9911796707
TMI Blog1994 (9) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows: According to this appellant, as per the resolution dated April 30, 1992, of the third respondent-company, it was resolved to increase the share capital from 5,000 equity shares to 25,000 equity shares having a value of Rs. 10 per share. As per article 6 of the articles of association, the same was offered to all the shareholders of the company. Since two shareholders did not agree to purchase the same within the period, the same was offered to the eighteenth respondent, another shareholder, who agreed to purchase the same. It was originally offered 8,000 shares according to the proportion of its holding. But it wanted an additional allotment of 12,000 shares more which was also agreed to be allotted. On that basis, all the 20,000 additional shares were allotted to the eighteenth respondent. The eighteenth respondent wanted financial assistance, and it requested the petitioner for the same, and the same was agreed to be given by the petitioner/appellant. It was also agreed that the eighteenth respondent should pay interest at the rate of 15 per cent, per annum, and the additional shares were to be pledged to the petitioner as security for the financial assistance. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holder now stands removed, and for that reason, it is aggrieved. The order binds it. The said order was sought to be set aside by invoking the extraordinary original jurisdiction of the writ court under article 226 of the Constitution of India. In the original petition, the fifth respondent contested the proceeding on the ground that the petitioner was given sufficient opportunity to present its case. In fact, its advocate was present all along during the proceedings. Its further allegation was that the petitioner has suppressed material facts and the petition itself is filed at the instance of other respondents who hotly contested the case before the first respondent. The petitioner is only a pledgee and the allotment of shares in the name of the pledgor was invalid and that it was in violation of the articles of association of the company. There was no offer to the other shareholders and they were not even aware regarding the increase of the share capital. It is contended that the petitioner not only produced the document but also advanced elaborate arguments. It is further contended that in the proceedings under sections 397 and 398 of the Companies Act, the issue regarding ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the order of the Company Law Board is violative of the principles of natural justice. According to the appellant, the petitioner before the first respondent had in fact relinquished the relief against the persons who are not parties to the proceedings and in spite of the same, the name of the appellant had been directed to be removed from the registers of the company. The petitioner/appellant was not given any opportunity to present its case, and the finding that it is a pledgee of the shares of the eighteenth respondent is not correct. The proceedings under sections 397 and 398 of the Companies Act are really to avoid the petitioner and had the petitioner before the first respondent invoked the jurisdiction under section 111 of the Companies Act, which is the correct provision that should have been invoked, the consequence would have been different. The complainants before the first respondent were aware that the appellant is a necessary party, that one of the complainants before the first respondent filed a suit, namely, C. S. No. 966 of 1992 before this court seeking the reliefs that are sought for in the petition before the Company Law Board, which was subsequently withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho was only a pledgee, cannot question the same. It is only a legal consequence of the cancellation of the allotment. For that purpose, the petitioner need not be heard. Alternatively, it was argued that in this case the appellant was fully heard by the first respondent, and, in fact, the appellant was represented by advocates and it also participated in the proceedings. The appellant had notice of the entire proceedings, but purposely avoided getting itself impleaded. It is further contended that the extraordinary jurisdiction of this court should not be invoked and the appellant should have invoked the jurisdiction under the Companies Act which is an effective alternative remedy. A necessary incidental proceeding was also initiated before the first respondent by way of an interlocutory, application in I. A. No. 19 of 1992. In that proceeding also, it was held that the petitioner is only a pledgee. That order has not been challenged. It was also contended that under section 405 of the Companies Act, the appellant should have got itself impleaded if it felt that its rights are going to be affected. The appellant who had sufficient opportunity and notice of the proceedings, refused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to take away the majority shares of the petitioner in the company. The notice was sent by registered post. It is alleged that thereafter a meeting of the directors of the board was held on April 30, 1992, in which the share capital of the third respondent-company was directed to be increased from 5,000 to 25,000. The said meeting and increase in the share capital are challenged by the petitioners before the Company Law Board as fraudulent. It