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



C.J. Mathew v/s Greendot Hotels & Resorts (India) P. Ltd.

    T.C.P. No. 107 of 2016

    Decided On, 02 August 2018

    At, National Company Law Tribunal Chennai

    By, THE HONOURABLE MR. CH. MOHD SHARIEF TARIQ
    By, JUDICIAL MEMBER

    For the Appellant: Mohan Pulickkal, Narayanan P. Potty, P. Ambili Menon, Advocates. For the Respondent: Dr. K.S. Ravichandran, Practising Company Secretary, S. Manjula Devi, Advocate.



Judgment Text

1. The Company Petition TCP 107/2016 was filed on 12.10.2012 before the erstwhile CLB under sections 397, 398 and 111(4) of the Companies Act, 1956. The Petition has been transferred to NCLT and renumbered as No. 91/2012.

2. There is one Petitioner and four Respondents. The 1st Respondent is a Company, the Respondent Nos. 2 and 3 are husband and wife who are the Directors along with the Respondent No. 4 of the 1st Respondent Company.

3. The 1st Respondent Company viz., M/s. Greendot Hotels and Resorts (India) Private Limited has been incorporated on 30.06.2008 with the Registrar of Companies, Kerala having identification No. U55200KL2008PTC022703. The authorised capital of the Company at the time of incorporation was Rs. 50,00,000 divided into 50,000 equity shares of Rs. 100/- each and the paid up capital is Rs. 25,00,000/- divided into 25,000 equity shares of Rs. 100 each, fully paid up. The main object of the Company is to carry on the business of hotels, restaurants, cafe, tavern, motel, rest houses, tea and coffee houses, bar, lodging and apartment house keeper, bakery products caters, suppliers and dealers of food, refreshment rooms, holiday resort, recreation centres and water sports facilities.

4. It has been submitted by the Petitioner that upon incorporation of the Company, there were two promoters of the 1st Respondent Company. The Petitioner is one of the Promoters and the other promoter being the 2nd Respondent, the Petitioner had taken 25.000 shares in the 1st Respondent Company, representing 50% of the authorised capital of the Company and the remaining 25,000 shares were taken by the 2nd Respondent, both being the subscribers to the Memorandum of Association, and the 1st Directors of the 1st Respondent Company. The Petitioner had fully paid for the entire 25.000 shares taken by him, and 2nd Respond has not paid any amount to the Company towards the value of the shares taken by him. The name of the Petitioner was entered into the Register of Members of the 1st Respondent Company under Folio No. 1 and relative share certificate No. 1 was issued to him. Since the Company did not have the Bank account, the Petitioner remitted the amount in cash to the, Company and the necessary entries were passed in the books of accounts of the Company.

5. It has been submitted by the Petitioner that the Registered Office of the 1st Respondent Company ever since its incorporation was functioning at Trinity House, 35/268 A, Opposite to Yatri Niwas, N.H. Road, Mamangalam, Kochi-25 and in the 1st week of January, 2011, the Petitioner came to know that the entire records of the 1st Respondent Company kept at the Registered Office, were taken away by the 2nd Respondent without intimation to the Petitioner and these documents included the share certificates issued in the name of the Petitioner.

6. The Petitioner has stated that he has issued a Registered Letter dated 11.01.2011 with acknowledgement due to the 2nd Respondent asking him to bring back all the documents. The true copy of the said letter dated 11.01.2011 is placed on record as Annexure A5. But, there was no response from the 2nd Respondent. Then, the Petitioner filed a Police complaint against the 2nd Respondent, seeking seizure of books and record of the 1st Respondent Company. The copy of the complaint dated 16.04.2011 is placed on record as Annexure A6.

7. The Petitioner states that having come to know that 2nd Respondent is proposing to alienate the landed properties of 1st Respondent Company with the documents of title deeds taken away by him from the Company's Registered Office, the Petitioner approached the Munsiffs Court, Ernakulam seeking an order of injunction restraining 2nd Respondent and his agent from alienating the property of 1st Respondent Company. The said Court vide its Order dated 14.03.2011 restrained the Respondents from alienating the Company's properties. The Order passed by the Munsiff Court, Ernakulam in IA No. 1800/2011 in oS No. 249/2011 is placed on record as Annexure A7.

