1. M/s Parwanoo Enterprises (P) Ltd. (hereinafter referred to as 'company') is a company incorporated in the State of Himachal Pradesh under the provision of the Companies Act, 1956 (hereinafter referred as the 'Act').
2. Shri Ashish Das Gupta (hereinafter referred as the petitioner) one of the shareholders of the company and claiming to be one of the directors and holder of 50% shares of the company in his own name and with the balance shares stated to be held jointly by him with Shri Satvinder Singh (hereinafter referred to as 'respondent') has made an application under Section 186 of the Act seeking directions from this Board for convening an EGM as it is not possible for the company to do so due to non-cooperation amongst the only two directors/shareholders of the company. It is alleged that due to non-cooperation of the respondent, it has become impossible to function in a normal manner resulting in non-finalisation of accounts for the year 1996-97 and 1997-98, non-holding of Board meetings after March, 1998, and non-holding of annual general meeting after the last one held on 30.9.1996. It is further alleged that the company has only two shareholders and directors and since the respondent, the only other shareholder/director of the company, is not co-operating by not attending the Board meetings resulting in the non-holding of Board meetings for want of quorum.
3. In reply to the said petition, Shri Satvinder Singh, respondent, disputed the allegations regarding non-holding of annual general meetings in the years 1997 and 1998. It is further submitted that the accounts for the year 1996-97 have been duly approved in the annual general meeting held on 30.9.1997. In his reply, he further disputed the contention of the petitioner regarding the shareholding pattern claimed by him. It is further submitted that the respondent and Shri Bhushan Ahuja are the directors of the company and the petitioner has been removed from the directorship of the company due to misappropriation of the funds of the company. Alongwith his reply, he also filed certified copies of the annual return made as on 30.9.1997; balance sheet as at 31.3.1997 and copies of Form No. 32 for appointment of Shri Bhushan Ahuja as a director and cessation of petitioner as a director of the company.
4. On receipt of the respondent's reply, the petitioner took the inspection of records of the company filed in the Office of the Registrar and thereafter, he moved another petition under Sections 397 and 398 of the Act alleging that the affairs of the company are being mismanaged and conducted in an oppressive manner to the petitioner. His main allegations are that false, fabricated and forged documents have been filed with the Registrar showing petitioner having ceased to be director of the company and appointments of Shri Bhushan Ahuja as the director of the company. It is further alleged that with a view to show that respondent holds more than 50% of the equity capital of the company in the following manner: Forged and fabricated annual return made as on 30.9.1997 has been filed without any basis.
4.1 The above shareholding pattern is stated to be patently incorrect, and shown with the intention to reduce the petitioner from the status of majority shareholder to the minority shareholder and vice versa.
4.2 As the allegations in both petitions are common, they were heard together and are being disposed of by this common order.
5. According to the petitioner, in the year 1986, he bought 1,000 equity shares from Shri Narendra Nath and family, one of the original co-promoters of the company and another 1,000 equity shares from Sirmour Sudberg Auto Ltd. and thus became 50% shareholder of the respondent-company. It is further stated that in the year 1995, the petitioner purchased balance 2,000 equity shares from Shri Praveen Kant and Shri R.R. Garg (1,000 shares from each of them) and the said shares were transferred in the name of the petitioner as first named shareholder and Shri Satvinder Singh as the second named shareholder.
Thus, from 6 October, 1995, the petitioner and respondent No. 2 are the only two shareholders of the company and their shareholding is as under:Ashish Das Gupta 2,000 50%Ashish Das Gupta jointly 5.1 The above two shareholders are only two directors of the respondent-company. The aforesaid position is also confirmed as per annual return made upto 30.9.1996 filed with the Registrar of Companies duly signed by the petitioner as well as respondent and the contents of the same stands admitted.
