9911796707
TMI Blog1996 (4) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... econstituted on 2-6-1994, the following subjects came up for discussion and resolutions were passed by the second respondent as under: "It was reported to and noted by the Board that the Share Certificate No. 47768 for 5,00,000 equity shares of Rs. 10 each fully paid up of Gordon Woodroffe Ltd., registered in the name of the company, bearing Distinctive Nos. 02617978 to 03117977, both inclusive, has been lost, as the share certificate has been illegally removed from the custody of the company and taken away by a person claiming to have control over Tracstar Investments (P.) Ltd. Accordingly, it was necessary to submit an application to the said Gordon Woodroffe Ltd. for issue of duplicate share certificates, together with a deed of indemnity, a draft whereof was tabled for the Board's consideration and approval. It was also reported to and noted by the Board that it was necessary to have the above holding of the company sub-divided in the lots of 1,75,000 shares, 1,75,000 shares and 1,50,000 shares. In this connection the following resolutions were passed by the Board: Resolved that Mr. M.S.A. Kumar, Mr. K.K. Banerjee, and Mr. A. Syed Ahmed, Directors, be and are hereby sever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iefs after issuing notices to 16th respondent on 11-6-1994 and 14-6-1994 asking for particulars: "( a ) To declare that the transfer of shares said to have been effected by respondents 10 to 15 for and on behalf of SSPL in respect of 5,00,000 shares held by SSPL in GWL bearing Distinctive Nos. 02617978 to 03117977, covered by Folio No. GIS 05348, Certificate No. 57768 as non est in law, illegal, fraudulent and invalid in law, as being violative of section 108(1) of the Companies Act, section 4(3) of the Companies (Issue of Shares) Rules, 1970 and section 22A(4) of the SCRA and not binding on the company and/or petitioners . . . . " 7. The material averments in the petition are as follows: Late Dwarakadoss Chhabria had two sons, R.D. Chhabria (R.D.C.) and M.D. Chhabria (M.D.C.). R.D.C. had two sons, namely, M.R. Chhabria (M.R.C.) and K.R. Chhabria (K.R.C.). In this case, we are concerned with the dispute between M.R.C. on the one hand and R.D.C. and M.D.C. on the other. The Chhabria family was controlling various companies. M.R.C. is having control over Shaw Wallace Group of Companies, and R.D.C. and M.D.C. are having control over the second respondent. 8. One of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts in the second respondent-company, and their apprehension regarding the interference by M.R.C. and his people. The reason for the apprehension was that the second respondent-company was controlled by a Board of Directors who were employees of SWC owned by M.R.C. The notice requested the board of directors to desist from exercising their powers in a manner which prejudices or undermines the interest of the shareholders of the company. 9. S.W.C. owned by M.R.C. filed an application before the CLB as C.P. No. 19 of 1992 under sections 247 and 250 of the Companies Act. One of the main reliefs sought in that case was to investigate into the persons who held the shares in the second respondent-company. That application is dated 5-5-1992. It was alleged in that petition that M.R.C. wanted to interfere with the rights of Standard and Stridewell in the second respondent-company. The second respondent was manufacturing shoe-uppers and had been manufacturing the same through GWL. G.W.L. was being managed by a board of directors which controlled the employees of S.W.C; second respondent was also being managed by a board of directors which essentially consisted of employees of S.W.C. or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stay petition. On 10-5-1994, the writ petition filed by Malleswara Finance Investment Co. (P.) Ltd. was dismissed. In the meanwhile, some of the respondents in C.P. No. 29 of 1992 filed C.M.A. before this Court as AAO Nos. 743 of 1993 and 875 of 1994. Against the dismissal of the writ petition, Malleswara Finance Investment Co. (P.) Ltd. filed Writ Appeal No. 806 of 1994. The writ appeal as well as the appeals against the order in C.P. No. 29 of 1992 were heard and disposed of. The judgment in Malleswara Finance Investments Co. (P.) Ltd. v. Company Law Board [1995] 82 Comp. Cas. 836 (Mad.). 11. When the attempt of M.R.C. to increase the share capital in the second respondent-company failed, another attempt was made by him to sell its shares in the first respondent-company in which the first petitioner claimed some right. For the said purpose, M.R.C. issued direct instructions to the board of directors to dispose of shares held by the second respon- dent in the first respondent, to third parties. Since there was already a judgment against the board of directors, in C.P. No. 29 of 1992 which was subsequently confirmed by this Court, those Directors expressed their dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h shares held in the second respondent which shares were transferred by the second respondent to three persons who are respondents 17 to 19 in the petition. It is further said that there is no restriction on the sale or disposal of shares held by second respondent and, therefore, the second respondent disposed of these shares without any restriction. It is said that such a claim will be invalid and opposed to clauses 40( a ) and 40( b) of the Listing Agreement Form and also in violation of section 372 