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TMI Blog2010 (10) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... arious acts of siphoning of funds, breach of fiduciary duties committed by the R-2; declaration that the shareholding of the R-1 company should be implemented as per the family settlement dated 3rd March, 2009 entered between the petitioner and R-2, 4 and 6; removal of R-2 and R-3 from the office of directorship of R-1; appointment of an independent chairman to act as administrator of R-1-company; appointment of a Committee of directors/managers consisting of representatives of petitioner and the minority shareholders to run day-to-day management of the company with the assistance of the administrator; restraining of the respondents from selling, alienating and disposing of the fixed assets and movable assets of the R-1-company situated at 189-191 Lawrence Road, Delhi; restraining of the respondents and anybody claiming through them in constructing or changing the nature of the construction as existing on the date of the filing of the petition; restraining of the R-2 to 6 from exercising the voting rights in respect of 35,600 equity shares of ₹ 100 each illegally allotted on 30th November, 2005 and 13,200 equity shares of ₹ 100 illegally allotted to the R-2, 3 and 6 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany which position the petitioner came to know only recently on inspection of the records of the Registrar of Companies ('RoC) on 8th December, 2009. It was contended that since the petitioner has challenged the reduction in her shareholding from 15 per cent to 2 per cent, on account of holding more than 10 per cent shares of the paid-up capital of the company and on account of being more than 1/10th of the number of shareholders in the R-1-company, which has a total number of 7 shareholders, the petitioner is eligible to maintain this petition. 6. It was pointed out that the father of the petitioner late Sh. Ram Lal was looking after the bakery business at Jamma Masjid area since 1942. He sent R-2 to do a bakery course to the United States of America ('USA') in the year 1977. After his return from USA, R-2 spoke to his father to set up a huge and a modern bakery business to which late Sh. Ram Lal disagreed as firstly he did not have the finances and secondly he was of the opinion that such a huge bakery with heavy investment is not financially viable in Delhi, R-2 then requested his sister, i.e., the petitioner and with the help of Mr. Arvind Thakkar, the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, Delhi-110015 was mortgaged with the said bank. This term loan was sanctioned for purchase of machinery and accessories. In addition to the term loan a cash credit limit of ₹ 5,00,000 was granted by the bank against the hypothecation of stock of packing material, sugar, soft ghee, yeast chemical, maida and ready products keeping 40 per cent margin in bank favour. The respondent-company filed Form 8 before the RoC. Thereafter in the year 1984 the revised Form 8 was filed once again by R-2 before the RoC. Some of the Form No. 8 in the year 2001 was also filed by R-6. It has come to the knowledge of the petitioner that the said Forms No. 8 were being filed from time-to-time till as lafe as 27th December, 2006 indicating that the property of the R-1-company situated at 189-191 is mortgaged initially with Punjab and Sindh Bank and later on with the Syndicate Bank, Kashmiri Gate by deposit of title deeds with the said banks. 7. It was pointed out that the business of the company was being looked after by the R-2 under the general guidance and supervision of the Board of directors of the R-1-company which comprised of the petitioner and R-2, 4 and 6. The company achieved good t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board meetings or of the shareholders meeting wherein the permission was sought to dispose of the said portion of the land of the company admeasuring 3,000 sq. yards out of total area of 10,000 sq yards. The petitioner sought directions to the respondents to produce the original minutes of the company to show that a decision has been taken by the company to sell 3,000 sq. yards of land. 9. Further, it was pointed out that recently, the petitioner on her visit to some family friends in a function came to know that in the year 2008, R-2 giving the reason that the bakery business was not picking up set up a Maruti Service Station inside the factory premises and it was shown as one of the divisions of the company. However, this area of new business was started without the knowledge of the petitioner. The petitioner, therefore, believes that the income generated from this new business is not correctly reflected in the books of account of the company. For instance, the replaced oil from the vehicles and other removed parts of the vehicles are being sold as scrap in cash and the entire money is pocketed by. R-2, Further, it was pointed out that the inspection also revealed that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of petitioner was to be increased to 2,360 shares. The petitioner stated that the family settlement was, however, not implemented deliberately by the R-2 insofar as the shareholding of the R-1-company is concerned. 12. It was pointed out that the petitioner went to the factory premises of R-1-company recently in the month of November, 2009 and to her utter shock she found that the plant and machinery which had been mortgaged with the Syndicate Bank could not be located. On enquiry she was informed that the bakery business has been wound off and the plant and machinery mortgaged with Syndicate Bank has been disposed of. The petitioner tried to contact the R-2 to seek details but no information was forthcoming from the R-2. Therefore, the P-1 immediately got an inspection carried out at the office of the RoC and after obtaining some of the documents the P-1 was shocked in disbelief about the manner in which the R-2 had managed to usurp the control of R-1-company to the exclusion of all other shareholders and directors of the company which is not only contrary to the Act out also contrary to the family settlement dated 3rd March, 2009. 