BEFORE THE COMPANY LAW BOARD

EASTERN REGION BENCH

CALCUTTA

C.P. No.11(111)/ERB of 1998

 

Present: 1. Shri S.Balasubramanian, Vice Chairman

                    2. Shri C.R. Das, Member

 

In the matter of Companies Act, 1956- Section 111

AND

In the matter of M/S Basubani Private Limited    

PETITIONERS:

1.     Smt. Nupur Mitra

2.     Smt. Jhumur Ghosh

RESPONDENTS:

1.     Basubani Private Limited

2.     Smt. Roma Bose

3.     Shri Himansu Bose

4.     Shri Nirmal Kumar Bose

5.     Shri Rajat Bose

6.     Shri Debjibon Bose

7.     Shri Kalyan Bose

8.     Smt. Protima Bose

9.     Shri Partha Bose

10. Shri Sailen Bose

11. Shri Utpal Bose

12. Shri Rajashsree Bose

13. Shri Alokee Bose

14. Shri Diptish Bose

INTERVENER RESPONDENT:

1.     Smt. Biva Bose

Present on behalf of parties:

     1. Shri  Sudipto Sarkar, Sr Advocate                         …for petitioners

     2. Shri  Siddhartha Mitra, Advocate                         …for petitioners

     3. Shri   Ahim Chowdhary, Advocate                         …for Resp. No 1

     4. Shri D.N.Mitra, Advocate                                            …for Resp. No 1

     5. Shri Pratap Chatterji, Advocate                                  …for Resp.No 3,8

     6. Shri R Banerji, Advocate                                            …----do----

     7. Shri S.N Mookerjee, Advocate                                 for Resp. 4 to 7&11

     8.  Shri S.Bagchi, Advocate                                           …  ----do---

 

O R D E R

(Date of  final hearing: 20/4/2000 )

 

S. BALASUBRAMANIAN:

 

1.     This petition filed on 20.1.1998 under Section 111 of the Companies Act, 1956 ( the Act)  seeking rectification of the Register of members of M/S Basubani Private Limited ( the company) was dismissed by this Board by an order dated 31.7.1998 on the grounds of limitation and pendency of a suit on identical issues filed prior in time.  This order was taken on an appeal to the Calcutta High Court, which,  while setting aside the order of this Board dated 31.7.1998, remitted the case back to this Board for re-deciding the petition in the light of the observations contained in its judgment. Accordingly, the petitioners moved an application to this Bench for re-hearing the matter. When the application was taken up for hearing, the respondents pointed out that they had moved the Supreme Court with a Special Leave Petition challenging the order of the Calcutta High Court and prayed for deferring the hearing of the petition. The Supreme Court disposed of the SLP in the following terms:

 " Leave granted. Heard learned counsel appearing for the parties.  After hearing for some time and on perusal of the documents and judgment, we are of the opinion that the order of remand made by the High Court calls for no interference.  The High Court has set aside  the order dated 31.7.1998 passed by the CLB (Company Law Board).  Various contentions are raised on behalf of both the parties before us and, in particular, on behalf of the appellants as regards the limitation and delay.  The respondents in their petition have made out a prima facie case for condonation of delay and if necessary, the respondents may file such documents as permissible in law to get the delay condoned.  Contentions raised before the CLB as well as before the High Court and before us are kept open and the reasons recorded by the High Court be not treated as final and will not prejudice the contentions of either party.  Since the matter is pending before the CLB, we direct the CLB to dispose of the same as early as possible preferably within 6 months in accordance with law".

2.     Accordingly, the petition was heard afresh. The admitted facts in this case are as follows: There are six groups of shareholders in the company, the head of each group being  the brothers of the same family. None of brothers was alive on the date of filing of this petition. The equity  shareholding of the brothers/their family members, as per the records of the company, is as follows:

            

 1.Indu Bhushan Bose      - 80 shares

                2. Phani Bhushan Bose      - 80 shares

                3.Kanti Bhushan Bose      - 80 shares

                4.Banga Bhushan Bose      - 80 shares

                5.Satya Bhushan Bose      - 100 shares

                6.Shanti Bhushan Bose    -80 shares

3.     This shareholding has been going on from 1950 onwards. The shares held by these brothers, had either been devolved on or transferred to their own family members. In the present petition, the petitioners who are the daughters of Satya Bhushan Bose are challenging the above mentioned shareholdings on two main grounds as would be indicated later and as such have sought for rectification of the Register of Members by deleting the names of respondents 3 to  14 in respect of the shares impugned in the petition and also for a declaration that the legal heirs of Late Satya Bhushan Bose are the holders 100 equity shares and the other respondents are holders of an aggregate of 75 shares. In effect the prayer of the petitioners is that there should be a declaration that the subscribed capital of the company consists of only 175 equity shares.

4.     A summary of the petition is as follows: One Late Satya Bhushan took a  land on lease for 71 years in 1945 and constructed a Cinema House in the name of BasuSree Cinema for which purpose he took a loan of Rs.3.1 lacs from a Bank.  With a view to provide for his brothers, the late Satya Bhushan Bose converted this proprietary business into a private limited company and  the 1st respondent company was incorporated under the provisions of the   Indian Companies Act, 1913 on 10.12.1947. The authorized capital of the company comprised of 500 equity shares of Rs.100/ each  ( herein after referred to as shares) and 4500 preference shares of Rs.100/-each.  The subscribers to the Memorandum of Association were Shri Satya Bhushan Bose, 3 of his brothers viz. Sarvshri Shanti Bhushan Bose, Kanti Bhushan Bose and Phani Bhushan Bose having agreed to subscribe to 100 shares, 25 shares, 25 shares and 25 shares, respectively. Thus, late Satya Bhushan Bose held 57% of the shares in the company while the other 3 brothers collectively held 43% shares.  Shri Satya Bhushan Bose was the Managing Director of the company for life and the other 3 brothers were directors.  Shri Satya Bhushan  expired on 13th January, 1950.  At this time, the wife of the deceased, the mother of the petitioners was only 26 years old and the petitioners were 5 and 1-1/2 years of age. The shares held by Satya Bhushan Bose devolved on his wife- the 2nd respondent.  In course of time, the other brothers also died and the shares held by them had been either earlier transferred to their family members or devolved on them.  The petitioners obtained 25 shares each from their mother- the 2nd respondent by transfer sometime in 1960s.

