TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 1426
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.... 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 hold 28,858 shares of the Respondent No. 1 Company. 2.3 it i....
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..... 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 respect of the sale transaction. After sometime, when the Petitioner inquired about the sale transaction, the....
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.... 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 surreptitiously entered into by the Respondent No. 2. The Petitioner has further alleged that she has not signed any transfer documents nor has she atten....
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....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 Kurla (old) in the registration sub-district of Sandra, District Mumbai Suburban, together with structures and buildings including Electric Power House standing thereon; b. To pass an order directing the Respondent No....
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....nt 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 for that purpose to appoint such appropriate and fit persons as this Hon'ble Board may deem fit and proper as Administrator, and/or appoint an Independent Committee of management for managing the affairs of the Respondent No. 1 Company for such time and on such terms and conditions as t....
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....espondent 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 Respondent Nos. 4 to 8. The Ld. Counsel added that to the Petitioner's knowledge, her shareholding in the Company was agreed to be sold in favour of the Respondent Nos. 4 to 8 at the rate of Rs. 1,178/- per equity share. The Ld. Counsel further submitted that the amount of Rs. 24,01,942/-, admittedly receiv....
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....l 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 record. I am not convinced with the conduct of the Petitioner. Admittedly, she has received a sum of Rs. 24,01,942/- from the Respondent Nos. 4 to 8. From perusal of the share transfer forms filed by her, alongwith the Rejoinder, at page Nos. 363 of the Compilation of Documents, it is noted that she has duly sign....
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....o. 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 have refunded this amount immediately. To my mind, this clearly proves misconduct on the part of the Petitioner. I cannot ignore the settled proposition that the law relating to oppression and mismanagement is basically based on equity, fairness and probity on the part of the shareholders of a Company whether su....
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....e 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 detrimento et injuriajien locupletiorem", means that it is a law of nature that one should not be enriched by the loss or injury to another. (Vide Ramjas Foundation v. Union of India [1993] Supp (2) SCC 20, K.R. Srinivas v. R.M. Premchandh [1994] 6 SCC 620 and Noorduddin v. Dr. K.L. Anand [1995] 1 SCC 242 SCC p. 249, para 9.) 49. Similarly, in Ramniklal N. Bhu....
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....d 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 disclose all the material/important facts which have bearing on the adjudication of the issues raised in the case. In other words, he owes a duty to the court to bring out all the facts and refrain from concealing/suppressing any material fact within his knowledge or which he could have known by exercising diligence expected or a person of ordinary prudence. If he is found guilty of concealment of material facts or making an attempt to ....
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....s 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 General Meetings of the shareholders of the Company, authorizing the sale of the subject property. c) The report obtained from DID Consultants (Architects & Engineers) dated 6/10/2010 by the Respondent No. 2 for placing reliance in support of the valuation of the subject property proves that it is an afterthought, as according to the Respondent Nos. 4 to 6, they had already made various payments to the shareholders of the Company prior to October 2010, and the....
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....o. 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 was argued by the Ld. Counsel on behalf of the Petitioner that such a crucial document has never been mentioned in the Meetings of the Board of Directors and Shareholders of the Company, nor was disclosed/placed at any meetings, which goes to show that the Project Feasibility Report is a fabricated document. e) The e-mails received from Maulik Kamadar dated 25/06/2009 and 1/07/2009 have been filed by the Respondent No. 2 to support his claim that various purchase offer....
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.... 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 Respondent No. 2 has handed over possession of the only asset of the Company i.e. the subject property without making payment to the Petitioner except Rs. 24,01,942/- and this amounts to mismanagement in the affairs of the Company as defined in Section 398 of the Act. Elaborating the said charge, it was argued by the Ld. Counsel that the Respondent No. 2, under the guise of repairs and maintenance of the subject property, got a Power of Attorney executed on 13/7/2011 in favour of the Respondent ....
