TaxTMI 
TaxTMI 
2018 (8) TMI 1952
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.... Tribunal for adjudication and the company petition, as above, it should be mentioned is in itself a legacy passed on by the erstwhile Company Law Board to this Tribunal consequent to its formation on and from 01,06.2016. 2. In order to understand the background of the case and the complexities involved, it will be in order to first provide a genealogical tree which will explain the relationships of the parties inter-se, then to give out the facts and allegations to the extent in brief of the rival parties as can be culled out from the respective pleadings essential for the dispute on hand , their rival legal submissions as canvassed by the Learned Senior Counsels for the respective parties and of course the findings of this Tribunal in reaching the ultimate conclusion in relation to the lis. Family Tree in Brief Late Sir Sawai Man SinghJi W1 Murdhar Kanwar (Deceased) W2 Kishore Kumari (Deceased) W3 Maharani Gayatri Devi (MGD) S1-Lt.Col. Sawai Bhawani Singh Maharaj S2 Maharaj Jai Singh S3-Maharaj Prithvi Raj (R-2) S4-Maharaj Jagat Singh (Late MJS) D1-Smt. Prem Kumar W/o H.H.Baria (Since deceased) GS1-Vijit Singh (R-3) Minakshi Singh w/o....
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.... royal family of Jaipur and at the time of accession of the State of Jaipur to the Indian Union by the erstwhile princely state, was classified as a private property and not as a State property and that Late Maharaja Sawai Mansinghji father of Late MJS bequeathed it by way of a gift deed based on natural love and affection to Late MJS, father of the petitioners, and ever since the date of gift on 05.05.1956 it remained the exclusive property of Late MDS till his demise. With a view to run a hotel business and thereby commercially exploit it, Late MJS retaining it as his exclusive property, however decided to give it on a licence basis to the Company upon its formation in 1981. Subsequently an agreement was entered into between Late MIS and Indian Hotel Co. Ltd. (IHCL) to be used it as a Hotel with a Minimum Guarantee Payment by IHCL, the same being the only business income of the Company all along, and that all the other incomes earned only arising out of subsequent investments made in Fixed Deposits, Bonds and the like out of the said Minimum Guarantee Payment received year after year by the company and not otherwise. 8. The petitioners aver that in view of Late MJS being the e....
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....s of RI Company including the 2nd and 3rd respondent insisted on the production of succession certificate in relation to 5050 equity shares. The insistence of succession certificate on the part of the respondents, instead of transmitting the shares in accordance with Article 16 of the Articles of Association, delayed the succession to the 5050 equity shares of the 1st respondent company it is alleged. Further, in the meanwhile, it is also averred by the petitioners that no representation was also provided in the Board to the nominees of the petitioners thereby leading to a situation where the majority having a right to succession went unrepresented in the Board and thereby in the management of the RI Company, but on the other hand enabled 2nd and 3rd respondent having only 50 equity shares as their holding in the Company out of 5100 equity shares to effectively take control over the affairs of the RI Company and which position they manipulated in effect to gain control over the Company to the exclusion of the legal heirs of the deceased MJS, being the petitioners and their grandmother. The petitioner alleges that as an act of oppression, prior to the 11. resignation of Maharaja Dig....
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....ion Rs. 5,30,00,000/- was available in the form of balance with Scheduled Banks which seemed to have also been the position for the year ended 31.03.2002 and it is also stated that further investments had also been made out of accruals for the year ended 31.03.2002 in ICICI Bonds and hence in the absence of any business activity being carried, there was no requirement of any funds by way of share capital and the increase in the paid up capital in view of the above was not required at all. The increase in the authorized capital from to Rs. 1 crore on 27.03.2001 vide a special resolution passed in the Extra- ordinary General Meeting, enabling the respondents to subsequently increase the paid-up share capital as detailed above is also challenged as done without due notice and without prior intimation on the part of the respondents. 14. In addition to the oppressive acts coupled with mismanagement on the part of the respondents, it is also alleged that there have been siphoning off funds from 1^st respondent company by the other respondents to their personal accounts and of which, instances have been detailed in paragraph 8 of the petition to the effect inter-alia that though the Co....