is alleged by the eighteenth respondent that notice was given to petitioners Nos. 1 and 2 before the Company Law Board offering the increased shares in proportion to the shares held -by them. The same was sent by certificate of posting and a date was fixed for accepting the same. Petitioners Nos. 1 and 2 before the Company Law Board did not accept the same before the stipulated time, and hence it was offered to the eighteenth respondent. Originally, the offer was for 8,000 shares in proportion to the shares held by it. Later, the eighteenth respondent requested for increasing the allotment, and it was acceded to, since petitioners Nos. 1 and 2 before the Company Law Board did not accept the same. On the basis of the allotment in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h nominee always has in its possession valid transfer deeds in respect of the said securities. During the period of the pledge, you or your nominee will be entitled to all accretions to the said securities, including all dividends/ interest, bonus shares/rights shares and other benefits from time to time accruing or issued in respect of the said securities or any part thereof. We hereby agree that if so demanded by you, we shall from time to time deposit with you all interest/dividend from time to time receive in respect of the said securities and you will be entitled to adjust the same in liquidating the balance, if any, outstanding under the said accounts. We shall if so demanded by you from time to time forthwith also deposit with you all bonus shares and right shares that may from time to time be issued and they shall be deemed to form part of and be comprised in the expression 'the said securities' and subject to the pledge hereby created over the said securities if so demanded by you, we shall execute a supplemental document of pledge for the purpose. Without prejudice to the aforesaid, until they are deposited with you, we shall hold them in trust for you. During the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igal, entered appearance on behalf of respondents Nos. 8 to 11 also. The fourteenth respondent also entered appearance on August 19, 1992, through Mr. Pramod Saigal, one of the advocates appearing for the appellant. It goes without saying that when the same counsel appear for the fourteenth respondent and also for some other respondents, they have a common case to be urged before the Company Law Board and there is no inconsistency in their stand to be taken before them. It also goes without saying that they are agitating for the same cause and for the common purpose. Taking into account the above facts, we have to consider whether the principles of natural justice are violated. Pursuant to the notice mentioned above, the appellant filed a memo (letter) before the first respondent on October 7, 1992. From that letter, it is clear that the appellant was aware of the purpose for which notice was issued to it. It had notice of the proceedings. After submitting the documents on that date, the appellant has stated in that letter thus: "We, however, reserve our right to add, amend and modify our contentions and submissions at the time of hearing". The same is seen at page 1103 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t least a mortgagee in so far as the shares are concerned, and for that reason he should be heard. Even that contention forgets for a moment that nothing prevented the appellant from disputing that fact before the first respondent. This court will have to take as the truth what has been recorded by the Company Law Board, especially when the same is not challenged or disputed either in the writ petition or in this appeal. Vide Bhagwati Prasad v. Delhi State Mineral Development Corporation, AIR 1990 SC 371 and State of Maharashtra v. Ramdas Shrinivas Nayak, AIR 1982 SC 1249. Since a different stand is taken by the appellant before this court claiming itself to be a mortgagee, the same is also considered here de hors the admission made before the first respondent. We have already extracted the clauses of the pledge agreement. The main contention of the appellant is based on clauses 5 and 6 of the pledge agreement. We may say that it should not be read in isolation. Clauses 5 and 6 should be read along with clause 3 of the agreement, and the circumstances under which the said document was executed. It is on the basis of clause 3, a pledge deed is executed and a blank transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 2,40,000 made by them. The appellant cannot claim any independent interest or right in the 20,000 equity shares, the allotment of which has been set aside by the Company Law Board (first respondent)". Article 6 of the articles of association read along with articles 7, 8 and 9 will show that a transfer of a share in favour of a stranger is more or less prohibited. It is said in the articles ( sic ) that shares have been transferred in favour of the appellant. The said clauses read thus: "6. If at any time any shareholder desires transfer of his or her share held in the company, the share shall in the first instance be offered at a price determined by the auditors of the company to the existing shareholders or to such other party to whom the board of directors may agree. 