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TMI Blog2006 (10) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... ressive to the petitioners. Durga Builders (P.) Ltd. was impleaded as respondent No. 6 in said company petition. 4. R.K. Nanda, his wife, Promila Nanda, their friends Ram Gopal Sharma and his wife, Ms. Shakuntala Devi Sharma, are the common respondents in the two petitions. 5. Rival versions of the parties, as per pleadings in CP 54/2005 and CP 59/2005, have been pithily culled out by the CLB in the order impugned. I note the said rival versions as extracted by the CLB. Following has been noted by the CLB : "1. Insofar as CP 59 of 2005, (Rajdhani Builders) is concerned, the allegations of the petitioners are : The company is engaged in the business of development of land for building purposes. In June 1992, Haryana Government granted a licence to the company for setting up residential colony in district Faridabad in respect of 84.54 acres. The authorised and paid-up capital of the company is Rs. 5 lakhs divided into 5,000 equity shares of Rs. 100. Out of 5,000 shares, the 2nd respondent held 2,500 shares and the 3rd respondent 2,300 shares, balance shares were held by 8 other shareholders at 25 shares each. The petitioners and the 2nd and 3rd respondents entered into an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company. With these allegations, the petitioners have sought for rectification of the register of members of the company by inserting the name of the 1st petitioner as shareholder in respect of the impugned 2,500 shares and also the name of the 2nd petitioner in respect of 2,300 shares impugned in the petition. They have also sought for removing 2nd and 3rd respondents and appointment of 1st and 2nd petitioners of their nominees as directors. They have also sought for a declaration that the purported transfer of the licence in favour of the 6th respondent be declared as null and void . 3. Insofar as CP No. 54 of 2005 (Durga Builders) is concerned, the allegations of the petitioners are : This company, is engaged in the business of development of land for purposes of building colonies. The authorised capital of the company is Rs. 10 lakhs divided into 1 lakh equity shares of Rs. 10 each and the issued and paid-up capital consists of 28,500 equity shares of Rs. 10 each. The 2nd respondent held 1,45,000 equity shares and the 3rd respondent held 14,000 shares. : By an agreement dated 19-5-1997, the 1st petitioner acquired the shares held by the 2nd respondent for a conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es through the Deputy Commissioner of Police, Economic Offences Wing to various investors. As a matter of fact, the petitioners themselves have moved an application before Delhi High Court stating that the agreement is time-barred. The petitioners were never interested in the company, and as such, it is wrong on their part to contend that because the company was in bad shape, they did not take over the control of the company. The agreement dated 19-5-1997 was purportedly entered into among the 1st and 2nd petitioners, on Class Sales (P.) Ltd., respondents 2 and 3; admittedly, the said agreement was not signed by the 2nd petitioner and anyone on behalf of Class Sales (P.) Ltd. Therefore, the said agreement is no agreement in the eyes of law. Originally, the petitioners were interested in purchasing 50 plots of 505 sq. yds. for a total consideration of Rs. 2.5 crores to be funded through their various sister concerns. With a view to grab the company through the 2nd respondent for taking over the entire assets and liabilities of the company. Thereafter, the 1st petitioner as a director of the company started issuing various cheques on behalf of the company. Class Sales (P.) Ltd. also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, a few more facts need to be noted. 8. Foundation of the dispute projected under both petitions were two agreements dated 19-5-1997. 9. Pertaining to Durga Builders (P.) Ltd., agreement dated 19-5-1997 executed between R.K. Nanda and his wife (sellers) and the Mehras, including their company Class Sales (P.) Ltd. and True Value Trade Link (P.) Ltd. (buyers) records that the sellers hold 28,500 fully paid-up equity shares of Rs. 10 in Durga Builders (P.) Ltd. That, for a total sale consideration of Rs. 8.55 lakhs, said shares were being sold to the buyers. Thus, price per share came to Rs. 30. The sale consideration is recorded as having been received. It is recorded that the sellers shall resign as directors of the company and, henceforth, would have no right, title or interest in the company. 