TaxTMI 
TaxTMI 
2014 (12) TMI 1426
X X X X Extracts X X X X
X X X X Extracts X X X X
....reliefs as set out in the Petition. 2. The facts, in brief, giving rise to the present petition are as under:- 2.1 It is the case of the Petitioner that the Company was incorporated on 3/07/1944 to carry out the business as more particularly described in the Memorandum of Association of the Company. The authorized issued and subscribed share capital of the Company as on 31/03/2012 is Rs. 1,00,00,000/- (Rupees One Crore only) divided into 1,00,000 equity shares of Rs. 100/- each. 2.2 It is stated by the Petitioner that the Respondent Nos. 2 and 3 are the Directors of the Respondent No. 1 Company. The Respondent Nos. 4 to 6 are the Companies Incorporated under the Companies Act, 1956 and form part of the Group of Companies of the Respondent No. 7. The Respondent No. 7, along with the Respondent Nos. 4 to 6 and 3, are claiming to be the Purchasers having purchased entire shares held by the respective shareholders of the Respondent No. 1 Company on payment of consideration. The Respondent No. 9, who is wife of the Respondent No. 2, claims to hold 2001 shares of the Respondent No. 1 Company. The Respondent No. 10, who is mother of the Respondent No. 2, claims to hol....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stated by the Petitioner that soon thereafter the Respondent No. 2 handed over to her a cheque of Rs. 24,01,942/- drawn in her name from the Respondent No. 4 and told her that the said cheque was towards earnest/advance money. It is further averred by the Petitioner that the Respondent No. 2 further informed her that the sale transactions like that of a sale of a Company are lengthy and time consuming procedure, as the same is required to be in accordance with law as also with approval of the Board of Directors of the Company and its shareholders, and therefore, the whole transaction would take considerable time to complete in all respects. Further, the Respondent No. 2 further represented to the Petitioner that he would hand over the balance amount to her as and when the sale progresses and once the value of the shares are determined. It is further pleaded by the Petitioner, that she, relying on the aforesaid representations of the Respondent No. 2 as he was not only one of the Directors of the Company but also her nephew, accepted the said cheque of Rs. 24,01,942/-. 2.9 It is further case of the Petitioner that she expected that the Respondent No. 2 would follow up in r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was the only person communicating with her as regards the sale transaction and was the face of the Company, and also she had never seen the Respondent No. 3 involved in the affairs of the Company. 2.14 It is further pleaded by the Petitioner that she having come to know the aforesaid facts, approached a Chartered Accountant to conduct search of the records of the Registrar of Companies. When the said Chartered Accountant conducted search of the record of the Respondent No. 1 Company as well as that of the Respondent No. 4 Company, she came to know various other irregularities in the affairs of both the Companies. She was, therefore, compelled to believe that the Respondent No. 2 has siphoned off the funds of the Company in collusion with the Respondent Nos. 4 to 8 to the detriment of the Company and its shareholders. 2.15 It is further case of the Petitioner that she doubts the bona fides of the Respondent No. 2 and believes that he has surreptitiously entered into the transaction and has kept the shareholders, including the Petitioner, in dark. According to the Petitioner, in the circumstances narrated above, she is entitled to challenge the safe transaction sur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the shares held by her in the Company either in Favour of the Respondent No. 2 or the Respondent No. 4. (v) The Respondents, in order to fulfill their ill-design to usurp the Company, have illegally appointed the Respondent Nos. 9 and 10 as Additional Directors of the Company. (vi) No General Meetings of the Company have been held since 2009 and the statutory documents required to be filed under the law, have not been filed with the Registrar of Companies, and this act of the Respondent No. 2 constitutes a gross act of oppression. 2.18 Based on the aforesaid complaints, the Petitioner has sought the following reliefs:- a. To pass an order setting aside/cancelling the purported sale transaction entered into by the Respondent No. 2 in relation to the Respondent No. 1 Company and its properties, assets etc. including the property of the Respondent No. 2 Company at Kurla bearing CIS Nos. 240-B, 240-B/1 to 13, 241(pt) 243(pt), 242/1 & 243/A (old Survey No. 203H No. 1, 2 and 3(pt), S. No. 204H No. 5, 6/1, 12(pt), 13(pt) and 14(pt), 5. No. 205H No. 1(pt) and S. No. 207H. No. 1(pt), admeasuring in aggregate 5826.6 sq. meters situated, lying and being at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation into the dealings of the Respondent No. 2 with regard to the assets, properties, accounts and