TaxTMI 
TaxTMI 
2017 (3) TMI 1975
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....ated as a public limited company in the year 1962, and subsequent to its incorporation had entered into a collaboration with FRICK, USA, who had participated in the equity of Respondent No. 1 to the extent of 51% and which holding seems to have been subsequently bought by Late Shri. Manmohan Singh to the extent of 11% and the balance 40% by Petitioner No. 1. The Petitioners aver that Respondent No. 1 was promoted by Late Sh. Manmohan Singh, Late Sarabhjit Singh and Sardar Sahib Balwant Singh and presently the Respondent No. 1 for all intents and purposes is controlled and managed by the progenies and family members of the above named promoters as is evident from the composition of the Board as disclosed in the petition, save the independent director(s) who are in the Board. 2. The petitioners in paragraph 6 of the petition has tabulated the extent of shareholding held by each member of the family, of course some of the holdings of shares held by Respondent 2 to Respondent 5 being disputed by the petitioners. According to Petitioners, the dispute in relation to shareholding of Respondents arises in so far as they are concerned on two counts. "a) Firstly in relation to 25....
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....0% out of the total of 40% shares as aforesaid to Respondents No. 2 to 5 and the above said agreement dated 22.12.2011 is claimed by the Petitioners as illegal, unlawful and void agreement and hence it is claimed that the respondents 2 to 5 are not entitled to the said 20% of the total equity of the Respondent No. 1 company held by Petitioner No. 1 in his personal name based on such a void agreement. In addition it is also claimed by the Petitioners that the respondents are required to conform to Indian Laws including the SEBI formulated guidelines, Take Over Code as well as FEMA, even assuming the said agreement is binding and to have the shares transferred in the manner as contemplated under the Settlement Agreement and hence the shareholding of the company must be changed only under due process of law. c) In addition to the above claims of the Petitioners, the Petitioners have alleged acts of mismanagement in relation to the affairs of the Respondent No. 1 company by Respondent No. 2, he being the Managing Director of the R-l Company which can be broadly classified as under:- a) That the respondent No. 2 has not provided any reliable information/analysis in rel....
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.... No. 1 Company to reflect the shareholding of the Petitioner No. 1 as having 242502 equity shares instead of the 240002 as presently shown; c) Restrain Respondent No. 2 from changing the shareholding pattern of the company, without the due process of law as set out under the Companies Act, 1956; d) Pass an order that the Respondent No. 2 shall not act on behalf of the Respondent No. 1 Company nor shall be interfere in the day-to-day affairs and business of the Respondent No. 1 Company in any manner, except as authorized by the Board of Directors; e) Direct Respondent No. 2 to bring back the funds siphoned off. f) Pass appropriate orders, relief's, directions under section 111A, 397, 398, 402 and 403 of the Companies Act, 1956 to bring to an end the aforesaid acts of oppression and mismanagement perpetrated by the respondents and for necessary orders and reliefs in respect thereto, including as prayed for therein; g) Pass an order awarding the costs of the present litigation to the Petitioner; h) Pass such other and/or further orders be made affording complete reliefs to the Petitioner as the Hon'ble Company Law Board may....
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....ectification in the register of members should be made as prayed for by the Petitioners on the said count. b) Coming to the allegations of the Petitioners in relation to the attempt of the respondents to acquire 20% shares out of a total of 40% shares held by the Petitioner No. 1 illegally by undue threat and coercion, the respondents vehemently denies the same and on the contrary contends that the petitioner No. 1. in order to purchase peace with the respondents in relation to legal proceedings initiated in United States of America by Respondent No. 2, had on his own volition signed the agreement dated 22.12.2011 termed as 'Settlement Agreement' as entered into between Petitioners and Respondent No. 2 & 5, wherein amongst other things, it was agreed between the parties that the 40% shareholding standing in the name of Petitioner No. 1 who happens to be a practicing doctor in USA and the younger brother of Late Manmohan Singh, would transfer shares representing a 20% interest i.e., one half of his total shareholding, in the respondent company to respondent No. 2 to 5. In relation to three accounts held by the Petitioner No. 1 in the names of Petitioners No. 2 and 3....
