9911796707
TMI Blog1993 (7) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... there are something like three dozen interconnected litigations effectively between the same parties, including an identical suit pending before the Calcutta High Court, in all of which proceedings the subject-matter of this litigation is in issue. All those litigations are in a manner of speaking dependant on the outcome of this proceeding which explains why the parties have virtually treated this one as the "mother of all battles" to borrow an expression that has now become current, judicial time is precious and it is equally necessary that in order to curtail repetitive hearings and litigations in different parts of the country, the High Court which hears the proceedings, first, must set at rest all the points that are canvassed in view of the principles of res judicata. That, in other words, explains the length of this judgment which inevitably involved an elaborate factual and legal exercise of some magnitude. I need to also observe here that the courts which are groaning under the load of arrears can ill-afford multiple litigations and the immediate fall-out of these skirmishes is the disastrous effect on the companies and units that are being fought over which should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontested litigation in which the pleadings are voluminous, but the greater part of this material has seen the light of day at a subsequent point of time. The plaintiffs are necessarily circumscribed to the case made out by them before the trial court and no amount of padding and grafting on at later stages in the litigation is really permissible because this appeal is essentially a review of an ad interim order passed by the trial court and then confirmed on the basis of certain material before it and of a specific case made out. It is, therefore, necessary to assess, in the first instance, as to what was the cause of action pleaded at that point of time. The plaintiffs are a wholly owned subsidiary of Shaw Wallace and Co. Ltd. (hereinafter referred to as "Shaw Wallace"), which company, in turn, is engaged, inter alia , in the business of manufacture and sale of Indian made foreign liquor and beer for the past about one hundred years. The plaintiffs contend that Shaw Wallace and Co. Ltd. conceived, developed and promoted various brands of liquors, which were well-received and which are virtual market-leaders. The plaintiffs go on to aver that during 1987-88, Shaw Wallace and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree brands to BDA. Since, it had manufacturing facilities, BDA was in a position to obtain excise licences for import of IMFL products in the States mentioned above. I need to observe, at this stage, that this is the solitary ground set out in justification for the assignment of the three brands in question to BDA though it was sought to be argued at a subsequent stage that the difficulty was, in fact, a genuine one, nothing has been produced in support of this crucial averment. As I shall presently point out, that does not make much difference because the assignment in question did take place which is a matter of record and the reasons that prompted it, genuine or weak, are not of consequence because it is a case of documents vs. statements in the air. The plaintiffs further contended that they continued to control the manufacture of the products of the above brands at the factory of BDA and that Shaw Wallace had provided various types of equipment for use in the factory on lease basis. The technical and other personnel of the plaintiff-company are supposed to have been deputed/assigned from time to time to undertake the supervision of the manufacture of these products and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppointed as the managing director of BDA with effect from April 9, 1992, and that all functions of the company shall be under supervision and control of the fourth defendant and that he will be assisted in his functions by the fifth defendant. The circular specifically states that all sanctions and approvals in regard to BDA are to be obtained from the fourth defendant only and these documents have been issued to the executives of BDA. In other words, what is pleaded is that by virtue of this act on the part of defendant No. 3, BDA was to function independently of the supervision and control of the plaintiffs which, according to them, was being exercised pursuant to an arrangement. I repeat that the plaintiffs have neither produced the agreement, resolution or any other document under which the so-called agreement was arrived at nor have they spelt out in the plaint as to how an agreement of that type is to be considered as enforceable in a court of law. The plaintiffs proceed to state in paragraph (14) that the issuance of the circular dated April 10, 1992, is contrary to the "arrangement" existing for the supervision and control of the affairs of the BDA. They contend that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secondly, what is pointed out is that at the time of the transfer of these shares, the price paid was inadequate. The plaint is silent with regard to the all important details such as dates, consideration, the manner in which the transfer took place, etc. A scheme for amalgamation of Arunava Investments Ltd. and Shaw Wallace was pending before the High Court of Judicature at Calcutta. That scheme provided for the shares of Arunava Investments, i.e. , the shares held in BDA to be transferred and vested in Shaw Wallace. The scheme for amalgamation, which has so far not been approved of by the High Court nor has it become final, provided that with effect from the appointed day and up to the effective date that the transferor companies shall carry on their business and activities and stand possessed of all their property for and on account of and in trust for the transferee-company and shall account for the same to the transferring company .. It is contended that the board of directors of Arunava Investments Ltd. had no authority or power to transfer the shares to any third party contrary to the scheme of amalgamation and contrary to the decision of the shareholders in regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A was required to function under the dominion and control of the Shaw Wallace group and any attempt to function independently can be stopped by order of the court. In ground ( d ), a vague allegation is made to the effect that defendants Nos. 3 to 7 "and certain other persons supporting them" are threatening and pressurising employees of BDA and at other offices which again are unnamed, to the effect that they will suffer if they do not submit to their dictates. It is also alleged that defendants Nos. 4 to 7 have been in the city of Aurangabad since April 13, although ordinarily their presence is not required, and that they have been meeting the employees working in the factory and asking for records and papers, access to various departments and the general control over the premises, and that they are adopting coercive and intimidative attitudes towards the above employees. April 14th and 15th were public holidays and the plaintiffs contended that after the factory reopened, defendants Nos. 4 to 7 and other persons supporting them will cause interference in the working of the factory. A general averment thereafter follows, which is as nebulous and vague as could be, that the defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated April 9, 1992, appointing defendant No. 4 as the managing director of BDA. ( ii )Letter dated April 24, 1989, from the plaintiffs to BDA confirming that the plaintiffs will continue to market all the products of BDA and that they will provide the managerial inputs necessary to sustain the operation of the unit and that certain representatives would be posted there for running the day to day operations the cost of which would be to the account of BDA. ( iii )Letter dated May 20, 1991, from BDA to Central Bank of India including the requisite corporation guarantee from the plaintiffs for the sum of Rs. 5,50,00,000 along with the requisite board resolution and a copy of the guarantee. ( iv )Scheme for the amalgamation and merger of various companies, including Arunava Investments Ltd. and Paraganas Investments Ltd. with Shaw Wallace Co. Ltd., which is pending before the Calcutta High Court. Then follows the interim application for the grant of the injunction prayed for supported by an affidavit of Shovan Roy, who is a vice-president and duly constituted attorney of the plaintiff-company. On the basis of this material, the learned trial judge passed an ex parte order whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was little justification for dispensing with the notice and the subsequent order that was passed by the learned judge which can never be condoned having regard to the type of plaint that had been filed and the material placed before him. A court is obliged to weigh the consequences of judicial orders and to act with a degree of utmost restraint and caution when they are passed ex parte . The material before the court does not justify an order that virtually had the effect of handing over the management and control of a public limited company, namely, the first defendants, to the plaintiffs and at the same time restraining all those who were lawfully entitled to the management and control of that company from performing their functions. The defendants filed their reply and the matter was argued in detail after which the learned judge passed an order dated May 5, 1992, not only confirming the initial order but virtually expanding its scope. It is this order that is the subject-matter of the present appeal. Though the order runs into as many as fifty pages, I intend summarising the contents of that order because, in my considered view and as indicated in my earlier order dated Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of section 30( c ) of the Monopolies and Restrictive Trade Practices Act, 1969, and that any director of the company be authorised to make the said application and to complete the transaction relating to transfer of the shares. Relying on the minutes of the meeting dated May 4, 1990, the defendants contended that the shares were then held by Intrust Securities Pvt. Ltd. The transfer of such shares was notified to the Department of Company Affairs, which department by letter dated July 18, 1990, authorised the company to transfer the shares of defendant No. 1 to Intrust Securities Pvt. Ltd. They pointed out that Shri S. Roy, signatory to the plaint, was present in the meeting of May 4, 1990, and has confirmed the resolution. They pointed out that in the said meeting, S. Roy had tendered his resignation. The defendants have also pointed out that on or about August 30, 1990, an agreement of assignment was entered into between plaintiff No. 1 and BDA whereby BDA purchased the three disputed brands. It is their case that these three brands of liquors are essentially manufactured by BDA, that it was because of the efforts of BDA that they became market leaders