5.     Sometime in December, 1996,  one Shri Aloke Kumar Bose, a son of  late Kanti Bhushan Bose, wrote a letter to the petitioners (Annexure- D) enclosing therewith copies of certain documents (Annexure -E) and Annexure -F)   from which petitioners came to know that there had been illegal allotment of shares in the company. When the petitioners made further enquiries, they found that a Return of Allotment dated 3.1.1950 had been filed on 30.1.1950 with the Registrar of Companies indicating that an allotment of 500 shares had been made in a board meeting  on 24.12.1949 as indicated below:

               1. Indu Bhushan Bose            - 80 shares

2. Phani Bhushan Bose       -80 shares

3. Kanti Bhushan Bose            -80 shares

4. Banga Bhushan Bose       -80 shares

5. Shanti Bhushan Bose            -80 shares

6. Satya Bhushan Bose       -100 shares

6.      The allegations of the petitioners are that the allotment of 500 shares ultra-vires the Memorandum in as much as with the 175 shares allotted to  the subscribers to the Memorandum, the total number of shares would be 675 shares as against the authorized capital of 500 shares and as such this allotment is invalid.  Secondly, by this allotment, two new members were inducted and the existing members were not allotted shares in proportion to their existing holding. It is in violation of the provisions of Section 105 C of the Companies Act, 1913, according to which, further shares had to be offered to the existing members in proportion to their holdings and only if they don't accept the shares, shares could be offered to others.   However, no offer in writing was made to any existing member and disproportionate allotment was made including to outsiders. Therefore, the violation of the provisions of Section 105 would also make the allotment invalid. According to the petitioners, no Board Meeting was actually held on 24.12.1949 and the Return of Allotment even though was signed on 3.1.1950 by Shri Santi Bhushan Bose, during the life time of Satya Bhushan Bose, the same was filed only on 30.1.1950, after the death of Shri Satya Bhushan Bose.  This, according to the petitioners, would indicate that documents had been  fabricated  as if the decision to allot shares was taken during the life time of Shri Satya Bhushan Bose.  In view of the nullity of the allotment on account of violation of the provisions of Section 105 C as also on account of his being ultra-vires the Memorandum, the petitioners have sought for rectification of the Register of Members to delete the names of the shareholders in respect of 500 shares.

7.     Respondents 1, 3 and 8 have filed a joint reply as also Respondents 4 to 7 and 11 jointly  opposing the petition. Respondents 2 and 13 in their individual replies  have supported the petition. The mother of the 13th respondent joined the proceedings as an intervener and she has opposed the petition.  Later, when the matter was taken up for hearing on remand from the High Court, respondents 1, 3 and 8 filed a  supplementary affidavit as also the respondents 4 to 7 enclosing therewith a large number of documents. The petitioners have  filed their replies to the supplementary   affidavits.

8.      A brief of the reply of the opposing respondents is as follows:  The petition is barred by the Law of Limitation as what is sought to be agitated in the petition relates to an event that took place nearly 50 years back.  Further, the 2nd respondent who  is the mother of the petitioners and widow of the late  Satya Bhushan Bose, has been a director of the company right from 1952 and as such has been fully aware of the shareholding position in the company.  Even the petitioners who became shareholders on transfer of shares to their mother in 1960s  have been attending all the General Body Meetings and have been receiving dividends on the basis of paid up capital of 500 shares.  There have been a number of proceedings relating to the affairs of the company initiated by the petitioners/ 2nd respondent and a civil suit on issues similar to the one in the present petition was also instituted by the petitioners.  The land on which the Cinema House has been constructed was taken in the name of Late Satya Bhushan Bose out of joint family funds.  At the time of incorporation of the company, the promoters of the company had decided to equalize their holdings at a later stage so that all the six brothers would have equal interest in the joint family business.  Therefore, the holding of shares at the initial stage is not germane presently. It is wrong to say that the petitioners came to know of allotment of 500 shares only from the letter of Aloke Kumar Bose in December, 1996.  The number of shares shown as 500 in the Return of Allotment filed on 30.1.1950 includes 175 shares subscribed by the promoters of the company and only the balance of 325 shares were allotted in the Board Meeting held on 24.12.1949. Therefore,  the allotment cannot be considered to be ultra-vires the Memorandum.  These 325 shares were allotted in pursuance to an agreement by and  between the promoters of the company including the father of the petitioners and was made with the concurrence of all the shareholder directors at that time including the father of the petitioners.  Therefore, the question of violation of the provisions of Section 105 C does not arise.  Accordingly, these respondents have sought for dismissal of the petition

9.     Shri Sudipto Sarkar, Sr Advocate,  initiating arguments on behalf of the petitioners,  submitted that the question of Limitation no longer survives in view of the prima facie opinion expressed by the Supreme Court that the petitioners have a case for condonation of delay.  He further submitted that the Calcutta High Court has found that the allotment of 500 shares was ultra-vires the memorandum and that the provisions of Section 105 C had not been complied with.  These findings he submitted, should be kept in mind while deciding  this petition. 

10. Dealing with the issues raised in the petition, Shri Sarkar submitted that at the time of incorporation of the company, the father of the petitioners viz. late Satya Bhushan Bose held 100 shares out of 175 shares and thus he held 57% of the shares in the company and thus was  an absolute majority shareholder. The number of shares left to be allotted remained as 325 shares.  However, the petitioners and other shareholders were under the impression that 500 shares had been allotted by the company to six shareholder brothers and accepted this position, but  they were never aware of the allotment of 175 shares till they received a letter dated 21.12.96 from one Shri Aloke Kumar Bose, the 13th respondent and son of late Kanti Bhushan Bose, that that the company had filed 2 Returns of Allotments - one relating to 175 shares (Annexure E) and another relating to 500 shares (Annexure F).  The first Return of Allotment had been filed with the Registrar of Companies on 10.12.47 and the second one for allotment of  500 shares, even though dated  as 3.1.1950 was filed only on 30.1.50. As per the second return of allotment, these 500 shares were allegedly allotted on 24.12.1949 i.e. during the lifetime of late Satya Bhushan Bose.  The relevant Board Minutes have  not been disclosed so far to any one leading to a suspicion that no  Board Meeting ever took place on 24.12.49 and that the 5 brothers had fabricated the said allotment.  According to him, the very fact that the Return of Allotment was filed after the death of late Satya Bhushan Bose would indicate that the purported allotment did not have the consent and approval of late Satya Bhushan Bose.  He also pointed out that even otherwise the allotment of 500 shares would be ultra-vires the Memorandum as with 175 shares allotted to the promoters of the company, the allotment of 500 shares would take the total  issued shares to 675 shares as against the authorized capital of 500  equity shares. This being ultr vires the Memorandum, the same is void. This ultra-vires act cannot be ratified even by the general body. On this proposition, he relied on Buckley on the Companies Act 14th Edn-page 30. He also pointed out, relying on Babu Lal Vs. Nariana Sugar and General Mills Ltd. ( 28 CC 155 Panjab) that in case of subscribers to the Memorandum, there is no need for any formal allotment of shares and if that be the case, there would have been only 325 shares to be allotted and not 500 shares. Accordingly, he sought for canceling the allotment of 500 shares and consequently rectifying the Register of Members in regard to these shares even if it results in reduction of share capital.  In this connection, he relied on   Re: Transatlantic Life Insurance Co.Ltd. (1979 3 AER 352) in which it was held that in  a petition for rectification of Register of Members, such an order can be passed if shares are issued beyond the authorized capital of the company as such excess issue would be void and therefore  reduction of share capital could be ordered. 