management of the Respondent No. 1 Company and direct the Respondent No. 2 to render full accounts on oath of his dealings with the assets and properties of the Respondent No. 1 Company and make good all losses caused to the Respondent No. 1 Company; h. That this Hon'ble Board be pleased to appoint an officer of this Hon'ble Board to supervise the affairs of the Respondent No. 1 Company, for an investigation into the dealings of the Respondent No. 2 with regard to the assets, properties, accounts and management of the Respondent No. 1 Company; i. For appropriate orders, reliefs and directions under sections 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956, to bring an end to the aforesaid acts of oppression and mismanagement perpetuated by the Respondent No. 2, for necessary orders and reliefs in respect thereto, including as prayed for herein; j. That this Hon'ble Board be pleased to pass an order under sections 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956, for appropriate management of the Respondent No. 1 Company and f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for specific performance, being Suit No. 17/2012, which is pending before the Hon'ble High Court, and hence, the instant Petition is barred by the principle of res-judicata and deserves to be dismissed on this ground as well. 7. The Respondent No. 9 has also filed reply dated 3/12/2013. The Respondent No. 10 has not filed her reply. 8. To the Replies filed on behalf of the aforesaid Respondents, the Petitioner has filed rejoinder dated 23/11/2012. The Respondent No. 1 filed Sur-Rejoinder dated 13/12/2012. The Petitioner filed Sur-Rejoinder dated 30/05/2013 to which the Respondent No. 1 filed an Affidavit dated 18/07/2013. 9. I have heard the Ld. Counsel for both the sides and perused the record. 10. Dealing with the first preliminary issue as to the suppression of material facts and vital documents, it was argued by the Ld. Counsel appearing on behalf of the Respondent No. 2 that the Petitioner has approached this forum with unclean hands and, therefore, on this ground the petition deserves to be dismissed. According to the Ld. Counsel for the Respondent No. 2, the Petitioner has been a consenting party to sell her shareholding in the Company in favour of the Respon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amount admittedly received by her as an advance amount. On these grounds, the Ld. Counsel for the Respondents contended that the Petitioner has not come with clean hands before the CLB, and therefore, the petition therefore deserves to be dismissed on this ground as well. 11. In reply, the Ld. Sr. Counsel appearing for the Petitioner has not denied that the Petitioner has received a sum of Rs. 24,01,942/-. According to him, this amount was paid to her by the Respondent No. 2 by representing to her that this is an advance amount subject to determination of the final value of the property shares and thus the balance amount in respect of the shares held by her in the Company would be paid. According to the Ld. Sr. Counsel, the Petitioner, therefore, was not expected to refund the amount. Furthermore, the Respondents at any point of time did not claim refund of the said amount. The Ld. Sr. Counsel further submitted that the Petitioner has disclosed all these facts of having received the said amount as advance, etc. and therefore, she cannot be held guilty for suppression of any material fact and documents. 12. I have considered the rival submissions and carefully perused the reco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Respondent No. 2, by misrepresenting the fact with respect to the sale of the subject property, has finalized the sale at under-value and unauthorizedly delivered the possession of the subject property to the prospective purchasers, ought to have Immediately refunded the said amount either to the Respondent No. 2 or to the Respondent Nos. 4 to 8 under protest, irrespective of the fact whether they demanded this amount or not. Admittedly, this amount is lying with the Petitioner since 2010 till date. The Petitioner has been all these years very conveniently reaping the benefits of the said amount. Even she did not care to deposit the said amount with the CLB at the time of filing of the petition. She is continuing to enjoy the said amount since then. The Petitioner has failed to convince me by giving any cogent reason as to why she did not refund the amount till date despite having come to know the alleged misrepresentation made by the Respondent No. 2 with respect to alleged sale transaction and the delivery of possession of the subject property to the prospective purchasers. In my considered view, if the Petitioner was not a consenting party to the sale transaction, she should hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ums. The object underlying the principle is that every court is not only entitled but is duty bound to protect itself from unscrupulous litigants who do not have any/respect for truth and who try to pollute the stream of justice by resorting to falsehood or by making