9911796707
TMI Blog1998 (12) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... ffairs of the company and the management thereof are being conducted in a manner oppressive to some members of the Company. Be it noted that isolated act of indiscipline or indifference or even deprivation by itself would not bring home the charge of oppression - there shall have to be a continuity of a burden-some, harsh and wrongful conduct. As a matter of fact, the conduct of the oppression towards oppressed shall have to be such so as to evince an existing element of absence of fair dealing or lack of probity. The observations of the Supreme Court in the case of Shanti Prasad Jain v. Kalinga Tubes AIR 1965 SC 1535, lends support to the above. The discretion spoken of earlier and as is available within the meaning of the statute, however, knows no fetters by reason of specific language used, to wit, "make such order as it thinks fit", by the law makers in Section 397 of the Companies Act. 2. Before proceeding further, it would, however, be convenient to advert briefly to the factual matrix of the matter under consideration. 3. The Deccan Enterprises Private Ltd., being the respondent-company, was incorporated under the provisions of the Companies Act on 15-4-1966 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being one of the five brothers, including the ninth and seventh respondents, has in fact taken all necessary steps to promote the Company, though, however, the signature of Sri O.P. Jalan is significantly absent in the Articles an Memorandum of Association. As an explanation thereto Mr. Mukherjee contended that during February, 1966, the marriage of Sri O.P. Jalan was fixed at Calcutta and as such he was required to go to Calcutta. But, since the printer could not deliver the printed copy of Memorandum and Articles of Association before Sri O.P. Jalan left for Calcutta an in order to avoid any delay in the incorporation of the Company, Sri UN. Jalan, being the elder brother of Sri O.P. Jalan, was requested to sign the Memorandum of Association along with Sri R. Khemka, who was working as a deputy to Sri UN. Jalan. Be it noted that while deposing Sri O.P. Jalan in no uncertain terms stated that even before the incorporation of the Company, he had applied to the Directorate of Industries for allotment of land in a private Industrial Estate at Balanagar in his personal name and got two plots allotted being B-58 and B-59 and subsequently also obtained the third plot being B-60. This ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (14.67%) (14.65%) (16.08%) (12.88%) (12.88%) Miscellaneous - - 500 500 925 (2.00%) (2.00%) (1.85%) Total 7500 10000 25000 25000 50000 (100%) (100%) (100%) (100%) (100%) 6. It is to be noted that Shri R. Khemka and Sri R.N. Jalan were the directors since its inception and the appellants' principal contention is that the understanding of the Khemkas was to the effect that Sri O.P. Jalan, said to have been brought from Calcutta subsequently to look after the business, was to function under the definite guidance of Shri R. Kfiemka and Shri UN. Jalan. The whole tenor of submissions of Mr. Sarkar is that two groups, viz., Khemkas and Jalans were to function as partners and reposed implicit faith on each other. As a matter of fact, since its inception right till 1985, the proportionate share-holding in the company was in the ratio of 1/3rd and 2/3rd between Khemka and Jalan groups and this was so in spite of increase in share capital from time to time prior to 1985-86. 7. On the factual score, two diametrically opposite versions are available; one pertaining to participation and active assistance of Shri H Khemka and Shri R.N. Jalan which has led to the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 20-8-1986, 20-9-1986, if there were any such meeting or meetings and that each of the said meetings are illegal and the resolutions if any passed there at are void and inoperative. (iii) Declare that the purported allotment of further/fresh shares in the years 1985 or 1986 if any, by the Board of the respondent No.1 is void, illegal and to injunct the respondent No.2 and 3 as Secretary and Managing Director from permitting any rights of such allottee share-holders under such further/fresh allotment including the voting right in respect of such further/fresh allotted shares. (iv) Declare that the respondent No.3 is not the Managing Director of the Company and/or in the alternate to terminate his appointment as Managing Director on the ground that he has shown himself to be unfit to be entrusted with the management of the company. (v) Declare that the respondent No.2 is not the Secretary' of the Company and in alternate to terminate his appointment as the Secretary on the ground that he has shown himself to be unfit to be entrusted with such functions. (vi) Restrain the respondent No.2 and 3 i.e., Secretary and Managing Director by an injunction From giving effect to any re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in in elaborating the same with great lucidity and since the matter has been dealt with in the manner as it has been, we refrain ourselves from dealing with the same once again in this judgment on the factual score excepting the essentiality, more so by reason of the stage of the proceeding as at present. 