TaxTMI 
TaxTMI 
2010 (7) TMI 815
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....m just and proper, (b) if necessary, a scheme of management be framed for running the management and administration of the company on such terms as the Company Law Board may deem just and proper, and (c) the board of directors of the company be reconstituted. The petitioners further sought declaration that the business conducted at and/or the proceedings of the meetings of the board of directors attended by respondent No. 3 are bad in law in view of the Department's Circular No. 14/51/62-PR and as such, the same cannot be acted upon and/or implemented. In addition to above reliefs, the petitioners prayed for (a) injunction restraining the respondents from issuing any shares or from increasing either the authorised or paid-up share capital of the company, (b) injunction restraining the respondents and each of them from dealing with or disposing of or alienating or encumbering or transferring any of the assets of the company in any manner whatsoever, and (c) permanent injunction restraining the respondents and each of them from expending any funds of the company in any manner whatsoever including for the purpose of contesting the present proceedings. The petitioners then prayed for d....
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....be appointed in his place; (4) The allotment of 1,409 shares in favour of respondent No. 2 (which were offered to and ought to have been accepted by the executors of the Will) be declared as void, in the alternative, the said 1,409 shares out of 1,712 shares standing in the name of respondent No. 2 be transferred to the executors of the Will and ultimately to the Maharana Mewar Institution Trust so as to maintain the original ratio of shareholding as at the time of death of H.L.H. Maharana Bhagwat Singh of Mewar; (5) It be declared that the present executors of the Will (respondent No. 2 and Shri A. Subramaniam) shall not be competent to represent the interest of the estate of H.L.H. Maharana Bhagwat Singh of Mewar in the company and a committee comprising of the trustees of the Maharana Mewar Institution Trust be constituted for the exercise of all rights in respect of the shares in the company transmitted to the said executors; (6) A new additional director be appointed in place of the resigning director, Mr. Ashwani Chaturvedi-as per nomination by all the trustees of Maharana Mewar Institution Trust (as was done in the case of Mr. Ashwani Chaturvedi also) so that the in....
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....bhadra Singhji, both residents of Dungarpur, are appointed as directors of Lake Shore Palace Hotels (P.) Ltd., with immediate effect. In case the or any of them do not/does not wish to act so, any of the parties may move this court for appointment of any other person as director/directors. (iv)Respondent No. 2 Arvind Singh is directed to repay the company all amounts spent by it in connection with his foreign tours, Bombay Flat (spent after April 1, 1988) and present litigation, with interest at 15 per cent per annum. The amounts of dividends payable to respondent No. 2 will not be paid to him till the aforesaid amounts with interest stand fully paid to the company, if not paid earlier." 6. Against the above judgment dated 23-11-1994, three D.B. Special Appeals Nos. 3 of 1995, 4 of 1995 and 5 of 1995 were preferred by Lake Shore Palace Hotel, Arvind Singh and by present appellant No. 1. Before the Division Bench, the parties decided to settle the matter amicably and a memorandum of understanding was entered into between petitioner No. 1 and respondent No. 2 and it was agreed that in place of two directors appointed by the learned single judge, Shri T. Narayan Unni be appointe....
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....pression. The contention of the petitioners is that as per the amicable settlement and looking to the nature of the company and its shareholders, and appellant No. 1 and respondent No. 2 are real sister and brother and in view of the amicable settlement, the percentage of shares held by the appellants-petitioners cannot be reduced nor respondent No. 1 can increase the shareholding and further allegation is that all of it is being managed by respondent No. 2 with collusion of respondent No. 3 who is one of the directors in the company though initially appointed with the consent of petitioner No. 1, appellant No. 1 but he then indulged in unethical and improper acts to favour respondent No. 2. 8. Then the appellants-petitioners in the company petition also submitted that respondent No. 2 under the guise of requirement of capital has once again embarked on a plan to increase his shareholding in the company and instead of making attempts or efforts to look for alternate sources of funds for the respondent-company, either by way of loans from banks and financial institutions or by way of unsecured borrowings, has adopted the mode of issuing shares on right basis as stated above. The ....
