TaxTMI 
TaxTMI 
TaxTMI 
1994 (9) TMI 276
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....lved to increase the share capital from 5,000 equity shares to 25,000 equity shares having a value of Rs. 10 per share. As per article 6 of the articles of association, the same was offered to all the shareholders of the company. Since two shareholders did not agree to purchase the same within the period, the same was offered to the eighteenth respondent, another shareholder, who agreed to purchase the same. It was originally offered 8,000 shares according to the proportion of its holding. But it wanted an additional allotment of 12,000 shares more which was also agreed to be allotted. On that basis, all the 20,000 additional shares were allotted to the eighteenth respondent. The eighteenth respondent wanted financial assistance, and it requested the petitioner for the same, and the same was agreed to be given by the petitioner/appellant. It was also agreed that the eighteenth respondent should pay interest at the rate of 15 per cent, per annum, and the additional shares were to be pledged to the petitioner as security for the financial assistance. On June 5, 1992, a resolution was passed by the petitioner-company to provide the financial assistance sought for by the eighteenth re....
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....oking the extraordinary original jurisdiction of the writ court under article 226 of the Constitution of India. In the original petition, the fifth respondent contested the proceeding on the ground that the petitioner was given sufficient opportunity to present its case. In fact, its advocate was present all along during the proceedings. Its further allegation was that the petitioner has suppressed material facts and the petition itself is filed at the instance of other respondents who hotly contested the case before the first respondent. The petitioner is only a pledgee and the allotment of shares in the name of the pledgor was invalid and that it was in violation of the articles of association of the company. There was no offer to the other shareholders and they were not even aware regarding the increase of the share capital. It is contended that the petitioner not only produced the document but also advanced elaborate arguments. It is further contended that in the proceedings under sections 397 and 398 of the Companies Act, the issue regarding how the company is being managed, and whether it affects the shareholders or the public at large alone has to be decided. An individual ....
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.... the first respondent had in fact relinquished the relief against the persons who are not parties to the proceedings and in spite of the same, the name of the appellant had been directed to be removed from the registers of the company. The petitioner/appellant was not given any opportunity to present its case, and the finding that it is a pledgee of the shares of the eighteenth respondent is not correct. The proceedings under sections 397 and 398 of the Companies Act are really to avoid the petitioner and had the petitioner before the first respondent invoked the jurisdiction under section 111 of the Companies Act, which is the correct provision that should have been invoked, the consequence would have been different. The complainants before the first respondent were aware that the appellant is a necessary party, that one of the complainants before the first respondent filed a suit, namely, C. S. No. 966 of 1992 before this court seeking the reliefs that are sought for in the petition before the Company Law Board, which was subsequently withdrawn. In that suit, the first respondent and the appellant were also parties. The withdrawal of the suit was also mala fide and it was intende....
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....itioner need not be heard. Alternatively, it was argued that in this case the appellant was fully heard by the first respondent, and, in fact, the appellant was represented by advocates and it also participated in the proceedings. The appellant had notice of the entire proceedings, but purposely avoided getting itself impleaded. It is further contended that the extraordinary jurisdiction of this court should not be invoked and the appellant should have invoked the jurisdiction under the Companies Act which is an effective alternative remedy. A necessary incidental proceeding was also initiated before the first respondent by way of an interlocutory, application in I. A. No. 19 of 1992. In that proceeding also, it was held that the petitioner is only a pledgee. That order has not been challenged. It was also contended that under section 405 of the Companies Act, the appellant should have got itself impleaded if it felt that its rights are going to be affected. The appellant who had sufficient opportunity and notice of the proceedings, refused to do so, and the said conduct is sufficient to refuse to exercise the discretionary jurisdiction of this court. It is also contended that the ....
