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TMI Blog2011 (9) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... se brothers (R-2, R-3, P-2, and P-3) except P-4 initially started a partnership firm for production of oil having medicinal value. To the fortune of them; it has been going well in the market, on seeing the growth of the firm started by these brothers, they went ahead opening another unit at Patna, Bihar and the same has been given to Prem Math Sharma (P-4). In order to extend it further, one more unit was started at New Delhi to spread their business to all corners of the country. They too, as do any other people flourishing in business, converted this firm into a private limited company in the year 1992. R-2 shifted his family to Delhi to look after the business of Delhi unit, whereas other two brothers, P-2 P-3 have been looking after the business of Kolkata. First petitioner, who Is mother of these fighting brothers, has been remaining in 35, RBS Road house, Kolkata, with 5,000 shares in her name. All was well until the year 2007, in the year 2007 bad days started to this company, the confidence and trust supposed to remain among these brothers began thinning out as time going by, the result is present litigation. 4. With this brief history rolled out while they were doing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty for having a Civil Suit been filed over the given property on the ground that property belongs to the brothers not to the company. Responding to the same, the said authority on 16.5.2007 sought immediate explanation (Annexure P-6) from the company over the letters written on behalf of R-2. The petitioners submit that this property has been shown as the property of the company in partnership deeds (Annexure R 3, 4) earlier entered among these brothers, even in the schedule (Annexure P-1) annexed to the memorandum of association and other documents and yearly license (Annexure A 3) came into existence from time to time disclosing the property at 35 ABS Road, Angus, Hooghly is being used as factory premises. Since these acts of filing criminal case under Section 144 of Cr.P.C. filing partition suit over the property, upon which this company has been carrying this business since 1932, and also writing letters to licensing authority not to renew license to carry on business, were considered as immediate threat to the business of the company, a Board meeting was called on 29.5.2007 vide notice dated 21.5.2007 (Annexure P-7) to discuss the immense damage R-2 caused to the other member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company under the Articles of Association of the company. The petitioners in the Board meeting held on 5.1.2008 indicated the reasons for the removal of R-2 as director under Section 284 of the Act. Respondents 2, 3 4, despite receipt of notice of aforesaid board meeting, did not attend the board meeting dated 5.1.2008. The copy of the notice dated 20.12.2007, the attendance sheet; the minutes of the board meeting dated 5.1.2008 are annexed as Annexure P-15. The petitioners herein received a letter from RoC, West Bengal, on 21.1.2008 (Annexure P-17) asking the company to explain about the complaint given by R-2 to 4. To which the petitioners gave a reply dated 12.2.2008 (Annexure P-18) contending R-2 has no authority to convene a Board meeting except to convene a meeting for development of Baddi factory situate at Himachal Pradesh and for no other purpose. The petitioners gave a notice (Annexure P-19) on 25.1.2008 to hold a Board Meeting on 18.2.2008 at Kolkata to approve the removal of R-2 as director under Section 284 of the Act. The respondents 2 to 5 collectively acted against the interest of the company for a couple of months to appropriate the assets of Delhi manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by R-2 in the year 1982 in respect of the factory premises bearing no. 36, RBS Road. Since the company was expanding, R-2 shifted to Delhi somewhere in the year 1995-96, since then the petitioners, particularly 2nd petitioner, started mismanaging the affairs of factory no. 1 by keeping R-2 in dark about the affairs of the company. He came to know of all these misdeeds only when these petitioners were trying to convert the joint residential property into a factory premises, in continuation of it, in the year 2007, they misrepresented the facts to the Drugs Control Directorate. Since R-2 being aggrieved of knowing the petitioners converting residential property into the factory premises, he filed a suit before Civil Judge against the petitioners for partition of the property bearing no. 35, RBS Road, Hooghly. In the process of it, he also put it to the notice of Drugs Control Directorate so that the licensing authority may not issue license showing residential property as factory premises. The sale deed and mutation records of the properties bearing no. 35 36, RBS Road, clearly indicate that the property bearing no. 35 is residential property and the property bearing no. 36 is us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the name of Sharma Ayurved Pvt. Ltd. i.e. Respondent no. 1. The shareholding pattern of the company in the year 1999 is mentioned as 20% shareholding to R-2, 10% shareholding to R-3, 10% shareholding to R-4, 10% shareholding to 1st petitioner, 20% shareholding to 2nd petitioner 20% shareholding to 3rd petitioner and 10% shareholding to 5th petitioner. It is also said that these petitioners made fresh allotment in the year 2005-06 in the name of non-family members i.e. 10,000 shares to Britex Financial Services Pvt. Ltd. and 15,000 shares to Ujjal Merchandise Pvt. Ltd. opening shareholding to non-family members. This was never brought to the notice of the respondents. As soon as R-3 came to know of it, he protested the said allotments vide letter dated 28.4.2007 (Annexure R 4A). It is said that the shares held in the name of Petitioner No. 1 are always for the benefit of R-2 only for he is the person brought this company into existence and caused it to come to this position and the same was never disputed by any of these brothers. This was done hoping that the brothers of this company would listen to Petitioner no. 1, contrary to this, the petitioners 