TaxTMI 
TaxTMI 
1985 (8) TMI 296
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....sband of Rajeswari Ramakrishnan and respondents Nos. 2 and 4 are two of their sons. The sixth respondent is V. Ramakrishna Sons Ltd. which is a company registered under the Companies Act, 1956, hereinafter referred to as "the company." The company was incorporated under the Companies Act and a certificate of incorporation was granted on July 7, 1949. The nominal capital of the company is Rs. 10,00,000 divided into 1,000 shares of Rs. 1,000 each. The company was promoted by the late V. Ramakrishna, I.C.S., and Rajeswari Ramakrishnan as a private limited company, the shareholding being distributed as follows : V. M. Rao ... 199 V. L. Dutt ... 199 Rajeswari Ramakrishnan ... 95 R. Prabhu ... 4 V. Ramakrishna, I.C.S. ... 1 P. R. Ramakrishnan ... 1 V. R. Durgamba ... 1 (V. R. Durgamba got this share from her husband, V. Ramakrishna, in the year 1951) The entire share capital of the company was contributed, according to the plaintiffs, by the late V. Ramakrishna and his wife, V. R. Durgamba. The late Ramakrishna also promoted another company by name R. S. Industrial Corporation P. Ltd. V. Ramakrish....
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....disposed of, a right of pre-emption be given to Rajeswari Ramakrishnan and a corresponding right of pre-emption in favour of V. M. Rao and V. L. Dutt in case Rajeswari Ramakrishnan or R. S. Industrial Corporation wanted to dispose of their shares in K.C.P. Ltd., Andhra Cement Co. Ltd. and V. Ramakrishna Sons Ltd. According to the plaintiffs, the family arrangement so brought about by the father was agreed to by Rajeswari Ramakrishnan, V. M. Rao and V. L. Dutt, the children of the late V. Ramakrishna. In accordance with this family arrangement, V. M. Rao, who was on the board of directors of Jeypore Sugar Co. Ltd. and R. S. Industrial Corporation (P.) Ltd. resigned on October 29, 1961, and February 1,1962, from the above companies and also gave up all positions and responsibilities in respect of those companies. He had also transferred to Rajeswari Ramakrishnan and to her branch and/or nominees the shares which he was holding in Jeypore Sugar Co. Ltd. The company also had sold the bulk of its holding in Jeypore Sugar Co. Ltd. to Rajeswari Ramakrishnan and/or her branch or nominess. Likewise, Rajeswari Ramakrishnan also resigned her life-directorship on the board of V. Ramakrishna....
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....t constitute fraud on the rights of the plaintiffs. The plaint further states that the first plaintiff has been trying to avoid conflict since March, 1975 and has been trying to arrive at a reasonable and mutually acceptable compromise through very respectable mediators, but the negotiations did not produce any fruitful response. With these allegations, the plaintiffs filed C.S. No. 322 of 1975 on December 17, 1975, praying for a decree declaring : (1)That defendants Nos. 1 to 4, or anyone claiming through or under them, are not entitled to participate in the management of the company ; (2)that the election of defendants Nos. 1 and 2 to the board of directors of the company at the annual general meeting held on April 22, 1975 is null and void ; and, (3)for a permanent injunction restraining defendants Nos. 1 and 2 from functioning as directors; and (4)for a permanent injunction restraining defendants Nos. 1 to 4 from participating in the management and affairs of the company in any manner whatsoever. The plaint specifically states that no relief is asked for against defendants Nos. 5 and 6. Durgamba, wife of late V. Ramakrishna, is not impleaded as a party to the ....
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.... also unenforceable. As the family arrangement pleaded is at variance with and contradicts the articles of association of the sixth defendant, such oral agreement pleaded is also barred by the provisions of section 92 of the Indian Evidence Act. They have also contended that having regard to the nature of the allegations in the plaint and, in particular, allegations of fraud against and oppression of the plaintiffs and the nature of the reliefs prayed for which relates entirely to the internal management of the sixth defendant company, this court, as a civil court, will have no jurisdiction to entertain the suit and the matters raised and the reliefs prayed for here can be agitated, if at all, only before the court having jurisdiction under the Companies Act, 1956. The fifth defendant, the brother of the first plaintiff filed a separate written statement, contending that the so-called family arrangement was not true. He had also submitted that there was never any family arrangement regarding the management of the sixth defendant company or any other company, that there was no arrangement to vest in any member or group of members the exclusive management of the said companies, th....
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....ovisions of the Companies Act. The sixth defendant also pleaded that it had no knowledge of any such family arrangement. It was also contended that the rights and liabilities are to be decided only with reference to the memorandum and articles of the company and the provisions of the Act and that the company cannot take note of any family arrangement, even if such arrangement existed between the parties. On these pleadings the following issues were framed on September 15, 1976: (1)Whether the family arrangement pleaded by the plaintiffs is true, valid and binding on the parties ? (2)Whether the said family arrangement was not acted upon and whether the same is not enforceable for any of the reasons set out in the written statement ? (3)Whether the defendants are estopped from denying the truth and validity of the family arrangement ? (4)Whether the suit is not maintainable for any of the reasons can contained in the written statement ? (5)To what relief the parties are entitled ? When the suit was pending, V. M. Rao filed on December 13, 1976, Company Petition No. 94 of 1976, under sections 397 and 398 of the Companies Act, praying for an order superseding the ....
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....are being conducted in a manner prejudicial to the public interest and also in a manner oppressive to the members especially, the petitioner. The various acts of oppression and mismanagement relied on by the petitioner are set out in paragraphs 26(A) to G of the petition and on those grounds it was contended that it is a case in which the company can be wound up on just and equitable grounds. It was also contended that the conduct of the company's affairs by the respondents is unfair, burdensome, harsh and wrongful to the other members of the company who constitute 47.3% of the shareholding. It is both oppressive and also against public interest. The petitioner has set out certain features in the administration of the company and the conduct of the directors in paragraph 32 of the petition as justifying interference by this court in exercise of its powers under section 397 of the Companies Act. We are not setting out the details of the allegations at this stage as learned counsel for the appellants has not pressed some of the allegations and relied on only some of them. We will set out the relevant facts relating to the points pressed in the appeal and the submissions on these ....