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.... board of directors to be held at Udaipur on 29-12-2004. According to the petitioner, she attended the board's meeting wherein she recorded her dissent on the proposed increase of the authorised share capital of the respondent-company from Rs. 50 lakhs to Rs. 50 crores. Then respondent No. 2 gave another notice dated 5-1-2005, wherein the agenda was to consider increase in the authorised share capital of the company from Rs. 50 lakhs to Rs. 50 crores by creation of 45,000 equity shares of Rs. 1,000 each, ranking pari passu with the existing equity shares and that clause (5) of the memorandum of association and articles of association of the company be altered accordingly. According to the petitioner, she also received a document purporting to be a valuation report prepared by respondent No. 3 T.N. Unni, which has been shown to have been prepared at the instance of petitioner No. 1, whereas petitioner No. 1 never asked respondent No. 3 T.N. Unni or any body else to prepare any valuation report. It is alleged that it was done with a view to create a false valuation report so that the same may be used to bargain the price of shares in the event of a buy out. Petitioner No. 1 immediate....
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....earlier round of litigation between the parties and considering the financial position of the company, it does require funds to carry out renovations. The Company Law Board rejected the allegations of the petitioners that the full project details for the investment to be made had not been disclosed and instead of projects, the one sheet project report reflects only renovation and that the estimates are overstated, etc., and held that the objections are mostly technical. The Company Law Board observed that it did not find either in the pleadings or during the arguments that the renovations proposed in the project report are unnecessary or unwarranted and in a hotel, upgradation of the facilities and also constant renovation is a standard practice. The Company Law Board from the accounts of the company found that there was an addition to the fixed assets of a sum of about Rs. 40 lakhs in 2002-03 and about Rs. 85 lakhs in the year 2003-04. Even after finding the need for the funds for the company genuine, the Company Law Board examined whether the company was justified in raising the funds and the only source was by way of issue of right shares and whether in terms of the agreement en....
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....nting reliefs or the relief as claimed by the petitioners in the company petition, gave four options to the petitioners with liberty to the petitioners to choose one of them out of four options. Then the Company Law Board held that any of the options chosen by the petitioners shall be binding on the company and the second respondent. The Company Law Board directed the petitioners to intimate the company, the second respondent, in writing by 10-1-2008, the option that they have chosen. In case, the petitioners elect the fourth option, the parties shall be at liberty to apply to the Board for deciding on the terms of payment. In case, the petitioners do not choose any of the options, the petition shall be deemed to have been dismissed and all interim orders shall also be deemed to have been vacated. The petition was disposed of in terms referred to above. 15. Following options are given to the petitioners : "(1) I had passed an interim order allowing the company to go ahead with the rights issue keeping the shares offered to the petitioner and the estate intact. It was pointed out by Shri Mookerjee that in terms of the said order, while the second respondent has subscribed to h....
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....James Fredrick v. Mrs. Minnie R. Fredrick [2000] 101 Comp. Cas. 294, the company will transfer 25.1 per cent of the shares held by it in Lake Palace Hotels as face value to the petitioners and the petitioners will surrender all their shares to the company at face value and cease to be members of the company and the company shall reduce its paid-up capital to this extent. Difference, if any, in the value of shares surrendered/transferred, the same shall be adjusted by payment in cash. The first petitioner shall cease to be a director of the company and there shall be no payment of Rs. 6 lakhs as hereto before. (4) The fourth option is parting of ways. The petitioners demanded that their shares should be valued on real estate price taking into consideration the assets of the company as also that of Lake Palace Hotel. The second respondent not only objected to the inclusion of the assets of the Lake Palace Hotel in the valuation, he also expressed his inability to mobilise funds to purchase the shares of the petitioners on a real estate price basis. Considering the fact that the company is a family company and that after a full round of litigation, the second round is going on and ....
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....ether a party which has been held to be guilty of oppressive and improper conduct can be permitted to enjoy the fruits of such oppressive and improper conduct and/or act. The said application was allowed by order dated 2-12-2008 and in this judgment the above issue will also be decided. 19. The appellants in Company Appeal No. 3 of 2008 submitted one application, i.e., S.B. Company Application No. 15707 of 2008 seeking order of rejection/dismissal of S.B. Company Appeal No. 1 of 2008 filed on behalf of the respondent-company and seeking directions against respondent No. 2 to provide the statement of account in respect of all expenses incurred by the respondent-company towards the cost of litigation before the Company Law Board during pendency of the company petition as well as before this court since the filing of the S.B. Company Appeals Nos. 1, 2, and 3 of 2008. The appellants further sought order of injunction against respondents Nos. 2 and 3 preventing respondents Nos. 2 and 3 from incurring any further expenses towards the cost of litigation in respect of company appeal. The said Application No. 15707 of 2008 was dismissed by this court vide order dated 2-12-2008. So far as....
