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TMI Blog2018 (11) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... Pleadings have just been completed. An opportunity should be granted to the plaintiffs to take steps to seek reliefs which will also have the effect of implementing the terms and conditions of the family settlement. Such a step would help resolve the conflict between the family and also help in implementing the terms and conditions of the family settlement. Order accordingly. Accordingly, in the interest of family amity and unity and to uphold the family settlement, thus confirm the interim order passed by this court. - IA No. 1854/2018 in CS(OS) 51/2018 and IA No. 3238/2018 in CS(OS) 100/2018, IA No. 3241/2018 in CS(OS) 101/2018 - - - Dated:- 16-11-2018 - MR. JAYANT NATH J. Plaintiffs Through: Mr. Kapil Sibal, Mr. Rajeev Nayar, Mr. Sandeep Sethi and Mr. Dayan Krishnan, Sr. Advs. with Mr. Rishi Agrawala, Ms. Niyati Kohli, Mr. Pranjit Bhattacharya, Mr. Raghav Pandey, Mr. Saurabh Kirpal, Mr. Vishnu Tallapragada, Mr. Karan Luthra and Ms. Aakanksha Kaul, Advocates Defendants Through: Mr. P. V. Kapoor, Sr. Advocate with Mr. Sanjay Gupta, Mr. Ateev Mathur, Ms. Jagriti Ahuja and Mr. Amol Sharma, Advocates for D-1 to D-3 Mr. Vipul Ganda, Ms. Dipika Ganda, Ms. Shreya Jain, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court on 07.02.2018 in CS(OS) 51/2018, the defendants herein, i.e. defendant No. 2 Mr. Sahchit Gupta (s/o Sh.Anand Gupta) sent a notice dated 16.02.2018 under Section 100(2) of the Companies Act, 2013 with regard to plaintiff No.12-Renu Promoters Pvt. Ltd. It is also pleaded that Sh.Anand Gupta had issued notice dated 22.2.2018 challenging the gift of mutual funds in favour of the plaintiffs which have been made by Anand Gupta Group prior to execution of the family settlement. Defendants have also addressed notice dated 23.02.2018 challenging the voluntary transfer of shares made by Anand Gupta Group in favour of the plaintiffs. Hence, the suit was filed seeking to restrain the defendant, namely, the Anand Gupta Group from acting in contravention of the family settlement dated 2.12.2017 and 9.12.2017. Decree of declaration was also sought that notice dated 16.2.2018 issued in respect of plaintiff No.12 is null and void. A decree of declaration declaring the letter dated 12.2.2018, 22.2.2018 and 23.2.2018 as null and void was also sought. Other connected reliefs are also sought. Alongwith suit CS(OS) 100/2018, IA No.3238/2018 was filed under Order 39 Rules 1 and 2 CPC. Notice was is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited the main company of the group which was to come to the plaintiffs. This was done against payment of ₹ 3.03 crores already made. Attempts were further made to effectuate fully the terms of the settlement. However, there were diversions from the terms of the family settlement by defendant-Rajesh Gupta. It is stated that Sh.Rajesh Gupta has taken various steps which are contradictory to the terms and conditions of the family settlement. Complexities in effectuating the family settlement arose because of intertwining of rights and obligations amongst the parties in various companies and entities. It is stated that the plaintiff had suggested disgorgement of rights and obligations amongst the parties as per the family settlement through a common agency. The defendant on 9.1.2018 agreed to appoint a common agency of Chartered Accountants for the said purpose. It is the case of the plaintiff that they have no intention to interfere with the various entities which came to the share of Rajesh Gupta Group. Yet Sh. Rajesh Gupta and his group are trying to claim control of entities which have come to the share of the plaintiffs. It is further pleaded that Sh. Rajesh Gupta is seeki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount has not been paid to Sh. Rajesh Gupta. It is further stated that a Resolution of the Board of the companies vested in the plaintiff group to empower Sh. Rajesh Gupta to contest actionable claims amounting to more than ₹ 150 crores have not been provided as required under the family settlement. Various other such pleas have been elaborated in the written statement. Based on the above, it is pleaded that the said suit is liable to be dismissed and interim order vacated. Similar pleas have been raised in the other two suits. 7. I have heard the submissions of learned senior counsels for the parties on IA 1854/2018 in CS(OS)51/2018, IA No.3238/2018 in CS(OS) 100/2018 IA No.3241/2018 in CS(OS) 101/2018. 