7. No transfer of shares shall be made or registered without the previous sanction of the directors who may, in their absolute and uncontrolled discretion, decline to register any proposed transfer of shares with out assigning any reason. The directors may also decline to register any proposed transfer of shares if they are of the opinion that it would not be desirable to allow the proposed transferee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in issue in that case. The admitted shareholder executed the deed of pledge evidenced by exhibit A-l in that case, directing the transferee to obtain the transfer of shares in his favour and also exercise the rights of a shareholder. It was in view of the said circumstance in that case, their Lordships held that it was a mortgage and not a pledge. The facts and circumstances of the case are entirely different, and on the basis of that position alone, we cannot hold that the deed of pledge executed in this case amounted to a mortgage. In fact, in view of the admissions made by the appellant before the Company Law Board, we can only say that the finding of the learned single judge and the Company, Law Board that the document is only a deed of pledge and not a transfer, has to be upheld. The third respondent-company is a private limited company. The transfer of shares are controlled by the articles. Hence, it cannot be considered as a marketable security. That also shows that there cannot be a mortgage. It is only after finding that the appellant is holding the property only as a pledgee, the Company Law Board further found that necessary orders are required to protect its ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons best known to itself. We feel that such an action on the part of the appellant is intentional. We feel that it is intended to reserve for itself an opportunity to challenge the Company Law Board's order, if it goes against it. The opportunity to get itself impleaded was not exercised, and the appellant had waived its right to be a party to the proceeding. It did not want itself to be impleaded before the Company Law Board. But in spite of the same, the Company Law Board (the first respondent) protected its interests and rights. The question whether the appellant is a necessary party may also be considered. The petitioner before the Company Law Board challenged the genuineness and truthfulness of the board meeting dated April 30, 1992, and also the subsequent decision to allot the shares to the eighteenth respondent. The alleged policy decision of the third respondent was in fact the subject matter before the Company Law Board. In that proceeding, the appellant cannot be a necessary party. The removal of its name from the register is only a consequential order, which the Company Law Board is bound to pass, to make its order effective. We are taking that view on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent, if any, that the appellant can claim. If the equitable right sought in the affidavit is granted, then this court will have to recognise the illegality in proceedings in the allotment of shares to the eighteenth respondent. It means, this court will have to perpetuate the illegality. Another contention of the appellant is that in spite of the petitioner before the Company Law Board having relinquished the relief against persons not parties to the proceedings, the first respondent has allowed the same. The -said submission of learned counsel is not correct. Rel inquishment of any relief can only be against a party to the proceedings. The relief of removal of the name of the appellant is incidental to the relief to be granted under sections 397 and 398. In Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd., AIR 1966 Cal. 512, it was held that it is always open to courts to give a plaintiff or an applicant such general or other relief as they deem just to the same extent as if it had been asked for. The powers under sections 397 and 398 of the Act are wide enough to grant that relief. The writ petition was objected to by the contesting respondents on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights are affected is also in issue in the same appeal. When effective remedy is available by statute, we decline to interfere in proceedings which have to be decided mainly on affidavits. A further argument was advanced before us that only a certain category of proceedings under the Act enables a person to make suggestions or objections as contemplated under section 2( p ) of the Regulations, and since the petitioner in the writ petition does not come within that category, the appellant cannot be a party for the purpose of filing an appeal. For the said purpose, learned counsel relied on various sections, namely, sections 17(3), 101, 141, and 391 to 394. According to learned counsel, only when the Company Law Board invokes the powers under the said sections, he could file his submissions. A reading of the definition given to the word "party" shows that it should not be interpreted in the way in which learned counsel for the appellant wants us to read it. It is too exhaustive a definition, and takes in all persons who are entitled to make suggestions or objections, as deemed parties. In this connection, it must also be remembered that the appellant itself has understood the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declined. We find that such a contention is false to its own knowledge. The same can he found to be false in view of the earlier proceeding's taken by the appellant before the Karnataka High Court. Before the Karnataka High Court, it only stated that even on the production of the documents before the first respondent, it