Allowed

Shailendra Garg v. Sharad Bansal

Rajasthan HC7 Jun 2019COA/10/2013

Case brief

AI extract

What is this about?

This High Court bench allowed an appeal against a Company Law Board order that ousted a majority shareholder under Section 402. The court held that Section 402 cannot be used to benefit minority shareholders or oust a majority shareholder found to have contributed significantly to the company. The CLB order was quashed, share allotments were declared void, and the company's majority shareholder wa

What did the court decide?

CLB order under Section 402 quashed; withdrawal direction to appellant set aside; share increase and allotment to respondent director declared null and void.

Shailendra Garg Vs Sharad Bansal — Company and Corporate | Rajasthan HC (2019)

¶1

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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S.B. Company Appeal No. 612013

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snaraa itsansal S/o Shri S.k. Bansal, R/o House No. 7 Jha 34, i lawaha5 Nagar, Iaipur.

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: I I ----Appellant 1 I Versus I

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1. dl/s Naman Diagnostic And Research Centre Private Ltd. Having Its Registered Office At F-47, Malviya Industrial i'

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I Atear i 3aipur-30i0dqJ\ ,.& ---~* ,. e H,Ph;&,

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@!'" bk,pi."- ""*K y

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2. ghri Sahi.l,ktnder Garg S/o Late Shr~ B.&%arg, R/o 8-98! k* llh)Uii- I.. *I?.-*

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dyan %. Mgrg, v Tilak Marg, Jaipur-302004. t.,f --. .=+,* &f i' ''

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Sh'r; ~ Sukhdev Singh, R/o House No. 15, 3 M.'d,kani Saheb ?%

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3. ,,u S$ogh Wala, Sriganganagar Rajasthan. ,."\

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S/o Shri Prithvi Singh (gar, Tonk Road, " - .- -.. 4, ! 5. Smt. Manju Garg, R/o B-98, 6. ----Respondents I ;-i "1 "" .PO ;on-n@ctEdkWbh I ,.g$: 1"""" '" *&n$tM _&+tl_* $13 i i>* I s . B. Cop~~~nybpp, ,., a; d~-::.! eal2No: WW~Y. :"k 10/2013 4 qqE:.Fdq;f%gg%%3 Shailend qe r Garg ~ $$ae~~~&&$~~~~ Pratap S / p Nursery, Lal Kothi, 14ipur. b :$,."I --".-.--.-.,--R&Bksizxga# , & -&-&-"o 3;Lzx .%.. I ----Appellant F -.. r + q$ze$ cqja I C %,

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~ Sharad :j B ansal S/o Sh. S.k. Bansal, R/o House No.3, Chetak c Marg J.l.!n. Marg Jaipur Rajasthan. I

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For pd~~ant(s) : Mr.Kamlakar Sharma, Sr.Adv assisted by Mr.Rishabh Khandelwal For Respondent(s) : Mr.'Siddharth Bapna, with Ms.Mahi I Yadav; Mr.V.L.Mathur and Mr.Anuroop Singhi i

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HON'BLE MR.JUSTICE SANJEEV PRAKASH SHARMA

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Judarnent 1 Order

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JUDGMENT RESERVED ON : 1 I JUDGMENT PRONOUNCED ON :

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I i!

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/I I

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Both these appeals are directed against the judgment and order deted 2.4.2013 passed by the Company Law Board I 11 (heteinafter referred to as "the CLB") on an application moved I < before it under f04zaan(? ,403 of the Companies Act, I 1 195;6 (h, filed by the : e *-. . 8- , %+/% appkllant Soarad Bansal (appellant in appeal nb5+:p/13) praying , a.3 relief against the operation of the Fights of the hare ho)bet-s of the company and mismanagement of the affairs of the company don I @nt no.2 Shailendra Garg (qppellatjit in Appe n to the company I M/s:Naman Diagnostic r_e Pvt Ltd. (hereinafter referred ,to as 'NDR egistered office at F-47, I plalqiya Bndustrial Area, n Marg, JLN Marg, Near I Gangwal,jPark, Jaipur.

