TaxTMI 
TaxTMI 
2017 (5) TMI 588
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....ication under section 403 of the Companies Act. 1956 was also filed for grant of interim relief. 2. It is seen that there are 36 petitioners in the case who are all shareholders of R-1 company. Petitioner No.1 has been given Powers of Attorney and authorisation by each of the other petitioners namely, P-2 to P-36. Respondents R-2 to R-13 are also shareholders of R-1 company, while R-14 and R-15 are proforma respondents, namely the Regional Director of Companies, Noida and the Registrar of Companies, Punjab. R- 1 to R-3 are the only contesting respondents. 3. The National Company Law Tribunal was notified on 01.6.2016. As the Registered office of R1 company is situated at Ludhiana, Punjab, the instant CP was transferred to National Company Law Tribunal, Chandigarh. 4. The brief facts of the case are discussed hereinafter. R-1 company was incorporated as a private limited company on 17.08.1961 and registered with the Registrar of Companies, Jalandhar. Initially, its business of setting up of steel furnace for steel melting and rolling steel was initiated by way of constituting a partnership concern styled as "The National Steel Manufacturing Company, Ludhiana". This partn....
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.... (P22) 0.02% 23. Puleen Dhallwal (P23) 0.02% 24. Japman Dhallwal (P24) 0.02% 25. Madhu Dhallwal (P25) 0.02% 26. Sania (P26) 0.02% 27. Divya (P27) 0.02% 28. Mr. G.B. Singh Dhallwal (P28) 0.02% 29. Dr. Gurmohan Singh Grewal (P29) 4.3% 30. Mrs. Gretchen Ann Grewal (P30) 4.1% 31. Warren Stuart Grewal (P31) 2% 32. Ms. Gurdeep Kaur (P32) 1.60% 33. Ms. Gurmit Kaur (P33) 1.92% 34. Ms. Kanwal Lehl (P34) 0.12% 35. Lt. Col. Charanjiv Singh Lehl (P35) 0.12% 36. S. Sarabmeet Singh Lehl (P36) 0.12% 37. S. Pritpal Singh Grewal (R2) 3% 1970 38. S. Gursimran Singh (R3) 1.2% 7 March 2007 39. S. Parambir Singh Grewal (R4) 1.2% 40. Dr. Surjit Singh Grewal (R5) 0.9% 1976 4 Oct 2006 41. S. Saminder Singh Grewal (R6) 3.6% 7 March 2007 42. S. Gurparshad Singh Grewal (R7) 3.1% 43. Ms. Kushal Grewal (R8) 2.25% 44. Ms. Jitind....
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.... Kaur Grewal Punia (then working Director and later Joint Managing Director) who is daughter of founder MD Sardar Inder Mohan Singh Grewal from 1997-98 till 2001-02 and from 2002-03 till 2005-06. 6.1.2 It has been stated that in the extraordinary general body meeting dated 10.1.2007, the agenda for regularisation of violation u/s 314 contained names of only three persons namely, Sardar Paramvir Sinigh Grewal, Ms. Harsimran Dutta and Sardar Mandeep Singh Grewal while the other two alleged violators namely, Sardar Saminder Singh Grewal and Sardar Gursimran Singh Grewal were not placed in the agenda. The resolution was not approved. 6.1.3 The petitioners have pointed out that R-3 was appointed as Production Coordinator in 1987 at a monthly remuneration of Rs. 2610/-In 1995-96 he had earned promotion and the annual salary payable became Rs. 1,26,874.50, meaning thereby, he was earning more than Rs. 10,000/- per month. As no special resolution for this appointment was passed, and permission of Central Government as required was not taken and thus, R- 3's appointment was violating the provisions of section 314. Subsequently also, in 2001-02, when his salary was revised beyond R....
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....ration even though she did not do any work for the R-1 Company, The petitioners have questioned her appointment and have stated that her appointment was to gain the support of her family that has 10.7% shareholding. 6.4 Appointment of R-2 Sardar Pritpal Singh Grewal as CMD and subsequent appointment of R-3 Gursimaran Singh Grewal as Vice-CMD. Sardar Pritpal Singh Grewal who has been the director of the company since 1970 to March, 2007 was appointed as Joint MD after he resigned as Principal of the Guru Nanak Dev Engineering College in 1986 His appointment was to expire in June, 2001, but his re-appointment was taken up as a miscellaneous item in the notice calling for Board Meeting on 06 09,2001. In this meeting, he was appointed as Chairman-cum-Managing Director, It is stated that when he was appointed as CMD on 06.9.2001, he was not even a director as his appointment as Joint Managing Director (JMD) was to expire on June, 2001. 6.4.2 In the Board of Directors Meeting held on 15.12.2006 when Sardar Pritpal Singh had already reached the age of 75 years, he informed the Board of Directors that "the family had decided to appoint Sardar Gursimran Singh Grewal (son) as the ne....
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.....2006. It is stated that this proposal was ruled out allegedly on the ground that P-10 refused to support the majority group in all its activities. The Garcha group has a total shareholding of 14.1%. The petitioners have alleged that a special resolution had been moved by the minority shareholders to elect P-10 as a whole-time director in the EOGM held on 10.1.2007, but the special resolution was voted out. 6.6-6.6.1 It is alleged that in the Board of Directors meeting held on 15.12.2006, a resolution was passed to consider retirement plan of working directors. The gist of this resolution is that the retiring working directors would be given a monthly pension of Rs. 45,000/- for life and / or lifetime of his or her spouse. It was further resolved that the said retirement policy shall come into effect from the date of retirement of R-2 Managing Director of the company and he was authorised to take due steps to give full effect of the policy. 6.6.2 The petitioners have alleged that this resolution was in violation of section 318 of the Companies Act, 1956 and there is no such provision under the Articles of Association of R-1 company. It is stated that such benefits were grante....
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....sed a loss of Rs. 10 crores approximately to the company by purchase of this second-hand rolling mill and such act shows mismanagement and is oppressive to the shareholders. 6.10 The Petitioners questioned the amount of Rs. 7.22 crores that had been written off as bad debt by the Board of Directors in the Balance Sheet for 2004-05, statedly only for saving the tax liability. 6.11 The Petitioners also questioned the withdrawal of cheque signing authority of P-1 and dilution of the same as he was authorised only to affix his signatures along with one of the co-directors belonging to the majority group. 6.12 The Petitioners have pointed that R-2 tendered his resignation from the office of MD by communication dated 10th January. 2007 but the said communication is not indicative as to whether he would continue as a director of the company. It is stated that this resignation was accepted in Board of Directors meeting held on 24.1.2007, but in the draft minutes it was stated that R-2 shall continue as a non-working director of the company and shall act as a Chairman accordingly. Such act is stated to be oppressive. 6.13 The Petitioners have questioned the monetary gain to an i....
