TaxTMI 
TaxTMI 
1997 (9) TMI 467
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....nd the Board Meeting held on 9-11-1985, 11-11-1985 and 20-8-1986, 20-9-1986, if there were any such meeting or meetings and that each of the said meetings are illegal and the resolutions if any passed thereat are void and inoperative. (iii) Declare that the purported allotment of further/fresh shares in the year 1985 or 1986 if any, by the Board of the respondent No. 1 is void, illegal and to injunct the respondent Nos. 2 and 3 as Secretary and Managing Director from permitting any rights of such allottee shareholders under such further/fresh allotment including the voting right in respect of such further/fresh allotted shares. (iv) Declare that the respondent No. 3 is not the Managing Director of the Company and/or in the alternate to terminate his appointment as Managing Director on the ground that he has shown himself to be unfit to be entrusted with the management of the company. (v)Declare that the respondent No. 2 is not the Secretary of the Company and in alternate to terminate his appointment as the Secretary on the ground that he has shown himself to be unfit to be entrusted with such functions. (vi)Restrain the respondent Nos. 2 and 3 i.e., Secretary and Managing Dire....
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....y. The 7th Respondent Shri S.G. Jalan (for short R-7) was sought to be inducted to the Board of Directors of the 1st Respondent Company in January, 1987 and the validity of such appointment is being questioned. P-1 and the 9th Respondent Shri R.N. Jalan (for short R-9) conceived the idea of setting-up of a personal business for himself and R-9 as a partnership in recognition of their close and cordial relations with a view to provide opportunity to the children of two families namely Khemka and Jalan families. During 1965 the son of P-1 and R-9 were students and they intended to hand over the business after they completed their studies. Therefore, the company was promoted in April, 1966 as a Private Limited Company, but in fact it is a partnership concern inter alia for manufacturing of rubber rings. Since its inception the P-1, R-9 were the Directors. Respondent No. 3 Shri O.P. Jalan (for short R-3) was brought on Board for looking after the affairs of the Company as P-1 and R-9 were already pre-occupied with the employment in the management of the large public limited company namely Hyderabad Asbestos Company Limited (later on re-named as Hyderabad Industries Limited) (for short ....
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....struction and commission of the project till 1982. After P-3 returned in 1982 from Saudi Arabia, he was expecting that he would be associated with the management of the R-1 company as Executive Director, when the Company was in a very prosperous and sound state of affairs. However, the P-3 was not inducted on the Board on his return from Saudi Arabia. Thus, the disproportionate management took its seeds in the administration of the company. In March, 1985 in furtherance of the idea of J group to oust K group from the joint venture company informed the K group not to deal with any longer with P-3 on behalf of the R-1 Company. Thus the humiliation and harassment was being caused to P-3. It is the case of the petitioners that from about 1983, R-3 of J group unilaterally stopped sending the monthly reports, statement of affairs, notices, minutes of the meetings or AGM. They did not receive any such notices or the audited annual accounts from 1983 and thus the K group was completely kept in dark and it was being surreptitiously excluded from the management and participating in the affairs of the company for the benefit of the J group. The scheme of exclusion was known by March, 1985 whe....
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.... and how the notices of the meetings were sent to all the shareholders. None of the K group shareholders received the notices. However, after a lapse of 18 months for the first time, notices for two board meetings scheduled to be held on 27-6-1985 and 8-7-1985 were sent. For 1984-85 Annual General Meeting no notices were received and there has been statutory violation of holding minimum four meetings of the Board for the year 1984-85. On account of the differences between R-3 and R-9, R-2 and R-3 started excluding R-9 of J group from the participation in the affairs of the company and thus R-9 and his wife and children isolated. R-9 also did not receive the notice of any Board in the year 1984-85 or Annual General Meeting. This was brought to the notice of the R-2 and R-3 by R-9 by letters dated 21-10-1985 and 29-10-1985. The petitioner also by letter dated 17-12-1985 hinted R-3 not to attempt to alter the pattern of shareholding. The petitioner also by letters dated 9-2-1986 and 22-10-1986 brought to the notice of R-1 company the violations of the provisions of the Companies Act. The Registrar of Companies (R.O.C.) issued a show-cause notice dated 6-11-1986 to the petitioner and o....
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....as not real and accounts were manipulated. The Company has been lending money to other concerns where R-3 had substantial interest. There was a systematic channeling out of funds by way of lending to related concerns. The income-tax arrears made the authorities to initiate compulsory recovery proceedings. Any further control in the hands of R-2 and R-3 would cripple the company and cause severe loss to the petitioners and other shareholders of both K group and R-9 group. There was a deliberate oppression of the petitioners. Therefore, the petitioners sought various reliefs referred to above. 3. In this regard, it is necessary to note the names of respective parties and relationship which is as detailed below: P-1. R. Khemka P-2 Mrs. Radha Devi Khemka (wife of P-1) P-3 Mr. Mahesh Khemka (son of P-1) R-1 Company R-2 Mr. V.K. Chemariya, Company Secretary. R-3 Mr. O.P. Jalan R-4 Mrs. Sudha Jalan (wife of R-3) R-5 Mr. Vikas Jalan (son of R-3) R-6 Miss Kavita Jalan (daughter of R-3) R-7 Mr. S.N. Jalan (brother of R-3 and R-9) R-8 Mr. S.K. Jalan (father of R-3, R-7 & R-9) R-9 Mr. R.N. Jalan (brother of R-3 & R-7) R-10 Mr. Ajay Kumar Ghuwalewala. R-11 Mr. Mahes....
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.... Products Export Promotion Council in 1984-85. He was the President of All India Rubber Industries Association in 1983-84. He was appointed to the Rubber Board by the Government of India in 1984. It was denied that there was an allotment of shares in the ratio of 1/3rd and 2/3rd to K and J group. There was no such practice with regard to the increase of share capital. It was stated that the petitioners did not subscribe to the further issues. P-3 was never inducted in furtherance of the concept of joint and equal participation in the management. He was inducted to the Board on 1-2-1970 and on 10-3-1973 he was appointed as Executive Director and he resigned the same on 2-4-1977. This was only made to appease the P-1 and P-3 never involved himself in the management of the company. It was denied that the P-1 was guiding the affairs of the Company and that he was advancing huge amounts to the Company. Whatever the amounts advanced were repaid at the request of the petitioner and the loans carried 18% interest. During 1981 the petitioners hatched conspiracy to start parallel competitive business and started withdrawing their monies and by March, 1982, all the monies advanced were withdr....
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....y taking advantage of absence of P-3. In fact P-1 was very much in India. There was no understanding of any proportionate management. The alleged harassment by the R-3 was absolutely incorrect. The P-1 filed a suit in Calcutta High Court and could not succeeded in getting the interim orders. In fact after the return of P-3 to India, the family of the P-1 started two separate business concerns namely M/s Andhra Polymers Private Limited and M/s Ramak Enterprises Private Limited and they were designed to carry on the business as Competitors to R-1 Company despite the prohibition contained in Articles of Association of R-1 Company that no shareholder directly or indirectly concerned or interested in or associ-ated with shall carry on the business in competition with the company. On the other hand, P-1 and P-3 have been committing various acts causing damage and loss to the R-1 company. They diverted the order meant for R-1 company to be supplied to the International Airport Authority. They also started manufacturing the same items as that of R-1 company in violation of the Articles of Association. The HIL started placing orders on Andhra Polymers instead of R-1 Company with the active ....
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..... From March, 1983 to July, 1985 P-1 never protested in any manner about the conduct and affairs of the company. By letter dated 25-3-1985 for the first time, P-1 complained of the non-receipt of the notices etc. This itself showed that the P-1 was not interested in the affairs of the company. He could not have kept quite for such a long time. By letter dated 30-4-1985 it was made clear that all the notices of the Board meetings and Annual General Meeting were duly sent to all the shareholders. The Company did not violate any provisions of law. It was admitted that some differences arose between R-3 and R-9, but it was only a family dispute. There was no exclusion of R-9 at any point of time. It was also denied that the notices were not sent to R-9. When R-9 sent a letter dated 21-10-1985 the same was replied by the Company Secretary on 13-11-1985. So also to a letter written to R-3 by R-9 on 29-10-1985, the same was replied on 8-11-1985. P-1 was trying to exploit the strained relations between R-3 and R-9. The letter of P-1 dated 17-12-1985 was suitably replied on 16-1-1986. The show-cause notice issued by the ROC was suitably replied. In the meeting held on 11-11-1985, R-3 was ap....
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.... carried out. The allegation of systematic oppression was denied. The R-3 with his wife and children have been holding 63,934 shares in the company which is 63.93 per cent. The allegations of mismanagement of the company was denied. The allegations of manipulation of books and records were also denied. The reasons for decrease in the profits during 1983-84 was on account of reduction of sales. The reason for reduction of sales was on account of unfair competition by the company put-up by the Petitioners and the worldwide recession in the Export Market. In 1984-85 and 1985-86 the Company incurred losses on account of increase in cost of production and unfair competition. The lending by the Company as on 31-3-1984 was about Rs. 63 lakhs. But, it was denied that the loans were given to the concerned in which R-3 had substantial interest. In fact Rs. 50 lakhs were given to the concerns in which the P-1 was substantially interested. Number of employees of R-1 company were made to resign and join the Andhra Polymers Private Limited. R-3 was never interested in keeping the management in his hands to the exclusion of K group. 5. The 2nd Respondent filed a Memo adopting the counter of the ....
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....he P-1 was denied. Though a lengthy reply was filed, the sum and substance of the reply which is relevant for the purpose of this case is that the petitioners never received any notices for the Board meetings and Annual General Meetings that the companies established by them have no rival business and that the petitioners were subjected to oppression in the hands of R-3, that the withdrawal of the son of P-1 namely P-3 was illegal that the losses alleged to have taken place from 1984 onwards are only mere book entries. 9. A further additional counter affidavit has been filed on behalf of R-1 and R-3 in effect reiterating same contentions raised in the counter except further elaborating the points referred to in the reply of the Petitioners. 10. There was exchange of affidavits and counter affidavits between the rival parties denying the contentions of each other. 11. A detailed counter affidavit was filed by the R-9 on 29-2-1988. He stated that purported allotment of shares in 1985 was illegal and only intended for the benefit of the R-3 to R-8 and their nominees. No offer was made. In the counter he traced out the background of his employment in Hyderabad Asbestos Company Limit....
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....ere duly prepared and signed by him as Chairman. One Mr. P.V. Subba Rao was the Secretary for some time and in the meeting held on 21-2-1985 R-2 was appointed as Secretary. It is his case that in July, 1985 one Mr. S.C. Kedia, General Manager of R-1 Company informed him that R-3 was planning to issue allotment of unissued capital of Rs. 5 lakhs in the company and to allot the shares to himself and his nominees converting the Petitioners from majority into minority. To ascertain the factual information, he requested R-2 to send the true copies of the Board meetings of the company and accordingly Minutes of 12 Board meetings were sent. But, they were unsigned. Therefore, on 16-8-1985, a letter was sent to R-2 stating that he had sent only unsigned copies of the Minutes Board Meetings from 28-7-1983 to 8-7-1985 and the same were not certified by him. Therefore, he sent the photostat copies of the meetings duly initialled by him for record. Although R-2 received the letter dated 16-8-1985 no reply was sent. He sent another letter dated 21-10-1985 to R-2 referring to letter dated 16-8-1985. Further he sent two other letters on 27-10-1985 and 29-10-1985 requesting the R-2 to send all the....
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...., for the first time, he received notices of board meetings. He did not receive the notices of Board meeting for 19-9-1986 and 20-9-1986. He states that he received the Annual General Meetings notice to be held on 31-10-1987 along with the final accounts for the year 1986-87 and for the first time he came to know that the share capital of the company was increased from Rs. 5 lakhs to Rs. 10 lakhs. He states that the resolutions passed in the Board meetings dated 8-11-1985, 11-11-1985, 19-8-1986 and 20-9-1986 and Annual General Meeting dated 18-12-1985, 18-10-1986 and 31-10-1987 wherein the accounts for the years 1984-85, 1985-86 and 1986-87 were passed were illegal and invalid. The purported issue was in violation of the understanding. 12. Affidavit was filed on behalf of the Respondents No. 1 and 3 in reply to the counter affidavit of the R-9 again reiterating the same averments. But, however, some more averments were pressed into service with regard to the necessity for increase of share capital. It was stated that R-1 company had lent substantial funds to Nucon and Secunderabad Commercial Corpn. etc. and the amounts were not returned by the said companies. The break-up value of....
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....tes, sharehold-ers and of mismanagement of 1st Respondent Company, by Respond-ent No. 3 and his family members and associates, prejudicial to the interests of the company, are made out? 3 .Whether the alleged issue of additional shares of Rs. 5 lakhs in the year 1985 of the 1st respondent Company, is valid, legal and binding on and/or is in the interests of, the said company or were they issued solely for the benefit of respondent Nos. 3-6, 7 and 10? 4.Whether the Board and/or the Annual General Meetings of the 1st Respondent Company in respect of the years 1984-85, 1985-86 and 1986-87 are validly held and the Annual Accounts and Balance Sheet of the said years are validly approved and passed by the Board and/ or the General Body of the 1st Respondent Company? 5.Whether there has been any violation by Respondent 3 or respondent 2 of any of the provisions of Companies Act in respect of the affairs of the 1st Respondent Company for the years 1984-85, 1985-86, and 1986-87 as alleged in the petition and reply affidavit? 6. Whether the alleged resolution of the Board of the 1st Respondent Company dated 21-8-1984 withdrawing the nomination of respon-dent No. 11 from the Board of Dire....
