TaxTMI 
TaxTMI 
2011 (6) TMI 666
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....e questions of law which can be formulated are as under :- A. Section 111A is the only provision that talks of free transferability of shares. In view of section 111A read with section 111(14), the provisions of section 111A do not apply to a private company which had become a public company by virtue of section 43A. Accordingly, section 111A is not applicable to the present company; B. The 2000 amendment states that section 43A will not apply "on and after" its introduction. Therefore, companies that had acquired such status would continue to retain such status." C. Alternatively and assuming that the 2000 amendment is construed as a "repeal" of section 43A under section 6 of the General Clauses Act such repeal would not disturb GCL's status." 2. The questions of law that arise and which are enumerated herein above are not exhaustive. In the circumstances, company appeal is admitted." 3. Although this Court has in the order of 28-6-2010 observed that these questions of law are not exhaustive, yet, the arguments of the Senior Counsel appearing for parties revolve around these questions. I am of the opinion, therefore, that the questions as framed suffice for determin....
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....e control 8115 shares aggregating to approximately 13 per cent of the issued, subscribed and paid up share capital. The Kavasmaneck family accordingly holds and or otherwise controls 18,631 equity shares aggregating to 30 per cent approximately of the issued, subscribed and paid up share capital. In addition to the Kavasmaneck family, there is also a Rebello family that holds and or otherwise controls 2640 equity shares aggregating to 4 per cent approximately of the issued, subscribed and paid up share capital of GCL. 7. The first respondent is a closely held family company which was incorporated as a private limited company under the Companies Act, 1956. The first respondent is a family run enterprise whose continued existence has been based on mutual trust and faith amongst the Kavasmaneck/Gharda families. The second respondent is the first appellant's brother. He is the Chairman and Managing Director of first respondent company. Respondent No. 3 is second respondent's wife and a Director of first respondent. The third respondent however, does not discharge any functions as Director of the first respondent and is appointed as a Director only because she is second respondent's ....
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....ally all his savings as mentioned in the petition. 10. In or about April 1962, the second respondent, late Grand mother of second appellant (Bai Ratanbai Gharda), husband of first appellant and father of second appellant (Rutton Kavasmaneck) and late Mrs. Coomi Warden (maternal aunt of second appellant) entered into a partnership dated 28-4-1962 called M/s. Gharda Chemical Industries. The deed of partnership dated 28-4-1962 shows that the total capital contribution from the partners was Rs. 2,50,000 out of which Rs. 1,00,000 (40 per cent) was contributed by the late Rutton Kavasmaneck, Rs. 50,000 (20 per cent) by the late Bai Ratanbai Gharda and Rs. 50,000 (20 per cent) by late Mrs. Coomi Warden. The only financial contribution of the second respondent was Rs. 50,000 i.e., 20 per cent of the total contribution. As far as the appellants are aware, the second respondent was not even in a position to fulfil his financial contribution. In fact the second respondent was unable even to raise the "pennies" initially. Against his capital contribution of 20 per cent, the second respondent was to receive 40 per cent of the profits and/or losses while the remaining 60 per cent was divided ....
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....tract for supply of a vital product known as G-11 used by Godrej Soaps Limited for their prestigious product Cinthol soaps. The appellants understand that the second respondent requested for financial support/assistance of an amount of Rs. 50,000 from Dr. Rebello. The second respondent persuaded Dr. Rebello to break his family investment and guaranteed far better returns. To the end and intent, the second respondent, inter alia, agreed to grant to the Rebello family an option not to accept prepayment of the loan but to invest maximum of Rs. 20,000 in a limited company that would be formed on conversion of the said firm of M/s. Gharda Chemicals Industries. 13. With the profits of the firm of M/s. Gharda Chemicals Industries subsequently escalating, the second respondent reneged from his commitment viz-a-viz the Rebello family. Appellants were informed that the second respondent attended Dr. Rebello's residence without any prior intimation and left a cheque for an amount of Rs. 51,500 on a sofa. Dr. Rebello however refused to accept the said cheque as he desired to take a share in the limited company as per the agreement with Dr. Gharda. The Rebello family who had a right to acqui....
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....- (a)Shri K.H. Gharda (b)Shri R.M. Kavasmaneck Who are also the subscribers of the Memorandum of Association of the company; and they shall not be subject to retirement by rotation. 147. Save as otherwise expressly provided in the Act, questions arising at any time in the meeting of the Board shall be decided by a majority of votes. In case of an equity of votes the Chairman of the Board shall have a second or casting vote." 16. It is therefore, alleged that the company is a private limited company and accordingly the provisions of Companies Act and the Articles of Association are hence referred to. It is then alleged that despite formation of the company all business of partnership being taken over by the said GCL, the character and business was always treated as if it is partnership between Kavasmaneck family and second respondent's family being the dominant partners having substantial stake in GCL. To that end and intent it was also a family understanding between dominant partners that their inter se proportionate shareholding in the first respondent company should not be altered without consent of the other groups and should any group decide to sell their shares ....
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....use the names of the members who have purchased the shares to be entered in the Register as the holders of such shares and thereafter the validity of the proceedings shall not be questioned by any person; (f)In case no member shall apply for any of the shares included in the transfer notice or in case any are untaken after compliance with the foregoing provisions of this Article the intending transferor shall have the right (which right shall endure for the period of one year from the date of transfer notice) to sell and dispose of his shares to any person and at any price and to apply for registration of the transfer of the same and the company shall be bound to give effect to the transfer of such shares accordingly. (g)For the purpose of this clause the fair value of the share shall be such sum, if any, as the auditors for the time being of the Company shall certify as the fair value thereof provided that it expressly declared that the fair value shall be (1) the amount of capital paid up thereon plus (2) a sum bearing the same proportion to the value as appearing in the company's last balance sheet of any reserve fund or other fund of the company as the capital paid up on ....
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....eeting (EOGM) to appoint additional Directors on the board of first respondent. He along with his nominees first issued a requisition notice dated 20-6-1975 and then as one of the requisitionist, he issued a Notice dated 6-8-1975 convening an EOGM on 4-9-1975. This being the last straw, the late Ratton Kavasmaneck became constrained to institute a suit in the City Civil Court being Short Cause Suit No. 6360 of 1975, inter alia, against the respondent Nos. 1 to 3. In the said suit, the late Rutton Kavasmaneck sought a declaration that the purported Notice dated 6-8-1975 was void, illegal and of no effect and that the first respondent and the second and third respondents were not entitled to hold the said EOGM of the first respondent or to pass any resolution as mentioned in the said notice and for injunction, ad interim reliefs etc. On the institution of the above suit, an application for ad interim reliefs was made and an ad interim order was passed on 3-9-1975. On the passing of the said ad interim order, a close relative, both of the second respondent and Kavasmaneck family who was also a Solicitor and shareholder of the first respondent company, intervened in the matter and on t....