6. According to the petitioner, later on forged/fabricated annual return as on 30.9.1997 has been filed with Registrar of Companies, Jalandhar, showing the shareholding pattern as under: 6.1 It is also alleged that the directorship of the company has also been altered as under: (1) Shri Bhushan Ahuja is stated to have been appointed as an additional director in the Board of directors meeting held on 31.3.1997. It is stated that his appointment has been regularised in the AGM held on 30.9.1997 and thus he has become a regular director with effect from 30.9.1997.
The return in Form No. 32 in respect of the above appointment of Shri Bhushan Ahuja as additional director was filed with Registrar on 22.2.1999 and the annual return made upto 30.9.1997 was also filed on 22.9.1999. The Form No. 32 was signed by Shri Satvinder Singh, respondent, and has been filed almost after 2 years from the purported dates of happenings. So also, annual return made as at 30.9.1997 has been filed almost after one and half year.
(2) The petitioner was shown to have ceased from the directorship of the company with effect from 28.8.98 in terms of the provision of Section 283(1)(g) of the Act for not having attended three consecutive Board meetings.
The Form No. 32 intimating the cessation of Shri Ashish Das Gupta, the petitioner, from the directorship of the company with effect from 28.8.98 was filed with the Registrar on 12.3.99. This form was also signed by Shri Satvinder Singh, the respondent.
6.2 According to petitioner, there is no change either in the shareholding pattern or directorship of the company as reported in the annual return made upto 30.9.96. It is further submitted that all other documents like annual returns and balance sheet and the Form No. 32 filed after the aforesaid annual returns as at 30.9.1996 are forged and fabricated.
7. It is submitted that balance sheet as on 31.3.97 does not disclose the correct position of the assets and bank balances of the company as on that date. It is further submitted that alleged meeting of the Board of directors stated to have been held on 31.3.97 could not have been held as it was not attended by the petitioner, who was travelling and, therefore; the question of appointment of Shri Bhushan Ahuja as additional director of the company does not arise. It is further submitted that no AGM has been held on 30.9.97 and thereafter. It is also submitted that no meeting of the Board of directors has been held after 28.3.98 ; therefore, the question of petitioner having failed to attend the three consecutive Board meetings does not arise ; hence, there is no question of petitioner ceasing to be director of the company with effect from 28.8.98 under Section 283(1)(g) of the Act 8. Shri K.G. Somani, Chartered Accountant, on behalf of the respondent, invited our attention to the annual return filed for the period 1986 to 1995 and submitted that these are registered documents with RoC and depicts the correct position of the shareholders and directors of the company as under: 9. He further clarified that the respondent has inadvertently accepted the shareholding pattern as depicted in the annual return made upto 30.9.96 as correct in the reply filed in the petition under Section 186 of the Act instead of the annual return upto 30.9.95 and, accordingly, filed an amendment reply later on.
10. Shri Somani further submitted that on 6.10.95, Shri Praveen Kant and Shri R.K. Garg sold their shares to Shri Ashish Das Gupta and Shri Satvinder Singh. Later, on 7.10.95, Shri Ashish Das Gupta sold his interest in these 2,000 shares to Shri Satvinder Singh. Thus, Shri Satvinder Singh became the owner of these 2,000 shares. He further submitted that necessary transfer deeds were duly executed by S/Shri R.K. Garg and Praveen Kant in favour of Shri Satvinder Singh. Shri Ashish Das Gupta also acknowledge the receipt of consideration for shares from Shri Satvinder Singh on 7.10.95. Copies of these documents are attached as Annexure R4 at pages 36-38 of the reply filed in petition under Sections 397-398 of the Act. He further invited attention to an affidavit, dated 3.8.99 (R5 attached to the sur rejoinder of the respondent) of Shri Praveen Kant wherein he has confirmed that Shri R.K. Garg and Praveen Kant sold their shares to Shri Ashish Das Gupta and Shri Satvinder Singh and handed over the transfer deed to Shri Satvinder Singh on 7.10.95. He further submitted that the shareholding position as depicted in the annual return made as on 30.9.97 as indicated hereunder is the correct shareholding position of the company.
