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TMI Blog2003 (12) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... a doctor is the brother-in-law of the 1st petitioner. They among themselves hold 70000 equity shares of ₹ 10/- each out of 1,10,000 shares being the subscribed and paid up capital of the company, thus constituting 63.67% shares in the company. The balance 40,000 shares are held by the 1st respondent. 3. Arguing for the petitioners in CP 20 of 2002, Shri Mookerjee submitted: The setting of the company to provide eye care facilities was conceived by the 1st petitioner, being a famous eye surgeon. The company had obtained a loan of ₹ 30 lacs from West Bengal Financial Corporation for purchase of medical equipments to be used in the eye treatment center of the company and the 1st petitioner has invested huge funds of his own besides investment in the shares of the company. Since he and the 3rd petitioner being doctors by profession could not attend to the administrative affairs of the company, they associated the 1st respondent, who was a friend of the 3rd petitioner, as a shareholder and a director with the responsibility to look after the administration work. However, in breach of his fiduciary duties and to enrich himself at the cost of the company, the 1st responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the various decisions of this Board wherein this Board has directed one of the warring groups to go out of the company. Since the petitioners are majority shareholders, the 1st respondent should be directed to go out of the company. 4. The learned counsel for the respondent submitted: This petition is not maintainable as only minority shareholders are entitled to invoke the provisions of Sections 397/398 of the Act. Further, it is the petitioners who are managing the affairs of the company. The company was not promoted only by the petitioners but also by the 1st respondent who holds 1/3rd of the total paid up capital of the company. The 1st respondent never intended to either appropriate the company's property in his own name or has acted in any manner detrimental to the interest of the company. With a malafide intention, the petitioners convened EOGM on 22.7.2000 to remove the 1st respondent. Even though he had informed the company by a letter dated 19.7.2000 that he would not be able to attend the meeting on 22.7.2000 due to illness and sought for deferring the meeting, the meeting was held and the resolution to remove the 1st respondent was passed. This resolution is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor. In the balance sheet for the year 1998-99 the respondents have shown that an amount of ₹ 5,19,600 had been paid towards unsecured loans which was not actually paid but was pocketed by them. Huge liabilities have been created without justification. The petitioners are guilty of fraud, misfeasance etc. In the winding up petition filed by the petitioner before the Calcutta High Court, he has sought for appointment of a provisional liquidator under Section 450 of the Companies Act, 1956. In view of the mismanagement in the affairs of the company, this Bench should direct an investigation into the affairs of the company. 6. Shri Mookherjee, Sr. Advocate for the respondent submitted: The petitioner has not made out any case for ordering an investigation. This petition has been filed as a counter blast to CP 20 of 2002 filed by the respondents. The petitioner is not interested in the affairs of the company and that is why he filed a winding up petition before the Calcutta High Court. The conduct of the petitioner has been elaborated in CP 20 of 2002. Presently, the company has repaid the entire loan to WBIC, which would not have been possible if there was any diversion or mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the 1st respondent has questioned his removal as a director on procedural grounds, yet, when his removal is on account of his breach of fiduciary duties, his removal cannot be challenged. The issue for consideration is, when the majority shareholders have already removed him as a director, whether they are entitled to seek that either his shares should be forfeited or he should be directed to sell his shares. 9. It is an admitted fact that there are only two groups of shareholders, namely the petitioners' group holding 63.67% shares and the respondent holds the balance shares. The relationship between the two groups is so strained that the petitioners have filed a criminal case against the 1st respondent and the 1st respondent has filed a winding up petition and CP 28 of 2003 seeking for investigation. Thus, it is apparent that both the groups cannot continue together in the company. The provisions of Sections 397/398 are alternative to a winding up petition and therefore, one of the most important aspects to be considered in granting relief is that the survival of the company is ensured by protecting its interests. When there are two warring groups in a company, it is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the petition that when he joined the company, he was unemployed. Since he was in charge of the administrative work in the company, I presume, in the absence of any details to the contrary either in the petition or in the counter in this regard, that he was getting some remuneration as long as he was a director, which, in a way could be considered to be a sort of return for his investment. Since he was removed as a director in July 2000, he would not have drawn any remuneration afterwards. Even though his removal as a director was on account of his own conduct, purely on equitable grounds, I am of the view that he should get a token interest at the rate of 6% from July 2000 till his investment of ₹ 4 lakhs is returned to him. Accordingly, I direct the petitioners/the company to purchase his shares at par with 6% simple interest per annum from July 2000, till the consideration for the shares is paid to him. The consideration for the shares should be paid by a demand draft drawn in the name of the 1st respondent by 31st December 2003. In case the company purchases the shares, it is authorized to reduce the capital of the company to the extent of the paid up value of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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