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....then Company Secretary of the first respondent. The said transfer forms itself would show that they had been so dated as to fit in the larger scheme of the second respondent without the knowledge of the Kavasmaneck family. Two of the forms also have the date of the form corrected from another date. It appears that the said blank transfer forms were filled in after the transfer, inasmuch as, in the form pertaining to the transfer of 25 shares of the first appellant, the entry in the form shows the entry number in the register of transfers as No. 5 and dated 4-8-1977 though in the case of transfer of the 2nd appellant's 155 shares, all the entries in the forms are shown as entered in the register of transfers as No. 6 and dated 30-7-1977. An entry purportedly earlier in point of time has a subsequent number than the purported subsequent entry. 22. After setting out the details of the transfer in paras 6.17 to 6.20, it is alleged that the appellants were wrongfully and illegally deprived of their bonus shares as subsequently discovered. It is also alleged that after demise of Rutton Kavasmaneck on 6-2-1977, instead of any member of the said family being taken on board of directors ....
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....principles and on the basis of funds got in by the family, the family members/shareholders shares in the business and profits of the company by substantial amounts ranging from 20 per cent to 45 per cent of the net profits of the company being distributed to the family members/partners/shareholders as and by way of dividend as only Dr. Gharda received remuneration/commission. Such distribution of profits by way of dividend was the only manner in which the other partners who had contributed funds could receive benefits/returns. To that intent, profits were further distributed to the partners/shareholders by way of bonus issues of capital by the company in the ratio mentioned in petition. 25. During 1982 to 1987 the first respondent however continued to duly distribute profits/benefits to the partners/shareholders in accordance with partnership principles. Except for 1982 and 1983 when the first respondent made only marginal profits, the first respondent distributed substantial proportions of its net profits ranging from 7 per cent to 30 per cent to the partners/shareholders. In fact, in 1986 and 1987 the first respondent declared dividends amounting to 27.91 per cent and 29.76 pe....
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....book value of the shares consequently increased from Rs. 1787 to Rs. 4382 per share. This resulted in a steep increase in the wealth tax liability and the dividend received by the appellants was not even sufficient to meet the wealth tax liability on the shares. The amount distributed by way of dividend to all the partners/shareholders was Rs. 19.35 lakhs. As against that first respondent invested Rs. 634 lakhs on units of UTI, received Rs. 79.72 lakhs as and by way of donation. In fact in some years the amount paid by the first respondent/Dr. Gharda by way of donation has exceeded the amount distributed/paid to the partners/shareholders by way of dividends. Between the period 1-4-1988 and 31-3-1992, the wealth tax payable by appellant No. 2 alone for his shareholding in the 1st respondent aggregated to Rs. 13,89,376. However, the dividend received by appellant No. 2 in respect of the said shareholding was only Rs. 4,34,000 for the same period. 28. During the period 1989-90 whilst commencing the unfair dividend squeeze policy, Dr. Gharda and the first respondent despite being fully aware that the appellants and their family members were the only heirs of the late R.M.Kavasmaneck....
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.... in the context of the scheduled EGM where respondent No. 2 was proposing to make far reaching changes which would be destructive of the appellant's right of preemption. The appellant No. 2 pointed out that Dr.Gharda was apparently seeking to oust the appellants although the first respondent was a closely held family concern. The appellant No. 2 called on Dr. Gharda to defer the EGM and threatened action. Thereafter, on 6-2-1990 Dr. Gharda and the Company Secretary of first respondent agreed to transmit the shares on receipt of the certificates and on the appellants agreeing to send an indemnity bond subsequently. By its letter dated 9-2-1990 the first respondent forwarded the said shares duly transmitted. 29. After narrating the events of 1989-90 leading up to filing of company petition No. 77 of 1990 in this Court invoking sections 397 and 398 of the Companies Act and referring to the reliefs claimed therein, what has been alleged is that after the petition was filed, the oppressive attempts of second respondent continued and each of these attempts are narrated from para 6.4 onwards and under heading Item No. I etc. During the course of referring to attempts there is a detaile....
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....o squeeze out the appellants in any manner possible so as to force and/or compel the minority shareholders to sell their shares to the 2nd respondent at a very negligible value and to oust them from the first respondent. The second respondent being at the helm of the control and management of the affairs of the first respondent is only ensuring that he gains and enjoys the benefits which other shareholders cannot and which he would receive having regard to his status and position as the Managing Director of the first respondent through excessive remuneration, increased commission and grant of huge donations to Trusts/ entities owned/controlled by the second respondent and his wife. For the year ended March 2004, the second respondent also siphoned a huge amount of approximately Rs. 4 crores in the guise of alleged compensation for alternative accommodation. Further it is alleged that in or around August 2004, the second appellant received a notice dated 27-7-2004 by which the first respondent convened the 38th Annual General Meeting of the first respondent on 4-9-2004. By the said notice it was inter alia, proposed to empower the first respondent to give donation of an amount aggre....
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.... letter dated 7-9-2004, the first respondent replied to the second appellant's letter dated 26-8-2004 in an attempt to reply to the various queries contained in the second appellant's letter dated 26-8-2004. This letter further demonstrates that first and/or second respondents' intention was to keep the appellants in dark and deny them any information. 36. The second appellant also addressed a letter dated 30-8-2004 to the second respondent. By the said letter it was pointed out by the second appellant that notwithstanding the encouraging performance of the first respondent, the company at the behest of second respondent was continuing with its policy of unfairly and/or inadequate distribution of its wealth especially to the minority shareholders. It was pointed out that whilst the minority is deprived from sharing the profits through dividend, the majority shareholders who were controlling the first respondent sought to take away huge and disproportionate sums of money in the form of remuneration, perquisites, commission and charity to institutions owned and/or controlled by themselves. By the said letter, the second appellant further suggested to the second respondent that if ....
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.... recorded that the same was clearly reflective of the discriminate policy of the majority shareholders and in particular the second respondent of self aggrandizement at the cost of minority shareholders and the company. It was further pointed out that this self aggrandizement constituted to a further act of oppression. By its letter dated 7-9-2004 the first respondent declined to furnish copies of the minutes of the said Board meeting on the ground that shareholders are not entitled to the same. 39. It is stated that the decision to enhance payment of commission to the second respondent is retrospective inasmuch as the first respondent has in its letter dated 7-9-2004 clarified that the remuneration paid to the second respondent for the year ended March 2004 is Rs. 410 lakhs comprising of commission of Rs. 398 lakhs @ 4 per cent of the net profits for the said year. The aforesaid figures demonstrate that the total amount paid by the first respondent to the second respondent towards remuneration excluding perquisites but including commission is Rs. 410 lakhs whilst the total dividend paid to all the share holders including the second respondent is Rs. 193 lakhs. Out of the said a....
