MANU/KE/0975/2016

Equivalent/Neutral Citation: [2016]135C LA183(Ker), [2016]199C ompC as85(Ker), (2017)1C ompLJ381(Ker), ILR2017(1)Kerala684,
2016/KER/26840

IN THE HIGH COURT OF KERALA AT ERNAKULAM

Company Appeal No. 13 of 2015
Decided On: 17.06.2016
Ayoli Abdulla Vs. Meezan Realtors Pvt. Ltd. and Ors.
Hon'ble Judges/Coram:
P.R. Ramachandra Menon and Anil K. Narendran, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: M.P. Shameem Ahamed, Cyriac Tom and S.K. Saju,
Advs.
For Respondents/Defendant: N.K. Santha Kumar, Cavetor, M. Gopikrishnan Nambiar, P.
Gopinath, P. Benny Thomas, Kuryan Thomas and Paulose C. Abraham, Advs.
* *Case Note:
Companies Act, 1872 (Central Act 9 of 1872) - Sections 193, 194 and 195--In
order to treat the minutes of any general meeting of the company or of any
meeting of its Board of Directors or of a committee of the Board to be
evidence, as provided under Section 194, or to draw presumption as provided
under Section 195, the minutes of such meeting have to be kept in
accordance with the provisions of Section 193--The presumption under
Section 195 is a rebuttable presumption, which can be rebutted by showing
that the minutes were not kept in accordance with the provisions of Section
193 of the Act.
The company appeal was filed by the appellant challenging the order passed
by the Company Law Board holding that the company petition filed by the
appellant was not maintainable. The reason given by the Company Law Board
is that the appellant ceased to be a shareholder of the respondent company,
on transfer of his shares to the 4th respondent and therefore the appellant
did not have locus standi to file the company petition before the Company
Law Board. The Division Bench, allowing the appeal filed by the appellant;
Held:
Section 193 of the Companies Act deals with minutes of proceedings of
general meeting and of Board and other meetings. By the Companies
(Amendment) Act, 1960 (Act 65 of 1960) sub-section (1) of Section 193 of
the Act was substituted. Sub-section (1) of Section 193 of the Act, as
amended by Act 65 of 1960 provides that, every Company shall cause minutes
of all proceedings of every general meeting and of all proceedings of every
meeting of its Board of Directors or of every committee of the Board, to be
kept by making within fourteen days of the conclusion of every such meeting
concerned, entries thereof in books kept for that purpose with their pages
consecutively numbered. The time-limit of 'fourteen' days prescribed in sub-
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section (1) of Section 193 has been later amended as 'thirty' days by the
Companies (Amendment) Act, 1965 (Act 31 of 1965). Sub-section (1A) of
Section 193 provides the manner in which each page of every such book has
to be initialled or signed, etc. Sub-section (1B) of Section 193 provides
further that, in no case the minutes of proceedings of a meeting shall be
attached to any such book as aforesaid by pasting or otherwise. Section 194
of the Act provides that, the minutes of meetings kept in accordance with the
provisions of Section 193 shall be evidence of the proceedings recorded
therein. Section 195 of the Act provides further that, where minutes of the
proceedings of any general meeting of the Company or of any meeting of its
Board of Directors or of a committee of the Board have been kept in
accordance with the provisions of Section 193, then, until the contrary is
proved, the meeting shall be deemed to have been duly called and held, and
all proceedings thereat to have duly taken place, and in particular, all
appointments of directors or liquidators made at the meeting shall be deemed
to be valid. A conjoint reading of Sections 194 and 195 of the Act along with
Section 193, makes it explicitly clear that, in order to treat the minutes of the
proceedings of any general meeting of the Company or of any meeting of its
Board of Directors or of a committee of the Board to be evidence as provided
under Section 194, or to draw presumption as provided under Section 195
that, such meeting have been duly called and held, and all proceedings
thereat have been duly taken place, etc., the minutes of meetings has to be
kept in accordance with the provisions of Section 193. Therefore, in order to
have evidentiary value under Section 194 or to draw presumption under
Section 195 of the Act, the minutes should be one kept in accordance with
the provisions of Section 193. The presumption under Section 195 of the Act
is a rebuttable presumption, which can be rebutted by showing that the
minutes were not kept in accordance with the provisions of Section 193 of the
Act. [27], [28] and [30]
JUDGMENT
Anil K. Narendran, J.