8. The Petitioner further submits that he has filed a detailed complaint before the Registrar of Companies, listing out all the fraudulent activities indulged in by the Respondent Nos. 2 and 3. But, the Registrar of Companies failed to take appropriate action in the matter due to which the Petitioner has filed a Writ Petition No. 4014/2012 before Hon'ble High Court of Kerala seeking a direction to be issued to the Registrar of Companies to take action on the complaint filed by the Petitioner and the said Petition is pending disposal before the said High Court.

9. It has been alleged by the Petitioner that after receipt of his Letter dated 11.01.2011 issued by him, Respondent Nos.2 and 3 filed various false and fabricated returns, reports and forms before the Registrar of Companies during the months of January and February, 2011 in respect of the 1st Respondent Company which include returns/forms pertaining to the appointment of Respondent Nos. 3 and 4 as Directors of 1st Respondent Company, bogus transfer of the shares in respect of the 3rd Respondent, illegal shifting of the Registered Office of the Company, illegal ousting of the Petitioner from the office of the director of the Company by falsely showing that he had vacated office, the unauthorised increase of authorised share capital of the Company, allotment of further shares in the name of Respondent Nos.2 and 3, manipulated and fabricated Annual Accounts of the Company, falsely and manipulated Annual Return and Compliance Certificate etc.

10. It has been alleged that 2nd Respondent filed a fabricated document i.e., Form -32 admitting his wife (R3) as director of 1st Respondent Company. The appointment of his wife viz., Smt. Bindu Paul is shown as on 12.07.2008 whereas Form-32 has been filed before the Registrar of Companies only on 29.01.2011 and such appointment was made without the knowledge and concurrence of the Petitioner who is the only director and shareholder of the 1st Respondent Company and the same is a fraud played by the 2nd Respondent. The Petitioner has submitted that the consent letter of Smt. Bindra Paul is dated 02.07.2008 wherein her (R3) DIN 02268897 is mentioned whereas the DIN has only been allotted on 21.07.2008 which is evidencing that the consent letter and DIN number are fabricated to defraud the Petitioner.

11. It has been contended by the Petitioner that all meetings that had actually taken place were chaired by the Petitioner and he has signed the Director's attendance Register and in no such meetings a decision to appoint the 3rd Respondent as Director was taken, and without the presence of the Petitioner there would be no required quorum for Board Meeting. So, without the consent and knowledge of the Petitioner, the 3rd Respondent could not have been validly appointed at any Board Meeting, and if 3rd Respondent is appointed as additional director, the appointee should vacate his office at the subsequent to Annual General Meeting. But, there is no record of the reappointment of 3rd Respondent as Director at the subsequent Annual General Meeting of the Company. In short, the Petitioner assails the appointment of the 3rd Respondent as Director stating that the same is invalid and illegal and liable to the set aside.

12. The Petitioner has also challenged the transfer of 5000 shares held in the name of 2nd Respondent in favour of 3rd Respondent which have been transferred on 16.08.2008. The information with regard to such transfer was made first appeared only on 02.02.2011 i.e. the date of filing of the Annual Return for the Financial Year ending 2009, which as per the submission of the Petitioner, is illegal, as no share held by other members of the 1st Respondent Company could be validly transferred to any outsider which is in violation of Article 34 of the Article of Association of the 1st Respondent Company which provides a procedure for giving an intimation to the Board for the purpose of ascertaining the willingness or otherwise of the members to purchase the shares and if several members express their willingness to purchase the shares then, the question will be decided by drawing lot and the intending transferors shall be bound to transfer their shares in the name of the person in whose favour his lot is drawn.

13. The Petitioner has also pointed out some other contradictions in the record relating to Folio numbers of shares of Respondent Nos. 2 and 3 and has submitted that the transfer of shares created in favour of the third Respondent is bogus and invalid and 3rd Respondent is not a member of the 1st Respondent Company. The Petitioner has also alleged that the Respondent Nos. 2 and 3 have sought to shift the Registered Office of the 1st Respondent Company unauthorisedly and without the knowledge of the Petitioner, the decision is shown to have been made at the Board Meeting held on 26.06.2010, whereas no such Board Meeting has taken place for shifting of the Registered Office; no Board Resolution or decision was taken to that effect at the Board Meeting or any of the subsequent Board Meetings. So, the Respondent Nos. 2 and 3 have fabricated the minutes of the Board Meetings to include the said item without any such decision or Resolution. Thus, the shifting of the Registered Office is fabricated and intended to support the 2nd Respondent's action of unauthorisedly removing the records of 1st Respondent Company from the genuine Registered Office, in violation of the provisions of law.

