Case Law Details

Case Name : Naresh Mohan Mittal Vs Sangeeta Construction (P.) Ltd. (Company Law Board Delhi)
Appeal Number : CP NOS. 151 TO 153 OF 2007
Date of Judgement/Order : 05/09/2011
Related Assessment Year :
Courts : Company Law Board (19)
COMPANY LAW BOARD, NEW DELHI BENCH
Naresh Mohan Mittal
v/s.
Sangeeta Construction (P.) Ltd.
CP NOS. 151 TO 153 OF 2007
SEPTEMBER 5, 2011

ORDER

1.In this order I am considering Company Petition Nos. 151 of 2007, 152 of 2007 and 153 of 2007 (these company petitions are being disposed of together, the facts and circumstances and the parties being almost the same, arguments were made in Sangeeta Construction (P.) Ltd. to be adopted in the other two company petitions) filed by Naresh Mohan Mittal and another (petitioners) against Sangeeta Construction (P.) Ltd. and others Nippun Construction (P.) Ltd. and others Aarti Construction (P.) Ltd. and others alleging oppression and mismanagement under section 397/398 of the Companies Act, 1956 (‘the Act’) seeking a declaration that the appointment of Sandeep Mittal, Nippun Mittal in Sangeeta Construction (P.) Ltd. and Nippun Construction (P.) Ltd. and Sameer Mittal and Naveen Mittal in Aarti Construction (P.) Ltd. as directors is null and void and they be restrained from interfering with the administration of the company and acting for and on behalf of the company in any manner whatsoever ; declaration that the illegal purported resolutions dated 9th December, 2006, 27th August, 2007 and 31st August, 2007 are null and void and are of no consequence; declaration that the petitioner No. 1 and his group manage the operation and administration of the company in the interest of all the members of the company and the company in general and to appoint an independent chairman/administrator, if deemed necessary ; that the R-3 to 5 should not interfere with the administration ; debarring of R-3, R-4 to 5 from acting as a director or involving themselves as director and or in any capacity in the management of a company for a period of at least 5 years from the date of passing of said order.2. It is noted that the petitioner No. 1 is one of the four bothers, namely, S/Shri Mahesh Mohan Mittal, Naresh Mohan Mittal, Ratish Mohan Mittal and Satish Mohan Mittal and petitioner No. 2 is the nephew of the petitioner No. 1. It was condended that in order to streamline the business and to the business activities in more professional manner and to have a scope for diversification for business, all four brothers including the P-l got together and conceived an idea to form three private limited companies, wherein all brothers would have equal shareholding. Accordingly on 28th April, 1993 three private limited company by the name of Aarati Construction (P.) Ltd., Nippun Construction (P.) Ltd, and Sangeeta Construction (P.) Ltd. were incorporated. The R-1 companies in all the three company petitions (CP No. 151, 152 and 153) are engaged in the business of acquiring land for the construction of the multistoreyed building and to licence flats therein on suitable terms and conditions. All four brothers, namely, S/Shri Mahesh Mohan Mittal, Naresh Mohan Mittal, Ratish Mohan Mittal, Satish Mohan Mittal, were declared to be first directors of the company. The R-1-companies are closely held private limited companies, wherein, all four brothers had equal shareholding in all three companies. It was pointed out that with the passage of time, three directors, namely, S/Shri Naresh Mohan Mittal, Ratish Mohan Mittal and Amul Mohan Mittal remained on Board in all three companies, viz., Sangeeta Construction (P.) Ltd., Nippun Construction (P.) Ltd. and Arati Construction (P.) Ltd. On 20th October, 2004 the youngest brother of the petitioner Shri Satish Mohan Mittal expired. On his death his son Amul Mohan Mittal was inducted as director in the Board of all three companies in place of his father. It was pointed out that Shri Ratish Mohan Mittal (R3) although being a director since inception of the company, never participated in the affairs of the company in any manner whatsoever, he attended only one Board meeting in last seven years, the petitioners were managing the affairs of the respondent-company.

