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Manipal Sowbhagya Klidhi Ltd. vs. G.N. Rama Rao & Ors [(2006) 134 Comp. Cas 321(Kar)].

On application filed u/s 45QA(2) of the Reserve Bank of India Act, 1934 by the depositors of the appellant, a non-banking financial company, the Company Law Board ordered repayment of the deposits with a time schedule.

The appellant filed an appeal contending that since an application u/s 391 of the Companies Act, 1956 was pending before the Court, the Company Law Board ought not to have granted any relief.

The Court held that when the appellant had chosen to point out the pending application filed u/s 391 of the Act in the High Court, the Company Law Board ought not to have granted any relief and on the other hand it should have disposed of the application by ordering to await the disposal of the petition u/s 391. The direction for repayment during the pendency of a proceeding u/s 391 was neither warranted nor was it in the interest of the members in the light of a better status to an order u/s 391 of the Act. The order of the Company Law Board was liable to be set aside. However, liberty was reserved to the respondents to move the Board if ultimately the scheme was not approved by the High Court.

Sahara Fabrics P. Ltd. & Ors. vs. Smt. Kailash & Anr. [(2006) 134 Comp. Cas. 472 (Bom)].

In a suit filed by the Respondent Nos. 1 & 2, inter alia, for a declaration that they were the sole owners of 50 shares and 216 shares respectively in the first Petitioner company and the appointment of Defendants Nos. 3 and 4, as directors of the company as null and void, the question of jurisdiction of the Civil Court to entertain and try the suit was raised by the Petitioner and it was held in favour of Respondents. In a writ petition, the Petitioners’ contended that as the Company Law Board was conferred wide powers to grant reliefs under the Companies Act, 1956, the respondents ought to have approached the Board as impliedly the civil court’s jurisdiction was barred.

The Court held that section 155 of the Companies Act, merely provides a statutory remedy. Its object is not to whittle down or abrogate the procedure by way of suit for getting the relief contemplated by that section. Thus, the civil suit was maintainable in matters pertaining to rectification of register on transfer of shares. The shareholder agitating his common law right to seek rectification of register of members involving disputed question of fact and law, could to go the Civil Court directly.

Smt. Anupamarani Satpal Shwara vs. Anand Steel Works P. Ltd. [(2006) 134 Comp. Cas 285 (CLB)]

On a petition filed u/ss. 397, 398, 402 and 403 of the Companies Act, the petitioner alleging oppression and mismanagement in the affairs of the First Respondent company, sought for appointment of an administrator or special officer to take possession and charge of the assets and properties of the company and to appoint an independent firm of chartered accountants to investigate into the accounts and affairs of the company and to submit reports thereon.

The Court dismissing the petition held that the petitioner had although pleaded that there was just and equitable ground to pass a winding up order u/s 433(f) of the Act, the petitioner had failed to establish to that effect. The allegations of the petitioner that the company and the other respondents had violated the provisions of the companies Act by not filing annual returns and balance sheets for three years could not be considered as the Registrar of Companies had stated in his affidavit that the company had filed all the annual returns and balance sheet in 2002 and he was not contemplating prosecution against the company and its directors. Even assuming that the company had not filed the statutory return with the Registrar of Companies that could not be the ground for action u/s. 397/398 of the Act. There were certain demands made by the statutory authorities against the company and the company had challenged those demands before the competent authority and those facts could not be a ground for action u/s. 397/398 of the Act. The petitioner held majority shares in the company and she could call for an Extraordinary General Meeting of the company on requisition to remove and appoint the directors of the company. If the company failed to hold the Annual General Meeting in terms of section 166 of the Act, the petitioner could apply to the Company Law Board u/s 186 of the Act to hold the general meeting of the company. Though there were alternative remedies available, the petitioner had not availed of them, but had instead filed the petition u/s 397/398. Hence, the petition was not maintainable.

Electrex (India) Ltd. vs. Usha D. Rohira & Ors [(2007) 135 Comp. Cas. 157 (Bom)]

The appellant company received deposits from the respondents and utilized them towards its working capital requirements. It became sick and on a reference to the Board for Industrial and Financial Reconstruction, an operating agency was appointed to prepare a comprehensive report in the matter. In the meantime, an application was filed by the respondents u/s. 58A(9) of the Companies Act, 1956. The company Law Board ordered repayment of the amount in deposit together with upto date interest. The Court by an interim order granted liberty to the depositors to file complaints, a few depositors filed criminal cases and their payments were settled.