1 . This appeal arises out of the order dated 20.11.2015 of the Company Law Board,
Chennai in C.P. No. 100 of 2011. The said Company Petition was one filed by the
appellant herein under Sections 111, 398, 402 and 406 of the Companies Act, 1956
(hereinafter referred to as 'the Act'), seeking an order to set aside the share transfers
purported to have been made to the 4th respondent by the appellant and the 2nd
respondent and the subsequent transfers made by the 4th respondent to the 2nd and
3rd respondents and to declare void (i) Form 32 filed for appointment of the 3rd
respondent as a Director and the 4th respondent as the Managing Director of the 1st
respondent Company; and (ii) Form 32 filed for changing the designation of the
appellant from that of the Managing Director of the 1st respondent Company to that of a
Director of that Company. The appellant has also sought for rectification of the register
of members of the 1st respondent Company by removing the names of the 2nd, 3rd and
4th respondent as its members and other consequential reliefs.
2. The Company Law Board (hereinafter referred to as 'the CLB') by Annex. A12 order
dated 20.11.2015 dismissed C.P. No. 100 of 2011 as not maintainable, on a finding that
the appellant ceased to be a shareholder of the 1st respondent Company, on transfer of
his shares to the 4th respondent and as such he has no locus standi to file Company
Petition before the CLB. The reasoning of the CLB, as contained in Para. 8 of Annex. A12
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order, reads thus;
"8. The petitioner has not denied the transfer of shares to the 4th respondent
nor disputed the signatures on the share transfer forms. However at para 6(viii)
it is stated that he was merely coerced by the 4th respondent along with few
other persons with a threat to his life and bodily harm, to transfer the shares
held by him in the R1 Company to the 4th respondent. Further it is stated that
he was coerced to sign a share transfer form which was first signed by the 2nd
respondent as the 1st holder and the petitioner was forced to sign it as a 2nd
holder. There is no record to show that what legal action the petitioner has
taken if he was threatened to sign the share transfer form and transfer the
shares to the 4th respondent. As per law the transfer of shares by the petitioner
is legal and valid. Further the petitioner contends that he represented the
Company when the Company filed a suit for specific performance against the
defendant being OS No. 82 of 2006 before the Hon'ble Court of Subordinate
Judge, Calicut. The R1 Company is the plaintiff in the suit however the
petitioner represented the Company in the capacity as Managing Director. The
said stand cannot be a ground to contend that he continued to be a shareholder
of the Company or has any vested interest. Further the 4th respondent filed an
affidavit dated 26.7.2011 before the Hon'ble Sub Court in OS No. 82 of 2006
clarifying the position and stated that the petitioner had transferred his shares
on 27.4.2011 itself and he ceases to be a director of the Company and lost all
association with the Company. Hence it was prayed to delete the name of the
petitioner from the cause title of the plaint being O.S. No. 82 of 2006. It is
more clinching evidence regarding transfer of shares of the petitioner to the 4th
respondent from the annual returns for the year 30.9.2011 wherein the transfer
of shares of the petitioner was shown as transferred to the 4th respondent. In
view of the aforesaid reasons, the petitioner ceases to be a shareholder of the
Company and has no locus standi to file a petition before this Bench.
Accordingly, the C.P. No. 100/2011 is dismissed as not maintainable. The
interim orders if any operating as on this date stand vacated. Applications if any
pending as on this date stand disposed of. No order as to costs."
3 . Feeling aggrieved by Annex. A12 order passed by the CLB, the appellant is before
this Court in this appeal filed under Section 10F of the Act, raising substantial questions
of law.
4. By order dated 7.12.2015 in I.A. No. 4332 of 2015 in Co. Appl. No. 13 of 2015 this
Court ordered that status quo shall be maintained till the next posting date and the
matter was ordered to be listed immediately after competition of service of notice. The
said order of status quo was thereafter extended from time to time till 2.2.2016. Later,
on 4.2.2016, while posting the matter to 12.2.2016, it was ordered that the interim
order will continue till then.