3. It was pointed out by the counsel for the petitioners that in the year 1983 R-1-company purchased Plot No. 3 in Mohan Bazar Community Centre, Ashok Vihar Phase-1, Delhi-52, from Delhi Development Authority (‘DDA’) in public auction held on 4th May, 1983 and developed it. Vide agreement to letter dated 25th August, 1987, the R-1-company, leased out a total area of 3247.60 sq. ft. to Mittal Hotels (P.) Ltd., for a period of five years commencing from 1st September, 1987 on a monthly rent of Rs. 6,200. The rent was to be payable in advance on the 7th day of each calendar month. It was pointed out that Mittal Hotels (P.) Ltd. was also promoted by all four brothers and their family members but later on all the shares of Mittal Hotel (P.) Ltd. were transferred to eldest brother Shri Mahesh Mohan Mittal (now dead) and his family members in and around April 1995. On 31st August, 1992, the tenancy agreement between Sangeeta Construction (P.) Ltd. and Mittal Hotel (P.) Ltd. came to an end by efflux of time. The Mittal Hotel (P.) Ltd. did not get the lease deed renewed and since that day, i.e., 1st September, 1992, they are the illegal occupant of the premises. As on today, the lessee is in arrears of rent. To compound the illegalities, Mittal Hotels (P.) Ltd., has encroached upon terrace and carried on illegal and unauthorised construction.

4. The petitioners’ grievance is that the respondent-company had convened a Board meeting on 31st August, 2007. A notice of the meeting was sent to all three directors along with agenda. Due to some unavoidable circumstances two of the three directors were not able to attend the meeting and both of them sent their application for leave to the registered office of the company. When Shri Amul Mohan Mittal went to the registered office of the company to submit the leave application, to his utter shock and surprise he saw that R-3 was sitting with R-4, 8 along with Shri Sameer and Shri Naveen Mittal. When he reached near R-3, he was forcibly made to sit and was asked by all present to sign his attendance and sign few blank papers to which he refused and almost fainted out of shock, after which he was allowed to leave and he ran away, later he filed his complaint in the office of the company. On receiving a complaint from Shri Amul Mohan Mittal, the P-l immediately made a written complaint and reported the matter to the Registrar of Companies (‘RoC’) and Ministry of Corporate Affairs (‘MCA’) and also endorsed and sent a copy of the same to R-3 (Shri Ratish Mohan Mittal) for explanation. In response to the complaint filed by the P-l, the company received an e-mail from MCA informing that some documents were filed on 31st August, 2007. It was pointed out that on 5th September, 2007 the P-l received a letter of enquiry from one of the shareholders. It was pointed out that after the shareholders of the respondent No. 1-company and petitioners received some documents by speed post dated 5th September, 2007, namely, auditors report, balance sheet and profit and loss account without any schedules and notes to accounts, the petitioners passed a resolution in the Board meeting held on 7th September, 2007 to the effect that the petitioner No. 1 is authorised to apply to RoC to grant extension of time to hold annual general meeting (‘AGM’). He was also authorised to seek explanation from the respondent No. 2 (Ritish Mohan Mittal) and 5 (G K Arora). A careful perusal of the documents showed that these were signed by R-3, Shri Ratish Mohan Mittal an R-4 Shri Sandeep Mittal as director and Shri G K Arora as the auditor of the company. This was the first time that the P-l came to know that the R-3 and two sons of his eldest brother late Shri Mahesh Mohan Mittal have started indulging in fraudulent practices. On 11th September, 2007 the petitioner received an e-mail from MCA about filing of certain documents by the respondent-company. It was also revealed that DIN 3 of Shri Ratish Mohan Mittal was filed on 31st August, 2007 as per resolution dated 27th August, 2007, which never took place. While searching the Website of RoC the petitioner was shocked and surprised to discover that a company secretary Sh. Naresh Kumar vide diary No. 3615 had filed certain documents including Form 32 certifying induction of Shri Sandeep Mohan Mittal as director of the R1-company, the Form 32 indicated that Sh. Sandeep Mittal had been made director of the company based on a Board resolution dated 9th December, 2006. The same was a matter of utter shock for Sh. Naresh Mohan Mittal and Sh. Amul Mohan Mittal as no Board meeting ever had taken place on 9th December, 2006 and no such resolution had ever been passed including Shri Sandeep Mittal as a director of the company. Another Form 32 certifying induction of Sh. Nippun Mittal as director of the company was also filed indicating that Sh. Nippun Mittal had been made director of the company based on a Board resolution dated 31st August, 2007. After these facts came to the knowledge of the petitioner on 12th September, 2007, the petitioner located Mr. Naresh Kumar (R9, the company secretary who had filed the said Form 32 with the office of the RoC). The petitioner wrote to R-4 to give an explanation for these fraudulent act vide letter dated 12th September, 2007, the R-9 vide reply dated 15th September, 2007 narrated entire sequence of events which revealed that signatures of the petitioner had been forged and used with an intention of committing a serious fraud, embezzlement, criminal breach of trust, forceful illegal control over the company. The entire drama of forger, was masterminded and done at the instance of Ratish Mohan Mittal, Sandeep Mittal and Nippun Mittal.

