Company Law Board
Shri D. Ramkishore, Shri P. ... vs Vijayawada Share Brokers ... on 17 July, 2003
Equivalent citations: 2004 50 SCL 552 CLB
Bench: K Balu
ORDER K.K. Balu, Member
1. This is an application filed under Rule 44 of the Company Law Board Regulations 1991 against M/s Vijayawada Share Brokers Limited ("the Company") and others seeking directions against the Company to produce the following documents:-
(a) Books of accounts of 1st respondent company from the date of incorporation to 31st March 2003.
(b) Bank account statements from the date of incorporation to 31st March 2003.
(c) Minutes of Board meetings from the date of incorporation to 1998.
(d) Minutes of annual general meetings from the date of incorporation.
(e) Register of transfers.
2. Shri V.S. Raju, learned Counsel for the applicants has submitted that the application made in CA No. 10 of 2003 for impleadment of M/s Kakatiya Public School ("KPS") and M/s Fortune Shares and Investments (FS&I) as parties to the Company Petition was dismissed by this Bench on the ground that the reliefs claimed in the Company Petition can be granted, even in the absence of the proposed parties, provided the alleged acts of oppression and mismanagement are established by the applicants. According to the applicants, the second respondent has let out the properties of the Company without any Board resolution in favour of KPS for parking vehicles and for play ground purposes on a monthly rental of Rs. 20,000/-; that FS&I is in occupation of the registered office of the Company and that FS&I is operating activities by using the infrastructure facilities available with the Company. Shri Raju contended that these alleged acts of oppression and mismanagement can neither be proved nor reply by filed to the counter statement of the respondents, in the absence of the documents sought by the applicants. Shri Raju, therefore, prayed for suitable directions against the Company, as claimed in the application.
3. Shri T.K. Seshadri, learned Counsel for the respondents, while opposing the application has submitted that the Company cannot be directed to produce Bank accounts, Bank account statements, minutes of Board meeting, minutes of annual general meeting and register of transfers since inception of the Company. The applicants, being members are entitled to inspect minutes of annual general meetings and obtain copies of the same from the Registrar of Companies. Particulars of share transfers are also available in the records of office of the ROC. Shri Seshadri pointed out that the Company has already produced the minutes of Board meetings held from January 1998 to December 2002 and minutes of all annual general meetings before the CLB. The present application is with intent to protract the proceedings. According to Shri Seshadri, in a petition under Section 397/398, the petitioner must furnish the full particulars of the acts of oppression and management. If the petitioner cannot make out a case of oppression or mismanagement, the CLB cannot direct the Company to offer inspection of its books of accounts and other materials enabling the petitioner to collect the materials so as to substantiate his case. Shri Seshadri in support of his claim has referred to the decision in (1974) 40 CC 119 - Mohta Bros. (P) Ltd. v. Calcutta Landing and Shipping Co. Ltd. and, therefore, sought for dismissal of the application.
4. Shri Seshadri, further sought the indulgence of this Bench to clarify the interim order passed on 08.11.2002 to the effect that the respondents will have to maintain the status-quo in regard to the properties held by the Company, in view of the difficulties experienced by the Company in registering the land already obtained in a court auction through its members by way of Agreement of Sale-cum-Power of Attorney. In this connection he referred to paragraph 8 of the petition.
5. I have considered the submissions of learned Counsel for the applicants as well as respondents. It is on record that main alleged acts of oppression and mismanagement relate to the financial years 2000-2001, 2001-2002 & 2002-2003. The charges levelled in relation to KPS pertain to the period from 1998 to 2002 and the allegations pertaining to FS&I relate to the year 2001. It is also on record that the minutes of the Board meetings convened for the period from 29.01.1998 to 06.11.2002 and minutes of the annual general meetings for the period from 21.12.1996 to 26.9.2002 are forming part of the reply filed by the respondents. It is beyond doubt that the petitioners are statutorily entitled to take inspection of, inter-alia, minutes of the annual general meetings and register of transfers at the office of the ROC. When the burden is cast on the petitioner to substantiate the acts of oppression and mismanagement alleged in the Company Petition, they cannot seek the interference of this Bench for production of books of accounts, Bank statements etc. from the date of incorporation of the Company. For these reasons, the claim of the applicants is not justified. Accordingly the application is dismissed. However, the petitioners are at liberty to file rejoinder to the counter statement filed by the respondents, by 15.08.2003. The petition will be heard on a date to be notified later.
6. In so far as the clarification sought by Shri Seshadri, learned Counsel for the Company on the interim order dated 08.01.2002, the background against which the said order has been passed assumes significance. While moving the Company Petition on 08.11.2002, the petitioners contended that the respondents are taking steps to sell the immovable properties of the Company situated at Vijayawada for a price below the market rate and that the Company has already sold a part of the property and hurrying to sell the remaining extent. In these circumstances, this Bench ordered that the respondents will have to maintain the status quo in regard to the properties held by the Company, however, granting liberty to the respondents to seek sanction of this Bench before effecting sale of any portion of the property. Therefore, the tenor as well as spirit of the order dated 08.11.2002 is that the Company shall not alienate or sell any of its properties without prior permission of this Bench. Thus, there is no bar for the Company in registering any land in its favour, which, in my view, would be in the interests of the Company and its members including the petitioners and any such registration of the land is subject to the outcome of the Company Petition. This clarification is given in exercise of the inherent powers of this Bench.