TaxTMI 
TaxTMI 
2008 (11) TMI 399
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....inal petitioner Nos. 4 and 5 (hereinafter referred to as 'the present Petitioners') have decided to pursue this action. Notably, the shares held by the petitioner Nos. 4 and 5 together would constitute only about 6.66 per cent of the share capital of the respondent No. 1-company. 2. Briefly stated, sometime in or around 28-4-1962, a partnership firm consisting of four partners came into being which operated in the name and style as Gharda Chemicals Industries. The four partners were none other than the predecessor of the present petitioners Mr. Rutton Kavasmaneck who held 30 per cent in profits. The mother of respondent No. 2 Mrs. Ratanbai Gharda having 15 per cent share in profits. The Respondent No. 2 Dr. Keki Hormusji Gharda having 40 per cent share in profits. The 4th partner Mrs. Coomi Warden had 15 per cent share in profits. The partnership firm was running business of selling chemical process know-how and of manufacturing dyes, chemicals and textile auxiliaries. On 30-11-1965, one of the partner, namely, mother of respondent No. 2 Ratanbai Gharda expired. After her demise, new partnership firm in the same name Gharda Chemical Industries was constituted consisting of three p....
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....etitioners relied on instances which, according to them, constituted oppression on the minority group and claimed that the mischief committed by the respondent No. 2 should be remedied. The grievance is that the second respondent has taken over complete control of the company after the demise of predecessor of present Petitioner (Rutton Kavasmaneck). During the life-time of the said Rutton Kavasmaneck, he was admittedly the Chairman of the Board of Directors of the respondent No. 1-company. It is alleged that even during his life time, the respondent No. 2 attempted to rest complete control of the Company with himself. With that end in mind, the respondent No. 2 delayed the transmission of shares of the deceased Rutton Kavasmaneck in favour of the present petitioners and other heirs of the deceased and at the same time allowed transfer of substantial other shares in complete violation of article 57 of the Articles of Association (hereinafter referred to as 'the AOA'). It is asserted that there was consistent campaign on the part of the second respondent to oust the petitioners and for that repeated attempts were made, inter alia, to prevent them any access to even the basic informa....
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....is then stated that the third respondent was not a member of the Company, for which reason, he was not qualified for being appointed and to continue as Director, having failed to acquire qualification shares within two months from his appointment as Director. In spite of having ceased to be a Director on 29-12-1988 in terms of Article 123 of AOA, the third respondent purports to hold office as Director with full knowledge and connivance of second respondent. It is then stated that the second respondent decided to institutionalise and perpetuate the research culture of the Company by starting the Gharda Research Foundation, for which he issued Circular on 24-8-1989 addressed to all shareholders of the Company. According to the Petitioners, the sole purpose thereof was to usurp complete control over the Company. The petitioners further allege that the Company was not declaring fair dividends in spite of high earnings. The main cause for the Petitioners group to rush to file the present Petition was issuance of notice by the Company dated 16-1-1990 purportedly convening an Extraordinary General Meeting on 15-2-1990 to transact the business mentioned in the notice. The Agenda of items ....
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....d proxy of the Petitioners and further to discard the valid votes of the Petitioners group which would defeat the Resolution required to be carried out as Special Resolution by majority of not less than 75 per cent. It is further asserted that the respondents allowed invalid proxies of the respondent group to vote on the said resolutions. By way of amendment, new parties have been impleaded as respondents essentially those who were to be affected by the challenge to the transfer of shares in breach of Article 57 of AOA. The contesting respondents have countered each of the allegation. I shall deal with the relevant facts and the stand of the respective parties while considering the relevant grounds. 6. As aforesaid, the original petitioner Nos. 1, 2, 3, 6 and 7 have withdrawn from the present proceedings unconditionally. As per their request, they have been deleted from the array of petitioners. The effect of unconditional withdrawal from the proceedings by the said petitioners is that they have given up their challenge with regard to the alleged acts of oppression and mismanagement. In that, those petitioners have consciously acquiesced in the acts complained of. It is further si....