failed to discharge the appellant from further appearance. The learned single judge has given in detail the inconsistent stands taken by the appellant in courts and forums, which we do not want to narrate once again. We fully agree with the observations of the learned single judge in holding that the appellant has been taking inconsistent stands before different courts and forums, and that it has also suppressed material facts and the present writ petition is' filed without good faith. We confirm that finding of the learned single judge. In this connection, it is worthwhile to note the decision of this court. In K. Marappa Gounder v. State of Madras [1956] 1 MLJ 324 ; [1956] LW 58, it has been held that it is obligatory on the part of a person invoking the writ jurisdiction of the High Court to make a full and true disclosure of all relevant facts. If the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g authority must act in fairness. In Russell v. Duke of Norfolk [1949] 1 All ER 109 (CA), it was held that the requirement of natural justice must depend on the circumstances of the case, the nature of enquiry and rules under which the Tribunal is acting on the subject-matter that is being dealt with, etc. In that case, it was decided that the person concerned must have opportunity to be heard. It was held that domestic Tribunals are entitled to act in a way, which would not be permissible on the part of local justice sitting as a court of law. The same author, in Constitutional and Administrative Law, 1971 edition, held that the rules of natural justice are often described as "fair play in action". One must always remember, however, that natural justice imposes no more than a duty to observe minimum standards of procedural fairness. It does not require that the decision be right or even just; or that reasons be given for the decision ; or that the proceedings be conducted in public or that a record of the proceedings be maintained. On the basis of the said enunciation of law, we cannot but conclude that the appellant in this case was given sufficient opportunity, and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Supreme Court. Their Lordships of the Supreme Court held in that case as follows (head-note): "Section 37(1) incorporates only a rule-of natural justice, namely, that an. order prejudicially affecting a person shall not be made without hearing him and considering his objections, if any, to the proposed order. But an order can be said to affect a person prejudicially only if any right of his would be affected adversely and in view of the non obstante clause contained in section 21, the tenant on the expiry of the limited period has no right or protection whatsoever under any law to continue in possession and as such the issuance of a warrant of possession directing him to vacate the premises in his occupation cannot be regarded as one which prejudicially affects him." (emphasis supplied) In this case, it is admitted by the appellant before the first respondent that his position is that of a pledgee. Its contention has been recognised by the first respondent and necessary direction has been given to pay the amount due to it. In that view, we cannot find that the appellant is in any way prejudiced by the order of the first respondent. In Rattan Lal Sharma v. Managi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and ( l ) of the affidavit could not be raised by him before the first respondent. We have already stated that in the proceeding under sections 397 and 398 of the Companies Act, the allotment of additional shares to the eighteenth respondent was the main question that was being agitated. The appellant, under normal circumstances, cannot be interested in that proceeding, and he could not be heard since he was only a creditor. What the appellant now wants is, that it should be allowed to agitate those points. We do not think that the contentions stated in the affidavit will in any way affect the decision of the case. There would not have been even a remote chance of a change in the decision by the first respondent. Some of the contentions that have been raised are legal arguments not affecting the facts. Such contentions have been taken and fully argued by the appellants in the connected appeals, who support the present appellant in this writ appeal. In that view, we hold that there could not have been any prejudice to the appellant, nor its right affected in any way. In Ramana Dayaram Shetty v . International Airport Authority of India, AIR 1979 SC 1628, generally known as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the learned single judge has only to be confirmed, and it is accordingly confirmed. C. M. A. No. 743 of 1993 and C. M. A. No. 875 of 1994.