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....onduct of respondent No. 3. It is submitted by learned counsel for the petitioners that respondent No. 3 being an auditor of the Lake Palace Hotels and Motels (P.) Ltd., in which respondent No. 1 company owns 49.5 per cent shares ought not to have agreed to and/or ought not to have continued as a director in respondent No. 1 company. Serious charges have been levelled against respondent No. 3 that he has compromised with the integrity/credibility of his role as a director of respondent No. 1 company during his tenure in his dual positions and capacities by accepting direct and indirect assignments from respondent No. 2. It has also been alleged that respondent No. 3 at the behest of respondent No. 2 prepared and sent a valuation report to appellant No. 1 with incorrect allegation that the same had been prepared at the instance of appellant No. 1 and that was done with an intention of creating a false valuation report to bargain with the price of the shares in the event of a buy out. It has been submitted that respondent No. 2 ought not to have prepared the valuation report because the said exercise of valuation of shares of respondent No. 1 company necessarily entailed the valuatio....
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.... between the parties in earlier round of litigation, respondent No. 2's shareholding reached 1,567 shares out of 3,027 shares whereas petitioner had 760 shares. 24. According to learned counsel for the petitioners, in view of the settlement referred to above, 145 shares were transferred by the respondent to the petitioner Smt. Yogeshwari Kumari and it was to ensure 25.1 per cent shareholding of the petitioner Yogeshwari Kumari. It has been alleged that in the year 1989, respondent No. 2 illegally created a majority by refusing to allot shares to the petitioner Yogeshwari Kumari according to her proportion. On the other hand, respondent No. 2 acting as executor of late Maharana's Will refused the shares offered to the Maharana Mewar Institution Trust and thereafter bought these shares in his individual capacity, thus further increased his proportion of shareholding. Learned counsel for the petitioner vehemently submitted that looking to the constitution of the company, it is clear that in fact the company is a family company and there are only two groups in the company and that too belonging to brother and sister. Learned counsel for the petitioner with the help of these facts su....
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....petitioner submitted that the petitioner has submitted an application, i.e., Company Application No. 11857 of 2008 seeking permission to withdraw her consent to the initial appointment of Shri T.N. Unni as director of the company before this court in view of the observations made by the Company Law Board. The petitioner also moved Company Application No. 11860 of 2008 praying for setting aside of the Board's resolution dated 31-3-2008, appointing Shri M.S. Kapoor as director of the company, as this appointment was made while appeal was pending and the appointment was made to ensure that respondent No. 2 continues on the board of the company in the eventuality of Shri T.N. Unni being removed. Learned counsel for the petitioner also submitted that the petitioner is entitled to order for recovery of all the cost spent by the company to contest the present litigation. 27. To oppose Company Appeals Nos. 1 of 2008 and 2 of 2008 preferred by Lake Shore Palace Hotels (P.) Ltd., and Arvind Singh Mewar respectively, it has been submitted by learned counsel for the petitioner that section 397 of the Companies Act, 1956, envisaged only one enquiry and not two separate enquiries and that one....
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....ra), whereby restrictive interpretation given in other judgments stands rejected by the courts in India. 29. Learned counsel for the petitioner, in support of his contention that even in case where rights of the members of the company were affected equally by the alleged unfair prejudicial conduct, the interest of some part of the members may be affected in a way that that was unfairly prejudicial to them and with the help of the above plea, submitted that asking the petitioner to invest substantial amount just to maintain her proportion of shareholding without any realistic possibility of return on investment whereas under the same rights issue, respondent No. 2 would have not only increased his shareholding but also control the company with all its attendant benefits, this act of the respondent is prejudicial to complaining member and is also unfair and oppressive. Therefore, the rights issue if it has the effect of being unfairly prejudicial to the party complaining of it, then the said rights issue would be oppressive. Learned counsel for the petitioner also tried to distinguish the judgments relied upon by learned counsel for the respondent which are : (1) Jaladhar Chakrabo....