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....o family purportedly under Article 59(c) of the Articles of Association of the first respondent. By the said notice, the first respondent sought to contend that the appellants, inter alia, had been found to be working and or doing activities against the interest of the first respondent and accordingly the appellants were called upon to serve a Transfer Notice under Article 57 of the Articles of Association of the first respondent. One of the reasons cited by the first respondent as an act against the interest of the first respondent was quoted as under:- "You have attempted to induct persons in allied fields knowing that the research of the company is a precious and invaluable asset and the involvement of outsiders/persons from associated fields will affect the confidentiality and value of the company's research and adversely affect the company." 42. In the meanwhile, on 17-3-2005, the first/ second respondents filed Suit No. 1170 of 2005 in this Court, inter alia, against the appellants invoking the said Article 59(c) of the first respondent's Articles of Association. By the said suit, the first/second respondents have sought a direction that the appellants should be directe....
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....nter alia, on the ground that:- "paragraph 10.4 Ground (d) of letter dated 10th March, 2005 of GCL .... you Godrej Industries Ltd. Being engaged in the allied field of activity, such application for splitting the share certificates of GCL to thereafter get these shares transferred to its name in the circumstances would be prejudicial to the economic interest and the well being of GCL .... With reference to para 10.4 of the said petition, I reiterate all that is stated hereinabove and deny all that is contrary thereto and inconsistent therewith in the said para 10.4. I submit that the Godrej Group of companies is into allied business." 45. It is further stated that by an order dated 31-7-2008, the CLB has dismissed the petition filed by Godrej Industries Ltd. Against the aforesaid dismissal, the said Godrej Industries Ltd., have preferred an appeal in this Court under section 10F of the Companies Act, 1956. The aforesaid appeal is admitted and pending. 46. The appellants along with their supporters were diligently pursuing the said company petition. However the continued litigation of over a decade and a half had already taken its toll on the appellants, particularly, the f....
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....ndent agreed to withdraw from the company petition. Accordingly, the appellants made statement before this Court that they were not interested in prosecuting the company petition No. 77 of 1990 and requested for withdrawal from the same. The said request was accepted by this Court. After withdrawing from company petition the relationship between the appellants and second respondent started improving. The appellants and the second respondent who were earlier litigating with one another started socialising and meeting often with the second respondent inviting the appellants and particularly appellant No. 2 to his office. The second respondent also as assured declared a dividend of Rs. 400 for the year ended March 2005 and March 2006. 50. It is further stated that sometime in the year 2007 at a meeting held between the second respondent and second appellant, the second respondent confided in the second appellant that for the year ended March 2007 it may not be possible to declare any dividend as the performance of the first respondent company was not satisfactory. The second respondent at this juncture stated that this would work unfairly on the minority shareholders whose only mea....
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....he second appellant in the affairs of the 1st respondent. 53. It is also stated that the second respondent informed second appellant that in so far as the 1st respondent's factory at Dombivali was concerned, it had constructed in excess of the construction permissible under the MIDC Rules. The second respondent informed the second appellant that he wanted to involve the second appellant in the aforesaid matter and for that purpose the second appellant could not represent the 1st respondent, interact with the 1st respondent's staff and also interact with the 1st respondent's lawyers. 54. It is further stated that, accordingly, the second appellant started visiting the office of the 1st respondent. At the request of the second respondent, one Mr. V. Satheesh of the 1st respondent addressed an email dated 20-6-2008 to the second appellant giving out details of the factory and built up area, the excess construction etc. By the said email the 1st respondent also furnished details of the available plots around the premises of the 1st respondent. 55. It is transpired that the 1st respondent had entered into an MOU with one Mulgaonkar Engineering Works and Forgings Pvt. Ltd. It is....
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....equested the second respondent that in all fairness they shall abide by his assurance of declaring a dividend of Rs. 500 per share. It is stated that there is no reply to the said letter dated 10-11-2008. 62. It stated that by a further letter dated 24-11-2008 the second appellant informed the second respondent that he and the said Dr. Rebello would be unable to attend the proposed AGM. There were a few questions on the accounts which, the second appellant requested the second respondent to answer. The second appellant also informed the second respondent that he would meet the second respondent latter in the day and if convenient to the second respondent have lunch with him as usual. 63. The second appellant thereafter met the second respondent on several occasions and reminded the second respondent of having failed to declare the assured dividend of at Rs. 500 per share. The second respondent ultimately assured the second appellant that on or before 21-3-2009, which was the prospective New Year, the second respondent would declare interim dividend of at least Rs. 250 per share. It is stated that second appellant by his letter dated 2-3-2008 recorded some of the aforesaid fac....
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....ty investor who would ultimately sell the company to another competitor of the 1st respondent. 67. It is also stated that after publication of the aforesaid news reports, the second respondent has turned a complete blind eye to the appellants. The second appellant has made several attempts to contact the second respondent to seek a dialogue with him, but the appellants efforts have been unsuccessful. The intentions of the second respondent became quite clear, when the appellants (who believed to have improved their relation with the second respondent) were not even invited for the 80th birthday celebration of the second respondent on 26-9-2009. 68. It is stated that report of the second respondent selling his share privately have also appeared in Business India December 2009 Edition. The appellants now understand that the second respondent is at a very advanced stage of divesting his shareholding in the 1st respondent contrary to the agreements with the Kavasmaneck family, contrary to the assurances made to the appellants and contrary to the Articles of the 1st respondent and in breach of the preemptive rights of the appellants. 69. On these allegations that the aforementi....
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....s of respondent No. 1 are also made on the basis of the fact that it is a public company. Respondent No. 1 has more than 50 members. Respondent No. 1 has more than three directors as mandated by the said Act. Respondent No. 1 has accepted deposits in the form of fixed deposits from public and hence cannot be a private limited company. The appointment of the Managing Director of respondent No. 2 was after following the provisions of section 269 of the Act as applicable to public limited companies. The approval of the Central Government has also been sought and obtained. Such approvals are not required for private limited companies. The appointment of the directors of respondent No. 1 has also been in consonance with section 257 of the said Act, which is not applicable to private companies. It is pertinent to note that even appellant No. 2 has followed the provisions of section 257 of the said Act whilst nominating himself for being appointed as a director of respondent No. 1 on several occasions since the year 2001. The Board of Directors of respondent No. 1 comprises of well reputed independent directors like Mrs. Almitra Patel who is a member of the Supreme Court committee for Sol....