and that it is for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir property which they are entitled to use without any hindrance, obstruction or interference from the plaintiffs or any other parties. I need to reiterate once again that the defendants had specifically pointed out to the trial court that the desubsidiarisation of the company and the assignment of the brands both of which have not been challenged in the plaint nor is there any relief claimed under these heads, (for which purpose I have reproduced the prayer clauses earlier) and that the plaintiffs are, in these circumstances, wholly and completely precluded from claiming any incidental reliefs. The fact that arguments were advanced in effect calling these transactions into question would not serve as a means to get over the basic fact that the plaint proceeds on the footing that there is no relief claimed under these two heads. It is not a matter of technicality, but the fact remains that the effect of this situation is not only far-reaching but would provide a complete barrier to the type of reliefs asked for by the plaintiffs being granted. The defendants had, therefore, pleaded that unless the courts were to be satisfied that BDA is, in fact, legally subordinate to the plaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summarised, in detail, the complexities of the case, the learned judge formulated the following points which completely and totally bypassed everything that is in contention before the court and it is, therefore, useful to reproduce the points in question : Points Findings "( i )Can it be said that this court has Yes. jurisdiction to entertain the civil suit and decide this interim application ? Yes. ( ii )Do plaintiffs prove that there is a Proved. . legal injury and do they further prove that there is a strong prima facie case for grant of ad interim injunction pending disposal of the suit to protect their interest and interest of the Shaw Wallace group and the interest of others who are interested in this litigation, but are absent ? Proved. ( iii )In whose favour does the balance of convenience lie and to whom will irreparable injury not compensated in terms of money and comparative hardships and mischief be caused ? In favour of plaintiff irreparable injury and comparative hardship will be caused to plaintiffs, ( iv )What order? As per final order". The first issue regarding jurisdiction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice-note dated March 24, 1989, and the subsequent office-note dated March 26, 1990, of K. Srini-vasan, whereby the delinking of BDA from Shaw Wallace is recommended, reasons have been set out from the business and tax strategy angle as to why this ought to be done and it is significant that a perusal of the documents will indicate that it was a collective corporate decision and not something underhand or an action that was clandestinely manipulated or pushed through by defendant No. 3. Apart from the various technicalities that were involved in this operation, which are referred to by the learned judge, there is a specific reference to the minutes of the second meeting of the group management committee of Shaw Wallace which was presided over by the chairman of the company, M.R. Chhabria, wherein the aspect of desubsidiarisation of BDA was virtually finalised. The plaintiffs had contended before the learned judge that in the case of another company, namely, Nagarjuna Fertilizers, which was a public limited company in which Shaw Wallace held merely some shares, the decision was to dispose of that investment, but, as far as BDA was concerned, that the mechanics was to make it a tie-up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has harboured certain apprehensions, which are reproduced verbatim, namely, "It creates doubt whether really such meeting happened or not... moreover about the name of Mr. Roy there is no mention Therefore, it is a suspicious document." Once again, I am required to repeat, as earlier, that no such case with regard to non-holding of the meeting, fabrication of minutes, non-attendance of Mr. Roy, etc., had been originally pleaded by the plaintiffs before the court and all these pleas which have been introduced for the first time at a subsequent stage are sought to be used as justification for confirming the original injunction order. While deciding this head, the learned judge has referred to an allegation from the plaintiffs' learned counsel that the shares were transferred at a price of Rs. 10 per share, that this constitutes gross undervaluation as the book value of the shares at that time was more than Rs. 50. This, again, was never the case of the plaintiffs when they first applied for the injunction and has once again been put forward as one of the several grounds to justify its continuance. The learned judge thereafter deals with the circumstances under which defendant No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set at rest because the original minutes of the meeting dated April 9, 1992, have been produced before me. I have scrutinised them and, to my mind, I find nothing suspicious with regard to the documents, nor is there any ground on which they can be called into question. Before parting with this head, however, I need to deal with two aspects of the matter concerning this crucial meeting which has been dealt with by the learned trial judge. The first of them is the contention put forward by Mr. Ramani that neither he nor Mr. A.K. Jain nor for that matter Mr. R.L. Jain, three of the directors of BDA whose resignations were accepted in the board meeting, received notice of the meeting. It is quite amazing as to how Mr. Ramani can depose about the non-receipt of the notice by the two Jains. A weak excuse has been made that the gentleman concerned were "far away" and that, therefore, their affidavit could not be filed. The implications of Mr. Ramani's charge are far-reaching in so far as it is contended that even if the meeting is supposed to have been held it is not a valid meeting as notice of the same was n6t served on three of the directors. The defendants have pointed out that these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notes that no such document is forthcoming and he relies on the affidavit of Mr. S.S. Sanyal, defendant No. 5, who points out that after January 27, 1992, the registered office of the company is at Bombay. Shri Manohar, learned counsel appearing on behalf of the appellants, has pointed out that this is a total misreading of the record. He has relied on the minutes of the board meeting dated March 9, 1992, of BDA wherein the decision to shift the registered office has been incorporated and it is only an intimation and no permission that is required to be sent to the Registrar of Companies. The conclusions arrived at by the learned trial judge in this regard are not only baseless, but they are too far-fetched and sweeping in so far as there is no justification for the. conclusion that the meeting dated April 9, 1992, had never taken place. Coming to the most crucial aspect of the judgment, namely, the justification for the grant of reliefs, the order of the learned judge proceeds on the basis of weird reasoning that I find it not only impossible to sustain but even difficult to comprehend the line of thought even after repeated reading. To start with, the entire approach is wrong. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vit along with annexures running into over 150 pages and then seeks to sustain a relief that was obtained on the basis of non-existent material, it is almost a situation of all accepted canons of law being thrown to the winds, The trend of this litigation, and in particular the plaintiffs' case, reminds me of the troublesome tapeworm that is said to have no head or tail and still keeps multiplying from the smallest bit. The main thrust of the attack of the plaintiffs is directed against defendant No. 3, who is the younger brother of the chairman of Shaw Wallace and as appears from the record has thereafter parted company. The learned judge, in passing , observes that it was contended before him that defendant No. 3 has misused his position as managing director of Shaw Wallace, that he has been guilty of misconduct in his official and fiduciary capacity, that he has acted in furtherance of his personal benefit. The learned trial judge suddenly flies off at a tangent and disapproves of the conduct and behaviour of Mr. Raju Dharmani, company secretary of Shaw Wallace, who is alleged to have locked his office room, never handed over the record and tendered the resignation and who is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this could never justify an application of the present type to the court that on these grounds the management and control of an independent limited company be handed over to the plaintiffs on; a platter. The position is far worse in law as far as the three brands are concerned because even if everything pleaded by the plaintiffs is true, it will have to be held that the plaintiffs have quantified their investments in the brands and on the basis of this assessment the consideration of Rs. 15,00,000 was paid to plaintiff No. 1 at the time of the agreement. The payment having been accepted, and the transaction having assumed all aspects of finality, the plaintiffs just cannot be heard and that too so late in the day, on a vague complaint that they had invested crores of rupees in these brands and that, therefore, they should be permitted to retain control of the manufacturing unit. Such a conclusion would be downright perverse. I must, at this stage, mention the submission canvassed by Shri Manohar on behalf of the appellants who pointed out that the policy of the plaintiffs was to get the products manufactured by BDA at the lowest possible cost and to thereafter market these product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked after by the plaintiffs and that there is no harm if the arrangements were to continue was totally and completely unjustified. The learned judge concludes his order with the statement that the balance of convenience is in favour of the plaintiffs and that no prejudice would be caused to the defendants if the relief prayed for were to be granted. Accordingly, the learned judge passed the following order : "1.Exhibits is allowed. 2.Defendants Nos. 3 to 7 are hereby restrained from interfering with the existing working and day to day affairs of defendants Nos. 1 and 2 which are managed by plaintiffs Nos. 1 and 2 as regards manufacturing, distribution, sale, marketing, working arrangements and operations of the bank accounts by any manner either by themselves or with any person acting under them in any manner except due process of law till further orders of the court. Even they1 are restrained from giving effect to the alleged circular issued by defendant No. 3 styling as a chairman, dated April 9, 1992, till further orders of the court. 