5. We heard the arguments of the learned counsel for the appellant and also the learned
counsel for the respondents.
6 . Going by the averments in the Company Petition, M/s. Meezan Realtors Pvt. Ltd.
(hereinafter referred to as the 1st respondent Company) was incorporated on
23.8.2003, vide Annex. A1 certificate of registration, with the appellant and one Mr.
Salahuddin Nalakath as its first Directors. The authorised capital of the Company was '
1,00,000/- divided into 1,000 equity shares of ' 100/- each and that, the appellant holds
500 equity shares of ' 100/- each, equivalent to 50% of the issued share capital. Article
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29 of the Articles of Association of the 1st respondent Company prescribes holding of at
least 5 equity shares as qualification shares for continuing as a Director and that such
shares shall be acquired within a period of two months from the date of their
appointment. Mr. Salahuddin Nalakath failed to pay the share subscription money in
respect of the equity shares agreed to be subscribed, within the time prescribed under
Section 270 of the Act, and thus vacated his office as Director on 5.11.2003, under the
provisions of Section 283(1)(a) of the Act. Annex. A3 is Form No. 32 regarding
cessation of office of Mr. Salahuddin Nalakath. Soon after the incorporation, the 2nd
respondent was admitted as a Director of the 1st respondent Company on 29.8.2003.
Annex. A2 is Form No. 32 filed by the 1st respondent Company in this regard. But, the
1st respondent Company did not issue any shares to the 2nd respondent.
7 . The appellant contended that, after cessation of office of Mr. Salahuddin Nalakath,
the entire affairs of the 1st respondent Company was being managed by him as its
Managing Director. Later, in O.S. No. 82/2006 filed on behalf of the 1st respondent
Company before the Sub Court, Kozhikode, for specific performance of Annex. A4
agreement, the 4th respondent filed an application along with Annex. A6 affidavit
seeking an order to amend the cause title of the plaint by substituting his name as the
Managing Director of the 1st respondent Company, in the place of the appellant. In the
said affidavit it has been stated that, on 27.4.2011 the entire shareholding of the
appellant in the 1st respondent Company was transferred in the name of the 4th
respondent and necessary application for transfer of shares has already been submitted.
The 4th respondent was appointed as the Managing Director of the Company, he having
purchased the shares of the appellant and the other Director, and ever since 27.4.2011
the appellant ceased to have the authority to represent the Company.
8 . The appellant contended that, he has not consented to the purported transfer of
shares alleged to have been made on 27.4.2011 and that he was coerced by the 4th
respondent along with few others, with a threat to his life and bodily harm, to transfer
the shares held by him in the 1st respondent Company to the 4th respondent. He was
coerced to sign a share transfer form as the second holder, which form was first signed
by the 2nd respondent as the first holder. The appellant contended further that, the
transfer deed executed by him was invalid, as the date of presentation of that deed was
16.11.2010, which has not been re-validated before its acceptance in a Board meeting,
even if it is to be assumed that such a Board meeting was in fact convened. Further, the
said transfer deed contain the signature of both the appellant and the 2nd respondent as
the joint transferors, for the transfer of 500 equity shares of the 1st respondent
Company, as if the appellant and the 2nd respondent are the joint holders of those
equity shares, which is prima facie invalid and erroneous. In sub-para (i) to (xii) of
Para. 6(b) of the Company Petition, the appellant has stated in detail the alleged
oppressive tactics and acts of mismanagement in the affairs of the 1st respondent
Company. It was in such circumstances, the appellant approached the CLB in C.P. No.
100 of 2011, seeking various reliefs.
9 . Before the CLB, the respondents filed Annex. A9 counter. According to the
respondents, the appellant had transferred his entire shareholding to the extent of 1000
shares, by executing Annex. B1 share transfer form on 27.4.2011, in favour of the 4th
respondent. Having thus divested his entire shareholding, the appellant ceased to be a
member of the 1st respondent Company and hence he has no locus standi to maintain
the Company Petition before the CLB. The respondents have also denied the alleged acts
of oppression and mismanagement in the affairs of the 1st respondent Company.
