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TMI Blog2013 (5) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... CLB with the following directions. The CLB will appoint a Local Commissioner to ascertain, in a time bound manner, as to who is in possession of the properties of NHEL and submit a comprehensive report (ii) The fee of the Local Commissioner will be shared equally by the Appellants and Respondents 2 to 4. The CLB will appoint an accredited valuer to value the shares of NHEL for current market value of the assets. The valuer so appointed will submit a valuation report within the time stipulated by the CLB. On the basis of the valuation report, the CLB will proceed to issue further directions for payments by Respondents 2 to 4 for the shareholding of the Appellants. Based on the report of the Local Commissioner to be submitted before the CLB in a time bound manner, the CLB will issue further directions as regards the possession of the property and assets of NHEL. The appeal is disposed of in the above terms with costs of Rs. 10,000 which shall be paid by Respondents 2 to 4 to the Appellants within a period of 4 weeks. - CO. A (SB) No. 18 of 2008 - - - Dated:- 5-3-2013 - S. Muralidhar, J. For the Appellant Krishna Kumar and Kaustubh Shukla. For the Respondent Sanjay Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs.10 each of NHEL. 25,950 shares were held by Mrs. Suhag Rani, the mother of the Appellant 1 and Respondents 3 and 4. 22,600 shares were held by Respondent 2 Mr. Vidya Prakash Mehra as Karta of the Hindu Undivided Family ('HUF') comprising of himself and his sons. The other shareholders included Mr. Nagesh Kumar who holds 27,750 shares, Mrs. Renu Mehra who holds 13,190 shares, Mr. Ravinder Kumar who holds 25,750 shares, Mr. Rakesh Kumar who holds 30,100 shares, Mrs. Charu Mehra, Respondent 5 and wife of Mr. Ravinder Kumar, who holds 15,189 shares and Mrs. Sudha Mehra, Respondent 6 and wife of Mr. Rakesh Kumar, who holds 10,840 shares. In terms of the annual return filed by NHEL with the Registrar of Companies ('ROC'), Mrs. Shammi Sobti holds 17,290 shares and Mr. Om Prakash Khanna holds 50 shares. 4. It is stated that on account of differences between the parties, a Memorandum of Understanding ('MoU') was entered into on 10th April 1993 between Mr. Vidya Prakash Mehra Respondent 2 (referred to in the MoU as party of the First part), Mr. Ravinder Kumar Respondent 3 (referred to in the MoU as party of the Second part), Appellant 1 Mr. Nagesh Kumar, (referred to in the MoU as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd resolution dated 9th January 2006. Proceedings in the CLB 8. On 11th October 2006 Appellants 1 and 2 filed Company Petition No. 97 of 2006 in the CLB under Sections 397 and 398 of the Act alleging oppression and mismanagement. On 12th October 2006, the CLB appointed a Bench Officer to authenticate the members' register, minutes of the board and general meetings, the fixed assets register and the dispatch and attendance registers of NHEL. Respondent 2 was directed by the Bench Officer by an order dated 12th October 2006 to produce the statutory records of NHEL. 9. The Appellants state that when the Bench Officer visited the registered office of NHEL at Greater Kailash on 19th October 2006 he found that no books of accounts were maintained. This is denied by the Respondents. 10. On 5th December 2006, the Appellants filed an application being CA No. 446 of 2006 before the CLB. On the same day, a direction was issued by the CLB permitting the Appellants to furnish a list of documents that they desired to inspect in the records of NHEL. The Appellants state that the aforementioned orders dated 12th October 2006 and 5th December 2006 were disregarded by the Respondents. The Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts for the years 2003-04 and 2004-05 also remained uncontroverted. (f) The Appellants had themselves restricted their prayers to the determining of their share holding to 27.106% instead of 20.47% that is instead of the admitted 40940 shares, their shareholding should increase by a further 13137 shares i.e. totaling 54077 shares (13137 shares being 1/4th of the total share holding of late Mrs. Suhag Rani and 1/4th of the total share holding of the HUF held by Mr. Vidya Prakash Mehra). (g) The Appellants had further restricted their prayers to the valuation of their shareholding to enable them to exit NHEL as they were not willing to continue with the Respondents. 12. It was held that the claim of the Appellants for a 1/4th share of the holding of Mrs. Suhag Rani and Mr. Vidya Prakash Mehra as Karta could not be adjudicated in the petition before the CLB. Therefore only the admitted share holding of 40940 shares amounting to 20.47% of the total shareholding of NHEL could be said to be validly held by the Appellants. 13. In conclusion the CLB held as under: "that to end the matters complained of directing the petitioners to go out of the R-1 company on receipt of fair valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution of the disputes. Accordingly, the appellant and respondent nos.2, 3 4 are directed to appear before the Delhi High Court Mediation Centre on 30th July, 2008 at 3:00 p.m. to explore the possibility of an amicable resolution of the disputes. List on 3rd November, 2008. Dasti." 15. It was reported to the Court on 13th August 2009 that no settlement was possible. Interim orders were continued till further orders. 