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....which the share capital of the third respondent-company was directed to be increased from 5,000 to 25,000. The said meeting and increase in the share capital are challenged by the petitioners before the Company Law Board as fraudulent. It is alleged by the eighteenth respondent that notice was given to petitioners Nos. 1 and 2 before the Company Law Board offering the increased shares in proportion to the shares held -by them. The same was sent by certificate of posting and a date was fixed for accepting the same. Petitioners Nos. 1 and 2 before the Company Law Board did not accept the same before the stipulated time, and hence it was offered to the eighteenth respondent. Originally, the offer was for 8,000 shares in proportion to the shares held by it. Later, the eighteenth respondent requested for increasing the allotment, and it was acceded to, since petitioners Nos. 1 and 2 before the Company Law Board did not accept the same. On the basis of the allotment in favour of the eighteenth respondent, the eighteenth respondent paid the share value in cash, and immediately thereafter, the eighteenth respondent wanted financial assistance from the appellant-company, and the request was....
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....ng all dividends/ interest, bonus shares/rights shares and other benefits from time to time accruing or issued in respect of the said securities or any part thereof. We hereby agree that if so demanded by you, we shall from time to time deposit with you all interest/dividend from time to time receive in respect of the said securities and you will be entitled to adjust the same in liquidating the balance, if any, outstanding under the said accounts. We shall if so demanded by you from time to time forthwith also deposit with you all bonus shares and right shares that may from time to time be issued and they shall be deemed to form part of and be comprised in the expression 'the said securities' and subject to the pledge hereby created over the said securities if so demanded by you, we shall execute a supplemental document of pledge for the purpose. Without prejudice to the aforesaid, until they are deposited with you, we shall hold them in trust for you. During the period of the pledge, you will be entitled to all the rights of a shareholder as available under law. You shall also have the right to have a separate folio allotted to you in the register of members in respect of the sh....
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....without saying that when the same counsel appear for the fourteenth respondent and also for some other respondents, they have a common case to be urged before the Company Law Board and there is no inconsistency in their stand to be taken before them. It also goes without saying that they are agitating for the same cause and for the common purpose. Taking into account the above facts, we have to consider whether the principles of natural justice are violated. Pursuant to the notice mentioned above, the appellant filed a memo (letter) before the first respondent on October 7, 1992. From that letter, it is clear that the appellant was aware of the purpose for which notice was issued to it. It had notice of the proceedings. After submitting the documents on that date, the appellant has stated in that letter thus: "We, however, reserve our right to add, amend and modify our contentions and submissions at the time of hearing". The same is seen at page 1103 of the first respondents, file (Volume II). From the above submission, it is clear that the appellant understood what it meant by hearing and the purpose for which the notice was sent to it. The hearing may be either oral or in wri....
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....is court will have to take as the truth what has been recorded by the Company Law Board, especially when the same is not challenged or disputed either in the writ petition or in this appeal. Vide Bhagwati Prasad v. Delhi State Mineral Development Corporation, AIR 1990 SC 371 and State of Maharashtra v. Ramdas Shrinivas Nayak, AIR 1982 SC 1249. Since a different stand is taken by the appellant before this court claiming itself to be a mortgagee, the same is also considered here de hors the admission made before the first respondent. We have already extracted the clauses of the pledge agreement. The main contention of the appellant is based on clauses 5 and 6 of the pledge agreement. We may say that it should not be read in isolation. Clauses 5 and 6 should be read along with clause 3 of the agreement, and the circumstances under which the said document was executed. It is on the basis of clause 3, a pledge deed is executed and a blank transfer deed is also taken. It also says that the eighteenth respondent will execute in favour of the appellant or its nominee fresh transfer deeds from time to time, if and when required. It is in this context, we have to find out whether a mortgag....
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....ead along with articles 7, 8 and 9 will show that a transfer of a share in favour of a stranger is more or less prohibited. It is said in the articles (sic) that shares have been transferred in favour of the appellant. The said clauses read thus: "6. If at any time any shareholder desires transfer of his or her share held in the company, the share shall in the first instance be offered at a price determined by the auditors of the company to the existing shareholders or to such other party to whom the board of directors may agree. 7. No transfer of shares shall be made or registered without the previous sanction of the directors who may, in their absolute and uncontrolled discretion, decline to register any proposed transfer of shares with out assigning any reason. The directors may also decline to register any proposed transfer of shares if they are of the opinion that it would not be desirable to allow the proposed transferee to become a member or to increase his holding in the company. 8. Save as provided in section 108 of the Act, no transfer of shares shall be registered unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor or by ....