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....pany have always been circulated to all the Board Members; ii) That Respondent No. 2, despite being the M.D. of the Respondent No. 1 Company was not availing any house rent allowance, even though prior to construction of his own house, 30 kms away from the office he was drawing the same. However, since his mother's property was up for lease due to an order of a Court and as he was finding it easier to access the office and factory from the property at Golf Links, he sought to take the property on lease after renovation on behalf of Respondent Company. However, in view of the objections taken by the Board, on and from 31.7.2010 the rentals for the Golf Links property is debited to Respondent's personal account and not from the Company in compliance with resolutions passed. Further only a sum of Rs. 4,40,000/- was spent and not a sum of Rs. 20,03,943.91, as claimed by Petitioners, towards repairs and renovations. iii) That Respondent No. 2 never interfered in the independent functioning of the Board, and was never instrumental in the resignation of the Independent Director, but on the other hand the independent director in question resigned on his own accord....
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....s of the company." 5. Respondent No. 2 claims that under his Managing Directorship the company has increased profits from Rs. 4.5 crores in 2007 to 12.86 crores in 2011 and has increased sales from Rs. 4864.75 lacs in 2005-06 to Rs. 16998.05 lacs in the year 2011-12 and that his agreement with the company in relation to Managing Directorship had been renewed in 1999, 2004 and 2009 for a term of 5 years each, which shows the efficient management of Respondent Company under Respondent No. 2. It is also pointed out that the agreement between Respondent No. 1 and Respondent No. 2 is covered by arbitration clause and that the Petitioners have also not served any show cause notice seeking any clarifications about the acts of mismanagement despite being in the Board. The Respondents repeatedly contend that this Petition is only a ruse to avoid effectuating the Settlement Agreement in full and the allegations of mismanagement or siphoning is without any basis and hence the Petition should be dismissed. It is also contended by the Respondents that their late father was only instrumental in the promotion of the Respondent No. 1 Company and not as contended by the Petitioners, including Pe....
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....d he was also appointed as Joint Managing Director of the company. In relation to the written instructions left behind by Late Mr. Manmohan Singh relating to the distribution of its assets held in USA, it is claimed by the Petitioners that they were at best only a wish and desire, and nothing more. Hence to base the claim for the ownership of 240,002 equity shares of Respondent No. 1 Company on it, as being held in trust by Petitioner No. 1, is totally unsustainable. In the absence of trust, it is contended by the Petitioner that there can be no knowledge of existence of the trust. The Petitioners No. 2 and 3 have pointed out in the rejoinder that they were never parties to the litigation in USA and in the circumstances, it is claimed that Petitioner No. 1 could not have signed the Settlement Agreement as their Power Agent and hence Petitioner No. 2 and 3 are not bound by the same. Petitioner No. 1 affirms in the rejoinder that in any case, he is ready to perform his obligations under the Settlement Agreement provided the same is in accordance with laws of the United States of America as well as India. He has pointed out that on the one hand Respondent No. 2 is refusing and unwilli....
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....en adjusted against the expenses of the company which it is claimed as a glaring instance of financial impropriety. In fine, it is submitted by the Petitioners that Respondent No. 2 has seriously violated the Principles of Corporate Governance and has mis-utilized his position as Managing Director of Respondent No. 1 Company and have gone to the extent of even bypassing the Board of Directors of the company to whom his actions are accountable and hence the Petitioners are justified in seeking the reliefs as prayed for in the Petition. 9. We have laid out the facts bare after perusing the pleadings of the parties in detail and before we delve into the issues involved and the merits of the Petition, we would like to place on record the valuable assistance provided by the Learned Senior Counsels appearing for the rival parties. 10. Both the sides crystallized their arguments and made their respective submissions on three core issues: "a) In relation to the transfer of 2500 equity shares held by Petitioner No. 1 and the legality of questioning the same after considerable efflux of time by the Petitioner No. 1; b) In relation to the transfer of shares as sought t....