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. /I 2. Brief facts whic perusal of record are I that the NDRC is a on I h -9r^{pany incorporated} xw$"i*;$ r2f;fq 20.11.20'01 with appehant-Sharad -Ban'Sal, and respondent no.5- 11 11; ~mt.~anbu Garg (respondent no.5 in appeal no. 6/2013) as its I promoters,, Directors and share holders. The share holding of the f ? a,ppellant and the respondent 170.5 at the time of incorporation of I the company was 7000 shares and 3000 shares respectively. The I main otijects as per memorandum of association of the responddnt no.1 company was for running a medical hospital, I medical diagnostic research centre and to carry on the business

¶23

activitie~ (hereto. Thus respondent no.5 held 30% equity shares I' I : equivalent to 3000 equity shares in the company while the I appellani was holding 70% equity shares equivalent to 7000 / equity shares. The respondent no.2 is the son of respondent n0.5 I I while the appellant Sharad Bansal and respondent no.6 are I brothers/ and related to respondent no.5 who is their fathers sister. I

¶24

1 by the appellant Shailendra to have - ,,., no.2 in the year 2007 frsudulently 28.3.2009, share existing capital of d that there was no s it had not started available with NDRC I Y'9 wad a pipke of land situate#& J~;.~A%u; hetan Marg, near 1K i Loan ~o$~ital, 4. I It &s further a that he was wrongly I Shown io have attended. the ?,o&aI&d .* Board meeting on $ \ +# $.L a : ., (3-"qqyd --%l-d 25.4.2049'. On that dattcwas resolved that the next meeting of theBBoare'of Directors of the company would be held on 29.5.2009 I i as since there was no notice of the meeting of 25.4.2009, th'ere I was no duestion of appellant having the knowledge of the meeting I of ~oard Idf Directors fixed for 29.5.2009. It was further submitted that the'alleged meeting of Board of Director held on 1.5.2009 was alsoinot in his notice wherein 40% equity shares were allotted to respondent no.2 who was appointed as Chairman of NDRC. It

¶25

is submitted that such action was clearly in contravention of ' 1 tinandatelof law and Art. 16 and 17 of the Articles of Association of the comany, and was an act of oppression. I 5. Th' respondent no.2 had also put in appearance before the El I CLB and; submitted its stand and respondent no.5 also filed its I replk , independently ,i . before this court. I I 6. i Feeling aggrieved by the order dated 2.4.2013, as noted I RP<:-% * k 7q above, &e present-dppealbhas been ffled. by appellant Sharad " ",d'".$ 2 8-* I I 4L Ib Bansal wtiile regpondent no.2 Shailendra ~a& l@sas preferred an ! $=$ $;. appeal ~/o$~072013 wherein he has challenged the ffndibgs arrived fid %. at in the Impugned order relating to 7000 equity shares and I! . finding relating I

¶26

In the appeal pref$~d% by gpgg/Jg$t Sharad Bansal, the I 4 r 4T4 4-TI responddnt n0.5 ManjuFarg has filed a reply with affidavit stating I that she has never been agreed to what has been done by her son I /I iesiondent 110.2 and has supported the appellant Sharad Bansal. I It has been specifically mentioned therein that there is no I jl acrimony at all between the appellant Sharad Bansal and I 'I iespondent no.5 Manju Garg. The respondent no.6 Vishal Bansal I supportsithe contention raised by appellant Sharad Bansal.

