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TaxTMI 
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2026 (4) TMI 1009
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.... referred to as 'Girdharlal Dalal'), who was the petitioner before the CLB, and issued directions with which the appellants are aggrieved. During the pendency of the appeal, the original appellant No. 2 - Bharat Kantilal Dalal (hereinafter referred to as 'Bharat Dalal') expired and in his place, his son Darshan Dalal, representing his estate, came on record. Original respondent No. 1 - Girdharlal Dalal also expired and his interest is represented by Chetan Dalal before this Court. The said Girdharlal Dalal was the uncle of the said Bharat Dalal. In other words, both, the uncle and the nephew have expired and their successors are pursuing the proceedings. 2. The said original respondent No. 1 - Girdharlal Dalal filed Company Petition No. 120 of 2013 before the CLB invoking Sections 397, 398 read with 402 and 403 of the Companies Act, alleging oppression and mismanagement in the affairs of the appellant No. 1 company - M/s. Star Grain & Shipping Private Limited. The said Girdharlal Dalal approached the CLB stating that he and his brother Kantilal Dalal were carrying on business since 1951 through a partnership firm called 'Kantilal & Company'. The business increased due to which p....
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....ellant No. 1 company. He also called upon Bharat Dalal to furnish all relevant documents. But, Bharat Dalal refused to do so and in this backdrop, some time in June 2007, Bharat Dalal allegedly behaved in an abusive manner with Girdharlal Dalal and threw him out of the office of the company and even the residence. 5. According to Girdharlal Dalal, although he was shocked and aggrieved by the behaviour of Bharat Dalal, he did not take any precipitate action with the hope that his brother Kantilal Dalal would intervene. It is claimed that several attempts were made by relatives and common friends to resolve the issues and to refrain from any legal action. When Girdharlal Dalal wrote to DSIPL on 09.08.2011 seeking certain information regarding investment of appellant No. 1 company, income generated etc., the DSIPL claimed that it recognized only Bharat Dalal as the person representing the appellant No. 1 company and on that ground, no response was given to the enquiries made by Girdharlal Dalal. It is further claimed that Girdharlal Dalal came to know about an arbitral award dated 10.07.2010, only in July 2011, pertaining to an arbitration proceeding between Bharat Dalal and his fa....
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....ction to the statutory auditor of the company to furnish all information regarding the appellant No. 1 company and other directions to restrain Bharat Dalal and others from mismanaging the affairs of the appellant No. 1 company. 8. The said Bharat Dalal appeared before the CLB and raised a preliminary point about delay and laches on the part of Girdharlal Dalal in approaching the CLB. All the allegations about misbehaviour on the part of Bharat Dalal were denied and it was stated that Girdharlal Dalal was all along aware about the change in the shareholding. It was emphasized that Girdharlal Dalal held 30% of the shareholding as a trustee and for the benefit of Darshan Dalal and Mangal Dalal, both being the sons of Bharat Dalal. It was claimed that Girdharlal Dalal acquired 30% shareholding from the wife of Bharat Dalal i.e. Jyoti Bharat Dalal without payment of any consideration, which further demonstrated that he held the shares only in trust for the benefit of the sons of Bharat Dalal. It was submitted that the entire management of the appellant No. 1 company was always with Bharat Dalal and that Girdharlal Dalal never actively participated in the business. It was with a mala....
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....een the said Girdharlal Dalal (original respondent No. 1), the appellant No. 1 company and the respondent No.5 i.e. Jyoti Bharat Dalal, it was agreed that 30% shares of the company held by the said respondent No.5 would be transferred to Girdharlal Dalal wherein the consideration was left blank. It was further claimed that as per agreement dated 08.02.1999, Girdharlal Dalal was holding shares in the appellant No. 1 company jointly with the said Bharat Dalal and that, Girdharlal Dalal was not to sell, gift or otherwise transfer his share / shareholding to any person other than Bharat Dalal and / or his wife or sons. It was further claimed in the application that the said agreements came to light when the papers of the company were being shifted by Darshan Dalal in the year 2018. It was further claimed that since the said documents are crucial in the context of the appeal and they are necessary for assisting this Court in disposing of the appeal, the application filed under Order XLI, Rule 27 of the Code of Civil Procedure, 1908 (for short 'CPC') may be allowed. The said application was vehemently opposed on behalf of the contesting respondent Girdharlal Dalal whose interest is now r....
