Present: K.C.
Ganjwal, Member
In the matter of
Companies Act, 1956, Sections 397,402,403 and 406
And
In the matter of
:
1.
IT Cube Inc.
2.
Anil Anand ..Petitioners
Vs.
1.
IT Cube India Pvt. Ltd
2.
Shri Hari Swaminathan, MD,IT Cube India Pvt. Ltd
3.
Shri Prashanth Chandra Mohan , Director of IT Cube India P. Ltd
4.
Shri Shakir Ganjee, Director of IT Cube India P. Ltd.
5.
Ms. Pushpa Mitra Khutia, Director of IT Cube India P. Ltd
6.
Shri Fahim Ganjee, Additional Director of IT Cube India Ltd. ..Respondents
1.
Sh. Pradeep Kumar Bakshi, Advocate for petitioners
2.
Shri C.D Mehta, Advocate for petitioners
3.
Shri P.B. Suresh, Advocate for respondent
4.
Sh. Vipin Nain , Advocate for respondent
K.C. GANJWAL
1. The petitioner
No.1 is the company incorporated under the laws prevailing in the USA having
its office at 1209, Orange Street , Wilmington, Delaware, USA. The petitioner No.2 is the director of the
petitioner No.1 having his office at Mahalakshmi Chambers, 3rd
Floor, 22 Bhulabari Desai Road, Bombay-26.
2. The respondent
company, namely IT Cubes India Pvt. Ltd. was incorporated on 5th
July, 2000 with limited liability under the provisions of C.A. 1956 having the
authorized share capital of Rs. 10,00,000 divided into 1 lakh shares of Rs.10
each. Out of the same 8900 shares of Rs.10 each were issued and subscribed on
incorporation of the company. The
respondents were the original promoters of this company with one share each. However, the majority shares amounting to
8900 shares were held by the petitioner NO.1 and their shareholding at the time
of incorporation was as under:-
I.
Petitioner No.1, 8896
shares
II.
Respondent NO.2 1
share
III.
Respondent NO.3 1
share
IV.
Respondent No.4, 1
share
V.
Respondent NO.5, 1
share
3. The petitioners
have filed petition under Section 397 of the C.A. 1956 against the above
mentioned respondents. They have stated
that the main business of the company respondent company was to develop
software and other related products for IT Cube INC in USA. The petitioners have further stated that one
Mr. Hitain Patel was employed by Respondent No.1 company who represent the
petitioner in day to day business of the company. Shri Hiten Patel shifted his office to Bangalore. The petitioner
No.1 found that the performance of respondent No.4, who is one of the directors
of respondent company was not upto the mark and he was asked by to either reduce his take home pay or
resign. Instead of resigning, respondent
No.4, on 27.1.2003 directed Mr. Hiten Patel to immediately leave the premises
of the respondent company and also to vacate the flat provided to him by the
respondent company. The petitioner No.2
was disturbed by this event and he enquired from respondent No.4 as to the
reason of Patel’s termination and why he had not resigned or reduced his
salary. R-4 did not give any
satisfactorily reply and rather indicated that the petitioner No.1 and 2 had no
control over the Respondent company.
This raised some doubts in the
petitioner No.2’s mind as to the reason behind Mr. Patel’s termination and the
boldness of respondent no.4.
Thereafter, the representative of P-1 conducted search in the records of
ROC at Bangalore. The P-1 was surprised
to learn that the R-1 had filed relevant document to show that the respondent
No.1 had purportedly issued further 28400 shares . This further issue of 28400 shares was by issuing 7100 shares
each to R-2,3,4 and 5. No notice of such further issue of shares was given to
the petitioner No.1 even though Petitioner No.1 originally holding 8896 shares
out of 8900 shares issued at the time of incorporation of Respondent
company. This further issue of shares
reduced the shareholding of the petitioners from 99.95% to 23.85%. The petitioners have submitted that this
further issue shares to Respondents 2,3,4 and 5 on 16.01.2003 are illegal and
wrongful and against public interest.
The petitioners have further alleged that the respondent No.2 to 6
collectively and each one of them individually are under an obligation to the
company and shareholders to ensure that the management and affairs of the
company are conducted in accordance with the provisions of the C.A. and
articles of association of the company.
The respondent numbers 2 to 6 have acted in breach of such
obligation. The further issuance of shares has been made without any
intimation to petitioner No.1 who has majority shareholding and also without
calling a general meeting of shareholders.
I.
The petitioners have sought inter-alia the following reliefs:-
II.
Perpetual Induction restraining the respondent No.2 to 6 from
acting and holding themselves to be director of the respondent company.
III.
