Company Law Board (CLB), Mumbai Bench, rejected rectification of Register of Members pursuant to Section 111(4) & 111 A of the Companies Act, 1956 (now Section 58 & 59 of the Companies Act, 2013). (Re: M/s Badve Engineering Limited in CP No 19 of 2013)
Background:
The Board of Directors of M/s Badve Engineering Limited [CIN U73100MH1996PLC102827] (Company) allotted 1,400 Equity shares of Rs. 10/- each at a premium of Rs. 4,990/- per shares, in its meeting held on 31st March, 2012. The allotment was made to three (3) existing shareholders of the Company pursuant to Section- 75 of Companies Act, 1956. The company clerk filled form 2 and wrongly entered the number of Equity shares as 7,00,000 instead of 1,400 Equity shares and also did not fill up the premium amount of Rs. 4,990/- per share. Again, the Company allotted 18,600 Equity shares of Rs. 10/- each at a premium of Rs, 4,990 per equity share at its Board Meeting held on 21st May, 2012 but while filing form 2, the number of equity shares were wrongly entered as 93,00,000 instead of 18,600 and the premium amount was not duly filled.
As per the contention of the Company, the said forms were filled wrongly in totality mentioning the wrong figures in respect of equity shares and the same were approved and taken on records by Registrar of Companies (ROC), Mumbai.
During amalgamation with its group company, the company officials came to know about this mistake in Form no 2 and immediately took up the matter with the Ministry of Corporate Affairs (MCA). However, MCA directed to take up the said matter with the concerned ROC. The ROC informed that it had no power to correct the above Form no. 2 and advised the Company to approach the CLB, Mumbai Bench. The Company filed a petition before the CLB stating that the mistake in filing form 2 was caused due to oversight and did not involve any willful malafide intention also that and no creditor or shareholder would be prejudiced.
CLB Observations:
- Company claiming an inadvertent typographical error in the forms is extremely doubtful as it is evident that the issued, subscribed and paid up share capital was Rs.29,42,200 during the year 2010-11 and Rs.99,42,200 (Rs.29,42,200+Rs.70,00,000) during the year 2011-12 which was duly Audited by the Auditors. No premium was paid as has been shown in the Balance Sheet
- The Company also did not attach the list of allottees and board resolutions to the Form 2 due to which the details allotment of shares and the amount paid per share could not verifiable.
- Regional Director, Western Region, Mumbai in his report stated that in order to accommodate the two allotments of shares 7,00,000 equity shares of Rs.10/- each on 31/03/2012 and 93,00,000 equity shares of Rs.10/- each, the company increased its Authorized Share Capital from Rs.17,500,000 to Rs.115,000,000/-and filed Form 5. The same fact was confirmed in the Compliance Certificate issued by Practising Company Secretary and filed with the ROC in Form 66 and the Company also declared dividend @ 10% which includes dividend on 7,00,000 equity shares of Rs.10/- each which clearly indicates that the company had allotted 7,00,000 equity shares of Rs.10/- each at par and not with premium of Rs.4,990/- as claimed. Annual Return made as on 13/08/2012 filed in form 20B certified by Chartered Accountant clearly indicates that the paid up capital of the company was Rs.10,29,42,200 which included subsequent allotment of 93,00,000 equity shares of Rs.10/- each.
- It is evident that the records of ROC reveal that shares were allotted at par without premium of Rs.4,990/- as claimed by the Company and not rectified the typographical errors while filing balance sheet and annual return which are in agreement with the both Form 2’s which were certified by the Auditors. While the issue was pending before the CLB, the company reduced its paid up share capital from Rs.10,29,42,200 to Rs.31,42,200 without compliance of procedures as contemplated for reduction of capital under Section 100 of the Companies Act, 1956 and without seeking confirmation of the Hon’ble High Court.
Decision:
The Company gave no justification on the amendment in the share holding pattern of the company u/s. 111A of the Companies Act, 1956. It was difficult to accept the version that the errors were committed by the clerk of the Company and have happened due to inadvertence and are bonafide. It can hardly be believed that such major mistakes can be repeated one after another by a Company and go unnoticed by the signatories who signed the statutory forms and the Auditor’s Reports.
CLB came to the definite conclusion that the petition is malafide, collusive and has been made with an oblique motive. It deserves to be rejected out rightly. The petition was rejected. The concerned ROC, Mumbai was directed to take immediate appropriate action as per law against the Officer(s) in default of the Company who were responsible for committing these illegalities and also Ordered Director (Inspection), MCA, New Delhi and SEBI for necessary action.