w w w . L a w y e r S e r v i c e s . i n



Ashok V. Doshi v/s Doshi Time Industries (P.) Ltd.

    C.P. NO. 21 OF 1999

    Decided On, 03 April 2000

    At, Company Law Board Southern Region Bench Chennai

    By, S. BALASUBRAMANIAN
    By, VICE CHAIRMAN AND K.K. BALU
    By, MEMBER

    V. Ramachandran and V. Ramakrishnan for the Petitioner. T. Raghavan for the Respondent.



Judgment Text

1. Balu -


The petitioner holding 33-1/3 per cent shares in Doshi Time Industries (P.) Ltd. (?the company?) has filed this petition under sections 397 and 398 of the Companies Act, 1956 (?the Act?), alleging various acts of oppression and mismanagement in the affairs of the company and seeking the following reliefs :


(i) to direct inspection of the books of account of the company;


(ii) to declare that the petitioner and second Respondent are the only Directors of the Company; and


(iii) to direct allotment of 9,85,400 shares of the face value of Rs. 10 each in favour of the petitioner or his nominees and 9,75,000 shares in favour of the second Respondent or his nominee(s);


The alleged acts of oppression and mismanagement relate to the following :


(a) non-convening of Board meetings and the first annual general meeting of the company;


(b) non-allotment of shares of the Company in favour of the petitioner;


(c) functioning of the second Respondent as Chairman of the company without approval by the Board of Directors;


(d) functioning of the third Respondent as Director, though she ceased to be a Director;


(e) exclusion of the petitioner from the management of the company;


(f) alleged acts of the second and third Respondents in respect of the management and affairs of the company in a manner prejudicial to the minority shareholders and against public interest;


(g) manipulation of the records and documents of the Company to the detriment of the petitioner and misuse of the funds and assets of the Company.


2. Shri V. Ramachandran, the senior advocate, appearing for the petitioner, while initiating his arguments, submitted that, the company was incorporated in January, 1997 with a paid up capital of Rs. 3,000 as a family company consisting of the Petitioner, his brother - the 2nd respondent and Respondent 3 - the wife of Respondent 2, each holding 100 equity shares of Rs. 10 each in the company. The main objects of the company are to manufacture, assemble, market, service and export watches and take over the assets and liabilities of Doshi Time Industries, a partnership firm consisting of the Petitioner and second Respondent as partners. The Company entered into a joint venture agreement (JVA) with Citizen Watches Co. Ltd. and Citizen Trading Co. Ltd., both body corporates having principal place of office in Tokyo, Japan to incorporate a joint venture company. Pursuant to the JVA between the parties, a company under the name and style of Citizen Watches (India) Ltd. was incorporated in April, 1997 with the object of manufacturing watches. The JVA provided for allotment of 49 per cent shares in the J.V. Company to the first respondent company. The Petitioner, Respondents 2 and 3 were allotted 9 (nine) shares each in Citizen Watches (India) Ltd. as subscribers to the Memorandum and articles of association. Further, the company advanced an aggregate sum of Rs. 1,96,12,000 to Citizen Watches (India) Ltd. for the purpose of allotment of shares to the company in accordance with the JVA, out of which 4,90,000 shares of the face value of Rs. 10 each were allotted in the name of the Company and the balance of Rs. 1,47,12,000 is held by Citizen Watches (India) Ltd. as share application money pending allotment in favour of the company. Shri Ramachandran reiterated that at the time of incorporation of the company it was agreed between the petitioner and second Respondent that they would contribute equally to the share capital of the Company for investment in the JV Company and that they would be equal partners. The third Respondent was brought only as a nominee of the second Respondent. The petitioner has considerable experience in the watch industry business. The second respondent in due course of time disassociated active connection with watch business; entered into the business of real estate and is now totally involved in real estate business. The petitioner is solely responsible for the successful implementation of the joint venture business. Because of the understanding of equal partnership, the petitioner contributed Rs. 98,54,000 and the second Respondent Rs. 97,58,000 towards allotment of shares of Citizen Watches (India) Ltd. in the name of the company. The second respondent has been in charge of the affairs of the company. The company does not have any active business excepting the finalisation of the joint venture proceeding, securing the shares allotted and attending the matters connected with the JVC. The petitioner was actively involved in the watch business and was under the bona fide belief that the affairs relating to the company were properly carried on by the second respondent. However, it came to light that the second Respondent did not regularly convene the Board Meetings and deprived the petitioner from the day-to-day affairs of the company. The first annual general meeting of the company though ought to have been conducted on or before 2-9-1998, was never conducted resulting in retirement of the third respondent as a director of the company. Though the petitioner contributed Rs. 98,54,000 no shares were allotted. On the other hand, the second Respondent falsified the records and filed Form No. 2 on 29-7-1998 before the Registrar of Companies reporting that 7,15,300 shares were allotted at 2,38,433 shares each in favour of the petitioner and respondents 2 and 3. Shri Ramachandran pointed out that by allotting equal number of shares, the understanding of equal shareholding between the petitioner group and respondent group has been infringed. Thus, now the petitioner is having only 1/3 of the shares allotted against the understanding between the parties that each group will have 50 per cent shares in the company. Further Form No. 2 lacked details. The annexure said to have been filed with Form No. 2 was not filed along with Form No. 2. This was deliberately omitted by the second Respondent with a view to secure an undue advantage to himself and with a view to oppress the petitioner, mismanage the company and misuse the funds and assets of the company. The second Respondent was never appointed as Chairman of the company by the Board of Directors, but he has projected himself as the Chairman of the company. The second Respondent has excluded the petitioner from the management of the company and he is holding the reins of the company and controls its affairs between himself and his wife as Directors, though the latter ceased to be a Director. The intention of the second Respondent has been to exercise control over the Company. The Board Meetings and Annual General Meeting were never convened and the minutes of the reported Board Meetings and Annual General Meeting are fabricated. The petitioner never attended any of the alleged meetings. The respondents have not produced any attendance register to substantiate their claim.


