Removal of directors by forged sign on resignation letters is oppression

By | November 1, 2015

Facts of the case :

Petitioner and R2 being real brothers were only shareholders in R1 family company . Petitioner alleged that R2 had forged his signatures on petitioner’s alleged resignation letter from directorship and also on alleged Board Resolution allowing appointment of wife of R2 (R3) as new director of company . Further, he alleged that R2 committed fraud and forged his signatures to change signatories of bank accounts and increased share capital .

Whether petitioner being a promoter and continuing as shareholder of company and keeping his guarantee with bank, it was not possible that he resigned from company as director

Held, yes

Whether as there was no record on R3’s appointment for two years and Form 32 was not filled, appointment of R3 as new director of company was to be held invalid

Held, yes

Whether further, increase in capital was to be declared invalid as there was a strained relationship between parties; and it did not seem that petitioner would have agreed to allow a change in shareholding pattern prejudicial to his interest

 Held, yes

Whether R3’s appointment as director was to be rejected and petitioner would continue as director and two real brothers would continue working as before

Held, yes

COMPANY LAW BOARD, NEW DELHI BENCH

Narottam Singh

v.

Notam India (P.) Ltd.

B.S.V. PRAKASH KUMAR, JUDICIAL MEMBER

C. P. NO. 74 (ND) OF 2009

JUNE  22, 2015

U.P. Mathur, Adv. for the Petitioner. Rajath Bhalla, Adv. for the Respondent.

ORDER

1. The petitioner, eider brother of R2, filed this CP u/s 397, 398 read with 402 of the Companies Act, 1956 against a Company called M/s Notam India Private Limited (R1 Company) and against R2 and his wife (R3), alleging that R2 & R3 conducting the affairs of the company prejudicial to the interest of the petitioner, therefore, sought reliefs as follows:

(a) To declare the letter of resignation dated 14.03.2007 fabricated by R2 as invalid;
(b) To declare appointment of R3 as director on 19.02.2007 and Form 32 dated 21.3.2009 as invalid;
(c) to direct R2 & R3 to close the new Current Accounts of R1 company with the Branches of Bank of Baroda, situated at Rajendra Nagar, Sec-5, Ghaziabad and at karkardooma, New Delhi by crediting the balance in those accounts to the current account No. 979 of Rl company maintained in Punjab & Sindh Bank, Link Road, Sahibabad, Ghaziabad;
(d) To allow the petitioner and R2 to jointly operate the Current Account No. 979 and FDRs with Punjab & Sindh Bank;
(e) To execute sale deeds for sate of shops/flats at company’s behalf jointly by the petitioner and respondents;
(f) To declare alleged the increase of authorized capital from Rs. 5 lackh to Rs. 10 lakh and Form 5 as null and void;
(g) To direct RoC, Delhi to file prosecution u/s 628 of the Companies Act 1956 against R2 & 3 for making false statements and for filing forged documents with RoC Delhi.

The case of the petitioner:

2. The petitioner is an Electrical Engineer, had worked in Gulf countries during 1987 to 1995; after having returned to India from Gulf in the year 1995 with lots of savings under NRI Account, he worked with Flour Daniel, world’s No. l construction/Engg consulting company until February, 1996. He purchased a commercial office space in December 1995 at 70A-215, Chawla Complex, Shakarpur, Vikas Marg, Delhi, and established a sole proprietary concern on 18.03.1996 in the name and style of “NOTAM” to carry on electrical contract works. While this proprietary concern was making good business, the petitioner initially accommodated his brother (R2) in his sole proprietary concern ‘NOTAM’. He looked after the needs of his brother and even spent huge money on his marriage in Nov. 1999. As they were going together well, these brothers incorporated R1 Company on 4th September, 1997 with the petitioner and R2 as shareholders and promoter directors having its Registered Office at Vikas Marg, Delhi, in the property owned by the petitioner, R1 opened a current account with Punjab & Sind Bank, situated at Link Road, Sahibabad with cheque signing authority to both the directors to operate on “either or survivor” basis. After 2002-03, day-to-day activities of the company were carried on from its corporate office situated at Flat No. 1303, Nanda Apartments, Kaushambhi, Ghaziabad, U.P. This property was purchased by the petitioner in the year 1998 by including his brother name as power of attorney holder along with him. The business of NOTAM was far higher than R1 Company business before transferring its business into R1 Company. The petitioner, at the cost of his personal business, transferred the assets of NOTAM worth of Rs. 1,81,405.23/- to R1 Company on 31.03.2002. To carry real estate business, R1 purchased two plots of land – Land No. 3/82, Sector 5, Rajendra Nagar, Ghaziabad for Rs. 18, 20,000/- in November, 2003 and land No. 9/5, Sector 3, Rajendra Nagar, Ghaziabad for Rs. 32 lakh in February, 2006 for developing and constructing flats/shops for sale. To start with, RI company took a loan of Rs. 25,73,000/- from [CIC1 Bank by pledging the petitioner flat KA 14, second floor at Kaushambhi, Ghaziabad with the Hank as collateral security.

3. The petitioner, being skilled person with varied experience in the business, looked after the project execution on the site, whereas R2 used to look after the Accounts and Office management, including maintenance of books, statutory record and as to finalization of accounts. Both the petitioner and R2, being directors, used to take remuneration as salary from the Company. First project was completed in 2003 and the other was completed in March, 2009.

4. The petitioner submits that R2, without any notice to the petitioner, fraudulently increased the authorized share capital of the company from Rs. 5 lakh to Rs. 10 lakh in the EoGM allegedly held on 28.03.2008. The petitioner being one out of two directors, to pass a Board Resolution, R2 shall take approval of the petitioner, but R2 unilaterally decided EoGM date as 23.8.2008 without any Board Resolution. He went ahead and showed as if EoGM was held on 28.03.2008 for increase of authorized capital from Rs. 5 lakh to Rs. 10 lakh without any notice to the petitioner. Though meeting was shown as held on 283.2008, R2 did not file Form 5 immediately, he filed it on 02.04.2009 i.e., after more than one year from the date of alleged increase of share capital.