11. He further contended that, in addition, the allotment is  even otherwise void. As per Section    105 C of the Companies Act, 1913, which  was applicable at the relevant point of time, shares should  have been offered to the existing shareholders in proportion to their shareholdings. Since the father of the petitioner was a subscriber to the Memorandum, he was a member of the company and as such further shares should have been offered to him.  Since, no offer was made as per the affidavit of one of the respondents, the allotment is null and void. Further, by this allotment, two new members were also inducted. The respondents cannot rely on any agreement between the brothers of equal shareholdings as no documentary proof has been produced relating to such agreement nor any private agreement between the shareholders could bind a company as the company was not a party to the agreement. On this proposition he relied on V.B.Rangaraj Vs. V.B. Gopalakrishnan ( 1992 SC 453) according to which private agreement  contrary to Articles of Association of the company is not binding either on  the shareholders or on  the company.

12. Drawing our attention to Nanalal Zaver Vs. The Bombay Life Assurance Company Limited: (AIR 1950 SC 172) wherein it was held that  Section 105 C contemplates issue of shares on proportionate basis to the existing shareholders whenever further shares are issued within the authorized capital of the company, he contended that while allotting  of 500 shares, the principles of proportionate allotment was not followed and as such the allotment is void. Referring to  Balkrishan Gupta Vs. Swadeshi Polytex Limited ( AIR 1985 SC 520) in which it was observed that a glance at the scheme of the Indian Companies Act, 1913 shows that the words " Member", "Shareholder" and "Holder of a share" have been used interchangeably in the Act and since Section 30 of the Act recognized the subscribers to the memorandum as members, they should have been allotted shares in proportion to their holding when further shares were allotted.  He pointed out to the decision in  Re: Calcutta Stock Exchange Association Ltd. (AIR 1957 Cal. 438):  wherein it was held that "subscribers become shareholders either by mode of transfer or by mode of allotment. What in fact the law does in their case is that their subscription to the Memorandum takes place by application for shares and registration of the Memorandum operates  as the acceptance of the application by the company". Accordingly he submitted that in respect of subscribers to the memorandum, they become members on incorporation of the company and were automatically issued shares as per their subscription and any further issue of shares in the company will have to be made to them in accordance with Section 105C. Failure to do so is against the provisions of Section 105C and such these shares have to be cancelled.

13. In regard to the contention of the respondents that there has been long and undue delay in filing the petition and as such  the same barred by limitation, he submitted that when an act is illegal and void or fraudulent, limitation is not applicable in challenging such an act.  He also pointed out that as per Section 17 of the Limitation Act, 1960, the limitation does not begin to run until the applicant discovers fraud or mischief.  For the first time the petitioners came to know of the allotment of 175 shares made on 10th December, 1947 from the Annexure E enclosed with  the  letter received from Shri Aloke Kumar Bose.  Till then, they had no knowledge of the allotment of 175 shares and were under the bona fide belief that only 500 shares had been issued in the company right from incorporation.  Therefore, only in December, 1996, the petitioners came to know of the illegal and void allotment of 500 shares and the petition was filed in January, 1998 without any loss of time.  He pointed out that in Lazarus Estates Limited Vs. Beasley (1956 1AER 341) in which it was held that no court would allow a person to keep an advantage which was obtained by fraud.  He also referred to Shah Mulchind & Co. Vs. Jawahar Mills Ltd. ( AIR 1953 SC 98 ) wherein the court held that for the purpose of limitation, time would run only after the applicant comes to know of his right to sue.  In the present case, the petitioners came to know of the allotment made in 1947 only in 1996 and therefore the petition does not suffer from limitation. He further submitted that even otherwise the CLB has held that Limitation Act is not applicable to the proceedings before it.  Therefore, he submitted that the petition cannot be dismissed on the ground of limitation.

14. Shri Ahim Choudhary appearing for the 1st respondent submitted that the Company Law Board should not take cognizance of any of the observations made by the Calcutta High Court in as much as the Supreme Court has kept all the issues open.  He also pointed out that even though the Supreme Court formed a prima facie opinion that the petitioners had made out a case for  condonation of delay, yet, it had also advised  the petitioners to  submit further documents to seek condonation of delay which the petitioners have not done and therefore the question of limitation is still an issue to be decided by the Company Law Board.

15. He submitted that the petitioners have been put up by the 2nd respondent to question acts which were fully within her knowledge for the last about 50 years.  She knew fully well that the petition would not survive if she herself had filed this petition. He pointed out that when other family members/shareholders decided to participate in the management of the company, she caused institution of a number of civil suits and in fact she had challenged the present shareholdings in Suit 62/97.  She was fully aware that the company was incorporated with joint family funds  and was to be run as a family business.  He pointed out, referring to the additional affidavit,  that in the  title suit Number 104 of 1950, the 2nd respondent filed an affidavit stating that many properties including the leasehold right of the  land on which the cinema hall is constructed  were joint family properties and that each brother would have 1/6th share in all the properties.  Accordingly, a consent decree was passed in that suit declaring that all the properties mentioned in the schedules to the plaint were joint family properties entitling each of the 6 brothers to have 1/6 share in all the properties.   Further, a Memorandum of  Agreement was entered into on 31st March, 1958 by the 5 brothers and the 2nd respondent being the widow of the deceased brother wherein the terms of the decree were confirmed and it was further reiterated that all the brothers  should have 1/6th share in the properties of the family including the company.  He further submitted that there are three other business entities in which all the six families have 1/6th interest.  Therefore, he contended that the present shareholding in the company which is more or less equal among the families of six brothers should be considered in the light of the family arrangement.  He also pointed out that even though the petitioners' claim that their father had taken loan from the bank in his name for the purposes of the company, yet, the loan was repaid to the 2nd respondent over a period of time from out of the family funds and she had acknowledged as is evident from the stamped receipts signed by her on receipt of various installments.