misstatement or by suppressing facts which have a bearing on adjudication of the issue(s) arising in the case". b. In the case of Manohar Lal (dead) by LRs. Vs. Ugrasen (Dead) by LRs. And Ors. With Ghaziabad Development Authority Vs. Ugrasen (Dead) by Lrs. And Ors. [2010] 11 SCC 557, wherein it is held as follows:- "48. The present appellants had also not disclosed that land allotted to them falls in commercial area. When a person approaches a court of equity in exercise of its extraordinary jurisdiction under Articles 226/227 of the Constitution, he should approach the court not only with clean hands but also with clean mind, clean heart and clean objective. "Equally, the judicial process should never become an instrument of oppression or abuse or a means in the process of the court to subvert Justice." Who seeks-equity must do equity. The legal maxim "Jure naturae aequum est neminem cum atterius det....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... This Court wants to make it clear that an action at law is not a game of chess. A litigant who comes to Court and invokes its writ jurisdiction must come with clean hands. He cannot prevaricate and take inconsistent positions. Courts have, over the centuries, frowned upon litigants who, with intent to deceive and mislead the courts, initiated proceedings without full disclosure of facts. Courts held that such litigants have come with "unclean hands" and are not entitled to be heard on the merits of their case. It is one of the fundamental principles of jurisprudence that litigants must observe total clarity and candour in their pleadings and especially when it contains a prayer for injunction. A prayer for injunction, which is an equitable remedy, must be governed by the principles of "uberrima fides" d. In the case of Oswal Fats & Oil Ltd. Vs. Additional Commissioner (Administration) Bareilly Division, Bareilly & Ors. [2010] A SCC 728, wherein the Hon'ble Supreme Court has held as follows:- "it is settled law that a person who approaches the court for grant of relief, equitable or otherwise, is under a solemn obligation to candidly ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t that the Respondent No. 2 did not take necessary steps to find the best possible offer for the sale of the Company:- a) The value of the property as per the Ready Reckoner of 2010 was Rs. 21,04,34,840/-, whereas, though the Respondent No. 2 in his Sur-rejoinder dated 17/07/2013 has sought to contend that the value of the subject property in 2010 was less than Rs. 10 Crores, yet he has not annexed any document to his pleadings to bolster this contention. Referring a decision in the case of U.P. Jal Nigam vs. Kalra Properties Pvt. Ltd. reported in (1996) 3 SCC 124, relied upon by the Respondent Nos. 4 to 8 the Ld. Counsel argued that the Respondent No. 2, on one hand has made a reference to the Ready Reckoner to justify his valuation of the subject property, and on the other hand, he has sought to dismiss the Petitioner's reliance on the Ready Reckoner to show the undervaluation on the ground of inadmissibility. b) The Advertisement published in the Times of India, Mumbai dated 23/06/2009 in respect of the sale/lease of the subject property does not find any mention, much less ratification in any of the meetings, either of the Board of Directors or Annual Gene....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ri family members. The Ld. Sr. Counsel further submitted that, contrary to the above, the Ld. Counsel for the Respondents in the course of arguments had stated that the Project Feasibility Report was obtained by the Company as the Company desired to ascertain the profit that it would stand to gain if the Company undertakes an industrial estate project on its own. The Ld. Counsel, therefore, contended that in view of these two contradictory stands taken by the Respondent No. 2, it is clear that there was no attempt to ascertain the fair value of the shares and/or the subject property. According to the Ld. Sr. Counsel, the Respondent No. 2 had first chose to cite this very document as the basis of valuation and when confronted as to why the costs of the land is marked as "approximately Rs. 20.20 Crores", the Respondent No. 2 has now conveniently changed his stand by explaining that this document was obtained for ascertaining the Project Feasibility and the profit that the Company could make if it undertakes an industrial estate project. It was, therefore, argued that the explanation offered on behalf of the Respondent No. 2 is nothing but an afterthought. In addition to the above, it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bject property. In other words, according to the Ld. Counsel, the valuation of the subject property was crucial for determining the value of the shares of the Company. On the contrary, the Respondent Nos. 4 to 7 have stated that the valuation of the shares of the Company was independent of the valuation of the subject property. The Ld. Counsel contended that had the agreement for sale was bona fide then the seller and buyer should have a common understanding in respect of the valuation of the subject property. Another contradiction pointed out by the Ld. Counsel is that, according to the Respondent No. 2, the final price was arrived at after calculating the price at the rate of Rs. 1178/- per share, whereas at some places the Respondent No. 2 has stated that a lump sum offer of Rs. 12 Crores was given by the prospective purchasers, which was initially of Rs. 10 Crores and was increased after negotiations, to Rs. 12 Crores. Then the Ld. Sr. Counsel for the Petitioner tried to point out certain contradictory figures from the pleadings filed by the Respondent Nos. 2 and 7. 