TaxTMI 
TaxTMI 
2017 (6) TMI 525
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....ealed that Petitioner No.1 is daughter of Respondent No. 2 & 3 namely Mr. Manikrao Basappa Hamilapurkar and Mrs. Hemlatha M. Hamilapurkar. Facts of the case have also revealed that R-4 & R- 6 are brother and sister of Petitioner No.1. Respondent No.5 is wife of Respondent No.4. The composition of the Company thus clearly indicates that it is a family owned company. 2.3 The Petitioner No.1 is holding 2600 Equity Shares of Rs. 100/- each in the paid up Share Capital of the Company. In the Petition it is stated that the Petitioner No. 1 had earlier resigned from the Company on getting married in the year 1996, however re-appointed as Addl. Director on 2nd Nov. 2005. Later on she became a full fledged regular Director of the Company. 2.4 Petitioner No.2, husband of Petitioner No.1, is having 175 Equity Shares of Rs. 100/- each in the Paid Up Share Capital of the Company. 2.5 Respondent No.2 namely Mr. Manikrao Basappa Hamilapurkar, father of Petitioner No. 1 is holding 2959 (15.43%) Equity Shares of the Company. My attention is drawn on the fact that the Respondent No.2 has resigned on 16th Oct. 2013 as a Director from the Company. 2.6 Respondent No.3 namely Mrs. Hemlath....
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.... the next Annual General Meeting of the Company. He was appointed as Addl. Director in the month of Aug. 2013 and the AGM was to be held on 30th Sept.2013, however could not be held. As a result he was not authorised to put Digital Signature in respect of a meeting held in the month of Oct. 2013. 3.4 The third allegation is that the Respondents have sold the undertaking of the Company situated at MIDC, Kulgaon, Badlapur, Thane before resigning from the Directorship. The rights of the Petitioner has been oppressed. According to the Petitioners on inspection it was found that On the factory premises there was a sign board of "Horizon Industries" as per the Photograph annexed, instead the sign Board of the R-1 Company. Without the knowledge of the Petitioner either the Company was sold or the asset was given on lease. According to the Petitioner the value of the assets as per the Balance Sheet drawn on 31-03.2012 were to the tune of Rs. 1,81,98,547/- The allegation is that the Respondents have disposed off the assets and received about an amount of Rs. 1,65,00,000/-. 3.5 The fourth allegation is that the Respondents were in control of the affairs of the Company and in that capac....
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.... ultra virus and therefore null and void. (c) That the Respondents 2,3,4,5 6 and 7 be directed to make good the amount to the Company which they siphoned and diverted to their personal use. (d) Direct the Respondents 6 and 7 to refund the moneys to the Company which they received as remuneration or other wise for which they were not entitled. (e) Directions to pay remuneration as Directors to the Petitioners from October,2011 to their disassociation i.e. upto to March 2012. 5. From the side of the Respondent a detailed Reply is on record. The salient features of the reply viz-a-viz counter allegations are summarised below:- (a) The Petitioner has supressed the material facts by not disclosing the diversion of the business of R-1 Company to the Proprietary concern of the Petitioner namely M/s. Archana Corporation. The important details of the customers have been stolen from the records of the Company (R-1) and used for personal benefits. The design and patterns of R-1 have been misused by the Petitioner for the benefit of proprietary concern M/s. Archana Corporation. (b) Next counter allegation of the Respondents is that the reason for decrease in the Turnover was ....
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....mer had stopped business with R-1 company from March 2013. (d) After noticing the illegal act of the Petitioners a Criminal Complaint against the Petitioners was filed at the Powai Police Station for infringement of Copy-right Act and infringement of Information Technology Act, 2000. The Petitioner as a Director has misused and abused her position. The Petitioner had started a parallel business of her own which was not only in direct competition with R-1 Company but also misutilized the technology of R-1 Company. They have diverted the business of R-1 Company to M/s Archana. (e) In the Reply the Respondents have narrated the brief back ground that since 1983 the family was in the business of manufacturing and exporting of leather foot wear under the proprietary concern M/s Jay Components under sole Proprietorship of R-3. To further expand the business, this Company was incorporated in the year 21/04/1994 as " Arviyas Shoes Pvt. Ltd. R-2 (father) and R-3 (mother) were the promoters of the Company. The Company was manufacturing shoes, sandals, kid foot wears side by side out sourced some other leather products. In the year 1996 the Petitioner got married with P-2 thus resigned ....
