9911796707
TMI Blog2014 (12) TMI 1426X X X X Extracts X X X X X X X X Extracts X X X X ..... tworthiness. It is, therefore, established that the Petitioner has not approached the CLB with clean hands. For the reasons discussed hereinabove, the Petitioner having approached to the CLB with unclean hands is not entitled to any discretionary reliefs - the petition deserves to be dismissed on the said preliminary ground. Time Limitation - HELD THAT:- There are no hesitation to hold that the instant petition filed under Section 397/398 of the Act is not hit by the law of limitation as, firstly, the provisions of Limitation Act are not applicable to a petition filed under Section 397/398 of the Act, secondly, the acts of oppression and mismanagement being continuing in nature, the cause of action continues until the alleged acts of oppression and mismanagement are brought to an end and in such case the question of limitation therefore becomes irrelevant. In the instant case the alleged acts of oppression according to the Petitioner's case pertain to the period 2010 and the petition being filed in 2012 cannot be said to be time barred nor does the petition suffer from delay and laches. Whether the subject property has been grossly undervalued by the Respondent No. 2 or not? - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned, the Respondent No. 2 in his pleadings and written submissions has clearly stated that the gift in favour of Ms. Meena Khetani and Ms. Bindu Khetani as per the alleged family arrangement could not take place owing to the pre-emption clause of the Articles of Association of the Company and as such the payments made to Ms. Meena Khetani and Ms. Bindu Khetani have been reversed as stated in the Affidavit of the Respondent No. 2 dated 17/07/2013. In view of the above, the entire complaint made by the Petitioner as to the alleged gifting of shares and making payment thereof to them - The contention of the Respondent No. 2's Counsel that the part payments were made in between January to July, 2010 and the agreement came to be negotiated in July, 2010 makes the document doubtful, is also meaningless. It is a common practice of the mark that some amount is paid as advance even at the early stage of negotiation with a purpose to block the deal and then final terms for sale transaction are settled. Validity of the POA purportedly executed by the Company in favour of the Respondent No. 2 based on a Board Resolution dated 14/06/2011 - HELD THAT:- The Petitioner had received part paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the Company as on 31/03/2012 is Rs. 1,00,00,000/- (Rupees One Crore only) divided into 1,00,000 equity shares of Rs. 100/- each. 2.2 It is stated by the Petitioner that the Respondent Nos. 2 and 3 are the Directors of the Respondent No. 1 Company. The Respondent Nos. 4 to 6 are the Companies Incorporated under the Companies Act, 1956 and form part of the Group of Companies of the Respondent No. 7. The Respondent No. 7, along with the Respondent Nos. 4 to 6 and 3, are claiming to be the Purchasers having purchased entire shares held by the respective shareholders of the Respondent No. 1 Company on payment of consideration. The Respondent No. 9, who is wife of the Respondent No. 2, claims to hold 2001 shares of the Respondent No. 1 Company. The Respondent No. 10, who is mother of the Respondent No. 2, claims to hold 28,858 shares of the Respondent No. 1 Company. 2.3 it is further stated by the Petitioner that the shareholding pattern of the Respondent No. 1 Company as on 12/12/2009 was as under:- 2.4 However, it appears from the pleadings filed by the Respondent No. 2 that 26,130 shares of the Respondent No. 10 were gifted to the Respondent No. 9 thereby making her a holder of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is required to be in accordance with law as also with approval of the Board of Directors of the Company and its shareholders, and therefore, the whole transaction would take considerable time to complete in all respects. Further, the Respondent No. 2 further represented to the Petitioner that he would hand over the balance amount to her as and when the sale progresses and once the value of the shares are determined. It is further pleaded by the Petitioner, that she, relying on the aforesaid representations of the Respondent No. 2 as he was not only one of the Directors of the Company but also her nephew, accepted the said cheque of Rs. 24,01,942/-. 2.9 It is further case of the Petitioner that she expected that the Respondent No. 2 would follow up in respect of the sale transaction. After sometime, when the Petitioner inquired about the sale transaction, the Respondent No. 2 informed her again that completion of the transaction would take time in view of lengthy procedure and the sale transaction would take some more time for completion of it. 2.10 It is further stated that the Petitioner and the Respondent No. 2, being relatives, she used to inquire about the sale transaction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 1 Company as well as that of the Respondent No. 4 Company, she came to know various other irregularities in the affairs of both the Companies. She was, therefore, compelled to believe that the Respondent No. 2 has siphoned off the funds of the Company in collusion with the Respondent Nos. 4 to 8 to the detriment of the Company and its shareholders. 