18. In this regard, another limb of argument of the Ld. Sr. Counsel appearing for the Petitioner is that the R....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the Company, decided to sell its shareholdings. According to the Ld. Counsel, the Company had nominated the Respondent No. 2 to identify the prospective purchasers to materialize sale of the subject property of the Company. According to the Ld. Counsel, to ensure a fair value of the subject property, the Respondent No. 2 commenced his efforts for finding prospective purchasers, however, these efforts were hampered by the global recession of 2009. According to the Ld. Counsel, the Respondent No. 2 caused enquiries to be made in the matter through brokers, and further, the Respondent No. 2 obtained the valuation report which evaluated the worth of the subject property. It was also considered as to what profit would gain if the company takes steps for development of the subject property. However, no shareholder of the Company was willing to put up moneys to undertake any development of the property. In the meantime, according to him, the Respondent No. 7 approached for purchase of the entire Javeri family shareholding in the Company for a total amount of Rs. 12 Crores, which included discharging of the family liabilities in the books of the Company, including all the loans of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he valuation of the shares of the Company. Taking me through the Sur-rejoinder Affidavit dated 17/07/2013, the Ld. Counsel for the Respondent Nos. 1 and 2 stated that the said Respondents have fully explained the basis on which the price of Rs. 1,178/- per share was arrived at. Elaborating this calculation, it was argued that the Respondent Nos. 4 to 8 had agreed to pay a total sum of Rs. 12 Crores in respect of the entire shareholding of the Company. It is further argued that out of this, payment of Rs. 86,11,167/- was towards discharge of the Company's loan taken from its shareholders and the balance amount of Rs. 11,13,88,893/- was to be paid towards the shares held by Javeri Family in the Company, and as such, the rate per share was arrived at Rs. 1,178/-. It was, therefore, submitted that the methodology of the valuation of the Company's shareholding has been rightly explained. 22. The Ld. Counsel for the Respondent No. 2 further submitted that all the shareholders of the Company were fully aware of the price at which the Company's shareholding/subject property was being transacted. According to the Ld. Counsel, this is evident from the fact that the Petitioner ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....could not be executed because of the petitioner. According to the Ld. Counsel, since the Petitioner has accepted the consideration for and in respect of 2039 shares and she never raised any demand for execution of any written agreement for sale, and therefore, she is not entitled to raise any grievance now in this regard. 25. As regards delivery of physical possession of the subject property without receiving the entire consideration, it was argued by the Ld. Counsel on behalf of the Respondent Nos. 1 and 2 that the Respondent Nos. 4 to 8 are not in possession of the subject property in their capacity as owners thereof, but in the capacity as Constituted attorneys of the Company. According to the Ld. Counsel for the Respondent Nos. 1 and 2, the Company has not yet transferred the subject property and no sale deed has been executed, nor have shares been transferred in their favour as yet. Further, according to the Ld. Counsel, the Respondent Nos. 4 to 8 have filed a civil suit seeking specific performance of the agreement for sale of the Company, which is presently sub-judice in the Hon'ble Bombay High Court and they can get title to the shares of the Company and/or the subje....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... petitioner that the Respondent No. 2 has agreed to sell the property at grossly undervalue for his sole benefit and to deprive the Petitioner from the right value of the shares in the Company. She further failed to substantiate her allegation that the Respondent No. 2 has gained wrongfully out of the impugned sale transaction. While rendering this finding, I make it clear that the validity of the agreement for sale is already under challenge before the Hon'ble High Court in the civil suit filed by the Respondent Nos. 4 to 8 for specific performance. Therefore, I am refraining myself from expressing any opinion with respect to the validity of the agreement for sale purportedly entered into between the Respondent Nos. 4 to 8 and the Respondent No. 2 on behalf of the Company. My finding is limited on the aspect that the Petitioner has failed to establish her version that the alleged value of shares determined between the Respondent No. 2 and the Respondent Nos. 4 to 8 for effecting sale of Company's shares was not just, proper and adequate. This point is decided accordingly. 