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....d circumstance in that case, their Lordships held that it was a mortgage and not a pledge. The facts and circumstances of the case are entirely different, and on the basis of that position alone, we cannot hold that the deed of pledge executed in this case amounted to a mortgage. In fact, in view of the admissions made by the appellant before the Company Law Board, we can only say that the finding of the learned single judge and the Company, Law Board that the document is only a deed of pledge and not a transfer, has to be upheld. The third respondent-company is a private limited company. The transfer of shares are controlled by the articles. Hence, it cannot be considered as a marketable security. That also shows that there cannot be a mortgage. It is only after finding that the appellant is holding the property only as a pledgee, the Company Law Board further found that necessary orders are required to protect its rights. It directed the eighteenth respondent to pay back the loan with interest. It directed the eighteenth respondent to pay the amount of Rs. 2,40,000 with interest due to the appellant. When protective orders have been passed by the Company Law Board, it cannot be....
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....d was not exercised, and the appellant had waived its right to be a party to the proceeding. It did not want itself to be impleaded before the Company Law Board. But in spite of the same, the Company Law Board (the first respondent) protected its interests and rights. The question whether the appellant is a necessary party may also be considered. The petitioner before the Company Law Board challenged the genuineness and truthfulness of the board meeting dated April 30, 1992, and also the subsequent decision to allot the shares to the eighteenth respondent. The alleged policy decision of the third respondent was in fact the subject matter before the Company Law Board. In that proceeding, the appellant cannot be a necessary party. The removal of its name from the register is only a consequential order, which the Company Law Board is bound to pass, to make its order effective. We are taking that view on the basis of the decision in General Manager, South Central Railway v. A. V. R. Siddhanthi, AIR 1974 SC 1755, and also in A. Janardhana v. UOI, AIR 1983 SC 769. It is also held in Cosmosteels (P.) Ltd, v. Jairam Das Gupta [1978] 48 Comp. Cas. 312 (SC) that in a proceeding under secti....
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....her contention of the appellant is that in spite of the petitioner before the Company Law Board having relinquished the relief against persons not parties to the proceedings, the first respondent has allowed the same. The -said submission of learned counsel is not correct. Rel inquishment of any relief can only be against a party to the proceedings. The relief of removal of the name of the appellant is incidental to the relief to be granted under sections 397 and 398. In Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd., AIR 1966 Cal. 512, it was held that it is always open to courts to give a plaintiff or an applicant such general or other relief as they deem just to the same extent as if it had been asked for. The powers under sections 397 and 398 of the Act are wide enough to grant that relief. The writ petition was objected to by the contesting respondents on the ground that the petitioner has got an effective alternative remedy, and the extraordinary jurisdiction of this court should not have been invoked. Section 10F of the Companies Act provides for an appeal by the person aggrieved by the decision of the Company Law Board within 60 days from the date of communication of....
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....to make suggestions or objections as contemplated under section 2(p) of the Regulations, and since the petitioner in the writ petition does not come within that category, the appellant cannot be a party for the purpose of filing an appeal. For the said purpose, learned counsel relied on various sections, namely, sections 17(3), 101, 141, and 391 to 394. According to learned counsel, only when the Company Law Board invokes the powers under the said sections, he could file his submissions. A reading of the definition given to the word "party" shows that it should not be interpreted in the way in which learned counsel for the appellant wants us to read it. It is too exhaustive a definition, and takes in all persons who are entitled to make suggestions or objections, as deemed parties. In this connection, it must also be remembered that the appellant itself has understood the meaning of the word "party" as we have explained here. On October 7, 1992, when it moved a representation before the Company Law Board, it reserved its rights to modify, cancel or add to the submission which it intended to make. So, it knew that it is a person entitled to make suggestions or objections. So, the a....
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....ent, it failed to discharge the appellant from further appearance. The learned single judge has given in detail the inconsistent stands taken by the appellant in courts and forums, which we do not want to narrate once again. We fully agree with the observations of the learned single judge in holding that the appellant has been taking inconsistent stands before different courts and forums, and that it has also suppressed material facts and the present writ petition is' filed without good faith. We confirm that finding of the learned single judge. In this connection, it is worthwhile to note the decision of this court. In K. Marappa Gounder v. State of Madras [1956] 1 MLJ 324 ; [1956] LW 58, it has been held that it is obligatory on the part of a person invoking the writ jurisdiction of the High Court to make a full and true disclosure of all relevant facts. If the petitioner has suppressed materials and relevant facts, which, if brought to the notice of the court, when applying for the rule nisi, should have certainly influenced the court in deciding one way or the other, it is not enough to say that even had these facts been placed before the court, it might have issued rule nisi p....