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....sues which are required now to be proceeded with are as follows: (a).Whether there are any acts of oppression of the minority sharehold- ers of the company by any other group of shareholders or majority shareholders? (b).Whether petitioner - R. Khemka and 9th Respondent - or any other person on their behalf, as alleged by the 3rd respondent, consented to the allotment of additional shares to the several other persons and if they have not consented to the above, whether allotment of shares as alleged by the petitioners, is an act of oppression attracting action under section 397 and/or 398 of the Companies Act? 17. Enormous oral evidence and voluminous documentary evidence was pressed into service by the parties. However, the evidence which is relevant only for the purpose of deciding the issue are being considered in this petition. Two witnesses were examined on behalf of the petitioners P. W-1 is Mr. Mahesh Khemka and P. W-2 is Mr. R. Khemka. Five witnesses were examined on behalf of Respondents. R. W-1 is Mr. R.N. Jalan, who is R-9 in the Petition, R.W-2 is Mr. Hemanth Jalan (son of R-9), R. W-3 is Mr. S.G. Jalan (son of R-8), R. W-4 is Mr. V.K. Chemariya (R-2 in the Company P....
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....oint of time after March, 1982 and no Board Meetings took place for consideration of the increase of the issued capital and no such resolutions were passed. However, it is the case of the R-9 that only 12 board meetings were held for the period from June, 1983 to July, 1985 and that no decision was taken with regard to the increase of the issued capital at any point of time. On the other hand, it is the case of R-3 that the board meetings were being held in accordance with the procedure prescribed under the articles of associ-ation and the notices were sent to the board of directors in case of board meetings and in case of Annual General Meetings to all the shareholders. The resolutions were passed in the Board meetings to increase the share capital to Rs. 10 lakhs and therefore, the claim put-up by P-1 and R-9 is completely baseless and mala fide. Brief Summary of relevant evidence. 19. Before dealing with the relevant issue it is necessary to refer to the relevant evidence. As referred to elsewhere the evidence both oral and documentary is in extenso. This Court had to identify the real grain by eliminating chaff. 20. P.W-1 is Mr. Mahesh Khemka (P-3 and son of P-1). He narrate....
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....to deal with Jalans in any way after his experience with them. He has come to this conclusion since about 1984. 21. It is in the evidence of P-1 Mr. R. Khemka as P. W-2 that a resolution dated 21-8-1984 was passed by the Board of R-1 company withdrawing the membership of P-3 on the Board of foreign joint Venture company. Though he made efforts with R-9, but there is no meeting point. Therefore, he immediately wrote a letter to R-9, on 25-3-1985 regretting for the unfortunate development. On the very same day, he also wrote a letter to R-1 company and R-3 and sought for copies of the Board meetings and the Annual General Meetings since 1983. He also requested Annual Report for the year ended 31-3-1984. He also requested that future notices should be sent by Registered Post. As there was no response from R-9 with regard to the Directorship of his son to foreign company, he filed the suit before the Calcutta High Court in May, 1985. R-3 replied by a letter dated 30-4-1984 but the minutes were not furnished. But, only copy of the annual report and balance sheet for the year ending 31-3-1984 was furnished. He did not receive any notice for the meeting of the Board which held on 21-8-19....
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....ingency and that the machinery was already available with R-1 company. There was several other assets in the company which could have been sold if real necessity arose. In effect he says that there was no necessity and the issue relating to additional share capital is nothing but a ruse to gain the majority in the company. He also said the sale of shares of HIL was illegal and contrary to the statutory provisions. He also narrated certain events subsequent to the filing of the company application inasmuch as the issues are very specific it would be a futile exercise to refer to the events which would not be relevant for the purpose of deciding the matters in dispute. He also states that R-3 had established other companies-Deccan Indus-trial Products Private Limited and Deccan Auto Sales Private Limited and they are being represented by benamidars who are the close associates. It is also his case in the cross examination that Shreyans Finance Private Limited is also established under benami name. R-3 brought about diversification of business with a view to favour his new companies to thrive. The events subsequent to the company petition are not much relevant. Among other notices, he....
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....from 1985 to 1987 also no action was taken. He denied the suggestion that the nomination of his son was withdrawn as they started APPL. He states that he did not see Ex. B-70 and the contents are false. The signature appeared to be that of Mr. Mahesh and he has no authority to sign on behalf of Khemkas. R-3 and R-9 had partitioned their house. He had received the notice for the Board Meeting on 28-6-1985 and 17-6-1985 and the Acknowledgement is Ex. B-92. He also received the notice of board meeting dated 27-6-1985 and acknowledgement is Ex. B-93. But, he took leave of absence. He had received the notice of Board meeting on 18-7-1985 and the acknowledge-ment was signed by his daughter-in-law under Ex. B-95. Ex. A-28 was addressed in connection with item No. 4 of the Agenda of the Board meeting held on 8-7-1985. He did not know that Board meetings were held on 8-11-1985 and 11-11-1985. He only confirmed that the Board meetings were held on 27-6-1985, 8-7-1985, 6-3-1986, 15-3-1986 and 16-10-1986. R-9 did not inform about the Board meetings dated 8-11-1985 and 11-11-1985. He only came to know about the additional share capital in 1986. Ex. B-89 is the acknowledgement received on 6-3-19....
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.... Between July, 1981 and June, 1983 ten Board meetings were held, out of which he chaired 7 Board meetings and between 20-7-1983, and 8-7-1985, twelve Board meetings were held and he chaired all the Board meetings except one held on 21-8-1984. In the Board meeting held on 20th February, 1984, R-2 was appointed as Secretary. In July, 1985 one Mr. S.C. Kedia, the then General Manager of R-1 company informed him that R-3 was planning to issue and allot unissued capital of Rs. 5 lakhs and distribute the same to himself and his nominees with a view to convert the Petitioners and R-9 into minority. It is his case that no resolution was passed for issue of additional shares. When he requested for copies of minutes, the Secretary R-2 sent the Minutes of 12 Board meetings, but unsigned copies were sent. Therefore, he had kept the originals with himself and sent the photostat copies with his initials. He says that they were sent under letter dated 16-8-1985 under Registered Post Ex. R-2. Again by letters dated 21-10-1985 Ex. R-4, 27-10-1985, Ex. R-5, 29-10-1985, Ex. R-6, requested R-2 to send all the notices of the Board meetings and other communication by Registered Post. On 29-10-1985 a per....
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....he shareholding of R-3 to majority. There was no practice of sending the notices for Board meetings. It was started only in June, 1985 when a specific request was made to send the notices by Registered Post. There was no discussion with regard to family settlement in August/September, 1984 and no decision was taken in pursuance of the settlement. From July to November, 1985 he exchanged some correspondence relating to the fraudulent issue of unissued capital. On 8-11-1985 R-3 wrote a letter stating that the father would have to mediate and resolve the dispute. However, certain tentative proposals were made with regard to family settlement in 1985 with the assistance of the father. In 1986, R-3 approached him for partition and separate purchase of shares which was agreed and bills were sent and R-3 refused to honour the bills. It is his case that R-8 had always been supporting the R-3 in this case. He stated that he reposed the faith in R-3, and that he had given certain signed papers which R-3 had misused. In the cross examination the witness stated that his father and R-3 are the legal owners of the shares allotted to them before 1984 in R-1 company and he has no rights in those s....
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....688 dated 11-11-1985 and he denied the suggestion that he received Ex. B-125 under postal receipt No. 2466. He received Exs. R-11 and R-12 under postal receipt No. 2466. He denied the suggestion that he received the statement of accounts for the year 1984-85 of D.E.P.L. He did not write any letter to R-1 company that he has not received the accounts for the year 1984-85. But, he states that he called for a meeting of the Board of Directors to be held on 18-11-1985 to discuss the affairs of the company. He did not attend Board meeting dated 6-3-1986. He received notice for the Board meeting to be held on 15-3-1986. All Minutes in Ex. R-2 are correct. He admits that the contents in para 6 of the Minutes dated 8-7-1985 were approved. He did not receive Ex-B-165 Notice or Agenda. He did not also receive Ex. B-66 Notice for the meeting or agenda for the meeting dated 24-8-1982. He also did not receive the Notice for the Meeting dated 2-6-1983 and for the Meeting dated 20-7-1983 and 27-7-1983, 1-11-1983, 3-3-1984. He stated that there was no practice of sending the Notices by Certificate of Posting. He came to know only in the year 1987 about the additional share capital and this was in ....
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....lace on 10-5-1982, Notice for the Board meeting was dated 3-5-1982, Ex. B-275. It was sent under Certificate of Posting Ex. B-274. Agenda for the meeting is Ex. B-275-a. Similarly for the Board Meeting held on 4-8-1982, Notice was issued on 26-7-1982. Certifi-cate of Posting is Ex, B-276 while the Notice is Ex. B-165, Agenda is Ex. B-165-a. For the next Board meeting held on 24-8-1982, the Notice was issued on 16-8-1982 Ex. B-166 and the Certificate of Posting is Ex. B-276 and Agenda is Ex. B-166-a. For Board meeting dated 27-8-1982, the Notice dated 23-8-1982 was issued and Certificate of Posting is Ex. B-278, Agenda is Ex. B-167-a. For the Board meeting held on 21-11-1982, Notice was issued dated 18-11-1982 were posted under Ex. B-279. For the Board meeting dated 3-2-1982 the Certificate of Posting Notice dated 31-1-1983 is Ex. B-280. Similarly for the Board meeting held on 31-3-1983, the Certificate of Posting for Notice dated 31-3-1983 is Ex. B-281. For the board meeting dated 2-6-1983, the Certificate of Posting for the Notice dated 25-8-1983 was marked as Ex. B-282. Notice dated 25-8-1983 is Ex. B-67 for Board meeting held on 2-6-1983. Agenda for Board meeting dated 2-6-1983 ....
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....e states that at the end of March, 1985, P-1 wrote a letter complaining of the non-receipt of the Notice for the Board meeting and general meetings and requested to send the future notices by Registered Post Acknowledgement Due. He says that after incorporation of A.P.P.L. the substantial orders of R-1 company were diverted. The witness further stated that after March, 1985 all the Notices of the Board meetings and general meetings of the R-1 company were sent to P-1 by Registered Post Acknowledgement Due. The postal receipt under Registered Post of Notice dated 30-6-1985 is Ex. B-343. The acknowledgement is Ex. B-92. Notice dated 13-6-1985 is Ex. B-344 and Agenda is Ex. B-344-a. The meeting scheduled under Ex. B-344 was adjourned to 27-6-1985. Again the Notices were sent on 18-6-1985 under Registered Post to P-1 under Ex. B-346 and Ex. B-93 is the Acknowledgement for Ex. B-346. Notice is Ex. B-347. In respect of Board meetings held on 8-7-1985, the certificate of Posting sent to all the Directors except P-1 under Ex. B-348 and the postal receipt in respect of P-1 is Ex. B-349. Ex. B-94 is the Acknowledgement of Ex. B 349. Notice dated 28-6-1985 is Ex. B-350 and Agenda is Ex. B-350....
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....retary he was being put to harassment by various letters and phone calls from the Directors particularly from R-9. He informed the telegram dated 30-10-1985 to R-3 by that time Notice was already sent calling for the Board meeting on 8-11-1985 and 11-11-1985. As the director is not entitled to call for the Board meeting under the Article 48 of articles of association, he was asked by R-3 to reply suitably explaining the position, which he did under Ex. R-12 dated 13-11-1985. Notice dated 31-10-1985 for Board meeting dated 8-11-1985 and 11-11-1985 is Ex. B-353 and the Notice sent under the Registered Post to P-1 is Ex. B-97. Acknowledgement of the Notice from P-1 is Ex. B-95. Similarly the Notice sent to R-9 under Registered Postal receipt is Ex. B-354. Both P-1 and R-9 did not attend the meeting of 8-11-1985 and 11-11-1985. Mr. S.K. Jalan was granted leave of absence. In the meeting held on 8-11-1985, the draft annual accounts for the year 1984-85 were approved. In the meeting held on 11-11-1985 the annual accounts for the year 1985-86 along with the directors report and Auditors report prepared and approved and it was also decided to call for 19th Annual General Meeting on 18-12-1....
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....Similarly in respect of the Board meetings held on 15-3-1986, the P-1 sought for leave of absence, R-9 did not attend. For Board meeting dated 19-9-1986 and 20-9-1986 even though the Notices were acknowledged, P-1 and R-9 did not attend. The draft Annual Accounts of R-1 company for the year 1985-86 were approved in the meeting held on 18-9-1986 and in the meeting held on 20-9-1986 the Audited Accounts of R-1 Company for the year 1985-86 along with the Directors and Auditors Report were approved and it was also decided to hold 20th Annual General Meeting on 18-10-1986. Notices were sent as per the instructions of the parties and Acknowledgements were also received and they were marked. R-9 and P-1 did not attend the meetings held on 18-10-1986. R-1 wrote a letter on 31-12-1986 to the Registrar of Companies for filing the annual return upto 18-10-1986 under Ex. B-382, and under Ex. B-383, the audited accounts were filed before the Registrar of Com-panies. Certified Copy of the annual return of R-1 as Certified by the R.O.C. is Ex. B-384. Board meeting was held on 4-11-1986. The Notice sent under Registered Post was acknowledged by P-1. So also though notice was sent under Registered ....