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....g indulgence to the shareholders for proportionate representation in the Board as well as amongst working directors, keeping in view the experience. g. It is further prayed that the delinquents on the Board as well as members of the company be required and be directed to furnish adequate securities to the satisfaction of this Hon'ble Bench, in regard to the monetary liabilities which have culminated into wrongful losses to the company, be furnished within the time frame granted by this Hon'ble Bench so that such securities remain effective till the final relief, in regard to reimbursement of the amount is ordered by this Hon'ble Bench. 8. This Company Petition has been pending for almost 10 years. During the pendency of the petition, several Company Applications (CAs) have been filed by both the petitioners and the respondents. Some of these CAs have been disposed of by the erstwhile Company Law Board (CLB) and final orders passed. Some of these orders of CLB have also been agitated before the Hon'ble Punjab and Haryana High Court and decisions obtained in some. However, in other cases, the Hon'ble High Court has declined to interfere and have direct....
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....erest. The answering Respondents in their written submission have denied such a quid pro quo deal and have stated that only 12% interest is being paid to P 30 and 31. 10.3 The Petitioners have filed CA 396/2012 for modifying CLB's order dated 24.8.2011 and for transposing P- 29, 30 and 31 as respondents. 11. From the detailed pleadings, rejoinders, several CAs, and written submissions filed by the Petitioners, it is evident that they are primarily aggrieved by the developments in the company after the death of the founder MD Sardar Inder Mohan Singh Grewal in 2001. R-2, Sardar Pritpal Singh Grewal was appointed as MD thereafter. The petitioners have primarily alleged that R-2 committed various illegal acts of oppression and mismanagement to muster up majority and illegally got himself appointed as MD and later in 2007, he got his son R-3 illegally appointed as MD. The public directors were made to resign in 2001 after the death of Sardar Inder Mohan Singh Grewal and prior to the AGM of 2001. 11.1-11.2 have gone through the detailed pleading in the regard of the above allegation. R-2 was elected MD in 2001 in the AGM and was voted so unanimously by the shareholders. Thu....
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.... whom five were working directors at the time of filing of the petition in April 2007. While R-2, Sardar Pritpal Singh Grewal was Chairman (which as per the petitioners is illegal as there is no such designation in the Articles of Association of the company) R-3 was allegedly illegally appointed as MD. P-1 continued as Joint MD Smt. Jitender Kaur Punia who was a whole-time director from 2001 and subsequently appointed as Joint MD in 2006 (she has passed away during the pendency of the petition), Saminder Singh Grewal and Smt. Kushal Grewal were both working directors. It is stated that at present, there are 9 directors, of whom four are working directors, as Smt. Jitender Kaur Punia and Sh. Guriqbal Singh Grewal have passed away during the pendency of the petition. 13.1-13.2 It may be mentioned that replies, statements etc filed by the Respondents are only on behalf of R-1 and R-2 and R-3. The other respondents namely, R-4 to R-13 have not filed any reply and have neither given any power of attorney to the answering respondents to act on their behalf. It is also noticed that R-9 and R-12 namely. Smt Jitender Kaur Grewal Punia and Sardar Guriqbal Singh Grewal have passed away dur....
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....den by law". In this regard, they have referred to Section 269 of the Companies Act, 1956. Petitioners have stated that Respondents have nowhere pleaded that R-9 could be paid salary of a whole-time director without performing any work. They have also stated that there cannot be any waiver of a statutory requirement that is a distinction drawn by the Companies Act between an ordinary director and whole-time director. They have also cited several judgments on waiver and estoppel to support their case. 14.2.1-14.2.2 The respondents in their reply and the written submission have defended the appointment of R-9 as Whole-Time Director on 29.09.2001 and subsequent appointment as JMD on 2.9.2006. It is stated that R-9 was entrusted with bill verification process and labour welfare activities and her appointment cannot be said to be unnecessary. It is stated that as R-9 had passed away on 26.05.2012, the allegation made against her, which is in personal capacity does not survive as on today. P-3, P-10 & P-15 and R-10 had attended the AGM on 29.09.2001 and had voted in favour of the resolution for appointment of R-9 as Whole-Time Director. Subsequently also, they voted for re-election of....
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....7 as a Whole-Time-Director and Director w.e.f. 1.1.2007. Upon such resignation by R-7, his daughter R-8 who is stated to be well qualified and holds an MBA from USA was appointed as Whole-Time-Director and this was consented by everyone including the petitioners. The appointment of R-8 was also carried unanimously in the EOGM on 10.01.2007. 14.3. Appointment of R-2 (Pritpal Singh Grewal) as Chairman and Managing Director. 14.3.2 The Petitioners have stated that the manner and method of appointment first of R-2 as the MD and subsequent appointment of his son R-3 as MD is oppressive. This allegation has been discussed in detail above and the same is not repeated for the sake of brevity. 14.3.3 The appointment of both R-2 as MD and subsequent appointment of R-3 as MO has been approved by the members/shareholders of the company in board meetings and AGM. The Petitioners have alleged that as security guards were present during the EOGM held on 2007, the shareholders were terrorised. The main grievance of the Petitioners group is that R-3 who was otherwise not eligible for appointment as a director of the company being a violator of section 314 of the Companies Act, 1956, was ap....
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....y understanding that proportionate representation is to be given to any particular group of shareholders. 14.4 Appointment of R-3 as Managing Director. The respondents have stated that the petitioners' challenge to the appointment of R-3 as Managing Director is liable to be rejected on the following grounds:- (i) R-3 has worked for more than 19 years in the company and has headed various functions and is credited with implementation of SAP ERP in the R-1 company to show greater transparency and accountability. (ii) P-1 did not raise any objection in the Board meeting on 2.09.2006 when the name of R-3 was proposed and approved for the first time to be inducted as Whole-Time-Director w.e.f. the date of the ensuing shareholders meeting i.e. 25.09.2006. (iii) R-3 is stated to have refused to accept the said appointment as Whole-Time-Director as his father R-2 was already on the Board and leading the company as CMD. Thus the resolution of appointment of R-3 was not required to be put to vote. (iv) In December, 2006, R-2 desired to step dawn as CMD and a Board meeting was called for 15.12.2006. The agenda for this Board meeting included the appointment of R-3 as an ....
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....gs of the Board as well as general meetings were recorded incorrectly. It is also stated that the petitioner group would agree to the discussion in the Board meeting and later start sending letters of objections to the recording of minutes. It is further stated that the petitioners were asked to refrain from such activities vide letter dated 5.03.2007 and were advised to give their objections in the meeting itself. (xiv) The respondents have stated that P-1 is basically a disgruntled family member who is aggrieved on being looked over for the appointment of CMD after R-2. Pleadings to such effect have been made in the main petition where it is stated that:- "In the meeting of Board of Directors which was held on December 15, 2006 the factual status was recorded despite the objection raised by Shri Guriqbal Singh Grewal to the effect that he being fully qualified person and having looked after the business of the company for the last 43 years is the right person to be appointed as the Managing Director of the Company and of course is one of the senior persons amongst the families who constituted closely held company. This objection was never recorded and the recommendation was....