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....he following decisions have been cited by the Learned Senior Counsel for the petitioners, namely:- (b) In relation to the mandatory nature of compliance required to be adhered to relating to share transfer under Section 108 of the Companies Act, 1956:- a) Mannalal Khetan & Ors v. Kedar Nath Khetan & Ors reported in (1977) 2 SCC 424 b) Claude-Lila Parulekar (Smt) v. Sakal Papers (P) Ltd. & Ors. reported in (2005) 11 SCC 73 In relation to the date of knowledge and points arising out of limitation, delay and laches: a) Ramesh B. Desai & Ors. v. Bipin Vadilal Mehta & Ors reported in (2006) 5 SCC 638 b) Sulochna Neelkanth Kalyani v. Takle Investments Company & Ors reported in 2016 (4) Bom CR 272 (c) On behalf of the respondents, the Learned Senior Counsels vehemently contended that it is evident from the records that the transfer of 2500 shares had taken place in the year 1990 itself duly approved by a validly constituted Board and since the date of transfer, the respective shareholdings of the parties herein has been consistently reflected taking into consideration the effect of transfer, and dividends declared have also be....
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....khdeep Singh Jhikka v. Ajit Singh Deogan & Ors. rendered in C.APP. No. 10/2008 by P&H High Court dated 17.04.2009 (unreported) e) Praveen Bhargava & Anr v. Calcutta Phototype Co. Ltd. & Ors reported in (2007) 81 CLA 13 (CLB) On the point of referring the parties to Civil Court in relation to allegation of forgery and the summary jurisdiction of CLB a) Ammonia Supplies Corporation Pvt. Ltd. v. Modern Plastic Containers Pvt. Ltd. reported in 1998 7 SCC 105 b) Sutodiya Investments & Trading Co. Ltd. v. Tivoli Park Apartments (P) Ltd. & Anr reported in (2014) 183 Company Cases 297 (CLB) (e) We have considered the rival pleadings and submissions in relation to the impugned share transfer of 2500 equity shares. It is trite law that parties to the lis are bound by their own pleadings. Thus in relation to the impugned transfer of 2500 equity shares from the petitioner No. 1 to respondent No. 3, the averments made specifically in the petition becomes relevant for ascertaining the factum of knowledge of the said transaction of share transfer impugned by Petitioner No. 1 primarily for the purpose to ascertain, the action has been brought about with....
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....er petitioners, are not mere shareholders not having any access to records, but have been consistently part of the active management of the respondent company since long. In fact, for a considerable period, petitioner No. 1 had also been the Chairman of the respondent company and in case he had allowed the so called illegality of transfer of 2500 equity shares to be perpetuated by the respondents by having the same recorded in the register of members and also in filing year after year, the annual returns, thereby creating records of depriving him of his holding of 2500 equity shares to his detriment then, it was incumbent on the part of petitioner No. 1 to bring to the notice of the respondents of such illegality promptly, and seek the avenue for redressing his grievance with alacrity if not redressed by the Respondent Company. Further the fact of Petitioner No. 1 accepting the dividends for equity shareholding, excluding the 2500 equity shares, despite being in the management of the company all along, clearly discloses only his further acquiescence. g) In this regard we are not required to look beyond the pleadings of the petitioners in their petition as extracted above b....
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....nowledge of transfer in 1990 and he maintained silence, then challenging such a transaction after two decades cannot be permitted. The starting point of limitation has to be established as a fact which in the instant case is admitted to be 1990. These principles are well settled as would be evidenced from a perusal of Para 16 of the above referred to judgment. (i) Further the applicability of the considerations of delay and laches, even assuming that limitation may not be applicable to the 1956 Act will apply for denying the grant of reliefs for rectification of register as sought for under the 1956 Act and the same has also been dealt with, in Sulochna Neelkanth Kalyani v. Takle Investments Company & Ors. reported in 2016 (4) Bom CR 272 at paragraph 16 of the judgement supports our views and the same is extracted hereunder: "16. That is not to say that there are no considerations of delay and laches for granting reliefs under Section 111(4) of the Act. The relief to be granted under Section 111 is in the nature of a discretionary relief. Exercise of such discretion could certainly be affected by inordinate and unexplained delay, and laches. Any such delay may ren....