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....hairman. Therefore, R-3 was appointed as Chairman. There was no written letters from R-9. The company issued Notice and Agenda for the meetings dated 3-11-1984 and 26-11-1984. But, they were not filed by him. The minutes of the meeting dated 3-11-1984 were signed by R-3. He did not file the Notice and Agenda in respect of the meeting dated 26-11-1984. In the said meeting the decision was taken to increase the capital from Rs. 5 lakhs to Rs. 10 lakhs. He was present in the Board meeting held on 26-11-1984. In the Board meeting held on 5-11 -1984 time was extended for subscription of new shares and Mr. Subba Rao was the Secretary till February, 1985. To a question that he deliberately failed to produce the Notices and Agenda for three meetings dated 3-11-1984, 26-11-1984 and 5-1-1985 the witness answered that from November, 1984 Mr. Subba Rao was not attending to his duties as he was under the threat of removal and in his absence R-3 was looking after the Secretarial work and the Board meetings were signed by R-3 in his absence. The Notices for the Board meeting dated 3-11-1984, 26-11-1984 and 5-1-1985 were available in the company. He admits that a sum of Rs. 5 lakhs was received to....
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....983 onwards P-1 also stopped attending the Board meetings in spite of Notices. R-1 was successful in getting Tenders in International Airport Authority, but APPL also submit-ted offer as competitor and 50 per cent orders were got diverted to APPL. The R-1 was set-up as an ancillary to HIL for supply of rubber rings which is an essential component for manufacture of A.C. Pressure Pipes. In the years 1982 and 1983 the orders were to the tune of about 80 lakhs and 60 lakhs respectively, but showed downward trend in 1984 which was Rs. 38 lakhs, in 1985 which was Rs. 12 lakhs and in 1986 it was only Rs. 2 lakhs and it was nil subsequently. These orders were being diverted to APPL. It is his case that the P-1 is responsible for exit of R-9 from HIL which is not relevant for the purpose of this case. As Mr. Khemka started rival business clashing with the interest of R-1, Jalan family decided to withdraw nomination of P-1 as director of ARIL on behalf of R-1 company and accordingly resolution was passed on 21-8-1984 to the effect and against this the P-1 and P-3 also filed suit in Calcutta High Court which is pending. After return of P-3 in 1982 Khemka intended to sell their holdings in DE....
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....ey applied for shares in Public subscription and were allotted 1130 equity shares. He also incorporated Golconda Investments Company, a Public Limited Company. Petitioners applied for shares in Public Issue and they were not granted in Promoters shares. He stated that there was an understanding between the family of Jalans in or around August/September, 1984. In the said understanding DEPL went to R-3 and Nucon went to R-9. In furtherance of the said understanding he resigned from Managing Director of Nucon on 15-12-1984 and R-9 became Managing Director in the said meeting. He also nominat-ed his wife as Additional Director in the said meeting. Mr. P.V. Subba Rao, Company Secretary was removed and Mr. Beemal was appointed as Company Secretary of Nucon. The Registered Office, which was in the DEPL premises was shifted to the residence of R-9. All the records of the Nucon were handed over to them. In the Board meeting held on 28-12-1984 excessive powers were given to R-9 and R-9 was also given power to operate Bank account individually. The share capital of Nucon was increased in August, 1984 which was contributed by Mr. R.N. Jalan and his family. The personal guarantees extended by ....
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....Notice was sent by Certificate of Posting on 28-12-1984 Ex. B-133. P-1 and R-9 did not attend Ex. B-227 is the minutes of it. In the Board meeting held on 5-1-1985 it was decided to extend the date for receipt of the applications for additional shares upto 15-2-1985. Ex. B-132 is the copy of Notice. Ex. B-133 is the Certificate of Posting. To the Notice dated 5-1-1985 Mr. S.N. Jalan and his wife, son and daughter sent letter expressing their unwillingness. His father and mother also followed the suit. His father informed that R-9 and P-1 and Mr. S.G. Jalan declined to subscribe to the new share capital. P-3 also wrote a letter on 16-1-1985 to R-9 declining to subscribe. It is Ex. B-64. R-9 also wrote a letter on 21-1-1985 to Mr. S.K. Jalan's father declining to subscribe. In the said letter he also forwarded Ex. B-61. Ex. B-201 is the letter dated 21-1-1985 from R-9 to Mr. S.K. Jalan. Ex. B-64 and B-205 were given by his father. Board meeting was called on 28-2-1985 for allotment of further capital. Notice dated 18-2-1985 for the Board meeting was sent under Certificate of Posting, Ex. B-87 is the copy of the notice. Ex. B. 87-A is the Agenda, Ex. B-128 is the Certificate of Postin....
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....-1983 to 28-8-1985 to his father Mr. S.K. Jalan. He also did not give copies to R-9. He did not see the letter dated 16-8-1985 addressed to R-3. In the Board meeting held on 3-11-1984, R-3 resigned from the Chairmanship and thereafter he has been functioning as Chairman and there was no objection from any quarters. R-9 valued the shares of DEPL in the wealth-tax returns. P-1 showed the value at Rs. 10 per share in his wealth-tax return. Since the amount which is due to R-1 company was not paid by Nucon, he filed C.P. No. 67 of 1987 for creditors winding-up. Though elaborate cross examina-tion was conducted on behalf of R-9 and P-1 it is not necessary for the purpose of this case. The evidence regarding formation of the company is not relevant. The evidence with regard to the issue of Notices and conduct of meetings to ascertain the consent of the parties for additional issue is only relevant for the purpose of this case and they are only referred to. It is also in the cross examination that R-3 was looking after the accounts of P-1 for certain period and in that process he used to send the cheques for signature of members of Khemkas family. He denied the suggestion that P-1 and R-9....
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....ttendance Register. Similarly Ex. A-193 was written in the same circumstances as Ex. A-203. Ex. B-330-A, Ex. B-330-B, and Ex. B-330-C are the minutes of the Board meetings held on 2-6-1983, 20-7-1983 and 27-7-1983. As per the instructions of R-9, Chairman of the meetings directed the Company Secretary to remove the name of P-1 shown as present as he refused to sign the Attendance Register. As per the proce- dure in the company, the draft minutes were first required to be approved by the Chairman and finally they are to be typed in the Minutes book. R-9 must have directed the Company Secretary to delete P-1's name at the time of approval of draft minutes. He denied the minutes of Board meeting dated 2-6-1983, 20-7-1983, 27-7-1983 were fabricated. He also denied the suggestion that minutes dated 26-10-1983, 5-1-1985, 25-1-1985 are fabricated. He also denied the suggestion that the losses shown by the Company were false. He also denied the suggestion that Ex. B-128 to B-133 and B-87 and B-87-A were fabricated. Similarly, he denied the suggestion that Ex. B-411, B-411-A, B.-412, B-412-A, B-413 and B-413-A were fabricated. He denied the suggestion that he diverted the funds of R- 1 comp....
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....alan family is being represented by two persons namely R-9 representing by himself and his family members while R-3 representing himself, his family members and other Respon-dents. 28. Let us now consider the procedure in general relating to issue of Notices and the conduct of the Board of Directors and Annual General Meetings. It is the case of the P-1 and R-9 that the meeting of the Board of Directors were being held on intimation over telephone and the Notices some times were being sent by the messengers as the P-1, R-3 and R-9 were staying as neighbours. It is also the case of P-1 and R-9 that these Notices were never sent by post much less under Certificate of Posting. It is also his case that the Minutes of the meetings of the Board of Directors were being circulated after the Minutes were finalised and this practice was not continued from the year 1983 onwards. Having waited for considerable time and having noticed that the P-1 was not being sent with any Notices for the meetings of the Board of Directors nor Annual General Meetings and the accounts were not being circulated to him, he sent letter to Managing Director of R-1 company dated 25-3-1985 Ex. A-21 stating that the....
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....g that the Minutes of the meetings dated 27-6-1985 and 8-7-1985 were not sent apart from the papers requested in letter dated 16-8-1985. He expressed certain apprehensions that the Jalan group was attempting to change the pattern of shareholding of the Company viz. issue of un-subscribed capital and allotting to the nominees of the Jalan group. On the same day another letter was sent to R-3 under Ex. A-35. In this letter he sent a draft for Rs. 100 requesting the R-3 to send the Notices, Agenda and relevant materials and all other communication by Registered Post with Acknowledgement due. Again on 17-12-1985 another communication was sent under Ex. A-36 requesting certain documents. On 16-1-1986 Ex. A-37 a reply was sent by R-3 expressing concern about the false allegations made against him including the non-receipt of the various Notices of meetings and that in fact he has not been attending any meetings since about 1983. He also expressed that he did not wish to go into this matter as the negotiations are in progress with regard to various pending matters. Ex. A-38 is the Telegram received by R-3 from Mr. Khaitan to the effect that the talks with regard to resolving the disputes ....
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....t genuine and they are fabricated for the purpose of establishing that the Notices were sent under Certificate of Posting. The board of directors passed resolutions in 1982 to the effect that Minutes of the Board of Directors should be maintained in Loose Leaf Papers and subsequently it appears that they were got bound for safe custody in view of the pendency of the case. Exs. B-156, B-332, B-227, B-333 are the copies of the Minutes of the Board of meetings from April, 1982 to March, 1983. From the said Minutes it is seen that the following persons attended the meeting: Date of Meeting Persons attended Ex. No. 10-5-1982 O.P. Jalan (R-3) Smt. Sudha Jalan (R-4) Leave of absence was granted to R.N. Jalan (R-9), R. Khemka (P-1), and S.K. Jalan (R-8). A-14 4-8-1982 R.N. Jalan (R-9) R. Khemka (P-1) O.P. Jalan (R-3) Smt. Sudha Jalan (R-4) B-156 24-8-1982 R.N. Jalan (R-9) R. Khemka (P-1) O.P. Jalan (R-3) Smt. Sudha Jalan (R-4) Leave of absence was granted to Mr. S.K. Jalan (R-8) A-12 27-8-1982 O.P. Jalan (R-3) Smt. Sudha Jalan (R-4) Leave of absence was granted to R.N. Jalan (R-9), R. Khemka (P-1) and S.K. Jalan (R-8) A-11....
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....n (R-4) B-333 31-12-1987 S.K. Jalan (R-8) O.P. Jalan (R-3) S.N. Jalan (R-7) Leave of absence was granted to Smt. Sudha Jalan (R-4) and R. Khemka (P-1). B-333 With regard to Annual General Meeting Ex. B-334 is the relevant docu-ment. It contains the Minutes of the Annual General Meeting from 1982 to 1990. The details of the Meetings are as follows: Date of Annual General Meeting Persons attended Ex. No. 29-9-1982 O.P. Jalan (R-3) R.N. Jalan (R-9) Hemanth Jalan (R.W-2 & son of R-9) Satyabhama Jalan Sudha Jalan (R-4) Radha Devi Khemka (P-2) B-334-A Kamla Devi Khemka R. Khemka (P-1) 29-9-1983 R.N. Jalan (R-9) O.P. Jalan (R-3) Satyabhama Jalan Sudha Jalan (R-4) B-334-B 28-9-1984 R.N. Jalan (R-9) O.P. Jalan (R-3) Satyabhama Jalan Sudha Jalan (R-4) B-334-C 18-12-1985 O.P. Jalan (R-3) Sudha Jalan (R-4) Sanjay Jalan B-334-D 18-10-1986 O.P. Jalan (R-3) Sudha Jalan (R-4) Sanjay Jalan B-334-E 31-10-1987 O.P. Jalan (R-3) Sudha Jalan (R-4) Sanjay Jalan R. Khemka (P-1) Mahesh Khemka (P-3) B-334-F 5-7-1988 O.P. Jalan (R-3) Sudha Jalan (R-4) R.N. Jalan (R-9) R. Khemka (P-1) and ot....
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....ed 1-11-1985 written by R-3 to R-9 asking R-9 to remit a sum of Rs. 1,17,938.93 which is outstanding from Nucon Industries. Similarly another letter on the same day Ex. R-9 written asking R-9 to pay a sum of Rs. 26,36,931.17ps. outstanding from the Nucon. To the personal letter Ex. R-7 written by R-9 it was replied by R-3 by his letter dated 8-11-1985 Ex. R-10 wherein he had stated that he did not wish to enter into any controversy in view of the conciliatory efforts being undertaken by his father to resolve the differences. On 13-11-1985 the Secretary R-2 also wrote a letter to R-9 Ex. A-11 stating that he was unable to enter into any controversy in view of the factual position. Again on the same day, vide Ex. R-12 it was intimated in response to his letter dated 30-10-1985 that all the Board meetings are being held under proper Notice and that R-9 cannot convene a meeting of Directors. Some letters were exchanged between R-3 and R-9 with regard to the director-ship in Nucon which we have no concern. 31. It is the case of R-3 and also R-2 that the Notices were being sent by post and also under Certificate of Posting after 1982. R-9 and P-1 did not attend the meetings deliberately....