2.15 It is further case of the Petitioner that she doubts the bona fides of the Respondent No. 2 and believes that he has surreptitiously entered into the transaction and has kept the shareholders, including the Petitioner, in dark. According to the Petitioner, in the circumstances narrated above, she is entitled to challenge the safe transaction surreptitiously entered into by the Respondent No. 2. The Petitioner has further alleged that she has not signed any transfer documents nor has she attended any meeting of the shareholders of the Company for the alleged sale transaction of the Company by the Respondent No. 2 The Petitioner has denied having received any consideration except the earnest money/advance amount. The Petitioner has, therefore, filed the present petition, inter alia, to challenge the purported sale transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Based on the aforesaid complaints, the Petitioner has sought the following reliefs:- a. To pass an order setting aside/cancelling the purported sale transaction entered into by the Respondent No. 2 in relation to the Respondent No. 1 Company and its properties, assets etc. including the property of the Respondent No. 2 Company at Kurla bearing CIS Nos. 240-B, 240-B/1 to 13, 241(pt) 243(pt), 242/1 243/A (old Survey No. 203H No. 1, 2 and 3(pt), S. No. 204H No. 5, 6/1, 12(pt), 13(pt) and 14(pt), 5. No. 205H No. 1(pt) and S. No. 207H. No. 1(pt), admeasuring in aggregate 5826.6 sq. meters situated, lying and being at Kurla (old) in the registration sub-district of Sandra, District Mumbai Suburban, together with structures and buildings including Electric Power House standing thereon; b. To pass an order directing the Respondent No. 2 to take all measures as may be required under law to restore unencumbered possession of the aforesaid property at Kurla to the Respondent No. 1 Company and to restore the status quo ante with respect to the Respondent No. 1 Company; c. To pass an order to remove or supersede the Respondent Nos. 2 and 3 from directorship of the Respondent No. 1 Company and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1 Company; i. For appropriate orders, reliefs and directions under sections 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956, to bring an end to the aforesaid acts of oppression and mismanagement perpetuated by the Respondent No. 2, for necessary orders and reliefs in respect thereto, including as prayed for herein; j. That this Hon'ble Board be pleased to pass an order under sections 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956, for appropriate management of the Respondent No. 1 Company and for that purpose to appoint such appropriate and fit persons as this Hon'ble Board may deem fit and proper as Administrator, and/or appoint an Independent Committee of management for managing the affairs of the Respondent No. 1 Company for such time and on such terms and conditions as this Hon'ble Court may deem fit and proper; 3. The Respondents appeared. The Respondent Nos. 1 and 2 have filed their joint reply to the Petition. In their reply, they initially have challenged the maintainability of the Petition and sought its dismissal mainly on the ground that the Petitioner has not disclosed material facts and has suppressed material documents and thus sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and perused the record. 10. Dealing with the first preliminary issue as to the suppression of material facts and vital documents, it was argued by the Ld. Counsel appearing on behalf of the Respondent No. 2 that the Petitioner has approached this forum with unclean hands and, therefore, on this ground the petition deserves to be dismissed. According to the Ld. Counsel for the Respondent No. 2, the Petitioner has been a consenting party to sell her shareholding in the Company in favour of the Respondent Nos. 4 to 8. The Ld. Counsel added that to the Petitioner's knowledge, her shareholding in the Company was agreed to be sold in favour of the Respondent Nos. 4 to 8 at the rate of Rs. 1,178/- per equity share. The Ld. Counsel further submitted that the amount of Rs. 24,01,942/-, admittedly received by the Petitioner, was, in fact, full consideration towards 2039 shares held by her in the Company. The Ld. Counsel pointed out that after having received the aforesaid amount, she had deposited her entire share certificates with the Respondent No. 1 Company's Advocate, as is confirmed from the communication available on record, and in this manner the Petitioner has not only acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to the Ld. Sr. Counsel, the Petitioner, therefore, was not expected to refund the amount. Furthermore, the Respondents at any point of time did not claim refund of the said amount. The Ld. Sr. Counsel further submitted that the Petitioner has disclosed all these facts of having received the said amount as advance, etc. and therefore, she cannot be held guilty for suppression of any material fact and documents. 