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~h4 learned Senior counsel appearing for appellant Sharad I Bansal has assailed the order passed by CLB and submits that the I ! CLB has no jurisdiction under Sec.402 of the Companies Act to I direkt tde! appellant to exit from the company. Once the CLB i i reached io the conclusion that the action of respondent no.2 was I oppressiye and all his actions were fou'nd to be unjustified and I that resqo.ndent no.2 is only a stranger in the company, having norr su -1 the appellant who is a . - to exit fro& ttiE company, the and illegal. It is submitted t!h.d&%hile ",,, "..' CLB action of respondent no.2 as o"p;ressive, I still while 'passing under Sec.402 of I the '~ct, ;he appel favour of person who is asdefaulter. pellant has relied on 2010 (6)'s~~ 1 71 1 Ltd and ors. Vs. AP I Aksh Broadban Ltd that unless'the condu.ct I"v of hajor'ity share oppressive, the order , I could not have been y.of the Act. Counsel for I the appellant has su bmissions that shares could no1 have been p be sold.;to respondent no2 and I q =4;3 thad too by an order holding his consideration of share to be t hs.2.0 lacs. It is submitted that as respondent no.2 was not a ! I!! l ' shaie ho i der or creditor of the company as per own findings of the i CLB: the shares of appellant could not have been transferred in his name ndr'direction to sell shares to respondent no.2 could have I I been passed, hence order is wholly erroneous and beyond jurisdiction.

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1 I ;,0. I Counsel further submits that respondent no.2 who has been I I 1 i fouqd bJ ~LB to have committed fraud could not be allowed to .I 1 I take advantage thereof. ' 1 I It is submitted that an FIR was registered i i by the aippellant and the respondent no.2 was arrested and still I' the CLB has directed the appellant to sell its shares to respondent I ' no.2 whibh amounts to a fraud. Counsel has relied on 2005 (1) ; SCC 212 , ,Dale , & Carrington Invt. (P) Ltd. Vs. P.K.Prathapan would amount to holder nor

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possessi&i of the n 01 the e land to authorized 1 I, re'pceskn'lative of was perverse. The , I I appellant's counsel s gs were arrived at by I CLB withlout recording roperty was owned by i I / the company and the ing 70% share capital of the company and, th be said to be an illegal / I I pdssessi6n on the land llant was thus holding i I the possession as 70 e property in question I and his !possession was neve~~*_objectedato from 2002 to 2012 I I I' 111 GVtET waxq including, by respondent no.2 or respondent no.5. It is submitted that theifindings of CLB that the appellant was residing in the I /I1 pre(nises,!are also perverse as no evidence was recorded in this ! regard. the appellant has stated that he is having his own resiaence situated at 7-Jh-34 at Jawahar Nagar, Jaip-ur and his I ., I1 I f&si'dent&l address has been shown as 7-Jh-34. It is further I submitted that the license to store medical items is only for the shop ' available with the appellant. The appellant has further

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(7 of 21)

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[COA-6/2013]

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assailed ,the findings of CLB with regard to the contribution in the I loari/land. It is submitted that the land was actually vested in the I varqe of, I ' company by contribution of 70% approximately of the I I ' i appellant' and his family members, and 30% of respondent no.5 I and, her Husband late Bhim Sen Garg. I+ I; 1 !I\ 12., It has been mentioned in the written submissions that late I Shri him Sen Garg, was the younger brother of the mother of the I iI + s, -T -FT F .+ appellant [and were,cose;ykntted.w~~teach other. By virtue of \n I I ?b"gs ' 4 ;J F..',. the reratiqnslb$$ the mother of the( ,aTpellant, had 33 " #I' * allowed/$%m~tted 1 L % late Sh. Bhim Sen Garg to undertake I P 1 C I agrilcul&activities upon the one Murabba land (appr6ximately

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out'of thb same, use tg reaain ip tjle exelusive possession of late I ir ~ q3- xw ~Ari ~hih Sen Garg. %End in issue, herein owned by the I resionddnt no.1 Company was purchased in the name of the I corripan;i' on dated 18.12.2001 and April 2002, the total I consideration, paid to the seller for acquiring the land was i Rs.1,05,00000/- out of which an amount of Rs.70.0 lacs approx I I I was: acfpally paid by late Shri Bhim Sen Garg from that 1 accumulated money lying with him belonging to the mother of the appellant herein for the purchase of the land, including the