12. Be it noted that the learned single Judge after considering the respective pleadings initially framed issued on 8-4-1998 in the manner following: "1. Whether the petitioner No.1 and respondent No.9 and members of their family and associates have been excluded from the joint management and participation and enjoyment of the benefit of the 1st respondent Company and of the foreign joint venture Company from and by about 1983? 2. Whether the allegations of Oppression of the petitioner's and respondent No.9, their family members and associates, share-holders and of mis-management of 1st respondent Company, by respondent No.3 and his family members and associates, prejudicial to the interests of the company, are made out? 3. Whether the alleged issue of additional shares of ₹ 5 lakhs in the year 1985 of the 1st respondent Company, is valid, legal and binding on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther there are any acts of oppression of the minority shareholders of the company by any other group of share-holders or majority shareholders' - and relevant lo the above is the issue -'whether petitioner-R. Khemka and ninth respondent and/or any other person on their behalf, as alleged by the third respondent, consented to the allotment of additional shares to several other persons and if they have not consented to the above, whether allotment of shares, as alleged by the petitioners, is an act of oppression attracting action under Section 397 and/or 398 of the Companies Act. The main issue, as stated by us above, it is obvious, is comprehensive enough to bring into its fold all questions as to maintainability of an action under Section 397 of the Companies Act on the suggestive of the presence of any act of oppression leading to the instant petition - Company Petition No.27 of 1987." Thus, it is not necessary for this Court to decide all the issues which are framed earlier, but the relevant issues which are required now to be proceeded with are as follows: (a) Whether there are any acts of oppression of the minority shareholders of the company by any other group o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., I am surprised to learn that various Board Meetings and general meetings of the Company have been held for the last 18 months whereas during this period I have received no Notices, agenda or invitation for any of these meetings. I have also not received, as yet, the annual report and balance-sheet for the year ending 31-3-1984 for my signature and records. Since last year I have also not been receiving the monthly reports of the company as was our usual practice. I would, therefore, request yon to please let me have copies of the minutes of various board and general meetings since June, 1983 (or my perusal and record and also a copy of the annual report and balance-sheet of the company for the year ended 31-3-1984. In future I would request you to please send me the notice for the board and general meetings by "Reg. Post Ack. Due" at my above address so as to reach me a week before the date of the meeting. The monthly reports of the company may also be sent to me regularly as usual in future. Sd/- R. Khemka." 16. The reply letter from the Managing Director, Deccan Enterprises Pvt. Ltd., dated 30-4-1985, being Exhibit A22, is also set out herein below for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of events expected that the 18 months period would be allowed to be lapsed before a complaint is lodged to that effect - we are afraid, the answer cannot but be in the negative. 18. The letter dated 30-4-1985 (Ex.A22) categorically records that all notices, agendas and other documents in connection with the meetings of the Board of Directors and the share-holders of the Company held during the period mentioned in the letter dated 25-3-1985 (Ex.A21) were duly sent to each of the Directors of the company including the complainant as was being done in the past. The letter further records the discontinuance of the practice of despatching of the monthly reports to each of the Directors individually -there was, therefore, a practice which has since been abandoned but, there was no whisper in regard thereto at any point of time earlier than March, 1985. There is not even any immediate reaction from Shri R. Khemka either - if there was any deprivation or any oppression and the complaint had some justification in the normal course of events, there would have been some reaction from Shri