TaxTMI 
TaxTMI 
2018 (11) TMI 936
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....(OS) 51/2018 is filed by the plaintiff seeking a decree of permanent injunction to restrain the defendants, their associates, shareholders etc. from acting in contravention of the family settlement dated 2.12.2017 and 09.12.2017. A decree of declaration is also sought to declare that the notices dated 19.1.2018, 24.1.2018, 25.1.2018 and 29.1.2018 issued by the defendants under Section 100 of the Companies Act, 2013 in respect of the plaintiffs No.4,9,14 and 15 are null and void and unenforceable being in contravention of the Family Settlement. A decree of mandatory injunction is also sought directing appointment of KPMG or any other similar agency to effectuate the Family Settlement and disgorge the shares/interests of each group from the other. Other reliefs are also sought. 2. When the above matter came up for hearing on 7.2.2018 this court had in IA No. 1854/2018 restrained the defendants from giving effect to the aforenoted notices dated 19.1.2018, 24.1.2018. 25.1.2018 and 29.1.2018. 3. Subsequently, the plaintiff filed the second suit CS (OS) 100/2018 titled Dinesh Gupta and Others vs. Anand Gupta and Others. Shri Anand Gupta is the elder brother of the parties, namely, ....
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.... injunction restraining defendant No.2, its associates, agents, employees etc or anyone acting on its behalf from enforcing or utilizing the shareholders rights in plaintiff No.4 company, i.e. M/s R.N. Technobuild Pvt. Ltd. to breach the family settlement including right, title or interest of the plaintiff Nos.1, 2, and 3 in plaintiff No.4. A decree of declaration is also sought declaring notice dated 16.2.2018 issued by defendant No.2 Bechu Singh HUF under Section 100 (2) of the Companies Act, 2013 in respect of plaintiff No.4 as null and void and unenforceable being in contravention of family settlement. Other connected reliefs are also sought. Alongwith suit CS(OS) 101/2018, IA No.3241/2018 was filed under Order 39 Rules 1 and 2 CPC. Notice was issued in the said application on 14.03.2018. 5. The case of the plaintiff, i.e. Sh. Dinesh Gupta is that around 1992 Sh. Rajesh Gupta and the plaintiff i.e. Sh. Dinesh Gupta started participating in the family business of their late father Mr. R.K.Gupta. The family also ventured into real estate which flourished. It is stated that over a period of time disputes arose between the two groups after August, 2017. A broad settlement was en....
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....tors of BDR Builders and Developers Pvt. Ltd.. Other such notices have also been sent seeking an AGM to be called for removal of some of the other Directors. Hence, it is pleaded that the intention of the defendants, is to usurp the movable and immovable properties owned and controlled by entities/companies which are coming to the share of the plaintiff under the family settlement. Hence, the present suits were filed. 6. Defendants No.1 to 3 in CS(OS) 51/2018 have filed a written statement and have taken the following preliminary objections to the present suit:- (i) The suit is simplicitor for injunction and declaration without seeking specific performance of the family settlement and is hence barred under the Specific Relief Act. (ii) The suit for declaration and injunction simplicitor is not maintainable without asking for consequential reliefs. (iii) The suit is barred under section 430 of the Companies Act, 2013 as the plaintiffs have sought declaration in respect of notices sent for mismanagement and oppression under section 100(2) of the Companies Act, 2013. (iv) It is an admitted fact that the plaintiff and Sh.Rajesh Gupta had entered into the family settlemen....
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....iew the judgments of the Supreme Court in Kale & Ors. vs. Deputy Director of Consolidation & Ors., (1976) 3 SCC 119 and S.Shanmugam Pilai & Ors. vs. K.Shanmugam Pillai & Ors., (1973) 2 SCC 312. (iii) That the steps taken by the defendants are in direct contravention of the settled legal position and seek to resile form the family settlement. Hence, it is pleaded that the interim order dated 07.02.2018 be confirmed for all three suits. 9. Learned senior counsel appearing for the Rajesh Gupta Group has pleaded as follows:- (i) It is pleaded that there is no power in a Civil Court to grant an injunction to injunct the majority shareholders from calling an extraordinary general meeting. Reliance is placed on the judgment of the Supreme Court in Life Insurance Corporation of India vs. Escorts Ltd. and Others, AIR 1986 SC 1370. Hence, it is pleaded that this court cannot pass the said injunction as done on 07.02.2018. (ii) In the facts of this case keeping in view the provisions of the Specific Relief Act the suit as framed is not maintainable. A suit for declaration without consequential relief would not lie. (iii) It is further pleaded that the plaintiffs is only seek....