of the Companies Act. It is further said that the first respondent-company has issued duplicate certificates and the same were registered in accordance with law. There is no violation either under section 23A( iv ) of the Securities Contract (Regulation) Act, 1956 and rule 4(3) of the Companies (Issue of Share Certificates) Rules, 1960. According to them, the challenge is without any merit, and the Directors have done only their duties in accordance with law. It is further said that the board of directors duly elected in pursuance of the resolution passed by the board of directors were competent to effect the transfer. It is said that the duplicate certificate was issued pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce disputed questions of fact and law are in issue. It is their case that there is no violation of either section 84 or section 108 of the Companies Act, and the remedy of the petitioners, if any, is only to file a suit and get appropriate relief. 16. On the above contentions, the CLB raised the following issues: "1. Whether the petitioners have locus standi to present the petition? 2. Whether the matter is to be relegated to suit? 3. Whether SSPL has violated the undertaking given to Company Law Board (CLB) in C.P. No. 29 of 1992? 4. Whether sale of shares of SSPL is deemed to be the sale of the undertaking? 5. Whether GWL has violated the provisions of section 84(2) of the Act and Companies (Issue of Share Certificates) Rules, 1960? 6. Whether removal of the name of SSPL and consequent entry of the names of respondents 17, 18 and 19 in the Register of Members of GWL was 'without sufficient cause'? 7. Whether the prayer for rectification of Register of Members is to be granted?" 17. On Issue No. 1, the Board held in favour of the petitioners. On Issue Nos. 2,3 and 4, the finding was against the petitioners. On Issue No. 5, the finding was in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eadings. 21. The learned counsel for the respondents (appellants) relied on the decision in Bishundeo Narain v. Seogeni Rai AIR 1951 SC 280 and also on the decision in Ladli Parshad Jaiswal v. Karnal Distillery Co. Ltd AIR 1963 SC 1279 for the said purpose. The learned counsel also relied on the provisions of Order 6, Rule 4 of the Code of Civil Procedure, 1908, for the said purpose. I will deal with these decisions and the provisions of the Code of Civil Procedure in seriatim. 22. The object of pleadings is to present a full picture of the cause of action with such information and detail as to make the opposite party understand the case. The object of giving such particulars is to enable the opposite party to know as to what case he has to meet and thus to prevent a surprise trial and to limit the generality of the pleadings to definite and limited issues to be tried and thus save unnecessary expenses. 23 'Fraud' is defined in section 17 of the Indian Contract Act. But the 'fraud' dealt with therein is concerning the fraud between two contracting parties. In fact, the provisions under section 17 may not be specifically applicable to the facts of this case. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to the transactions into which they enter on behalf of the company, and trustees for the company so far as concerns the company's funds and property." At page 230, the learned author further says thus: "Directors are in a fiduciary position. They must exercise their powers for the company's benefit and, if abuse of these powers is threatened, the Court will intervene. There have been cases, for example, of directors having been restrained by the Court from abusing powers in the articles relating to the registration of transfers and the issue of shares under their control. Alternatively, the Court may order a general meeting: "Under a scheme designed to avoid a takeover bid, the board altered the voting rights attaching to shares so that the board and its associates obtained a majority of votes at general meetings by means of an issue of new preference shares. The Court regarded this action as unconstitutional but made no order until a general meeting had an opportunity of approving the scheme." 28. Palmer's Company Law -Vol. 1, 23rd edn. (1982), Chapter 64 deals with 'Directors' Fiduciary Duties' at page 850 (Chapter 64-04), the learned author says that D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92] 1 SCC 534, their Lordships considered a similar question as to how far fraud and collusion invalidate any decision or action. In paragraph 20 of the judgment, their Lordships said thus: "Fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. It is a concept descriptive of human conduct. Michael Levi likens a fraudster to Milton's sorcerer, Cosms, who exulted in his ability to, 'wing me into the say-hearted man and trap him into snares'. It has been defined as an act of trickery or deceit . . . ." After extracting the various definitions in the dictionaries, their Lordships further held thus: "... fraud in public law is not the same as fraud in private law. Nor can the ingredients which establish fraud in commercial transaction be of assistance in determining fraud in commercial transaction be of assistance in determining fraud in Administrative Law. It has been aptly observed by Lord Bridge in Khawala that it is dangerous to introduce; maxims of common law as to effect of fraud while determining fraud in relation to statutory law....Present day concept of fraud on statute has veered round abuse of power or mala fide exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quity and the Law of Trusts by Philip H. Pettit, Fifth edn. [1985], at page 148, the learned author says that there is no distinction between the words 'fraud' and 'dishonest'. Both of these mean the same thing and the use of the two together does not add to the extent of dishonesty required. The learned author also says at page 149 what a trustee should know before he is made liable or charged with dishonesty or fraudulent act. The learned author says thus: "( i )actual knowledge; ( ii )wilfully shutting one's eyes to the obvious - 'Nelsenian knowledge'. ( iii )wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; ( iv )knowledge of circumstances which would indicate the facts to an honest and reasonable man; ( v )knowledge of circumstances which would put an honest and reasonable man on inquiry." A director of a company must know that he is a trustee for the company; though he need not know all the details of it. He must know of the dishonest and fraudulent design, though not necessarily of the whole design; and he must know that his act assisted in the implementation of such design - if these acts are proved, fraudul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard were present. They are, Eswaran and Ramani. Except for the resignation of the three Directors, no other business was transacted at that time. Next day, ie., on 2-6-1994, Eswaran also submitted his resignation and one Mr. Sriram was appointed as Additional Director. He is the 14th respondent herein. In that Board meeting held on 2-6-1994 only Additional Directors who were appointed on 1-6-1994 and the 14th respondent were present. In that meeting, a decision to obtain duplicate certificates was taken, and it was also decided to apply for sub-division of the said certificates into three different lots of 1,75,000,1,75,000 and 1,50,000. In the 43rd meeting held on 3-6-1994, it was unanimously resolved to sell the 5 lakh equity shares at the best available market price, but at a price not below Rs. 12.75 per share. On 8-6-1994, there was another Board meeting of the second respondent in which it was decided that out of the sale consideration, a sum of Rs. 22,19,725.77 due to the first respondent as per letter dated 1-6-1994, be paid off. It was also resolved to pay another sum of Rs. 33,18,248 to the first respondent towards the admitted liabilities. It was further resolved to k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iately thereafter it is implemented, there is a presumption that all these things are pre-determined, and the negotiation for sale also might have been the consequence of such a pre-determination. It is here the role of the third respondent gains importance. 42. While extracting the facts, we have already stated about the fight in the Chhabria family, and how the third respondent was taking steps to unsettle the family arrangement. The Additional Directors who were appointed on 1-6-1994 and 2-6-1994 are admittedly employees of the third respondent in S.W.C. The first respondent is also a company under the direct control of the third respondent. 43. In this connection, we may also note that in Company Petition No. 29 of 1992, orders were pronounced on 28-5-1993 whereby the allotment of 20,000 shares in the second respondent-company was set aside and the CLB directed rectification of the register. The immediate consequence was the attempt of the third respondent to take control of the second respondent-company failed. When the oppression was continued, another petition, namely, C.P. No. 44 of 1993 was filed and when the same was about to be taken up for consideration, Mallesw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first respondent-company. Such application was filed on 15-7-1992. On 20-8-1992, the counsel for the second respondent undertook not to alienate the shares of the second respondent in the first respondent-company and that undertaking was there at least till the disposal of that petition, ie., till 28-5-1993. So, even at that time, the petitioners herein had the apprehension that their right over the company will be taken away by illegal methods by the third respon dent, and the same had to be prevented. 46. In this connection, we may also note that the third respondent is also a director and chairman in the first respondent-company. C.P. No. 44 of 1993 itself was filed to remove the Directors appointed by the third respondent and to have an extraordinary general meeting for the election of Directors. The action of the third respondent in asking the previous Board to resign and in appointing his own employees, was to pre-empt the decision that was to be taken in C.P. No. 44 of 1993. So, the intention or motive of the third respondent was clear, i.e., to dislodge the control of the second respondent in the first respondent-company, by some means. It was that power which he e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intent to defraud, renews a certificate or issues a duplicate thereof, the company shall be punishable with fine which may extend to ten thousand rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both. (4) Notwithstanding anything contained in the articles of association of a company, the manner of issue or renewal of a certificate or issue of a duplicate thereof, the form of a certificate (original or renewed) or of a duplicate thereof, the particulars to be entered in the register of members or in the register of renewed or duplicate certificates, the form of such registers, the fee on payment of which, the terms and conditions, if any (including terms and conditions as to evidence and indemnity and the payment of out-of-pocket expenses incurred by a company in investigating evidence) on which a certificate may be renewed or a duplicate thereof may be issued, shall be such as may be prescribed." Rule 4(3) of the Companies (Issue of Share Certificates) Rules says thus: "(3) No duplicate share certificate shall be issued in li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a duplicate certificate will be issued. 