10.1 In view of this, he submitted that respondent holds the majority of shares of the company ; however, taking advantage of the fact that the share certificates and other records of the company were in the possession of the petitioner, he has fabricated the share certificates by endorsing the transfer of shares in his favour jointly with respondent in respect of 2,000 shares acquired in October, 1995, under his own signature which is in violation of the rules.
11. Shri Somani also invited our attention to various acts of embezzlement of huge funds of the company and misappropriation of funds and other misdeeds relating to the company and affairs of Sirmour Sudberg Auto Ltd. referred in the respondent's reply and submitted that such acts are relevant to the present petition under Sections 397/398 of the Act, because this Board has to determine as to who has committed the acts of mismanagement and oppression in this case. According to him, the petitioner has destroyed and fabricated the records of the company which is evident from the fact that he took away the statutory records of the company from the registered office of the company to his personal house sometime in September, 1997, and after a long gap of one and a half year, he filed a false complaint with the police at Parwanoo in February, 1999, stating that important records and documents including several share transfer deeds, blank but signed transfer deeds, etc., of the company were missing.
12. Shri Khanna, Advocate, appearing for the petitioner, denied petitioner having made any illegal endorsement on the share certificates. He further submitted that the shareholding pattern of the company as existed on the share certificate has been admitted by Shri Satvinder Singh under his own signatures in Annexure II attached to the annual return made up to 30.9.1996. It is further stated that the shareholding pattern as claimed by the petitioner has been again admitted by respondent in the averments made in para 2 of his reply in the petition filed under Section 186 of the Act. The relevant portion of the reply of the respondent in para 2 of the petition under Section 186 of the Act reads as under: "The shareholding pattern upto 30.9.96 as mentioned by the petitioner is accepted since it is based on annual return made upto 30.9.1996." 13. He submitted that respondent cannot be allowed to shift stand every time convenient to him. In this connection, he placed reliance on the decided cases Narendra Kumar v. Vishnu Kumar Nair AIR 1994 Del 209; Dattatraya v. Rangnath Gopalrao Kawathekar (dead) by LRs AIR 1971 SC 2548 and Heeralal v. Kalyan Mal AIR 1998 SC 618, also in JT 1988 (2) SC, He further submitted that admission of documents means admission of facts contained in the documents as held in Sitaram Motilal Kalal v.Santanuprasad Jaishanker Bhatt AIR 14. He denied the allegation of having made any endorsement on the share certificate without any proper authority. He also denied that 2,000 equity shares were purchased by Shri Satvinder Singh, respondent from Shri R.K. Garg (since deceased) and Shri Praveen Kant and he also denied that any transfer deeds were executed by them in favour of respondent. According to him, these shares were bought by petitioner and the share certificates were jointly endorsed in the name of the petitioner and respondent. This fact is admitted by the respondent as per annual return made upto 30.9.1996 which has been signed by respondent and also corroborated by the endorsement appearing on the share certificates. The reliance placed by respondent on the transfer deeds now produced allegedly executed in his favour are fabricated and are not corroborated by the facts admitted by respondent.
15. He further submitted that respondent is claiming the ownership of 2,000 equity, shares transferred from Shri Praveen Kant and Shri R.K.Garg in his favour on the strength of transfer deeds executed on 7.10.95, and so also receipt, dated 7.10.95 of Shri Ashish Das Gupta indicating that after jointly purchasing the shares with Shri Ashish Das Gupta, he purchased his interest in these shares. If one has to go with the submissions of respondent, then aforesaid position should have been reflected in the annual return made upto 30.9.96 ; however, this position is not reflected in the said annual return though duly signed by respondent himself. The change in the shareholding pattern from that claimed by Shri Ashish bas Gupta is reflected for the first time in the annual return made upto 30.9.97. As per the said annual return, the following transfers have taken place since the last annual return as at 30.9.96.31.3.97 1,000 equity Transferred from Ashish to Satvinder Singh shares Das Gupta31.3.97 1,000 equity Transferred from Ashish to Satvinder Singh share Das Gupta jointly with 15.1 Shri Khanna further stated that the petitioner has never sold the shares as alleged above. No transfer deeds have been signed by him and no such deeds have been produced by the respondent. He further submitted that if respondent's plea is to be believed that he has purchased 2,000 shares from Shri R.K. Garg and Shri Praveen Kant, then aforesaid position of transfers as reflected in annual return made upto 30.9.97 cannot be correct. He, therefore, submitted that, it is abundantly clear that the plea taken by the respondent of having purchased the shares from Shri R.K. Garg and Shri Praveen Kant is not correct and is contradicted by the document on which reliance has been placed. Thus, it follows that the position of the shareholding as reflected in the annual return made upto 30.9.96 which is signed by respondent as well as petitioner and admitted is the correct position.