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....catena of judgments rendered by the Hon'ble Supreme Court that the proceedings initiated by invoking equitable jurisdiction under Artie 226 of the Constitution, the maximum period fixed by the legislature as the time within which relief by a suit in a Civil Court must be claimed, may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Article 226 can be measured. Where the delay is more than the period prescribed by the Limitation Act, then it would be appropriate for the Court to hold that it is unreasonable. In that regard, reliance may be placed on 7-Judge judgment rendered in the case of State of Madhya Pradesh v. Bhailal Bhai & Ors. AIR 1964 SC 1006. The aforesaid view has been repeatedly followed and applied by Hon'ble The Supreme Court. In a recent judgment rendered in the case of MTNL v State of Maharashtra and Anr. 2013(9) SCC 92 placing reliance on the judgment rendered in the case of Bhailal Bhai (Supra), Hon'ble The Supreme Court observed that in equitable jurisdiction, the maximum period of limitation can reasonably hold to be the same as has been provided by the Limitation Act. Where a person comes to the Court for relief....
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....oner No. 1 to have approached this Tribunal without any delay or laches. Lack of diligence on the part of Petitioner No. 1 for all these years, particularly after he had acquiesced by his conduct, clearly disentitles him from maintaining the action in relation to the 2500 equity shares before us. In relation to the alleged act of forgery, the petitioner No. 1 through his power agent, has already filed a criminal complaint before the concerned criminal court and respondent No. 2 having filed a cross complaint both of which will take its own course and our above observations and order shall not in any way prejudice the respective rights of the parties concerned." The second vexatious issue which arises for our consideration is in relation to the 2,40,002 equity shares: The genesis of the instant litigation before us as well as the other litigations pending before the U.S and Indian courts seems to have been triggered between the parties over the above said issue, of course, the first salvo having been fired by Respondents 2 & 5 before the Probate Court, Massachusetts, USA and subsequently in multiple forums which seems to have been approached by the parties with a view to secur....
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.... and removal of trustees. Probate Court granted temporary restraining order and preliminary injunction against petitioner no.1 2. 13.12.2011 Defendant's (JBS) motion to dissolve the "Temporary Restraining order and opposition to motion for Preliminary Injunction allowed. Temporary Restraining order Dissolved granted vide order dated 17.11.2011 3. 22.12.2011 Settlement Agreement entered into between JBS, for and on his own behalf and on behalf of Gurmit Singh and Jagmit Singh as their PoA holder (collectively Petitioners) and Jasmohan Singh (Respondent No.2) and Jasleen Kaur (Respondent No.5) [also on behalf of Respondent No.3 and 4]. 4 06.02.2012 Motion in Probate Court, USA by Jasmohan Singh (Respondent No.2) and Jasleen Kaur (Respondent No.5) to enforce the Settlement Agreement dated 22.12.2011 and to permit limited discovery. 5. 20.03.2012 Motion of R2 to enforce Settlement Agreement denied on the ground of lack of jurisdiction of the Probate Court. 6. 27.03.2012 Complaint filed in Superior Court, Massachusetts, USA ("Superior Court") by R2 & R5 seeking declaration of the Settlement Agr....
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....ourt, Massachusetts 16. 13.05.2016 Appeal filed by P1 before Appellate Court, Massachusetts, USA against the Superior Court's order dated 06.10.2014 was dismissed by Appeals Court. 17. 08.06.2016 Superior Court, USA, allows the motion filed by R2 & RS for release of the executed Share Transfer Form, which was kept in the custody of Escrow Agent pursuant to order dated 05.03.2015. The motion for release of Share Transfer Form was allowed unopposed. P1 did not object to the release of Share Transfer Form. 18. 28.07.2016 Hon'ble Appeals Court at Massachusetts imposed a cost of $126,572.33 in favour of the Respondents and against the Petitioner No.1. From the above tabulation and from the perusal of appeal as filed by the Petitioner No. 1 in the Appellate Court of Massachusetts; United States, it is evident that the U.S. Courts have gone into legality at considerable length about the Settlement Agreement dated 22.12.2011, P1 and R2 and R5 being signatories to the said agreement and who have voluntarily subjected themselves to the jurisdiction of the courts in US, including P1 who happens to be a U.S. citize....
