9911796707
TMI Blog1985 (8) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents Nos. 2 and 4 are two of their sons. The sixth respondent is V. Ramakrishna Sons Ltd. which is a company registered under the Companies Act, 1956, hereinafter referred to as "the company." The company was incorporated under the Companies Act and a certificate of incorporation was granted on July 7, 1949. The nominal capital of the company is Rs. 10,00,000 divided into 1,000 shares of Rs. 1,000 each. The company was promoted by the late V. Ramakrishna, I.C.S., and Rajeswari Ramakrishnan as a private limited company, the shareholding being distributed as follows : V. M. Rao ... 199 V. L. Dutt ... 199 Rajeswari Ramakrishnan ... 95 R. Prabhu ... 4 V. Ramakrishna, I.C.S. ... 1 P. R. Ramakrishnan ... 1 V. R. Durgamba ... 1 (V. R. Durgamba got this share from her husband, V. Ramakrishna, in the year 1951) The entire share capital of the company was contributed, according to the plaintiffs, by the late V. Ramakrishna and his wife, V. R. Durgamba. The late Ramakrishna also promoted another company by name R. S. Industrial Corporation P. Ltd. V. Ramakrishna Sons Ltd. were the managing agents of K.C.P. Ltd. and R. S. Industrial Corporation Ltd. we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-emption in favour of V. M. Rao and V. L. Dutt in case Rajeswari Ramakrishnan or R. S. Industrial Corporation wanted to dispose of their shares in K.C.P. Ltd., Andhra Cement Co. Ltd. and V. Ramakrishna Sons Ltd. According to the plaintiffs, the family arrangement so brought about by the father was agreed to by Rajeswari Ramakrishnan, V. M. Rao and V. L. Dutt, the children of the late V. Ramakrishna. In accordance with this family arrangement, V. M. Rao, who was on the board of directors of Jeypore Sugar Co. Ltd. and R. S. Industrial Corporation (P.) Ltd. resigned on October 29, 1961, and February 1,1962, from the above companies and also gave up all positions and responsibilities in respect of those companies. He had also transferred to Rajeswari Ramakrishnan and to her branch and/or nominees the shares which he was holding in Jeypore Sugar Co. Ltd. The company also had sold the bulk of its holding in Jeypore Sugar Co. Ltd. to Rajeswari Ramakrishnan and/or her branch or nominess. Likewise, Rajeswari Ramakrishnan also resigned her life-directorship on the board of V. Ramakrishna Sons Ltd. on October 19, 1961, which was accepted on January 9, 1962. It is further stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been trying to avoid conflict since March, 1975 and has been trying to arrive at a reasonable and mutually acceptable compromise through very respectable mediators, but the negotiations did not produce any fruitful response. With these allegations, the plaintiffs filed C.S. No. 322 of 1975 on December 17, 1975, praying for a decree declaring : (1)That defendants Nos. 1 to 4, or anyone claiming through or under them, are not entitled to participate in the management of the company ; (2)that the election of defendants Nos. 1 and 2 to the board of directors of the company at the annual general meeting held on April 22, 1975 is null and void ; and, (3)for a permanent injunction restraining defendants Nos. 1 and 2 from functioning as directors; and (4)for a permanent injunction restraining defendants Nos. 1 to 4 from participating in the management and affairs of the company in any manner whatsoever. The plaint specifically states that no relief is asked for against defendants Nos. 5 and 6. Durgamba, wife of late V. Ramakrishna, is not impleaded as a party to the suit. Defendants Nos. 1 to 4 filed a written statement denying the allegations that the first defendant had ever enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sixth defendant, such oral agreement pleaded is also barred by the provisions of section 92 of the Indian Evidence Act. They have also contended that having regard to the nature of the allegations in the plaint and, in particular, allegations of fraud against and oppression of the plaintiffs and the nature of the reliefs prayed for which relates entirely to the internal management of the sixth defendant company, this court, as a civil court, will have no jurisdiction to entertain the suit and the matters raised and the reliefs prayed for here can be agitated, if at all, only before the court having jurisdiction under the Companies Act, 1956. The fifth defendant, the brother of the first plaintiff filed a separate written statement, contending that the so-called family arrangement was not true. He had also submitted that there was never any family arrangement regarding the management of the sixth defendant company or any other company, that there was no arrangement to vest in any member or group of members the exclusive management of the said companies, that the resignation of any of the parties from his or her directorship was on the volition of the person concerned and not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also contended that the rights and liabilities are to be decided only with reference to the memorandum and articles of the company and the provisions of the Act and that the company cannot take note of any family arrangement, even if such arrangement existed between the parties. On these pleadings the following issues were framed on September 15, 1976: (1)Whether the family arrangement pleaded by the plaintiffs is true, valid and binding on the parties ? (2)Whether the said family arrangement was not acted upon and whether the same is not enforceable for any of the reasons set out in the written statement ? (3)Whether the defendants are estopped from denying the truth and validity of the family arrangement ? (4)Whether the suit is not maintainable for any of the reasons can contained in the written statement ? (5)To what relief the parties are entitled ? When the suit was pending, V. M. Rao filed on December 13, 1976, Company Petition No. 94 of 1976, under sections 397 and 398 of the Companies Act, praying for an order superseding the board of directors of V. Ramakrishna Sons Ltd., and appointing an administrator or administrators to take charge of the affairs of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various acts of oppression and mismanagement relied on by the petitioner are set out in paragraphs 26(A) to G of the petition and on those grounds it was contended that it is a case in which the company can be wound up on just and equitable grounds. It was also contended that the conduct of the company's affairs by the respondents is unfair, burdensome, harsh and wrongful to the other members of the company who constitute 47.3% of the shareholding. It is both oppressive and also against public interest. The petitioner has set out certain features in the administration of the company and the conduct of the directors in paragraph 32 of the petition as justifying interference by this court in exercise of its powers under section 397 of the Companies Act. We are not setting out the details of the allegations at this stage as learned counsel for the appellants has not pressed some of the allegations and relied on only some of them. We will set out the relevant facts relating to the points pressed in the appeal and the submissions on these when we deal with the contentions. V. L. Dutt and V. Ramakrishna Sons Ltd., respondents Nos. 1 and 7 have filed a counter-affidavit in which it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution was passed that the sanction of the company under section 81 of the Act be accorded to the directors to issue further shares to any person, whether or not those persons are existing shareholders of the company and in pursuance of that resolution at a subsequent meeting of the board of directors, shares worth Rs. 5,00,400 were allotted to Bajranbali Engineering Co. Ltd. and three other individuals which, according to the petitioner, has resulted in the dilution of the value of the shares of the existing shareholders. Because of this allegation, the eighth respondent was brought on record as a party respondent and a counter-affidavit was filed on behalf of the company. In the counter-affidavit filed, the facts relating to the allotment of shares are referred to in detail and the allegation of mismanagement based on those facts was denied. In