8. Learned senior counsel for the plaintiffs has submitted as follows:- (i) It has been vehemently argued that the parties are bound by the terms of the family settlement dated 2.12.2017 and 9.12.2017. All the members of the family have acted based on the family settlement. Persons in respective groups have resigned from the Directorship of the companies which are to go to the other group. Further the respective groups have also transferred certain shares in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rores is payable towards balance sale consideration for transfer of shares of M/s. Nishit Capinvest Pvt. Ltd to Sh.Rajesh Gupta which the plaintiff has deliberately withheld. Similarly, a sum of ₹ 22.43 crores is payable to Sh.Rajesh Gupta on account of redemption of Mutual Funds which has as per the plaint also not been paid to Sh.Rajesh Gupta. Further resolution of the companies vested in Dinesh Gupta Group to empower Mr.Rajesh Gupta to contest actionable claims which are amounting to more than ₹ 150 crores have not been provided. It is further pleaded that the plaintiffs have got control of plaintiff No.4 and have sold property being E-353, Greater Kailash, Part II, New Delhi at a price which is less by about ₹ 6 crores than what was agreed upon. Hence, it is pleaded that in equity the plaintiff cannot be granted any interim order 10. Learned counsel appearing for the Bechu Singh Group has relied upon section 6 of the Companies Act, 2013 to submit that a family settlement amongst certain set of shareholders cannot bind the company or other shareholders. It is vehemently pleaded that the Bechu Singh Group is not a signatory or party to the family settlement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of one of the notices dated 19.01.2018 sent by some of the defendants under section 100(2) of the Companies Act, 2013 would show that the same states as follows:- . It has been found that the present Board of Directors comprising of Mr. Dinesh Gupta and Mr. Shreyansh Gupta have been, inter alia, engaging themselves in the acts of omission and commission prejudicial to the interest of the Company, particularly in prosecuting and defending its various litigations pending in different forums. Mr. Dinesh Gupta and Mr. Shreyansh Gupta are, therefore, not fit to continue and are liable to be removed as Directors of the Company in terms of Section 169 of the Companies Act, 2013. In order to protect the interest of the Company, the Board of Directors is required to be reconstituted immediately. We, being the members of your Company, holding more than 1/10th of the paid up share capital of the Company, as on date, hereby require you to call an Extra-Ordinary General Meeting of the Company as early as possible but not later than 21 days from the date of this requisition, to consider and approve the following resolution(s) as Ordinary Resolution(s): 1. RESOLVED ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeks to appoint Sh. Rajesh Gupta and Sh. Shashank Gupta as directors of the company and seek to remove Sh. Dinesh Gupta and Sh. Shreyansh Gupta as the directors of the company with immediate effect. Certain powers are also sought to be given to Sh. Rajesh Gupta and Sh. Shashank Gupta. The plea of the plaintiffs here is not that the defendants who have requisitioned the said meeting do not have power under the Companies Act, 2013 to call for such a meeting. The plea is that the said meeting is being called contrary to the terms and conditions of the Family Settlements dated 02.12.2017 and 09.12.2017. The defendants cannot be allowed to act contrary to the Family Settlement. The company in question is, namely, M/s BDR Builders and Developers Pvt. Ltd. A perusal of the Family Settlement dated 02.12.2017 shows that the said company, M/s BDR Builders and Developers Pvt. Ltd. goes to the share of Sh.Dinesh Gupta (plaintiff) being part of Annexure-B to the Family Settlement. The defendants have not been able to show any provision of the Companies Act, 2013 under which the aforesaid relief could have been obtained by the plaintiffs from NCLT. 18. Reference may now be had to the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that under section 397, it is not only the oppression that given a cause of action but also the applicant or the applicants shall have to show that that the facts would justify the making of a winding up order on the ground that it is just and equitable that the company should be wound up. In other words it is necessary to show that the facts are such that normally the company could be sought to be wound up under the just and equitable clause but such winding up would unfairly prejudice the members. Therefore, I am of the view that section 397 is not an effective