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2006 DIGILAW 1342 (DEL)

E. SHANMUGAM v. APS CAM-O-MATEC PVT. LTD.

2006-08-10

SANJIV KHANNA

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( 1 ) THIS appeal has been filed under Section 10f of the Companies Act. 1956 (hereinafter referred to as the Act ). ( 2 ) THE appellant herein was a Director of APS CAM-O. MATEC Private limited (the respondent company) and was/is holding 40 shares. The balance 200 shares were equally held by Mr. Surjit Singh and Mr. Lakhbir Singh. Thus, the appellant held 16. 66% of the paid up capital and the balance 83. 32% were held by the respondent group. This shareholding pattern continued till fresh shares were issued on 9th December, 2002. 9760 additional shares were allotted to Mr. Lakhbir singh and after the said allotment the shareholding of the appellant got reduced from 16. 66% to barely. 004%. ( 3 ) IT is admitted by the Counsel for the parties that further shares were issued on 9th December, 2002, pursuant to the direction given by the Ministry of company Affairs that minimum paid up share capital of a company should be Rs. 1 lac. ( 4 ) DISPUTES and differences arose between the appellant on one side and Mr. Surjit Singh and Mr. Lakhbir Singh on the other side and in June, 2004 a petition under Sections 397-398 for oppression and mismanagement was filed by the appellant before the Company Law Board. The said petition has been disposed of by the impugned order dated 27th June, 2005. ( 5 ) LEARNED Counsel appearing for the appellant submitted that the impugned order is perverse and, therefore, a substantial question of law arises out of the order dated 27th June, 2005. He has specifically referred to the observations made by the company Law Board in paragraphs 19 and 20 of the impugned order. It is submitted that the finding of the Company Law Board that the petitioner had not come before the Board with clean hands, is factually incorrect. It is further submitted that the finding of the Company Law Board that loan of Rs. 2. 50 lacs was given to the appellant is also not correct. It is stated that Rs. 2. 50 lacs was given to the appellant as an imprest amount for meeting misc. expenditure and was not a loan. ( 6 ) LEARNED Counsel for the appellant also refers to averments made in the rejoinder written submissions, wherein allegation was made that Rs. 51. It is stated that Rs. 2. 50 lacs was given to the appellant as an imprest amount for meeting misc. expenditure and was not a loan. ( 6 ) LEARNED Counsel for the appellant also refers to averments made in the rejoinder written submissions, wherein allegation was made that Rs. 51. 76 lacs representing the sale proceeds of the respondent company have been diverted and siphoned by the respondent Directors. ( 7 ) LEARNED Counsel for the respondents on the other hand, submitted that impugned order is just and fair and no substantial question of law arises. Directions have been given for valuation of 40 shares held by the appellant by a Chartered accountant on the basis of the balance sheet of the company as on 31st March, 2003. He also points out that directions have also been given with regard to payment of arrears of the salary payable to the appellant @ Rs. 30,0007- per month after adjusting Rs. 2. 50 lacs, which was given in advance as imprest amount to the appellant. It is stated that no account has been rendered by the appellant for Rs. 2. 50 lacs. ( 8 ) DURING the course of hearing, however, the learned Counsel for the respondents agreed and has given a concession that the valuation of 40 shares held by the appellant can be made on the basis of paid up share capital prior to issue of further shares on 9th December, 2002. ( 9 ) I have examined contentions of the parties. The appeal under Section 10f of the Companies Act, 1956 is maintainable only on a question of law and not on a question of fact. A perverse order is one, which is contrary to the facts and evidence on record and an order which no reasonable adjudicating authority would pass after examining the material placed before it. ( 10 ) THE fact that the appellant has signed the balance sheet as on 31 st March, 2003, is an admitted position. In this balance sheet the issue of fresh shares on 9th december, 2002 was duly reflected. Thus, the finding of the Company Law Board that fresh shares were issued with the knowledge and approval of the appellant, cannot be regarded as perverse. The appellant by his conduct had accepted and agreed to issue of fresh shares to the respondents. In this balance sheet the issue of fresh shares on 9th december, 2002 was duly reflected. Thus, the finding of the Company Law Board that fresh shares were issued with the knowledge and approval of the appellant, cannot be regarded as perverse. The appellant by his conduct had accepted and agreed to issue of fresh shares to the respondents. Nothing on record was filed to show and establish that the appellant had protested against issue of new shares to the respondent group in December, 2002. Memorandum of Understanding dated 15th July, 2000 was with Mahle Migma Ltd. and not the respondent-company. Even otherwise by conduct, it was modified and altered. The appellant was fully aware of the issue of fresh shares and has signed balance sheet for year ending 31. 3. 2003 without any reservation and protest. The petition under Sections 397- 398 was filed 18 months after the issue of the new shares. ( 11 ) THE appellant concealed the fact that he had signed balance sheet and accounts for the year ending 31st March, 2003. He should have filed copy of the balance sheet for the year ending 31st March, 2003 before the Company Law board. On the other hand, he made allegations that fresh shares were issued to the respondent group without his knowledge and information. This is factually incorrect. ( 12 ) IT is also an admitted fact that the appellant is now working on his own and has floated two companies in competitive business. ( 13 ) IN these circumstances, I find that directions issued by the Company Law board for valuation of shares held by the appellant are justified. The Company Law board has also issued directions for payment of arrears of remuneration @ Rs. 30,000/- per month. The question whether Rs. 2. 50 lacs, which was advanced to the appellant and has been duly accounted for, is a matter of accounts. This Court need not go into this aspect. If required, the appellant and the respondent can approach company Law Board. ( 14 ) WITH regard to allegation of siphoning and diversion of funds of Rs. 51. 76 lacs, there is no such averment in the petition under Sections 397 and 398 of the Act. No application/pleading was also filed by the appellant making the above allegation. If required, the appellant and the respondent can approach company Law Board. ( 14 ) WITH regard to allegation of siphoning and diversion of funds of Rs. 51. 76 lacs, there is no such averment in the petition under Sections 397 and 398 of the Act. No application/pleading was also filed by the appellant making the above allegation. Learned Counsel for the respondent on the other hand submitted that the deposits made by the family members of the respondent group were repaid. ( 15 ) AN appeal under Section 10f of the Act is maintainable only on a question of law arising out of the impugned order. Allegation which was not examined or raised before the Company Law Board cannot be raised before the High Court for the first time in an appeal under Section 10f of the Act. (Refer Seth Pushalal mausinghka (P) Ltd. v. CIT, AIR 1967 SC 1626 and CIT v. Scindia Steam navigation Co. Ltd. , AIR 1961 SC 1633 ). ( 16 ) IN view of the above, I do not find any merit in the present appeal and the same is dismissed. However, it is clarified that valuation of 40 shares of the appellant, will be made on the basis of the paid up share capital prior to 9th december, 2002, in view of the concession and consent of the learned Counsel for the respondents. Appeal dismissed.