TaxTMI 
TaxTMI 
2024 (12) TMI 616
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....is about 7.35% of the issued and paid up capital of the Respondent company. Petitioner Nos.2 and 3 are both shareholders of the Company and each one is holding 25 equity shares of Rs. 100/- each which is about 0.05% of issued and paid up share capital. Petitioner no 2 and 3 are sons of Petitioner no. 1. 1.1 The Petitioners submit that though they put together hold less than 10% of the issued capital, they constitute more than 1/10th of the total number of members (3 out of 7) of the company and hence the petitioners herein are eligible to file this Petition as they have right to apply for reliefs under Sections 397 and 398 of the Act, as provided by Section 399 of the Act. A copy of the form no. 20B along with the annual return made up to 27th September 2013 containing list of members of the respondent company is annexed as Annexure P2. 1.2 It is further submitted that V Bedekar & Sons Private Limited, Respondent No.1 Company was incorporated on February, 27 1943 under the companies Act 1913 as a private company limited by shares and has Corporate Identification No. U51900MH1943PTC003872 issued by the Registrar of Companies, Mumbai, Maharashtra. The Respondent No. 1 Company w....
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....of the Respondent no.1 company till the annual general meeting for the year ended 31st March, 2007. Respondent no. 7 is also a necessary party to this petition. 1.10 Respondent no. 8 and 9 are companies, which are owned, managed and controlled by the Respondent no. 1 to 5 and are included as necessary parties to the petition. The petitioners alleged that the Respondent no,. 8 and 9 are subsidiaries of the Respondent no. 1. The Respondent no. 2 to 5 have been siphoning off funds of the Respondent no. 1 company through these companies. 1.11 The petitioners are three in number out of the total seven members of the respondent company and hence by virtue of their number being more than 1/10th of the total number of members of the company are eligible to file this petition under section 399 of the Act. 1.12 It is further alleged in the petition that V P Bedekar and Sons Private Limited, Respondent No. 1 Company was incorporated of February 27, 1943 as a private company limited by shares under the Companies Act 1913 and has Corporate Identification No. U51900MH1943PTC003872 i issued by the Registrar of Companies, Mumbai, Maharashtra. The company is being run by the members of Hin....
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....artnership by the same name viz 'V P Bedekar and Sons'. The partnership engaged in exactly the same earlier business activity of manufacturing Pickles and Spices. 1.17 On February 27,1943 a private limited company by the name 'V P Bedekar and Sons Private Limited' i.e. the respondent company was formed which took over the operations of the partnership firm 'V P Bedekar and Sons'. This company was incorporated to further the personal relationship involving mutual confidence and on understanding as to the extent to which each was to participate in the management of the company's business. At the time of incorporation, there were only two shareholders viz Late Shri Vishwanath Parsharam Bedekar (Grandfather and Great Grand Father of Petitioners and Respondents 2 to 5) Late Shri Mukund Vaman Chitale who was son in law of Late Shri Vishwanath Parsharam Bedekar. Though Late Shri Vasudeo V. Bedekar was a great entrepreneur, his father, brothers and he himself did not have formal educational qualifications. Looking at the growth of the business and its future potential, it was thought fit that someone close to the family capable of giving proper legal advice b....
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....d to be not that of a company, equitable consideration applicable to a partnership could be applicable to that company. 1.21 The respondent company was first a HUF business of the Bedekar family. The HUF was converted/ taken over into/ by a partnership business with the co- parceners as the partners and subsequently, a private company, V P Bedekar and Sons Pvt. Ltd was incorporated wherein the current account balances of five partners of V P Bedekar and Sons' were converted to their share capital. Barring initial directorship of Shri Chitale, who was son in law of Late Shri Vishwanath Parsharam Bedekar, the directors and shareholders of the company have only been the male lineal descendants of the Bedekar family and the business run by Bedekar family members only. At no point of time, neither the shareholding nor the board control over the company has been with anybody other than Bedekar family members, except one instance where 5 shares of the company were transferred. There shares were transferred by Petitioner No. 1 for the purpose of acceptance of deposit from Esquire Press Private Limited, as being a private company, the respondent company could not accept deposits from....
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.... 5 shares of the respondent company held by the Petitioner no. 1 were transferred to Esquire Press Limited which used to supply cartons and printed material to the company. These shares were transferred to Late Shri Trimbak V Bedekar sometime in 1989. Except for this, the shares of the company have always been held only by the male lineal descendants of the Bedekar family as stipulated in the Articles of Association of the company. 1.24 Late Shri Vasudeo V. Bedekar, who was the real entrepreneur, passed away in the year 1977. In May 1978, the family branches of Late Shri Govind V. Bedekar, Late Shri Vishnu V. Bedekar and Late Shri Gajanan V. Bedekar wrote a letter to the Chairman of the Board of directors to appoint their sons as directors on the board for participations control in the management of the company. The four sons and youngest brother of Shri Vasudeo. V Bedekar had sufficient majority and hence the other three family branches were not given participation in the management of the company. The differences in various branches of the family began to surface for control of the company. From 1977 to 1986, the respondent company was run by the four sons of Late Shri Vasudeo....