Company Application No. 425 of 1977, the points for consideration in the company petition were determined and they are as follows : "(1)Is the present plaintiff, petitioner in Company Petition No. 94 of 1976 precluded from maintaining an action under the Companies Act in respect of all or any of the matters stated therein and in the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in paragraph 26F of the petition were acts of mismanagement by the first respondent and could they, if true, be agitated in these proceedings ? (15)Whether the resolution of the board of directors of the seventh respondent company dated December 3, 1975, concerning the furnishing of copies of documents and information amounts to abuse of power and exclusion of the petitioner from management to warrant action under sections 397 and 398 of the Act ? (16)Whether the allegations in the petition concerning the internal affairs of M/s. K. C. P. Ltd. can be investigated in these proceedings? (17)Whether the proposals dated November 17, 1976, of the seventh respondent company to raise the strength of the board of directors of M/s. K. C. P. Ltd. and proposing the appointment of the third respondent as a director of M/s. K. C. P. Ltd. are irregular, invalid and illegal ? (18)What reliefs?" Having considered the oral and documentary evidence and the legal position, the learned judge gave his findings on the issues in the suit and posers in the company petition as follows : "The result of the above discussion is, the family arrangement as pleaded by V. M. Rao and his group is neither tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be in exclusive management of one company and the daughter, the other company". Then it is stated that the family arrangement thus brought about at Madras was as follows : "(a)participation in the management and affairs of V. Ramakrishna Sons Ltd., the then managing agents of K. C. P. Ltd., will be the exclusive entitlement of the two sons, V. M. Rao (first plaintiff), V. L. Dutt (fifth defendant) and/or their respective branches along with their mother, V. R. Durgamba, during her lifetime. (b)participation in the management and affairs of R. S. Industrial Corporation Private Ltd., the then managing agents of Jeypore Sugar Co. Ltd., will be the exclusive right and privilege of the daughter, Rajeswari Ramakrishnan (first defendant), and her respective branch. (c)In the event of the holding of V. Ramakrishna Sons Ltd. and/or personal shareholdings of V. M. Rao and V. L. Dutt, in the said Jeypore Sugar Co. Ltd., Krishna Industrial Corporation Ltd., and R. S. Industrial Corporation P. Ltd., were to be disposed of to third parties, i.e., outside their branches, the first option should be given to Rajeswari Ramakrishnan and/or her branch of the family or her nominees at the prevail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon it. Apart from the fact that the affidavit uses the expressions like "desirable", "advisable" and "suggested", as against the plaint allegation that the father "brought about" an arrangement, the affidavit of Durgamba does not confirm the plaint relating to the "exclusive" right of participation in the management and affairs of the companies by the respective parties. On the other hand, the affidavit refers to the "control" of V. Ramakrishna Sons Ltd., by the two sons and not the exclusive participation "in the management and affairs of the company". In his oral evidence as P.W.-1, V. M. Rao, has stated: "Then one day, my father called all of us, my sister, Rajeswari Ramakrishnan, my brother-in-law, P. R. Ramakrishnan, my brother, V. L. Dutt and myself to the office of K. C. P. Ltd. in 38, Mount Road, Madras, in the evening and then suggested to us that a formula could be evolved which would solve the differences. We accepted this arrangement gladly and without questions." It was not the case of the plaintiffs in the plaint or in the company petition that P. R. Ramakrishnan was a party to the family arrangement pleaded. There is also no allegation in the plaint about the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged family arrangement according to appellants was R.W.-3, V. L. Dutt. He had completely denied the existence of any such family arrangement. He was cross-examined elaborately by counsel for the plaintiffs, but with no effect. Nothing can be stated to disbelieve his evidence either. Rajeswari Ramakrishnan filed a counter-affidavit in Applications Nos. 3246 and 3247 of 1975. After stoutly denying the alleged family arrangement and the implementation of the same and denying any type of arrangement providing for participation in the management and affairs of V. Ramakrishna Sons Ltd. to be the exclusive entitlement of the first plaintiff and the fifth defendant and their respective branches along with their mother, the affidavit further stated : "The only intention of late Sri V. Ramakrishna declared and expressed to me, my husband the third respondent and my brother the first applicant and the fifth respondent was that the two brothers should jointly take over the management of K.C.P. Ltd. and I should take over the management of Jeypore Sugar Co. Ltd. There was no family arrangement concerning either the sixth respondent (that is, V. Ramakrishna Sons Ltd.) or R. S. Industrial Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orry very much about the matter and he then looked after the affairs. Then, one or two days later, my husband told me that he did not like his son and daughter quarrelling with each other and he would make some arrangement for them. Then two or three days thereafter, my husband, sons, son-in-law and daughter made the division of the companies." To a question as to what was the division, she answered : "It was decided that my sons should look after V. R. and Sons and my daughter should look after R. S. Industrial Corporation." When asked as to the terms of the arrangement, she said : "In V. R. and Sons, my daughter was having twenty per cent. of the shares. It was agreed that if my daughter wanted to sell her shares in V. R. and Sons, the same should be sold equally between our two sons. In the same manner, my two sons are having shares in R. S. Industrial Corporation and if they wanted to sell their shares in that company, the same should be sold to my daughter. In this way, my husband had made the arrangement without any connection between my sons and daughter." In the cross-examination, however, while denying that the concept of family arrangement is a figment of imagination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the first plaintiff has stated that his father had informed about this arrangement to his mother, his mother's brother, A.V. Subramanyam, one A. Visweswara Rao (P.W.-15) and the late A.V. Raghava Rao. It is also mentioned that friends like S.V.R. Appa Rao, a director of K.C.P. Ltd., M. Sitharama Rao (P.W.-8), the then plant manager of Vuyyuru Sugar Factory of the K.C P. Ltd., etc., A.V.M. Caesar, son of late A.V. Raghava Rao and M.K. Bhandarkar (P.W.-13), the then sales manager of K.C.P. Ltd., also know of the above arrangement. P. Punniah (P.W.-6), a former manager of Jeypore Sugar Co. Ltd., knows of this arrangement having been informed thereof by Rajeswari Ramakrishnan. However, in his evidence, as P.W.-1, the first plaintiff, had stated that it was his father who informed his mother, his mother's brother and the friends referred to above and P. Punniah. This is also an improvement on the pleadings. Be that as it may, let us see what they say about the terms of the alleged family arrangement. P.W.-6, Punniah, says, "Ramakrishna arranged in such a way that Mrs. Rajeswari Ramakrishnan has nothing to do with the management of Mr. V.M. Rao, and on a reciprocal basis, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the dispute. Though he stated that the present evidence is in accordance with that statement, the plaintiff has not produced that statement, entitling the court to draw an adverse inference. It may be noted that this evidence also refers to the sons "looking after the management of K.C.P. Ltd. and the daughter the management of Jeypore Sugar co. Ltd. and Krishna Industrial Corporation Ltd. It does not speak of any exclusive entitlement of any arrangement relating to V. Ramakrishna Sons Ltd. We may also state that this witness also is a partisan witness and, therefore, his evidence could not be relied on. P.W.