16. With regard to the plea taken that subsequent annual returns filed with Registrar of Companies and duly registered by him reflects the true shareholding pattern and should be taken as such, Shri Khanna submitted that mere production of certified copies of documents filed with Registrar does not prove the same as the question of its admissibility involves that contents must relate to the facts. He further submitted that the position relating to relevancy, admissibility and proof have to be fully complied with before gauging the evidentiary value of a document. The contents of a public document are not conclusive. In this connection, he placed reliance on Prakash Rai v. J.N. Dhar AIR 1997 Del 73. He further submitted that Registrar is neither a court nor an adjudicating body. His actions shall not prejudice the rights of the party as held in the case of S.K.Bhattacharya v. Union of India (1998) 2 Comp LJ 258 (Del): (1998) 91 Comp Cas 37 (Del) and submitted that in the light of the above referred decided case, mere registration of documents with Registrar of Companies does not necessarily reflect the correct position of the shareholding position and directorship of the company when it is disputed by the parties.
17. With regard to affidavit filed by Shri Praveen Kant and relied upon by the respondent, he submitted that the said affidavit contains factual inaccuracies; affirming that he was promoter director of the company during the period 30.12.85 to 6.10.95 whereas the fact of the matter is that the company was incorporated in the year 1977 by Col.
B.K. Sharma. Likewise, his affirmation that respondent was also promoter director of Sirmour Sudberg Auto Ltd. is also incorrect. The said company was promoted by petitioner, Shri R.K. Garg and Shri Praveen Kant in the year 1985 and respondent was appointed director of the said company only on 30.9.91. He further submitted that verification of the affidavit does not disclose whether affirmations are on the basis of any records or personal knowledge of the deponent.
He further submitted that this is contrary to the well-settled principles of law upheld by various courts and, therefore, has no evidentiary value.
18. With regard to the appointment of Shri Bhushan Ahuja as additional director in the Board meeting held on 31.3.97, he submitted that Shri Bhushan Ahuja was never appointed as an additional director. He emphatically denied the petitioner's attending any Board meeting in which Shri Bhushan Ahuja was appointed as additional director. He further submitted that in support of the appointment of Shri Bhushan Ahuja, as additional director in the Board meeting held on 31.3.97, no Board minutes have been produced. He further submitted that Shri Bhushan Ahuja could not have been appointed as regular director also in the AGM held on 30.9.97 for the reason that in the absence of the petitioner, no proper AGM could have been held for want of proper quorum.
19. Similarly, regarding the cessation of petitioner as director of the company, no minutes or any other evidence regarding the non-attending of three consecutive Board meetings by the petitioner has been produced by the respondent. He further submitted, that no such valid Board meeting could have been held in the absence of the petitioner for want of quorum. He further submitted that the respondent has taken the contradictory stand regarding the cessation of the petitioner as director of the company. In the reply filed in petition filed under Section 186 of the Act, respondent has taken the plea that petitioner was removed from the directorship of the company due to siphoning [off] of the funds of the company whereas in the reply filed in the petition under Sections 397/398 of the Act, the respondent has taken the stand that he ceased to be director under Section 283(1)(g) of the Act for failure to attend three consecutive meetings of the Board. He submitted that the respondent is not sure of his stand and defence and is blowing hot and cold in the same breath.