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....g for the defendants for grant of interim orders in favour of the plaintiffs. I. THIS COURT HAS NO JURISDICTION TO PASS AN INTERIM ORDER IN VIEW OF THE BAR UNDER SECTION 430 OF THE COMPANIES ACT, 2013. 13. The first submission that was vehemently urged before this court was that this court does not have jurisdiction to adjudicate the present suit. Reliance was placed upon section 430 of the Companies Act, 2013. The plea was that, as the notices have been sent for mismanagement and oppression under section 100(2) of the Companies Act, 2013 this court does not have jurisdiction to adjudicate the present suit. 14. Reference may be had to Section 430 of the Companies Act, 2013. The said section 430 of the Companies Act, 2013 reads as follows: "Section 430: Civil Court not to have jurisdiction No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power confer....
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....requisite Form DlR12 with the office of the Registrar of Companies in respect of the aforesaid appointment and to do all such other acts, deeds and things as may be considered necessary or incidental thereto." 2. "RESOLVED THAT in pursuance to Section 152(2) of the Companies Act, 2013, Mr. Shashank Gupta be and is hereby appointed as director of the Company. "RESOLVED FURTHER THAT Ms. Uma Sharma, the present Company Secretary or any of the Directors or the Company Secretary at the relevant time, be and are hereby directed and authorised singly and severally to file the requisite Form DlR12 with the office of the Registrar of Companies in respect of the aforesaid appointment and to do all such other acts, deeds and things as may be considered necessary or incidental thereto." 3. "RESOLVED THAT in pursuance of Section 169 of the Companies Act, 2013, Mr.Dinesh Gupta be and is hereby removed as the Director of the Company with immediate effect. "RESOLVED FURTHER THAT Ms. Uma Sharma, the present Company Secretary or any of the Directors or the Company Secretary at the relevant time, be and are hereby directed and authorised singly and severally to file the requisite Form DlR....
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....ting pursuant to Special Notice dated 8.7.2017 received from a member of the company proposing to remove a Director of the company. The learned Single Judge passed an interim order holding that permitting the defendants to convene any Board meeting or an AGM and passing the resolution as proposed would cause irreparable loss and injury to the plaintiff who would then be removed from the Board of Directors of the company and restrained the defendants from acting upon the notice dated 8.8.2017 and resolutions passed in the consequential meeting dated 26.8.2017. In this background the Division Bench held as follows:- "118. We are constrained, therefore, to observe that it is not possible to accept Mr. Chandhiok's submission that the reliefs claimed by the plaintiffs in CS (OS) 285/2017 fall, statutorily, within the purview of jurisdiction of the NCLT. 119. There is, in fact, no provision, in the Act, whereunder the claim contained in CS (OS) 285/2017, as made by the plaintiffs - irrespective of the merit or demerit thereof - could have been preferred before the NCLT. No case of exclusion of the jurisdiction of the Civil Court, under Section 430 of the Act or, consequently, u....
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....ended that his name was proposed to be included, in the said meeting, as one of the directors scheduled to retire the rotation, even though, in his submission, he was not so due for retirement. Mr. Kaushik, therefore, filed a suit in the Court of the Subordinate Judge, for a declaration that he was the Director of the company and that the election, held on 30th December 1967 was illegal, ultra vires and void. Consequential relief, by way of permanent injunction restraining the defendants from interfering with the management of the company, or for allowing Mr. Kaushik to act as director, was also sought. An application for interim relief, under Order XXXIX of the CPC, was also filed therewith. The company (who was the revision petitioner before the High Court) raised a preliminary objection to the effect that the jurisdiction of the civil court, to adjudicate on the matter, stood ousted by Section 9 of the CPC read with Sections 398 and 402 of the Act. These provisions, it may be noted here, were somewhat parallel to Section 241 and 242 (2) of the present Act. Consequent on a detailed discussion, the learned judge held that the civil court had jurisdiction to try the suit. Significa....