-13, M.K. Bhandarkar, who was the general manager of K.C.P. Ltd. between 1950-1956 and 1959-1972, states in his evidence that "Rao stopped giving instructions regarding Jeypore Sugar and he told me to refer to his father or his sister and he (Rao) was giving instructions only in respect of K.C.P. and that Raghava Rao, the co-brother of V. Ramakrishna and one of the directors of K.C.P. and Jeypore Sugar told him that "Mr. Ramakrishna has decided that Jeypore Sugar and R.S.I.C. and K.I.C. should be managed by his daughter, K.C.P., Andhra Cements and Machela Workshops to be man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned judge. It should also be remembered that even according to the plaintiffs, the arrangement was devised by the father, put to the sons and daughter and agreed to by them. Admittedly, Durgamba was a life director of V. Ramakrishna Sons Ltd., and she was not a party to the arrangement. The other shareholders who are R. Prabhu and his father, P. R. Ramakrishnan, are also not parties to this arrangement though they are as per the articles eligible to become directors. It is not also pleaded that Rajeswari Ramakrishnan represented or acted on behalf of her son and husband who are the other shareholders in entering into this arrangement. Admittedly, there was no simultaneous recording of the oral family arrangement as set out in the plaint in any document, letter or proceeding either in family accounts, correspondence or files or the files of correspondence or meetings of any of the companies. The alleged family arrangement had also not been noted in any of the proceedings of the board of directors of the concerned companies. The language employed by the plaintiff is also his own and does not purport to be that of the father. The immediate cause or provocation for bringing abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occupied with other planning and expansion programmes, but she was not aware that the first plaintiff was upset by her checking of the accounts. The fifth defendant who filed a separate written statement characterised these allegations of the plaintiffs as based on imaginary disbelief in others and are invented by the plaintiffs in order to make it appear that there was some occasion to bring about the so-called family arrangement. In his evidence as, P. W.-1, V. M. Rao, has stated that his sister is a domineering individual and he himself is a very strong-willed individual. His sister was in charge of all the companies during the absence of his father, himself and his brother. When he came back, he found that his sister was still giving instructions and that he did not approve of this interference. It is not clear as to what is meant by this statement that the first defendant was "giving instructions" because it was his own case that as a technical man, he was only looking after the technical problems of K. C. P. Ltd., and the expansion programmes of all the companies and that his father was completely in charge of the administration and management of the company. After his broth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strong or compelling circumstances which would warrant an inference that the father would have felt compelled to create groups and bring in a family arrangement in the form in which it is referred to in the plaint. In this connection, we may also keep in mind that the alleged family arrangement not only referred to the management of the first plaintiff and the first defendant but grouped the mother, Durgamba, and the other brother, V. L. Dutt, along with the first plaintiff, though no particular reason is suggested as to the reason for excluding the mother and the other brother from participation in the management of R.S. Industrial Corporation and Krishna Industrial Corporation which were to be managed by the first defendant. The circumstances and the reasons stated, therefore, do not suggest, and are not strong enough to suggest, that the father entertained a doubt about the intentions or cordiality or mutual respect among the brothers and sister compelling and necessitating him to bring about a family arrangement. There is, therefore, great force in the suggestion of the defendants that this allegation of temperamental differences is invented in order to make it appear that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etirement of a director or manager, the appointment of new director or manager or otherwise". It may be seen from section 346 of the Act, the family arrangement pleaded, if true, would amount to a change in the constitution of V. Ramakrishna and Sons Ltd. It is the case of the plaintiffs that the alleged family arrangement took place some time in July, 1961. Exhibit R-10 dated October 19, 1961, is a letter written by V. Ramakrishna Sons Ltd. to the Government of India with reference to section 346 of the Companies Act. In this letter, it is stated that (a) Rajeswari Ramakrishnan has tendered her resignation from the post of the director of the company subject to the approval of the Central Government thereto, and that (b) she has also vacated her office by reason of her absence from four consecutive meetings of the board. Rajeswari Ramakrishnan, in her letter dated October 18, 1961, had not also given any reason for the resignation. They have further stated that the board of directors at their meeting held on October 19, 1961, have resolved to accept her resignation from the date of approval of the Central Government and to appoint V. L. Dutt as director of the company in the place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anaging agents of K.C.P. Ltd., which is a public limited company, the provisions of Schedule VIII are applicable to it. Clause 7 of Schedule VIII requires a declaration signed by a director of the company to be filed whenever there is a sale or transfer of any shares in the company or any other change occurs in regard to any of the matters specified in clause 5. Sub-clause (a) of clause 5 relates "to the particulars to be furnished in regard to the manner in which each such member deals with his shares or interest, that is to say, whether he owns the same beneficially or on behalf of or in trust for any other person; and in the latter case, the name or names of the person or persons on whose behalf or interest for whom, the shares or interest is held and the extent of interest of each such person". Sub-clause (e) requires the declaration to specify "the names of the directors of the private company and the name of its managing director, if any". The case of the plaintiff was that as per the family arrangement, the first plaintiff and his brother along with their mother are entitled to be in exclusive management of the affairs of V. Ramakrishna Sons Ltd. and the other shareholders c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an and to her branch and/or nominees. It was the contention of Mr. Pai, learned counsel for the respondents, that the resignation of V. M. Rao was not in pursuance of any family arrangement. According to him, V. M. Rao was a strong-willed person and the father thought that he was likely to come in the way of his sister whom he was associating with Jeypore Sugar Co. Ltd. and R. S. Industrial Corporation along with him and in order to enable V.M. Rao to concentrate on K.C.P. where he was in charge of the technical aspect, the father had asked him to resign from the company. It was his further case that Rajeswari Ramakrishnan was not actively taking part in the management as a director in V. Ramakrishna Sons ever since its inception in 1949 to 1960 and in order to make way for her younger brother who had just then returned from abroad and who was in charge of the administration, she resigned her directorship. It is seen from exhibits R.-68 to R.