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TMI Blog2013 (12) TMI 1634X X X X Extracts X X X X X X X X Extracts X X X X ..... d returned to India and married R2 (also a divorcee) in the year 1995. 2.2 Upon request of Mr. Dindayal Gosain to advance some money in consideration for 50% partnership with the Petitioner, the Petitioner paid money for the acquisition of the property and building with the purpose to commence electronic business. Accordingly, on 3/07/1995 a Plot No.EL-100, Mahape, MIDC, T.T. Industrial Area, Navi Mumbai was acquired in the name of Late Mr. Dindayal Gosain from MIDC in consideration of ₹ 6,75,000/-. 2.3 Thereafter, on 21/01/2000 late Mr. Dindayal Gosain further requested the Petitioner to provide more funds to develop the property in question. 2.4 As per the case of the Petitioner, the Petitioner held 4750 shares of ₹ 100/- each, late Mr. Dindayal Gosain held 4600 shares and R2 held 150 shares of ₹ 100/- each, thus constituting 50%, 49% and 1% shareholding in the Rl Company. Further, late Mr. Dindayal and R2 were appointed as the directors of the Rl Company. The Rl Company was thus in the nature of quasi partnership. 2.5 Pursuant to the request made by late Dindayal the Petitioner remitted the following amounts: (i) On 9/05/2003 - £ 3000 (Rs. 2,25,150/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of arguments in the C.P case withdrew the suit with the leave of the Court concerned. 2.11 It is alleged that, the Respondents in collusion with each other arbitrarily without following the due procedure of law, increased the share capital of the company and thereby reduced the shareholding of the petitioner from 50% to 8% and the R2 increased her shareholding from 1% to 92% which is a clear case of oppression. 2.12 It is further alleged that, the Respondents have also appointed R3 and R4 as Directors of the Rl Company in contravention of the provisions as laid down in the Companies Act, 1956 without notice to the Petitioner and without holding any valid meeting. According to the case of the Petitioner, no such meetings were held. Further, the Respondents have also failed to comply with the formalities with the ROC. They did not give inspection of statutory record, despite request to which the Petitioner was entitled to as a director and shareholder of Rl Company. Lastly, it is alleged that the Respondents have also siphoned off the amount of the Rl Company for their personal gains. Based on the above allegations the Petitioner in a nutshell has sought for the following reliefs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional shares in favour of R2 was made in the paramount interest of the company in accordance with law. Further, by the allotment of impugned shares to R2 and R3, the Respondents have never diluted the shareholding of the Petitioner. The allegation of the Petitioner that Respondents failed to comply with the formalities of the ROC and or did not give statutory records of the Rl Company has been denied by them. 5. In reply, it is further pleaded that the Petitioner was never a director of the company and therefore, he does not have any right to inspect the record in the Rl company in the capacity of the director and further all the filing made by the company are available on the website of ROC to which the petitioner can access easily. The Respondents have also denied having siphoned off the funds of Rl Company in any manner. Based on the above, the Respondents have prayed to dismiss the petition. 6. I have heard the ld. Counsel appearing for the Parties and perused the record. Firstly, I propose to deal with the preliminary objections taken by the Respondents challenging the maintainability of the petition and seeking its dismissal on such grounds. 7. The first preliminary po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petitioner's shareholding was reduced to the extent of 8% by serving a valid notice on the Petitioner calling upon him to attend the EOGM whereat the allotment of additional shares was made. It was further contended that to determine the eligibility of the Petitioner to file a petition under section 397/398 of the Act, by virtue of the provisions contained in Section 399 of the Act, the Board is required to see the last undisputed position as held in the following cases. (i) Decision of the Division Bench of the Karnataka High Court in the case of Vijayan Rajesh v. MSP Plantations (P.) Ltd. [2010] 98 SCL 383 wherein it was held as follows: "32. The reasoning given by the Company Law Board does not appeal to us. If the finding is to be that the persons presenting the petition do not qualify for presenting a petition under Section 399 of the Act, no further question arises and the petition was to be dismissed at the threshold. But the Company Law Board has viewed the working of the Section 399 of the Act in the converse way, which is not a proper understanding of the provisions of Section 399. But, on authority, it has been established that for the purpose of examining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders has been held, by many High Courts and the Company Law Board itself, as an issue which could be agitated as an act of oppression, in a petition under Section 397/398. Therefore, we are of the view that when the holding of a petitioner is reduced below 10 per cent, due to further allotment of shares and such allotment itself is impugned in a petition under Section 397/398, the petition should be held to be maintainable on the strength of his holding before the further allotment of shares...... " [Emphasis Supplied] (iv) The above case of T.N.K. Govindaraju Chetty & Co. (supra) has been relied upon in the case of Prabhjit Singh Johar v. Johar Hotels (P.) Ltd. [2010] 2 taxmann.com 7 (CLB - New Delhi) wherein it was held that: "56...... It has been rightly contended by the petitioners that the Company Law Board in the case of T.N.K. Govindaraju Chetty & Co. v. Kadri Mills (CBE) Ltd. [1998] 3 Comp. LI 329 : [1999] 96 Comp Cas 871, has held that the transfer and allotment of shares which has been done with mala fide motive cannot be impugned in a petition under Section 111 and they have to be agitated as an act of oppression in the petition under Sections 397 and 398 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioner was holding approx. 