27. Now, I proceed to consider other allegations made by the Petitioner against the Contesting Resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted out from the alleged Agreement for Sale of Shares of the Company that Ms. Meena Khetani and Ms. Bindu Javeri were paid consideration on similar assumptions that Gift Deeds in respect of the shares would be executed in their favour. The Ld. Counsel submitted that admittedly both of them were never shareholders in the Company. 29. Refuting the allegation made by the Respondent Nos. 2 and 4 to 10 that the Petitioner was not paid the full consideration because she failed to tender her balance shares, the Ld. Counsel appearing on behalf of the Petitioner submitted that non Insistence for tendering of shares of Ms. Meena Khetani and Ms. Bindu Javeri clearly proves the fact that there was absolutely no requirement for tendering the shares as a pre-condition to receive consideration of the shares held by the respective shareholders. In other words, according to the Ld. Counsel appearing for the Petitioner, there was never co-relation between tendering/transferring of shares and receipt of consideration, keeping in view that the other shareholders, who have admitted to have received the full consideration have not transferred any of the shares nor have the Respondent Nos. 4 to 7 insi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ner and the Respondent No. 3, were/are in support of the sale of the Company's shares in favour of the Respondent Nos. 4 to 8 and as such they have been made payments for and in respective of their respective shares. According to the Respondents' Counsel, there is no dispute between the other shareholders and the Respondent Nos. 4 to 8 the Ld. Counsel further submitted that as regards the payment to the Respondent No. 3 is concerned, the same was made in good faith and on the understanding that the Respondent No. 3 would deliver her shares for transfer in favour of the Respondent Nos. 4 to 8. However, according to the Ld. Counsel, the Respondent No. 3, despite having received full payment, has wrongly and illegally refused to deliver her shares and the same has resulted in dispute by and between the Respondent No. 3 and other Respondents. 34. Lastly, the Ld. Counsel appearing for the Respondent Nos. 1 and 2 stated on their behalf that the Respondent Nos. 4 to 8 are still ready and willing to pay to the Petitioner the balance amount for and in respect of her balance shares at the agreed rate of Rs. 1178/- per share provided she deposits her balance shares for the purpose ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffs. ii. Defendant No. 3 to hand over original share certificate together with duly signed share transfer forms to the Plaintiffs. iii. Defendant No. 4 to hand over original share certificate together with duly signed share transfer forms to the Plaintiffs. iv. Defendant No. 5 to hand over original share certificate together with duly signed share transfer forms to the Plaintiffs. v. Defendant No. 6 to record the transfer of shares by Defendant Nos. 1 to 5 in favour of the Plaintiffs in its records and substitute the name of the Plaintiffs in place of the Defendant Nos. 1 to 5 in its fist of members. vi. Defendant No. 6 be ordered to arrange to execute the tease deed in favour of the Plaintiffs in respect of the Kurla Property, more particularly described in the Exh. "B" hereto. vii. The defendant No. 6 be ordered not to deal with or dispose of the Defendants' shareholding in Defendant No. 6 by way of transfer, mortgage, lien, lease, charge, etc. to any other person/s except the Plaintiffs. viii. The Defendants be restrained by an order and injunction of this Hon'ble Court from in any way dealing with the Kurla ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d as a charge on the Kurla Property and in the event if the Defendants are unable to pay the said refund amount and the said interest thereon, such charge be enforced by a public auction and the Plaintiffs be permitted to participate in such auction and purchase the property and decretal amount be adjusted against such auction price. e) Plaintiffs be awarded damages to the extent of Rs. 50,00,00,000/- (Rupees Fifty Crores only) being the damages for the breach of the agreement as averred in the plaint." 