9911796707
TMI Blog1992 (9) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... preference shares and petitioner No. 2 holds 275 equity shares in GICPL. This petition came up for admission and interim relief on February 20, 1992, and we directed that GICPL shall not exercise its voting rights in the general meeting of Alaukik Trading and Investment Private Limited without the leave of this Board. We also appointed a Commissioner to authenticate the statutory books maintained by the company. We further directed that in so far as the other interim reliefs claimed by the petitioner are concerned, the matter would be considered in the hearing to be held on April 20, 1992, after hearing all the parties. The hearing proposed to be held on April 20, 1992, was postponed to May 11, 1992. On that day, respondent No. 2, pointed out that before proceeding with the petition, the preliminary objections regarding the maintainability of the petition may be considered, as an identical matter was already being heard by the Gujarat High court under Section 397/398 in a petition filed by Smt. Shanta Devi Gaekwad and others against the company and certain others. On May 11, 1992, respondent No. 3 has also filed an application praying for staying the hearing by the Company Law Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city are parties in both the proceedings. (iv) Almost all the other respondents are common in both the proceedings. 4. Regarding the commonality of the issues involved in both the proceedings, it is contended that the issues before this Board are directly and substantially the same as in the proceedings before the Gujarat High Court. It is further pointed out that the reliefs sought are also substantially the same. In support of the stay application, the learned advocate referred to the proceedings before the Gujarat High Court regarding withdrawal of the petition in which it was contended by the opponents that the proceedings before the Company Law Board are comprehensive and exhaustive and cover all the issues before the Gujarat High Court. However, the Gujarat High Court rejected the request of the petitioners to withdraw the petition with liberty to file fresh proceedings before the Company Law Board. It was also pointed out that counsel appearing for the petitioners are also common in both the forums. 5. In view of the above, it is pleaded in the stay application that considering the identity of the parties, identity of the subject-matter, identity of the reliefs clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Counsel also referred to the decision in Sheikh Mohd. Yasin v. Mohd. Abdur Razzaque, AIR 1954 Pat 10 and Bhagwat Prasad Singh v. Sudheshwar Singh, AIR 1954 Pat 11, and pointed out that in a matter which is not covered by Section 10 or by any other express provision of the Civil Procedure Code, it is competent for a court to exercise its inherent jurisdiction to do that justice between the parties, which is warranted under the circumstances and which the necessities of a particular case require. It was pointed out that even when the subject-matter is not identical in both the suits, still where because of identical pleas taken in both the suits by the parties, the decision of the second suit depends on the decision in the first suit, justice requires that the later suit should be stayed till disposal of the first. The decision of the Delhi High Court in Mathur (V.K.) v. K.C. Sharma [1987] 61 Comp Cas 143 was also referred to by learned counsel for the respondents to point out that the petition before the Company Law Board is nothing but to fight for the same grievances which are being agitated before the Gujarat High Court inasmuch as the case of the main petitioner, Smt. Shanta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of the stay application and pointed out that the provisions of Sections 10 and 151 of the Civil Procedure Code have no application either to the present proceedings or to the present case as these sections apply to suits only. It was also contended that the parties before the Gujarat High Court and before the Company Law Board are different and are entitled to agitate their rights as members separately. It was also submitted that none of the parties in either of the proceedings are claiming or enforcing any rights claimed through another. Counsel argued that the petitioners before the Company Law Board have an independent right to agitate their rights as members of the company and there is no other forum where they can file a petition under these sections. It was also pointed out that any orders passed by the Gujarat High Court in C. P. No. 51 of 1991, shall not be binding on the petitioners before the Company Law Board as they are not parties before the High Court. He submitted that Smt. Divyani Devi Gaekwad resigned as a trustee of Shri Jaisingh Ghorpade Trust in 1985 and to support this he filed a copy of the resolution of the board of trustees in this regard. He conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the issues and reliefs have been established and as the provisions of Sections 10 and 151 of the Civil Procedure Code are not applicable to the present proceedings, the request for stay should be rejected. He also referred to the decision in Ram Charan v. State of U.P., AIR 1979 All 114, in which it was held that the provisions of Section 10 of the Civil Procedure Code come into operation only when the subject-matter of the two sets of the proceedings is identical. Shri Desai also pleaded that even if the Bench comes to a conclusion to stay