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....er and in any event, it was submitted that as a result of transfers applied for by appellant No. 2, the strength of members of respondent No. 1 has increased to 54, which is inconsistent with respondent No. 1 being a private limited company." 72. Thereafter, it is alleged that there is no cause of action for filing the petition. How the petition is barred by virtue of Order XXIII Rule 1 of C.P.C., read with Rule 88(2) of Company Court Rules, 1959 and principles outlined thereunder is mentioned. Thereafter it is stated that the petition is barred by res judicata. In any event, therefore, it is argued that the petition should be dismissed because there is suppression of material facts. The Appellants are, therefore, not entitled to any relief. Their conduct has been highlighted and then it is stated thus:- "(a)On 13th February, 1990 the appellants along with five others (Kavasmaneck/ Rebello group) had instituted in this Court Company petition No. 77 of 1990 inter alleging oppression and mismanagement citing, inter alia, the following instances as acts of oppression and mismanagement which are identical to those set out in the present petition and on the following grounds:- ....
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....ons including instances of alleged oppression and mismanagement raised in the present petition. (c)I say that the present petitioners, especially petitioner No. 2 herein has/have contested the petition and have filed several company applications starting with Company Application No. 41 of 1990 and the last being Company Application No. 403 of 2005. By the last Company Application taken out on 18th March, 2005, the petitioners inter alia sought to further amend the petition further to incorporate the following issues which also find mention in the present petition:- (i)Status of the said Company (ii)Dividend issue (iii)Donations (iv)Remuneration of respondent No. 2 (v)Tenancy Compensation (d)I say that respondent No. 1 has filed an affidavit in reply of Mr. J.P. Somaiya, erstwhile Director of Respondent No. 1 dated 13th July, 2005 to the last amendment application filed by petitioner No. 2. Petitioner No. 2 has also filed a rejoinder dated 3rd August, 2005 thereto. I crave leave to refer to and rely upon the said amendment application and the various affidavits filed therein. It is pertinent to note that the Hon'ble High Court, Bombay vide its order dated 16th J....
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....for hearing on 14th July, 2005. I crave leave to refer to the said amendment application when produced. (k)In the affidavit of Mr. J.P. Somaniya dated 13th July, 2005 filed on behalf of respondent No. 1 it disclosed the contemptuous conduct of the petitioners, inter alia, setting out the contents of the said MOU dated 3rd June, 1992 and the fact that the same had been suppressed from respondent No. 1 and had infact used the said earlier company petition as a subterfuge and to acquire shares for and on behalf of Godrej. Petitioner No. 2 in his affidavit in rejoinder dated 3rd August, 2005 categorically stated "The amendment in paragraph 1 only seeks to correctly describe the status of respondent No. 1 and nothing more." I crave leave to refer to the said affidavit when produced. (l)By its order dated 4th August, 2005 the Hon'ble Bombay High Court, inter alia, directed the parties to file replies if any on or before 25th August, 2005 and adjourned the matter to be listed on 8th September, 2005 for final hearing. I crave leave to refer to and reply upon the said order when produced. (m)Unknown to the respondents, Godrej filed an affidavit dated 1st September, 2005 in reply to....
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.... 75. It is on this material that the company petition was placed before CLB and heard accordingly. The CLB firstly held that the first respondent is a public company. Once it is held to be a public company, then, its shares are freely transferable and the issue was to whether any pre-emption clause/article restraining transferability of shares in public company is valid. The Board held that the Article 57 does contain such restriction but, the Board relying upon a judgment of this Court in the case of Western Maharashtra Development Corpn. Ltd. v. Bajaj Auto Ltd. [2010] 154 Comp. Cas. 593/ 102 SCL 239 (Bom.) held that such an clause in the Articles of Association will not be applicable to 1st respondent company. Once it is held to be a public company, its shares are freely transferable and the Articles would not hold good as they are contrary to the statute. Holding that violation of such an clause in the Articles is not an act of oppression, the petition came to be dismissed. 76. These conclusions are assailed in the instant appeal by the original petitioners-appellants. 77. Mr. Samdani, learned counsel appearing for appellants submits that the impugned order is illegal and ....
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....ng a right of pre-emption will also amount to oppression and will be actionable. What cannot be done directly cannot be permitted to be done indirectly. The right of pre-emption is a vested right of a shareholder and cannot be taken away or cancelled without his consent. The power to amend articles cannot be used to oppress the minority and or take away their vested rights. 82. Further it is submitted by Mr. Samdani that the notice and explanatory statement dated 16-10-2010 are misleading and are not in conformity with section 173 of the Companies Act, 1956. The material facts of (i) the pendency of the Appeal No. 24 of 2010, (ii) the said appeal having been admitted, (iii) this Court having granted an injunction not to violate Article 57, (iv) the questions formulated have all been omitted-giving a totally misleading picture. It is further stated that compliance of section 173 is mandatory. A meeting convened on the basis of a notice which is not compliant with section 173 will be bad in law and so will the resolutions passed thereat. 83. He submits that the questions of law, therefore, as framed arise for determination and they can be broadly indicated thus : (a)Whether ....
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....tances, the finding recorded is vitiated by non-application of mind. The conclusion that there cannot be any reversal of Status from public limited to private limited company and, therefore, Article 57 must yield and give way to section 111A of the Companies Act is not accurate, because assuming that if GCL is a public limited company it is a unlisted public company. The shares are not listed on the stock exchange. Such a company can always have a right of preemption. Upon this vital issue and question, no finding is rendered by the Board. There is no finding on question of oppression as well. Mr. Samdani submits that it is also to be borne in mind that the dispute is between family members. The principles of partnership apply to a family concern/company. It cannot also be forgotten that initial partnership and later on becoming a company is only an arrangement to take over business of partners. The initial partners are appointed as Founder Directors. Mr. Samdani submits that ground of oppression and mismanagement of minority and the background for filing the petition cannot be lost sight of by this Court. Mr. Samdani then contended that section 43A of the Companies Act, 1956 shoul....
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....al Spg. & Mfrg. Co. (188) Cal. App. 2d 728; 15.Bechtold et al v. Coleman Realty Co. et al 367 Pa. 208, 79 A.2d 661; 16.Maltida P. Cowles v. Cowles Realty Co. 201 A.D. 460 194 N.Y.S. 546 17.Bajaj Auto Ltd.'s case (supra); 18.Messer Holdings Ltd. v. Shyam Madanmohan Ruia [2010] 98 CLA 325/ 104 SCL 293 /7 taxmann.com 57; 19.Smt. Nirmala v. Hari Singh AIR 2001 HP 1 20.Albert Judah Judah v. Rampada Gupta AIR 1959 Cal. 715/[1960] 30 Comp. Cas. 582 (Cal.); 21.Abdul Majid Kha v. Mahmudabi AIR (36) 1949 Nagpur 366; 22.N.R. Narayan Swamy v. B. Francis Jagan AIR 2001 SC 2469; 23.Satrucharla Vijaya Rama Raju v. Nimmaka Jaya Raju [2006] 1 SCC 212; 24.Tata Memorial Hospital v. Ayub Mohamed Ishaq Sheikh [2007] AIHC 899 (Bom.); 25.M.S.D.C. Radharamanan v. M.S.D. Chandrasekhara Raja [2008] 83 SCL 451 (SC); 85. On the other hand, Mr. V.A. Bobde, learned Senior Counsel appearing on behalf of respondent No. 2 submits that the company petition filed before the Company Law Board alleged breach of pre-emptive rights, adoption of unfair dividend squeezing and respondent No. 2 unjustly enriching himself. He submits that first two grounds relate to oppression and third is....