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....g Rs. 6,59,31,947/- and that the said HUDCO Bonds had been pledged for the sake of loans availed by one Ram bagh Palace Hotel (P) Ltd under the control of Respondents 2 to 4 to ICICI Bank, without the consent of the petitioners nor in their interest or in the company's interest. It is also alleged by the petitioners that no consideration for allotment of shares by the respondents were given by them and in any case only by showing bogus expenses on the one hand and writing off sundry balance write off by way of mere entries in the subsequent years, the accounts have been manipulated to suit their convenience. 16. Thus effectively based on the above averments and allegations inter-alia, the petitioners have sought for the following reliefs, namely:- a) Set aside the Resolution allegedly passed in Extraordinary General Body Meeting of the Members of respondent company on 27.3.2001 to increase the Authorized share capital of Respondent no. 1 Company; b) Set aside the issue and allotment of 60,882 equity shares of Rs. 100/- each of Respondent no.1 on 28.4.2001 in favour of Respondents no.2 and 3 and direct that Registrar of Members shall be rectified to that ext....
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....n filed under Section 372 of Indian Succession Act, 1925 for grant of Succession Certificate in respect of debts and securities of Late MJS, jointly filed by the petitioners along with their grandmother MGD during her life time and filed by her in Case No.SA 134/1998 before the District Judge, Jaipur City, Jaipur has been enclosed and brought to the notice of this Tribunal, as well as other documents allegedly sent along with a covering letter under the hand of 2^nd respondent to the mother of the petitioners. 18. In relation to reply to the main company petition, a reply has been filed by the respondent company and perusal of the reply as filed by the Company raises a preliminary objection regarding the competency of the petitioners herein individually or jointly to maintain the petition as it is contended that they do not conform to the qualifying standards in relation to shares as prescribed under Section 399 of the Companies Act, 1956 on the date of filing the petition. In this connection it is also pointed out in the reply by way of preliminary submissions that, even assuming that the petitioners are entitled to the estate of Late MJS, all the legal heirs to the said Estate....
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....ssed without jurisdiction in view of the provisions contained under Section 213 of Indian Succession Act, 1925 read with the provisions of Section 57 of the said Act under which in order to prove a will, other than the territories specified therein to which it is mandatory and as the State of Jaipur does not come within the ambit of the said territories, proving a will by virtue of a probate proceedings is not compulsory and that even assuming that it is required, the same cannot be done without a categorical finding that the Will stands proved or not and hence the orders placed by the Petitioners with a view to bring to the notice of this Tribunal that they are entitled to the shares cannot be considered. It is also contended by the Company, being the 1^st respondent, that in the absence of any clear-cut division between the legal heirs, the order passed in the Succession Certificate cannot also be considered. 20. In addition to the grounds of non-maintainability of the petition arising out of non-compliance with Section 399 of the Companies Act, 1956, a ground based on limitation is also taken and it is contended that no pleading has been made as to how the cause of action has....
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....and also following the specific procedure prescribed taking into consideration the provisions of the Companies Act, 1956 and the Articles of Association of the Company and as per the decision of the Board on 27.03.2001 and as per the Schedule which is as follows:- a)Offer to existing shareholders on prorata basis of holding giving 10 days time 30.03.2001 b) Offer accepted by M.Prithviraj and Vijit Singh with 25% application money through cheque. 07.04.2001 c) Response by Estate of M.Jagat Singh through Rajmata Gayatri Devi who declined the offer as per her letter dated 10.04,2001 on behalf of Estate. 10.04.2001 d) In terms of Board decision un-subscribed portion offered to Maharaj Prithviraj and Mr.Vijit Singh. 12.04,2001 e) Confirmation by Maharaj Prithviraj and Mr. Vijit Singh with application money. 25.04.2001 f) Allotment of shares. 28.01.2001 g)Notice for balance call money 29.01.2002 h) Received call money through cheque 01.03.2002 23. Despite the offer on pro-rata basis of share entitlement being made to the Estate of Late MJS through MGD, since the same was not accepted in terms of letter dated 10.04.2001, the said portion ....