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.... the shares of Escorts Ltd. an Indian company by thirteen Overseas Companies. Majority of the shares in the overseas companies were owned by Caparo Group Ltd. The Board of Directors of Escorts Ltd. passed a resolution refusing to register transfer of shares. A writ petition was filed that challenged the validity of certain RBI circulars/press notes which dealt with a portfolio investment scheme by NRI, governed under Foreign Exchange Regulation Act, 1973. The said scheme allowed overseas companies, owned by Non-residents of Indian nationality / origin to own shares to enable them to invest in the shares of an Indian company. 21. The Supreme Court held as follows: "100. Thus, we see that every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to call an extraordinary general meeting in accordance with the provisions of the Companies Act. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolutions proposed to be moved at the meeting nor are the reasons for the resolutions subject to judicial review. It is true that under Section 173(2) of the Companies Act, then sha....
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.... next deal with the submission of the defendants that other than Sh. Rajesh Gupta and Sh. Dinesh Gupta, no other family members have signed the Family Settlement. That apart, it has been strenuously pleaded that the subject matter of the Family Settlement includes companies which comprise of large number of individual share holders other than family members of Sh. Rajesh Gupta and Sh. Dinesh Gupta. Some of individuals are the defendants in the other two suits, namely Sh. Anand Gupta and Sh. Bechu Singh, etc. In addition, none of the corporate entities are a signatory to the Family Settlement. Hence, it had been pleaded that none of these entities are bound by the Family Settlement. Further without their participation the settlement cannot be implemented as full control of the companies cannot vest in a particular group. 25. The plaintiffs have countered the said submissions stating that all the parties have taken steps to implement the Family Settlement. Reference was made to the various steps taken by the individuals, including tendering of resignation from some of the companies as directors and transferring of shares in the companies which belong to different groups. 26. Re....
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....ny condition, or barrier in the form a necessity to involve all members of a family. If the disputes are inter se as between two members, there is no bar to the designation of their settlement as a family arrangement or settlement. It has the objective of orderliness in the title of each member of the family and crucially, ensures peace and harmony amongst all of them. In S. Shanmugam Pillaiv. K. Shanmugam Pillai (1973) 2 SCC 312: AIR 1972 SC 2069, the Supreme court pertinently held as follows: "To consider a settlement as a family arrangement, it is not necessary that the parties to the compromise should all belong to one family. As observed by this Court in Ram Charan Das v. Girijanandini Devi [1965] 3, S.C.R. 841, the word "family" in the context of a family arrangement is not to „be understood in a narrow sense of being a group of persons who are recognised in law as having a right of succession or having a claim to a share in the property in dispute. If the dispute which is settled is one between near relations then the settlement of such a dispute can be considered as a-family arrangements' See Ramcharan Das's case (supra)." 32. Thus, even a wider body of pers....
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..../2018 would show that the plaintiffs have raised the plea that pursuant to the rough settlement arrived at, the parties to the suit have taken various steps including resignation from the Board of Directors of various companies and also transfer of shareholdings of various companies. These steps were taken to ensure that management of various companies is handed over to that group to whose share the said company was to go to under the settlement. Subsequent to these transfers, the Family Settlement has taken place on 02.12.2017 and 09.12.2017. It has been reiterated that transfer of shares and resignation of the directors was in consonance with the terms of the Family Settlement. 30. The defendants have in written statement denied the said averments of the plaintiffs. It is denied that the said transactions have taken place pursuant to any understanding with the plaintiffs. 31. In my opinion, in the facts of this case, the written statement filed by defendant Nos.1 to 3 in CS(OS) 51/2018 is evasive. In fact, no logical explanation is given in the written statement as to why such resignations/transfer of shares took place if there was no settlement. Prime facie, it appears tha....