50% shareholding in the Rl Company as per own admission made by the R2 and therefore, in my opinion the petition is maintainable in terms of Section 399 of the Act. 14. The ld. Counsel appearing for the Respondents has further challenged the maintainability of the petition interalia on the ground that the Petitioner has not come with the clean hands and therefore, he is not entitled to any equitable reliefs in a petition under Section 397/398 of the Act. 15. In this regard, it was contended by the ld. Counsel for the Respondents that the Petitioner in his petition has heavily banked upon the letter dated 3/11/2006 annexed with the Board resolution dated 2/11/2006 purportedly passed by R2 and her deceased husband Mr. Dindayal thereby appointing the Petitioner as a Director of Rl. According to the ld. Counsel for the Petitioner, it is on basis of this Board Resolution dated 2/11/2006, the Petitioner claims to be the Director of Rl. Apart from above, the Respondents have also referred to a Will dated 6/11/2006 purportedly executed by Late Shri Dindayal Gosain bequeathing certain properties in his favour. The ld, Counsel appearing for the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Gosain. It is contented by the Ld, Counsel that the Will of late Dindayal Gosain at the highest can deal with the shares held by late Dindayal Gosain in the company and cannot deal with the Petitioner's shareholding in the company or his directorship or with the company's property. The Ld. Counsel for the Petitioner contended that the Respondents reliance on the Wills dated 5/04/2006, 6/11/2006 of late Dindayal Gosain is of no relevance whatsoever, with the present matter. The Ld. Counsel therefore, argued that the Petitioner is not guilty of the suppression of the facts and the contention raised by the Ld. Counsel for the Respondents is liable to be rejected. 17. Having considered the submissions of both the sides. I find force in the contention raised by the Ld. Counsel for the Respondents that the Petitioner is guilty of suppression of facts. It is an established law as held in the following cases that if a party approaches the Court with unclean hands, he is not entitled to the equitable relief sought for under section 397/398 read with section 402 of the Act. (i) Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad [2005] 57 SCL 476, where the Supreme Court has held: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of the reply filed by the Respondents, it is revealed that Late Dindayal during the period April- June 2006 was suffering from cancer and was being treated in Jaslok Hospital. The record further reveals that on 5/04/2006, Late Dindayal executed purported registered Will in favour of his wife R2 and minor sons. Further, the Respondents have also filed an affidavit dated 29/03/2006 duly executed by late Dindayal Gosain which states that due to ill-heath his right hand is not working properly. Thereafter, in the month of June, 2005, he further executed a Codicil confirming the Will in their favour and authorizing them to sell the bequeathed properties. 19. It is also evident from the perusal of the record that prior to filing the instant petition, the Petitioner filed a special civil suit No. 668/2008 in the court of Senior Division at Thane based on the registered Will dated 6/11/2006 purportedly executed by late Dindayal Gosain in his favour and sought various reliefs claiming to be 50% shareholding in the company. The said suit was pending until 31/08/2012 when the Petitioner withdrew the suit from the said court. All the aforesaid facts, except making a mention of a Civil S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. That pending the hearing and final disposal of the present suit, the Court Receiver or some fit person be appointed receiver in respect of the said factory premises belonging to Defendant No. 1 with all powers under Order XL of the Code of Civil Procedure 20. It is further revealed that in the said suit, the Respondents who were Defendants, therein filed their reply on 25/03/2010. It is also pertinent to mention here that the Respondents herein have also challenged the purported will executed in favour of the Petitioner by filing a Special Suit No. 803 of 2007. 21. Therefore, withholding all the above-stated documents, and not disclosing all the material and vital facts in the petition clearly go to show that the Petitioner is guilty of suppression of facts and therefore, on this ground, in my considered view, the Petitioner is not entitled for equitable reliefs and the petition is thus liable to be dismissed on this ground alone. 22. The ld. Counsel for the Respondents has raised next preliminary objection challenging the maintainability of the petition contending that the petition suffers from acute delay and laches and thus liable to be dismissed on this ground as well. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken the view, as submitted by learned counsel for the petitioner, that allotments due to which the percentage holding had come down to below 10 per cent could be examined at the threshold. While doing so, this Board has always kept in view whether the allotments are challenged at the earliest without much loss of time. However, in the present case, allotments have been made right from 2000 on various occasions. The petitioner has not adduced any reason as to why he resigned from the Board in 2004, by which time, at least four allotments had been made. Being a closely held family company especially when proceedings were going on in respect of the suit filed by Rishi Bhatia, it is inconceivable that the Petitioner was not aware of the allotments made, at least, till he was a director on the Board. Even otherwise, according to his own averment, he came to know of the allotment in 2006 from the proceeding in CP No. 86 of 2006, but even then he did not approach this Board immediately. This petition was filed only in May, 2008. Therefore, It is crystal clear that there had been undue delay and laches in filing this petition. Since on the day of filing of the petition, the petitioner did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tches in this case. Thus, I find that the petition is not maintainable even on the basis of the preliminary objections raised in this case.' 26. Now coming to the merits of the case, I propose to take up first complaint made by the Petitioner with respect to his alleged non-appointment as a director in the Company. 27. The Ld. Counsel appearing for the Petitioner submits that the Board resolution dated 2/11/2006 thereby appointing the Petitioner as a Director of the Rl Company was passed by all the Directors of the company and was ratified by all the shareholders of the company. To support his contention the Ld. Counsel has relied upon a letter dated 3/11/2006 Exh-G purportedly written by late Dindayal Gosain to him together with a resolution dated 2/11/2006. He has also referred to a letter dated 2/11/2006. I would like to reproduce the contents of the said letters:- 3/11/2006 'To Mr. Rajiv Laxman Attached herewith please find a Resolution on Bobby's letterhead and a letter of your acceptance of Directorship. Please give me ring on receipt and I will explain you what to do. Thanks Sd/- BOBBY ELECTRONICS PVT. LTD. 301, Station View Sanpada, Plot No. 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing you, Sd/-" 29. Thereafter, I would like to reproduce two legal notices one issued by the Petitioner and other issued by R2 in reply to the said notice. "Ref No. PB/NOT/09/07 08th Feb, 2007 Mrs. Nirmala Dindayal Gosain, Station View, Plot No. 19, Sector 30, Vashi, New Bombay - 400 705. Madam, I am concerned for my client Mr. Rajeeve Kant Laxman, having address at 25, Grimwade Avenue, Croydon, Surrey - CR05DJ, United Kingdom, who has instructed the undersigned to address you as under: Your husband, Late Mr. Dindayal Punnulal Gosain, who was the maternal uncle of my client and had absolute attachment between my client and your late husband. You are my client's maternal aunt. My client is British Citizen and thus he is the Non-Resident Indian settled in U.K. Your late husband has been visiting time & again to meet my client, either for business purpose & for the purpose of availing finance from my client. My client states that he has assisted your husband in purchasing land situated in the MIDC area, Plot No. EL-100, Mahape, M1DC, T.T.C. Indl, Area, Navi Mumbai and have also provided financial assistance in the construction of Factory Premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so one of the Director of M/s. Bobby Electronics Pvt. Ltd. and by virtue of being the Director it was your bounden duty to accept and to act in accordance with the Resolution passed by the Company, dated 02nd Nov, 2006 and submit the required documents to the Registrar of Companies, after the endorsement upon the same. Since you have refused to endorse the documents and further refused to cooperate with my client, and therefore, my client states as follows: (a) Your refusal to accept my client as Director, indicates your motives and intentions. (b) Your said refusal also indicates that you do not wish to fulfil the commitment made by your late husband and maternal uncle of my client, which has accepted by signing the resolution. (c) You do not wish to fulfil the last wish and desire of your late husband. (d) You do not wish to co-operate in fulfilling your obligations towards the shareholder, who is entitled to be the Director in performance of the resolution passed by the Company & who has obligation to perform his part in rendering day-to-day activities and its development but your acts are not in conformity with the purpose and objectives, which are to be fulfilled by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vashi, Navi Mumbai- 400 705, I have to address you as under: - "1. My client denies that her husband in order to reciprocate your client for the assistance provided by your client to my client's husband, wanted to make him the managing director of his company. My client states that to reciprocate your client her husband Mr. Dindayal Gosain had made your client a 50% shareholder in the company. My client state that the alleged resolution dated 3/11/2006 was drafted as per your client's instructions and the signature of my client was obtained forcefully, Late Mr. Gosain was released from S. L. Raheja Hospital on 2/11/2006 itself. A man of common prudence can understand that a man who has been released from the hospital would not take such a serious decision on the same day. 2. My client states that the original copy of the will and testament, allegedly executed by late Mr. Gosain is in the custody of your client only. Your client had handed over a Xerox copy of the will to my client in presence of police inspector Mr. Kendre of Sanpada, Turbje Police Station. However, your client purposely did not even show the original Will to my client for the reasons best known t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... post of Director subject to his acceptance and submission of requisite documents. However, in any event, the impugned resolution was never acted upon and /or implemented. No statutory forms were filed at any point of time. I have, therefore, come to the conclusion that the Petitioner has failed to substantiate the alleged act of oppression with respect to his non-appointment as a Director of Rl Company. Further, it is a settled law that the dispute with respect to directorship of a Company does not fall within the purview of Section 397/398 of the Act as held in the following decisions :- 1. V.M. Rao v. Rajeswari Ramakrishnan [1987] 61 Comp Cas 20 (Mad) "In this case the Hon'ble High Court has referred the following extractive oppression complained must affect a person in his capacity or character as a member of the company, harsh or unfair treatment in any other capacity for example, as a director or creditor is outside the purview of the section". 