Khemka's end. Be that as it may, there is thus a two pronged attack on to the management: one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Balance-Sheet for 1983-84 it was shown as if the Company had incurred a loss of ₹ 13 lakhs but the same does not reflect, as a matter of fact, the real financial position but it is the resultant effect of manipulated accounts and there has been a systematic siphoning of the funds of the Company by way of money lending to related concerns and in fine Mr. Sarkar stated that there has been thus a deliberate oppression and systematic refusal to permit participation in the management on the part of Sri O.P, Jalan so far as Shri Khemka is concerned, which however, did not find favour with the learned single Judge. The learned single Judge in paragraph 96 of the judgment recorded: "96. With regard to the alleged oppression on the ground of (a) above, it is the case of R3 that there was total disinterestedness on the part of the PI and R9 in the management of Rl company. PI never attended the meetings and he continued to patronise the company APPL set up by P3. There is also evidence to the effect that APPL established by the P3 has been supplying the same products which were hitherto being supplied by Rl company and that the purchase of rubber rings by HIL from Rl comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of procurement of orders for Deccan Enterprises from Hyderabad Industries Limited. In fact, the main survival of the respondent No. 1 (Deccan Enterprises) were had from Hyderabad Industries Limited. The exclusion of Deccan Enterprises and inclusion of Andhra Polymers Pvt. Ltd., in the matter of placement of orders cannot be said to be an instance without any significance since the same was effected during the continuance of both Shri R. Khemka and Shri K.N. Jalan with Hyderabad Industries Limited. As a matter of fact there has been a definite attempt to avoid the meetings of the company after commencement of the business of a competitive industry viz., Andhra Polymers Pvt. Ltd., and Ramak Enterprises Pvt. Ltd. The records depict that after March, 1983 Shri R. Khemka never attended any of the meetings of the company. The records further depict that as early as 21-8-1984 the Board of the respondent No.1 company passed a resolution withdrawing the nomination of Shri Mahesh Khemka from Directorship of the Board of the joint venture company in Saudi Arabia. This meeting was held at Calcutta and notices were issued to all the Directors of the Board. Inspite of such a notice, Khemka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Directors and to all the share-holders fixing the last date of receipt of the applications up to 15-2-1985 and in the Board meeting held on 28-2-1985 it was resolved to allot further shares to the share-holders who made applications and the allotment of shares were effected in accordance with the provisions of law. As a matter of fact, Mr. Mukherjee contended that the shares were issued on 4-3-1985 and a report to that effect was filed before the Registrar of Companies on 21-3-1985 and there is no question of the issue being declared invalid or illegal or in any way tainted. In the Board meeting held on 15-1-1987 the respondent No.7 Shri Sr'marain Jalan was inducted as an Additional Director and even though the petitioner No.1 Shri R. Khemka indicated his dissent the majority, however, did lend concurrence and as such the resolution was adopted with a majority. It has been the definite case of Mr. Mukherjee that by reason of active connivance of the respondent No.9 and the appellant No.l there has been substantial reduction in sales and this is, however, apart from the general recession in the total export market. The records depict that in 1984-85 and 1985-86 the company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed that various powers were given to R9 in respect of Nucon Company and also the documents and records were handed over after he took over Nucon (Exs.13300, B243, B296). Even though his disinterestedness is not directly established, the fact remains that the decision for additional share capital was taken in the meeting held on 26-11-1984 and other meetings, he failed to respond. Therefore, it is to be only presumed that he was not interested. Moreover, the way in which he initiated the litigative process from the alleged letter dated 16-8-1984 it was established that he was not coming with true facts. Hence, the contention that R9 would have purchased the additional shares had he been offered cannot be swallowed with confidence." 