3. Shri B. Ramachandran drew our attention to the averments made in paragraph 7 of the counter statement filed on behalf of the respondents to show that it was agreed between the parties that the same principles of profit ratio which applied to the Doshi Time Industries, partnership firm, were to be applied in the company, which took over Doshi Time Indus-tries. The petitioner was not a party to the proceedings of the Board Meeting allotting the shares in favour of the petitioner as well as Respon

dents 2 and 3. Further the company has also appointed two additional directors allegedly in a Board Meeting held on 22-12-1998, without the knowledge of the petitioner. He further submitted that the provisions of section 81 are not attracted especially when two years had not expired from the date of allotment of shares. While concluding his arguments, Shri Ramachandran submitted that the JVA provides for two nominees of the company on the Board of Citizen Watches (India) Ltd. which establishes the fact that there should be equal representation on the part of the petitioner and second respondent in the affairs of the company. There is every possibility of refusing nomination of the petitioner in the joint venture by the Board of the company and, therefore, the petitioner should be allotted 50 per cent of the shares in the company in accordance with the understanding between the parties. The acts of the second and third Respondents in respect of the management of the affairs of the company are prejudicial to the interest of the company and the minority shareholders and against the public interest. Moreover, the joint venture will also be unfairly affected. The facts and circumstances justify the making of a winding up order as envisaged under section 397, but to wind up the company would unfairly prejudice the members and accordingly he prayed for the reliefs sought in the petition.