3.Costs of this petition will be costs in the cause." I need to only record at this stage that regardless of whether the contentions canva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that certain ad interim orders and interim orders have been passed in that matter and that subsequently the same has been 'argued in detail and that the judgment is awaited. The fact that a challenge has been presented in some other proceeding is of limited relevance except to the extent that if a court of competent jurisdiction had passed orders in the matter on the merits, it would be an order of which this court would have to take cognizance since it is a decision on the merits on the same issues and between the same parties. The position that now emerges would be the reverse in so far as this court is called upon to decide the issues in question on the merits in the first instance which may inevitably have a bearing on the other proceedings. I categorise the situation as being curious because the plaintiffs in their affidavit-in-rejoinder have made out and built up a detailed case which they had never done in the first instance. The effect of doing this at a subsequent point of time on the question of bona fides and credibility apart, since it goes to the very root of the matter, the defendants, in turn, have met their case in defence squarely, both in the pleadings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were required to stop this from happening. He also contended that the problem was an unusual one in so far as it had never been expected that defendant No. 3, who is the real brother of the chairman of Shaw Wallace and who was holding the position of managing director of the group, would suddenly decide to declare war on Shaw Wallace and to spirit away its valuable assets. These arguments may be relevant to some extent while going into the question of the charge against defendant No. 3 with regard to breach of trust or breach of fiduciary obligations. They still do not answer the question as to how in this proceeding on the present record a composite relief of virtually handing over the administration and control of BDA could have been granted. To my mind, the irresistible conclusion is that the question is unanswerable and indefensible. Shri Manohar, learned counsel appearing on behalf of the appellants, alleged that the passing of the orders constituted a fraud on the court because the learned judge was led to believe that such orders were essential for a variety of reasons, including the welfare of the company, but that, more importantly, the plaintiffs owed a fundamental duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter because he contends that in this unfortunate dispute, defendant No. 3 is the main target with the charge being levelled against him that he single-handedly manipulated the transfer of the shares of BDA. Shri Manohar pointed out that one needs to look to the status of persons who formed the board of directors, the group executive council, etc., for purposes of establishing as to whether it is at all possible for one individual, even if he so desired, to have subjugated the collective intellects and to have got all these senior experienced knowledgeable people to act in a fraudulent and dishonest fashion. The second argument proceeds on the footing that there is a chain of actions spread over a period of time, all of which are documented and from which it unmistakably emerges that there is no justification for the charge against defendant No. 3. Towards this end, he points out from the record that a meeting of the group executive council of Shaw Wallace was held on August 27, 1989, which was about a year after BDA was acquired by Arunava Investments Ltd. This meeting was attended by 15 senior executives of Shaw Wallace, some of whom were A.S. Malik, T.S. Venkateswaran, J. Bha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting on April 3, 1990, was presided over by M.R. Chhabria and not defendant No. 3 and concluded by submitting that the learned trial judge has unfortunately mixed up the reference of Nagarjuna Fertilizers with the present transaction. To my mind, the sequence of events clearly discloses that for business economic and tax reasons, a collective decision was taken to sell out the interests that the Shaw Wallace group had in BDA. I would have thought it more appropriate to consciously use the word "sever" because nothing in the resolutions, minutes or notes would justify the conclusion that this was a "paper transaction" in order to overcome the Central excise difficulties and to get the liquor manufactured at a unit where the production costs' were very low or for that matter that it was decided to retain the umbilical cord of control and communication between the two. Had this intention been there, nothing would have prevented the records from indicating it. The omission is not an act of negligence but, on the other hand, is eloquent of the true complexion of the transaction, namely, that BDA, which was a small unit and in any event not doing well, was to be amputated completely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iffs' case, one would have expected an immediate and a strong re-action, the absence of which would establish that at this late stage, finding no other means of attacking the transfer, a virtually false ground is made out that Roy had not attended the meeting and that, therefore, the minutes and the resolutions are both bad. S. Roy of all people is not a stranger to this litigation and even if he had not done so earlier in April, 1992, when this very issue was challenged and was the central pivot of the litigation, he could never have omitted mentioning his absence at the meeting unless, as is more than evident, this story is pure concoction. There is another angle from which the defendants' case may be tested and which ultimately lends credibility to it. Pursuant to the resolution dated May 4, 1990, of Arunava Investments Co. Ltd. an application dated May 8, 1990, was drawn up addressed to the Central Government seeking permission for the transfer of the 25,000 equity shares of the first defendant-company and this application is signed by one Sadashivan, who admittedly was a director of Arunava Investments Co. Ltd. and was present in the meeting of May 4, 1990. It is too much to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The plaintiffs at least would be totally estopped from contending anything to the contrary and in the background of that record, the price of Rs. 10 per share can, under no circumstances, be regarded either as inadequate or improper. In relation to this transfer, apart from the charge that defendant No. 3 is alleged to have been instrumental, which conclusion does not emerge from the record, it needs to be pointed out that he was in no way concerned with the management and affairs of Arunava Investments Co. Ltd. except that it was on paper a subsidiary of Shaw Wallace. The record does not indicate that defendant No. 3 was a party to the important resolution dated May 4, 1990, nor is there anything on record to connect him with the application moved to the Central Government under section 30( c ) of the Monopolies and Restrictive Trade Practices Act, 1969. Admittedly, he is not a director of this company. A vague allegation has been levelled against defendant No. 3, which was one of the principal planks of Shri Venugopal's argument, that at all stages he has acted in breach of his fiduciary responsibilities as he was at the relevant time managing director of Shaw Wallace. On this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction, the necessary application would be made to the Department of Company Affairs for its deregistration under the Monopolies and Restrictive Trade Practices Act, and, more importantly, that BDA will cease to be a subsidiary of the group effective from the date of payment of the aforesaid shares is received by Arunava Investments Co. Ltd. This last recital demolishes the plaintiffs' case that the transfer regardless, BDA was to continue for all times within the Shaw Wallace group. The record indicates that the share money was received by Arunava on August 3, 1990, the date on which the shares were transferred to Intrust Securities and Investments Pvt. Ltd. and the legal effect of this transaction would be that on and from August 3, 1990, BDA stood desubsidiarised from Shaw Wallace. Unusual as it may seem, normally one expects the plaintiffs to establish their case in support of the relief claimed. Ironically, we have a situation whereby the plaintiffs have established nothing, the defendants have established their defence to the hilt and the tragedy of the situation is that the plaintiffs leave the court with almost a decree against the defendants. Obviously, something ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f that were so, and if it were a mere paper transaction or a camouflage for a working arrangement within the group, there would not have been the physical transfer of Rs. 15,00,000, which is a relatively large amount of money. What really clinches the issue is something else, namely, the wording of clause (7) of the deed of assignment, which contains a negative covenant to the effect that as and from that date the plaintiffs shall not use the trade marks in question. Quite apart from the time factor, namely, that the transaction was completed a good two years prior to the plaintiffs' raising the issue challenging the assignment for the first time before the court, one needs to necessarily examine the question as I shall presently do from a slightly different angle. The documentary evidence before me fully, completely and conclusively establishes that the assignment had taken place in February, 1991, that it was accompanied by the requisite sanctions such as board resolutions, etc., that it was duly registered and that it was for a lawful consideration and in these circumstances, there can be no going back from the finality of that transfer. The real clue to the dispute can be gau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the best of the brands that belonged to the Shaw Wallace group, I find that what has been attempted is exactly the opposite. Defendant No. 3, who has been attacked by the plaintiffs as being the villain of the piece, does not appear to have figured prominently anywhere in these transactions, nor do I find anything devious or improper that can be attributed to him. The complexion of these transactions unmistakably indicates that they are pure, simple, commercial transaction and that one cannot read in anything underhand in these matters. What literally sets the matter at rest, apart from the conduct of the plaintiffs who accepted the transaction for two long years before they woke up from their slumber is that there is unimpeachable, conclusive documentary evidence which establishes the correctness of the defendants' case on the one hand against an unsustainable, inconsistent and wholly oral challenge on the other. Obviously, the former will have to be upheld. We then come to the next set of transactions entered into between the plaintiffs and the first defendant which are dated April 1, 1991, the first being a marketing agreement between the plaintiffs and defendant No. 1 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart from the fact that they took all the liquor on credit which BDA just could not afford. The plaintiffs for their own convenience, therefore, offered the bank guarantee so that BDA could draw against it; whereas, in fact, the plaintiffs were the real beneficiaries and that the plaintiffs are attempting to make capital of the fact that they had provided the bank guarantee to the extent of Rs. 5,50,00,000 to the Central Bank of India for the loan facilities to be availed of by defendant No.1-company. This bank guarantee was furnished by virtue of resolution of the plaintiff-company dated April 26, 1991, which was subsequent to the entering into for the marketing agreement. Shri Manohar was quick to illustrate that there was no risk or liability whatsoever to the plaintiffs because they were fully secured by virtue of the huge liquidity, namely, the recoveries from the sale proceeds of everything manufactured by BDA and, more importantly, by the fact that the bank guarantee was only a reassurance to the Central Bank of India, but did not involve any risk to the plaintiffs because BDA was a running unit, the company possessed its own assets and the subsequent events do illustrate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the professional experience but the techniques and, more importantly, the various other inputs that went into the production of the quality control and every stage of production came from the plaintiffs. This last aspect was objected to by learned counsel on behalf of the defendants, who contended that the plaintiffs are not and never were a manufacturing unit and that, therefore, even if they sent some of their administrative staff it was impermissible to contend that every single input came from the plaintiffs. Shri Venugopal also contended that BDA has wrongly created the impression that the employees concerned had become the employees of defendant No.1-company and that it was wrong to contend that they were functioning as employees of the plaintiffs. The argument is a novel one in so far as Shri Venugopal submitted that, admittedly, they were employees of the plaintiffs prior to April1, 1991, and that they were not reappointed after their services were terminated by the plaintiffs. In substance, Shri Venugopal contends that these employees were only on deputation and that, therefore, since they were working physically for BDA, it was only natural that BDA had to pay their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinued, the staff and officers would have easily moved within the group and if they had been deputed from one company to the other, their salaries would have continued with the plaintiff-company as their status cannot be changed. But in this instance the payment of their salaries by PDA is the strongest evidence to support the view that since BDA was no longer a part of the Shaw Wallace group but had assumed the status of an outsider that it was specifically provided that they would have to take over the staff which they, in fact, did. To my mind, before a conclusion can be reached that the management and the control of BDA effectively vested in the plaintiffs, it will have to be demonstrated that all matters of administration, policy and decision making and the day-to-day working were under the supervision and control of the plaintiffs. We are in the present instance concerned with two corporate entities and there is nothing from the record before me to indicate that BDA did not have a board of its own and, furthermore, that the board of the plaintiffs was, in fact, administering BDA. Unless this can be demonstrated, which has not been done in spite of voluminous material being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what according to me was the real background for the institution of the present suit. The plaintiffs have adopted a sanctimonious approach whereby they have made out that defendant No. 3, through his actions on April 9, 1992, virtually left the plaintiffs with no option except to 6eek legal redress and in this context what is, in fact, pleaded is that this was an attempt to upset the existing arrangement that then existed. Having regard to the volume of material suppressed from the trial court at that stage, it was not difficult for the plaintiffs to project the image that they were the aggrieved parties, taking maximum advantage of the fact that BDA originally was one of the Shaw Wallace companies and the trial court was made to believe that the old situation, in fact, prevailed and was sought to be unjustifiably disturbed. Undoubtedly, if this was true, the defendants would be put in the wrong box and it was on the basis of such a projection that the ad interim orders were obtained. An interesting document, and a very important one, is the letter of resignation submitted by BDA's officers dated April 1, 1992. I shall have occasion to deal with this document subsequently, but suff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of law had to be tendered as at the annual general meeting of Shaw Wallace in keeping with the provisions of the Companies Act, appending therewith the balance-sheet of its subsidiaries. Shri Manohar made capital out of the fact that the name of defendant No. 1-company had been removed from the list of subsidiaries of Shaw Wallace in this balance-sheet and in the balance-sheet of Arunava Investments Co. Ltd., the shareholding of BDA Ltd. as well as one more company, Vinedale Ltd., which are to be found as on March 31, 1990, have been deleted as on March 31, 1991. These balance-sheets have been signed by the chairman of the group, Shri M.R. Chhabria, and the same applies to the report. Under the statutory provisions of the Companies Act, the balance-sheet has to be signed at least by two directors and has to be approved at the annual general meeting. In this case, these requirements have been fulfilled. The inevitable consequence that emerges from this record is that the general body of the shareholders of both, Arunava Investments Co. Ltd. as well as Shaw Wallace, had the knowledge of desubsidiarisation of defendant No. 1-company from Shaw Wallace. Short of the present challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe did appear in the records that it was not surprising and that it was only on April 9, 1992, with a sense of sudden shock, that the plaintiffs and everybody else in Shaw Wallace realised what the implications were. I find it impossible to even take a charitable view of what has happened in this case because there is no manner of doubt that it is not a few stray facts or documents that have been kept back from the trial court, but I find after the three-week hearing of this proceeding from day to day that virtually everything that mattered and everything that was of necessity was absent from the plaint. I refuse to accept that this was because of exigencies of time or that it happened accidentally. These are facts that Stare one in the face, and if any of this material was placed before the trial court at the earliest point of time, it would have been impossible for the plaintiffs to have obtained the ad interim order. In these circumstances, the one and only conclusion is that the material was deliberately suppressed. I need to add that it was not the ethical consideration of being fair with the court which is on a higher plane that I am concerned with, but I need to take a ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Narayan Chetiyar v. Official Assignee, AIR 1944 PC 93 ( sic ) , the position .has been quite unambiguous, namely, that where a fraud or breach of trust are alleged as in a criminal trial, the charge will have to set out full, complete and specific particulars in the form of facts, dates, incidents and allegations and that there can be no compromise with regard to this requirement. Shri Manohar submitted that even in the case of an allegation of fraud or misconduct relating to a director, the party making the charge and who is in possession of the particulars of the fraud is obliged under Order 6, rule 4 of the Code of Civil Procedure, 1908, to set out the full particulars of such objective facts. It is impermissible to get away with, mere vague allegations in the plaint. It is true that Shri Venugopal accepted that there is no quarrel with regard to the requirements of law, but he maintains that in a case of the present type where the broad particulars have been averred, that the details were a question of subsequent evidence and substantiation and he contended that the plaintiffs have placed on record voluminous records from which the plaintiffs are in a position to completel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bar that defendants Nos. 1 and 3 are being subjected to litigation in different forums on the same record that is before this court and that, therefore, in order that judicial time be saved, this court should apply its mind, hear both the parties and decide the issue once and for all. That briefly is why this lengthy exercise became necessary. That the plaintiffs have miserably failed to substantiate the charge against defendant No. 3 would be putting it mildly. It is now necessary for me to deal with another unusual aspect of this case which concerns the exercise on the part of the plaintiffs in disputing the minutes of the meeting of its subsidiary Arunava Investments Co. Ltd. dated May 4, 1990, as also disputing the minutes of the board meeting of BDA dated March 9, 1992, and April 9, 1992. At the very outset, I found it rather unusual that a challenge of considerable seriousness was levelled on these Counts even though there were no pleadings in the plaint to that effect. What was really surprising was that as far as the minutes dated May 4, 1990, relating to Arunava Investments Co. Ltd. are concerned, not only had a period of two years elapsed but, more importantly, the vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut to the plaintiffs' learned counsel. A careful examination of this book completely satisfied me that there was no justification for the adverse findings recorded by the learned trial judge in respect of these minutes. The appellants' learned counsel pointed out to me that the learned trial judge seems to have been swayed by trivialities and in the process has overlooked the basic substance. The original minutes book resolves the controversy completely, it inspires complete confidence and, therefore, does not require detailed re-examination of that aspect of the case. Two aspects to which I have made a brief reference earlier require to be disposed of at this stage, the first of them being the case of the defendants that the three persons who ceased to be directors of BDA had orally expressed their desire to resign. Shri Venugopal contended that this is unthinkable in a corporate set-up and that not only was the plea a false one but that it justified the charge of the plaintiffs that it was a clever ploy to get over the absence of the three directors when defendant No. 3 took several crucial decisions. Shri Manohar countered the arguments by pointing out that there is no prohibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance-sheet has the signatures of the chairman of Shaw Wallace and its directors and the same is the position as far as Arunava Investments Co. Ltd. is concerned. The legal implication that flows from such a situation is that a presumption arises on the basis of the material that all concerned, including the shareholders to whom the balance-sheet was despatched, were in the knowledge of the fact of desubsidiarisation of defendant No. 1-company. I do not need -to deal with the judicial decisions cited by learned counsel at length because the legal position is unambiguous, but as regards this aspect of the matter, Shri Venugopal met the argument from an entirely different angle. He reiterated that the transactions did, in fact, take place, but that in the background pointed out by him, it must be accepted by the court that the act of severance was for business and tax reasons with the full understanding of all the parties that it was only for record purposes and not intended to be given effect to or acted upon. Shri Venugopal's argument, therefore, proceeds on the lines that these facts cannot be construed as admissions, but only reflect the transactions which were not of any co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laintiffs in so far as it establishes the falsity of the contentions put forward by them. I need to observe that in the rather involved and furious battle that this litigation has created, a large number of documents have come on record. The learned trial judge has been critical with regard to many of the documents produced by the defendants, the ostensible reason being that these documents are either documents of the plaintiffs or of the Shaw Wallace group to which they are parties and thus have conscious knowledge. As I have had occasion to indicate earlier, these documents ought to have been produced by the plaintiffs themselves along with the plaint if they were serious about a full, candid, faithful and fair disclosure to the court. What is surprising is that the authenticity, probity and genuineness of these documents is not disputed by the plaintiffs, nor for that matter is the question of their relevance. The learned trial judge has been unjustifiably critical of the conduct of the company secretary, Rajiv Dharmani, which, to my mind, was unnecessary in so far as it would virtually amount to putting a premium on deliberate suppression of documents from the court. The posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as it amounted to a sale of undertaking without a resolution of the general body of Arunava. When Shri Manohar on behalf of the appellants took up this point, Shri Venugopal, learned counsel on behalf of the plaintiffs, stated that the contention and challenge under this head was not being pressed by the plaintiffs. I, therefore, do not need to consider it. The next major head of controversy centres around the question as to whether at all BDA as a company could have been severed from the Shaw Wallace group since a petition under section 391/394 of the Companies Act for the amalgamation of Arunava Investments Co. Ltd. with Shaw Wallace was proposed and the scheme was pending approval of the court. The factual position is that the scheme of amalgamation of 14 companies, including Arunava Investments Co. Ltd. with Shaw Wallace, is set out at page 32 of the paper-book, and the scheme provides for the appointed date, namely, July 1, 1988, and the effective date, meaning the date on which the scheme becomes effective in accordance with clause (1) of the scheme. Clause 1 in terms provides that the scheme is subject to the conditions and upon the five conditions provided in claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of his argument that if the court refuses to set its seal to the scheme of amalgamation, the arrangement would fall to the ground and it is, therefore, the sanction of the court which gives life to it. Learned counsel also pointed out to me that even an order of the court does not have retrospective operation to enable a claim that the scheme has been in operation from the date anterior to the date of the scheme. Also, in support of his contention that this head of challenge is groundless, Shri Manohar pointed out to me that as against the shareholding worth Rs. 2,50,000 of BDA, that Arunava Investments Co. Ltd. had transferred a shareholding of an amount of Rs. 55,50,000 held by it in Vinedale Distilleries Ltd. and no grievance had been made by Shaw Wallace in respect of transfer of this holding. A scrutiny of the present record does indicate that there is no material produced in support of any such challenge. Shri Venugopal, learned counsel representing the respondents, did seriously urge that the pendency of the scheme of amalgamation would prescribe a complete bar to any form of alienation while the scheme is pending, the principal reason being that according to learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finality. If this is its legal status, then it necessarily follows that the proposals contained therein are not of a binding character, but are essentially fluid and flexible. Apart from other aspects of the issue which I have referred to earlier, in the ultimate analysis, before the transfer can be questioned on grounds of legality or permissibility, a specific legal prohibition will have to be pointed out. The terms of the present scheme of amalgamation viewed at from any angle do not provide any such prohibition and, therefore, the transfer in question cannot be struck down on this ground. Having held that the transfer does not suffer from any infirmity, one needs to devote some time to the examination of the next argument canvassed by Shri Venugopal, which is to the effect that it was only an ostensible transfer or, in other words, that it was a sham transaction. To summarise, it was supposed to have been done in order to get out of and avoid the provisions of the Monopolies and Restrictive Trade Practices Act to avail of taking facilities which were otherwise not available or, to put it very candidly, to jump over various legal provisions. I have earlier pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been done. He advanced before me an argument which is one of considerable substance and requires to be upheld. I had occasion to observe earlier that in sum and substance, the learned trial judge had handed over the management and control of BDA to the plaintiffs. Shri Manohar pointed out to me that this would virtually invest the plaintiffs with the status of a managing agent as defined in section 2(25) of the Companies Act. Section 324A of the Companies Act abolishes the concept of managing agency and under section 294, the appointment of sole selling agents has been prohibited. The relief granted, therefore, would be tantamount to appointing the plaintiffs as the managing agents of BDA and would be in complete violation of law. Admittedly, defendant No. 1-company has only one manufacturing unit at Aurangabad and the order of the trial court would, therefore, comprehensively mean that the entire company is under the total dominion and control of the plaintiffs. It is very unfortunate that the effect and consequences of such orders are not taken into account and that such an order came to be passed. The situation becomes all the worse when one finds that in spite of everythin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary for a brief reference to be made in this judgment to the contents of that civil application. The effort of the respondents was to admit additional evidence and annexed to the application were extracts of affidavits of defendant No. 3, K.R. Chhabria, in a litigation pending at Calcutta and before the Supreme Court and annexure No. 3 consisted of a list of documents without setting out any copies thereof. As far as the application itself is concerned, for the reasons set out by me in the order separately passed, I have held that, in the first instance, this application is an obvious afterthought filed with the sole purpose of delaying the disposal of the present appeal, that the copies of affidavits sought to be relied upon have been reduced to extracts and none of the so-called documents, which are supposed to be additional evidence, are even certified copies. The technicalities apart, in the overall interest of justice and particularly in a litigation of the present type, where several issues are being decided, I would have overlooked technicalities if the application were bona fide , if it was justified and if it would assist the fair disposal of this appeal. Where it was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judicial time of another court if the angles canvassed are to be left undecided. It is true that certain limited references have been made in the affidavit of Shri S. Roy, which came to be filed as late as on April 28, 1992, when the matter was being heard, but what needs to be noted is that the statements made therein are not supported by what was later contended before me at the Bar during the oral arguments. In order to test the validity or otherwise of the charge levelled against defendant No. 3, which would have a bearing on the larger issue, I have scrutinised everything that has come before this court which has been done in spite of the absence of the pleadings in order to look at the material, if any, that even if it had gone by default, when the suit was originally filed, could be of assistance to the plaintiffs. Admittedly, the shareholding of BDA was transferred in favour of Intrust Securities and Investments Co. Ltd., but I also find that the third defendant and his family members had no concern with this company. It is not alleged in the plaint nor is there any document on record to show that Intrust was a nominee devised or designed by defendant No. 3. This is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted even from the affidavit of Mr. S. Roy that even on August 2, 1990, when the shareholding was actually transferred, the current liabilities of BDA were Rs. 3,31,00,000 as is clear from page 130 of the paper-book. In practical terms, therefore, the company which was acquired in September, 1988, with current liabilities of Rs. 55,00,000 was being sold on August 2, 1990, when the liabilities had mounted to Rs. 3,31,00,000. It is in this background that Shri Venugopal's charge that the company has been "hijacked" for an amount of Rs. 2,50,000 will have to be not only examined but straightaway discarded. The valuation of the shares, which is normally worked out on the basis of the assets and liabilities, was done so by the board of Arunava Investments Co. Ltd. on the basis of the balance-sheet, which was available to them for the year 1988-89 ending March 31, 1989. If one traces the relevant date for purposes of the price as May 4, 1990, when it was resolved to dispose of the shareholding at face value, the balance-sheet of BDA for the year 1989-90 was not available. In terms of the decision reported in 100 CLR 447, at page 456, the directors would be acting diligently and correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave dealt, in passing, with certain references and features pertaining to the Companies Act, but it is necessary to deal specially with the provisions relating to subsidiaries because that is one of the main planks of challenge in this litigation. Under section 212 of the Companies Act, particulars of the subsidiaries are required to be furnished and attached to the balance-sheet of the holding company and such particulars are to be signed by the persons by whom the balance-sheet of the holding company is to be signed. Under section 215 of the Companies Act, every balance-sheet is to be signed by not less than two directors and the manager and the secretary. It does not require to be emphasised that these are responsible officers and persons holding positions of some status. It is also a requirement that the balance-sheet in question is required to be approved by the board of directors before filing. Section 220 of the Companies Act requires laying of the accounts before the general body and in pursuance of these provisions, the balance-sheet of Arunava Investments Co. Ltd. for the year ended March 31, 1991, was approved by the general body on June 24, 1991, which revealed the disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat defendant No. 3 only by virtue of the position which he occupied fully and completely dominated everything that was happening in Shaw Wallace and, frankly, that there was never any opportunity for Mr. M.R. Chhabria to so much as worry about, leave alone suspect, what he was up to. In these circumstances, Shri Venugopal contends that defendant No. 3 was instrumental in getting the decision to alienate BDA passed through the requisite channels without personally involving himself because the various executives were virtually all under his control. Shri Venugopal also contended that the court will have to take cognizance of the fact that even if many of these persons had smelt a rat and did not like what they were being asked to do, they had virtually no option and dared not go against the managing director of the group, who happened to be the chairman's own brother. He, therefore, submitted that this court would have to adopt the unusual approach of disregarding the fact that all procedures right up to the Government approval are apparently beyond question and would have to review the entire transaction in this background. Shri Venugopal thereafter proceeded to enumerate before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a very complete and thorough appraisal of the record, that the charges levelled, in particular those directed against defendant No. 3, are not only unjustified but are false. The parallel allegations relate to the adequacy of consideration in respect of the three brands of IMFL products and that the entire transaction is liable to be struck down. Once again, it is my painful task to record that there are no pleadings in the entire plaint except a reference to an agreement of assignment and even that is so hopelessly inadequate that it does not even mention the deed for the assignment thereof. In the course of arguments before me, capital was made of the total consideration being only Rs. 15,00,000, and Shri Venugopal devoted considerable time towards supporting this charge. He demonstrated to me, through various references, that the three brands were virtually market leaders and that the turnover in respect of these three brands ran into not only lakhs but into crores of rupees. Even though there is no pleading to that effect, Shri Venugopal contended that these brands were virtually conceived, promoted and propagated until they reached the top of the ladder on which exercise al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y were introduced in the market a couple of months later around December, 1988. It was on April 24, 1990, which was within hardly a year, that the plaintiffs had resolved to assign the labels to BDA for a consideration fixed at Rs. 15,00,000. Shri Manohar has objected' very strongly to the manner in which the plaintiffs have glossed over one very important fact, namely, that the figures themselves would indicate that these brands did not catch on like wild fire, that the turnover was relatively small to start with and that it took considerable amount of effort before they received public acceptance and began to do well. Shri Manohar illustrates this by pointing out that one would have to draw the line at about March/April, 1990, and that it is true that in the subsequent period, these brands not only did well, but that the sales virtually galloped. In retrospect, by April, 1992, when the present dispute arose, undoubtedly, the plaintiffs or Shaw Wallace must have regretted having disposed of them because they were doing extremely well. What we are concerned here is with the status and performance of these brands in the pre-April, 1990, period during which time there was absolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate level. If this was so, the plaintiffs would never have put in a negative covenant extinguishing any right on their part in the brands. In the same breath, a composite attack is levelled against the main transaction where the plaintiffs have virtually gone for the jugular, which incidentally is quite inconsistent with their earlier plea, contending in the alternate that the transaction itself should be struck down. On the figures placed before me, at the point of time when the evaluation was done and having regard to the totality of circumstances, it is crystal-clear that the plaintiffs willingly and voluntarily disposed of the three brands for a price which they themselves fixed and which they obviously considered to be adequate. The challenge, technicalities apart, is, therefore, wholly and completely devoid of any merit. I need to mention, in passing, that Shri Manohar pointed out to the court that the plaintiffs have not done any act of charity to the defendants because the plea with regard to the expenses spent on promotion is utterly false and hollow. He stated that the expenses mentioned by the plaintiffs had been incurred on account of BDA from out of the sale proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phold at all times the interests, particularly financial, of the concerned companies is accepted. I, however, consider it wholly irrelevant to take cognizance of the relationship between the two brothers because, to my mind, that has little to do with legal responsibilities. If defendant No. 3 has misused his position or if he has been guilty of breach of fiduciary duty, merely because he is the chairman's younger brother would not in the least bit come to his assistance before a court of law. Also, the argument that senior executives and directors would join hands with him in sabotaging the interest of the company of the magnitude of Shaw Wallace is to my mind, far-fetched and in any event this charge is unjustified on an examination of the present record. The plaintiffs contend that it was defendant No. 3 who was responsible for the alienation of BDA shares by Arunava Investments Co. Ltd. I have discussed the transactions in some detail and have recorded the finding that this was not so. The plaintiffs further allege that defendant No. 3 was responsible for the price at which the shares were transferred, the material in support of this charge has been examined by me and I have re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is outside the original set of pleadings will be ignored. I have been virtually prevented from adopting that procedure because the trial court permitted the scope of the dispute to be enlarged and magnified and based its decision on that material. Also, it has been pointed out to me repeatedly that there is a host of litigations between the same parties effectively where all these issues have, in fact, been canvassed and that, therefore, this court must not refuse to give its decision on all points. The interest of justice would require that a total adjudication of the entire matter is the right and correct course rather than a piecemeal one and it is certainly not in the interest of judicial time that there should be multiple hearings before different courts. This is precisely the reason why in spite of strong pleas from Shri Manohar who did of course also deal with the merits of each point since he had to contend with the judgment of the lower court, that I have to give my findings on the merits in respect of each issue. As indicated earlier, in the circumstances of this case, I refuse to avoid deciding the issue or bypassing it on to another forum. The examination of what is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of by the learned judge who was possibly misled by the fact that after BDA ceased to be a subsidiary in view of the past association, there was no immediate sudden change in the management structure, but the important difference in law was that they were no longer nominees of Shaw Wallace. This is more than adequately established from the affidavit of Shri S. Roy dated April 28, 1992, where, in paragraph (15), he states that since the desubsidiarisation, the share capital of BDA increased and this had to be done by a resolution of the board of directors who took the decision in question regarding the allocation. It is significant that no additional shares were issued and allotted either to Shaw Wallace or to any of its allied companies, but the allotment was made to different persons with which Shaw Wallace had no concern. Shri Venugopal did advance the argument before me that regardless of the transactions concerning the shares and assignment of the brands, de facto BDA was managed and controlled by Shaw Wallace personnel and that this was the principal reason why the ad interim and interim orders came to be passed. It is his argument that the validity of the other transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at page 375 wherein the signature of the factory manager, who incidentally is plaintiff No. 2, appears at serial No. 1 shows that he is resigning from the service of BDA. I do not need to emphasise that he could resign from service only if he was an employee of BDA. Shri Manohar went on to state that this document would indicate something else of importance, namely, the fact that in the course of this unfortunate dispute, the loyalties of many of the employees have shifted and that was the principal reason why the third defendant was required to take the steps which he did on April 9, 1992, which were necessary for the proper administration of BDA since some of the employees had crossed the floor. Another head that was relied upon by the plaintiffs and which Shri Venugopal did emphasise was that there is considerable amount of equipment in the possession of BDA, which has been provided for by Shaw Wallace. He stated that this is conclusive proof of the fact that the character of BDA was that of being one of the group companies which had never been challenged and that was the reason why Shaw Wallace had provided it with such assistance. He also stated that this equipment