5. The petitioner submits that the shareholding pattern in the Annual Return dated 4-9-2002 was – the petitioner holding 6605 shares i.e., 57%, R2 holding 5,000 shares i.e., 43%. However, in the Annual Returns of 2003 & 2004, the shareholding started showing as the petitioner and R2 holding 25,000 shares each amounting to 50:50 in between them in reverse to the shareholding pattern of 57% in the name of the petitioner and 43% in the name of R2 as reflected in the AR of 2002. The petitioner submits that he has never signed over any of those documents which showing 25,000 shares each against the petitioner and R2. Since he was not a party to this change of shareholding in ARs 2003 & 2004, the petitioner says they shall be declared invalid.

6. When the relations in between petitioner and R2 have been strained, the petitioner asked R2 to deliver the cheque book of the Company Account with Punjab and Sindh Bank after completion of second project in the year 2009. To which, R2 refused to deliver the cheque book, above this, he misbehaved with his elder brother, petitioner, indeed asked the petitioner to leave the work site for ever. Then suspecting something wrong happening in the company, the petitioner approached Manager of Punjab & Sindh Bank on 4.3.2009 to cancel the instructions of operation of Bank Account “either or survivor” and make it joint operation by both the Directors. Again on 16,4.2009, when the petitioner requested the Bank Authorities for new Cheque Book vide letter dated 16.4.2009, the bank officials placed a letter dated 13.04.2007 written by R2 and other documents before the petitioner saying R2 showed a letter dated 14.3.2007 saying his brother (P) resigned from the Bank, by issuing a letter of resignation. He was shocked to see those documents showing as the petitioner resigned from the company, as R3, wife of R2, appointed as director, as if a resolution was passed by R2 & R3 on 19-2-2007 changing the signatory slip for bank account operation with Punjab & Sind Bank, and a board resolution on 14.3.2007 signed by R2 & R3 changing the operation of FDR account with Punjab & Sindh Bank.

7. On seeing the letter dated 14.03.2007 R2 passed on to the Bank, the petitioner for the first time realized that R2 made fraud to shunt him out from the company by falsely manipulating and forging the company records as if the petitioner signed all those papers showing as if the petitioner resigned from the company, showing as R2’s wife appointed as director. That the petitioner has never written any letter dated 14,3.2007 to the company that he resigned as director from the company for being preoccupied in his own private concern. That the petitioner has never signed or passed any board resolution appointing R2’s wife (R3) as director of the company on 19.2.2007, that the Board resolution shown as passed by R2 &R3 changing the Bank signatories of Account 979 maintained with Punjab & Sindh Bank is invalid because R3 has never been appointed as director of the company and she is admittedly not even shareholder of the company.

8. The petitioner came across a Board Resolution dated 10.4.2007 from one of its customers, namely, Shri Hemraj Singh, which is showing as signed by R2 and the petitioner. He was shocked of seeing it as signed by him, because he never signed upon the said resolution. R2 deployed this to make customers believe that R2 is allowed by the petitioner to execute sale deeds on behalf of the company, to achieve this, R2 fabricated false board resolution dated 10.4.2007 forging the signature of the other director i.e., the petitioner. With this, he held out to the customers he is allowed to sell the flats and receive money from the customers, of course, he did it to his best. It is pertinent to note, the date on this resolution is 10.4.2007, whereas the resignation letter dated 14.3.2007 set up by R2 to show the petitioner resigned from the company as director is ante to the Board Resolution dated 10.4.2007. Summing it the petitioner submits that R2 forged the signatures of the petitioner left, right and center without foreseeing that he would fall into his own snare. R2 simply passed off the Board resolutions and shareholders resolutions one after another as if the petitioner signed all those resolutions set up by R2.

9. The petitioner filed a Handwriting Expert opinion dated 08.08,2009, indicating that the signature on the letter dated 14.03.2007 is not matching with the signature of the petitioner. The petitioner immediately after noticing false resignation on him, he filed a civil suit No. 818/09 in April, 09 assailing the resignation letter dated 14.03.2007 and other issues. He submits that R2, to suit to his convenience, fabricated a Board Resolution on 10.04.2007 showing as if the petitioner continuing as director in the company, subsequent to the alleged resignation set up by R2. When this contention was taken in the petition, respondents in their reply produced another Board Resolution with the same date 10.04.2007, showing as signed by R2 & R3.

10. The petitioner submits that R1 Company, on 04.11.1997, opened Current Account in Punjab & Sindh Bank, Sahibabad, Ghaziabad, with a right of operation of Bank Account by anyone of the two directors i.e., the petitioner or R2. In this authorization given to the Bank, the petitioner was referred as Chairman of the Company. When the petitioner again approached this Bank on 16.04.2009, he came to know that R2 wrote a letter on 13.04.2009 to Punjab & Sindh Bank, alleging that the petitioner and R2 appointed R3 as director on 19.02.2007 and then the petitioner resigned from the company on 14.03.2007. R2 knowing full well, in case, the Bank permits any joint operation of account with Punjab & Sindh Bank, he would have to disclose financial transactions in relation to R1 company, to overreach this, on 25.3.2009, he quietly opened another current Account in the name of the company with a Branch of Bank of Baroda, at Rajendra Nagar, Ghaziabad enabling himself to operate a new account, so that there would not be any hurdle in dealing with the affairs of the company to suit to his needs and the petitioner would not have any clue of the operations of the company. Besides this, R2, on 01.05,2009, opened another current account in the name of the company in another Branch of Bank of Baroda situated at Karkardooma, New Delhi.

