TaxTMI 
TaxTMI 
2017 (1) TMI 1343
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....nies Act, 1956 primarily on two grounds - one, R2 & R3 proposing to hold EGM on 31.10.2015 for ouster of Sanjay from the post of director, two, R2 & R3 non-cooperating with Sanjay for clearance of all statutory dues, which the petitioners claim oppressive against the petitioners and detrimental to the interest of the Company. 2. For the sake of brevity, this Bench, instead of separately paraphrasing the averments of the Petitioners and the Respondents, gives storyline of the dispute before narrowing down respective stands of the Parties, discussion of this Bench and ensuing directions in the backdrop of the given facts. Since old Companies Act 1956 sections alone are referred in this order, wherever sections are referred in the order, the same may be construed as sections of old Act 1956. 3. It is a Company started by their father deceased Shrikant Parlikar (shortly called "Shrikant") in the year 1993 taking Sanjay and his two other sons namely Mr. Satish Parlikar (shortly called as "Satish") and Mr. Ajit Parlikar (shortly called Ajit) as permanent directors on the Board in the year 1993 to running diagnostic centre business in one of the prospering suburbs of Mumbai i.e. Kalyan,....
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....pite he is a permanent director by virtue of Clause 21 of Articles of Association, by mother giving a requisition notice dated 6.10.2015 for holding EGM on 30th October, 2015 to appoint herself and Bavana (wife of Rajiv) as directors and to oust Sanjay from the directorship without even putting it to the notice of Board of Directors for considering the request of the requisitionist. And the mother and Rajiv have not been co-operating to make payments to statutory dues by refusing to sign the cheques. 5. The counter allegation of the mother and Rajiv is that they never refused to co-operate in making statutory payments and indeed it is Sanjay who regularly takes away cash from the counter without any accountability causing loss to the Company and not allowing the mother and Sanjay to withdraw money from the Banks. To justify the same, they submit that when they tried to withdraw Rs. 6 lakhs cash from PNB for the medical treatment of the mother, this very Sanjay wrote a stop payment letter to the Manager of PNB saying that no money should be released unless cheque is signed by him for he and Rajiv alone are jointly entitled to withdraw the money but not the mother and Rajiv, the Res....
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....s' contention is that this requisitionist neither has given a notice to the Board requesting for holding EGM nor given 45 days' notice for holding EGM on requisition, therefore, the petitioners sought for a declaration that EGM proposal to be held invalid. The Petitioners further submit that no notice has come to them informing the Board to hold EGM on the requisition given by the requisitionist; Sanjay has not even received any notice from the requisitionist proposing to hold EGM on 31stOctober, 2015. The second contention of the Petitioners, as we said above, is that the mother and Rajiv had not co-operated for clearance of statutory dues by not signing the cheques forwarded to R3 which is detrimental to the interest of the Company and the business as well. By considering these two contentions as oppressive against the interest of the Petitioners they filed this Company Petition u/s 397 and 398 of the Companies Act, 1956. 7. The reply to the Petitioners' case is that the requisitionist hand delivered notice to Sanjay and Vishakha for they happened to be residing in the premises of the Company itself. Thereafter, the requisitionist issued notice and it was received by P2, therefo....
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....natures of Sanjay and Rajiv. That apart, the Hon'ble High Court recorded the undertaking of the Petitioners that they would not operate SBI account and would give copies of SBI statements of the Account from 1st August, 2015 onwards. The Order was passed on the consent given by Sanjay and Rajiv. In the order dated 18.12.2015, it was also recorded that both the parties agreed to hold EGM on 19.12.2015 as directed by CLB. 11. The Counsel further said that the Hon'ble High Court of Bombay finally disposed of 10F Appeal on the consensus arrived between the parties on 22nd April, 2016 reflecting that the parties agreeing to continue the Order passed by the Hon'ble High Court on 18th December, 2015 but the decisions will not be given effect till the final disposal of the CP, that the mother is appointed as Chairman of the Board of Directors with a casting vote, that medical expenses of Savita shall be provided from the monies of the Company with a caveat that all interim arrangements made in the Appeal are open before CLB and before the Civil Court which is seized of the Civil Suit filed by Sanjay inter alia against the mother and Rajiv. This Order has also given liberty to the Petition....
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....g, if one application is disposed of, order will travel up to Honourable Apex Court, once that application has visited from original court to Apex Court, one of the parties land up with another application to redo the same exercise, of course with another application with apparently different cause of action. When the company is a running concern, one or other thing keeps happening and decisions keep coming, but every small thing happening will not amount to an act coming within the ambit of sections 397 & 398 of the Companies Act 1956. Therefore, to the extent possible without affecting substantive rights of the parties, Company Applications are tagged with main Petitions. Here, this Application being an Amendment Application, it cannot be tagged alongwith the main Petition, therefore, to give a solution to the same, this Bench has asked the parties to file Additional Affidavits before us to consider the same along with main Company Petition, instead of giving time for completion of pleadings, deciding application, if application is allowed then giving time for carrying amendment and then time for filing reply to the amended application, in the meanwhile there is no guarantee that....