16. In regard to the filing of Return of allotment indicating the allotment of 500 shares, he submitted that as per Section 32 of the Companies Act, 1913, the company had to file a list of shareholders within  18 months from its incorporation. Since the company did not do so,  in the Return of Allotment filed on 30.1.50,  the shareholding of the subscribers to Memorandum was also included even though only 325 shares were allotted on 24.12.49. The learned counsel submitted that it is wrong to contend that 500 shares were allotted on 24.12.47. In fact only 325 shares were allotted at 55 shares to the three brothers who were subscribers to the memorandum and 80 shares each to two other brothers. Since the petitioners father had subscribed to 100 shares, no further shares were allotted to him. Thus after this allotment, there was equality in the share holding of all the brothers, except that the father of the petitioners had 100 shares as against other brothers who held 80 shares each.  The share scripts were also issued only after this allotment.  The total number of shares in existence is only 500 as is evident from the serial number of shares issued which runs from 1 to 500 and in all  only six share scripts were issued.  The serial number assigned to each share script was according to the age of the brothers viz. the eldest brother was given the share script containing 1 to 80 shares and the youngest brother 421 to 500. Referring to the copies of  Balance Sheets  annexed to the additional affidavit,  the learned counsel pointed out that the paid up capital of the company has always been shown as 500 shares and no where the existence of 675 shares is reflected.  He also questioned as to how the alleged excess 175 shares have been accounted for. Referring to the copies of share scripts in the affidavit of his clients,  he pointed out that even though shares were allotted to two of the brothers who were not the subscribers to Memorandum only in December, 1949, yet, they had remitted money for the shares, in installments, between 1947-49 as is evident from  the entries found at the reverse of the share scripts.  This would clearly indicate the intention of the brothers that all the six brothers would have equal interest in the company. He contended that the 2nd respondent from whom the petitioners obtained the shares by transfer fully knew that there were only four subscribers to the Memorandum and as such should have questioned as to how six shareholders came into being.  She never did it for nearly 50 years  because she was fully aware of the fact that the company was  a joint family property in which all the brothers had equal interest.  This question becomes more relevant in view of her being a director of the company right from 1952 and has been signing the Annual Reports for nearly 48 years.  Even the petitioners having been the members of the company for nearly 35 years should have agitated on this issue much earlier.  The shareholding is now being challenged only on account of certain family feud. The learned counsel pointed out that Shri Aloke Kumar Bose who had written to the petitioners about the alleged fraud himself has been the beneficiary of the additional shares allotted to his father viz. Kanti Bushan Bose. Therefore, he submitted that there is absolutely no basis for the allegation that the issued capital is more than the authorized capital and that there has been violation of the Memorandum.

17. Dealing with the provisions of Section 105 C of the Companies Act, the learned counsel submitted that when the Board took a decision to allot further shares in the meeting held on 24.12.47,  all the four subscribers to the memorandum were directors and the question of their giving offer to themselves did  not arise.  They had collectively decided to allot further shares to three brothers and also to  induct two more members in line with the family arrangement of all the brothers having equal share in the family properties.  He also pointed out that Section 105 C of the Act did not specifically provide for offers being made in writing.  Therefore he submitted that the allegation of the petitioners that no offer was made in writing is baseless. He submitted, that this issue cannot be decided in isolation of the family arrangement evidenced by various documents that he had pointed our earlier.  He also pointed out that in the absence of the Board Resolution dated 24.12.47, which has not been produced by either of the parties, the Company Law Board has to go by the most probable possibility.  Considering the conduct of the parties over such a long period and in the absence of any documents to the contrary, the only presumption could be that the provisions of Section 105 C of the Act had been complied with.

18. Dealing with the issue of  limitation, the learned counsel submitted that this petition suffers from unduly long delay.  The petitioners are challenging an act which took place in the year 1950 in 1998 after a delay of over 45 years. Referring to C.Mathew V Cochin Stock Exchange Ltd( 1991 CC 344), he pointed out that the CLB had dismissed the said petition as time barred.   It is wrong, he contended, to take a stand that the petitioners came to know of the allotment made in 1947 only in 1996.  The 2nd respondent who has been a director of the company from 1952 onwards should have been aware of this allotment.  Even otherwise, he contended that provisions of Article 137 of the Limitation Act are applicable to all proceedings and not limited only to suits as held in Kerala State Electricity Board V Kunhaliumma (Air 1977 SC 282) and therefore this petition should have ben filed befor 1953 . He also questioned the claim of the petitioners that in cases of fraud, there is no limitation by  citing the decision of Supreme Court in State of Punjab V Gurdev Singh (Air 1991 SC 2219) wherein the Apex Court held that even in case of void and inoperative acts, the provisions of Article 113 of the Limitation Act are  applicable. Even otherwise, he submitted that in case of allegations of fraud, full particulars should be given especially when the petitioners seek exemption from limitation on the grounds of fraud, as decided in Kasturi Lakshimibayamma V Sabnivas Venkoba Rao( AIR 1970 AP 440). According to the learned counsel, other than alleging fraud on the basis of surmises, the petitioners have not adduced any evidence to that effect.

19. Summing up his arguments, the learned counsel submitted that to set aside the allotment, which has been in existence for nearly 50 years, there should be concrete materials before the CLB other than the mere allegations based on suspicion and surmises.  In this connection, he cited Ambica Prasad Thakur Vs. Ram Ekbal Rai ( AIR 1966 SC 605) wherein it was held “ If a thing or a state of things is shown to exist, an inference of its continuity within a reasonably proximate time both forwards and backwards may sometimes be drawn in terms of illustration (d) to Section 114 of Evidence Act.”

20. Shri Mookherji, Advocate appearing for respondents 4 and 7 to 11 initiating the arguments pointed out that there is no basis for the petitioners to allege that there was no Board Meeting on 24.12.49 since they have not produced any documents to substantiate this allegation.  No minutes book of the Board of Directors during initial stages of the company are available.  None among the six brothers is alive today to throw light on this issue in person in the absence of records.  Therefore, the presumption has to be, on the basis of the Returns filed with the Registrar of Companies that there was a Board Meeting on that date to allot  shares.  The only issue is about the number of shares allotted in that meeting - whether 325 shares or 500 shares.  If 500 shares had been allotted on that day, then, the total number of shares in the company would be 675 shares, which should be reflected either in the paid up capital of the company or in the number of shares issued or by relevant certificates.  He pointed out that the total number of shares issued is from serial number 1 to 5 and there were only six share scripts for all these shares and that the paid up capital was all along been shown in the Balance Sheet as 500 shares.  Therefore, the question of ultra-vires the Memorandum has not been established at all. In so far as the issue relating to complying with the provisions of Section 105 C is concerned, he pointed out that there is nothing on record to show that no offer was made to the existing members. Even otherwise, he contended that the provisions of Section 105C would be applicable only when shares are issued out of  enhanced authorized capital and not when shares are issued within the authorized capital. Drawing our attention to Whitehouse V Carlton Hotel Pvt Ltd (11ACLR 715), he submitted that in similar instances, the Australian High Court has held likewise. He submitted that similar view had been taken by Rajasthan High Court also in Mahalaxmi Mills Ltd V The State ( AIR 1968 Raj 331). Referring to Nanalal Zaver case (supra), he submitted that even though the Apex Court has held that the provisions of this Section are applicable to issue  of shares even out of the existing authorized capital, this was not an issue before the Court and such the observation of the Court could only be taken as an obiter dicta

21. He also pointed out that in the allotment of shares, the doctrine of indoor management arises.  The two brothers who are not subscribers to the Memorandum and to whom 80 shares each were allotted were not directors at the time of allotment.  They were outsiders and they were not supposed to know that the company had not complied with the provisions of Section 105 C of the Act. Therefore, the allotment made to them cannot be cancelled. On this proposition he relied on Dewan Singh V Minerva Films Ltd (29 CC 263).  Further he pointed out that these two brothers had remitted money for the shares even before formal allotment was made as is evident from the entries made of payments in the share scripts given to these brothers.  It is because the company was to be a joint family property.  He also pointed out that Late Satya Bhushan Bose was 14 years old when his father died and no independent source of funds was available to late Satya Bhushan Bose.  The company being a joint family property was also admitted by the 2nd respondent in the decree suit.  Therefore, he submitted that this petition should be dismissed as neither the alleged violation of the provisions of Section 105 C of the Act nor the allegation relating to ultra-vires the Memorandum has been established. According to him, as decided by the CLB in Polar Latex Ltd v Lakshmi Narayan (85 CC 766) the CLB has no powers to order reduction of share capital in a proceedings under Section 111 and therefore, the petitioners prayer for rectification, which would result in the reduction of capital cannot be granted.  Otherwise, he further contended that the issues before the CLB cannot be decided on the basis of affidavits as seriously disputed questions of facts including allegations of fraud are involved and as such the matter should be relegated to a suit as held in Daddy S Mazda v K.R.Irani (47 CC 39). In addition, he also drew our attention to the decision of the CLB in Bhupender Rai V M/s Kannappa Automobiles (86 CC 18) wherein it as held that in a petition under Section 111, allegations relating to malafide and that CLB had no powers to order reduction of share capital.