13. It was reiterated that no notice o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20th December, 2006 the R-1-company altered the main object clause in the memorandum and articles of association of company, the petitioner does not have the knowledge of any such change as not notice of the said EGM was given to the petitioner; the balance sheet for the year 2008-09 reveals that R-2 is taking a remuneration of ₹ 1,50,000 and the new division called Maruti Automobile division has been commissioned as on 30th March, 2009. The object clause includes the warehousing business, the petitioner was not informed as to when the new area of business was started; the balance sheet for the year 2008-09 further reveals loans payable to various banks up to a staggering amount of ₹ 2,59,83,390.56. The company has also showed an unsecured loan of ₹ 29,60,264 and a net profit of ₹ 2,95,698. All the figures in the balance sheet do not give an accurate picture in the company; without the permission of the shareholders and the directors, in particular that of the petitioner, the R-2 has entered into some sale transaction with prospective buyers and it is believed that R-2 has already taken advance payment. On 7th December, 2009. The petitioner wrote a letter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner stated that she has prayed for a more equitable relief by invoking the jurisdiction of the CLB. 15. To support her contentions that though the petitioner had abandoned her interest in the company due to the faith deposed in her father and in her elder brother, it being a family company in the nature of quasi-partnership, the petitioner's shareholding cannot be reduced and she cannot be removed from the directorship, that, UPCs shown to have been sent cannot be relied upon, that fraud vitiates everything, the counsel for the petitioner relied upon the case law in S. Ajit Singh v. DSS Enterprises (P.) Ltd. [2001] 45 CLA 102 (CLB)/[2001] 4 Comp LJ 421; Padma v. Hiralal Motilal Desarda [2002] 6 SCALE 383 (SC); Valji Khimji Co. v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. [2008] 86 CLA 126 (SC)/[2008] 9 SCC 299. 16. On mentioning of the petition, the R-1-company was required to maintain status quo qua the immovable assets and shareholding. R-8 and R-9 filed CA No. 407/10 seeking vacation of the interim injunction. Respondents were required to file reply affidavit to the CP and argue the matter in reply. 17. R-8's and R-9's case is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of R-2 for executing the required sale documents in favour of R-8 and R-9 for and on behalf of R-1. On receipt of copy of the said Board resolution the R-8 and R-9 entered into Bayana agreement dated 23rd November, 2009, terms and conditions mentioned therein, with R-1-company through its managing director who is R-2, in the presence of all the directors and shareholders of the company and the said Bayana agreement was witnessed by R-4 and R-6 in writing after receiving the payment of ₹ 75 lakh. The copy of the said Bayana agreement was given to the shareholders and directors for their records along with phone numbers of R-8 and R-9 and is also available on the CLB's file at pp. 5 to 11 duly supported with affidavits of R-8 and R-9. It came to the notice of the R-8 and R-9 in first week of December 2009 that there is some dispute between shareholders and directors regarding their shares and the same was discussed by R-8 and R-9 with all the directors and shareholders and they replied that it is their internal dispute and they will resolve it before executing the final sale deed within given time by 23rd May, 2010. 19. As regards the petitioner's contention th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akash, regarding their very old company, it was pointed out that the R-8 and R-9 have nothing to do with their old dispute. 21. As regards the allegation of the petitioner that the R-8 and R-9 are not bona fide purchasers and the land under Bayana agreement dated 23rd November, 2009 is being sold below the market rate my attention was drawn to the legal notice dated 9th December, 2009 issued by the petitioner to R-8 and R-9. Neither the said legal notice nor para 3.8 of petition have allegation against R-8 and 9 that they are not bona fide purchasers nor that the land under the said Bayana agreement is being sold below the market rate, it is only in the petitioner's rejoinder after hearing the R-8 and R-9 in their CA that the petitioner is trying to improve her case by making bald allegation that the sale consideration is inadequate. The petitioner has failed to explain with cogent evidence what the definition of bona fide purchaser is and what is the present market rate. The rejoinder is not a part of the pleadings. It was contended that on receiving reply of R-8 and 9 the petitioner found that there is no case made out against them, rather the petition against the R-8 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eep the company as a close family unit. Since the time of inception of the company there was no Board meeting within the company. After the death of Sh. Ram Lal, R-2 being the eldest member of the family was looking after the affairs of the company. All the decisions in the company are taken by R-2 whose decisions were never questioned by R-6 and R-7. It was pointed out that after their father's death and taking over of the