-89 that, though she had been designated as a life-director, she was living at Coimbatore with her children and had never taken any active part in the management or affairs of V. Ramakrishna Sons. We find from these records that she signed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The father, V. Ramakrishna, was the chairman till his death in 1968 and, thereafter, from 1969, his wife, Durgamba, became the chairman and continued as such. Thus, both Durgamba and V. L. Dutt who, according to the family arrangement, had to carry on the business of K.C.P. Ltd. only through V. Ramakrishna Sons Ltd. were taking active participation as chairman and director in the management of Jeypore Sugar Co. Ltd., which is not consistent with the terms of the family arrangement pleaded by the plaintiffs. If the family arrangement was true, V. L. Dutt and Durgamba could have no connection with Jeypore Sugars. The first plaintiff sought to explain this, saying that the family arrangement only refers to participation in the management of the affairs and that if one member of the group was invited by the opposite side for giving help, it would not affect the family arrangement. This argument could not be accepted at all, because they were elected as directors of Jeypore Sugars with the votes of R. S. Industrial Corporation and they were functioning as elected directors of shareholders of both. In fact, the argument of Mr. Bhatt, learned counsel for the appellants with reference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 1967-68. With reference to this allegation, it was stated in the written statement of defendants Nos. 1 to 4 that it was not in pursuance of any family arrangement. The sale of the shares of the first plaintiff in Jeypore Sugar Co. to the first defendant was a small number of shares which were offered to the first defendant and which she purchased to avoid the shares being disposed of to any third party. With reference to the alleged disposal of the shares of the sixth defendant in Jeypore Sugar Co. Ltd. to R. S. Industrial Corporation P. Ltd. and to the first defendant and her son, it was again stated that it was not in pursuance of any family arrangement or settlement. It is further stated that the sixth defendant company owed a large sum of Rs. 3,25,000 to R. S. Industrial Corporation P. Ltd. and a block of shares of the sixth defendant in Krishna Industrial Corporation Ltd. and in Jeypore Sugar Co. Ltd. were transferred to adjust the liability. Moreover, with a view to consolidate the position of the first plaintiff and that of the fifth defendant in K. C. P. Ltd. the plaintiffs were going in for the shares of K.C. P. Ltd. in the market and under the pressure of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have no objection to Rajeswari Ramakrishnan becoming a director if a special resolution is passed allowing proportional voting rights to the members of the company totally negatives the existence of a family arrangement. Further, the first plaintiff's proxy attended the annual general meeting held on April 22, 1975. The proxy voted at the election held on that day but did not register any protest that the first and second defendants were not eligible to contest for directorship on account of any family arrangement or agreement. There was also no protest even from Durgamba who attended the meeting but abstained from voting. Exhibit P-8 is a letter dated September 2, 1975, written by the first plaintiff to the company complaining of omissions of material and relevant facts in the minutes relating to the annual general meeting held on July 22, 1975. Though he complained that his proxy was not permitted to take part in the discussion, he had not stated as to what he wanted to represent. What is more, this is the first letter after the meeting relating to the conduct of the meeting and one would have expected him to protest that the election of the first and second defendants as dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors of V. Ramakrishna Sons Ltd. is illegal and opposed to the family arrangement." and states that : "It is opposed to and contrary to the family arrangement brought about by late father, Sri V. Ramakrishna, I.C.S. (Retd.) in the year 1961, and is calculated to exclude me from my rightful participation in the management of the company of which I was assured in the year 1961, as this "leads to a disruption of the special relationship which is the sub stratum of the domestic company." Promptly, this allegation was denied by the first defendant in her reply, exhibit P.-15 dated December 14, 1975. She also pointed out that the letter was not clear and that the first plaintiff has not spelt out what was the family arrangement which he had in mind and that, therefore, she could not be specific in her denial. It is for the first time in the lawyer's notice, exhibit P.-14, dated December 12, 1975, that the first plaintiff has mentioned the alleged family arrangement as pleaded in the plaint. The language employed in the notice also shows that the plaintiff wanted to bring his case within its ratio and accordingly made the allegations. In this connection, we may notice that the fath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors that would ease the situation. Learned counsel for the appellants contended that an arrangement or agreement between two groups of shareholders that one group will not participate in the management and affairs of the company and the other will have exclusive rights of such management, is valid. He also contended, if certain things have been done, though not embodied in the articles, automatically, the articles shall be deemed to have been amended. In support of his argument he relied on the following decisions : Puddephatt v. Leith [1916] 1 Ch 200; and Fender v. Lushington [1876] 6 Ch 70, and certain passages in Palmer's Company Law. Learned counsel for the respondents-defendants contended that articles of association formed the basis on which any particular person becomes a member of the company and that constituted a binding contract with the company and its members and between the members of the company inter se. Any agreement or contract which varies the manner of exercising votes, electing directors and management of the company as envisaged in the memorandum and articles of association and the provisions of the Act, is not valid and enforceable, unless the articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsferee whom they do not consider a fit person to hold shares. In exercise of this power, the directors refused to register the transferee. Thereupon, the transferee moved the court to have the register rectified by registering him as the holder of the shares on the ground that since the articles had not been validly registered, Table A only was applicable. It may be mentioned that Table A did not authorise the directors to reject any transfers. Overruling the contention of the plaintiff, the Judicial Committee of the Privy Council observed (at p. 235): "It appears, therefore, that these articles have been registered, and have been published and put forward as the company's only articles of association, and have been acted on, amended, and added to by the shareholders of the company, and the company's business has been conducted under the regulations contained therein for nineteen years without any objection, and the company on the record says that these articles are its articles of association. Their Lordships think that in these circumstances they are entitled to draw the inference that all the shareholders have accepted and adopted the articles as the valid and operativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without first consulting you, I shall vote in all cases when a vote is necessary in respect of these shares as you wish me to do. This proviso will not be mentioned in the agreement, but you can preserve this note if you like." Differences had arisen in connection with the management of the company's business, and at the last general meeting of the company, the defendant who was himself a director of the company had voted in respect of the mortgaged shares against the wishes of the plaintiff and was insisting on his right to do so at the approaching general meeting to be held later. The plaintiff then brought an action in which she had prayed for an injunction restraining the defendant from voting in respect of the shares otherwise than in accordance with the plaintiff's direction. After holding that the undertaking to vote in accordance with the plaintiff's wishes contained in the letter constituted a collateral agreement binding on the defendant, the court