9911796707
TMI Blog2001 (8) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. On 11-12-1986 Smt. Parveen Ajit Singh (second petitioner) and Smt. Reema Satwant Singh (third respondent) wives of first petitioner and second respondent respectively were inducted as directors and were subsequently allotted 25 shares each, while S. Daljit Singh was allotted one share. On 27-3-1989 further 900 shares were allotted by the first respondent-company which were equally divided amongst the two families of the brothers with 450 shares being allotted to second petitioner and balance 450 to the second respondent. Thus on that point of time the total shareholding of the company was 1001 shares of ₹ 100 each, 500 each owned by the two families of the brothers aforesaid and one being held by the father S. Daljit Singh. On 28-3-1989 the authorised capital of the company was increased from ₹ 5 lakhs to 10 lakhs and subsequently on 25-5-1989 the name of the company was formally changed and the certificate issued in the name of DSS Enterprises (P.) Ltd. (D.S.S. in short). 3. S. Daljit Singh expired on 2-7-1990 leaving a Will, in furtherance of which a compromise was entered into between the legal heirs of S. Daljit Singh in proceeding before the Delhi High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng alleged resolutions and matters have been shown- (a)The petitioners reiterated an earlier suggestion that the shares held by the DSS in Skycell Communications should be sold as they were not interested in infusing any funds in the company. (b)The petitioners were not willing to give any personal guarantee under any circumstances whatsoever, and wanted their earlier guarantees given to Deutsche Bank to be released. (c)That petitioners tendered their resignations from directorship of the Board but the same were returned. (d)That petitioners offered to sell their shares in DSS to Second Respondent at par to be paid for within a period of two years with interest at the rate of 15 per cent from August 21, 1996 till the date of payment. (e)That a decision was taken to increase the authorized capital of the company from ₹ 2 crores to ₹ 9 crores to meet the financial requirements of the company and the same be put up in the next AGM for ratification. (f)That a decision was taken to issue 40,000 equity shares of ₹ 100 each partly paid up of ₹ 4 per share and the balance to be paid without any interest by 31-12-1997. (g)That it was resolved tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial address of the father of the third respondent. It was further alleged that the second and third respondent illegally excluded petitioners from management of the company for the last almost two years without holding any meeting of the Board since year 1996 or any general meeting since 1995. Inter alia in these circumstances the petitioners submitted that the affairs of the company were being conducted in a manner which is oppressive to the petitioners and such affairs of the company are being mismanaged. While it is just and equitable that the company should be wound up but to do so would prejudice the interest of the petitioners, therefore, it was prayed that the relief specified in the petition (as amended) be granted. 9. The respondents have filed their reply to the petition wherein they have at the outset challenged the maintainability of the petition on the ground that the petitioners not hold the requisite shareholding as specified in section 399 of the Act to maintain the petition. Denying the allegations made in the petition the contesting respondents have pleaded that the petitioners do not hold 50 per cent of the shareholding of the company as alleged and their sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds the second and third respondent agreed to accept allotment of 6,25,000 numbers of equity shares with the full knowledge of the petitioners. The petitioners thereafter lost interest in the respondent-company and even neglected to attend the meeting of the Board of Directors. The first petitioner did not attend the meeting of the Board held after 21-2-1997 and the second petitioner did not attend any meetings after 21-8-1996. The petitioners ceased to be directors of the respondent-company with effect from 6-6-1997. Due notices of the meetings were dispatched to the petitioners by post/by fax/by hand and the allegation that no meeting of the Board of Directors has been held since 1996 is wholly false to the knowledge of the petitioners. 11. It is the case of the respondents that it was incorrect to allege that one share which belong to S. Daleep Singh and was transmitted in the name of the second respondent was to be kept in trust without any voting rights. There is no such evidence or any understanding to that effect. On the contrary the annexure to the compromise decree passed by the Delhi High Court would show that second respondent was given one share more in this compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either oppression of mismanagement has been made out and the relief as prayed for in the petition is not liable to be granted. 