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....oppression and mismanagement has not been made out as against the respondents, in as much as mere allegations cannot be the basis for invoking the said provisions and claiming relief. On the contrary, the facts will vouch that the affairs of the 1st respondent company which was run by the 2 d and 3rd respondents even during the life time of Late MJS continued to be taken care of subsequent to his death as well, all being Indian Nationals and that the smooth running of the affairs of the 1^st respondent company should not be disturbed based on mere allegations, more so when the petitioners have failed to establish mismanagement of its affairs. In this connection it is also pointed out that the agreement entered with IHCL by the 1st respondent company has not been questioned by the petitioners and if that were so, it only leads to the conclusion that the business of the 1st respondent company is carried undisputedly well and no grievance as sought to be made out can arise. Further it is contended that no just and equitable clause for winding up the company has been made out and that mere personal animosity cannot be made a ground for filing the petition. 28. In relation to the pet....
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....courage foreign tourists to visit the palace and stay and as they had an onus to do so as per the understanding with not only the travel agents and tour operators but also with IHCL, the agreement holder managing the Hotel business and that these promotions as desired by the tour operators and agreement holder, namely IHCL has also resulted in the Minimum Guaranteed business profit being increased by 1.89 lac on 25.10.2008 due to the increased foot falls arising out of promotions and consequent increase in revenues. In relation to the company's legal expenditure incurred, it is contended in the reply Of respondents that it was incurred bonafide in relation to Urban Land Ceiling as well as encroachment issues of the immovable properties and towards income tax matters as well as company law matters and for other professional fees and that all such expenditures are duly supported by proper documents as well as approved by taxing authorities, 30. In relation to sundry expenses written off during financial year 2003-04 to the extent of Rs. 34.98 in the petition, it is stated that expenditure were incurred in relation to cremation expenses of Late MDS and further expenses incurred....
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....dents that the profit sharing ratio was fixed equally between Late MJS and 2^nd respondent who were the partners of the firm, that the firm itself was dissolved in terms of Dissolution Deed dated 01.06.1984, and in which it was agreed that the hotel business was sought to be done in the name of the Company incorporated in 1981 and in relation to the same Late MJS was to have 99% of the shareholding and which was also held by him till his life time, but however, which had been fraudulently converted into a minority holding because of it being enhanced to 65892 equity shares by respondents 2 and 3 allotting to themselves 60882 equity shares in the year 2001 and in the circumstances this petition. 35. Despite request for transfer or transmission by the legal heirs of Late MJS, including MGD, the petitioners contend that it was not done by the respondents and that a succession certificate was insisted and the legal heirs of Late MJS was hence compelled to file for grant of succession certificate which was also ordered by the District & Sessions Judge, Jaipur in relation to respective 1/3rd share in Case No. 134/98 dated 08.05.2009 and that subsequent to the said grant, MGD on 27.04.....
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....ed in Raj Kumar Dev Raj and another -vs- Jai Mahal Hotels P. Ltd and others reported in (2006) 134 Company Cases 405 (CLB) and it is contended that since it has also reached finality as no appeal has been preferred against the order in relation to maintainability passed by the CLB, the same cannot be again regurgitated at this stage. In relation to the minority of the petitioners, it is contended that the 2nd petitioner attained majority on 02.12.1997 and in relation to 1st petitioner it is stated that he attained majority on 12.01.1999 and that notices during their respective minority are to be given to the legal guardian under Section 6 of Hindu Minority and Guardianship Act and taking into consideration the same, notices, if any, should have been served during their minority on their mother under the law and subsequently on they attaining majority, to the petitioners individually and not as otherwise sought to be projected by the respondents in this regard of having given the offer to MGD, their grandmother alone and in the circumstances as no notices were given in a manner known to law to them all the meetings are required to be declared as null and void. Further in relation to....
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.... MJS as well as to gain the illegal control over the Company by induction of additional Directors from the family and friends of Respondent No. 2 and 3 and also by increasing the share capital of the Company and thereby the shareholding to the detriment of the Petitioners. It is further contended in the rejoinder by the Petitioners that the Respondents particularly Respondent No.2 is seeking to rely on the clauses contained in the partnership deed with a view to sustain their illegal allotment. It is further stated that the terms of the partnership deed are not relevant for the purpose of deciding the controversies between the parties and the same cannot be relied on in order to justify the illegal and mala fide allotment. The contention of the Respondents that late MJS was fond of his brother namely, Respondent No.2 herein is sought to be denied and it is also stated that the intention of Respondent 2 who is a family member in any case became mala fide after the death of late MJS. Further, it is also submitted that the illegal allotment had been done deliberately in order to keep away the Petitioners from the estate of the late MJS. It is averred that the will dated 23.6.1996 was ....
