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TMI Blog2011 (6) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... they failed to disclose their interest in terms of section 299. - RFA (OS) NO. 45 OF 2009, CM NO. 7043 OF 2009 - - - Dated:- 3-6-2011 - MS. GITA MITTAL AND J.R. MIDHA, JJ. Vijay Jhanji, G.K. Mishra and P.N. Singh for the Petitioner. Vikas Dhawan, Abhimanyu Mahajan, Vaibhav Kumar and Virender Goswami for the Respondent. JUDGMENT Ms. Gita Mittal, J - The present appeal lays a challenge to an order dated 17th February, 2009 whereby the learned Single Judge has held that the suit filed by the plaintiffs is not maintainable being frivolous and dismissed the same with costs of Rs. 50,000/- to be paid to the defendants equally. 2. The facts giving rise to the suit are in a narrow compass. CS (OS) No.1944/2003 was filed on or about 10th November, 2003 by the appellants seeking the following prayers:- "( a ) Issue an order of permanent injunction in favour of the Plaintiffs and against the Defendants herein restraining the Defendants from acting upon the Board Resolution dated 12/01/02. ( b ) issue an order of permanent injunction restraining the Defendants 2-4 from dispossessing the Plaintiffs from the said premises. ( c ) issue an order of permanen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal reads, as follows:- " Present :- 1. Shri Hansraj Gupta 2. Shri Shivraj Gupta 3. Shri R.K. Gupta 4. Shri M.K. Gupta ** ** ** 3. Resolved as a special resolution to take on lease rent the premises known as No.3, Ratendone Road, New Delhi from M/s Hansraj Gupta Sons at Ajmeri Gate, Delhi at a rental at Rs. 495/- (Rs. 450/- per month rent plus Rs. 45/- PM or as may be revised by the Municipal Corporation from time to time as House Tax) with effect from 1.3.74 as the company require for the residence of its officers, staff and guests etc. In this connection a draft lease agreement prepared was placed before the meeting and the terms and conditions mentioned therein were approved and confirmed. 4. Resolved a special resolution to allot the premises No.3, Ratendone Road, New Delhi to Sh. Hansraj Gupta, Director and Chairman of the company or to any other officer, as the Board may determine from time to time free of costs Charges for residence purpose. The premises 3 Ratendone shall be maintained by the company at its cost and rent, House Tax, Electricity, water charges, Telephone facility, while washing, repairs, sanitary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed. 3. Properties :- The properties not being utilized by the company were discussed. The matter was differed to give some more thought on what to do with such properties. 4. Kohlu Division:- The current estimate of this year hiring is about Rs. 85 lacs (eighty five Lacs), Though this is higher than Rs. 64 Lacs (Sixty four Lacs) in the previous year, it is still not satisfactory and the company is not likely to make much profit from this scale of operation. The company is in the process of rationalizing the cost of operations to increase the profit margin of hiring. 5. Preference shares:- Resolved that Mr Mahendra Gupta is authorized to take steps to redeem the preference shares of Rs. 2 Lacs (Two lacs) and pay the divided payable thereon from 1987 to 31.3.2001 of approximately Rs. 1,35,000/- 6. Payment of capital gains:- (Kosi Property). Resolved that Mr. Mahendra Gupta be and are hereby authorized to make investment in 250 Bond of Rs. 10,000/- each bond of Rs. 25,00,000/- (Rs. Twenty Five Lacs) only in rural Electrification Corporation Ltd, for the purpose of 54EC of the Income Tax Act. He is also authorized to sign necessary forms and other documents to apply for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest in the property being co-parceners of the HUF which is the owner thereof and as directors of the company. As such they were bound to disclose their interest in view of Section 299 of the Companies Act, 1956 which these respondents failed to do so. It has been further averred that in passing the resolution, the respondents were acting to further their own interest and were misusing their authority as directors to cause injury to the interest of the appellants/plaintiffs as well as the company. It has been submitted that the company was holding leasehold rights in the said property at a notional rent of Rs. 495/- per month amounting to only Rs. 5940/- per annum which does not cause any financial burden on respondent no.1 and that the retention of the premises was in the financial interest of the company. 14. It is noteworthy that when the suit came up for the first time for hearing on 12th November, 2003, the following order was passed by the learned Single Judge:- "The short question for consideration is whether the suit is maintainable. Let a short notice be issued to the defendants for hearing on 18.11.2003." 15. The matter remained pending for consideration on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Resolution and the approval of the shareholders is necessary. Sd/- Chairman 27.2.1974" The appellants cannot and do not deny knowledge of this resolution. 20. The entire narration of the factual position with regard to the ownership of the property and the interest of all the directors including that of the present respondents as well as that of the appellant no.2, is thus contained in the resolution and the background note to this resolution whereby the lease was created in favour of the company. The meeting was attended by and the resolution dated 27th February, 1974 was passed in the presence of respondent no.2, respondent no.3, respondent no.4 and chaired by Lala Hasraj Gupta as Chairperson. The challenge in the instant appeal can be summed up as follows :- ( i ) Whether the resolution passed by the board of directors of the company incorporated under the provisions of the Companies Act can be voided on the sole ground that the directors did not re-disclose personal interest in a contract or arrangement which was discussed in the meeting even though admittedly such disclosure in the previous meetings was on record? ( ii ) Whether persons having no right, tit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the plaint and the background note thereto reproduced above contains sufficient disclosure of the interest of all directors in the subject property. This resolution was very much a part of the record of the company available to all. 27. The information of the interest held by the directors in the subject matter of the resolution was admittedly available in the aforesaid background note and the resolution dated 27th February, 1974. 