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TMI Blog2007 (9) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... f quasi-partnership no right of pre-emption which is an equitable right was provided; P-1 to P-3 were illegally removed from the Board of the company; the memorandum and Articles were illegally charged to make the R-1 as a guarantor for providing loan to the Directors by the bank; Finalization of the Accounts of the R-1 was allegedly done in a clandestine manner; the R-4 had acted in a clandestine manner; the petitioners have no intention to enforce the MOU which the parties had abandoned by their conduct. 2. The undisputed facts of the case are: The respondent company, namely M/s Madan Mohan Cold Storage Pvt. Ltd. was incorporated on 14.10.1988 having Registered Office at 167/4 Lenin Sarani, Kolkata, West Bengal. The authorized share capital of the company was Rs. 50,00,000 divided into 50000 equity shares of Rs. 100/- each. The issued, subscribed and paid up capital of the company as on 31.3.2004 was Rs. 30,00,000 divided into 38000 equity shares of Rs. 100/- each. The main objects of the R-1 company were to own, establish, purchase, take on lease, rent, or on hire, build construct, develop or otherwise acquire Cold Storage Plant, space warehouses, godowns, containers, shops, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificates and transfer deeds had already been handed over. In the said meeting, respondent no 2 was also present who left the meeting without giving answer to the questions raised in the meeting. The petitioners reiterated that firstly upto 6 January 2005 transfer deeds and share certificates did not reach the company; secondly, on 6th January 2005 the petitioner No. 1 to 6 were considered as members of the company; thirdly, in the said meeting petitioner No 1 occupied the chair since he was Director and member in eyes of respondents and, therefore, he was entitled to preside the meeting and accordingly he was voted to the chair. Thus, it was contended, transfer of shares allegedly as on 1st February 2004 is a forgery on part of the respondents. Neither it is possible nor it is permissible to lodge the transfer deed in January 2005 and show the transfer in February 2004. My attention was drawn to the provisions of Section 108 of the Act. Further, it was contended that - (i) The transfer deed has been executed on 15th March 2002, therefore, the date of ROC stamping has to be prior to this. Assuming it was 15th March 2002 itself then it would have been lodged with the company upto 14t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration and issue the receipt, if any, for the consideration received, (b) Assuming without admitting the first instalment was alleged to be paid in March 2002, second was alleged to be paid in July 2002, and third was alleged to be paid on June 2003. But receipt of all 3 payments is only one. It is not known for what reason Escrow A/c holder respondent no 4 did not obtain the receipts instalment wise, why he thought fit to obtain an alleged consolidated receipt. This shows that instalments were not paid in fact the alleged receipt is a fabricated document, (c) On the alleged receipt there are no signatures on the revenue stamp, whereas in the actual receipt it is always ensured that signatures of the recipient appear across on the revenue stamp. This also shows that the alleged receipt has been fabricated for the purpose of the reply.(d) Without prejudice to above, receipt was to be obtained from petitioner No. 1 within 1 month from alleged receipt. The respondents have miserably failed to demonstrate any efforts made by them to obtain official receipt from petitioner No. 1 Shri Ranjeet Singh. This circumstantial evidence again speaks of non-genuineness of the alleged receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself shows that he had never resigned. The factum of cessation of directorship is false and concocted, (d) Form No. 32 relates to ousting of petitioner No. 1 who is Managing Director of the company. In this Form also reason of cessation from Managing Directorship is not given. Thus removal of all the three petitioners Nos. 1 to 3 without any reason is oppressive besides being harsh and burdensome and which further lacks probity and fair play on part of the respondents. Without proper Board Meeting no change in directorship can take place. In the Compliance Report for the year ended on 31-3-2003 dates of Board Meeting are: (i) 9-5-2002; (ii) 16-6-2002; (iii) 1-12-2002; (iv)21-3-2003 whereas petitioner No. 1 allegedly ceased to be a director from 18-2-2003 and petitioner No. 2 3 allegedly ceased to be a director from 11-2-2003. Thus there are no Board meetings on 11-2-2003 and 18-2-2003. In the absence of Board Meetings on the aforesaid dates, it is a clear case of a clandestine ouster of the petitioners.(e) Assuming without admitting cessation of all Petitioner Nos. 1 to 3 took place in the February 2003 then why two Forms 32 were filed as pursuant to Section 303, one Form 32 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h themselves at the cost of the company and its shareholders. 