12. Dr. Singhvi senior counsel appearing for the petitioners has strongly urged that no such meeting as alleged to have been held on 21-8-1996 was in fact held and the said minutes were forged and fabricated, which a perusal of the original minutes books would establish. No reliance can be made on the minutes as the second respondent has fabricated the minutes books as he had removed all the records of the company from the registered office providing enough opportunity to manipulate and fabricate the Minutes Books. Of the 5 Minutes Books, two of them which were kept in loose leaf forms were found to have been bound very recently after removing the original Minute Sheets and substituting fabricated ones. In some of the minutes in which the second respondent is shown as the Chairman, the paper on which the minutes have been recorded look crisp and fresh and in some of the minutes the signature of the second respondent has been rubbed off to show aging. In some of the minutes, different pages are found to have been typed on different typewriters indicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with Skycell which was entered on 18-3-1992 wherein there was a restriction of transfer of shares for a period of at least three years from the date of the license as provided in clause 3.4 of the said agreement. It was further submitted that Skycell had started doing business from early 1995 and it was well known by that time that it would be a profitable venture. It was therefore, inconceivable that the petitioners would advise disposing of the shares of DSS in Skycell. As a matter of fact steps were taken to raise finances for equity participation in Skycell and with that end in view a loan of ₹ 1 crore was obtained from Deutsche Bank on personal guarantees being given by the petitioners. The loan had to be taken ostensibly for leasing of bottles as banks do not give loans for investment in equity of companies. Under the circumstances the allegation regarding the proposed sale of DSS shares by the petitioners was without any basis. Similarly, the allegation that the petitioners were not interested in infusing any further funds in the company was totally incorrect. The entire share capital investment in Skycell has been raised from loans taken by the petitioners f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable person would agree to sell shares and to have them paid for within a period of two years specially when the petitioners were aware that investment in Skycell would have given substantial returns. So far as the alleged decision to increase the authorised capital from ₹ 2 crores to ₹ 9 crores it is submitted that the minutes appear to have been forged or fabricated and no notice of the meeting was served on the petitioners. Even the Form No. 5 required to be filed with ROC with respect to the increase in authorised capital was not filed within 30 days of 28-9-1996 but only filed on 30-5-1997. Obviously the resolution has been prepared subsequently on a back date. It was alleged that the balance amount of 40,000 equity shares allotted to respondent No. 2 on 21-8-1996 was to be paid by 31-12-1997 but there are no documents to show that the said amount has been paid. 17. So far as the induction of Vikram Nanda as a Director of the company it was submitted that said Nanda was a close friend of the respondent No. 2 and a rank outsider who could not be accepted in a family concern specially when he has not brought any funds to the company. Though he was alleged to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d filed an FIR in March 1997 alleging fraud and whereas admittedly according to the respondents, the petitioners continued to be the directors till 6-6-1997 and would have signed the certificates, if they had agreed for the issue of shares to the respondents. 19. Summing up Dr. Singhvi has contended that the petitioners 1 and 2 who were 50 per cent shareholders of the respondent-company have been reduced to a minority by the machinations and manipulations of the respondents 2 and 3 inasmuch as meetings of the Board of Directors have been shown when none was held notice of the meeting and the minutes thereof have been forged and fabricated. Notices of alleged meetings of 21-8-1996 and held thereafter has not been served on the petitioners. It is apparent from the copies of the notices that they have been typed on the same typewriter and all allegedly sent under certificate of postings issued by the Minto Road Post Office bearing the same Gandhi Stamp though alleged notices were of different dates, covering several months. Shares have been allotted to respondent Nos. 2 and 3 without their being any offer to the petitioners that too on payment of only 4 per cent of the face value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer was held to be invalid. Reliance was placed on the case of P.D. Chitlangia v. Trinity Combined Associates (P.) Ltd. [1999] 4 Comp. LJ 514 (CLB) wherein a family company major decisions were taken in the Board meeting without the presence of all the family directors it was held to be an act of oppression and all acts in pursuance of the Board decisions was declared as null and void. Reliance was also placed in the case of S.T. Ganapathy Mudaliar v. S.G. Pandurangan [1999] 1 Comp. LJ 350 (CLB) wherein allotment of additional shares were made to certain shareholders to the exclusion of others in a family company to gain undue advantage and further the allotment had actually been made against certain credits standing in the name of the respondent without fresh cash having been brought, the CLB had cancelled the allotment of the additional shares in favour of the respondent and passed consequential orders. 