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COMPANY LAW BOARD, NEW DELHI BENCH
Naresh Mohan Mittal v. Sangeeta Construction (P.) Ltd.
CP NOS. 151 TO 153 OF 2007
SEPTEMBER 5, 2011
In the facts and circumstances of this case, it is noted that the respondents have not been able to refute the allegations made by the petitioners regarding the irregularities and illegalities in filing of Forms 32 and DIN-3. The reason given for cessation of directorship of petitioner No. 2 was that he was appointed as an additional director with effect from 25-10-2004 to hold office up to the date of next AGM which was held on 24-9-2005, and in the AGM he was not appointed as director, petitioner No. 2 had accordingly ceased to be director with effect from 24-9-2005. It is not understood as to how petitioner no. 2 could be invited to the meeting allegedly held properly by the respondents on 31-8-2007, if he had ceased to be director with effect from 24-9-2005. It was also noted that ‘G’ was, in fact, removed by the Institute of Chartered Accountants of India from his membership during the period when the company had re-appointed him as a statutory auditor, he, in fact, was ineligible to be re-appointed as statutory auditor. Further, it was noted that the replies of the company secretaries was also very evasive and not up to the standards of statutory compliances which they are required to practice and uphold. It is very obvious that the filing of the documents with the RoC has been managed and is not in accordance with the procedure prescribed. Form 32 has been filed after a delay of 9 months. Signatures on the documents are alleged to be forged. The facts and circumstances of this case give credence to the narration of events as given by the petitioners. The exoneration of the company secretary by the ICSI and restoration of membership of the statutory auditor does not validate the irregularities and the illegalities committed in the present case. Meetings without adequate quorum and without proper notice, onus of proving which is on the sender, are held to be ab initio void and so are the resolutions passed therein.
In view of the facts and circumstances of this case, these being family companies being managed by the brothers in accordance with the family settlement, adherence to which has not been disputed, it is noted that by levelling allegations and counter-allegations by manipulating records by holding meetings without quorum both parties have endeavoured to gain control of the management of the companies and have acted in breach of fiduciary duties. [Para 23]
The fiduciary capacity within which directors have to act enjoins duty upon them to act on behalf of the company with utmost care and skill and due diligence and in the interest of the company. More so, in a family company where even directorial complaints can be looked into. Directors have a duty to make full and honest disclosures to shareholders regarding all important matters relating to the company. In the present case a clear case of oppression has been made out, even a single act can cause continuous oppression. The conduct of the respondents have been harsh, burdensome, against probity and good conduct. Once conduct is found to be oppressive under sections 397 and 398, the discretionary power given to the CLB under section 402 to set right, remedy or put to an end to such oppression is very wide. The respondents have been involved in continuous acts of oppression against the petitioners and the present petitions deserve to be allowed in favour of the petitioners. Status quo ante is hereby restored setting aside the appointments of respondent Nos. 3 and 5 as directors. Petitioner no. 2 continues to be a director on the Board. All statements/statutory forms filed in this regard with the RoC are held to be invalid, all resolutions passed in Board meetings/AGM/EGM are hereby cancelled.
The company petition stand disposed of in the above terms. All company applications stand disposed off. All interim injunctions given stand vacated.
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