2009 (8) TMI 692 - HC - Companies Law

Permanent injunction, mandatory injunction and damages an ex parte injunction - whether the plaintiffs have been able to make out a case for grant of the ad interim directions sought by them against the defendants? Held that - It was for the plaintiffs to have established, at least prima facie, that the society had sold all its shares of the company to different persons and that those transfers had been recorded in the relevant records of the company in accordance with law after due compliance of the relevant provisions of the Companies Act dealing with the transfer of shares of a company and recording of the transfers in the company s records. Since it is the case of the plaintiffs themselves that the society was the major shareholder at one time of the company after having acquired 500 shares out of total share capital of 560 shares, non-production of the original share certificate in respect of those 500 shares will not, in my view, give any strength to the case of the plaintiffs entitling them to grant of any of the interim directions sought for by them in their injunction application. Even if it is accepted that plaintiff Nos. 3 and 4 had purchased 20 shares each of the company from the society, as is being claimed by them, they would still not be entitled to get any injunction order or any other direction against any of the defendants. As far as plaintiff No. 2, Ankur Sachdeva, is concerned, he does not even claim to have purchased any share from the society. So, he has also not been able to make out a prima facie case for grant of any ad interim relief to him.

Summary

Issues Involved:
1. Ex parte injunction order and its violation
2. Ownership and transfer of shares
3. Representation and management of the company
4. Pending proceedings before the Company Law Board
5. Ad interim reliefs and their justification

Detailed Analysis:

1. Ex parte injunction order and its violation:
In this suit for permanent injunction, mandatory injunction, and damages, an ex parte injunction order was passed on 6-10-2006 restraining the defendants from representing themselves as shareholders/representatives of Capital Land Builders (P.) Ltd. The plaintiffs filed another application for a stay on certain sale deeds allegedly executed by some defendants in violation of the ex parte injunction order. The court had previously held some defendants guilty of violating this order. These applications, along with another for clarification of the order dated 6-10-2006 and one filed by defendants for vacation of the ex parte injunction order, were disposed of by this common order.

2. Ownership and transfer of shares:
The company, Capital Land Builders (P.) Ltd., was incorporated in 1959 with two original subscribers. One of them, Smt. Satya Chaudhary, held ten shares, and the other, Mr. Kishor Lal Sachdeva, held five shares. Ch. Brahm Parkash acquired 500 shares in 1962, which he later transferred to Shaheed Memorial Society in 1963. Plaintiff Nos. 2 to 4 claim that the society transferred all its shares to different persons by 1989, leaving it with no shares, thereby removing the society from the register of shareholders. However, the society contends it never transferred its shares.

3. Representation and management of the company:
After the death of Ch. Brahm Parkash, his sons formed a separate group (Chaudhary group) and started taking interest in the company's affairs, claiming the society was still the major shareholder. The plaintiffs (Kishor group) and the Chaudhary group both constituted separate boards of directors and filed separate returns with the Registrar of Companies, leading to a fierce battle for control of the company. Both groups issued share certificates and sold properties of the company, claiming authorization.

4. Pending proceedings before the Company Law Board:
The society initiated proceedings before the Company Law Board, claiming it never transferred its shares and seeking rectification of the register of members. The plaintiffs, contesting this petition, filed the present suit. Despite the pending decision of the Company Law Board, the plaintiffs sought to establish their claims independently through this suit.

5. Ad interim reliefs and their justification:
The court noted that the plaintiffs failed to establish a prima facie case for the ad interim reliefs sought. The plaintiffs could not provide sufficient evidence of the society's transfer of shares or compliance with relevant legal provisions. The court emphasized that the plaintiffs should have awaited the Company Law Board's decision. Consequently, the court vacated the ex parte injunction order but restrained both parties from disposing of any property of the company during the suit's pendency to prevent squandering of assets.

Conclusion:
The court dismissed the plaintiffs' applications for ad interim reliefs and clarification of the order dated 6-10-2006. It allowed the defendants' application for vacation of the ex parte injunction order. However, to protect the company's assets, the court restrained both parties from disposing of any property of the company during the suit's pendency.