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....cts and grounds to maintain the petition are in the petition. According to learned counsel for the respondents, before passing any order under section 397 of the Companies Act, 1956, it was the duty of the Company Law Board to record finding as required both under sub-clause (a) as well as sub-clause (b) of sub-section (2) of section 397 of the Act of 1956. It is submitted that it is mandatory requirement that the petitioner should prove his case that the company's affairs are in oppressive manner to any member or members and particularly in this case, oppressive to the petitioners and the petitioner is further required to prove that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up. It is submitted that section 397 is clear in its language and there cannot be any reason for not giving true meaning to the section particularly when there is no ambiguity or inconsistency in the language of section. In the present case, the petitioners miserably failed to prove that the facts have justified the making of wind....
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....issuing direction to the company to go ahead with issue of rights shares with directions that if the petitioners do not subscribe to the share to the extent of their entitlement, then those shares shall be kept intact and shall not be allotted to any one and the entire issue of rights shares shall be subject to final order on the petition. After the said interim order dated 4-5-2005, respondent No. 6 and Ms. Bhargvi Kumar Mewar, Ms. Padmaja Kumari Mewar and Shri Lakshya Raj Singh Mewar, the executor of the Will accepted 2,000 shares out of 6,938 shares offered to them and as such the company was able to raise a sum of Rs. 1,75,30,000 as equity by allotting 15,362 shares to the appellant, 49 shares to Ms. Bhagwati Kumari Mewar, 49 shares to Ms. Padmaja Kumari Mewar, 70 shares to Shri Lakshya Raj Singh Mewar and 2,000 shares to executor of the Will of his late Highness Maharana Bhagwat Singh Mewar. Learned counsel appearing for the respondent-company pointed out that on the basis of raising of such equity, the banks also lent a sum of Rs. 1,50,00,000 as loans to the company and the company was able to undertake urgently required renovation/modernisation of its hotel property. Therefo....
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....pany Law Board, giving option to the company petitioners, submitted that the Company Law Board had no basis to arrive at the payment of Rs. 5,00,00,000 to the petitioner for parting of shares when there was already a valuation report placed on record which was prepared at the instance of the petitioner herself and that too by one of the directors and wherein valuation of the petitioner's shares have been assessed to only Rs. 3,00,00,000 which too was not acceptable to the respondent-company, therefore, fixing of Rs. 5,00,00,000 for this purpose is absolutely arbitrary decision of the Company Law Board. It is also submitted that the Company Law Board has given four options to the petitioner to accept one of the proposals given by the Company Law Board so as to effect the interest of some persons who were not parties before the Company Law Board in the company petition. It is also submitted that if the company petitioner would exercise for first option, it would lead to the bank recalling of the loans as the same had been advanced on the basis of increase of the capital of the company. The Company Law Board also misinterpreted and misconstrued the order dated 22-10-1999, passed by th....
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....the respondents, drew this court's attention towards the pleadings as well as the reliefs claimed by the petitioners and submitted that the petitioners did not plead that funds sought to be raised by the respondent-company were not needed. The petitioner even did not plead since when the alleged financial mismanagement began which was a material and relevant fact because the petitioner signed the balance-sheets without any objection. Once the petitioner herself accepted that the petitioner had occasion to look and examine the financial affairs of the company and she herself put her signatures on the balance-sheet, she firstly had no right to assail the statement of financial activities of the company after admitting them to be correct and secondly, any allegation in relation to the earlier act of oppression which is complained in the earlier round of litigation, the petitioner cannot rely upon those facts to substantiate her allegation of any alleged oppressive act of the company or Arvind Singh Mewar. According to learned counsel Shri M.S. Singhvi, the Company Law Board should have dismissed the company petition on the ground of non-discloser of cause of action and for want of any....
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....osition. 44. Learned counsel Shri Vikas Balia supplemented the arguments on this point by stating that Shri T.N. Unni was co-auditor since 1973, therefore, every fact was in the knowledge of the petitioner herself about T.N. Unni and, therefore, the allegations against T.N. Unni, on the face of it, are only result of an afterthought. 45. I considered the submissions of learned counsel for the parties and perused the record and also gave thoughtful consideration to the judgments cited by learned counsel for the parties which includes the judgments rendered by the Company Law Board, the High Courts as well as by the hon'ble Supreme Court. 46. In the light of the arguments advanced by all counsel appearing for the company petitioners, or the respondents in the company petition and after going through the reasons given in the impugned order dated 2-3-2007, passed by the Company Law Board, this court is of the view that the ultimate directions as given by the Company Law Board cannot be sustained as it will not achieve the object for which the options were given to the petitioners to choose one out of the four options given by the Company Law Board. The reasons for challenge to....
