The instant petition was disposed by this Bench by an order dated 13.10.2000. However, due to administrative difficulties, the same was dispatched to the parties only on 22.11.2000. Before the receipt of the said order, the petitioners had filed two applications-one on 2.11.2000 and another on 20.11.2000, enclosing therewith certain documents, which according to them were relevant in determining the issues in the petition and as such they had sought for taking them on accord and also for further hearing of the petition.
Along with the first application, they had enclosed certain documents including two balance sheets which had not been produced during the hearing of the main petition. One is an unsigned manuscript balance sheet as on 31.3.1949 and the other unsigned typed balance sheet as on 31.3.1948. In the second application, they had enclosed a copy of a signed Balance sheet as on 31.3.1949. Since the applications were filed after the signing of the order, these applications were not placed before this Bench. On receipt of the order dated 13.10.2000, the petitioners filed a writ petition before the Calcutta High Court for directions to this Bench to consider these two applications and in the meanwhile keep the said of this Bench suspended. The High by an order dated 18th January 2001, directed this Bench to consider these two applications by giving a hearing to the parties and thereafter decide whether to retain the order dated 13.10.2000 or recall the same.
BEFORE THE COMPANY LAW BOARD,
EASTERN REGION BENCH, KOLKATA
C.P. No.11(111)/ERB of 1998
Companies Act, 1956- Section 111
Smt. Nupur Mitra & others
M/S Basubani Private Limited
O R D E R
(Dates of Hearing 1.3.2001 &17.4.2001)
1. The instant petition was disposed by this Bench by an order dated 13.10.2000. However, due to administrative difficulties, the same was dispatched to the parties only on 22.11.2000. Before the receipt of the said order, the petitioners had filed two applications-one on 2.11.2000 and another on 20.11.2000, enclosing therewith certain documents, which according to them were relevant in determining the issues in the petition and as such they had sought for taking them on accord and also for further hearing of the petition. Along with the first application, they had enclosed certain documents including two balance sheets which had not been produced during the hearing of the main petition. One is an unsigned manuscript balance sheet as on 31.3.1949 and the other unsigned typed balance sheet as on 31.3.1948. In the second application, they had enclosed a copy of a signed Balance sheet as on 31.3.1949. Since the applications were filed after the signing of the order, these applications were not placed before this Bench. On receipt of the order dated 13.10.2000, the petitioners filed a writ petition before the Calcutta High Court for directions to this Bench to consider these two applications and in the meanwhile keep the said of this Bench suspended. The High by an order dated 18th January 2001, directed this Bench to consider these two applications by giving a hearing to the parties and thereafter decide whether to retain the order dated 13.10.2000 or recall the same.
2. These two applications were heard on 1.3.2001. The learned Sr.Counsel for the petitioners, Shri Mitra, submitted as follows: At the time when the petition was heard, there was no document available with the petitioners to support their claim that the company had in fact allotted 175 shares to the 4 subscribers to the memorandum. However, in the month of October 2000, the petitioners were able to trace the balance sheets as on 31.3.1948 and 31.3.1949, These balance sheets would indicate that the 4 subscribers to the memorandum had paid money towards 175 shares and as such these shares must have been allotted during that year. If so, then, further allotment of 500 shares on 24.12.1949 ultra vires the memorandum. Now that proof of allotment of 175 shares has been placed before the CLB, it should declare the further allotment of 500 shares as null and void and rectify the register of members deleting the name of those who now hold these 500 shares.
3. The learned counsel for the opposing respondents contended that these two balance sheets actually support the stand of their clients that the allotment made on 24.12.1949 of 500 shares included these 175 shares and further allotment of only 325 shares was made on that day. They pointed out that as per the balance sheet as on 31.3.1948, the subscribed capital was Rs 17,500 and the paid up capital was Rs 6500 and calls in arrears were Rs 11,000. As per the entries in the reverse of the share scripts issued in the names of the 4 subscribers, the amount paid by them towards the shares upto 31.3.1948 was also Rs 6500. This would conclusively prove that there are no certificates other than those issued for 500 shares and it would also indicate that for the money paid by the 4 subscribers, share certificates had been issued only on 5.1.1950. If it is so, they contended that the allotment made on 24.12.1949 included these 175 shares and that share scripts for 500 shares were issued on the basis of this allotment on 5.1.1950. Accordingly, they submitted that the finding on this Bench in paragraph 28 of the order dated 13.10.2000 on the allegation relating to ultra vires the Memorandum does not need any modification and the said order should be retained.
