Case Law Details

Case Name : Aman Goel Vs EileenTech Communications (I) (P.) Ltd. (Delhi, Company Law Board)
Appeal Number : C.P. NO. 18 OF 2007
Date of Judgement/Order : 23/05/2012
Related Assessment Year :
Courts : Company Law Board (19)

COMPANY LAW BOARD, NEW DELHI BENCH

Aman Goel

Versus

EileenTech Communications (I) (P.) Ltd.

Smt. Vimla yadav, MEMBER

C.P. NO. 18 OF 2007

MAY  23, 2012

ORDER

1. In this order I am considering CP No. 18/2007 filed by the petitioners in the affairs of the R-1 company namely M/s. Eileentech Communications (I) Pvt. Ltd. & Ors. The petitioner’s case is that the R1 Company was incorporated on 10.1.2005 by transferring the business of 3G Communication a partnership firm which was started in 2004 comprising of the petitioners Aman Goel, Abhishek Mittal and two more persons namely Gaurav Suri and Amit Vaid, and on 20.12.2004 R-2, Manmohan Garg who approached the petitioners was inducted as a partner and a fresh partnership deed was executed. The name finally approved as Eileentech Communications Pvt. Ltd., was coined by the petitioners. Shareholding of the petitioners is 20% each, i.e. 40%. the petitioner No, 1 has 2000 shares and petitioner No. 2 also has 2000 shares i.e. 4000 shares out of total admitted shareholding of 10,000 shares. After incorporation A/c opened in PNB, Shalimar Bagh was to be operand jointly bv the petitioners and respondent.. The respondents froze the account and opened a new A/c without the knowledge and without any board meeting.

2. The petitioner’s case is that they hold 2000 shares each of die respondent company, the shareholding of the petitioners at the time incorporation as such was 20% each, the petitioners were admittedly the subscribers of the Memorandum of the respondent-company, Subscribers to the Memorandum are deemed to have agreed to become members of the Company and upon its registration, they are required to be entered as. members in its register of members. per section 41(1) of the Act, all money payable by any member to the Company under the Memorandum it a debt due from him to die Company as provided in section 36(2) of the Act , there is no time-limit prescribed in the statute for the payment of subscription-money, Form No. 2 is not to he filed with ROC in case of subscription shares, as per Opinion given by Expert Advisory Committee of ICAI- Volume XI – page 222 “the unpaid amount towards shares subscribed by the subscribers of the Memorandum of Association should be considered as subscribed and paid-up capital, therefore, on incorporation, the subscriber of the Memorandum of Association become members It was further contended that the respondent. No. 2 was looking alter the compliance of the statutory formalities and mala fidely and deliberately did not file Form No. 2 with respect to the petitioner’s shareholding; no details of the alleged investment made by the respondents have been placed before the CLB despite directions of the same by the CLB along with the details of the cheques handed over to them by the petitioners during the pendency of the petition, hence, adverse inference as such has to be drawn against the respondents It was pointed out by the counsel for the petitioners that they have invested over Rs. 14 lacs in the respondent-company in cash as well as by way of cheques. My intention was drawn to the payment of (i) Rs. 2.00,000/- paid from the account of Sh. Aman Goel, the petitioner No. 1 vide cheque no 128070 drawn on ICICI Bank, University Road, DU Nortn Campus on 05.08.2005;(ii) Rs. 1,95,000/- paid from the account of Sh. Gaurav Suri vide Ch. No. 5427l4 drawn on ICICI Bank, University Road, DU North Campus on 17.08.2005 and it was contended that the respondents mala fidely and in premeditated manner threw out the petitioners from the respondent-company due to which the petitioners were constrained to open another company, however no client of the respondent No. 1 company was retained by the petitioners as the intentions of the petitioners were all along honest and bona fide.

3. It was pointed out that there were five directors in the company i.e both the petitioners and Manmohan Garg, Vikas Garg and Trishna Garg, Gaurav Suri, Abhishek Mittal and Aman Goel stated to be first directors of the company.