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....in full may not be a material criterion as there was no legal requirement for infusion of additional capital. It is also stated in relation to HUDCO Bonds that they have been pledged as security with ICICI Bank for loan availed by Rambagh Palace Hotel Pvt. Ltd. without consent and without taking any security from the said Company. 40. The legal heirs of late MDS have thus been completely excluded by the deliberate action of the respondents that too after filing an affidavit by Respondent No. 2 recognizing the Petitioners as the legal heirs of late MJS in the proceedings relating to succession. A repeated challenge is also mounted to the allotment of additional shares and it is contended that the same has been done with undue haste and that the letter dated 10.4.2001 is also fabricated and that the same could have been obtained, it is alleged by the petitioners due to misrepresentation by Respondent No.2. In any case it is also contended that MGD did not have the authority whatsoever to receive notice and issue the said letter. Respondent No, 2 has also failed to produce the letter of offer made to MGD and in the circumstances it is stated that the letter dated 10.4.2001 is forge....
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....ath one of the Petitioners was a minor and the other had just attained majority, and as both the Petitioners relied upon Respondent No.2 more so on the assurance of Respondent No.2 that their interest in the estate is being taken care of, they fully reposed faith in Respondent No.2, Further Clause 16 of the Articles of Association of the first Respondent Company also contains an obligation upon the Respondents to transmit the shares to the legal heirs. It is further averred that the Succession Certificate and the application to obtain it was also deliberately delayed by Respondent No. 2 who represented that he was pursuing the matter. Further, at the relevant time the Petitioners were ignorant or oblivious to the oblique motive of Respondent No.2 to grab the estate of late MJS to the exclusion of his legal heirs. The Power of Attorney given by late MJS and of Which it is sought to be relied upon by Respondent No.2t it is contended by the Petitioners is of no relevance to the case on hand. It is further denied in the rejoinder that late MJS wanted Respondent No.2 to continue to run the affairs of the Company after his death. 44. In relation to the suppression of material facts, i....
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....n the instant company petition was completed in the year 2010, however from the records it is seen that there had been a lull in the proceedings due to an order of stay granted by the erstwhile CLB based on an application filed by the respondents in CA No.272 of 2010 on 16.03.2011 in view of the disputes regarding entitlement of the shares, standing in the name of Late Maharaj Jagat Singh in the books of the 1st respondent company, are settled, 48. However, by virtue of an application filed in CA.No.239/C-II/2015, the petitioners have brought to the notice of the CLB that the stay granted vide order dated 16.03.2011 under the circumstances stated therein is no more prevalent in view of the decisions rendered by the Hon'ble High Court, Delhi in CA (SB) No.25 of 2011 on 12.12.2012 as well as subsequently by the Hon'ble Supreme Court thereafter on 23.09.2015 whereby, inter-alia, the issue of 5050 equity shares being a part of the estate of Late MJS and as to its succession in favour of the petitioners, being the only persons entitled to it is no more res-integra and in the circumstances the instant petition is to be taken up for final hearing and adjudication. Based on the ....
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.... and as rendered by the Hon'ble Supreme Court which after a detailed consideration of the facts leading to the filing of the SLP and those connected therewith in Civil Appeal No. 7914 of 2015 (arising out of SLP (CIVIL) No.4384 of 2013), including the challenge meted out to the proceedings concerning the probate of the will of Late MJS and the succession certificate obtained by the legal heirs of MJS summed to the following effect: 22. We sum up our conclusions as follows: - (i) LMJS executed will in favour of his mother- GD which is not in dispute; (ii) GD and DR jointly obtained succession certificate; (iii) GD signed the transfer deeds and communicated the same to the Board of Directors; and (iv) The civil court vide order dated 28th July 1991 declined to grant temporary injunction finding no prima facie case against the succession certificate The argument put forth by the Learned Senior Counsel for the petitioners in this regard is that the judgement of the Hon'ble Supreme Court as well as the Hon'ble High Court of Delhi should be read in totality and if the same is done, then it will be e....