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....s unconditionally. Insofar as the present petitioners are concerned, as a matter of fact, they are free to deal with the shares held by them. In that, the shares are now freely transferable. Indeed, when the Petition was presented at the relevant time, the respondent No. 1-company was a Private Limited Company. As a result, there was restriction in the transfer of shares. However, it is common ground that now the respondent No. 1-company has become a Public Limited Company - as a result of Special Resolution moved in the Extraordinary General Meeting dated 5-5-2001 having been defeated. Having acquired the status of a Public Limited Company, the restriction on the right to transfer the shares which was applicable to Private Limited Company, would naturally get diluted. That, however, does not mean that there would be no right in the Board of Directors to consider the transfer request on case-to-case basis on its own merit, keeping in mind the best interests of the company so as to prevent any undesirable person becoming its member and if enrolment of such person as a member, is likely to be prejudicial to the company. In other words, the Board of Directors would be justified in dec....
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....f any share. In my opinion, the principal relief claimed by the present petitioners would stand addressed with the above arrangement. 11. I shall now proceed to consider the alternative reliefs pressed during the course of arguments by the counsel for the present petitioners. Indeed, although the present petitioners have submitted that the reliefs to be presently reproduced are alternative reliefs, the same in fact, are the substantive reliefs. I would straightaway refer to the said reliefs pressed by the present petitioners, which read thus : "(c) That the 2nd Respondent be restrained by an order of permanent injunction from exercising any rights or receiving any dividends or any rights or bonus shares or any accretions in respect of the said 3,000 share purportedly registered in the name of the 2nd Respondent and the 1st Respondent; (d) For orders and directions directing Respondents 1 & 2 to offer the said 3,000 equity shares of the face value of Rs. 100 each (together with all accretions thereto) to the Petitioners in accordance with Article 57 of the Articles of Association at the value determined in accordance therewith and directing the 1st Respondent to register the same....
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....tsider non-member of the company; (hhh)( iv) that this Hon'ble Court be pleased to declare that the purported sale or transfer of shares from Respondent Nos. 33 to 36 in favour of Respondent Nos. 27 to 32 and the Respondent No. 1 Company's registration of such transfers as per particulars set out in Exhibit-QQ20 hereto is void, invalid and illegal; (hhh)( v) that this Hon'ble Court be pleased to order and declare that the purported sale or transfer of the said shares in favour of Respondent Nos. 27 to 32 by Respondent Nos. 33 to 36 and the registration of the transfer of the said shares in the Register of Members of the Respondent No. 1-company be cancelled and set aside and the Register of Members of Respondent No. 1-company be rectified accordingly; (hhh)( xix) that it may be ordered and declared that the purported transfer of the said 5 shares referred to in paragraph 16(S)(1)(xiii) hereto from the names of Respondent Nos. 2 and 4 to the name of Respondent No. 44 is contrary to the Articles of Association of the 1st Respondent-company and, therefore, illegal null and void and is liable to be set aside; (hhh)( xx) that the Register of Members of the 1st Respondent Company be ....
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....erewith and directing the 1st Respondent to register the same in the name of the petitioners and make consequential notings on the 1st Respondent's records. (ii) (1) that it may be ordered and declared by this Hon'ble Court that the Extra-ordinary General Meeting purported to have been held on 15th February, 1990 and the business conducted therein/resolutions purported to have been passed therein are all null and void and bad in law; (2) that Respondent No. 1 be restrained by an Order and injunction of this Hon'ble Court from taking any steps or action on the basis or in pursuance of the resolutions purported to have been passed at the said meeting of 15th February, 1990 or from in any manner whatsoever giving effect thereto; (3) that it may be ordered and declared that the purported transfer of 3,000 equity shares by Respondent No. 5 in favour of 2nd Respondent is illegal, null and void; (4) that this Hon'ble Court be pleased to rectify the register of members of the 1st Respondent by deleting the name of Respondent Nos. 2 and 4 in respect of 3,000 equity shares standing in their name and substituting the name of Respondent No. 5; (5) that Respondent No. 2 be restrained by a ....