4. The petitioners have also challenged the increase in shareholding from 1 lac to 3.90 lacs. It was pointed out that the respondents allotted further shares which were never offered to the petitioners and no notice of any meeting in which the shares were allegedly allotted was given to the petitioners. Moreover, the respondents have not brought the additional money for alleged additional shares.

5. It was argued by the counsel for the petitioners that no notice of the meeting on 3.02.2006 was given. As per R-2 no director except him was present and R-2 unilaterally called an EGM stating that there is a deadlock in the functioning of the Board. EGM was allegedly fixed for 25.02.2006 at 11 AM, there was no quorum, 21 days clear notice was not given.

6. It was argued that in a meeting of Board of Directors dated 03.02.2006 no EGM could have been called for 15.02.2006. No notice of 15.06.2006 meeting was received by the petitioners. Six directors appointment on the basis of Article 25 of the AOA and Section 260 of the Act is illegal, Article in 25 is not applicable as that only authorizes the board of directors to appoint additional directors. All the alleged appointed directors are family members of R-2, Section 260 of Companies Act is also not applicable, no notice of any such meeting was given to the petitioners on 24.02.2006, the petitioners protested against the aforesaid appointment.

7. On 25.02.2006 for alleged meeting of Board of Directors which was held, leave of absence was sought vide letter dated 25.02.2006. In fact the petitioners reached the venue on 25.02.06 and when they reached the venue they were told that the meeting was already over, all other members had left and no minutes were made available. On 15.06.06 a complaint to SHO was made as the petitioners were not allowed to attend the meeting.

8. It was alleged that there is total non-compliance of the statutory compliances including those of Income Tax, ROC, Labour Law, etc., there is no maintenance of any statutory records Annual Returns, Income Tax Return have not been filed. It was pointed out that R-2 misappropriated the entire assets of R-1 Company. In the notice issued for the meeting to be held on 25th February, 2006 one of the agenda is the status of assets of the company deployed at various sites. On the contrary vide alleged complaint, dated 05.12.05 the respondents are alleging that the assets were already stolen by the petitioner and R-10 & 11. In fact, new directors were allegedly appointed by R-2 in February, 2006, if they were no assets of the company where was the occasion to appoint new directors in such a company. Even the auditor of the company is being shown as a witness of the complaint. It were the Petitioners who realized Rs. 7,43,306/-which cheques were handed over during the present proceedings Rs. 1.90 lacs lying in the frozen account.

9. The Respondents Nos. 1 to 9’s case is that the petitioners are not the members of the company as in the memorandum of article of association, they agreed to take the shares in the capital of the respondent company, but after registration of the memorandum, they failed to pay any amount towards capital and made only some investment as loan on the company and even that investment was transferred by them in their new company Eileentech Commet India Pvt. Ltd. Even till date, they have not paid any amount towards capital, therefore, they cannot be the members of me company. The amount invested by Shri Gaurav Suri as loan, who is neither the subscriber nor the member of the company is in the form of investment (loan) and that investment cannot make the petitioners members in the company and further the said investment has already been transferred along with the other assets of the respondent company in their new company i.e. Eileentech Comnet India Pvt. Ltd. The petitioners are allegedly showing only Rs. 3,95,000/- amount of investment whereas the respondent’s No. 2 to 9 showed their investment in the form of vouchers and bank guarantee for more than Rs. 25 lacs. It was pointed out that the petitioner Sh. Abhishek Mittal has withdrawn Rs. 2,30,000/- in cash from the company account and also they have transferred Rs. 2,05,000/- to their partnership firm, therefore, there is no investment in the capital of the company by the petitioners nor by Shri .Gaurav Suri as all the investments made by them were withdarwn or transferred by them.

