9911796707
TMI Blog2018 (8) TMI 1952X X X X Extracts X X X X X X X X Extracts X X X X ..... ply giving rise to the said objection, this Tribunal holds that the petition as filed by the petitioners without impleading MGD, as long as no rival claim is set up to that of her interest is maintainable. Conversion of majority shareholder into minority - HELD THAT:- From the facts it is seen that upon the death of MJS in 1997 who was holding 5050 equity shares constituting an overwhelming majority of 99%, the 2nd and 3 rd respondents, despite the petitioners and MGD being close relatives and the legal heirs of Late MJS and thereby to his estate, dragged their feet in transmitting the equity shares of Late MDS to the legal heirs including the petitioners of MJS, in accordance with Articles 16 and 18 of Articles of Association of the 1 st respondent company. MGD being only a grand mother could not have represented the other legal heirs, namely the petitioners in relation to their rights to the Estate and particularly to act to their detriment, even though she could have acted for the preservation and benefit of the Estate and in the interest of other legal heirs, She could not have held out for the other legal heirs in denying the additional capital without any specific autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he additional capital was raised. - The manner in which the entire sequence of events seems to have been unleashed clearly points out that between 1999 to 2003 a concerted effort has been put up which seems to be more premeditated solely to benefit the family of 2 nd and 3 rd respondents and thereby to the detriment of the shareholding of the estate of Late MJS and its legal heirs in the 1 st respondent company. Since the act of the respondents in denying their legitimate right to become members being the legal heirs to the estate of Late MJS holding 99% of the paid up equity of the 1 st respondent company had been consistently denied and on the other hand their majority shareholding having been converted into a minority by the overt and covert acts of the respondents and the said acts being returned with the finding, constituting as oppressive acts in relation to the petitioners by the respondents and having a continuous bearing and suffering even as of today, the aspect of limitation, delay and laches sought to be used as a defence to ward of the present litigation on the part of the respondents is totally unsustainable. This Tribunal is of the considered view that the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awani Singh Maharaj S2 Maharaj Jai Singh S3-Maharaj Prithvi Raj (R-2) S4-Maharaj Jagat Singh (Late MJS) D1-Smt. Prem Kumar W/o H.H.Baria (Since deceased) GS1-Vijit Singh (R-3) Minakshi Singh w/o R3 (R-4) GDI-Urvashi Devi GS2-Dev Raj (P-1) GD2-Lalitya (P-2) W=Wife, S=Son, GS 1 2 Grandsons, D=Daughters, GD 1 2 Grand Daughters 3. The material facts as can be culled out after a careful perusal of the averments contained in the petition pans out in relation to the affairs of the 1st respondent company and the conduct of the other respondents as follows: 4. That the 1st respondent company (hereinafter referred to as the Company) was incorporated on 05.01.1981 under the Companies Act, 1956 and registered with Registrar of Companies, Delhi Haryana. The 1 st directors of the Company being Late Maharaja Jagat Singh (Late MJS) and the 2nd respondent herein, being his brother. The main objects of the Company, inter-alia, is to carry on the business of hotels and restaurants. At the time of incorporation, the authorized capital as reflected in the Memor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness income of the Company all along, and that all the other incomes earned only arising out of subsequent investments made in Fixed Deposits, Bonds and the like out of the said Minimum Guarantee Payment received year after year by the company and not otherwise. 8. The petitioners aver that in view of Late MJS being the exclusive owner of Jai Mahal Palace having subsequently been converted into a hotel in view of the agreement entered into with IHCL, yet even after the agreement, it belonged only to Late MJS and that the said property was never transferred to any person including RI Company or the firm constituted earlier by way of any valid conveyance deed and taking into consideration the same, when the paid up share capital was increased to 5100 equity shares in RI Company, 5050 equity shares or 99% of the share capital was held by Late MJS as his individual shareholding strength, and out of the remaining 50 equity shares, only 45 equity shares was held by 2nd respondent and the remaining 05 equity shares by his son, the 3rd respondent herein. 9. The petitioners further aver in the petition to the effect that this position continued till the demise of Late MJS on 05,02.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y take control over the affairs of the RI Company and which position they manipulated in effect to gain control over the Company to the exclusion of the legal heirs of the deceased MJS, being the petitioners and their grandmother. The petitioner alleges that as an act of oppression, prior to the 11. resignation of Maharaja Digvijai Singh on 17.06.1999, the wife of 3rd respondent, namely 4th respondent was inducted in the Board without the consent of the petitioners and their grand mother on 31.03.1999 and that subsequently on 27.03.2001, 5th to 8th respondents were co- opted to the Board Of RI Company and their appointment was confirmed on 30.08.2001, all without notice to the petitioners who being entitled along with their grand mother to 5050 equity shares constituting 99% of the shareholding in RI Company, and thereby all done without their consent and knowledge. 