50. In this case, we find that on 2-6-1994, second respondent wrote to the first respondent about the loss of certificate and wanted a duplicate certificate to be issued. Without waiting for any investigation or evidence regarding the loss of certificate on 4-6-1994, first respondent-company, at its 127th meeting, resolved to issue a new certificate bearing No. 48177 (for 1,50,000 shares), No. 48178 (for 1,75,000 shares) and No. 48179 (for 1,75,000 shares) under its common seal, in the name of the second respondent, in lieu of original certificate No. 47768 as recorded in the Register of Loss of Certificate, tabled at the meeting. It was further resolved that share certificate No. 47768 be cancelled. Such decisions were taken by two Directors of the company, namely, K.P. Jayakar and P.L. Narasimhan, who are respondents 4 and 5 in the company petition. 51. Before taking a decision to issue duplicate certificates, decision had to be taken or satisfaction must be entered that the original certificate was lost. In this case, the very request by the second respondent says that the original certificate is with the first petitioner herein. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession of the original certificate and this fact is affirmed by the 9th respondent in this case in an earlier proceeding namely, C.P. No. 19 of 1992, between the same parties. The share certificate in this case is entered and only asset of the second respondent in the first respondent-company and the value is also very high. Under these circumstances, necessary precau-tions ought to have been taken by the first respondent which it failed to do. The reason for such speedy action is that every formality had to be complied with before 8-6-1994. So, the procedure and fairness in action were all thrown to winds. 54. As per rule 3 of the Companies (Issue of Share Certificate) Rules, the 'Board' is defined. There must be at least three Directors when the Board consists of more than six members, and in other cases where there are less than six, the Board, for the purpose of that rule, is fixed as two. In this case, the board of directors consists of more than six members and the resolution to issue duplicate certificates was passed only by respondents 4 and 5 who constitute only two Directors. Patently the said resolution passed is invalid in law. It is contended on behalf of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more things that are exactly alike; an exact copy'. As an adjective, it means 'exactly like another thing'. 57. In view of the above meaning given for the word 'duplicate', a contention was raised that the resolution passed by the first respondent, and the request by the second respondent cannot be for the issue of duplicate certificates, in the sense, what they wanted was, to sub-divide the certificate in three lots and give three different numbers. The further contention is that once it is sub-divided and three different numbers are given, it cannot be a duplicate as known to law. 58. Under the Companies (Issue of Share Certificate) Rules, rule 5(3) provides thus: "(3) When any certificate is issued in any of the circumstances specified in rule 4, sub-rule (3), it shall state on the face of it and against the stub or counterfoil to the effect that it is a 'duplicate issued in lieu of share certificate No ..' Further, the word 'duplicate' shall be stamped or punched in bold letters across the face of the share certificate." 59. Once new numbers are given and the quantum of shares is also changed, legally, the certificates issued as per resolution dated 4-6-1994 cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Form shows that the company shall comply with all Rules and Bye-laws and Regulations of the Exchange which are now or hereafter will be in force, and the company shall further agree to comply within a reasonable time such further Regulations as may be promulgated as general requirements, for new listing. To escape from the rigour of those clauses, the entire shares had been split so that even without the know- ledge of the Stock Exchange, this could be negotiated. The attempted fraud is being perpetrated by ingenous methods. 