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....nds to the company as observed in paragraph 28 of the impugned order but as stated above, the Company Law Board ignored the impact of taking loan by the company and gave no reason for permitting the petitioners to dictate her terms upon the company, of taking loan from the petitioner instead of generating funds to increase in share capital. 48. Option No. 2 given by the Company Law Board to the petitioner provides that the company will go ahead with the rights issue and respondent No. 2 is at liberty to acquire the shares unsubscribed and result of which would be reduction in the shareholding of the petitioner substantially, therefore, the company shall pay a sum of Rs. 20 lakhs per year (including Rs. 6 lakhs) with an increase of Rs. 1 lakh every three years thereafter. This amount will include the dividends, if any, declared by the company in future. The petitioners will continue to hold the shares that they currently hold and petitioner No. 1 will continue as a director as long as the said shares are held by the petitioners. The Company Law Board was of the view that this second option would be more or less in line with the agreement between the parties before the High Court ....
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....Hotels and Motels (P.) Ltd. The Company Law Board in option No. 3 noticed that the petitioners are mainly concerned with the shares held by the company in Lake Palace Hotels and Motels (P.) Ltd., which is one of the main assets of the company. The Company Law Board relying upon S. James Fredrick v. Mrs. Minne R. Fredrick [2000] 101 Comp. Cas. 294 6 (CLB - Chennai), declared that the company will transfer 25.1 per cent of the shares held by it in Lake Palace Hotel at face value to the petitioners and the petitioners will surrender all their shares to the company at face value and cease to be members of the company and the company shall reduce its paid-up capital to this extent. Difference, if any, in the value of shares surrendered/transferred, the same shall be adjusted by payment in cash. Then the first petitioner shall cease to be a director of the company and there shall be no payment of Rs. 6 lakhs which is paid to the petitioner in pursuance of the earlier settlement in the earlier round of litigation. The objection of the respondent-company to this offer is just and valid that firstly it will not be a parting of two family members and in fact this offer may result into a majo....
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....t to receive notice of meeting of the company and may not be entitled to exercise any right conferred by the membership in relation to meeting of the company, but nevertheless they are members in the company Lake Palace Hotels and Motels (P.) Ltd. 50. Be it as it may be. So far as option No. 3 is concerned, this option made the share value of the petitioner's shareholding in the company equal to the value of shares of the Lake Palace Hotels (P.) Ltd. There is no basis for this equalisation. The share value of the company is equal to the share value of share of equal number in Lake Palace Hotels (P.) Ltd., is not the case of the petitioner. The offer is prejudicial to the respondent-company and is absolutely arbitrary and cannot be justified. Further, even according to the facts stated in the company petition in paragraph 24 the Indian Hotels Ltd., had guaranteed a minimum revenue to the Lake Palace Hotels and Motels (P.) Ltd., whereas, admittedly, the respondent-company had no such assumed revenue. Be it as it may, there is no reason and basis for treating share of two companies equal in valuation. The petitioner's learned counsel informed and it is also mentioned in the Review ....
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....nd is going on and that future litigation can also not be ruled out, I am (Company Law Board) of the view that the petitioners should go out of the company for a reasonable consideration for their share. The Company Law Board observed that : "Purely on an equitable ground, I am fixing the price for their shares at Rs. 5 crores. Either the company or the second respondent, as his option, shall purchase the shares at this price. The first petitioner shall cease to be a director of the company effective from the date of surrender/transfer and on receipt of consideration and the petitioners shall not be entitled for Rs. 6 lakhs as hereto before. I make it abundantly clear that this amount of Rs. 5 crores is not based on any valuation but has been fixed on equitable consideration taking into consideration, the interests of both the sides". (p. 433) From the above reasons given by the Company Law Board in option No. 4, it is clear that the Company Law Board knowingly quantified the amount of Rs. 5 crores without any basis but on equitable consideration. How it is equitable, is not given out in the order impugned. The equities cannot be without any reason. The fair calculation of an....