5. My attention was drawn to the petitioners letter dated 12th September, 2007, to R-9 which reads as under :

“….We have come to know that you have filed certain documents on behalf of our companies with the Registrar of Companies (Delhi and Haryana) under your Digital Signature as a company secretary in full time practice. You are requested to kindly provide us a copy of the same. We are surprised as to who authorised you to file the said documents, as we have neither appointed you nor you are associated with us in any official capacity.

Reply is solicited in 24 hours failing which necessary legal action will be initiated at your cost. Information is to be provided at the addresses mentioned hereunder….

Further, to R-9’s reply which reads as under:

…………

Sub: Reply to your letter dated 12-09-2007

Respected Sir

I beg to say that on 31st August, 2007, Mr. Naveen Gupta representing himself as an part time accountant of the company and Mr. Ajeet Chhikara (my friend) of Chikrara and secretary came to my office at 6.00 PM and asked me to certify and submit Form 32 of the company, namely, Sangeeta Construction (P.) Ltd.

I asked them to show me the related documents and they showed me the consent of directors, which are not necessary in the case of private company and they also showed me the resolution authorising to file Form 32 resolved in the meeting dated 31st August, 2007 and 9th December, 2007 and some other documents. Both the resolution documents were shown in photocopy and I also retained the photocopy of the same for my record.

Mr. Chhikara requested me to help him in filing the said documents as he stated that there was some problem in his computer due to which he expressed his inability to submit the forms electronically. Therefore, in the good faith and as a helping gesture, I certified the Form 32 and DIN-3.

I also hereby enclosing the certified true photocopy of both resolutions given to me by Mr. Naveen and Chhikara for your reference as Annexure A and Annexure B.

I also hereby state that in future, if your goodself want some more information, then I am ready to cooperate….

Certified copy of resolution passed in the Board meeting of Sangeeta Construction (P.) Ltd. held on Saturday, 9th day of December, 2006 at its Registered Office of the company.

“RESOLVED THAT pursuant to section 260 of the Act, Mr. Sandeep Mohan Mittal be and is hereby appointed as additional director of the company to hold office till the date of AGM”.

“Resolved further that Mr. Ratish Mohan Mittal, director of the company be and is hereby authorised to sign and submit the Form No. 32 in RoC, Delhi”.

Resolved further that Mr. Naresh Kumar, company secretary in whole time practice is authorised to certify the said Form….

Certified copy of resolution passed in the Board meeting of Sangeeta Construction (P.) Ltd. held on Saturday, 31st day of August, 2007 at its Registered Office of the company.

“RESOLVED THAT pursuant to section 260 of the Act, Mr. Nippun Mittal be and is hereby appointed as additional director of the company to hold office till the date of AGM”.

“Resolved further that Mr. Ratish Mohan Mittal, director of the company be and is hereby authorised to sign and submit the Form No. 32 in RoC, Delhi”.

“Resolved further that Mr. Naresh Kumar, company secretary in whole time practice is authorised to certify the said Form…”

6. The petitioners pointed out that there is no Naveen Gupta working in any capacity with Sangeeta Construction (P.) Ltd. but Shri Naveen Gupta is working in accounts department of Mittal Hotels (P.) Ltd.; Shri Ajeet Chikkara of Chikkara & Associates has never worked with Sangeeta Construction (P.) Ltd. in any capacity ; Mr. Ajit Chikkara was physically present at the registered office of Sangeeta Construction (P.) Ltd. along with respondent No. 2 on 31st August, 2007 when Amul Mohan Mittal refused to concede to unlawful demands of Ratish Mittal and Mr. Chikkara as mentioned in his complaint dated 31st August, 2007 ; the very fact that Mr. Ajit Chikkara did not share this important event and facts with Sh. Naresh Kumar shows his criminal intent and scheming mind directed towards committing serious criminal act ; Shri Ajeet Chikkara from the very beginning knew that whatever was being done was illegal and false and a major crime that is why he most conveniently shifted the onus of filing requisite documents to Sh. Naresh Kumar as he was aware of the serious repercussions of this crime. Further, it was contended that Sh. Naresh Mohan Mittal’s signatures on the resolutions were forged which make Form 32 a false form. Form 32 shown to be based on the Board resolution in meeting dated 9th December, 2006 has been filed almost 9 months later is an afterthought and part of a greater criminal conspiracy. The mention of name of Sh. Naresh Kumar in both the resolutions itself is evidence of criminal conspiracy as Shri Naresh Kumar has never ever been associated with the company in any manner whatsoever. It showed existence of pre-thought, pre-planned criminal operation by several interested people and professionals. It was contended that as Shri Naresh Mohan Mittal did not attend the meeting dated 31st August, 2007 as confirmed by Ratish Mittal how could have he issue a Board resolution referring to a meeting which never took place and he never attended.