22. Shri Pratap Chatterji, Counsel for the respondents 3  and 8 contended that the petition is a benami petition filed on behalf of the 2nd respondent and as such this petition should not be entertained.  Adopting the other arguments of the counsel for the opposing respondents, he submitted that the petitioners have not established either of the allegations.  Further, he pointed out that the petition suffers from gross delay and inaction for over a period of 50 years and therefore the petition is not maintainable. Referring to Canara Bank V Nuclear Power Corporation of India (1995 Supp 3 SCC 81), he pointed out that Company Law Board is a court for the purposes of Section 111 and as such Limitation Act is applicable.  Further, even for condonation of delay, the petitioners have not alleged in the petition any fraud.  Even otherwise, in State of Panjab Vs. Kulbir Singh ( 1997 11 SCC 394), the Supreme Court has held that even in case of a void act, the limitation is applicable. He further pointed out that the cause of action, according to the petitioners, arose when they received a letter from Shri Aloke with which he was supposed to have enclosed a letter written by his father indicating fraudulent allotment of shares.  He pointed out that the said letter of the father has not been produced so far. Therefore he prayed for dismissal of the petition.

23. Shri Sarkar, replying to the arguments of the counsel for the respondents submitted that the reliance of the respondents on the affidavit of the 2nd respondent in the title suit is misconceived.  This title suit was instituted within a short time after the death of Shri Satya Bhushan Bose and then the 2nd respondent was in grief.  It was actually a collusive suit to share the property of the deceased.  Further, the loans taken by late Satya Bhushan Bose was repaid only after 1960.  He pointed out that it is wrong to contend that the company had not filed, during the life time of late Satya Bhushan Bose any return. Referring to the document at Annexure B to the plaint in the TS 62 of 1997 filed by the petitioners, he submitted that this document indicating the list of shareholders holding 175 shares as on 5.4.49 was filed with the ROC on 5.9.49 and therefore the contention of the counsel for the 1st respondent that the Return of Allotment filed on 30.1.50 included these 175 shares cannot be sustained. If it is so, then, the Return filed on 30.1.50 indicating allotment of 500 shares would take the total number of shares allotted to 675 shares which is over and above the authorized capital.  In regard to the claim of joint property, he questioned as to why at the time of incorporation itself all the six brothers were not made subscribers to the Memorandum and allotted equal shares.  Since the Return of Allotment for 500 shares was filed with the Registrar only after the death of late Satya Bhushan Bose, it would very clearly establish that the deceased was not a party to the allotment and the allotment was made only with a view to reduce the absolute majority of the deceased.  He further contended that if either or both of his arguments relating to violation of the provisions of Section 105 C and ultra-vires the Memorandum is/are accepted, then, the question of limitation becomes irrelevant. He also repeatedly contended that the 2nd respondent is the most competent  person in the family and restoring the majority with her family as sought for would be in the interest of the company.

24. We have considered the pleadings and arguments of the counsel.  At the outset we would like to make it abundantly clear that in consonance with the order of the Supreme Court, we have not taken into consideration either the earlier order of the Company Law Board or of the Judgment on appeal of the Calcutta High Court in examining the issues before us. Further,  in view of the fact that the allegations relate to events that occurred   before the petitioners became share holders and that they obtained the shares on transfer from their mother-the 2nd respondent, whatever knowledge that she had about the events have to be attributed to the petitioners also.  The present shareholding in the company has been challenged mainly on two grounds -  one relates to ultra- vires the Memorandum and the other on violation of the provisions of Section 105 C of the Act. Additionally, the respondents have raised an issue relating to limitation.

25. Before dealing with the merits of the case, we shall deal with  certain preliminary legal issues raised by the counsel. They are- the power of CLB to order reduction of share capital in a proceeding under Section 111, applicability of the Limitation Act to the proceedings before the CLB, maintainability of the petition in view of allegations of fraud etc,. As far as reduction in the share capital is concerned, the counsel for the respondents relied on the decision of the CLB in Kannappa Automobiles  and Polar Latex cases (supra) wherein the CLB had held that it had no powers to order reduction of share capital. In both these cases,  rectification was not sought on account of  violation of provisions of law or that the act complained of was void . In the first case, rectification was sought for on the ground that further issue was malafide and in the second case, rectification was sought on the ground that shares reserved for employees had been allotted to members of public. In case of violation of law or void acts , if  the consequence of  order of rectification would result in reduction of capital, the same can be ordered in terms of Section 111(7)(b) of the Act. The next issue is about the applicability of Limitation Act  to the proceedings before the CLB. This Board has, in a number of cases has held that it is not applicable. However, it has also held that if there is unexplained long delay, latches or acquiescence , then, the CLB would not allow such petitions as done in the case of Cochin Stock Exchange(supra) wherein there was an unexplained  delay of 11 years. In regard to relegation to a civil suit, it would depend on the facts of a case and it is not that whenever fraud is alleged or complicated questions of law or facts are involved, the matter should be relegated to a suit. In Gorden woodroff case, when fraud was alleged, the CLB took a view  that on the basis of the materials placed before it, it could decide the issue and accordingly it did so. It is what the  Supreme Court has also  laid down  in Ammonia case(supra)

