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2010 DIGILAW 140 (KAR)

S. Kunjithamala v. HVAC Systems P. Ltd.

2010-02-03

D.V.SHYLENDRA KUMAR, N.ANANDA

body2010
JUDGMENT D.V. Shylendra Kumar, J.—This is an appeal under Section 10F of the Companies Act, 1956 (for short "the Act") directed against the order dated November 30, 2009, passed by the Company Law Board, Additional Principal Bench, Chennai, purported to be in C.A. No. 35 of 2009 in pending Company Petition No. 41 of 2005 which is in the form of a memo filed by the company petitioners on July 14, 2009, seeking for the following prayers: (A) To direct the present auditor Sri C.R. Murali's appointment as chartered accountant for verification process is withdrawn, forthwith. (B) Direct an independent auditor from Bangalore be appointed from a panel of names to be suggested by the Karnataka Association of Chartered Accountants. (C) Direct that the report of the verification and scrutiny for the purposes of quantification of misappropriation, fraud and defalcation of accounts of respondent No. 1 by respondent No. 2 be submitted by October 1, 2009. (D) Pass such other and further orders that this hon'ble court may deem fit in the facts and circumstances of the case. 2. It was also accompanied by an affidavit sworn to by the first petitioner - the first appellant herein who is described as the managing director of the first respondent-company as submitted by Sri G.V. Rao, learned Counsel appearing for the appellants. 3. The application, it appears was for the purpose of changing the auditor by name C.R. Murali who had been appointed earlier by the very Company Law Board (for short "the Board") on January 13, 2006 and with the consent of the parties to look into the aspects of the manner and management of funds of the company and as to whether the person in charge of the management had acted to the detriment of the other person, etc. 4. The application itself was made in the pending Company Petition No. 41 of 2005, which is one under Sections 397 and 398 of the Act by the person who claims to be the managing director figuring as the first petitioner and her two minor children figuring as petitioners Nos. 4. The application itself was made in the pending Company Petition No. 41 of 2005, which is one under Sections 397 and 398 of the Act by the person who claims to be the managing director figuring as the first petitioner and her two minor children figuring as petitioners Nos. 2 and 3 and directed against the company of which she herself is the managing director with the company figuring as the first respondent and the second respondent to the company petition, being one L. Vivekananda who according to the appellants-petitioners, is the only other shareholder of the company, but there being dispute as to the extent of shareholding by this respondent and further the third respondent to the petition being the financier of the company. 5. It is because the Board rejected the prayer of this nature for changing the auditor who was required to go into the aspects mentioned above, against whom the appellants-petitioners made themselves bold to allege professional misconduct, etc., and the Board examining this application which had been joined issue by the respondents, particularly, the second respondent by filing objections, etc., found that the prayer was not a practical one, particularly, with the auditor having been appointed as per order dated January 13, 2006 and only for the purpose of submitting a report to the Board on the question of the extent of misappropriations and ironically both company petitioners and the second respondent who are the only two shareholders of the company, trading charges against one another and to ascertain the existence of any truth in such allegations and also to value the shares of the company so that the second respondent who it appears had agreed to exit if commensurate price is paid to the shares held by him on a proper valuation, etc., the Board opined it was proper to dismiss the application. 6. It is because the second respondent also objected that the matter has already prolonged for quite some time and with an element of possibility only to settle the matter as between the two warring shareholders and with the second respondent having offered to exit from the company if the shareholding should be sufficiently compensated while the matter with regard to valuing the shares may have some significance and it is only for that purpose appointing another auditor was found not feasible by the Board and the application was dismissed. 7. It is aggrieved by this order, the present appeal. 8. Appearing for the appellants Sri G.V. Rao, learned Counsel has made very vehement submissions that the appellants have been subjected to untold harassment, misery and what not; that the first appellant in particular has suffered a lot in life; that she is looking up to succour and relief before the adjudicatory forums and in such circumstances, until and unless the application was allowed by the Board, she apprehending further damage and adverse possibilities against the interest of herself and her minor children, the matter warrants interference, etc. 9. The impugned order is an order passed in a pending company petition under Sections 397 and 398 of the Act and for modification of an earlier order on an earlier interim application and a consent order. 10. Though Sri Rao, learned Counsel for the appellants has taken us through the provisions of Sections 539 - 544 of the Act and submits that these sections enable filing of a complaint and prosecution being launched against the erring persons who are in the management of the company, etc., they are all neither relevant nor can be subject-matter for an appeal of the present nature seeking for change of an auditor who had been earlier appointed by the Board with the consent of the parties and as prosecution proceeding is an independent proceeding which is independent of the application under Section 397 of the Act and it is open for the appellants to pursue this matter elsewhere, but not through a company application presented under Section 397 of the Act and therefore we reject this submission. 11. Professional misconduct is not a matter which normally the Board examines and neither this court examines any such sundry matters and professional misconduct of the chartered accountant is a matter for the Institute of Chartered Accountants which is the disciplinary body. If the appellants have not been advised properly and in our understanding we find that she has been sufficiently taken for a ride in protracting this litigation for so long. Be that as it may, this is not a matter warranting interference with the order passed by the Board impugned in this appeal under Section 10F of the Act. 12. Accordingly, this appeal is dismissed. 13. Be that as it may, this is not a matter warranting interference with the order passed by the Board impugned in this appeal under Section 10F of the Act. 12. Accordingly, this appeal is dismissed. 13. With the dismissal of the main appeal itself, all the applications filed in this appeal do not survive for consideration and are hereby dismissed.