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....g for the same with Practicing Company Secretary and Chartered Accountants 7. Mr. Rajesh Kashinath Gaikwad, Director (Petitioner No.2) Handling production, labour and labour issues and quality control. (f) At present the share holding pattern is stated to be is that R-2 is holding 2959 ( 15.43%), R-3 is holding 9708 ( 50.63%) and P-1 is having 2600 (13.56%). Respondent-4 became Director in 1994 and presently holding 3108 ( 16.21%) shares. R-5 is holding 375 (1.96%) and R-6 is holding 250 (1.30%) shares. (g) Next, in the Reply is it claimed that as per the statement of account the Company is to repay loan of Rs. 2,29,95,000/- to R-2 to R-4. To further expand the business a piece of land was taken on lease at Survey No. 68, Lonad, Bhiwandi, Thane. An amount of Rs. 45,00,000/-was spent to construct the shed, for installing transformer etc. For that reason a loan of Rs. 1.12 Crore taken from Central Bank of India by the Company. For obtaining loan the personal property of R-2 & R-3 as well A3 Unit MIDC was mortgaged. Due to sudden decline in the business, in and around 2012, loan could not be repaid to Central Bank Of India. To settle with the Bank and to foreclose the l....
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.... from Rs. 2,90,39,903/- to Rs. 1,93,05,343/- for that reason a meeting was called and the minutes of that meeting was duly circulated dated 5th September 2013. On internal investigation it was found that the Petitioners were secretly writing e-mails to the customers and suppliers and diverted the business of the Company to their own proprietary concern M/s Archana Corporation. To ascertain the fact, R-4 had inspected the Laptop of the Petitioners and found several such emails. The Petitioners have stolen the data of R-1 viz. list of customers, designs & patterns confidential details thus breached their fiduciary duties. (k) A meeting of the Board of Directors was held on 22nd August 2013 and resolved to appoint R-7 as Additional Director since he was associated with the Company for around 8 years and on the other hand P-2 was not attending the duty given to him. Hence it was decided to appointed an Addl. Director. On 16th October 2013 the Respondents - 2 to R-5 have tendered their resignations. In that meeting it was resolved that R-7 was authorised to file Form No. 32 with the R.O.C. and to do needful to give effect of the said resolution. On that day R-6 chaired the meeting, b....
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.... been settled first. (vi) That the Respondents, particularly R-4, had incurred heavy expenditure and money was siphoned to the tune of Rs. 87.98 lacs during the period of April 2013 to October 2013 despite there was no business activity. The Petitioner had raised objection somewhere in July 2011 and the dispute started. In fact R-4 had taken several wrong decisions which were objected by the P-1 being concerned about the accounts, which resulted into serious differences with R-4 and ultimately disassociation with him. He had not taken any interest in the business which started diminishing. Due to his adamant behaviour once he had decided to set-up a company in London which was ultimately closed but with a loss of setting up expenditure of about Rs. 12.90 lacs. Likewise it was decided to start another office at Vikhroli, Mumbai on a rented premises. Hefty rent of Rs. 75,000/- was paid but it was vacated after 2yrs with the waste of more than Rs. 16,30,000/- (vii) That the assets were sold and the amount was siphoned so it was reduced to an empty Company 'khoka'. The Respondents have not settled the payment of the labourer and told them to contact the Petitioners. By re....
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....s have made difficult to run the business and compelled the Directors to resign so that to have total control over the Company. However the Petitioners were never willing to undertake the responsibility to square-up the outstanding liabilities. The allegation of syphoning of the funds by the Respondents was baseless because the Respondents have advanced loan to the Company which was repaid to them out of the sale consideration received by the Company. Ld. Counsel has placed reliance on the following decisions:- (i) Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd. [1981] 3 SCC 333 (ii) Sangramsinh Gaekwad v. Shantadevi P. Gaekwad [2005] 57 SCL 476 (SC). (iii) Shanti Prasad Jain v. Kalinga Tubes Ltd. AIR 1965 SC 1535. 8. FINDINGS/JUDGEMENT :- Heard at length the arguments of both the sides in the background of the factual matrix of the case, compilation submitted, evidences annexed and case laws cited. It may not be out of place to mention at this juncture i.e. in the beginning of my findings that this case is one of the rare instance in which a daughter has filed a suit against her parents and brother. In general, my experience is that in I....