26. Mr. Sarkar, on the issue of increased share capital, strenuously contended that there was, as a matter of fact, no necessity for increase of the share capital as the company was rather in a prosperous state and it has its reserves much more than the share capital. Similar was the submission made before the learned single Judge and before we refer to the observations of the learned single Judge it would only be proper in the fitness of thing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-payment of premium by you all the shipments made during the period of cover under the said policy. We shall, therefore, be glad if you will please settle the matter with ECGC and confirm to us having done so, to enable us to obtain fresh cover of ECGC for all the export limits presently enjoyed by you. 2. Incidentally, we invite your kind reference to our letter No. SIB 845 dated the 16th June, and shall be glad if you will please advice us whether the paid-up capital is increased to ₹ 10 lakhs, to enable us to examine your proposal for enhancement of Working Capital requirements. 3. Please treat the matter as most urgent. Yours faithfully. Sd/- Manager." Subsequent thereto, (he records depict that on 16-7-1981 the respondent No.1 sent a reply, being Ex.B31, inter alia recording the following: "..... 1. We are agreeable to increase our paid-up capital from ₹ 2.5 lakhs to ₹ 10 lakhs by capitalisation of our reserves and surplus and are doing the needful in the matter shortly." Therefore, there is, thus, a presenting need for the purposes of increase of share capital. Mr. Sarkar contended that while some documentary evidence remained on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not and cannot arise. The subscription for increased share capital is a genuine requirement of the company in order to fulfil its obligation. It is for the company to decide what and which method to be applied for the purposes of increased share capital and not for the Court to suggest what would have been better for the company. The jurisdiction of the Court to interfere in the ordinary administration is restrictive in nature and unless it is shown that there is an utter mala fide involved, question of there being any interference would not arise. We also do feel it expedient to record our concurrence with the observations of the learned single Judge that in the contextual facts there cannot be any mala fides in the matter of increase of share capital and it is only to fulfil the obligations, as has been recorded in the letters noted herein before in this judgment, such an increase was effected. 29. The factum of the assurance being given relates back to 1981 and at that juncture there was no complaint whatsoever and the parties were proceeding with amity, cohesion and cooperation amongst themselves, but the relationship was strained subsequently and in July, 1985 the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri R.N. Jalan, excepting, however, some corrections incorporated at page 3 of the document. Though rather longish in nature, the same is however set out herein below for proper appreciation of the same: "Whereas Mrs. SKJ/RNJ/SGJ/SNJ/OPJ has been carrying on the business in name of companies firms, trusts, etc., as per Annexure I enclosed. Whereas this business was a joint family business for all practical purposes and the constitution, share-holding, partnership in various companies, firms were for sake of meeting the various statutory requirement of various enactments only. That whereas the percentage of shareholding, percentage of partnership has no relevance for practical purposes and that each member is entitled to l/5th share of the total assets of the family. Whereas dispute has arisen between members and with a view to avoid litigation and to arrive at an amicable settlement the parties discussed the issues in various meetings with Mr. B.L. Jalan and Mr. Rajaram Musaddi. As a result of these discussions agreement has been arrived on most of the issues as listed in Annexure II, III & IV. That whereas certain issues have remain unresolved as per Annexure IV it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets will be made good by payment by each group to the other group. At that particular time, Mr. R.N. Jalan was holding by way of loans and advances more than ₹ 1.00 crore in Nucon and in the personal accounts of himself and his family belonging (o the company firms and individuals of the other groups' families. In order that he is not required to return his amount, Mr. R.N. Jalan started undervaluing the value of the shares/assets, etc., allotted to other group. In spite of repeated meetings no solution could be arrived at mainly because of the unreasonable and uncomprising stand taken by Mr. R.N. Jahiu. Even my father Mr. S.K. Jalan's repeated efforts failed. The matter was therefore brought to the attention of Mr. Rajaram Musaddi a prominent industrialist/businessman at Calcutta and a close relative of the Jalan Family to arbitrate on this issue. Accordingly, all the Jalan family members sat down at Calcutta and a draft was prepared by Mr. R.N. Jalan as per Exs.B157, 157A and 157B in his own handwriting to refer the disputes