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....D and sister of Mrs. Jitender Punia, then a working director and Sardar Mandeep Singh Grewal (R-10), S/oGurlal Singh Grewal, then JMD and P-1 have been discussed in detail earlier. These persons were drawing salary above 'the limits prescribed in section 314. In the Agenda for the EOGM held 12.1.2007. only 3 names out of 5 (namely, R-4, R-11 and R-10) were given for passing of special resolution with regard to violation u/s 314. The Petitioners have stated that as the names of R-3 and R-6 were not included in the said resolution, their group voted against the same and the resolution was rejected. The Petitioners have stated that section 314(2) makes it mandatory that any salary received in violation of section 314 has to be refunded and such relative who has been employed shall be deemed to have vacated his office. It appears that the R-1 company has not taken any action even till date in this regard. 14.2 The Petitioners have further stated that R-4 and R-11 alleged violators u/s. 314 are stated to be subsequently working for R-1 company without any remuneration. The Petitioners have doubted this statement and have stated that these two persons are being paid in cash. 14....
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....der MD. A copy of the same has been attached. 14.6 Debt of Rs. 7.22 crores written off for the period 2004-05. This issue has not been raised by the petitioners either in their written statements or oral arguments before the Tribunal. These amounts were written off as bad debts and were accepted by the Income Tax Deptt. The Balance Sheet for 31.03 2003 was signed by both R-2 and P-1 and both P-1 and P-10 were present in the meeting that approved these accounts. The respondents in their written statements have stated that debts were written off after taking legal opinion from a law firm and the Board approved the writing off in its meeting on 21.03.2005 on the basis of a sanction letter duly signed and recommended by P-1. It is also stated that even after the amount was written off the company has made subsequent recoveries and is duly making efforts to recover other amounts as well from the creditors by initiating appropriate legal proceedings. 14.7.1 The Petitioners have alleged that the act of purchase of a second-hand 22 inches rolling mill without the approval of Board of Directors as required under section 292 of the Companies Act, 1956 and without obtaining any detai....
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.... their written submission, the respondents have stated that the petitioners case is that the 22" rolling mill was not needed by the company is liable to be rejected for the following reasons:- (a) P-1 has not disclosed in the petition that he was a party to the decision of purchasing the 22" rolling mill and he had played an integral part in the purchase and the deal of purchase was negotiated by him. (b) P-1 and P-10 were present in the Board meeting on 30.06.2005 wherein expansion plans were discussed and did not raise any objection to the acquisition or the said Mill. (c) P-1 was present in the Board meeting on 28.03,2006 where the Board was informed of the commissioning of the Rolling Mills and the amount of expense involved, and did not raise any objections. (d) P-1 having signed all the Balance Sheets for the relevant period is estopped from raising questions about this acquisition. (e) The petitioners' averment that a new Plant would have cost Rs. 15 crores in based on pure conjecture as cost of sheds rolls, allied equipment, electrical and sub station equipment has not been considered. (f) The petitioners' contention that similar objective could ha....
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....007, he had consented to the above arrangement. 15.2.1 In the written submission, the Petitioners have stated that they were denied access by the majority group into the works area of the factory premises. This Act is stated to be oppressive as it affects proprietary interest of the minority shareholders and had led to their exclusion from the business. In this regard, they have filed CA 272/2008 seeking directions for free access into the factory premises. 15.2.2 The Respondents in their oral arguments and the written statement have stated that P-1 has been stopped from visiting the factory premises and the work area as he is alleged to have instigated the workmen and also taken trade secrets from them and given to their competitors. The Petitioners have denied this. The Respondents have stated that P-1 is permitted access to his office area. During the oral arguments, the Respondents have averred several times that P-1 continues to draw salary since filing the petition though he has not done any work for the company. However, this statement is not made in any pleading or written statement filed by the Respondents and is hence liable not to be considered. 15.3.1 The Petit....
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.... petition. These are detailed below and are discussed in brief. CA 272/2008 - was filed by the petitioners on 7.5.08 praying that the respondents be directed to allow free access to the applicant petitioner as well as non-working directors of the minority group into the premises, work area of R-1 company and to disclose information pertaining to the functioning of the company as and when required by petitioners, This CA is pending. CA 442/2008 - had been filed by Respondents under section 634A of Companies Act 1956 seeking enforcement of the order dated 13,5.2008 & 21.5.2008, which reads as "the learned counsel for the petitioner submits that his client is willing to go out of the company for a fair value of his shares. Respondents were agreeable. On 21.5.2008 at 2.30 p.m. respondents will indicate the consideration that they are willing to pay" and order dated 21.5.2008 reads "the counsel for the respondents has offered a sum of Rs. 12 crores for the shares of the petitioner Sr. Counsel for the petitioner is not agreeable to this amount and seeks time to indicate his price for the shares. For doing so he desires to have some information on the affairs of the company. He may ....
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.... the respondent Nos. 1,2,3,4,5,6,7,8,9 & 11 Applicant Petitioner alleged that it is evidently clear that the respondents have accepted valuation of land and building of the company at only Rs. 32 crores while offering fair price for the shares held by the petitioners. Petitioner submitted that value of the company is much higher than Rs. 138.57 crores which represents the value of only land & building. The goodwill of the company, free reserves etc. have not been included. The market value of plant and machinery is much higher. So it was prayed that R.No.1 to 9 and 11 be prosecuted u/s 340 of Code of Criminal Procedure, 1973. This CA is pending. CA 228/2011 - was filed by the Petitioners on 21.4.2011 for restraining the respondents for holding any meeting of the Board of directors for issuing fresh preference shares. CA 653/2011 - was filed by the petitioners on 8.12.11 for striking off annexure "N" from the record, alleging the same to be forged and fabricated document and same deserves to be struck off from the record. This CA is pending. CA.27/2012-was filed by the petitioners on 16.112011 for filing an additional affidavit along with Annexures PA-1 to PA-9 which are TA....
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.... transparency. (iv) Denial of access to the directors of the petitioners group to the works area and not permitting them to interact with any staff member. (v) Acts of perjury committed by the respondents to withhold information and provide incorrect information to CLB and the Board of Directors. (vi) Majority group has burdened the company with a huge loan liability and made the company debt ridden. (vii) Unexplained increase in secured working capital. (viii) Raising of unsecured loans from the majority group of shareholders without following the due procedure and without any benefit to the company. (ix) Drastic fall in the dividends declared after filing of the petition. No dividends have been paid for the past two years. (x) Inflated stock / inventories. (xi) Destruction of the assets of the company. (xii) The board of directors have not been discharging their duty diligently and in the best interests of the company. (xiii) Removal of senior staff members as well as drastic reduction in labour strength. (xiv) Re-employment of employees removed under section 314. (xv) In this CA, the petitioners have prayed for the following reliefs: a.&nbs....
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....5/2014. In this CA, a prayer had been made to take cognizance of subsequent events along with prayer to exercise power under section 406 to direct the Respondents to refund the entire loss caused and to initiate the prosecution against the delinquent / respondents and to re-constitute the Board of Directors by excluding the delinquent / respondents. It is stated that the CLB has widest possible jurisdiction to take cognizance of subsequent acts under the regulations 24 and 44 of the CLB Regulations, 1991. 17.2.1 Several judgments have been quoted to support this contention by the petitioners. These are discussed hereinafter along with respondents' objections therein: 17.2.2 Promode Kumar Mittal v. Southern Steel Ltd. [1980] 50 Comp Case 555. (Calcutta High Court) In this case the High Court agreed with the contention of the respondents that the court is to take notice of all subsequent events to grant reliefs finally after trial in a company matter. The respondents in the written submissions had stated that this case is not applicable on facts as in that case the respondents had brought on record subsequent events to show that the petition was infructuous whereas in....