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....nt illegal; (b) Dr Singh was not required to wait for approval from Reserve Bank of India ("RBI") prior to signing the relevant share transfer forms; (c) Indian Law does not require Mr. Singh to pay monetary consideration for the shares; (d) Dr. Singh was "on notice" of Mr. Singh's alleged corporate misconduct at Frick in November 2011 and therefore could not have been fraudulently induced to sign the Agreement; (e) Dr. Singh's unclean hands argument based upon Mr. Singh's alleged misconduct at Frick failed because those allegations did not relate to the Agreement; and (f) Dr. Singh's fraudulent inducement and unclean hands defenses based upon evidence of Mr. Singh's alleged pre-Agreement statements regarding the payment of monetary consideration for Dr. Singh's Frick shares and Mr. Singh's promise to research how to properly effect the share transfer under Indian Law, were barred by the Court's previous determination that the parties' obligations under the Agreement were "unambiguous." On November 7, 2015, Dr. Singh filed a notice of appeal. On March 6, 2015, the Court ordered Dr. Singh to sign the share transfer fo....
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.... R2 restraining P1 and his POA holder, P2 from voting on 20% shares and further directing that voting rights on the said 20% shares shall ensure to the benefit of R2 to R5 K. 01.08.2016 Hon'ble Delhi High Court imposed a cost of Rs.7.80 lacs on the Petitioners for seeking an adjournment in their own civil suit CS(OS)665/2015 in relation to the disputed shares being the subject matter of foreign judgement details as given in paragraph supra . L. 31.08.2016 The Hon'ble High Court of Delhi refusing the application for amendment as sought by the petitioners herein to mount a challenge, in effect, the order passed by Superior Court, Massachusetts however allowing the application of the respondents for rejection of plaint CS(OS)665/2015 of Petitioners herein. M. 20.09.2016 Filing of RFA by Petitioners herein challenging the order dated 31.08.2016 of Hon'ble Delhi High Court rejecting the plaint of the Petitioners. P. 28.11.2016 Hon'ble Supreme Court dismissed the SLP of Petitioners challenging the order dated 17.03.2015 and 10.05.2016 of Division Bench ....
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....itioner No. 1) to the effect that the interim order may be set aside. However, on complete volte face of the earlier stand, Petitioner No. 1 seems to have filed an application before the Division Bench seeking for a recall of the earlier order passed on 17.03.2015 which seems to have been not accepted by the Division Bench and the application for recall seems to have been dismissed on 10.05.2016 and the order of 17.03.2015 also affirmed. From the list of dates and events filed by the parties as well as based on oral representations of the counsels appearing for the parties, it is also evident that SLP filed before the Hon'ble Supreme Court against the said order dated 10.05.2016 of the Division Bench of Hon'ble High Court of Delhi seems to have also been dismissed on 28.11.2016. The effect of the dismissal of the SLP by the Hon'ble Supreme Court seems to be that the legal fetters sought to be imposed on the judgment of the Superior Court of Massachusetts, being a foreign judgment before the Courts in India seems to have failed and in effect, the transfer as contemplated under the Settlement Agreement dated 22.12.2011 sought to be prevented by Petitioner No. 1 seems to h....