4. After this hearing was concluded, the petitioners again filed another application, enclosing therewith a copy of the Balance Sheet as on 31.3.`1950, with the prayer to consider the same also along with the ones submitted earlier. According to the petitioners, this Balance sheet was discovered by them subsequent to the hearing on 1.3.2001 and as such the same should be taken on record and considered. In view of this new document, we decided to hear the parties on this application and accordingly arguments were heard on 17.4.2001.
5. Shri Mitra, Sr Advocate for the petitioners, referring to the Balance Sheet as on 31.3.1950, pointed out that the issued and subscribed sahre capital as on this date is shown only as 175 shares even though according to the respondents, share certificates had been issued in respect of 500 shares in January 1950. He further pointed out that the respondents, relying on the entries on the reverse of the shares, contend that these entries would evidence that even during the life time of the father of the petitioners, with his consent, the non members had paid share application money. According to him, this contention cannot be sustained as the contribution of cash as noted in the reverse of the share scripts do not tally with the figures of appearing on the balance sheets of these three years. To substantiate his stand, he presented calculation sheets comparing the figures of the amount noted on the reverse of the share scripts and the one noted in the balance sheets during these three years and pointed out that the difference. Therefore, he contended that the entries in the reverse of share scripts should be ignored. In regard to the entries in the balance sheets as share application money, he contended that in the absence of any record indicating the details of the persons from whom this application money had been received, it should be presumed that the original subscribers had paid this money towards allotment of proportionate shares out of the authorized capital of 500 shares. Accordingly he prayed that it should be held that there had been issue and allotment of 675 shares and that the same is ultra vires the Memorandum.
6. Shri Choudhary, Sr Advocate appearing for the contesting respondents submitted that the limited issue for consideration the hearing is the additional document filed by the petitioners viz Balance Sheet as on 31.3.1950. All the calculations given by the petitioners should be ignored as the same do not arise out of the new document. He further pointed out that the case has been reopened only on the ground that the three balance sheets would reflect the allotment of 175 shares and therefore the allotment of additional 500 shares in December 1949 is ultra vires the Memorandum. Therefore, the calculations furnished by the petitioners should be ignored as it has no nexus with the ground for reopening the issue. He also pointed out that even the 1950 Balance Sheet indicates the issued and subscribed capital only as 175 shares and not 675 shares. Accordingly he prayed for retaining the order dated 13.10.2000.