12. Further it is alleged by the petitioners in the petition that with a view to convert their majority shareholding of 99% into a minority, Respondents 2 and 3 have increased the paid up share capital from 5100 equity shares of ₹ 100/- each to 65,982 equity shares of ₹ 100/- each, and out of the increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. 14. In addition to the oppressive acts coupled with mismanagement on the part of the respondents, it is also alleged that there have been siphoning off funds from 1 st respondent company by the other respondents to their personal accounts and of which, instances have been detailed in paragraph 8 of the petition to the effect inter-alia that though the Company is not engaged in any business activity, a sum of ₹ 41,78,637/- for the year ended 31.03,2000 had been withdrawn as administrative expenses and a sum of ₹ 8,28,710/- as Operating expenses that too when the business profit was only ₹ 15,00,000/- for the said year. Further by way of travelling expenses from 1999- 2000 to 2002-03 amounts have been siphoned off by the respondents even though the 1 st respondent company did not have any business activity other than the arrangement with IHCL. Similarly, substantial amounts have been withdrawn towards legal expenditure when there was no legal matter pending and were required to be dealt with by the Company. It is also pointed out that salary and service staff charges have been only ₹ 1,82,228/- for the year ended 31.03.2001 thereby demonstrating no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on allegedly passed in Extraordinary General Body Meeting of the Members of respondent company on 27.3.2001 to increase the Authorized share capital of Respondent no. 1 Company; b) Set aside the issue and allotment of 60,882 equity shares of ₹ 100/- each of Respondent no.1 on 28.4.2001 in favour of Respondents no.2 and 3 and direct that Registrar of Members shall be rectified to that extent; c) Declare that the appointment of additional directors, i.e. Respondents no.4 to 8 as Directors is illegal/unlawful/nullity and/or remove the Respondents no.4 to 8 from the post of Directors of Respondent no.1 Company; d) To issue directions for detailed investigation into the affairs of the Respondent no.1 Company by an independent person or agency as may be appointed by this Hon'ble Board; e) To pass an appropriate direction for the appointment of Administrator for the Respondent no.1 Company with directions to take possession and charge of their assets and properties and to manage the business and affairs of the Respondent no. 1 Company for such time and on such terms and conditions as this Hon ble Board may deem fit and proper; f) Restrain the Respondents no. 2 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualifying standards in relation to shares as prescribed under Section 399 of the Companies Act, 1956 on the date of filing the petition. In this connection it is also pointed out in the reply by way of preliminary submissions that, even assuming that the petitioners are entitled to the estate of Late MJS, all the legal heirs to the said Estate have not joined to file the petition and in this connection, it is pointed out to the absence of Late Maharani Gayathri Devi (MGD) as a party to the petition despite repeatedly it is being stressed by the petitioners at various places of the petition that they succeeded to the estate of Late MJS jointly along with their grandmother MGD, who was also very much alive at the time of filing the petition. In this connection it is also contended that the estate of Late MJS, particularly in relation to 5050 equity shares at the time of filing the petition, remained undivided and in the circumstances none of the petitioners herein could claim a divided share in distinctive terms with respect to the shares bearing Distinctive Nos and Folio Nos as their own and in the circumstances the petition could have been filed only along with MGD being one of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order passed in the Succession Certificate cannot also be considered. 20. In addition to the grounds of non-maintainability of the petition arising out of non-compliance with Section 399 of the Companies Act, 1956, a ground based on limitation is also taken and it is contended that no pleading has been made as to how the cause of action has been continuing from the date of the petitioners attaining majority as the instant petition has been filed after a period of 8 to 10 years from the date of allotment. In this connection it is also pointed out that one of the legal heirs, namely MGD, had declined the offer by the Company vide letter dated 10.04.2001 and in the circumstances the petition is barred, it is claimed by reason of acquiescence, estoppels, delay and latches. It is also contended that the petitioners never applied for transmission of shares as legally required of 5050 shares under clauses 18 and 19 of the Articles of Association of the Company. 21. Apart from the preliminary objections, on merits the 1 st respondent company contends that the 2 nd respondent along with the 5th respondent enjoyed the confidence of Late MJS as a result of which Late MJS had grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngh. 12.04,2001 e) Confirmation by Maharaj Prithviraj and Mr. Vijit Singh with application money. 