JUDGMENT 1. These two appeals arise out of the order passed by the Company Law Board ('CLB') -Mohamed Ataulla v. Central Park Farm & Developers (P.) Ltd. [2008] 86 CLA 210 (CLB) : [2008] 145 Comp Cas 193 in a petition filed under Sections 397, 398, 402, 403 and 406 of the Companies Act, 1956 ('the Act') issuing certain directions. 2. Aggrieved by the said order, the parties have preferred these two. appeals to the extent they are affected. Both the appeals are taken up for consideration together and disposed of by this common order. As we are not deciding these appeals on the merits, and are setting aside the order passed by the CLB on procedure of irregularity, it is not necessary to set out in detail the pleadings of the parties before the Board. 3. The Appellants in Company Application No. 4 of 2008 are the Petitioners in the company petition. They filed the petition under Sections 397, 398, 402, 403 and 406 of the Act alleging a case of oppression and mismanagement of the affairs of the company at the hands of the Respondent. The broad features of the case is as under: The company owned 9 acres 7 guntas of land, in Survey Nos. 33/1 and 33/2 situated at Nelamangala Taluk, Bangalore Rural District, which had been bought under two sale deeds dated 25th August, 1997 and 2nd March, 1998 for a total consideration of Rs. 22.94 lakh, contributed equally by the Petitioners and Respondent Nos. 2 to 6, to form sites. The company did not implement the project. The real estate market fell and, therefore, the company did not carry on any business at all. The case of the Petitioners is that Respondent No. 3, the managing director had sold an extent of 3 acres and 35 guntas of land in favour of his son Rajesh Gandhi under two registered sale deeds dated 21st July, 2006 and 30th August, 2006 for a consideration of Rs. 11,62,000 who is arraigned as seventh Respondent in these proceedings. The remaining extent of land was sold on 28th April, 2005 in favour of his nephew, Respondent No. 8 for a sum of Rs. 5,90,000. In turn, he had sold the property in favour of three persons who have developed the property. 11,62,000 who is arraigned as seventh Respondent in these proceedings. The remaining extent of land was sold on 28th April, 2005 in favour of his nephew, Respondent No. 8 for a sum of Rs. 5,90,000. In turn, he had sold the property in favour of three persons who have developed the property. The grievance is, the Respondents have increased the share capital and allotted the shares to their kith and kin as well as to themselves without notice to the Petitioners. The notice of the meeting was not served on the Petitioners. The resolution, authorising the Board to sell the property for a value which is almost equal to the value at which the company acquired the schedule properties is passed behind the back. The sale transaction is a clandestine deal of Respondent Nos. 2 to 6 without notice to the Petitioners. The company has borne the cost of stamp duty and registration charges. Form 32 is filed by Respondent No. 4 informing the Registrar of Companies ('RoC') that the Petitioners have resigned from the company, which is factually incorrect. Respondent No. 3 who resigned, has been brought back by allotment of fresh shares in a clandestine manner without there being any valid allotment of shares. In respect of allotment of shares, no money is collected or paid by the shareholders. The Respondent in collusion have defrauded the Petitioners. It is a clear case of breach of trust. In fact, Petitioner No. 1 on coming to know of the move of the Respondents to sell the property sent a telegram indicating a better sale offer for Rs. 165 lakh, which offer was not accepted nor replied to by the Respondents and, therefore, the Petitioners contend, the action of the Respondents has caused serious loss and injury to the company and interest of the shareholders and, therefore, they want a declaration that Respondent No. 3 has no authority to represent as a director of the company and execute the sale deeds in favour of Respondent Nos. 7 and 8 ; to declare that the sale of properties of the company under two sale deeds dated 28th April, 2005 by the 3rd Respondent in favour of Respondent Nos. 7 and 8 ; to declare that the sale of properties of the company under two sale deeds dated 28th April, 2005 by the 3rd Respondent in favour of Respondent Nos. 7 and 8 are null and void and not binding on the company ; to declare that Form 32, filed with the RoC notifying that the Petitioners have resigned from the directorship of the company is illegal and void ab initio ; to frame a scheme for the vesting of the properties of the company in the hands of an administrator for distribution to all the shareholders as per their original shareholding or to dispose of the properties and distribute the proceeds to the shareholders in proportionate to their shareholding; to declare that the further allotment of shares made by the company on 29th June, 2002, 30th June, 2003, 30th December, 2004 and 14th March, 2005 are illegal and void ab initio and not binding on the company and to direct the company to be wound up and distribute the proceeds of the sale of the properties in favour of the shareholders or in the alternative to distribute the properties in the ratio of the shareholding as it existed at the time of incorporation. 