26. The foundation on which the petition rests is the letter dated 21.12.1996 (Annexure D) received by the 2nd petitioner from one Shri Aloke Kumar Basu ( 13th respondent) with which he had enclosed copies of two documents(Annexure E and F). The said letter which is in Bengali, translation of which as given to us, reads as follows: “Regarding High Court case I was searching the papers in my father's almirah yesterday.  At that time I found a certified copy of the then Registrar, Joint Stock Company as proof of irregularities regarding incorporation, share allotment and appointment of directors of Basubani Company and along with that I found one typed note.  If you go through that typed note you would understand as to what explosive materials it contain.  You know, my father never cheated anybody nor did he act improperly.  Therefore, it was possible that he was trying to take appropriate steps since his conscience was pricking him by reason of his name being involved in illegal and wrongful deeds. And I feel that for some special reason he could not proceed further.  I am sending those papers to you. See that these be of any help to you.  If they help you, I know that my father's departed soul would rest in peace.“ " We are all well here.  I am busy regarding admission of Puja to school.  Possibly Bublai is coming from America in the next week.  Hope you are all well.  I conclude." The petitioners have not annexed the note from the father of Shri Aloke said  to have been enclosed with the letter alleged to be containing explosive materials.  Annexure E is a copy of the 7th page of the Memorandum and is dated as 10th December 1947 wherein the subscribers to the Memorandum had undertaken to subscribe to a total of 175 shares.  Annexure F is a copy of the Return of Allotment indicating the allotment of 500 shares on 24.12 1949. The petitioners have not averred in the petition as to which of these documents raised a doubt in their mind about the alleged over issue of shares.  During the arguments and in  the written submission, it is pointed out  that only after seeing the  Annexure E which is a s a copy of the Return of Allotment indicating the allotment of 175 shares on 10/12/47 the petitioners came to know of  this allotment giving them the cause of action to challenge the further issue of 500 shares. As we have indicated earlier, Annexure E is not a copy of any return of allotment but only a copy of the 7th page of the Memorandum

27. We shall first deal with the allegation relating to ultra-vires the Memorandum. A company is incorporated on the basis of a Memorandum of Association which specifies the objects to be pursued by the company, the quantum of share capital it proposes to raise which is divided into a number of shares of a specified denomination. This is known as the authorized capital. When a company decides to mobilize capital within its authorized capital, shares to that extent  are offered for subscription. The  total nominal  value of the shares so offered is known as  issued capital. When shares are subscribed, the total nominal value of the shares  so subscribed is known as subscribed share  capital. The total amount paid on the shares subscribed is known as the paid up capital. Shares to the extent subscribed are then allotted either as fully paid or partly paid as per the terms of offer.  The issued capital cannot be more than the authorized capital, and if is so, then the same would  be ultra-vires the Memorandum and is a nullity.  Whether the issued capital is more than the authorized  or not will have to be examined with reference to the entries in the capital account of the company as reflected in the Balance Sheet and also with reference to the shares in existence in the form of share scripts. In other words, the question relating to ultra vires the memoradum   is purely a question of fact to be examined with reference to the tangible materials available on record. . 

28. The allegation of the petitioners is that, as against the authorized capital of 500 shares, the company had allotted 675 shares and as such the allotment is a nullity. 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  and dated as 10th December 1947wherein the subscribers had undertaken to subscribe totally to 175 shares. Therefore, there is nothing on record to show that 175 shares agreed to be subscribed by the subscribers had been allotted prior to the allotment of 500 shares on 24.12.49 to substantiate the allegation of the petitioners that 675 shares had been allotted as against the authorized capital of 500 shares. It is on record as is evident from the affidavit of the 2nd respondent that the share holding pattern in the company reflects only 500 shares right from 1950. According to the return of allotment filed on 30.1.50, the father of the petitioner was also allotted 100 shares. 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. It is also an admitted position that 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.  Right from 1950 till today, every Balance Sheet exhibits as   only 500 shares  as issued, subscribed and paid up.  The number of shares in existence as seen from the serial numbers is only from 1 to 500.  If 500 shares had been allotted in addition to 175 shares, then, 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.  They have been receiving dividend only on this basis and have also been exercising the voting rights only on this basis. Even though, the opposing respondents contend that only 325 shares were allotted on 24.12.1949, there is no material before us to establish the same nor these respondents would have any personal knowledge of the same. Since we find that the Annexure -E is only the 7th page of the Memorandum and not a Return of Allotment, there is no other material placed before us that 175 shares had been allotted earlier.  No doubt the counsel for the petitioners pointed out to Annexure B, a copy of Form E  in the plaint in TS No 62/97 indicating the names of shareholders holding  175 shares as on 5.4.49, no document relating to the actual allotment of 175 shares nor issue of share scripts for  175 shares has been placed before us.  Under the circumstances, it is quite possible that all the  500 shares were allotted only  on 24.12.1949 and accordingly the  Return was filed. This presumption gets strengthened from the fact that all the share certificates were issued only on 5.1.50. In the alternative,  the other possibility is the one contended by the opposing respondents that the Return of Allotment filed on 30.1.50 indicating allotment of 500 shares included 175 shares agreed to be subscribed by the subscribers to the Memorandum. 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 assuming 175 shares had already been allotted.  Therefore, notwithstanding the fact that the Return of Allotment filed on 30.1.50 shows allotment of 500 shares, actually only 325 shares had been allotted.  If that is so, we have to only declare that the Return of Allotment did not reflect the correct allotment and as such it should not  be acted upon. 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.  Therefore, the question of ultra-vires the Memorandum does not arise.  This is the only conclusion that we could come to 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.   In view of this, we do not find any basis to come to a conclusion that the Board of Directors had acted in a manner ultra-vires the Memorandum. Accordingly, we hold that the petitioners have not established the allegation relating to ultra-vires the Memorandum.  

29. The second ground taken by the petitioners for rectification of the Members' Register is that the company had not complied with the provisions of Section 105 C of the Companies Act 1913 which was in force at the relevant time when 500 shares were allotted. Section 105 C reads as follows:

"Where the directors decide to increase the capital of the company by the issue of further shares such shares shall be offered to the members in proportion to the existing shares held by each member                        ( irrespective of class) and such offer shall be made by notice specifying the number of shares to which the member is entitled, and limiting a time within which the offer, if not accepted, will be deemed to be declined; and after the expiration of such time, or on receipt of an intimation from the member to whom such notice is given that he declines to accept the shares offered, the directors may dispose of the same in such manner as they think most beneficial to the company."