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....nd family of Respondent no. 5 were almost equal. In line with this agreement of amicable settlement between the family members, Petitioner no. 1 retired and did not opt to stand for re-election as a director. Representatives of two branches of the family, Shri Chandrakant G. Bedekar and Shri Ashok V. Bedekar were appointed as directors to oversee equitable distribution of the assets of the company. These two persons were representatives of the majority shareholders of the respondent company at this time. During this period, shares held by Govind Bedekar and family, Vishnu Bedekar and family and Gajanan Bedekar and family were acquired by Respondent no. 2 and Late Shri Trimbak V. Bedekar illegally by giving tenancy rights of the company which were shops and factories of the company in various buildings and immovable properties in return for these shares to gain majority in the respondent company. The following are the particulars of the shares acquired by Respondent no. 2 and Late Shri Trimbak Bedekar illegally during the period 1988-1992: Serial No. Transferor Transferee 1. Govind Bedekar and family Tenancy rights in the shop at Dadar relinquished in their favour ....
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....rnered illegal majority holding in the company, Respondent no. 2 and Late Shri Trimbak V. Bedekar began delaying the completion of the partition of the family business amongst the shareholders who all were members of the Bedekar family. Other three family branch heads i.e. the Petitioners, Late Shri Gajanan V. Bedekar and Late Shri Suresh V. Bedekar were not given their due share commensurate with their shareholding. 1.30 After the Petitioner no. 1 resigned from the board of directors in 1986 and after garnering majority control of the respondent company in 1989, Respondent no. 2 and Late Shri Trimbak Bedekar became greedy and went back on their word regarding amicable and equitable distribution of company's properties and offered share value to the Petitioner no. 1 which was totally incommensurate with the value of his holding then. However, after the untimely demise of Late Shri Trimbak V. Bedekar in 1993, having acquired the absolute control of the company, Respondent no. 2 totally went back on the understanding and simply refused to purchase the shares of the Petitioners and this matter has been pending since 1992 till date. To corner and pressurize Petitioner no. 1 into....
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....y's profit margins and diminishing market presence. No reply was given to the petitioners. A copy of this letter is annexed as Annexure P-6. 1.35 Petitioner no. 2 vide his letter dated 20th March 2009 had intimated the company about the change of address for the receipt of future correspondences on the notified address. On 01 September 2009, Petitioner No. 2 visited the registered office of the company for the inspection of the statutory register (register of members) to verify whether his address had been updated as per his request of change in address as he had not received the annual report for the year ended 31 March, 2009. Respondent No. 3, who is the director in charge of the legal matters of the company, informed Petitioner No. 2 that the register was not available on that date. A copy of the letter requesting such inspection is annexed as Annexure P-7. 1.36 Petitioner no. 2 requested Respondent no. 3 by a letter dated September 01, 2009 to make the register available to him for inspection on September 05, 2009. The Respondent informed of his "inability to commit" confirmation of the timing of the inspection. The copy of the letter complaining about the denial of i....
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....ode in the year 2009-10, when the Petitioner again vide his letter dated 27th August 2013 requested for copies of various registers and returns, the respondents failed to provide complete copies of the same. The copies of the updated registers as required by the Petitioners were never provided to them. The entire correspondence in this regard is annexed as Annexure P-10A. 1.40 It is further submitted by the petitioners that by letter dated December 05, 2009, Petitioner no. 2 requested the company to provide extracts from the statutory registers i.e. extracts from the register of Members and Register of Contracts with Directors which are interested. On the 28th of December, 2009, the company provided the copies of the registers. After studying the register of Contracts of the Company, Petitioner no. 2 found several lapses and mistakes on the part of the concerned officers of the company in maintaining the register thereby contravening the provisions of the Companies Act. A complaint regarding this was made to the ROC, Mumbai on 04 January, 2010. 1.41 In response to the complaint of the Company dated 04 January, 2010, the ROC, Mumbai, issued a show cause notice no. 3872/09/3866....
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....of the rights of a shareholder. A copy of this letter is annexed as Annexure P-15. 1.45 By a letter dated October 12, 2009, Petitioner no. 2 requested the Registrar of Companies not to take the relevant Form no. 23AC and Form no. 23ACA for the year ended 31 March, 2009 on record as that would be incorrect and in contravention of the provisions of the Companies Act 1956. In spite of such request, the company filed the relevant forms and the Registrar of Companies, Mumbai, has taken the forms on record. A copy of this letter is annexed as Annexure P-16. 1.46 The petitioners have further alleged that time and again the Petitioners have been raising queries about the accounts of the company in the Annual General meeting by sending the list of queries well in advance. However, the Respondents do not bother to reply to these queries or give evasive answers during the meeting or state that they would reply in writing and state that all queries have been answered. It is pertinent to note that the then Department of Company Affairs has issued a clarification that it is a healthy practice to answer queries of the shareholders related to accounts of the company. This act on the part of ....
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....led through contracts with these group companies which are owned and controlled by the respondent 2 to 5. The Respondent no. 1 company owns 12 buildings in Mumbai. The tenancy rights of properties of the respondent no. 1 company are transferred in favour of relatives of Respondent no. 2 to 4 or to the companies controlled by them without any gain for the company. Tenancy rights in one room on the 1st floor in the building at Bedekar Sadan no. 3 have been given to Mrs. Rohini Bedekar, wife of Respondent no. 2 and mother of Respondent no. 3 and 4. Tenancy rights in the room on 3rd floor, Bedekar Sadan no. 4 have been given to Respondent no. 9 which is controlled by Respondent no. 2 to 5. The Petitioners are in the know of this since the Petitioners reside there. The Petitioners apprehend that there could be other instances also. Three industrial galas of the company at C9, 10 and 11 at Royal Industrial Estate, Mumbai near Dadar have been given on rent to Respondent no. 9 at a rent of Rs. 5000 per month which is absolutely peanuts for the said property. Further, no proper entries of such transactions are made in the register of contracts of the respondent company. 1.50 The Petition....
