2014 (5) TMI 749 - SC - Companies Law

Fraudulent reduction in shares held by the respondent - Forgery of documents - Respondent contends that she held 49% shares in the Company which had been further reduced to 36% and that the affairs of the Company were being managed in a manner oppressive to the minority shareholders - Alternative modes of resolution - Mediation - Held that - it is not necessary to either enforce orders dated 31.1.2008 passed by the CLB or orders dated 11.4.2008 passed by the High Court. Fact remains that there has been a complete deadlock, as far as affairs of the Company are concerned. The project has not taken off. It is almost dead at present. Unless the parties re-concile, there is no chance for a joint venture i.e. to develop the resort, as per the MOU dated 21.12.2005. It is only after the decision of CLB, whereby the respective rights of the parties are crystallised, it would be possible to know about the future of this project. Even the Company in question is also defunct at present as it has no other business activity or venture. In a situation like this, we are of the opinion that more appropriate orders would be to direct the parties to maintain status quo in the meantime, during the pendency of the aforesaid company petition before the CLB. However, we make it clear that if any exigency arises necessitating some interim orders, it would be open to the parties to approach the CLB for appropriate directions - Decided against appellant.

Summary

Issues Involved:
1. Dispute over collaborative business venture and mutual distrust.
2. Allegations of oppression of minority shareholders.
3. Legality of Board meetings and appointment of Directors.
4. Maintenance of status quo regarding shareholding and Directorship.
5. Filing of applications under Section 340 of Cr.PC alleging forgery.
6. Appeals and review petitions against CLB orders.
7. Suggestion for mediation and its advantages.
8. Interim arrangements pending the final decision.

Detailed Analysis:

1. Dispute over Collaborative Business Venture and Mutual Distrust:
The judgment begins by highlighting the severe litigation between two groups, stemming from a collaborative business venture that turned sour. The Khosla Group owned prime lands in Kasauli and entered into a joint venture with the Bakshi Group, under an MOU dated 21.12.2005, to develop a tourist resort. The Bakshi Group was to provide finances and administrative expertise. However, mutual distrust led to the project stalling and subsequent litigation.

2. Allegations of Oppression of Minority Shareholders:
Ms. Sonia Khosla filed a petition under Section 397 and 398 of the Companies Act, alleging that the Bakshi Group managed the company in a manner oppressive to minority shareholders. She claimed her shareholding was reduced from 49% to 36%, despite acknowledging that the majority shareholding was with Mr. Vikram Bakshi.

3. Legality of Board Meetings and Appointment of Directors:
A significant point of contention was the legality of various Board meetings and appointments. The Bakshi Group contended that appointments made in a purported meeting on 18.12.2007 were illegal, while the Khosla Group disputed the legitimacy of the Bakshi Group's appointments. The CLB directed maintaining the status quo regarding shareholding and Directorship as of 13.8.2007.

4. Maintenance of Status Quo Regarding Shareholding and Directorship:
The CLB's order on 31.1.2008 to maintain the status quo was challenged by both groups. The High Court dismissed appeals against this order, which led to further litigation, including review petitions that were also dismissed.

5. Filing of Applications under Section 340 of Cr.PC Alleging Forgery:
Ms. Sonia Khosla filed applications under Section 340 of Cr.PC, alleging forgery of documents submitted to the CLB. While the application was pending before the CLB, she filed a similar application in the High Court, which passed orders on 15.2.2010, now challenged in the present proceedings.

6. Appeals and Review Petitions Against CLB Orders:
Mr. R.K. Garg, appointed as Director in the disputed meeting, challenged the CLB's order by filing a writ petition and later an appeal in the High Court. The High Court stayed the CLB's order concerning his Directorship, which led to the present Special Leave Petition, arguing that the High Court should not have passed interim orders without condoning the delay in filing the appeal.

7. Suggestion for Mediation and Its Advantages:
The judgment extensively discusses the advantages of mediation as an alternative dispute resolution mechanism. It emphasizes that mediation can preserve relationships, reduce litigation costs, and provide a win-win solution for both parties. The court suggests that mediation could be a viable option for resolving the ongoing disputes.

8. Interim Arrangements Pending the Final Decision:
The court directs the CLB to decide the main Company Petition within six months, emphasizing that interim orders from previous proceedings should not be enforced. Instead, the parties are directed to maintain the status quo. The court also clarifies that parties can approach the CLB for interim directions if necessary.

Conclusion:
The judgment underscores the complexity and multiplicity of proceedings arising from a single business dispute. It highlights the importance of mediation and directs the CLB to expedite the resolution of the main dispute. The court's decision aims to provide a procedural roadmap for resolving the ongoing litigation while maintaining interim status quo.