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....o. 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 Company aggregating to approximately Rs. 85 Lacs. According to the Ld. Counsel, after calculation, it was found that the shareholders would receive Rs. 1178/- per share after discharging the loan amount, and hence, the offer made by the Respondent No. 7 was far superior to any previous offers received. 20. Dealing with the valuation of the subject property, it was argued on behalf of the Respondent Nos. 4 to 8 that, according to the Ready Reckoner, the price of the subject property may be around....
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.... 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 has, admittedly, received Rs. 24,01,942/- for and/or in respect of 2,039 shares, and she acting in pursuance thereto deposited and executed share transfer forms for 10 shares. The Ld. Counsel then pointed out the various documents and material placed on record to demonstrate exercise of due diligence while conducting the sale of the shareholding/subject property of the Company, and submitted that as against these material, the Petitioner has placed on record only the Ready Reckoner valuation. According....
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.... 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 subject property only upon getting a decree in their favour in the said suit. In order to further substantiate that the Respondent Nos. 4 to 8 have been put in possession of the subject property in their capacity as the Constituted Attorneys is further proved by the Power of Attorney submitted by the Respondent Nos. 1 and 2 on record on the basis of which the Respondent Nos. 4 to 8 have been put into possession of the subject property, the Ld. Counsel added that the prospective buyers i.e. the Respondent Nos. 4 t....
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....pondent 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 Respondents as to the acts of oppression and mismanagement purportedly committed by them in conduct of the affairs of the Company. The next charge relating to alleged act of oppression levelled by the Petitioner is that the Respondent No. 2, whom the Petitioner had entrusted with the task of negotiating and finalization of the sale transaction of the Company, deceitfully conspired with the Respondent Nos. 4 to 8 to illegally expropriate her 8738 shares and not paying her any consideration over Rs. 24,01,942/-, there....
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....sel 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 insisted on the sellers transferring any of the shares for which the Respondent Nos. 4 to 7 have paid consideration. 30. In addition to the above, it was argued by the Ld. Counsel for the Petitioner is that the Respondent Nos. 2 and 4 to 7 never called upon the Petitioner, whether orally or in writing, to tender her shares and/or execute any share transfer forms. Even otherwise, according to the ld. Counsel, the Petitioner was not in a position to tender her shares as her original share certificates were always in poss....
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....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 of sale in their favour. It was, therefore, argued that the allegation of the Petitioner of expropriation of her shares is misconceived and unsustainable in law. According to the Ld. Counsel, in any event, the Respondents have never expropriated the shares of the Petitioner as she continues to be the shareholder of the Company till date. 35. Based on the above, it was argued by the Ld. Counsel for the Respondent Nos. 1 and 2 that the Petitioner's allegations against the Contesting Respondents are not proved and she is, t....
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.... 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 Property, more particularly described in the Exh. "B" hereto by way of transfer, mortgage, lien, lease, charge, etc. to any other person/s. ix. The Defendant Nos. 1 to 5 be ordered to hold their shares in Defendant No. 6 company in trust and for the benefit of the Plaintiffs. c) In the alternative to prayers (a) and (b) above, the Defendants be ordered and decreed to pay to the Plaintiffs as under: (i) The Defendant No. 1 be ordered and decreed to refund to the Plaintiff No. 2 a sum of Rs. 24,01,942/- (Rupees Twenty Four lakhs One Thousand Nine Hundred forty Two only) together with the intere....
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....01 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. All the parties are directed to maintain status-quo in respect of the suit shares until further orders. S.O. to 14th January 2013. This order is passed without prejudice to the proceedings pending before this Court or before any other forum." 38. Referring the aforesaid reliefs sought in the said suit and the interim order passed therein, it was argued that there is no substantive suit filed by the Respondent Nos. 4 to 7 in the Hon'ble High Court, and an injunction order is operating against the shareholders of the Company, and therefore, this Bench has no jurisdiction to pass any order in respect of the claim of the Petitioner in the present petition against the Respondent Nos.....