6. Sh. Adesh Tandon further argued that the balance sheet for 2000-2001 and onwards was finalized without knowledge, consent and approval of petitioner No. 1. Assuming without admitting that the petitioners ceased to be directors in February 2003 then balance sheet of 2000-2001 and 2001-2002 could not be finalized without a proper meeting of and notice of which must be given to all including Petitioners No. 1 to 3. Furthermore, petitioner No. 1 was the Managing Director and as per the provisions of Section 215 of the Companies Act signatures of Managing Director are compulsory. The idea was to keep the petitioners in dark about the affairs of the Respondent No. 1 Company. Admittedly the accounts for the Financial Year 2000-2001 were not ready as per minutes of the Board Meeting dated 30.8.2001. It is surprising how the balance sheet of 2000-2001 was got signed on 25.8.2001, which was not ready on 30.8.2001. This is a case of grave degree of oppression - the sole purpose of doing so was to keep the petitioners out of company from participation from the aforesaid exercise. No notice, no Board Meeting, no supply of annua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners. Even the Annual Accounts of R-1 were not supplied. It was further pointed out that this is not the case of petitioners no 1 to 6 only but other petitioners in the petition have annexed by way of letters written from time to time regarding the mismanagement of the Respondent No. 1 Company. It was contended that petitioners Nos. 7 to 11 have not withdrawn the charges made in the petition but have simply shown their disinclination to pursue the petition. The Learned Counsel for the respondents has not been able to match the charges levelled by the petitioners. 9. Sh. U.P. Mathur arguing for Respondent Nos. 1 to 3 pointed out that the petitioners No. 7 to 11 are all own brothers and sisters of the Respondent Nos. 2 3 who have since withdrawn from the present proceeding. The Respondent No. 4 who was the auditor of the company and well wisher of the family enjoyed trust and confidence of all the members of the family. My attention was drawn to the subscribers of the Memorandum of Association and it was pointed out that Sh. Ranjit Singh, the Petitioner No. 1 appointed himself as the Managing Director in 1989 and filed Form No. 23 with the Registrar of Companies intimating hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umiliation having raised the objection. The huge Bank loan was taken by the company upon mortgaging of the only residential house of Late Shib Shankar Singh, father of Respondent No. 2 and Respondent No. 3. Petitioner No. 1 and his group wanted to be majority share holders by hook or by crook and by making allotment of shares whimsically, and arbitrarily. Respondent No. 2 and Respondent No. 3 being in minority could not get their views supported by their uncle, petitioner No. 1. Unfortunately Respondent No. 2 met with an accident and at present he is physically handicapped. 10. Further, Sh. Mathur pointed out that on 20/3/1997 the Authorized Capital was raised from Rs. 25 lacs to Rs. 50 lacs. Form No 5 was signed by petitioner No. 1 but no EGM was held to increase the authorized capital from Rs. 25 lacs to Rs 50 lacs. It was pointed out that by allotting 8000 shares on 31.3.1997 and 5000 shares on 31.3.98 mostly to the petitioners, petitioner No. 1 ensured control over the company by holding more than 50% of the paid up capital of the Respondent No. 1. 11. Sh. Mathur further pointed out that when siphoning of about Rs. 1.5 Crores came to light petitioner No. I, approached Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as by way of consideration in terms of the agreement and also the tendering of the balance of amount Rs. 30 lacs. 12. Responding to the allegation that the petitioner Nos. 1, 2 3 have been wrongfully removed as Directors of the company the counsel for the Respondents argued that the petitioners were urging that no liability be created in respect of the respondent Company and hence the respondent No. 4 had clearly stated that the liability of the petitioner group was upto 24.01.2002 and that the respondent B group were well within their rights to raise loans for the purpose of running the business. It was agreed that the petitioners were to resign from the Board so as to avoid any future liability. Accordingly, the petitioners No. 2 3 resigned and the Form 32 was signed by the petitioner No. 1 himself as the Managing Director. Similarly, in consonance with the understanding the petitioner No. 1 also resigned on 18.02.2003 and Form 32 was filed by the respondent group. 