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.... iv. The respondent company holds 490 equity shares of Rs. 100 each in M/s Bedekar Pickles Private Limited. Further, M/s Bedekar Masalewale Private Limited holds 490 equity shares of Rs. 100 each in M/s Bedekar Pickles Private Limited. Hence, the respondent company has power directly and through its subsidiary M/s Bedekar Masalewale Private Limited at its own discretion and without depending upon any other person's consent or concurrence, to appoint a majority of directors of M/s Bedekar Pickles Private Limited. v. The Memorandum of Association of the respondent company does not provide for the formation of a subsidiary company. The Board of directors has acted with total disregard to the Memorandum of association and, thus, contravened the provision of the Companies Act. vi. The related party disclosures made by the Board of Directors of the respondent company are not in conformity with the Accounting standards and hence the disclosure is not only insufficient but totally misleading and gives far from true and fair view of the affairs of the Company. vii. All major transactions viz, purchase, sales, advertisement are routed through contracts....
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....ender of tenancy can be made only in favour of the landlord. If the term is to be interpreted in this way, then since the entry appears in the profit and loss account, it is either a revenue income or a revenue expenditure. Each entry relating to 'Premium on transfer of tenancy must be accompanied by minimum of two entries involving crossed account payee cheques, as the Income tax act does not allow cash transactions of the same. Without prejudice to whatever is stated earlier, even a small 10 X 10 room in the mentioned area in Mumbai costs not less than 10-12 lac rupees. Considering the amounts charged by the Company for 'transferring tenancy' of the premises, the petitioners humbly contend that, the figures so reported by the board of directors appear to be blatantly false and concocted. xiii. The management of the company has been planning production schedule of pickles without taking into account the quantity of opening stock and assessment of demand during the year. Thus, year after year, the company is burdened with unnecessary huge closing stocks of pickles in the range of 45% to 50% of total sales during the year in terms of quantity and 50% to 60% in t....
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....horities is annexed as Annexure P-33. The Petitioners sent a number of reminder letters following this which are annexed as Annexure P-34. 1.54 Following this, in December 2013, the Respondents called an extraordinary general meeting for approval of the shareholders under section 180 of the Companies Act 2013 for borrowing in excess of the limits prescribed under that section. It is pertinent to note that taking into account the pattern of borrowings by the respondent company and their inability to properly manage the funds of the respondent company, there is no need to borrow further amounts. Further, the explanatory statement provided under section 102 of the Companies Act 2013 is incomplete and vague as no proper details regarding the amount borrowed till date, the need for further borrowing, the future plans of the company are given. A copy of the notice calling the EGM along with the explanatory statement is annexed as Annexure P-36. The Petitioners wrote a letter asking for the above details, a copy of which is annexed as Annexure P-37. The Respondents have not bothered to reply to this letter and neither was any explanation given in the EGM when the Petitioner raised this....
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....ondent no. 7 is prima facie guilty of the allegations made in the complaint regarding improper disclosure in the register of contracts. 1.59 The Petitioners state that the respondent company has violated provisions of section 5(2A), 8(1) and 10 of the Fruit Products Order, 1955. The Petitioner filed a complaint dated 06th March 2010 with the appropriate authority and after a number of reminders and follow up, was provided with the details of actions taken against the company for violation of the Order. Entire correspondence in this regard is annexed as Annexure P-46. 1.60 The Income Tax Department has also initiated investigation on the complaint of the Petitioner no. 2. The correspondence in this regard is annexed as Annexure P-47. 1.61 The Respondents have time and again humiliated the Petitioners. The Respondent company being a quasi-partnership, the Petitioners have legitimate expectation to participate in the management of the company or to get a fair exit from the company. 1.62 The Respondents have stooped down to the level of personal harassment of the Petitioners. The Respondents have filed a suit for eviction of the Petitioners from their dwelling house. The Pe....
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....the Board and the manner of managing the affairs of the company make the company in substance a partnership. Respondents have attempted to acquire complete control of the company and have excluded the other directors from the management of it. iv. There exists lack of probity, fair dealing and recognizing equitable rights of the minority shareholders. This is a "just and equitable" cause for the company to be wound up. However, such winding up would not be in the interest of petitioners and the Respondent No.1 company. Section 397 warrants looking at business realities of a situation and does not confine to a narrow legalistic view. v. The Respondents had the majority power and they exercised their authority in a manner which can justly be described as "oppressive" to the minority shareholder; vi. That the interest of petitioners as members, who ventured their capital in the Respondent's business and worked for the company, does include a legitimate expectation. vii. That the Respondents have abused the majority power to the detriment of the Petitioners and to their personal advantage and not in the interests of the company. Actions and decis....