22. As regards the authenticity of notices sent through certificate of posting, the learned counsel has also sought support from a decision of the Supreme Court in the case of Shiv Kumar v. State of Haryana 1994 (4) JT 162 wherein on the facts of the said case the Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent petition is not maintainable in terms of section 399 but also is liable to be dismissed as an abuse of the process of law. It was submitted that the petitioners had no faith in the businesses of the company hence refused to contribute any funds for the same. They voluntarily withdrew from the business of the company and it was left to the respondents 2 and 3 to raise funds by selling their assets and to arrange the requisite funds by their own efforts. When the petitioners were offered to take shares of the respondent company to raise its equity base as the company needed funds the petitioners declined to do so. Consequently the respondents were allotted the shares issued. Now finding that the investment made by the respondents in Skycell will become a profitable venture the present petition has been filed feigning ignorance of the affairs of the company for over two and a half years. The petition is, therefore, barred by latches and is liable to be dismissed as this Board is exercising its equitable jurisdiction. In support of this submission Learned Counsel has referred to the decision of the Supreme Court in the case of Gattulal v. Gulab Singh AIR 1985 SC 547 and relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire 150 bonus shares in the name of the second respondent. As a matter of fact the minutes of the meeting of the Board of Directors held on 25-3-1996 which was attended by the first petitioner would go to show that the old share certificates held by the second respondent were split in order to facilitate the transfer and one Rajesh Arora was authorised to register the transfer. 27. Appearing along with Shri Bhakru for the respondents Shri Sarkar, senior counsel has invited attention to the reliefs sought in the petition and has contended that as the petitioners have not challenged the allotment of shares made in favour of the second and the third respondents nor sought their cancellation they cannot be permitted to challenge the same in their oral submission. The learned counsel has further contended that the case of the petitioners is that no meeting of the Board of Directors were held after the year 1995 and they have also challenged the meeting dated 21-8-1996 by which 40,000 shares were allotted to the second respondent, as fabricated and manipulated. In paragraph 18 of the petition the petitioners were admitting that they participated in the management till June, 1996 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was drawn around Sep. 1995 and wherein it was shown that an investment of ₹ 5.25 crores were required to be made by the first respondent company as equity contribution of Skycell. This was also inconformity with the admitted decision of the Board of Directors of the respondent company as recorded in its meeting of 28-3-1995, the minutes of which indicate that a sum of ₹ 5 crores were required. As noticed above the first petitioner was present in the said meeting. That apart with a view to raise finance for the equity participation in Skycell a loan of ₹ 4.5 crores was being negotiated through one Atul Goel from South Asian Financial Exchange (SAFE). The fact that the said funds did not materialise is also admittedly known to the petitioners. A complaint was filed by the respondent company against Atul Goel through Shri P. Ramachandran who was given a power of attorney on behalf of the company in the Board Meeting dated 3-10-1996 presided by First petitioner. Ramachandran was functioning directly under the first petitioner as Senior Manager (Legal) of Pure Drinks (New Delhi). According to the learned counsel the meeting of the Board dated 21-8-1996 has to be v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nutes dated 12-9-1995 and 6-2-1996 in which the first petitioner was allegedly present and the requirement of funds for investment for purchase of shares in Skycell was discussed. In this connection our attention was also drawn to pages 58, 67, 79, to 95 of the Sur-rejoinder (Vol. II) which are the various correspondences for obtaining funds from SAFE through Atul Goel and letters from the Deutsche Bank requiring the company to make payments of the loan of ₹ 1 crore taken from the bank. That a sum of ₹ 5.5 crores were required by October 1995 was sought to be substantiated from the feasibility report which has been annexed by the petitioners and was in their full knowledge. Apart from the same there are correspondence on the record (copies annexed to the Sur-rejoinder) showing that the joint venture partners in Skycell had been putting tremendous pressure on the respondent company to bring in their share of contributions. Under the above circumstances it has been contended that it could not be said that there was no urgency for funds. It was also contended that by 1994-95 as admitted by the petitioners himself the Pure Drinks (P.) Ltd. was in dire financial strain. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t book entries as alleged. On the other hand the fact that the petitioners were not willing to give personal guarantee or security and arrange funds for the respondent company was discussed in various meetings of the Board of Directors held on 25-7-1995, 1-9-1995, 8-3-1996, 24-6-1996, 21-8-1996, 11-12-1996 and 21-2-1997. Further there was nothing to show on the record that any personal guarantees were given by the petitioners after July, 1995 for the loans taken by the respondent company. On the contrary, the petitioners were keen to have their personal guarantee released which were given to Deutsche Bank will be evident from the recorded minutes of the Board. 