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....hat the person concerned must have opportunity to be heard. It was held that domestic Tribunals are entitled to act in a way, which would not be permissible on the part of local justice sitting as a court of law. The same author, in Constitutional and Administrative Law, 1971 edition, held that the rules of natural justice are often described as "fair play in action". One must always remember, however, that natural justice imposes no more than a duty to observe minimum standards of procedural fairness. It does not require that the decision be right or even just; or that reasons be given for the decision ; or that the proceedings be conducted in public or that a record of the proceedings be maintained. On the basis of the said enunciation of law, we cannot but conclude that the appellant in this case was given sufficient opportunity, and it did avail of the same, though it did not avail of the opportunity of being made a party which it was entitled to. In K.L. Tripathi v . State Bank of India, AIR 1984 SC 273, it was held that the basic concept is fair play in action-administrative, judicial or quasi-judicial. The concept of fair play in action must depend upon the particular lis,....
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....n prejudicially only if any right of his would be affected adversely and in view of the non obstante clause contained in section 21, the tenant on the expiry of the limited period has no right or protection whatsoever under any law to continue in possession and as such the issuance of a warrant of possession directing him to vacate the premises in his occupation cannot be regarded as one which prejudicially affects him." (emphasis supplied) In this case, it is admitted by the appellant before the first respondent that his position is that of a pledgee. Its contention has been recognised by the first respondent and necessary direction has been given to pay the amount due to it. In that view, we cannot find that the appellant is in any way prejudiced by the order of the first respondent. In Rattan Lal Sharma v. Managing Committee, Dr. Hari Ram (Co-education) Higher Secondary School, AIR 1993 SC 2155, it was held as follows (at page 2161): "What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body....
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.... be heard since he was only a creditor. What the appellant now wants is, that it should be allowed to agitate those points. We do not think that the contentions stated in the affidavit will in any way affect the decision of the case. There would not have been even a remote chance of a change in the decision by the first respondent. Some of the contentions that have been raised are legal arguments not affecting the facts. Such contentions have been taken and fully argued by the appellants in the connected appeals, who support the present appellant in this writ appeal. In that view, we hold that there could not have been any prejudice to the appellant, nor its right affected in any way. In Ramana Dayaram Shetty v . International Airport Authority of India, AIR 1979 SC 1628, generally known as International Airport Authority's case, their Lordships said that the principles of natural justice are part of article 14 of the Constitution. Their Lordships further held that a decision violating the said principles is really void. After so holding, their Lordships refused to interfere in that case only for the reasons that the petitioner therein was instigated by some other person, and that....
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....respondent before the Company Law Board. An application was filed under sections 397 and 398 of the Companies Act in C. P. No. 29 of 1992, before the Company Law Board, New Delhi, by Stridewell Leathers Private Limited and Standard Distilleries and Breweries Private Limited along with their directors. In both the appeals, the petitioners before the Company Law Board are respondents Nos. 1 to 4. The parties in these appeals are described as in the company petition. Petitioners Nos. 1 and 2 are registered shareholders in the fifth respondent-company holding 2,000 and 1,000 equity shares of Rs. 10 each, respectively, out of the total paid-up capital of 5,000 equity shares as on June 5, 1992. They together constituted 60 per cent, of the total paid up capital, the balance 2,000 equity shares being held by the appellant in C. M. A. No. 875 of 1994. It is the contention of petitioners Nos. 1 to 4 that on June 5,1992, the sixth respondent issued additional 20,000 equity shares of Rs. 10 each to the appellant in C. M. A. No. 875 of 1994 (hereinafter referred to as the eighteenth respondent before the Company Law Board) without making any offer to the petitioners as the existing sharehold....