37. The Ld. Counsel submits that in the aforesaid civil suit, the Respondent Nos. 4 to 7 had taken out a Notice of Motion, being Notice of Motion (L) No. 3401 of 2013, wherein the Hon'ble High Court passed an interim order on 18/12/2013, which reads as under:- "1. Pursuant to the order passed by this Court dated 17th December 2012, the learned Advocate for Respondent Nos. 2, 4 and 5 has today tendered in court the Original Share Register of the Defendant No. 6 Company. The same is taken on record and the Prothonotary and Senior Master, High Court, Mumbai, is directed to keep the same in safe custody. 2. Heard the learned Advocates for the parties. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fer of the shares in good faith. It is further submitted that possession of the subject property was delivered upon payment of the entire consideration, and therefore, the performance of the agreement has already been done by handing over possession of the subject property to the Respondent Nos. 4 to 8, pursuant to Power of Attorney, is also valid, and it is a part performance of the said agreement for sale. 41. Having considered the rival submissions, I do not find any substance in the complaints made by the Petitioner saying that she was discriminated because she was not paid full consideration of her shares, whereas the other shareholders have been paid full consideration and that the Respondents have made an attempt to expropriate 8738 shares. I am convinced from the explanation offered by the Respondent Nos. 2 and 4 to 8 that the petitioner was paid full consideration in respect of 2039 shares deposited with the Respondent No. 2 and since she did not deposit balance 8738 shares, she was not paid the balance consideration. Moreover, the Respondent No. 2 has categorically stated that the proposed gift of 8738 shares has already been cancelled and the Petitioner is still owner....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... paid substantial amounts even before finalizing the rate per share. The next point argued by the Ld. Sr. Counsel for the Petitioner is that the Respondent Nos. 1 and 2 have sought to explain the payment of consideration to the non-shareholders i.e. Ms. Meena Khetani and Ms. Bindu Javeri by stating that these payments were made on the basis that the Respondent No. 10 and the Petitioner would gift certain shares to the said Ms. Meena and Ms. Bindu, respectively, however, they failed to produce the alleged Gift Deeds to substantiate their claims that, in fact, in the case of said Ms. Meena and Ms. Bindu, they have admitted that the alleged Gift Deeds had never happened. This itself creates a doubt as to the bona fide of the sale transaction that inspite of absence of any Gift Deeds, the Respondent Nos. 4 to 8 proceeded to make substantial payment without verifying existence of the alleged Gift Deeds. The Ld. Counsel then pointed out other infirmities to show that without tendering actual shares, the Respondent Nos. 2, 3 and 9 were paid substantial amounts of Rs. 3,15,71,578/-, Rs. 3,06,89,256/- and Rs. 3,31,38,318/-, respectively, and on the contrary, the Petitioner was denied the pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... clause in the Articles of Association of the Company and as such these payments were reversed. It was, therefore, argued that the Petitioner and the Respondent No. 3 now cannot derive any capital qua these payments which have subsequently been reversed. The Ld. Counsel further submitted that certain payments to the tune of Rs. 1 Crore, in fact, made to the Respondent No. 3 were later reversed as the purchaser wanted the purchase in a different name. He, therefore, argued that all the aforesaid contentions have been made by the Petitioner to prejudice the mind of the Board. It was also argued that the allegations of collusion and conspiracy are being levelled without any basis or justification. The Ld. Counsel further submitted that the Petitioner's balance 8738 shares are still in her possession and have not been transferred to any individual, which is evident from the Share Register of the Company, which is currently in the custody of the Hon'ble High Court. 46. Having considered the rival submissions, in my opinion, the said complaint made by the Petitioner is also without substance. As regards payment of the amount with respect to certain shares to Ms. Meena Khetani ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o subsequently resigned from the Board of Directors of the Company. The Ld. Sr. Counsel submitted that the Respondent No. 3 in her pleadings has categorically denied being present in the Board Meeting purportedly held on 10/04/2010 whereat Mr. Anant Khetani was appointed as a Director of the Company. The Ld. Sr. Counsel further submitted that the Respondent Nos. 1 and 2 have failed to produce the Attendance Register and/or any other document to show that a proper quorum was present in accordance with the Articles of Association of the Company at the meeting purportedly held on 10/04/2010. The Ld. Sr. Counsel then invited my attention to the pleadings filed by the Respondent No. 3, wherein she has denied having received any notice calling for the meeting to be held on 10/04/2010. The Ld. Counsel further submitted that any proof of service of the notice has also not been produced by the Respondent No. 2. It