-Both these appeals under section 10F of the Companies Act arise out of the order passed by the Company Law Board, New Delhi, in C. P. No. 29 of 1992. C. M. A. No. 743 of 1993 is filed by respondents Nos. 1 to 6, and C. M. A. No. 875 of 1994 is filed by the eighteenth respondent before the Company Law Board. An application was filed under sections 397 and 398 of the Companies Act in C. P. No. 29 of 1992, before the Company Law Board, New Delhi, by Stridewell Leathers Private Limited and Standard Distilleries and Breweries Private Limited along with their directors. In both the appeals, the petitioners before the Company Law Board are respondents Nos. 1 to 4. The parties in these appeals are described as in the company petition. Petitioners Nos. 1 and 2 are registered shareholders in the fifth respondent-company holding 2,000 and 1,000 equity shares of Rs. 10 each, respectively, out of the total paid-up capital of 5,000 equity shares as on June 5, 1992. They together constituted 60 per cent, of the total paid up capital, the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f further" shares in the fifth respondent-company, so as to reduce the holding of the petitioners from 60 per cent, to 12 per cent, and to increase the holding of the eighteenth respondent from 40 per cent, to 88 per cent, which was achieved by raising the paid up capital, by issuing the entire further shares of Rs. 2 lakhs to the eighteenth respondent. As per article 9 of the articles of association of the fifth respondent, an offer of new shares must be refused by a member. That is a condition precedent to offer the said shares to other members. The first respondent and its officials exerted pressure on Mr. P.R. Pandia to misuse his position as ex-director of the second petitioner-company and as the representative of the second petitioner-company in the fifth respondent under section 187 of the Companies Act, to sign the documents so as to show as if the first respondent refused to subscribe to the additional shares. Three subordinate officers of the eleventh respondent-company who ceased to be directors with effect from April 10, 1992, in the fifth petitioner-company, also colluded with their bosses in the eleventh respondent-company by creating and forging records, to show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the impugned newly issued paid-up capital ; ( e )to declare the resolutions passed by respondents Nos. 2 to 6 after May 23, 1992, supporting SWC/MRC in the matter of GWL are null and void; ( f ) to remove respondents Nos. 2 to 6 from the office of the director of the first respondent-company ; ( g ) to direct the first respondent-company to convene the extra ordinary general meeting of the first respondent-company and to direct voting on the resolution proposed in the requisition of the two petitioner- companies dated June 12, 1992, on the basis of the paid-up capital and voting rights subsisting prior to the impugned further issue of the paid- up capital of Rs. 2,00,000 in favour of Bhankerpur; ( h ) to strike off affidavits sworn to by the fourth respondent on May 25, 1992, and June 29, 1992, before this Hon'ble Bench in C. P. No. 19 of 1992; ( i ) grant injunction restraining respondents Nos. 2 to 6 from convening the extraordinary general meeting pursuant to the notice dated June 12, 1992, sent by the petitioners or to any notice sent or purported to have been sent by Bhankerpur or by any persons who own, hold or possess the shares allotted after May 23, 1992, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nlawful activities of the petitioners Nos. 3 and 4. It is filed with an improper motive and the whole object was to bring the individual rivalry before the forum, and under those circumstances, they wanted a dismissal of the application. On the merits of the case, they contended that the application is vague and lacks material particulars. They denied that Mr. Pandia had anything to do with the offer to increase the capital of the twelfth respondent. According to them, Mr. Pandia never manipulated any record. According to them, one R. K. Bhattacharya, one of the directors of the company had informed in writing that they are not willing to accept the offer made, and he has written a letter to the fifth respondent rejecting the same. In so far as the offer made to the second petitioner is concerned, it was alleged that they have not answered within the stipulated time. The offer was made to petitioners Nos. 1 and 2 by sending the same by post evidenced by certificate of posting dated May 2, 1992. Since petitioners Nos. 1 and 2 did not accept the offer, the same was offered to the eighteenth respondent. Originally, the eighteenth respondent was offered 8,000 shares in proportion to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eply, denied having any part in creating any document. He said that he is an unnecessary party, and he is at present secretary of the company B. D. A. Limited with effect from April 9, 1992. After the petition was filed, an application was filed by one V.B. Nandhi on October 16, 1992, in his individual capacity that the second petitioner's name should be deleted from the array of petitioners. The said application was also considered by the Company Law Board. In that application, namely, C. M. P. No. 92 of 1992, it was contended that Malleswara to whom the shares were pledged by the eighteenth respondent is under the ultimate control of the eleventh respondent. Since the second petitioner is not under the control of the respondents Nos. 3 and 4 and since they are not authorised to institute the proceedings, the application is liable to be dismissed. He requested that the name of the second petitioner be deleted from the petition. The said application was dismissed by the Company Law Board along with the order which is now under challenge. But we find that the dismissal of the order in C.M.P. No. 92 of 1992, is not challenged in the C. M. A. No ground has been taken questioning the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts to an election and abandonment. The result is that they have abandoned the relief sought for before the Company Law Board. (3) The reasoning adopted by the Company Law Board regarding the allotment of shares is wrong.