10. Simultaneously, on 19-5-1997, a Board resolution was passed by the Nandas in which Mehras joined as special invitees. The resolution passed is as under : "Resolved that Smt. Seema Mehra, w/o Shri Arun Mehra, r/o A-74, New Friends Colony, New Delhi, be and is hereby appointed as director on the Board of the company with immediate effect. Resolved that Mr. Arun Mehr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chairperson of all the Board meetings of the company in future. It was further discussed and resolved that the bank operations of the company be henceforth conducted by the new directors only and the bankers be informed of the same forthwith. The bankers should be supplied with the copies of the following resolutions, cancelling the earlier authorisation of signatories for the operations of the bank accounts, except the post-dated refund issued for which a list is to be submitted to the concerned banks and empowering henceforth Mr. Arun Mehra, director and to operate the same. Shri R.K. Nanda informed the Board that in order to consolidate and expand the activities of the company, an executive director be taken on the Board. Hence it was unanimously decided that, Shri S.K. Gauba, General Manager of the company be taken on the Board as ED. Shri S.K. Gauba be appointed ED of the company and be authorised to deal with the banks, and sign cheques up to a limit of rupees ten thousand only. Shri R.K. Nanda placed before the Board, certain share certificates and duly stamped completed and signed transfer deeds, for transfer of the same in the name of transferee mentioned therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had a licence to develop a residential colony in Faridabad (Haryana). Over booking was done. Cases of cheating were registered against the Nandas. 13. Admitted position between the parties is that Mehras did not function as directors of the two companies. No intimation was furnished to the Registrar of Companies regarding change in the constitution of the Board of directors of the two companies. Pursuant to the two agreements and the Board resolutions, information as per Form 32 was not submitted. 14. What happened till the year 2004 is not known. But, in the year 2004, a civil suit registered as Suit No. 961/2004 was filed by the Nandas seeking declaration, permanent injunction and damages. Mehras were the defendants. 15. In the suit, Nandas stated that, somewhere, in the year 1995, Mehras approached them holding that they were directors of Class Sales (P.) Ltd. They wanted to purchase 50 plots in the colony being developed by Durga Builders (P.) Ltd. Colony being called Edenburg City. That Mehras stated that they would make payment through two companies, Hindustan Commercial Investment Trust Ltd. and MGF Ltd., stated to be sister concerns of Class Sales (P.) Ltd. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit and proper." 16. Since the CLB has non-suited the Mehras on their pleadings in the written statement filed in Suit No. 961/2004, it would be important to reproduce relevant parts of the written statement in verbatim. 17. Stating facts as a prelude to the agreement dated 19-5-1997, Mehras pleaded as under : "2-4. That the contents of paragraph Nos. 2, 3 and 4 of the suit are wrong and denied. In the present case the plaintiff-company in the year 1992-93 had awarded the works of development of Satellite Town Phase-1, Okhla Enclave, Faridabad for a value of approximately Rs. 12.22 crores to CE Construction Ltd. company of defendant No. 1. The correspondence in this regard annexed along with the list of documents so as to certify that initially, the dealings between the plaintiff-company and the answering defendants executed the works in respect of the development of the Satellite Township at Faridabad. As such the dealings between the plaintiff-company and the answering defendants started in the year 1992-93 and not in 1995 as alleged in the corresponding paragraph of the plaint. It is denied that Class Sales (P.) Ltd. were ever interested in purchasing any lots from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said failures on part of the plaintiff, the defendants did not take any precipitative action as the real intention behind executing the said agreement was to safeguard/protect the various pending payments towards execution of works and loans which had been advanced by the defendants and its group companies in favour of the plaintiff. It is, therefore, submitted that the entire contention raised by the plaintiff in the present para under reply dealing with the agreement dated 19-5-1997 are incorrect, afterthought, mischievous and contrary to the provisions of the said agreement itself and contemporaneous understanding between the parties. Insofar as the averments made in the present para under reply dealing with MGF Ltd. is concerned, the defendants are aware that loans were advanced by the said company in favour of the plaintiff-company. Apart from that the defendants are only aware that a suit has been filed by the said MGF Ltd. seeking for closure and sale of the properties of the plaintiff duly mortgaged by the plaintiff with the said MGF Ltd. as the plaintiff had failed to repay the loan granted to them by MGF Ltd. To the best knowledge of the defendants, the said suit is pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plaintiffs to use the present suit for some collateral purpose : which cannot be permitted. Significantly, Mr. R.K. Nanda is permanent director of Durga Builders as per article and memorandum of association." 