11. The petitioner submits that when the petitioner obtained statement from 24.03.2009 to 20.10.2009, it appears an amount of Rs. 52,10,000/- was deposited in cash/cheque in the account maintained with Branch of Bank of Baroda, at Rajendra Nagar, Chaziabad leaving a credit balance of Rs. 21, 644/- The petitioner submits that R2 withdrew Rs. 40 lakh in cash on 04.08,2009 from Bank of Baroda situated at Karkardooma Branch, therefore, it is evident that R2 siphoned Rs. 9l lakh from these two accounts and not placed any kind of explanation as to what made him open these accounts and why he withdrew such a huge amount from these two accounts without any explanation. He submits R2 is guilty of misfeasance and breach of trust for having not placed any reasoning for opening other bank accounts behind the back of the petitioner and surreptitiously siphoned the funds of the company for a tune of Rs. 90 lakh.

12. The petitioner submits that he entered into profit sharing partnership with SOHO Construction Private Limited, it has not affected the project undertaken by the company.

13. The petitioner submits that he filed Civil Suit 818/09 in Ghaziabad civil court and was later withdrawn on 21.08.2009. He further submits that though cause of action in the earlier suit is cause of action in this CP filed u/s 397/398 of the Act 1956, the reliefs sought in this Company Petition being different and in relation to oppression and mismanagement by R2 against the petitioner and the right of remedy available to a member of the company under sections 397 & 398 of the Companies Act 1956 not being available before civil court, the petitioner filed this company petition and withdrew the suit seeking comprehensive reliefs in this CP.

Reply of R2 & R3:

14. R2 submits that the petitioner has not approached with clean hands, it is a directorial compliant because the petitioner main grievance is about his removal from the office of Director and appointment of R3 as director in the company.

15. R2 submits that the petitioner has been running a competing business in the name of NOTAM PROJECTS, his sole proprietary concern holding out in the market that the flat business run by R1 is in dispute, by which the customers have taken out the booking money paid by them by cancelling the flats already booked in the last 6 months.

16. The petitioner in fact, around FEB-MARCH 2007, entered into a partnership deed with a company called SOHO Construction Pvt. Limited for development of flats on plot No 171, Gyan Khand -1, Indirapuram, Ghaziabad (UP) expecting huge profits in short period. Since he remained in the illusion that joint venture with SOHO would give high returns, he started investing his money in that company from March, 2007. Looking at, he could make big money in SOHO, he left this company by making R2’s wife as director (R3) 19-2-2009, moreover he tendered his resignation as director of the company on 14-3-2007 citing his preoccupation in his private concern. By that time, the company was in dire necessity of funds to start the new project for which land was already purchased, but whereas the petitioner preferred to invest money elsewhere with persons of doubtful credibility leaving the company and R2 to their fate. Though the petitioner left the company when it was in the need of funds, R2 raised funds to the company in the second half of 2007 to start 9/5 project of the company and saved the company from crunch, then this petitioner was nowhere. As was expected, the petitioner was put to losses in the joint venture with SOHO and he could even get back his principle amount which he hurriedly poured in the joint venture leaving the company of their own. Now the consequences are, he has got embroiled in civil and criminal litigation with SOHO group. He did not even attend to ground breaking ceremony when second project was started eyeing something big in the joint venture with SOHO.

17. R2 submits that the petitioner filed CS (OS) 818/2009 before ld. Civil Judge, Ghaziabad on the same issues which he raised in the present case. In that suit, the learned Judge, on 21-7-2009, dismissed the relief of temporary injunction sought by the petitioner on the ground that the petitioner has not been continuing in the management, so that he could not represent the company, and that the petitioner has not proved that his resignation letter as forged till date of passing the interlocutory orders.

18. For having the petitioner withdrew the suit unconditionally without seeking any liberty from the first court, and for having the ld Judge on 24-8-2009 dismissed the suit without giving any liberty to the petitioner to initiate new proceeding, this CP is hit by order 23 Rule (1) Sub-rule 4 CPC. The plea of forgery taken up by the petitioner requires comprehensive evidence, therefore only remedy available to him is by way of filing civil suit not the present petition.

19. R2 submits that the petitioner, on 3-3-2009, fraudulently transferred an amount of Rs 1, 25,000/- from the company current account lying with Punjab & Sindh Bank, Link Road, Sahidabad, Gaziabad to a saving Bank Account jointly operated by the petitioner and his wife using transfer voucher without putting it to R-2, since the company fund was siphoned away by the petitioner, R-2 gave complaint over this issue to SSP, Ghaziabad. Due to this surreptitious transfer made to them, a transfer cheque given to one supplier or the company called Omprakash was bounced, R-2, to keep the company- reputation in the market, R-2 squared up this money to the said Omprakash. Despite all these hurdles from the petitioner, R-2 timely repaid the loan taken from IC1C1 Bank for use of the company, though the petitioner siphoned out the company funds from the company account. As a pressure tactics against R-2, the petitioner taking advantage of his connection with the Bank officer got the account frozen so as to stop the money operations driving the company to suffer from flow of funds. The bank manager who is hand in glove with the petitioner froze FDRs of the company saying that the matter is sub-juice before court of Law though there is no restraint order against the company to use its funds. The petitioner, for being left high and dry in the project with SOHO, started mounting pressure on the respondents by holding out in the market that the properties of R1 Company were in dispute in between the brothers, simultaneously began pressurizing R-2 to take him into the Board, in this background, the Company opened new accounts in the Bank of Baroda. However R-2 was able to persuade the existing customers not to back out from the agreements they had with the company, R-2, alone made the project complete and handed over possession of flats to the customers. Since the petitioner had been mudslinging the company by saying R1 Company selling the flats at a rate higher than the market rate, the company was forced to put a public notice that the petitioner resigned as director and he has nothing to do with the company. When time came to clear the balance due to the sellers, the petitioner simply left to Kashmir for holidaying in the year 2005 leaving it on the shoulders of R2. To see the project not put to halt, R2, himself raised money and paid it to the customers in January 2006. R2 submits that this petitioner has been unauthorizedly using stilt floor and roof of second floor; plot no KA-14, Kaushambi. Ghaziabad of the company without any permission from the Board of Directors and without paying anything to the company-neither consideration nor rent since November 2004 causing financial loss to the company- The petitioner refused to hear the old parents when they went to him to persuade not to continue with litigation between the brothers. R2 submits that this petition is not maintainable on the ground that the petitioner has not come with clean hands, and single act of removal of the petitioner as director or appointment of R3 as director will not amount to oppression under section 397 & 398 of the Act 1956.

