1. In this order, I am considering three petitions, CP 72 of 2000 filed under sections 397/398, CP 5(111A)ERB/2000 filed under section 111A and CP 46 of 2001 filed under section 543/544 of the Companies Act (the Act) as all these petitions were heard together.

2. The petitioners claiming to hold 14.12% shares along with those who have given their consent have filed the petition CP 72/2000 under section 397/398 of the Companies Act, 1956 (the Act) with the main allegation that the respondent directors managing the affairs of M/s. Grab Tea Company Limited (the company) are guilty of siphoning off the funds of the company to a tune of more than Rs. 1 crore. According to them, the Income-tax Authorities conducted a search and seizure operation and ordered a block assessment for 10 years as a result of which the company became liable to pay Rs. 66.28 lacs as tax towards undisclosed income and therefore, the undisclosed amount should have been more than Rs. 1 crore and this amount should have been siphoned off by the respondent directors. This is the main allegation in the petition.

3. The respondents have raised a preliminary objections on the maintainability of this petition in terms of section 399 of the Act, on the ground that the petitioners together with the consenting shareholders had acquired shares with a mala fide intention of taking over the control of the company and in violation of SEBI (Substantial Acquisition of Shares and Take Overs) Regulations, 1997 (Take Over Regulations). According to the respondents, they came to know of the petitioners acquiring the shares acting in concert only when they had disclosed their shareholdings in the petition. The company later on filed CP 5(111A) ERB/2000 under section 111A (3) of the Act seeking for rectification of the Register of Members by deleting the names of the respondents in respect of shares acquired beyond 5% for their having contravened the provisions of Take Over Regulations. During the pendency of the proceedings, the petitioners filed CP 46 of 2001 invoking the provisions of sections 542 and 543 read with Schedule XI of the Companies Act against the respondents. All the petitions were heard together.

4. Since the maintainability of the petition CP 72/2000 has been challenged in terms of section 399 of the Act, it is necessary to examine this section. In terms of this section, to maintain a petition under section 397/398, in case of a company having a share capital, the petition should be filed by members having 10% or more of the subscribed capital or constituting 10% of the total membership of the company or by a member/members who have obtained consent of the rest. In the present case, there are two petitioners and they have obtained the consent of 13 shareholders. The total percentage of shareholding held by the petitioners and the members who have given the consent account to 14.12%. Thus, on the day of presentation of the petition, the petitioners fulfilled the requirements of section 399 of the Act. However, the respondents are questioning the validity of the shareholdings by the petitioners and their supporters. If, in a petition, the legality of the acquisition of the shares or the factum of holding shares, the strength on which the petition is filed, is challenged in terms of section 399 of the Act, this Bench has to examine the same and give its findings, before proceeding with the merits of the case as held by this Board in Mega Resources v. Bombay Dyeing & Mfg. Co. Ltd. [2002] 1 CLJ 347. Since the legality of the acquisition of the shares is also challenged independently and seeking for rectification of the register of members of the company in CP 5(111A) ERB/2000, I am dealing with that petition first as a finding on this petition would be material to decide the maintainability of the petition under section 397/398.

5. Since certain definitions of the Regulation are relevant in deciding this petition, I am extracting the same :

Regulation 7 reads :

"Acq