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kistr~ 'I / and other miscellaneous charges, which has been i I inditated in the note sheet. The remaining 49 lacs was paid by bate; Shril Bhim Sen Garg via respondent no.5 i.e. the wife of late I / / i I1 ghri; BhiG Sen Garg.A total of one crore forty five lacs (Approx.) I I was: speqt for acquiring the land and sssets, so that the business 1 I I ,) j of the company can be started in the year 2001-2003. However, I 'I 1 due to CU reasons, the land use of the land in issue could not be 4. p -p+l 1:- j' ,$,#-.* ihahged ldecause ofWh:rch-$he busness~cf fte company, could not 1 4, ib"i - 4 &f ---, , ..% P" - i + g piogress! b5 ,-c ' .%&. < -j sf* ,:, "

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13. It is$;l.el"jeant to state that at that time, the appellant had ii additte%contributed I Rs.9.0 lacs 30.0 thousand for purchasing I the property, which is alance sheet for the 1 I yea; 20b2, as th was affected on I I 18.12.20,Ol to Apr om 2001 to 2009 an amount Of Rs.26.0 the 9.30 lacs, was I contributed by the appel ily members. Thus, I A total of 96 lacs ( ppellant from 2001 I of the company. Only Rs.49.0 kcs 60.0 by the respondent I no.5 mother at the tirqee&f,p,u~cbAasg _of"Jhe land, where after no i I "r, qc4wq q+&$$"j x -* ~onkribut'ion was made from their own account in the company. i I I

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The respondent n0.5 in her reply has also admitted that the ellan( an( has a major contribution to the land and endorsed the I I I submissi'ons of the appellant and finding contrary thereto of CLB, I therefore!,'liable to be set aside.

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In ]written submissions filed by Shailendra Garg, he has admitted 'that the appellant Sharad Bansal had contributed i personally a sum of Rs.9.30 lacs as an unsecured loan in the

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(9 of 21)

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[COA-6/2013]

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Oompan? at the time of acquisition of the land in the year 2002 as ,I ! : I i 11 I per balance-sheet and thus the finding of CLB on the land having been purchased from the assets of respondent no.5 or her late 1 /I $usband:i was contrary to the provisions and clearly unjustified. 'I 16. It qas further been stated by counsel for the appellant that had given his consent for the land of the company to with ICICI Bank as co-lateral security for because loan, does not'in any%manner show that the property of the co'mpany belong I* 2 q'L% i *+. 1 -st to respo,ndent no.2. It is the case of the appellant that the property, of the com I acquired and the total I. . investmqnt in the contribution of the I appbllan!. The loan f he respondent no.2 on 31.10.20!06 1 when n the appellant and I the respondent no.2. im Sen Garg, father of I I respond$dt la no.2 -applicant in the loan I facility aiailed. E as Garment Craft I co-applica n the loan facility. . I bwever) 'the respondentdo-2 whg+~~&cousin brother of the / 3 q%qpd c;+L'. appellan, stopped the installments of the loan and the appellant :I1 j has deposted the dues of ICICI Bank in order to protect the I property" bf the company. The certificate issued by ICICI Bank 1 dated 17.11.2017 was referred to showing the appellant having depositeh i! Rs. 84,76,162/upto 17.11.2017 whereafter it is submittefl that in all sum of Rs.1.50 crores has already been depositeh with ICICI Bank by the appellant and the appellant I continues to pay loan installments which were availed by

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(10 of 21)

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[COA-6/2013]

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resiondirjt no.2. The FIR where allegations were leveled by the i '11 appellani as against respondent no.2 regarding committing of I I forgery of signatures and photographs of appellant, charge-sheet I I. has'been flled under Secs.420, 467, 468, 471 and 1208 IPC and I respondent no.2 remained in judicial custody for more than a year. I

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the respondent Shailendra Garg, in appeal no. in appeal no. 10/2013, while assailing the findings as noted judiciously the companies under its direction dated r h the CLB has further made a-n error in

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(11 I I/ I shows that respondent Sharaa~ BansaGq3 using the premises of I I +A 4ta* the 'comdany wrongfully. It is further submitted that the provisions I undbr ~Gcs.397, 398 could only be invoked only when the affairs 11 1% of the d,ompany are being conducted in the manner which is I prejudicial to the interest of the share holders and public. In the i present ,case, indisputably the company never commenced its operation and, therefore, there is no question of business being I I cdnducte,d. It is submitted that the business could not be started I ak {he lidd use of the property situated at 3-Chetak Marg, ILN