7. We have perused the additional documents viz balance sheets as on 31.3.1948, 31.3.1949 and 31.3.1950. The first two documents were place before us to establish that there had been an allotment of 175 shares in 1948 and there fore allotment of 500 shares was ultra vires the memorandum. These three documents were not placed before us when the main petition was heard. Now that these documents are available, we would like to consider the matter afresh as far as the allegation relating to ultra vires the Memorandum is concerned. Since, this allegation has been exclusively dealt with only in paragraph 28 of our order dated 13.10.2000, we recall that paragraph and substitute the same with the following:
Paragraph 28: The allegation of the petitioners is that, as against the authorized capital of 500 shares, the company had allotted 675 shares, thus acting ultra vires the Memorandum. They have relied on the document at Annexure E to argue that 175 shares had been allotted on 10/12/47 and suppressing that allotment, further 500 shares were allotted on 24.12.49. We have already noted that the said document is nothing but a copy of the 7th page of the Memorandum dated as 10th December 1947wherein the subscribers had undertaken to subscribe totally to 175 shares. However, the balance sheet of the company as on 31.3.1948, now produced, shows the subscribed capital as Rs 17,500 and paid up capital as Rs 6,500. Thus, it is clear that during the year 1947-48, the company had received money in respect of 175 shares. Once a company shows in its accounts, any money under the head “paid up capital” in respect of certain shares, then the presumption has to be that those shares had been allotted. Further, as pointed out by Sarkar, in case of subscribers to memorandum there need not be actual allotment of shares in respect of the shares that they had agreed to subscribe. Once, money has been received either in full or in part in resp ect of 175 shares and also been taken into the share capital account of the company, these shares had come into existence. Therefore, the company could not have allotted more than 325 shares irrespective of the fact whether 175 shares had actually been earlier allotted or not. Now the only question to be examined is whether further 500 shares had been allotted additionally. As we have observed in paragraph 27, the number of shares in existence has to be reflected either in the capital account of the company or by the share scripts issued. Balance sheet as on 31.3.1948 shows 175 shares as issued, subscribed and Rs 6500 as paid up leaving Rs 11,000 as calls in arrears. The balance sheet as on 31.3.1949 shows the same number of shares as issued, subscribed and Rs 12,000 as paid up leaving an amount of Rs 5,500 as calls in arrears. In addition, this balance sheet also shows Rs 16,000 as share application money. This balance sheet has been signed by the father of the petitioners. The Balance Sheet as on 31.3.1950 shows 175 shares as issued and subscribed and Rs 14,050 as paid up leaving Rs 3,450 as calls in arrears. It also shows an amount of Rs 26,250 as share application money. The next balance sheet on record dated 31.3.1951 shows the issued, subscribed capital as 500 shares with Rs 39,300 as paid up leaving a sum of Rs 10,700 as calls in arrears. Balance Sheet as on 31.3.52 shows the issued, subscribed and paid up capital as Rs 50,000. Thus, by this time all the 500 shares had been fully paid up. From then on, till date, the same figure is shown in all the subsequent balance sheets. The very fact that the balance sheet as on 31.3.49 signed by the father of the petitioners indicates a sum of Rs 16,000 as share application money, over and above the paid up capital of Rs 12,000, it is clear that the Board had intended, during the life time of the father of the petitioners, to allot shares beyond 175 shares. This being the case, the petitioners cannot contend that issue of shares beyond 175 shares was behind the back of the father of the petitioners. The learned counsel for the petitioners pointed out the differences in the figures noted in the Balance Sheets and the ones noted on the reverse of the share certificates. We find that the total of the figures noted on the reverse of the share certificates relate only in respect of 5 scripts as the share script in the name of Shri Banga Bushan who had been allotted 80 shares is not available on record. Unless and until we have the figures noted on the reverse of this share script also, it would be difficult to compare these figures to come to a conclusion that they do not tally and therefore we have to draw some inference as suggested by the learned counsel for the petitioners. Even otherwise, the non tallying of the figures does not have any bearing on the issue under consideration viz ultra vires the Memorandum. For determining this issue, we have to weigh between the audited accounts of the company together with the number of shares in existence as evidenced by the share scripts and the return of allotment filed on 30.1.1950 to come to a conclusion as to whether the company had acted ultra vires the Memorandum. The contention of the petitioners is that if the return of allotment is taken as it is and with the balance sheet as on 31.3.48 showing allotment of 175 shares, then the company had allotted 675 shares as against the authorised capital of 500 shares. According to the opposing respondents, the return of allotment indicating allotment of 500 shares on 24.12.1949 included the 175 shares agreed to be subscribed by the 4 brothers. Unfortunately, none has produced the copy of the