13. Responding to the allegation of certain discrepancies in maintenance of statutory records, it was argued that the petitioner No. 1 himself was that Managing Director of the company. He was overseeing day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forth from a member. One has to be a member before he can complain of oppression as a member of the company. Reliance was placed on the decision in Gulabrai Kalidas Naik and Ors. v. Laxmidas Lallubhai Patel and Ors. 1977-(047) COMP CAS-0151-GUJ. When the Petitioner Nos. 1 to 6 admit themselves that they are not members of the company at the time of filing of the petition, it was argued, it would be improper to permit such persons to maintain a petition under Sections 397 and 398. The present petition in the absence of Petitioner Nos. 7 to 11 is not permissible in as much as the same does not comply with the requirement of Section 399(1). It was argued that one can complain of oppression or conduct prejudicial to public interest, if he is a member of the company. The Petitioners No. 1 to 6 are not members of the company. Similarly, Section 398(1) provides that a member of a company, complaining of things sets out in the section, may apply for relief to the court, and it is absolutely well settled that for relief under Sections 397 and 398, the oppression complained of must be in the capacity of members. The language of Sections 397 and 398 leaves no room for doubt that the oppressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 and 3 chose to resign as directors of the company on 11.02.03 and the Petitioner No 1 on 18.02.2003. Petitioner No. 1 himself filed the Form No. 32 with the ROC on 5th March 2003, holding him out as Managing Director of the Company. The first petitioner had not only accepted his removal as the managing director but also resigned from the board of the company on 18 02. 03, pursuant to the agreement reached between the parties. The respondents made payments aggregating Rs. 90 lacs to the petitioners within the stipulated period. The settlement agreement was accepted in full, but acted upon partly by the parties. The disputes in relation to the implementation of the settlement deed, which is attributable to the Petitioner no 1 himself who inspite of being offered, refused to accept the last instalment of Rs. 30 lacs, it was vehemently argued, cannot constitute acts of oppression or mismanagement in the company's affairs and the remedy for the petitioners is to approach a civil court for specific performance of the settlement deed claiming damages on account of the breach, if any, and the relief claimed in the company petition do not fall within the purview of Section 397/398. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby resiling from the very spirit of the family settlement entered on 24 01.2002. 17. Furthermore, the counsels for the Respondents argued that in any event the Petitioners not being members of the company cannot refer to any alleged mismanagement which is not their even otherwise. There is no truth in the allegations. The petitioner Nos. 1 to 3 have acquiesced the said resignation as directors as well as the factum of transfer of shares upon payment of the consideration amount in terms of the MOU dated 24.01.2002 and have thereby by their conduct accepted the same and have waived their rights, if any, to challenge the said resignation and or transfer of shares. The present application as such is bad in law by the principles of acquiescence and estoppel. The petitioner No. 1 to 6 having approbated the said transactions can not reprobate the same. The claim made in the application is barred by the principles of approbate and reprobate. The other petitioners being petitioner Nos. 7 to 11 all being brothers and sisters of the respondent Nos. 2 3 have withdrawn from the present proceedings unconditionally and have no grievances whatsoever. 18. Sh. U.S. Agarwal counsel for Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the share certificates and the transfer deeds. The present petition, it has been rightly pointed out, is nothing but a futile attempt to recover their balance money for transfer of shares (the last instalment which they themselves avoided to collect). The respondents have drawn my attention to the petitioners' conduct (specifically that of the P-I who himself had substantial powers of management being the Managing Director) reiterating that they have not come with clean hands. It has been vehemently argued that the petitioners cannot be permitted to approbate and reprobate. Apart from acquiescence, waiver, estoppel, unclean hands, delay and latches, the maintainability of the petition under Sections 397 and 398 has been questioned attracting the provisions of Section 399(1) of the Act. 20. In order to maintain a petition under Section 397/398 as per the provisions of Section 399 sub Section (1) the petitioners should hold either 10% or more shares of subscribed capital or should constitute 10% or more of total members in the company. The present petition has been filed by 11 petitioners out of which the petitioner Nos. 1 to 6 had transferred their entire shareholding a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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