20. Arguing Company Appeal No. 8 of 2006, which pertains to Rajdhani Housing Syndicate (P.) Ltd., Shri Parag Tripathi, learned senior counsel, urged that pleadings in the Suit No. 961/2004 related to Durga Builders (P.) Ltd. and, therefore, the CLB gravely erred in disposing of CP 59/2005 by placing reliance on the pleadings in the said suit. 21. In addition to the aforesaid plea, other pleas raised were common to the pleas raised by Shri Aman Lekhi, learned senior counsel, who appeared in Company Appeal No. 7 of 2006 pertaining to Durga Builders (P.) Ltd. 22. Learned senior counsel, Shri Parag Tripathi and Shri Aman Lekhi, "urged that factum of the agreements dated 19-5-1997 was not in dispute. That Board resolutions were passed on 19-5-1997 was also not in dispute. It was urged that, as held in the report published as Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 3 SCC 333, a conduct which lacks in probity and is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that each day gave rise to a fresh cause of action as long as shares were not transferred in the name of Mehras and Mehras were not put in control of the two companies. 25. Questioning the finding of the CLB that Nandas have incurred expenses of nearly Rs. 25 crores in settling claims of third parties post-1997, learned senior counsel stated that the finding was an ipse dixit finding of the CLB. Counsel urged that best evidence was the books of account of the two companies, which were not produced. Citing Hiralal v. Badkulal AIR 1953 SC 225, counsel urged that, where a party in possession of documentary evidence withholds the same, adverse presumption needs to be drawn against the party that had documentary evidence [having] been produced, contents would have gone against the said party. 26. Counsel urged that the order of the CLB failed to note investment of Rs. 10 crores made by Mehras in the companies, as a consequence, counsel urged that equities were not fairly considered by the CLB. 27. Citing the decisions in Vijay Krishan Jaidka v. Jaidka Motor Co. Ltd. [1996] 6 CLA 289 1 (CLB - Delhi); R.R. Rajendra Menon (No. 2) v. Cochin Stock Exchange Ltd. [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by Vishesh Jain and no signatures of three parties on the agreement, at that, noting that nothing turns thereon. 34. Shri Sharad Aggarwal, learned counsel for the Nandas, urged that complete averments were made as to why agreement dated 19-5-1997 were bogus agreements. Counsel urged that the CLB rightly opined that, in view of the civil suit filed, i.e ., Suit No. 961/2004, where the issue raised was whether the agreements dated 19-5-1997 are void, no relief ought to be granted. Counsel further urged that as pleaded by Mehras in their written statement, Mehras themselves pleaded that the two agreements were to secure investments made by Mehras through their companies in the project of Durga Builders (P.) Ltd. and Rajdhani Housing Syndicate Ltd. Rs. 10 crores, stated to have been invested by Mehras was disputed by Shri Sharad Aggarwal. Alternatively, counsel stated that the said investment was a business investment by the companies of Mehras in the project of Durga Builders and Rajdhani Housing Syndicate Ltd. Counsel urged that the investment was not post-1995-97. Counsel urged that the project Edenburg City was a composite project where land of Durga Builders, Rajdhani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while pleading that the agreements dated 19-5-1997 are bogus, Nandas have not elaborated with clarity as to what facts are relied upon to establish that the two agreements are bogus, but pleadings have to be read meaningfully and with an intention to find whether the opposite party has meaningfully understood the case pleaded. 43. I need not elaborate further for the reason that in the written statement filed in Suit No. 961/2004, Mehras themselves have pleaded that the agreements were to secure the investments by them in the project of the two companies. 44. It is a careless use of words, by the counsel, who drafted the pleadings on behalf of the Nandas. What is intended to be conveyed is that there was a distinct oral understanding between the parties that the two agreements would not be given effect to and were actually intended to secure investments by Mehras in the project of the two companies. 45. Conduct of the parties shows that having got the share certificates, duly endorsed in their favour, by not taking any steps to control the two companies, Mehras intended to retain lien over the shares to secure their investments made in the two companies. 46. Acquie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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