20. R-2 says R-3 was appointed as director with the approval of the petitioner, his signature was not forged, the delay in filing form 32 is that no director of the company has DIN number as per provisions of section 253 of the Companies Act, since there is a rule that no director can file forms unless there is DIN number to him, they could not file it in time.

21. R-2 denies the petitioner supporting R-2 financially; in fact, the brothers invested their joint earnings in the company. It is an admitted fact that the petitioner purchased an office at 70 A-215, Chawla complex, Shakarpur, Vikas Marg, Delhi-110092 as an investment, then the petitioner started a firm in the name of NOTAM with the support of parents. R-2 claims that that the property bearing flat number 1303, Nanda Apartments, Kaushambi, Glaziabad, UP was purchased by both the brothers and earnings of the parents, it is not that it was purchased by the petitioner in the year 1998 with his earnings. The petitioner and R2, each have 50% stake in R1 Company.

Observations of this Bench:

22. The points for consideration are as follows:

(1) Whether this petition under sections 397 & 398 of the Companies Act 1956 is maintainable or not.
(2) Whether the petitioner seized to continue as director of the company on an alleged letter dated 14.03.2007 or not.
(3) Whether appointment of R3 m director of the company is oppressive against the petitioner or not.
(4) Whether increased of authorized capital on 28.03.2008 is oppressive against the petitioner or not.
(5) Whether R2 to be directed to restore Rs. 91 lakh shown as taken out.
(6) To what relief.

23. Issue 1: Whether this petition under sections 397 & 398 of the Companies Act 1956 is maintainable or not.

24. The argument of the respondents’ side is that this Company Petition is not maintainable u/s 397 & 398 of the Companies Act, 1956 on the ground:

That prior to filing this CP, the petitioner filed OS 818/2009 before the Ld. Civil Judge (Sr. Division) Ghaziabad (UP), inter alia seeking the same reliefs which have been sought in this CP, In the said suit, when the petition filed an interlocutory application, seeking interim reliefs, Ld. Civil Judge, on 21,7.2009, passed A detailed order dismissing the interlocutory application seeking restraint order against R2 & R3 in relation to the business of R1 company.
That the petitioner has not filed any appeal over the said order, therefore, the order passed by the Ld, Civil Judge on 21.72009 has attained finality
That, on seeing no interim relief has been granted to the petitioner in the said Civil Suit; the petitioner filed this Company Petition on 11.8.2009 and mentioned the case on 18.8.2009 stating that OS 818/2009 was already withdrawn. On believing the submissions of the counsel, CLB passed an order on 18.8.2009 stating that for having the petitioner counsel stated that the Civil Suit has already been withdrawn, R1 Company was directed to provide fortnightly statement of the Banking operations to the petitioner. In fact, by the time the petitioner mentioned this CP on 18.8.2009, OS 818/2009 was not withdrawn by 18.8.2009, it was indeed dismissed as withdrawn only on 24.8.2009, therefore R2 says that the petitioner indulged in giving false statement to the court and obtained an order, therefore he shall be prosecuted for perjury, hence CA under section 340 Cr P C has been moved.
That R2, for having the petitioner concealed the facts from the Company Law Board and obtained orders by making false statement, submits that this CP shall be dismissed on this ground alone.
That the petitioner is precluded from instituting this CP in terms of the provisions of Order 23 Rule 4 of CPC because Ld. Civil Judge dismissed OS 818/2009 without giving any liberty to initiate proceedings on the same cause of action, therefore, R2 says this petition is liable to dismissed on this ground itself.

25. The petitioner counsel, of course, denied all these allegations on the point of maintainability of the petition. He also relied upon a citation in between STV Spg Mills (P.) Ltd. v. M. Palanisami [2009] 95 SCL 112 (Mad.) to say that CP filed u/s 397 & 398 of the Act 1956 cannot be dismissed on the ground earlier proceeding was dismissed as withdrawn without liberty to prosecute on the same cause of action, because the reliefs that can be granted under section 397 & 398 proceeding cannot be granted by any other court except by Company Law Board under these sections.

26. The petitioner also relied upon Gautam Kapur v. Limrose Engg. Works (P.) Ltd. [2006] 65 SCL 388 (CLB – New Delhi)to say that in a family company on seeing a grievance of removal of director in a CP filed u/s 397 & 398 of the Act 1956, that CP cannot be thrown out from the file of CLB saying it as directorial complaint hence maintainable.

27. As to dismissal of prior suit, without liberty for filing this CP, I must say, before going into this issue, what are the observations in the order passed by the Ld. Civil Judge. On reading the interlocutory order dated 21.7.2009 passed by Ld. Civil Judge, it appears that the petitioner claimed that he had been running the company as MD of it, therefore, he had sought restraint order against R2 & R3 continuing as directors of the company for they had been doing various acts affecting the affairs of the company and interest of the petitioner. On which, Ld. Civil Judge has not granted temporary injunction against R2 & R3 from functioning as directors on two grounds – one, the petitioner did not place any proof till date that R2 & R3 forged the resignation letter said to have been given by the petitioner, two – for R2 & R3 have admittedly been continuing as directors of the company. Apart from this, it is also held in the order that R2 & R3 should place ail the details of the sales in the company.