33. It has been contended that the letter of resignation of the petitioners is not a fabrication as alleged would be evident from the photocopy of the said letter filed by the respondents. The said letter was tendered at the Board Meeting dated 21-8-1996 by petitioners but the same was not accepted and before returning the original resignation letter a photocopy of the same was not made as the said facility was available in the registered office of the respondent company. The resignation letter and the various minutes sign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l investment of the petitioners in the respondent company was only ₹ 50,000 whereas they will be getting at least ₹ 75 lakhs for their shares. Therefore, the delay in getting the consideration was well worth it specially when the joint venture was not doing well and large sums of money were required to be contributed for Skycell and payment of loan. 38. It was also contended that the decision to amend the articles to provide voting rights on partly paid up shares was as per the advice of Dinodia and Company (an eminent firm of professional accounts/consultants) as shares were proposed to be placed with third parties as collateral who have desired voting rights for their protection. In fact amendment of articles was an Item in the agenda of the Board Meeting dated 21-8-1996 as per copy of notice dated 7-8-1996 (at page 1.1.5 Vol. II). The idea of placing shares with third parties as collateral was considered even in the meeting of 27-12-1994 attended by the petitioners, therefore, the allegation that it was considered only in Mid. 1997 and minutes of 21-8-1996 are fabricated is ex facie erroneous. 39. As regards induction of V. Nanda as a director it was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s counsel for holding AGM, Shri Bhakru, the counsel for the respondent vide letter dated 15-12-1998 after obtaining instructions, wrote back mentioning that notice for AGM has been sent by Regd. Post but notwithstanding the same copy of the notice, annual report and final accounts were being enclosed and sent by courier. Admittedly, these documents were received by the petitioners on 17-12-1998 yet to dramatize the entire thing they did not attend the AGM and sought to open the Regd. Envelope in which they had already switched the document, before CLB on 19-12-1998. Had there been any intention to keep the petitioners in dark about the AGM there was no question of sending an additional copy through courier. 42. As regards the petitioners claim that they had written four letters to the second respondent making certain complaints regarding functioning of the company, the learned counsel has contended that the said letters were fabricated for the purpose of the present case copies of which have been produced without any proof of dispatch. 43. So far as the allegation of fabrication of certificates of posting and sending all notices of the board meeting from Minto Road post offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t observed that if the company was in need for funds the issue of further shares was necessary. This decision of the Supreme Court was followed in the case of Needle Industries India Ltd. v. Needle Industries Neway (India) Holding Ltd. [1981] (3) SCC 333. Following the above cases the Bombay High Court in the case of Jetu Jacques Taru Lalvani v. J.B.A. Printing Ink Ltd. [1997] 88 Comp. Cas. 759 . Observed Merely because the minority shareholders were required to make substantial payment for buying the shares this was no ground for holding the resolution as oppressive of the minority unless it was shown that the Board of Directors had acted with some oblique motive (p. 769). On the same proposition, Shri Sarkar also relied on Maharani Lalita Rajya Lakshmi v. Indian Motors Co. Ltd. AIR 1962 Cal. 127, Pushpa Prabhudas Vora v. Voras Exclusive Tools (P.) Ltd. 2000 3 CLJ 271 (CLB) and Rajinder Kumar Malhotra v. Harbanslal Malhotra Sons Ltd. [1996] 87 Comp. Cas. 146 (CLB). 46. We have considered the pleadings and the arguments of the counsel. In this petition mentioned on 17-9-1998, the petitioners had voiced their grievances in relation to their being kept in dark about the affair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a fortnightly statement of receipts and payments to the petitioners and that the petitioners would be given inspection of records and documents of the company as per the list to be furnished by them. In regard to the minutes of the Board meeting since, the respondents objected to the inspection by the petitioners, the Bench Officer was directed to authenticate the Minutes Book. It was also directed that the company would not invest, disinvest an amount exceeding ₹ 25,000 in respect of a single transaction, till the disposal of the petition. In the hearing held on 9-2-1999, the petitioners were permitted to inspect the Directors Minutes Book till 6-6-1997 up to date of which according to the respondents, the petitioners were directors. In the hearing held on 7-4-1999, on an application filed by the respondents, the company was permitted to take all steps in regard to the sale of investment in the shares of Skycell Communications Private Limited, however, with the stipulation that before sale of the shares, the matter should be brought before this Board. During the course of the proceedings it was also intimated that the parties were attempting to settle all the disputes wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents, the shares were allotted to themselves only in view of the reluctance of the petitioners to invest in shares and their exclusion from the management was due to operation of law and that additional members were admitted as members and non-family members were appointed as directors only with the view to get their assistance in mobilizing funds for the company. 