Board minutes in regard to the allotment, which would have shown some light on this issue. None of the directors who attended this meeting is alive to assist us in this matter. None of the present shareholders, not being a party to the decision of the Board could take a stand on this issue. Therefore, we have to go by the contemporaneous documents/records of the company and reach a reasonable/justifiable conclusion. While we find some substance in the contention of the learned counsel for the petitioners, that since the balance sheet as on 31.3.1950 continues to show the issued and subscribed capital as 175 shares, even after the issue of share scripts in January 1950 for 500 shares, the same does not reflect the correct position, yet, it is not germane to the issue before us. If it had indicated 675 shares as issued and subscribed capital then there would be merit in the contention of the petitioners. Right from 1951 till today, every Balance Sheet exhibits only 500 shares as issued, subscribed and paid up. The number of shares in existence as seen from the serial numbers of the share scripts issued is only from 1 to 500. In the return of allotment, the father of the petitioners is also shown to have been allotted 100 shares. If so, the petitioners together with their mother, should hold 200 shares and other three subscribers to the Memorandum should hold 105 shares each. But the present position is that the petitioners together with their mother hold only 100 shares and the families of the deceased 3 other subscribers hold only 80 shares each. It is not the case of the petitioners that their father had contributed towards 200 shares and that he was given possession of only 100 shares. They have been receiving dividends only on this basis and have also been exercising the voting rights only on this basis. Under the circumstances, the only possibility, in view of return of allotment dated 30.1.50 showing allotment of 500 shares, is that, this allotment included the 175 shares which had already come into existence in the year 1948 itself. This presumption gets strengthened from the fact that all the share certificates were issued only on 5.1.1950. These share certificates indicate, in their reverse, the dates of payment of the consideration in installments. Shri Mookerjee pointed out, that, as per the balance sheet as on 31.3.1948, the paid up capital in respect of the 175 shares was Rs 6,500 which tallies with the amount shown as paid by the 4 brothers during 1947-48 as indicated in the reverse of the share certificates held by them. We have examined this point and find the same to be correct. ( Satya Bhusan Bose-Rs 3000: Santi Bhusan Bose –2000: Phani Bhusan Bose-Rs 1000: Kanti Bhusan Bose- Rs 500). In the written submission filed by the petitioners on 8.11.2000, they have also confirmed this. If so, then it conclusively establishes that for the amount paid by these brothers for 175 shares, share scripts were issued only on 5.1.1950. Even otherwise, when the accounts of the company do not exhibit receipt of money for 675 shares and in the absence of existence of share certificates for 675 shares, it is difficult to come to the conclusion, on the basis of the return of allotment, that 675 shares had been allotted. Even assuming, for argument sake that the allotment of 500 shares was in addition to the 175 shares, in facts of the case as enumerated above, actual allotment had been made only to the extent of 325 shares. If that is so, then the opposing respondents are right to claim that these 500 shares included 175 shares or the Return of Allotment did not reflect the correct allotment. Either way, whether 500 shares or 325 shares were allotted on 24.12.49, the factual position is that only 500 shares are in existence and there is no document to reflect existence of 675 shares at any point of time. None of the balance sheets produced by the petitioners indicate that 675 shares had been issued or paid up. In case, we agree with the petitioners that there are 675 shares and that the allotment of 500 shares has to be declared as invalid, then the 500 shares have to be cancelled by refunding Rs 50,000. As of date the subscribed, issued and paid up capital is only Rs 50,000. Once the amount of Rs 50,000 is refunded, there will be no share capital left in the company, even though for 175 shares, the 4 brothers had paid the full consideration. It would also mean that no shareholder including the subscribers to the memorandum would have any share script since all the existing share scripts have to be cancelled. Thus, the inescapable conclusion that has to be arrived at, on the basis of materials placed before us especially in the absence of the minutes book of the company during the relevant time which would have brought to light whether there was a Board meeting on 24.12.49 to allot shares and if there had been one, the actual decision taken thereat, is that the company has not issued more shares than the authorized capital and therefore the question of ultra-vires the Memorandum does not arise. Accordingly, we hold that the petitioners have not established the allegation relating to ultra-vires the Memorandum.
8. Since, we have reached the same conclusion on the only issue raised and argued on the basis of the new documents with respect to ultra vires the Memorandum as had been reached by us in our order dated 13.10.2000, and since no modification or changes are required in that order in respect of other matters, we retain the said order with substitution of paragraph 28 as above in that order.
9. The applications are accordingly disposed of.