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....smanagement alleged was that an extraordinary general body meeting of the eighth respondent company was held on September 25, 1975, in which a special resolution was passed that the sanction of the company under section 81 of the Act be accorded to the directors to issue further shares to any person, whether or not those persons are existing shareholders of the company and in pursuance of that resolution at a subsequent meeting of the board of directors, shares worth Rs. 5,00,400 were allotted to Bajranbali Engineering Co. Ltd. and three other individuals which, according to the petitioner, has resulted in the dilution of the value of the shares of the existing shareholders. Because of this allegation, the eighth respondent was brought on record as a party respondent and a counter-affidavit was filed on behalf of the company. In the counter-affidavit filed, the facts relating to the allotment of shares are referred to in detail and the allegation of mismanagement based on those facts was denied. In Company Application No. 425 of 1977, the points for consideration in the company petition were determined and they are as follows : "(1)Is the present plaintiff, petitioner in Comp....
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.... company as alleged in para graph 26D of the petition and is it a matter that could be agitated in these proceedings ? (14)Whether the hundi loans and other transactions referred to in paragraph 26F of the petition were acts of mismanagement by the first respondent and could they, if true, be agitated in these proceedings ? (15)Whether the resolution of the board of directors of the seventh respondent company dated December 3, 1975, concerning the furnishing of copies of documents and information amounts to abuse of power and exclusion of the petitioner from management to warrant action under sections 397 and 398 of the Act ? (16)Whether the allegations in the petition concerning the internal affairs of M/s. K. C. P. Ltd. can be investigated in these proceedings? (17)Whether the proposals dated November 17, 1976, of the seventh respondent company to raise the strength of the board of directors of M/s. K. C. P. Ltd. and proposing the appointment of the third respondent as a director of M/s. K. C. P. Ltd. are irregular, invalid and illegal ? (18)What reliefs?" Having considered the oral and documentary evidence and the legal position, the learned judge gave his find....
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.... and whether the plaintiffs have proved any family arrangement. In the plaint, it is stated that late V. Ramakrishna "thought it best to bring about a family arrangement by virtue of which the two sons will be in exclusive management of one company and the daughter, the other company". Then it is stated that the family arrangement thus brought about at Madras was as follows : "(a)participation in the management and affairs of V. Ramakrishna Sons Ltd., the then managing agents of K. C. P. Ltd., will be the exclusive entitlement of the two sons, V. M. Rao (first plaintiff), V. L. Dutt (fifth defendant) and/or their respective branches along with their mother, V. R. Durgamba, during her lifetime. (b)participation in the management and affairs of R. S. Industrial Corporation Private Ltd., the then managing agents of Jeypore Sugar Co. Ltd., will be the exclusive right and privilege of the daughter, Rajeswari Ramakrishnan (first defendant), and her respective branch. (c)In the event of the holding of V. Ramakrishna Sons Ltd. and/or personal shareholdings of V. M. Rao and V. L. Dutt, in the said Jeypore Sugar Co. Ltd., Krishna Industrial Corporation Ltd., and R. S. Industrial ....
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....., they should give her, her branch or her nominees, the first option to buy the shares". It is further stated that her husband put these suggestions to each one of them individually and they accepted the same and acted upon it. Apart from the fact that the affidavit uses the expressions like "desirable", "advisable" and "suggested", as against the plaint allegation that the father "brought about" an arrangement, the affidavit of Durgamba does not confirm the plaint relating to the "exclusive" right of participation in the management and affairs of the companies by the respective parties. On the other hand, the affidavit refers to the "control" of V. Ramakrishna Sons Ltd., by the two sons and not the exclusive participation "in the management and affairs of the company". In his oral evidence as P.W.-1, V. M. Rao, has stated: "Then one day, my father called all of us, my sister, Rajeswari Ramakrishnan, my brother-in-law, P. R. Ramakrishnan, my brother, V. L. Dutt and myself to the office of K. C. P. Ltd. in 38, Mount Road, Madras, in the evening and then suggested to us that a formula could be evolved which would solve the differences. We accepted this arrangement gladly and w....
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.... and not relating to the management and affairs of V. Ramakrishna Sons Ltd. and R. S. Industrial Corporation (P.) Ltd. The evidence of P.W.-l thus does not establish the family arrangement pleaded in the plaint. One of the parties to the alleged family arrangement according to appellants was R.W.-3, V. L. Dutt. He had completely denied the existence of any such family arrangement. He was cross-examined elaborately by counsel for the plaintiffs, but with no effect. Nothing can be stated to disbelieve his evidence either. Rajeswari Ramakrishnan filed a counter-affidavit in Applications Nos. 3246 and 3247 of 1975. After stoutly denying the alleged family arrangement and the implementation of the same and denying any type of arrangement providing for participation in the management and affairs of V. Ramakrishna Sons Ltd. to be the exclusive entitlement of the first plaintiff and the fifth defendant and their respective branches along with their mother, the affidavit further stated : "The only intention of late Sri V. Ramakrishna declared and expressed to me, my husband the third respondent and my brother the first applicant and the fifth respondent was that the two brothers sh....
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....sister looking after the affairs of the company and that if he wanted anything to be looked after, he may be given some other work and that there should be no connection between him and his sister. Then we pacified my son and told him that he should not worry very much about the matter and he then looked after the affairs. Then, one or two days later, my husband told me that he did not like his son and daughter quarrelling with each other and he would make some arrangement for them. Then two or three days thereafter, my husband, sons, son-in-law and daughter made the division of the companies." To a question as to what was the division, she answered : "It was decided that my sons should look after V. R. and Sons and my daughter should look after R. S. Industrial Corporation." When asked as to the terms of the arrangement, she said : "In V. R. and Sons, my daughter was having twenty per cent. of the shares. It was agreed that if my daughter wanted to sell her shares in V. R. and Sons, the same should be sold equally between our two sons. In the same manner, my two sons are having shares in R. S. Industrial Corporation and if they wanted to sell their shares in that compa....
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....in management of K.C.P. Ltd. and the daughter to be in management of Jeypore Sugars. The arrangement thus could not be with reference to the management and affairs of V. Ramakrishna Sons Ltd. or R. S. Industrial Corporation Ltd. In the plaint and in the company petition, the first plaintiff has stated that his father had informed about this arrangement to his mother, his mother's brother, A.V. Subramanyam, one A. Visweswara Rao (P.W.-15) and the late A.V. Raghava Rao. It is also mentioned that friends like S.V.R. Appa Rao, a director of K.C.P. Ltd., M. Sitharama Rao (P.W.-8), the then plant manager of Vuyyuru Sugar Factory of the K.C P. Ltd., etc., A.V.M. Caesar, son of late A.V. Raghava Rao and M.K. Bhandarkar (P.W.-13), the then sales manager of K.C.P. Ltd., also know of the above arrangement. P. Punniah (P.W.-6), a former manager of Jeypore Sugar Co. Ltd., knows of this arrangement having been informed thereof by Rajeswari Ramakrishnan. However, in his evidence, as P.W.-1, the first plaintiff, had stated that it was his father who informed his mother, his mother's brother and the friends referred to above and P. Punniah. This is also an improvement on the pleadings. B....