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....ed in favour of the petitioner on 23-11-1994. Three appeals were preferred against the said judgment wherein dispute was resolved in terms of the settlement dated 25-8-1999 and S.B. Company Petition No. 1 of 1991 was withdrawn. Both the parties agreed that Shri T.N. Unni, chartered accountant be appointed as director of the company. The respondent, Arvind Singh Mewar would transfer 145 shares from his existing shareholding to Smt. Yogeshwari Kumari, petitioner, at face value but for that equal consideration be paid by said Smt. Yogeshwari Kumari. Both the petitioner Smt. Yogeshwari Kumari and the respondent, Arvind Singh Mewar were free to transfer their shares to their immediate children. It was agreed that the service of proprietary business concern of Smt. Yogeshwari Kumari which is equipped with expertise in the field of tourism and travel related business such services to the company would be engaged for the purpose of the company's business on a regular basis for a reasonable consideration. It is stated that for this, the company regularly paid Rs. 6 lakhs per annum to Smt. Yogeshwari Kumari. The petitioner Smt. Yogeshwari Kumari agreed in Company Petition No. 1 of 1991 with ....
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....ompany is attempting to increase the paid-up capital of the respondent-company from its existing paid-up capital of Rs. 30,27,000 to Rs. 3,30,27,000 by issuing 30,000 equity shares of Rs. 1,000 each. It is not in dispute that shares were offered to the existing shareholders on pro rata basis depending on their entitlement based on shareholding on relevant date. This triggered the dispute between the petitioner and the respondents and the petitioner in paragraph 24 levelled allegation of mismanagement in the affairs of the company by respondent No. 2 and alleged that the final accounts of the company for the year ended 31-3-2004, indicates that the company has spent substantial funds of real estate and thus even though it has made cash profits, has declared only 5 per cent dividend. It is alleged that despite spending significant amount on building of respondent No. 1 company, the company disclosed for the year ended 31-3-2004, that it has made profits before depreciation and thus is able to meet its cash flows. Therefore, before this company petition was filed, admittedly, the company came in position to give dividend, may be 5 per cent only, but that was the position when the comp....
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....titioner's group holding for Rs. 1 crore. Petitioner No. 1 refused to accept the offer stating that it was necessary that a valuation of the shares to be carried out first. Up to this, there cannot be any objection as respondent No. 2 offered to buy the shareholding by the petitioner's group and the petitioner's group was willing to sell their shareholding in the company to respondent No. 2. If the offer given by respondent No. 2 of Rs. 1 crore as consideration for the sale of the shareholding by the petitioner's group was not accepted by the petitioner then that was within their domain to not accept that offer. The petitioner connected this offer of respondent No. 2 to buy the shareholding of the petitioner's group and unwillingness of the petitioner to sell their shareholding for sum of Rs. 1 crore alleged that the respondent, therefore, evolved this mode of rights issue and respondent No. 2 pushed the petitioner to the corner so that either she may sell her group shareholding to the respondent at no price or may lose percentage of her group shareholding. At this juncture, it may be noticed that both learned counsels cited judgments referred to above as well as the decision of th....
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....mpany Law Board, as stated above, held that there is no financial mismanagement in the company, the company was in need of funds then the petitioner's allegation that rights issue is tinted out as decision to issue rights issue had other object than to raise funds for need of the company cannot be accepted. There is no assessment that the petitioner's share percentage, in any case, shall be maintained and, therefore, there was no corresponding obligation of the respondent to maintain the share percentage of petitioners in the company. Therefore, the finding of the Company Law Board that attempt to disturb the shareholding of the petitioner in the company without her consent could be an act of oppression is illegal. 57. The Company Law Board held that the company was in need of funds. The company's position, as noticed by the Company Law Board, is that there was an addition to the fixed assets of sum of about Rs. 40 lakhs in the year 2002-03 and about Rs. 85 lakhs in the year 2003-04. The contention of the respondent is that the petitioner could not declare dividend before 2004, was due to the fact that the tourism as a whole in the world and particularly in India suffered a jolt....
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....0 times of the face value of the shares. The Company Law Board then observed that even after such huge investment, the petitioners are not likely to get any return in the near future. The above observation of the Company Law Board that the petitioners are not likely to get any return in the near future, appears to be an assessment of the Company Law Board but not based on facts and by taking lightly the submission of the respondent that the respondents were also required to invest proportionately to maintain their percentage of the shareholding. Meaning thereby, if the petitioners are to invest 10 times of the face value of their share then respondent No. 2 was also required to invest to the same proportion, the proportion in which the petitioner was require to invest. The Company Law Board refused to accept the above proportion only on the ground that the investment by a majority shareholders is different from the investment from minority shareholders, as majority shareholders has advantage of controlling the company and thus being in a position to derive various attended benefits while the minority shareholders does not. The reasoning given by the Company Law Board, even on face ....