the proceedings in the exercise of the inherent powers of the Board as per provisions of Regulation 44, his request pending from February 20, 1992, for interim reliefs should be considered. He pointed out that in the case of Senaji Kapurchand v. Pannaji Devichand, AIR 1922 Bom 276, it has been held that the court is not prevented from making any interlocutory orders, such as orders for a receiver, or an injunction, or an order for attachment before judgment given for staying the proceedings. He also referred to the decision of the Allahabad High Court in Kulsumum Nisan (Smt) v. Md. Farooq, AIR 1969 All 479, in which it was held that the object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the context of Section 10 of the Civil Procedure Code relates to the jurisdiction of the court and, therefore, affects the rights of the parties. The various cases referred to by the learned advocates clearly indicate that whenever there are parallel proceedings before two concurrent judicial authorities one proceeding is stayed in order to avoid conflicting orders, but there is no bar on instituting such proceedings except where such proceedings are instituted with a view to abuse the process of courts. Considering the facts of this case, we find that the jurisdiction under Section 397/398 has been transferred from High Courts to Company Law Board with effect from May 31, 1991, and members of a company who fulfil the conditions laid down under Section 399 of the Companies Act, have no other forum for redressal of their grievance except to seek jurisdiction of the Company Law Board. The fact that one set of shareholders have already sought the jurisdiction of the other authority before May, 1991, will not bar the right of another set of shareholders to approach the competent authority, namely, the Company Law Board now. Even if there had been no change in the jurisdiction, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o file the final orders of the Gujarat High Court, as and when delivered, so as to consider this matter further. 11. Shri Ashok Desai, senior counsel, referred to paragraph 8 of the petition which contains the interim as well as final reliefs sought and requested that in addition to the reliefs already granted on February 20, 1992, the following prayers for interim reliefs may be considered : (i) Freezing the voting rights in respect of all shares issued beyond 425 shares originally issued in GICPL para (d). (ii) The existing board of directors of the company to be superseded and an independent board of directors be appointed and a neutral chairman may be appointed for the board meetings and meetings of the shareholders para (h)(b)(i). (iii) Pending the final disposal of the petition, direct GICPL and respondents Nos. 2 to 10 to produce and deposit all books of account, register of members, register of transfers, minute books and other statutory records.--para (p). (iv) Restrain GICPL from selling, disposing of alienating, encumbering or dealing with any of its assets except under an order of this Board--para (v). (v) Restrain the board of directors of GICPL from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ini Gaekwad, daughter of SSG, and 1,475 shares to Sangram Singh Gaekwad, Hindu undivided family, who were not the members of the company at the relevant time. It was further pointed out that 1,500 shares were allotted to Smt. Asharaj Gaekwad wife of SSG, when no requisition was received from her. Similarly instead of giving 500 shares to Smt. Mrunalini Devi Puar as per her requisition, 1,000 shares were allotted to her. It is the contention of the petitioners that 7,975 shares allotted to these 5 persons were not according to the resolution passed by the shareholders and management committee and out of this illegal allotments, 7,475 shares were allotted to the SSG group. It was further pointed out that because of this allotment the shares of Shri Sangram Singh Gaekwad and his family members have gone up from 1.41 per cent to 86.69 per cent and the other shareholders who were holding 98.59 per cent were reduced to a minority of 13.31 per cent In this connection, Shri Ashok Desai pointed out that the purported minutes of the committee meeting held on March 21, 1988, filed at annexure E , page 82 of the petition, were totally fabricated, as they are in contradiction with the stand ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n breach of his fiduciary obligation to the existing majority shareholders. 13. Shri Desai then referred to another episode in which it is stated that respondent No. 2 has indulged in fabrication of the company records. In this connection, he referred to the minutes of the board meeting held on March 30, 1990 (extract filed at pages 94 to 100 of the petition), and pointed out that at this meeting respondent No. 2, SSG group's transfer of 9,415 shares out of 9,481 shares, held by them to Indreni Holdings Pvt. Ltd. was approved. In support, he also referred to the entries made in the register of members extracts of which are filed at page 91 of the petition. He also pointed out that the return filed in January, 1991, (annexure T ), shows that shares were held by Indreni Holdings Pvt. Ltd. as on December 20, 1990. It is the contention of the petitioner that this fabrication was done by respondent No. 2 on coming to know that these transfers have been challenged by some shareholders who had filed a suit in Rajkot (305 of 90) and Baroda (867 and 872 of 1990) challenging the validity of the transfers and, inter alia, claiming pre-emptive rights as per articles 7 to 13 