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.... an offer of new shares must be refused by a member. That is a condition precedent to offer the said shares to other members. The first respondent and its officials exerted pressure on Mr. P.R. Pandia to misuse his position as ex-director of the second petitioner-company and as the representative of the second petitioner-company in the fifth respondent under section 187 of the Companies Act, to sign the documents so as to show as if the first respondent refused to subscribe to the additional shares. Three subordinate officers of the eleventh respondent-company who ceased to be directors with effect from April 10, 1992, in the fifth petitioner-company, also colluded with their bosses in the eleventh respondent-company by creating and forging records, to show that the second respondent-company had declined to subscribe the additional shares in the fifth respondent-company. It is further stated that the meeting dated April 30, 1992, was intended to defraud the petitioners. Even long before the alleged meeting dated April 30, 1992, a notice was issued by petitioners Nos. 1 and 2 to the fifth respondent and its directors, to desist from exercising their powers in any manner prejudicial ....
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....e resolution proposed in the requisition of the two petitioner- companies dated June 12, 1992, on the basis of the paid-up capital and voting rights subsisting prior to the impugned further issue of the paid- up capital of Rs. 2,00,000 in favour of Bhankerpur; (h) to strike off affidavits sworn to by the fourth respondent on May 25, 1992, and June 29, 1992, before this Hon'ble Bench in C. P. No. 19 of 1992; (i) grant injunction restraining respondents Nos. 2 to 6 from convening the extraordinary general meeting pursuant to the notice dated June 12, 1992, sent by the petitioners or to any notice sent or purported to have been sent by Bhankerpur or by any persons who own, hold or possess the shares allotted after May 23, 1992, or their nominees or suo motu on the basis of enhanced paid-up capital of Rs. 2,50,000 and the enhanced voting rights ; (j ) grant an injunction restraining the respondents from permitting the allottees of the fresh allotment of equity shares of Rs. 10 each from exercising their rights as shareholders of the first respondent-company including the voting rights ; (k) grant injunction restraining the respondents from transferring the further issue of equity s....
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....hem, Mr. Pandia never manipulated any record. According to them, one R. K. Bhattacharya, one of the directors of the company had informed in writing that they are not willing to accept the offer made, and he has written a letter to the fifth respondent rejecting the same. In so far as the offer made to the second petitioner is concerned, it was alleged that they have not answered within the stipulated time. The offer was made to petitioners Nos. 1 and 2 by sending the same by post evidenced by certificate of posting dated May 2, 1992. Since petitioners Nos. 1 and 2 did not accept the offer, the same was offered to the eighteenth respondent. Originally, the eighteenth respondent was offered 8,000 shares in proportion to the shares held by it. It was allotted additional shares of 20,000 since the same was rejected by the other shareholders. The allotment of shares to the twelfth respondent was legal and the same cannot be questioned by the petitioners, nor can it be a ground for invoking the jurisdiction of the Board under sections 397 and 398 of the Companies Act. The allotment of the additional shares to the eighteenth respondent was on the basis of the decision taken by the fifth ....
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....lication, namely, C. M. P. No. 92 of 1992, it was contended that Malleswara to whom the shares were pledged by the eighteenth respondent is under the ultimate control of the eleventh respondent. Since the second petitioner is not under the control of the respondents Nos. 3 and 4 and since they are not authorised to institute the proceedings, the application is liable to be dismissed. He requested that the name of the second petitioner be deleted from the petition. The said application was dismissed by the Company Law Board along with the order which is now under challenge. But we find that the dismissal of the order in C.M.P. No. 92 of 1992, is not challenged in the C. M. A. No ground has been taken questioning the correctness of the said order. But certain facts in the interlocutory application have got some relevance in disposing of the C.M.A. Those findings are : (1) that it is the practice of the second petitioner-company to accept registration orally ; (2) that R. K. Battacharya ceased to be a director of the second petitioner-company from April 10, 1992, and that the same is clear from a copy of Form 32 filed before the Registrar of Companies and which was accepted, and that....
