9911796707
TMI Blog2002 (11) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... promoted in December 1946 at the instance of one late M.R. Mannar Aiyah by two of his sons, namely, M.M. Gurunath ( MMG ), since deceased and Shri M.M. Subrahmanyam (MMS ). Mannar Aiyah had three sons, namely, MMG, MMS (second respondent) and Shri M.M. Shankaranarayanan ( MMSN - 7th respondent). MMG is survived by the petitioners. The respondents 3 to 6 and respondent No. 8 are children of the second respondent. During the year 1943, Mannar Aiyah got salt works known as the Karapad Extension comprising of 50 acres of land to his share in a partition between him and his two brothers. Shri Harikrishnan pointed out that the Karapad Extension is a joint family property of Mannar Aiyah and his three sons MMG, MMS and MMSN. The Company was incorporated with the object to purchase and take over of the rights title and interest of Mannar Aiyah in the Karapad Extension and with a view to adopt the agreement referred to in clause 3 of Articles of Association, according to which, the Company entered into an agreement with Manner Aiyah, whereby he transferred to the Company all his right title and interest in the Karapad extension. MMG, MMS and MMSN are the directors of the Company. Every me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding in USA and Canada respectively since 1972 and used to visit India intermittently. The petitioners were appointed as directors of the Company in the year 1977. The respondents 2 and 7 were carrying on the affairs of the Company. The petitioners came to know in the year 1983 that the affairs of the Company were not being properly managed. The funds of the Company were diverted and some of the assets of the Company were sold by the respondent No. 7. At the instance of the petitioners, a meeting of the respondents 2, 3, 7, 8 was held in August 1984, wherein it was confirmed that the Company should function for the benefit of all the three families, namely, MMG, MMS and MMSN in equal proportion, as evidenced from Annexure P-4. The Company has been selling the entire salt produced by it to the ninth respondent, managed by the second respondent and his family members at a rate less than the market rate, thereby the profits of the Company are being enjoyed by the ninth respondent and the second respondent, in contravention of the agreement entered on 6-8-1984. As per this agreement, all the monetary benefits from the Company should be shared equally among the branches of MMG, MMS and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 4 do not have any known source of income. They have not contributed any money towards the allotment of impugned shares. Therefore, both the allotments should be set aside. Shri Harikrishnan, in support of his legal contentions has relied upon the following decisions:- u Trackparts of India Ltd. v. K.N. Bhargava [2001] 33 SCL40 (All.) to show that the CLB has wide powers for bringing to an end the oppression and mismanagement and can make any order that it considers just and equitable. The division of assets can also be ordered by the CLB in appropriate cases while exercising such powers. u New Horizons Ltd. v. Union of India [1997] 89 Comp. Cas. 849 (SC) to show that in certain exceptional cases the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade and that in the expanding horizons of modern jurisprudence, the lifting of the corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of situation. In this case Shri Harikrishnan pointed out that the CLB should go into the details of the shareholders and the arrangement among them in finding out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respondent is aggrieved on account of these developments and consequently responsible for the present litigation. The petitioners are having grievances against the respondents group as they did not agree to pay the enhanced salary sought by them. The eighth respondent had filed a civil suit in O.S. 4/99 before the District Court, Tuticorin, challenging the holding of the general meeting held on 21-4-1999 yet another suit in O.S. 170/99 after the general body meeting at the instance of the petitioners. Both these suits were withdrawn by the eighth respondent in order to file a company petition. The averments made by eighth respondent in the plaints have been used in the present petition. Thus, the petitioners have put up the eighth respondent. Therefore, there are no bona fides in the present litigation. As the petitioners have not come with clean hands, they are not entitled for any equitable relief from the CLB, in support of which he relied the following decisions:- (a) Anugraha Jewellers Ltd. v. K.R.S. Mani [2002] 111 Comp. Cas. 501 (Mad.). ( b) Nurcombe v. Nurcombe [1985] 1 All ER 65. (c) Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterpris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 20 (Mad.) ( ii) V.B. Rangaraj v. V.B. Gopalakrishnan [1992] 73 Comp. Cas. 201 (SC). ( iii) Radhe Shyam Tulsian v. Panchmukhi Investment Ltd. [2002] 35 SCL 849 (CLB - Delhi). ( iv) Mrs. Deepa Goyal v. Nanda Devi Builders (P.) Ltd. [2002] 35 SCL 842 (CLB). In regard to the allotment of impugned shares, Shri Mylsamy pointed out that on 2-5-1992, the Board of directors resolved to issue 60,000 equity shares of ₹ 5 each to meet working capital of the Company, upon which letters have been sent to the shareholders advising of decision of the Board to issue shares to all the members. The notice was sent to the shareholders by certificate of posting. Thereafter, the