4. Shri Raghavan, the senior Advocate, appearing for the respondents submitted that the petition does not fulfil the requirements of sections 397 and 398. The petitioner has not made out any case for winding up of the company on the ground that it is fair and equitable. The averments of the petitioner do not show that the affairs of the company are conducted in a manner oppressive to the interest of the members or in a manner prejudicial to the interest of the company. The petitioner never complained either orally or in writing to any of the respondents about any act of oppression or mismanagement, in the domestic forum. The petitioner as a director did not take any steps to remedy the alleged acts of oppression or mismanagement. The petitioner could have convened Board Meetings and requisitioned general meetings. But he has not chosen to do so. He further stated that the petitioner and second respondent were carrying on watch business as partners in Doshi Time Industries with 45 per cent share for the petitioner and 55 per cent share for the second Respondent. Pursuant to the JVA with the Japanese collaborators, the petitioner, second and third Respondents incorporated the company which took over the assets and liabilities of the partnership firm viz., Doshi Time Industries. Accordingly, the second Respondent would have a majority stake in the company and the second Respondent?s Group would have one more Director and one more member than the petitioner?s Group and also a majority shareholding. Shri Raghavan reiterated that the meetings of the board were held at regular intervals as per the provisions of the Act. Notices of the Board Meetings were sent to all the Directors under certificates of posting. The petitioner attended a few of the meetings and failed to attend other meetings of the Board. However,

the petitioner is aware of the meetings and the decisions taken thereon from time to time. The petitioner has also acted in pursuance of many of the board resolutions. In pursuance of such decisions of the Board, the petitioner had withdrawn foreign currencies from the company in order to undertake foreign tour in connection with the joint venture business. The petitioner had signed sales tax returns in accordance with the board resolutions, signed memorandum of undertaking for counter guarantee in Tokyo acting on behalf of the company. If all the resolutions passed at the Board Meetings of the company are to be set aside, as sought for by the petitioner, he cannot be a Director in Citizen Watches (India) Ltd. He further submitted that the first Annual General Meeting of the company was duly held on 27-6-1998. The third respondent retired by a rotation was re-appointed at the Annual General Meeting. The company appointed auditors and approved the accounts and carried on the business and affairs of the company in accordance with the relevant provisions of the Act. According to the counsel, the petitioner invested only Rs. 51,35,000 and the second Respondent?s Group more than Rs. 1,10,96,200 which itself would show that no equality was envisaged in the shareholding. The Company became a public Company under section 43A of the Act pursuant to allotment of 4,89,951 shares of Citizen Watches (India) Ltd. in its favour. Consequently, the company was to allot shares in the manner provided under section 81 of the Act. The Board of Directors at the meeting held on 29-6-1998 allotted 2,38,435 shares each in favour of the petitioner, second and third Respondent respectively against the share application money standing against their names. The petitioner was a party to the allotment. Form No. 2 was properly filed together with annexures and other Returns periodically with the Registrar of Companies. The respondents never falsified the documents. There was no misuse of funds, assets and properties of the company. The Board at their meeting held on 22-12-1998 appointed two independent directors for smooth running of the company. The affairs of the company are being carried on in accordance with the law and the respondents have not committed any act of oppression or mismanagement. Shri Raghavan further submitted that if the petitioner had paid Rs. 98,54,000, the company would return the excess amount remitted by him. In a sections 397 and 398 proceeding the petitioner cannot seek for allotment of shares. The CLB cannot direct allotment of shares in violation of section 81 of the Act. The petitioner has to approach the Civil Court for appropriate remedy. Shri Raghavan while concluding his arguments, submitted that the petitioner has not made out any case of the acts of oppression or mismanagement and sought for dismissal of the petition.


5. We have considered the pleadings and arguments of the counsel. Before dealing with the disputed issues, it is essential to observe that, in the course of hearing, we advised the parties to try to settle the disputes amicably among themselves in view of the fact that the petitioner and the respondents 2 and 3 are closely related. However, the compromise efforts failed and therefore the petition was heard on merits.


6. After the hearing was concluded, since there was a dispute between the parties regarding quantum of money invested by the petitioner which according to him was of the order of Rs. 98,54,000 and according to the respondent it was only Rs. 51,35,000 and that his claim was that he had contributed to the funds of the company equally along with the second respondent group, to ascertain the real position, we directed the statutory auditor of the company to examine this matter and file a report. The petitioner placed his comments on the auditors report, a copy of which was furnished to the respondents. The arguments of the counsel on the same was heard on 8-3-2000.


