rajiv (director) 23 June 2011

CLB proceeding

Problem – Company X formed in Mumbai has three shareholders Mr A, Mr B and Mrs B.

Mr A has 50%, Mr B has 47.5% and Mrs B has 2.5%. Mr B and Mrs B are directors.

(Mr A is a nephew of Mr B).

Mr B falls ill. The company decides to appoint Mr A as a director. Resolution is passed and signed by both the directors ( Mr & Mrs B). The company accountant is instructed to carry out the formalities ( PAN card, DIN number and form 32 etc.). While the PAN & DIN applications are progressing, sadly Mr B expires. From hereon Mrs B stops co-operating and ignores information request from Mr A. She appoints her sister as a director.

Mr A starts a civil suit but no CLB case is started.

While civil suit is continuing, Mrs B appoints additional director and increases her shares without any notice to Mr A. Mr A now has less than 10% shares.

Questions – Is mismanagement under section 397, 398 the best proceedings or some other proceeding would be better?

Question – Do I have to file a petition first and then the application to CLB?

What r the differences?

Reply Follow

5 Replies

Advocate Rajkumarlaxman (Advocacy) 23 June 2011

You can file both but on separate cause of action not same. diff proceedings

murali (legal advisor) 23 June 2011

Good day Mr. RAjiv

in fact, no civil suit shall be entertained in view of Directors, the civil courts have no jurisidriction to entertain the cases against Directors, its purely internal affaris of the compnay. no court will interfered. further, whether u confirm, your appointment formalites have been filed with ROc or not? even though, from the date of the passing of resolution, you are treated as director, despite Mr. B expired.

my opnion is, better to ask Mrs. B in writting, what you want to ask, if any pending issues which reflects in the day to day affairs of the Company and which are related to compnay's business. in fact, its not comes under Mismanagement, until unless you may prove something should be against or contrary to the fundementals or loss to the Company and prejeducial to public interest. and any material changes in the Company, then only you can file before CLB.

Thanks

MURALI VASIREDDY

Company secretary

rajiv (director) 24 June 2011

Thank you Murali ji.

I have written to Mrs B several times. I do not receive any reply.

If Mr A should be treated as director, I believe Mrs B has conducted the company affairs contrary to the fundamentals. She has appointed other directors, increased her shares and not notified of AGM to Mr A.

rajiv (director) 24 June 2011

Rajkumar ji,

Do I have to file a petition and an application at CLB under s.397, 398. If yes please explain why and the reason and benefits.

thks for ur help.

rajiv (director) 29 August 2011

Murali ji,

You kindly answered my question recently. Thaks for that.

I want further help (if you have question before you reply then please ask).

Mr. B died in January 2007.

I have obtained some ROC documents. Documents show –

Statement of shareholding of March 2007 shows Mr. A 50% shareholder, Mr. B 48% shareholder and Mrs. B 1% shareholder.

Form 32 shows after death of Mr B, Mrs. B appointed a director without Mr. A’s knowledge in 2007.

March 2007 shareholding changed – Mr A 50% Mrs. B 50%. Mr A was not informed. Also how she can transfer her deceased husband’s share without probate ?

Special Resolution passed March 2009 to increase authorised share capital. This decreases the shareholding of Mr A to less than 10%. Form no. 5 filed in December 2009.

Resolution & Form 32 show another director is added in 2010.

I have given you rough picture of what is being done by Mrs B without Mr A’s knowledge.

The company only owns a land and factory. The factory is rented out. The company does not have any other property or business.

I want to know exactly what proceeding I can start.

Your help is appreciated.

Murali ji what city are u based in?

Regards.