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....o advert to section 399(1) of the Act, which reads thus : "Right to apply under sections 397 and 398.-(1) The following members of a 'company shall have the right to apply under section 397 or 398 :- (a )In the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b )in the case of a company not having a share capital, not less than one-fifth of the total number of its members." 14. The law requires that the specified strength of members of the Company have right to apply under section 397 or 398 of the Act. Admittedly, the present Petitioners (original Petitioners 4 and 5) do not fulfil the requirement of section 399(1) of the Act, which mandates that in the case of a Company having a share capital, not less than 100 members of the company or not less than one-tenth of the total number of its members, whichever is less or any member or members holding not less tha....
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.... in the present Petition will have to be confined only in the context of grievance of the present Petitioners (original Petitioners 4 and 5) and not on the basis of grievance made by the other original petitioners (1, 2, 3, 6 & 7), since those Petitioners have consciously withdrawn from the proceedings unconditionally thereby giving up all the grievances made at their instance in the present Petition. That conscious act of the said Petitioners (original Petitioners 1, 2, 3, 6 & 7) relates back to the cause for institution of the Petition in relation to the grievances made by them. Any other view would result in a situation where the original Petitioners 1, 2, 3, 6 & 7 having consciously withdrawn from the present Petition unconditionally, would, indirectly, resurrect their claim by this process, which cannot be countenanced. For, the said Petitioners have willingly chosen to acquiesce into the acts and stand of the Respondent Company as also the decisions of the Respondent No. 1 Company taken from time to time which were made subject-matter of this Petition by them. It is well-established position that the conduct amounting to oppression must be "continuing at the date of hearing o....
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....special resolutions can be passed. The argument was that special resolutions under section 189(2) of the Act requires majority of 75 per cent of shareholding which majority shareholders do not have; whereas, minority shareholders held in excess of 25 per cent of the shareholding. It was argued that all matters which require a Special Resolution, cannot be passed in view of the deadlock between the majority and the minority of shareholders. At the same time, it was contended that an order of winding up would unfairly prejudice the members. 21. Insofar as the argument of deadlock is concerned, it is noticed that there is no specific case made out in the Petition in this behalf. Besides, the shareholding pattern of majority and minority shareholders was almost same right since its inception when the Company was incorporated. In that, the minority shareholders always held in excess of 25 per cent of the shareholding. In spite of that, the Company has travelled thus far. The facts would not justify a finding of deadlock in the Respondent No. 1 Company. 22. According to the Petitioners, after the incorporation of the 1st Respondent, the 2nd Respondent with a view to gain absolute major....
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....ion that the heirs of the deceased would be in a position to avail of the rights only after becoming a member of the Company and not otherwise. It is noticed from the record that within three days from the date of presentation of the request, the shares were transmitted in the name of heirs of the deceased. Therefore, no fault can be found with the company for not transmitting the shares of the deceased Rutton Kavasmaneck in the name of his heirs immediately after the demise of deceased Rutton Kavasmaneck. Suffice it to observe that the fact that the shares of deceased were transmitted in favour of heirs after over 12 years from the demise of the deceased is not on account of any deliberate failure or omission on the part of the Respondents and in any case, cannot be the basis to draw inference that it was with a view to suppress or oppress the minority shareholders. It was for the heirs of the deceased to apply for transmission of shares expeditiously. Due to their lapse, no adverse inference can be drawn against the Company. As aforesaid, so long as the shares were not transmitted in the names of heirs of the deceased, the question of nominating any of them on the Board of Direct....
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....e same at the fair value as hereinafter provided; (b )The member proposing to transfer any shares (hereinafter called the proposing transferor) shall give notice in writing (hereinafter called a transfer notice, to the Company that he desires to transfer the same; (c )Within the period of seven days from the receipt of a transfer notice as aforesaid the Company shall offer to each of the existing members of the Company respectively such number of the shares included in the transfer notice as a pro rata or as nearly as may be to the holding of each member respectively on the footing that if he desires to purchase any or all of such numbers of the said shares at the fair value he shall within fifteen days of the offer be entitled to apply for the purchase and transfer of the same and the Company shall be bound, upon payment to the transferor of the fair value of such shares, to transfer the shares of member applying; (d)in case any member or members shall not have applied for the purchase and transfer of any or all of the shares to which he is entitled, the Company shall within seven days of the date at which the offer closed, offer the untaken shares to such of the members as hav....