held that the general principles of injunction could be applied to that case also, inasmuch as there is one definite thing to be done about the mode of doing of which there can be no possible doubt and granted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educe the voting rights so as to bring them in conformity with the voting rights attached to such equity shares under sub-section (1) of section 87. Sections 255, 256, 257, 260, 261 and 262 deal with the appointment of directors and sections 274 and 283 relate to the qualifications, disqualification and vacation of office of directors. The family arrangement pleaded is also contrary to these provisions. We are, therefore, of the view that the family arrangement pleaded, even if true, is not valid and binding on the defendants. As per the family arrangement pleaded, the first defendant and her branch shall be deemed to be holding shares in the company as legal owners with beneficial interests in favour of the branches of the first plaintiff and his brother and also his mother during her lifetime. The first plaintiff admitted that this is the legal implication of the family arrangement. However, he did not dispute that no declaration as is required under section 187C in respect of the shares held in trust has been filed with the Registrar of Companies. Nor have the provisions of sections 153A and 153B of the Companies Act been complied with. In the foregoing circumstances, we agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear law that in order to redress a wrong done to the company or to recover moneys or damages alleged to be due to the company, the action should prima facie be brought by the company itself. These cardinal principles are laid down in the well-known cases of Foss v. Harbottle [1843] 2 Hare 461; 67 English Reports 189 and Mozley v. Alston [1847] 1 Ph 790, and in numerous later cases which it is unnecessary to cite. But an exception is made to the second rule, where the persons against whom the relief is sought themselves hold and control the majority of the shares in the company, and will not permit an action to be brought in the name of the company. In that case, the courts allow the shareholders complaining to bring an action in their own names. This, however, is mere matter of procedure in order to give a remedy for a wrong which would otherwise escape redress, and it is obvious that in such an action, the plaintiffs cannot have a larger right to relief than the company itself would have if it were plaintiff, and cannot complain of acts which are valid if done with the approval of the majority of the shareholders, or are capable of being confirmed by the majority. The cases i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity. It is open to a majority always to set right a thing which was done by the majority either illegally or irregularly, if the thing complained of was one which the majority of the company were entitled to do legally and was within the powers of the company by calling a fresh meeting. That is the reason why in such cases the court refuses to interfere at the instance of a shareholder even in a representative action brought by him. If the majority, however, act in an oppressive manner, it is not as if the minority are without a remedy. This possibility was foreseen by Sir James Wigram, Vice-Chancellor, who delivered the judgment in Foss v. Harbottle [1843] 2 Hare 461. At page 492, the Vice-Chancellor says : 'If a case should arise of injury to a corporation by some of its members, for which no adequate remedy remained, except that of a suit by individual corporators in their private characters and asking in such character the protection of those rights to which in their corporate character they were entitled, I cannot but think that the principle so forcibly laid down by Lord Cottenham in Wallworth v. Holt [1841] 4 Myl & Cr 619 at 635, and other cases would apply and the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised to do a particular thing only by a special resolution does it without a special resolution duly passed as, in such a case, to deny a right of suit to the shareholders without using the name of the company would in effect result in the company doing the thing by an ordinary resolution. In other words, this means that where a special resolution was improperly passed, if the rule that the company alone is the proper plaintiff to institute a suit questioning such resolution were to be enforced, the shareholders by a bare majority could defeat and prevent the minority from using the name of the company. The result of such a course would be indirectly to uphold the validity of a special resolution which was otherwise invalid. To avoid this result this exception was recognised in the two decisions." In B. N. Viswanathan v. Tiffin's Barytes Asbestos and Paints Ltd. [1953] 23 Comp. Cas. 29 (Mad.), after discussion of all the English authorities and other precedents, this court summed up the principles laid down therein thus: (headnote) "A company has inherent power to take all steps to ensure its proper working and that, of course, includes the power to appoint directors. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited company on December 1, 1950, with an authorised capital of Rs. 25 lakhs. Originally, shares worth Rs. 21 lakhs were held by two groups of shareholders equally and the two groups were represented by one Patnaik and Loganathan. In 1954, the company was in financial difficulties. One S.P. Jain, the appellant in that case, was requested to help the company by providing finance and by arranging loans from banks and other sources. The appellant agreed to do so and, consequently, on July 27, 1954, an agreement was entered into between the appellant and Patnaik and Loganathan. To this agreement, the company was not a party. Besides these two groups, a French company and one Rath who between themselves held shares worth Rs. 4 lakhs, were also shareholders. These shareholders were also not parties to the agreement. The agreement provided that the appellant would be allotted shares in the company equal to those held by Patnaik and Loganathan after increasing the share capital of the company. The agreement further provided that these three groups of shareholders would have equal number of representatives on the board of directors of the company and that the appellant was to be the chairma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted. However, the injunction was vacated later on July 30, 1958. On the same day, a meeting of the board of directors was held and the new shares were allotted to 7 persons who had applied for the same. On the same day, the return as required by the Act was also duly filed with the Registrar of Companies. In September, 1960, an extraordinary general meeting of the company was also called with a view to increase the capital of the company from Rs. 1 lakh to Rs. 3 crores. Thereupon the appellant filed a petition under sections 397 and 398 in the High Court. The contention of the appellant was that the allotment of new shares was made surreptitiously and deliberately with the sole idea of defeating the rights of shareholders represented by him and his group and this amounted to oppression of the minority shareholders. It was urged by the appellant that the proposal to increase the share capital from Rs. 1 lakh to Rs. 3 crores was in furtherance of the continuing and continuous process of oppression of the appellant and his group and was designed for the purpose of completely excluding the appellant and his group from all control in the affairs of the company and it was also urged tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of a company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder". The Supreme Court also held that the company was not bound by the agreement and that the mere fact that it was decided at the meeting in March, 1958, to offer the new shares to outsiders and not the existing shareholders did not necessarily amount to an oppression of the minority shareholders. We have already referred in another context to the decision in Viswanathan v. Tiffin's Barytes Asbestos and Paints Ltd. [1953] 23 Comp. Cas. 29 (Mad.), that a company has inherent power to take all steps to ensure its proper working and