4. The Respondents have filed a detailed reply denying all the allegations made in the petition. It is not in dispute that both the parties did not adduce any evidence and after hearing the parties, the CLB had proceeded to pass the impugned order directing that the Petitioners shall continue as directors of the company and the company shall file necessary Form 32 with the RoC in accordance with the relevant provisions of the Act. All the allotment of shares made by the company on 29th June, 2002, 30th June, 2003, 30th December, 2004 and 14th March, 2005, being oppressive as well as illegal are set aside as null and void and consequently, its share capital stands reduced. Further it held that, the company shall rectify the register of members in respect of all the impugned shares which are set aside, by deleting the names of the concerned allottees within 30 days of the receipt of the order. However, it held that, Respondent Nos. 2 to 6 shall contribute an amount of Rs. Further it held that, the company shall rectify the register of members in respect of all the impugned shares which are set aside, by deleting the names of the concerned allottees within 30 days of the receipt of the order. However, it held that, Respondent Nos. 2 to 6 shall contribute an amount of Rs. 1,40,23,200 to the assets of the company by way of compensation on or before 30th June, 2008, failure of which shall attract 9 per cent simple interest for the period of default. The Respondents shall further execute necessary affidavit and indemnity bond as provided in the "Simplified Exit Scheme, 2005", undertaking to contribute the compensation in terms of this order, before getting the name of the company struck off from the register of companies under Section 560 of the Act, through the operation of the "Simplified Exit Scheme, 2005". The Board of directors of the company shall distribute the sale proceeds of the properties of the company in favour of all the shareholders in proportion to their shareholding, after meeting the statutory liabilities and expenses if any, before availing the benefit of the "Simplified Exit Scheme, 2005". The Bench Officer shall forward a copy of the order to the RoC, Karnataka at Bangalore, for appropriate action, in pursuance of the directions, as per Clauses (i) and (iv) here above. 5. Learned Counsel for the Respondents in the original petition assailing the impugned order contends that, the petition was filed under Sections 397 and 398 of the Act. There was an allegation of oppression and mismanagement made against the Respondents in the petition. There was no opportunity to the Respondents to meet any such case. No issues were framed. No evidence was adduced. Merely acting on the amount mentioned in a telegram, which was sent subsequent to the sale of the property, the Board has come to the conclusion that it is the market value of the property and has directed the Respondents to pay the difference amount to the company, which subsequently is to be distributed among the shareholders. This portion of the order is illegal, unsubstantiated by any legal evidence on record and, therefore, it requires to be set aside. He further contended in a proceedings under Sections 397, 398, 402 and 406, the said question cannot be gone into. This portion of the order is illegal, unsubstantiated by any legal evidence on record and, therefore, it requires to be set aside. He further contended in a proceedings under Sections 397, 398, 402 and 406, the said question cannot be gone into. It is after the conclusion of the said proceedings, if a finding is recorded that the Respondent's conduct is such that to cheat the creditors of the company or other persons or for any fraudulent purpose, then a separate application is to be filed under Section 543 of the Act and after an enquiry, if the Board is of the view that the Respondents are guilty of misfeasance or breach of trust in relation to the company, then only the order to compensate all other creditors could have been passed and, therefore, the order passed is without jurisdiction and requires to be set aside. Further, he contended that, it is well settled that proceedings under Section 543 is not a summary procedure as the ultimate order would have penal consequence. The party should have an opportunity to meet the case effectively and only after a trial, such an order could be passed. In the instant case, the order has been passed summarily without enquiry, without any evidence being adduced. The impugned order cannot be sustained. 6. Per contra, learned Counsel appearing for the original Petitioners submitted, as the allegations made in the petition are not denied by the Respondents and intact, impliedly admitted, there was no necessity for the Board to hold an enquiry or to call upon the parties to adduce evidence as the entire finding is based on admitted facts and the order cannot be found fault with, by virtue of Section 406 of the Act in relation to an application under Sections 397 and 398, Sections 504 to 539 (both inclusive) shall apply in the form as set forth in Schedule XI and, therefore, it is not the requirement of law the independent applications have to be filed in a proceedings under Sections 397 and 398. The relief under Section 543 of the Act could be granted and, therefore, he submits that, no case for interference