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8rk, 3bipur ,. could not be converted from residential to ij 1 commeraial and, therefore, the company is a dormant and nonfunctional and hence application under Sec.397 and 398 of the Act ) i 1: I wodld not apply. Accordingly, respondent was disqualified and 4 I. appiication , B was ought to be rejected by CLB. It is further j submitte'd that as Sh.Sharad Bansal had already sold his entire 1 I sharehol$i,ngs to the appellant Shailendra Garg, he was $43f.o rsdc+t~~.$%der Sec.397 and 398 - c dP"k not holding shares $f $Be respondentt..,>B " ..%. a e not entitled. ..,. A -- E ' #+".

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he appeal no. 612013 where Shailendfa '~arg is

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da$d oi ,oath that 70% of contribution in the company was from I +~~?@~~q qEm I '. him and, hls brother and thus there was no occasion for ousting the appe\lant Sharad Bansal. 1 It is also pointed out that Rs.lO.0 lac I i has! contributed by his brother Sharad Bansal as is reflected from I the 'balaAce-sheet for the year 2002. Thereafter, from 2001-2009, I 1 I an amoupt of Rs.26.0 lacs was contributed including 9.30 lacs by I ' I the appeilant Sharad Bansal. Thus a total sum of Rs.96.0 lac was I ihvested by him and his family members towards the entire land

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andiprojects. Copy of the balance-sheet is enclosed with the file as ! Ann,ex.2.

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written submissions filed by respondent no.5, intei-estihgly it has been mentioned on oath by mother of ! I respondedt no.2 that she being wife of late Bhim Sen Garg and I1 I m:a$ernal Bunt "Mami" of the appellant Sharad Bansal was a 30% I share holder and a Promoter Direcot of the company. Para n0s.4 & il.1 Bfq-?,

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J, y$ I .a. f-,, that the respondentkno72, had held board meetings, in wh.kb,>-The no.5, was shown to be fraudulently, <fl present, which the respondent n0.5, was never

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no.5 and had fi1edkbh;'e; I I corpct fact. 11, *&

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which rightly been company law board. The respondent

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no.2, had manipulated the unsecured loan of the I

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respondent no.5 to increase the authorized capital of the/ company. Because of the illegal enhancement in the authorized capital of the company and allotment of fFOOOO shares in favour of respondent no.2, the share of the respondent no.5 has been illegally redbced by the respondent no.2, due to his mahipulation to 6% from 30% shareholding."

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(13 of 21)

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[COA-6/2013]

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1 Shd /has further specifically stated that there is no dispute I exists b&ween t her and the appellant and respondent no.2 has I Ii il'leg'ally ,anipulated the share holding and Director-ship of the ! i 'E I I I companq and she is an unsecured creditor. It is stated that she i has, already filed a suit for partition and rendition of accounts I I ' I I galnst respondent no.2 in the court of Distt. Judge, laipur city in I the year12011 which is subjudiced. The company petition has also I/ I I 4 b. FkJ w 3.83 .. been filed by her agalfp-han Bul.dw$ilp$. Ltd and respondent 1 3" ."- &PTs no.2, which i~~also still pending. In a case penping before DRT, i I d$ k, " -i Zi F.. ' A were initiated and the exparte. .judgment DRTA. As respondent no.2 afterWreceipt of I I Fp9 the notice on behalf of all 9% : >..- .efendants, did not appear nor - ?- P-X'OI I ihfolmedl tesponden&%$$ elationship between

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1 22. Shirad Bansal vit that Punjab National Bank ha! h~ed OA in ananjay Textile in which -. i he was impleaded as I

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represen

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pasked on 14.3.2014 aftgar-,the ~o,tceggere served on Sharad i dankal by 'the recovery gf2r.^w43d I*

