Sarwar Zaman Vs.Yongtai Industries Bangladesh Ltd. and another, IV ADC (2007) 855

Case No: Civil Petition for Leave to Appeal No. 654 of 2005

Judge: Md. Tafazzul Islam ,

Court: Appellate Division ,,

Advocate: Mr. AKM Shahidul Huq,,

Citation: IV ADC (2007) 855

Case Year: 2007

Appellant: Sarwar Zaman

Respondent: Yongtai Industries Bangladesh Ltd.

Subject: Company Matter,

Delivery Date: 2006-8-20

 
Supreme Court
Appellate Division
(Civil)
 
Present:
Md. Ruhul Amin J
Md. Tafazzul Islam J
 
Sarwar Zaman
…….........Petitioner
Vs.
Yongtai Industries Bangladesh Ltd. and another
……........Respondent
 
Judgment
August 20, 2006.
 
The Companies Act, 1994
Section 81(2), 85(3)
Under section 81 (2) of the Companies Act 1994 empowers the Court to call or direct the calling of the annual general meeting of the company upon an application of any member of the company and accordingly the petitioner could have filed an application as a member of the company and that his filing of the application describing himself as Managing Director of the Company is motivated and the application is based on a false premise in as much as the application does not contain a correct description of the petitioner and accordingly the application is liable to be rejected as not maintainable.
 
Lawyers Involved:
M.A. Aziz Khan, Advocate (appeared with the leave of the Court) instructed by A.K.M. Shahidul Huq, Advocate-on-Record-For the Petitioner.
Not represented- the Respondents
 
Civil Petition for Leave to Appeal No. 654 of 2005
(From the judgment and order dated 9th May, 2005 passed by the High Court Division in Matter No. 4 of 2005).
 
JUDGMENT
 
Md. Tafazzul Islam J.
 
1. This petition for leave to appeal is directed against the judgment dated 9.5.2005 passed by Company Bench of the High Court Division in Matter No. 4 of 2005 rejecting the application filed by the petitioner under section 81(2) read with section 85(3) of the Companies Act, 1994 holding that the above application is not maintain­able.
 
2. The petitioner filed the above Matter No.4 of 2005 seeking condonation of delay for holding statutory first annual general meeting of Yongtai Industries Bangladesh Ltd, hereinafter referred to as the company, stating that he is the manag­ing director, promoter and sponsor direc­tor of the company which was incorporat­ed on 7.4.2003 as private limited company under the Companies Act, 1994; the spon­sor directors initially made subscription as under:
 
Sl. No. Shareholder’s name No. of Shares % of shares
 
1 Yu Xiang, Li 550 55%
2 Jeffrey Ling 150 15%
3 Hin Wah, Tarn 150 15%
4 Sarwar Aaman 150 15%
 
            
 Total Shares 1000 100% The company is a 100% export oriented joint venture; the petitioner was appointed as its first managing director for a period of one year as is evident from Article 30 of the articles of association of the company and he having established the company remained busy in getting orders from for­eign buyers, arranging capital, going into production in quickest possible time and making a commendable headway and due to above and also extraordinary pressure of work which was exaceserated due to power failure, political/labour unrest, flood and other export difficulties he could not take appropriate care for com­plying the statutory formalities for holding the annual general meeting, hereinafter referred to as AGM, of the company; sub­sequently steps for holding the AGM and to complete other statutory formalities were also taken but since Mr. Jeffery, one of the director, having suffered heart attack went back to China and he never returned and Mr. Hin Wah, another Director, also resigned situation arose which was hardly conducive to hold the first AGM; subsequently, attempts were made to appoint three new directors, increase share capital to 2000 shares and issuing/redistributing the shares among directors by transacting such business through the meeting of Board of Directors as the statutory AGM could not be held but subsequently it became known that the above transactions of the business of the company through the meeting of the Board of Directors were unlawful, the company decided to hold the AGM by fil­ing application before of the High Court Division under section 81(2) read with section 85(3) for condonation of delay and hence the application.
 