forum to grant any relief of an individual member under all circumstances. Similar is the situation under section 398 also. Being a constituent of the company a shareholder has several individual rights and those rights could be enforced by invoking the civil jurisdiction of the courts. Further, the Act nowhere specifically excludes the jurisdiction of the civil courts. (Emphasis supplied) 122. Panipat Woollen and General Mills Co. v. R.L. Kaushik, 1969 (39) Comp Cas 249 (P H) is another case in point. The memorandum and articles of Association of the petitionerCompany before the High Court, in that case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lders Association Ltd., (1978) 48 Com Cas 401 (P H) was concerned with a situation in which a petition was moved, before the High Court, under Section 166 of the erstwhile Companies Act, 1956, for declaration of a meeting of the Company, held on 28th September 1977, to be illegal and void. Following, inter-alia, the decision in Panipat Woollen and General Mills Co. (supra), it was held that the petition was competent. Similarly, a suit for declaration that the Annual General Meeting of the Company was illegal, was held to be competent, by the Kerala High Court, in R. Prakasam v. Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp Cas 611 (Ker), which went to the extent of holding that the Company Court could not grant relief in such matters. 125. The inevitable outcome of the above discussion is that the invocation, by Mr. Chandhiok, of Section 430 the Act, to nonsuit the plaintiffs, is misplaced. Per sequitur, CS (OS) 285/2017 has to be held to be competent. 19. The Division Bench after having gone through a catena of judgments came to the conclusion that in a suit like the present one this court will have jurisdiction and there is no bar in filing a suit before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e right as every shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some Directors and appoint others in their place. The Life Insurance Corporation of India cannot be restrained from doing so nor is it bound to disclose its reasons for moving the resolutions. 22. It was strongly urged relying on the above judgment that it is settled law that a share holder has the right to call an Extraordinary General Meeting (in short the EGM ) under the provisions of the Companies Act and he could not be restrained from calling such a meeting. It is pleaded that no interim order can be passed by this court in favour of the plaintiff pursuant to the notices calling for EGM by the defendants. 23. In my opinion, the above judgment does not help the defendants in any manner. That judgment was not rendered in relation to any family settlement. The Hon ble Supreme Court was dealing with a case where third party or outsider was trying to purchase the shares of an Indian Company Escorts Pvt. Ltd. The facts in the present case are materially different. The plaintiffs seek by filing the present suit and injunction application to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon since all the co-sharers were not signatories thereto. .. 26. As far as the second question is concerned, a Deed of Family Settlement seeking to partition joint family properties cannot be relied upon unless signed by all the co-sharers. In the instant case, admittedly, the Respondent No. 8, Sau. Pratibha, was not a signatory to the Deed of Settlement dated 8th February, 1967, although, she is the daughter of Bapu Saheb Kante by his first wife. 27. As was held in the case of M.N. Aryamurthy (supra), under the Hindu Law if a Family Arrangement is not accepted unanimously, it fails to become a binding precedent on the cosharers. Both Mr. Vivek Tankha and Mr. Anoop G. Chaudhary, learned Senior Advocates, brought this point to our notice to indicate that all the co-sharers had not consented to the Deed of Family Settlement which could not, therefore, be relied upon. The argument would have had force had it not been for the fact that acting upon the said Settlement, the appellants had also executed sale deeds in respect of the suit property. Having done so, it would not be open to the appellants to now contend that the Deed of Family Settlement was invalid. 27. Refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs., (2004) 9 SCC 204 . The court held as follows: 137. We have already said that except for Clauses 1, 2, 3 and 11, all the other clauses of the Karar related to the division of the several concerns among the four brothers. In deciding whether the agreement should be implemented, the Appellate Court overlooked the basic fact that each of brothers had been given the majority shareholding of 52 percent in the companies specified against their names in the Karar. Since the other three brothers had taken the full benefit of the Karar, they were bound to comply with all its terms. It was not open to them to accept that portion of the Karar which was in their favour and jettison the rest. And the Karar which is in the nature of a family settlement seeking to settle disputes between brothers, having been already acted upon at least to the extent that the four brothers were each given the majority shareholding in the different companies as mentioned in the Karar, should not be lightly interfered with. (See K.K. Modi v. K.N. Modi and Ors.) The above cases show that where other family members have pursuant to the Family Settlement which was not executed by them taken steps in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms of the family settlement. Hence, there is no merit in the present plea of the defendants. III. THE TERMS OF THE FAMILY SETTLEMENT ARE INCOHERENT AND INCAPABLE OF BEING IMPLEMENTED AS THE PARTIES ARE NOT AT AD IDEM. 32. Another plea strongly raised by the learned senior counsel for the defendants was that the parties were not ad idem as to the terms of the Settlement. The terms are incoherent, vague and incapable of being implemented. 33. In this context, reference may be had to the judgment of the Supreme Court in the case of Kale Ors. v. Deputy Director of Consolidation Ors.,(supra). In context of Family Settlement, the Supreme Court held as follows: 9. Before dealing with the respective contentions put forward by the parties, we would like to discuss in general the effect and value of family arrangements entered into between the parties with a view to resolving disputes once for all. By virtue of a family settlement or arrangement members of a family descending from a common ancestor or a near relation seek to sink their differences and disputes, settle and resolve their conflicting claims or disputed titles once for all in order to buy peace of mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Where the Courts find that the family arrangement suffers from a legal lacuna or a formal defect the Rule of estoppel is pressed into service and is applied to shut out plea of the person who being a party to family arrangement seeks to unsettle a settled dispute and claims to revoke the family arrangement under which he has himself enjoyed some material benefits. The law in England on this point is almost the same. In Halsbury's Laws of England, Vol. 17, Third Edition, at pp. 215-216, the following apt observations regarding the essentials of the family settlement and the principles governing the existence of the same are made: A family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour. The agreement may be implied from a long course of dealing, but it is more usual to embody or to effectuate the agreement in a deed to which the term family arrangement is applied. Family arrangements are governed by princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Courts will find no difficulty in giving assent to the same; (6) Even if bona fide disputes, present or possible, which may not involve legal claims are settled by a bona fide family arrangement which is fair and equitable the family arrangement is final and binding on the parties to the settlement. 34. It is clear from the perusal of the above judgment and various other judgments including judgment of the Supreme Court in the case of K.K. Modi v. K.N. Modi and Ors., (1998) 3 SCC 573, that the courts have given family arrangements a higher pedestal than the normal contracts. While the contracts of the regular variety are generally commercial in nature, family arrangement would not normally have a commercial undercurrent. The object of both are different and hence the rigorous of law of contract may not apply to family arrangements. The courts have always leaned in favour of enforcing the family arrangement with a view to preserve family unity and honour of the family. Merely because there are two views possible on interpretation of the clauses of the Family Settlement or there are other grey areas in the terms of the Family Settlement would not be a ground to strike ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are themselves in breach of the terms of the Family Settlement. Reliance has been placed on para 31 of the plaint where the plaintiffs themselves have admitted that they owe Rajesh Gupta Group a sum of ₹ 11.28 crores. Number of other such submissions have been made pointing out that the plaintiffs are in breach of the terms of the Family Settlement and hence cannot accuse the defendants of not adhering to the terms of the family Settlement. 