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I have considered the submissions, perused the record, and gone through the documents filed before the CLB. It is noticed I I I I that the \respondent no.2 also had put in appearance before the t I CLB. ~ftel? considering the facts as have come on record, the CLB held as under:-

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I there was no written notice for holding a meeting, the petitionel cannot be said to be absent in three consecutive board 1

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heetingpd the removal of the appellant as Director in NDRC is I bad in law.; ! (b) the respondents have miserably failed to prove that the I / appellant had transferred his entire share holdings of 7000 equity shayes iA favour of respondent no.2 in the year 2007 and further I I I! 1 held tha ! 'the appellant continues to hold 7000 equity shares of ' I' Rs.101- dach in NDRC;

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passed by NDRC I I of NDRC to f. / allotting 40,000 equlty shares to 78 -3 qL$ ;esdond nt no.2 were, per se oppressive to the appella"ii't Sharad 'ii !I I Bansal;

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(d) ' CLB he1 of 70,000 equity . shares ak khe fime mpany and in lieu of I I 7000 eqliity shares of to the appellant, there I has bee; no contri t either monetarily or in I hb/lagement of t no.5 had solely i con'tribufed a sum of f land i.e. only I

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shown li~ i (e) ' ~LB has gixe,nr,fjandin,g, &ba-fa ;the appellant permitted 1 G vq*! w!+4 respondent no.2 and respondent no.5 to keep the land as ,,I ' //I . moitgaged with ICICI Bank for the loan taken by respondent no.2; I (f) CLB has given finding that the appellant has a private medical storelshop adjacent to the land of NDRC and he is I ' uAauthoiiisedly using the constructed portion situated on the land :y 9

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belonging to NDRC; (g) the respondent no.2 has dishonestly paid amount of / 7000 eqdity shares in the account of appellant.

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23.1 Thus. it is apparent that conduct of respondent no.2I I Shailender Garg has not been found to be above board by the also found that the appellant has not transferred his sha~ehol$ings in favour of respondent no.2 and the action of increasing the capital of NDRC was oppressive. Thus, the appellant!-lharad Bansal has majority shareholding in his favour. I 24.' In / Tncable Net (Andhra) Ltd and ors. Vs. AP Aksh t I phj R=i g&-* Broadban Ltd and-boss:~fisupra9,-.the .Ape,x Court has held as pi"i r 3$ P ij s : "ndgr:/ , $3

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"ndgr:I , I ,." I i s

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1. ~h%&cision in V.S. Krishnan's case (supra)' is more ' &.,. .a$ d !\a * .%-

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apposl& to the facts of the case. Quoting Halsbury, thisScourt o'bservkd that the sion" within the meaning of the I1 Sections 39 panies Act had I

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I b'een i!nterpreted t of the majority shareholders towa ers was harsh, b'urdedsome and wr uct was mala fide

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I!, I . ,I 1 a'nd was for a colla ould result in an I

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aldvant'age I for some bthers, although, the ultimaie object might the Company. I I

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oeve;, the not establish I

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shch conduct on the No.5. Until the condudt of t as found to be i

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oppressive in terms under Sections 3'97 a d 398 o the Company Law I 4;

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Board 'was its jurisdiction under Section 402 of the said Act to set right, or put an end to such dbpression. I 11,

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' 50. On an overall analysis of the facts involved and the part i

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played by the Petitioner No.2 in the affairs of the Company at I

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the relevant time, we are not inclined to interfere with the I

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drderslof the High Court or the Company Law Board, since we are noi satisfied that any act of oppression or mismanagement within the meaning of Sections 397, 398, 402 and 403 of the companies Act, 1956, has been made out by the Petitioners dgainsk the majority shareholders of the Respondent No.1 I

¶86

Company which would justify the making of a winding up order

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on tne'ground that it would be just and equitable to do so and I to appropriate orders to bring to an end the matters 'I I :' cpmplaibed of. f 1 $1 !