16. At a subsequent stage, the parties again sought adjournments stating that since they were closely related they were hopeful of an amicable settlement. Ultimately, it was informed to the Court on 11th October 2012 that if no settlement is possible by the next date, the matter would be heard on merit. The final arguments were heard on 10th January 2013 and 22nd January 2013. Submissions of counsel for the Appellants 17. The submission of Mr. Krishna Kumar, learned counsel for the Appellants, is that once the CLB had come to the conclusion that there was no defence by the Respondents to the charge of oppression and mismanagement, the CLB was bound to put an end to the matter complained of by passing an appropriate order under Sections 397 and 398 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween themselves. Reference is made to Suit No.459 dated 28th August 2007 filed by Respondent No.2 in the Court of the Civil Judge/Judicial Magistrate, Ludhiana, where he admitted that the property is acquired by the firm and belonged to the three brothers. 20. Fourthly, it is submitted that the finding that the Appellants had approved the balance sheet as on 31st March 2006 was based on no evidence whatsoever. Further, the balance sheet was not signed by the Appellants. Reference is made to the decisions in Hemant Kumar Rohatgi v. South Delhi Maternity Nursing Home (P.) Ltd., Vinod Kumar v. Sigmalon Equipment (P.) Ltd. [2005] 62 SCL 332 (Bom.) and Dale Carrington Invt. (P) Ltd. v. P.K. Prathapan [2004] 54 SCL 601 (SC). It is accordingly prayed that Respondents 2 to 4 should be debarred from being directors of NHEL and the board should be reconstituted with the Appellants being part of it. 21. In the written submissions filed by the Appellants, an alternative prayer is made as under: "c. Without prejudice to the Prayers above, the Appellants may be permitted to leave the Respondent Company by disposing of its shares, and for the value of the shares, the Appellants may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch question of law. It is submitted that the Appellants are inviting the Court to interfere on pure questions of facts. Reliance is placed on the decisions in V. Krishnan v. Westfort Hi Tech Hospital Ltd. [2008] 3 SCC 363, Scottish Cooperative Wholesale Society Ltd. v. Meyer 1958 3 All E.R. 66 (HL), Cosmosteels (P.) Ltd. v. Jai Ram Das Gupta [1978] 1 SCC 215, A. Mylsamy v. Sri Gajendra Paper and Boards (P.) Ltd., Alibante Developments Ltd. v. Matheran Realty (P.) Ltd. [2011] 168 Comp. Cas. 437 (CLB) and Chatterjee Petrochem India (P.) Ltd. v. Haldia Petrochemicals Ltd.. 26. On merits learned counsel for the Respondents reiterates the submissions made before the CLB. According to him the occasion for the Respondents to make payment in terms of the impugned order never arose since the Appellants challenged it in this Court and the appeal was pending ever since. The Appellants never demanded enforcement of the impugned order. It is submitted that the limited prayer of the Appellants having been granted by the CLB, there was no room for any grievance on that score and the impugned order called for no interference. Scope of the proceedings under Section 10F of the Act 27. One of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f NHEL remained uncontroverted. 31. However, the Court finds no ground to interfere with the CLB's rejection of the Appellants' prayer for a higher percentage of shareholding. The question whether on the death of Mrs. Suhag Rani, who died in 2000 leaving behind a will, the Appellants would be entitled to any share therein or in the 22,600 equity shares held by Respondent 2 as Karta of the HUF could not have been examined by the CLB. 32. On the question of relief, while the Appellants did restrict their prayers to determine their shareholding as 27.106% instead of 20.47%, the CLB failed to explain how it arrived at the fair market value of the shares held by the Appellants as Rs. 706.73 per share. The consequence of the payment not being made by the Respondents was also not spelt out. Thirdly, without a factual determination that the Appellants were in actual physical possession of the assets of NHEL, an order directing them to restore to NHEL possession of such property could not have been issued. 33. The Appellants are justified in contending that the Respondents cannot now insist the impugned order being implemented. The Respondents have not made the slightest effort to com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny sound financial and accounting principles. The remedy provided by the CLB has thus been rendered illusory. 37. As pointed out by the Bombay High Court in Vinod Kumar (supra), the valuation report has to be prepared in a just and fair manner by an independent valuer. This exercise should have been ordered by the CLB. The decisions relied upon by the Respondents i.e., in Cosmosteels (P.) Ltd. (supra) Wholesale Society Ltd. (supra) and A. Mylsamy case (supra), are distinguishable on facts. In none of the said cases was oppression alleged and found on facts. In the present case the CLB has effectively ruled that acts of oppression were committed by the Respondent. In the circumstances, given the limited prayer sought by the Appellants, the CLB ought to have required the Respondents to pay the fair market value for the shares held by the Appellants. This had to be done by a proper examination of the value of the assets of the company. Given the manner in which the operative portion of the impugned order has been framed by the CLB, it is no longer just, equitable or legally valid to require it to be implemented as such. 38. In their written submissions, the Appellants have now sou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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