28. By this, it is apparent on record that the learned judge has not granted interim relief not by saying no case was made out to proceed with the suit. He has also not said that the right of proving alleged resignation as forged has been foreclosed. He has only observed that till date of passing the order on 21.7.2009, the petitioner has not placed proof to prove the letter of resignation as forgery, therefore no interim restraint order could be passed. Not only that. Civil Court held that R2 & R3 shall provide all the details of sales in the company, therefore, it cannot be said that Ld. Civil Judge has gone into every issue raised in this case and decided the issues in favor of the Respondents.

29. To fortify that dismissal of Civil Suit will not come in the way of filing this CP u/s 397 & 398 of the Companies Act. 1956, the petitioner counsel relied upon a ratio cited in the case in between STV Spg Mills (P.) Ltd. (supra) which is as follows:

“Para – Again, the mere fact that the Civil Suit stated above has been dismissed by the Court without giving liberty to the first respondent to take appropriate forum itself will not take away the rights of first respondent if the same are available and conferred on him under the provisions of the Companies Act, 1956, especially for approaching a forum viz. the Company Law Hoard complaining about the oppression and mismanagement u/s 397 & 398 of the Act, That being the statutory right available to a shareholder or member of the company, in my considered view, it does not require any leave to be granted by the Civil Court. . . . . . . . . . . . .”

30. Here also, the petitioner filed a withdrawal application before the Civil Court and then filed this CP before this Bench. The Suit was then dismissed. It was only a dismissal simplicitor. As per the ratio laid in the citation supra, it is clear that jurisdiction u/s 397 & 398 of the Companies Act, 1956 is unique, enabling the Company Law Board to pass orders on equity, notwithstanding the fact whether acts of the parties are valid or invalid. Besides this, the order passed by Ld. Civil Judge is not a final order; no decision has been taken on any of the issues which arc subject-matter of the Company Petition. It was only said that the petitioner has not placed any material to prima facie believe that R2 & R3 forged the signature of the petitioner on the alleged resignation letter dated 14,3.2007.

31. A prima facie view cannot be taken as adjudication over any issue pending before a Court of Law. It is true, if an issue is decided and if an order is passed akin to the adjudication as defined in Section 2(2) of CPC then such an order is hit by Section 11 of CPC. In the order passed by Ld. Civil Judge, it is not said that the plea of forgery taken by the petitioner is decided against the petitioner, it is only said – no proof is placed so far to prove the alleged resignation letter as forged. It is pertinent to mention that Ld. Judge has not foreclosed this issue from taking it up on final hearing. If an interim relief is not granted, it does not mean that the issue will not be taken up in the main hearing. Normally in an allegation like forgery, it could only be decided when that issue is put to trial. Therefore, in consideration of these facte, I do not find any merit in the argument of the counsel of R2 & R3 saying it is hit by Res Judicata or even by forum shopping.

32. Before discussing over filing the Company Petition without permission when Suit was withdrawn, I must place Sub-Rule 4 of Rule 1 Order 23 of CPC here:

“Sub-Rule (4) Where the Plaintiff-

(a) Abandons any suit or part of claim under sub-rule (1) or
(b) Withdraws from a suit or part of a claim without the permission referred to in sub-rule (3),

He shall be liable for such costs as the Court may award and shall be precluded from instituting any fresh suit in respect of such subject-matter or such part of the claim.”

33. On seeing this sub-rule, whenever any party withdraws a suit without permission, that party is precluded from instituting fresh suit in respect of the subject-matter or such part of it. Before applying this doctrine, one has to see whether the claim in the previous suit and in the later proceedings is one and the same or not and it is also to be seen whether the jurisdiction exercisable by the Courts is one and the same or not. I agree, if the party seeks the relief on the same subject, then such issue cannot be re-agitated in the later proceedings unless permission is sought as envisaged under sub-rule 4 of Rule 1 of Order 23, CPC. Here, the petitioner no doubt, sought that R2 forged the signature of the petitioner on a letter said to have been executed by the petitioner and he also said, R2, till date, has not filed Form 32 informing ROC that the petitioner resigned from the company, but whereas he filed other Forms before ROC. Had there been no authority to file Form 32 showing the petitioner ceased to continue as director, R2 could not have filed other forms as well. R2 has not said anywhere he could not file any Form with RoC for want of DIN number, it could not be assumed that Form 32 showing the petitioner resigned from the company, was not filed for want of authority. If CLB can take a decision over any issue and safely conclude an issue, without touching the issue of forgery, then Company Law Board can very well take a decision over the said issue. When an issue is decided, the party will not be entitled to take up other grounds in the later proceedings to adjudicate thy issue already adjudicated. When an issue is not decided, can a party be precluded from adjudicating his right before a Court of Law just because permission is not taken when earlier proceedings were withdrawn? If the issue of forgery is a subject-matter in the earlier proceeding, that party cannot agitate over the issue of forgery in the later proceeding without obtaining permission in the earlier proceeding. When other issues are taken over along with forgery issue, if Courts are in a position to de-alienate the forgery and other aspects, then Court can safely decide the point ignoring the allegation of forgery. Here, in this case, one – it is a case u/s 397 & 398, where normally issues are decided on equity and two – his resignation is detachable from the allegation of forgery, then such on issue could be decided ignoring the allegation of forgery.

34. According to Companies Act, as and when any director is removed or ceases to continue as director or appointed as director, there is a mandate under the Companies Act to file it before a statutory authority i.e. ROC, within 30 days saying such and such person la removed on such and such ground. Here, it has not been done despite more than two years have gone by.