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....r family, including persons who are not parties before this Tribunal. It is, however, well settled that a private family arrangement, especially one to which the Company is not a party, cannot be the subject matter of a petition under Sections 397 and 398 of the Companies Act. 5. Moreover, the Petitioners are embroiled in several family disputes with a number of members of the Bedekar family which have nothing to do with the Company. The instant proceedings have only been filed to blackmail and armtwist the Respondents into settling the said disputes. These disputes have arisen on account of the illegal acts committed by the Petitioners. Such acts include usurpation of the estate of Mr. Vasudev Bedekar (i.e. father of Petitioner No. 1 and Respondent No. 2), usurpation of funds belonging to Mrs. Rakhamabai Vasudeo Bedekar (i.e. mother of Petitioner No. 1 and Respondent No. 2), illegal retention of funds belonging to Mrs. Mangala Anant Bhide (i.e. sister of Petitioner No. 1 and Respondent No. 2), failure to repay the advance/ loan taken by Petitioner No. l's company M/s Shriram Foods Private Limited from Respondent No. 1 Company and other commercial disputes pertaining to M/s ....
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....any by consistently making patently false, frivolous and vexatious accusations that have remained unsubstantiated. Further, constant requests for documents, many of which the Company and its management is not required to provide, have hamstrung the management's ability to concentrate their faculties on growing the Company and its operations. Further still, the Petitioners have complained to various authorities, including the Income Tax Authorities, alleging illegal acts and omissions on the part of the Respondents. Despite these allegations proving to be false and vindictive, the Petitioners have continued with their abrasive stance and attempt to derail the management's attempts to grow the Company. 10. It is also submitted that the Petitioners have failed to explain, much less make a justifiable case for the winding-up of the Company. According to the respondents, a petition under Sections 397 or 398 of the Companies Act, 1956 is maintainable only if the petitioner is able to justify that the facts of the case warrant a winding-up of the company but that such winding up would be unfairly prejudicial to the members concerned. In the instant case, however, Respondent No.....
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..... 1 Company is not a merely a different avatar of the erstwhile partnership firm in as much as the shareholding pattern of Respondent No. 1 Company is totally different from the partnership pattern of the erstwhile partnership firm. While the partnership firm comprised of the four partners named above the founding members of Respondent No. I Company at the time of its incorporation were: (i) Mr. Vasudeo Vishwanath Bedekar; and (ii) Mukund Chitale. In fact, the Petitioners themselves have admitted that the then promoters of the Company had brought in Mr. Mukund Chitale as a member in the Company, even though he was not a member of the Bedekar family to ensure that the management of the Company includes a qualified and competent expert who could assist in the professional management of the Company. Moreover, in 1978, Petitioner No. 1 had himself transferred 5 (Five) of his shares to one M/s Esquire Press Private Limited. These shares held by M/s Esquire Press Private Limited were subsequently transferred to Mr. Triambak Bedekar in 1989. The said five shares were subsequently transferred to Mr. Mandar Bedekar on May 4, 1990. Mr. Mandar Bedekar obtained the remaining 3695 owned by him ....
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.... 1 to 3) 740 shares 7.40% Total 10,000 shares 100% As there is absolutely no similarity, much less equality, of shareholding among the persons whom the Petitioners claim are "partners" in business, there is no basis for treating Respondent No. 1 Company as a quasi-partnership. 15. It is further submitted that none of the Petitioners, admittedly, are directors or otherwise involved in the management or affairs of Respondent No. 1 Company. While Petitioner No. 1 was a director of the Company from 1972 to 1986, he admittedly voluntarily resigned from the Board in 1986 vide his letter dated May 1, 1986, and has played no role whatsoever in the management of the Company since. As regards Petitioner Nos. 2 and 3, they have never been directors or managers of Respondent No. 1 Company. In the light of the aforesaid, Respondent No. 1 Company does not possess any of the hallmarks of a quasi-partnership and there is no basis whatsoever for applying the principles of dissolution of partnership to Respondent No. 1 Company. It is further submitted that as the Petitioners' entire case is predicated on Respondent No. 1 Company being treated as a quasi-partnership....
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....he Company as and when the Company was in need of finances. Admittedly, when Respondent No.1 Company came out with a rights issue, all shareholders were invited to subscribe to the same. The Petitioners, despite being aware of the rights issue, chose not to subscribe to the same and consciously and voluntarily permitted other shareholders to increase their shareholding in the Company. This further indicates that the Petitioners have no interest or concern for Respondent No.1 Company and the present Petition is nothing but an evil design to blackmail Respondent Nos. 1 to 5. 19. It is submitted that the Petitioners' demand for allotment of Petitioners' shares clearly indicates that the Petitioners are only trying to enforce a purported private agreement among certain family members, to which Respondent No.1 Company is not a party, under the guise of a Company Petition under sections 397 and 398 of the Companies Act. As is evident from the Petition, the Petitioners claim that there was a "settlement between all Bedekar family members" and it is this "settlement" that the Petitioners are trying to enforce. However, the Petitioners have not produced even a shred of evidence t....
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....actic even though they have no connection whatsoever to the reliefs prayed for in the Company Petition. 24. With reference to paragraphs 7.1 and 7.2 of the Company Petition, it has been denied that either the Company or the erstwhile partnership was an HUF business. The Petitioners have not even bothered to describe the HUF that they are purportedly referring to and have failed to explain who its coparceners are. That apart, it is clear from the partnership pattern of the erstwhile partnership and the shareholding structure of Respondent No. 1 Company that neither its membership or nor entity was ever confined to an HUF and the Petitioners' contention that Respondent No. 1 Company is an HUF business has no basis either in law or in fact. 25. With reference to paragraphs 7.3 and 7.4 of the Company Petition, it is stated that the same are riddled with inaccuracies and inconsistencies. In any event, the history of the Bedekar family is wholly irrelevant to the subject matter of the instant Petition. With specific reference to "V.P. Bedekar and Sons", it is stated that the Petitioners have incorrectly described the partners of the said entity. 26. With reference to paragra....