1 0 . The respondents contended that, the Board of Directors of the 1st respondent
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Company at its meeting held on 28.5.2011 considered and approved the transfer of
shares to the extent of 330 shares each held by the 4th respondent, to and in favour of
the 2nd and 3rd respondents. Annex. B2 is the minutes of that Board meeting held on
28.5.2011. The fact that no fresh shares were issued in favour of the 2nd respondent
has been admitted in Para. 14 of Annex. A9 counter. According to the respondents, the
unsubscribed 500 equity shares of the other promoter Mr. Salahuddin Nalakath has been
transferred in favour of the 2nd respondent way back on 5.11.2003 and the Board, of
which the appellant was a party, unanimously approved the share transfer and handed
over the share certificates in favour of the 2nd respondent, as evident from Annex. B3
minutes of the Board meeting held on 5.11.2003.
11. The respondents alleged that, when the appellant was the Managing Director of the
1st respondent Company he had collected ' 2,24,10,000/- as share application money
from prospective investors, but did not allot shares or even increased the authorised
capital of the Company. When there was protest from the investors, a religious leader
acceptable to both the parties acted as a mediator and facilitator to resolve the deadlock
in the management and in the meeting held on 27.4.2011, it was resolved to transfer
the management and control of the 1st respondent Company from the hands of the
appellant to the 4th respondent. In pursuance of that decision the appellant tabled
before the Board a duly signed share transfer form to transfer all the shares held by him
to the 4th respondent, which was unanimously approved in the meeting. Therefore,
according to the respondents, the appellant is not holding any shares in the 1st
respondent Company and the appellant not being a member of the said Company has no
business to enquire into its affairs.
12. Regarding the share transfer forms, the respondents contended that, if the share
transfer forms are invalid as alleged, the appellant has to take the responsibility for the
same, since it was he who presented the forms. The respondents would also point out
that, the appellant has not denied his signature on the form and the only aspect that is
being impugned before the CLB is that, the 2nd respondent has also signed the form as
if he was a joint holder of the shares. According to the respondents, the appellant,
knowing fully well that the 2nd respondent's signature was not needed as transferor,
duly acquiesced in the process, and having done so, he is estopped at this stage from
questioning the validity of that process.
13. The respondents contended that, at the Board meeting held on 9.8.2011, the 3rd
and 4th respondents have been made additional Directors of the 1st respondent
Company. Later, they were confirmed as Directors of the Company in the General
Meeting of the 1st respondent Company held on 30.9.2011, as evident from Annex. B5
resolution. The appellant raised the issue of threat to life, etc., only in the Company
Petition which was filed before the CLB in December, 2011. He did not find it proper to
approach the Police authorities to file a complaint if he was indeed threatened with
death or bodily harm. According to the respondents, since the entire shareholding of the
appellant stood transferred in favour of others, with effect form 27.4.2011, he did not
hold necessary qualification shares (5 shares) as required under Article 29 of the
Articles of Association of the 1st respondent Company. Hence his office stood
automatically vacated in terms of Section 283(1)(a) of the Act, without any act or deed
or thing on the part of the Company or its Directors.
14. The respondents contended further that, the decisions taken at the General Meeting
of the Company on 27.4.2011 was duly ratified by the Board in its meeting held on
15.5.2011. Hence, the transfer of shares was complete. Further, the Board meetings
held on various dates on and subsequent to 27.2.2011, the date on which the appellant
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transferred his entire shareholding in favour of others, were all with necessary quorum,
in terms of Article 32 of the Articles of Association of the 1st respondent Company, i.e.,
one-third of the total strength of the Board or two Directors, whichever is higher. All the
meetings were conducted with proper quorum as evidenced by Annex. B2 to B4.
Therefore, according to the respondents, the Company Petition is nothing but a sham to
arm-twist the respondents. Since the appellant has no locus standi to prefer or maintain
the Company Petition, the same is liable to be dismissed.
15. The CLB, after considering the rival contentions, dismissed the Company Petition by
Annex. A12 order, holding that since the shareholding of the appellant was shown as
transferred to the 4th respondent, he ceases to be a shareholder of the 1st respondent
Company and has no locus standi to file a petition before the CLB. Accordingly, the
Company Petition was dismissed as not maintainable. It was also ordered that the
interim orders, if any, operating as on the date of order shall stand vacated and the
applications, if any, pending as on that date shall stand disposed of.