was, therefore, argued that the appointment of Mr. Anant Khetani as a Director is void and ineffective. The Ld. Sr. Counsel also drew my attention to the Minutes of the Meeting of 10/04/2010 and submitted that these minutes produced by the Respondent Nos. 1 and 2 are fabricated fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gnificantly, the notice uploaded on the website of the MCA simply refers to 'ordinary business' and is completely silent as to any 'special business' to be conducted at such a meeting. Even the venue of the proposed AGM differs. This goes to show that the Respondent Nos. 1 and 2 in a desperate attempt to mask their misdeeds, have resorted to fabricating documents as mentioned in Sub-paras (a) to (c) mentioned above as well as the purported notice dated 10/04/2010 calling for an AGM to be held on 30/09/2010. 49. In addition to the above, the records of the MCA clearly indicate that even as late as on 2/10/2012 there were only two directors viz. Respondent Nos. 2 and 3, of the Company. This is borne out from perusal of the screenshots of the MCA website as tendered to the CLB by the Petitioner in the course of the arguments. 50. Moreover, the draft agreement for sale of shares of the Company as attached to the said e-mails exchanged in September, 2010 repeatedly makes a reference to only two Directors viz. Respondent Nos. 2 and 3 of the Company. Had there been a third director allegedly appointed in April 2010 (effectively from 10/05/2010), his name ought to hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pany. The Ld. Counsel submitted that the allegations of the Petitioner and Respondent No. 3 that the letter dated 9/4/2010 is not mentioned in the Minutes of the Meeting dated 10/4/2010 and Mr. Anant Khetani's name is not mentioned in the letter dated 30/9/2010 and further, the records of the ROC shows only two names of the Directors and therefore, these documents are manufactured documents, are wrong and baseless. According to the Ld. Counsel, there is no legal requirement for the minutes of meeting dated 10/4/2010 to mention the letter dated 9/4/2010 or the name of Mr. Anant Khetani being mentioned in the AGM Notice dated 30/9/2010. According to the Ld. Counsel, in absence of any legal requirement, there is no basis to draw an adverse inference against them. As regards Mr. Khetani's name not being mentioned in the draft share purchase agreement, it was submitted that this documents were prepared prior to 10/04/2010 and as such Khetani's name not reflected therein. It was next argued that the Petitioner and the Respondent No. 3 have dishonestly made alliance despite having fully participated in the sale transaction. 54. I have considered the rival submissions and pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pport of my aforesaid findings, I would like to state that, admittedly, a Registered Power of Attorney came to be executed on 3/07/2011 on the basis of a Board Resolution purportedly passed on 14/06/2014 having signatures of the Respondent No. 2 and Mr. Anant Khetani. The Respondent No. 3 was undisputedly a Director during the relevant period. It is presumed that being a Director, she must have been in the knowledge of execution of Power of Attorney in favour of the Respondent No. 2. It may also be presumed that according to Articles of Association of the Company, three directors were necessary on the Board of Directors of the Company. After death of the husband of the Respondent No. 3, she was appointed as a Director. However, in her place a third Director was required to be appointed in order to comply with the requirement of the Articles. Therefore, the Respondent No. 3 ought to have raised this question as to how only one director i.e. Respondent No. 2 was competent to pass a resolution for execution of the Power of Attorney, immediately after having come to know the said fact that a Power of Attorney has been executed in favour of the Respondent No. 2 without proper authority.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... so far as the contention of the Petitioner that in draft Share Purchase Agreement, is concerned the name of Mr. Anant Khetani does not exist. I am of the opinion, that since alleged draft agreement was prepared prior to 10/04/2010, and as such Mr. Khetani's name was not reflected therein as contended by the Respondents. In my view, the omission also does not give any assistance/support to the Petitioner's case. In any event, to my mind, this question is not relevant for the reason that Mr. Anant Khetani has already resigned and he is no more a director of the Company nor any relief has been sought against him. For the reasons discussed hereinabove, in my opinion, Mr. Khetani's appointment as a Director of the Company challenged by the Petitioner as illegal, is not tenable being devoid of merits. This issue is answered accordingly. 