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....onies, both of which are movables, could not have been an issue as in this respect the Courts in India have formulated certain essentials which are required to be considered by the Courts here to ascertain the jurisdiction of the Foreign Court in passing the order and for which reference is made to the judgment of the Hon'ble High Court of Madras rendered in Mohammed Abdulla v. P.M. Abdul Rahim AIR 1985 Mad 379 as follows more particularly to Paragraph 2 of the said judgement after discussion of several authorities on the point: "As per the above pronouncements, the following circumstances would give jurisdiction to foreign Courts: (1) Where the person is the subject of the foreign country in which the judgment has been obtained; (2) Where he was a resident in the foreign country when the action was commenced and the summons was served on him; (3) Where the person in the character of plaintiff selects the foreign summons voluntarily appeared; and (5) whereby an agreement, a person has contracted to submit himself to the forum in which the judgment is obtained." Going further in Paragraph 5 of the above-said judgment, the Hon'b....
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....#39;ble Supreme Court rendered in R. Viswanathan V. Rukn-ul-Mulk Abdul Wajid reported in AIR 1963 SC 1: (1963) 3 SCR 22 and referred to above by the Hon'ble High Court of Madras wherein it was held that the same can be made amenable to the jurisdiction of the foreign courts. Taking into consideration the decision rendered in Mohammed Abdulla v. P.M. Abdul Rahim by the Hon'ble High Court of Madras as cited above as well as the decision of the Hon'ble Supreme Court rendered in AIR 1963 SC 1: (1963) 3 SCR 22 the same seem to apply on all fours with respect to jurisdiction over the parties as well as the subject matter of the Settlement Agreement dated 22.12.2011 and which established position of law cannot be ignored by this Tribunal while dealing with the reliefs prayed for in connection with Section 111A, being reliefs (ii) & (iii) in the instant company petition. Further as consistently held by the courts in India, even though the Tribunals in India can take into consideration of a foreign judgment rendered between parties, who are before it, but however the decision rendered by the Tribunal of India should not be in conflict with the foreign judgment. The relief sou....
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....ector of the company resigned from his directorship basically due to the harsh language used in relation to integrity of the said Independent Director, who had been serving the respondent company for long. The Board of Directors of the respondent company on 27.01.2012 seems to have accepted the resignation in which both the 1st and 2nd petitioners as well as the 2nd respondent are seen to be part off. It must be stated that the resignation of a director for personal reasons or due to other commitments are not unknown and does not ring alarm bells. However in a public limited company that too the company claiming to be a listed company having numerous share holders, the resignation of an Independent Director calls for attention particularly when it is raised by shareholders having considerable percentage of share capital in the respondent company and who have also been consistently part of the Board, occupying significant positions in managing the affairs of the respondent company. It will be an understatement to say that both the stock market regulators, namely SEBI as well as the Government considers the role of an independent director as very crucial for effective Corporate Go....
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....d has thus become a listed company having numerous shareholders in its Register of Members, even according to the admission of the parties, and to whom they are accountable and answerable. Under the circumstances to claim the company as a "family company' as sought to be portrayed is in itself not acceptable and the parties cannot consider the respondent company as their personal fiefdom or property and they are required to act as custodians of public money and run the company, more as trustees, rather than as members of say a Hindu Undivided Family or Joint family controlling the business of the family. Further in case of borrowings from banks or financial institutions accentuate the concept of public interest still further and compliance with Corporate Governance becomes all the more compelling and rigorous to safeguard the interest of the company and thereby the economic well being of all the stakeholders concerned. In this regard it is worth noting that one of the common underlying strand which runs, both in Section 397 as well as Section 398 of the Companies Act, 1956 involved herein, is the aspect of "public interest" which aspect had been succinctly brought about in t....
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.... against one of the salient Corporate Governance Practices formulated by the stock market regulatory authority and subsequently given statutory force under Companies Act, 2013 as well. Turning to the allegation of the ouster of the 2n petitioner from Joint Managing Directorship, it is seen from the records furnished which brings out the fact that the 2nd petitioner had voluntarily resigned from the position vide resignation letters dated 25.05.2007 and 26.05.2007. Further in any case to make the allegations about his resignation after considerable lapse of time and despite the 2nd petitioner occupying the directorship of the company even at the time of filing the petition, points out to acquiescence on the part of the 2nd petitioner. In addition it also suffers from laches and delay and hence cannot be taken into consideration as an act of mismanagement for granting reliefs. Siphoning of Funds, Sale of Scrap, Manner of Procurement and Consumption of Materials and Sale of Products: The allegations pertaining to purchase of materials other than from recognized vendors, over-invoicing of material purchased, consumption of Gl sheets not in consonance with the industry standard....