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....ed. No evidence was taken. (5) It was further contended that though in the application before the Company Law Board, so many allegations are made, ultimately except regarding the allotment of shares to the eighteenth respondent, all other matters have been given up. In that case, the proceedings cannot be maintained under sections 597 and 398 of the Companies Act. (6) There is nothing to show that the notice contemplated under section 400 of the Companies Act was issued to the Central Government. Hence, the application is liable to be dismissed. (7) The application under section 397 of the Companies Act was reduced to an application under section 111 of the Companies Act. If So, the procedure contemplated under section 111 of the said Act should have been followed. The appellant in C. M. A. No. 875 of 1994, also supported the argument of the appellant in C. M. A. No. 745 of 1993. No additional contention was taken by the appellant in C. M. A. No. 875 of 1994. Regarding the contention that no notice was issued under section 400 to the Central Government, we may say that such a contention is not correct. We find that notice was issued on July 27, 1992, and on behalf of the Central ....
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.... the application before the Company Law Board. The relevant passages that are relied on by the appellants are found in paragraph 4 of the plaint. It says: "... It calls for the powerful arm of the high judiciary to unravel this unlawful misappropriation of property and proprietary rights of the plaintiffs by securing evidence of the kind which only the substantive jurisdiction under the Civil Procedure Code and the original side of the High Court can ensure. In fact, it is settled law that in matters of corporate general body meetings the limited jurisdiction of the Company Law Board is not available for judicial regulation. It is again an accepted principle of law that the validity of allotment of shares is eminently suited to be determined in declaratory proceedings. Again the limited jurisdiction under the Companies Act conferred on the Company Law Board under sections 397 and 398 can only deal with the conduct of a corporate management towards its own shareholders. Consequently, the Company Law Board forum cannot judicially treat a malice where the remote controllers acting through a puppet management affect the rights of not just the shareholders of the concerned corporate b....
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....en inconsistent proceedings have been taken. It is a kind of estoppel. In this case, the filing of the suit subsequent to the filing of the petition before the Company Law Board cannot be said to be an inconsistent proceeding taken by the plaintiffs. The civil court and the Company Law Board have jurisdiction to decide some matters pleaded. But the Company Law Board has wider jurisdiction and it can pass any orders just and convenient. Its powers are very wide. It is only an additional remedy given to the plaintiffs. At any rate, it has come out in evidence that they have withdrawn, and the withdrawal was allowed by the court with liberty to pursue their rights under section 397 of the Companies Act. It is also to be noted that by filing the suit, the appellants or the contesting respondents have not changed their stand to their detriment. In fact, the plaintiffs have only accepted the stand taken by the appellants, that the civil suit is not maintainable and they are proceeding with the application filed before the Company Law Board. Having accepted the stand taken by the appellants, by no stretch of imagination, can it be said that the petitioners are estopped on the principle of....
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....lternative Tribunals is open to a litigant, each having jurisdiction over the matters in dispute, and he resorts for his remedy to one of such Tribunals in preference to the other, he is precluded, as against his opponent, from any subsequent recourse to the latter, at least at the point at which he has taken judgment in the first, and, so also, in the case of two alternative modes of trial, if a litigant, by conduct or inaction, acquiesces in the adoption of one of these modes, by taking part in the proceedings down to their conclusion without objection, protest, he is estopped from afterwards complaining that the mode of trial with which he was content at the time was irregular or without jurisdiction..." In view of the abovesaid law, we are of the opinion that the same has no application to the facts of this case. The said contention of the appellants is, therefore, repelled. The other contention of the appellant is that the reasoning adopted by the Company Law Board regarding the validity of the allotment of shares to the eighteenth respondent and the decision to increase the share capital is wrong. According to it, the Company Law Board has not taken into consideration the l....
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....oup, by one section of the Chhabria family consisting of R. D. Chhabria and M.D. Chhabria. Shoe Specialities Private Limited, i.e., the fifth respondent, is another company wholly owned and controlled by one section of the Chhabria family, namely, M. D. Chhabria and R. D. Chhabria. One of the members of the Chhabria family, namely, K.R. Chhabria, was a non-resident Indian like his brother, M.R. Chhabria, until 1984. K. R. Chhabria had contributed substantially for the growth of the Chhabria group abroad until 1984. The Chhabria group gained control of the shareholdings of R.G. Shaw and Company Limited in Shaw Wallace Company. In the year 1984, K.R. Chhabria was requested to go over to India by M. R. Chhabria to secure and complete the takeover of Shaw Wallace Company by the Chhabria group. Pursuant to the family understanding and after takeover of Shaw Wallace Company by the Chhabria family, K. R. Chhabria gave up his non-resident Indian status under the Foreign Exchange Regulation Act and income-tax laws. In view of this, M. R. Chhabria was the only family member of the Chhabria family who could officially hold the shares of not only Shaw Wallace Company, but also of the other Ch....