-It is against pleadings and admissions, overlooking statutory provisions regarding presumption. (4) The allegation before the Company Law Board is not proved by any evidence. Fraud ,of one kind was alleged, but another kind of fraud is sought to be proved. No evidence was taken. (5) It was further contended that though in the application before the Company Law Board, so many allegations are made, ultimately except regarding the allotment of shares to the eighteenth respondent, all other matters have been given up. In that case, the proceedings cannot be maintained under sections 597 and 398 of the Companies Act. (6) There is nothing to show that the notice contemplated under section 400 of the Companies Act was issued to the Central Government. Hence, the application is liable to be dismissed. (7) The application under section 397 of the Companies Act was reduced to an application under section 111 of the Companies Act. If So, the procedure contemplated under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to multiplicity of proceedings, and the Company Law Board should have desisted from entertaining the application or at least should have stayed the entire proceedings till the civil suit was decided. It is true that some of the petitioners filed a suit before this court for more or less the same reliefs sought before the Company Law Board. It was subsequent to the filing of the application. It was contended that from the averments in the plaint we can infer that they have abandoned the application before the Company Law Board. The relevant passages that are relied on by the appellants are found in paragraph 4 of the plaint. It says: "... It calls for the powerful arm of the high judiciary to unravel this unlawful misappropriation of property and proprietary rights of the plaintiffs by securing evidence of the kind which only the substantive jurisdiction under the Civil Procedure Code and the original side of the High Court can ensure. In fact, it is settled law that in matters of corporate general body meetings the limited jurisdiction of the Company Law Board is not available for judicial regulation. It is again an accepted principle of law that the validity of allotment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application was filed on January 28, 1993. The said application was opposed tooth and nail by the appellants herein. A similar memo was also filed before the Company Law Board stating that they have moved an application for withdrawal of the suit. Ultimately, this court allowed the plaintiffs therein to withdraw the suit with liberty to take appropriate proceedings and without prejudice to continue the proceedings which they have already taken. The question of election will arise only when inconsistent proceedings have been taken. It is a kind of estoppel. In this case, the filing of the suit subsequent to the filing of the petition before the Company Law Board cannot be said to be an inconsistent proceeding taken by the plaintiffs. The civil court and the Company Law Board have jurisdiction to decide some matters pleaded. But the Company Law Board has wider jurisdiction and it can pass any orders just and convenient. Its powers are very wide. It is only an additional remedy given to the plaintiffs. At any rate, it has come out in evidence that they have withdrawn, and the withdrawal was allowed by the court with liberty to pursue their rights under section 397 of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opt one of the two alternative and inconsistent proceedings or positions, with the result that the latter is thereby encouraged to adopt or persevere in a line of conduct which he otherwise would have abandoned or modified, or (as the case may be) to change tactics from which he otherwise would never have deviated, the first party is estopped, as against his antagonist, from resorting afterwards to the course or attitude which, of his free choice, he has waived or discarded. Thus, where either of two alternative Tribunals is open to a litigant, each having jurisdiction over the matters in dispute, and he resorts for his remedy to one of such Tribunals in preference to the other, he is precluded, as against his opponent, from any subsequent recourse to the latter, at least at the point at which he has taken judgment in the first, and, so also, in the case of two alternative modes of trial, if a litigant, by conduct or inaction, acquiesces in the adoption of one of these modes, by taking part in the proceedings down to their conclusion without objection, protest, he is estopped from afterwards complaining that the mode of trial with which he was content at the time was irregular or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (Rampur), India Breweries and Distilleries Limited (Bihar), Tracstar Investments Private Limited (Bangalore), Bankerpur Simbhaoli Beverage Private Limited and BDA Limited (from August, 1-990), were and even among the independent companies with which the Shaw Wallace group had, and even now have, business tie up arrangements. Out of these companies, the last three, namely, Tracstar Investments Private Limited, Bhankerpur Simbhaoii Beverages Private Limited and BDA Limited are owned outside the Shaw Wallace group, by one section of the Chhabria family consisting of R. D. Chhabria and M.D. Chhabria. Shoe Specialities Private Limited, i.e. , the fifth respondent, is another company wholly owned and