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....eady complete. It could not be said to be a continuing wrong even though it may be claimed that the damage resulting from the act continued. It was emphatically submitted that even as per Girdharlal Dalal, none of the alleged oppressive acts were continuous in nature and therefore, the petition filed before the CLB suffered from gross delay and laches. In this context, reliance was placed on the judgements of the Supreme Court in the case of Balkrishna Savalram Pujari and others vs Shree Dnyaneshwar Maharajsansthan and others, 1959 SCC OnLine SC 68 and Samruddhi Co-operative Housing Society Limited Vs. Mumbai Mahalaxmi Construction Private Limited, (2022) 4 SCC 103 as also judgement of Bombay High Court in the case of Sulochana Neelkanth Kalyani Vs. Takle Investments Company and others, 2016 SCC OnLine Bom. 3543. 14 It was further submitted that the CLB erred in granting relief to Girdharlal Dalal, when he had made allegations of fraud and forgery while pursuing the reliefs in the company petition. Since the jurisdiction exercised by the CLB is necessarily summary in nature, such complicated questions of fraud and fabrication, involving disputed questions of facts could not have....
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....rt in the case of Sabita Rajesh Narang Vs. Sandeep Gopal Raheja and others, AIROnline 2023 BOM 699 and judgement of Allahabad High Court in the case of Ajodhya Pd. Bhargava Vs. Bhawani Shankar Bhargava and another, 1956 SCC OnLine All 131. 16. It was submitted that the findings rendered by the CLB with regard to the consideration for transfer / allotment of 30% shares in favour of Girdharlal Dalal and other such aspects suffered from patent illegality, as such findings were rendered in the face of documents that demonstrated the facts to be otherwise. It was also submitted that the CLB could not have held that joint shareholding was not permitted when Article 9 of the Articles of Association provided otherwise and hence, the error on the face of the record and perversity of the said findings was writ large. The said findings were clearly contrary to the record and hence, the impugned order deserved to be set aside. Reliance was placed on the judgement of the Supreme Court in the case of Commissioner of Customs, Pune Vs. Ballarpur Industries Limited, (2021) 10 SCC 736. 17. It was then emphatically submitted that the direction issued in clause (j) of the impugned order of the C....
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....before this Court, it was submitted that the reference to the minority shareholding in the appellant No. 1 company of Girdharlal Dalal was merely stated by way of abundant caution in the light of the last Will of Girdharlal Dalal. It was submitted that this clearly would not absolve the obligation of Girdharlal Dalal and his legal representative Chetan Dalal in proving lawful title in respect of the said shares and establishing that consideration was indeed paid for allotment / transfer of the said shares. It was submitted that the contents of the said suit and the testamentary petition were being misread by the contesting respondent to deliberately mislead this Court. It was submitted that nothing would turn on the contents of the said suit and the testamentary petition, as the onus was entirely upon Girdharlal Dalal and his successor to first show that the shares were transferred in his favour for consideration and that, they were not held in trust. On this basis, it was submitted that the impugned order ought to be set aside. 20. On the other hand, Mr. Haresh Jagtiani, learned senior counsel appearing for Chetan Dalal, representing the interest of Girdharlal Dalal i.e. the pe....
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....lal Dalal merely as a custodian or as a trustee for the benefit of Darshan Dalal and Mangal Dalal (sons of Bharat Dalal), the burden was on them to prove such an assertion. This was all the more necessary when the annual returns and balance sheets of the appellant No. 1 company for various years, including the year 2007-08, endorsed the fact that Girdharlal Dalal held 30% shares in the appellant No. 1 company and particularly when, such documents were signed by Bharat Dalal himself. The documents on record stated that 30% shares were received by Girdharlal Dalal from Jyoti Dalal at par with issue price. This further demonstrated that the assertions made by the appellants were without any substance. The documents on record also recorded that Girdharlal Dalal had introduced capital in the company. On this basis, it was submitted that no fault could be found in the findings rendered by the CLB on the aforesaid aspect of the matter and also in the context of the provisions of the Benami Act. 23. On the aspect of lack of jurisdiction in the CLB to decide questions of fraud and forgery, it was submitted that the CLB had correctly inferred from the documents and material on record that....
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....appellants have lied on oath about the timing of discovery of these documents, for the reason that Bharat Dalal, before he passed away, had produced these very documents during the course of an arbitration proceeding in September 2017 and this was to the knowledge of Darshan Dalal, who was himself a party to the arbitration proceedings. Yet, a false statement has been made in the interim application that Darshan Dalal discovered these agreements only in February / March 2018. It was submitted that on this ground alone, the application ought to be dismissed. 25. It was further submitted that in any case and without prejudice to the aforesaid submissions, the contents of the said agreements do not support the claims made by the appellants. The agreements proceeded on the basis of ownership of 30% shares of Girdharlal Dalal and only stipulated that Bharat Dalal would have right of first refusal, in the event Girdharlal Dalal desired to dispose of the shares at market value. Nothing in these agreements indicate that Girdharlal Dalal held the aforesaid shares in trust. This was also contrary to the assertion made before the CLB that the aforesaid understanding about Girdharlal Dalal ....