remained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages, there is not one scrap of paper that can support this view. Shri Manohar advanced a strong plea at the conclusion of his arguments, as he had done in the beginning, that immediate interference by the appellate court is essential in the present case. He submitted that after three weeks of day-to-day hearings and of a threadbare examination of the record, it will be more than evident to this court that the trial court has ignored the three basic requirements, namely, the existence of a prima facie case, the balance of convenience and the aspect of irreparable injury which governs the grounds for the grant of a discretionary order. Shri Manohar contended that this has been done in blatant disregard and violation of the basic norms and that the trial court has acted unreasonably and capriciously that it has ignored material and facts on record and has arrived at perverse and unsustainable findings. He stated that painful as it may seem, the two orders whereby the total management and control of the company has been handed over to the plaintiffs and the lawfully empowered authorities of the company have been bound hand and foot are even worse than a final decree and that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable office premises, giving bank guarantees, etc. In fact, the bank guarantee was given on April 29, 1991 (at page 247). ( iii )In March, 1989 (see exhibit 10, at page 261, volume 1), the board of directors of Arunava approved a scheme of amalgamation of Arunava with Shaw Wallace with the purpose that "the business of Arunava could become integrated with that of Shaw Wallace and the company's investment would be rationalised by their being held by a single company, namely, Shaw Wallace." Under the scheme, the business of Arunava was to vest in with effect from July 1, 1988, i.e. , the appointed date. ( iv )In March, 1989 (see exhibit 10, at page 259, volume 1), the board of directors of Shaw Wallace approved such a scheme. ( v )On March 29, 1989, applications filed by Arunava and Shaw Wallace in the High Court at Calcutta for directions regarding holding of meeting of the shareholders to consider the scheme of amalgamation. The High Court directed the holding of the meeting (pages 282 to 328, volume 1). ( vi )In May, 1989 (see exhibit 10, at pages 262-263 of volume 1), the shareholders of Arunava and Shaw Wallace approved the scheme of amalgamation as required by law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting arrangements with regard to the management and control of the affairs of defendant No. 2 continued to subsist. ( xv )In fact, a general power of attorney was given to Mr. Shovan Roy as far back as in December, 1990, by BDA, was not terminated or revoked, on the contrary Shri Shovan Roy continued to exercise the powers conferred thereby ( pages 131 and 132 of the plaintiff's affidavit-in-rejoinder). ( xvi )In April/May, 1991, further liabilities were incurred by the plaintiff by giving a corporate guarantee for Rs. 5.50 lakhs (see pages 260-261 and pages 244-251 of volume 1). ( xvii )Even subsequent to the desubsidiarisation, the board of directors of BDA consisted of nominees appointed by Shaw Wallace and/ or the plaintiff (see page 127 of volume 1). ( xviii )Defendant No. 3 continued to be a managing director of Shaw Wallace as well as director of the plaintiff-company. At the same time, defendant No. 3 has illegally claimed the control of the affairs of BDA (see para 15 at page 135 of volume 1 and para 16, pages 553-554 of the judgment) and wants to engage in business in competition with the Shaw Wallace group. ( xix )For the first time on April 9/10, 1392, an at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the chief executive and Mr. S.K. Sinha, the factory manager, and others were reporting to the Delhi office of Cruickshank where Mr. S. Roy, the vice-president of the Shaw Wallace group, was functioning. All sanctions were being taken from Mr. S. Roy. ( iii )A general power of attorney dated December 26, 1990, was executed by BDA Breweries and Distilleries Ltd. in favour of S. Roy which continued to remain in force until April, 1992, without any interference whatsoever (cancelled on April 19, 1992). ( iv )Cruickshank provided a corporate guarantee in the sum of Rs. 5,50,00,000 for credit facilities sanctioned to BDA Breweries by the Central Bank of India. This guarantee was given in April-May, 1991, i.e. , after the desubsidiarisatiori. ( v )The principal employees working at the factory of BDA Breweries and Distilleries Ltd. were those deputed/assigned/seconded by Shaw Wallace group. These include technical people, such as the factory manager, the blender, etc. ( vi )The essences, specification, the blending formula developed by Shaw Wallace group continued to be used by BDA. ( vii )The registered office of BDA Breweries has been at all relevant times situated within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... getting over various legal provisions or contributions by way of taxes to the State and its exchequer. One can scarcely look for a more absurd argument. As regards the question of breach of fiduciary duties by defendant No. 3, Shri Vehugopal summarised the position under the following heads : ( a )It is obvious from the facts stated above that defendant No. 3 has abused his powers as a managing director of Shaw Wallace and as a director of the plaintiff-company and has committed the gravest breach of his fiduciary duties as a trustee of the shareholders of Shaw Wallace and the plaintiffs by acquiring the control of the company which was a substantial asset and/or one of the undertakings of the Shaw Wallace group at a throw-away price and that too without disclosing his interest therein. ( b )The breach of fiduciary duties on the part of defendant No. 3 is two-fold, namely, ( i ) by acquiring control over BDA on the erroneous footing that there was an intended outright sale of shares of the under taking of BDA, and ( ii ) by converting BDA into a competitor of Shaw Wallace and the plaintiff whilst holding charge as a managing director of Shaw Wallace and a director of plainti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavit dated May 10, 1992, of defendant No. 3 filed in the Calcutta High Court) and also (see arguments advanced on behalf of the defendants before the trial judge listed at para 16 of the judgment dated May 5, 1992, pages 553 and 554). ( e )In this connection, the allegations made in the plaint filed by BDA Limited, declared on June 7, 1992, in the Bombay City Civil Court, to the effect that BDA limited along with the various other companies forms part of "Kishore Chhabria Group of Companies" is also extremely relevant (see para 6 of the plaint filed in B.C.C. Suit No. 4421 of 1992). I am firmly of the view, after hearing learned counsel for both sides, that there is more of a personality clash than substance in this head of charge and that is the reason why voluminous case-law was cited in support of the contention that the conduct of defendant No. 3 is unpardonable. It is unnecessary for me to repeat the findings that I have recorded earlier except to observe that my approach to the matter has been totally dispassionate and to decide the controversy strictly in keeping with the accepted principles of law that a court has to observe. That defendant No. 3 has been relentles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of company law but the veil has been pierced in many cases." The law with regard to the lifting of the corporate veil as laid down by the Hon'ble Supreme Court is expressly applicable and has been applied in the case of holding and subsidiary companies, particularly where the facts requires the court to assess "the business realities" and where the facts would disclose that the subsidiary company was in substance though not in law of partnership between the holding company and its subsidiaries. ( b )Similar is the position in England which would be revealed by the statement of the law as set out in Palmer's Company Law, 24th edition, para. 18-23, sub-paras 12, 14 and 16 at pages 218 to 220. ( c )In this behalf, it would not be out of place to refer to the law with regard to the role of a managing director/director, the duties cast upon him and the position enjoyed by him qua the shareholders of the company of which he is a director/managing director. ( d )The law in this behalf is found eloquently stated in paragraph 63-13 at page 943 of Palmer's Company Law as also in the ratio of the case decided by the House of Lords in the case of Regal ( Hastings ) Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... My short comment with regard to all these legal niceties is that this case and at the present stage requires to be decided exclusively on the facts, which is why I have consciously avoided extensive references to case law. I see no camouflage or ambiguity nor do I need to go into any involved research for purposes of deciding on the status of BDA, which originally was a subsidiary of Shaw Wallace and thereafter ceased to be one, both factually and legally, which is why it needs to be treated as a wholly-independent corporate entity. Apart from what has been pointed out by me earlier, Shri Venugopal advanced certain contentions with regard to the board meetings dated May 4, 1990, March 9, 1992, and April 9, 1992, which I am recounting : (1)In order to support the allegation that the meeting of the board of directors of Arunava was purportedly held on May 4, 1990, and that the meeting of the board of directors of BDA was purportedly held on March 9, 1992, reliance was placed by the appellants upon the provisions of section 195 of the Companies Act as also upon the ratio of the judgments of the Bombay High court in ( i ) F.A.C. Rebello v. Co-operative Navigation and Trading C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1907] 2 Ch 370. As would be clear from a plain reading of section 195 of the Companies Act, the presumption contained therein would be applicable only where the minutes of the proceedings of the "meeting of the board of directors have been kept in accordance with the provisions of section 193." The burden of proving that the minutes of the meeting have been kept in accordance with the provisions of section 199(3) rests upon the party which is seeking to place reliance upon such minutes. It is only when this burden is discharged that the burden of proving "to the contrary" is shifted to the other party. Section 193 sets out the manner in which the mitiutes of the proceedings of board and other meetings are required to be kept. (5)As regards the purported resignations of Mr. R.L. Jain, Mr. A.K. Jain and Mr. R. Ramani from the board of BDA, it is pertinent to note that the same is alleged to be oral. No particulars of the day, date, time and place and to whom and by whom the purported oral request was made are forthcoming. Furthermore, Mr. P.R. Pandya, who acted as the chairman of the purported meeting, reportedly held on March 9, 1992, has not filed any affidavit in these proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be