On an appeal the Court held, dismissing the appeal, that the repayment of the deposits was not barred by section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. This quick remedial measure was an urgent need as the depositors were fairly old and having invested their hard earnings was fairly entitled to repayment in terms of the deposits. The appellant having made payments to a few depositors was to settle similarly situated depositors.

State of U. P. & Anr. vs. Uptron Employees Union UMD. I. & Ors [(2007) 135 Comp. Cas 180 (SC)].

M/s. Uptron is a company incorporated under the Companies Act, 1956, and is a subsidiary of U.P. Electronics Corporation, a company wholly owned and controlled by the State of Uttar Pradesh. It was declared a sick industry under the Sick Industrial Companies (Special Provisions) Act, 1985. The company had proposed a onetime settlement whereby it offered to pay 100% of the principal amount and only 25% of the interest due. However, this proposal made no progress in the absence of a confirmation by the State Government M/s. Uptron made a fresh proposal to the Government. In these circumstances, the BIFR considered the matter and passed certain directions by its order dated 27-8-1997. The last direction made by the BIFR was in the nature of a direction to the Government to make arrangements for payment of salaries/wages of the workers till the proposed package of revival/rehabilitation of M/s Upton was finalized by the BIFR.

The last direction for payment of salaries/wages to the workers of M/s. Upton was challenged by the U.P. Electronics Corporation before the appellate authority under SICA that was dismissed. Thereafter, the State of UP filed a Writ Petition before the Delhi High Court that was dismissed.

On an appeal filed, the appellant held that none of the provisions of the SICA provides that while considering a scheme for revival, the Board for Industrial and Financial Reconstruction has authority to direct payment of wages to the workers of the sick industrial company. In respect of sick industrial company, even if it were a subsidiary of a Government company, there is a no legal obligation cast upon the State Government to pay the wages due to the workmen. The rights of the workmen are governed by the relevant provisions of the Companies Act where their claim has been awarded priority. Moreover, there is nothing in the SICA that authorizes the BIFR to pass an interim order directing the State Government in such circumstances to pay the wages due to the employees of the sick company. The economic viability on financial capacity of the employer is an important factor that cannot be ignored while fixing the wage structure, otherwise the unit itself may not be able to function and may have to close down which will inevitably have disastrous consequence for the employees themselves.

Ajit Jayantilal Sheth vs. Shriram Transport Finance Co. Ltd. [(2006) 72 SCL 559 (CLB)]

The petitioner lodged several share certificates along with share transfer forms with the company for recording the transfer thereof in his name. The company transferred certain shares and returned the remaining share certificates to the Third Respondent who is a member of the stock exchange, allegedly without any authority from the petitioner. The legality of the custody of shares with the Third Respondent was under legal dispute in a suit. Meanwhile, the petitioner moved the Company Law Board (CLB) seeking directions to the company to issue duplicate share certificates with respect to the share certificates in custody of the Third Respondent.

The CLB dismissed the petition and held that under section 113, the CLB has no power to give direction for issuance of duplicate share certificates. The provision for issue of duplicate share certificate has been prescribed under Rule 4(3) of the Companies (Issue of share certificates) Rules, 1960. Therefore, the relief of issue of duplicate share certificates falls outside the ambit of section 113 of the Act.

S.N. Jain vs. Registrar of Companies [(2006) 72 SCL 332 (Del)].

The Registrar of Companies filed a complaint u/s. 159/162 alleging that the petitioner, as a Managing Director of a company did not file the company’s return for some years within the prescribed time. The petitioner pointed out with substantive evidence by filing Form No. 32 that he was no longer the Managing Director of the company in the relevant period and, thus, was not responsible for the non-compliance of the statutory provisions. The trial court, however, dismissed his application for discharge.

On a revision petition, the Delhi High Court held that the complaint had to be seen as it had been made and in the same manner in which it had been made. According to the complaint, it was clear that the petitioner had been arrayed as an accused on the ground that he was the MD of the company and not as a non executive director of the company as was sought to be contended by the respondent thereafter. Therefore, when the complaint had made the petitioner an accused in his capacity as the MD of the company he could not turn around and attempt to have the accused presented in a different capacity. Therefore, the impugned order was set aside and the Petitioner was discharged in all the seven cases referred to in the impugned order.

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