators who buy signals from MCR. Lastly Cable Operator(s) gives connections to end user(s)/ viewers for which the end user/viewers pay money to the Cable Operator. Since the Channel owners have to pay hefty amount towards usage of Satellite they, to remain commercially viable, charge for signals from MSOs who in turn to ensure their commercial survival look for bulk consumers (MCRs) who are having a large base of Cable Operators and this is done by offering discounts to MCRs. In turn MCRs for their economic viability and sustenance in market pool together substantial number of Cable Operators, often grouping together in the form of a Company so that maximum benefit of discount is derived by all which again is in the economic interest of all the participants/cable operators. Such group of Cable Operators becomes MCR to avail the best of deal by way of discount from MSO for each of its member operator. Thus in the present case besides being shareholders, all the shareholders are also having business relation with Company for their purchasing of signals from the company. The cable operators/shareholders of the company do not get direct connections from MSO. The cable operators ultimately provide signals to the viewers. Hence all the shareholders are having dual relationship with the company, one as shareholder and the other as its customer. As a customer the shareholder pays for the signals received from the company (Master Control Room). To augment its income the company also runs its own channels through DVD/computer exhibiting movies and local programs, etc. and thereby attracting local corporate houses for telecasting their advertisements through such channels. Larger viewer base enables the company to purchase signals at considerable concessions/rebates from the MSO. Profit from the advertisements and also the concessions from MSO are passed on to the shareholders/cable operators. The authorized share capital of the company is Rs. 5,00,000 divided into 50,000 equity shares of Rs. 10/ - each. As per the Memorandum and Articles of Association of the company the total paid up share capital of the company is Rs. 4,88,000 divided into 48,800 equity shares of Rs. 10/ - each. The petitioners as a bulk hold/held 16800 shares out of 48,000 shares in the respondent No. 1 company constituting approx 31% of shares. Petitioner No. 12, Shivaji Rao is also a Director/Promoter of the company. As on the date of hearing petitioner No. 16 withdrew his support to the petition.

(3.) REGARDING the allegation of 'oppression' Shri Rana Mukherjee, counsel for the petitioners argued that the petitioners No. l to 17 were prevented from participating in any annual General Meeting or any meeting of the members of the respondent company since 2002; the respondent company was purportedly trying to take steps for forfeiture of issued share capital of the petitioners. The Memorandum and Articles of Association of the respondent company did not provide for forfeiture of any share; no notice was given by the company to any of the petitioners calling upon any of the petitioners to explain as to why the shares of the petitioners should be forfeited; the purported exercise of power of forfeiture of the shares of the petitioner by the respondent Nos. 1 to 8 had been done malafide, contrary to the provisions of law and is oppressive; the respondents deliberately with malafide intention, illegally and wrongfully tried to re -allot the shares held by the petitioners allegedly forfeited by the respondent company, the respondent Nos. 2 to 6 invited them to apply for allotment of the alleged forfeited shares so as to dilute the shareholding by the petitioners. It was argued that the purported forfeiture of the shares is in contravention of Section 100(8) read with Schedule 1 table A Article 29 of the Companies Act, 1956. Despite solemn order of the Civil Court and despite service upon the respondents, they have illegally and nonchalantly with their defiant attitude violated such order by holding the AGM (Annual General Meeting) at Hayyat Regency Hotel, Kolkota on 30.9.2005. The Civil Court's injunction passed in suit (filed by P -1 to 10) has been violated by the respondents. However, it was argued that the instant petition is of a wider nature encompassing the entire gamut of reliefs claimable under Sections 397 and 398 read with Section 402 of the Act and pendency of a Civil Suit on one of the grounds which is common is not a ground to oust the petitioners in the instant petition where reliefs claimed are of a wider nature and can be granted only by the Board (CLB). In any event such prayers and reliefs as claimed are maintainable only under the provisions of the Companies Act before the CLB and the petitioners have every right and are entitled to maintain this petition independent of the Civil Suit which of course the petitioners, upon advice have taken steps to withdraw. Without a valid and proper notice the respondents had conducted an extra -ordinary general meeting at the Administrative Office of the company, and illegally passed a special resolution regarding expulsion and forfeiture of shares of the members; the respondents illegally amended and modified the Memorandum and Articles of Association and such modification and alteration in Articles is in complete violation of Section 31 of the Act. Shri Rana Mukherjee, Counsel for the petitioners pointed out that the respondents have admitted that they have forfeited the shares in terms of the Clause 7 of the purportedly amended Memorandum and Articles of Association of the respondent No. 1 company. Pointing out to further acts of Oppression it was stated that during pendency of the instant petition the respondents have removed petitioners Nos. 11 to 15 and 17 as Members of the company on the ground that they have not paid their dues "in the usual course of business" to the respondent No. l company. The malafide of the action is writ large and the abuse of the so -called amended Article is also apparent on the face of it in as much as the dues which have nothing to do with the independent rights of a member have been sought to be clubbed and used as a handle by the respondent to forfeit the shares of the said petitioners. It was argued that dues in the usual course of business have no nexus or have nothing to do with the rights of a member qua a company. The amended Article is, therefore, non est in the eyes of law being illegal, being a Clause fomenting oppression and is a handle which gives unwarranted power to the management to disqualified members by forfeiting the shares on specious and alien pleas, alien to corporate jurisprudence.