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....S. Industrial Corporation Ltd." In cross-examination, he stated that Ramakrishna told him orally about this, that he did not make any note of what was conveyed to him and for the first time in 1975 he made a statement before a notary public at the instance of V.M. Rao after the dispute. Though he stated that the present evidence is in accordance with that statement, the plaintiff has not produced that statement, entitling the court to draw an adverse inference. It may be noted that this evidence also refers to the sons "looking after the management of K.C.P. Ltd. and the daughter the management of Jeypore Sugar co. Ltd. and Krishna Industrial Corporation Ltd. It does not speak of any exclusive entitlement of any arrangement relating to V. Ramakrishna Sons Ltd. We may also state that this witness also is a partisan witness and, therefore, his evidence could not be relied on. P.W.-13, M.K. Bhandarkar, who was the general manager of K.C.P. Ltd. between 1950-1956 and 1959-1972, states in his evidence that "Rao stopped giving instructions regarding Jeypore Sugar and he told me to refer to his father or his sister and he (Rao) was giving instructions only in respect of K.C.P. and that....
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....on. In cross-examination he, however, clarified that V. Ramakrishna asked his daughter to look after Jeypore Sugars and "the sons to look after K.C.P.". The learned judge has pointed out several materials to show the animosity of this witness against V.L. Dutt and we agree with the learned judge. It should also be remembered that even according to the plaintiffs, the arrangement was devised by the father, put to the sons and daughter and agreed to by them. Admittedly, Durgamba was a life director of V. Ramakrishna Sons Ltd., and she was not a party to the arrangement. The other shareholders who are R. Prabhu and his father, P. R. Ramakrishnan, are also not parties to this arrangement though they are as per the articles eligible to become directors. It is not also pleaded that Rajeswari Ramakrishnan represented or acted on behalf of her son and husband who are the other shareholders in entering into this arrangement. Admittedly, there was no simultaneous recording of the oral family arrangement as set out in the plaint in any document, letter or proceeding either in family accounts, correspondence or files or the files of correspondence or meetings of any of the companies. The al....
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....aviour or any other unfriendly feelings in her. She had further stated that after the return of their father and brother from foreign tour, she continued to check the accounts of K. C. P. Ltd., as she was doing in their absence but that was as directed by the father since he was fully occupied with other planning and expansion programmes, but she was not aware that the first plaintiff was upset by her checking of the accounts. The fifth defendant who filed a separate written statement characterised these allegations of the plaintiffs as based on imaginary disbelief in others and are invented by the plaintiffs in order to make it appear that there was some occasion to bring about the so-called family arrangement. In his evidence as, P. W.-1, V. M. Rao, has stated that his sister is a domineering individual and he himself is a very strong-willed individual. His sister was in charge of all the companies during the absence of his father, himself and his brother. When he came back, he found that his sister was still giving instructions and that he did not approve of this interference. It is not clear as to what is meant by this statement that the first defendant was "giving instructions....
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....important and noteworthy that there is no allegation of mutual distrust among the brothers and sister or any overbearing conduct of the sister in business matters. Thus, neither this character of P.W.-1 nor the verifying of the accounts by the first defendant could be considered such strong or compelling circumstances which would warrant an inference that the father would have felt compelled to create groups and bring in a family arrangement in the form in which it is referred to in the plaint. In this connection, we may also keep in mind that the alleged family arrangement not only referred to the management of the first plaintiff and the first defendant but grouped the mother, Durgamba, and the other brother, V. L. Dutt, along with the first plaintiff, though no particular reason is suggested as to the reason for excluding the mother and the other brother from participation in the management of R.S. Industrial Corporation and Krishna Industrial Corporation which were to be managed by the first defendant. The circumstances and the reasons stated, therefore, do not suggest, and are not strong enough to suggest, that the father entertained a doubt about the intentions or cordiality ....
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....of that time, to the changed constitution of the body corporate. The explanation to clause 1 of that section defines a change in the constitution of a body corporate as meaning among others "(h) any change among the directors or managers of the corporation whether caused by the death or retirement of a director or manager, the appointment of new director or manager or otherwise". It may be seen from section 346 of the Act, the family arrangement pleaded, if true, would amount to a change in the constitution of V. Ramakrishna and Sons Ltd. It is the case of the plaintiffs that the alleged family arrangement took place some time in July, 1961. Exhibit R-10 dated October 19, 1961, is a letter written by V. Ramakrishna Sons Ltd. to the Government of India with reference to section 346 of the Companies Act. In this letter, it is stated that (a) Rajeswari Ramakrishnan has tendered her resignation from the post of the director of the company subject to the approval of the Central Government thereto, and that (b) she has also vacated her office by reason of her absence from four consecutive meetings of the board. Rajeswari Ramakrishnan, in her letter dated October 18, 1961, had not also gi....
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....could not have been any family arrangement as pleaded in the plaint. Under section 347(1) of the Act, the provisions of Schedule VIII to the Act shall apply to every private company which acts as the managing agent of any company whether public or private. Since V. Ramakrishna Sons P. Ltd. are the managing agents of K.C.P. Ltd., which is a public limited company, the provisions of Schedule VIII are applicable to it. Clause 7 of Schedule VIII requires a declaration signed by a director of the company to be filed whenever there is a sale or transfer of any shares in the company or any other change occurs in regard to any of the matters specified in clause 5. Sub-clause (a) of clause 5 relates "to the particulars to be furnished in regard to the manner in which each such member deals with his shares or interest, that is to say, whether he owns the same beneficially or on behalf of or in trust for any other person; and in the latter case, the name or names of the person or persons on whose behalf or interest for whom, the shares or interest is held and the extent of interest of each such person". Sub-clause (e) requires the declaration to specify "the names of the directors of the p....