39. Sections 34 and 41 of the Specific Relief Act, read as follows: 34. Discretion of court as to declaration of status or right.:- Any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right, and the court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in such suit ask for any further relief: Provided that no court shall make any such declaration where the plaintiff, being able to seek further relief than a mere declaration of title, omits to do so. Explanation .--A trustee of property is a person interested to deny a title adverse t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Plaintiff could seek declaratory relief without seeking any consequential relief, if he sought permission of the court to make his subsequent claim in another suit/proceedings. However, such an amendment was not accepted. There is no provision analogous to such suggestion in the Act 1963. 24. A mere declaratory decree remains non-executable in most cases generally. However, there is no prohibition upon a party from seeking an amendment in the plaint to include the unsought relief, provided that it is saved by limitation. However, it is obligatory on the part of the Defendants to raise the issue at the earliest. (Vide: Parkash Chand Khurana etc. v. Harnam Singh and Ors. AIR 1973 SC 2065; and State of M.P. v. Mangilal Sharma ). 25. In Muni Lal v. The Oriental Fire and General Insurance Co. Ltd. and Anr., AIR 1996 SC 642, this Court dealt with declaratory decree, and observed that 4 . mere declaration without consequential relief does not provide the needed relief in the suit; it would be for the Plaintiff to seek both reliefs. The omission thereof mandates the court to refuse the grant of declaratory relief. 26. In Shakuntla Devi v. Kamla and Ors., (2005) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will relegate the parties to the remedy by way of comprehensive suit for declaration of title, instead of deciding the issue in a suit for mere injunction. (d) Where there are necessary pleadings regarding title, and appropriate issue relating to title on which parties lead evidence, if the matter involved is simple and straightforward, the court may decide upon the issue regarding title, even in a suit for injunction. But such cases, are the exception to the normal rule that question of title will not be decided in suits for injunction. But persons having clear title and possession suing for injunction, should not be driven to the costlier and more cumbersome remedy of a suit for declaration, merely because some meddler vexatiously or wrongfully makes a claim or tries to encroach upon his property. The court should use its discretion carefully to identify cases where it will enquire into title and cases where it will refer to the plaintiff to a more comprehensive declaratory suit, depending upon the facts of the case. 42. Similarly, in Muni Lal vs. Oriental Fire General Insurance Co. Ltd. Anr., (1996) 1 SCC 90 , the Supreme Court noted as follows:- 4. The q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been entered into between the parties, the said provision proscribes an injunction being granted where an equally efficacious remedy, viz. Specific Performance in the case in hand, can be sought for by the plaintiff. There cannot be any cavil that the Court is continuously obligated to separate the chaff from the grain, that is, to bring a vexatious or legally ill founded suit to its earliest conclusion; and that frivolous litigation, which would inexorably lead to a sterile end, must be nipped in the bud. We need not dilate upon this duty beyond merely mentioning T. Arivandandam v. T.V. Satyapal MANU/SC/0034/1977: (1977) 4 SCC 467 . However, it is equally well-established, and for the pragmatic reasons, that a piecemeal consideration of a lis is not envisaged or encouraged in law. 44. The legal position that clearly follows is that a suit for mere declaration without consequential relief where the plaintiff can seek other relief would mandate the court to refuse to grant relief of declaration. Somewhat similar is the case where relief of injunction is sought where an equally efficacious relief can be obtained, relief of injunction would be declined. 45. A perusal of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all banks, financial institutions and mutual fund houses to reopen the Mutual Fund coming to the share of the Plaintiffs including those bearing Folio Nos. 9051496351, 9051498822, 9051500892, 9051489878 of Edelweiss Mutual Fund, Folio No.4602943/91 of Kotak Mutual Fund and Folio Nos.403166914243 and 403173224241 of Reliance Mutual Fund forthwith. The other two suits seek somewhat similar relief. 