2 to 5 prevailed over petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents. Since law permits the respondents to hold EoGM with requisite quorum, they held EoGM with requisite quorum to streamline the functioning of the company and for shifting of registered office. The respondents submit that any of these acts could be called as oppressive acts; thereby the petition is liable to be dismissed. They further say that R-2 reporting to Drugs Control Directorate is only to see no license given in the name of their personal property; this being not oppression against anybody, this charge is liable to be dismissed. The petitioners concealed the fact that it is family company came into existence from partnership firm, which has its roots from proprietary ship; hence it is to be dismissed for not approaching with clean hands, here there is no pleading that facts of this would justify passing winding up order, hence liable to be dismissed. It is also said that this petition is liable to be dismissed on the ground the petitioners have not signed it and there is no power of attorney from the remaining petitioners to petitioner no. 2 authorising to represent the case. 9. The respondents stated that no resolution was passed on July 21, 2007 approving the min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing, to which R-4 being director of the company, he has every right to issue notice, thereby it cannot be invalid on that ground. The respondents contended that the notice 25-1-2008 is invalid In the eye of law for having not annexed explanatory statement relating to special notice for removal of R-2 as director of the company. Indeed the respondents 3 to 5 were prevented from attending that EoGM stated to be held on 18-2-2008. They deny the allegation of respondents acting prejudicial to the interest of the company. In view of the above factual situation, the respondents sought for the dismissal of the petition. 10. The petitioners, in their rejoinder, stated that the respondents have been trying to highlight 35 RBS property as family property by not revealing the municipal tax documents and also license obtained from health department showing this property as working place of the company for the last thirty years; the same is evident in the documents annexed as Annexure A-1 ; that the petitioners denied that the letters written by 2nd respondent to the Drug Controller not related to the affairs of the company, that the allegation of showing it run as proprietary concern of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reported to the police if really they were objected from attending the meeting. He further stated that Section 173(1)(b) is not applicable here because the reasons for his removal were given in the Board meeting held on 5th January 2008 and indeed circulated the same to everybody. He also filed documentary material disclosing that the respondents 2 to 5 started canvassing Delhi unit product alone is genuine one, apart from this, the respondents started selling Delhi product at lower rate to the rate of the product of Kolkata, so they have stooped down to undercutting to damage Angus unit. With this the petitioners again prayed that this petition may be allowed for the respondents have been causing immense damage to the company. 13. When this case has come up for hearing, the counsel on either side vehemently argued substantiating the pleadings of the respective parties. Their arguments will be considered one by one in the charges discussed below. Before discussing the charges leveled against the respondents, I discuss as to whether it is a family company or not. 14. Whether the company is a family company or not. It is not in dispute that it is a business run by the brot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d continued until recent past was deleted by these petitioners saying the said space is accommodated to give publicity of other products. There is material to say this business was started before partnership firm came into existence in the year 1982. Though there is no proof to say R-2 singly continued this business for some time, it could be said be was in lead in this business right from the beginning; otherwise his portrait and name could not have got a place on the packet of the product. By all these observations, I hold it is a family company deserved to be dealt with in that line. 15. Charge against R-2 to 5 is R-2 initiated proceedings under Section 144 Cr PC, which is detrimental to the interest of the company and its members. 2nd respondent herein filed a petition before Sub-Divisional Magistrate, Chandannagore on 23-2-2007 stating that the 2nd and 3rd petitioners herein are proceeding with unlawful construction causing disturbance to 2nd respondent relating to the property shown as 35, RBS Road, Angus, Bhadreswar, Hooghly. In this petition he mentioned that the construction and installation of electric meter be restrained until and unless a police enquiry be called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I limit myself to that end only. Though the obligation is cast upon the petitioner no. 2, as a man controlling the company and also as a co-owner of the property along with R-2, 3, he should propose construction in 35 RBS Road property by putting it to the notice of respondents 2 to 5. P-2 only said they started it by taking oral consent from R-2, but the respondents submit that they were not put to notice at any point of time. In that situation, R-2, being elder brother of the family, being one of the co-owners of the property, he would feel aggrieved of the acts of the petitioners 2 3. The petitioners could not shy away from this situation saying they have taken the decision in the interest of the company because the property belongs to the company. As there being no intimation to the respondents relating to the work taken up by the petitioners 2 3, the property upon which a construction was proposed still not being conveyed to the company, 2nd respondent, as a co-owner, giving report against the petitioners 2 3 is not squarely covered within the four corners of oppression or prejudicial against the interest of the members or the company; therefore there is no merit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the charge ascribed against the respondents on this point. 