7. It appears that disputes between the petitioner and the second and third respondents started some time in the middle of 1998 as is evident from a copy of the MOU at page 183 of the reply. As per this MOU, the division of work between the petitioner and the second respondent in the affairs of the joint venture company had been agreed. Even though in the MOU both had agreed to sort out their disputes, from the conduct of the parties, we find that they have not done so. It has culminated in filing of this petition.


8. The main claim of the petitioner is that the company is in the nature of quasi-partnership with the understanding that his share holding would be equal to that of the second respondent group and that in violation of such understanding the respondents have fabricated the board minutes to show as if the petitioner was allotted one-third shares while the second respondent group was allotted two-third shares in the company. Whether this company is really in the nature of quasi-partnership has to be examined with reference to the averments made in the pleadings and also the documents enclosed therewith.


9. The facts which are not in dispute are that Shri Vadilal K. Doshi, father of the petitioner as well as the Respondent No. 2 originally started the watch business. Thereafter, the petitioner and second Respondent joined the watch business and carried on the partnership firm under the name and style Doshi Time Industries, as partners in the proportion of 45 per cent and 55 per cent respectively. The company was incorporated in January, 1997 with one of the main objects of taking over the assets and liabilities of the aforesaid partnership firm. The company entered into a JVA with foreign collaborators for the purpose of the manufacturing watches in India. Accordingly, Citizen Watches (India) Ltd. was incorporated in April, 1997 with the authorised capital of Rs. 80 million consisting of 08 million equity shares of the nominal value of Rs. 10 each. The agreed issued and subscribed capital of Citizen Watches (India) Ltd. is Rs. 40 million consisting of 4 million equity shares out of which 51 per cent was to be subscribed by the foreign collaborators and the remaining 49 per cent by the company. While it is the contention of the petitioner that the petitioner and Respondent No. 2 would have equal shares in the company, it is contended by the second respondent that he would have majority shareholding in the company.


10. It is observed from the memorandum of association of the company that one of its main objects is to takeover the assets and liabilities of the existing firm ?Doshi Time Industries, No. 74, Debaraja Mudali Street, Madras 600003?. The deed of partnership dated 25-6-1982 between the petitioner and second Respondent as partners shows that they would share the profits of the firm in the ratio of 45 per cent and 55 per cent respectively. The notes of accounts of the statutory auditors Report forming part of the balance sheet of the company as at 31-3-1998 confirms the fact that the company took over the assets and liabilities of the partnership firm ?Doshi Time Industries? on 1-4-1997. The extract from the minutes of the third Board Meeting of the company held on 12-5-1997, which is disputed by the petitioner, contains the following :


?Absorption of the assets and liabilities of the firm ?Doshi Time Industries.?


The Board was informed that with the assets and liabilities of the partnership firm, Doshi Time Industries, are absorbed in the books of the Company as per the Memorandum of Association. The statement of accounts as at 31-3-1997 of Doshi Time Industries (firm) were tabled before the board. Board took note of the assets and liabilities and approved the absorption in the Books of the Company as per the Memorandum of Association.? We also find from the minutes of the board meeting held on 2-9-1998 (page 214 of the Reply) that the Board decided to make an application to Sales Tax Authorities to transfer the Sales Tax licence in the name of the earlier firm in favour of the company. It is also seen from the articles of association of the company that both the petitioner and the second respondent have been made permanent directors and it is also stipulated that in the event of a vacancy caused by the resignation or death or otherwise, the spouse of the vacating director will be appointed as a permanent director. Thus we find that both the brothers are to be treated on par, signifying the intention of the parties that the company is in the nature of a partnership between the two. While coming to the conclusion that the company is in the nature of a quasi partnership, we have taken note of the test laid down by the Supreme Court in Hind Overseas (P.) Ltd. v. R.P. Jhunjhunwala [1976] 46 Comp Cases 91 (SC), which was later approved in Kilpest (P.) Ltd. v. Shekar Mehra [1999] 2 CLJ 261 (SC) for treating a company as a quasi-partnership. The present case substantially satisfied the test laid down by the apex court.