14. The Petitioner has averred in the Petition that Form No. 32 filed with the Registrar of Companies on 01.02.2011 indicates that the Petitioner had ceased to be the Director of the Company with effect from 22.01.2011 under Section 283 (1) (f) and 283 (1) (g) of the Companies Act, 1956, i.e., the former section deals with the disqualification for directorship on the ground of nonpayment of the call monies on shares on due dates and the latter section deals with disqualification on the ground of non-attendance of three Board Meetings. The Petitioner contends that he being the subscribers to the Memorandum of 1st Respondent Company shall be deemed to have agreed to become member of the Company and on its registration, his name has been entered as Member in the Register of Members of the 1st Respondent Company and in the absence of any formal allotment of shares or any calls being made as due on specific dates or any time limit prescribed for remitting the share money, any disqualification of directorship under section 283 (1) (f) of the Companies Act, 1956, cannot arise or occur and much less any disqualification for membership of the Petitioner in 1st Respondent Company. The Petitioner has further submitted that even assuming but not conceding that he has not remitted the share subscription amount, if the applicability of Section 283 (1) (f) has to be invoked, the disqualification is to take effect upon the expiry of 6 months from the due date of non-payment of the call monies and there was no demand served on the Petitioner to pay up any amount in that respect.

15. The Petitioner has also contended that the allegations of the Respondents that the Petitioner has not attended several Board Meetings of the 1st Respondent Company, is totally false and contrary to the facts. He submits that the 2nd Respondent has been fraudulently and cunningly trying to avoid and keep the Petitioner away from day to day affairs of the 1st Respondent Company, by trying to remove him from directorship and membership of the company with the devious and mala fide intention to take full control of the Company and full possession of the Company's assets and properties to the detriment of the interests of the Petitioner and the Petitioner is unable to produce the Director's Attendance Register and the share certificates issued to the Petitioner, as the records of the 1st Respondent Company has been removed from the Registered Office of the Company unauthorisedly.

16. The Petitioner is also aggrieved for filing Form No. 23 by the 2nd Respondent with the Registrar of Companies which shows purported increase of the authorised capital of 1st Respondent Company from Rs. 50 Lakhs to 125 Lakhs, in an Extra-ordinary General Meeting held on 05.02.2011 at which the General Body Resolution authorising the increase is purported to have been passed. But, in fact, the proposal to increase the authorised capital was never discussed or decided at any Board Meeting of 1st Respondent Company and even assuming without conceding that there was Extraordinary General Meeting on 05.02.2011, the said meeting is invalid and illegal.

17. The Petitioner submits that the share allotment claimed to have been made on 18.02.2011 in favour of the Respondent Nos. 2 and 3 were made against the share application monies brought in by the Petitioner to the first Respondent Company and after purported share allotment dated 18.2.2011, the equity percentage of the Petitioner is reduced from 50% to 16.66% in the 1st Respondent Company with the Respondent Nos.2 and 3 making corresponding gains in terms of their equity percentage. Thus, after fabricating and filing the Form No. 32, pertaining to vacation of directorship by the Petitioner by all illegal means, the Respondent Nos. 2 and 3 being spouses of each other, sat on the Board of the 1st Respondent Company to allot substantial volume of shares in their names to take illegal and unjust gains at the cost of the Petitioner and the said allotment is invalid and illegal.

18. The Petitioner has contended that the Respondent No. 2 has filed Balance Sheets and Reports of 1st Respondent Company for financial years 2008-2009 and 2009-2010, on 01.02.2011 and the belated filing is being done by grossly manipulating the original version of the Balance Sheet and Reports approved by the Board and adopted by the shareholder were fudged in collusion with. signing partner of the Auditor Firm, Mr. Tinu Anto, Chartered Accountant, who is a close relative of the 2nd Respondent, so as to unduly favour the Respondent Nos. 2 and 3.

19. In the premises, the Petitioner has prayed for granting reliefs as follows:-

(A) An order declaring that the conduct of the Extra Ordinary General Meeting of the Company held on 05.02.2011 and the increase of the authorized capital of the Company as per the resolution passed thereat are illegal, null and invalid.

(B) An order declaring that the transfer of 5000 shares of the Company from the name of the second Respondent in favour of the third Respondent on 16.08.2008 is invalid, null and void and directing the 1st Respondent to rectify the Register of Members accordingly.

(C) An order declaring that the removal of the Petitioner as Director of the 1st Respondent virtue of the Board Resolution dated 22.01.2011 is illegal and void.