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....l/ payments made, or dealings had, in good faith in respect of such debts or securities to or with the person to whom the certificate was granted." 30. Admittedly a joint Succession certificate was issued on 19.02.2009 in favour of Gayatri Devi, Dev Raj and Lalitya Kumari. A succession certificate issued by the competent Court is a conclusive evidence of the fact that the person in whose favour a succession certificate has been issued is the successor of the moveable estate of the deceased to that extent. Xxxxx 38. Having considered carefully, the facts of the present case and the nature of the allegations made by the respondents, it is clear that the alleged disputes raised by the respondent group in so far as the rectification issue is concerned ore all illusory. Admittedly these shares were in the name of Jagat Singh who had bequeathed them to his mother Maharani Gayatri Devi and she in terms of a settlement arrived at between her grandchildren followed by her Will had bequeathed the said share holding thereafter in favour of her grandchildren i.e. the petitioner group. The respondents who were the cousins of Jagat Singh are not even claiming as legal heirs ....
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.... to the is finally decided by the Hon'ble Supreme Court of India. This finality is borne out on the fact that eventually 5050 shares were transmitted to DR Group in September, 2015 on the basis of the final judgement of the Hon'ble Supreme Court of India. Having enjoyed the title of shares in terms of the judgement of the Hon'ble Supreme Court, DR Group now cannot argue that they are having the interest in the shares from the date of the death of LMJS, particularly in the teeth of the findings given by the Hon'ble Supreme Court of India. Their claim of interest in shares from the death of LMJS need to be rejected in view of findings of Hon'ble Delhi High Court and Supreme Court. 54. The fulcrum of defense respondents questioning the maintainability of this petition lies in the above paragraph. At first blush the arguments advanced by Learned Counsel for the respondents may look very convincing but however, this Tribunal is fully aware that the jurisdiction it exercises under Section 397 read with 398 of the Companies Act, 1956 is one of equitable jurisdiction and not of a testamentary jurisdiction to decide upon the issue Of succession, more so when the same ....
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....titioners were entitled to maintain the petition on the date of filing the petition and the respondents cannot take a plea based on subsequent developments in order to challenge the maintainability of the petition. 56. At this juncture, the judgement of Hon'ble Supreme Court in World Wide Agencies Pvt.Ltd and Another v. Margaratt T.Desor and others in Civil Appeal No.5186 of 1989 as cited on behalf of the petitioners where also the locus standi of the legal representatives of deceased to move a petition under Section 397 and 398 of the 1956 Act was dealt with and answered at paragraph 24 of the said judgement is to be considered which is to the following effect: It appears to us that to hold that the legal representatives of a deceased shareholder could not be given the same right of members under Section 397 and 398 of the Act would be taking a hyper-technical view which does not advance the cause of equity or justice. The High Court in its judgement under appeal proceeded on the basis that legal representative of a deceased member represents the estate of that member whose name is on the register of members. When the member dies his estate is entrusted in th....
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.... there is no real dispute between the parties for the purposes of issue of rectification, therefore, the documents executed by GD clearly entitled the DR group to hove the rectification made. For the issue regarding entitlement has been decided by the Hon'ble Supreme Court of India, the petitioners have sought for listing this matter for final hearing. 2, Upon which, the respondents side raised an objection to post this matter for hearing on the ground since the petitioners have not applied for transfer of shares, this petition cannot be posted for final hearing unless such request has come from the petitioners and the same is decided by the company. 3,0n hearing the submissions of either side, I am of the view that since Hon'ble Supreme Court made it clear that the petitioners are entitled to the shares standing in the name of late Maharaj Jagat Singh in the books of the company, this CP which has been adjourned sine die by the orders dated 16.032011 is hereby posted tofinal hearing, accordingly, the application is allowed. 4.The Petitioners are directed to serve notice upon all the respondents mentioning next date of final hearing, 5.Li....