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.... considering the fact that this is an appeal filed under Section 10F of the Companies Act, it has to be considered and decided on questions of law. It is a settled position of law that such an appeal would lie only on a question of law and that the CLB is the final authority on facts. Only if the Court considering the appeal concludes that the findings of fact rendered by the CLB, are perverse or based on no evidence or are found to be otherwise arbitrary, any interference would be warranted. This position of law has been recognized and reiterated by this Court in the case of Abdul Wahid Abdul Gaffor Khatri Director and others Vs. Safe Heights Developers Pvt. Ltd. and others (supra). In the said judgment, this Court referred to and relied upon judgments of the Supreme Court in the cases of V. S. Krishnan Vs. Westfort Hi-Tech Hospital Limited, (2008) 3 SCC 363 and Purnima Manthena Vs. Renuka Datla, (2016) 1 SCC 237. Thus, the scope of jurisdiction under Section 10F of the Companies Act is limited. This Court has considered the rival submissions in the backdrop of the said position of law and it is found that the following questions of law arise for consideration: (a) Whethe....
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....ctober 2013 to file the petition before the CLB. It was submitted that merely issuing notice on 11.09.2013 would not push forward the cause of action to maintain the petition before the CLB and that therefore, the petition was hit by delay and laches, which the CLB failed to appreciate. In this context, it would have to be examined as to what was the grievance of Girdharlal Dalal when he approached the CLB. On a proper appreciation of the statements made in the petition filed before the CLB and the nature of grievance raised by Girdharlal Dalal, this Court finds that the allegations pertained to a continuous course of actions of the said Bharat Dalal, resulting in oppression and demonstrating mismanagement of the affairs of the appellant No. 1 company. It is only when a wrongful or oppressive act is an isolated event and can be said to be stale, that a petition filed after considerable period of time, could be said to be hit by delay and laches. 32. This would also entail an aspect of acquiescence and estoppel, on the basis that the aggrieved person knowing fully well about such an isolated event, failed to take any precipitate action in the matter. This is the position of law, ....
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....ontinued to breach their obligations qua Girdharlal Dalal, who according to Bharat Dalal himself was holding 30% shares in the appellant No. 1 company. The said Bharat Dalal could not have been permitted to escape the liability of such continuous acts of wrongdoing by hiding behind the shield of delay and laches, and therefore, the approach adopted by the CLB in this regard cannot be faulted with. The acts of oppression and mismanagement were found to be of continuous nature and therefore, the petition filed before the CLB could not be said to be hit by delay and laches. Thus, the first question is answered against the appellants and in favour of the contesting respondent. 35. The second question pertains to the jurisdiction exercised by CLB in rendering findings on the aspects of fraud and forgery. It is the specific case the appellants that the nature of allegations made by Girdharlal Dalal necessarily required detailed oral and documentary evidence on the aspects of fraud and forgery and that the said issues could not have been decided in the summary jurisdiction exercised by the CLB. In this regard, a distinction will have to be made between cases where the issues of fraud a....
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....%, that he held the shares in the first place only in trust and as a custodian for the sons of Bharat Dalal and that the change in percentage of shareholding and removal of Girdharlal Dalal as director, was based on steps taken in accordance with law, upon meetings being conducted after due notice to Girdharlal Dalal. 38. It is while examining the said assertions of Bharat Dalal upon whom the burden was to prove the same, that the CLB considered the documents on record. Even while exercising summary jurisdiction, the CLB found that glaring facts emerged, indicating substance in the allegations levelled by Girdharlal Dalal. As a matter of fact, when CLB called upon Bharat Dalal to produce the original share certificates, they were never produced. The CLB found that the documents on record demonstrated that Bharat Dalal himself had addressed correspondence to Girdharlal Dalal, admitting him to be a director. 39. The CLB also found that the meetings allegedly held by the Board of Directors of appellant No. 1 company, wherein Girdharlal Dalal was removed as a director, were based on notices that were never served upon Girdharlal Dalal. Such notice was neither found to be issued o....