10. My attention was drawn to an affidavit on 16.08.2008 regarding the cheques handed over by the petitioner and the statement of account of the company along with the affidavit of R-2. It was argued that it is the petitioners who are trying to defraud and usrup the investments made by the R-2 and other directors. Relying on the case law in ‘Turner Morrison Ltd. v. Jenson & Nicholson (India) Ltd. [1998] 16 SCL 619 (CLB-New Delhi) wherein it was held that one has to be a member before he can complain of oppression as a member off the company, if the petitioner’s title to the membership is in dispute, he has to seek relief under section 155 for getting his name placed on the register of members or clothe himself with the rights of a member, it would be improper, till the dispute is decided, to permit such a person to maintain a petition under sections 397/398. It was further pointed out that the petitioners themselves have pleaded in their petition that the physical shares have not been issued by the company. It was further pointed out that all the shareholdings in the company is of Trishna Garg and Manmohan Garg and the same is reflected in the form No. 2 of return of allotments wherein the name of Manmohan Garg and Trishna Garg were only reflected and the same is in categorical knowledge of the petitioners. Therefore, the present petition is not maintainable as the petitioners do not hold any shares nor any shares have been allotted to the petitioners.

11. Responding to the Petitioner’s contention that 3G communication belonged to the petitioners from the very beginning and besides petitioners Gaurav Suri and Amit Vaid are their partners, it was pointed out that the partnership firm 3G communication is still in existence, the petitioners have failed to prove that Manmohan Garg was the partner of the said alleged firm. 3G communication and the company are two separate entities which is corroborated by the fact that for opening of the account of the company, the 3G communication became the introducer for the company and the 3G communication is still in existence. Furthermore, if 3G communication has merged in the company then the same would be mentioned in Memorandum of Association but it is not so and also the company is not registered under schedule 9 of the Act. 3G communication was their own entity from the very beginning to the end with partners Aman Goel, Abhiskek Mittal, Gaurav Suri and Amit Vaid till date.

12. It was argued that it is a case of the petitioners that the affairs of the company are conducted in a manner oppressive to them by appointing new directors in the company but however, they have failed to show any of the conduct of the company which affecting their rights and position in the company. Both the petitioners are only the directors of the company and for which they have been paid salary but they have no shareholding of the company and when both the petitioners along with their other co-directors started abstaining from the meetings of the company deliberately creating deadlock, it become necessary to break the deadlock by induction of new directors as the working of the company suffered. It is essential that there must be an AGM of the company within a year of its incorporation and all other directors along with both the petitioners failed to supply the requisite particulars to be filed for the DIN which becomes mandatory after the amendment in the Act but all the directors i.e. both the petitioners and respondents No. 10 and 11 have failed to do so till date, therefore, the induction of new directors became necessary and essential for the functioning of the company and the same was done by complying with all the formalities and laws laid down. My attention was drawn to the case of “Maharani Lalita Rajiya Lakshmi v. Indian Motor Co. (Hazaribagh) Ltd. AIR 1962 Cal. 127 wherein it was held that “Under Section 397 of the Court has to be satisfied that the affairs of the Company are being conducted in a manner oppressive to any member or members. The acts of oppression, therefore, have not only to be alleged with sufficient particulars but they must be proved also to the satisfaction of the Court”. In the present case the petitioners have miserably failed to produce any incident which shows any mismanagement or oppression on the part of the company against the petitioners and also as they are not shareholders of the company, therefore, the question of mismanagement in the affairs of the company in a manner oppressive to them does not arise.

13. It was alleged that it is the petitioners who are carrying on the activities which are against the interests of the company and the same is corroborated by the letters of Sh. R.K. Sharma and Ajay Gupta dated 22.08.2005 addressed to Manmohan Garg, respondent No. 2 which reveals the misuse of funds and unrecorded movement of the Company’s events.