7. The petitioners’ case is that the respondent Nos. 2 to 6 through their ulterior motive and conduct, tried to gain the control over the affairs of the respondent No. 1 company in violation of various provisions of the Act and have been continuing to defraud the company, petitioners. The R-3 directly with respondents 4, 5 and 6 have virtually gained control over the composition of the Board of the directors of respondent No. 1 without conducting any meeting of the Board and shareholders. This act of acquiring the control on the Board of respondent 1 is in violation of section 171 read with section 174 of the Act. The action of R-3 is prejudicial to the interest of the company, creditors as well as oppressive to the petitioners. Further the appointment of respondent Nos. 4 and 5 to the Board of respondent 1 is not done by following the provisions of the Act, as no Board meeting was conducted for making the said appointment. The petitioners were never given a notice of these alleged Board meetings. The appointments of respondents 4 and 5 on the Board is not in conformity of provisions of the Act relating to notices, quorum and Board meeting and appointment of directors by Board is void ab initio. The respondent are not issuing any notices for holding the meetings of the Board of directors and shareholders, therefore, they are not complying with the provisions of sections 171, 174, 286 and 287 of the Act. The R-l is not forwarding the copy of balance sheet, profit and loss accounts and other documents to the members of the company, nor holding any AGM, hence, not complying with the provisions of sections 166, 210 and 219 of the Act.

8. It was contended that the R-3 to 5 do not intend to conduct the business of the respondent No. 1 in fair and transparent manner. Their illegal and mala fide acts are causing are likely to cause to loss to the R-1-company. The respondents are engaged in reducing the future prospects of the respondent-companies by mismanaging the affairs and, thus, adversely affecting the rights and interest of the petitioners.

9. The counsel for R-2 to 5 and 7 and 8 drew my attention to the conduct of the petitioners and pointed out that they had not complied with the Company Law Board’s (‘CLB’s’) orders, till date they had not deposited statutory records with the CLB nor have they sought any modification of the orders. Further, it was pointed out that in violation of the CLB’s orders vide which the R-1-company was directed not to create third party rights in respect of its assets, a “Reliance mobile antenna” had been installed at the terrace, the reply of the petitioners that it was installed “in the normal course of business” is not tenable because the order dated 22nd November, 2007 did not exclude creation of third party rights “in the normal course of business” ; and the petitioners should have sought permission of the CLB for creating third party right even if it was deemed “as in the normal course of business”.

10. Ft was pointed out that minutes book of the Board meetings and also of the meetings of the shareholders are neither serially numbered nor signed and confirmed in accordance with section 193 of the Act. Further, as per item No. 6 of minutes of the Board meeting held on 26th August, 2006 the Board had recommended a dividend of Rs. 350 per share, the said dividend has however, not been declared in AGM held on 23rd September, 2006 nor is there any decision to the effect that the dividend recommended by Board need not be declared and paid.