28. The appellant no. 1 was also the CEO of the company since 25th of August, 1981 and would be expected to know the affairs of the company. Admittedly, the company was paying rent to the owners of the property and the appellants were residing therein with late Lala Hansraj Gupta. All the directors of the company were therefore fully aware of the ownership of the property and the interest of the appellant no. 2 and the respondents therein. For this reason, reiteration of the information already on the record of the company or repetition of the disclosure in the format of a formal disclosure as used in Section 299 of the Companies Act, 1956 was clearly in the nature of an empty formality. This is more so as, other than the demise of Lala Hansr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the resolution dated 21st June, 2002. 36. We are noticing this fact for the sole reason that Mr. Jhanji, learned senior counsel for the appellants has contended that the appellants have challenged the resolution dated 21st June, 2002 as well by way of an additional affidavit which was filed in the proceedings in the suit. Perusal of this affidavit, which also has been dated 24th February, 2004, would show that the same has been filed as an after thought when the appellants realised that the respondents would disclose the second resolution in defence of the suit. 37. The filing of the affidavit dated the 24th of February, 2004 cannot supply the concealment of the material fact in the plaint that the appellant no.1 had been a party to the meeting of the board of directors of 21st June, 2002 in which the minutes of the meeting of the board of directors of 12th January, 2002 were confirmed. No explanation for this material omission in the plaint could be suggested before this court. 38. We also notice that the affidavit dated 24th February, 2004 refers to mere oral objections in the meeting held on 21st June, 2002 without anything more. These bald assertions in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company, it had to be by a specific resolution of the board of directors. 46. As per the assailed resolution, Shri Hans Raj Gupta unfortunately expired on 3rd July, 1985. Other than the permissive residence and occupation as members of the family of Late Lala Hansraj Gupta during his lifetime, the appellants do not plead any authorisation by the company to support their occupation. There is also no document to support the same. The appellants do not assert any plea of payment of rent or any use and occupation charges by them, to the owner of the premises. The appellants have stated that appellant no.1 was appointed as the Chief Executive Officer of respondent no.1-company during the lifetime of Late Lala Hansraj Gupta. It is not appellants' claim in the plaint that allotment of the premises has ever made in his favour by the company. 47. We also find that upon demise of Late Lala Hans Raj Gupta, his widow Smt. Angira Devi continued to reside in the premises besides the appellants. Shri Ravi Raj Gupta-appellant no.1 is the son of Shri Desh Raj Gupta and was so residing with him. 48. It is well settled so far as a suit is concerned, its filing and maintainability h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution dated 9th October, 2000, the appellant no.1 has no relationship with the company of any kind. The legality of this resolution would of course be decided in the other litigation which has been initiated by the appellant no.1. Nothing herein said is an expression of opinion on this aspect of the matter. 55. The decision making by a Board of Directors of a company incorporated under the provisions of the Companies Act, 1956 is necessarily to be concerned with furthering the interest of the company and not of any individual director. For the same reason, no director can compel a company to take any particular decision on the sole ground that his interest would stand protected thereby. 56. The appellants cannot take the shelter of the lease which was created by the HUF in favour of the company and its permission to the Chairperson of the company to occupy the same, in order to perpetuate their occupation which admittedly is not even authorised or permitted by or on behalf of the company. There can be no manner of doubt at all that the suit was motivated by pure self interest without any concerns of the property or interest of the company. 57. The contours within which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s doing from 1968 upto 1976. The net result of all this has been that despite lapse of nearly 30 years since filing of the eviction petition, respondent no. 1 was unable to recover the possession and that is despite the respondent no. 1 having succeeded up to High Court in the eviction case nearly a quarter century ago. For the aforesaid reasons we dismiss the appeal with costs. 13. It is distressing to note that many unscrupulous litigants in order to circumvent orders of Courts adopt dubious ways and take recourse to ingenious methods including filing of fraudulent litigation to defeat the orders of Courts. Such tendency deserves to be taken serious notices of and curbed by passing appropriate orders and issuing necessary directions including imposition of exemplary costs. As noticed, despite eviction order having become final nearly a quarter century ago, respondent no. 1 still could not enjoy the benefit of the said order and get possession because of the filing of the present suit by the brother of the person who had suffered the eviction order. Under these circumstances, we quantify the costs payable by the appellant to respondent no. 1 at Rs. 25,000/-" 62. In this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g fraud on the court. A fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. Jagannath was working as a clerk with Chunilal Sowcar. He purchased the property in the court auction on behalf of Chunilal Sowcar. He had, on his own volition, executed the registered release deed (Exhibit B-1S) in favour of Chunilal Sowcar regarding the property in dispute. He knew that the appellants had paid the total decretal amount to his master Chunilal Sowcar. Without disclosing all these facts, he filed the suit for the partition of the property on the ground that he had purchased the property on his own behalf and not on behalf of Chunilal Sowcar. Non-production and even non-mentioning of the release deed at the trial tantamounts to playing fraud on the court. We do not agree with the observations of the High Court that the appellants-defendants could have easily produced the certified registered copy of Exhibit B-15 and non-suited the plaintiff. A litigant, who approaches the court, is bound to produce all the documents executed by h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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