(D) An order directing the first Respondent Company to rectify its Register of Members to the effect that the Petitioner is holding 25,000 fully paid-up equity shares of the Company out of the total authorized capital of Rs. 50,00,000/- before the illegal enhancement of the shares capital in violation of the provisions of the Companies Act, 1956.

(E) An order declaring that the appointment of the 3rd Respondent as Director of the 1st Respondent made on 12.07.2008 is illegal and invalid.

(F) An order declaring that all decisions taken by the Board of the Company reconstituted after removing the Petitioner from the office of director and inducting the 3rd and 4th Respondents as directors, are invalid, null and void as vitiated by fraud.

(G) An order setting aside the allotment of 1,00,000 shares of the 1st Respondent Company in favour of the 2nd and 3rd Respondents purported to have been made on 18.02.2011, and any subsequent transfer of shares by them to any other person, as invalid and bad in law.

(H) An order restraining the Respondents from making any further issue of shares without rectifying the illegal share allotment made on 18.02.2011.

(I) An order directing the first Respondent Company to make allotment of shares of the Petitioner against the share application money of Rs. 88,10,000/- paid by him and lying to his credit in the Company's account.

(J) An order setting aside the appointment of the 4th Respondent purportedly made on 10.01.2011 as illegal and invalid.

(K) An order declaring the shifting of the Registered Office of the 1st Respondent Company on 26.06.2010 as illegal, null and void.

(L) An order directing the Registrar of Companies to reject all statements of accounts, returns, forms, certificates and reports filed on behalf of the 1st Respondent Company after the date of Annexure-A5 issued by the Petitioner to the second Respondent, as falsified, fabricated or manipulated.

(M) An order appointing an independent practising Chartered Accountant to verify the books of Accounts of the 1st Respondent and ascertain the extent of fraud, manipulation and falsification of books of Account perpetrated by Respondents 2, 3 and 4.

(N) An order directing the Central Government to carry out an investigation into the affairs of the first Respondent Company in the light of the submissions made in this petition.

(O) Such other further order as may be deemed fit by this Hon'ble Bench on the facts and in the circumstances of the case.

20. The Counter Statement has been filed by the Respondents 1 to 4 wherein all the allegations contained in the Petition have been denied except to the extent specifically admitted by the Respondents. It has been submitted that the action of the Petitioner is accentuated by mala fides as he has suppressed vital and material facts and has filed the Petition for a collateral purpose. The Respondents have stated that the Petitioner did not come to the Court with clean hands, therefore the Petition deserves to be dismissed inlimine.

21. The Respondents have submitted that the case of the Petitioner is that in the Memorandum of Association, he had subscribed for 25,000 equity shares constituting about 50% of the share capital of the Company, but as on the date of filing the Petition, his name does not appear in the Register of Members of the Company. Therefore, he is not entitled to invoke the jurisdiction of this Tribunal under Section 397/398 of the Companies Act, 1956, unless until he succeeds in his prayer for rectification of Register of Members and gets back as member of the Company.

22. It has been submitted by the answering Respondents that the Petitioner is a retired additional commissioner in the Income Tax Department, and he did not discharge the basic burden of proving that he had contributed the money to the Company, to the tune of Rs. 25 lakhs towards the money payable by him for the shares as subscribed and share application money of Rs. 88.10 lakhs aggregating to Rs. 1,13,10,000/-. It has been submitted that though the Petitioner claims that the shares have been allotted to him and necessary share certificates were also issued to him. However, he has not produced any paper and when confronted with the above challenges, has cooked up a story stating that in the first week of January 2011, he had come to know that the Respondent No. 2 had taken away the books and records including Title Deeds of the 1st Respondent Company. Thus, the Petitioner sets up this defence in order to surmount the burden of producing any documentary evidence in support of his claim.

23. The answering Respondents have submitted that in or about September 2010, a dispute arose between the Petitioner and the 2nd Respondent in relation to several of the Companies in which both were partners in business and both had made investments, and in relation to the affairs of the Company viz., Trinity Arcade Private Limited, the 2nd Respondent had taken out a Company Petition which resulted in the disputing parties arriving at a settlement on 12.11.2010 on the basis of a Settlement Agreement of that date. But in relation to the 1st Respondent Company the truth is that the Petitioner had never invested any money whereas he contends that he was in charge of the finance and fund raising matters in the 1st Respondent Company, while the 2nd Respondent was in charge of operations, administration and accounting matters, and being in charge of finance and fund raising, he is supposed to have custody of all the documents and deeds, if he had really been Chairing the board meetings and signing the attendance registers, he would have kept up all records, and could have open the bank account of the 1st Respondent Company.