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....hat issue now cannot be raised and agitated by the appellants. Mr. Bobde invites my attention to the findings of the learned Single Judge in the order dated 14-11-2008. 87. Mr. Bobde then submits that the main issue is about free transferability of shares. That issue, for being answered must necessarily require a finding and conclusion as to what is the Status of GCL i.e., Respondent No. 1. Mr. Bobde submits that this Court has held that as a result of special resolution moved in EOGM dated 5-5-2001 having been defeated, GCL has become a public limited company. Once it acquires that status the restriction on the right of transfer of shares applicable to a private limited company would not apply and it would be open to the present appellants to sell the shares to any outsider as per the price finalised with them inter se. Mr. Bobde submits that the effect of the judgment in the company petition must be considered. However, he submits that respondent No. 2 is not running away from answering this issue and core question. 88. In this behalf, Mr. Bobde submits that the two events of vital importance occurred in 2001 which, taken even singly, made the company cease to be a private ....
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....ame 54. Section 3(1)(iii)( b) requires that a private company cannot have more than 50 members. Hence, on 31-12-2001, yet another requirement of the law for being a private company disappeared. 91. He further submitted that in the light of the above indisputable factual and legal position that the company was no more a private company which became a deemed public company under section 43A, after 13-12-2000 and this position being reinforced and made permanent from 5-5-2001 when the resolution to make the company a private company was defeated, sections 3(1)(iv) and 111A(2) have operated with full force and made the shares of the respondent No. 1 public company freely transferable. 92. It is stated that the Companies Act, 1956 contemplates only two kinds of companies : 'public company' and 'private company'. If the company satisfies the requirements of section 3(1)(iii) it is a private company. If not, it is a public company by virtue of section 3(1)(iv)(a ) and if it satisfies also the requirements of section 3(1)(iv)(b ) and (c). 93. Further it is submitted that section 43, under the heading "Private Companies" (which has only three sections viz., sections 43, 43A and 44)....
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.... 97. It is submitted that by the amendment of 2000, with effect from 13-12-2000, sub-section (2A) was inserted alongwith sub-section (11), sub-section 2A contemplates if such a public company 'becomes a private company on or after the commencement of the Companies (Amendment) Act, 2000, the company shall inform the Registrar and he shall substitute the words 'private company' for the words 'public company'. Sub-section (11) made inapplicable the entirety of section 43A except sub-section (2A) 'on and after the commencement of the Companies (Amendment) Act, 2000'. Thus, the third 'hybrid' category of deemed public companies under section 43A ceased to exist after 13-12-2000. Sub-section (2A) was retained to allow the public companies to revert to being private companies. This is because a new requirement was added in 2000 for being a private company : clause (d) was added to section 3(1)(iii). From 13-12-2000, the position was restored to only two legally recognized categories of companies under section 3(iii) and 3(iv) i.e., private company and public company. 98. It is further submitted that the most important addition to section 3(1)(iii) was made by the amendment of 2000 by ....
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....l appearing for respondent No. 3 while adopting the submissions of Mr. Bobde, learned Senior Counsel, relied upon the Security Contracts Regulation Act, 1956 and omission of section 22A therefrom. He submits that the appellants should not be permitted to canvass the abovenoted submissions because the appellants have not advanced any argument on mismanagement except to urge that respondent No. 2 allegedly unjustly enriched himself. He submits that there is no act of oppression inasmuch as reliance is placed on newspaper reports and that cannot be termed as proof of act of oppression. He submits that the petition has been filed only to advance the cause of M/s. Godrej Ltd., and not that of the original petitioners - appellants. There is suppression of material facts by the appellants. There appeal, therefore, should be dismissed. Mr. Subramaniam has also invited my attention to certain provisions of the Transfer of Property Act and the Sale of Goods Act to submit that shares are freely transferable and Article in question has no applicability to respondent No. 1. For all these reasons, the appeal may be dismissed. 102. Mr. Sen appearing on behalf of respondent Nos. 1, 4 and 5 adop....
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....dent. Thus, the thrust of the submissions of the appellants is that the company incorporated as private company, if, by fiction of law is treated as public company it does not lose its character/fabric of a private company. In such circumstances the right of preemption provided by the Articles of Association of the 1st respondent would continue to hold the field. Once it continues to hold the field and there is no free transferability of shares of the 1st respondent, then, the attempt to defeat the pre-emptive rights by issuing notice dated 16-10-2010 cannot be countenanced in law. Therefore, such an Act should be construed as an oppression of the minority by the majority and the CLB should prevent the same by granting the reliefs claimed. 106. On the other hand, it was the contention of 1st respondent that the statutory provisions referred to by the appellants cannot be construed in this manner and after 13-12-2000, in law, there is no third category namely a deemed public company. In law there are only two categories viz., private company and public company. This broad classification and categorisation does not permit invocation of any third category and the attempt to introdu....
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....its any invitations to the public to subscribe for any shares in, or debentures of, the company; (d)prohibits any invitation or acceptance of deposits from to persons other than its members, directors or their relatives: Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member; (iv)"Public Company" means a company which - (a)is not a private company; (b)has a minimum paid up capital of five lakh rupees or such higher paid up capital, as may be prescribed; (c)is a private company which is a subsidiary of a company which is not a private company;" 108. Both sides also made a reference to section 9 to point out that the Companies Act, 1956 would over ride the memorandum and Articles of Association even if there is anything contrary contained in the same. Thus, the argument is that by sub-clause (b) of section 9 any provision contained in the memorandum/Articles/agreement or resolution to the extent to which it is repugnant to the provisions of this Act become void as the case may be. 109. Then comes sections 43 and 43A which read thus : "43. Where the ....
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....ied in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be, reduced below seven; Within three months from the date on which a private company becomes a public company by virtue of this section, the company shall inform the Registrar that it has become a public company as aforesaid, and thereupon the Registrar shall delete the word "Private" before the word "Limited" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association. (2A) Where a public company referred to in sub-section (2) becomes a private company on or after the commencement of the Companies (Amendment) Act, 2000, such company shall inform the Registrar that it has become a private company and thereupon the Registrar shall substitute the word "private company" for the word "public company" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association within four weeks from the date of application made by the company....