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.... such acts and things as the Company is authorised to exercise and do. Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by the Act or any other statute or by the Memorandum of the Company or by these Articles or otherwise, to be exercised or done by the Company in General Meeting. Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to the provisions in that behalf contained in the Act or any other statute or in the Memorandum of the Company or in these Articles, or in any regulations not in consistent there with and duly made thereunder, including regulations made by the Company in General Meeting but no regulation made by the Company in General Meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made." Articles 49 to 56 relate to holding of Board meetings, which are extracted below: "49. The Board shall meet together at least once in every three months and atleast four such meetings shall be held in every year for the despatch of business and may adjourn and otherwise regulate its meetings and proc....
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....ddress or (if he has no registered address in India) to the address, if any, within India supplied by him to the Company for the giving of Notices to him. (2) Where a Notice or other document is sent by post: (a)service thereof shall be deemed to be effected by properly address-ing, prepaying and posting a letter containing the Notice or docu-ment, provided that where a member has intimated to the Company in advance that notices or documents should be sent to him under a certificate of posting or by registered post with or without acknowledgement due and has deposited with the Company a sufficient sum to defray the expenses of doing so, service of the notice or document shall not be deemed to be effected unless it is sent in the manner intimated by the member; and (b)unless the contrary is proved, such service shall be deemed to have been effected: (i)In the case of a notice of meeting at the expiration of forty-eight hours after the letter containing the same is posted; and (ii)In any other case, at the time at which the letter would be delivered in the ordinary course of post." Under Article 73 it is open for any member or other persons to have inspection of the doc....
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....ery other director. (2) Every officer of the company whose duty it is to give notice as aforesaid and who fails to do so shall be punishable with fine which may extend to one hundred rupees." 33. R-9 and P-1 have been stating that no formal Notices were sent and meetings were being held on informal intimation being neighbours. Their case was that Notices were never sent by post much less under Certificate of Posting. On the other hand R-3 stated that Notices for all the meetings were invariably sent along with Agenda by post under Certificate of Posting and they were sent under Registered Post after specific instruc- tions from R-9 and P-1. Section 286 mandates sending of Notices in writing and omission attracts penalty. Article 49 clearly stipulates that the notices for the meetings shall be in writing. Even though P-1 and R-9 stated that there was no practice of sending the Notices, yet the practice cannot be in violation of statutory provision and articles of association. Such a practice even assuming was in existence, would be illegal. Section 286 read with section 53 and Article 67 leads to inevitable conclusion that the Notices shall be in writing. Therefore, I have to hold....
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....he date of the meeting. The monthly reports of the company may also be sent to me regularly as usual in future. Sd/-R. Khemka" To the said letter, the reply was sent by R-1 company under Ex. A-22 dated 30-4-1985 which is extracted as follows: "Mr. R. Khemka This is with reference to your letter dated 25th March, 1985. At the outset we express our great surprise at the contents of your letter under reference. The notices, agendas and other documents in connection with the meetings of the Board of Directors and the Shareholders of the Company held during the period mentioned in your letter were duly sent to each of the Directors of the Company including yourselves as was being done in the past. The Annual Report and Balance Sheet of the Company for the year ending 31-3-1984 was placed before the meeting of the Board of Directors held on 3rd September, 1984 and was signed by all the Directors present at the said meeting. A copy of the said Annual Report and the balance sheet of the Company is enclosed. As you are aware we had discontinued the practice of despatching monthly reports to each of the directors individually. Save and except as stated herein we deny each and ....
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....letter under reply. The purported meeting called by you if held, would be illegal, resolutions purported to be passed at such meeting if any, would be of no consequence. For Deccan Enterprises Pvt. Limited Sd/- Secretary." No reply was given to this letter by R-9 while the same was replied by P-1 after 1½ months vide Ex. A-34 dated 17-12-1985 which is in the following terms: "The Managing Director, Deccan Enterprises Pvt. Ltd. I refer to above cited letter addressed to Mr. R.N. Jalan and copied to me. I have not received any notice(s) of Board meeting(s) beyond that of 8-7-1985. I still await copies of Minutes of the meetings dated: 27-6-1985 and 8-7-1985, besides the other papers and matters sought for in my two letters of 16-8-1985. On the basis of information received by me, I apprehend that the 'Jalan Group' is attempting to change the pattern of shareholding of the company by unwarrantedly issuing the unsubscribed capital of the company and allotting it to the nominees of the Jalan group only. I must reiterate that such an action would be contrary to the original understanding between the two groups. We call upon you to refrain from taking any such wrongful and ....
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.... etc. Please ensure that the notices for Board meetings are received by me at least 3 days prior to such meeting. Thanking you and awaiting your compliance in the above regard. Sd/- R. Khemka. Ex.A 36, dated 17-12-1985 The Managing Director, Deccan Polymers Ltd. I acknowledge with thanks the receipt of your letter dated 1-11-1985 enclosing therewith copies of Minutes of the Annual General Meetings dated 29-9-1984, 27-9-1985 and 4-10-1985. I invite your kind attention once again to my letter dated 16-8-1985 of which several other requests remain still to be attended to and complied with by you. Please comply. I request you to send me all notices, agenda and relative minutes and other communications in connection with meetings of the Board and shareholders of the company by Registered Post Acknowledgement due. I am sending herewith a pay order for Rs. 100 to defray the expenses towards such postage and delivery. Sd/ R. Khemka." and under Ex. A-37, the Company by its letter dated 16-1-1986 addressed P-1 in the following terms: "Mr. R. Khemka I am in receipt of your two letters both dated 17th December, 1985 addressed in my o....
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.... did not mention about non-circulation of Minutes and non-receipt of Notices for various meetings. But, there was no response from R-9 in reply. Further R-9 himself stated that he did not reply and further said that he did not know the reasons for not replying. Thereafter P-1 did not pursue the matter with R-9. It is thus seen that after long gap of 18 months P-1 started corresponding with R-1 and R-3 only from March, 1985 and no explanation is coming forth from him for not writing such a letter at the earliest possible opportunity. From letter dated 25-3-1985 Ex. A-21, it implies that P-1 knew that the meetings were held. The Articles of Association also says that the Board meeting should be held once in a three months. It is not as if he was not aware of this position. No reasons are forthcoming as to why he kept quite beyond 3 months when he did not receive any Notice after March, 1983. It is beyond anybody's comprehension that a person of his status possessing vast knowledge of Corporate Law, could have kept quiet for such a long time. It is also not understood as to why he did not take up the matter with R-9 when he did not receive the Minutes of various Board meetings. When i....
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....y. Since our last talk, I have been waiting for some sort of response from you. There has been no response from you and unfortunately now the status quo is being seriously disturbed by the attempted withdrawal of Mahesh's nomination on ARIL's Board and that too, by keeping me completely in the dark. We have known each other, and worked together for almost 30 years during which period we have been extremely close and I have reposed the utmost trust and confidence in you. You have yourself always said that an understanding of partnership between two people is far more binding than an agreement on paper and during the last 18 years we have been extremely business partners. The attempted withdrawal of Mahesh's nomination has shaken my confidence. I had requested you to reverse certain loan transactions routed through accounts of my family members and in particular the entry of approximately Rs. 15 lacs being a loan from Deccan Polymers to Nucon but routed through Mahesh Trading Co. This has not been done as yet and I would request you to kindly get the needful done immediately. I find that I have also not been receiving any Notices/Minutes of board and general meetings and monthly ....
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.... with the letter to defray the expenses towards such postage/delivery. Please acknowledge the receipt of this letter. Sd/- R.N. Jalan." He also wrote another personal letter to R-3 vide Ex. R-7 dated 29-10-1985 in the following terms: "My dear Omprakash, I have already addressed a letter dated 21st October, 1985 to the Secretary Company Law of Deccan Enterprises (P.) Ltd. that no Board meeting has been held after 8th July. I had further informed him that a Board meeting should have been held before 31st October, 1985 as per practice in the Company. I had further requested him to call a Board meeting immediately. I have not heard anything from him so far. I have therefore decided to call a Board meeting on 18th November at the Registered Office at 11 a.m. In the meantime I sincerely believe that information received by me, that you and your wife in connivance with Secretary Company Law, with a view to change the shareholding of the Company to your benefit in detriment to the interests of other Directors have planned by wrongful and improper means to allot the unsubscribed Capital of the Company to you and your nominees by keeping either Directors and Shareholders totally in th....
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....4 was received to the effect that the Notices should be sent in advance. The cover under which Ex. B-404 was sent was marked as Ex. B-405. The letter Ex. R-2 alleged to have been sent by Ex. R-9 containing the Minutes of the meetings was disputed by the Company. It has to be seen whether this letter Ex. R-2 is genuine letter which R-9 could establish. In the letter dated 16-8-1985 it was stated that in response to his letter he received the Minutes of the meetings, but what is the date of the said letter was not mentioned nor he filed the copy of the letter. Similarly in his letter dated 21-10-1985 Ex. R-5 he stated that he sent a letter on 16-8-1985 requesting for giving 10 days advance Notice for holding the Board meetings. That letter was not filed by R-9 for the reasons best known to him. It is un-understandable as to why R-9 had written a letter when he chaired all the meetings. Moreover, the Minutes are finalised immediately after the meetings are held. It is not understood why he retained original copy of the Minutes and sent photostat copies to the Company with him initially, while it is the case of the Company that he never sent such a letter Ex. R-2. It is stated by R-9 t....
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....tings of the Company held between 20th July, 1983 and 8th July, 1985. In the premises by a letter dated 16-8-1985, I drew the attention of the Respondent No. 2 that he had sent me only unsigned copies of the Board Minutes from 20th July, 1983 to 8th July, 1985 and the same were not certified by him. I also sent a photocopy of the said Minutes to the Secretary duly initialled by me for his record. A copy of the said letter dated 16-8-1985 together with all the enclosures thereto i.e., to say Board Minutes from 20th July, 1983 to 8th July, 1985 are hereto annexed and collectively marked 'B'. I say the copies of the Minutes sent by me under the cover of my letter dated 16th August, 1985 are all true and correct and any contrary and/or inconsistent recording in the purported directors Minutes book of the company, are wholly untrue and false. The said minutes show that the affairs of the company upto July, 1985 was being conducted in usual course of business and no further shares whatsoever had been issued by the company during the said period." In his examination in chief, he did not refer to another letter of dated 16-8-1985 regarding the sending of Notices in advance. He only stated....
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....The unsigned copies of minutes of DEPL referred to at para 31 of my chief examination evidence were sent by the respondent No. 2 to S.K. Jalan and Mr. S.K. Jalan has handed over his minutes to me. R-2 did not write to me any letter, sending to me copy of minutes, it is not true to suggest that R-2 has not handed over any copies of minutes referred to at para 31 to Mr. S.K. Jalan. It is not true to suggest that Mr. S.K. Jalan has not handed over to me any such minutes. It is not true to suggest that I have not sent Ex. R-2 by registered. Post either by receipt covered by Receipt No. 5802 or 5805. I do not have acknowledgements relating to the above registration numbers. Ex. R-3 does not indicate the person who registered the article as the rules do not require it. It is not true to suggest that Ex. R-3 is sent by Nucon. Ex. R-2 could have been sent either under registered No. 5802 or 5805." Therefore, this statement is quite inconsistent with the tenor of letter Ex. R-2. Further R-9 filed counter only in February, 1988, by which time R-3 has already filed his counter on behalf of R-1 to R-3. Further P-1 had filed Reply to the R-3's counter and R-3 had filed additional counter. No r....
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....ake steps to verify by taking inspection of records. Even P-1 in his letter dated 17-12-1985 stated that he apprehended on the basis of information received by him that the Jalan group was attempting to change the pattern by unwarrantedly issuing the unsubscribed capital of the Company and allotting it to the nominees of the Jalan group. It is not known why P-1 resorted to brow beating instead of straight away asking for the information about the issue of unsubscribed capital. Even R-3 also cannot be said to be plain. He also equally tried to shield the information. Obviously, everybody wanted to indulge in shadow fighting. It is also seen that the suit challenging the withdrawal of the nomination of P-3 from the Board of ARIL was filed in Calcutta High Court in May, 1985 and the correspondence started be- tween P-1 and R-3 only in March, 1985. Thus, it shows that the entire gamut of litigation only started after/around March, 1985 and around that period the suit was filed in Calcutta High Court by P-1. The dates of some of the letters of P-1 and R-9 also strengthen the suspiciously collusive nature of litigation. On 16-8-1985 P-1 wrote letter to R-3 Ex. A-29. On the same day R-9 i....
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....he conclusion that the petitioners had no knowledge of them on March 14 and 15, 1963 when they moved this Court. The happenings at the extraordinary general meeting could have been made capital of by the petitioners as regards their case of oppression. If it had been the case of a particular share-holder or director not receiving the Notice sent through the Post, one might possibly take the view that it had gone astray, but it is impossible to believe that all the notices of the Board meetings as also those of the extraordinary general meeting should have failed to reach all the addressees. Leaving aside the shares which were alleged to have been issued after the extraordinary general meeting of February 21, 1963 the company had 16 shareholders those in the respondents' group being 4 while the number of members in the petitioners' group was 12. If any person in the petitioners' camp had received the notice, he or she would undoubtedly have made it known to the others, and although letters are known to lose their way in the post, I find myself unable to believe that the notices addressed to all these 12 persons in the petitioner' camp had gone astry. In my opinion the conclusion is ....
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....s (P.) Ltd. v. Stridewell Leathers (P.) Ltd [1995] 82 Comp. Cas. 836. While dealing with section 53(2), it held thus: ". . . A presumption can be drawn only when there is no other evidence available. In this case, the primary evidence regarding the posting of the letter is not produced. The best evidence that can be produced in this case is the despatch register of the company, and the books of account showing the expenses incurred by the company for posting the letters, 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 ad....