62. Now I come to the conduct of respondents 17 to 19, for it is from the cumulative effect of all these acts, a legal inference has to be drawn. Respondents 17 to 19 are also stock-brokers, and they are well aware of the intricacies involved in the sale and purchase of shares. Respondents 17 and 18 are residents of Calcutta and the 19th respondent is a resident of Secunderabad. It is the case of these respondents that they purchased these shares bona fide for consideration. It is said that they paid the consideration on 7-6-1994. The very decision to issue duplicate certificates was taken only on 4-6-1994. How the respondents 17 to 19 who are residing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, and they were published in the local dailies. Being stock-brokers, respondents 17 to 19 might have been well aware of the circumstances under which these shares are being sold. 64. The cumulative effect of all these acts can be summarised thus: The third respondent is controlling respondents 1 and 2. There is a family dispute between the third respondent and other members of the family. The other members of the family were controlling the second respondent-company. When the same was attempted to be dislodged by the third respondent, it ended in serious litigations. He failed. He appointed new Directors and wanted the shares to be sold by issuing duplicate certifi- cates. It was achieved through his employees, who were appointed as Directors in both the companies. Respondents 17 to 19 actively participat-ed in purchasing these shares by private negotiations, and subsequently, the 17th respondent was also appointed as a Director of the first respon-dent-company. These are the facts that are made mention of in the company petition. The same was proved by documentary evidence in this case. The documents are produced by respondents 1 and 2 themselves. So, even if there is any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps answered the reference by stating that it is a discretion which has to be exercised by the Company Court. The question that came up for consideration was, whether the civil court's jurisdiction is barred in cases coming under section 111. Their Lordships said that the jurisdiction of the civil court is not barred. It is very wide, unrestricted and unlimited. Their Lordships further said that the provision of section 155 of the Companies Act (at present section 111) does not whittle down or abrogate the provision for filing a suit available under section 9 of the Code of Civil Procedure. Their Lordships further said that the provisions of the Companies Act only show that a question regarding title can also be answered by a Company Court, but that is also possible without detailed examination of complicated questions of fact and law, requiring extensive oral and documentary evidence and it cannot be inferred from section 155(3) that the remedy is not summary. Their Lordships further said that it is not necessary in every case where questions relating to title may be involved that there has to be a detailed examination and determination of oral and documentary evidence. Their Lords ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents cited the decisions reported in Bishundeo Narain's case ( supra ) and Ladli Parshad Jaiswal's case ( supra ) to substantiate their case that better particulars are required. We have already said that the strict principles of contract law are not applicable to the facts of this case. It is the collusion between the respondents which has affected the rights of the petitioners herein. The details of the acts have been narrated in the petition. 69. Even if there is any lack of particulars, we do not think that can be a ground which could be rightly agitated by the respondents herein. They knew the purpose of this petition, and the accusations made against them. When they are aware of the allegations and have answered the same, and have also produced documents to substantiate their case, it is too late for them to contend that they were prejudiced by the lack of particulars. After all, the pleadings are intended only to give notice. If the respondents are aware of the matter and were given opportunities to substantiate their defence, a technical plea of lack of particulars will not hold good. Hence, the decision cited by them will have no application to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ths from the date of lodgement. After holding that the company has registered the shares, after forming an opinion in good faith as required under sub-section (4) of the said section 22A of the Act, this Court held that in such cases, registration ought not to be refused, and the company has to effect the registration. After holding thus, this Court further went on to say thus: "We do not accept the contention of learned senior counsel for the appellant that the proceeding for rectification should be dealt with exclusively under section 111(4) and (5) of the Companies Act, corresponding to section 155 prior to May 31, 1991, without having any regard to section 22A of the Securities Contracts (Regulation) Act. The two sections cannot be put in two different separate compartments for the purpose of considering an application for rectification. The language of section 111(4) of the Companies Act shows that even the person who seeks rectification has to rely upon the provisions of section 22A of the Securities Contracts (Regulation) Act for the purpose of showing that the name of any person is entered in the register without sufficient cause. After the introduction of section 22A(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aud and collusion. We have also held that 5 lakh shares were split into three lots so as to overcome the provisions of clauses 40( a ) and 40( b ) of the listing agreement form and respondents 17 to 19 have also purchased the shares not in good faith. All of them colluded together to defeat the rights of the petitioners in this case. As stated by the Supreme Court in Shrisht Dhawan's case ( supra ) , fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. The respondents' counsel submitted that the transfer of securities in contravention of law can only be a corresponding law which deals with the transfer of any security and, therefore, relied on section 