to Mr. Rajaram Musaddi for settlement of the values of shares, assets, etc., and to complete transactions between the family members to finall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrue and demonstrate the extent of untruth which Mr. R.N. Jalan can speak to extract money from me. In August, 1990, my eldest brother B.L. Jalan tried to mediate and arrived at Hyderabad on 29th August, 1990. During mediation by Mr. B.L. Jalan in August, 1990, Mr. R.N. Jalan once again changed the date of valuation of shares of companies from 31-7-1984 to 31-3-1984. This fact is duly recorded in Exb.B269. The additions and corrections in the said typed document are in the hand writing of Mr. B.L, Jalan. It was also stated by Mr. R.N. Jalan that Khemka's shares has been settled by him for ₹ 25.00 lakhs which is as per Private Agreement Exb.No.B70 and B7` and should be paid by both parties equally. Accordingly, Mr. B.L. Jalan has mentioned that both Mr. R.N. Jalan and Mr. O.P. Jalan will pay Khemkas ₹ 25.00 lakhs in the ratio 50:50." 33. In this context, it is significant to note the evidence of Sri R.N. Jalan as well Sri R.N. Jalan in his deposition on 5-11-1996 stated that Exb.8157 is in his handwriting and it is not true to suggest that it represents the family settlement entered into by Jalans' family in August/September, 1984. Shrj R.N. Jalan continue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of new shares. The first of the two letters is dated 21-1-1985 being Exb.B201, the signature whereof stands admitted. It is a type-written document in the manner following: "R.N. Jain Shubham Gulmohar Avenue, Rajbhavan Road, Hyderabad, 21 January 1985 Respected Father, I have to inform you that I am not interested to invest in DEPL's new share issue which is to Omprakash's share. In fact Nucon requires substantial funds and I am unable to spare an finance at present. Khemkas have also refused to contribute and I enclose Mahesh's letter dated 16-1-1985 in this regard. With respects, Yours obediently, Sd/- Ram Niranjan Jalan (R.N. Jalan)" The words "which is to Omprakash 's share" run counter to the case made out by Mr. Sarkar to the effect that there was never any settlement. As noted above, the signature stands admitted, though, however, it has been stated that certain blank documents were kept both with the father and O.P. Jalan, which have been utilised by father at the instances Shri O.P. Jalan. We are not, however, very much impressed with the submission. Though, however, we are not expressing any opinion, but suffice it to recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, 1986 being Exhibit 'A52', which reads as follows: "Pradip Kumar Khaitan Advocate 9, Old Post Office Street Calcutta -1 03-07-1986 Tele: 23 3197, 234388 Telegram: Khaitanco Cal Telex: KCL CA 2187 My dear OP, Please refer to your letter on 25th June, 1986 and the conversation i had with you as well as with Shree Narayan. It was agreed that the payment for the shares would be made within June, 1986 although you would attempt to do so in April, 1986. Before 1 left for abroad in the last week of May, I had informed everybody that I would definitely be back on 22nd June, 1986. I would therefore have been happy if the payment could have been completed within June, 1986. As discussed with your and Shree Narayan, kindly arrange for the payment within next week on Shree Narayan's return from Hyderabad on Monday. The exact date convenient to you should be communicated to the Khemkas so that they may also be present to receive the money from you. With regards, Yours sincerely, Sd/- Mr. O.P.Jalan 5-2-175/1 Rashtrapathi Road Secunderabad-500003 Cc noo : Mr. Mahesh Khemka 6-3-1089/A/3/7 Gulmohar Avenue Raj Bhavan Road Somajiguda Hyderabad-500 482" 37. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already set out above. Therefore, even after the additional allotment of shares in favour of R3, it cannot be said that the position of PI and R3 changed in a manner prejudicial to their interest or their members. As already found by me, the genesis took place when P3 was not properly accommodated in 1982 when he returned back from Saudi Arabia and the crisis which was brewing from 1982 took its deep route in 1985 when P3 was withdrawn from the Board of ARIL Saudi Arabia. This lead to the filing of the suit by PI and exchange of letters between PI and R3 and simultaneously the correspondence was started by R9 with R3. Even though the additional issue was never focal issue, yet it was made the basic issue in this Company Petition, for sustaining the alleged acts of oppression. Even otherwise what is sought to be established was that PI and R9 in their capacities as Directors and not as shareholders were subjected to oppression. That is not the requirement of law." 39. We do feel it expedient to record our concurrence to the observations of the learned single Judge in the contextual facts. 