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of <h1>Resolution of Family Company Control Dispute: Ahuja Tyres (P.) Ltd.</h1> The court resolved a dispute over control of a family company, Ahuja Tyres (P.) Ltd., between brothers and heirs. Allegations of oppression and ... Oppression and mismanagement Issues Involved:1. Control of family company2. Allegations of oppression and mismanagement3. Appointment and removal of directors4. Issuance of additional shares5. Financial accountability and audit6. Valuation and buy-out of shares7. Protection of interests during payment period8. Potential winding up of the companyDetailed Analysis:1. Control of Family Company:The proceedings stem from a dispute over the control of a family business, Ahuja Tyres (P.) Ltd., between four brothers and the heirs of a fifth brother. The deceased brother had started the business, which was incorporated in 1974. After his death in 1976, his heirs held less than 40% of the shares, while the brothers and their wives held more than 60%.2. Allegations of Oppression and Mismanagement:Tensions arose when Suresh Kumar Ahuja, son of the deceased, was appointed managing director. Allegations of oppression and attempts to exclude one of the brothers led to a petition under sections 397/398 of the Companies Act. Despite a consent order in 1977, disputes persisted, culminating in the expansion of the board and issuance of additional shares, which intensified the conflict.3. Appointment and Removal of Directors:The managing director's adverse reaction to Bhim Sen Ahuja's appointment as technical director led to further disputes. The board meeting on October 16, 1978, resulted in the election of additional directors, which caused a violent reaction. Both factions held parallel meetings, each excluding the other from the board.4. Issuance of Additional Shares:The heirs issued additional shares to themselves, neutralizing the brothers' majority. The court found that both factions' actions followed a pattern of trying to outdo each other, leading to deadlock and confusion. The court decided to treat the parties as having their holdings as of October 15, 1978, making it unnecessary to consider the validity of the additional shares.5. Financial Accountability and Audit:The court directed the completion and audit of the company's accounts to ensure accountability for transactions during the dispute. Both groups were to account for business conducted in the company's name, and any amounts owed would be settled accordingly. The audit would determine the true worth of the shares and the total holding of the heirs.6. Valuation and Buy-Out of Shares:The court determined that the brothers should have the first option to buy out the heirs, considering their collective holding of over 60% and their long association with the business. The valuation of the shares would be conducted by an independent firm of chartered accountants, V. Sankar Aiyar & Co. The payment schedule for the buy-out was set in four installments over three years.7. Protection of Interests During Payment Period:To protect the heirs' interests, the court imposed several measures:- Prohibition on alienation of assets except in the ordinary course of business.- Appointment of an independent chairman, Shri S. L. Bhatia, to oversee the company's affairs.- Payment of reasonable interest on the deferred installments.8. Potential Winding Up of the Company:If the brothers defaulted on payments, the heirs would have the option to buy out the brothers on the same terms. If neither group exercised the option, the company would be liable to be wound up, and the parties could seek court directions for partitioning the assets.Final Directions:- Completion and audit of the company's accounts by V. Sankar Aiyar & Co.- Payment of amounts owed based on the audited accounts.- Determination of the true worth of the shares within three months.- Transfer of the heirs' shares to the brothers or their nominees upon payment of the first installment.- Appointment of Shri S. L. Bhatia as chairman to oversee the company's affairs.- Prohibition on alienation of assets without court permission until full payment is made.- Liberty for parties and the chairman to seek further directions to protect interests.The court disposed of C.P. No. 17 of 1979, dismissed the transferred Civil Suit No. 157 of 1979 as infructuous, and vacated the injunction granted by the trial court. C. As Nos. 164 and 322 of 1979 were dismissed, and the notice in Cr. (O) 3 of 1979 was discharged. Each party was to bear its own costs.
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