12. I have considered the rival submissions and carefully perused the record. I am not convinced with the conduct of the Petitioner. Admittedly, she has received a sum of Rs. 24,01,942/- from the Respondent Nos. 4 to 8. From perusal of the share transfer forms filed by her, alongwith the Rejoinder, at page Nos. 363 of the Compilation of Documents, it is noted that she has duly signed the transfer forms thereby transferring 10 shares for a consideration of Rs. 11,780/-. According to this, the value comes to Rs. 1178/- per equity share. The Petitioner is an educated lady. She has not denied her signature on the transfer forms. It is, therefore, difficult for me to accept her statement that she was not aware of the price of the shares at the time of signing the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. She is continuing to enjoy the said amount since then. The Petitioner has failed to convince me by giving any cogent reason as to why she did not refund the amount till date despite having come to know the alleged misrepresentation made by the Respondent No. 2 with respect to alleged sale transaction and the delivery of possession of the subject property to the prospective purchasers. In my considered view, if the Petitioner was not a consenting party to the sale transaction, she should have refunded this amount immediately. To my mind, this clearly proves misconduct on the part of the Petitioner. I cannot ignore the settled proposition that the law relating to oppression and mismanagement is basically based on equity, fairness and probity on the part of the shareholders of a Company whether such party is a Petitioner or Respondent in the petition filed under Section 397/398 of the Act. They are supposed to approach the CLB under the said provisions with all fairness and trustworthiness. It is, therefore, established that the Petitioner has not approached the CLB with clean hands. For the reasons discussed hereinabove, the Petitioner having approached to the CLB with unclean ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traordinary jurisdiction under Articles 226/227 of the Constitution, he should approach the court not only with clean hands but also with clean mind, clean heart and clean objective. Equally, the judicial process should never become an instrument of oppression or abuse or a means in the process of the court to subvert Justice. Who seeks-equity must do equity. The legal maxim Jure naturae aequum est neminem cum atterius detrimento et injuriajien locupletiorem , means that it is a law of nature that one should not be enriched by the loss or injury to another. (Vide Ramjas Foundation v. Union of India [1993] Supp (2) SCC 20, K.R. Srinivas v. R.M. Premchandh [1994] 6 SCC 620 and Noorduddin v. Dr. K.L. Anand [1995] 1 SCC 242 SCC p. 249, para 9.) 49. Similarly, in Ramniklal N. Bhutta v. State of Maharashtra [1997] 1 SCC 134 this Court observed as under: (SCC p. 140, para 10) 10.... The power under Article 226 is discretionary. It will be exercised only in furtherance of interests of justice end not merely on the making out of a legal point....the interests of justice and the public interest coalesce, They are very often one and the same.... The courts have to weigh the public interest vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Oil Ltd. Vs. Additional Commissioner (Administration) Bareilly Division, Bareilly Ors. [2010] A SCC 728, wherein the Hon'ble Supreme Court has held as follows:- it is settled law that a person who approaches the court for grant of relief, equitable or otherwise, is under a solemn obligation to candidly disclose all the material/important facts which have bearing on the adjudication of the issues raised in the case. In other words, he owes a duty to the court to bring out all the facts and refrain from concealing/suppressing any material fact within his knowledge or which he could have known by exercising diligence expected or a person of ordinary prudence. If he is found guilty of concealment of material facts or making an attempt to pollute the pure stream of justice, the court not only has the right Put a duty to deny relief to such person . 14. Based on the above discussion, I have come to the conclusion that the petition deserves to be dismissed on the said preliminary ground referred to above. 15. The Ld. Counsel appearing on behalf of the Respondent Nos. 1 and 2 has also raised another preliminary objection as to the maintainability of the petition contending that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of inadmissibility. b) The Advertisement published in the Times of India, Mumbai dated 23/06/2009 in respect of the sale/lease of the subject property does not find any mention, much less ratification in any of the meetings, either of the Board of Directors or Annual General Meetings of the shareholders of the Company, authorizing the sale of the subject property. c) The report obtained from DID Consultants (Architects Engineers) dated 6/10/2010 by the Respondent No. 2 for placing reliance in support of the valuation of the subject property proves that it is an afterthought, as according to the Respondent Nos. 4 to 6, they had already made various payments to the shareholders of the Company prior to October 2010, and therefore, this belies the contention of the Respondent No. 2 that DID Consultants assisted him in arriving at the valuation of the subject property. The Ld. Counsel, therefore, contends that the