57. In continuation of the arguments, the Ld. Sr. Counsel for the Petitioner has also challenged the validity of the POA dated 13/07/2011 purportedly executed by the Company in favour of the Respondent No. 2 and it has been contended that the said POA is null and void. Giving the reasons therefore, it was argued that since the appointment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter to the Respondent No. 3. The Ld. Sr. Counsel gave another Instance to show that the said Circular Resolution is a fabricated document by pointing out that the Respondent Nos. 2 and 3 reside in the same building, and even then why the Circular Resolution was firstly sent to Mr. Anant Khetani, who resides at a location away from that of the Respondent No. 2, and thereafter to the Respondent No. 3. 59. Apart from the above, it was also argued by the Ld. Sr. Counsel for the Petitioner that during inspection, the Respondent Nos. 1 and 2 produced the purported POA and the Board Resolution dated 14/06/2011, being an annexure thereto. However, since none of the minutes of any of the Board Meeting is placed on record containing any reference to such a Board Resolution, nor was any Board Meeting held on 14/06/2011, therefore, such POA is per se invalid. It is further argued by the Ld. Sr. Counsel that when the Respondent Nos. 1 and 2 were called upon to produce the Minutes, they sought time to produce the Circular Resolution without giving any plausible reason for seeking time to produce the same, and that itself shows that the Circular Resolution is a got up document. Moreover, accor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and was in a dilapidated condition. It is also not in dispute that it needed urgent repairs and attention. It has further not disputed that none of the shareholders were in potion to take financial burden for the preservation and maintenance, therefore the company thought it appropriate to appoint some proper person to take care of the property. In pursuance thereto the Respondent No. 2, Mr. Deven R. Raghani made an oral request to the Board of the Directors to appoint him as the constituted attorney of the company and considering the fact substantial payments were made to the majority holders for purchase of their shareholdings in the Respondent No. 1 Company, the Board of Directors of the Company appointed him as its constituted attorney of the Company. In view of the above stated urgency, I am inclined to accept the Respondent No. 2's case that the Board passed a circular resolution and resolved to appoint the Respondent No. 2 as a constituted attorney of the Company by executing a POA in his favour. Further, I do not find any illegality in the Circular Resolution which has been seriously challenged by the Petitioner and the Respondent No. 3 saying that the circular resoluti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich POA is executed, are without merits. I, therefore, hold that the POA is a valid and subsisting document and the aforesaid ground taken by the Petitioner as an act of oppression, in my considered view, thus fails. This point is decided accordingly. 62. Now, I proceed to consider the next complaint made by the Petitioner to effect that the appointment of the Respondent Nos. 9 and 10 as Additional Directors of the Company is invalid for the reason that the appointment of Mr. Anant Khetani as a Director of the Company is illegal. The Ld. Sr. Counsel for the Petitioner submits that once it is held that the appointment of Mr. Anant Khetani as a Director was illegal, the subsequent appointment of the Respondent Nos. 9 and 10 as Additional Directors made on 11/05/2013 and 26/05/2013, respectively, must, therefore, necessarily held invalid. The Ld. Counsel, therefore, contended that the same requires to be set aside and the status quo ante should be restored. 63. Dealing with the said charge, it was argued by the Ld. Counsel appearing on behalf of the Respondent Nos. 1 and 2 that the appointment of Mr. Anant Khetani as a Director was made in accordance with the Articles of Associa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lect of the Interest of the company by the sale of its only assets and the total inattention thereafter to the affairs of the company clearly justified the granting of relief under section 397 and 397 of the Act. 67. In my opinion, the facts, of the said case and the facts of the present case are absolutely different. In the present case, the Respondent Nos. 4 to 8 have instituted a suit for specific performance of the alleged agreement Respondent No. 2 and therefore, subject to result of the said suit, the revival of the company is to be considered. Moreover in the present case it has been held that the Respondent No. 2 was authorized to sell the assets of the Company by its shareholders and, pursuant to such authorization the Respondent No. 2 agreed to sell the entire shareholding of the Company to the Respondent Nos. 4 to 8. Therefore, in my opinion, the said decision do not apply to the facts of the present case. 68. The Ld. Sr. Counsel for the Petitioner has referred another decision namely Prabhu Dayal Chitiangla & Anr. v. Trinity Combine Associates (P) Pvt. Ltd. & Ors. [1999] 4 Comp LJ 514 (CLB), wherein it was held that the major decision should not have been taken in....