24. It has also been admitted in the reply by the answering Respondents that the Petitioner has also filed a complaint before the police on the allegations of misappropriation of Crores of Rupees and falsification of documents of the 1st Respondent Company. He has also filed a civil suit before the Court of Principal Munsiff, Ernakulum for restraining the Respondents from selling immovable properties of the 1st Respondent Company, on the basis that all the documents pertaining to the immovable properties have been taken away by the Respondents.

25. It has been brought on record by the answering Respondents that the Demand Notices dated. 26.06.2010, 21.08.2010 and 25.09.2010 were issued to him by the Company on the strength of the resolution of the Board of Directors dated 26.06.2010, 21.08.2010 and 25.09.2010, he did not respond at all, and as a result unpaid shares were forfeited after due notice to him as decided in the Board of Directors meeting held on 22.11.2010. The answering Respondents have also stated that the forfeiture of shares were intimated to the Petitioner by notice dated 01.12.2010, the notices sent to the Petitioner calling for remittance of share subscription money are placed on record as Annexure-R4 (series). The copies of the minutes of the Board of Directors Meeting dated 26.06.2010, 21.08.2010, 25.09.2010 and 22.11.2010 are placed on record as Annexure-R5 (series). The Respondents state that the Petitioner has lost his membership by his own fault as his shares have been forfeited by the 1st Respondent Company, which has lien on his unpaid shares, resultantly he has no locus to file this Petition.

26. The answering Respondents have submitted that it reveals from the minutes of the meeting dated 22.01.2011 that since the Petitioner failed to attend the three consecutive Board Meetings on 22.11.2010, 10.01.2011 and 22.01.2011, he had vacated his office as per law.

27. The answering Respondents have submitted that the appointment of 3rd Respondent as Director as on 12.07.2008 and filing of Form-32 in this regard on 29.01.2011 cannot be considered to be a back dated appointment as late filing of Form-32 is duly filed as per the procedure for delayed filing. The answering Respondents have submitted that 3rd Respondent was validly appointed as one of the Directors of the Company in the Board Meeting held on 12.07.2008, though the Form-32 was filed belatedly. The copy of the minutes of the Board of Directors meeting dated 12.07.2008 pertaining to the appointment of Respondent No. 3 as Director of the 1st Respondent Company, is placed on record as Annexure-R6. It has also been submitted by the answering Respondents that the shares were validly transferred to the 3rd Respondent in accordance with the provisions of the Act and the Articles of Association of the 1st Respondent Company. The copy of the minutes of the Board of Directors meeting dated 16.08.2008 is placed on record as Annexure-R7.

28. The allegations with regard to illegally shifting of the registered office of the Company levelled by the Petitioner against the Respondents have also been denied, and it has been stated by the Respondents that the registered office of the 1st Respondent Company has been shifted in the manner prescribed under the Act, as the Board of Directors of the Company passed resolution on 26.06.2010 to shift the registered office of the Company. The copy of the minutes of meeting dated 26.06.2010 is placed on record as Annexure-A8. It has been submitted by the answering Respondents that the Petitioner had remained silent between 2008 to the end of 2010 without doing anything, as he did neither act as shareholder nor a director of the 1st Respondent Company. But, he seems to be playing with certain inconsistencies in the particulars furnished which per-se did not constitute the act of falsification of record or even oppression and mismanagement in relation to the 1st Respondent Company.

29. The answering Respondents have also submitted that the EoGM held on 05.02.2011 wherein the resolution was passed to increase the authorized share capital of the 1st Respondent Company was duly convened after issuance of notice to all the shareholders and resolution was validly passed to increase the authorized capital of the 1st Respondent Company. The authorized share capital was increased to Rs. 125 lakhs in the said EoGM, and thereafter the shares were duly allotted to Respondent Nos. 2 and 3 on 18.02.2011. The copy of the minutes of the EoGM dated 05.02.2011 and minutes of the Board of Directors meeting dated 18.02.2011 are placed on record as Annexures-R10 & R11 respectively. It has specifically been mentioned that the Board of Directory meeting was duly held on 18.02.2011 after issuing notice to the directors and resolution was passed to allot shares to the Respondent Nos. 2 and 3 as against the share application money brought by them. Therefore, the Petitioner's contention that the shares were allotted to Respondent Nos. 2 and 3 as against the share application money brought by him are not substantiated with any documentary evidence.