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....mpany. As a result, there is no logical basis to substitute or impose my decision on the majority decision of the Board. No interference is called for hence this objection is dismissed. 8.2 There is one more major allegation that most of the Directors i.e. R-2 to R-5 have resigned from the Company on 16th Oct. 2013 with an ulterior motive to leave Company after syphoning the assets of the Company. As far as the legality of the resignation is concerned the notice was found to be circulated and the quorum was complete as a result the legal formalities to convene a meeting have found to be complied with. The allegation of syphoning of the funds requires some deliberation. The Company was incorporated on 21st April 1994. R-2 was Promoter Director by holding 2959 Shares (15.43%) at that time. Likewise his wife R-3 was also a Promoter Director by holding 9708 shares (50.63%). Facts of the case have further revealed that R-2 was in the business of leather goods since 1983 by running his proprietary concern M/s, Jey Components. This Company was incorporated to expand the family business. Since the business was run by the father hence he had made the largest contribution towards the C....
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....desired results. In the business it is not always possible to earn profit out of each decisions. There is always an element of risk in running a business. In this regard a decision was taken by the Board of Directors to close the manufacturing unit situated at Lonad, Bhivandi, Dist- Thane(termed as Lonad Unit). That decision cannot be blamed merely because of the strained relationship and unsatisfactory business result. Rather it was found that father of Petitioner No.2 with whom the Company had entered into a lease contract had not cooperated. Be that as it was, the Respondents have issued the notices duly informing the convening of the said meetings and only thereafter the impugned decision was taken on due consideration of the business interest. In the absence of any contrary direct evidence against the said bona fide decision, no adverse view is legally justifiable. 8.4 There is one strong objection as well as allegation that a bad/illegal decision was taken to sale one unit situated at Plot A-3, MIDC, Badlapur, Distt- Thane (Termed as A-3 Unit). On careful examination of the background it was noticed that during the year 1995 to 2003 it was decided to expand the business he....
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....s the "Deed of Assignment" was executed and the amount of consideration received on sale of the said unit was stated to be duly recorded in the regular books of account of the R No.1. The facts and the corroborative evidence do not indicate that there was any mala fide on the part of the Respondents hence it is justifiable to hold that the impugned allegation is baseless; as a result dismissed. 8.5 The allegation is that the Respondents were controlling the affairs of the Company and in that capacity contravened certain provisions of Companies Act, 1956, such as not holding AGM within prescribed time. Since the Petitioners were also members of the Board then ought to have shared the responsibility. In the reply the Respondents have stated that the intimation well in advance was given to the Petitioners, however some times they have chosen not to appear in the Board Meeting. As far as the correct procedure was concerned the same was duly followed. Inter alia, rest of the decision whether to attend or not to attend any such meeting entirely depended upon the willingness of the Petitioners. The answer given by the Respondents is therefore convincing hence can be held that there was....
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....he family members are in general treated as a closely held Company having a characteristic of a Registered Firm. The Typical characteristic of a registered firm is that there is always a total existence of trustworthiness among the partners of a firm. It is to be quoted from a celebrated decision of Needle Industries (India) Ltd. (supra) The Company in substance, though not on Law, a Partnership". It is common in partnership that there should be utmost good faith between the constituent members. Hence on the same lines it is also expected from the shareholders/Directors of a Pvt. Ltd. Company to run the business in good faith and with fair motives. In a law abiding society it is expected from the stake holders of a Pvt. Ltd. Company to conduct themselves in fair and trustworthy manner. It can be added at this juncture that there is no harm in protecting one's own interest but that should not adversely effect the legitimate right of other members of a Company. 8.8 In this case on due analysis of the evidences an observation can be made that whether the Petitioners have acted throughout fairly/conscientiously ? It is worth to quote, "He who seeks equity, sine qua non, must do ....
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....ng the family members and also to strike a right balance among the rival parties, in my opinion, doctrine of Natural Justice demands to direct both the sides to respectively accomplish their part of duties. The litigation is old related to the events took place in and around the years 2011 to 2013 therefore as a consequence some of the relief sought have lost their significance by the passage of time Due to this reason it shall be more realistic to look for a wholistic solution. In my considered opinion the relief sought in this Petition can be addressed as under:- (a) The Petitioner is seeking direction to restore the Directors who have resigned from the Board of the R-1 Company. However in a situation when the family members are not keeping good relation, rather a Police Complaint was lodged, it is not worthy to force the Directors who have resigned to sit together with the Petitioners to run the company. This proposition is not suitable considering the background of the case. There is no harmony among the family members as is evident from the attempts of settlement made by the learned member of CLB in the past but all such efforts have gone in vain. The Petitioners at present....