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....han that. It, therefore, could not even be believed that this document by oversight has become part of the annexure, because there is a pleading over this document in the petition and rebuttal is also there in the reply. We strongly believe that nothing more is required to say what it is and what this petitioner is. All this happened in the court hall one day before passing this order. This Bench has not proceeded any further over this issue, because calibration to a case u/s 397 & 398 is conduct, the person whose conduct itself is dubious and overreaching, such person does not deserve for a relief calling other's unfair to him. 19. On hearing submissions from either side, the points for discussion are as follows: (a) Whether giving a notice for holding EGM for removal of Sanjay is oppressive or not. (b) Whether non-payment of statutory dues by the Company he treated as an act done by the Respondents causing oppression to the Petitioners or to the Company. (c) Whether a proposal for removal of P1 in a family Company in the given facts of the case be treated as an oppressive act or not. Point (a):- Whether giving a notice for holding EGM for removal of Sanjay is oppressive or n....
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....bject to the outcome of Main Petition, For there being an opportunity to the Petitioners to raise their grievances not only in the EGMs held but also before the CLB, it cannot now be said that since the Respondents failed to give 45 days' notice to the Petitioners for holding the EGMs or not given notices to the Petitioners for holding both meetings to propose EGM will not have any merit. Since the orders are clear that the right of 45 days notice stood waived, Sanjay having attended to the EGMs, it has become clear that the meetings held on 31st October, 2015 and 19th December, 2015 cannot be held bad for want of compliance of procedure. Assuming Sanjay have failed to attend the meeting despite knowing meeting would be held at the direction of CLB given in the presence of Sanjay, it will be construed that opportunity is given to Sanjay, if he does not avail it and start assailing the meeting does not deserve consideration. Whether meetings held are right or wrong will be considered below. 22. It has been time and again reiterated by English Courts and our Constitutional Courts laid down whenever a case is filed u/s 397 and 398 it has to be dealt with looking at the equities of th....
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....nt to meet u/s 397 & 398 is that the act complained of shall be unfair to the aggrieved or the company and laced with malafide, and it shall be consequently led to winding up of the company, it always remains there, but when none of such fulfilment is evident, then removal of director even in a family company cannot be taken on standalone basis to pass orders under section 402, because in the case of removal of director in a family company also, it is incumbent upon the aggrieved to prove said act falls within the four corners of sections, either 397 or 398, if it is not so, the only recourse is suit. Here Sanjay himself is at fault and his conduct is doubtful in relation to the affairs of the company, on the other hand, the mother has 98% shareholding, therefore when Sanjay as director could not discharge his fiduciary obligations effectively in the company, he cannot seek a relief by owning this family concept. 24. The above two citations, as to Gaekwad supra, it has not been said whether qua removal of director in a family company amounts to grievance u/s 397 or 398, hence a general reference about quasi partnership principle cannot be subscribed to this case. 25. As to other ....
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....ioners have set up this allegation against the Respondents to dress up this Company Petition to impress upon this Bench. How does this court subscribe to the point that the Respondents' conduct is prejudicial to the interests of the Company or the Petitioners? Of course, the Respondents placed voluminous material, employees writing letters to R2 and R3 that P1 directly taking out cash from the cash counter on his own, but whereas for third party's statement cannot be taken as evidence unless it is proved before Court of Law, such material cannot therefore have any legs to say that Sanjay siphoned the monies of the Company by taking cash from the cash counter. Hence, the same is not taken into consideration. It is also pertinent to point out that when R2 and R3 went to PNB to withdraw money from PNB account for medical treatment of R2, P1 wrote a letter to the authorities of PNB not to allow them to withdraw money from the account. It is a fact that this Company is bread and butter to R2, R3 and to P1 as well. In the Order passed by the Hon'ble High Court of Bombay, the Hon'ble High Court itself passed an Order directing the Company to meet the medical expenses of R2 i.e. mother. By....
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....the interest of the person complained. It has been said that orders passed u/s 402 shall be without prejudice to the generality of the powers u/s 397 & 398 of the Companies Act, 1956, therefore unless and until the act complained of is proved that it is prejudicial to the interest of the members and such act otherwise would lead to winding up of the company, which would unfairly prejudice the persons complained of, an act complained of shall not be said as conduct under sections 397 & 398 of the companies Act 1956. The power under section 402 will flow upon the Tribunal only after it is proved as case u/s 397 & 398. If it is not family company or a company in partnership lines, the grievance of removal of directorship has to be thrown out as not falling within the ambit of section 397 & 398. As said above, the directorial complaint will not come within the ambit of oppression and mismanagement because directorship in a Company is an employment. If the partner's or family member's conduct itself is oppressive against the other shareholders and not for the wellbeing of the Company, such person cannot take shelter or continue as director of the Company to continually causing problems ....
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....is bickering, the substratum of the company would go down; it will be like killing a goose that lays golden eggs. It is evident P1 kept a bank account to himself, not allowed his own mother; wife of the progenitor of this family business to take money for her treatment, the disputes went to such an extent that daily incoming cash had to be kept in the custody of the other brother. In this scenario, to protect this company, it has to continue in one hand, therefore the mother being 98% shareholder and R3 having remained looking after her and since she has confidence in him, this company for time being shall continue under the management of the mother and R3. 33. However, despite the case of the petitioners not being proved, this Company alone being major source of income of the family members including Sanjay as director, of course his wife (P2) working as Ophthalmologist, this Bench, for the well being of all the members of the family and for smooth running of the company, hereby directs R1 Company to allow P1 to continue as director of the Company only to claim salary equivalent to the salary Rajiv taking, but not to interfere with the affairs of the Company, including day to day....