controlled by one section of the Chhabria family, namely, M. D. Chhabria and R. D. Chhabria. One of the members of the Chhabria family, namely, K.R. Chhabria, was a non-resident Indian like his brother, M.R. Chhabria, until 1984. K. R. Chhabria had contributed substantially for the growth of the Chhabria group abroad until 1984. The Chhabria group gained control of the shareholdings of R.G. Shaw and Company Limited in Shaw Wallace Company. In the year 1984, K.R. Chhabria was requeste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne during April, 1990, to September, 1991, and began to claim that all the companies including BDA Limited, GWL, Tracstar and Bhankerpur belonged to him and to Shaw Wallace Company and not to any other Chhabrias. This was the family dispute, M.R. Chhabria caused a press release stating that there was no split in the family, but it was only a family squabble that had intruded into the business. According to the petitioners, the said statement of the eighth respondent appeared in the Bombay daily, Sunday Midday, dated April 19, 1992. Eventually, a family dispute had been converted into a corporate battle. Subsequent to April 19, 1992, there are records to show that the family dispute has ended in a dispute over the ownership and control of the companies. On April 22, 1992, a notice was issued by the counsel for M.D, Chhabria and R. D. Chhabria to the fifth respondent regarding their rights in the company and their apprehension regarding the interference by M.R. Chhabria and his people. The reason for the apprehension was that the directors in the fifth respondent-company were employees of Shaw Wallace Company owned by M.R. Chhabria. The copy of the notice is among the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25, 1992, the first respondent, on the basis of the request made by the eighth respondent, has allotted 12,000 shares. It is the said offer and allotment that is questioned in this case. In the affidavit dated May 23, 1992, filed in C.P. No. 19 of 1992 which is also among the file, nothing is said about the increased share value as on that date, i.e. , on May 23, 1992. It is admitted therein that petitioners Nos. 1 and 2 are holding 3,000 shares and the eighteenth respondent 2,000 shares. There is no change in the pattern of shareholding, nor is there any mention, about the board meeting alleged to have been held on April 30, 1992. This affidavit is filed by none other than one of the directors of the company. It is the very same director who subsequently filed an affidavit on June 29, 1992, that the petitioner's shareholding is now reduced to a minority. Even then, nothing is stated about the increased shareholding by the eighteenth respondent or the allotment to Malleswara. On June 9, 1992, petitioners Nos. 1 and 2 therein sought impleadment in C.P. No. 19 of 1992. It is averred that, on June 12, 1992, the very same petitioners wanted to convene an extraordinary general bod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dressee, there is a deemed fiction that the cover is received by the addressee. The said argument of learned counsel presupposes that the document is sent by post. It is only a matter of presumption. A presumption can be drawn only when there is no other evidence available. In this case, the primary evidence regarding the posting of the letter is not produced. The best evidence that can be produced in this case is the despatch register of the company, and the books of account showing the expenses incurred by the company for posting the letters, etc. None of these documents is produced. When the primary evidence is not produced, a presumption on the basis of section 53(2) of the Companies Act cannot be made use of since the posting of the letter is in dispute. Only if a document is sent by post, the presumption under section 53 of the Companies Act can arise. When there is no evidence regarding the posting of the letter, the document relied on by the appellant cannot be made use of. We have also a doubt whether the paper in which the address is typed, can be construed as a certificate of posting. The paper bears the date May 2, 1992, whereas the postal stamp is dated May 3, 1992 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Sindri Iron Foundry (P.) Ltd., AIR 1966 Cal. 512, and also the decision of the Supreme Court in Shiv Kumar v. State of Haryana [1994] 4 IT 162, are worth consideration. In both these decisions, it is held that a certificate of posting by itself is not evidence of posting a letter, and in the Calcutta case, their Lordships have observed that judicial notice can be taken that a certificate of posting can be obtained even without posting a letter. Two more decisions, namely, Smt. Kanak Lata Ghose v. Amal Kumar Ghose, AIR 1970 Cal, 328 and Smt. Achamma Thomas v. E.R. Fairman, A IR 1970 Mys. 77, were cited before us by learned counsel for the appellants for the proposition that when there is a presumption, that presumption will hold good unless it is rebutted. According to us, even if there is a presumption, the same stands rebutted by virtue of the circumstances of this case. Even in those cases, it was held that to raise such a presumption, the circumstances also will have to be taken into consideration. Taking into consideration the above circumstances, we hold that there is no valid offer made to the petitioners and hence the finding of the Company Law Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer invalid even if