14. Further, it was pointed out that the petitioners along with R-2, R-10 and R-11 created Eileentech Communications India Pvt. Ltd. on 19.01.2005 and entered in it, at different times showing one or other requirement in the company, whereas R-10 and R-11 were having their own company Shri Ganesha Constructions and the projects done by Eileentech Communications were billed of approximately amount Rs. 7,54,268/ to illegally extract funds from the company for their own use, which was later converted to Shri Ganesha Telenet Comm. Pvt. Ltd. in 2007 and other three Aman Goel, Abhishek Mittal and Gaurav Suri incorpoated their another company (identical) in the name and carrying the same business of telecom services i.e. Eileentech Communications India Pvt. Ltd. within 8 months exactly on 19.09.2005 only to misappropriate the funds of the present company in their own company. It was pointed out that the Accountant Sunil Kumar Pandit working in the company was also working in their new company Eileentech Comnet India Pvt. Ltd. While working on behalf of the company, they all were carrying out other operations anywhere else also. The two electronic devices of the company (i) Site master cost of Rs. 4,32,000/- and (ii) Power meter cost Rs. 70,200/-, were taken away in their new company through cash voucher of Rs. 20,000/- each whereas the company selling such machines do not accept payment in such fashion over a span of four months and first voucher is entered exactly on the date they made their new company and on the printed voucher of their company signed by Gaurav Suri and voucher having no bill No. for their these purchases to Amil Limited and Chirag Enterprises. They used the same website of Eileentech Communications for the purpose of their new company.

15. It was contended that no investment was done by the Petitioners and Respondent Nos. 10 and 11. Investment of Manmohan by cheque Rs. 2,50,000/-by cash Rs. 5,39,770/- receiving vouchers of these cash payments were received by Abhishek Mittal. Trishna Garg paid by cheque Rs. 25,000/- on 16.02.2005 and Rs. 25,000/- on 19.03.2005 by cheques of Bank of Baroda, Model Town and by cash Rs. 1,30,000/-. All other remaining cash vouchers are missing during the theft done by them. In conspiracy with each other with nefarious designs, the petitioners while introducing new directors to the company, every day they told R-2 to get Vikas and Trishna to resign from company on the pretext that they were not active and were not working for the company in any way except being shareholder on 27.04.2005 and addition of Gaurav Suri, Ajay Gupta and R.K. Sharma on 26.04.2005. Besides all directors were withdrawing salary regularly from the company and were working for their own other companies, which is evident from their bank statements. It was contended that the petitioners acted mala fidely and not trustworthy. Cheques given by them in 2007 were kept with them. Some emails were received on account of Manmohan garg@sify.com from some company against the payment defaults of about Rs. 29 lacs by their new company Eileentech Comnet India Pvt. Ltd. Even when company was completely shut work order of Rs. 3 lacs was received at registered office of the company which was misaddressed to company in the view of new company dated 1.12.2006.

16. R-10 and R-11’s case is that although the Respondent Nos. 10 and 11 have been arrayed as Respondents but there is no allegation set out against them except as contained in para “E-IV” of the Company Petition, otherwise, there is absolutely no allegation of mismanagement, oppression or breach of any duty as against Respondent Nos. 10 & 11. The Respondent No. 10, as a complainant, has filed a criminal complaint in respect of various offences under section 406/420/506/120 B of I.P.C. relating to criminal breach of trust, cheating and giving threat to life etc. against Petitioners No. 1 & 2 and also against Respondent No. 2, 4 & 9 and the same is pending in the Court of Additional Chief Metropolitan Magistrate, Karkardooma Court, Delhi since 2005. In fact the Respondent No. 10 had business relations with M/s. Telecom Network Solutions, Sector 16, Noida, with which the Petitioners were at one time working, the Petitioners became friendly with the Respondent No. 10 and it were the Petitioners, who induced the Respondent No. 10 to become a Director in the Respondent No. 1 Company. They projected that the Respondent Company is earning good profit. The Petitioners also got the Respondent No. 10 introduced with the other accused i.e. Respondent Nos. 2, 4 & 9. In fact, the Respondent No. 10, acting on such inducement had already shelled out over Rs. 14,00,000/- by them on various dates to the Petitioners and the Respondents on one pretext or the other, with the hope of earning profit by way of investment in the Respondent No. 1 Company. During all this period, all the above persons continued to give assurances that they will give shares of Respondent No. 1 Company to the Respondent No. 10 in lieu of the amount paid, which would fetch a very good price in the market and he would earn good profit also, the Respondent No. 10 had been deprived of their entire life savings and now stand ruined and are now repenting. It was pointed out that the R-10 was flabbergasted when it was revealed that the respondents by adopting similar modus operandi and in similar fashion have cheated other persons including the Respondent No. 11.

