TaxTMI 
TaxTMI 
2010 (2) TMI 577
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....hkumar Jain is the managing director in the said M/s. Unique Construction (P.) Ltd. Respondent No. 3 is one Anandrao Gaekwad. 3. The aforesaid Shri Gaekwad holds a perpetual leasehold right over the land bearing Municipal No. 79 admeasuring 77,708 sq. feet situated at Indore. On 14-6-1950, the said land was leased to the father of respondent No. 3, Shree Khanderao Shivajirao Gaekwad by the then Government of Madhya Bharat. A cinema theatre in the name of Yashvant Talkies had been constructed over the said land. 4. The company was incorporated on 6-10-1989, with the authorised share capital of Rs. 5 lakhs divided into 5,000 shares of Rs. 100 each. In the year 1994, respondent No. 3 Anandrao Gaekwad entered into an agreement and a memorandum of understanding with the company and respondent No. 2, its managing director, in respect of the development of a commercial complex on the aforesaid land bearing Municipal No. 79. Under the said agreement and the memorandum of understanding, the company agreed to develop a commercial building "Yashvant Plaza" on the said land and to share the sale proceeds with respondent No. 3 in the ratio of 45 per cent and 55 per cent. Since the said agreem....
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....gal and valid rights to the purchasers of the shops and offices in the commercial complex, defrauded the public at large. The appellant complained that the affairs of the company were conducted in a manner prejudicial to the public interest and oppressive to the appellant. The appellant prayed that: The board resolution dated 27-12-2004 and Form No. 32 dated 27-12-2004, removing the petitioner and his wife Smt. Meera Tekriwal and son Shri Gaurav Tekriwal from the directorship of the company be declared null and void ; The board resolution dated 24-11-2003, allotting 2,876 (two thousand eight hundred and seventy six) equity shares of respondent No. 1 company to respondent No. 2 and Form No. 2 dated 27-11-2003, be declared null and void ; The board resolution dated 14-7-2005, allotting 14,000 (fourteen thousand) equity shares of respondent No. 1 company to respondent No. 2 and Form No. 2 dated 14-7-2005, be declared null and void ; The board resolution dated 27-7-2005, allotting 2,000 (two thousand) equity shares of respondent No. 1 company to respondent No. 2 and Form No. 2 dated 27-7-2005, be declared null and void ; The respondents be directed to submit an audited statement o....
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.... set aside the allotment of shares made on November 24, 2003, July 14, 2005 and July 27, 2005 totalling to 18,876 (2,876 + 14,000 + 2,000), the allotment is declared null and void and the status quo ante is restored." 11. As to the removal of the appellant and his family members from the directorship of the company, the Board was pleased to hold (page 760 of 147 Comp. Cas.) : "... I find that this company not being in the nature of quasi-partnership (though there are agreements and memorandum of understanding which partake the form of partnership agreement, the partnership referred to being unregistered, the agreements/memorandum of understanding are claimed to be unenforceable), as a principle, directorial complaints cannot be a ground in a petition under section 397/398 as the complaints in such a petition should be relating to the rights qua a member. It is only in the case of family companies or companies in the nature of partnership, depending on the facts of the case, directorial complaints have been adjudicated by this board in section 397/398 proceedings." In view of the aforesaid finding, the Board refused to grant directorial reliefs. The Board also refused to grant re....
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....e matter of transfer of shares, the appellant's right to pre-emption conferred by the articles of association has been abrogated. This conduct of the company and respondent No. 2 alone is sufficient to establish oppression against the said respondents. He has also submitted that neither the appellant nor his family members who were directors in the company was given intimation of the meeting of the board of directors held on 19-11-2003, 11-7-2005, or any other meeting held since the year 2003. Thus, the appellant was surreptitiously kept out of the management of the company. He has submitted that by the aforesaid clandestine increase in the authorised share capital of the company, not only respondent No. 2 and his family members received 18,876 additional shares in the company but they have also earned hefty amount of dividend on the aforesaid 18,876 shares of the company. He has submitted that the appellant and his family members were surreptitiously removed from the directorship of the company. The said action having been found to be bad and illegal, the Board ought to have interfered in the matter and have restored the appellant and his family members on the board of directors o....
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.... has submitted that the appellant and his family members were not removed from the board of directors by the company. He has submitted that the appellant and his family members ceased to be the directors of the company as they failed to attend the meetings of the board of directors for three times in a row. He has submitted that the appellant has failed to make out a case of oppression. The petition under sections 397 and 398 of the Act was misconceived. In support of his submission, he has relied upon the accounts and the pleadings submitted before the Board. He has relied upon the judgment in the matter of Sangramsinh P. Gaekwad's case (supra) ; particularly paragraph 177 thereof. 20. Learned advocate Mr. N.D. Nanavati has appeared for respondent No. 2. Mr. Nanavati has also questioned the maintainability of the present appeal under section 10F of the Act. He has relied upon section 283(1)(g) of the Act to buttress the submission that the appellant and his family members had ceased to be the directors of the company by force of law. He has further submitted that the oppression requires to be specifically pleaded and proved. In the absence of specific allegation of oppression, th....
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....ry power given to the Company Law Board under section 402 to set right, remedy or put an end to such oppression is very wide. (f )As to what are facts which would give rise to or constitute oppression is basically a question of fact and, therefore, whether an act is oppressive or not is fundamentally/basically a question of fact." (p. 245) 25. In the matter of Needle Industries (India) Ltd.'s case (supra), the hon'ble Supreme Court has issued a summary of its judgment for guidance. While considering what constitutes an act of oppression in extenso, the hon'ble Supreme Court held : "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" (page 780). The Supreme Court further held : "It is clear from these various decisions that on a true const....
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....ukla and Sanjay Shukla, the sons of the above referred Vishnuprasad Shukla. Thus, the appellant's holding was reduced to 25 per cent by his own action. However, the appellant's holding was further reduced to less than 10 per cent by an illegal act of the company and respondent No. 2 of increasing the authorised share capital of the company and of making clandestine allotment of additional shares to respondent No. 2 or the members of his family. In our opinion, reduction in the appellant's holding to less than 10 per cent by dubious acts of the company and respondent No. 2 is of no consequence. That would not dis-entitle the appellant from availing of the remedy under sections 397 and 398 of the Act. 29. It is true that the appellant and the members of his family did not remain present in three consecutive meetings of the board of directors of the company. Section 283 of the Act provides for vacation of office by directors. Clause (g) of sub-section (1) thereof refers to absence of a director from three consecutive meetings of the board of directors or from all the meetings of the board for a continuous period of three months, whichever is longer, without obtaining leave of absence....