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TMI Blog2013 (8) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... registers to the petitioners - Held that:- From the correspondence it was seen that there was no clear intention of the respondents to provide inspection of the documents to the petitioner - it was directed the company to provide the inspection of registers and records to the petitioners in accordance with law - The petitioners were also entitled to the notices for the board and general meetings as per the articles of association and the law - It was an admitted fact that the petitioners are 50 per cent. shareholders of the company and they were entitled to inspect the records and registers in the capacity as shareholders and directors. Family Settlement and Arrangement - Whether the Bench had any power to direct the parties to enforce the family arrangement/settlement - Held that:- The private agreements between the parties, however, will not be considered by the Company Law Board - The private agreements can neither be sought to be enforced nor their breach give any cause of action to file a petition under sections 397 and 398 of the Act - The said provisions were the exclusive domain of the members and shareholders of the company against acts of oppression and mismanagement i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited company on April 27, 1976, by late Shri Parmeshwar N. Sadh along with petitioner No. 1, respondent No. 2 and Basudev Sadh. It was registered with the Registrar of Companies, Maharashtra. Petitioner Nos. 1, 2 and 3 hold 25,000 equity shares of Rs. 100 each out of total of 50,000 equity shares of Rs. 10 each representing 50 per cent. of the issued, subscribed and paid-up share capital of respondent No. 1 company. Respondents Nos. 2 to 6 hold 25,000 equity shares of Rs. 100 each out of total of 50,000 equity shares of Rs. 10 each representing 50 per cent. of the issued, subscribed and paid-up share capital of respondent No. 1. It is further submitted that respondent No.1 is a quasi partnership between petitioner No. 1 family and respondent No. 2 family on 50 : 50 basis. It was agreed upon between petitioner No. 1 family and respondent No. 2 family that the same ratio will always be maintained in future as well. Petitioner No. 1 and respondent No. 2 had signed the annual accounts for the year ended March 31, 2003 and after that respondent No. 2 has not sent any annual accounts for the year ended March 31, 2004, 2005, 2006, 2007 and 2008 respectively. The petitioners requested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 company as a vehicle for their personal enrichment. The petitioners have now also learnt that as a part of their design to deny and deprive the legitimate rights and expectations as shareholders, as also of the fruits of their labour and vision, respondents Nos. 2 to 6 have been siphoning away the valuable assets and rights of respondent No. 1 company. The sole motive of respondents Nos. 2 to 6 is to exclusively take over respondent No. 1 and its management to the exclusion of the petitioners, with the ultimate aim and objective of converting the company into their personal business for their personal benefits and enhancement. It is further submitted that respondents Nos. 2 to 6 are not interested in the welfare and well being of respondent No. 1 but is actively engaged in illegalities and misconduct and misappropriating the assets to their personal accounts under his control which is prejudicial to respondent No. 1 and the petitioners as the 50 per cent. shareholder of respondent No. 1. Such actions are bound to result into winding up of respondent No. 1. Learned counsel further submitted that the respondents admitted the fact that the petitioners and the respondents are equal s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., M/s. Parmeshwar Exports P. Ltd. (hereinafter referred to as "the Bazzardev Sadh group companies") and one M/s. Club-3 Apparels P. Ltd. (hereinafter referred to as "the Gyandev Sadh group company") wherein the Bazzardev Sadh group and the Gyandev Sadh group held more or less 50 per cent. share each. The properties held in the name of the Bazzardev Sadh group companies, by and under the family arrangement/ settlement have been allotted to the Bazzardev Sadh group and the property held in the name of the Gyandev Sadh group company, has been allotted to the Gyandev Sadh group. As per such family arrangement/ settlement, the shares held by the Gyandev Sadh group in the Bazzardev Sadh group companies belong to and have to be formally transferred in favour of the Bazzardev Sadh group and similarly, the shares held by the Bazzardev Sadh group in the Gyandev Sadh group company belong to and have to be formally transferred in favour of the Gyandev Sadh group. 