20. Shri Khanna denied that allegation of siphoning off of the funds of the company and submitted that the funds were withdrawn under the proper authority of the Board and accounted for and submitted that withdrawal of funds has been duly explained in detail by the petitioner in his reply relating to the affairs of the company so also of Sirmour Sudberg Auto Ltd. 21. We have considered the various averments made by the authorised representatives of both the parties. In this connection, we note that the main dispute amongst the parties relates to shareholding pattern of the company, appointment/ cessation of directors, holding of AGMs.
There are also allegations like siphoning off of the funds, tampering with the records and also allegations relating to the affairs of Sirmour Sudberg Auto Ltd. During these proceedings, the matter relating to withdrawal of funds by the petitioner was duly explained in the pleadings and was not pressed by the respondent during the course of hearing. Further, we are also not concerned about the allegations relating to Sirmour Sudberg Auto Ltd. Thus, in these proceedings, we are required to deal with allegations relating to shareholding of the petitioners and respondent in the company and appointment and cessation of directors and holding of AGM.22. Shri Khanna has taken the stand that in the sur rejoinder filed by the respondent, contradictory stand from the position earlier admitted has been taken and in view of the various rulings of the court, the same should not be taken on record. In this connection, we note that in the amendment to the reply filed by the respondent in the petition under Section 186, he has claimed that the shareholding pattern from 1986 to 1995 has not been changed as per the record of the company and annual returns filed with Registrar of Companies during the period 1986 to 1995. As the petitioner is claiming the shareholding in annual return made up to 30.9.1996 different from what is stated to be shown in the annual returns, it is necessary and in the interest of justice that the facts brought out and-in sur rejoinder and the reply filed thereto by petitioner be taken into consideration.
23. The petitioner is claiming that he has acquired 2,000 shares in the year 1986 (1,000 shares from Shri Narendra Nath and his family members and 1,000 from Sirmour Sudberg Auto Ltd., photocopy(ies) of the relevant shares certificate have been filed).
24. The petitioner also claims to have acquired another 2,000 shares on 6.10.95 from Shri Praveen Kant and Shri R.K. Garg and these shares were jointly held with Shri Satvinder Singh. During the course of hearing, the records of the company relating to membership of the company and transfer of shares (register of members and share transfers) were shown in support of that contention.
25. On the other hand, respondent is claiming that Shri Ashish Das Gupta acquired only 1,000 shares in his personal name in the year 1986 and another 1,000 shares were held in the joint names of Shri Ashish Das Gupta and Shri Satvinder Singh since 1986 and there is no change in the shareholding of the company as is evident from annual returns for the years 1986 to 1995. Further, the respondent claims that after purchase of the interest of Shri Praveen Kant and Shri R.K. Garg of 1,000 shares each by respondent and petitioner on 6.10.95, respondent purchased the interest in these shares from Shri Ashish Das Gupta ; thus, these 2,000 shares are now held in his individual name. For acquiring the shares in 1986, reliance has been made on the annual return made as on 30.12.1986 filed with the Registrar of Companies ; a copy of the same was filed alongwith submission, dated 3.8.96 under title amendment in the reply by the respondent on the petition filed under Section 186 of the Act. In respect of the 2,000 shares acquired on 7.10.95, reliance is placed on the transfer deeds executed by S/Shri Praveen Kant and R.K. Garg in his favour and a receipt from Shri Ashish Das Gupta, dated 7.10.95 of Rs. 10,000 having been paid by the respondent for acquiring his interest in these shares (R-4/36 to 38 of the respondent's reply).
26. The petitioner has categorically stated that as to from whom he has purchased the 2,000 shares in the year 1986 whereas the respondent has not placed on record as to from whom he has purchased these shares.