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....he resignation of Rajeswari Ramakrishnan of her life directorship on the board of V. Ramakrishna Sons Ltd. on October, 19, 1961, which was accepted on January 9, 1962. Learned counsel also relied on the sale of his shares and that of V. Ramakrishna Sons Ltd. in Jeypore Sugar Co. Ltd. to Rajeswar Ramakrishnan and to her branch and/or nominees. It was the contention of Mr. Pai, learned counsel for the respondents, that the resignation of V. M. Rao was not in pursuance of any family arrangement. According to him, V. M. Rao was a strong-willed person and the father thought that he was likely to come in the way of his sister whom he was associating with Jeypore Sugar Co. Ltd. and R. S. Industrial Corporation along with him and in order to enable V.M. Rao to concentrate on K.C.P. where he was in charge of the technical aspect, the father had asked him to resign from the company. It was his further case that Rajeswari Ramakrishnan was not actively taking part in the management as a director in V. Ramakrishna Sons ever since its inception in 1949 to 1960 and in order to make way for her younger brother who had just then returned from abroad and who was in charge of the administration, she ....
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.... arrangement as such. The subsequent conduct of the parties also is not consistent with any family settlement. It is seen from exhibit R.-1 series which are the annual reports of Jeypore Sugar Co. Ltd. that V. L. Dutt became a director in Jeypore Sugars in 1963 and continued as such till the filing of the suit. The father, V. Ramakrishna, was the chairman till his death in 1968 and, thereafter, from 1969, his wife, Durgamba, became the chairman and continued as such. Thus, both Durgamba and V. L. Dutt who, according to the family arrangement, had to carry on the business of K.C.P. Ltd. only through V. Ramakrishna Sons Ltd. were taking active participation as chairman and director in the management of Jeypore Sugar Co. Ltd., which is not consistent with the terms of the family arrangement pleaded by the plaintiffs. If the family arrangement was true, V. L. Dutt and Durgamba could have no connection with Jeypore Sugars. The first plaintiff sought to explain this, saying that the family arrangement only refers to participation in the management of the affairs and that if one member of the group was invited by the opposite side for giving help, it would not affect the family arrange....
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....also sold its 37,790 equity shares in Jeypore Sugar Co. Ltd. to R. S. Industrial Corporation P. Ltd. and Rajeswari Ramakrishnan during the assessment year 1966-67 and 36,900 equity shares in Jeypore Sugar Co. Ltd. were sold by the company to Baba Chandrasekhar, the second son of the first defendant, during the assessment year 1967-68. With reference to this allegation, it was stated in the written statement of defendants Nos. 1 to 4 that it was not in pursuance of any family arrangement. The sale of the shares of the first plaintiff in Jeypore Sugar Co. to the first defendant was a small number of shares which were offered to the first defendant and which she purchased to avoid the shares being disposed of to any third party. With reference to the alleged disposal of the shares of the sixth defendant in Jeypore Sugar Co. Ltd. to R. S. Industrial Corporation P. Ltd. and to the first defendant and her son, it was again stated that it was not in pursuance of any family arrangement or settlement. It is further stated that the sixth defendant company owed a large sum of Rs. 3,25,000 to R. S. Industrial Corporation P. Ltd. and a block of shares of the sixth defendant in Krishna Industria....
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....need to expand the board. He also admitted in his evidence that no reference was made to the family arrangement in exhibit P-3. There was also no reference to the right of pre-emption in that letter and no mention about exclusive rights of management. The statement of the first plaintiff in exhibit P-3 that he will have no objection to Rajeswari Ramakrishnan becoming a director if a special resolution is passed allowing proportional voting rights to the members of the company totally negatives the existence of a family arrangement. Further, the first plaintiff's proxy attended the annual general meeting held on April 22, 1975. The proxy voted at the election held on that day but did not register any protest that the first and second defendants were not eligible to contest for directorship on account of any family arrangement or agreement. There was also no protest even from Durgamba who attended the meeting but abstained from voting. Exhibit P-8 is a letter dated September 2, 1975, written by the first plaintiff to the company complaining of omissions of material and relevant facts in the minutes relating to the annual general meeting held on July 22, 1975. Though he complained....
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....s. V. R. Durgamba. Mr. V. L. Dutt has also exercised his voting power wrongfully in so far as he supported Mrs. Rajeswari Ramakrishnan and Mr. R. Prabhu to become directors and in the reduction of the dividend. I hasten to point out that the continued functioning of Mrs. Rajeswari Ramakrishnan and Mr. R. Prabhu as directors of V. Ramakrishna Sons Ltd. is illegal and opposed to the family arrangement." and states that : "It is opposed to and contrary to the family arrangement brought about by late father, Sri V. Ramakrishna, I.C.S. (Retd.) in the year 1961, and is calculated to exclude me from my rightful participation in the management of the company of which I was assured in the year 1961, as this "leads to a disruption of the special relationship which is the sub stratum of the domestic company." Promptly, this allegation was denied by the first defendant in her reply, exhibit P.-15 dated December 14, 1975. She also pointed out that the letter was not clear and that the first plaintiff has not spelt out what was the family arrangement which he had in mind and that, therefore, she could not be specific in her denial. It is for the first time in the lawyer's notice, ex....
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....he disputes and dissensions between the brothers, we agree with the view of the learned judge that even assuming that the family arrangement alleged was true, the two brothers put in a group were at loggerheads and there developed a deadlock and the company, to avoid a paralysis of its affairs, had to interfere and elect directors that would ease the situation. Learned counsel for the appellants contended that an arrangement or agreement between two groups of shareholders that one group will not participate in the management and affairs of the company and the other will have exclusive rights of such management, is valid. He also contended, if certain things have been done, though not embodied in the articles, automatically, the articles shall be deemed to have been amended. In support of his argument he relied on the following decisions : Puddephatt v. Leith [1916] 1 Ch 200; and Fender v. Lushington [1876] 6 Ch 70, and certain passages in Palmer's Company Law. Learned counsel for the respondents-defendants contended that articles of association formed the basis on which any particular person becomes a member of the company and that constituted a binding contract with t....
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.... have been in use by the company from that day for over 19 years. They had been twice amended by special resolutions which had also been registered. A purchaser and transferee of shares in the company applied for registration. The articles contained power for the directors to prevent and disallow the sale or transfer of shares to a transferee whom they do not consider a fit person to hold shares. In exercise of this power, the directors refused to register the transferee. Thereupon, the transferee moved the court to have the register rectified by registering him as the holder of the shares on the ground that since the articles had not been validly registered, Table A only was applicable. It may be mentioned that Table A did not authorise the directors to reject any transfers. Overruling the contention of the plaintiff, the Judicial Committee of the Privy Council observed (at p. 235): "It appears, therefore, that these articles have been registered, and have been published and put forward as the company's only articles of association, and have been acted on, amended, and added to by the shareholders of the company, and the company's business has been conducted under the r....