5. To resolve the disputes and differences between the petitioners and the respondents, the above family arrangement came to be arrived at. It is an admitted fact that the Bazzardev Sadh group and the Gyandev Sadh group held cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently to complete the implementation of the family arrangement/settlement arrived at between the parties and is now appearing to be interested in resiling and/or wriggle out of the family arrangement/settlement already arrived at and not implementing the remaining part of the same. The Bazzardev Sadh group therefore was constrained to file the said suit before the hon'ble High Court. Needless to state that the respondents, i.e., the Bazzardev Sadh group have always been ready and willing to fulfil their part of the obligations under the family arrangement/settlement and to implement the same as agreed including by executing appropriate documents for formally conveying the title in respect of the properties coming to the share of the petitioners, i.e., the Gyandev Sadh group. 6. In or about November 2007, to the shock and surprise of the said respondents, viz., the Bazzardev group, the said respondents learnt that the Gyandev Sadh group, and in particular the concerned members of Gyandev Sadh group indulged into several acts of oppression and mismanagement in respect of the income and properties of and belonging to another private limited company of the Sadh Family group, viz., M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f respondent No. 1 company. It is false to state that the respondents are using the property of the company for their personal use and the same is being used for the purpose of the company as set out in the books of account of the company. In any event, it is none of the business of the petitioners as under the said family arrangement/ settlement the said company, the management, control thereof as well as the properties, assets and income solely and exclusively belong to the Bazzardev Sadh group and the Gyandev Sadh group have no right, title or interest of any nature whatsoever in respect of the same. When the property was given on licence to respondent No. 8, the same was appropriately recorded in the minutes of the meeting of the board of directors. 8. Learned senior counsel further submitted that the petitioner admitted at paragraph 2.5 of the petition that respondent No. 1 is a family business and quasi partnership between petitioner No. 1 family and respondent No. 2 family. The family settlement dated August 30, 2004 and September 11, 2004, are binding upon all the parties. It is also pertinent to note that all the properties/assets reflected in the family settlement have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 201 , paragraphs 7 and 9. (2) in the matter of (Mrs. Bacha F. Guzdar v. CIT) [1955] 25 Comp Cas 1 . (3) in the matter of (Rolta India Ltd. v. Venire Industries Ltd.) [2000] 100 Comp Cas 19 (Bom), page 32. (4) in the matter of (Radhe Shyam Tulsian v. Panchmukhy Investments Ltd.) [2002] 35 SCL 849 (CLB - New Delhi). It is to show : "The Company Law Board will not consider private agreements between parties. The memorandum of understanding between the shareholding groups will not be considered". (5) in the matter of (Reliance Natural Resources Ltd. v. Reliance Industries Ltd.) [2010] 156 Comp Cas 455. 10. Learned counsel for the petitioner relied upon the following citations during the course his arguments : (1) in the matter of (Ajit Kumar Nag v. General Manager (PJ), Indian Oil Corpn. Ltd. [2005] 7 SCC 764 in the matter of (Smt. Vijay Khanna v. V.K. Kapoor Associates (P.) Ltd.) [2007] 139 Comp. Cas. 524 (CLB) paragraph 5. (3) in the matter of (Sardar Associates v. Punjab Sind Bank [2009] 8 SCC 257), paragraph 27 (4) in the matter of (Moti Ram v. Ashok Kumar) [2011] 1 SCC 466. (5) in the matter of (Grasim Industries Ltd. v. Agarwal Steel) [2010] 1 SCC 83 paragraph 6. (6) in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly admitted that all the properties/ assets have been purchased out of a common pool of funds jointly owned by the Sadh family. The petitioners have filed search report dated April 10, 2008, it reflects that petitioner No. 1 and respondent No. 2 and other two persons are directors of the company and the first petitioner and respondent No. 2 still continuing as directors. According to the shareholding pattern of the company, the petitioners' group holds 25,000 shares and the respondents' group holds 25,000 shares. There is no denial to this report and it further strengthens the stand that the petitioners' group and the respondents' group hold 50 per cent. each. Moreover the respondents have neither specifically denied nor admitted with respect to the averment made by the petitioners that respondent No. 1 company is a family business and a quasi partnership except stating that in view of family arrangement the question of 50 per cent. ratio does not arise. Learned counsel for the petitioners contended that there must be clear denial in respect of pleadings, if there is no admission either denial or admission it amounts to admission of facts