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.... company becoming a private company. In other words, this section permitted a private company to become a public company in certain cases and once the word private is deleted it becomes a public company. However, there was nothing which permitted such public company to again become private company and that is achieved by insertion of section 43(2A). Section 43A(11) which also was inserted by Act 53 of 2000 from 13-12-2000, clarified that nothing contained in section 43A, save and except sub-section 2A shall apply on and after the commencement of Companies (Amendment) Act 2000. In other words, whole of section 43A except for one sub-section viz., sub-section (2A) ceases to apply after the commencement of Companies (Amendment) Act, 2000. The reason for this is obvious because the Parliamentary Standing Committee submitted a report which is known as 64th report on Companies Second Amendment Bill 1999. It recommended that entire section 43A must be deleted. The recommendation was that some part and particularly section 43A(4) may be retained so that deemed public companies may submit certificate of incorporation to Registrar of Companies for correction by adding the word "Private" befo....
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....pany but is a subsidiary of company which is not a private company, then, this only shows that the Legislature wanted to include within the term "public company" a private company which is a subsidiary of a company which is not private. If the holding company is not a private company but its subsidiary is a private company such subsidiary also becomes a public company now. If all this is read together and seen as a whole, it becomes at once clear that the Legislature did not desire to continue any concept of deemed public company which was in force on account of the amendment made in the year 1974 to the Companies Act. The effect and implication of 1974 amendment is to be wiped out completely and that has been done by the 2000 Act to the extent it made the whole of section 43A except sub-section (2A) inapplicable and from ineffective from 13-12-2000. 115. It is clear from the factual position that the attempt to amend the Memorandum and Articles of Association of the first respondent was unsuccessful. The said resolution proposed in the meeting held on 5-5-2001 was not carried but in fact defeated. Once it was defeated, then, the first respondent which had become a public compan....
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....change in the status of GCL after the amendment had come into force. In such circumstances, emphasis on the words "on and after" as appearing in section 43A(11) will not be of any assistance to the appellants. 117. In any event, as far as the principles of statutory interpretation are concerned, long back in a decision Bhagatram Sharma v. Union of India AIR 1988 SC 740 the Supreme Court held that it is a matter of legislative practice to provide, while enacting and amending a law, that an existing provision would be deleted and a new provision substituted. Such deletion has effect of repeal of the existing provision. Such a law may also provide for introduction of new provision. There is no real distinction between "repeal" and "amendment". The Supreme Court holds that amendment is in fact a wider term and it includes abrogation or deletion of a provision in a existing statute. If the amendment of existing law is small the act professes to amend the Act. If it is wide, it repeals a law and re-enacts it. (see paras 16 to 18 pgs. 745-6). 117A Therefore, in my view, once the first respondent is a public company as evidenced by the certificate referred to above, with effect from ....
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....e of such refusal or where no notice has been sent by the company, within four months from the date on which the instrument of transfer, or the intimation of transmission as the case may be, was delivered to the company. (4) If - (a)the name of any person -- (i)is, without sufficient cause, entered in the register of members of a company; or (ii)after having been entered in the register, is, without sufficient cause, omitted therefrom; or (b)default is made, or unnecessary delay takes place, in entering in the register the fact of any person having become, or ceased to be a member including a refusal under sub-section (1)" The person aggrieved, or any member of the company, or the company, may apply to the Tribunal for rectification of the register. (5) The Tribunal while dealing with an appeal preferred under sub-section (2) or an application made under sub-section (4) may, after hearing the parties, either dismiss the appeal or reject the application, or by order - (a)direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within ten days of the receipt of the order; or (b)direct rectifica....
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....l the circumstances of the case (12) If default is made in complying with any of the provisions of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues; (13) Nothing in this section and section 108, 109 or 110 shall prejudice any power of a private company under its articles to enforce the restrictions contained therein against the right to transfer the shares of such company; (14) In this section "company" means a private company and includes a private company which had become a public company by virtue of section 43A of this Act." 119. A bare perusal of the entire section would denote that by virtue of Act 22 of 1996 section 111(14) was inserted with effect from 20-9-1995. By insertion of this provision it has been clarified that section 111 applies to a company which is a private company and includes a private company which had become public company by virtue of section 43A of the Act. Once section 43A ceases to apply in the present case to GCL, then, there is substance in the argument of Mr. Bobde that section 111 is inappli....
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....med as listed public company. Nonetheless it remains a public company and merely because its shares are not listed in any recognised stock exchange does not mean that there is any restriction on their transfer. They are and continue to be freely transferable as they are shares of a public company. The broad distinction as noticed above, between the term 'Private" and "Public" company, is enough to turn down this alternate argument. 122. Considerable time was taken by the Counsel to point out that the reliance placed by the CLB on the decision of a learned Single Judge (Dr. Justice D.Y. Chandrachud) in the case of Western Maharashtra Development Corpn. Ltd. (supra) is either misplaced or not justified and apposite. 123. Mr. Samdani contends that the basis of the conclusion drawn by the CLB is reliance on this decision and now it stands over-ruled by the Division Bench and in that behalf he invites my attention to the Division Bench judgment in Messer Holdings Ltd.'s case (supra). He submits that the Division Bench was dealing with a case of public limited company and while dealing with somewhat identical controversy and argument, the Division Bench held as under :- "(43) Th....
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....he arrangement agreed between defendant No. 3 and defendant No. 1, the nominee of Goyal Group would be in the control of management of defendant No. 4 company. That arrangement is also indicative of the fact that it is the Goyal Group who is in complete control of defendant No. 4 company. If it were to be otherwise, there is no reason why defendant No. 4 should toe the line of defendant No. 3 and resist grant of any relief to the plaintiffs. Moreso when the defendant No. 1 has entered into amicable arrangement with the plaintiffs as recorded in agreement dated 5th December, 2002. We are conscious of the fact that defendant No. 4 is a company and a separate juristic person. However, if it were to be a Hoechst Group of Company, by no stretch of imagination, it would take stand contrary to what is taken by defendant No. 1. The fact that in proceedings before this Court, the defendant No. 3 and defendant No. 4 are pursuing remedy together, inference can be drawn that the Goyal Group has complete control over the defendant No. 4. In other words, there is material to take prima facie view that the defendant No. 4 is not and was never intended to be a Hoechst Group of Company. Instead, it....
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....herein ought to be freely transferable. The decisions of the Apex Court both in the case of Rangaraj and Madhusoodhanan (supra) have been considered. The Learned Single Judge of this Court has taken the view that the dictum in the said decisions were of no avail as the case on hand was in relation to a public company. It is held that in case of public company, section 111A provides that the shares or debentures and any interest therein of the company shall be freely transferable. Reliance is also placed on section 9 of the Companies Act which stipulates that provisions of the Act shall have the effect notwithstanding anything to the contrary contained in the Memorandum or Articles of the Association. The Learned Judge has then adverted to the dictionary meaning of expression "transfer" and "transferable". The Learned Judge has distinguished the exposition of the Privy Council in the case of Ontario Jockey Club Ltd. v. Samuel McBride AIR 1928 PC 291. It is held that the Privy Council was considering the case in which the legislation authorised the Board of Directors to regulate the transfer of shares and transferability of the shares of the company. The bye-laws specifically contemp....