11. As regards the cessation of petitioner No. 2 as director it was pointed out that consequent upon the demise of Mr. Satish Mohan Mittal on 20th October, 2004, his son the petitioner No. 2 was appointed as additional director of the respondent No. 1-company with effect from 25th October, 2004 to hold office up to the date of next AGM, which was held on 24th September, 2005. As per the minutes of the said AGM, Mr. Amul Mohan Mittal (petitioner No. 2) was not appointed as director, the P-2 had accordingly ceased to be director with effect from 24th September, 2005. All Board meetings held thereafter are purportedly attended by Mr. Naresh Mohan Mittal (petitioner No. 1) and Mr. Amul Mohan Mittal (petitioner No. 2). It was pointed out that the petitioner No. 2 having ceased to be director with effect from 24th September, 2005, hence, all such Board meetings are illegal and invalid as the same having been held without any quorum, the petitioners have never refuted those averments despite the same being on record since August 2008, except the reference made in the rejoinder arguments to the provisions of section 290 which only validates the acts done by a person as director. As per the proviso to section 290, however, nothing in section 290 shall validate acts done by petitioner No. 2 after the comments of respondents on statutory records in the form of affidavit was placed on record on 22nd August, 2008, in any case the appointment of the petitioner No. 2 as director has not been validated and the petitioners have admitted the said legal positions by making a reference to the provisions of section 290.

12. It was pointed out that despite admitting that Mr. Amul Mohan Mittal (petitioner No. 2) had ceased to be director, said Mr. Amul Mohan Mittal has been operating bank accounts of the company at Union Bank of India, Ashok Vihar in collusion with Shri Naresh Mohan Mittal and huge amounts are being withdrawn and misappropriated. It was pointed out that the petitioners do not have any respect for judicial proceedings and have not only been indulging in illegalities but also continue to do so during these proceedings for last about three years and are not entitled to be heard and on this ground alone petition is liable to be dismissed.

13. The counsel for R-2 to 8 (except R-6 who has not entered appearance) contended that the petition has been signed, verified and filed by petitioner No. 1 and petitioner No. 2 in the capacity as directors and shareholders of the respondent No. 1-company. The petitioner No. 1 has also filed a reply to the petition verified by him in the capacity as directors of respondent No. 1-company on 13th November, 2007 through Mr. Suman Doval, advocate. It was pointed out that the said Mr. Suman Doval, advocate has been simultaneously appearing on behalf of the petitioner and also for the respondent No. 1-company. When it was pointed out by the respondents, the petitioners gave an oral explanation as the same being an error through oversight. There is no document whatsoever placed on record to rectify the aforesaid error occurred, if any. It was pointed out that the language, the type and the font style used in the petition is exactly the same as used in the aforesaid reply to the petition. The petitioners/respondent No. 1-company, as represented by the petitioner No. 1, are, therefore, the same person and thereby makes the proceedings as collusive proceedings which should be dismissed forthwith and can under no circumstances be allowed to be proceeded with, much less the equitable proceedings under sections 397 and 398 of the Act, where a person who seeks equity must come with clean hands and the equity is of utmost importance. Further, it was pointed out that in fact, as per the reply filed by petitioner No. 1 to the petition on 13th November, 2007 admitting the allegations in the petition, the respondent No. 1-company becomes the petitioner itself which can not be allowed under the provisions of sections 397 and 398 of the Act, reliance was placed on the case of Sai Sugars Ltd. v. Deepak Sabharwal [2008] 144 Comp. Cas. 726 (CLB – New Delhi)

14. Further, the respondents argued that the reliefs sought by the petitioners are for seeking declaration to the effect that appointment of respondent Nos. 4 and 5 as directors was illegal and so were the resolutions dated 9th December, 2006, 27th August, 2007 and 31st August, 2007. It was pointed out that the entire petition deals with the facts and circumstances, wrongly or rightly as to whether or not the Board meeting was held on 31st August, 2007 and, whether or not the appointment of respondent Nos. 4 and 5 as directors was valid. It was contended that it is an established principle of law that an isolated act and directorial complaints cannot be made subject-matter of a petition under sections 397 and 398 of the Act. Reliance was placed on Hanuman Prasad Bagri v. Bagrees Cereals (P.) Ltd. [2001] 33 SCL 78 (SC).

15. Further, the respondents pointed out that in the petitioners rejoinder it is not clear as to whether the contents of the corresponding paras of the reply are denied or admitted or they are wrong or correct.

