1996 (3) TMI 396 - HC - Companies Law

Issues Involved:
1. Validity of the Family Arrangement dated 5-7-1993.
2. Legitimacy of the issuance of 840 shares by Puspaj to Defendant No. 2.
3. Allegations of fraud, suppression, and misrepresentation by Defendant Nos. 1 to 3.
4. Plaintiff's entitlement to control Puspaj and Chemstar based on the Family Arrangement.

Detailed Analysis:

1. Validity of the Family Arrangement dated 5-7-1993:
The Family Arrangement was executed between the Plaintiff and Defendant Nos. 1 to 3, along with the wife of Defendant No. 3. The recitals of the Family Arrangement referred to the setting up of a Private Trust on 29-11-1971, holding 100 shares of Puspaj, and its dissolution after 18 years on 28-11-1989. The Family Arrangement aimed to resolve differences regarding the shares of Puspaj and maintain peace and cordial relations within the family. Clause 10 of the Family Arrangement explicitly stated that the parties had no claims against one another relating to the equity shares of Puspaj. The Plaintiff had returned the draft Family Arrangement with corrections and additional notes, including a request for a certificate from Puspaj confirming its present share capital. The certificate was furnished on 9-7-1993, after the execution of the Family Arrangement.

2. Legitimacy of the Issuance of 840 Shares by Puspaj to Defendant No. 2:
The Plaintiff challenged the issuance of 840 shares by Puspaj to Defendant No. 2, alleging that it was done with the intent to deprive him of control over Puspaj and Chemstar. However, the court found that the Board of Directors of Puspaj had acted within their powers while issuing the shares. The shares were issued to repay a loan advanced by Defendant No. 2, making the issuance legitimate. The court noted that the issuance of shares was done on 9-10-1992, well before the Family Arrangement was executed on 5-7-1993. The court did not find any evidence of mala fide intentions behind the issuance of shares.

3. Allegations of Fraud, Suppression, and Misrepresentation by Defendant Nos. 1 to 3:
The Plaintiff alleged fraud, suppression, and misrepresentation by Defendant Nos. 1 to 3, claiming that he was led to believe that the total issued share capital of Puspaj was 160 shares. However, the court found that the Plaintiff did not provide full particulars of the alleged fraud. The Plaintiff's averments were found to be vague and insufficient to support the plea of fraud, suppression, or misrepresentation. The court referred to the Supreme Court's decision in Afsar Shaikh v. Soleman Bibi, emphasizing the need for specificity, particularity, and precision in pleading fraud. The court concluded that the Plaintiff's allegations were not substantiated by concrete evidence.

4. Plaintiff's Entitlement to Control Puspaj and Chemstar Based on the Family Arrangement:
The Plaintiff contended that the Family Arrangement was executed on the representation that he would gain control of Puspaj and, through it, Chemstar. However, the court found no evidence to support this claim. The Family Arrangement did not explicitly state that the Plaintiff was to be given control of Puspaj. The Plaintiff's reliance on an alleged agreement/arrangement from 1980 was not substantiated by any concrete evidence. The court noted that the Plaintiff had not challenged the entire Family Arrangement but only sought to enforce a specific representation. The court found no misrepresentation or inferential representation in the Family Arrangement and concluded that the Plaintiff was not entitled to any relief in the suit.

Conclusion:
The High Court of Bombay allowed the appeal, setting aside the order dated 22-8-1995 passed by the learned Single Judge. The court found that the Plaintiff had not made out a prima facie case of fraud, suppression, or misrepresentation. The issuance of 840 shares by Puspaj to Defendant No. 2 was found to be legitimate, and the Plaintiff's claim to control Puspaj and Chemstar based on the Family Arrangement was not substantiated. The court did not award any costs, considering the relations between the parties. The ad interim order dated 30-9-1993 was extended for a period of three months, with an expectation that both parties would abide by it.

← Previous Next →