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.... 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 of the 8738 shares and her name exists in the Register of Members, which is deposited with the Hon'ble High Court pursuant to the order passed by it in the pending civil suit seeking specific performance of the alleged agreement for sale in dispute with respect to these shares. In view of the statement made above, the Petitioner's grievances as to alleged expropriate of 8738 shares held by her comes to an end. With respect to 2039 shares held by her which is the subject matter of the civil suit, I have held that the Petitioner has already received the consideration. For these reasons, I am therefore of the opinion, that these complaints do not amounts to acts of oppression and mism....
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....ubt 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 payment of full consideration on the ground that she had not tendered her entire shares. According to the Ld. Counsel, apart from the above, the Respondent Nos. 4 to 8 though claim to have paid full consideration to all the shareholders of the Company, except the Petitioner, they never Insisted for transfer of share certificates of these shareholders in their favour at any point of time from 2010 till filing of the present petition. 43. The Ld. Sr. Counsel for the Petitioner then submitted that on 14/01/2010 the Respondent No. 7 paid the said Ms. Meena and Ms. Bindu Rs. 75,00,000/- and Rs. 25,00,000/-, respectively, in anticipation of sale of shares since the said Ms. Meena and Ms. Bindu were ....
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.... 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 and Ms. Bindu Khetani, are concerned, the Respondent No. 2 in his pleadings and written submissions has clearly stated that the gift in favour of Ms. Meena Khetani and Ms. Bindu Khetani as per the alleged family arrangement could not take place owing to the pre-emption clause of the Articles of Association of the Company and as such the payments made to Ms. Meena Khetani and Ms. Bindu Khetani have been reversed as stated in the Affidavit of the Respondent No. 2 dated 17/07/2013. In view of the above, the entire complaint made by the Petitioner as to the alleged gifting of shares and making payment thereof to them. As indicated hereinabove, any agreement with respect to sale of shares does not require....
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....d 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 for the following reasons:- (a) Because, the Letter dated 9/04/2010 addressed by the Respondent No. 10 to the Board of directors of the company recommending Anant Khetani as a permanent director does not find any reference or mention in the minutes. This is significant considering the fact that it was solely on the basis of this written recommendation that the said Anant Khetani was appointed as a permanent director of the Company in the Annual General Meeting held on 30/09/2010. (b) Because, the Respondent Nos. 1 and 2 have sought to reply upon the minutes that the said Anant Khetani was appointed as an additional director of the Company in the meeting purportedly dated 10/04/2010. It can therefore,....
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....erusal 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 have been included in the said agreement. The Respondent Nos. 1 and 2 have, in the course of arguments, sought to justify this exclusion of the name of the said Anant Khetani by stating that since the draft of the said agreement was drawn up prior to the appointment of the said Anant Khetani, subsequent amendments were not carried out to the draft. According to the Ld. Counsel for the Petitioner, this stand of the Respondent Nos. 1 and 2 is a complete hogwash considering the fact that the annexure to the said agreement explicitly list out the dates and numbers of the cheques paid to various shareholders till as late as August 2010. If payment details as late as August 2010 could be included in the said agreement, there can be no ju....
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....dverse 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 perused the record. Admittedly, Mr. Anant Khetani is no more a director on the Board of the Company. He has already resigned. He is not a party to the petition. No relief whatsoever has been sought qua Mr. Anant Khetani. It is a fundamental law, that the provisions of Section 397/398 of the Act are preventive in nature. The CLB, in exercise of its rights and powers by virtue of Section 402 of the Act, is entitled to pass such orders as it deems fit in the facts of a given case to bring an end to the acts of oppression and mismanagement which are continuing in nature, Keeping in view the said settled proposition of the law and considering the fact that Mr. Anant Khetani is no more a director, on the Board of the Company, in my opinion, the....