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....." 30. On a fair reading of the provision, in particular, clause (a), I am in agreement with the argument of the Respondents that in case of transfer of share between member to member of the Company, the requirement of offering the shares to other existing members on pro rata basis, would not arise. The avowed object of the Article is to restrict the right to transfer the shares of the Company "essentially to outsiders". As the Company was incorporated as Private Limited Company, imposing of such restriction was very natural. Notably, the restriction in clause (a) is of very limited nature. It postulates that as a general rule, transfer of shares to a person who is "not a member" of the Company is prohibited. It, however, makes one exception that a member can transfer his shares to his lineal descendant though not a member of the Company. That provision, in no way, creates any inhibition for transfer of share by a member to another member of the company. For, by doing so, the change that would be brought about is only in the percentage of holding of the respective members and not to introduce any outsider as member of the Company. It is well-established position that while constru....
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....he shareholder wishing to transfer. The Apex Court has referred to authorities dealing with restrictions on transfer shares, amongst others, Penington's Company Law (6th Edition) at page 753, wherein it is mentioned that shares are presumed to be freely transferable and restrictions on their transfer are construed strictly and so when a restriction is capable of two meanings, the less restrictive interpretation will be adopted by the Court. It is also noted that the restrictions have to be clearly embodied in the A.O.A. 31. It is well-established position that Articles of a Company are constituent document and are binding on the Company and its Directors. As aforesaid, the intention of Article 57 is that the share capital of the company remains within the close knit group and nothing more. On the plain language of the said provision and the Intent behind it, the regime of Article 57 has no application to transfer of shares between member to member of the Company inter se. There is force in the argument of the Respondents that from the contemporaneous situation, it would appear that all concerned were ad idem on this aspect, which position is reinforced from the fact that on 27-6-1....
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....or expansion plans. It is stated that the mala fides are also borne out from the fact that the Directors and/or Company did not deem it fit nor felt it necessary to propose any such resolution at the Annual General Meeting convened on 29-12-1989. 33. The Respondents by filing affidavit have not only stated that the allegations of the Petitioners are baseless, but also assert that notices of Extraordinary General Meeting dated 15-10-1988 were duly sent on the last known address of present Petitioners (original Petitioner Nos. 4 and 5) in India. There is nothing on record to doubt this position. Besides, at the time of hearing, grievance was made on behalf of the Respondents that the present Petitioners have given false and incorrect residential address in the cause title of the Petition. Be that as it may, in the reply, it is stated that the decision to enhance the borrowing powers of the Board of Directors was in the interests of the Company. The Respondents have stated on affidavit that the Company has had expansion programme on hand involving capital expenditure of Rs. 30 crores. That was to cover the period from March 1990 to June 1991. It is stated that the Company had plans t....
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....ice only at around 12.00 noon, by which time, meeting had already been terminated. The Respondent Company has thus denied the allegation that no meeting was in fact held. There is no reason to doubt the correctness of the stand taken by the Respondent company. In any case, it is the 2nd Petitioner (original Petitioner No. 2) and Dr. Rebello (representing original Petitioners 6 and 7) had attended the meeting. The said Petitioners have already withdrawn from the present proceedings unconditionally. Implicit in that is giving up the allegation stated in the Petition on their behalf. 35. Be that as it may, the items on which decision was taken by the General Body was in relation to declaration of dividend and reappointment of 3rd Respondent. With regard to issue of dividend, the grievance of the Petitioners is that from the period from 1991 to 1998, the Company has declared low dividend with a view to cause harassment and prejudice to the minority members. It is the case of the Petitioners that the Respondent No. 2 in addition to dividend was being paid remuneration by the Company; whereas, the Petitioners were fully dependent on the dividend income receivable from the Company. On ac....