1 6 . Since the Company Petition filed being a composite one seeking rectification of
register and also alleging oppression and mismanagement, the appellant has to
establish his right to apply, as provided under Section 399 of the Act, A reading of
Annex. A12 order passed by the CLB would show that the appellant was non-suited
accepting the case of the respondents that, the entire shareholding of the appellant
stands transferred in favour of the 4th respondent on the strength of Annex. B1 share
transfer form and as such, as on the date of presentation of C.P. No. 100 of 2011, the
appellant has no locus standi to maintain such a petition before the CLB. The
circumstances taken into account by the CLB for arriving at such a conclusion are that,
the appellant has not denied the transfer of shares to the 4th respondent nor disputed
the signatures on the share transfer forms; there is no record to show that what legal
action the appellant has taken if he was threatened to sign the share transfer form and
transfer the shares to the 4th respondent; the transfer of shares held by the appellant to
the 4th respondent is shown in the annual returns of the 1st respondent Company for
the year 30.9.2011; etc. In view of the aforesaid reasons, the CLB concluded that, the
transfer of shares by the appellant to the 4th respondent is legal and valid, and the
appellant, who ceased to be a shareholder of the 1st respondent Company, has no locus
standi to file such a petition.
1 7 . Along with the Company Appeal the appellant produced certain additional
documents, which do not form part of the Company Petition filed before the CLB.
Instead of producing the additional documents along with an application under Order
XLI Rule 27 of the Code of Civil Procedure, 1908, those documents are marked as
Annexures and produced along with the memorandum of appeal, as if it forms part of
the proceedings before the CLB. Going by the provisions under Order XLI Rule 27 of the
CPC, additional documents can be accepted only if due diligence is established, despite
which the appellant could not produce the same before the CLB. No explanation is
forthcoming from the appellant in this regard. During the pendency of this appeal, the
appellant produced few more additional documents along with I.A. No. 138 of 2016
filed on 14.1.2016 and I.A. No. 1049 of 2016 filed on 18.3.2016, both filed under Rule
154 of the Rules of the High Court of Kerala, 1971. It is well settled that, mere quoting
of a wrong provision of law in an application will not disentitle the party to the relief
sought for in that application. However, for entertaining such an application, in the
affidavit accompanying the said application the appellant has to make out a case for the
exercise of power by the appellate Court under Order XLI Rule 27 of the CPC.
18. Though a copy of I.A. Nos. 138 of 2016 and 1049 of 2016 has been served on the
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respondents, they have not sought for time to file any counter affidavit. On 16.3.2016,
the respondents have filed an additional affidavit sworn by the 2nd respondent,
producing therewith a true copy of the minutes of the meeting of the Board of Directors
of Meezan Jewellers Ltd. held on 27.4.2011 [Annex. R1(a)]; a true copy of the letter
dated 15.8.2011 of the appellant addressed to Meezan Jewellers and to its Managing
Director [Annex. R1(c)]; and a true copy of the minutes of the meeting of the Board of
Directors of 1st respondent Company held on 27.4.2011 [Annex. R1(d)].
1 9 . Relying on Annexure R1(a) minutes, the learned counsel for the respondents
contended that, in the meeting of the Board of Directors of Meezan Jewellers Ltd. held
on 27.4.2011, a decision has been taken to transfer all the shares held by the appellant
in Meezan Realtors Pvt. Ltd. (the 1st respondent Company) in favour of the 4th
respondent, who has been authorised to take over the management of all associate
Companies of 'Meezan Group'. Following the said decision, the appellant sent Annex.
R1(c) letter dated 15.8.2011, resigning from the directorship of Meezan Jewellers Ltd.