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....ed in the Articles of Association of the company, it is stated that the Petitioners' interpretation of the Articles is contrary to a plain reading of the Articles, and is totally incorrect. In fact, the Articles make it abundantly clear that the shares of the Company can be transferred to persons other than male lineal descendants of the Bedekar family. It is also pertinent to note that Article 8(8) of the Articles, that the Petitioners seek to rely upon, was not present in the original Articles of the Company that were adopted at the time of incorporation of Respondent No. 1 Company. Accordingly, Article 8(8) cannot be considered a founding principle on which the Company was incorporated. That apart, the Petitioners themselves admit that persons other than Bedekar family members have been shareholders of the Company and that none of the Petitioners have been in management of the Company since 1986. 30. With reference to paragraph 7.12 of the Company Petition, it is denied that the current account balances of the partners of the erstwhile partnership firm were converted into share capital of the Company. In fact, the shareholders of Respondent No. 1 Company actually subscrib....
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....mpany since. As regards the transfer of shares that took place between 1988 and 1992, it is vehemently denied that there was any illegality in the same and that the Petitioners allegations of illegality are nothing but a bald and unsubstantiated averment that warrants no detailed response. In any event, the Petitioners have chosen not to object to the aforesaid transfers for the last 26 years and are now estopped from raising any dispute in respect of such transfers. With reference to the purported transfer of lands and properties referred to by the Petitioners, the allegations are denied in toto. It is further stated that in the years 1985 and 1986, the Company was facing severe labour problems and it was difficult to manage the affairs of the Company through small units located in different places. It was, therefore, decided that all business activities would be transferred to the Company's factory in Kurla and the properties that were no longer required would be surrendered to their respective landlords. As regards transfer of shares among family members, it is stated that the same is fully permissible under the Articles of Association of the Company and the price at which s....
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....vil Court also dismissed the Petitioner No. l's claim for gratuity. Annexed hereto and marked as Annexure 'R6' is a copy of the City Civil Court's Order dated June 24, 2013. As far as the suit filed by the Company against M/s Shriram Foods Private Limited is concerned, the same was filed by the Company to recover the debt owed by the M/s Shriram Foods to the Company. That apart, the said suit is a commercial dispute between the Company and M/s Shriram Foods, viz. a third party, and the same can never amount to oppression of the Petitioners. 38. With reference to paragraph 7.21 of the Company Petition, it is denied that the Company came out with the rights issue knowing well that Petitioners could not subscribe to the same. As a matter of fact, in 1997, the Company urgently needed an equity infusion, as the same was required by the Company's lenders as a precondition to grant of a further loan facility. That apart, all shareholders were given an equal opportunity to subscribe to the rights issue and purchase shares of the Company. The Petitioners, who were not interested in the Company or its affairs, chose not to subscribe to the rights issue and allowed thei....
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....h reference to paragraphs 7.32 to 7.35 of the Company Petition, it is stated that the Company has substantially complied with all necessary provisions of law and no prejudice whatsoever has been caused to the Petitioners. That apart, the allegation regarding accounts is a singular incident relating only to the year 2009 and such an isolated incident cannot amount to oppression and mismanagement. 43. With reference to paragraphs 7.36 and 7.37 of the Company Petition, the allegations contained therein have been denied. According to the respondents, the Company has at all times been managed diligently and in accordance with the applicable provisions of law. As regards the queries raised by the Petitioners, they may inspect the records that they are entitled to under the law, which in fact they have already done. It is further submitted that the Company is not an information booth and is not required to provide any more information/ records than is necessary under applicable law. The Company is not bound to answer each and every whimsical question that may be asked by the Petitioners. It is obvious that the Petitioners were only issuing frivolous correspondence and attempting to bui....
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....transactions of the Company have been carried out in the interests of the Company and on the best possible terms. The Petitioners allegation regarding siphoning of funds is totally baseless. As regards the transactions relating to advertisements, it is stated that the contract is with the same firm since 1964, i.e. from a time when Petitioner No. 1 was a director in the Company. As such, the Petitioners have acquiesced to this transaction and are estopped from objecting to it at this belated stage. 47. With further reference to paragraph 7.40 of the Company Petition and in particular reference to the allegation regarding the rooms given on rent in Bedekar Sadan, it is stated that the Petitioner No. 1 himself is a tenant in the same building and, therefore, the Petitioners have no basis for complaining about any other tenancies in the said building. That apart, the tenancies in Bedekar Sadan are protected under the Bombay Rent Control Act, 1940. With particular reference to the room given on rent to Respondent No. 9, it is stated that the said tenancy is actually beneficial to the Company as Respondent No. 9 permits the Company to stock its goods in the said room without payment ....
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.... with the MCA and paid the requisite fee on November 9, 2009 Moreover the MCA has confirmed the approval and registration of form. 23AC filed by Respondent No. 8 vide its confirmation email dated November 11, 2009. Annexed hereto and marked as Annexure 'R11' is a copy of the Challan dated November 9, 2009 confirming payment to the MCA by Respondent No. 8. Also, annexed hereto and marked as Annexure 'R12' is a copy of the confirmation email dated November 11, 2009. 50. With reference to paragraph 7.41 (i), it is denied that Respondent No. 1 Company has contravened the provisions of Section 217 of the Companies Act, and reiterate that the Company has complied with all provisions of applicable law. 51. With reference to paragraph 7.41 (iv), it is denied that Respondent No. 1 Company has contravened the provisions of Section 227 of the Companies Act. Even otherwise, allegations against an auditor cannot be the subject matter of a petition under sections 397/398 of the Companies Act. 52. With reference to paragraph 7.41 (v), it is submitted that the contents thereof are nothing but a baseless and unsubstantiated allegation that has already been rejected by a com....