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....alued the shares held by the petitioner from various methods and as per P/E Ratio method, the value of the petitioner's shareholding came to Rs. 78 lakhs. On income capitalisation method, it was found to be Rs. 75 lakhs and on break up value, it was found to be Rs. 311 lakhs. The Company Law Board rightly held that the petitioner did not question the principles adopted for valuation. The allegation against the said Shri Unni is that he projected that the report has been prepared at the behest of petitioner No. 1, whereas that was not correct. The allegation in other way can be of a serious nature of creating evidence against the petitioner and in favour of respondent No. 2. As the seriousness and its consequences increases, the burden to prove becomes heavier upon the person levelling the allegation. The allegation levelled by the petitioner upon Shri T.N. Unni was of serious nature of professional misconduct and particularly in view of the fact that Shri Unni was also connected with another company, Lake Palace Hotels and Motels (P.) Ltd., and connected with the respondent-company for several years. Therefore, this serious allegation had two consequences, one action against said S....
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....is finding as well as looking to the totality of the facts of the case, this court is of the view that the petitioner was not entitled to relief against Shri T.N. Unni and more particularly the petitioner was not entitled to relief as claimed in the petition of declaration that respondent No. 3 is not a director of the company. There is substance in the submission of learned counsel for the respondent that for such relief there is no fact foundation in the entire company petition nor such declaration, as sought by the petitioner in the petition, could have been given by the Company Law Board and there is no prayer of the petitioner that respondent No. 3, Shri T.N. Unni be removed from the board of directors. 62. From the above discussions, it is clear that the petitioners miserably failed to make out any case under section 397 of the Companies Act, 1956. 63. Now the next question is, whether in this case, the petitioners could make out a case for any relief on the ground of equity and even if the petitioners failed to make out a case under section 397 still they are entitled to any relief under section 402 of the Companies Act, 1956. The petitioner's claim for relief under se....
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....ny is similar to the facts of various cases relied upon by the petitioner wherein for parting ways even companies were distributed in a manner so that a person who had no shares in a company, got the company itself out of the sister companies. It is also submitted that the petitioner is yet seeking a fair valuation of her shares and after valuation of her shares, the court may direct respondent No. 2 and/or the respondent-company to purchase the petitioner's group shares willingly or may be unwillingly, by the order of the court to give an end to all disputes. 64. The contentions of the respondents are that equitable relief also can be granted only when the company petition is found maintainable. From the facts of this case it is clear that the petitioner's company petition was not maintainable and the company petition was liable to be dismissed on the ground of non-discloser of cause of action. Further the petitioner is not entitled to equitable relief as the non-issue has been sought to be made an issue by the petitioner to get the premium for her shareholding because of her position, may be because of her being the sister of respondent No. 2 or may be because of the reason th....
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....ithout unnecessary fear of winding up and also interference by the shareholders on some minor disputes and differences. Reason may be that in the affairs of a company, decisions are taken by the shareholders and work is executed by the decisions of the board of directors. Looking to the large activities of any company there is always possibility of differences of opinions among not only the shareholders but may be between the shareholders and the management as well as it may be between the directors of the company. Every dispute in a company cannot be made a ground for winding up of the company and even if the ground for winding up is made out by the person complaining even then unless the court is satisfied that winding up is just and equitable and there is no other way than to wind up the company and further that winding up of the company wound not be prejudicial to the member complaining then only an order of winding up of the company can be passed. If a case for winding up of a company is made out but the court is of the opinion that the winding up of the company will unfairly prejudice such member or members then the court can pass appropriate order but not of winding up of th....
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....e dispute, the company could not have incurred and paid for the cost of litigation from the beginning to the cost of appeal as none of the interest of the company was involved in defending the company petition or appeal preferred by the petitioner nor there was any reason for the company to challenge the order of the Company Law Board. Learned counsel for the petitioner also submitted that earlier the court passed the order praying the director of the company to pay the cost and in other cases where it was found in case where there was no reason for the company to indulge in the litigation then the cost be recovered from the director. 67. In the facts of the case, I do not find any reason to hold that the company, whose shareholding in other companies could have affected and the company in its wisdom found that the company should contest the appeal wherein the petitioner was under an obligation to implead the company as party in the company petition and appeal then the company should not have put forward its own case before the court. The act of the company cannot be condemned to the extent of holding that the company committed wrong and for that wrong the other director and res....