25.04.2001 f) Allotment of shares. 28.01.2001 g)Notice for balance call money 29.01.2002 h) Received call money through cheque 01.03.2002 23. Despite the offer on pro-rata basis of share entitlement being made to the Estate of Late MJS through MGD, since the same was not accepted in terms of letter dated 10.04.2001, the said portion was also subscribed to by the 2 nd and 3 rd respondents being the remaining shareholders, and hence cannot be faulted. Further in view of the Will of Late MJS making MGD as the sole legatee to the estate and she having relinquished the offer, the petitioners are in fact debarred from challenging the increase in the share capital. MGD it is again stressed, has not joined the petitioners in filing the petition and has also not challenged the allotments made to respondent no.2 and 3 in the year 2001, nor expressed any grievance or filed any complaint against the management or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners have failed to establish mismanagement of its affairs. In this connection it is also pointed out that the agreement entered with IHCL by the 1st respondent company has not been questioned by the petitioners and if that were so, it only leads to the conclusion that the business of the 1st respondent company is carried undisputedly well and no grievance as sought to be made out can arise. Further it is contended that no just and equitable clause for winding up the company has been made out and that mere personal animosity cannot be made a ground for filing the petition. 28. In relation to the petitioners questioning the increase in the authorized capital on 27.03.2001 in the Extra-ordinary General Meeting (EGM), it is contended that it was done in compliance with law and in fact notices were also given to the Estate of MJS on 14.02.2001 at the Indian address as required for which documentary proof are available. Taking into consideration the business requirement and long-term expansion plans, the capital was increased according to Articles of Association of the Company, however due to factors beyond the control of the respondents in view of 11.09.2001 incidents, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incurred, it is contended in the reply Of respondents that it was incurred bonafide in relation to Urban Land Ceiling as well as encroachment issues of the immovable properties and towards income tax matters as well as company law matters and for other professional fees and that all such expenditures are duly supported by proper documents as well as approved by taxing authorities, 30. In relation to sundry expenses written off during financial year 2003-04 to the extent of ₹ 34.98 in the petition, it is stated that expenditure were incurred in relation to cremation expenses of Late MDS and further expenses incurred during his life time towards legal expenses of personal nature concerning HUF disputes in which Late MJS was involved as well as certain other expenses and in view of the death Of MJS, the said expenses has been written off as not recoverable and it cannot be considered as siphoning of funds as alleged by the petitioners, 31. In relation to the grievance of the petitioners that no dividends have been declared, it is contended in the reply that while the reserves at the time of death of MJS in 1997 was to the extent of only ₹ 6.73 Lacs, for the year en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 65892 equity shares by respondents 2 and 3 allotting to themselves 60882 equity shares in the year 2001 and in the circumstances this petition. 35. Despite request for transfer or transmission by the legal heirs of Late MJS, including MGD, the petitioners contend that it was not done by the respondents and that a succession certificate was insisted and the legal heirs of Late MJS was hence compelled to file for grant of succession certificate which was also ordered by the District Sessions Judge, Jaipur in relation to respective 1/3rd share in Case No. 134/98 dated 08.05.2009 and that subsequent to the said grant, MGD on 27.04.2009 had also transferred vide a transfer deed and had also confirmed it vide a letter addressed to the Board of 1st respondent company of her 1/3rd share to the petitioners herein. It is also averred that the application for transfer/transmission had been duly furnished along with relevant documents as detailed in the rejoinder on 17.07.2009 and it is contended that while all the other documents had been acknowledged to have been received by the respondents, the letter dated 27.04.2009 is being denied and all the documents mentioned in the rejoinder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces during their respective minority are to be given to the legal guardian under Section 6 of Hindu Minority and Guardianship Act and taking into consideration the same, notices, if any, should have been served during their minority on their mother under the law and subsequently on they attaining majority, to the petitioners individually and not as otherwise sought to be projected by the respondents in this regard of having given the offer to MGD, their grandmother alone and in the circumstances as no notices were given in a manner known to law to them all the meetings are required to be declared as null and void. Further in relation to the notices alleged to have been given to MGD, it is contended to be fabricated