is made out. 7. After going through the pleadings of the case, we are satisfied in the first place that the Respondents have not admitted the case of the Petitioners either expressly or impliedly. The relief under Section 543 of the Act could be granted and, therefore, he submits that, no case for interference is made out. 7. After going through the pleadings of the case, we are satisfied in the first place that the Respondents have not admitted the case of the Petitioners either expressly or impliedly. The case of the Respondents is that they have denied the case of the Petitioners. Though, some vague allegations of fraud, clandestine conduct causing loss to the shareholders ; id the company has been made out specific pleas constituting misfeasance or breach of trust in relation to the company as contained in Section 543 of the Act are missing in the pleadings of the Petitioners. Section 543 categorically provides: If in the course of winding up of a company, it appears that any person who has taken part in promotion or formation of the company, or any past or present director, manager, liquidator or officer of the company: (a) has misapplied, or retained, or become liable or accountable for, any money or property of the company ; or (b) has been guilty of any misfeasance or breach of trust in relation to the company. and, if those allegations are proved, a power is conferred on the tribunal to pass appropriate orders by way of compensation in respect of misapplication, retainer, misfeasance or breach of trust. There is a catena of decisions of the Apex Court which has held that material particulars and allegations are a must to be considered by the court. Once those material allegations are denied, certainly, the parties should have an opportunity to adduce evidence to prove the respective cases. The forum or the authority conducting such an enquiry should frame issues or points for consideration and then record evidence and hear the parties and then decide the case on merits on the basis of the legal evidence adduced before it. In the instant case, admittedly, no issues are framed, no evidence is adduced by either of the parties. The Board has not called upon the parties to adduce evidence and merely on the allegations in the petition and on counter objections, the Tribunal has proceeded to record the findings, assuming the case of misfeasance. In the instant case, admittedly, no issues are framed, no evidence is adduced by either of the parties. The Board has not called upon the parties to adduce evidence and merely on the allegations in the petition and on counter objections, the Tribunal has proceeded to record the findings, assuming the case of misfeasance. In fact, the entire finding of the tribunal is based on the consideration mentioned in a telegram, which was sent two and half months after the actual sale of the property. Unless the Board recorded a finding that the value of the property was worth Rs. 1.65 crore on the day, the property was sold, such a finding could not have been recorded. Merely because the Petitioners mentioned in the legal notice or in a telegram the value of the land by way of offer it cannot form the basis for recording the said finding. In the instant case. Regulations framed by the Board do not provide for adducing evidence. These material allegations should be established by the acceptable evidence. It cannot be based on mere say or the personal knowledge of this Board members. In that view of the matter, the order passed by the Board does not satisfy the requirement of the law. The procedure adopted is illegal. The findings recorded are without any basis. In that view of the matter, we deem it proper to set aside the matter, remand the matter to the Board to permit the parties in the first instance to amend the pleadings, if they want to amend the pleadings and then frame necessary issues, then afford an opportunity to adduce evidence, and then afford an opportunity to the parties to cross-examine the opposite witnesses and after hearing them, the tribunal to record findings on the merits. That is the settled legal position as contained in the statutory provisions as well as the judgments and the law laid down by the Apex Court. That would meet the ends of justice. Hence, we pass the following: ORDER (i) The appeals are allowed. (ii) The impugned order is set aside. (iii) The matter is remanded to the Board with a direction to frame the issues, permit the parties to adduce evidence in respect of their case. (iv) Permit them to cross-examine the witnesses who are examined in support of their respective cases. Hence, we pass the following: ORDER (i) The appeals are allowed. (ii) The impugned order is set aside. (iii) The matter is remanded to the Board with a direction to frame the issues, permit the parties to adduce evidence in respect of their case. (iv) Permit them to cross-examine the witnesses who are examined in support of their respective cases. (v) To hear the parties, after conclusion of the trial and to pass appropriate orders in accordance with law. (vi) The parties shall appear before the Board on 15th September, 2010 without waiting for any notice from the Board. Thereafter, the Board shall make every endeavour to complete with the trial and pass orders within six months therefrom, (vii) Parties to bear their own costs.