16. The respondents contended that the notice dated 22nd August, 2007, for Board meeting dated 31st August, 2007 was issued by the petitioner No. 1 himself. Letter dated 31st August, 2007, of petitioner No. 2 was addressed to the chairman (purportedly petitioner No. 1) of the company seeking leave of absence (not adjournment) as he was indisposed. Letter dated 31st August, 2007, of petitioner No. 1 was addressed to Board of directors intimating that he would not be attending the said Board meeting (without seeking adjournment). Letter dated 31st August, 2007, of petition No. 2 addressed to the chairman of the company (purportedly petitioner No. 1) alleged that he was forcibly made to wait by eight persons people and was held as a hostage against his willingness, he was allowed to leave only if he signed the attendance register, few papers and documents, ail blanks which he refused, since he was indisposed and almost fainted, he was allowed to leave. It was pointed out that the letters referred to as above, purportedly exchanged between petitioner No. 1 and petitioner No. 2 are stage-managed and fabricated. Jt is unbelievable that a family member (petitioner No. 2) was kept as a hostage by another family member (respondent No. 3) in the residence of his brother (petitioner No. 1) where all other members of the family including ladies and children would be present. It is also unbelievable that the drama as reflected in the aforesaid communications could take place at the premises where the petitioner No. 1 himself resides along with others. The petitioner had filed a police complaint about the Board meeting and allegedly keeping the petitioner No. 2 as hostage. The complaint was disposed of without any findings against the respondents.

17. The respondents pointed out that R-6 has been the statutory auditors of the R-1-company since inception. As per the notice dated 22nd August, 2007 issued by the R-6 was proposed to be re-appointed as statutory auditors by the P-2 himself. It later transpired that the respondent No. 6 was ineligible to be appointed as statutory auditor due to temporary removal of his name as a member by the Institute of Chartered Accountants of India for a short period. Respondents had no comments to offer on the eligibility or ineligibility of respondent No. 6 to be appointed as statutory auditor and the same shall have to be dealt with as per the laws, however, it was contended that the letter dated 12th September, 2007, reflects and provides true proceedings held at the meeting dated 31st August, 2007, and refute all the allegations made by the petitioners. Further, it was pointed out that the petitioners have heavily relied upon the R-9’s letter dated 12th September, 2007, reproduced above. It was pointed out that R-9 has been a close associate of the petitioners attending to the secretarial matters of several companies belonging to them. There is, therefore, direct collusion of petitioners with respondent No. 9. It was pointed out that the facts directly contradict the contents of letter dated 12th September, 2007, of the petitioner addressed to the R-9. Whether or not the said Board meeting dated 31st August, 2007, was held, is a fact which can be proved or disproved by leading evidence, oral or documentary, and corresponding cross-examinations which can only be adjudicated upon in a civil proceedings and not in the proceedings under sections 397 and 398 ; reliance was placed on the case of P.L.G. Manu v. Shashi Distilleries (P.) Ltd. [2010] 1 clonline 249 (CLB – Chennai). It was pointed out that the petitioner had tried to compare the two unequal, i.e., draft and actual minutes of the Board meeting and then tried to mislead and misrepresent the CLB. The order dated 26th July, 2010, of Institute of Company Secretaries of India (‘ICSI’), consequent upon a complaint filed by the petitioners alleging the misconduct of R-8, the Board of discipline, constituted by ICSI under the Company Secretaries Act, 1980 has concluded beyond doubt that the Board meeting of R-l-company was duly held on 31st August, 2007 and accordingly Form 32 in respect of appointment of R-5 was rightly taken, on record by the RoC. Filing of DIN Form, etc, are of no relevance whatsoever to the present proceeding. The use of credit card of respondent No. 8 for a limited purpose of payment of fees in respect of filing of DIN-3 does not indicate the active involvement of respondent No. 8 in the affairs of the company in any manner.

18. My attention was drawn to the family settlement in this case. It was pointed out that the elders in the family, anticipating the current problems, had taken a practical view of dividing the properties/companies amongst the family members. The appointment of respondent Nos. 4 and 5 as directors was in line with the aforesaid family settlement. It is evident by the conduct of the parties that the family settlement was being acted upon all brothers. When each of them of the opposite side enjoyed the benefit of the family settlement in respect of different properties, now with all mala fide petitioners are trying to attack only a part of the property which fell to the share of Shri Mahesh Mohan Mittal. It was argued that these kinds of disputes cannot form subject-matter of the proceedings under sections 397 and 398, the petition Reserves to be dismissed.