30. The answering Respondents have also controverted the allegations of the Petitioner with regard to the appointment of the 4th Respondent by stating that Form-32 filed on 12.03.2007 was filed well in time. So the contention of the Petitioner that the appointment of the 4th Respondent is invalid is baseless and is liable to be rejected. A copy of the minutes of the meeting of the Board of Directors dated 10.01.2011 wherein the decision was taken to appoint Respondent No. 4 as one of the Directors of the 1st Respondent Company is placed on record as Annexure-R12.

31. The answering Respondents have submitted that the Petitioner finds fault with the delay in filing the audited balance sheets of the company and the contentions that there have been falsification of records, manipulation of records, there was criminal conspiracy, fraudulent connivance, gross manipulation and collusion with the Auditors, and these allegations cannot be enquired into in the guise of the Company Petition under Section 111(4) r/w Sections 397/398 of the Companies Act, 1956. It has further been submitted that the Petitioner himself says that he was chairing all the meetings and he was in charge of the finance and fund raising matters, but he had not done anything with respect to the company, and not to speak about any statutory compliance's even though he claims to have been in charge. Thus, he has no locus standi to file the Petition.

32. It has further been averred in the reply that the Petitioner has apparently found some errors in the compliance certificates, but he did not deny the holding of the board meetings and transaction of the business as recorded in the Minutes Books. It has been submitted by the answering Respondents that the prayer of the Petitioner for permanent injunction with regard to alienating the immovable properties of the 1st Respondent Company made before a civil court and also before this Bench, exposes his malicious intentions. The Petitioner is also known for forum shopping, as most of the allegations levelled in the Company Petition have already been stated by him in the police complaint and civil suit filed. Thus, having chosen a forum and remedy, he cannot conveniently invoke the jurisdiction of all the courts in the country. Thus, he has no locus standi to seek indulgence of this Tribunal into the several allegations which according to him constitute oppression and mismanagement. Based on the reply, the answering Respondents have submitted that since the allegations of fraud, fabrication, collusion and criminal conspiracy have neither been pleaded with requisite substance nor been proved despite sufficient opportunity. Therefore, Respondents prayed to dismiss the Petition with exemplary costs and render justice.

33. The Petitioner has filed the Rejoinder wherein he has denied the allegations levelled by the answering Respondents in their reply and have reiterated the contents of the Petition. The Respondents have also filed the Sur-Rejoinder wherein the contents of the reply have been reiterated, therefore the same is not repeated for the sake of brevity.

34. In view of the pleadings recorded herein above, the only issue that arises is as to whether or not the petitioner is entitled to get his name entered in the register of the members of the 1st Respondent Company as is prayed under para 'D' of the prayers made in the petition, which is reproduced as follows :

"D. An order directing the first Respondent Company to rectify its Register of Members to the effect that the Petitioner is holding 25,000 fully paid-up equity shares of the Company out of the total authorized capital of Rs. 50,00,000/- before the illegal enhancement of the shares capital in violation of the provisions of the Companies Act, 1956. "

If, the answer to the above stated issue is found in negative then the other prayers need not to be examined. The Petition is composite one which is filed under Sections 111(4), 397 & 398 of the companies Act 1956. For Section 111(4), Section 59(1) is given in the Companies Act, 2013, which is Pari Materia to the provisions of Section 111(4) of which the necessary ingredients are as follows

(i) If the name of any person is, without sufficient cause, entered in the register of members of a company, or

(ii) after having been entered in the register, is, without sufficient cause, omitted there from, or

(iii) if a default is made, or unnecessary delay takes place in entering in the register, the fact of any person having become or

(iv) ceased to be a member, the person aggrieved, or any member of the company, or the company may appeal to the Tribunal, for rectification of the register.