2. Hanuman Prasad Bagri v. Bagrees Cereals (P.) Ltd. [2001] 33 SCL 78. In this case the Supreme Court Calcutta has observed as follows:- "termination of directorship would not entitle such person to ask for win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholding. 33. It is further contended by the ld. Counsel appearing for the Petitioner that the Respondents have failed to produce any document evidence to prove notice of EOGM dated 20/03/2009 was served upon the Petitioner. Ld, Counsel further submits that the Respondents have also failed to prove their plea that money advanced by the Petitioner was not in his capacity as a shareholder and the transaction between the Petitioner and late Dindayal was personal. It was further contended by the Petitioner's Counsel that the payment of 14000 pounds to the Petitioner by cheque through Mr. V.M. Kapil has also not been proved. According to the ld, Counsel for the Petitioner, the Respondents' case that Petitioner has not advanced any monies is an afterthought. According to him, he has advanced monies to the Respondents Company towards his contribution in the immovable property of the Rl Company and for his share in the share capital of the company. Ld. Counsel appearing for the petitioner on his behalf denied that the MIDC had passed any order for demolition of the factory premises, nor any order has been produced by the Respondents as pleaded by them. According to him, all the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legally in compliance of due process of law, called for Extraordinary General Meeting and altered the share capital of the company with the bonafide intention to save the company. It is, therefore, contended that the R2 in order to dilute the shareholding of the Petitioner altered the share capital without his knowledge. 36. I have considered the rival submissions and examined the documents carefully. It is a cardinal principle of law that if the authorsied share capital in a Company is increased to meet out the requirement if require funds, in that case, such act cannot be said to be an oppressive act. In my view, the reasons stated by the Respondents for alternation in the share capital of the Respondent Company clearly prove that the company needed funds to meet out its urgent requirement and therefore in my opinion, the holding of EOGM and allotment of impugned shares may not be strictly in accordance with the provisions of the Indian Companies Act, but to my mind in the facts and circumstances of the case it does not amount to an act of oppression. Further, I do not find force in the contention of the ld. Counsel for the Petitioner that R2 in order to dilute the shareholding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors of the company in contravention of the mandatory provisions of the Companies, Act without holding any EOGM for this purpose. Further, no notice was served upon the Petitioner intimating him any proposal for appointing R3 and R4 as Directors and the same was done without obtaining his consent and without his knowledge. It was, therefore, contended that their appointment as Directors is liable to be set aside, being non-est, illegal and void. 40. I have carefully considered the submission advanced by the ld. Counsel appearing for the respective parties in this regard. I do not find much force in the contention advanced by the ld. Counsel for the Petitioner for three-fold reasons: a. Firstly, because in my opinion, the consent of the Petitioner was not required under law as contended by him. b. Secondly, because the challenge to the appointment of R3 and R4 as Directors made after a period of two years of such appointment does not carry any weight on account of unexplained delay on the part of the Petitioner. Undisputedly, the Respondent Nos. 3 and R4 were appointed as Directors during the year 2010 while the Civil Suit was pending. The statutory forms with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... access to such statutory records of the Company. I, therefore hold that the Petitioner had failed to substantiate the aforesaid charge by any cogent and reliable evidence. Therefore, this complaint is also found untenable being devoid of merits. 43. The last allegation made by the Petitioner against the Respondent is that R2 to R4 are involved in the siphoning of funds of Rl company arising from the leave and licence agreement with the Rl Company. 44. Refuting the said allegation it was argued by the ld. Counsel appearing for the Respondents that she is a widow having two minor sons. According to ld. Counsel, her husband expired on 25/01/2007. The ld. Counsel submits that the R2 and her late husband were the only two directors of the Rl Company. According to her case, by a Will dated 5/04/2006, the R2 and her minor children were given rights to use the rent received from M/s. Bizerba whereby the said Company has executed MOU / Leave and license agreement dated 30/11/2005 with the Rl Company during the lifetime of the then Director Mr. Dindayal i.e. the husband of the R2. Thus, vide the said Will, the R2 i.e. the widow of Mr. Dindayal and their children are given the rights to use ..... X X X X Extracts X X X X X X X X Extracts X X X X
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