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....he case of ordinary compromise between strangers, do not equally apply to the case of compromises in the nature of family arrangements. Family arrangements are governed by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties, originating in mistake or ignorance of fact as to what their rights actually are, or of the points on which their rights actually depend. The object of the arrangement is to protect the family from long drawn litigation or perpetual strifes which mar the unity and solidarity of the family and create hatred and bad blood between the various members of the family. Today when we are striving to build up an egalitarian society and are trying for a complete reconstruction of the society, to maintain and uphold the unity and homogeneity of the family which ultimately results in the unification of the society and, therefore, of the entire country, is the prime need of the hour. A family arrangement by which the property is equitably divided between the various contenders so as to achieve an equal distribution of wealth instead of concentrat....
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....ch would be fatal to the validity of similar transactions between strangers are not objections to the binding effect of family arrangements. 10. In other words to put the binding effect and the essentials of a family settlement in a concretized form, the matter may be reduced into the form of the following propositions: (1) The family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family; (2) The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence; (3) The family arrangements may be even oral in which case no registration is necessary; (4) It is well settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the Court for making necessary mutation. In such a c....
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....ces which have to be done by the plaintiffs pursuant to the Family Settlement. In response to the said communication, the learned counsel for the plaintiffs sent a letter on 07.04.2018 stating that some of the transactions stated by the defendants were disputed or accepted partially. For some of the transactions, the learned counsel for the plaintiffs has said that the plaintiff was willing to do the stated acts subject to the condition that shares in respect of the companies falling to the share of Dinesh Gupta Group be transferred by Rajesh Gupta Group to the Dinesh Gupta Group. 36. Prima facie, from the above communications exchanged between learned counsel for the parties, it appears that the terms and conditions of the Family Settlement are capable of being performed and the Family Settlement cannot be said to be suffering from the vagueness or uncertainty. There may be some grey areas in the Settlement but these could be resolved in the course of adjudication. The defendants themselves have spelt out the steps the plaintiffs have to take to implement the Family Settlement. There is no merit in the said plea. IV. WHETHER THE RELIEF SOUGHT IS BARRED UNDER THE SPECIFIC REL....
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....ecuting any proceeding in a court not subordinate to that from which the injunction is sought; (c) to restrain any person from applying to any legislative body; (d) to restrain any person from instituting or prosecuting any proceeding in a criminal matter; (e) to prevent the breach of a contract the performance of which would not be specifically enforced; (f) to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it will be a nuisance; (g) to prevent a continuing breach in which the plaintiff has acquiesced; (h) when equally efficacious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust; [(ha) if it would impede or delay the progress or completion of any infrastructure project or interfere with the continued provision of relevant facility related thereto or services being the subject matter of such project.] (i) when the conduct of the plaintiff or his agents has been such as to disentitle him to the assistance of the court; (j) when the plaintiff has a no personal interest in the matter." Hence, it would follow fr....
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....me of the other judgments in this regard. In Anathula Sudhakar vs. P.Buchi Reddy (D) By LRs. & Ors., (2008) 4 SCC 594 the Supreme Court held as follows:- "21. To summarise, the position in regard to suits for prohibitory injunction relating to immovable property, is as under: (a) Where a cloud is raised over the plaintiff's title and he does not have possession, a suit for declaration and possession, with or without a consequential injunction, is the remedy. Where the plaintiff's title is not in dispute or under a cloud, but he is out of possession, he has to sue for possession with a consequential injunction. Where there is merely an interference with the plaintiff's lawful possession or threat of dispossession, it is sufficient to sue for an injunction simpliciter. (b) As a suit for injunction simpliciter is concerned only with possession, normally the issue of title will not be directly and substantially in issue. The prayer for injunction will be decided with reference to the finding on possession. But in cases where de jure possession has to be established on the basis of title to the property, as in the case of vacant sites, the issue of title may directl....
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....imitation prescribed by law is void to that extent. The reason being that such an agreement is absolutely to restrict the parties from enforcing their rights after the expiration of the stipulated period, although it may be within the period of general limitation. But acceptance of that contention does not per force solve the controversy in this appeal. Section 34 of the Specific Relief Act provides that any person entitled to a legal character, or to any right as to any property may, institute a suit against any person denying or interested to deny, his title to such character or right, and the court may in its discretion make such declaration and the plaintiff need not ask for such relief. However, proviso to the said section puts the controversy beyond pale of doubt that "no courts shall make any such declaration where the plaintiff, being able to ask for other relief than a mere declaration of title, omits to do so". In other words, mere declaration without consequential relief does not provide the needed relief in the suit; it would be for the plaintiff to seek both the reliefs. The omission thereof mandates the court to refuse to grant the declaratory relief. In this appeal, ....