11. Having held that the company is in the nature of a quasi partnership, the next issue for determination is the claim of the petitioner that he should have 50 per cent shares in the company as against the stand of the respondents that the petitioner is entitled only to 1/3 shares in the company. In Para 6 of the Reply, the respondents have stated ?The same principles which were followed in the firm were adopted by 1st respondent company when it took over the assets and liabilities of the firm. It was therefore always expected and recognised that the 2nd respondent would have a majority stake in the first respondent company just as he had in the firm?. The same is reiterated in Paragraph 7 of the Reply also. If the contention of the respondents that the same principles which were followed in the firm were adopted by the company, then, we do not find any reason as to why the company did not allot further shares to the petitioner and the respondents in the ratio of 45 and 55. Instead, the petitioner was allotted shares to the extent of 33 per cent only. According to the petitioner, when the company was incorporated, the understanding was that the petitioner and the 2nd respondent would have equal shares in the company and even though the 3rd respondent was also made a shareholder, she was to only represent the interest of the 2nd respondent as a part of his group. In the earlier paragraph, we have observed that both the brothers have been placed at par in respect of the directorship of the company. Whether such a parity has been agreed to in respect of share holding also is the issue for consideration. For claiming 50 per cent shares in the company, the petitioner relies on the contribution of funds to the extent of 50 per cent made by him in the company and also on a letter written by the 2nd respondent to the joint venture company. According the petitioners the company is not carrying on any business other than holding shares in the joint venture company in which the company has to acquire 49 per cent shares at a cost of Rs. 196 lakhs and out of this amount his contribution was Rs. 98.9 lakhs which is slightly more than 50 per cent. This amount, according to him was routed through the accounts of the company by way of share application money against which shares to the extent of 50 per cent were to be allotted to him. Since the claim of the petitioner of equal contribution was disputed by the respondents, we had the matter examined by the statutory auditor of the company. According to the report of the Auditor, the shareholders have brought in about 2.02 crores into the company out of which the petitioner?s contribution is Rs. 98.9 lakhs and out of this amount, a sum of Rs. 46.45 lakhs has been kept in the suspense account. According to the respondents, this amount was deposited by the petitioner in the bank account of the company without the knowledge of the respondents and as such the same is kept in the suspense account and, therefore, the petitioner cannot claim this amount as share application money against which shares were to be allotted. After the report of the auditor was received, the petitioner filed detailed comments on the auditor?s report in which he has given the full details of the investments made by him in the company. He had also enclosed the statements of the bank account of the company in which the amount deposited by the shareholders and remittances made therefrom to the JV company. So for the company has invested Rs. 1,96,12,000 in the JV company. This investment was made in two spells. Firstly, an amount of Rs. 64,25,000 in which the contribution of the petitioner was Rs. 34.40 lakhs and secondly Rs. 1,31,87,000 in which the petitioner?s contribution was Rs. 64.5 lakhs. Practically, the entire amount remitted by the petitioner has been invested in the shares of the JV company. Thus, the petitioner?s contribution of Rs. 98.9 lakhs constitutes slightly more than 50 per cent investment in the joint venture company. We are not in a position to accept the contention of the respondents that since the amount was remitted into the bank accounts of the company without the knowledge of the respondents and as such the same is kept in the suspense account for the reasons that the company being a closely held company and that the amount being so large, the respondents should have been aware of the deposits. Further, but for this remittance by the petitioner and utilisation by the company of the same, the company could not have acquired 49 per cent shares in the JV company. The petitioner has relied on a letter written by the 2nd respondent to the joint venture company dated 29-6-1998, to substantiate his stand that there was an understanding about equality in the share holding in the company. The said letter reads as follows :


?We are enclosing herein a Cheque No. 366450 dated 29-6-1998 for Rs. 65,88,000 drawn on Dena Bank, Chennai, forming capital to be


invested by Harshad V. Doshi

Rs.


