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Vacation of office of Director

MARBLE CITY HOSPITAL AND RESEARCH CENTRE P.LTD V. SARABJEET SINGH MOKHA [2010] 155 COMP CAS 13 (MP)] RAJENDRA MENON J DECIDED ON 17.07.2009 Companies Act, 1956 – Sections 53, 193, 194 and 283(1)(g) –Vacation of the office of director due to  failure to attend three consecutive meetings whether removal of director is valid – held, no Brief Facts: The respondent and the appellants were subscribers to the memorandum of association of the company and had equal shareholding in the company which was in the nature of a quasi-partnership. By a notice , the respondent was informed that he had ceased to be a director in terms of section 283(1) (g) of the Act. He filed a petition alleging oppression on the grounds that no notices of meetings were served on him and in reply to the petition the appellants disclosed that by issue of further shares respondent’s shareholding had reduced. The petitioner challenged the allotment of the shares on the grounds that it was oppressive to him. The Company Law Board (Board), inter alia., found that the factum of issue of notices and also the factum of holding of the meetings had not been established and it reinstated the respondent as a director and the appellants were directed to restore the respondent’s percentage in shareholding. The Board refused to accept the certificates of posting as proof of service of notice on the ground that collateral evidence like dispatch register, register showing payment of postage stamps, accounts books, etc. , were not adduced. Appellants challenged this ruling before the High Court. Decision: Appeal dismissed. Reasons: That mere filing of postal certificates would not give rise to a presumption of service of notices. There was no evidence regarding posting of the letter or documenting its posting or affixing adequate stamps. No presumption could be drawn to hold that the postal certificates were proof of sending the notices to the respondent. (Madhusoodhanan (M. S.) v. Kerala Kaumudi P.Ltd [2003] 117 comp cas 19 (SC) relied on). The onus of proving the fact that the notices were sent on the appellant- company and it had failed to discharge this onus by adducing cogent, legal and admissible evidence. Therefore, the sending of notices for the five board meetings and its service on the respondent, who was one of the founder directors of the appellant- company, was not proved. The affidavit filed by the employee of the company to show personal service of notices lacked specific particulars and details. The copies of notices carried by him did not form part of the affidavit. The appellants failed to prove service of the notices on the respondent personally through the employee of the appellant-company. When the law contemplated a procedure for services of notices, then without service of notice and intimation of the meeting being proved in accordance with law, no presumption could be drawn merely because the respondent was involved in some criminal case or was absconding or on the ground that he was not available to civil society. The allotment of shares had been made without proper notice to the respondent and the findings recorded by the Company Law Board regarding allocation of shares did not warrant any interference.
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