of the arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors including Smt. Asharaje, wife of SSG, were appointed to obtain complete control of the hoard and the management committee was dissolved and Smt. Asharaje was appointed as executive director with wide-ranging powers to invest and sell shares and thus obtaining full control of the day-to-day management of the company. In this meeting, transfer of 23 shares of FRG to his mother and 9,481 shares of the SSG group to Indreni Holdings were approved. Because of the legal difficulties about Indreni shares , the SSG group was apprehensive of losing the control of GICPL and, therefore, indulged in writing false minutes of the annual general meeting held on December 20, 1990. This was followed by passing of resolutions at the extraordinary general meeting held on January 14, 1991, to shift the registered office from Indumati Mahal, Baroda to Surat, appointment of SSG as permanent director and chairman of the company, amendment of articles of the company and removal of certain directors who were on the board even when FRG was in control of the company. He then referred to the changes that have occurred in the board and how SSG has, over a period of time, in utter violation of the trust of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res reserved for FRG and she has received dividends on these shares and, therefore, there is acquiescence on her part, and she cannot use it as a ground for alleging oppression after getting the benefits on the same. 18. Shri Chagla then pointed out that the petitioners have not placed all the facts before the Company Law Board regarding allotment of shares. He pointed out that the additional equity in GICPL was being raised as the company was not in a position to service interest payments and other expenses. None of the family members was interested in taking up shares as GICPL was not doing very well. In the context of this, SSG and his family members took up the shares which were not subscribed by other family members. He pointed out that the annual returns made up to September 30, 1989, of these allotments has been filed on November 30, 1989, by Shri Shinde and Rana who are the petitioner's supporters and share certificates issued were signed by Shri Shinde, SSG and Shri Khande. After this allotment, an annual general meeting was also held on September 30, 1989, and members belonging to the petitioners' group including the petitioners in the present case, and the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n September 16, 1992, Shri Soparkar, in support, pointed out various documents filed by the petitioners and the respondents in the case before us and also in the case before the Gujarat High Court. In particular, he pointed out that the charge of fabricating the minutes of the managing committee meeting held on March 21, 1988, is baseless, as the respondents have not relied on these documents and these documents were filed by the petitioners' group in the Gujarat High Court case. He also pointed out that in spite of the request to the petitioners to show the originals of these documents, the petitioners have not co-operated in this matter and therefore, they cannot make allegations that this document has been fabricated by the respondents. He reaffirmed that the documents filed at annexure D (page 80 of the petition) do show the correct state of affairs of what happened in the management committee meeting held on March 21, 1988. He pointed out that at that meeting, a decision was taken to make allotment to four members and the shares would be allotted as and when the amounts were received from these four members. Referring to pages 20 and 74 of the affidavit in reply filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al difficulties of GICPL also arose as 80 per cent of the investment of GICPL was in the shares of Baroda Rayons and Baroda Rayons had not paid dividend. In view of this, Shri Soparkar pointed out that probably, the family members had no confidence that GICPL will be in a position to give adequate return on the equity investment and, therefore, some of them invested in interest bearing loans to the GICPL rather than in equity. In this connection, he also pointed out that a specific averment has been made in the affidavit of SSG that the other family members also failed to contribute to the rights issue of Baroda Rayons made in the year 1988. 22. Shri Soparkar then dealt with the episode relating to transfer of shares to Indreni Holdings. He pointed out that the bona fides of the respondents would be clear from the notice dated November 15, 1989, meant for all shareholders indicating the proposed transfer of shares and providing the members an opportunity to indicate their no objection to the proposed transfer. He stated that SSG had instructed Shri Khade, company secretary, to issue the notice. In the board meeting held on December 27, 1989, a reference was also made about this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents from the Company Law Board, delay and acquiescence with regard to the matters complained of, the petitioners' ventilating private grievances rather than grievances as shareholders and the pending matter before the Gujarat High Court. He also pointed out that at the highest, the allegations in the petition disclose only a single irregular act, and do not establish any continuous, series of acts oppressive of the petitioners. He pointed out that neither a case for winding-up, nor any allegation to support the plea of oppression by the management has been made out