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....l 19, 1992. Eventually, a family dispute had been converted into a corporate battle. Subsequent to April 19, 1992, there are records to show that the family dispute has ended in a dispute over the ownership and control of the companies. On April 22, 1992, a notice was issued by the counsel for M.D, Chhabria and R. D. Chhabria to the fifth respondent regarding their rights in the company and their apprehension regarding the interference by M.R. Chhabria and his people. The reason for the apprehension was that the directors in the fifth respondent-company were employees of Shaw Wallace Company owned by M.R. Chhabria. The copy of the notice is among the file of the Company Law Board. The notice makes mention of the family dispute that has arisen between the two groups of Chhabrias. The notice requested the board of directors to desist from exercising their powers in a manner which prejudices or undermines the interest of the shareholders of the company, who are petitioners Nos. 1 and 2 in this case. The receipt of the notice is admitted. We find that an application was filed before the Company Law Board as C.P. No. 19 of 1992, under sections 247 and 250 of the Companies Act by Shaw ....
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....f shareholding, nor is there any mention, about the board meeting alleged to have been held on April 30, 1992. This affidavit is filed by none other than one of the directors of the company. It is the very same director who subsequently filed an affidavit on June 29, 1992, that the petitioner's shareholding is now reduced to a minority. Even then, nothing is stated about the increased shareholding by the eighteenth respondent or the allotment to Malleswara. On June 9, 1992, petitioners Nos. 1 and 2 therein sought impleadment in C.P. No. 19 of 1992. It is averred that, on June 12, 1992, the very same petitioners wanted to convene an extraordinary general body meeting of the fifth respondent-company. In the affidavit, the petitioners have asserted that they hold 60 per cent, share in the company. They never suspected till that date that their control over the company is taken away. The main argument of the appellant's counsel was that on May 2, 1992, an offer was made to the petitioners regarding the allotment of the increased share on the basis of the board meeting dated April 30, 1992, and they did not accept the same within the time granted. For the said purpose, the appellants'....
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.... etc. None of these documents is produced. When the primary evidence is not produced, a presumption on the basis of section 53(2) of the Companies Act cannot be made use of since the posting of the letter is in dispute. Only if a document is sent by post, the presumption under section 53 of the Companies Act can arise. When there is no evidence regarding the posting of the letter, the document relied on by the appellant cannot be made use of. We have also a doubt whether the paper in which the address is typed, can be construed as a certificate of posting. The paper bears the date May 2, 1992, whereas the postal stamp is dated May 3, 1992. There is also a discrepancy in the address of one of the addressees. The address of the first petitioner is not correct. In the certificate of posting, the pin code number of the first petitioner is mentioned as "110036" whereas the pin code number of the first petitioner is New Delhi-110035. So, it cannot be presumed that a letter was sent to the correct address. It has also been noted by the Company Law Board that the letter was addressed to the registered office of the first petitioner at New Delhi. But a reply is sent on the basis of a para....
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.... Thomas v. E.R. Fairman, A IR 1970 Mys. 77, were cited before us by learned counsel for the appellants for the proposition that when there is a presumption, that presumption will hold good unless it is rebutted. According to us, even if there is a presumption, the same stands rebutted by virtue of the circumstances of this case. Even in those cases, it was held that to raise such a presumption, the circumstances also will have to be taken into consideration. Taking into consideration the above circumstances, we hold that there is no valid offer made to the petitioners and hence the finding of the Company Law Board regarding the allotment of shares to the eighteenth respondent herein is not valid. The petitioners' case was that the first respondent-company was doing only contract job and, therefore, there was no justification for raising the share capital. From the subsequent events, it can be seen that the share capital was increased only for the purpose of including the name of Malleswara in the register as if the shares have been transferred. There is no evidence forthcoming that such increase in the share capital was necessary. That also supports the case of the petitioners. T....