equally null and void. (9)In the circumstances, defendant No. 3 would also have no authority to issue the purported circular dated April 9/10, 1992 (see page 19, volume 1). Shri Venugopal also advanced a contention in law that the sale of shares of BDA was illegal under section 30B of the Monopolies and Restrictive Trade Practices Act and what he contended was as follows : ( i )The purported transfer of shares held by Arunava in BDA is also in violation of section 30B of the Monopolies and Restrictive Trade Practices Act. The argument that by reason of a letter addressed by Shri Sadashivam (page 421, volume 2), in which it is alleged that section 30B is not applicable, the said section is inapplicable is an untenable contention. The provisions of section 30B are mandatory. There can be no estoppel against a provision contained in a statute. If the provision of section 30B are attracted, the same cannot be nullified by any letter addressed by Arunava to the contrary. ( ii )The argument that section 30B is applicable only to cases where the shares of a private company, which is subsidiary of public company, are acquired by a company "under the same management" is a cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basic premise on which the argument is founded is absolutely wrong the learned trial judge, if he had gone through the exercise required of him, could never have passed the orders in question. ( ii )The trial court in granting the injunction had also acted within the four-corners of law inasmuch as the present case being a clear case of breach of trust and fiduciary duties by directors who are constructive trustees is a case where compensation in monetary terms cannot afford adequate relief and would clearly be governed by the exception contained in section 41( h ) of the Specific Relief Act. The reply to this is that sadly enough, the court has not assessed the more important aspect, namely, the havoc caused by the passing of the order. I have had occasion to deal with this at the end of the judgment. I have had occasion to refer more than once to the charge levelled against defendant No. 3, which alleges that he has been guilty of impropriety which is defined as breach of fiduciary duties during the period when he was managing director/director and Shri Venugopal has repeatedly adverted to this aspect of the matter because, according to him, the entire case hinges on this. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir case that the transactions right up to the process of delinking were done on the grounds of business and trade and financial considerations alone. Shri Venugopal's argument completely overlooks the fact that it is the plaintiffs' own case that the entire production of. BDA was being marketed by them, that they had no manufacturing unit of their own and that, consequently, they were heavily dependent on BDA as far as the sales were concerned and, according to them, the I.M.F.L. was one of the main products of the Shaw Wallace group ; though I found it a little difficult to comprehend, all these involved business intentions. Shri Venugopal repeatedly told me that there was also the intention of generating "internal competition between various brands, etc." This kind of shadow-boxing was apparently the name of the game. If I were to, therefore, proceed on the basis of this logic and thought process of Shri Venugopal's clients, I would assume that it would be beneficial rather than detrimental for the plaintiffs and the Shaw Wallace group if, even after it had become an independent entity, a person connected with the Shaw Wallace group were to head the management and control of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 19. The protection of article 19 is available only to a citizen. The Supreme Court earlier held in State Trading Corporation of India Ltd. v. CTO [1963] 33 Comp Cas 1057 ; AIR 1963 S.C 1811, that a company and corporate body is not a citizen. In order to overcome the decision of the Supreme Court, a petition came to be filed by the company and some of the shareholders. It was argued that the shareholders are the real beneficial owners and, therefore, they are entitled to complain in a case of violation of article 19 (paragraphs 6, 23 to 27). The Supreme Court reiterated the principles of a company being equal to a natural person and having a legal entity of its own following the judgment in A Saloman v. A Saloman and Co. Ltd. [1897] AC 22 (HL). The Supreme Court after categorising the cases where the doctrine of lifting the veil applied, overruled and rejected the arguments of the shareholders for lifting the corporate veil. ( iv ) Heavy Engineering Mazdoor Union v. State of Bihar [1969] 39 Comp Cas 905 ; AIR 1970 SC 82. The question was whether the company is carried on under the authority of the Central Government within the meaning of section 2( a ), 2( g ) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and, therefore, it was not necessary to lift the corporate veil (paras. 6 and 7). ( ix ) CIT v. Associated Clothiers Ltd., AIR 1963 Cal 629. There were two companies, A and B, having identical set of directors. The entire shareholding, of company, B, was owned by company, A. Company B's property was transferred to company, A. It was contended that the transfer was self to self and, therefore, there was no liability to pay tax. The company's claim was that they are actually one and the same person and, therefore, the corporate veil should be lifted and, Therefore, they are not liable to pay tax. The court refused to lift the corporate veil. The High Court, after laying down the broad category of cases for lifting the corporate veil, observed that this is generally permitted when the statute gives a lead in that respect and not otherwise (paragraphs 9, 10, 11, 16, 17, 21 and 22). ( x ) State of U.P. v. Renusagar Power Co. [1991] 70 Comp Cas 127 (SC). Hindustan Aluminium Corporation (Hindalco) is a statutory corporation having its factory in U.P. Renusagar Power Company is a wholly-owned 100 per cent. subsidiary of Hindalco. Renusagar Power Company is producing elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred to by the Supreme Court cannot be read out of context. In all the cases the court was considering the effect of cases of fully-owned subsidiaries. The respondents are simply picking up some sentences from these observations and saying that the facts of the present case are on par with the facts of those cases and, therefore, the corporate veil should be lifted. This is only an attempt to mislead this court and nothing else. The entire discussion in Renusagar's case [1991] 70 Comp Cas 127 (SC) is about lifting of the corporate veil between a holding company and a subsidiary company It is an undisputed fact that BDA has been desubsidiarised and is no longer a subsidiary of Arunava Investments Ltd. and, consequently, there does not exist any "holding company-subsidiary company" relationship between the plaintiff company and the defendant-company. In each and every case, there existed a "holding company-subsidiary company" relationship between the two companies. ( xi )Further, in this case, the party which was involved and concerned in the desubsidiarisation and has taken advantage of desubsidiarisation, now comes before the court and submits to the court to ignore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed and that the orders of the trial court are set aside. I have set out in this judgment the salient and the material areas that fall for determination with reference to the relevant parts of the record and that which is of crucial importance. Undoubtedly, this is a hotly contested litigation and quite apart from the documents and pleadings the written submissions and compilations of cases run into several thousand pages. The conclusions that emerge ultimately are as follows : ( a )That the record establishes that the BDA shares were trans ferred to Intrust and that this constituted the entire holding of Arunava as far as BDA was concerned, which was done for a valuable consideration. The entire transaction right from the requisite procedure up to the Government approval is a valid and binding transaction, which has assumed finality. The legal implications and the immediate fall-out of this situation is that BDA as a company has assumed independent status and it, there fore, cannot be subjugated or managed or controlled by any outside agency other than its own board of directors and the power of taking all decisions in respect of its working also vested in the general body and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ad-interim order was obtained and that this was highly improper. The word "improper" is, in fact, a gross understatement, the conduct of the plaintiffs bristles with mala fide s. Regardless of the plaintiffs' conduct, the record before the court at that time could never justify an ex parte injunction order let alone the type of order that was passed. That order is atrocious and the plaintiffs cannot be permitted to get away with the damage that has resulted, more so considering the fact that they have ensured at all stages that the order continued for as long as possible, which was a matter to their benefit and to the detriment of the defendants. A party who obtains interim relief from a court in these circumstances cannot be absolved of the responsibility and would, therefore, be liable to compensate the plaintiffs for the entire loss that has occurred. Shri Manohar, in the course of the hearings, demonstrated in actual terms how staggering these figures are, but it will still be essential for the heads to be quantified. The defendants may, if they so desire, quantify the loss/damage and apply to this court separately for the award of such compensation. Having examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of taking over the company. This was the real reason for instituting the proceedings in Aurangabad and, to my mind, when at the beginning of April 1992, BDA was faced with a plot of this type, there was no option left except to take immediate corrective steps. It was the virtual conspiracy between the executives of BDA who were ex-Cruickshank/Shaw Wallace to enact the drama of resigning en bloc and to collectively sign the letter dated April 1, 1992, that made it absolutely necessary for defendant No. 3 to issue the 9th April circular. It was inevitable when a situation of this type emerged for defendant No. 3 to take necessary measures for the survival of the company and to keep it running and to offset the act of treachery that had been instigated. A mere reading of the letter dated April 1, 1992, leaves no doubt in my mind that this was the carefully-planned step which was the forerunner to the court proceedings and it was used in order to hijack the unit and achieve a coup in conspiracy with the executives. That the so-called resignations were not only inspired but were part of a plot is as clear as daylight and the action that followed from the plaintiffs in misusing the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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