by the petitioners. While dealing with the allegation of the petitioners regarding hijacking of GICPL by the respondents, Shri Chagla pointed out that it is the petitioners who had tried to hijack the subsidiary of GICPL, namely, Alaukik Trading and Investment Co. Pvt. Ltd. (Alaukik). He pointed out that four attempts were made by the petitioners group to hijack Alaukik. In or about October, 1989, the first attempt was made when 1,500 shares were issued in the name of Dr. Mrs. M. Puar, who was not a member of Alaukik at that time and, thus, diluted the majority shareholding of GICPL by reducing it to a minorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Gujarat High Court. Referring to the various reliefs sought by the petitioners, Shri Chagla pointed out that if the Bench is inclined to vacate the ad interim order dated February 20, 1992, on the ground of suppression of facts, further relief should be denied for the same reasons. Shri Chagla pointed out that there were no allegations about mismanagement by the board of directors of the company. He pointed out that no changes were made in the board of directors for two years after the alleged hijacking of the company by allotment of further shares to SSG and his family members. However, he conceded that in the extraordinary general meeting held on January 14, 1991, Shri P.U. Rana and Shri H.A. Shinde and in the extraordinary general meeting held on July 10, 1991, Shri S.G. Shirke were removed from directorship after giving a proper explanatory statement in the notice issued for the meetings. He pointed out that the company had earned a profit of ₹ 1.59 crores on account of new activities developed by respondents Nos. 2 and 3 including from the export of cotton bales. He also pointed out that while the petitioners were opposed to making further investment in the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the respondents have spoken eloquently about the suppression of certain documents and proceedings when the petitioners sought our ex parte interim orders of February 20, 1992, the least that was expected of the respondents was not to be guilty of doing the same things. We also pointed out that the ground on which the appeal was filed on the alleged oral orders is contrary to what had happened in the hearing before us and no oral order was pronounced except to state that orders in writing will be issued on the stay application only at the conclusion of the hearing of the stay application and request for interim relief. In fact, till the hearing of September 24, 1992, we had not heard counsel for the respondents on the point of vacation of the interim orders issued on February 20, 1992, which is also a part of the stay application and, therefore, there was no occasion to issue any orders till the hearing was complete. 26. In the hearing held on September 25, 1992, Shri Ashok Desai, senior counsel for the petitioners pointed out that there are four different versions given by the respondents about allotment of shares and there are obvious contradictions in the statements mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act are strictly made applicable, the entire allotment beyond 425 shares should be set aside as there are no offer letters after March 10, 1988, no applications for shares and all relevant records are full of contradictions. He also pointed out that the advocate of the respondents has stated that the petition under Section 397/398 before the Gujarat High Court is not yet admitted and if we accept this, their question regarding staying of the present proceedings does not arise. He also prayed that if we stay the present proceedings, the stay should automatically lapse if the application for withdrawal of the petition before the Gujarat High Court is allowed. He also requested that the statement made at the Bar by the respondent's counsel that the respondents will not oppose the amendment application of the petitioners in the proceedings before the Gujarat High Court, should be recorded. 28. He then requested for interim relief in the nature of reconstitution of the board of directors with two-thirds of the directors representing both the parties and an independent chairman without whose concurrence GICPL will not be able to raise loans, exercise voting rights relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further interim reliefs prayed for by the petitioners and the decisions of various court cases referred to by them. Any order at this stage freezing the voting rights in relation to the shares issued beyond the 425 shares, without providing a further opportunity to both the parties to substantiate their arguments, will not be appropriate. At this stage, the only protection the petitioners deserve is to maintain status quo so far as the petitioners' representations on Alaukik are concerned, and also protection of their interest in GICPL as requested by the petitioners. In our opinion, a representative of the petitioners' group on the board of directors of GICPL and appointment of an independent chairman of the board of directors who will also preside at the meetings of the shareholders would take care of the concern expressed by the petitioners during the hearing. Since the petitioners will have a representation on the board of GICPL and an independent chairman will ensure functioning of the company as per the provisions of the Companies Act, we do not think that it is necessary to continue our interim orders passed on February 20, 1992. 32. Accordingly, we stay the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