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....of the Companies Act. According to learned counsel, one kind of fraud is alleged in this case, stating that the fifteenth respondent was the man responsible for creation of documents and fraudulent acts. The said act of Pandia is not substantiated, but the Company Law Board has taken the increase in the allotment of shares as a fraudulent act. According to learned counsel, though one kind of fraud is alleged, the finding is with regard to another kind of fraud without any basis. The said contention has also no force. From a reading of the petition and also the various counter-affidavits filed by the respondents, it can be seen that the main matter in dispute was the decision to increase the share capital of the company so as to reduce the majority shareholders into minority shareholders. The petitioners averred that the alleged board meeting dated April 30, 1992, is an afterthought. The same has been discussed in the earlier part of this judgment. The immediate effect of the increased allotment may also be considered. It is admitted that the petitioners were holding 60 per cent, shares in the fifth respondent-company. The eighteenth respondent was holding 40 per cent, which also ....
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....Board under section 397 of the Companies Act. According to learned counsel, it must be a continuous act and burdensome. It was also contended that it is not just and convenient for the Company Law Board to intervene in this case as contemplated under the sections. Learned counsel for the appellants contended that the allotment of shares is a matter of internal management of the company, which is outside the scope of sections 397 and 398 of the Companies Act. It is held in Gluco Series Pvt. Ltd., In re [1987] 61 Comp. Cas. 227 (Cal.) as follows (p. 243) : "It is Well-settled that it is not open to the directors of a company to issue and allot shares in a manner by which an existing majority of shareholders are reduced to a minority. The court will scrutinise with particular circumspection any such issue or allotment and unless it is satisfied beyond reasonable doubt that such issue was unavoidable and was resorted to as an express and emergency measure with an object of fundamental importance, e.g., saving the existence of the company, it will not allow the existing balance of power in the company to be disturbed." (emphasis supplied). In this connection, it may also be noted th....
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....t was held that the purpose of introducing section 210 in the English Companies Act was to give an alternative remedy to winding up in case of mismanagement or oppression. The law always provided for winding up, in case it was just and equitable to wind up a company. However, it was being felt for some time that though it might be just and equitable in view of the manner in which the affairs of a company were conducted to wind it up, it was not fair that the company should always be wound up for that reason, particularly when it was otherwise solvent. That is why section 210 was introduced in the English Act to provide an alternative remedy where it was felt that though a case had been made out on the ground of just and equitable cause to wind up a company, it was not in the interest of the shareholders that the company should be wound up and that it would be better if the company was allowed to continue under such directions as the court may consider proper to give. That is the genesis of the introduction of section 153C in the 1913 Act, and at present section 397 of the Indian Companies Act. In paragraph 18 of the said judgment, it is held that the word "oppressive" meant "burden....
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....k 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 the 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. It is in the light of these principles that we have to consider the facts in this case with reference to section 397". The petitioners have demonstrated before the Company Law Board as to how they have been oppressed as regards the management and even after the order how they are not allowed to manage the company. We find that in spite of the order of the Company Law Board, the fifteenth respondent has transferred the shares to two or three persons though it has undertaken that it will not transfer the shares to any one. Further, in spite of the notice calling for a general body meeting, for one reason or other it is being dragged on. Even though the order has been passed by the Company Law Board in the year 1993, till date (it is now more than one year since the order has been passed), the petitioners c....
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....etition will show that the petitioners cannot invoke the powers under section 111 of the Companies Act. It is not a case of rectification of register that they sought for. Section 111 of the Companies Act has no applicability at all in this case. It is mismanagement and misuse of powers by the directors that is pleaded in the petition, and hence that argument of the learned counsel for the appellants has to fail. The Company Law Board has taken into consideration all materials and has given the finding that it has to invoke the powers under section 397 of the Companies Act and has found that grounds for winding up amendment has been made out. But it has refused to wind up the company in the best interest of the shareholders. We agree with the said findings. An appeal under section 10F of the Companies Act before this court can be entertained only on a question of law which arises from that order. We do not find any question of law in this case. The only question is whether the increased share capital was proper and whether the same was offered to the petitioners. That is purely a only question' of fact. In that view of the matter, we hold that the decision of the Company Law Boar....