and even the Will of Late MJS is also contended to be fabricated and it is also pointed out that it was not in the picture during the relevant period and hence it cannot absolve the respondents of the requirement of service of notice to be effected to the petitioners during the relevant period. It is also contended that being privy to the fact that the petitioners are resident of Bangkok, deliberately service is claimed to have been effected at local addresses and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed are not relevant for the purpose of deciding the controversies between the parties and the same cannot be relied on in order to justify the illegal and mala fide allotment. The contention of the Respondents that late MJS was fond of his brother namely, Respondent No.2 herein is sought to be denied and it is also stated that the intention of Respondent 2 who is a family member in any case became mala fide after the death of late MJS. Further, it is also submitted that the illegal allotment had been done deliberately in order to keep away the Petitioners from the estate of the late MJS. It is averred that the will dated 23.6.1996 was set up and that any dispute between MGD and the Petitioners are the creation of Respondent No,2 and 3 and other members who are close to Respondent No. 2 and that in the circumstances the will has to go, consequent and more particularly in view of the fact that the probate petition filed by MGD had been dismissed as stated in the paragraphs supra as above, by the concerned court and that a Succession Certificate has also been granted in favour of the legal heirs of Late MJS as 1/3 rd share each which is also annexed along with the rejoinder. In relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MJS in the proceedings relating to succession. A repeated challenge is also mounted to the allotment of additional shares and it is contended that the same has been done with undue haste and that the letter dated 10.4.2001 is also fabricated and that the same could have been obtained, it is alleged by the petitioners due to misrepresentation by Respondent No.2. In any case it is also contended that MGD did not have the authority whatsoever to receive notice and issue the said letter. Respondent No, 2 has also failed to produce the letter of offer made to MGD and in the circumstances it is stated that the letter dated 10.4.2001 is forged and fabricated one. The raising of additional capital on the basis of expansion plan when ample funds were lying in the bank also clearly exposes the motive of the Respondents in increasing the additional capital and the averments made jn the Petition of siphoning of funds is being reiterated in the rejoinder. 41. In relation to the challenge mounted to the grant of Succession Certificate and dismissal of probate proceedings by Jaipur City Judge under Section 372 of the Indian Succession Act, Case No-134/98, it is contended by the Petitioners th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iberately delayed by Respondent No. 2 who represented that he was pursuing the matter. Further, at the relevant time the Petitioners were ignorant or oblivious to the oblique motive of Respondent No.2 to grab the estate of late MJS to the exclusion of his legal heirs. The Power of Attorney given by late MJS and of Which it is sought to be relied upon by Respondent No.2t it is contended by the Petitioners is of no relevance to the case on hand. It is further denied in the rejoinder that late MJS wanted Respondent No.2 to continue to run the affairs of the Company after his death. 44. In relation to the suppression of material facts, it is averred by the Petitioners in the rejoinder that the matter pending before the Delhi High Court in suit No,870 of 1986 is in respect of the alleged HUF properties as compared to the individual property of late MJS and hence the same was not brought forth before this Tribunal. It is also stated that the share holding of the late MJS was never an issue in the said suit as can be evidenced by the list of suit properties specified in the plaint. It is also stated that there is no mala fide as the property being Jai Mahal Hotel is also not subject ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice of the CLB that the stay granted vide order dated 16.03.2011 under the circumstances stated therein is no more prevalent in view of the decisions rendered by the Hon'ble High Court, Delhi in CA (SB) No.25 of 2011 on 12.12.2012 as well as subsequently by the Hon'ble Supreme Court thereafter on 23.09.2015 whereby, inter-alia, the issue of 5050 equity shares being a part of the estate of Late MJS and as to its succession in favour of the petitioners, being the only persons entitled to it is no more res-integra and in the circumstances the instant petition is to be taken up for final hearing and adjudication. Based on the above said application filed by the petitioners in C,A.239/15 as well as the orders passed by the superior courts, CLB directed the instant Company Petition to be listed for final hearing vide its order dated 8, 10.2015 pursuant to which the matter was heard in detail by this Tribunal after the proceedings were transferred consequent to its formation. 