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Bhajirao G. Ghatke and Others Vs. Bombay Docking Co. Pvt. Ltd. and Others - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Case NumberCompany Petition No. 752 of 1981
Judge
Reported in[1984]56CompCas428(Bom)
ActsCompanies Act, 1956 - Sections 397 and 398
AppellantBhajirao G. Ghatke and Others
RespondentBombay Docking Co. Pvt. Ltd. and Others
Excerpt:
.....1956 - petitioners alleged that respondent-company indulged in various acts of mismanagement of company - company is neither functioning nor holding annual general meeting - respondent-company contended that petitioners are not members of company and petition not maintainable - company admittedly does not possess statutory records - company held meeting after filing of this petition - company has received large amounts from petitioners for equity shares as borne out by receipt - no documents produced to show that company working in accordance with provisions of companies act - such being condition of company administrator to be appointed for three years to set company on proper way - at end of three years affairs of company to be handed over to newly constituted board of directors. ..........referred to in this paragraph. this public notice has nothing to do with the reconstruction of the company's records. it is a public notice given in respect of an alleged theft of 24 share certifcates. in these circumstances, no reliance can be placed on such a register of members of the company prepared after the filing of the present petition.3. the petitioners have produced in court photostat copies of receipts issued in the years 1977 and 1978 and singed by the second respondent, showing various amounts received by her from the petitioners against the equity shares of the first respondent company - the number of such shares is mentioned in each receipt. the petitioners have in all paid about rs. 94,000 for the equity shares of the first respondent company. mr. barve sought to explain.....
Judgment:

Sujata V. Manohar, J.

1. This is a petition under Ss. 397 and 398 of the Companies Act, 1956, filed by six petitioners against the first respondent company and respondents Nos. 2 and 3 who claim to be in the management and control of the company. In the petition, the petitioners have set out various acts of gross mismanagement of the company. It has been alleged that the company is not at all functioning and that the company is not holding annual general meetings or any other meetings. The petitioners have produced notices received by them in their capacity as directors of the company in respect of prosecutions launched by the Registrar of Companies. The petitioners have stated that though their names are shown as directors of the company in the record of the Register of Companies, in fact no meetings of the board of directors have been held, that they are totally kept out of the management and that on account of the mismanagement of the company by respondents Nos. 1 and 2, they are being prosecuted as directors of the company for no fault of theirs. The petitioners have further submitted that the company has not held annual general meetings during the years 1977, 1978 1979 and 1980. In short, there are various acts of mismanagement of the company. In answer to these grave allegations, the respondents have submitted that the petition is not maintainable because the petitioners are not members of the company, nor do they have the requisite capacity under s. 339.

2. It has been strongly urged by the learned advocate for the respondents that the names of the petitioners are not shown as members in the register of members of the respondent-company. This fact would have been ordinarily sufficient to put the petitioners out of court. In the present case, however, the register of members on which such strong reliance is placed by the respondents is a register of members, admittedly reconstituted in March, 1982, long after the present petition was filed. The original register of members is not forthcoming. The first respondent compan, in its affidavit of July 6, 1982, in paragraph 7, has stated that all the statutory records of the company have been removed by one Dr. J. R. N. Muzumdar. The company claims to have instituted criminal proceedings against him and one Mr. M. K. Banerjee. In para. 7, the company has stated that it has taken steps to reconstruct the records and give public notice in regard to the share certificates of the members which are lost. By this statement, an impression is sought to be created that a public notice was given in respect of reconstruction of the statutory records of the company including the register of members. Mr. Barve, learned advocate for the respondents, read out the public notice which is referred to in this paragraph. This public notice has nothing to do with the reconstruction of the company's records. It is a public notice given in respect of an alleged theft of 24 share certifcates. In these circumstances, no reliance can be placed on such a register of members of the company prepared after the filing of the present petition.