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....hould also be impleaded as a party to the suit. In the instant case based on the said principle it is seen that averments and allegations of the petitioners, inter-alia is that the estate of Late MJS is sought to be threatened or has been threatened by conversion of a 99% majority behooving the estate of Late MJS to a miniscule minority which action pre-dominantly is sought to be challenged by the petitioners as co-owners to the estate, which if successful enures to the benefit of the estate as a whole of which MGD also had a share as a co-owner and can result in an obvious advantage to her as well on the date of filing the petition and since her right as a co-owner or as a tenant in common not being challenged anywhere in the petition, but in fact repeatedly reinforced, even according to the contentions of the respondents as stated in their reply giving rise to the said objection, this Tribunal holds that the petition as filed by the petitioners without impleading MGD, as long as no rival claim is set up to that of her interest is maintainable. 60. Thus, having considered the issue of maintainability in favour of the petitioners, it is required of this Tribunal to consider the ....
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....ioners on notice particularly when there was no requirement or pressing financial commitments for the 1st respondent company warranting an increase in both the authorized and paid up capital of the company. Ld. Sr. CounseI for the petitioners submits that the appointment of the 4th respondent on 31-3.99 as well as other respondents, namely 5 to 8 on 27.3.2001, and the increase in the authorized capital on 27.03.2001, as well as the issue of further capital and allotment of equity shares to the 2^nd and 3^rd respondents, all to the detriment of the petitioners is per se bad as it has been done in gross violation of the provisions of the Companies Act, 1956 as no notice has been given to the petitioners and all the above acts have been done behind the back of the petitioners and without their knowledge and consent despite the estate of Late MJS of which they are the legal heirs along with MGD holding 99% of the paid up capital of the 1^st respondent company, 62. It is also pointed out that there was no necessity for further increase in the paid up capital as the company was not in the necessity of funds and in any case the allotment had been made at par which is much below the int....
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....ncluded transactions cannot be challenged by the petitioners and that the petition is also hit by the aspect of limitation. 65. It is not in dispute as between the parties that on the date of death of MJS on 05.02.1997, he was holding 5050 equity shares out of the total paid up equity capital of 5100 equity shares of Rs. 100/ each of the 1^st respondent company. Thus, upon his death, the estate of Late MJS was holding 99% of the paid up equity share capital of the 1^st respondent company to which the legal heirs of Late MJS became entitled, compared to the remaining 1% of the equity share capital being held by respondents 2 and 3. It is also not in dispute that during the life time of MJS he was a part of the Board of the 1^st respondent company and thereby being in the management of the company along with the 2^nd and 3^rd respondents, also being part of the Board. Family tree as given at the commencement portion of this order clearly demonstrates that the contesting parties to the present proceedings, namely the petitioners without any representation in the Board over the years, however, respondents 2 to 4 alone are still part of the Board who are closely related to each other....
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....e of the father. In any case after the 1 st petitioner attained majority on 12.01.1999 and the 2^nd second petitioner prior to him on 02.12.1997, law considers that they are capable of representing themselves from the said dates on attaining majority. In view of the parties being close relatives and being fully aware as to who the legal heirs of MJS were and thereby jointly entitled to 99% of the fully paid up equity capital of the 1^st respondent, the question which arises is as to whether the acts of the respondents can be considered bonafide or solely done with a view to deprive the estate of the deceased MJS and thereby the petitioners by converting an overwhelming majority to a minority holding of less than 10%. 67. Ld.Sr,CounseI for both the parties has Cited the decisions of Hon'ble Supreme Court in this regard as already seen in paragraph supra. However before considering the decision of Dale and Carrington's case or Sangram Singh Gaekwad's case, reference to the oft cited decision rendered by Hon'ble Supreme Court in Needle Industries (India) Ltd and others v. Needle Industries Newey (India) Holding Ltd and others AIR 1981 SC 1298 laying down the yard stick ....