Further, he has based the reliance on the annual return made upto 30.12.86 only. We have gone through the said annual return and note that at pages 4 and 5 under the heading 'list of past and present members and debenture holders', 1,000 shares are shown in the name of Shri Ashish Das Gupta and another 1,000 shares in the name of Ashish Das Gupta jointly with Shri Satvinder Singh. Whereas at page 11 of the said annual returns under the heading 7-names and addresses and number of equity shares' held under the heading 'directors and their relatives', it is indicated that Shri Ashish Das Gupta is holding 2,000 shares. The respondent's name is not appearing in the said list even though he was appointed as a director on 20.12.86. Thus, the position reflected in the annual return on which respondent is relying is self-contradictory. We further note that Shri Praveen Kant, in his letter, dated 23.8.1986 addressed to Risk Capital Foundation, Annexure A-20, page 25, of the reply to sur rejoinder in connection with the loan being negotiated with them following information was submitted : "We are agreeable to pledge shares of face value of Rs. 50 lakh including the shares to be acquired by Parwanoo Enterprises (P) Ltd. of which we S/Shri R.K. Garg, Ashish Das Gupta and Praveen Kant hold the entire shareholding." 27. Likewise, in the letter, dated 19.8.86 from Shri Praveen Kant to Risk Capital Foundation, Annexure 21, page 26, of the reply to sur rejoinder under the heading 'Brief note on Parwanoo Enterprises (P) Ltd.' -- the following has been stated : "The entire share capital of the above company was purchased by promoters named Shri Ashish Das Gupta, Shri R.K. Garg and Shri Praveen Kant in the ratio of 2 :1:1 respectively." 28. The above position is also reflected in the shareholding pattern of the directors and their relatives at page 11 of annual return made upto 30.12.86. The letters referred to above and summarised shareholding and the details provided by the petitioner as to from whom he has purchased these 2,000 shares, copies of share certificate and entries in register of members of the company lends support to petitioner's contention that 2,000 shares were acquired by him in the year 1986 in his individual name. On the other hand, respondent is only relying on the entries made under the heading 'the past and present members' in the said annual return at pages 5-6, which is contradicted on page 11 of the said return. Under the circumstances, we hold that in the year 1986 Shri Ashish Das Gupta acquired 2,000 shares in his individual capacity.
29. In regard to the 2,000 shares acquired in the year 1995, the petitioner's contention is that he acquired these shares and got them registered in the joint names of the petitioner and the respondent, whereas the respondent's case is that after acquiring these 2,000 shares jointly from Shri R.K. Garg and Shri Praveen Kant, he bought the interest in these shares from the petitioner and became the owner of 2,000 shares. Petitioner submits that in reply to petition under Section 186 of the Act in para 2 of his reply, respondent has admitted the shareholding pattern as reflected in the annual return made upto 30.9.96 wherein the shareholding pattern is reflected as under: 30. The aforesaid position is not only admitted in the reply but has also been admitted in the said annual return which is also signed by him. Now he is taking a contradictory stand that he acquired 2,000 shares in October, 1995, in his individual capacity. Further, in his reply to the petition under Section 186 in Annexure R-1, the certified copy of annual return made upto 30.9.97 has been filed. In para 2 of the said reply the following is submitted : "The shareholding pattern upto 30.9.1996 as mentioned by the petitioner is accepted since it is based on the annual return filed upto 30.9.1996. However, the share holding pattern has been changed during the year 1996-97 and the shareholding pattern of the company on the basis of annual return filed with the Registrar of Companies and certified copy obtained (photocopy enclosed as Annexure R-1) as on 30.9.1997 is as under: 30.1 In the said annual return, following changes in the shareholding pattern have been indicated at Annexure III.DETAILS OF SHARE/DEBENTURE TRANSFERS SINCE DATE OF LAST ACM Date of previous AGM 30.9.96Date of Type of No. Ledger Transfer Ledger Transfertransfer transfer folio of name folio of name trans- transfer31.3.97 equity 1,000 13 Ashish Das Gupta 17 Satvinder Singh31.3.97 equity 1,000 16 Ashish Das Gupta 17 Satvinder Satvinder Singh Singh 30.2 The said annual return is signed by the respondent as well as petitioner. But petitioner has denied signing any such annual return.