49. Learned Senior Counsels appearing for both the parties even though are in concord that the issue of 5050 equity shares in relation to the estate of the deceased MJS has been virtually settled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute; (ii) GD and DR jointly obtained succession certificate; (iii) GD signed the transfer deeds and communicated the same to the Board of Directors; and (iv) The civil court vide order dated 28th July 1991 declined to grant temporary injunction finding no prima facie case against the succession certificate The argument put forth by the Learned Senior Counsel for the petitioners in this regard is that the judgement of the Hon'ble Supreme Court as well as the Hon'ble High Court of Delhi should be read in totality and if the same is done, then it will be evident that clause (i) and (ii) of Paragraph 22 as extracted above of the Hon'ble Supreme Court can co-exist without offence to each other. However, a position contrary of which is sought to be projected by the Learned Senior Counsel for the respondents as pointed out by him in the reply of the respondent being reinforced as well as in the Application filed in CA-C 23/C-11/16 on 19.01.2016 by the respondents. 51. In order to sustain his submission in relation to the succession and the probate proceedings of the Will of Late MJS and compromised as between the legal heirs of Late MJS, Learned Senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents, it is clear that the alleged disputes raised by the respondent group in so far as the rectification issue is concerned ore all illusory. Admittedly these shares were in the name of Jagat Singh who had bequeathed them to his mother Maharani Gayatri Devi and she in terms of a settlement arrived at between her grandchildren followed by her Will had bequeathed the said share holding thereafter in favour of her grandchildren i.e. the petitioner group. The respondents who were the cousins of Jagat Singh are not even claiming as legal heirs of Jagat Singh but only in their capacity of his legal representatives, these allegations do not in any manner affect the title of the shareholding of Jagat Singh There is no involvement of any fraud or forgery. Petition under Section 111 of the Companies Act was well maintainable. 52. Per contra, Learned Senior Counsel for the respondents and for easy reference as elucidated in the written submissions filed thereafter to buttress his arguments, relies on paragraph 38 of the decision cited of Hon'ble High Court as above and more specifically to the portion of paragraph 38 relating to both the Will of Late MJS bequeathing the estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Delhi High Court and Supreme Court. 54. The fulcrum of defense respondents questioning the maintainability of this petition lies in the above paragraph. At first blush the arguments advanced by Learned Counsel for the respondents may look very convincing but however, this Tribunal is fully aware that the jurisdiction it exercises under Section 397 read with 398 of the Companies Act, 1956 is one of equitable jurisdiction and not of a testamentary jurisdiction to decide upon the issue Of succession, more so when the same has been decided by a competent court in Jaipur and subsequently taken note of by the Hon'ble High Court in appeal arising out of transmission of the said 5050 equity shares and thereafter by the Hon'ble Supreme Court. Further, as rightly pointed out by the Hon ble High Court of Delhi in its decision dated 12.12.12 at paragraph 29 and paragraph 30 wherein it was noticed that a joint succession certificate was issued on 19.02.2009 in favour of Gayathri Devi (MGD) and the petitioners herein relating to the moveables of the estate of Late MJS and thus considering the provisions of Section 381 of the Indian Succession Act, 1925 a succession certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing effect: It appears to us that to hold that the legal representatives of a deceased shareholder could not be given the same right of members under Section 397 and 398 of the Act would be taking a hyper-technical view which does not advance the cause of equity or justice. The High Court in its judgement under appeal proceeded on the basis that legal representative of a deceased member represents the estate of that member whose name is on the register of members. When the member dies his estate is entrusted in the legal representatives, When, therefore, this vesting are illegally or wrongfully affected, the estate through the legal representatives must be enabled to petition in respect of oppression and mismanagement and it is as if the estate stands in the shoes of the deceased member. We are of the opinion that this view is a correct view. It may be mentioned in this connection that succession is not kept at abeyance and the property of the deceased member vests in the legal representatives on the death of the deceased and they should be permitted to actfor the deceased memberfor the purpose of transfer of shares under Section 109 of the Act. (Italics supplied) 57. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0n hearing the submissions of either side, I am of the view that since Hon'ble Supreme Court made it clear that the petitioners are entitled to the shares standing in the name of late Maharaj Jagat Singh in the books of the company, this CP which has been adjourned sine die by the orders dated 16.032011 is hereby posted tofinal hearing, accordingly, the application is allowed. 