19. Shri Ajeet Kumar Chikkara’s (R8’s) prayer is that the present petition may be dismissed so far as respondent No. 8 is concerned in the interest of justice or name of the respondent No. 8 be deleted from respondents, no relief has been claimed against answering respondent and he is in no way a necessary party in the present petition. It was pointed out that R-8 has nothing to do and is having no knowledge of the particulars as mentioned in para 1 of the petition except the fact that Shri Ratish Mohan Mittal, director of the company, namely, Sangeeta Construction (P.) Ltd. had engaged respondent No. 8, for and on behalf of the said company, in the capacity of professional advisor as special invitee for recording the proceedings of the Board meeting on 31st August, 2007. It was denied that he asked Shri Naresh Kumar to file Form 32 and supported them with documents. It was stated that the petitioners made a false complaint to police of P S Ashok Vihar against respondent No. 8 in response to that respondent No. 8 gave a legal notice to the petitioners dated 21st September, 2007 explaining the facts and circumstances and thereby asking the petitioners to withdraw the false complaint against respondent No. 8. It was stated that Shri Amul Mohan Mittal was not known to him and when he entered in the office, Shri Ratish Mohan Mittal told him that the person who had just entered in the office is one of the directors, namely, Shri Amul Mohan Mittal. Shri Amul Mohan Mittal was not forcibly made to sit and asked to be present to sign his attendance and sign a few blank papers. Only Shri Ratish Mohan Mittal asked Shri Amul Mohan Mittal to sign his attendance sheet and the same was refused by Shri Amul Mohan Mittal. It is wrong that Shri Amul Mohan Mittal almost fainted out of shock. It was stated that the allegation that – “I was told that I would be able to leave only if I sign the attendance register, few papers and document(s) all blank by one Mr. Chhikara posing himself as company secretary brought by Mr. Ratish Mittal which I refused”, is wrong as R-8 (Shri Chikkara) did not talk to Shri Amul Mohan Mittal and the question of asking to sign certain papers and documents did not arise at all. It was stated that he had not asked Mr. Naresh Kumar to certify and submit Form 32 of the company, namely, Sangeeta Construction (P.) Ltd. He had not shown related documents to Mr. Naresh Kumar. He did not request Mr. Naresh Kumar to help him in filing the said documents as he had stated that there was a problem in his computer. It was stated that he had no role in submitting the documents/papers/forms of any company, namely, Sangeeta Construction (P.) Ltd. to the office of RoC, Mr. Naresh Kumar is not his personal friend.

20. Shri Naresh Kumar’s (R9’s) case is that he is a practising company secretary and as regards his certification to the said DIN-3 form, he had checked all the record of the company to which in his opinion was sufficient to ascertain that whether Mr. Ratish Mohan Mittal was the director of the company or not and the most important document was the annual return filed by the company and signed by Mr. Naresh Mohan Mittal and other director of the company showing him the ministry www.mca.gov.in and can be viewed by anyone. Further that none of the party to the petition had questioned the directorship of Mr. Ratish Mohan Mittal besides the annual return, he had also checked the Form DIN-2 signed by Mr. Ratish Mohan Mittal and all other relevant documents.

21. I have considered the rival submissions and the case laws cited by the parties. There is no dispute with the case laws cited. But each case turns on its own facts. It is noted that in this matter wherein three company petitions have been filed by the petitioners, there is a family settlement which has also been acted upon and properties which are assets of these companies and affairs of these companies are also being managed as provided in the settlement and understanding among the four brothers. In this matter there are allegations and counter-allegations. The petitioners’ case is that P-2 was forcibly made to sign the attendance sheet and other blank papers relating to the Board meeting dated 31st August, 2007 to the venue of which he had gone simply to inform that he was indisposed and will not be able to attend the meeting the other petitioner had already sought leave of absence. It has been alleged that the R-3, namely, Shri Ratish Mohan Mittal who was the only third director in these companies, and who had attended only one meeting in the last seven years, with the help of the other respondents which also included the company secretary and the statutory auditor overpowered P-2 forcibly, for which even complaint was filed with the police, in the endeavour of the respondents to gain control on the affairs of the company. The petitioners have sought resolutions passed on 9th December, 2006, 27th August, 2007, and 31st August, 2007, to be declared as null and void as the quorum of the Board of directors was not met, hence, the appointments of Shri Sandeep Mittal and Nipun Mittal in Sangeeta Construction (P.) Ltd. and Nippun Construction (P.) Ltd. and appointment of Shri Sameer Mittal and Shri Navin Mittal in Aarti Construction (P.) Ltd. to be declared as null and void. Further, cessation of directorship of Amul Mohan Mittal has also been alleged to be illegal. The respondents connivance with the statutory auditor and the company secretary as well forging of signatures on the documents have also been alleged. The respondents’ case is that the petitioners have not come with clean hands in these equitable proceedings. The petition is collusive as the counsel for R-l and the petitioners have been the same and the R-l reply supports the contentions made by the petitioners, there is collusion between the petitioners and R-9 as well. Whether the meetings were held or not, according to the respondents, would require recording of oral evidence and examination and cross-examination of witnesses which cannot be done in these summary proceedings. The allegations regarding leasing out of property to Mittal Hotels Ltd. which is in accordance with the properties being managed as per family settlement and, hence, cannot be adjudicated upon by the CLB. Re-appointment of the statutory auditor was done, his ineligibility due to temporary removal by the Institute of Chartered Accountants was not in their knowledge. The company secretary against whom the petitioners have alleged irregularities has already been exonerated by the ICSI. Directorial complaints cannot be agitated under section 397/398 of the Act. An isolated act cannot be made subject-matter of petition under section 397/398 of the Act. P-2 ceased to be a director with effect from 24th September, 2005, and, hence, all meetings held by the petitioners are null and void. Further, the petitioners have withdrawn huge amounts from the Bank account.