According to petitioner, a copy of early years' annual return which have been fabricated by the respondent in connivance with auditors of the company.
31. The entire case of the respondent is based on the annual return filed with Registrar of Companies ; all these annual returns were filed together on 31.1.1996. According to respondent, the shareholding pattern from 1986i to 1995 is as under: 32. According to respondent, he acquired the shares held by Shri Praveen Kant and Shri R.K. Garg on 7.10.95 and, if it is so, the shareholding pattern of the company as on 30.9.96 should be reflected as under: 33. Then in the annual return made upto 30.9.97, it is indicated that on 31.3.97, he has acquired by transfer 1,000 shares each from Shri Ashish Das Gupta and from Shri Ashish Das Gupta jointly with Shri Satvinder Singh, details given earlier. In that event in his own showing he should be holding entire 4,000 shares (2,000 acquired on 7.10.95 and 2,000 acquired on 31.3.97 by transfer) whereas the shareholding pattern in the annual return upto 30.9.97, Annexure-2, the shareholding pattern is shown as : 34. The two positions claimed by him as on 30.9.96 and 30.9.97 are, therefore, contradictory. The respondent has not produced any transfer deeds duly executed by Shri Ashish Das Gupta and Shri Ashish Das Gupta jointly with Shri Satvinder Singh in support of the alleged transfers on 31.3.97 in his favour. Under the circumstances, reliance placed by him on annual return made upto 30.9.97 cannot be accepted. Further, in regard to respondent's contentions that he is the owner of 2,000 shares earlier held by Shri Praveen Kant and Shri R.K. Garg, he has admitted that the shares from these persons were first acquired by him jointly with petitioner on 6.10.95 and thereafter on 7.10.95, he has purchased the interest of Shri Ashish Das Gupta. The shares stand transferred on 6.10.95 in their joint names in the records of the company ; the transfer deeds, dated 7.10.1995 executed by these two persons cannot be acted upon by the company without mandatory compliance of the provisions of Section 108 of the Act.
35. It was submitted on behalf of the respondent that the share certificates have not been issued as per rules relating to issue of shares and have been endorsed in the name of petitioner under his own signature alone; but the fact remains that the name of the petitioner and shares claimed to be acquired, by him are reflected in the register of members and unless the said register is rectified one will have to go by the entries made in the register of members. The position as reflected in annual return made upto 30.9.96 which was earlier admitted by the respondent and also reflected in the register of members of the company is the correct position of the company's shareholding; accordingly, we hold that the shareholding of the company is as under: 36. Another point of dispute is regarding the appointment of Shri Bhushan Ahuja as additional director of the company on 31.3.97 ; the petitioner has emphatically denied of having attended any Board meeting in which Shri Bhushan Ahuja was appointed as additional director as he was travelling, and in his absence, the appointment could not have been made in any Board meetings for want of quorum, there being only two directors of the company at that point of time. No minutes of the Board of directors meeting wherein he was allegedly appointed as additional director have also been filed. We also note that his appointment as additional director has been notified in Form No. 32 to Registrar of Companies on 22.2.99 almost after two years from the date of his appointment on 31.3.97 gives support to petitioner's assertion that no Board meeting was held and he was never appointed as additional director. Further, Shri Bhushan Ahuja whose appointment is under challenge and who has been made one of the parties in the proceeding under Sections 397/398 of the Act has not taken part in these proceedings by filing the submission or appearing before this Board.
Under the circumstances, we hold that Shri Bhushan Ahuja was never appointed as an additional director of the company.
37. Another point of dispute relates to holding of AGM on 30.9.97. As there are only two shareholders and Shri Ashish Das Gupta's categorical denial of his having attended any alleged AGM of the shareholders held on 30.9.97 wherein the accounts for the year 1996-97 were laid and adopted and Shri Bhushan Ahuja was allegedly appointed as regular director of the company, could not have been held for want of quorum.
No minutes of the said alleged AGM were filed. Under the circumstances, we hold that no AGM of the company was held on 30.9.97. Consequently, appointment of Shri Bhushan Ahuja as regular director of the company and so also adoption of the accounts for the year 1996-97 has not taken place.