19( b ) of the Foreign Exchange Regulation Act. According to the learned counsel, the law that is said in clause ( b ) of sub-section (3) of section 22A of the Securities Contracts (Regulation) Act refers to clause ( b ) of section 19 of the FERA. 74. According to us, the submission made by the learned counsel is not correct. Clause ( b ) refers to contravention of any law. It refers to any law that is in force in India, and not only to section 19(1) of the FERA. If the intenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading of sub-section (3) makes it clear that the CLB is empowered to rectify a register if the transfer of shares or debentures is in contravention of any of the provisions of Securities and Exchange Board of India Act, 1992 or Regulations made therein or the Sick Industrial Companies (Special Provisions) Act, 1985. Securities and Exchange Board of India Act, has made it clear that the provisions of that Act are only in addition to and not in derogation of the provisions of any other law for the time being in force ( vide section 32). If so, by virtue of section 111(4) of the Companies Act itself, rectification could be ordered. That apart, we have already held that the entire procedure has been violated by respondents 1 and 2 along with respondents 17 to 19 and that they have noted against all provisions of law and, therefore, rectification has only to be ordered. 76. The learned counsel for the respondents also contended that section 111(4) contemplates the removal of the 'name of any person' or insertion of the 'name of any person' in the register of the company. It is contended that respondents 17 to 19 were not made parties originally, and after they were impleaded, no co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents 17 to 19 wanted to protect themselves from that consequence claiming themselves as bona fide purchasers for valuable consideration and without notice of the actions of the Directors. It is for them to prove that assertion. In Yajju Adinarayana v. Gurala Jagannadha Rao AIR 1949 Mad. 762, it was held that if a person claims that he is a bona fide purchaser for value, the burden is on him to substantiate the same. That is a case under the Specific Relief Act, 1877. 82. That apart, in this case, both the parties have adduced evidence and, therefore, the question of burden of proof loses its importance. Apprecia-tion of evidence alone remains. We have already held on appreciation of evidence that respondents 17 to 19 are not bona fide purchasers for value. 83. It was next contended by the learned counsel that the first petitioner claimed himself to be a pledgee of the impugned shares and the said case has been given up. While describing the first petitioner, it is stated that the first petitioner is a pledgee in respect of 12.73 per cent of the paid-up capital of the first respondent-company, which is registered in the name of the second respondent-company in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second respondent in C.P. No. 29 of 1992 has no life after the company petition has been disposed of; and (2) the second respondent has been directed to pay the value of the shares to respondents 17 to 19. 87. The case of the petitioners insofar as the undertaking is concerned, is that when they moved C.P. No. 29 of 1992, they apprehended that the share of the second respondent in the first respondent-company will be alienated so as to defeat their rights, and therefore, they wanted an injunction prohibiting the second respondent from doing so. An undertaking was given by the counsel appearing for the second respondent thus: "As directed in our last order, copies of the minutes of the ECM held at the registered office of the company on 28-7-1992 have been filed by the Chairman of the Meeting. Shri S.S. Ray, senior advocate appearing on behalf of the petitioners pointed out certain developments that have taken place after filing of the petition and submitted that the company should be restrained, till the petition is disposed of from issuing any further share capital, from registering any further transfer of shares of the company and also from disposing of the shares held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a victim of the fraud committed by its Directors. The interest of the shareholders was not protected. The Directors were dancing to the tunes of the third respondent without taking into consideration the grievance of the majority sharehold-ers. They committed breach of trust and violated the fiduciary relation- ship. Violating all the provisions of law, respondents 17 to 19 also pur-chased the shares. When there is a finding by the Board that they are no bona fide purchasers for value, the impugned direction directing the company itself to repay the amount cannot stand. The respondents 17 to 19 are also parties to the fraud and collusion. The question of restitution in such case will never arise. That direction by the CLB is, therefore, to be deleted. The question whether respondents 17 to 19 are entitled to get reimbursement of their share value from the Directors or the price paid by them from 6 lakh shares from the Directors need not be considered in those proceedings. It is for respondents 17 to 19 to take appropriate proceedings. We hold that the second respondent-company is not liable to pay any amount for the same. To that extent, interference is called for with the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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