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....nts to instruct various financial institutions to reopen the mutual fund coming to the shares of the plaintiffs etc. 46. The plaintiff in the suit pending between two main parties, namely, Sh. Dinesh Gupta and Sh. Rajesh Gupta being CS(OS) 51/2018 seeks following reliefs: i) A decree of permanent injunction restraining the defendants, their associates, shareholders, agents, employees, servants, representatives and /or anyone acting on their behalf or connected with them from in any manner (directly or indirectly) acting in contravention with the Family Settlement dated 02.12.2017 and 09.12.2017 in respect of any rights, title and interest of the Plaintiff Nos. 1, 2, 3 in the Plaintiff Nos. 4 to 19 and proforma Defendants No. 38 to 44 including any right to the possess, control and manage such entities and similarly pass a decree of permanent injunction restraining the Plaintiffs from interfering in the rights, title and interest of the Defendant No.1 to 3 arising out of such Family Settlement dated 02.12.2017 and 09.12.2017. ii) A decree of declaration declaring that the notices dated 19.01.2018, 24.01.2018, 25.01.2018 and 29.01.2018 issued by the Defendants jointly or sev....
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.... parties to implement the family settlement are completely missing from the averments in the plaint. 49. Further, perusal of the pleadings and the communications between the learned counsel for the parties dated 04.04.2018 and 07.04.2018 would show that apart from the other steps the plaintiff has not issued the board resolution in favour of Sh.Rajesh Gupta for the purpose of pursuing litigation with respect to the immoveable properties which are vested in the Rajesh Gupta Group. Similarly, an irrevocable specific resolution of the companies vested in the Dinesh Gupta Group were to be given in favour of Rajesh Gupta Group to contest/pursue the cases of actionable claims of various companies which are falling to the shares of Dinesh Gupta Group though the actionable claim pertains to the share of Rajesh Gupta Group. No such resolution has been given by the plaintiff. The stand of the plaintiff in the said communication is that he is ready to pass the resolutions, on the conditions that with respect to the various companies falling to the share of Dinesh Gupta Group the shares be transferred by Rajesh Gupta Group. That apart the plaint admits that a sum of Rs. 11.28 crores(as per ....
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....parties shall challenge the terms of the settlement in any court, authority etc. 9. The cross holdings shall be mutually transferred between the parties on the basis of vesting of companies as detailed above and in a manner and at valuations which will lead to the entire capital distributed 50:50 between both groups detailed as above A and B. 10. The parties agree that the tax will be borne respectively by the respective parties as per Annexure-A &B. however, taxes pertaining to claims as per annexure E&F as list as per annexure H shall be borne by the respective beneficiary. 11. The parties shall cooperate with each other to implement the terms of this settlement. 12. That more than 100 Crores worth of actionable claims were held in excess by Dinesh Group which is to be reimbursed to Rajesh Group if received, Specific irrevocable resolutions of companies will be given to recover the actionable claims by Dinesh Group." It is the case of both the parties that this settlement does not itself transfer the right, title or interest in the shares/properties in favour of the respective groups. Steps would have to be taken by the parties to effectuate and implement the afore....
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....ttles disputes within the family should not be lightly interfered with especially if the settlement has already been acted upon by some members of the family. It is also settled that such settlements have to be treated differently from ordinary contracts and should not be lightly disturbed. In the present case the settlement has been partially implemented as noted above. If I were to vacate the interim order passed by the court on 7.2.2018 on the aforenoted grounds relating to the omissions of the plaintiff and also relating to failure to seek alternative efficacious remedy it would jeopardize the family settlement and complicate matters more. The family may further get embroiled in a complicated dispute which may get difficult to resolve. Presently, the suit is at the initial stage. Pleadings have just been completed. In my opinion, an opportunity should be granted to the plaintiffs to take steps to seek reliefs which will also have the effect of implementing the terms and conditions of the family settlement. Such a step would help resolve the conflict between the family and also help in implementing the terms and conditions of the family settlement. I order accordingly. 53. Ac....