DTI has to invest

1,96,00,000


Already invested

64,25,000


Balance to be invested

1,31,75,000


Both HVD & AVD each has to invest a sum of Rs. 65,87,500 in DTI.


Hence the above stated cheque is enclosed as my contribution.?


The contents of this letter clearly brings out the understanding between the parties that it is only the petitioner and the 2nd respondent who have to make equal investment in DTI the company and the 3rd respondent has no independent obligation to invest. Thus the contention of the petitioner that the 3rd respondent is only a part of the 2nd respondent group appears justified. If it is so, then the question of allotting 1/3 shares in the company to the 3rd respondent does not arise. The company, having utilised the entire amount of investment of Rs. 96.9 lakhs made by the petitioner for acquiring the shares in the JV company, is not justified in showing a part of this amount in the suspense account. Shri Raghavan contended that of the total investment in the company of Rs. 202 lakhs the petitioners contribution is only Rs. 98.9 lakhs, which is below 50 per cent. While this contention appears to be valid, yet, the shortfall in the contribution by the petitioner is negligible, which could be easily made up by the petitioner. Therefore, considering the facts and circumstances of the case, that there is parity in their directorship, that the letter of the 2nd respondent refers to equality in their investment and that the actual contribution by both the brothers is more or less equal and that it is the two brothers who have been actively participating in the joint ventures efforts, we are of the firm opinion that the petitioner should have been allotted 50 per cent shares in the company, the rest of the 50 per cent being allotted to the respondents. Non allotment of the agreed shares to the petitioner in a company in the nature of a quasi partnership, especially when he has made more or less equal contribution of funds as that of the respondents, which has been used for investment in the JV company, is an act of oppression meriting appropriate relief.


12. Shri Raghavan contended that since it is a deemed public company, the provisions of section 81 are applicable to it and that the existing shareholders have to be allotted shares on proportionate right basis. It is necessary to point out that this company was incorporated as a private limited company and by operation of law it has become a deemed public company. The change in the status of the company in such circumstances cannot defeat the equities between the parties. Even otherwise, we find that the first allotment of shares as agreed to be subscribed in the memorandum were allotted in a board meeting held on 6-1-1997. Further shares were allotted on 29-2-1998. As per section 81, proportionate allotment to the existing shareholders would become mandatory only in respect of allotments made after an expiry of two years from the formation of a company or made after the expiry of one year from the allotment of the shares in that company made for the first time after its formation whichever is earlier. This company was incorporated on 3-1-1997 and, therefore, provisions of section 81 would apply only for allotments made after 3-1-1999. Even though, it was contended by Shri Raghavan that since the company made first allotment on 6-1-1997, the period of one year expired on 6-1-1998 and as such the provisions of section 81 are applicable for allotments made thereafter, we are not in a position to subscribe to this view. As per section 41, subscribers to the Memorandum shall be entered as members in the register of members on incorporation of the company. The allotment of shares to the subscribers cannot be taken as the first allotment to fall within the provisions of section 81. Therefore, for applicability of provisions of section 81 in this case, the same would be applicable only after a period of two years from the date of incorporation, i.e., after 3-1-1999. Even otherwise assuming that the contention of Shri Raghavan is correct, equity demands that the company should have taken recourse to the provisions of section 81(1A) to enable the company to allot shares in the proportion of 45 and 55, keeping in view that the company became a deemed public company by operation of law.


13. In regard to the other alleged acts of oppression and mismanagement, stated supra the following extracts of the minutes of various Board Meetings, which are disputed, of which our findings are given separately, reveal the following :?


(a) The first meeting of the Board of Directors of the company held on 6-1-1997, authorised, inter alia, the following :?


(i) to participate in the joint venture with foreign collaborators;


(ii) to subscribe to and sign the Memorandum and Articles of Association of Citizen Watches (India) Ltd. by the second respondent.


(iii) to invest and acquire up to 19,60,000 equity shares of Rs. 10 each in Citizen Watches (India) Ltd. by the company;


(iv) to open an account with Dena Bank in the name of the company to be operated by the petitioner, second Respondent or his wife individually;


(v) to allot 100 equity shares each of Rs. 10 each in favour of the Petitioner, Respondents 2 and 3.