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.... of posting. . . . 24. No adverse inference can be drawn against the wife of Kalipada for not taking the precaution of sending these three letters by registered post. They might have acted imprudently by sending the said letters under certificate of posting, but from that it cannot be inferred that the story of sending the said letters by certificate of posting is a myth." (p. 332) The learned counsel for R-3 also relied on the decision in Mrs. Achamma Thomas v. E.R. Fairman AIR 1970 Mys. 77, the High Court while consid-ering section 27 of the Mysore General Clauses Act, 1899, which is to the following effect: "27. Meaning of service by post-Where (any Mysore Act) (substituted by Act 12 of 1953) made after the commencement of this Act authorises or requires any document to be served by post, whether the expression 'serve' or either of the expressions 'give' or 'send' or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would b....
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....den is on the party alleging that he did not receive the Notice to rebut the presumption by adducing satisfactory evidence. Such issue has to be decided keeping in view the facts and circumstances of each case. 41. From the point of view of the above perspective, let us consider, whether Notices for various Board meetings were sent by R-1 company? It is in evidence that the Notices in writing were sent for various Board meetings and also general meetings. Right from 1982, the Notices issued for the Board meetings, Agendas and Certificate of Postings and also the Minutes were filed on behalf of R-1 company. While it is the case of R-9 that he did not attend certain meetings and in respect of certain meetings, Minutes were not properly recorded, it is the case of the P-1 that no Notices were ever received by him at all. It is also the case of P-1 and R-9 that the Notices for the meetings and the Certificate of Postings are manipulated with a view to justify the validity of resolutions and consequential actions in conformity with the statutory procedures. As noticed from the Minutes of the meetings, P-1 did not attend the meeting after 31-3-1983. The reasons for absence were non-rece....
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.... decision was taken by him as Managing Director to send the Notices under Certificate of Posting in 1982 when the Board passed resolution to maintain the Minutes of the Board meetings in Loose Leaf Folders. It is also not understood as to why P-1 kept quite for nearly 18 months when he did not receive any Notices or Agendas, for Board meetings or Annual General Meetings. It is also not his case that he asked Rs at any time during 1983 and 1984 that he was not receiving the Notices for Board meetings, which should have been normal reaction of a human being in the ordinary course of events. It is also beyond anybody's comprehension that R-9 could not have enquired the P-1 for not attending the various meetings. 43. The learned counsel for P-1 submits that R-1 company did not discharge the burden to prove that the Notices were properly sent. R-1 Company filed only Notices and Certificate of Postings and the connected postage stamp account were not filed. This submission cannot be accept- ed for the reason that R-1 company discharged the burden of proof placed on it namely sending of Notices and the postal Certificate of Posting. When R-3 and R-2 were in witness box and subjected to c....
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....d 34 of the Company Petition and they are extracted below: "23. After his return in 1982, it was expected that the respondent No. 11 (now P-3) would be again associated with the management and affairs of the company as Executive Director or in other similar important capacity. 24. This return of Respondent No. 11 (now P-3) however, signalled a change in the attitude of J-Group towards the K-Group. By 1982-83 the Respondent Company was very prosperous and sound with reserves amounting to 20 times of the capital and with assured foreign market and flow of funds from the joint venture company. 27. The J-group started the process of ousting the K-group from the Joint venture company by informing them in about March, 1984 not to deal any longer with Respondent No. 11 (now P-3) on behalf of Respondent No. 1. Simultaneously the Respondent No. 11 was also being subjected to harassment in many petty ways by denial of various facilities in Respondent No. 1 Company on the instructions of Respondent No. 3. Similarly Petitioner No. 1 and Respondent No. 11 are sought to be denied operational informations of vital importance concerning the working of Respondent No. 1 company or as to the major....
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....P-1, the grievance also did not appear to be not that of non-receipt of the Notices of meetings, but the withdrawal of the nomination of his son from ARIL Board. A person of a status of P-1 cannot be expected to be non-vigilant. More especially when he had pursued the matter with R-1 Company so vigorously after 16-8-1985. A person who is not vigilant cannot have any right to claim equity before this Court. The equity comes to the aid of the vigilant and not the slumbering (Vigilanti bus non dormienti bus Jura subveniunt). Therefore, the P-1 having remained intentionally dormant for a considerable length of time cannot complain that he has not received the Notices. Further, he was a neighbour and it cannot be said that the neighbours cannot have this information, more especially when they are very cordial and the P-1 himself has categorically stated that R-9 was also being kept aloof by R-3 from the affairs of the Company and that there were strained relations between R-3 and R-9. Therefore, it has to be presumed that the neighbour knows the neighbourhood as the maxim goes Vicini vicini-ora prae prae sammantur scire (neighbours are presumed to know things of the neighbourhood). 44.....
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....92. On 26-11-1984, R-3 and his wife were present, leave of absence was granted to Mr. S.K. Jalan and Mr. R.N. Jalan. The following is the extract of Notice: "Ex. B-412, dated 10-11-1984 To All Directors, Mr. S.K. Jalan, Mr. R.N. Jalan, Mr. R. Khemka, Mr. O.P. Jalan. Mrs. Sudha Jalan, Please take Notice that the meeting of the Board of Directors of the Company will be held on Monday the 26th November, 1984 at 11.00 A.M. at the Registered Office of the Company to discuss the matters as per the enclosed Agenda. Please make it convenient to attend. For Deccan Enterprises Pvt. Ltd. Sd/- Managing Director." Agenda Ex. B-412-A sent along with Notice reads thus: "Agenda for the Board Meeting to be held on 26th November, 1984 at 11.00 A.M. at the registered office of the Company at 5-2-175/1, Rashtrapathi Road, Secunderabad - 500003 Andhra Pradesh 1. To take note of or Election of the Chairman of the Meeting. 2. To consider the approval confirmation of the Minutes of the Previous Meeting of the Board of Directors of the Company held on 3rd November, 1984. 3. To consider, about issue of further share capital of Rs. 5.00 lakhs. 4. General. For Deccan Enterprises Pvt. Ltd.....
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....ong with the amount received in full before the Board for allotment. "Further Resolved that for the purpose of giving effect to this resolution, Mr. O.P. Jalan, Managing Director of the Company be and is hereby authorised to do all such acts, deed, matters and things as he may in his absolute discretion deem necessary to settle any question, difficulty, or default that may arise in regard to the issue and distribution of new equity shares as he may think fit." After General discussions, the meeting terminated with a vote of thanks to the Chair. Sd/- Chairman." In pursuance of the decision taken in the Minutes dated 26-11-1984, the Company sent letters to all the shareholders on 26-11-1984 under Ex. B-130 offering the additional shares. The said letter was sent by post under Certificate of Posting on 26-11-1984. The Certificate of Posting is Ex. B-131. The share offer letter is extracted below: "Ex. B-130, dated: 26-11-1984 All shareholders, The Board of Directors of the Company have decided at the Board Meeting held on Monday, 26th November, 1984 to increase the Share Capital of the Company from Rs. 5 lakhs to Rs. 10 lakhs by the issue and allotment of 50,000 New Equity Sha....
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....eeting of the Board of Directors of the Company will be held on 5th January, 1985 at 11.00 A.M. at the Registered Office of the Company as per enclosed Agenda. Please make it convenient to attend. For Deccan Enterprises Pvt. Ltd. Sd/- Managing Director." The Notice and Agenda were sent by post under Certificate of Posting. Ex. B-133-B is the Certificate of Posting. The Agenda is extracted below: "Agenda for the Board of Directors Meeting to be held on 5th January, 1985 at the registered office of the company at 5-2-175/1, Rashtrapathi Road, Secunderabad-500003, Andhra Pradesh 1. To take note of or Election of the Chairman of the meeting. 2. To consider the approval/confirmation of the Minutes of the previous meeting of the Board of Directors held on 26th November, 1984. 3. To consider and grant extension upto 15th February, 1985 for receipt of application for further issue of share capital. 4. General. for Deccan Enterprises Pvt. Ltd. Sd/- Managing Director." The Minutes recorded were marked as Ex. B-227-E which reads thus: "Minutes of the Meeting of the Board of Directors of M/s Deccan Enterprises Private Limited held on Saturday the 5th January, 1985 at 11.00 A.M. ....
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....genda were sent by post under Certificate of Posting. Ex. B-128 is the Certificate of Posting. It was attended by R-3 and his wife. Leave of absence was granted to Mr. S.K. Jalan and Mr. R.N. Jalan. The following are the Minutes: "Ex. B-227-F, dated 28-2-1985 Minutes of the Meeting of the Board of Directors of M/s Deccan Enterprises Private Limited, held on Thursday the 28th February, 1985 at 11.00 A.M. at the Registered Office of the Company at 5-2-175/1, Rashtrapathi Road, Secunderabad - 500003, Andhra Pradesh. Present:1. Mr. O.P. Jalan 2. Mrs. Sudha Jalan. Also Present Mr. V.K. Chamariya on Invitation. 1. Mr. O.P. Jalan took the Chair. 2. Leave of absence was granted to Mr. S.K. Jalan and Mr. R.N. Jalan. 3. Minutes of the Previous Meeting of the Board of Directors held on 5th January, 1985 were read, confirmed, initialled and signed by the Chairman. 4. Mr. O.P. Jalan put before the Board the resignation letter of Mr. P.V. Subba Rao, Secretary of the Company. The Board considered the matter and decided to relieve Mr. P.V. Subba Rao as Secretary of the Company with immediate effect. Mr. O.P. Jalan further informed the Board that he has selected Mr. V.K. Chamariya, B. Sc (....
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....said offer was sent by post under Certificate of Posting vide Ex. B-129. The letter extending the date for subscribing to the additional capital is extracted below: "Ex. B-132: All Shareholders, We refer to our letter dated 26th November, 1984 inviting application for issue and allotment of Equity Capital of the Company. Please note that the Board of Directors of the Company at the Board Meeting held on Saturday 5th January, 1985 have extended the last date of receipt of application from 15th December 1984 to 15th February 1985. You are requested to send your application along with application moneylatestbyl5th February, 1985. for Deccan Enterprises Pvt. Ltd. Sd/- Managing Director." To 1.Sri Ramniranjan Jalan 2.Sri Rajkumar Khemka 3.Sri Om Prakash Jalan 4.Sri Shubhkaran Jalan 5.Sri Mahesh Kumar Khemka 6.Smt. Satyabhama Jalan 7.Smt. Sudha Jalan 8.Smt. Kamala Devi Khemka 9.Sri Shree Gopal Jalan 10.Smt. Bimla Devi Jalan 11.Miss. Kavita Jalan 12.Master Vikas Jalan 13.Miss Bela Jalan 14.Master Pramod Jalan 15.Master Bimal Kumar Ghuwalewala 16.Mr. Hemant Jalan 17.Smt. Manju Jalan 18.Sri Shree Narayan Jalan 19.Smt. Manju Jalan 20.Miss Ritu Jalan....
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....the company. It is also the case of P-1 and R-9 that there was no necessity for additional share capital as the Company was having tremendous reserves and that contribution of Rs. 5 lakhs as additional capital is only a pittance. The Company had sufficient resources to mobilise this small amount instead of creating additional share capital. Therefore, they contend that the additional share capital was brought into books only for the purpose of converting the minority Shareholders represented by R-3 into majority Shareholders. On the other hand, it is the case of R-3 that P-1 and R-9 were very much disinterested in the affairs of the Company and they did not take any active role from 1983. P-1 did not evince any interest after his son returned from Saudi Arabia and when his son is not provided with appropriate position in R-1 company, he was not attending to the meetings even though Notices were sent for each and every meeting. In fact P-3 had already incorporated a Company in 1982 and commenced the production in end of 1984. The products are identical with the products of R-1 Company. After February, 1985 when R-9 resigned from HIL P-1 was promoted as President of HIL and using the....
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....hs. Accordingly, letters were sent on 26-11-1984 to all the Shareholders offering them additional shares and requesting them to apply for additional shares if they so desire on or before 15-12-1984 with the application money. In response to the said offer, only four Shareholders sent the application together with the application money by 30-12-1984. But, however in the Board meeting held on 5-1-1985 one more chance was given to the Shareholders to apply for additional shares fixing the date of receipt of the application together with application money to 15-2-1985. Even in response to that letter of offer, there was no application from any Shareholders. However, some Shareholders declined to subscribe to the additional shares. Therefore, in the Board meeting held on 28-2-1985, a decision was taken to allot the shares to the Shareholders who responded and sent the application money. Thus it was submitted on behalf of R-3 that when the Notices were in accordance with the Articles of Association and when there is no response from the Shareholders, it has to be treated that they did not wish to contribute to the additional share capital and that it shall be presumed that they did not c....
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....ed from DPPL for a sum of Rs. 4,55,000 and the balance Rs. 45,000 was credited to the Bank towards the payment of over-draft amount. It is also his case that on instructions of DPPL who sold the machinery to R-1 Company, cheques were issued by R-1 compa- ny in favour of the R-3 and his family members within two days of subscribing to the share capital and that again the amount was paid to Poddar Industries. While it is seriously contested by P-1 and R-9 that this transaction is nothing but purely imaginery and that the money brought by R-3 did not remain with the Company for two days and again the money was returned to him. Evidence was adduced in-extenso on this aspect. It is also the case of R-3 that apart from the machinery purchased from DPPL for Rs. 4,50,000 he also purchased the machineries worth Rs. 20 lakhs from other firms through out the country by borrowing monies from various institutions. 49. I have given my serious and anxious consideration to the issue which is contested tooth and nail by all the parties. But, the question remains is whether the P-1 and R-9 consented for the additional share capital. In the instant case, the question of consent cannot be directly es....