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....r oral or documentary evidence"--in the application out of which case appeal arises, the petitioners have alleged certain acts on the part of the present management which according to the petitioners were committed subsequent to institution of the petition Case of the petitioners is that such acts would lead to further prejudice to the interests of the company, in my opinion, though the acts complained against are not directly connected with the instances of mismanagement and oppression as alleged in the main petition, so far as allegations made in CA No.302 of 2011 are concerned, there is link to the basic foundation of the petitioners' complaint. The acts complained against in CA 302/2011 are relatable to the core allegation made in the said petition and can be set to form part of a chain of events. I do not think in conflict pertaining to allegations of mismanagement and oppression in a company, for each instance of mismanagement and oppression filing of an independent petition u/s 397/398 of the Companies Act 1956 would be necessary if the subsequent acts can be said to be connected with the main allegations." The petitioners have referred to the following case regarding....
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....05 was Rs. 14.20 crores and in 2013, the company suffered a loss of Rs. 17 crores and in 2014, the loss was Rs. 22 crores. The dividends paid in 2005 were Rs. 20.16 crores and reduced to Rs. 48 lacs in 2008. While no dividend was paid in 2009, in 2010-11, dividends of Rs. 48 lacs were declared, but after 2014, no dividends were paid. The contention of the Petitioners is that the alleged investment of Rs. 62.47 crores has not benefitted the shareholders at all. 17.3.3 The respondents have contradicted the contentions of the petitioner regarding investment in fixed assets for the following reasons:- (a) P-1 has signed all the balance sheets as JMD of R-1 company and was well aware of the investments made and cannot question them now. (b) capital expenditure has remained the same before and after filing the petition, despite the fact of change in accounting practices leading to additional items like rolls being capitalized in the period after the petition. (c) the investment particulars in R-1 company are as follows: - Period Investment amount. (1) 1965 to 2001 = 31.07 crores. (2) 2001 to 2007 = 34.91 crores. (3) 2007....
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....to two applications filed by them before the CLB namely 208/2013 filed on 25.5.2013 for production of records and inspection of relevant documents pertaining to fixed assets and enhanced labour costs. The second application is CA 76/2014 for appointment of a Local Commissioner to carry out physical inspection of the fixed assets along with the relevant records. These applications are stated to be still pending. 20.1 The Petitioners have stated in the written statement that the CLB has powers under sections 406, 539 to 544, read with schedule 11 to initiate proceedings of misfeasance and to order recovery of the losses caused to the company from the delinquent directors. Judgment which has been cited in this regard is referred earlier in para 15.3.3 at page No. 41. 20.2 The Respondents in this regard have stated that the accounts of the company are audited by the auditors who are also auditors of the company run by the petitioners group and therefore the Petitioners cannot question the same. The Petitioners in their rebuttal have stated that the auditors themselves stated in their report that the fixed assets have not been physically verified. 21.1 The Petitioners vide thei....
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.... is not justified as here can be no direct relationship between the same. Some senior persons who have been retained on superannuation do not fall under the PF regime. (d) Selective comparison of labour cost with that of competitors cannot be made as at least one of them has a fully automatic plant and thus reduced labour costs. (e) More than 90% of labour is paid through cheque. 22. The Petitioners have alleged that after filing of the petition, the Respondents have siphoned the funds of the company and turned a profit making and debt free company into a debt ridden company running into losses. In this regard, detailed comparison with competitor companies have been given. 23. The Petitioners have stated that even though negligible dividend has been paid to the shareholders, the four working directors from the majority group have purchased six luxury cars for themselves on 31.12.2010 by making a payment of Rs. 2.92 crores. On raising of objection, the cars were refinanced. It is stated that the limits of remuneration provided in sections 198, 269 and 309 read with schedule XIII stand violated. 24. Vide CLB's order 25.6.2009, the Respondents were permitted to incr....
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....bt of the company in violation of CLB's status quo orders dated 8.5.2007. It is stated that the debt restructuring agreement with M/s Canara Bank for converting an amount of Rs. 40 crores from the working capital limit into a working capital term loan repayable over 6 years. It is stated that an additional charge has been created for securing the said term loan on 25879 sq.yds of land (approx.5 acres). It is stated that as the status quo order was imposed the charge could not have been created. Also there is no consent of BoD for creating this charge. It is also stated that the working capital limit was earlier secured by the stock and inventories of trade receivable. While the term loan of Rs. 40 crores is only against the land measuring 5 acres. 28. The Petitioners have also sought to lead further arguments by way of written submissions: a. Preference Share redemption as per CA 605/2008 and CA 228/2011. It is stated that the issue of fresh preference shares to redeem the old shares is not sustainable as it is not in the best interest of the company but is for the personal aggrandisement of the majority group. It is also stated that issue of fresh preference shares....
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....ed that P-1 has opened two restaurants in his house with a total turnover of Rs. 3 crores and his floriculture business is closed and his third business i.e. Upper India Special Casting Unit has a turnover of Rs. 13 crores with a profit of Rs. 6 lakhs. P-1 has stated that his businesses are nothing compared to the turnover of the respondent company which was Rs. 250 crores approx. in 2007. h. The Petitioners have stated that the Respondents also have their own businesses. Sardar Saminder Singh Grewal (R-6) runs a school by the name of "Little Kingdom School" in Ludhiana, Late Dr. S.S Grewat was an Ophthalmologist in DMC Hospital and had been later managing Gurdev Hospital being run on family trust land; Gursimran Singh Grewal (R-3) started his own business of manufacturing auto cut-outs. The founder MD Late Shri Inder Mohan Singh Grewal also had his Cold Storage at Parwanoo. The Petitioners have rebutted the argument raised by the Respondents that the Petitioners should be given a fair valuation of their shares and should be made to exit the company. (i) The Petitioners have stated in the written submissions that this relief in itself would not be sufficient as....
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....ncern and the Respondents are only interested in encashing the land bank. It is also stated that the company has 37 acres of land and certain areas are lying absolutely vacant and with minor relocation of the machinery within the premises, vacant land commensurate to the shareholding of the Petitioners can be created for the purpose of demerger. 29. The Respondents in their written submissions have stated that the instant petition is a mala fide petition filed only to settle personal scores and grievances of P-1 against the Respondent group. It is also stated that the present petition merely raises directorial complaints and other irregularities and there is no cause of action to make out a case of oppression & mismanagement. * R1 company is the only source of livelihood for the Respondents while P-1 has other independent businesses. * P-1 failed, to bring out any case of oppression & mismanagement. 29.1 Sangramsinh P.Gaekwad v. Shantadevi P.Gaekwad [2005] 57 SCL 476 (SC) The respondents have drawn our attention to paras 183-214 of the said judgment which are reproduced below for reference: "183. The expression 'oppressive', it is now well-sett....