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.... January 20, 1913, sent by the defendant to the plaintiff and that read as follows (at p. 200): "I should have mentioned to you today that your voting rights in virtue of the shares held in mortgage by me during the period of the loan will be untouched. Though the shares will be in my name and my voice may give the vote, I shall give no such vote without first consulting you, I shall vote in all cases when a vote is necessary in respect of these shares as you wish me to do. This proviso will not be mentioned in the agreement, but you can preserve this note if you like." Differences had arisen in connection with the management of the company's business, and at the last general meeting of the company, the defendant who was himself a director of the company had voted in respect of the mortgaged shares against the wishes of the plaintiff and was insisting on his right to do so at the approaching general meeting to be held later. The plaintiff then brought an action in which she had prayed for an injunction restraining the defendant from voting in respect of the shares otherwise than in accordance with the plaintiff's direction. After holding that the undertaking to vote i....
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....carry voting right or rights in a company as to dividend, capital or otherwise which are disproportionate to the rights attaching to the holders of other shares; and even if with reference to an existing company, if the shares carry voting rights in excess of the voting rights attaching under sub-section (1) of section 87 to equity shares, the company shall reduce the voting rights so as to bring them in conformity with the voting rights attached to such equity shares under sub-section (1) of section 87. Sections 255, 256, 257, 260, 261 and 262 deal with the appointment of directors and sections 274 and 283 relate to the qualifications, disqualification and vacation of office of directors. The family arrangement pleaded is also contrary to these provisions. We are, therefore, of the view that the family arrangement pleaded, even if true, is not valid and binding on the defendants. As per the family arrangement pleaded, the first defendant and her branch shall be deemed to be holding shares in the company as legal owners with beneficial interests in favour of the branches of the first plaintiff and his brother and also his mother during her lifetime. The first plaintiff admitt....
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....hese two cases in this judgment. The Judicial Committee of the Privy Council in Burland v. Earle [1902] AC 83 at pp. 93 and 94 observed: "It is an elementary principle of the law relating to joint stock companies that the court will not interfere with the internal management of companies acting within their powers, and in fact has no jurisdiction to do so. Again, it is clear law that in order to redress a wrong done to the company or to recover moneys or damages alleged to be due to the company, the action should prima facie be brought by the company itself. These cardinal principles are laid down in the well-known cases of Foss v. Harbottle [1843] 2 Hare 461; 67 English Reports 189 and Mozley v. Alston [1847] 1 Ph 790, and in numerous later cases which it is unnecessary to cite. But an exception is made to the second rule, where the persons against whom the relief is sought themselves hold and control the majority of the shares in the company, and will not permit an action to be brought in the name of the company. In that case, the courts allow the shareholders complaining to bring an action in their own names. This, however, is mere matter of procedure in order to give a re....
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....monies as damages alleged to be due to the company, the action should ordinarily be brought by the company itself. In order, therefore, to enable a shareholder to institute a suit in the name of the company, in such a case, there must be the sanction of the majority for corporate action. In ordinary cases, therefore, this principle implies the supremacy of the will of the majority. It is open to a majority always to set right a thing which was done by the majority either illegally or irregularly, if the thing complained of was one which the majority of the company were entitled to do legally and was within the powers of the company by calling a fresh meeting. That is the reason why in such cases the court refuses to interfere at the instance of a shareholder even in a representative action brought by him. If the majority, however, act in an oppressive manner, it is not as if the minority are without a remedy. This possibility was foreseen by Sir James Wigram, Vice-Chancellor, who delivered the judgment in Foss v. Harbottle [1843] 2 Hare 461. At page 492, the Vice-Chancellor says : 'If a case should arise of injury to a corporation by some of its members, for which no adequat....
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....ction of the majority is illegal. The decisions in Baillie v. Oriental Telephone and Electric Co. Ltd. [1915] 1 Ch 503 and Cotter v. National Union of Seamen[l929] 2 Ch 58, recognised a fourth exception where a special resolution was required by the articles of the company and the company obtained the assent of the majority to such special resolution by a trick, or even where a company authorised to do a particular thing only by a special resolution does it without a special resolution duly passed as, in such a case, to deny a right of suit to the shareholders without using the name of the company would in effect result in the company doing the thing by an ordinary resolution. In other words, this means that where a special resolution was improperly passed, if the rule that the company alone is the proper plaintiff to institute a suit questioning such resolution were to be enforced, the shareholders by a bare majority could defeat and prevent the minority from using the name of the company. The result of such a course would be indirectly to uphold the validity of a special resolution which was otherwise invalid. To avoid this result this exception was recognised in the two decision....
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....y shareholders like the petitioner. Before we deal with these contentions, it would be useful to refer to certain decided cases dealing with similar questions. In Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp. Cas. 351 , the Supreme Court had considered the provisions of sections 397 and 398 elaborately. The facts in that case were as follows. The company was floated as a private limited company on December 1, 1950, with an authorised capital of Rs. 25 lakhs. Originally, shares worth Rs. 21 lakhs were held by two groups of shareholders equally and the two groups were represented by one Patnaik and Loganathan. In 1954, the company was in financial difficulties. One S.P. Jain, the appellant in that case, was requested to help the company by providing finance and by arranging loans from banks and other sources. The appellant agreed to do so and, consequently, on July 27, 1954, an agreement was entered into between the appellant and Patnaik and Loganathan. To this agreement, the company was not a party. Besides these two groups, a French company and one Rath who between themselves held shares worth Rs. 4 lakhs, were also shareholders. These shareholders were also not parti....
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....lant filed a suit praying for a declaration that the resolutions of the general body were ultra vires, illegal, void and not binding on the appellant the company and its shareholders with a prayer for permanent injunction restraining the defendants in the suit from issuing and allotting the new shares in terms of the impugned resolutions of the general body. An ex parte interim injunction was granted. However, the injunction was vacated later on July 30, 1958. On the same day, a meeting of the board of directors was held and the new shares were allotted to 7 persons who had applied for the same. On the same day, the return as required by the Act was also duly filed with the Registrar of Companies. In September, 1960, an extraordinary general meeting of the company was also called with a view to increase the capital of the company from Rs. 1 lakh to Rs. 3 crores. Thereupon the appellant filed a petition under sections 397 and 398 in the High Court. The contention of the appellant was that the allotment of new shares was made surreptitiously and deliberately with the sole idea of defeating the rights of shareholders represented by him and his group and this amounted to oppression of ....