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....milarly, in the Board meeting held on 5-1-1985 R-3 and Mrs. Sudha Jalan (R-4) only attended the meeting and leave of absence was granted to Mr. S.K. Jalan and Mr. R.N. Jalan (R-9). Again in the Board meeting held on 28-2-1985 Mr. S.K. Jalan (R-8) and Mr. R.N. Jalan (R-9) apart from R-3 and R-4 attended the Board meetings in which the resolution was passed and following shares were allotted: Mr. O.P. Jalan 40,000 Mrs. Sudha Jalan 6,000 Miss. Kavitha Jalan 2,000 Master Vikas Jalan 2,000. I have already held that the version as narrated by R-9 in Ex. R-2 cannot be believed and therefore whatever the Minutes that were alleged to have been sent under R-2 letter cannot be relied as the letter itself was not a genuine letter. Therefore, the contention of R-9 that the Minutes as enclosed by him vide his letter dated 16-8-1985 Ex. R-2 were only the correct Minutes cannot be accepted. It is also to be noted in this regard that R-3 was examined himself as R. W-5. When he was offered for examination, it is for P-1 and R-9 to have elicited the relevant information from him. When he was offered for cross examination even though he was subjected to lengthy....
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....fered for cross examination, he should be cross examined on material point. Failure to cross-examine witness on certain points amounts to acceptance of truth of his testimony, except when the testimony itself is inherently improbable and incredible. Therefore, cross examination is a powerful and valuable weapon for the purpose of testing the veracity of a witness and the accuracy and completeness of his story. Hence, when the witness was not tested by cross examination, his evidence may be accepted subject to the above exception. 51. There is no cross examination on this point. There is also no suggestion. Therefore, it has to be concluded that R-9 did seek for leave of absence, thereby establishing that he had the Notice of meeting. Any resolutions passed in such meeting are valid unless properly challenged. 52. The learned counsel for P-1 and R-9 contended that the burden placed on P-1 and R-9 was discharged by stating that they did not receive any Notices and the burden shifted to R-3 to establish that Notices were sent. In this regard it has to be noted that proof of burden on the respective parties pales into insignificance when they adduced the evidence at length. Yet, if t....
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....s was never issued and Certificate of Postings produced by R-3 cannot also be accepted, because in pursuance of the orders of this Court, an Advocate-Commissioner was appointed to take charge of the documents of the Company and in pursuance of the said order, various documents were taken charge of by the Advocate Commissioner by putting her initials on each and every document on 11-7-1987. The notice issued for the meetings dated 26-11-1984 and 5-1-1985 and 28-2-1985 bears the signature of the Advocate-Commissioner and the Certificate of Postings also bear the signature of the Commissioner. That goes to establish that these docu- ments were in the files of the Company as on the said date and it cannot be said that they were manufactured or fabricated subsequently. It is also one of the circumstances which goes to show that these documents were maintained during the course of the company's business. 54. For all these reasons, it must be held that proper Notices were issued for the meetings dated 26-11-1984, 5-1-1985 and 28-2-1985 and the Minutes were recorded in those meetings cannot be said to be irregular or manipulated. When once it is found that the offers were made to all the ....
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....action. The said finding was arrived by the learned Single Judge after fullfledged argu- ments and after application of mind to full facts of the case duly consi-dering the documents referred to in the respective pleadings. He submits that when there is a finding that the issue relating to additional share capital is fishy and clouded with great suspicion, the said finding has become final, even though it is a prima facie finding. Thus he submits the orders in the Interlocutory applications are not only binding in the separate proceedings, but also in various stages in the same proceedings and consequently they constitute res judicata. He takes the assistance of the judgment of Privy Council in G.H. Hook v. Administrator General of Bengal AIR 1921 PC 11. The Privy Council observed as follows: "The learned Judge held that this matter had already been definitely settled and in addition gave reasons why he adhered to his former opinion. This was, in fact, superfluous. The question as to the perpetuity had been definitely and properly before him on the former hearing, and, was, in fact, decided without any reservation, as is made plain by the terms of the judgment itself, which show t....
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....rimarily it applies as between past litigation and future litigation. When a matter-whether on a question of fact or a question of law - has been decided between two parties in one suit or proceeding and the decision is final, either because no appeal was taken to a higher court or because the appeal was dismissed, or no appeal lies, neither party will be allowed in a future suit or proceeding between the same parties to canvass the matter again. This principle of res judicata is embodied in relation to suits in section 11 of the Code of Civil Procedure; but even where section 11 does not apply, the principle of res judicata has been applied by courts for the purpose of achieving finality in litigation. The result of this is that the original Court as well as any higher Court must in any future litigation proceed on the basis that the previous decision was correct. (8) The principle of res judicata applies also as between two stages in the same litigation to this extent that a Court, whether the trial court or a higher court having at an earlier stage decided a matter in one way will not allow the parties to re-agitate the matter again at a subsequent stage of the same proceedings....
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....e the appellate authority moved the revision before the Tribunal, which allowed the revision. It held that the Watan was acquired by Basangouda-I. A filed Writ Petition and the same was allowed holding that it was not open for the Tribunal to reopen and set aside finding of fact in revision and accordingly remanded the matter. On remand, the Tribunal held against A holding that Watan was acquired by Basangouda-IInd, not Basangouda-I. Having been unsuc-cessful before the High Court, A carried the matter before the Supreme Court. It was contended that the High Court was in error in not interfering with the order of the Tribunal, whereby the Revision Petition filed by the Appellants had been dismissed. It was also urged that the Tribunal in affirming the finding of the Assistant Commissioner and Deputy Commis-sioner recorded question of Appellants being strangers qua, the law in dispute took a very restricted view of section 79 of the Act, dealing with the Revision. This contention was repelled. The Supreme Court observed "that the High Court at the time of the decision of the earlier Writ Petition, of the 18-12-1964, recorded a finding and gave directions to the Tribunal not to reope....
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....ppreciating the contro- versy raised for ascertaining the prima facie and balance of convenience for the purpose of interlocutory applications. Therefore, the learned Judge on the basis of such examination came to a prima facie conclusion. Even the Division Bench also confirms the order of the learned Single Judge. It only establishes that the prima facie findings for this purpose of balance of convenience for appropriate orders shall be deemed to have been confirmed. Therefore, I am not in agreement with contention of the learned counsel for P-1. The prima facie finding rendered by the learned single Judge for purpose of granting interim relief cannot be said to be binding in subsequent proceedings in the same case. Thus, any findings recorded by the learned single Judge in the interlocutory application, cannot be treated as res judicata in subsequent proceedings. In fact the learned Judge himself proceeded with the matter for ascertaining the existence of a prima facie case and balance of convenience. Therefore, I have to necessarily reject the contention of the learned counsel on this issue. 57. The learned counsel for P-1 and P-2 Mr. Srinivasa Murthy submits that the documents....
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....ed into. In Mrs. Om Prabha Jain v. Abnash Chand AIR 1968 SC 1083, the Supreme Court observed at para 11 which is extracted below: ". . . The ordinary rule of law is that evidence is to be given only on a plea properly raised and not in contradiction of the plea. Here the pleas were made on two different occasions and contradicted each other. The evidence which was tendered contradicted both the pleas. The source of the information was not attempted to be proved and the witnesses who were brought were found to be thoroughly unreliable. In these circumstances we do not propose to refer to the evidence in this judgment any more." (p. 1086) The Supreme Court in Ram Saurp Gupta v. Bishun Narain Inter College AIR 1987 SC 1242, observed thus: "6. The question which falls for consideration is whether the respondents in their written statement have raised the necessary pleadings that the license was irrevocable as contemplated by section 60(b) of the Act and, if so, is there any evidence on record to support that plea. It is well settled that in the absence of pleading, evidence, if any, produced by the parties cannot be considered. It is also equally settled that no party should be perm....
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....the parties know that the matter in question was involved in the trial, and did they lead evidence about it? If it appears that the parties did not know that the matter was in issue at the trial and one of them has had no opportunity to lead evidence in respect of it, that undoubtedly would be a different matter. To allow one party to rely upon a matter in respect of which the other party did not lead evidence and has had no opportunity to lead evidence, would introduce considerations of prejudice, and in doing justice to one party, the Court cannot do injustice to another.' " (p. 1246) Assistance was also taken from para 3 of the case in Davuluri Venkata Hanumantha Rao v. Kasinadhuni Chengalvarayudu AIR 1954 AP 25 which is to the following effect: "3. The first question raised is that the surrender of the suit lands by Purnachandramma, the widow of Sadasivalingamurthi, was invalid as the plaintiffs were not the next reversioners to the estate of her husband. This argument is based upon the contention, that in regard to unenfranchised inams, the rule of succession is different from that which obtains in the case of other property and that in regard to the said pro....
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....a 7 of the decision of our High Court in Allam Gangadhara Rao v. Gollapalli Ganga Rao AIR 1968 AP 291, which is extracted below: "7. It is trite to say that a party is expected and is bound to prove the case as alleged by him and as covered by the issues framed. This is in accordance with the main principle of practice that a party can only succeed according to what was alleged and proved: secundum allegate et probata. He should not be allowed to succeed on a case which he has failed to set up. He should not be permitted to change his case or set up a case which is inconsistent with what he had himself alleged in his pleading except by way of amendment of the plaint. It is pertinent in this connection to remember what Lord Westbury had to say in this connection, in Eshanchunder Singh v. Shamachurn Bhutto (1866-67) 11 Moo Ind. App. 7 (PC). 'This case is one of considerable importance, and their Lordships desire to take advantage of it, for the purpose of pointing out the absolute necessity that the determination in a cause should be founded upon a case either to be found in the pleadings or involved in or consistent with the case thereby made... It will introduce the greatest amou....
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....es. Therefore, they requested the Court to set aside the allotment of additional share capital and order appointment of Interim Administrator until the regular Board is constituted. Alternatively they also prayed for directions to sell the shares held by R-3 and his family members to the P-1 and R-3. On the other hand the learned counsel appealing for R-3 submits that there was no oppression at all, but it is only in order to cause humiliation and harassment to R-3 and his family members and also to destroy the R-1 Company, such a Petition has been filed with false and frivolous allegations. It is also contended that the Petition was filed by P-1 and his family members ostensibly, but in fact R-9 was the actual person who lead the litigation by joining the hands with P-1. The learned counsel also submits that there are no bona fides in the petition and the same should be dismissed. 61. It is to be noted that P-1 and R-9 are sailing together in this Company Petition. The P-1 throughout his case in the Company Petition contended that Jalan group has been acting to the detriment of the interest of the Khemka family, but in later stages of averments in the Petition, it is brought out ....
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....ere only two promoter families namely Khemka family and Jalan family and they held 1/3rd and 2/3rd shares, the shareholdings were only among the relations. Since it was aimed at joint management the principles applicable to partnership were relevant. It was tried to be contended that even though there was no partnership firm earlier to the incorporation of the Company, but if the corporate veil is pierced the Company is in substance a partnership, and therefore the partnership is liable to be wound-up if it is found by the Court that it is just and equitable to wind-up as and when the confidence between the partners is lost and business cannot be carried on successfully. Hence, the same principle can also be invoked in the Company Law as contained in Section 433. Since the oppression is writ at large, it is necessary that appropriate directions should be passed by this Court. Whether the Company is in substance a partnership? 63. As can be seen from the Company Petition, the case is sought to be made out that R-3 has been conducting in oppressive manner to the interest of other Shareholders which will be sufficient ground for winding up of the R-1 company under just and equitable....
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...., Nazar 400 shares and George Nazar 200 shares. The Nazars, father and son, thus had a majority of the votes in general meeting. Until the dispute all the three remained directors. Later on an ordinary resolution was passed by the company in general meeting by the votes of Nazar and George Nazar removing Ebrahimi from the office of director. That lead to the petition for winding-up before the Court." (p. 571) The Supreme Court noted the following features which were found in Ebrahimi's case ( supra): "(1) There was a prior partnership between the only two members who later on formed the company. (2) Both the shareholders were directors sharing the profits equally as remuneration and no dividends were declared. (3) One of the shareholder's son acquired shares from his father and from the second shareholder, Ebrahimi, and joined the company as the third shareholder-director with two hundred shares (one hundred from each). (4) After that, there was a complete ouster of Ebrahimi from the management by the votes of the other two directors, father and son. (5) Although Ebrahimi was a partner, Nazar had made it perfectly clear that he did not regard Ebrahimi as a partner but regarde....
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....ete 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 upon the just and equitable ground. In a given case the principles of dissolution of partnership may apply squarely if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership. On the allegations and submissions in the present case, we are not prepared to extend these principles to the present company." (p. 574) In Ebrahimi's case (supra), the House of Lords after reviewing all the earlier cases held: "The foundation of it all lies in the words 'just and equitable' and, if there is any respect in which some of the cases may be open to criticism, it is that the Courts may sometimes have been too timorous in giving them full force. The words are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own; that there is a room in company law for recognition of the fact that behind it, or amongst it, there are in....