20. The learned counsel for the respondents, with reference to the averments made in
the additional affidavit filed on 16.3.2016, contended that, since all the members and
directors of the 1st respondent Company are directors of Meezan Jewellers Ltd. and all
of them were present in the meeting of the Board of Directors of Meezan Jewellers Ltd.
held on 27.4.2011, following the execution of Annex. B1 share transfer form by the
appellant, a meeting of the Board of Directors of the 1st respondent Company was also
held on 27.4.2011, wherein a decision was taken to induct Mr. Salahuddin Nalakath as a
Director of the 1st respondent Company, as reflected in Annex. R1(d) minutes. The
learned counsel contended further that, the said appointment of Mr. Salahuddin
Nalakath was for filling up the casual vacancy in the Board of Directors of the 1st
respondent Company, resulted on account of the 'disqualification' incurred by the
appellant under Section 283(1)(a) of the Act.
2 1 . As borne out from the pleadings and materials on record, the fact that the 1st
respondent Company was incorporated on 23.8.2003 with the appellant and one Mr.
Salahuddin Nalakath as its Directors is not in dispute. It is also not in dispute that, the
appellant had subscribed 500 equity shares, out of the authorised share capital of '
1,00,000/- of the 1st respondent Company divided into 1,000 equity shares of ' 100/-
each. As such, the appellant was holding equity shares equivalent to 50% of the issued
share capital of the 1st respondent Company. The fact that, the appellant was the
Managing Director of the Company is also not in dispute.
22. The case put forward by the respondents in Para. 5 of Annex. A9 counter, in order
to non-suit the appellant is that, he had transferred his entire shareholding to the extent
of '1000' shares in the 1st respondent Company by executing Annex. B1 share transfer
form on 27.4.2011, in favour of the 4th respondent. However, as a matter of fact, the
shareholding of the appellant in the 1st respondent Company was only 500 equity
shares. Further, as per Article 16 of the Articles of Association of the 1st respondent
Company (which is a Private Company), no member shall be entitled to transfer his
shares except with the previous sanction of its Board of Directors. Neither the
documents produced along with Annex. A9 counter filed by the respondents before the
CLB nor the additional documents produced along with the additional affidavit filed
before this Court on 16.3.2016 would show any such sanction of the Board of Directors
of the 1st respondent Company.
23. We also notice that, in the additional affidavit filed before this Court on 16.3.2016,
the respondents have absolutely no case that the Board of Directors of the 1st
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respondent Company had accorded sanction on 27.4.2011 for the alleged transfer of
500 shares held by the appellant in favour of the 4th respondent, following the
execution of Annex. B1 share transfer form. The only averment in the said additional
affidavit is that, following the execution of Annex. B1 share transfer form by the
appellant, a meeting of the Board of Directors of the 1st respondent Company was held
on 27.4.2011, wherein a decision was taken to induct Mr. Salahuddin Nalakath as a
Director of the said Company. Moreover, Annexure R1(d) minutes of meeting of the
Board of Directors of 1st respondent Company held on 27.4.2011, produced along with
the additional affidavit, would not even indicate any sanction accorded by the Board of
Directors of 1st respondent Company for transfer of shares in terms of Annex. B1 share
transfer form.
24. Regarding the alleged share transfer in terms of Annex. B1 share transfer form, the
specific stand taken by the respondents in Para. 29 of Annex. A9 counter filed before
the CLB was that, the decision taken at the General Meetings of the 1st respondent
Company on 27.4.2011 were duly ratified by the Board at its meeting held on 15.5.2011
and hence the transfer of shares was complete. However, as borne out from the
additional affidavit filed before this Court on 16.3.2016, the stand now taken by the
respondents is that, in the meeting of the Board of Directors of Meezan Jewellers Ltd.
held on 27.4.2011 a decision has been taken to transfer all the shares held by the
appellant in the 1st respondent Company in favour of the 4th respondent, who had been
authorised to take over the management of all associate Companies of 'Meezan Group'.
Annexure R1(a) is the minutes of said meeting of the Board of Directors of Meezan
Jewellers Ltd. held on 27.4.2011.
25. It is trite law that, a Company incorporated under the provisions of the Companies
Act is a separate legal entity distinct from its individual shareholders or Directors. A
Company is a juristic person and has an existence independent from that of the
shareholders and it is the Company which owns its assets and not the shareholders.