47. As far as first relief, namely, decree of permanent injunction restraining the defendants from violating or acting in contravention of the Family Settlement is concerned, the plaintiffs had an alternative remedy of seeking specific performance of the Family Settlement or other such relief to implement the family settlement. He has chosen not to do the same. No doubt, one of the reliefs sought by the plaintiff in CS(OS)51/2018 is a direction to appoint KPMG or any other similar agency to effectuate the family settlement and disgorge shares of interest of each group. However, prima facie, it appears that appointment of such a body and its report can at best be advisory in nature and would not bind the parties. 48. The other reliefs which is sought by the plaintiff relates to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LEMENT BFTWFEN RAJESH GUPTA ASSOCIATES AND DINESH GUPTA ASSOCIATES This settlement is made at New Delhi on 9th day of December, 2017 The terms of the settlement are as under:- 1. The list of BDR Group companies / entities which shall vest in Dinesh Gupta Associates is annexed herewith as AnnexureA. 2. The list of BDR Group companies / entities which shall vest in Rajesh Gupta Associates is annexed herewith as AnnexureB. 3. The list of properties which shall be transferred to Dinesh Gupta by the companies vested in Rajesh Gupta and by Rajesh Gupta and Associates is annexed herewith as Annexure-C. 4. The list of properties which shall be transferred to Rajesh Gupta by the companies vested in Dinesh Gupta and by Dinesh Gupta and Associates is annexed herewith as Annexure-D. 5. The list of actionable claims (only if received) which shall vest in Dinesh Gupta shall be transferred to Dinesh Gupta by the companies vested in Rajesh Gupta and by Rajesh Gupta and Associates is Annexed herewith as Annexure-E. 6. The list of actionable claims (only if received) which shall vest in Rajesh Gupta shall be transferred to Rajesh Gupta by the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led and adjusted. Where it has become necessary to split any of the existing companies, this has also been provided for in the Memorandum of Understanding. It is a complete settlement, providing how assets are to be valued, how they are to be divided, how a scheme for dividing some of the specified companies has to be prepared and who has to do this work. In order to obviate any dispute, the parties have agreed that the entire working out of this agreement will be subject to such directions as the Chairman, IFCI may give pertaining to the implementation of the Memorandum of Understanding. He is also empowered to give clarifications and decide any differences relating to the implementation of the Memorandum of Understanding. Such a family settlement which settles disputes within the family should not be lightly interfered with especially when the settlement has been already acted upon by some members of the family. In the present case, from 1989 to 1995 the Memorandum of Understanding has been substantially acted upon and hence the parties must be held to the settlement which is in the interest of the family and which avoids disputes between the members of the family. Such settlemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 100 of the Companies Act. 54. However, the above interim order shall continue to operate during pendency of the accompanying suit provided the plaintiff does the following acts within six weeks from today:- (i) He will pay to Mr.Rajesh Gupta a sum of ₹ 11.28 crores plus ₹ 5.28 crores which he is seeking to withhold on his own interpretation of the family settlement. This amount would be in lieu of the redemption of mutual funds held by BDR Developers and Builders Private Limited. This would also be subject to further orders that may be passed by the court. (ii) The plaintiff will ensure resolution of the Board of Directors of the companies vested in Dinesh Gupta Group be given in favour of Mr.Rajesh Gupta to contest/pursue the case of actionable claims pertaining to the said companies/actionable claims have been given to the Rajesh Gupta Group. This is subject to further orders the court may pass. (iii) Plaintiff will also pass resolution of the Board of Directors in favour of Rajesh Gupta of Companies which have fallen to his share for the purpose of pursuing litigation with respect to immovable properties which are vested in the Rajesh Gupta Group. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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