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....e Tobacco Co. Ltd.'s case (supra). The Supreme Court narrated the facts of Yenidje Tobacco Co. Ltd.'s case (supra) as follows: "24. This was a company of two shareholders and two directors who had earlier traded separately but amalgamated their businesses and formed a private limited company. The constitution of the company was such that under its articles of association for any case of difference or dispute between the directors there was a provision for arbitration. In fact in one of such disputes a reference was made to arbitration which resulted in an award to which one of the two shareholders declined to give effect. It was proved in that case that the two directors were not on speaking terms, that the so-called meetings of the board of directors had been almost a farce or comedy, the directors would not speak to each other on the board, and some third person had to convey communications between them which ought to go directly from one to the other. Under the above situation it was observed by the learned Master of the Rolls as follows: 'It is possible to say that it is not just and equitable that this stage of things should not be allowed to continue, and that the court sho....
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....e of the undue emphasis put on the contractual rights arising from the articles over the equitable principles, derived from partnership law." (p. 572) The Supreme Court also referred to the Privy Council decision in Loch v. John Blackwood Ltd. [1924] AC 783, 793, wherein section 127 of the Companies Act, 1910, Barbados, identical with Section 433(f) of the Act was considered and in which, a passage from the case of Baird v. Lees [1924] SC 83 was quoted as follows: " 'I have no intention of attempting a definition of the circumstances which amount to a 'just and equitable' cause. But I think I may say this. A shareholder puts his money into a company on certain conditions. The first of them is that the business in which he invests shall be limited to certain definite objects. The second is that it shall be carried on by certain persons elected in a specified way. And the third is that the business shall be conducted in accordance with certain principles of commercial administration defined in the statute, which provide some guarantee of commercial probity and efficiency. If shareholders find that these conditions or some of them are deliberately and consistently violated and set a....
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.... business. Furthermore the lack of confidence must spring not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of the company. On the other hand, wherever the lack of confidence is rested on a lack of probity in the conduct of the company's affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound-up.'" (p. 573) Again in Mohan Lal v. Grain Chamber Ltd. AIR 1968 SC 772 the Supreme Court held thus: " 'Primarily the circumstances existing at the date of the petition must be taken into consideration for determining whether a case is made out for holding that it is just and equitable that the company should be wound- up.'" (p. 573) In Mrs. Bacha F. Guzdar v. CIT AIR 1955 SC 74, the position of a shareholder with respect to company assets was considered and it was held thus: "That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. A shareholder has not got a right in the property of the company. ....
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....ubstantial amounts. In the circumstances, it seems to me to be clear that the company was a quasi-partnership within Lord Wilberforce's criteria or, indeed within any other criteria which might be material. Mr. Jacob sought to argue that there was a partnership only in relation to the company's premises, but there was nothing in that point. The proposition implicit in his submission that there can only be a quasi-partnership in a case where all the shareholders make similar contributions to the company is supportable neither on authority nor in principle. Further, to compare the roles of Mr. Armstrong and Mr. Nin with that of consultants to a partnership is most unrealistic. Each of them was intended and expected to play a central and regular part in the affairs of the company, and that is exactly what they both did." The Supreme Court in Hind Overseas (P.) Ltd. case (supra), made it clear that it is not always necessary to follow the decisions of the English Courts, even though the Indian Companies Act is modelled on English Companies Act. The similar question was considered by the Division Bench of Madras High Court in G. Kasturi v. N. Murali [1992] 74 Comp. Cas. 661. Speaking ....
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....s to the complete exclusion of the petitioner, the unfair conduct of the respondents and the construction of flats which meant that the construction of hotel project was abandoned, cumulatively showed that there was oppression of the petitioner by group of the second respondent. The complaint of the petitioner that the affairs of the company were being conducted by the majority shareholders in a manner oppressive to the interests of the petitioner was justified and there were sufficient grounds to wind up the company. There was, therefore, to be an order for purchase by the respondents of the petitioner's shares." (p. 2) Held that in substance it was a partnership." After holding that the affairs of the company were conducted by the majority shareholders in a manner oppressive to the interest of the petitioner and that there was sufficient ground to wind up the company, directed purchase of shares by the Respondents (majority shareholders). 65. It is well within the competence of the Court to determine the real structure of the company. It is open for the court to pierce the veil for such determination. If it is found that the apparent structure of the company is not real struct....
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....be drawn that there are symptoms of partnership. Further, it is not the case where prior to the incorporation of the Company, the business was run on partnership basis. It is for the first time, the Company was incorporated straightaway under the provisions of the Companies Act nor it is the case of the parties that any of the parties were conducting the business analogous to the business of the R-1 company prior to the incorporation. Altogether it is a new business, not undertaken by any of the members previously. It was only established for the purpose of supply of rubber rings to HIL which is the main principal component for manufacture of AC Pressure Pipes. There is also no agreement which is forthcoming between the parties to the effect that the business shall be conducted on the lines of the partnership and no such understanding could be culled out from the facts of this case. The Memorandum of Articles of Association of the Company did not contain any clauses suggestive inference of partner-ship. Even the Directors are not elected on the basis of shareholdings. Initially there were five directors out of which only one Director was from Khemkas. Even in 1987 when there were s....
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....he shares are allotted in the ratio in which they were holding earlier, but that cannot be construed as a determinative factor for treating R-1 company as a partnership firm. Evidence was also adduced to say that even other Companies established by the Khemka and Jalan family, the shareholding is in the ratio of 1/3rd and 2/3rd, I am not inclined to go into those details in-as-much as the holding in other companies cannot form basis for the holding in the present Company. Moreover, the evidence adduced on behalf of P-1 and R-9 do not indicate that there was an understanding or agreement to the effect that the shareholding of Khemkas should always be 1/3rd at the level of incorporation and also at the points when the shareholdings were increased from time to time. Even assuming that the shareholding of the Khemka family and Jalan family is 30 per cent above and 60 per cent above respectively, that situation by itself is not a conclusive proof that it is a partnership concern. The Supreme Court also held in Kilpest (P.) Ltd.'s case (supra), that limited company should not be easily treated as a quasi-partnership. The Supreme Court observed "the promoters of a company, whether or not ....
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....sts of the company; or (b)that a material change (not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its board of directors, or of its managing agent or secretaries and treasurers or manager, or in the constitution or control of the firm or body corporate acting as its managing agent or secretaries and treasurers, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company; may apply to the Court for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1), the Court is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of ....
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....he affairs of the Company were being conducted in a manner prejudicial to the public interest. 71. The oppression is the core element to be proved and the nature of oppression to be tested in the context of "cause for winding up". But it has to be remembered that the provision is intended to avoid winding up and to mitigate and alleviate oppression. The relief under section 397 of the Act is geared to help the members who were oppressed. The relief under section 398 of the Act is geared to save the company and it is in the interest of the company alone and not to any particular member/members. 72. The right of members to apply under sections 397 and 398 of the Act is hedged in with certain restrictive conditions. This is to avoid frivolous applications from dis-satisfied members approaching the court (now the Company Law Board). The provision regarding member/members having one-tenth share capital of the company alone can file applications under sections 397 and 398 of the Act is intended to avoid frivolous petitions. Of course, under section 399(4), it is provided that the Central Government may authorise any member or members of the Company to apply to the Company Law Board for....
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....ould at the lowest involve a visible departure from the standards of fair dealing, and a violation of the conditions of fair play on which every shareholder who entrusts his money to a company is entitled to rely. This, broadly speaking, was the class of case which the draftsman of section 210 evidently had in mind, and the question is whether the petitioners have brought themselves within the scope of the section." (p. 55) Lord Keith in his judgment stated: "But, apart from this, the question of absence of mutual confidence per se between partners, or between two sets of shareholders, however relevant to a winding up, seems to me to have no direct relevance to the remedy granted by section 210. It is oppression of some part of the shareholders by the manner in which the affairs of the company are being conducted that must be averred and proved. Mere loss of confidence or pure deadlock does not, I think, come within section 210. It is not lack of confidence between shareholders per se that brings section 210 into play, but lack of confidence springing from oppression of a minority by a majority in the management of the company's affairs, and oppression involves, I think, at leas....
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....bsidiary company which also had a minority of independent members. A time came when trading conditions were such that it would be to the advantage of the parent company to do away with the subsidiary company. The question before the Court was whether the conduct of the parent company in seeking to achieve that result amounted to oppression or oppressive conduct of the affairs of the Company within section 210 and the court answered in affirmative, holding that the affairs of the Company were conducted in oppressive manner. 77. As to the meaning of oppression, Viscount Simmonds. J observed: ". . . it appears to me incontrovertible that the society have behaved to the minority shareholders of the company in a manner which can justly be described as oppressive. It had the majority power and exercised its authority in a manner 'burdensome, harsh and wrongful' - I take the dictionary meaning of the word. But, it is said, let it be assumed that the society acted in an oppressive manner; yet it did not conduct the affairs of the company in an oppressive manner. My Lords, it may be that the acts of the society of which complaint is made could not be regarded as conduct of the affairs of ....
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....lained of' and that an order on the society to purchase the respondents' shares in the company did not satisfy that condition. This argument is without substance. The matter complained of was the oppression of the minority shareholders by the society. They will no longer be oppressed and will cease to complain if the society purchase their shares." (p. 9) Lord Denning pointed out that, in such a situation, the most useful order is to order the oppressor to buy the shares of the oppressed at a fair price. Lord Denning observed: "... The object of the remedy is to bring 'to an end the matters complained of that is the oppression, and this can be done even though the business of the company has been brought to a standstill. If a remedy is available when the oppression is so moderate that it only inflicts wounds on the company, whilst leaving it active, so also it should be available when the oppression is so great as to put the company out of action altogether. Even though the oppressor by his oppression brings down the whole edifice - destroying the value of his own shares with those of every one else - the injured shareholders have, I think a remedy under section 210. One....
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....er section 210 of the Companies Act stated thus: ". . . This indicates that the oppression complained of must be complained of by a member of the company and must be oppression of some part of the members (including himself) in their or his capacity as members or a member of the company as such. Secondly, it is to be noted that the section does not purport to apply to every case in which the facts would justify the making of a winding up order under the 'just and equitable' rule, but only to those cases of that character which have in them the requisite element of oppression. Thirdly, the phrase 'the affairs of the company are being conducted' suggests, prima facie, a continuing process and is wide enough to cover oppression by anyone who is taking part in the conduct of the affairs of the company, whether de facto or de jure. Fourthly, the section gives no guidance as to the meaning of the word 'oppressive', although it does, as already mentioned, indicate that the victim or victims of the oppressive conduct must be a member or members of the company as such. Prima facie, therefore, the word 'oppressive' must be given its ordinary sense and the question must be whether in that se....
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....nd the question in each is whether the conduct of the affairs of the company by the majority shareholders was oppressive to the minority shareholders and that depends upon the facts proved in a particular case. As has already been indicated, it is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of section 397. It must further be shown 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 upto the date of 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 the company's affairs, and such oppression must involve at least an element of la....
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....e instance of shareholders in matters of internal administration, and will not interfere with the management of a company by its directors, so long as they are acting within the power conferred on them under the articles of association. But this rule can by its very nature apply only when the company is a running concern, and it is sought to interfere with its affairs as a running concern. But when an application is presented to wind up a company, its very object is to put an end to its existence, and for that purpose to terminate its management in accordance with the Articles of Association and to vest it in the Court. In that situation, there is no scope for the rule that the Court should not interfere in matters of internal management. . . ." (p. 213) 83. Under section 397, the Court has to be satisfied that the affairs of the company are being conducted in a manner oppressive to any member or members. Therefore, the acts of oppression have not only to be alleged with sufficient precision, but they must be proved to the satisfaction of the Court. This was reiterated by the Division Bench of Calcutta High Court in Maharani Lalita Rajya Lakshmi v. Indian Motor Co. (Hazaribagh) Lt....
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....hen dealing with a petition for relief from oppression or mismanagement made under sections 397 and 398 of the Companies Act, 1956, the Court must confine itself to the case as made out in the petition and to the allegations made therein and the supporting affidavits and not look at other evidence with regard to events that might have happened subsequent to the petition. Full particulars must be given by a petition in such an application of the alleged acts of oppression or mismanagement. Vague and uncertain allegations of oppression or mismanagement, although they may constitute grounds for suspicion, do not entitle a petitioner to ask the Court to embark upon an investigation into the affairs of a company in the hope that, in consequence of such investigation, something will turn up which will enable the Court to grant relief to the petitioner. The inability on the part of shareholders, who have no access to the books of the company, to furnish full particulars, is not a ground for directing an investigation into the affairs of a company or for giving any other relief. The petitioner must prove, prima facie, at any rate, that an investigation is called for. Negligence and ineffic....
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....for the extrication of their rights as shareholders, they are deprived of the ordinary facilities which compliance with the Companies Acts would provide them with, then there does arise, in my opinion, a situation in which it may be just and equitable for the court to wind up the company.' 27. We may also refer to an other decision of the Privy Council in D. Davis & Co. Ltd v. Brunswick (Australia) Ltd. AIR 1936 (PC) 114 which was from the decision of the Full Court of the Supreme Court of New South Wales. Section 84(e) of the New South Wales Companies Act (1899) also provides for winding up, inter alia, on just and equitable ground. In dealing with that clause, the Privy Council observed as follows:- 'The position of the Court in determining whether it is just and equitable to wind up the company requires a fair consideration of all the circumstances connected with the formation and the carrying on of the company during the short period which had elapsed since 12th May, 1930; and the common misfortune which had befallen the two shareholders in the company does not, in their Lordships' view, involve the consequence that the ultimate desires and hopes of the ordinary shareholders....