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.... full particulars so as to obtain an appropriate relief , 189. The remedy under Section 397 of the Companies Act is not an ordinary one. The acts of oppression must be harsh and wrongful. An isolated incident may not be enough for grant of relief and continuous course of oppressive conduct on the part of the majority shareholders is, thus, necessary to be proved. The acts complained of may either be designed to secure pecuniary advantage to the detriment of the oppressors or wrongful usurpation of authority. 191. It has to be borne in mind that when a complaint is made as regard 'Violation of statutory or contractual right, the shareholder may initiate a proceeding in a Civil Court but a proceeding under Section 397 of the Act would be maintainable only when an extraordinary situation is brought to the notice of the court keeping in view of the wide and far-reaching power of the court in relation to the affairs of the company. In this situation, it is necessary that the alleged illegality in the conduct of the majority shareholders is pleaded and proved with sufficient clarity and precision. If the pleadings and/or the evidence adduced in the proceedings remains unsatisfa....
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....directors which may in the passing contravene a provision of taw, but it may be very much in the interests of the Company and of the shareholders " 213. The said decision has been referred to with approval in Needle Industries (supra), (Para 49). The conduct which is technically legal and correct, thus, may justify grant of relief on the application of the just and equitable jurisdiction and conversely that conduct involving illegality and contravention of the Act may not suffice to warrant grant of any remedy. Isolated act of oppression may not be sufficient to grant any relief but there should be a continued oppression therefore. The test of lack of bona fide should be applied in both for the winding up petition while determining an application under section 397 of the Companies Act. (See Re-Guidezone Ltd., (2000) 2 BCLC 321). We may at this juncture notice that the Respondent No. 1 in her application under Section 397 of the Companies Act did not complain of any act of mismanagement Complaints of mismanagement were made by the Respondent No. 12 only. 214. For the purpose of grant of relief, the High Court could only consider the pleadings filed in Company Petition No.51 of....
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....ccounts were signed by all working directors in 2001 but from 2002 to 2006, only R2 and P1 were signing them. f. Petitioners have not come with clean hands g. Petitioners' conduct disentitles them to approach an equitable forum like CLB/NCLT as their conduct is isolative of the principle of one who seeks equity must do equity as: - (i) Petitioners group have withdrawn all the deposits from R-1 company. Rs. 1.6 crores was withdrawn in 2007 after filing a petition. The Petitioners have stated that all or some of the Respondents have also withdrawn their deposits. (ii) No personal guarantees from the Petitioners given since 2008 to secured creditors of R-1 company for repayment of dues. (iii) P-1 is admittedly a whole time director actively involved in the management of R-1 company from several years with access to all documents and records but has feigned ignorance. (iv) The grievances raised are merely directorial complaints. (v) P-1 was looking after R1 company unit in Tirupati while Ludhiana unit was running under the supervision of R2. While Ludhiana unit made profits, the Tirupati unit made huge losses and subsequently had to be sold off. Petiti....
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....low: 29.3.2 Remuneration violation of section 314 - There is no violation upto 1995-96 and thereafter P1 was party to all the decisions. P1's son R-10 has also drawn salary above the limits prescribed in section 314. It was not the case of the petitioners that neither such employees worked for the company or such positions were required in the company and that such employees were not qualified or eligible for employment by R-1 or the salary paid to such employees was in excess of what was the market rate or not commensurate with their work. P-1 and P-10 having been parties and P-1 directly being a beneficiary as R-10 is his son cannot question the same now. On a demurrer it is at best a technical violation which is a compoundable offence and cannot be a ground for oppression & mismanagement. 29.3.2.1 On 15.12,2006, a resolution was passed in Board of Directors meeting authorising the Board to take steps to ratify the defects in relation to the remuneration being paid to the employees being directors including R-10. It is stated that there was no requirement for R3 and R6 as R-3 was being considered to be appointed as Additional Director and Petitioners group opposed the s....
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....ollowing reasons: - (a) P-1 was aware of the appointment of R-9 and was a party to the decision. (b) In a family company members of the family are entitled to participate in the working of a company particularly where remuneration is part of livelihood. (c) The petitioner group had voted in favour of these appointments. (d) The petitioner has not raised any contemporaneous complaint ever against the manner and method of appointment of remuneration made up to the filing of the instant company petition. (e) Allowing the petitioner to challenge these acts without the same being challenged ever earlier would settle dangerous precedent and no finality will ever be attained with respect to duly approved resolutions passed in a Board or general meeting. (f) The petitioners have not been able to given any documentary evidence to establish that these Directors did not work for the company or were unqualified and ineligible for appointment or were employed gainfully elsewhere. (g) The respondents have stated that the allegation that independent Directors were forced to resign is completely false. Apart from saying that they had resigned on their own volition, the respond....
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....m then I used to take care of marketing affairs also." Though the auditors of both R-1 company and P-Vs company'1 namely Upper India Steel Castings Ltd. are the same. It is stated that the petitioners have referred to a qualification in the audit report that the fixed assets have not been verified. The respondents have argued that this is not a qualification, but a mere recording in the audit report where the same paragraph states "that there is a regular programme of verification which, in our opinion, is reasonable hiving regard to the size of the company and the nature of the assets. The respondents have stated that the entire allegation is baseless, devoid of any merits and is liable to the dismissed. 29.3.7 Despite the above averments, the respondents have discussed some of the allegations which were mentioned in the oral hearing:- (1) Purchase of scrap - The respondents have stated that the contentions that funds were misappropriated in purchase of scrap as imported scrap was purchased from domestic dealers at a higher rate and that imported scrap is cheaper than domestic scrap are wrong and the petitioners have created a false hypothesis on the basis of two false a....
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....THHOLDING INFORMATION - CA 135/2012. The respondents have stated in their written submission that the allegations pertaining to withholding of information and consequent perjury by the respondents are repetitive in nature and relate to averments made in CA-135/2012 and have already been adjudicated by CLB's Order dated 19.03.2013 and have been confirmed by the Hon'ble High Court. The project modernization and expansion was conceived in 2011 and the process to get the land released undertaken. Thereafter 21 acres of land was released and an application to mortgage six acres of land of the total released land was filed before in CLB in March, 2012. CLB allowed this application in April, 2013 and the respondents began the process to upgrade the rolling mill within limitations. However, by then the property prices had fallen and the company could not get sanction of Rs. 55 crores, the estimated cost of the project against the permitted properties The project was hence shelved. The respondents have stated that fortnightly statements pursuant to CLB order dated 8.5.2007 have been provided to the petitioners and thus the allegations of inspection and other related grievances ar....