40. As noted above, there ought to be some burden-some, harsh and wrongful conduct of on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the company to a particular person may be treated as an act of 'oppression'. The Calcutta High Court decision is, however, clearly distinguishable on facts, moreso by reason of the discussions as above pertaining to the issuance of notices and the documentary evidence in support of the disinclination of both Shri Khemka and Shri R.N. Jalan to participate in the new issue of shares. 42. In the oft-cited decision of the House of Lords in Scottish Co-operative, Ltd., v. Meyer (1958) 3 All ER 66, Viscount Simmonds stated in no uncertain terms that the oppressor must exercise the power and authority in a manner burden-some, harsh and wrongful. In the facts of the matter under consideration, question of there being any burden-some or wrongful conduct does not and cannot arise as detailed more fully herein-before. 43. The learned single Judge, while dealing with the matter observed that oppression and mis-management being the basic and foundational concepts in the Section are left by the Parliament without defining them and when once it is left without definition, the task of the Court is difficult and more responsible. The learned single Judge recorded that the word 'oppr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of absence of mutual confidence per se between partners, or between two sets of share-holders, however relevant to a winding up, seems to me to have no direct relevance to the remedy granted by Section 210. It is oppression of some part of the share-holders by the manner in which the affairs of the company are being conducted that must be averred and proved. Mere loss of confidence or pure deadlock does not, I think, come within Section 210. It is not lack of confidence between shareholders per se that brings Section 210 into play, but lack of confidence springing from oppression of a minority by a majority in the management of the company's affairs, and oppression involves, I think at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a share-holder." 45. As noted earlier, that there is a statutory sanction for user of discretion in the body of the Section itself, and it has been seriously contended by Mr. Mukherjee that since the relief is discretionary, the question of interference would not arise, unless the same tantamounts to a total perversity. There is no manner of doubt as regards the discretion as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case." While it is true that the matter under consideration before the Supreme Court pertains to Section 34 of the Arbitration Act of 1940, but the principle of law enunciated by the Supreme Court has its full force and applicability by reason of the discretionary remedy as is available in terms of (he provisions of Section 397 of the Companies Act. 46. Same is the view expressed by P.D. Desai, C.J., speaking for the Bench in Sharawan Kumar Agarwal v. Shrinenp Investment Ltd.1994 CWN 482, wherein in paragraph 29 of the report, Desai, C.J., observed: "It is not disputed that the order under appeal dated February 6. 1990, accepting the offer and confirming the sale in favour of the first respondent is discretionary in nature. The Appellate Court would not be normally justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage, it would have come to a different conclusion. If, however, the exercise of discretion by the trial Court is in law wrongful a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of the argument that a registered copy of the Will of 1898 was admitted in evidence without sufficient foundation being laid for its admission. No objection, however, appears to have been taken in the first Court against the copy obtained from the Registrar's office being put in evidence. Had such objection been made at the time, the District Judge, who tried the case in the first instance, would probably have seen that the deficiency was supplied. Their Lordships think that there is no substance in the Present contention." 49. On the second count, Mr. Sarkar contended that further issue of shares was only to gain control of the company and to reduce the majority to a minority. We, however, cannot lend any concurrence to the same. As noticed above, there was a definite assurance and commitment to the Bank and there was, in fact, a pressing need for such an increased share capital. The methodology to comply with such a requisition ought to be at the discretion of the company and it is no part of the Court's duly to intervene or direct the company to act in a manner other than what it desires. Mr. Sarkar contended that the Directors being in fiduciary capa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coupled with serious personal differences have created formidable symptoms, where P1 and R9 cannot