30.                          The counsel from both the sides argued on the applicability or otherwise of the provisions of this Section in the instant case which we have elaborated as a part of their arguments. Since the Supreme Court has decided this issue as a point of law in Nanalal Zaver case(supra) that the provisions of this Section are applicable for issue of further shares even within the existing authorized capital, we have to follow the same and examine the allegation in the petition. The counsel for the respondents, relying on Dewan Singh’s case (supra), argued that in allotment of shares the doctrine of indoor  management applies and as such the allotment ot the non shareholder brothers cannot be cancelled. We are of the view that if an act-in the present case- allotment of shares- is against the express provisions of a statute, this doctrine cannot apply. The stand of the petitioners is that the business of the company was a proprietary business of their father for which he had raised a loan  of Rs 3.1 lakhs and that he incorporated the company to take over the business and that he was to have majority shares accounting to 57% and by disproportionate allotment of further shares and inducting two more members in violation of the provisions of Section 105C, his shareholding was brought down to 20%. Their contention,  not withstanding their stand  that there was no Board meeting on 24.12.49, is  that  when the Board decided to allot 500 shares, the same should have been offered  only to the four  subscribers to the Memorandum in proportion to their holding before allotting to two new members so that the petitioners’ father would have got 57% of  500 shares viz 285 shares and thus would have majority control of the company.   According to them no offer was made to the then existing shareholders. They have also relied on the affidavit of one of the respondents wherein  he has  averred that provisions of Section 105 C were not applicable to contend the  no offer was made. We have already come to the conclusion, in the earlier paragraph, that the return of allotment filed on 30.1.50 included the 175 shares allotted to the subscribers to the Memorandum. Therefore,  we have to only examine as to whether the provisions of Section 105 C were complied with while allotting 325 shares. It is not in dispute that the provisions of this Section are mandatory and non compliance of the same would make the allotment a nullity. As we have already pointed out, in the absence of the Directors' minutes book, it is difficult to determine as to whether offers were made or not especially when none of the original shareholders is alive to throw some light on this issue.  We cannot go by the averment any of the parties before us on this issue as none of them was a shareholder at that point of time and as such none would have any personal knowledge on this issue. According to the opposing respondents, in view of the family arrangement by which all the 6 brothers would have equal share in all the properties and businesses  of the family, shares were allotted, with the knowledge and consent of all the then shareholder directors including the father of the petitioners, in such a way that there was equality in the shareholding among all the brothers including the  two  brothers who were not subscribers to the Memorandum. The petitioners deny that there was any agreement and according to them even if there was an agreement it would not bind the company since the company was not a party to any such alleged agreement. In the absence of materials before us on the question of any offer having been made, we shall  examine the probablity of the claim of the respondents about joint ownership and equality in the share of  the family properties and businesses. It is on record that a consent decree was passed in title suit  104/1950 according to which the  then surviving 5 brothers and the 2nd respondent, being the wife of the deceased brother and mother  of the petitioners had agreed that all the 6 families would have equal shares in all the properties( including the lease hold right on the property of the company) of the family, not withstanding the fact they were held in the individual names of the brothers. The counsel for the petitioners alleged that it was a collusive suit to deprive the petitioners family of  the majority control of the company and as such has no relevance to decide the matter before us. He also submitted that when the consent decree was passed, the 2nd respondent was in grief and she could not appreciate the terms of the consent.  We have gone through the plaint and  the  consent decree from which we find that various properties held in the names of individual brothers or jointly with  one or more brothers had   all been agreed to be decreed to be joint family properties and that each brother would have 1/6th share in all these properties. The 2nd respondent , the mother of the petitioners was  a party to the consent suit. Even assuming that she was in grief at that time, when the terms of the decree were incorporated in a Memorandum of Agreement dated 31/3/1958, that is nearly 8 years after the death of her husband, she was also a signatory to the Memorandum. We note that  one of the terms of the Memorandum of Agreement, at Para 8, was to reimburse the 2nd respondent of the loan taken by her husband for construction of the cinema hall and as per these terms, she had been paid the outstanding loan in installments as is evident from the various receipts executed by her. By virtue of the consent decree and the Memo of Agreement, her family has been benefitted to the extent of 1/6th of the properties held in the names of other brothers. The opposing respondents have annexed to the additional affidavit, a photo copy of the share certificate issued to late Indu Bhusahn Bose, who was not a subscriber to the Memorandum. In the reverse of this certificate, we find entries of remittances made by him towards the consideration for the  shares. In all he had made 8 remittances from 8.4.48 to 6.12.49 totaling to Rs  6,550 when he was not a member of the company. To cross check the position with regard to the  other share holders, we asked the counsel from both sides to produce copies of the share certificates issued to the 6 brothers. The counsel for the petitioners produced a copy of the share script issued in the name of late Satya Bhushan Bose and the respondents, copies of the share scripts issued to the other subscribers to the Memorandum. All these subscribers have also paid consideration only in instalments as is evident from the entries of remittances recorded on the reverse of the share scripts.  The very fact that the company had accepted money from non shareholders during the life time of Shri Satya Bhushan Bose and that too  even before allotment shares, would indicate that, such acceptance was made only due to the family arrangement  of equal shareholding. The company could not have accepted the remittances without the knowledge and the consent of the late Satya Bushan Bose, who was the managing director at that time. Thus all the 4 share holders, being the  subscribers to the Memorandum, and  also the directors of the company,  had consented to  the non members subscribing  to the shares and therefore,  the provisions of Section 105 C should be deemed to have  been complied with in spirit.  It is also on record that in 3 other family companies, each of the 6 families holds more or less equal share holdings.   Therefore, the overwhelming evidence before us indicates that when 325 shares were allotted, it was done with a view to equalize  the shareholdings among all the 6 brothers.  Merely because the Return of Allotment was signed by Kanti Bushan Bose  when Shri Satya Bhushan Bose, the Managing Director was alive and that the Return of Allotment was filed only after his death cannot lead us to hold that the allotment was made without his concurrence as against the overwhelming evidence of an understanding of equality in shareholdings. In this connection the ratio laid down in   Ambica Prasad Thakur case (supra) on presumption of continuity becomes relevant. Accordingly, we hold that the petitioners have not established this allegation.

31. Another argument was advanced that private agreement/understanding  between the shareholders cannot bind the company.  The learned counsel for the petitioners cited certain case laws.  No doubt it is so, yet, in a family company like this, it may become necessary to pierce the corporate veil to find out the real structure of a company.  As we have elaborated in the earlier paragraphs, the relationship between the parties, the consent decree, the Memorandum of Agreement, payment towards consideration even before becoming a member etc., would indicate that it is a fit case to pierce the corporate veil and once we do so, it is clear that the company is  nothing but a family business structured in the form of a company to be owned and managed by all the members of the family on an equal footing.  Therefore, in facts of this case and in the absence of any concrete material before us to come to the conclusion that the provisions of Section 105C had not been complied with, it is not possible to declare that the allotment of 325 shares was made in violation of the provisions of this Section. 