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....tated that a number of assets have been disposed of by way of sale by the Board of Directors and the petitioner-directors were present in the meeting and did not object. 29.3.11.1 LAND OF RESPONDENT NO. 1 COMPANY BEING ANCESTRAL LAND AND BEING CONTRIBUTED BY THE PROMOTERS. The respondents have stated that this allegation is without any basis and no such case was set up in the petition, but was made out in the subsequent pleadings in rejoinder as well as subsequent applications in particular CA-75/2014. The respondents have stated that some changes took piace in the shareholding of the company in the year 1962 and the consideration for buying those shares was in cash and the transfer of shares took place on 21.02.1962. The original shareholders namely Shri Dina Nath, Sohan Lal, Jagdish Chander, Mohan Lal, Tara Chand and Suresh Chand had offered to sell all their shares and the existing shareholders were asked to purchase them. Some shareholders purchased only 17 shares and Shri Joginder Singh Grewal purchased the balance 15 shares. The total no. of shares remained 117 shares. 'Subsequently 373 cumulative preferential shares of Rs. 1000 each were allotted on 21.04.1962 a....
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....8.62 29.3.11.3 The respondents have questioned this and have stated that the consideration for purchase of shares by Grewal family was paid in cash to S/Shh Dina Nath, Sohan Lal, Jagdish Chandra, Mohan Lal, Tara Chand and Suresh Chand. Subsequently, 29 acres and 2 Kanals of land was also bought from M/s Sherpur small Scale Industrialists Co-op House Bldg. Society Ltd. on payment of full amount of Rs. 310000/- as per Board Minutes on 7.5.62. The respondents have stated that at the time of purchase of land, it was the company having 117 shareholders that bought the land after raising Rs. 683000/- vide cumulative preference shares and no ancestral land was given to the company in lieu of equity shares as alleged by the petitioners. 29.3.12 REMOVAL OF SENIOR STAFF. It is stated that some senior staff superannuated at the same time and relatively younger people have taken their place to lead the company. 29.3.13 OTHER 'MISCELLANEOUS ALLEGATIONS The respondents have stated that the petitioners have made other allegations in CA 75/2014 as well as in other applications. However, these were not urged or pressed at the hearing. 29.3.14 CA-562 of 2008 The re....
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....p. The same has to be valued as a going concern and the interest of the company is paramount (Sangram Singh P Gaekawad Supra Para 187) (F) A shareholder acquires a right to participate in the profits of the company, but not in the assets of the company (Bacha F Guzdar v. CIT AIR 1955 SC 74) (G) No Division, of land is sought by the petitioner if the land is to be used in the interest of the company and shareholders (M/s. Najma M Saiyed v. Mehboob Productions (P.) Ltd. [2005] 62 SCL 468 (CLB - New Delhi) (H) it is not a sale in winding up of the company and the company is a going concern. Even if the petitioner go out, the company will continue to function with the remaining shareholders. (I) The company has no vacant land. Entire land on which the factory is situated is being used for the purpose of manufacturing activity of the company. (J) The company is not a property or real estate company (K) CA 167 of 2013 filed by the respondents be allowed and respondents be allowed to appoint two Directors due to casual vacancy arisen due to demise of two directors of R group subsequent to the status quo order. (L) All interim orders are to be vacated. 30.1 The foll....
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.... find that after the amendment to the articles consequent on the family settlement in 1991, article 69 provides for passing of special resolutions in respect of certain matters end Article 109 provides for affirmative vote from both the groups on various matters coming before the board. With such serious differences and disputes between the parties, the probability of stalemate in the proceedings of the board and the general body meetings in future is very high. Thus, parting of ways between the parties is the only solution which would ensure protection of the interest of the shareholders as well as the company including the financial institutions. As a matter of fact, this is what even counsel for the parties/and the parties themselves expressed, even though they had different perceptions of the modalities of working out the parting of ways. While counsel for the petitioners proposed division of assets, counsel for the respondents proposed that the petitioners being in the minority should sell their shares to the majority respondents. While, in many cases, we ourselves have directed the minority shareholders to sell their shares to the majority, yet, in the present case, in the fa....
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....y, the petitioners are managing the forge division and the respondents the other two divisions in Kanpur end this arrangement came into existence sometime in January, 1999. We formalise this division of the assets of the company with the cut-off date as January 1, 1999. Each group will manage their divisions independently without any interference from the other group. A balance- sheet as on December 31, 1998, will be prepared after preparing a profit and loss account for the period ending on that date including the accounts of the plastic division. Since the financial institutions have high stake in the company, we consider it expedient that they should be associated with the exercise of partitioning the company so that in the partition arrangement, their interests are also protected. Accordingly, we constitute a fresh board of directors for the company, which will consist of two directors from the petitioners group and two from the respondents group with an independent chairman to be nominated by the ICICI. The ICICI will appoint a valuer to value the shares as on December 31, 1998. Both the sides will be at liberty to make both oral as well as written submissions before the value....
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.... The CLB held that it would be appropriate to direct the petitioners to go out of the company on receipt of proper consideration. It was noted that the company was not having any business except running a hotel, but in possession of vast real estate. Hence the CLB held that instead of cash consideration being paid to the petitioners for their shares, the assets and properties of the company could be divided and properties to the extent of 44% given to the petitioners, it also held that determination of the value of the company as a whole and the value of the shares held by the petitioners could be done by an independent valuer. On the basis of valuation report the respondent could prepare two or three alternate packages of assets and properties to be given to the petitioners, and the petitioners could have the liberty to choose of the packages. Once the petitioners choose one of the packages, they will be no longer shareholders of the company and the company would reduce its share capital to the extent of 44% of the shares at face value,' (Emphasis supplied) The respondents in the written submissions have stated that in this case division of assets has been ordered as the....
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....ers of a company and can do all such acts and things that the company can do. A director as an individual has no power to act on behalf of the company except where the Board has delegated powers to him. The company must have the benefit of collective wisdom of the directors acting as a Board. But the exercise of such powers of the Board shall be in conformity with the provisions of the Company's Act or any other Act or memorandum, articles, regulations and resolutions of the company-in case of dispute the burden is on the company to prove delegation. The respondents have stated that this case is not applicable as the same relates to winding up. We are of the view that the cited case may relate to winding up but the portion cited above relates to the powers of Board of Directors, and is relevant in the present case. 30.5 RELIEF U/S 397 & 398 (A) Nafan B.V. v. SAF Yeast Co. (P.) Ltd. [2015] 64 taxmann.com 55 (Bom.); In this case the Bombay High Court noted that in the case of Sangramsingh (supra) the Apex Court determined the points for consideration. They were as regard the fiduciary duty of the Company Directors towards the shareholders and on facts whether there wa....
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....out in the rejoinder.'(Emphasis supplied). Furthermore, there are more reasons why reliance cannot be placed on the decision of Sangram Singh Gaekwad (supra), in the present case, the cause of action has been sufficiently pleaded in the petition for the relief that is sought. The decision of the Apex Court in Sangram Singh (supra) after taking review of the powers of the Board, has in fact emphasised that, looking at the nature of the proceedings, the Board will have to take into consideration the entire material on record. The other decisions cited by Mr. Dwarkadas, arise from either Civil Suit, Election Petition or a Writ Petition. The nature of jurisdiction exercised by the Board is very different from jurisdiction of the courts trying civil suit, election petition, and writ petition. It is not necessary to deal with these decisions arising under different jurisdictions, as in the case of Sangram Singh Gaekwad (supra) itself, the Apex Court. has emphasized the jurisdiction of the Board under the very provision in question, in the cases of oppression and mismanagement and has indicated that totality of the evidence must be looked at by the Board. (B) Bennet Coleman & Co....