that, of course, includes the power to appoint the directors. Therefore, the election of directors by a majority of the shareholders of a company cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement, he, his brother and mother alone can manage the company and persons belonging to his and his brother's branch alone can be elected as directors and that the election of his sister and her son though they are also shareholders, is invalid. Since the first respondent and second respondent in the company petition and their group together own 52.3 per cent. of the total shareholding strength, they are in a position to be an engine of oppression as against the petitioner and his supporters. Since the family arrangement pleaded is not true, and even if true it is not valid, as we have held in this case, there is no restriction on the election of directors. The exercise of the inherent right of the shareholders, in such circumstances, to elect their directors cannot be contended as constituting oppression. The majority shareholders are not bound to accept the views of the minority shareholders. If it is a lawful exercise of power by the majority, the minority shareholder is bound by the same. Further, as held by the Supreme Court, oppression involves at least an element of lack of probity or fair dealing "to a member in matters of his proprietary right as a shareholder a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons together form a company and there is no right as such agreed upon for active participation of members who are sought to be excluded from management, the principles of dissolution of partnership cannot be liberally invoked. Besides, it is only when shareholding is more or less equal and there is a case of complete deadlock in the company on account of lack of probity in the management of the company and there is no hope or possibility of smooth and efficient continuance of the company as a commercial concern, there may arise a case for winding up on the just and equitable ground. In a given case, the principles of dissolution of partnership may apply squarely if the apparant structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership. On the allegations and submissions in the present case, we are not prepared to extend these principles to the present company." It may also be pointed out that in this decision, the Supreme Court also observed that (at p. 102): "...although Yenidje's case [1916] 2 Ch 426 (CA) was a case of complete deadlock, that was not stated to be the sole basis for a conclusion to wind up the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ba ... 1 Rajeswari Ramakrishnan was even then married and was living with her husband at Coimbatore. V. Ramakrishna was living in Massolipatnam. It is, therefore, clear that at the time of formation of the company, there was no partnership, nor were there any groupings among the members. Nor do we find any special features which would unquestionably lead to the conclusion that the company is in substratum a partnership. The distribution of the shares, however, shows that V. M. Rao and his brother, V. L. Dutt, have been allotted equal shares almost one-third of the total for each and their sister, Rajeswari, her husband and son a total of 100 shares forming one fifth of the total paid up shares. The remaining 2 shares were held by the parents. The same ratio has been maintained even when the further shares were allotted and the shareholding for each of them were doubled. Thus, V. M. Rao and his branch had 400 shares; V. L. Dutt-400 shares and Rajeswari Ramakrishnan-200 shares. There were some further transfers by V. L. Dutt to V. M. Rao's group and that is how their shareholding later came to be not equal. On the date of petition, V. L. Dutt was having only 323 shares and V. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement or managing agency business and that when there is a breach of the agreement and when the managing agency system is abolished, the substratum of the company should be taken as lost. The objects of the company as set out in the memorandum of association are many and varied and not restricted to carrying on the business as managing agents alone. We may usefully quote clauses 3(b), (d) and (g ) thereof which are so unconnected in any way with the carrying on of business as managing agents. Those clauses read as follows: "3(b) To carry on the business of general merchants, importers and exporters, all kinds of agency business and business as sales agents and distributing agents, manufacturing representatives, stockists and distributors of all kinds of goods and merchandise ; (d) To acquire, establish and run any industrial concern, workshop, factory or mill for the manufacture of ferrous and non-ferrous metals, alloys and products thereof such as steel, copper, brass, bronze tin, zinc, lead, and manganese; textile such as cotton, silk, jute, flex, and rayon; heavy chemicals such as sulphuric acid, soda ash and chlorine; electrical goods such as generators, motors, cables, fans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of the company being gone or for any other reason." In that case, the company was formed to carry on the business of manufacturing hydrogenated vegetable oils, soaps, and other allied products, but as the company began to incur losses, the company thought that it would be better to give a lease of the factory for carrying on the same business for a period of years to another company, and leased the factory. On the ground that the substratum of the company was gone, a petition for winding' up of the company was filed. The learned judge dismissed that petition holding that the substratum of the company was not gone as the carrying on of the business of manufacturing oils, etc., had not become wholly impossible and the company could not be wound up on the petition of the shareholders if the majority of the shareholders objected to the winding-up of the company. It may be seen from this decision that the substratum of the company is mainly decided with reference to the substance of the venture as conceived by the members of the company at its formation and as set out in the objects clause of the memorandum of association. When the objects of the company are mentioned in a seri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances existing as at the date of the petition must be taken into consideration for determining whether a case was made out for holding that it was just and equitable that the company should be wound up. The decision is, therefore, an authority for two propositions, namely, ( i) that the substratum of the company is decided with reference to the objects of the company; and (ii) the possibility of the company re-starting the business with the assets which it possessed and prosecuting the objects for which it was incorporated shall always be taken into account in deciding whether the substratum is gone. Reading Jhunjhunwalla's case [1976] 46 Comp. Cas. 91 (SC) and Ebrahimi's case [1973] AC 360 (HL) in the light of these decisions, we are of the view that the principle of the special relationship between the parties forming the substratum of the company could be invoked only in a case where originally the business was a partnership concern which was later on converted into a private limited company or where if the veil of corporate character of the company is lifted, it could be found that in reality it was a partnership. This is obviously for the reason that a partnership con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solutely no justification for allotting these shares to K. N. Agarwal and the members of his family and Bajrangabali Engineering Co. Ltd. at par, which has resulted in the dilution of the value of the shares for the existing shareholders. Further, this has been done arbitrarily without any reference to the board of directors or the shareholders of V. Ramakrishna Sons Ltd., who owned the entire shareholding of Bajrangabali Iron and Steel Co. Ltd. This amounts to 50% of the assets of Bajrangabali Iron and Steel Co. Ltd. having been alienated for Rs. 5,00,400, unauthorisedly without consulting or referring to the owners of the assets. Such an un-business like and imprudent act has been put through by Mr. V. L. Dutt though the