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....at the petitioner should further show "that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of the petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of a company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder". The Supreme Court also held that the company was not bound by the agreement and that the mere fact that it was decided at the meeting in March, 1958, to offer the new shares to outsiders and not the existing shareholders did not necessarily amount to an oppression of the minority shareho....
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.... 397 that there is just and equitable ground for winding up the company ; (5) The conduct complained of can be said to be "oppression" only when it could be said that it is burdensome, harsh and wrongful; oppression involves at least an element of lack of probity and fair dealing to a member in matters of his proprietary right as a shareholder. The contention of the petitioner is that as per the family arrangement, he, his brother and mother alone can manage the company and persons belonging to his and his brother's branch alone can be elected as directors and that the election of his sister and her son though they are also shareholders, is invalid. Since the first respondent and second respondent in the company petition and their group together own 52.3 per cent. of the total shareholding strength, they are in a position to be an engine of oppression as against the petitioner and his supporters. Since the family arrangement pleaded is not true, and even if true it is not valid, as we have held in this case, there is no restriction on the election of directors. The exercise of the inherent right of the shareholders, in such circumstances, to elect their directors cannot b....
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....hat if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere." The Supreme Court in Hind Overseas P. Ltd. v. Raghunath Prasad Junjhunwalla [1976] 46 Comp. Cas. 91 considered the ratio of the English decisions including that in Ebrahimi v. Westbourne Galleries Ltd. [1973] AC 360 (HL) and held (at pages 104 and 105): "When more than one family or several friends and relations together form a company and there is no right as such agreed upon for active participation of members who are sought to be excluded from management, the principles of dissolution of partnership cannot be liberally invoked. Besides, it is only when shareholding is more or less equal and there is a case of complete deadlock in the company on account of lack of probity in the management of the company and there is no hope or possibility of smooth and efficient continuance of the company as a commercial concern, there may arise a case for winding up on the just and equitable ground. In a given case, the principles of dissolution of partnership may apply squarely if the apparant structure of the company is not the real structure and on piercing the veil it i....
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....ajeswari Ramakrishnan) and Mrs. Rajeswari Ramakrishnan. The nominal capital of the company was Rs. 10 lakhs divided into 1,000 shares of Rs. 1,000 each. The issued and paid up capital was 500 shares of Rs. 1,000 each and they were subscribed by the following members as follows : V.M. Rao ... 199 V. L. Dutt ... 199 Rajeswari Ramakrishnan ... 95 R. Prabhu ... 4 V. Ramakrishna, I.C.S. ... 1 P. R. Ramakrishnan ... 1 V. R. Durgamba ... 1 Rajeswari Ramakrishnan was even then married and was living with her husband at Coimbatore. V. Ramakrishna was living in Massolipatnam. It is, therefore, clear that at the time of formation of the company, there was no partnership, nor were there any groupings among the members. Nor do we find any special features which would unquestionably lead to the conclusion that the company is in substratum a partnership. The distribution of the shares, however, shows that V. M. Rao and his brother, V. L. Dutt, have been allotted equal shares almost one-third of the total for each and their sister, Rajeswari, her husband and son a total of 100 shares forming one fifth of the total paid up shares. Th....
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....do not entertain any animosity against the petitioner. Therefore, the petitioner himself could not say that he is not on talking terms and then claim there is a deadlock in the management of the affairs of the company. Hence, there is no justification for the allegation of the petitioner that he was excluded from management or that there was any deadlock in the management. We do not also agree with learned counsel for the petitioner that the substratum of the company is the family arrangement or managing agency business and that when there is a breach of the agreement and when the managing agency system is abolished, the substratum of the company should be taken as lost. The objects of the company as set out in the memorandum of association are many and varied and not restricted to carrying on the business as managing agents alone. We may usefully quote clauses 3(b), (d) and (g ) thereof which are so unconnected in any way with the carrying on of business as managing agents. Those clauses read as follows: "3(b) To carry on the business of general merchants, importers and exporters, all kinds of agency business and business as sales agents and distributing agents, manufactu....
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....shareholders may change their intention if the business had not become impossible. The learned judge further observed that "in order to bring the case within the principle underlying substratum cases, it is not enough to show that the main or dominant object for which the company is incorporated has been abandoned or that there is no intention on the part of the company to carry out such object but it must be proved that such object has become impossible of fulfilment either by reason of the subject-matter of the company being gone or for any other reason." In that case, the company was formed to carry on the business of manufacturing hydrogenated vegetable oils, soaps, and other allied products, but as the company began to incur losses, the company thought that it would be better to give a lease of the factory for carrying on the same business for a period of years to another company, and leased the factory. On the ground that the substratum of the company was gone, a petition for winding' up of the company was filed. The learned judge dismissed that petition holding that the substratum of the company was not gone as the carrying on of the business of manufacturing oils, etc.,....
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....t that there was no evidence that the company was unable to pay its debts, that the object for which the company was incorporated has not substantially failed and that it could not be said that the company could not carry on its business except at a loss nor that its assets were insufficient to meet its liabilities. It is also pertinent to note that during the pendency of the petition, the business of the company came to a grinding halt. But that was not given any weight, because, primarily, the circumstances existing as at the date of the petition must be taken into consideration for determining whether a case was made out for holding that it was just and equitable that the company should be wound up. The decision is, therefore, an authority for two propositions, namely, ( i) that the substratum of the company is decided with reference to the objects of the company; and (ii) the possibility of the company re-starting the business with the assets which it possessed and prosecuting the objects for which it was incorporated shall always be taken into account in deciding whether the substratum is gone. Reading Jhunjhunwalla's case [1976] 46 Comp. Cas. 91 (SC) and Ebrahimi's....
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....board of directors of Bajrangabali Iron and Steel Co. Ltd. held on September 27, 1975, shares worth Rs. 5,00,400 were issued to the following persons: Rs. M/s. Bajrangabali Engneering Co. Ltd. 4,00,400 K.N. Agarwal 10,000 Kantidevi Agarwal 40,000 Murarilal Agarwal 50,000 Total 5,00,400 According to the company-petitioner, "the fixed assets of the company, namely, Bajrangabali Iron and Steel Co., are worth about Rs. 48 lakhs and there is absolutely no justification for allotting these shares to K. N. Agarwal and the members of his family and Bajrangabali Engineering Co. Ltd. at par, which has resulted in the dilution of the value of the shares for the existing shareholders. Further, this has been done arbitrarily without any reference to the board of directors or the shareholders of V. Ramakrishna Sons Ltd., who owned the entire shareholding of Bajrangabali Iron and Steel Co. Ltd. This amounts to 50% of the assets of Bajrangabali Iron and Steel Co. Ltd. having been alienated for Rs. 5,00,400, unauthorisedly without consulting or referring to the owners of the assets. Such ....