4.The Petitioners are directed to serve notice upon all the respondents mentioning next date of final hearing, 5.List the matter on 30.11.2015 at 2.30 p.m. (B.S V.Prakash Kumar), Member (Judicial) 58. It is also pertinent to note that both the above said orders according to the Ld. Sr. Counsel for the petitioners remains unchallenged and thereby had reached a finality in relation to the maintainability of the petition and hence at the stage of final hearing the same cannot be regurgitated. Since Ld.Sr.Counsel appearing for the respondents has not refuted in relation to the appeal having not been preferred, presently it will not lie in the teeth of the respondents to rake up the issue of maintainability and accordingly taking into consideration the discussions above and also taking into cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon not being challenged anywhere in the petition, but in fact repeatedly reinforced, even according to the contentions of the respondents as stated in their reply giving rise to the said objection, this Tribunal holds that the petition as filed by the petitioners without impleading MGD, as long as no rival claim is set up to that of her interest is maintainable. 60. Thus, having considered the issue of maintainability in favour of the petitioners, it is required of this Tribunal to consider the acts alleged by the petitioners as against the respondents would indeed constitute an act of oppression against the shareholding of the estate of Late MJS of which, on the date of filing of the petition, the petitioners seek to represent. Now coming to the core issue relating to oppression, as can be gathered from the pleadings of the petitioners as well as taking into consideration the oral and written submissions advanced on behalf of the petitioners by their Ld. Sr. CounseIt the thrust of the attack is in relation to the increase of the paid up capital of the respondent company from 5100 equity shares by a further allotment of equity shares of 60882 equity shares at par in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been given to the petitioners and all the above acts have been done behind the back of the petitioners and without their knowledge and consent despite the estate of Late MJS of which they are the legal heirs along with MGD holding 99% of the paid up capital of the 1 st respondent company, 62. It is also pointed out that there was no necessity for further increase in the paid up capital as the company was not in the necessity of funds and in any case the allotment had been made at par which is much below the intrinsic value of shares all pointing out to lack of probity on the part of the respondents and that the 1 5t respondent company has not benefitted in any manner from the issue and allotment of additional capital. The petitioners in support of the legal proposition that conversion of a majority to a minority by allotment of additional capital without any necessity is per se an act of oppression relies on the decision of Dale Carrington Invt. (P) Ltd and another V. P.K. Prathapan and others (2005) 1 SCC 212. 63. In opposition to the submissions made on behalf of the petitioners, Ld Sr.Counsel for the respondents points out that the appointment of directors, being res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at during the life time of MJS he was a part of the Board of the 1 st respondent company and thereby being in the management of the company along with the 2 nd and 3 rd respondents, also being part of the Board. Family tree as given at the commencement portion of this order clearly demonstrates that the contesting parties to the present proceedings, namely the petitioners without any representation in the Board over the years, however, respondents 2 to 4 alone are still part of the Board who are closely related to each other. Despite respondent 2 being the brother of Late MJS and being fully aware that the petitioners and MGD are the legal heirs and also having recognized the petitioners as such in the affidavit filed before the proceedings initiated by the petitioners along with their grand mother MGD for the grant of succession certificate of which a copy has been annexed along with the additional documents filed by the petitioners at page nos.8 and 9 therein dated 18.08.1998, production of evidence of succession, however, had been insisted. It is also evident that the respondents herein have continued to impliedly take the stance that the petitioners have an interest in the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overwhelming majority to a minority holding of less than 10%. 67. Ld.Sr,CounseI for both the parties has Cited the decisions of Hon'ble Supreme Court in this regard as already seen in paragraph supra. However before considering the decision of Dale and Carrington's case or Sangram Singh Gaekwad s case, reference to the oft cited decision rendered by Hon'ble Supreme Court in Needle Industries (India) Ltd and others v. Needle Industries Newey (India) Holding Ltd and others AIR 1981 SC 1298 laying down the yard stick as to when an act of the majority can be considered as oppressive under the provisions of Section 397 of Companies Act, 1956, which this Tribunal at this stage considers it apposite recalling as enunciated in paragraph 58 of the said judgement to the following effect:- The true position is that an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burdensome, harsh and wrongful. But a series of illegal acts following upon one another can, in the context, lead justifiably to the conclusion that they are a part of the same transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the shareholding to which they were jointly entitled along with MGD. Thus the refusal to transmit the shares, despite being close