35. This filing procedure has been devised by the Statute to make it transparent, public and make it binding upon the company that the company has taken so and so decision on a particular date. Here, there being no other proof to say that the petitioner ceased to continue as director except a letter of resignation, this letter need not be taken into consideration to say that the petitioner resigned as a director from the company. Therefore, for there is enough evidence to believe that the petitioner continuing as a director without even taking the plea of forgery of resignation letter and resolutions if any into consideration, this Bench has decided this issue in favour of the petitioner ignoring the plea of forgery taken by the petitioner.

36. As to application filed u/s 340 CrPC alleging that the petitioner concealed the facts from the Company Law Board and obtained order by making false statement, there is no material before this Bench disclosing that the petitioner stated on oath that earlier suit was withdrawn by the time CP was filed before this Bench. It is an observation made by the Company Law Board while passing an order on mentioning. It goes without saying that unless there is a statement on oath before a Court of Law giving false statement; it will not fall within the definition of Section 195 of IPC. For having R2 not mentioned in his application u/s 340 CrPC that the petitioner gave a statement on oath that earlier proceeding was withdrawn on the date CP was mentioned before this Court of Law, therefore, an observation of Presiding Officer cannot be deemed as statement given by the party on oath before Court of Law. Whenever Section 340 CPC is invoked, Courts will take every care to find out whether any statement is there from the party on oath which can be considered as evidence in the Court of Law. For there being no such statement from the petitioner, a presumption cannot be drawn that the petitioner gave a statement on oath before a Presiding Officer of the Court on seeing the observation in an order passed by the Presiding Officer. A proceeding under section 340 CrPC shall not be taken on vague allegation and without support of a definite statement. On seeing CA under section 340 CrPC, it appears R2 banked upon the order passed by the Honourable Chairman of CLB on 18.8.2009, not upon a statement given by the petitioner. Therefore, I have not found any merit in the application filed u/s 340 CrPC. Hence this application is hereby dismissed.

37. The counsel of the Respondents relied upon a case in between K.R.S. Mani v. Anugraha Jewellers Ltd. [2004] 52 SCL 488 (Mad.) to say that if earlier proceeding on identical issues pending before civil court is withdrawn only on seeing the preliminary objection raised on maintainability of CP u/s 397 & 398, such withdrawal of suits on subsequent date will not absolve them about their conduct in not approaching CLB with clean hands. Here, the counsel of Respondents argued that for the facts of the case supra being identical to the facts of this case, this CP is also liable to be dismissed for having the petitioner approached with unclean hands.

38. On careful reading of the citation supra, it appears that the Honourable High Court only observed that since the petitioner withdrew suits on seeing the objection raised on maintainability by the adverse party, the petitioner conduct is said as he approached CLB with unclean hands. But in the given case, the petitioner had already moved application for withdrawal of civil suit on 11-8-2009, and then filed this CP on 12-8-2009, indeed moved this CP on 18-8-2009. That civil suit came for hearing on withdrawal of suit on 24-8-2009 and on the same day, that suit was dismissed as withdrawn. The only ground that appears in the case supra to come to an observation that the petitioner conduct for not having the suits dismissed as withdrawn is the petitioner there had not taken steps for withdrawal of suits until an objection was raised by the adverse party. Here, it is not the case. The petitioner filed an application for withdrawal on 11-8-2009 itself i.e., before filing this CP. Therefore, I hereby distinguish the finding supra from the facts of the case for the petitioner approached this Bench only after filing withdrawal application, not on the objection raised by the Respondents.

39. The counsel of the Respondents relied upon a case in between Jacob Cherian v. K.N. Cherian [1973] 43 Comp. Cas. 235 (Mad.) to say it would be abuse of process of the court to allow a person to drag to court the company and those in charge of affairs of the company by filing a petition u/s 397 &398 of the Act 1956 after withdrawing a petition on the same allegations.

40. It is true that it is undisputable when a proceeding is withdrawn unconditionally, there shall not be any later proceeding on the same cause of action, but when the reliefs are different which cannot be granted in the earlier proceeding, for such reliefs, if any statutory right is conferred on any person to proceed before a special forum for remedying the grievance of a party, then, like Honourable High Court of Madras held in M/s. S.V.T Spinning Mills (P.) Ltd. case supra, that a party is under no obligation to obtain liberty before withdrawal of suit from civil court to approach CLB u/s 397 & 398 of the Act 1956 for it is a statutory right given to a member to avoid oppression and mismanagement against member or the company, which a civil court cannot grant, therefore I, in the backdrop of this factual history, safely conclude that withdrawal of suit without liberty will not make this CP non-maintainable.

41. The counsel of the Respondents relied upon a case in between Upadhyay & Co. v. State of U.P. [1999] 1 SCC 81 to support the argument that this CP is hit by Order 23 Rule 1 (4) of CPC. Here, the Honourable Supreme Court held that Order 23 Rule 1 (4) CPC is applicable to writ proceeding under Article 226 of Constitution of India also. It need not be reiterated here that civil court adjudicates the validity of an act on the anvil of legality of an act, but whereas the process of adjudication under section 397 & 398 of the Act is different, it will perceive the issue on the anvil of equity, at times though act is legal, still it may be held not right, at times though act is not in compliance of any provision of law, still it may be held right, it all depends on whether, by this act, any member or company put to prejudice or not. Moreover the reliefs that can be granted by CLB u/s 397 & 398 cannot be granted by Civil Court. May be for this reason alone, in M/s S.V.T Spinning Mills Pvt. Ltd. case supra, Honourable Madras High Court held that for initiating proceeding u/s 397 & 398, no liberty be taken while withdrawing earlier proceeding. The citation Upadhyay & Co. (supra) referred supra not being on proceedings under section 397 & 398, I hold that the finding supra is not applicable to this case.