22. In the facts and circumstances of this case, it is noted that the respondents have not been able to refute the allegations made by the petitioners regarding the irregularities and illegalities in filing of Forms 32 and DIN-3. The reason given for cessation of directorship of P-2 is that, he was appointed as an additional director with effect from 25th October, 2004 to hold office up to the date of next AGM which was held on 24th September, 2005, and in the AGM he was not appointed as director, P-2 had accordingly ceased to be director with effect from 24th September, 2005. It is not understood as to how P-2 could be invited to the meeting allegedly held properly by the respondents on 31st August, 2007, if he had ceased to be director with effect from 24th September, 2005. It is noted that Naveen Kumar Gupta and Gulshan Kumar Arora have not entered appearance in these cases despite service. It is also noted that Shri Gulshan Kumar Arora was, in fact, removed by the Institute of Chartered Accountants of India from his membership during the period when the companies had re-appointed him as a statutory auditor, he, in fact, was ineligible to be re-appointed as statutory auditor. Further, it is noted that the replies of the company secretaries is also very evasive and not up to the standards of statutory compliances which they are required to practice and uphold. It is very obvious that the filing of the documents with the RoC has been managed and is not in accordance with the procedure prescribed. Form 32 has been filed after a delay of 9 months. Signatures on the documents are alleged to be forged. The facts and circumstances of this case give credence to the narration of events as given by the petitioners. The exoneration of the company secretary by the ICSI and restoration of membership of the statutory auditor does not validate the irregularities and the illegalities committed in the present case. Meetings without adequate quorum and without proper notice, onus of proving which is on the sender, are held to be ab initio void and so are the resolutions passed therein.

23. In view of the facts and circumstances of this case, these being family Companies being managed by the brothers in accordance with the family settlement, adherence to which has not been disputed, it is noted that by levelling allegations and counter-allegations by manipulating records by holding meetings without quorum both parties have endeavoured to gain control of the management of the companies and have acted in breach of fiduciary duties.

24. The fiduciary capacity within which directors have to act enjoins upon them a duty to act on behalf of the company with utmost care and skill and due diligence and in the interest of the company. More so, in a family company where even directorial complaints can be looked into. Directors have a duty to make full and honest disclosures to shareholders regarding all important matters relating to the company. In the present case a clear case of oppression has been made out, even a single act can cause continuous oppression. The conduct of the respondents have been harsh, burdensome, against probity and good conduct. Once conduct is found to be oppressive under sections 397 and 398, the discretionary power given to the CLB under section 402 to set right, remedy or put to an end to such oppression is very wide. The respondents have been involved in continuous acts of oppression against the petitioners and the present petitions deserve to be allowed in favour of the petitioners. Status quo ante is hereby restored setting aside the appointments of Sandeep Mittal, Nippun Mittal, Sameer Mittal and Naveen Mittal as directors. P-2 continues to be a director on the Board. All statements/statutory forms filed in this regard with the RoC are held to be invalid, all resolutions passed, in Board meetings/AGM/EGM are hereby cancelled.

25. CP Nos. 151/2007, 152/2007 and 153/2007 stand disposed of in the above terms. All company applications stand disposed off. All interim injunctions given stand vacated. No order as to costs.

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Category : Company Law (3490)
Type : Judiciary (10299)
Tags : CLB judgment (29)

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