3. The petitioners have produced in court photostat copies of receipts issued in the years 1977 and 1978 and singed by the second respondent, showing various amounts received by her from the petitioners against the equity shares of the first respondent company - the number of such shares is mentioned in each receipt. The petitioners have in all paid about Rs. 94,000 for the equity shares of the first respondent company. Mr. Barve sought to explain away the receipts by stating that these receipts are in respect of the amounts borrowed by the second respondent personally from the petitioers. He submitted that these amounts were not received by the first respondent company at all nor were any shares issued to the petitioners. Now, if these receipts are in the respect of amounts borrowed by the second respondent from the petitionres, it is difficult to understand how such receipts could have been issued in the name of the first respondent company under the printed letter head of the first respondent company. Mr. Satyanaran, learned advocate for the petitioners, also produced a number of notices sent by the first respondent-company and received by some of the petitioners as directors of the first respondent company. He has also produced Form 32 filed with the Registrar of Companies under s. 303, sub-s. (2), of the Companies Act, in which the names of petitioners Nos. 1 to 4 and 6 are shown as directors. As against this, the first respondent-company in its affidavit does not admit that the petitioners hold fully paid up shares of the company. It has further stated that the petitioners were allotted one share each as a 'qualification' share, butt the petitioners did not pay for even this share and hence the allotment was cancelled.

4. Mr. Barve submitted that under the articles of association of the first respondent-company it is not necessary for a director to hold any shares in the comany. He has, therefore, submitted tha Form 32 does not support the petitioners' claim that they are members of the company. If it was not necessary to have any qualification shares for becoming directors, it is difficult to understand why the company offered such qualification shares. Mr. Barve has further that the petitioners were only appointed as additional directors and they ceased to hold office as directors after September 30, 1977. The company has, however, failed to produce any record which would show that the petitioners Nos. 1 to 4 and 6 ceased to hold office as directors after September, 30, 1977. The company has, however, failed to produce any record which would show that the petitioners NOs. 1 to 4 and 6 ceased to hold office as directors after September, 1977. It is also unable to explain how petitioner No. 5 came to be prosecuted as a director of the company in 1982. Who is and who is not a director or shareholder of a company is not a matter of conjecture. A company which manages its affairs even with a modicum of efficiency ought to be able to produce enough material from its records to show who were its directors at the material time.

5. It is true that in the petition the petitioners have not set out the number of shares held by them. They have, however, been treated as directors of the company. The petitioners have submitted that they constitute more than 1/10th of the total number of members of the company (6 out of 11). The first respondent company in its affidavit has merely not admitted these statements. It has not denied that the petitioners do not consitute 1/10th total number of members. In view of the unsatisfactory state of pleadings and a total lack of records of the company, I am not inclined to hold that the petitioners are not members of the company or have not the requisite capacity to file the present petition.

6. In the present case, in view of the peculiar circumstances, no reliance can be placed on the company's register of members. The company admittedly does not posses statutory records. The company held its annual general meeting for the first time after the year 1977, only after the filing of the present petition. The company has received large amounts from the petitioners for equity shares as borne out by the receipts. It is not possible to know whether these amounts are reflected in the company's books for the relevant years since no such books have been produced. No. documents have been produced on behalf of the respondents which will go to show that the affairs of the company are being conducted in accordance with the provisions of the Companies Act or otherwise regularly, or that the company maintains proper records as prescribed under the Companies Act. All the documents produced in court indicate to the contrary.

7. The petitioners have, in the present petition, asked for removal of respondents Nos. 2 and 3 as directors and appointment of new directors. In my view, this is a fit case where an administrator should be appointed for the first respondent company for a period of three years so that the administrator can set the company's house in order.

8. Accordingly, I direct that the official liquidator be appointed as the administrator of the company for a period of three years. At the end of the period of three years the administrator will hand over charge of the company to a new and properly constituted board of directors of the first respondent company. The respondents to pay to the petitioners costs of the petition.


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