50. The admitted position is that the signatories to the memorandum were the first petitioner and the second respondent and they were also the first directors. Later on, their wives - the second petitioner and the third respondent - were admitted as members and when further shares were issued after their admission, the same was done in a manner that share holdings of the two groups remained equal. From each group, there were two directors. (The father, holding 1 share was also a director till he expired). Thus there was equality in the shareholding and directorship. There is a dispute in regard to the 1 share held by the father and transmitted to the second respondent, as indicated in the arguments. We find that the legal heirs of the deceased father entered into a compromise according to which his investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the same upsets the exiting shareholdings/ membership. Keeping these aspects in view, the grievances of the petitioners have to be examined. 51. At the outset, we would like to record that in respect of all the complaints, the respondents have justified the action on the basis of various minutes of the board of directors, which according to the petitioners are fabricated. Initially, when the petitioners desired inspection of the minutes books, the same was resisted by the respondents on the ground that the petitioners might misuse the same in other proceedings between them and therefore, this bench only directed the bench officer to authenticate the minutes books. Later on, at the insistence of the petitioners, they were allowed inspection of the minutes books and were also given copies of the same. After carrying out the inspection, the petitioners alleged that in many of the minutes their attendance, even though they were not present for want of notice, had been recorded and certain statements had been falsely attributed to them. They have alleged various infirmities in the minutes book and have claimed that these would indicate that the minutes were fabricated. Unfortunat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission should have taken place between June 1997 and November 1998. In terms of section 82, more particularly in case of private companies, the transfer of shares has to be in conformity with the Articles. We find that article 7 permits transfer of shares to non members (without prejudice to the provisions of article 8 which permits transfer of shares to a member or to any close relation of a member) provided the directors consider that the admission of the transferees would be in the interest of the company. We do not have the benefit of perusing the minutes of the board meeting in which the approval to register the transfer of shares was taken to examine the material before the board to consider that their admission would be in the interest of the company. Even otherwise, there is nothing on record to show that the company has been benefited by their admission as members as by then the investment in Skycell shares had taken place. The number of new members and the insignificant number of shares transferred to them by which they became members and the timing of the transfers etc. would indicate a possibility that they were admitted as members perhaps with the view to reduce the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners establish that other stamps of the same denomination were available in that Post Office on the relevant dates. However, a certificate posting only raises a presumption that a letter is posted and such a presumption is rebuttable especially in view of the fact that certificates of posting are easily obtainable. The cases cited by the learned counsel for the petitioners support this. Therefore, when the addressee denies receipt of the letter, the onus to prove the posting rests with the sender who has to establish the posting by sufficient corroborative evidence like postage account, dispatch register etc. Since in this case, the respondents have not done so, they have not conclusively established that notices for the various board meetings were sent to the petitioners. 56. A gist of the minutes of the alleged board meeting on 21-8-1996, is given in paragraph 6 ante. As per the minutes, the certain statements had been attributed to the petitioners directors - that they were not willing to give any personal guarantee, that they advised sale of the Skycell shares, that they offered to sell their shares in the company, that they had submitted their letters of resignation from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores. As per the minutes of the Board Meeting on 5-2-1996, the Board had decided to accept the offer of right shares by Skycell of similar number of shares, the consideration of which would again work out to ₹ 2.18 crores. As per the minutes of the Board Meeting on 8-3-1996, it was decided to raise ₹ 4.5 crores as loan from one Shri Atul Goel and it is recorded in the minutes that the petitioners present in that meeting had stated that they would not offer their personal guarantee and that the company should try to get this condition waived. From the minutes of the board meeting on 25-3-1996, we find that the petitioners were not willing to give their shares as collateral for this loan unless 75 shares in the company were transferred from the second respondent to the first petitioner. It is also recorded that 75 shares were accordingly transferred. (According to the petitioner, 75 shares were transferred out of the bonus declared on 1 share which was originally held by their father and the transfer was effected to keep the parity in the shareholdings). However, according to the respondents, in the next meeting held on 24-6-1996 which was reportedly attended by the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies. We find that the Form No. 2 was filed belatedly at which point of time, the disputes between the parties had escalated by filing of a suit in March, 1997 by the second respondent. We also note the respondents have not established that by this allotment, the company was in any way benefited. Therefore, we are of the view that the respondents have not established conclusively that a meeting took place on 21-8-1996 and the petitioners having attended that meeting