C.P. No. 25/2001(APB)

Present: 1. Shri S. Balasubramanian, Vice-Chairman.

2. Shri K.K.Balu, Member.

IN THE MATTER OF COMPANIES ACT, 1956 (1 OF 1956)

SECTION 398

AND

IN THE MATTER OF M/S TARUNI TECHNOVISION PRIVATE LIMITED

PETITIONERS:

1. APIDC-Venture Capital Limited

2. Zenplus Networks Private Limited

RESPONDENTS:

1. Kasapuram Anil Chandra

2. Arvind Kumar Samba

PRESENT ON BEHALF OF PARTIES:

1. Shri V.Harish Kumar, Practising Company Secretary … for Petitioner No.1

2. shri Shailender Prashad, Managing Director … for Petitioner No.2.

3. shri R.Varadharajan, Advocate … for Respondents.

O R D E R

(DATE OF FINAL HEARING: 28.02.2002)

K.K. BALU:

1. The petitioner-companies holding 100 per cent of the paid-up capital of M/s Taruni Technovision Private Limited (“the Company”) have filed this petition under Section 398 alleging acts of mismanagement in the affairs of the Company against the respondents, being the promoter-director and whole-time director of the company respectively.

2. The facts, in brief, as stated in the petition are that the Company was promoted in December, 1999 by the first respondent and one Shri Shailendra Prasad who became the Managing Director of the Company, with the main object of dealing in information technology systems and software. When the Company faced financial constraints, the promoters approached the first petitioner, a venture capital company for financial assistance to meet the project cost of the Company, which had accordingly provided financial assistance from time to time in the form of loans as well as equity share capital. At present, the entire paid-up share capital of Rs.15,16,818/- is held by the petitioners 1 & 2, first petitioner holding 5,16,818 shares and the second petitioner promoted by the promoter-directors of the Company holding 10,00,000 shares of Rs.1 each. The petitioners provided financial assistance to the Company on account of the technical and business qualifications of the directors of the Company, viz. the first respondent and Shri Shailendra Prasad, who had also signed an Investment and Shareholders Agreement including a Buyback Agreement and an Agreement for non-disposal of their shareholding in the Company. The first respondent was appointed as the Chief Technical Officer and the second respondent as the whole-time director. The first respondent, in due course of time failed to evince interest in the affairs of the Company and failed to complete the development works as per the pre-determined schedule. The main acts of mismanagement relate to the huge losses suffered by the Company on account of non-completion of the projects by first respondent. The first respondent being one of the signatories to the Shareholder’s Agreement, committed breach of trust by infringing the terms of the shareholder’s agreement. The respondents failed to fulfill the obligations entrusted to them in carrying on the business of the Company. They have intimidated the employees to leave the Company. They have illegally deleted the data from the computer system, being the rightful property of the Company and illegally retained the assets of the Company. The first respondent has illegally transferred the domain names registered in the name of the Company to the name of his wife and is guilty of fraud. The respondents have illegally removed the products developed by the Company and stolen the software developed by the Company, compelling the petitioners to lodge complaint with the Cyber Crime Police, Hyderabad, followed by a criminal complaint before Metropolitan Magistrate, Nampally, Hyderabad. In view of these acts of mismanagement, the petitioners are seeking for removal of the respondents from the office of directors and from all managerial position of the Company.

3. The learned Counsel for the respondents has filed an application seeking certain documents to enable him to file a reply to the petition. Since the main prayer in the petition relates to the removal of the first and second respondents as directors, we expressed a prima-facie view that since the petitioners held 100 per cent shares in the Company, in regard to appointment/removal of directors of the Company, the petitioners could take appropriate action in the domestic forum itself and as such we dispensed with filing of further pleadings.

4. This petition essentially one under Section 398 alleging that the first and second respondent have conducted the affairs of the Company in a manner detrimental to the interest of the Company. We find that the first respondent has already resigned from the office of director in April, 2001 and the second respondent has been absenting himself from office from April, 2001. Therefore, even assuming that the dispute could be adjudicated by this Bench, the same has become infructuous in view of the above facts. Accordingly, we dismiss the petition as being infructuous.

(K.K. BALU) (S. BALASUBRAMANIAN)

Dated this the 4th day of April, 2002