38. In the Sections 397/398 petitions, respondent has also claimed that the petitioner has ceased to be the director of the company with effect from 28.8.1998 pursuant to the Section 283(1)(g) of the Act for having not attended three consecutive Board meetings; the required Form No. 32 for his cessation has also been filed almost after 6 months. However, in the reply to the Section 186 petition, he has stated that petitioner was removed for siphoning [off] of funds of the company. Further, since there are only two directors, the question of any Board meeting being held does not arise unless both the directors attend the meeting as no proper Board meeting could have been held for want of proper quorum, the question of petitioner ceasing to be director of the company pursuant to Section 283(1)(g) does not arise. We, therefore, hold that Shri Ashish Das Gupta continues to be a director of the company, and the present Board of directors consists of Shri Ashish Das Gupta and Shri Satvinder Singh.
39. The petitioner has also alleged that the accounts prepared for the year 1996-97 does not reflect the correct position of assets and bank balance of the company. We have gone through these accounts and note that there is only one transaction in the profit and loss account, i.e., of audit fee of Rs. 2,500 on expenses side and the loss for the year has been shown equivalent to that amount. Further, in the balance sheet, this fee has been shown as payable and correspondingly accumulated losses have been increased. There is no other change in the figures in the balance sheet. The petitioners in support of his contention has filed bank certificates of State Bank of India showing balance to the credit of the company as on 31.3.97 at Rs. 1,008 and Punjab National Bank of Rs. 1,659 (Annexures A-26 and 27) pages 39 and 40 attached to petitioner reply to sur rejoinder which do not tally with the figures of bank balance shown for these two banks in the balance sheet as at 31.3.97 filed by the respondent with Registrar of Companies. Further, the number of shares held by the company in Sirmour Sudberg Auto Ltd. are also not correctly reflected. Therefore, the petitioner's contention that the balance sheet as at 31.3.97 does not reflect true and correct position -- appears to be correct.
40. Having held that 2,000 shares are held in the name of Shri Ashish Das Gupta in his individual name and that another 2,000 shares are jointly held in the names of Shri Ashish Das Gupta and Shri Satvinder Singh and that they are the only validly appointed directors, the question is the nature of relief to be granted. There are two petitions before us. One is under Section 186 of the Act and another under Section 397/398 of the Act. As far as the first petition is concerned, the relief sought is for directions to convene a general body meeting with the stipulation that even the presence of a single shareholder would constitute a valid quorum for the meeting. As far as the second petition is concerned, we have already given our findings on the prayer relating to the shareholding in the company as well as the appointment of the 3rd respondent as an additional director. There is another prayer in the second petition that we should order removal of the 2nd respondent from the directorship of the company. The company consists of only 2 shareholders and the proceedings before us have clearly brought out that the difference between the parties are such that they cannot carry on together. The petitioner is admittedly the majority shareholder having 50% shares in the company in the individual capacity and another 50% shares jointly with the 2nd respondent. Therefore, we give an option to the 2nd respondent either to continue as joint shareholder in the company or to transfer his interest in the joint holding to the petitioner or his nominee for a fair consideration to be determined by an independent valuer. He should indicate to the petitioner and to this Bench within 15 days from the date of this order choosing either of the option that we have given to him. In case the respondent likes to continue as joint shareholder in the company, then, the petitioner is at liberty to convene a general body meeting within 45 days thereafter in which meeting the presence of a single shareholder would constitute a valid quorum. For the general body meeting, notices should be sent by registered post acknowledgement due with 21 days notices together with the agenda for meeting. No resolution removing the 2nd respondent as a director will be proposed and as long as he continues as a joint shareholder, he will continue as a director. If need be, on an application being made, we shall appoint an observer/Chairman for the said meeting. In case, the respondent opts for the second option of transferring his interest which should be computed at 1,000 shares in the joint holding, then he may move an application for appointment of an independent valuer.