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....any prejudice was occasioned thereby or that Elder could have bought the shares had he been present, no complaint of oppression could be entertained merely on the ground that the failure to give notice of the board meeting was an act of illegality. The true position is that an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burdensome, harsh and wrongful. But a series of illegal acts following upon one another can, in the context, lead justifiably to the conclusion that they are a part of the same transaction, of which the object is to cause or commit the oppression of persons against whom those acts are directed. This may usefully be illustrated by reference to a familiar jurisdiction in which a litigant asks for the transfer of his case from one judge to another. An isolated order passed by a Judge which is contrary to law will not normally support the inference that he is biased; but a series of wrong or illegal orders to the prejudice of a party are generally accepted as supporting the inference of a reasonable apprehension that the judge is biased an....
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....rs during earlier years is no ground for winding up a company under the 'just the equitable' clause or for making an order under section 397 if the mismanagement had ceased at the time of application. The object of section 397 is not 'to rake up the past but to redeem the future'. The quote in the above observation of Teck Chand, J. is from H.R. Harmer Ltd.'s case (supra), wherein Roxburgh, J. said: 'The purpose of this section (section 210) is not so much to rake up the past as to redeem the future.' " 90. It was further held in Thakur Hotel (Simla) Co. (P.) Ltd.'s case (supra ) that merely on the conduct of Directors in misappropriating the funds of the company the order for winding up would not be just and equitable; it requires further clause that, in addition to such misconduct, circum-stances exist which render it desirable in the interest of the shareholders that the company should be wound up. 91. In G. Kasturi's case (supra) which came up before the Division Bench by way of appeal against the interlocutory order passed by the learned Company Judge while referring to the scope of sections 397 and 398 read with section 402 of Companies Act, P.S. Mishra, J. speaking for the....
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....rms and conditions as appear to it to be just and equitable. When and how a Court should grant an interim injunction may vary from fact to fact and case to case, but certain principles are universally accepted and applied. In no case does a Court grant an interlocutory injunction as a matter of course. In all cases of interlocutory injunction, the Court usually has to consider whether the case is so clear and free from objection on equitable grounds that it ought to interfere to preserve the property without waiting for the rights to be finally established. Section 397(1) of the Companies Act, 1956, talks of a complaint that the affairs of the company 'are being conducted in a manner prejudicial to public interest'. The words 'are being conducted' must mean several acts in continuity and not one isolated act. The expression 'interest' in this context also must receive a meaning different from interest of a reader of a news item who, as a member of the public, may have one or other opinion. Public interest cannot be allowed to be confused with public opinion. The expression 'a matter of public or general interest' does not mean that which is interesting or gratifies curiosity or lov....
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....y to majority shareholders for the purpose of capturing the control and adminis-tration of R-1 company. (b)The alleged additional issue is a sham transaction and there was no proper notice and the certificate of posting and minutes are fabricat-ed. (c)There was no bona fide requirement of additional share allotment and even otherwise there were other various measures which could have been taken. (d)The so called capital brought by R-3 and his family members is only a paper transaction and the company did not get any real benefit. (e)Withdrawal of P-3 from ARIL Board is illegal. 95. Before going into the above contentions, it may be stated that as far as withdrawal of P-3 from the Board of Joint-venture company is concerned the matter is seized of by the Calcutta High Court in suit O.S. No. 228/85. Admittedly, the suit was filed by P-1 and P-3 challenging the resolution dated 21-8-1984. Therefore, I am not inclined to express any opinion on the resolution passed by the Board of Directors in this regard and also with regard to the withdrawal of P-3 from the Board of ARIL. 96. With regard to the alleged oppression on the ground of (a) above, it is the case of R-3 that there was ....
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....eserves or issue bonus shares or could have obtained a loan from the financial institution. By resorting to increase in the share capital, the only intention of R-3 was to gain the majority shareholding and nothing else. On the other hand, it is in the evidence that from 1981 itself, the State Bank has been insisting for enhancement of share capital upto Rs. 10 lakhs, that a commitment was given to the Bank to enhance the share capital. That in the year 1984, the position of the company became very precarious and there was immedi- ate necessity for diverting the products, to save the company from further losses. Therefore, a decision was taken to enhance the capital. It is also the case of R-3 that he had obtained loan of Rs. 5 lakhs from Poddar Company and paid towards the share capital to R-1 company, R-1 company pur-chased the machinery such as Extruder, Generator etc., for Rs. 4,45,000 and the balance was paid to the bank towards the liquidation of overdraft amount. It is also the case of R-3 that not only the machinery from DPPL for Rs. 4,55,000 was purchased, but also other machinery valued more than Rs. 20 lakhs was also purchased during the said period from other companies ....
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....two days of the transaction. It is also their case that extention of time granted to the shareholders to subscribe to the additional share capital upto 15-12-1984 was only imaginary as by 1-12-1984 R-3 and his family members have already sent the cheques for Rs. 5 lakhs for additional shares and the amount was brought into the accounts of R-1 company and the amount was also paid to DPPL for purchase of machinery and part of amount was also sent to the Bank towards the liquidation of the overdraft amount. It is not in dispute that R-3 and his family members had paid the amount of Rs. 5 lakhs which he obtained from Poddar Company and it came to the records of R-1 company on 30th November and again on 1st/2nd December, cheques were issued to R-3 and his family members on the directions of DPPL. It is also in evidence that R.M. Trading Company wanted to advance the amount to R-3 and since they have no account in Hyderabad, it requested DPPL to advance the money as DPPL has to receive the amounts from R-1 company, it directed the R-1 company to issue cheques in favour of R-3 and his family members and finally it is in evidence that the amount was also paid by R.M. Trading Company to DPP....
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....ehalf of R-3 is that if there had been any subscription of the capital by P-1 or R-9 and their respective family members, then the value of the shares that would have been purchased by P-1 and R-9 could have been returned to R-3. The other contention was also raised to the effect that the alleged family settlement is a farce and no such family settlement has taken place and the documents were introduced by R-3 in a most suspicious circumstances and that R-3 had manipulated these documents to suit his convenience. It is true that number of documents were introduced by R-3 stating that there was a family settlement and that P-3 also had written to P-1 for settlement of the accounts and that there was private agreement between P-3 and R-9 to the effect that Khemka family will support R-9 in their efforts to fight against R-3 (Ex. B. 157, 157-A, 157-B). I am not inclined to refer to any of these documents as their source is very much doubtful. Apart from that, I do not find it relevant to decide the issue as to whether there was any family settlement. But one thing is clear that P-1 had reconciled to settle his accounts and P-1 and Jalan family submitted to the mediation and arbitratio....
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....on of P-1 and R-3 changed in a manner prejudicial to their interest or their members. As already found by me, the genesis took place when P-3 was not properly accommodated in 1982 when he returned back from Saudi Arabia and the crisis which was brewing from 1982 took its deep route in 1985 when P- 3 was withdrawn from the Board of ARIL. Saudi Arabia. This lead to the filing of the suit by P-1 and exchange of letters between P-1 and R-3 and simultaneously the correspondence was started by R-9 with R-3. Even though the additional issue was never focal issue, yet it was made the basic issue in this Company Petition, for sustaining the alleged acts of oppress-sion. Even otherwise what is sought to be established was that P-1 and R-9 in their capacities as Directors and not as shareholders were subject- ed to oppression. That is not the requirement of law. 100. For the foregoing reasons, I find that the grounds urged by the counsel for P-1 and R-9 for establishing oppression on the part of R-3 have not been made out. 101. The learned Counsel for P-1 and R-9 also relied on the judgment of Calcutta High Court in Tea Brokers (P.) Ltd. v. Hemendra Prosad Barooah [Company Appeal No. 186 of....
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....members deprived them of their rights and consid- ered that the state of company was conducted unfairly prejudicial to the interests of the members and not to some part of the members. 103. This case also does not help the P-1 and R-9 inasmuch as there is no failure to hold that the General meetings or Annual General Meetings. It is also not established that the R-3 has acted himself in a unfit manner to control the Company. Whether the affairs of the company are conducted in a manner prejudicial to the interest of the company? 104. After holding that the oppression as alleged by the P-1 and supported by R-9, was not established, the next question that arises for consideration is whether the circumstances exist for forming an opinion that the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interest of the Company or any material change was brought about and by reason of such change it is likely that the affairs of the Company will be conducted in a manner prejudicial to the public interest or to the interest of the Company. But in this case, the Company being a private limited company, public interest ma....
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...., only establishes that he had no bona fide interest in the affairs of the company. Similarly, R-9 cannot be said to evince any interest as he has been devoting full time in Nucon, after his resignation from the HIL in February, 1985. 106. It is also clear case of P-1 and R-9 that R-1 company was conceived by them for benefit of their sons namely P-3 and Mr. Hemanth Jalan after their education. The case of P-1 was that his son was not properly fixed after 1982 in R-1 company and that son of R-9 was suitably accommodat-ed in Nucon and therefore P-3 had to eke out his livelihood and hence P-3 established APPL and also Ramak Enterprises. It is also in evidence that APPL has been producing rubber rings and supplying to HIL, which was hither to being supplied by R-1 company. P-1 is also holding a very highest position in the HIL as President. Therefore, under these circum-stances, can it be said that P-3 and R-9 can function themselves in the interest of the company. It is also in evidence that criminal cases erupted between R-3 and R-9. This Court also found that the wholesale allegations that there was no notices, for meetings that the Minutes were manipulated and fabricated, that th....
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....e not interested in any settlement, but your intention appears to have prolong litigation". This manifests that P-1 was interested for settlement of his accounts with Jalan family and Mr. Khaitan was mediating the matter between both the families. While the mediation was in progress, P-1 and R-3 appears to have entered into an unending correspondence, yet created further vacuum in their relations. By letter dated 6-3-1986, R-3 again wrote letter to P-1 wherein among other things he stated thus: "I am unwilling to enter into any controversy or correspondence with you at this stage in view of the negotiations for settlement now going on, but would depend on the records of the Company. I assure that I have no intention of involving you being involved in any litigation. I sincerely request you to resolve the various pending matters amicably. I hope to receive your kind cooperation." To this letter there was no reply from P-1. Further as can be seen from Ex. A-52 dated 3-7-1986 letter written by Pradeep Kumar Khaitan, Advocate, Calcutta to R-3 with a copy to P-3. That the entire matter appears to have been settled and payment was directed to be made by June, 1986. The letter of Mr. Kh....
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....best known to the parties that it did not come through. Moreover, the very person from whom P-1 wanted to have proper position in R-1 company is also not interested in any association with R-1 company. The very purpose for accommodating P-3 and the beneficiary himself declares that he declined to associate any further with R-9, R-3 and Jalan family, it is his categorical assertions that he has decided not to have connection with the Jalan families. Thus, it is apparent that he is no more interested in the R-1 company. 107. Coming to the participation of R-9, as already stated earlier that he was not taking much interest and that he tried to introduce document Ex. R-2 which is found to be not genuine by this Court. He was also silent spectator to the enormous correspondence exchanged between P-1 and R-3 and that he also did not respond to the letter written by P-1 to him Ex. A-118 wherein allegations were levelled that the Jalan family has been attempting to exclude Khemka family. Even in the counter, he never denied that Jalan family did not exclude Khemka family. But, on the other hand, in no uncertain terms ated that he is supporting P-1. It is also in his evidence that he was a....
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....le position making themselves answerable to the shareholders and the company. Therefore they are not only expected to exhibit trust and transparency as Directors while man-aging the company, but also it is all the more necessary to maintain the same position among the Directors themselves. Developing suspicion on one director(s) or counter suspicions are not conducive in the general interest of the company, which ultimately leads to allegation of oppression and mismanagements. 108. Section 402 has been engrafted with wide discretionary powers to ensure smooth functioning of the companies. The Court is entitled to grant the relief as it thinks fit in the interest of the shareholders and company. That is the reason for both ailments under sections 397 and 398, the treatment is common under section 402. The Court is empowered to pass order both as a curative and preventive measures if it finds that the affairs of the company are being conducted detrimental to the interest of the company, for bringing an end or for preventing the matter complained of or apprehended. 109. This Court is interested in the affairs of the Company as a whole and the personal quarrels are wholly irrelevant.....
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.... is also open for the Court to pass appropriate orders. The Company has been running throughout by R-3 and after Company Petition has been filed, for some time by the Interim Administrator and now it is again being run by R-3 as Managing Director. Though the P-1 did not ask for direction for selling of shares of R-3 to him, it is only after filing of affidavit by R-3 reply to the counter affidavit of R-9, a further affidavit was filed by P-1 in which he had stated that P-1 was ready and willing to purchase the shares so as to save R-1 company from the clutches of R-3. R-9 also in his counter did not say that he was willing to purchase the shares, but only in his rejoinder to the counter of R-3, he stated that direction may be issued to R-3, and his family members to share their shareholding at a price as may be deter-mined by the Court. Thus, P-1 and R-3 never expressed their readiness to purchase the shares. R-3 has been managing the Company for several years and also presently he is managing the company, it is desirable to offer the management of the Company to R-3 by passing appropriate directions. Relief 110. Keeping in view the above factors, the situation prevailing as on t....