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....d 7.47 to the relevant authorities and the authorities have refused to take any action on such complaints. 56. It is further stated that the management of Respondent No. 1 Company has made every business decision in a bona fide manner for the benefit and growth of the operations and profitability of the Company and that the Petitioners claims are factually incorrect. Respondent No. 1 Company purchased a plot of land at Wada for the purpose of building a factory. However, the Respondents have been unable to construct a factory on the said plot owing to the nonissuance of a NA Order and delay in approving the plans of the Respondents by various government departments. Thus, despite two years of rigorous and methodical following up by the Respondents, the NA Order is yet to be granted. Further, only a compound wall and pump room have been constructed on the said plot. 57. With reference to paragraph 7.49 of the Company Petition, it is stated that the applicable statutory provisions were complied with by Respondent No. 1 Company. I say that the said EGM was convened to comply with amendments to the Companies Act. Further, a proper explanatory statement was annexed to the notice f....
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....nsel for the Petitioner that Respondent company V P Bedekar & Sons Private Limited, is a quasi-partnership. V P Bedekar & Sons Private Limited, Respondent No. 1 Company was incorporated on February 27, 1943 as a private company limited by shares under the Companies Act 1913. The authorized share capital of Respondent no. 1 company is Rs. 25,00,000 divided into 25000 equity shares of Rs. 100 each. The paid-up share capital is Rs. 10,00,000. This amount of Rs 10 lacs has remain unchanged since 1997 when the last rights issue was brought. All the shareholders are Bedekars. 63. Ld. Counsel for the Petitioners has further argued that initially, the respondent company was a HUF business of the Bedekar family. The HUF consisted of Late Shri Vishwanath Parsharam Bedekar and his four sons Mr. Vasudeo V Bedekar, Mr. Govind V Bedekar, Mr. Vishnu V Bedekar and Mr. Gajanan V Bedekar. Later on, the HUF was converted into/taken over by a partnership business with the co-parceners as the partners (Consisting of Late Shri Vishwanath Parsharam Bedekar, Late Shri Vasudeo V Bedekar, Late Shri Govind V Bedekar, Late Shri Vishnu V Bedekar and Late Shri Gajanan V Bedekar). Subsequently, a private comp....
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....rsons who are relatives of the existing shareholders. 66. Ld. Counsel for the Petitioners has further contended that the shareholders of the company since beginning have been only the family members. In fact, the main object of the company as per its MOA is "to enter into and carry into effect with such (if any) modifications or alterations as may be agreed upon, an agreement relating to purchase as a going concern of the business carried on at Bombay under the style or firm of V P Bedekar & Sons from its proprietors, with all its assets and liabilities already prepared and expressed to be made between the proprietors of that business and this company." 67. Ld. Counsel for the Petitioners has further argued that the subscribers may be only two, however, as explained in the petition, the capital balances of the partners in the company were drawn as they were into the firm. The Respondents have not denied this. As regards a professional being made a subscriber, the even said professional was not a third party, but the son-in-law of Mr. Vasudeo Bedekar who was included in the process as an expert to help with the incorporation of the company. Even he did not retain shares of the....
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....ir own wrong doings. 71. According to the Ld. Counsel for the Petitioners, the Respondents have not denied that they purchased shares of other family members in exchange of giving away assets of the company. In fact, they have gone one step ahead and said that the Petitioners also ought to have done the same. In fact, Petitoner No.1 had resigned from the directorship in good faith so that amicable settlement may take place. Obviously, the Petitioner group was not in management and control of assets of the company. The Respondents have treated the company as a personal fiefdom which is the basic allegation in the petition and this statement of the respondents proves it beyond doubt that the respondents themselves have not treated the R1 as a company under the Companies Act. It is also pertinent to note that none of these assets were acquired by these respondents; these assets belonged to the company and were not to be disposed of in the manner chosen by the respondents. 72. Ld. Counsel for the Petitioners has further pointed out other acts of oppression committed by the respondents such as: refusal /delay in grant of inspection of records, improper circulation of annual accoun....
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....mited (Respondent no. 8) which are owned and controlled by the respondent 2 to 5. Even the tenancy rights of properties of the respondent no. 1 company are transferred in favour of relatives of Respondent no. 2 to 4 or to the companies controlled by them without any gain for the company. 77. According to the counsel for the Petitioners, all these circumstances go on to show and prove that the respondents are guilty of having committed acts of oppression and mismanagement and, therefore, the petition deserves to be allowed. 78. Per contra, Ld. Counsel for the respondents has argued that the Petitioners hold 7.45% shareholding in the Company. On the contrary, Respondent Nos. 2 to 4 together hold 92.55% of the shareholding. Petitioner No. 1 resigned as director in 1986 and ever since none of the other Petitioners have been involved in the management of the Company. The Articles of the Company do not provide for any parity in shareholding or reserved seat on the board to any particular shareholder. The petitioners have not challenged the Articles of the Company and are, therefore, bound by them. The Petitioners have claimed that the Company is a quasi-partnership and sought the f....