go hand in glove with R3. It is also understood that in latter years, R9 resigned the Directorship of the company. The company has already faced litigation for over a decade for the reasons as set out earlier. Therefore, this Court is of the firm opinion that the affairs of the company have not been conducted nor will be conducted in future in the interest of the company. Apprehension of stalemate is writ at large. Consequently, the situation has arisen that company cannot function in the hands of P3, R9 and R3 jointly. Three powerful horses yielding strength in different directions cannot bring the chariot safely to the destination. Therefore, I find that the company should be run either by R3 or by PI and R9 jointly It can be safely concluded that a quietous cannot be brought in the company unless the matters complained of or apprehended are resolved once for all and this Court is fully empowered to meet such a situation in the interest of the company. In subsection 2 of Section 398 it is clearly stated that if the Court finds that the affairs of the Company are being conducted as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eping in view the above factors, the situation prevailing as on the date of the filing of the Company Petition and by exercising the powers under Section 398(2) read with Section 402 of the Companies Act, I pass the following orders: (i) The value of the shares held by P1, P2 and R9 and the members of his group viz., his wife and son and R3 and members of his group viz., R4, R5 and R6 shall be assessed by competent Chartered Accountant. (ii) The value of the shares possessed by P1 and P2 shall be assessed as on 30-6-1986 and the value of the shares possessed by R9 and his members of family shall be valued as on 31-7-1986. The value of shares held by R3 and members of his family viz., R4, R5 and R6 shall be assessed as on 1-1-1985 i.e., prior to the allotment of additional shares. Though the value of shares are to be normally reckoned on the date of presentation of Petition as per principle laid down in Scottish Wholesale Society's case (30th cited supra), since PI and R9 were agreeable for settlement during respective periods, the dates were fixed accordingly. (iii) The shares held by P1, P2, R9 and his wife Smt. Satyabhama Jalan and his son Hemanth Jalan after so valued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for the Bench observed: "A complaint was justly made that the learned Judge failed to evolve a formula for remedying the permanent evil of the company, namely, the conflict between two groups of share-holders. In my opinion, the company cannot function properly if these two warring groups continue to hold the shares. As a matter of fact, at the early stage of the hearing of the appeal, a suggestion was made that one of the two groups should buy up the other's holding but nothing tangible came out of attempts made by Counsel on that behalf. In my opinion, the special auditor should be directed to find out the fair value of the shares at the date of the petition as was directed by Lord Denning in Scottish Co-operative Wholesale Society Ltd. 's case 1959 AC 324. We also order the oppressor i.e., the respondents to the petition to buy the shares of the petitioners. In case the respondents are unable or unwilling to buy the shares, the petitioners should have an option to buy the respondent's shares at the same price. The price is to be arrived at on the basis of the break-up value of the shares. The respondents should be given three months time after the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r party conies to Court with an application complaining of acts of oppression to the said party, must necessarily be directed and ordered to sell his shares to the party who commits the acts of oppression. The said decision lays down no such proposition and indeed, to my mind, no such broad proposition can be laid down. Orders are passed by the Court to meet the requirement of justice in the facts of a particular case. As I have already noted in a case where the minority share-holder complains of acts of oppression by the majority, and that is what generally happens in most of the cases, the ends of justice may require that the minority share-holder should be directed to leave the company on payment of proper compensation to him. To ask a majority share-holder who is normally entitled to run the affairs of the company to go out of the company, will not, generally speaking, meet the ends of justice, as it will indeed be unfair and unjust to deprive the majority share-holder of his valuable right for all time to come." 57. Having regard to the observations as above, we do find the user of discretion by the learned single Judge to be in accordance with the known concept of justi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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