(b) The Meeting Board of Directors held on 1-4-1997 authorised the petitioner and Respondent No. 2 to be Directors in Citizen Watches (India) Ltd.


(c) In the Board Meeting held on 12-5-1997, it was resolved to invest funds of the company to the extent of Rs. 48,99,510 forming 49 per cent of the paid up share capital of Citizen Watches (India) Limited in tune with the joint venture agreement;


(d) In the Board meetings of the company held on 21-10-1997 and 20-1-1998, the petitioner and second Respondent were nominated to participate in the joint venture meetings at Japan on behalf of the company.


(e) In the Board Meeting held on 26-5-1998, the Board authorised the petitioner and second Respondent to execute the memorandum of understanding between the company and the foreign collaborators.


It is observed that all the above resolutions are in relation to?


(i) Incorporation of Citizen Watches (India) Ltd. by the petitioner and second Respondent.


(ii) Subscription to and signing of the Memorandum and Articles of Association of Citizen Watches (India) Ltd. by the second Respondent.


(iii) Acquisition of equity shares by the company in Citizen Watches (India) Ltd.


(iv) Opening and operation of bank account of the company with Dena Bank by the petitioner and respondents, Respondents 2 and 3.


(v) Allotment of 300 equity shares by the company in favour of the p

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etitioner and Respondents 2 and 3. (vi) Nomination of the petitioner and second Respondent as Directors in the Board of Citizen Watches (India) Ltd. (vii) Absorption of the assets and liabilities of the partnership firm, Doshi Time Industries, by the company. (viii) Investment of funds of the Company towards equity share capital of Citizen Watches (India) Ltd. (ix) Execution of memorandum of understanding between the first respondent company and foreign collaborators. (x) Nomination of the petitioner and second respondent in connection with their foreign tour towards implementation of the joint venture business. 14. It is on record that most of the above transactions in relation to the company have been duly completed, part of which executed by the petitioner or the second Respondent or by both and that all the Board resolutions were acted upon and duly implemented. We also note that most of the above occurred before the disputes started and that the petitioner had never complained about any of the above either in writing or otherwise earlier. Moreover, in the event of assailing these resolutions, the consequences would be that every such act and transaction of the company would be without approval of the Board of Directors and all such acts of the company since its inception would be invalid. We, therefore, do not find much substance in the allegations of the petitioner in regard to these meetings. 15. Thus, on an overall assessment of the allegations in the petition, we find that other than the allotment of shares, the petitioner has not established other allegations. In regard to the allotment of shares, we have already held that the petitioner should have been allotted 50 per cent shares in the company. The present shareholding in the company, as per the report of the Auditor, is that the petitioner holds 2,38,434 shares and the respondents 2,38,433 shares each. To bring his holding to 50 per cent, we direct the company to allot further 2,38,432 shares to the petitioner out of the funds remitted by him and kept in the suspense account. This should be done within 21 days of receipt of this order. After this allotment is made, the balance of the amount remitted by the petitioner/his group will be shown as share application money. Once these shares are allotted, the petitioner would have 4,76,866 shares and the respondents collectively would have the same number of shares, thus bringing in parity in the share holdings. We also stipulate, notwithstanding the provisions of section 81, that, in future, all the allotments will be in the ratio of 50 : 50 to the petitioner/his group and the respondents group. Since the only business of the company is to hold shares in the JV company and as the JV agreement provides for two nominees of the company on the Board of the JV company, we further stipulate that as long as the petitioner/his group and the second respondent/his group continue as the members of the company with 50 per cent shares each, the petitioner or his nominee and the 2nd respondent or his nominee alone will be nominated to the Board of the JV company. To avoid any future complaints of non receipt for meetings of the Board/General Body meetings, we direct the company to send notices to all the directors/members only by Registered post A/D together with the agenda and that the company will maintain attendance registers to be signed by the directors/members attending these meetings.
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