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....itioners is Rs. 1,21,14,425 (Rupees One Crore Twenty-one Lakhs Fourteen Thousand Four Hundred Twenty-five) and the total face value of 4,208 shares is Rs. 4,208 x 100 = Rs. 4,20,800, for which the present Petitioners have not spent any money to acquire the same. Moreover, the total value of the said 4,208 shares it was stated across the bar, at present, was at the rate of Rs. 50,000 per share, would be approximately Rs. 21.04 crores. 37. Be that as it may, the question is: whether payment of low dividend by the company can be the basis to hold that it results in oppression of minority shareholders. The answer is an emphatic "No.", especially in the fact situation of the present case. The decision to pay low dividend applies across the board to all the shareholders and not limited to minority shareholders. The Respondents have given justification for the low dividend policy keeping in mind the income-tax and wealth tax liability of individual shareholders at the relevant time. If any authority is required in support, we can usefully refer to the decision of the Calcutta High Court in the case of Maharani Lalita Rajya Lakshmi v. Indian Motor Co. (Hazaribagh) Ltd. [1962] 32 Comp. Cas....
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....hanced steeply. In such a case, the question of holding that on account of declaration of low dividend, has resulted in oppression of minority shareholders cannot be countenanced. 40. The decision in the case of Jaladhar Chakraborty ( supra) has been pressed into service also on the proposition that once the Court finds that there is no ground for oppression or mismanagement, there is no question of the Court passing any order from bringing to an end the matter complained of either under section 397 or 398. In that, the substratum for passing any order under section 397 or 398 is unavailable. For that, reliance has been placed in the said decision on the case of Jermyn Street Turkish Baths Ltd., In re [1971] 41 Comp. Cas. 999 (CA) wherein, it was observed as follows : "If this could be regarded as an act of oppression, which in our opinion it cannot, it would not, we think, justify an order that one side should buy the shares of the other. So drastic a remedy would go far beyond what is necessary to put an end to this particular form of oppression." (p. 526) 41. Reliance is also placed on the earlier decision in Maharani Lalita Rajya Lakshmi's case (supra) wherein at page 129 of....
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....e Companies Act, 1985 is in these terms: 'A Member of a company may apply to the court by petition for an order under this Part on the ground that the company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of some part of the members (including at least himself) or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.'" 43. I am in agreement with the argument of the Respondents that the provision in the Indian Companies Act, 1956 is differently worded. In that, the provision in Indian Companies Act does not limit the action to conduct which is unfairly prejudicial to the interest of some part of the members. Whereas, it requires that the conduct should be such that it is in a manner oppressive to any member or members. The Indian Law envisages that the act of the majority shareholders should be replete with malice and one of continuous oppression of the minority shareholders' right till the hearing of the Company Petition. 44. Counsel for the Respondents has invited my attention to the decision of the Apex Court in the case of Hind Overseas (P.)....
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....was no right accrued upon in this behalf. Besides, I have already dealt with the grievance of the Petitioners with regard to the delayed transfer of shares of the deceased. Until the shares were transmitted, the heirs could not have been made Directors. It is the Petitioners' group who delayed the process of transmission by submitting application in that behalf almost after twelve and a half years. With regard to the argument that it is a case of deadlock in passing of Special Resolution, is also answered by this decision as what is envisaged to be a complete deadlock in the company on account of lack of probity in the management of the Company and there is no hope and possibility of smooth and efficient continuance of the company concerned. By no standards, such a finding can be recorded in the fact situation of the present case. 46. Reliance is also placed by the Petitioners on the decision of Privy Council in the case of Loch v. John Blackwood Ltd. 1924 AC 783, in particular, exposition at pages 793 and 794 to contend that the Petitioners group had completely lost confidence in Respondent No. 2 on account of continuous act of Respondent No. 2 in keeping out the Petitioners grou....