42. The counsel of the Respondents relied upon a case in between Sarguja Transport Service v. State Transport Appellate Tribunal, MP.P. Gwalior [1987] 1 SCC 5 on the same principle that was discussed in Upadhyay & Co. case (supra), therefore the reasoning given for distinguishing Upadhyay & Co. (supra) is applicable to this case also. The counsel of the Respondents also relied upon Pradip Kumar Sengupta v. Titan Engg. Co. (P.) Ltd. [1998] 18 SCL 20 (CLB – New Delhi) to say the same point raised in Upadhyay & Co. (supra).

43. For having the respondents failed to establish that this petition is not maintainable, on the allegations referred above, I hereby decide this issue against the respondents.

Issue 2: Whether the petitioner seized to continue as director of the company on an alleged letter dated 14.03.2007 or not ?

44. It appears from the record that the petitioner is an elder brother of R2 herein; he has started his own proprietary concern called NOTAM, soon after he returned from Gulf countries. This petitioner along with his younger brother (R2) started this company, to do Real Estate business; he in fact, transferred his own proprietary concern to the company. To start the business of Real Estate, they in fact purchased two plots to construct apartments and sell them. They completed one project in the year 2006, thereafter it appears, differences arose between these two brothers, the result is the petitioner was shown as resigned from the company as director from 14.03.2007. The petitioner has submitted that he was looking after the construction work, his brother used to look after accounts of the company, whereby there was no occasion for him to go through the accounts of the company and books of the company on regular base. He only came to know that he was shown as resigned from the company and wife of R2, was appointed as director of the company in the year 2009, when he approached the bank of the company. The petitioner submits that R2 forged the signature of the petitioner over alleged resignation Letter dated 14.03.2007 and also on the resolution dated 19.02.2007, showing R3 was appointed as director of the company. On verification of the filings made before RoC it is nowhere shown the petitioner ceased to continue as director of the company. The petitioner filed a Board Resolution dated 10.04.2007, showing the petitioner also signed as a director, had he been ceased to continue as director from 14.03.2007, there could not have been any resolution on 10.04.2007, showing the petitioner as director of the company. To beat this argument, R2 produced another Board Resolution of the same day 10.04.2007, signed by R2 & R3 at Page No. 194 of the reply. The petitioner submits that the signature on the Board Resolution filed by the petitioner along with the petition Page No. 74 was in fact signed by R2, whereas the petitioner signature was forged by R2. The writing on both the resolutions are identical without even change of comma or full stop. It is not the case of R2 that he has made it to RoC that the petitioner ceased to continue as director through alleged resignation letter dated 14-3-2007. In the context of these facts, this resignation cannot be believed for many reasons, one R2 has not brought it to the notice of RoC that the petitioner ceased to continue as director in the company.

45. The petitioner filed a resolution copy saying that R2 set up a resolution dated 10th April, 2007, signed by him, showing the petitioner also signed on the same resolution as director of the company, though the petitioner filed this Board resolution saying that it was signed by R2, he has not taken any steps to show that Board Resolution was not signed by R2. Instead of taking up action against the petitioner on the statement that R2 signed on the Board Resolution dated 10th April, 2007, he set up another Board Restitution, showing as signed by R2 & R3 on the self-same Board Resolution, without any change in the resolution, thereby it can be easily construed that R2 took out the soft copy of the earlier Board Resolution shown as signed by the petitioner and R2, and used it again with R2 & R3 signatures, when the petitioner has come up with a pleading that he was shown as a director even on 10.04.2007, he set up another Board Resolution shown as signed by him and his wife. I have not taken the Hand Writing Expert opinion filed by the petitioner into consideration to say that R2 forged the signatures of the petitioner. R2 has not challenged the board resolution dated 10.04.2007 conferring power upon himself to sell the flats and receive cash, which is subsequent to the alleged letter of resignation of the petitioner dated 14.03.2007. The petitioner being the promoter director of shareholder of the company with a slightly majority shareholding in the company, it could not be assumed that the petitioner resigned from the company as director leaving his shareholding and his guarantees with the company. The petitioner being the elder brother of R2, being a promoter of the company, for still continuing as shareholder of the company, keeping his guarantee with the bank, it could not be construed by any stretch of imagination that the petitioner resigned from the company by submitting a resignation letter dated 10.03.2007. I have drawn this inference independent of the Hand Writing Expert opinion filed by the petitioner, therefore, I hereby hold that alleged resignation letter used by the R2, to show petitioner resigned from the company as invalid.

Issue 3 Whether appointment of R3 as director of R-1 company is oppressive against the petitioner or not ?

46. On the allegation made by the petitioner that R3 has never been appointed as a director of the company in any of the Board meetings he attended, it has to be seen whether any consent was there from the petitioner in appointing R3 as director of the company.

47. R3 is not a shareholder of the company, it is nowhere said what is the reason for appointing her as director in the company. The only qualification she has to become a director is, she is the wife of second respondent. The petitioner, even according to second respondent, is a shareholder with 50% shareholding in the company. He has also given personal guarantees to take loan for the company. It is not said anywhere that this petitioner entered into an agreement with second respondent to take exit from the company by giving opportunity to second respondent to run it solely on his own.