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....ch evidence being produced as may from time to time proper be required by the Board and subject to hereinafter provided, elect, either: (a) To be registered himself as holder of the share; or (b) TO make such transfer of the share as the deceased or insolvent member could have made. (ii) The Board shall, in either case, have the same right to decline or suspend registration as it would have had, if the deceased or insolvent member has transferred the share before his death or insolvency. Xxxx 69. Insistence of proof of succession and thereby denying transmission Of shares virtually denied the petitioners from exercising their legal and proprietary right in relation to the shareholding to which they were jointly entitled along with MGD. Thus the refusal to transmit the shares, despite being close relatives and in negation of the Articles of Association of the 1^st respondent company and without giving representation in the Board despite the petitioners having attained majority by the year 1999 also denied the right of 99% of the equity shareholding from participating in the management of the 1 5t respondent company and thereby being privy to de....
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.... itself was brought at leisurely pace as even as per the averments made in the reply, the entire funds were brought only at the end of the year from the date of issue showing a lack of urgency for funds but on other hand only to assist the respondents 2 and 3 to increase their shareholding strength disproportionately. Further no documents supporting the holding of meeting, for both the board as well as general meeting alleged to have been held had been filed by the respondents to sustain that the said meetings were in fact held and more so after giving due notices for these meetings to the petitioners, particularly in relation to Extra General Meeting held on 27.03.2001 were the authorized capital of the company was increased, being the precursor to the subsequent increase in the paid up capital of the company. 71. On behalf of the respondents it is contended by Ld. Sr. CounseI who points out to the letter dated 10.04.2001 of MGD which in itself according to him evidences that the legal heirs of MGD had been put on notice in relation to the proposed increase in paid up equity and their refusal to subscribe in view of the reasons stated therein, Further in relation to the notice ....
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....as to the happenings and thus the respondents have also prima facie failed to establish per se the holding of these meetings and the necessity and rationale for the issue of additional capital and whether the same stood justified, particularly when even according to the respondents there has been an uncertainty in relation to succession to the estate of Late MJS holding 99% of the paid up equity at the relevant point. 74. In this regard lack of proper notice, of either the Board Meeting or of General Meeting, to whom notices are required to be sent vitiates such Board or General Meeting held and the resolutions passed thereat as per the decision of Hon'ble Principal Bench, NCLT in the matter of Hari Prakash Poddar and others ve Shree Shree Radhaswamy Plastics Ltd & others C.P.No.34(ND) of 2011 rendered on 20.12.2016 which is to the following effect: "In this we are fortified by the decisions of the Hon'ble Supreme Court in Kamal Kumar Datta v. Ruby General Hospital Ltd reported in (2006) 74 CLA 91 and Shiv Nath Bajaj v. Nafabsindio Pvt. Ltd and another rendered by CLB, our predecessor reported in (2002) 108 Company Cases 642 wherein it has been held to the....
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....l capital was raised. 77. Subsequently only in the year 2003, back to back agreement itself seem to have been entered into between the 1^st respondent company and IHCL in relation to the properties situated at Mussoorie in Uttranchal, however, in the meanwhile respondents 2 and 3 had gained a majority in the shareholding through the alleged allotment of additional capital on 28,04.2001, and that too the funds brought in a staggered manner. It is thus evident in the increase of additional capital, the interest of the individuals seems to be the predominant motive rather than that of the company. The manner in which the entire sequence of events seems to have been unleashed clearly points out that between 1999 to 2003 a concerted effort has been put up which seems to be more premeditated solely to benefit the family of 2 nd and 3^rd respondents and thereby to the detriment of the shareholding of the estate of Late MJS and its legal heirs in the 1 st respondent company. 78. This Tribunal also does not find much merit that the 1 st respondent company was in dire need of funds and that out of necessity for requirements of funds additional capital was required to be ploughed ....
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....to the Board of Directors of the company. 79. The facts of Dale & Carrington's case also involved the propriety of issue of additional share capital, however by the Managing Director in his own favour and in the absence of placing any record justifying the issue of further share capital and proper procedure not being followed in allotting the additional share capital. In paragraph 29 of the said judgement the Hon'ble Supreme Court held that the conclusion is inevitable that neither was the allotment of additional shares in favour of the Managing Director bonafide nor was it in the interest of the company nor was a proper and legal procedure followed to make the allotment and further it was held that the motive for the allotment was mala fide, the only motive being to gain control of the company and hence in the view of Hon'ble Supreme Court, the entire allotment of shares to the Managing Director has to be set aside. 80. The facts in Dale & Carrington's case since being more akin to the instant one as compared to Sangram Singh Gaekwad's case, in as much as the majority rights of 99% herein have been effectively thwarted from the benefit accruing to such a ....