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....d of 2009 - 2010 e. Allegations pertaining to collection of premium on transfer of tenancy relate to 2004 - 2008. 81. Furthermore, the Petitioners had filed Company Appeal (AT) No. 103 of 2021 before the Hon'ble NCLAT against certain interlocutory orders passed in the present matter. In para. 12 of the said Appeal, the Petitioners have once again categorically admitted that the disputes between the parties have been "pending since 1992". In addition to this, the following letters issued by the Petitioners and annexed to the Petition show that the cause of action arose long prior to March 29, 2011 and the Petitioners have allowed the limitation period to lapse: a. Letter dated June 29, 1993: Petitioner No. 1 complained to Company's auditor about closing stock in balance sheet, etc. b. Letter dated April 6, 1996, Petitioner No. 1 seeks resolution of disputes relating to VPB Company (i.e. the present Company) c. Letter dated September 10, 2009, Petitioner No. 1 sought negotiations to resolve disputes regarding his shares in the Company. d. Letters dated April 3, 2009, May 6, 2009, April 3, 2009, May 6, 2009, April 13, 2009, Novem....
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....o corroborate the aforesaid claims of the petitioners. Admittedly, at the time of filing the petition, the petitioners jointly held only 7.5% of the shares and prior to that, it was 15% which stood reduced to 7.5% after the respondent company brought a rights issue in 1997, which was not subscribed to by the petitioners. Therefore, the facts remains that there has been unequal shareholding since 1997 as from then onwards, respondent no. 2 to 5 collectively hold 92.55% as against 7.45% of the petitioners. Thus, the fact remains that there has been no equality in shareholding since the year 1997. Therefore, this militates against the plea of the petitioners that the company is in fact quasi-partnership on account of the fact that equality in shareholding has been the primary feature of the company. 86. Though it has been claimed by the petitioners that the company was formed in continuation of the erstwhile partnership firm and the respective captured structure of the former partners was kept intact when the company was incorporated in 1943. Even this claim does not seem to be correct. In this regard, a reference can be made to the petition itself wherein para no. 7.7, it has been....
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....erefore, even this plea raised on behalf of the petitioners is neither proved nor appears to be tenable at all. 88. It is the admitted case of the Petitioners that at the time of inception of business in the 1920s, it was being single handedly run by Vasudeo Bedekar. It is also not disputed by the Petitioners that after the death of Vasudeo Bedekar, managerial control was based only on majority shareholding and the minority shareholders were kept out of management and since 1986, not even a single member of the family of the petitioners has been on the Board or has held any managerial position in the company. Therefore, it has been wrongly claimed by the Petitioners that the company was a continuation of the erstwhile partnership firm, especially when there has been admittedly unequal shareholding for almost more than two decades prior to the filing of the petition. Counsel for the Respondents has further rightly pointed out that in 1978, Petitioner no. 1 himself diluted his shareholding by transferring his shares to Esquire Press, a third party and further that the petitioners chose not to subscribe to the rights issue in 1997 for reasons best known to them. Even the share-hold....
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....obligations in law. Thus, a company, however, small or domestic, "is a company and not a partnership or even a quasi-partnership". Further, mere lack of confidence between the majority and minority shareholders is not enough, there must be a "justifiable lack of confidence" on the conduct of the directors. As regards the proportionate representation, the Court held that section 152 of the 2013 Act, which deals with appointment of directors, does not provide any right of proportionate representation in a public or private company. If there is no such right in the Articles, the company court cannot rewrite the contract between the parties. 92. In the light of the law laid down in the afore-cited cases and keeping in view the circumstances highlighted above, in our considered view, the plea of the respondent company being a quasi-partnership does not seem to have been established at all. Besides, the petitioners have also been able to make out a for winding up of the company which is sine qua non before a corporate body can be treated as quasi-partnership. 93. Secondly, the Petitioners have alleged and alluded to a family settlement of 1986. The Petitioners have alleged in the P....
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....tter dated 06.04.1996, 10.09.2009, 22.09.2009 whereby the Respondents were asked to settle the matter, however, there is no reference in the said letters to any agreement of 1986 having been executed between the parties. Thus, the very existence of the alleged family settlement of 1986 is doubtful. Moreover, there is no explanation forthcoming as to why the Petitioners kept sleeping over a long period of time and did not take any steps to enforce these alleged family settlements of 1986. All these circumstances lead to the only irresistible conclusion that no such agreement/family settlement was ever executed between the parties nor is there any evidence of the existence/execution of such a settlement. Even otherwise, such an agreement, on the face of it, does not appear to be enforceable considering the fact that a shareholder by virtue of his shareholding cannot claim a share in the properties of the company, much less the partition of its assets. 95. So far as, the question of alleged acquisition of shares by Respondent No. 2 and Late Trimbak Bedekar with a view to reduce the petitioners to minority is concerned, it is pertinent to point out that the Petitioners never challen....