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....ivate Company has to be contrasted with cases involving public Companies where the law provides for free transferability. Free transferability of shares is the norm in the case of shares in a public Company. 61. The provision contained in the law for the free transferability of shares in a public Company is founded on the principle that members of the public must have the freedom to purchase and, every shareholder, the freedom to transfer. The incorporation of a Company in the public, as distinguished from the private, realm leads to specific consequences and the imposition of obligations envisaged in law. Those who promote and manage public companies assume those obligations. Corresponding to those obligations are rights, which the law recognizes as inhering in the members of the public who subscribe to shares. The principle of free transferability must be given a broad dimension in order to fulfil the object of the law. Imposing restrictions on the principle of free transferability, is a legislative function, simply because the postulate of free transferability was enunciated as a matter of legislative policy when Parliament introduced section 111A into the Companies Act, 1956....
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....submission that section 111A would not interdict "an agreement between particular shareholders relating to the transfer of specified shares" is based on the judgment of the Supreme Court in Madhusoodhanan (supra). In that case, as already noted earlier, the Supreme Court noted that the Karar was an agreement between "particular shareholders relating to the transfer of the specified shares". What is significant is that the Company in that case was a private Company. The Supreme Court noted with some emphasis that in the case of a private Company, the Articles of Association would restrict the right of shareholders to transfer shares and prohibit invitation to the public to subscribe for shares or debentures of the Company. The position in law of a Public Company is materially different. By the provisions of the Companies Act, 1956, restrictions on the transferability of shares which are contemplated by the definition of a "private company" under section 3(1)(iii) are expressly made impermissible in the case of a public company by the provisions of section 111A. Once that be the position, the submission urged on behalf of the Respondent cannot be accepted. In essence, the submission ....
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....a restriction on the transferability of shares and it was unnecessary for the company or any other shareholders to be a party to the agreement. It is contended that this crucial distinction drawn by the Apex Court in Madhusoodhanan's case has been glossed over by the Learned Single Judge of this Court. In other words, an agreement by a particular shareholder or between two shareholders relating only to their own shares (by way of pledge, sale or for pre-emption) is a consensual arrangement entered into by them, in exercise of their right of free transferability and it consequently imposes no restriction on transferability. The company or any other shareholder of the company does not have to be a party to such agreement. For the same reason such agreement need not be embodied in the Articles of Association. Whereas, if arrangement by a particular shareholder relating to his own shares by way of pledge or pre-emption was to be restricted, then there ought to be an express provision in that behalf. Inasmuch as, the sweep of section 111A was intended mainly to restrict the right of Directors of the Company to refuse transfer of a members shares. It is not intended to and does not affec....
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....22A(3) of the Securities Contracts (Regulation) Act, 1956. According to the plaintiffs when a shareholder deals with a share or enters upon a contract to pledge, sale or principle of first refusal, he does so in exercise of his right of free transferability of shares. He does that in the same manner as in the case of any other movable or immovable property in India which is also freely transferable. That right would include right to pledge, mortgage or pre-emption regarding his property. That right of any person would be intrinsic in his right of free transferability. If the statute made by Parliament intended to affect such right, ought to have made express provision in that regard. Only upon making such express provision that legal right of the owner can be taken away. There can be no presumption that the legislature has taken away that right while making provision to restrict the right of Directors of a company to refuse transfer of members share. Reliance has been placed on the decision in the case of ICICI Bank Ltd. v. SIDCO Leathers Ltd. 2006(10) SCC 452 at paras 41-43 and in the case of Byram Pestonji Gariwala v. Union Bank of India (1992) 1 SCC 31 and at paras 28-30 and 35.....
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....ntended to regulate the right of the Board of Directors of the company to refuse transfer of members shares. That was not a provision to restrict the right of shareholders to deal with their shares or to enter into consensual arrangement/arrangement regarding their shares (by way of pledge, pre-emption, sale or otherwise). Suffice it to observe that the intention behind introducing section 22A in 1986 was to regulate the right of the Board of Directors to refuse transfer of members share and it was not to impose restriction on the right of shareholder to deal with his shares by entering into consensual arrangement with the third party to which the company need not be a party. 51. Section 22A was deleted by Depositories Act, 1996 and at the same time section 111A in the Companies Act came to be introduced. Section 111A as applicable at the relevant time (prior to amendment of 2003) reads thus : '111A. Rectification of register on transfer.-(1) In this section, unless the context otherwise requires, "company" means a company other than a company referred to in sub-section (14) of section 111 of this Act. (2) Subject to the provisions of this section, the shares or debentures....
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....n of register on transfer. Sub-section (2) opens with the expression "subject to the provisions of this section". In other words, it is a provision restating that the shares or debentures and any interest therein of a company shall be freely transferable subject, however, to the stipulation provided in the other part of section 111A of the Act. The proviso to sub-section (2) reinforces the position that section 111A is to regulate the powers of the Board of Directors of the company regarding transfer of shares or debentures and any interest therein of a company. The Board of Directors cannot refuse to register transfer of shares unless there is sufficient cause to do so. In other words, the setting in which section 111A is placed in part IV of the Act under heading "transfer of shares and debentures", it is not a provision to curtail the rights of the shareholders to enter into consensual arrangement with the purchaser of their specific shares. The right to enter into consensual arrangement must prevail so long as it is in conformity with the terms of Articles of Association and other provisions of the Act and the Rules. Whereas, section 111A is a provision mandating the Board of D....
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....to the public to subscribe to shares, unlike in the case of private company, does not whittle down the right of the shareholder of a public company to arrive at consensual agreement which is otherwise in conformity with the extant regulations and the governing laws. 52. In the case of Madhusoodhanan (supra) no doubt the Apex Court was dealing with the case of a private company. However, at the same time, it has considered the general question regarding the right of shareholder-not limited to shareholder of a private company-to enter into such consensual arrangement which is not in violation of Articles of Association or the provisions of Act or Rule. In Paragraph 140 of the decision while referring to the Judgment of S.P. Jain v. Kalinga Tubes AIR 1965 SC 1535, the Court has noticed two different situations. In the first case, it is the company which issues and allots the new shares and the second situation is of recognition of private arrangement between the existing shareholder by way of sale of share in favour of new shareholder. In the latter case, the company comes into the picture only for the purpose of recognition of transferee as the new shareholder. It is also noted th....