17. Relying on the case law in Subhash Jain v. Pioneer Shopping Complex (P.) Ltd. [2008] 79 SCL 289 (Ker) it was argued that the CLB has powers to give such directions as are necessary to meet the ends of justice, and to make suitable provisions to bring about an amicable settlement to the disputes between the parties. The Calcutta High Court in Pramod Kumar Mittal v. Andhra Steel Corporation Ltd. [1982] 2 Comp L.J. 629 held that while acting under section 398, read with section 402 of the Companies Act, the Court has ample jurisdiction and very wide powers to pass such orders and give such directions as it thinks fit to achieve the object and there would be no limitation or restriction on such power that the same should be exercised subject to the other provisions of the Act dealing with normal corporate management or that such orders and directions should be in accordance with such provisions of the Act. The Supreme Court in Consmosteels Pvt. Ltd. v. Jairam Das Gupta [1978] 48 Comp. Cas. 312 has examined the scope of sections 397 and 398 and stated that the scheme of sections 397 and 402 appears to constitute a code by itself for granting relief to oppressed minority shareholders and for granting appropriate relief, a power of widest amplitude. Further, reliance was placed on the case law in Debi Jhora Tea Co. Ltd. v. Barendra Krishna Bhowmick [1980] 50 Comp. Cas. 771 (Cal.). D. Ramkishore v. Vijayawada Share Brokers Ltd. [2009] 89 SCL 279 (AP) and Amrik Singh Hayer v. Hayer Estates (P.) Ltd. [2009] 147 Comp. Cas. 761 (CLB).

18. I have considered the rival submissions and the case law cited by the parties. In the facts and circumstances of this case it is noted that the petitioners along with R-10 & R-11 have failed to make out any case u/s. 399 of the Act to be eligible to maintain this petition. The Petitioners are only directors of the R-I Company. Though they are shown as subscribers to the Memorandum of Association, that alone, without any consideration having been paid for their shareholding does not make them members of the R-I Company. R-10 & R-11 also have not been able to show any allotment of shares to them making them to members of the R-I Company. For recovery of their dues they have already resorted to the appropriate proceedings. There are allegations and counter-allegations in the CP which have not been substantiated by the petitioners and the R-10 & R-11. The petitioners not holding the requisite shareholding or numerical strength to be eligible u/s 399 of the Act to file a petition u/s. 397/98 of the Act alone is sufficient to dismiss this petition at the threshold. Further, the allegations regarding the unclean hands of the petitioners have also not been met. It is noted that there has been a deadlock in the company, R-2 having been left as the only director of the R-I Company. In any case R-2 also cannot be allowed to conduct the affairs of R-I Company as per his own whims and fancies without complying with the provisions of the Act. Though non-furnishing of the statutory statements per se is not oppressive, the irregularities can be got regularized under the provisions of the Act, but the R-2’s intentions being mala fide to not to allow access and shareholding to other proposed members with whom he had some understanding at the time of incorporation of the company, cannot leave the petitioners and R-10 and R-11 remedies.

19. In the facts and circumstances of this case, the petitioners and the R-10 & R-11 are hereby permitted to take the shareholding in the R-I company as per their understanding and representation made to them a the time of incorporation of the R-I company, on payment of due consideration for which, R-I company, shall be bound to issue them shares at par and issue the share certificates within 30 days of payment of such consideration. The petitioners and R-10 and R-11 are otherwise given an option to receive back their investments made in the R-I company. R-I company shall get their investments ascertained through an independent auditor appointed in this behalf for implementing this order within eight weeks of receipt of this order.

20. CP No 18/07 stands disposed off in the above terms. All CAs stand disposed off. All interim orders stand vacated. No order as to cost. The B.O New Delhi, Bench to send a copy of this order to R-10 & R-11 at their new address at 207-Gaur Green Avenue, Abhay Khand-II, Indirapuram, Ghaziabad, U.P.

NF

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