and relied upon the judgments cited s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are entitled to inspect the records and registers in the capacity as shareholders and directors. Therefore, it is hereby directed the company to provide the inspection of registers and records to the petitioners in accordance with law. The petitioners are also entitled to the notices for the board and general meetings as per the articles of association and the law. Accordingly the issue is answered. Now I deal with issue No. 3 14. The respondents in their counter dated July 18, 2008, heavily relied upon that under a family arrangement arrived at between the first petitioner and the second respondent on August 30, 2004 and September 11, 2004, according to which the properties were divided between them. The respondents enclosed the said family arrangement along with their reply. The family arrangement dated August 30, 2004, wherefrom it shows that petitioner No.1 and respondent No. 2 and solicitor and chartered accountants present and shown the immovable properties divided and distributed between petitioner No. 1 and respondent No. 2. The family arrangement dated September 11, 2004, is in continuation of the earlier arrangement dated August 30, 2004. However, it is captioned as S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also have admitted the fact that they have not reached any agreement with the petitioner. Whatever may be the reason, whether this Bench can go into the merits of the family arrangement/settlement in a petition under sections 397 and 398 of the Act when such family arrangement is sub-judice and subject-matter of the hon'ble High Court of Bombay. In this regard the relevant provision is necessary to emphasise. Any member of the company who complains that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members, may apply to the Company Law Board by invoking the provisions of section 397 of the Act and in case of mismanagement in the affairs of the company the member can invoke the provisions of section 398 of the Act, provided they qualify the required criteria as enumerated under section 399 of the Act. The proceedings before the Company Law Board are summary in nature and the Bench upon adjudicating the matter after completion of its pleadings can pass orders as vested under section 402 to put an end to the affairs complained thereof to avoid winding up of the company in equitable manner. It is wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r private agreements between parties. The recent judgment of the apex court in the matter of Reliance Natural Resources Ltd.'s case (supra), at paragraph 329 held that the memorandum of understanding is a private pact between the members of Ambani family which is not binding on RIL. I follow the law laid down by the apex court that the private agreements between the parties, however, will not be considered by the Company Law Board. The private agreements can neither be sought to be enforced nor their breach give any cause of action to file a petition under sections 397 and 398 of the Act. The said provisions are the exclusive domain of the members and shareholders of the company against acts of oppression and mismanagement in the affairs of the company, but cannot seek any specific performance of private agreements. Since I hold that the family arrangement/settlement is not within the purview of this Bench, therefore the citations relied upon by the respondents will not apply squarely to the core point. Accordingly, the issue is answered. Now I deal with issue No. 4 15. One of the allegations in the petition is that the property of respondent No. 1 company situated at Andheri ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement. Be that as it may, the respondents stated that lease agreement has been terminated with respondent No. 7. In view of the statement I am of the view that it is a closed controversy with respondent No. 7. The petitioners in their prayer prayed this Bench to declare all the board resolutions and shareholders' resolutions passed by respondents Nos. 2 to 6 from September, 2003 are illegal, null and void. It is seen that except the prayer no documents/copies of the resolutions have been produced before this Bench showing that the respondents have taken decisions which prejudiced the petitioners. In the absence of any evidence, the prayer of the petitioners seeking declaration is vague and the same is rejected. The petitioners also sought a declaration that any agreements to sell, transfer, alienate the property of respondent No. 1 company to be set aside is concerned, except prayer in the petition they have not given any documentary proof to show that the respondents are trying to sell or alienate the property. Therefore, I am of the view that the prayer is vague and baseless hence rejected. Learned counsel for the petitioners during the course of arguments orally submitted th ..... 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