35. In this case ingredient number ii) mentioned above is relevant to be considered to grant prayer 'D' to the petitioner, as the contention of the petitioner is that after having been entered his name in the register, is, without sufficient cause, omitted there from. The petitioner would contend that being the subscribers to the Memorandum of Association, and the 1st Director of the 1st Respondent Company, he had fully paid for the entire 25,000 shares taken by him, and 2nd Respond has not paid any amount to the Company towards the value of the shares taken by him. The name of the Petitioner was entered into the Register of Members of the 1st Respondent Company under Folio No. 1 and relative share certificate No. 1 was issued to him. Since the Company did not have the Bank account, the Petitioner remitted the amount in cash to the Company and the necessary entries were passed in the books of accounts of the Company. The respondents would contend that the Petitioner is a retired 'Additional Commissioner' in the Income Tax Department, and he did not discharge the basic burden of proving that he had contributed the money to the Company, to the tune of Rs. 25 lakhs towards the money payable by him for the shares as subscribed and share application money of Rs. 88.10 lakhs aggregating to Rs. 1,13,10,000/- The respondents would further contend that the Petitioner claims that the shares have been allotted to him and necessary share certificates were also issued to him, but he has not produced any paper and when confronted with the above challenges, has cooked up a story stating that in the first week of January 2011, he had come to know that the Respondent No. 2 had taken away the books and records including Title Deeds of the 1st Respondent Company and as on the date of filing the Petition, his name does not appear in the Register of Members of the Company. As per Respondents, Petitioner is not entitled to invoke the jurisdiction of this Tribunal under Sections 397/398 of the Companies Act, 1956, unless until he succeeds in his prayer for rectification of Register of Members and gets back as member of the Company.

36. As per the pleadings it is admitted fact that the petitioner is a subscriber to the Memorandum of Association of the 1st Respondent of the Company and his name has been entered in the registered of the members and even share certificates were issued to him by the 1st Respondent Company, as claimed by the petitioner but there is no proof of the payment of the subscription money amounting to Rs. 25 lakhs payable by him for 25000 equity shares as subscribed. The petitioner's contention is that the subscription money was paid in cash, as the bank account of the company was not opened. He did neither prove to whom the money was given on behalf of the company nor produce any receipt to that effect. The petitioner even did not bother to place on record the share certificates, which he claims to have been issued to him by the 1st Respondent Company. Thus, there is no sherd of evidence to substantiate his claim that he has paid the subscription money.

37. Section 2(55) of the Companies Act, 2013 says that 'member means the subscriber to the memorandum of the company who shall be deemed to have agreed to become member of the Company, and on its registration shall be entered as member in its register of members ' and as per section 10(2) of the Companies Act, 2013, 'all monies payable by any member to the company under the memorandum or articles shall be a debt due from him to the company'. Even though the subscriber does not bring in subscription money yet his name will be entered in the register of members and share certificate can be issued, but the money will be shown as debt against subscriber on the asset side in the balance sheet of the Company. The Companies Act, does not contain any specific provision regarding forfeiture of shares. However, the Articles of Association of almost all the Companies contain detailed provisions regulating forfeiture of shares. These provisions are based on the regulations 29 to 35 in Table 'A' of Schedule I to the Companies Act, 1956.

38. The respondents would contend that the Demand Notices dated 26.06.2010, 21.08.2010 and 25.09.2010 were issued to the petitioner by the Company on the strength of the resolutions of the Board of Directors dated 26.06.2010, 21.08.2010 and 25.09.2010, he did not respond at all, and as a result unpaid shares were, forfeited after due notice to him as decided in the Board of Directors' meeting held on 22.11.2010. The answering Respondents have also stated that the forfeiture of shares were intimated to the Petitioner by notice dated 01.12.2010, the notices sent to the Petitioner calling for remittance of share subscription money are placed on record as Annexure-R4 (series). The copies of the minutes of the Board of Directors' Meeting dated 26.06.2010, 21.08.2010, 25.09.2010 and 22.11.2010 are placed on record as Annexure-R5 (series). The Respondents would further contend that the Petitioner has lost his membership by his own fault as his shares have been forfeited by the 1st Respondent Company, which has lien on his unpaid shares, resultantly he has no locus to file this Petition. It also reveals from the minutes of the meeting dated 22.01.2011 that since the Petitioner being directed failed to attend the three consecutive Board Meetings on 22.11.2010, 10.01.2011 and 22.01.2011, he had vacated his office as per law.

39. In order to ascertain the lien on the unpaid shares/powers of the board of directors of 1st Respondent Company to forfeit the same, we may refer to the provisions of the Articles of Association of the company and other record placed on the case file. Para numbers 20 & 21 of the Articles of Association provide as follows: -

"20. In the matter of exercising the right of lien on shares, the provisions of regulations 9, 10, 11 and 12 of Table A shall, verify be deemed to have been incorporated in these Articles and the Board shall duly comply with the provisions hereof whenever the Board thinks expedient to exercise the right of lien.

21. If any member fails to pay call money in accordance with the notice of call, the share held by him in respect of which the call money due has not been paid shall be forfeited by a resolution of the Board. Whenever it is deemed expedient to forfeit any such share the Board shall duly comply with the provisions of regulations 29, 30, 31, 32, 33 and 34 of Table A and all such provisions shall, verify be deemed to have been incorporated in these articles". (The copy of Articles of Association is placed at page 46 of the typed set filed by the Petitioner).