3. An application affirmed by one Li Tze Keung, claiming him as the managing director of the company, was then filed contents of which were however subsequently corrected by two supplementary affidavits affirmed by one Hossain M. Zahedi on the basis of power of attorney of said Li Tze Keung, wherein prayer was made for adding Li Tze Keung as respon­dent No. 2, stating inter alia that the company was registered on 7.4.2003 and the petitioner having 15% shares was made the Managing Director of the company for a period of one year from the date of incorporation of the company; 85% of the shareholders were foreign investors from China and Hong Kong and the majority shareholder Mr. Yu Xiana Li having 55% shares of the company, was appointed the chairman of the company; a meeting of the Board of Directors for appointment of new directors and increasing the shares in the company was also held in Dhaka on 6.6.2004 notice of which was duly issued by the petitioner who at that time was the managing director of the company; at that meeting two new directors were inducted in the company, one being Li Tze Keung from Hong Kong and the other was Hossain M. Zahedi from Bangladesh and thereby the number of directors of the company was raised to six and the peti­tioner himself was also present in the said meeting and subsequently the petitioner recorded the names of the above directors with the Registrar of the Joint Stock Companies; than an AGM of the company was called on 13.12.2004 after due service of notices upon the shareholders with the agenda for the appointment of a new Managing Director as there were number of complaints regarding the landling of the company's affairs and its finances by the petitioner; further at that time, the peti­tioner drawing handsome salary, was sup­posed to act as the full time Managing Director of the company but, as was revealed, he at that time was also working as full time paid Managing Director of another company named 'Wordy Ltd.' which was also engaged in similar gar­ment export business and as a result com­pany suffered significant loss due to lack of proper attention in running the business of the company; moreover it was a legal necessity to appoint a new Managing Director as the tenure of the petitioner expired on 6.3.2004; further despite repeated requests from the Chairman as well as other shareholders the petitioner did not submit any financial statements nor did he got the account of the company audited so that the statutory meeting of the company could be held; although the notice was served upon the petitioner 21 days prior to the meeting and despite the fact that the majority shareholders were coming from Hong Kong and China to attend the meeting for the important pur­pose of electing the Managing Director/Chief Executive Officer of the company, the petitioner sent letter addressed to the chairman of the company, which was duly presented in the meeting held on 13.12.2004, stating that for unavoidable circumstances he would not be able to attend the above meeting; one of the items in the agenda of the said meet­ing was to appraise the company of the completion of the statutory formalities for which the petitioner was asked to furnish the statement of account of the company which he was single handedly controlling and operating including signing of the cheques as the only signatory but the peti­tioner also did not provide the sharehold­ers the statements which he was asked to furnish; in the above circumstances in the said meeting held on 13.12.2004 the shareholders appointed Mr. Li Tze Keung as the new Managing Director; the peti­tioner then to disrupt the business of the company asked the internet service provider to discontinue service although the above service was in the name of the company and the fees were paid from the account of the company; further the peti­tioner took away all the important docu­ments of the company including the cheque books, customs documents and all documents relating to its accounts and also withdraw Tk. 8,00,000/- (taka eight lacs) from the account of the company two days after a new Managing Director was appointed leaving the account of the com­pany dry and the petitioner also did not spend the above amount for the purpose of the company and thereby misappropriated the said amount; further the petitioner had also been creating problems for the com­pany by falsely stating to the Chairman and General Manager of BEPZA and oth­ers that he was the Managing Director of the company; further the petitioner, claim­ing himself to be the Managing Director of the company also filed the present application under sec 81(2) read with sec 85(3) of the Companies Act 1994 for con­donation of delay in holding the AGM though following the said EGM held on 13.12.2004 and based on the resolution passed in it, the Registrar of Joint Stock Companies duly recorded the same and already issued the certified' copy of the Form XII recognizing Li Tze Keung as the Managing Director of the company; the company also made Ramna PS GD No. 1387 dated 17.12.2004 against the peti­tioner and also one Sohel, a former employee of the company, for taking away from the officer of the company all the official documents and earlier. Mr. Sohel also made a statement in writing admitting that on the instruction of the petitioner he removed the documents and files of the company from its office and pursuant to the above GD, the police on 10.3.2005 recovered from Sohel some documents including the cheque book maintained with HSBC Bank from where all the money was earlier withdrawn by the peti­tioner; further by a letter addressed to the police Sohel took the stand that all accounts and related documents have been handed over to Mr. M.A. Aziz Khan, Advocate, for 'audit purpose' and asked the police to get in touch with Mr. Khan for those though according to law all such documents are supposed to remain in the office of the company and not with a lawyer who was not even appointed by the company; since the petitioner in his appli­cation has made a number of allegations against the company as well as the Chairman and the duly appointed Managing Director of the company, those allegations, being false, need to be controverted and so the company should be made a party in the matter as the respon­dent No.2. The petitioner filed an affidavit-in-reply denying the statements made in the above affidavit-in-opposition.
 