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....ares to persons other than its shareholders, that the valuation adopted for valuing the shares was in accordance with law, that there was no violation of section 81 of the Companies Act, that the increase of share capital or allotment of shares is a matter of internal management, that if the allotment is to be questioned, the allottees should have been made parties to the petition and in their absence, the allotment itself cannot be questioned and that, in fact, the allegation relating to this lacks bona fides. Originally, a company known as Lal Steel Rolling and Casting Ltd. was incorporated on April 6, 1970. The subscribers to the memorandum and articles of association were V. M. Rao (petitioner), K. N. Agarwal, A. V. Raghava Rao, A. V. Jayaraman and B. Kalyanasundaram. The original subscribed capital was Rs. 400 only. The first three of the subscribers to the memorandum each held 10 shares of Rs. 10 each, totalling Rs. 300. The remaining 2 shareholders each held 5 shares of Rs. 10 each. It did not carry on any business in 1971 and 1972. The name of the company was changed into Bajrangabali Iron and Steel Co. Ltd. (hereinafter called "Bajrangabali") at an extraordinary general....
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....person other than an existing shareholder and issuing the further shares worth Rs. 5,00,400 by the board of directors in the meeting held on September 27, 1975, in favour of K. N. Agarwal and the members of his family was an imprudent, illegal, fraudulent and unbusinesslike transaction. It is seen from the documentary evidence produced in this case that for the year ended June 30, 1974, Bajragabali made a profit of only Rs. 3,771.95. In the directors' report for this year, it was stated that the chances of working the re-rolling mill on economic lines are bleak. For the year ended June 30, 1975, the company sustained a loss of Rs. 2,53,575.17 and this loss was before a provision was made for depreciation amounting to Rs. 1,25,736.66 and by way of amortisation of preliminary expenses amounting to Rs. 5,323.36. If these items are taken into account, the total loss for the year ended June 30, 1975, would be Rs. 3,82,625.19. The company had a huge liability amounting to Rs. 38,91,614 as on June 30, 1975. These liabilities included nearly about Rs. 6 lakhs due to Bajrangabali Engineering Co. (P.) Ltd. As on June 30, 1974, the value of fixed assets and machineries held by Bajrangabal....
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....or and they are taken into account; the total loss was Rs. 2,97,873.78. For the year ended June 30, 1976, the total loss was Rs. 4,40,687.84. The report of directors in both the years was that re-rolling industry is facing recession, selling rates have glided very much and the company is still in the throes of depression. In the circumstances, therefore, we agree with the finding of the learned judge that there had been a justification for V. Ramakrishna Sons Ltd. not opting for purchase of rights shares and allowing Bajrangabali to allot further shares to persons other than the shareholders. It was then contended by learned counsel for the appellants that this special resolution was passed on September 25, 1975, by Bajrangabali without any reference to the board of directors or the shareholders of V. Ramakrishna Sons Ltd. and, therefore, it is not valid. There is no dispute that notice of the extraordinary general meeting held on September 25, 1975, was sent to V. Ramakrishna Sons Ltd., as also to the other shareholders. At that meeting, one C. Ramanathan represented V. Ramakrishna Sons Ltd. This Ramanathan had not been duly authorised to represent the company is the case of th....
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....e. At any rate, the increase of the share capital and allotment of shares being matters of internal management, this is not a matter in respect of which section 397 can be invoked. Further, the allottees themselves had not been parties to these proceedings and without impleading them the validity of the allotment cannot be questioned, vide Smt. Jatan Kanwar Golcha v. Golcha Properties [1971] 41 Comp. Cas. 230 (SC); Shrimati Jain v. Delhi Flour Mills Ltd. [1974] 44 Comp. Cas. 228 , 249, 250 and Jogesh Chandra Majumdar v. Durga Mohan Chakrabarty, AIR 1932 Cal. 714. We, therefore, agree with the learned judge that a special resolution dated September 25, 1975, was in accordance with law and it is not liable to be questioned by the petitioner in these proceedings. The further submission of learned counsel for the petititioner was the fixed assets of Bajrangabali are worth about Rs. 48 lakhs and there is absolutely no justification for allotting these shares to K. N. Agarwal and the members of his family and such allotment of the shares at par has resulted in dilution of the value of the shares for the existing shareholders. The evidence relating to the valuation of the shares of ....
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....f valuation. It is also seen from evidence that in 1973, he has submitted a report to the Punjab National Bank valuing the several of the items contained in exhibit P. 29 at cost. This evidence is, therefore, unreliable and not trustworthy. P.W.-7 is the Sub-Registrar of Thiruvothiyur. He has stated that as per guidelines book, the value of the land was Rs. 5,000 per ground. No documents were produced. Further, these guidelines values are only for the purpose of stamp duty covering a large area in a city without any particular reference to the value of any particular item of property within the area covered by that statement. Much reliance cannot, therefore, be placed on this evidence. One Gatalia, a chartered accountant of Bombay was called as P.W.-9 to give evidence regarding the value of shares of Bajrangabali as on June 30, 1975. He had filed two computations, exhibits P-34 and P-35. It was admitted by him that they are mere arithmetical computations based upon the estimated value of land, buildings and machineries of the company as furnished to him by the petitioner who was stated to have obtained a report from an engineer. In exhibit P-34, he has computed the value taki....
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.... and March 31, 1976, might be the same. He never cared to verify whether the assets were old or were recent purchases, nor had he taken into account what represented the book value, the depreciation or the original cost. Though he admitted that the correct principle of valuation was to take into account the cost of the machine, the age and the present condition and to make adjustment for depreciation, he had not called for any of these particulars or verified the same and simply acted on the valuations provided by the petitioner, and that too, with reference to the date, March 31, 1976. He had not also cared to called for and look into the accounts relating to various practices such as dividends, if any, declared, the profitability of the company over a course of years, reasons for the losses sustained by the company, the prospects in future and whether the assets of the company are old or recent purchases. Though he admitted that the primary method of valuation of shares of a going concern is one based on yield or dividend and that in arriving at the value on the basis of assets, the balance-sheet figures should be taken into account and not on a revaluation item-wise, he has adop....