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! 25.: In ale & Carrington Invt. (P) Ltd. Vs. P.K.Prathapan : i ,/i and ors: (supra), the Apex Court has held as under:'! I

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' 29.1h the present case we are concerned with the propriety of issue of additional share capital by the Managing Director in his i ! own:/ favour. The facts of the case, do not pose any difficulty

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-_ A

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issue of further

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favocr of Ramanujam was bonafide nor it was in the interest of re was followed to e allotment was ol of the company.

¶93

ment of shares to

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t the allotment of

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himself was an act of Board drew this

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r had been made to e of further share

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ding of oppression.

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~owbver, it placed er base by taking into

¶99

: cons/deration 11. variot.ls{he "",Lp $: "c E" pr;~ . ,%!3e~~' y. rg I h Court's finding is base'd' on a much stronger footing. In fact, the High Court has gone 'on to conclude that Ramanujam has played a fraud on i

¶100

the ,minority shareholders by manipulating the allotment of ihar h 5 in his favour. We find no reason to differ with the finding I.

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of th,e: High Court.

¶102

I I' 26. In :he present case, based on the aforesaid findings, CLB I passed ah order under Sec.402 of the Act of 1956 to preserve the I assets of the company and directed the appellant to exit from

¶103

NDRC oh receiving the adequate consideration for his shares. Taking iito consideration the above factors and the time elapsed I,, I I: I / I 11 I since ~ncorporation of the company in 2001 the rise in price index I I and baldncing the period of constructed portion on the land of NDRC b j !, the appellant at no costs, I it directed to the appellant to I , exit' froy the NDRB on receiving a consideration of Rs.2.O lacs I from thq respondent no.2 as full and final consideration for the $due of hls 7000 shares it / /I . r)$JpJ of RS.O'-.%$$ Further c7 8. it directed to I I $"1. . . 5s .y $ ,. ?.adjust the I amount b, ST " of Rs.70,000/already -,deposited by the &i 1 .t %" res[ionderi"~n.o. dishonestly. Thereafter the appellarit-.was directed ." I i. ; * to submTa duly executed transfer deed for his 7000 equijy'shares

¶104

e would ceased to on of the constructed be handed over to s to deposit a sum 8s -Iz zha%ges of rent from 1.1.2002 !/ r month from the date n. The appellant was or any constructed portion thereon of N o any third party. The resolution I "&q **r enhancinIg the authorized capital of NDRC to Rs.5.0 lacs or the I I :

¶105

issu;ancei of 40,000 equity shares to respondent no.2 were kept I inta'ct andiupheld.

¶106

¶107

Such order passed by the CLB, therefore, goes contrary to I I. the aforesaid observations of the Apex Court. 48. Se \Ion 402 of the Companies Act, 1956 provides as under:- 4 ' 4021. Powers of Company Law Board on application under section 397 .or 398. Without prejudice to the qeneralitv of

¶108

' the'lpowers of the [Company Law Board] under section 397 or 398, any order under either section may provide for-

¶109

I (a) tHelregulation of the conduct of the company' s affairs in future; (b) tde purchase of the shares or interests of any members of the I I I company by other members thereof or by the company; (c) in/ the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; I (d) the,termination, setting aside or modification of any agreement, I howsoever arrived at, between the company on the one hand, and any o# the following persons, on the other, namely:I (i) the managing director,

¶110

rred to in clause (d), ,b,e terminated, set aside or party concerned and I1 be modified except

¶111

(f) the setting aside goods, payment, execution or other a e or done by or hs before the date of the , if made or done d in his insolvency to be a

¶112

I 29. From perusal of bove ait--is-appa?ent that the Court may qt~y+%s$q 6 G! q-!j I I provide tor purchase of shares or interest of any member of the I compan$ by other members but such power under Section 402(c) cannot d e exercised to benefit a member of the Company who ' I' does nog 'have the majority shareholding and by using powers f under Section 402, the majority shareholder cannot be ousted from the Company otherwise, the very purpose of the powers of Company to be held by a majority shareholder would become I

¶113

[COA-6/2013]

¶114

(19 of 21)

