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IN THE HIGH COURT OF JHARKHAND AT RANCHI
APARESH KUMAR SINGH, J.
Nand Kumar Singh – Appellant
Versus
Indica Composite Private Limited – Respondent
Company Appeal No. 03 of 2014
Decided On : 02-04-2018
The court held that the allotment of shares and increase in authorized capital of the company by the respondents were illegal and void. The court also held that the resignation of the petitioner as a director of the company was not voluntary and that he was entitled to be restored to his position as a director. The court further held that the respondents were not holding the shares of the company as trustees for the petitioner and that the petitioner was not the only legal beneficiary of the shares.
Fact of the Case:
The petitioner, a promoter-director of the respondent company, filed a petition under section 397, 398, 399, 402 and 403 of the Companies Act, 1956, alleging that the respondents, his brothers, were holding shares of the company as trustees for him and that they had illegally increased the authorized capital of the company and allotted shares to themselves. The respondents denied the allegations and claimed that the petitioner had voluntarily resigned as a director of the company.
Finding of the Court:
The court found that the allotment of shares and increase in authorized capital of the company by the respondents were illegal and void. The court also found that the resignation of the petitioner as a director of the company was not voluntary and that he was entitled to be restored to his position as a director. The court further found that the respondents were not holding the shares of the company as trustees for the petitioner and that the petitioner was not the only legal beneficiary of the shares.
Issues: Whether the allotment of shares and increase in authorized capital of the company by the respondents were illegal and void.
Ratio Decidendi: The court held that the allotment of shares and increase in authorized capital of the company by the respondents were illegal and void because they were not in accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the company. The court also held that the resignation of the petitioner as a director of the company was not voluntary because it was made under duress.
Final Decision: The court allowed the appeal and set aside the impugned order of the Company Law Board. The court also restored the petitioner to his position as a director of the company.
1. Heard learned counsel for the parties.
2. This appeal under Section 10(F) of the Companies Act, 1956 is directed against the order dated 24.09.2013 passed by the learned Company Law Board (CLB), Kolkata Bench in Company Petition No. 04 of 2012.
3. The appellant herein approached the CLB under section 397, 398, 399, 402 and 403 of the Act of 1956 inter-alia asserting as follows:-
That petitioner is the Promoter-Director of the Respondent Company and the virtual owner of the Company. The Respondent Company was incorporated on 01.11.1999 to carry on the business of manufacture and sale of automobile components. The directors and subscribers of memorandum of the Respondent Company were (a) Nand Kumar Singh (petitioner); (b) Narayan Jha; (c) Kavita Mishra; (d) Rajeev Ranjan Singh (respondent no. 2) and (e) Rakesh Kumar Singh (respondent no. 5). All the aforesaid persons subscribed 500 shares each of Rs. 10/- aggregating Rs. 25,000/- comprised in 2,500 shares of Rs. 10/- each against the authorized capital of Rs. 20,00,000/- divided into 2,00,000 shares of Rs. 10/- each. The paid up share capital as per the annual return for the financial year 2005-06 was Rs. 1,75,000/- divided into 17,500 shares of Rs. 10/- each as per the details of the shareholdings furnished as under:-
| S. No. | Name | No. of Shares | Nominal value per share (Rs.) | Total Value (Rs.) | % of Shareholding |
| 1 | Nand Kr. Singh (the petitioner) | 3325 | 10/- | 33,250/- | 19.00% |
| 2 | Rajeev Ranjan Singh (R-2) | 3325 | 10/- | 33,250/- | 19.00% |
| 3 | Rakesh Kr. Singh (R-5) | 3325 | 10/- | 33,250/- | 19.00% |
| 4 | Ashutosh Kr. Singh (son of petitioner) | 50 | 10/- | 500/- | 0.29% |
| 5 | Kumar Prabhakar Singh (son of petitioner) | 75 | 10/- | 750/- | 0.43% |
| 6 | Kamla Singh (wife of petitioner) | 375 | 10/- | 3,750/- | 2.14% |
| 7 | Menka Singh (wife R-2) | 375 | 10/- | 3,750/- | 2.14% |
| 8 | Sanjay Kr. Singh (R-4) | 3325 | 10/- | 33,250/- | 19.00% |
| 9 | Abhijit Kr. Singh | 3325 | 10/- | 33,250/- | 19.00% |
|
| Total | 17500 | 10/- | 1,75,000/- | 100.00% |
4. Respondent no. 2 to 5 are brothers of the promoter-director/petitioner. These shareholders were holding shares as trustees and the sole beneficiary is the petitioner himself as all such moneys against such shares were paid by the petitioner himself. Production and other operational parts were looked after by the petitioner while the finance, accounts and other legal compliances were delegated to his brother Rajeev Ranjan Singh, respondent no. 2. The shareholding, as reflected in the annual return for the financial year 2006-07 pursuant to the transfer of certain shares to the family members are also furnished as under:-
| S. No. | Name | No. of Shares | Nominal value per share (Rs.) |
| 1 | Nand Kr. Singh (the petitioner) | 3325 | 10/- |
| 2 | Rajeev Ranjan Singh (R-2) | 3325 | 10/- |
| 3 | Rakesh Kr. Singh (R-5) | 3325 | 10/- |
| 4 | Abhijit Kr. Singh (R-3) | 3325 | 10/- |
| 5 | Sanjay Kr. Singh (R-4) | 3325 | 10/- |
| 6 | Ashutosh Kr. Singh (son of petitioner) | 50 | 10/- |
| 7 | Kumar Prabhakar Singh (son of petitioner) | 75 | 10/- |
| 8 | Kamla Singh (wife of petitioner) | 375 | 10/- |
| 9 | Menka Singh (wife R-2) | 375 | 10/- |
5. As per the annual return for the financial year 2007-08, the shareholding pattern of the respondent company is as follows:
| S. No. | Name | No. of Shares | Nominal value per share (Rs.) | Total Value (Rs.) | % of Shareholding |
| 1 | Nand Kr. Singh (the petitioner) | 16725 | 10/- | 1,67,250/- | 11.49% |
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