I was of the opinion that the technological advancements and the schemes like MCA providing for on-line corporate filing, will be of help to the corporates. I was also of the opinion that the MCA scheme will also boost the pace in which the companies are being incorporated in India. There is a positive side of MCA scheme providing for speedy and risk-less corporate filing, however, I want to now focus on the negative issues of MCA scheme and as to how the scheme is being misused.
I have seen cases where the MCA scheme or the portal was misused and halting the very functioning of the Company. There exist many technical issues in this. I have focused on the issue earlier when I have written a small brief on “corporate filing”. The issue is really serious. A fictitious form filed with the MCA portal will change the destiny of Company and it is more so when the Company is a Private Limited Company and vigorously planning for expansions. Fictitious filing of Forms with the MCA scheme is very frequently seen in the recent past in Private Limited Companies and Public Limited Companies are guarded well in this regard and also it is very rare to see internal disturbances and groupism in Public limited or the Listed Public Limited Companies.
I want to present a case study referring to fictitious filing of From with MCA portal, the implication of fictitious filing and the corporate complications in general.
The facts are as follows:
1. A Private Limited Company is incorporated with three promoters and the promoter named “A” has taken all the risk in establishing the Company.
2. The Company has flourished within a year due to work done by the promoter “Mr.A”.
3. Two other outsiders have evinced interest in acquiring the shares of the Company and these two shareholders can be referred to as “B” and “C”.
4. “Mr.A”, being the majority in the Company, has processed the issue of induction of new shareholders “B” and “C” in the Company.
5. Apart form other directors, “Mr.A” and newly inducted shareholders “Mr.B” and “C” were also made as directors of the Company.
6. At one of point of time, all other directors barring “Mr.A”, “Mr.B” and “C” have expressed their interest in exist from the Company.
7. “Mr.A” could ensure investors to acquire the shares of out-going shareholders.
8. At this point of time, “Mr.A” and “Mr.B” and “Mr.C” were the directors of the Company. “Mr.A” and “Mr.C” are husband and wife.
9. There were difference of opinions between “Mr.A” on one part and “Mr.B & C” on the other hand.
10. While “Mr.B & C” constitute majority of the Board, they have appointed many of his relatives as his directors and uploaded forms with the MCA portal.
11. “Mr.A” was in actual control of the Company and he could ensure uploading of few other forms with the MCA portal as if the Board has appointed some of his men as “Directors”.
12. While the things stand at this, as “Mr.A” is in actual control of the Company, “Mr.B & C” have approached Company Law Board under section 397/398 of the Companies Law Act, 1956 seeking drastic measure against the Company including the investigation under section 237.
13. The Company Law Board has passed certain interim orders in favour of “Mr.B & C”.
14. While “Mr.B & C” press for orders against the Company which is in actual control of “Mr.A”, “Mr.A” too has a grievance with the presence of fictitious forms with the “ROC”.
15. “Mr.A” wants the fictitious forms to be removed form the MCA portal, however, he can not allege oppression and mismanagement against “Mr.B & C” as technically this can lead to winding-up the Company or appoint an independent Board and people to take care of the Company.
Analysis:
1. Facts of the case referred to above, exposes the seriousness in availability of easy uploading of forms with the MCA portal.
2. Once a Form is uploaded, and brought to the knowledge of the Company Law Board, then, it is really difficult to get the Form removed unless the Company Law Board passes an order.
3. Many Petitions under section 397/398 of the Act involves disputed facts and as such it will definitely take time for the adjudication before the Company Law Board.
4. The shareholders, the majo
It would be desireable if ROC allots a unique Number to the Company alongwith a Password. the password should be given to one of the Directors who is holding maximum interest and shares in the company and shpould be supported by a Company Resolution. No change be permitted unless a special resolution is passed in AGM.
some other precautionary measures can be thought of to prevent this type of overlaping filing of returns on MCA portal and the declaration for its use must be submitted at the time of Filin Annual Return
we can have further duscussion on this topic