consented to the allotment of shares and also to the appointment of Shri Nanda as a Director. Further, by this allotment, no money came into the company and the allotment was against the credit balance standing in the account of the second respondent. For us to conclude that the petitioners did attend that meeting and had declined to subscribe to further shares, we have no materials before us to take that view in the absence of any independent evidence. Therefore, we have to perforce come to the conclusion, even assuming that this meeting took place, that the petitioners did not attend that meeting to give their consent to decisions prejudicial to their interest. Since by the allotment of shares exclusively to the seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res and the only issue for consideration is whether the petitioners were offered the shares, especially in view of the recording in the minutes of the Board Meetings on 4-4-1997, 9-5-1995 that the shares would be offered to the promoter directors. In fact, in the minutes of the Board Meeting on 26-5-1997, it is recorded that the second respondent mentioned that he had sent offer letters to the petitioners. According to the respondents, the offer letters were sent to the petitioners by registered post, the receipt of which is denied by the petitioners. The respondents have also produced copies of the receipts given by the Post Office to evidence booking of the registered letters on 9-5-1997. In the offer letter, the petitioners were requested to subscribe to at least a part of the total offer since the shares were being offered at a low paid up value. Referring to the postal receipts, the learned counsel for the petitioners pointed out that the letters had been addressed to 9, Friends Colony, while the petitioners reside at 9, Friends Colony (West) and therefore, the letters were not properly addressed and as such no proper offers had been made. We find that in the body of the offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial amount of investment in Skycell shares had come from borrowings. Again, it is the stand of the respondents that the petitioners advocated the sale of Skycell shares indicating that they were not interested in investment in these shares. We find that the respondents themselves had proposed sale of the shares held in Skycell in the notice for the Board Meeting convened on 6-6-1997. As a matter of fact, the respondents filed a formal application seeking for permission to sell the Skycell shares. Therefore, when the respondents themselves had proposed the sale of the shares within a short time after the petitioners had allegedly made this suggestion, the respondents cannot hold the said proposal against the petitioners. 60. The next issue is about the cessation of the petitioners as directors. According to the minutes of the board meeting on 6-6-1997, the petitioner did not attend the board meetings held on 3-3-1997, 30-4-1997, 9-5-1997, 26-5-1997 and 6-6-1997 inspite of notice and without leave of absence and therefore they had ceased to be directors in terms of section 283(1)(g) of the Act. They have enclosed copies of certificates of posting for having sent the notices for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Nanda as a director are based on fabricated minutes one does not need any examination even though the petitioners have also brought to our notice, the application filed by the respondents to open a bank account with Punjab National Bank, Karol Bagh on 27-5-1997 in which in the list of directors, the name of Shri Nanda does not find place to contend that the minutes of the AGM on 28-9-1996 showing the appointment of Shri Nanda as a director is a fabricated one and also the contention raised in the application filed after the hearing was concluded that the company had shown that the petitioners were directors in the application to the RBI on 7-7-1997. 61. Even though we have held that by allotment of further shares, inducting new members and by excluding the petitioners as directors on the ground of operation of law, the respondents have acted in a manner oppressive to the petitioners, we also note that the petitioners seem to have abandoned their interest in the company. In the proceedings under section 397/398, the conduct of the parties is a relevant consideration. From a perusal of the board minutes and the minutes of the general body meetings, we find that the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company by selling their shares to the respondents/company on receipt of fair value for their shares. 63. Normally when we direct a shareholder to go out of the company, the option to purchase his shares is given to the other side or the company. In the present case, we find that the respondents themselves have been borrowing money and the company also does not have funds. But at the same time it is on record that the company is proposing to sell the Skycell shares by which the company can generate funds to purchase the shares of the petitioners. Accordingly we direct the petitioners to sell their shares to the company on the fair value to be determined by the statutory auditor of the company. The valuation will be made on the basis of the balance sheet as on 31-3-1998, being the proximate date of the petition. Since there are 6,25,000 shares as partly paid, the share of the petitioners in the company shall be determined on the basis of the paid up capital of the company as on 31-3-1998. Since the respondents had brought in substantial funds into the company other than investment in shares, by way of loans and advances, they will be entitled to bank rate of interest as on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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