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.... shares or debentures of the company. He has held that the scheme relating to transfer of shares of a private company and in contradistinction a public company, is different. The Learned Single Judge went only by the expression "freely transferable" occurring in section 111A(2) of the Act. It is held that principle of free transferability must be given a broad dimension in order to fulfil the object of the law. For that, reliance is placed essentially on section 111A and section 9 of the Companies Act. 55. Insofar as section 9 of the Companies Act is concerned, it contemplates that provisions of the Act shall have effect notwithstanding anything to the contrary contained in the Memorandum or Articles of Association or in any agreement executed by it or in any resolution passed by the company in General Meeting or by its Board of Directors, whether the same be registered, executed or passed as the case may be, before or announcement of the Act. Clause (a) thereof, which refers to any agreement executed, is in respect of an agreement executed by the company; and not by the shareholder with third party-which is a private consensual arrangement/agreement to which the company is not ....
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.... our command, we do not agree with this reasoning of the Learned Single Judge in the case of WMD Corporation Ltd. (supra) for the reasons recorded hitherto." 124. Mr. Bobde, learned senior counsel appearing for respondent No. 2 and Mr. Sen appearing for respondent Nos. 1, 4 and 5 urge that any wider question or controversy need not be gone into because the essential difference between a preemptive and restrictive right conferred by Articles of Association and an agreement between members inter se or with third parties providing for a preemptive right must be borne in mind. The inter se agreement conferring such right is de hors the Articles of Association and is, therefore, not affected by the character of the company, whereas, what is impermissible by the Statute is that in case of a public limited company, the Articles, even if having any such right, the same stands over-ridden by the statutory provision and enactment and must, therefore, give way to the same. The Division Bench judgment does not indicate that such a preemptive right conferred by the Articles remains intact or not and yet proceeds to over-rule the Single Judge's judgment in Western Maharashtra Development Corp....
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....000, the third category as projected (deemed public company), cannot be carved out or if existing earlier, cannot be held to be continuing any further. The arguments of Mr. Samdani that despite this amendment, the character and fabric of GCL is not altered or changed and it remains a glorified partnership or a private company or a family concern, essentially revolves around the same category noted by me above. For the reasons that have persuaded me not to read into or add any third category other than a private company and public company, these arguments must also fail. Once again, it must be clarified that the categorisation that has been highlighted before me is in the context of the assertions of the appellants that GCL is a deemed public company. It must be clarified that I have not held that the Act does not envisage any company other than a private company or public company limited by shares. The Act itself points out that there can be categories and sub-categories within the broad categorisation pointed out above. Further, a perusal of the section relating to kinds of share capital and voting rights would reveal that there can be a company limited by shares, unlimited compan....
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....drej 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 respondent No. 1 not being able to declare bonus shares; and on the other hand were acting against the interests of the company by committing themselves to sell their shares to person who happens to be the competitor of respondent company. According to the respondents the present petition is a speculative petition for which reason also the grievance made at the instance of petitioners with regard to meeting dated 15th February, 1990 cannot be countenanced." "50. The fact that even the present petitioners were party to memorandum of understanding and have committed themselves to espouse the cause of the alleged competitor of ....
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..... More so, 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." 129. In the earlier part of his judgment in para 47 the learned Judge has dealt with the argument regarding declaration of low dividend and found no substance in the allegation of oppression based on the same. My attention is also invited to the earlier paras of this judgment and in particular paras 35 to 37 wherein this charge of low dividend has been dealt with extensively. 130. The argument is that the appellants were not parties to this judgment and, therefore, it does not bind them. However, it is pertinent to note that the appellants were original petitioners. They withdrew from Company Petition No. 77 of 1990. There is nothing on record to indicate that they withdrew with liberty to raise the pleas raised by them again. Once the learned Judge has found that the conduct of the remaining petitioners was entirely blameworthy and they could not substantiate the charge and/or allegation levelled of being oppressed as minority shareholders, then, I do not see how the present appella....
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....ider controversy and particularly whether the judgment of the learned Single Judge (Khanwilkar, J) could be said to be a judgment in rem and or whether the Civil Procedure Code and particularly Order XXIII of the same applies to the present proceedings or not. The submission of Mr. Samdani is that this judgment cannot be a judgment in rem. Assuming it is not so, yet, it binds the appellants for the reasons indicated above. The appellants may have withdrawn from Company Petition No. 77 of 1990 but in their independent proceedings before the CLB on which the impugned order has been passed, they relied on the same material and same circumstances as were set out in Company Petition No. 77 of 1990. They relied upon the same amendments which were to Company Petition No. 77 of 1990. There allegations are also the same viz., of low dividend and unjust enrichment so also diversion of funds by respondent No. 2. These were the grounds raised in Company Petition No. 77 of 1990. Having found no substance therein, for the reasons, which have been given by Hon'ble Mr. Justice Khanwilkar, and finding them to be fully applicable to the present facts as well, I see no justification for taking a diff....
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....he respondent - Bajaj Auto held 24 per cent shares. The balance 49 per cent is held by public. The dispute as noted by the learned Single Judge between the parties was whether clause 7 of the agreement could form a valid basis for the conclusion of the arbitrator or not. The learned Judge held that the shares in question are of a public limited company. Those shares are freely transferable. The stipulation in clause 7, therefore, is inapplicable and reliance was placed on the provisions of the Companies Act in this behalf so also the judgments of the Supreme Court. The learned Judge concluded that section 111A applies to public companies and noticing the difference between private company and public company, he concluded that the effect of clause 7 is to create a right of preemption between the petitioner and respondent before me in the event either of them seeking to part with or transfer its shareholding in MSL. The learned Single Judge concluded that a clause of preemption is to impose restriction on free transferability of shares and that is impermissible because the provisions of the Companies Act have been given a over-riding effect. On such conclusion, he set aside the Award....
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....nged is the only issue before me. Therefore, the controversy with regard to the judgment rendered by the learned Single Judge in WMDC Ltd.'s case ( supra) and whether it is rightly over-ruled or not cannot be taken note of in the peculiar facts of this case. However, it must be immediately noted that the Agreement or a consensual arrangement relating to their own shares between shareholders would bind them or not or whether that is void as not surviving in the teeth of section 9 or section 111A of the Companies Act, 1956, was the core issue in Messer Holdings Ltd.'s case (supra) (see paras 48 to 57). 137. Mr. Samdani is in error in urging that the CLB has based its conclusion in the present case only on the view taken by the learned Single Judge in WMDC Ltd.'s case (supra). A complete reading of the judgment of the CLB would show that the conclusion is with regard to the status of GCL and merely to support it, that it referred to the judgment of the Single Judge. The view taken by CLB is, therefore, not founded only on the single Judge's judgment as erroneously urged by Mr. Samdani. 138. For the reasons that persuaded the learned Single Judge (A.M. Khanwilkar, J.), I am also ....