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....ce 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. There is nothing on record to suggest that she ever raised these questions prior to filing of written reply in the C.P. wherein she for the first time challenged the validity of the appointment of Mr. Anant Khetani as a Director of the Company and claimed these resolutions as got-up documents allegedly manufactured by the Respondent No. 2. It is to be noted here, the Respondent Nos. 2 and 3 are admittedly closely related. They stay in the same building. The Respondent No. 3 cannot deny that being a Director she owed a duty towards the affairs of the Company. There is nothing on record to suggest that she ever raised her voice being Director in respect of the alleged non-holding of the Board Meetings and AGMs since her appointment. In my ....
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.... 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 of Mr. Anant Khetani as the Director of the Company is itself in question in view of the facts and circumstances narrated above. Therefore, the Circular Resolution dated 12/06/2011, on the basis of which the purported POA is executed in favour of the Respondent No. 7, stands Invalid, and hence, such purported POA is not binding on the Company. In order to substantiate the allegation that the Circular Resolution dated 12/07/2011 was bad in law, the Ld. Counsel pointed out that the Respondent No. 3 has not signed the said Resolution either in favour or against thereto indicating that the Circular Resolution was never served on the Respondent No. 3. Referring to the pleadings of the Respondent No. 3, it was submitted that the Respondent No. 3 ha....
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....h 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, according to the Ld. Sr. Counsel, another compelling circumstance that indicates that this entire exercise is nothing but a collusive act between the Respondent Nos. 2 and 7 to gain possession of the subject property, which shows that the purported POA was executed a month after the purported Circular Resolution. Further, this lapse of time between the purported Circular Resolution and execution of the purported POA completely vanishes the contention of the Respondent Nos. 1 and 2 that the subject property was in need of urgent repairs, and therefore the Company could not wait until holding of the Meeting of the Board of Directors to execute the POA, but it was compelled to do so through the Circular Resolution. The Ld. Sr. Counsel submits that from t....
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....pany. 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 resolution is a got-up document. On perusal of Circular Resolution filed at Page No. 106 of the Compilation of documents in support of Further Affidavit in Rejoinder of the Petitioner (Vol-1), it is noted that the signature of the Respondent No. 3 does not exist thereon. However, out of the three directors, the two directors namely the Respondent No. 2 and former director Mr. Anant Khetani have signed it. Furthermore, whether this Circular Resolution was attempted to be served on the Respondent No. 3 or not in my view is not material and does not make the said resolution as void and illegal. It is also not material that the said Circular Resolution was signed by the Respondent No. 2 on Sunday i.e. 12/07/2011, in view of the reason that a proper Board Resolut....
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....e 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 Association of the Company and the provisions of the Companies Act, and therefore, the appointment of the Respondent Nos. 9 and 10 cannot be held invalid. 64. I have already held hereinabove that the appointment of Mr. Anant Khetani by the Company cannot be held as illegal. Consequently, the appointment of Respondent Nos. 9 and 10 as additional director made on 11/05/2013 and 26/05/2013 also cannot be held as illegal. This point is answered accordingly. 65. Lastly, having examined the nature of reliefs sought for by the Petitioner in the petition it is noted that the Petitioner seems inclined to approve the impugned sale transaction subject to determination of fair value of the property shares. It therefore appears that the Petitioner has filed the instant pe....
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....tire 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 a family company without presence of all the company directors. I have also considered the said decision. In my opinion, the parts of the said case are inapplicable to the facts of the case in hand. In the present case, all the shareholders of the company have already accepted either full payment or part payment of their shares that Indicates that they were consenting parties to the impugned sale transaction. Therefore, the said decision does not assist the Petitioner. 69. In so far as the decision cited by the Petitioner in Palak Kumar Mondal & Ors. v. Cine & Supply Corporation (P) Ltd. (2002) 46 CLA 156 (CLB), is concerned, there is no dispute as to the principle of proposition of law. However, the fact of the said case are different from the fact of the case in hand....