company by R-2 there was no decline in the profit as is evident from the balance sheets, still R-2 suo motu took the decision of closing the bakery business, no consent was ever obtained from R-6 and R-7 in this regard and no resolution was ever signed by them for shutting of the bakery business. However, when objection was made, R-2 assured the respondents that he had already obtained the oral consent from the other directors/shareholders and minutes will be circulated later for their consent. It was alleged that after shutting down of profitable bakery business R-2 never took any of the shareholder/ director into confidence before disposing of the bakery machinery which was mortgaged with Syndicate Bank. The consideration involved in selling the bakery mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Bayana agreement dated 23rd November, 2009 to which the R-6 was also one of the witnesses. Under the Bayana agreement purchaser was supposed to pay the total consideration as mentioned in the agreement to the R-1 within the period of 3 months. After the lapse of 3 months the R-6 was under the bona fide belief that the said agreement has come to an end and as per clause 18 of the Bayana agreement the advance money paid was to be forfeited. It was shocking for the respondent to know that R-2 suo motu without consultation with any of the directors extended the period for the performance of agreement dated 23rd November, 2009 for two terms of three months each. It was contended that the action of the R-2 is against the interest of the company as when the purchaser has failed to complete the contract within a time with specific forfeiture clause there was no occasion for the R-2 to extend the time. Further, it was contended that even though the property was mortgaged with the bank at the time of execution of the Bayana agreement R-2 had assured the respondents that the purchaser will directly deposit the Bayana amount with the Syndicate Bank to clear the liability of the R-1-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eirs of a deceased shareholder whose names are not entered in the register of -members, are entitled to maintain petition under section 397/398 of the Act, and, therefore, the total number of the member of the company is to be taken to be twelve, the petitioner is only one of them and constitutes only 1/12 of the total number. 29. It was argued that the family settlement dated 3rd March, 2009 cannot be implemented as the aforesaid legal heirs of Smt. Prem Lata Gupta, are not parties to the said family settlement. Moreover, no certificate or any document has been produced by the petitioner to the effect that the legal heirs of Smt. Prem Lata Gupta do not claim any right, title and interest in the transmission of the shares of late Sh. Ram Lal and late Smt. Sharbati Devi. 30. Further, it was argued that the petition is barred by limitation and no relief can be granted to the petitioner which is beyond limitation, the petitioner is seeking setting aside and quashing of allotment of 35,600 equity shares of ₹ 100 each, the same were not allotted on 30th November, 2005 as is being falsely claimed by the petitioner. Out of 35,600 shares 15,500 shares were allotted on 3rd March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion from all other articles in Part 1 of the Third Division. This court in Nityananda M. Joshi v. LIC of India AIR 1970 SC 209 has rightly thrown doubt on the two-Judge Bench decision of this court in Town Municipal Council, v. Presideing Officer, Labour Court AIR 1962 SC 1335 where this court construed article 137 to be referable to applications under the Code of Civil Procedure, 1908. Article 137 includes petitions within the word applications . These petitions and applications can be under any special Act as in the present case. The petition is an application falling within the scope of article 137 of the 1963 Limitation Act. 31. It was reiterated that the petition is bad in law for inordinate delay and laches, petition is barred by time. It is denied petition has been filed by the petitioner on or after 7th May, 2010, whereas the actions complained by the petitioner relates back to years 2001, 2002, 2003 and 2004. No cause of action has arisen in 2006 and as such 2006 and 2009 cannot be taken into consideration for the purposes of limitation. 32. Further, it was argued by the counsel for the R-2 that the petition filed under sections 397 and 398 of the Act is not maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn as on 30th September, 2009 and as such 13,200 shares were not issued, the petitioner has not mentioned this fact. 34. It was argued that when the R-1-company required funds the R-2 to 7 had agreed to invest more money in the R-1-company and thereby they were allotted new shares at premium. With the efforts of the R-2 and other shareholders except the petitioner, R-2-company after amending the memorandum and articles of association, was able to diversify the business of company to get Maruti Service Station . Since about ₹ 1 crore was required for this project as shareholders' contribution the shareholders including the petitioner were requested to put more funds in the company but the petitioner refused to do so. Whereas other shareholders raised money by hypothecation of their personal properties. In 2008-09 the directors approached the petitioner for some contribution as management was finding it difficult to meet the financial obligations. Petitioner at that point of time came to the factory with her son to propose to sell the part of the land of the factory and in fact Mr. Ram Thakkar, son of the petitioner came with her father-in-law, a builder, and other pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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