¶115

qedtindarit;. No reason has been assigned for directing for transfer I of share5 to the respondent no.2 by the CLB. The CLB does not I I eveil ta e into consideration the previous conduct of the iri responddrit no.2 in wrongfully transferring shares in his name. The" 1 affidavit ]of respondent n0.5 is required to be noted. She has ! I nowhere1 stated that she has stringent relations with the appellant. ,I I Qn the &her hand, allegations have been levelled by the mother I " ,. r * ,P- j j -r .$f-:*'- I against ker son of w,tongfblly'depnv..ngh$rof her status in tKe-8. 31 <%LC, " " w f ", , ,. v Tif Cornpant. Te&ir iew of this Court, the exerclse +J power by the I 9" '-d CLB ~nd8ection 402 of the Companies Act is cle~.rlf.illegal and ~ji5 arbitrary and the directions issued could not have been passed in I favour of Shailender

¶116

The direction f apital goes contrary I I to its' owri finding's a order passed by the i CLB' is p&rverse.

¶117

hd contentio t-Sharad Bansal of i 'I having used t the pr his own benefit is I not made out. Mr. S ocuments regarding balance-iheets I wh I has been included as a Director. However,.Qs~~y+rtfi.@~~~ all the balance-sheets C$ *q: Sa;;; 3-3 "i::j y-1 of the year 2007-08 onwards have been submitted alongwith a ! I judicial stamp paper which has been purchased on 05/11/2011. Thus, this Court finds that the balance-sheets have been prepared 1 I in 2011 !of earlier years. The appellant-Shailender Garg has also not been' able to prove that the meetings were conducted where Sharad ~ansal did not attend. No notice of the meetings has been i placed I oh record. The other Directors namely; Smt. Manju Garg I i (respnodent no.5) and Mr. Vishal Bansal (respondent no.6) have

¶118

also not' concurred with the submissions of Mr. Shailender Garg i I tiegardin4 {holding of meetings. It is also noticed that the property I L I of the c$mpany was mortgaged with the Bank with regard to the 1 11 i lloan adyanced to Mr. Shailender Garg for his own Company I 3 namely; jarment Crafts and Mr. Sharad Bansal has been paying installments relating to the amount released in favour of Garg. In view thereof, the contentions of the I jL.r f **_.r-,** appellant-Mr. hailed~~~~~a'~~. -L ate .found to ,be.without basis. I ~'k. " -- .. /I* 32. In iriew ?$&the above findings, the orde&d&@ 02/04/2013 1 .I;%$% . LP **.e"ak_** a, pasied iy?he CLB is quashed and set aside so far dsit relates to &%tf the powers exercised under Section 402 of the Companies Act and r in view df'the findings i B which are confirmed i by this Court, the nder Garg bearing cornpan# Appeal appeal filed by the I I appkllani-~harad Appeal No.612013 is I allowed. he property si no.3, Chetan Marg, JLN I i MBrg, jar Gan aipur shall remain I under the holding oft the appellant-Sharad 1 Bansal i'n Company I1 continue with the majority i shareholder yjtktlre respz-tflt n0.5 and the other I I t4&rqq .-: ~irectori as existing in 2007 to remain on the Board of Directors. The appellant-Shailender Garg shall haven no say or concerned kith the! NDRC and the share capital of NDRC will continue to iemain a!s one lac and the increase of the capital by Mr. Shailender Garg frd'm Rs.One Lac to Rs.Five Lac and allotment of 40000 ! Shares shall remain null, void, ab-initio. The Company shall now be entitlbd to file revised balance-sheets after proper auditing I I fro& the concerned Chartered Accountant and the Board of

¶119

(21 of 21)

¶120

[COA-6/2013]

¶121

~irectori shall take all steps for starting operations of the I I 11 ' Company. : il

¶122

ccdrdinl~, S.B.Company Appeal No.612013 is allowed and i S.B.Com,pany Appeal No.10/2013 is rejected.

¶123

, .

¶124

(SANJEEV PWKASH SHARMA),J

Shailendra Garg v. Sharad Bansal

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Shailendra Garg v. Sharad Bansal

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