relatives and in negation of the Articles of Association of the 1 st respondent company and without giving representation in the Board despite the petitioners having attained majority by the year 1999 also denied the right of 99% of the equity shareholding from participating in the management of the 1 5t respondent company and thereby being privy to decisions affecting their legal and proprietary interests in the shares of the estate, Thus, virtually the estate of Late MJS remained unrepresented which continues even as of today, even though the transmission had taken place based on the decision of the Hon'ble Supreme Court rendered in the year 2015, however by which time the overwhelming majority of 99% enjoyed by the estate of Late MJS having been converted to a miniscule minority of less than 10% by the following acts of the respondents in concert with each other, namely: - 31.03.1999 - Appointment of Respondent No.4 as a director of the 1 st respondent company instead of giving any Representation to the petitioners even though by the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was increased, being the precursor to the subsequent increase in the paid up capital of the company. 71. On behalf of the respondents it is contended by Ld. Sr. CounseI who points out to the letter dated 10.04.2001 of MGD which in itself according to him evidences that the legal heirs of MGD had been put on notice in relation to the proposed increase in paid up equity and their refusal to subscribe in view of the reasons stated therein, Further in relation to the notice of Extra Ordinary General Meeting held on 27.03.2001 it is contended that due notice was given to the petitioners at their addresses in India in compliance with the provisions of Companies Act, 1956. 72. However, as already discussed in paragraph supra, MGD being only a grand mother could not have represented the other legal heirs, namely the petitioners in relation to their rights to the Estate and particularly to act to their detriment, even though she could have acted for the preservation and benefit of the Estate and in the interest of other legal heirs, She could not have held out for the other legal heirs in denying the additional capital without any specific authorization, even assuming that the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rakash Poddar and others ve Shree Shree Radhaswamy Plastics Ltd others C.P.No.34(ND) of 2011 rendered on 20.12.2016 which is to the following effect: In this we are fortified by the decisions of the Hon'ble Supreme Court in Kamal Kumar Datta v. Ruby General Hospital Ltd reported in (2006) 74 CLA 91 and Shiv Nath Bajaj v. Nafabsindio Pvt. Ltd and another rendered by CLB, our predecessor reported in (2002) 108 Company Cases 642 wherein it has been held to the effect that lack of notice of Board or general meetings vitiates the meetings as such rendering it invalid. Even though the decisions pertain to lack of proper notice to majority shareholders residing abroad and notice being dispatched to the local address which it was held cannot be considered as proper notice, in the instant case too, the said decision will apply as notice of EOGM seems to have been deliberately sent to an address where the petitioners were not residing to the knowledge of the respondents thereby clearly showing the intent of the respondents being in majority to exclude the petitioners. 75. Even taking into account the position that the petitioners were not members figuring in the Register of Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1999 to 2003 a concerted effort has been put up which seems to be more premeditated solely to benefit the family of 2 nd and 3 rd respondents and thereby to the detriment of the shareholding of the estate of Late MJS and its legal heirs in the 1 st respondent company. 78. This Tribunal also does not find much merit that the 1 st respondent company was in dire need of funds and that out of necessity for requirements of funds additional capital was required to be ploughed in by the 2 nd and 3 rd respondents, As rightly contended by the petitioners jn the rejoinder, the 1 st respondent company was not engaged at the relevant point actively in any business activity other than having given on license basis as already noted in the factual portions given earlier, the property of Late MJS to IHCL who have also by virtue of the License Agreement agreed to pay 1% of the gross operating profit earned out of the hotel failing which a minimum guaranteed payment year after year for a period of 60 years, ending on 31 st May 2044. Further considerable sums of money accumulated had been lying in deposits with the banks, which if necessary could have been easily encashed in case of any urg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the motive for the allotment was mala fide, the only motive being to gain control of the company and hence in the view of Hon'ble Supreme Court, the entire allotment of shares to the Managing Director has to be set aside. 