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....ent transaction. At this stage, it would be convenient to consider another allegation made in the company petition against Rajeswari Ramakrishnan, her son, Prabhu, her brother, V. L. Dutt, and her husband, P. R. Ramakrishnan. The petitioner has stated that the conduct of these people as directors of Jeypore Sugar Co. Ltd., in relation to levy sugar allotted to various dealers in Andhra Pradesh, West Bengal and Orissa in diverting about 16,000 bags to the black market, though the same was shown in the company's books as though the goods had been despatched to the allottees, clearly establishes the lack of probity in them. He had further stated that such persons who have been unmindful of the public interest, particularly in relation to the affairs of a public limited company, have, by such lack of probity and their own oppressive conduct, forfeited their positions as directors. He had also contended that their conduct in relation to Bajrangabali Iron and Steel Company Ltd. has clearly proved that they are unworthy of any confidence being reposed in them whatsoever in relation to the affairs of V. Ramakrishna Sons Ltd. He has also made certain allegations relating to the elect....
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....9 on the file of the High Court of Andhra Pradesh and obtained on January 19, 1979, an order staying "all further proceedings by respondents Nos. 1 and 2 herein, viz., the Special Secretary to Government of India, Ministry of Finance, Department of Revenue, New Delhi, and the Central Board of Excise and Customs represented by its Secretary, New Delhi, in pursuance of the order dated December 26, 1979, in F. No. 196/11/289/78-CX-5 issued by the first respondent, including all proceedings for levy of duty, penalty or any proceedings relating to the release of sugar by the petitioner for the period from February to June, 1972, pending further orders. Even these proceedings are still stated to be pending. In the circumstances, therefore, we are of the view that it will not be proper to entertain or go into these allegations which are the subject-matter of proceedings in the High Court of Andhra Pradesh and the Government; nor can we permit the petitioner to rely on these allegations in this petition. We have also no doubt that these allegations are made in order to prejudice the Court though the appellants knew that they are pending proceedings and no finality could be attached to any ....
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....hat the petitioner sought to achieve this collateral purpose by two ways : one, by alleging a family arrangement and the other by initiating parallel proceedings before the Government and other courts which amount to contumacious conduct, disentitling him to ask for any relief in this court. We have already held that the family arrangement pleaded by the appellants had not been proved. Having failed in this attempt to project a family arrangement, according to learned counsel, the petitioner, with the connivance of P. Ws. Nos. 6 and 13 and others, tried to subvert the process of law by taking contemporaneous proceedings before the Government on the same allegations and for the same reliefs, but through his associate who has a common grievance as that of the petitioner against Rajeswari Ramakrishnan. Exhibit R.-92 dated May 9, 1977, is a petition presented by an advocate on behalf of P.W.-13 to the Central Government. The same allegations with regard to the excise fraud in Jeypore Sugar Co. Ltd. as alleged in these proceedings are contained in that petition. Almost identical allegations, as in the petition, alleging malpractice in the election of directors and in giving of contracts....
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....akrishnan could not complete the cross-examination for want of records and that after the receipt of records of Jeypore Sugar Co., he would like to further cross-examine the witness. It appears P.W.-6, P. Punnaiah, filed Company Act Case No. 1 of 1978 on the file of the High Court on Orissa of October 26, 1978, and obtained an interim order, exhibit R.-35, injuncting Jeypore Sugar Co. Ltd., "not to remove any papers, documents and books of account until further orders" from its premises at Madras and Coimbature and the premises of Mahaveer Transport Company at Vijayawada. This interim order further directed the opposite parties "not to invest funds of the Jeypore Sugar Company Ltd. in any other company and not to implement any resolution of the board of directors without the court's sanction". It is also in evidence that this relief was not originally prayed for in the interim direction application, but when the petition came on for orders on July 26, 1978, a note was given to the learned judge that an order of that nature was necessary pending preparation of the inventories to be taken in the said places which was the other relief-prayed for and ordered in that petition. The a....
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....of the company and prevent the respondents from syphoning off the funds of the company, the petitioners and the company would suffer irreparable loss. The petitioners apprehend that unless some interim orders are passed, funds of the company may be misappropriated." It is, therefore, clear that they have obtained an interim injunction on October 26, 1978, without disclosing that this court had at the request of the counsel for Rajeswari Ramakrishnan closed the cross-examination of V. M. Rao with liberty to the counsel to further cross-examine him after the records relating to Jeypore Sugar Co. Ltd., are made available to him to complete the cross-examination and the interim injunction was just to thwart this attempt to further cross-examine P. W-1. In fact, when summons was sent to produce records, the company produced the order of injunction. Of course, later, on a petition being filed to vacate the interim injunction by consent of parties, the order was vacated. Having initiated proceedings here, putting forth grievances touching on the affairs of Jeypore Sugar Co., it was not proper on the part of the petitioner and P. W-6 to attempt to stifle the defence in this manner and w....
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....bserved (at p. 114): "No words are strong enough to censure his conduct in taking recourse to the criminal law at a time when the identical allegations on which he moved the police court were the subject-matter of a pending application in this court. One of his charges in the winding-up petition is manipulation and falsification of accounts and a specific charge was that the cash in hand was found to be short upon a surprise checking done by him. Apart from the total falsity of the charge and apart altogether from the fact that he recorded in writing that the cash in hand agreed with the entires in the books, this court must take a serious view of his conduct in going to the police court to seek redress on identical allegations which formed the subject-matter of a pending application in this court for winding up the company." It may be mentioned that against the order of the Magistrate issuing the search warrant, a criminal revision was filed and it came before another learned single judge. He also deprecated this practice and made the following observations (at p. 114): "In the view I have taken as discussed above, I think the opposite party should not be allowed an indul....
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....thorised and if that somebody happens to be V. L. Dutt or Prabhu or Jayaraman, it could not be said that that would invalidate the resolution itself. The company petitioner is still a director of V. Ramakrishna Sons Ltd., and the managing director of K.C.P. Ltd. and if he is not able to persuade the other shareholders in K. C. P. Ltd. in the matter of election of the directors in place of the retiring director A. V. Subramanyam, that could not be a ground for questioning the nomination itself. We are unable to agree that this nomination manifests any intention on the part of the respondents to consolidate themselves as a pivot of power. The allegation in paragraph 26(G) relates to the resolution passed at the board meeting held on December 3, 1975. The resolution reads as follows : "RESOLVED to ratify the action of the office in furnishing copies of the company's records and other miscellaneous information to Mr. V.M. Rao, director of the company as per details in the list together with enclosures, containing the details of copies of documents handed over and initialled by the chairman of the meeting. Resolved further to furnish copies of the same records to all the direc....