19. Charge against R-2 to 5 is R-2 wrote notice and letter to Directorate of Drugs Control not to renew the license of the company over property 35 RBS Road, Angus, Bhadreswar, Hooghly, which is detrimental to the interest of the Company. On hearing the submissions of either side counsel and on perusal of the records, this Bench noticed this company is shown as carrying its business over the property in several documents, I believe the company carrying its business in a factory shed at 35 RBS Road, and this company has been obtaining renewal of license showing it as its working place for the last several years, now R-2, being a director of the company, it cannot be presumed that R-2 was not aware of renewal of this license in the past showing the factory shed as work place of the company at 35 RBS Road, Angus, Bhadreswar, because he was at the helm of affairs of Kolkata unit for several years in the past. It is also evident that this place continued as residential premises to all members of the family, still it is shown as residential house showing as P-1 living there. That being the factual situation, I believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip; though Articles are silent over permanent directorship of founder directors, the role of R-2 in the firm, later in the company discloses that he is the man of identification to the company in the market. As long as they sail together, it cannot be imagined without R-2 in the affairs of the company. I observed that the sensitivities of family structure are strained, though it is the company law that governs, in the case of a family company, it must be seen who is considered as head of the family, what the role is played by him, what place others given to him, are the underlying causative factors to be taken into consideration. Here it could be easily understood that R-2 is instrumental in developing this company, he himself went to Bihar, developed business, later to Delhi, and there he developed the business, whereas P-2 remained at Kolkata looking after the administrative work of the company. Even in the case of Baddi unit, if Minutes of 17-12-2007 are looked into. It appears R-2 visited Baddi several times in the initial days and did the entire spade work to get land and other works in the Government. Since he being the face of the company, his monogram coming on the packet o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained separately, their deliberations disclose that the control of R-2 over Delhi unit still remained in the hands of him as on 17-12-2007. Kolkata unit in the control of P-2 3, Bihar Company in the control of P-4, this could indicate that the petitioners have not come with clean hands to seek this equitable relief. It is clear R-2 and his group continuously pursued preparatory work including getting land and other arrangements for the last two to three years before filing this petition, when it has become certain that Baddi unit would came into existence, P-2 started going to Baddi, and started nudging the respondents away from Baddi unit, it will appear in the purported minutes dated 21-7-2007 that P-2 started making his moves to bring in themselves to have control over Delhi unit and Baddi unit. Hence, I hold the meeting and minutes approved on 21-7-2007 are invalid. 25. If the letter written by P-2 to RoC is taken into consideration it is evident, P-2 himself stated no meeting was held on 5-1-2008, no resolution was passed removing R-2 as director. 26. The respondents' side senior counsel Mr. S.N. Mukarjee argued at length over not giving explanatory statement alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that there is no dead lock in this company, that these groups are not half and half in shareholding, the respondents herein are minority in the company and whatever decisions that are given so far are only on the suggestions given by both the parties, thereby he submits that those citations are not applicable in the present case. 32. On seeing the submissions of either side, I believe, it may be right that the division in the above citations is allowed for the reasons in those contexts. There is no fetter on company law board to evince another solution to bring an end to the matters complained of. Here the context is it is a business started by a family headed by second respondent, this company has been running for the last 30 years as the company of second respondent - it appears on the packet on Banphool oil. If the person headed this company for such long years is excluded saying him as his group in minority, it is not justifiable. Here Kolkata Unit and Delhi Unit are being run separately. There being no need for sub-division of any unit, I believe the division is only viable alternative. 33. On considering the facts and reasons thereof, I am of the view that this compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners, this Bench, by invoking Jurisdiction under Section 402 of the Act. decides this case as follows. 34. In view of the above reasons, I hereby pass the following directions to the parties in this litigation: a) The petitioners' group shall get Kolkata Unit to them, whereas the respondents' group shall get Delhi Unit and Baddy Unit to them. b) This Bench hereby appoints a valuer, viz., Shri Sarbajit Datta, Chartered Engineer Valuer of 5, Kiran Shankar Roy Road, 2nd floor, Room No. 6, Kolkata-700 001, to value the units separately and the share value of the entire company so that the group whose share value is more than the unit that comes to them, they will be compensated in proportion to the share value of the shares that group held. This value of the shares of the company shall be determined on the basis of the Balance Sheet as on 30.9.2008. The valuer is directed to collect fee from the parties proportionate to their shareholding and file the report within two months from the date of intimation of this order. c) Both the groups are directed to supply a copy of this order upon the valuer and also approach the valuer for determination of fee and for furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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