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....nvened on the basis of undertaking given by the Respondents not to act on any Resolution that may be passed at the said meeting till further orders. The subjects which were to be discussed in the said meeting were notified by way of notice dated 16-1-1990 for holding Extraordinary General Meeting. The items that were to be discussed have already been mentioned hitherto. The grievance about the invalidity of this meeting at the instance of the Present Petitioners is on diverse grounds. However, those grounds at best make out a case bordering some irregularity. Significantly, the original Petitioners 1, 2, 3, 6 and 7 having unconditionally withdrawn from the present proceedings and have given up all the grounds presupposes that they have accepted the Resolution passed at the said meeting dated 15-2-1990. In other words, it is only the present Petitioners who are opposed to the validity of the said meeting and the decisions taken therein. The present Petitioners, however, constitute less than 7 per cent of the shareholding. By no standards, it can be said that the present Petitioners on their own would be in a position to defeat the Resolution which is supported and in any case now ac....
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....er compliance has been observed. In addition, the Respondents would contend that the Petitioners should be non-suited for having approached this Court with unclean hands. In that, the fact that the Petitioners have already entered into a Memorandum of Understanding with Godrej Soaps Ltd. to acquire shares in Respondent No. 1-company was kept a secret arrangement till it became known for the first time to the Respondent in February 2005. It is common ground that even the present Petitioners are signatories to the said Memorandum of Understanding. In fact, even the present Petitioners have sold 27 and 66 shares respectively to Godrej Soaps Ltd., without following the regime of Article 57. On the one hand, the Petitioners were questioning the intention of the 2nd Respondent but at the same time, the Petitioners were themselves indulging in act which was not only illegal but against the interests of the Company. According to the Respondents, the Petitioners group was bent upon selling their shares to a person who happens to be the competitor of Respondent Company. Besides, it is the Petitioners group who on the one hand were opposed to increase of authorised share capital-resulting in ....
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....e material has been produced to substantiate that position. Even the amendments suggested to the AOA were not to favour only the majority shareholders but would apply across the board and every member would be benefited by the said amendment. The controversy regarding deletion of Article 123 as raised is also without any substance. Besides, it is common ground that the Company has now become a Public Limited Company. Even on account of this change, it has become redundant to entertain the grievance of the present Petitioners in relation to the issues concerning Extraordinary General Meeting dated 15-2-1990. Moreso, when the stand taken by the present Petitioners at the time of arguments plainly suggests that they are interested in walking out of the Company and sell their shares at a fair price. 51. That takes me to next relief (hh)( i) to (h)( iii) which pertain to the transfer of four shares from Respondent Nos. 11 and 12 to Respondent No. 13 being contrary to A.O.A. According to the Petitioners Mrs. Ruby Madon and Mr. Fali Madon had offered 400 shares of the 1st Respondent. The shares were offered only to five shareholders of the 1st Respondent. It is not in dispute that the le....
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.... are to be regarded as Directors or shareholders holding not less than 51 per cent of the voting rights are persons who are the members of the Company. (iii)transfer by way of gift whether on account of love and affection between persons who ore relatives of each other or by way of philanthropy. (iv)transfer by a person to another person who is an existing member of the Company : Provided that in each the question as to whether the case falls under any of the foregoing circumstances shall be subject to a decision by the Board of Directors who shall be entitled to call for such information and particulars as may be reasonable required to examine as to whether the case does in fact bona fide fall under any of the foregoing circumstances." 52. It is not the case of the Petitioners that the transfer of said four shares in favour of Respondent No. 13 was also in breach of this amended Article 57 as such. Indubitably, the matter will have to be tested in the context of the amended Article 57 which amendment has been approved by the General Body on 15-2-1990, whereas the proposal for transfer of shares by Respondents 11 and 12 in favour of Respondent No. 13 in relation to the stated "....
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....fer of shares at the instance of Petitioners group in favour of non-member. Since the maximum number of members could be only 50. According to the Petitioners, the apprehension turned out to be correct since shares lodged for transfer at the instance of Petitioners group were declined as the maximum number of members was exhausted. Once again, the Petitioners heavily rely on the order passed by this Court dated 21-3-1991 to contend that splitting of shares in favour of non-members by the six employee members was impermissible. The above argument though attractive, is of no avail. Inasmuch as, as has been found earlier, once the validity of the Resolution passed on 15-2-1990 has been held to be conclusive and cannot be reopened, the transfers made by employees in favour of their relations only of part shares originally held by the employee concerned was permissible within the scope of amended Article 57. Amended Article 57 allows such transfer in favour of relative of the member without requiring him to offer those shares to the existing members. From the events that have unfolded from the inception of the Company, it is noticed that transfer of shares in favour of lineal descendant....