we consider that the arrangement with Malleswara was a transfer. The appellant's counsel also submitted that the transfer in favour of Malleswara is a mortgage. According to him, only in case there is a complete transfer, article 6 has to be invoked. We have already found in the connected writ appeal that the transaction with Malleswara is only a pledge and, therefore, the same is not repeated here. It was next contended by the appellants' counsel that no grounds have been made in this case for invoking the jurisdiction under sections 397 and S98 of the Companies Act. According to learned counsel, one kind of fraud is alleged in this case, stating that the fifteenth respondent was the man responsible for creation of documents and fraudulent acts. The said act of Pandia is not substantiated, but the Company Law Board has taken the increase in the allotment of shares as a fraudulent act. According to learned counsel, though one kind of fraud is alleged, the finding is with regard to another kind of fraud without any basis. The said contention has also no force. From a reading of the petition and also the various counter-affidavits filed by the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a director long before the date of refusal. He resigned on April 10, 1992, and the same is reported to the Registrar of Companies in Form 32 and the same is approved. Once he has resigned as a director, it is not shown as to under what authority and capacity in the second respondent-company, he has signed the letter refusing to accept the offer. That also shows that the offer made was only on paper and not a reality. It is also contended that no case of oppression has been made out. A single act by itself will not constitute a ground for invoking the jurisdiction of the Company Law Board under section 397 of the Companies Act. According to learned counsel, it must be a continuous act and burdensome. It was also contended that it is not just and convenient for the Company Law Board to intervene in this case as contemplated under the sections. Learned counsel for the appellants contended that the allotment of shares is a matter of internal management of the company, which is outside the scope of sections 397 and 398 of the Companies Act. It is held in Gluco Series Pvt. Ltd., In re [1987] 61 Comp. Cas. 227 (Cal.) as follows (p. 243) : "It is Well-settled that it is not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a company controlled by the fifth respondent. From the above facts, it is clear that the eighth respondent and his employees who are the directors of the fifth respondent-company did not act in good faith, and their action was detrimental to the company, and the same has affected its proper management and also the rights of the shareholders, and a case for winding up is proved. It is held in Shanti Prasad Jain v. Kalinga Tubes Limited [1965] 35 Comp. Cas. 351; AIR 1965 SC 1535, that the provision of section 397 of the Companies Act is more or less akin to section 210 of the English Companies Act of 1948. It was held that the purpose of introducing section 210 in the English Companies Act was to give an alternative remedy to winding up in case of mismanagement or oppression. The law always provided for winding up, in case it was just and equitable to wind up a company. However, it was being felt for some time that though it might be just and equitable in view of the manner in which the affairs of a company were conducted to wind it up, it was not fair that the company should always be wound up for that reason, particularly when it was otherwise solvent. That is why secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equitable cause for winding up the company, though that must be shown as preliminary to the application of section 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted 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 the 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. It is in the light of these principles that we have to consider the facts in this case with reference to section 397". The petitioners have demonstrated before the Company Law Board as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permit directors to exercise powers, which have been delegated to them by the company in circumstances which put the directors in a fiduciary position when exercising those powers, in such a way as to interfere with the exercise by the majority of its constitutional rights. Another contention that was taken by the appellants was that the increase in the shareholding is a matter of internal management and if the same is challenged, it is only a matter for rectification which comes under section 111 of the Companies Act. In that view, the powers under section 397 of the Companies Act should not have been invoked. A reading of the petition will show that the petitioners cannot invoke the powers under section 111 of the Companies Act. It is not a case of rectification of register that they sought for. Section 111 of the Companies Act has no applicability at all in this case. It is mismanagement and misuse of powers by the directors that is pleaded in the petition, and hence that argument of the learned counsel for the appellants has to fail. The Company Law Board has taken into consideration all materials and has given the finding that it has to invoke the powers under section 397 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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