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.... the position is clear that while acting under section 398 read with section 402 of the Companies Act, the court has ample jurisdiction and very wide powers to pass such orders and give such directions as it thinks fit to achieve the object and there would no limitation or restriction on such power that the same should be exercised subject to other provisions of the Act dealing with normal corporate management or that such orders and directions should be in accordance with such provisions of the Act. Once it is held that on a true construction that the court has the widest possible jurisdiction and ample powers to bring about the desired result, there would be no question of the court not being able to reframe or insert a new article which would be in conflict with some provisions of the Act Sections 397, 398 and 402, by their very nature and contents, indicate that they are intended to operate as express provisions to the contrary and would be covered by the phrase "save as otherwise expressly provided in the Act". In any case, the two sets of situations in which the provisions of section 255 and that provisions of section 397 and 398 read with section 402 would respectively op....
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.... of directors unless the power has been used for an ulterior motive or with an intent to defraud the company or to bestow an undue advantage to an outsider or in breach of the fiduciary duties of the directors." it is further stated in this judgement that "it has been held that commercial misjudgements will not amount to oppression even if they have adverse effect on the price of the shares of the company. (Rutherford, in re (1994) BCC 876.) The Supreme Court has observed in the celebrated Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1991] 51 Comp case 743 (SC) that, inefficient or careless conduct of a director can give rise to a claim u/s 397 unless the conduct is one which lacks probity or a conduct which is unfair.' It is further stated in the same judgement that (where) the requirements of all that sections are procedural, violation of which cannot lead to a confusion that such violations are prejudicial to the interest of the company or public interest. Most of these sections provide for penalties for violation and are compoundable - the petitioner has relied on Akbarali A. kalvert v. Konkan Chemicals (P.) Ltd. [1997] 88 Comp case 245 (C....
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....398 of the Companies Act. Reliance, in this connection, was placed on the case of Sheth Mohanlal Ganpatram v. Shri Sayaji Bhagwati J. (as his Lordship then was), white dealing with the applicability of ss.397 and 398, observed at page 813 as follows ....the power of the court under both the sections is confined only to making an order for the purpose of putting an end to oppressive or prejudicial conduct and the court cannot make an order setting aside or interfering with past and concluded transactions which are no longer continuing wrongs or giving compensation to the company or the aggrieved shareholders in respect of such transactions. 15. In that very case, it was also observed that the action of the directors, if it illegal or invalid may be challenged in a court of law by an appropriate action. The learned judge held that challenge to such an action was not appropriate under s.397 or 398 of the Companies Act. It was, of course, held that under s 397 or 398, action of the directors could be challenged if that action was oppressive to the minority shareholders or prejudicial to the interests of the company. In Kalinga Tube's case 1965 (35) Comp. Cas. 351 also it was ....
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....arch, 1977, by this court are relevant for deciding as to whether it is just and equitable to wind up the company or not. For the purposes of this petition, I am assuming that the principles laid down in Ebrahimi's case (1972) 2 All ER 492 apply and that it may be just and equitable to wind up the company. It might here be stated that this contention is controverted by the learned counsel for the respondents Nevertheless, merely because grounds or circumstances may justify a winding-up order being passed, that is not enough to entitle the petitioner to obtain relief under s 397 of the Companies Act". (D) Asoka Betelnut Co. Ltd. (supra) In this judgment it is stated that allegations in the petition must be specific along with proof. It is also stated that the respondent had made oral protests against the irregularities but there was no evidence regarding the same. It is also stated that failure to declare dividends does not amount to oppression and mere dissatisfaction to the minority does not justify interference by the court (vide V J Thomas Vettom v. Kuttand Rubber Co. Ltd. [1984] 56 Comp. Cas. 284 (Ker.). In this judgement CLB has also relied on Kalinga Tubes Ltd. (sup....
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....ec 314: The defence of the respondents in this regard is that the petitioner No.1 was present in the meeting of the board of directors where such persons were appointed and P-1 had also signed the balance sheets of the company tiff FY 2005-06. It is also stated that P-1 himself was a beneficiary of such violation as his son S. Mandeep Singh Grewal (R-10) was also drawing salary above the prescribed limits as per section 314 We have carefully examined the allegations in this regard and the response of the respondents. At the outset, it may be stated that section 314 is statutory, and its violation cannot be permitted on the basis that P- 1 had waived the same as he had knowledge of the same, or was also benefitted by the same violation. Violation of sec. 314 is a statutory violation and creates an illegality which cannot be permitted by using the doctrine of waiver and acquiescence. This is more so, as sec 314(2) provides that such employment is to be approved by way of special resolution passed at the general meeting of the company held for the first time after the holding of such office or place of profit. It is further provided that such consent may be obtained within three....
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....n and labour welfare. The respondents have produced the attendance sheet of Ludhiana unit for the month of January 2007 where she has been shown to be present while her TA/DA bill show that she was in Delhi from 01.01.2007 to 23.01.2007 and then again from 23.1 2007 to 26.1.2007. In this regard, the respondents have stated that it was the practice of the company to mark the presence of working directors in the Ludhiana unit regardless of the fact as to where or in which branch/office they were actually working. The respondents have also said that P-1 was present in both the meetings of September 2001 and December 2006 when the resolution for her appointment was .passed unanimously. It is also noted that she has passed away during the pendency of petition. In view of the above facts and circumstances and the fact that the petitioners did not raise the question of her being paid salary as a working director, without doing any work for the company till the filing of the petition and also the fact that the said director has since passed away, this allegation is dismissed. b. Improper appointment of S. Gurparshad Singh Grewal (R-7) and Ms. Kushal Grewal (R-8). These allegations we....
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....ed that there is no such practice in the company or stipulation regarding appointment of only the senior most person as managing director. Directors and managing directors are appointed by the shareholders/members of the company. R-3 was appointed first as additional director and then as a managing director in the meeting of board of directors and the resolution for his appointment was approved in the EOGM/AGM dated 15.12.2006 and 11.01.2007 respectively. Accordingly, we hold that there is no infirmity In the appointment of R-2 and R-3 as managing director and the allegation regarding the same is dismissed. 1.5 Rejection of appointment of S.Ashok Singh Garcha (P10) as whole time director, This allegation was raised in the pleadings. P-10 is stated to be representing the group of shareholders namely Garcha family who hold the maximum shares in the R-1 company. P-10 has been a director of the company since 2002 and his nomination for the appointment as whole time director was rejected in the meeting of Board of Directors held on 10.01.2007, The respondents have argued that S.Ashok Singh Garcha is having his own business of manufacturing of agricultural implements. We do not think ....