Therefore, Meezan Realtors Pvt. Ltd. (the 1st respondent Company) and Meezan
Jewellers Ltd. are two juristic persons entirely distinct from its shareholders or
Directors. In that view of the matter, any decision taken in the meeting of the Board of
Directors of Meezan Jewellers Ltd. on 27.4.2011, as reflected in Annex. R1(a) minutes,
would have no bearing on the shareholding of the appellant in the 1st respondent
Company. Merely for the reason that, all the members and Directors of the 1st
respondent Company are also Directors of Meezan Jewellers Ltd., the decision as
reflected in Annex. R1(a) minutes cannot be treated as an approval/sanction of the
Board of Directors of the 1st respondent Company, as provided under Article 16 of its
Articles of Association, for transferring the 500 shares held by the appellant in favour of
the 4th respondent.
2 6 . As discernible from the document produced as Annex. R1(a) and R1(d) in the
additional affidavit filed by the respondents, the so called minutes of the meeting of the
Board of Directors of Meezan Jewellers Ltd. and Meezan Realtors Pvt. Ltd. are written on
'Classmate' note book, the pages of which are not even numbered consecutively, as
mandated by sub-section (1) of Section 193 of the Act, a provision intended to ensure
the authenticity of the minutes of proceedings of general meeting and of the
proceedings the Board of Directors of a Company incorporated under the Act.
27. Section 193 of the Companies Act deals with minutes of proceedings of general
meeting and of Board and other meetings. By the Companies (Amendment) Act, 1960
(Act 65 of 1960) sub-section (1) of Section 193 of the Act was substituted. Sub-section
(1) of Section 193 of the Act, as amended by Act 65 of 1960 provides that, every
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Company shall cause minutes of all proceedings of every general meeting and of all
proceedings of every meeting of its Board of Directors or of every committee of the
Board, to be kept by making within fourteen days of the conclusion of every such
meeting concerned, entries thereof in books kept for that purpose with their pages
consecutively numbered. The time limit of 'fourteen' days prescribed in Sub-section (1)
of Section 193 has been later amended as 'thirty' days by the Companies (Amendment)
Act, 1965 (Act 31 of 1965). Sub-section (1A) of Section 193 provides the manner in
which each page of every such book has to be initialled or signed, etc. Sub-section (1B)
of Section 193 provides further that, in no case the minutes of proceedings of a meeting
shall be attached to any such book as aforesaid by pasting or otherwise.
28. Section 194 of the Act provides that, the minutes of meetings kept in accordance
with the provisions of Section 193 shall be evidence of the proceedings recorded
therein. Section 195 of the Act provides further that, where minutes of the proceedings
of any general meeting of the Company or of any meeting of its Board of Directors or of
a committee of the Board have been kept in accordance with the provisions of Section
193, then, until the contrary is proved, the meeting shall be deemed to have been duly
called and held, and all proceedings thereat to have duly taken place, and in particular,
all appointments of directors or liquidators made at the meeting shall be deemed to be
valid.
29. In Madhusoodhanan v. Kerala Kaumudi (P) Ltd. (MANU/SC/0553/2003 : 2004 (9)
SCC 204) the Apex Court held that, under Section 194 of the Companies Act, 1956,
minutes of meetings kept in accordance with the provisions of Section 193 shall be
evidence of the proceedings recorded therein and, unless the contrary is proved, it shall
be presumed under Section 195 that the meeting of the Board of Directors was duly
called and held and all proceedings thereat to have duly taken place.
30. A conjoint reading of Sections 194 and 195 of the Act along with Section 193,
makes it explicitly clear that, in order to treat the minutes of the proceedings of any
general meeting of the Company or of any meeting of its Board of Directors or of a
committee of the Board to be evidence as provided under Section 194, or to draw
presumption as provided under Section 195 that, such meeting have been duly called
and held, and all proceedings thereat have been duly taken place, etc., the minutes of
meetings has to be kept in accordance with the provisions of Section 193. Therefore, in
order to have evidentiary value under Section 194 or to draw presumption under
Section 195 of the Act, the minutes should be one kept in accordance with the
provisions of Section 193. The presumption under Section 195 of the Act is a rebuttable
presumption, which can be rebutted by showing that the minutes were not kept in
accordance with the provisions of Section 193 of the Act.