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....eal and depressed value. The argument will have to be rejected for more than one reason. In the first place, Article 57 is a complete Code as to how the shares offered by the member ought to be valued. The shares will have to be offered to the existing members at a fair value. The method of computing fair value is also spelt out in that Article itself. There is no ambiguity in that behalf. It is not the case of the Petitioners that the said method is inappropriate or unfair. The said Article will be as much binding on the company as on the present Petitioners. The regime of Article 57 further postulates that if the offered shares are untaken at the determined fair value, it is open to the offeror to sell the shares to a non-member or recognise such transfer unless the transferee was found to be unsuitable and opposed to the interest of the Company. Once it is held that the Company is obliged to recognise such transfer by the member, it necessarily follows that the Company would be bound to take such remedial measures including to amend its AOA so as to record the transfer within a reasonable time. As a matter of fact, it is common ground that the Company has now assumed the hat of ....
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....sfer of five shares in favour of Dr. Bomi Patel was not done within two months from his appointment as Additional Director. That, at best, would be a breach of Article 123, but by no standards, can be a case of oppression of minority. It is not the case of the present Petitioners that any of them wanted to be director when Dr. Bomi Patel was appointed or when he incurred such disqualification. In my view, the factum of illegal continuation of Dr. Bomi Patel as Additional Director even after two months from the date of his appointment without acquiring five shares, cannot be the basis to answer the issue of oppression of minority shareholders in the affirmative. 57. The only grievance of the Petitioners that needs to be considered in the context of oppression of minority is of transfer of five shares by Respondents 2 and 4 directly to Dr. Bomi Patel without following the regime of Article 57. Insofar as this grievance is concerned, as aforesaid, the said shares have been allotted to Dr. Bomi Patel being an employee of the Respondent No. 1 Company, which was permissible under the AOA. It cannot be overlooked that the transfer is only in respect of five shares which is insignificant ....
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....ch transfers, the purchase of shares in all by Gharda Consultants Pvt. Ltd. are illegal being contrary to section 77 of the Companies Act, 1956 and oppressive to the Petitioners apart from being an indicator of the mismanagement of Respondent No. 1 Company. These facts have come to the notice of the Petitioners only after the filing of the above petition. The Petitioners state that in respect of the aforesaid they have filed an independent application for appropriate reliefs. The Petitioners crave leave to refer to and/or reply upon the said application, when produced and reiterate all that is stated therein as if the same were specifically set out in this Petition. The Petitioners reserve their right to claim pro rata entitlement in respect of the said 5,492 equity shares in accordance with the Articles of Association of the 1st Respondent Company at the price when the same were purportedly transferred, from time to time." 59. The Respondents 1 to 4 have denied the above allegations. It is denied that Gharda Consultants have no income and were incapable of purchasing the said shares. It is also denied that the purchase of shares exceed Rs. 10 crores or that they were founded by a....
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.... reliefs are also incidental to the reliefs pressed at the time of arguments which have already been dealt with in the earlier part of this decision. For that reason, it is not necessary to separately deal with the same. 62. Taking overall view of the matter, I have no hesitation in concluding that no case regarding oppression of minority shareholders has been established by the present Petitioners. Assuming I were to hold to the contrary, I would still be inclined to hold that no tangible grounds are made out to conclude that it is just and equitable to wind up the Respondent No. 1 Company. For, on this finding as observed in the case of Jaladhar Chakraborty ( supra), no further direction needs to be issued. However, insofar as the direction pressed by the present Petitioners against the majority shareholders to buy out the shares of the present Petitioners, I have already dealt with that aspect in the earlier part of this judgment. Issue No. 3 : 63. That takes me to the 3rd issue as to whether the affairs of the Company have been conducted in manner prejudicial to the interests of the Company. At the cost of repetition, it is relevant to note that no case has been made out in ....