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....ions, it is being discussed. The petitioners have alleged that the debt of Rs. 7.22 crores was written off to get the benefit from the Income-tax Department. The respondents have stated that P-1 was in the management of the company when these debts were written off and had signed the balance sheets as Joint Managing Director. It is also stated that P-1 had recommended writing off the same and was also negotiating for recovery of the same. Though the writing off of these debts was accepted by the Income-tax Department, some recovery has since been made. Again, the argument that this is a business decision has been raised. The respondents have argued that in view of the fact that P-1 was a party to the decision to write off these debts, the same cannot be is challenged. P-1 has raised the argument that he is only one of the petitioners out of 36 petitioners (now 32) and holds only 2.71% of the total shareholding of the R-1 company as compared to 2674% shareholding of all the petitioners. Thus, he states that his having been a part of the decision should not act as a bar for other petitioners to raising the same. Writing off of debts is an accepted business practice to sho....
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....ce Sujata Manohar in the case of Khimji M Shah v. Rattilal Damardardas Modi 1987 (3) Bom. CR 236 did not agree with the contention that the words "up to the date of petition" suggested that the only conduct up to the date of the petition can be looked at in such a petition. The Bombay High Court held that the judgments in re Shanti Prasad Jain (supra) pointed out that there should be a course of conduct which could be considered as oppressive to some of the members, burdensome, harsh and wrongful and such conduct should continue till the date of the petition and the judgement does not deal with any subsequent conduct after (he date of filing of the petition. "The judgement does not deal with any subsequent conduct after the filing of the petition. It merely says that if there is no such conduct continuing fit the date of the petition, the petition would fail. From this a conclusion cannot be drawn if there is any subsequent of acts of oppression or mismanagement after the date of filing of the petition, those cannot be incorporated In a petition by way of amendment" (emphasis supplied). The Bombay High Court, subsequently observed in re Khimji M. Shah (supra) "Under Rule 6 of the C....
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....pplication has to be decided on the basis of the facts as they were when, the application was made." The Hon'ble Bombay High Court did not agree with the submission of the respondent's counsel as the Division Bench of High Court had permitted the appellant to amend the petition before the CLB. "The appellant was thus allowed to include events subsequent to the filing of the petition. The Hon'ble Bombay High Court held that "it is possible for the Court to avoid multiplicity of proceedings by holding that the proceedings (i.e. the petition u/s 397) on the amended grounds of oppression instituted on the date on which the amendments were allowed. So construed, the court would be entitled to take into consideration the oppressive actions up to the date of amendment and avoid multiplicity of litigation." The Bombay High Court in the case of Jer Rutton Kavasmaneck v. Gharda Chemicals Ltd. (2001) CC25 held that in a petition for relief under Section 397 of the Companies Act, 1956, it is permissible to bring on record by amendment not only the facts pertaining to the events upto the fifing of the petition but also subsequent events. The said judgment stated that "there is no....
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.... be considered provided the same are further acts that amount to oppression and mismanagement and are connected to the original cause of action and not the fresh cause of action. As observed by the Bombay High Court in re Jer Rutton (supra) there is no need of amendment of petition. We have gone through the list of subsequent events filed with CA 75/2014 and find that most of the so called subsequent events are connected With the allegations made in the original petition. The caveat filed by the respondents in this regard has been discussed in detail for each of the subsequent events alleged in CA 75 above. This discussion is not being reproduced for the sake of brevity. It is seen that these instances are connected to the cause of action detailed in the main lis, and they are in continuation of the alleged instances of oppression and mismanagement. As for the instances listed in the main petition, the petitioners have claimed that these actions were chiefly business and management decisions and do not come under the purview of Sections 397 and 398. The subsequent events filed by CA 75/2014 are being considered as they ace also connected with the instances of oppression and mismana....
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....eturn may be by way of dividends and/or remuneration and perquisites paid to members of the company who may be employed as Directors and/or as salaried employees In the instant case we observe that the returns to the minority group have been systematically whittled away by subsequent non-payment of dividends. The number of Directors and salaried employees from the minority group have also been reduced. Hence while the Directors and the salaried employees from the majority group are getting increasing salary income as well as perquisites, the same for the minority group have been reduced. This shows that there is some truth in the allegation of oppression and mismanagement The CLB Mumbai Bench, in the case of Tushar Clothing (P.) Ltd. v. Ramesh D Shah[2016] 59 taxmann.com 300/132 SCL 646 had held that even if in the opinion of the CLB, no case of oppression is made out under sections 397 and 398, the CLB in the exercise of its rights and powers u/s 402 of the Companies Act, 1956, is competent to direct the respondents to buy out the shares of the petitioners at a fair price to be determined by an independent valuer. 3.2 After considering all the pleadings, averments, replies, ....
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.... of the Tribunal while adjudicating applications under sections 397 and 398. 3.3 The petitioners have also argued that the reliefs sought for pertaining to refund of money into the coffers of the company, and initiation of prosecution of the directors and reconstitution of the Board are granted to them. We have already held in para 1 above that emoluments paid in violation of sec.314 till the date of waiver obtained by the company should be recovered from the delinquent directors/employees, The other alleged acts of siphoning of funds have not been proved by the petitioners. The decision to purchase the second hand 22-inch rolling mill.-or purchase of scrap, taking of loans, purchase of fixed assets, etc. and alleged destruction of assets of the company have been cited by the petitioners as instances of fraud by the respondents. The respondents have given detailed explanations for each of the same and have reiterated that all these acts were business decisions and cannot be adjudicated upon by the CUB/Tribunal. In this regard, the following judgements have been cited. Maharashtra Power Development Corporation Ltd.'s case (supra) 3.4 The petitioners have also raised the is....
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....any, though indirectly via sale to Sherpur Small Scale Industrial House Bldg. Society Ltd, which transferred the same to the R-1 company. 3.7 The petitioner company has requested the Tribunal to direct demerger of assets between the shareholding group of petitioners and the majority. They have cited case laws in their favour namely, K.N.Bhargava (supra) and T. Ramesh Pai (supra). The petitioners have stated that they question the averments of the respondents that the company is a going concern as they themselves had given a project report for relocating the factory from the existing premises so that a land bank could be created. They have stated that the company has 37 acres of land and certain areas are lying absolutely vacant. They have further stated that with minor relocation of the machinery within the premises, vacant land commensurate to the shareholding of the 'petitioners can be created for the purposes of demerger. The respondents have objected to this proposal of demerger on the ground that R-1 is not a real estate company and that its assets particularly land cannot be divided. It is seen that in the case of T. Ramesh Pai (supra), it was not a case of a real esta....
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..... Holiday Inn, Mahipalpur, New Delhi 110037 is appointed from out of the list of valuers submitted by the petitioners and agreed to by the respondents, as an independent valuer for fair value of the shares held by the petitioners of the company. The cut- off date for determining the value of the shares will be 31.3.2007 i.e, the date nearest to the filing of the petition. While computing the share value, the Valuers Shall also consider the asset based valuation as the Respondent Company has a large asset base. C. The date of filing of the petition is April 2007. Hence, the said valuer will find out the fair value of the shares of the company as on 31.3.2007 on the basis of going concern by all recognised methods and applicable rules and regulations as applicable on the said date in this regard. The respondent company is being managed by the respondents only since the filing of the petition and thus, they are alone responsible for any increase or decrease in both the profitability and liability of the company. As the date of valuation is almost 10 years ago, the fair price of the shares of the petitioners shall be enhanced by compound interest payable at the bank rate enhanced by....