Declare that any further issue of shares of the respondent company
after 13.7.2000 is null and void and purported further issue of shares issued
on 16.1.2003 as wrongful, illegal and ab-initio void.
4. The
respondent in reply to the averments
made in the petition have stated that the said equity shares were issued and
allotted by the Board of Directors of the
respondent company against valid application received from the
respondents 2-5 who are in any case promoter directors of the first respondent
company. The question of issuing notice of further issue of shares to
petitioner NO.1 does not arise since there is no such requirement either under
law or under the articles of association of the first respondent company. The question of disclosure of further issue
of shares to first petitioner does not arise since the respondent were under no
duty or obligation to make any such disclosure. The respondents have admitted that the shareholding of the first
petitioner stood reduced to 23.85% of the total paid up capital of the first
respondent company. The respondents
have further submitted no motive can be imputed and no illegality can be
alleged in that behalf. They have once
again reiterated that such further issue of shares did not require any notice
to the petitioners.
5. The petitioner in
his rejoinder has stated that further issue of shares was to be regulated under
the provisions of Article 9 of Articles of Association of the respondent
company. The respondents have ignored
to call general meeting of the shareholders before issue of any further issue
of shares which is in breach of said Article 9 of the Article of Association.
6. From the records
and arguments advanced by learned counsels of both the sides it is admitted
fact that the respondents 2-5 had only one share each in the company. The majority share of 99.95% were held by
the petitioner company. The article 9
of Article of association of the
respondent company reads as under:-
“Variation
of Capital: - Subject to the provisions of the Act and these Articles, the
shares in the capital of the COMPANY for the time being (including any shares
forming part of any increased capital of the COMPANY) shall be under the
control of the Directors who may issue, allot or otherwise dispose of the same
or any of them to such persons, in such proportion and on such terms and
conditions and either at premium or at par or (subject to compliance with the
provision of the Section 79 and Section 79A of the Act) at a discount and at
such times as they may from time to time think fit and proper, with full power
subject to the sanction of the COMPANY in General Meeting)”
7. The learned
counsel for respondent during arguments submitted that this provision of
calling general meeting of shareholder is only applicable in case the company
has to comply with the provisions of section 79 and section 79A of the C.A 1956
for selling shares at a discount.
However, the learned counsel for the petitioner submitted that further issue of
capital shares made by the Board of Directors was subject to sanction of the
company in general meeting of shareholders.
The learned counsel for respondent has further submit no general body
meeting has ever been called so far by the respondent company, even at the time
of allotment of shares to the petitioner amounting to 8896 share. The learned counsel for petitioner submitted
that there were only four directors who were only shareholders holding one
share each of respondent company. As
such the question of calling any general body meeting of shareholders would not
arise More over, it is not possible at this bilated stage to confirm whether
any general body meeting had been called or not at the time of issue of 8896
shares to the petitioners.
8. Having carefully
gone through the records of the case and the arguments advanced by learned
counsels for both the parties during the hearing, it is found that the plain
reading of Article 9 of Articles of Association envisages on the company to
hold general meeting of shareholders before allotment of any further
shares. The interpretation given by
learned counsel for respondent to article 9 of articles of association does not
seems to be correct and they were duty bound to hold general meeting of
shareholders before issue of further shares.
Accordingly, the petitioners should have been given notice of issuance of
further shares of the respondent company.
The second argument of the learned counsel for respondent that no
general meeting has been held and as such the original allotment to the
petitioner is also not tenable, is not correct. The respondents cannot be allowed to take advantage of their own
wrongs by not calling the general meeting of the shareholders at the time of
initial allotment of shares to the petitioners. Moreover, during the period of first allotment of shares to the
petitioners there were only four shareholders and they were all directors of
the respondent company. Therefore, I am
inclined to accept the arguments shareholder meeting was not held at the
initial stage because all the directors are only shareholders and they had
allotted the shares to the petitioner.
9. In view of the above
discussions, the allotment of 7100 shares each to respondent No.2,3,4 and 5
amounting to 28400 shares issued on
16.1.2003 without giving notice to the petitioner and without holding general
meeting of the shareholders of the company, is illegal and void in terms of
Article 9 of Articles of Association of the respondent company. Accordingly, the allotment of further issue
of shares of 28400 mentioned above is set aside being wrongful, illegal and
void abinitio. The other prayers made
in the petitioner are not considered in view of the above decision and the same
can be decided in the general meeting of the shareholders of the respondent
company. The petition is disposed of
with the above direction.
10. There are no
order as to cost.
(K.C.
GANJWAL)
Member
New Delhi,
Dated: the
January 2004.