80. The facts in Dale Carrington's case since being more akin to the instant one as compared to Sangram Singh Gaekwad's case, in as much as the majority rights of 99% herein have been effectively thwarted from the benefit accruing to such a majority by the acts of respondents 2 3, solely on the footing that they were the only members of the Board and thereby can act in any manner obtaining from such a position, by denying the transmission of shares of the deceased MJS to its legal heirs being the petitioners which at the cost of repetition denied the benefits or advantage which a member holding a majority is legally entitled to enjoy in the matter of administration of the affairs of the company by electing his own men to the Board of Directors of the company in accordance with the provisions of the Act, resulted in being completely excluded from the administration and also thereby denied being privy to the happening in the company. Secondly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill or improper or ulterior motive or mala fide acts solely to make a pecuniary benefit and gain for himself and to the detriment of such shareholders. 82. Taking into consideration the ratio of the above judgement it is seen from the records as filed by the petitioners by way of additional documents as well as in the re-joinder, a fiduciary duty has been in existence as between the petitioners and the 2 nd respondent recognized by the 2 nd respondent himself through two letters sent/ one dated 21 st May 2001 to the mother of the petitioners and another to the petitioners themselves dated 06th May 2003. Contents of the said letters clearly shows that the 2 nd respondent had taken upon himself, during the relevant period i.e between 1998, when the petition for grant of succession certificate filed by the 2 nd respondent for and on behalf of the petitioners and MGD in relation to the estate of MJS including 5050 equity shares and till the time of allotment of additional capital to himself and his son in April 2001 and there after, that this fiduciary relationship extended. Thus having taken upon himself the fiduciary duty to the 'family members, namely petitioners, the act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of which has been again re-assigned to a third party, whereas the other one is stuck in view of procedural hiccups in getting clearances even after lapse of considerable time from being utilised, Further the accumulation by way of Minimum Guarantee Payment or percentage of gross receipts even though have been invested in Bonds or deposits by way of FD's, have been given on pledge to a company in which the controlling interest is held by respondent 2 and 3 based on a corporate guarantee given by the 1 st respondent company for loan taken by the other company which again points out to the intent in not being bona fide on the part of respondents 2 and 3 in encumbering the same without taking the petitioners into confidence, but on the other hand consistently keeping away the petitioners from the affairs of the 1 st respondent company and behind their back. Further serious challenges have also been put forth by the petitioners in relation to accounting of expenses in the books of the 1 st respondent company and the petitioners, being kept away from the affairs of the 1 st respondent company and for that matter not even been recognized as a member all these years as evident fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew that the company's affairs in relation to the petitioners have been conducted in an oppressive manner by the respondents and that the facts would render that it is just and equitable to wind up the company, however the same would unfairly prejudice the petitioners and in the circumstances a case under the provisions of Section 397 and Section 398 of the Companies Act, 1956 has been made out and thereby petitioners are entitled to reliefs under the said provision read with Section 402 of the said Act and in the circumstances the following order follows:- I) All the resolutions which have been passed in the meetings of the Board of Directors, or in the Extraordinary General Meeting or Annual General Meeting with regard to appointment of Respondent No 4 to Respondent No.8 as directors of the 1 st respondent company including those passed in the Board of Directors meeting held on 31.03.1999 and 27.03.2001 and their subsequent confirmation of Respondent No.5 to 8 in the general meeting held on 30,08.2001 are hereby set aside and in relation to the strength and directors of the Board, this Tribunal restores the position ante immediately upon the death of Late MJS. II) Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted in terms of paragraph (IV) as above. VII) Mr. Amarjit Chopra FCA, Chartered Accountant having Mobile No.098101-00299 is hereby appointed as an independent auditor to conduct a Special Audit in respect of the accounts of the 1 st respondent company and the said audit shall be carried out from 05.02.1997, being the date of demise of Late MJS, until the period 31.03.2018. The purpose of the Special Audit shall be in relation to identifying any siphoning of amounts of the 1 st respondent company by the other respondents as well as in relation to identifying transactions, if any, prejudicial to the interest of the 1 st respondent company. The amounts so identified resulting in the siphoning or leakage of funds and thereby loss to the 1 st respondent company shall be duly recovered from such of the respondents who had been party to the same, The 1 st respondent company and other respondents and persons in the management of the company Shall duly co-operate with the auditor appointed herein by making available all documents including books of accounts in this regard. The fees payable to the auditor shall be negotiated with the auditor by the parties and the petitioners will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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