40. The above stated provisions of Articles of Association clearly provide for lien on the unpaid forfeit the same for non-payment of call money, which has not been paid by the petitioner as reflects from, para 13(i) of Compliance Certificate dated 18.08.2010 placed at page 100 of the typed set filed by the Petitioner. The said para is extracted as follows :

"13 (i) The Company has delivered all the certificates on lodgement thereof for transfer in accordance with the provisions of the Act There was no allotment/transmission of Securities during the period. One of the Subscriber to Memorandum has not paid for the shares subscribed by him and hence the company has not issued the share certificates to that subscriber".

(emphasis is supplied)

41. The Extract of Minutes of the meeting (placed at page 157 of the typed set filed by the Petitioner) of the Board of Directors of 1st Respondent Company dated 22.01.2011 provides as follows :

"Th

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e Chairman informed that Mr. C.J. Mathew has not attended in the last several Board Meetings and have also not paid the value of equity shares subscribed by him as the Subscriber to Memorandum of Association in spite of repeated requests. He further informed that there is no chance of getting the dues from him in the near future. The Board noted that pursuant to the provisions of Section 283(1)(f) of the Companies Act, if any director fails to pay the money in respect of shares held him within 6 months from the date fixed for payment, the director will automatically vacate office. Further pursuant to Section 283(1)(g) of the Act, the office of the director will automatically stand vacated, if the director absents himself from three consecutive meetings of the Board. The Board noted that by violating the above provisions, Mr. C.J. Mathew has already vacated office. The board after deliberations passed the following resolution: "Resolved That the vacation of office of Mr. C.J. Mathew as director be and is hereby noted by the Board". 42. It is also on record that on 22.11.2010 the Board of Directors of the 1st Respondent Company has forfeited the shares of the Petitioner. The copy of the Minutes is placed at page 75 of the typed set filed with the reply. The relevant Minutes of the Board Meeting dated 22.11.2010 are extracted below:-. "02. Forfeiture of Shares: Resolved That pursuant to Article No. 21 of the Articles of Association of the Company and other applicable provisions, if any, of the Companies Act, 1956 consent of the Board of Directors of the company be and is hereby accorded for forfeiture of 25000 Equity Share of Rs. 100/- each held by Mr. C.J. Mathew due to his failure to pay the total amount of shares agreed to be subscribed by him as subscriber to the memorandum. Resolved Further That Mr. K.J.Paul, Director be and is hereby authorised to make entries in the register of members for giving effect to forfeiture of Shares as per details placed before the Board. Resolved Further That Mr. K.J. Paul, Director of the company be and is hereby authorised to do all such acts, deeds and things as may be necessary for and on behalf of the company to give effect to the said forfeiture. Also Resolved that Mr. K.J. Paul, Director of the company be authorised to send an intimation letter to Mr. C.J. Mathew regarding forfeiture of shares. There being no other business, the meeting concluded with a vote of thanks to the Chair. " 43. In the light of the provisions of the Articles of Association of the company and the decision taken by the Board of Directors to forfeit the shares of the, Petitioner, it can safely be concluded that the Petitioner is not a member of the 1st Respondent Company as his shares stand forfeited for non-payment of the subscription money. The Petitioner has miserably failed to support his contention for rectification of the Register of Members for the purpose of entering his name in the Register of members of 1st Respondent Company. Though petitioner claims that he has been chairing all the Board Meetings and was in charge of the finance and fund raising matters, but he did not open any account of the 1st Respondent Company with the Bank and even not maintained any record, particularly with the regard to the payment, if any, of subscription money for 25,000 of shares subscribed. Even, he did not file PAS-3 to intimate the RoC of the allotment of shares being made by the Company. The defence of the Petitioner that the Respondents have fabricated all the record relating to the 1st Respondent Company is hollow and therefore, stands rejected. Thus, the issue raised under Para 34 hereinabove stands decided against the Petitioner, as he is not legally entitled to seek relief under prayer D. Therefore, he cannot invoke the provisions of sections 397 and 398 of the Companies Act, 1956, as he was not a shareholder of 1st Respondent Company at the time of filing the Petition. Accordingly, the Petition stands dismissed. However, these findings will have no bearing on the complaint filed by the Petitioner before the Police. There is no order as to costs. 44. The order is pronounced in the open court.
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