Board at its meeting held on 21-5-1992 allotted the shares in favour of the members who had applied for. He pointed out that 10,000 shares were allotted in favour of eighth respondent also. The Company had filed Form-2 with Registrar of Companies on 22-5-1992. The petitioners cannot plead ignorance of the allotment of shares, especially when the Company has been sending notices for the general meetings and Board meetings to the petitioners at their addresses in India. The petitioners had been receiving divide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he eighth respondent. The petitioners though had given proxies in favour of the eighth respondent for attending the meeting held on 21-4-1999, the eighth respondent did not attend the meeting, but came to the Company after the meeting was over. Shri Mylsamy pointed out that during the period from 1990 to 1999, the first petitioner had attended only three Board meetings and one general meeting. The second respondent had attended three Board meetings only and never attended any general meeting. The petitioners failed to attend 13 consecutive Board meetings till the Board recorded in March 1999 the vacation of their office under section 283(1)(g) of the Act. Their investment in the Company is about ₹ 70,000. In regard to the supply of salt produced by the Company to the ninth respondent, Shri Mylsamy pointed out that this arrangement was approved by the Board and accordingly the salt was being supplied to the ninth respondent at the rate higher than market rate. This practice was in force from the year 1958 onwards, which has been continued by the Company. He further pointed out that the main road, water, drainage, canal etc. are common to the Company and the ninth respondent. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. M.R. Mannar Aiyah of Tuticorin whereby Mr. M.R. Mannar Aiyah will agree to transfer to the company all his right, title and interest in the salt works known as Karapad Extension No. 3, Salt Factory (Eastern-Block), and situated at Urani, Tuticorin in terms of the draft agreement expressed to be between Mr. M.R. Mannar Aiyah and the company and signed for purposes of identification by Mr. R. Narasimhachari and the directors shall carry out the same with or without modifications. It shall be no objection to the said agreement that the said Mannar Aiyah the Vendor aforesaid and his son Mr. M.M. Gurunath, Mr. M.M. Subrahmanyam and Mr. M.M. Sankaranarayan, who are interested in the said Salt works and in the consideration payable therefore, are or may be promoters of this company, or that they or some or any of them are directors of this company, or stand in a fiduciary relation to the company or that the terms and conditions of the said agreement have been fixed by them nor shall the said agreement be impeachable on the ground that the Directors of this company are themselves personally interested in the said salt works and in the consideration payable therefore, or that the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first allotment on the ground that they never received notice for the Board meeting, wherein the impugned allotments were said to have been allotted. According to the respondents, the Company had sent notices for the general meetings and Board meetings to the petitioners at their respective addresses in India, though the petitioners have been residing outside India. In this connection, it will not be out of context to refer to the letter dated 7-8-1996 of the first petitioner (Page 17 of Counter) requesting the Company to send monthly payments to his addresses in India. It is also not disputed that the dividend warrants were periodically sent to the petitioners at their addresses in India. There is no record to show that the petitioners ever objected at any earlier point of time that the notices were not sent at their addresses where they have been residing. Moreover, after the allotment of shares the Company had filed Form-2 (page 171 of counter). The Company had allotted 10,000 shares in favour of the eighth respondent who is supporting the petitioners. The Company had disclosed this allotment in the civil suit filed by the seventh respondent in CS No. 614/92 as early as on 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and were getting remuneration for a long time, it would show that the intention of the parties had been to provide all the branches of the family some source of income for the Company. Stopping of this source of income on the ground of vacation of office is oppressive. Therefore, we direct that petitioners who were declared to have vacated office under section 283(1)(g) will be inducted into the Board with immediate effect and they will draw remuneration as earlier. Notices for Board meetings should be sent to them by Registered Post well in advance to enable them to attend the Board meetings and will be subject to disqualification under section 283(1)(g) of the Act, in future. In regard to the mismanagement in the affairs of the Company, the records show that the Company had financial transactions with the ninth respondent since the year 1958 as borne out by Annexure R-17. The Board resolution dated 5-8-1996 (page 179 of counter) shows that the Company was permitted to sell its entire production to the ninth respondent. Moreover, there has been no record to show that the Company suffered revenue loss on account of sale of the salt by the Company to the ninth respondent. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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