3 1 . In the instant case, the CLB in Annex. A12 order nonsuited the appellant on a
finding that, the transfer of shares by the appellant to the 4th respondent is legal and
valid, and on such transfer the appellant ceased to be a shareholder of the 1st
respondent Company, who has no locus standi to file the Company Petition. Two
circumstances taken into account by the CLB for arriving at such a conclusion are that,
the appellant has not denied the transfer of shares to the 4th respondent nor disputed
the signatures on the share transfer forms and that, the transfer of shares held by the
appellant to the 4th respondent is shown in the annual returns of the 1st respondent
Company made upto on 30.9.2011.
32. When the fact that, on incorporation of the 1st respondent Company the appellant
was issued with 500 equity shares, equivalent to 50% of the issued share capital of the

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Company, and the further fact that he was managing the affairs of the Company as its
Managing Director are not in dispute, the burden is heavily upon the respondents to
prove that the appellant ceased to be a share holder of the said Company on account of
the alleged transfer of his entire shareholding to the 4th respondent and vacated the
office of the Director of the Company, as provided under Section 283(1)(a) of the Act.
Though the respondents would contend that, the alleged share transfer was with the
approval of the Board of Directors of the 1st respondent Company, none of the
documents produced along with Annex. A9 counter filed before the CLB or the
additional affidavit filed before this Court would indicate any such approval/sanction. In
such circumstances, we find no reason to sustain the finding in Annex. A12 order of the
CLB that appellant ceased to be a shareholder of the 1st respondent Company and
hence he has no locus standi to file the Company Petition. The question as to the locus
standi of the appellant to maintain the Company Petition requires fresh consideration
with reference to the original minutes of the meetings of the Board of Directors of the
1st respondent Company and other statutory records. As the Company Law Board stands
dissolved with effect from 1.6.2016, on the constitution of the National Company Law
Tribunal, by virtue of the provisions under sub-section (1) of Section 466 of the
Companies Act, 2013, such exercise shall be undertaken by the National Company Law
Tribunal, Chennai Bench.
33. The learned counsel for the respondents advanced arguments on the maintainability
of the Company Petition on the ground that the jurisdiction of the CLB is only summary
in nature. The learned counsel has also argued that, the provisions under sub-section
(1A) of Section 108 of the Act is only directory in nature and hence a duly executed
instrument of transfer of share shall continue to be effective and valid even after the
expiry of the period specified in sub-section (1A); the pleadings in the Company
Petition do not disclose the material particulars or facts as to the alleged coercion in the
execution of the share transfer form; the appointment of Mr. Salahuddin Nalakath as the
Director of the 1st respondent Company on 27.4.2011 is perfectly legal and valid, etc.
Per contra, the learned counsel for the appellant argued that the jurisdiction of the CLB
is not ousted merely because there is an allegation of coercion; the provisions under
sub-section (1A) of Section 108 of the Act is mandatory in nature and as such, the
alleged transfer of shares has no legal sanctity; there is nothing on record to support
the case put forward by the respondents as to the alleged transfer of shares; the
appointment of Mr. Salahuddin Nalakath as the Director of the 1st respondent Company
on 27.4.2011 is per se illegal, etc. Both sides have also cited various decisions in order
to buttress their arguments. Since we propose to remand the matter to the National
Company Law Tribunal, we leave open all such contentions raised by both the sides,
which shall be dealt with by the Tribunal in accordance with law. It would be open to
both the sides to produce additional documents before the Tribunal in support of their
case.
In the result, this Company Appeal is allowed, setting aside Annex. A12 order of the
Company Law Board, Chennai dated 20.11.2015 dismissing C.P. No. 100 of 2011 as not
maintainable and consequently vacating the interim orders, if any, operating as on that
date in that Company Petition, and the matter is remanded to the National Company Law
Tribunal, Chennai Bench, for fresh consideration of the question of locus standi of the
appellant to maintain the Company Petition, with reference to the original minutes of
the meetings of the Board of Directors of the 1st respondent Company and other
statutory records.
No order as to costs.

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*A reproduction from ILR (Kerala Series)
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