32. Even though, we have concluded that neither of the allegations of the petitioners has been established, since the issue relating to limitation has been raised by the opposing respondents, we shall examine the same also.  According to the petitioners, the cause of action to file the petition arose only in 1996 when the 2nd petitioner received a letter from Shri Aloke Kumar Bose and since this petition was filed in 1998, the same does not suffer from limitation.  Further, they have also contended that Limitation Act is not applicable to the proceedings before the Company Law Board.  According to them, they had always believed that only 500 shares in the company had been allotted but on receipt of the said letter, they came to know that 175 shares had already been allotted.  We have already pointed out that Annexure -E to the petition is not a Return of Allotment but only a copy of the 7th Page of the Memorandum.  The Memorandum, on the basis of which a company is incorporated has to be kept in the registered office of the company.  It is an admitted position that the 2nd respondent, the mother of the petitioners, from whom the petitioners got the shares by transfer,  had been a director of the company right from 1952 and that the petitioners became shareholders in 1960s.  It is inconceivable that they were not aware of the names of the  subscribers to the Memorandum and the number of shares they had agreed to subscribe. They have not averred anywhere in the petition that they were not aware of the existence of the Memorandum of Association of the company.  The counsel for the petitioners himself  cited certain case laws to contend that in case of subscribers to Memorandum there is no need of formal allotment and that they become members on the date of incorporation. Therefore, even in the absence of knowledge of allotment to the Subscribers,  the 2nd respondent/the petitioners should have enquired as to how as against 4 subscribers to the Memorandum with only 175 shares, there were 6 shareholders with 500 shares.  Further, we also note that, as referred to by the counsel for the petitioners, in suit No. 62 of 1997 filed by the same  petitioners before us, they  had enclosed a certified copy of Form No. E dated 5th April, 1949 indicating the names of the persons holding shares in the company and also a copy of the minutes of the AGM held on 25.10.49 indicating the declaration of dividend of 40%. As per the Form E subscribers to the Memorandum were shown to be holding 175 shares on that day. This is a certified copy dated 29.6.1961. Further, the petitioners have, in the plaint, relied on the minutes of the AGM to urge that shares were in existence at that point of time.  How and when these  documents came into the possession of the petitioners is not known.    Since these two are  important documents to establish that the subscribers had been allotted shares prior in time to the allotment of 500 shares, these documents should have been disclosed in the petition before us especially when they had chosen to rely on Annexure-E, a copy of the 7th page of the Memorandum.  Perhaps, the reason for non disclosure of these documents in the petition could be that they could not establish the source of the same since they were  not a part of the letter of Shri Aloke.  Further, we also find that in the suit, which is proximate to the date of letter of Shri Aloke, the petitioners have not made any mention about  his  letter  other than averring that “on a recent discovery on or about 21st Dec 1996 of certain documents” they found about the Return relating to the allotment of 500 shares even though they had annexed with the plaint  the two documents enclosed with his letter (  Annexures E and F of the present petition). This leads us to an inference that these documents were in the possession of the petitioners even before the letter of Shri Aloke and the  letter of Shri Aloke is a procured one after the filing of the Suit only to get out of the problem of limitation. Further, the intervening respondent, who is the mother of the 13th respondent has stated in para 5 of her affidavit that "Your petitioner states that the petitioner before this learned bench has relied upon a letter dated 21.12.1996 which is absolutely false, frivolous, manufactured, procured and concocted documents and your petitioner states that the documents as referred to in the said purported letter at all material times were kept under the authority and custody of Smt. Roma Bose, the respondent No.2 herein, who has purportedly supplied the same to the respondent No.13." The documents at Annexure E and F to the present petition as also the Form  E in the civil suit are certified copies dated sometime in 1961/62. In view of this, it may not be wrong to presume that the 2nd respondent/petitioners might have been aware of the contents of the documents as early as in 1960s if not much earlier. Therefore, it is very difficult for us to believe the claim of the petitioners that they came to know about allotment of 175 shares only in 1996 providing them with the   cause of action  to file this petition.   In this connection, we may also refer to the order of the Supreme Court wherein the petitioners were given the liberty to file additional documents to get the delay condoned.  They have not done so.  Therefore, on the point of limitation, even though the Company Law Board has taken the view in a number of cases that Limitation Act is not applicable to the proceedings before it, yet, in the present case, in view of the unexplained delay or acquiescence  on account of family arrangement, the petition deserves to be dismissed on account of limitation.    In a case of unexplained delay of 11 years in Cochin Stock Exchange case (saupra) , this Board dismissed the petition on the ground of limitation.  In the present case the delay is nearly  4 decades. The counsel for the petitioners took a stand that in case of fraud, limitation is not applicable.  The only basis on which fraud is alleged is that the Return of Allotment for the shares allotted on 24.12.49  was signed by Kanti Bhushan Bose  and filed on 30.1.50.  According to the petitioners, the very fact that this Return was not signed by Shri Satya Bhushan Bose who was the managing director at that time and who was hale and healthy till 12/1/50  and the late filing of the same after the death of Shri Satya Bhushan Bose would indicate that the allotment had been done without his knowledge and the documents had been fabricated. We have already come to the conclusion that there is ample evidence to show that the allotment was made with the knowledge and concurrence of late Satya Bhusan Bose. Even other wise certain other aspects that we found may also be noted. According to the petitioners Late Satya Bhusahn was hale and healthy and was attending office till 12th January 1950. However, we find from the minutes of the AGM held on 25.10.49 (Annexure C to the plaint in Ts62/97) it is recorded “due to indisposition, Mr.Satya Bushan Bose, Mg.Director, was unwilling to preside over the meeting. The share holders then voted Mr Kanti Bushan Bose to the chair”.  Therefore, it appears that he was not actively involved in the affairs of the company for quite for some time before his demise.  Further it is also on record that the share certificates  issued on 5.1.50, during the life time of late Satya Bhushan Bose  do not bear his signature even though he was the M.D on that day. These certificates provide for signatures of a director and the Managing director. The word "Managing" is found to be struck of and one S.Bose  has signed the share certificate along with one K.B Bose as directors. The share certificate in the name of Satya Bhsuan Bose is found to have been endorsed in the name of the 2nd respondent on 31.7.51 as the "widow and legal heir to late Satya Bushan Bose". Therfore, the share certificate must have been in the possession of the 2nd respondent right from the day she became a shareholder. There is nothing on record to show that the petitioners/2nd respondent  had questioned  as to why the signature of the MD  was not on the share certificate even though the  same was issued during his life time. Perhaps, Shri  Satya Bushan Bose had delegated his responsibilities to  other  directors due to his  illness as is evident from the minutes of the AGM 25.10.49(supra). The  note allegedly left by the father of Shri Aloke and said to have been enclosed with his letter allegedly containing explosive materials has  not been disclosed so far to find out whether it contains any materials to show of any fraudulent event that took place at the relevant point of time.   In this connection, we would like to note that in the reply of the 13th respondent (Shri Aloke) there is no mention about this note. Instead, he has averred "That on or about 20/12/96, while arranging the records of my father, I found the certified copies of the Records forming Annexures "E" and "F" of the petition filed by the petitioners. With a view to expose the unlawful acts which had been committed to reduce the rights of the majority shareholders, I voluntarily passed over the said records and papers to the petitioner No 2 Smt. Jhumur Ghosh to enable her to take appropriate legal steps if they so desired."  Thus, other than alleging, no evidence to that effect has been placed before us.  Therefore,  the only  act of  late filing of the document without the signature of late Satya Bushan Bose, cannot lead us to conclude that his  brothers had   committed a fraud or that   the documents were fabricated or that there was no Board meeting on 24.12.49. One other aspect, we would like to note, as pointed out by Shri Sarkar, that the 2nd respondent herself, as the  chairman of the Board meeting on  7-2-92 had recorded in the Board minutes  that the  minutes book of the Board meetings during the initial stages of the company and the  General Body meetings before 26-11-81 could not be traced even after a thorough search.

33. Thus we find that the petitioners have not established either of the allegations - that there had been issue of shares beyond the authorized capital or  that provisions of Section 105C had been violated  in allotment of further shares. Further we also find  that the petition suffers from acquiescence, waiver, estoppel and unexplained delay. Accordingly,  we dismiss this petition. 

34. No order as to cost. 

 

 

 

            (C.R. Das)                                                            (S.Balasubramanian)

 

Dated at Calcutta, the ------day of ------2000