48. A person who has 50% shareholding, when his guarantees are lying with the company, no prudent man will come out of the management allowing another 50% shareholder to run the company at the whims and fancies of him. Though second respondent says the petitioner and the second respondent passed a resolution appointing R3 as director on 19.2.2007, he has not placed Form 32 before RoC within 30 days or anything close to those 30 days showing R3 was appointed as director in resolution passed by the petitioner and the second respondent. He only filed this Form on 21.3.2009 i.e. after a delay of two years from the date of alleged appointment of R3 as director in the company, especially after the petitioner withdrew Rs. 1,25,000/- from the account of the company as his salary on 3.3.2009. By that time he withdrew this money Bank had no information that R2 & R3 alone continuing as directors of the company. Therefore Bank had not raised any objection to the petitioner withdrawing this money from the Bank. That means, no resolution copy was given to the Bank saying that R2’s wife was appointed on the consent of the petitioner. This has come to the light of the petitioner only on 16-1-2009, when the petitioner asked the Bank to change the mode of operation of cheque issuing with the signature of the petitioner and R2. By this, it can be presumed that R2, on seeing the petitioner withdrew Rs. 1,25,000/- from the Bank, set up this story of appointment of R3 as director, resignation letter of the petitioner showing him as ceased to continue as director of the company and hurriedly filing Form-32 on 21.3.2009 showing R3 as director in the company. Had R2 along with the petitioner passed a resolution appointing R3 as director in the company, what prevented him from filing Form 32 before ROC until the petitioner had approached the Bank for withdrawal of Rs. 1,25,000/- from the bank. The explanation given by R2 saying they could not file Form 32 because DIN number has not come to the directors, is not believable, therefore, appointing R3, who is not a shareholder in the company as director by shunting the petitioner out of the company, is oppressive and prejudicial to the interest of the petitioner who is admittedly 50% shareholder in the company. It need not be seen whether the petitioner signed on the resolution or not, on seeing the overwhelming evidence disclosing that R2 set up appointment of R3 as director in the company only after the petitioner approached the Bank on 4.3.2009 for requesting the Bank to change mode of operation of the account, for there being no material on record showing R3 as director for more than two years from the date of alleged appointment of R3 as director, and on seeing the Form 32 filed only on 25-3-2009, that is only after the petitoner requested the Bank to change the mode of operation of the Account, this issue is therefore decided against the respondents holding that appointment of R3 as director is oppressive against the petitioner, hence declared it invalid.

Issue 4: Whether increased of authorized capital on 28.03.2008 is oppressive against the petitioner or not ?

49. As to increase of authorized capital as well as paid-up capital of the company, the petitioner, according to him 57% in the company, according to respondents he has only 50% in between them. Since the petitioner and respondents are not on cordial terms in between them in the year 2008, it could not be assumed that a resolution was passed to make their shareholding in between the petitioner and the second respondent as 50:50. The delay in filing Forms, happens in normal course, it could be considered as delay simplicitor, but if the delay is inordinate and such delay is not properly explained to the satisfaction of this Bench, and if such delayed filings are aimed at causing prejudice to any member of the company, such delay cannot be construed as happened in normal course. Here also Form-5 was filed one year after alleged increase of capital. For the relations in between the petitioner and respondents being strained from 2007 itself, it cannot be said that the petitioner agreed to allow R2 to change the shareholding pattern prejudicial to the interest of the petitioner, therefore, this issue is decided against the respondents. For this allotment being held invalid, the shareholding existing before this increase and allotment, will come into force.

lssue-5: Whether R2 to be directed to restore Rs. 91 lacs shown as taken out ?

50. As to the allegation of siphoning of Rs. 91/- lakh from the company, though the petitioner has not placed any particulars reflecting siphoning of the funds, for R2 opened two other Bank accounts in the name of the company and continuing Bank operations over the funds of the company in those two Banks without notice to the petitioner, an inference could be drawn that the respondents opened those accounts with a mala fide intention to deal with the affairs of the company behind the back of the petitioner. Since the siphoning of the funds is not proved, I could not say that R2 has siphoned the funds of the company at this juncture. 1 also cannot say that R2 opened those two Bank accounts with a bona fide intention for the growth of the company. When a Bank account is opened in the name of the company without notice to the other shareholder who has, according to him, 50% shareholding, it only reflects that those accounts are opened to handle financial transactions without notice to the other shareholder or director of the company.

51. The counsel of the Respondents relied upon a case in between Ramesh Bhajanlal Thakur v. Seaside Hotel (P.) Ltd.[2000] 23 SCL 164 (CLB – New Delhi) to say that when no particulars are given in support of allegation siphoning the funds of the company, then obviously no relief can be granted, as to this principle, I, on principle, agree no relief can be granted when a petition has come without any details and proof over the allegations of siphoning.

Issue 6: To what relief ?

52. Since R2 has not been dealing with the affairs of the company keeping the petitioner in dark for a long time, I believe that an impartial audit of the accounts of the company will clear whether R2 siphoned the funds of the company or not, for which I hereby appoint M/s Seema Naresh Bansal & Associates (Mobile No. 9810157418), R-13 & 14, LGF, Ansal Chamber-II, Bhikaji Cama Place, New Delhi, as Chartered Accountant to audit the accounts of the company taking all the three Bank accounts into consideration to find out whether any of these two parties siphoned the funds of the company in the light of the allegations made against each other and file report within 30 days from hereof. The company is directed to pay remuneration to the Chartered Accountant, as agreeable to him, because the company is an almost 50:50 company in between the petitioner and R2.

53. For having this Bench decided that the petitioner has not been removed as a director at any point of time, he will continue as director in the company whereas the wife of R2 i.e. R3 will not continue as director because her appointment has already been declared invalid. Since the company is a family company in between the two real brothers, the company’s size also not being big, these two real brothers can come together and continue working in the company as before. R1 company is directed to file forms with RoC in compliance of this order within 30 days hereof.

54. This Bench hereby directs the parties to pay to the company if any of them is held as siphoning the funds of the company in the audit report given by the Chartered Accountant. If any objections are there over the Chartered Accountant’s audit report, they are at liberty to place their objections before CLB.

55. Accordingly, this Company Petition is hereby disposed of.

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