company and V. Ramakrishna Sons Ltd. have not derived any benefit therefrom. The only logical inference one could conclude from this is that Mr. V. L. Dutt and his supporters have received substantial benefits on account of such transaction; otherwise it is not possible to imagine a person being a party to such an imprudent, illegal, fraudulent and unbusinesslike transaction which is also hit by section 81of the Act. The entire transaction was put through in a cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rolling and Casting Ltd. was incorporated on April 6, 1970. The subscribers to the memorandum and articles of association were V. M. Rao (petitioner), K. N. Agarwal, A. V. Raghava Rao, A. V. Jayaraman and B. Kalyanasundaram. The original subscribed capital was Rs. 400 only. The first three of the subscribers to the memorandum each held 10 shares of Rs. 10 each, totalling Rs. 300. The remaining 2 shareholders each held 5 shares of Rs. 10 each. It did not carry on any business in 1971 and 1972. The name of the company was changed into Bajrangabali Iron and Steel Co. Ltd. (hereinafter called "Bajrangabali") at an extraordinary general meeting of the company held on June 27, 1972. The reason for the change was that the said company proposed to take over the assets of a firm carrying on business under the name of Bajrangabali Engineering Works in which K. N. Agarwal was a partner. After the change of the name, a fresh certificate was obtained by the company on September 23, 1972. Even thereafter, the company did not have any activity. V. Ramakrishna Sons Ltd. had a foundry unit in Thiruvothiyur comprising of land, building and machinery. At a meeting of the board of directors of V. Rama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re bleak. For the year ended June 30, 1975, the company sustained a loss of Rs. 2,53,575.17 and this loss was before a provision was made for depreciation amounting to Rs. 1,25,736.66 and by way of amortisation of preliminary expenses amounting to Rs. 5,323.36. If these items are taken into account, the total loss for the year ended June 30, 1975, would be Rs. 3,82,625.19. The company had a huge liability amounting to Rs. 38,91,614 as on June 30, 1975. These liabilities included nearly about Rs. 6 lakhs due to Bajrangabali Engineering Co. (P.) Ltd. As on June 30, 1974, the value of fixed assets and machineries held by Bajrangabali were as shown hereunder : Rs. Properties acquired from V. Ramakrishna Sons Ltd. 4,75,285.92 Properties taken over from partnership firm, i.e., Bajrangabali Iron and Steel Co. 12,49,153.18 Machineries purchased from Bajrangabali Engineering Co. Ltd., Calcutta 1,10,937.39 Total 18,35,376.49 The value of additions to the buildings and purchase of other properties during the year was Rs. 1,48,133.23. The total in all is Rs. 19,83,509.72. The total liabilities amounted to Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as then contended by learned counsel for the appellants that this special resolution was passed on September 25, 1975, by Bajrangabali without any reference to the board of directors or the shareholders of V. Ramakrishna Sons Ltd. and, therefore, it is not valid. There is no dispute that notice of the extraordinary general meeting held on September 25, 1975, was sent to V. Ramakrishna Sons Ltd., as also to the other shareholders. At that meeting, one C. Ramanathan represented V. Ramakrishna Sons Ltd. This Ramanathan had not been duly authorised to represent the company is the case of the company-petitioner. On the other hand, the respondents contended that C. Ramanathan had been representing V. Ramakrishna Sons Ltd., at all general meetings of Bajrangabali and this was a well recognised and accepted course of conduct and convention of which the petitioner was fully aware and to which he never raised any objection. It is seen from the evidence of P.W.-1 himself that C. Ramanathan was representing V. Ramakrishna Sons Ltd., at the general meetings of Bajrangabali held on December 27, 1973, and December 30, 1974, also when he was in charge of the company. He had also been representing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udge that a special resolution dated September 25, 1975, was in accordance with law and it is not liable to be questioned by the petitioner in these proceedings. The further submission of learned counsel for the petititioner was the fixed assets of Bajrangabali are worth about Rs. 48 lakhs and there is absolutely no justification for allotting these shares to K. N. Agarwal and the members of his family and such allotment of the shares at par has resulted in dilution of the value of the shares for the existing shareholders. The evidence relating to the valuation of the shares of Bajrangabali are those of P. Ws.-4, 5, 7, 9 and 11. P. W.-4 claims to be a consulting engineer and a valuer. His report, exhibit P.-36, dated April 5, 1976, relates to the valuation in respect of the land and buildings of Bajrangabali. According to this report, the valuation of the land and building is Rs. 18,84,000. He has estimated the value of the land at Rs. 10,000 per ground. This is not based on any evidence. He had admitted that he did not verify any sale deeds in respect of neighbouring properties. On the other hand, we have documentary evidence in exhibit R.-21 which is a sale deed dated April 11, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by that statement. Much reliance cannot, therefore, be placed on this evidence. One Gatalia, a chartered accountant of Bombay was called as P.W.-9 to give evidence regarding the value of shares of Bajrangabali as on June 30, 1975. He had filed two computations, exhibits P-34 and P-35. It was admitted by him that they are mere arithmetical computations based upon the estimated value of land, buildings and machineries of the company as furnished to him by the petitioner who was stated to have obtained a report from an engineer. In exhibit P-34, he has computed the value taking the estimated value of the entire land at Rs. 5,000 per ground and in exhibit P-35 he has taken the value of the land at Rs. 10,000 per ground. These exhibits are not signed. When cross-examined on that, he admitted that they are mere computations and they are not to be taken as valuation reports and that is why he had not signed them. Again he stated that he asked for the balance-sheets for five years, namely, 1971, 1972, 1973, 1974 and 1975, but he got only for two years, i.e., 1974 and 1975. He accepted that the standard practice for arriving at the value of shares of a company is to call for the balance-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called for and look into the accounts relating to various practices such as dividends, if any, declared, the profitability of the company over a course of years, reasons for the losses sustained by the company, the prospects in future and whether the assets of the company are old or recent purchases. Though he admitted that the primary method of valuation of shares of a going concern is one based on yield or dividend and that in arriving at the value on the basis of assets, the balance-sheet figures should be taken into account and not on a revaluation item-wise, he has adopted the break-up value method on the basis of revaluation of the items provided to him by the petitioner himself. A reading of the entire evidence shows that he had himself conceded that the computation given by him is incorrect. This evidence is, therefore, worthless and could not be accepted. P.W.