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....al Meeting for the year 2008-09 were not properly circulated. It has also been alleged by the Petitioners that the company did not answer their question in the AGM. The Petitioners were not allowed to tender proxy form in the year 2010 and further that Petitioner No. 2 was denied the directorship of the Respondents company. It has also been alleged that the respondent company and its auditors have not been adhering to the Accounting Standards norms and have been manipulating the accounts of the company and in this regard, the petitioners preferred complaints to the income tax authorities as well. According to the Counsel for the Petitioners, all these instances constitute gross acts of oppression and mismanagement on the part of the Respondents. 98. We have thoughtfully considered the nature of the aforesaid alleged acts of oppression and are of the considered view, the same do not qualify as acts of oppression or mismanagement. It has been repeatedly held by the Higher Courts the denial of the access of the books of the company or non-compliance of statutory formalities/compliances cannot be considered as acts of oppression and mismanagement of the affairs of the company. In th....
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....compliance of Accounting Standards, undervaluation of fixed assets in the balance sheets, even if presumed to have been proved to an extent, cannot be treated to be as acts of oppression and mismanagement and in this regard, the remedy available with the Petitioners is to pursue the remedy before the appropriate Authority which can take appropriate action for the aforesaid acts of omission or commission committed, if at all, committed by the Respondents. 100. So far as the grievance raised by the Petitioners with regard to non-payment of gratuity dues of Petitioner No. 1 is concerned, in this regard, the Respondents have pointed out that Petitioner No. 1 had a filed suit in the Civil City Court claiming his outstanding salary and other dues including gratuity and the said suit was dismissed by the Civil City Court, Greater Bombay by the Judgment dated 24.06.2013 which is annexed with the reply as Exhibit R- 6. Therefore, the Petitioner having already availed a remedy before the Civil Court cannot now be reagitate the same in the Petition under Sections 397-398 of the Companies Act 1956. Even otherwise, non-payment of gratuity cannot be an act which can be said to be an act of op....
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.... Others v. Hindustan Fasteners Private Limited & others. AIR 1990 Delhi 32, whereby it has been held that though the Petition under Section 397-398 has to be filed within three years when the right to apply accrues, yet the events occurred after three years prior to the date of filing of the petition can be looked into in case such events form continuous acts and the same continued up to the date of the Petitions. Counsel for the Petitioners has further relied upon Lieutenant Shard Saxsena v. Efn Global Impex Private Limited & Others Manu/PH/3451/2022 whereby it was held that if there is a continuous running of limitation for every default and the acts/omissions resulting in breach form a part of a continuous process, continuing upto the date of Petition, then Section 22 of the Limitation Act, 1963 shall be applicable in such cases and a fresh period of limitation accrues on every single default and further that every act of oppression and mismanagement will give rise to a fresh cause of action. 104. Having thoughtfully considered the rival contentions of the Ld. Counsel for the parties on the point of limitation, we are of the considered view that so far as the specific acts of....
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....as also been placed upon Praveen Shankaralayam v. Elan Professional Appliances Pvt. Ltd. & Others. (2017) 136 CLA 78 whereby it was held by the Hon'ble NCLAT that if the allotments of the shares by increasing the share capital was made between 2009 and 2012 and the Petitioners had knowledge of the same in the year 2011, the Petition filed in the year 2015 was held to be hopelessly time barred as there is no provision for condoning the delay in filing of such suits. Similarly, in Ganesh Jaiswal & Others. v. Tourist Inn Private Limited & Others. (2019) SCC online NCLAT, it was held that the alleged acts of oppression attributed to the Respondents, if pertain to period between 1996 and 2009, the Petition filed in 2014 alleging oppression and mismanagement qua those acts was barred by time. 106. Thus, in the light of the law laid down in the afore-cited cases and the fact that the alleged acts of oppression and mismanagement do not constitute a continuing cause of action, we are constrained to hold that the Petition is barred by time so far as the aforesaid alleged acts of oppression and mismanagement are concerned. 107. It has been vehemently argued on behalf of the Petition....
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.... circumstances of the present case considering the fact that the allegations of oppression and mismanagement in this case stand conclusively proved against the Respondents and, therefore, all the reliefs sought in the Petition including the exit from the company on fair valuation can definitely be granted to the Petitioners. Even otherwise, according to the Counsel for the Petitioners, it would be just and equitable, if the Petitioners are given exit from Respondent No. 1 company on fair valuation as it would help resolve all the disputes pending between the parties, especially when Respondent No. 1 company is a closely held family company and for all intents and purposes, the dispute is actually between the members of the family. This is all the more relevant considering the fact that there is no dispute between the parties with regard to the fact that initially the business was being run by the HUF as well as partnership concern consisting of members of one family before it was converted into a company and till date, it retains the character of a closely held family company. 110. We have thoughtfully considered the above contentions raised by the Counsel for the parties. In ou....
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....ief can be granted to meet the ends of justice and equity. 111. So far as the case law laid down in Jaladhar Chakraborty and Others. v. Power Tools and Appliances Co. Ltd. & Others (supra) and Vardhman Dye Stuff Industries Pvt. Ltd & others v. M.R Shah (supra) is concerned, we are of the considered view that the said judgments are of the Hon'ble Calcutta High Court and Hon'ble Bombay High Court respectively whereas the Needle Industries case was decided by the Hon'ble Supreme Court. 112. Further, in the context of the present case, even though the Petitioners have not been able to make out and establish a case of oppression and mismanagement on the part of the Respondents, yet one cannot lose sight of the fact that the Respondent company is a closely held family company and it took over the same business which was earlier being run by the family through an HUF and a partnership concerned consisting of a family members prior to its incorporation. Over the years, the shareholding of the Petitioners has been reduced to a minuscule less than 8%, which may not strictly be on account of something attributable to the Respondents. However, despite all this, in our conside....