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....cumstances and given therein at paragraph 79 of the said judgement to the following effect:- 79. The law which emerges from the discussions made herein before is that the Directors do not have any fiduciary duty to advise shareholders as to when and in what manner they should enter into transactions with the company, including acceptance of an offer of additional shares, Such a fiduciary duty would arise inter alia in exceptional situations when the Directors take upon themselves the task of advising the shareholders who may be either the family members, or when a transaction of purchase or sale is entered into by and between the Director and shareholders wherein the former takes undue benefit or has ill or improper or ulterior motive or mala fide acts solely to make a pecuniary benefit and gain for himself and to the detriment of such shareholders. 82. Taking into consideration the ratio of the above judgement it is seen from the records as filed by the petitioners by way of additional documents as well as in the re-joinder, a fiduciary duty has been in existence as between the petitioners and the 2 nd respondent recognized by the 2 nd respondent himself through two le....
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....h respondent in the Board Meeting dated 31.03, 1999, increase of authorized capital from Rs. 10,00t000/- to Rs. 1 crore in the EOGM dated 27.03.2001 as well as the appointment of respondents 4 to 8 in the Board Meeting dated 27.03.2001 as well as the allotment of 58,839 equity shares to the 2nd respondent and 10,093 equity shares to 3^rd respondent all at par thereby aggregating to 60,882 equity shares on 28.04.2001 all being oppressive acts are required to be set aside. 84. In relation to the assets of the Company, it is seen that both the Mussorie property as well as Sohana Property are not free hold properties and are being given to the 1 st respondent company only on an assignment basis, one of which has been again re-assigned to a third party, whereas the other one is stuck in view of procedural hiccups in getting clearances even after lapse of considerable time from being utilised, Further the accumulation by way of Minimum Guarantee Payment or percentage of gross receipts even though have been invested in Bonds or deposits by way of FD's, have been given on pledge to a company in which the controlling interest is held by respondent 2 and 3 based on a corporate guarant....
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.... Professional Appliances Pvt. Ltd & Ors of the CLB dated 20.10.2016 in C.P.No.04/ND/2016. Taking into consideration the facts and circumstances of the present case which is more akin to the one passed by this Tribunal in Suhas Chakma -vs- South Asia Human Rights Documentation Centre Pvt. Ltd in C.P.No.4 (ND) of 2012 and subsequently stood confirmed in Company Appeal No. 51 of 2017 vide order dated 17.04.2017 of Hon'ble NCLAT will apply as the act of the respondents, as already discussed, had been done without the knowledge of the petitioners and upon knowledge as averred in the rejoinder to the petition, the petition came to be filed. 86. Further as this Tribunal is of the considered view that the company's affairs in relation to the petitioners have been conducted in an oppressive manner by the respondents and that the facts would render that it is just and equitable to wind up the company, however the same would unfairly prejudice the petitioners and in the circumstances a case under the provisions of Section 397 and Section 398 of the Companies Act, 1956 has been made out and thereby petitioners are entitled to reliefs under the said provision read with Section 402 of....
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.... above shall convene a meeting of shareholders by way of an Extra Ordinary General Meeting within period of eight weeks from the date of reconstitution of the Board and the shareholders of the 1 st respondent company will be at liberty to confirm or reject the candidature of all or any of the persons of the Board re-constituted as per (IV) above and to choose such persons to the Board of the company in accordance with law, to manage the affairs of the 1 st respondent company thereafter. VI) No major policy decision in relation to the affairs of the 1 st respondent company shall be taken by the existing Board consisting of Respondents No.2 and 3 till the Board of the Company is reconstituted in terms of paragraph (IV) as above. VII) Mr. Amarjit Chopra FCA, Chartered Accountant having Mobile No.098101-00299 is hereby appointed as an independent auditor to conduct a Special Audit in respect of the accounts of the 1^st respondent company and the said audit shall be carried out from 05.02.1997, being the date of demise of Late MJS, until the period 31.03.2018. The purpose of the Special Audit shall be in relation to identifying any siphoning of amounts of the 1^st respondent compa....