-11 is a consulting engineer. His evidence is of a general nature. He speaks about the methods of valuation of plant and machinery of a company. It has no particular reference to our case on record. On this evidence, it is not possible for us to accept the case of the petitioner that the value of the assets of Bajran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in them. He had further stated that such persons who have been unmindful of the public interest, particularly in relation to the affairs of a public limited company, have, by such lack of probity and their own oppressive conduct, forfeited their positions as directors. He had also contended that their conduct in relation to Bajrangabali Iron and Steel Company Ltd. has clearly proved that they are unworthy of any confidence being reposed in them whatsoever in relation to the affairs of V. Ramakrishna Sons Ltd. He has also made certain allegations relating to the election of directors in the thirty-fourth annual general meeting of K.C.P. Ltd. and the award of contract for transport of limestone and sugar. On the basis of these allegations relating to levy sugar allotment, issue and allotment of futher shares in Bajrangabali to third parties and the allegations relating to the exercise of control over the affairs of K. C. P. Ltd., the company petitioner also contended that they (respondents) are not persons of exemplary character and rectitude. Apart from meeting the allegations on facts, respondents Nos. 1 to 4 in their counter-affidavit, have characterised this allegation as fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 972, pending further orders. Even these proceedings are still stated to be pending. In the circumstances, therefore, we are of the view that it will not be proper to entertain or go into these allegations which are the subject-matter of proceedings in the High Court of Andhra Pradesh and the Government; nor can we permit the petitioner to rely on these allegations in this petition. We have also no doubt that these allegations are made in order to prejudice the Court though the appellants knew that they are pending proceedings and no finality could be attached to any finding. The affairs of K.C.P. Ltd. are also the grounds relied on by the petitioner in the company petition against the respondents in support of the reliefs prayed for. In respect of the award of transport contracts by K.C.P. Ltd. for the transport of limestone and sugar for 1975, the grievance of the petitioner is that the contract for transport of limestone, cement, etc., has been given to M/s. Vadde & Co. at negotiated rates and likewise, the contract for transport of sugar has been given to M/s. Mahaveer Transport Company at negotiated rates and both these rates are excessive and if tenders are called for, accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Government on the same allegations and for the same reliefs, but through his associate who has a common grievance as that of the petitioner against Rajeswari Ramakrishnan. Exhibit R.-92 dated May 9, 1977, is a petition presented by an advocate on behalf of P.W.-13 to the Central Government. The same allegations with regard to the excise fraud in Jeypore Sugar Co. Ltd. as alleged in these proceedings are contained in that petition. Almost identical allegations, as in the petition, alleging malpractice in the election of directors and in giving of contracts for transport of limestone, cement and sugar to K.C.P. Ltd. are made. The contention of learned counsel for the respondents was that this petition has been filed, since by that time the Janata Government had come to power and they would be able to prejudice the Government on the ground that respondents Nos. 1 to 4, and in particular the third respondent, belonged to the Congress party. There is great force in this argument. We find in the petition, exhibit R.-92, the following allegation: "Likewise, one of the managing directors, Mr. Dutt, himself contributed by way of advertisements to the souvenirs of the Congress party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to invest funds of the Jeypore Sugar Company Ltd. in any other company and not to implement any resolution of the board of directors without the court's sanction". It is also in evidence that this relief was not originally prayed for in the interim direction application, but when the petition came on for orders on July 26, 1978, a note was given to the learned judge that an order of that nature was necessary pending preparation of the inventories to be taken in the said places which was the other relief-prayed for and ordered in that petition. The argument of the learned counsel for the respondent is that the records are necessary for the purpose of using in the respondents ' case in this court, that the petitioner set up P. W. 6 to go to Cuttack, initiate proceedings there and obtain interim order preventing production of records ; and since P. W. 6 also is inimically disposed towards Rajeswari Ramakrishnan for various reasons, he did initiate proceedings and got the said order. P. W. 6 in cross-examination admitted that he filed the petition on October 26, 1978, and asked for interim relief and obtained an interim injunction preventing the records from coming to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplete the cross-examination and the interim injunction was just to thwart this attempt to further cross-examine P. W-1. In fact, when summons was sent to produce records, the company produced the order of injunction. Of course, later, on a petition being filed to vacate the interim injunction by consent of parties, the order was vacated. Having initiated proceedings here, putting forth grievances touching on the affairs of Jeypore Sugar Co., it was not proper on the part of the petitioner and P. W-6 to attempt to stifle the defence in this manner and we agree with the learned judge that their conduct is highly reprehensible. In this connection, we may usefully quote two decisions cited at the bar. The first one is Belladar Silk Ltd., In re [1965] 1 All ER 667. In that case, a petition was presented under section 210 of the Companies Act, 1948, alleging oppressive conduct of the company's affairs by two of the directors. The petitioner was one of the three directors of the company. The state of friction between the petitioner and his co-directors, and certain conduct on the part of his co-directors, were assumed to be such as would justify, apart from other circumstances, an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous view of his conduct in going to the police court to seek redress on identical allegations which formed the subject-matter of a pending application in this court for winding up the company." It may be mentioned that against the order of the Magistrate issuing the search warrant, a criminal revision was filed and it came before another learned single judge. He also deprecated this practice and made the following observations (at p. 114): "In the view I have taken as discussed above, I think the opposite party should not be allowed an indulgence of moving the machinery of the criminal law to satisfy his personal vendetta. I consider that in the facts of the present case, the proceeding before the crimimal court was really an abuse of the process of the court". The learned Judge who decided Sulekha Works Ltd., In re, AIR 1965 Cal 98 quoted these observations with approval. Though the order of interim injunction granted by the Orissa High Court was vacated on February 8, 1979, by that time, P. Ws. Nos. 1, 6, 8, 13 and 15 had already been examined and the learned counsel for the respondents therefore rightly contends that he was prevented illegally from an effective cross-examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in paragraph 26(G) relates to the resolution passed at the board meeting held on December 3, 1975. The resolution reads as follows : "RESOLVED to ratify the action of the office in furnishing copies of the company's records and other miscellaneous information to Mr. V.M. Rao, director of the company as per details in the list together with enclosures, containing the details of copies of documents handed over and initialled by the chairman of the meeting. Resolved further to furnish copies of the same records to all the directors of the company as furnished to Mr. V. M. Rao.'. Resolved further that in future any such information or copies of documents connected with the company required by any one of the directors be placed before the board for approval and then only furnished to the concerned director. A requisition in writing by the director who wants any information should be furnished to the office 15 days before the actual date of requirement. Resolved further that no original document can be requisitioned by any director and only copies thereof can be obtained. The original documents may be inspected at the office during office hours after giving due notice to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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