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....ng quantities even at the time when the 2^nd petitioners was it Joint Managing Director. In other words, it is submitted by the respondents that the Company has also been trying to establish additional procurement of raw materials without in any way compromising on the quality of production, from others and when dispatches were not forthcoming in order to continue with the production process. A perusal of the financial statements, as pointed out by the respective counsels shows an increase, both in consumption of raw materials as well as considerable increase in production. Consumption particulars of raw materials of some major items and production details for the year 2008 and 2009 discloses as follows:- Material Procurement 31.03.2009 [Kgs) 31.03.2008 (Kgs) Steel pipes (MS & GI) 939,163 626,449 Steel Plates & Sheets 756,279 912,152 ERW Steel Tubes 424,132 392,460 Pig Iron & Steel Scrap 409,431 249,435 Production Particulars Freon & Ammonia compressors 296 265 Packaged Type Cooling/ Freezing Units 7 21 Accessories & Fittings 6579 2853 During the course of the arguments, the counsels f....
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....nal as stated in paragraph supra is required to confine itself as to whether any allegation to the said effect has been made by the petitioners in the petition and anything based on facts brought before this Tribunal during the course of arguments is required to be eschewed not correlated with pleadings. Further, during the course of the arguments the counsels for the parties pointed out that the petitioner No. 2 has filed a criminal complaint in FIR No. 71/13, and even though initially after investigation it was closed by the investigating officer, however subsequently the FIR had been registered and investigations reopened by the Metropolitan Magistrate (5), Patiala House, New Delhi by allowing a protest petition filed by the Complainant, being the 2nd petitioner and is presently pending before the higher Court based on the Criminal Revision filed by the 2nd respondent. However a perusal of the order of the Learned Metropolitan Magistrate based on the complaint filed by petitioner No. 2 is quite interesting and seems to be very similar to the allegations raised in the present petition relating to materials and stocks as evident from the extract below: a) The reason for d....
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....may take various forms like lack of probity and fair dealing in the affairs of the company to the prejudice of some portion of its members. The section confers wide power on the court to deal with such a situation in an equitable manner which it did not have in the case of a company prior to the passing of the Companies Act, 1948. To obtain any relief under this section a petition must show that the oppression arises from the way in which the affairs of the company are conducted or is attributable to an act or omission on the part of the company. Where a shareholder repaid a loan taken by the company from its bank without informing the company and took a transfer of the company security it was held not to be oppression as the shareholder had acted in a personal capacity and the conduct did not alter the position of the company. Relief may be granted under section 397 of the Act only against the continuous acts on the part of the majority shareholders oppressive to the minority. Some isolated and illegal act do not amount to oppression. Denial of the right of inspection or other rights of a shareholder or failure to comply with formalities required in the matter of giving notice of ....
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....mplied with under the Act and warranting prosecution: In relation to mismanagement of the affairs of the company by the respondents under Section 398 of the 1956 Act, one of the instances being pointed out by the petitioners is that, both Respondent No. 2 as well as the auditors of the respondent company have been prosecuted for non-compliance and that subsequently the offences have been compounded with which are clear pointers to the acts of mismanagement as alleged by the petitioners. However, it has been consistently held by the predecessor to this Tribunal, namely CLB, that mere non-compliance with the statutory formalities by persons in the management of the company will not be considered as mismanagement in the affairs of the company and it will be upto the appropriate authority to initiate action in terms of the provisions of the Act, and which authority even as per the admission of the petitioners seems to have already initiated action against the company and its management and the auditors as well, which seems to have resulted in the compounding proceedings, where under, the offences seems to have been compounded by the CLB and in the circumstances we are not delving in....