4. Upon hearing of the application, the High Court Division by order dated 24.4.2004, allowed the application of the company for impleading it as respondent No.2 leaving the question as to who is the Managing Director of the company to be decided at the time of hearing of the merit of the main application. The operating part of the above order reads as follows:
 
"I have considered the submissions of the learned advocates. It appears that there are conflicting statements with regard to who is the Managing Director of the Company. However, since the petition deals with the AGM of the Company, it is felt that the company is & necessary party, particularly in view of the conflicting claims. In such circumstances I am inclined to allow this application. The matter of who is or is not the lawful Managing Director may be dealt with when considering the merit of this case. Accordingly, the application is allowed."
 
5. Subsequently when the matter was con­tinuing as part heard matter; another appli­cation was filed on behalf of the respon­dent No. 2 Company praying for injunction against the petitioner more or less on the basis of statements similar to the state­ments made in the previous application praying for adding the company as respondent No.2.
 
6. As it appears before the High Court Division the learned Advocate appearing for the petitioner submitted that there had been difficulties in managing the affairs of the company due to the fact that one of the Director, Jeffrey Ling, on having a heart attack went back to China and another Director Mr. Hin Wah resigned creating a situation non-conducive to hold the AGM of the company and there were subsequent attempts to appoint three new Directors and to increase the share capital of the company to 2000 shares and issue/redis­tribute the shares among the directors through the meeting of the Board of Directors which could not be legally done before holding the statutory first annual general meeting and so the delay in hold­ing the annual general meeting may be condoned so that the AGM of the compa­ny may be held. On the other hand the learned Advocate appearing for the respondent No.2 submitted that the peti­tioner was appointed as Managing Director for only one year and he not being re-appointed, is no longer the Managing Director of the company and as such cannot file the present application under section 81(2) of the Companies Act 1994 showing him as the Managing Director of the company and with regard to the appointment of new Directors and increase of the share capital the learned advocate submitted that the petitioner himself having taken steps for appoint­ment of new 3 directors and a new Managing Director, cannot now disclaim his liability after the three new Directors have already been appointed and share capital of the company has been increased to 2000 shares.
 
7. The High Court Division, having found that petitioner was appointed as the ad-hoc managing director of the Company for 1 (one) year only and his tenure expired on 6.4.2004, held that the petitioner was not entitled to filed the application under section 81(2) of the Companies Act 1994 describing himself as the Managing Director of the company and in view of that matter High Court Division gave the learned Advocate for the petitioner an opportunity to correct the application by making necessary amendments in the above application filed under section 81(2) as the petitioner was no longer the Managing Director of the company but instead of making any such correction, the petitioner altered only the prayer portion for which the High Court Division, by the impugned order, rejected the above appli­cation holding that section 81(2) of the Companies Act 1994 empowers the Court to call or direct the calling of the annual general meeting of the company upon an application of any member of the compa­ny and accordingly the petitioner could have filed an application as a member of the company and that his filing of the application describing himself as Managing Director of the company is motivated and the application is based on a false premise in as much as the applica­tion does not contain a correct description of the petitioner and accordingly the appli­cation is liable to be rejected as not main­tainable.
 
8. We are of the view that the High Court Division on proper consideration of the materials on record arrived at a correct decision. The learned counsel could not point at any illegality or infirmity in the decision of the High Court Division so as to call for any interference.
 
9. The petition is dismissed.
 
Ed.