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....hereinabove, the documents available on record themselves were enough for the CLB to reach conclusions regarding fraud and forgery on the part of Bharat Dalal and the other respondents. Such detailed analysis is found in various portions of the impugned order of the CLB, including paragraph 87. The CLB was clearly justified in reaching such conclusions on a bare reading of the documents and at relevant places, the CLB drew adverse inferences as the appellants failed to produce documents in their custody. As regards reliance placed on judgement of the Supreme Court in the case of Indian Bank Vs. Satyam Fibres (supra), it is found that the appellants as well as the contesting respondent are relying on the said judgement in order to support their respective stands. The position of law has to be applied to the facts and circumstances of the individual cases. A reading of the impugned order of the CLB shows that the issue of fraud and forgery has been approached in a correct manner as the documents and material on record, on the face of it, demonstrated the mala fide actions of Bharat Dalal and this was an open and shut case of fraud and forgery committed by him in connivance with the o....
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....arlal Dalal from 30% to 0.03%, the CLB found that such crucial decisions were taken in meetings, which were clearly held behind the back of Girdharlal Dalal. It was also found that the minutes of meeting and documents produced in that context, indicated that they were prepared with the design of illegally ousting Girdharlal Dalal and in any case, reducing him to a non-entity, behind his back. The CLB found that the aforesaid step of drastically reducing the percentage of shares held by Girdharlal Dalal was with a design to deprive him of any locus of raising objection in future, with regard to oppression by Bharat Dalal and others. The aforesaid findings are again found to be based on appreciation of documents and material on record, the contents of which were not even denied by Bharat Dalal. Therefore, it cannot be said that the findings rendered by the CLB were based on no evidence or that they could be said to be arbitrary. Hence, the findings cannot be termed as perverse. 46. This Court has perused the impugned order and it is found that on the said aspects of the matter as well as the alleged relinquishment of shareholding by Girdharlal Dalal, the CLB found that the documen....
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....as refused to admit evidence which ought to have been admitted, or (aa) the party seeking to produce additional evidence, establishes that notwithstanding the exercise of due diligence, such evidence was not within his knowledge or could not, after the exercise of due diligence, be produced by him at the time when the decree appealed against was passed, or] (b) the Appellate Court requires any document to be produced or any witness to be examined to enable it to pronounce judgment, or for any other substantial cause, the Appellate Court may allow such evidence or document to be produced, or witness to be examined. (2) Wherever additional evidence is allowed to be produced by an Appellate Court, the Court shall record the reason for its admission.' 48. A perusal of the above-quoted provision clearly shows that the appellate Court can permit the parties to produce additional evidence only in circumstances enumerated in sub-clauses (a), (aa) and (b) of the Clause 1 of Order XLI Rule 27. A party seeking to produce additional evidence is required to demonstrate that the existence of such evidence was not within its knowledge, despite exercise of du....
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....ation proceedings. Yet, it is stated that Darshan Dalal discovered the said purported agreements for the first time in February/March 2018. In this backdrop, it has been vehemently submitted on behalf of the contesting respondents that since false statements were made on oath before this Court, appropriate action regarding perjury should be initiated. 51. This Court finds that the explanation sought to be given, as regards the reason for not being able to produce the said agreements at any time earlier, is wholly unacceptable and it does indicate that the appellants, while filing this application, have not approached this Court with clean hands. The Supreme Court, in a number of judgments, has held that in such a situation, the party misrepresenting or suppressing facts in Court proceedings, pollutes the stream of justice and it is not entitled to any relief, interim or final. This is specifically held by the Supreme Court in its judgment in the case of Kishore Samrite Vs. State of Uttar Pradesh and others, (2013) 2 SCC 398. On this ground alone, the application deserves to be rejected. 52. Even if the prayer made in the application is to be considered on the touchstone of Or....
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.... Mohanlal Kalwar, (1990) 1 SCC 166, are to be applied to the application filed by the appellants under Order XLI Rule 27 of the CPC, it is clear that no case is made out for allowing the same. In fact, it is clearly a desperate attempt on the part of the appellants to find fault with the cogent findings rendered by the CLB in the impugned order. 54. In this regard, the contents of the additional affidavit filed on behalf of the contesting respondent cannot be ignored. It is pointed out therein that the said Bharat Dalal had filed a suit seeking administration of estate of Girdharlal Dalal on 15.12.2017 bearing Suit No.807 of 2018 before this Court. Bharat Dalal sought a declaration that shares held by Girdharlal Dalal in the appellant No. 1 company be declared to be forming part of the estate of Girdharlal Dalal. In Testamentary Petition No.871 of 2018, again filed by the said Bharat Dalal, he stated on oath that the estate of the deceased Girdharlal Dalal comprised of a minority shareholding of the appellant No. 1 company. The said petition was also filed before this Court. Thus, Bharat Dalal, during his lifetime, asserted on oath before this Court in the aforementioned two pro....