said document was obtained post finalization of the sale of the subject property in order to give colour to the false defence taken by the Respondents. In addition to the above, a perusal of the Report of the DID Consultants and of the Development Plan of the Municipal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Project Feasibility and the profit that the Company could make if it undertakes an industrial estate project. It was, therefore, argued that the explanation offered on behalf of the Respondent No. 2 is nothing but an afterthought. In addition to the above, it was argued by the Ld. Counsel on behalf of the Petitioner that such a crucial document has never been mentioned in the Meetings of the Board of Directors and Shareholders of the Company, nor was disclosed/placed at any meetings, which goes to show that the Project Feasibility Report is a fabricated document. e) The e-mails received from Maulik Kamadar dated 25/06/2009 and 1/07/2009 have been filed by the Respondent No. 2 to support his claim that various purchase offers were received pursuant to advertisement dated 23/06/2009. The Ld. Counsel stated that these e-mails, except reflecting few names and contact details, do not bear any offers or suggestion of price. He, therefore, contended that placing reliance on these e-mails to indicate that offers in the range of Rs. 8 to 10 Crores were received by the Company, is wholly unwarranted and unfounded. Furthermore, the List of persons in the said e-mails appears to be a figment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petitioner tried to point out certain contradictory figures from the pleadings filed by the Respondent Nos. 2 and 7. 18. In this regard, another limb of argument of the Ld. Sr. Counsel appearing for the Petitioner is that the Respondent No. 2 has handed over possession of the only asset of the Company i.e. the subject property without making payment to the Petitioner except Rs. 24,01,942/- and this amounts to mismanagement in the affairs of the Company as defined in Section 398 of the Act. Elaborating the said charge, it was argued by the Ld. Counsel that the Respondent No. 2, under the guise of repairs and maintenance of the subject property, got a Power of Attorney executed on 13/7/2011 in favour of the Respondent No. 7 in respect of the subject property and has handed over its legal and actual possession to the Respondent No. 7. The Ld. Counsel further submitted that the Respondent No. 2 has although claimed that the possession of the subject property has been handed over to the Respondent No. 7 to enable him to carry out repairs as an agent of the Company, but it is the case of the Respondent No. 7 that the possession has been handed over to him in part performance of the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oached for purchase of the entire Javeri family shareholding in the Company for a total amount of Rs. 12 Crores, which included discharging of the family liabilities in the books of the Company, including all the loans of the Company aggregating to approximately Rs. 85 Lacs. According to the Ld. Counsel, after calculation, it was found that the shareholders would receive Rs. 1178/- per share after discharging the loan amount, and hence, the offer made by the Respondent No. 7 was far superior to any previous offers received. 20. Dealing with the valuation of the subject property, it was argued on behalf of the Respondent Nos. 4 to 8 that, according to the Ready Reckoner, the price of the subject property may be around Rs. 20 crores, but the price of the subject property was adversely impacted for the reasons that the property is located in flood prone area and was heavily affected by water deluge on account of flood in July 2006, whereby the structures standing on the said property were flooded up to first floor; that the subject property has a height restriction prescribed by the Airport Authority of India since the said property is in the vicinity of the Airport; that the structur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders of the Company were fully aware of the price at which the Company's shareholding/subject property was being transacted. According to the Ld. Counsel, this is evident from the fact that the Petitioner has, admittedly, received Rs. 24,01,942/- for and/or in respect of 2,039 shares, and she acting in pursuance thereto deposited and executed share transfer forms for 10 shares. The Ld. Counsel then pointed out the various documents and material placed on record to demonstrate exercise of due diligence while conducting the sale of the shareholding/subject property of the Company, and submitted that as against these material, the Petitioner has placed on record only the Ready Reckoner valuation. According to the Ld. Counsel, there is no other independent material produced by the Petitioner to substantiate her allegation of undervaluation qua sale of the company's shareholding/subject property. It was, therefore, argued that the Petitioner's allegation that the sale of the Company's shareholding in favour of the Respondent Nos. 4 to 8 at undervalue, is unjustified and unmeritorious. 23. Taking me through the petition, the Ld. Counsel appearing on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeking specific performance of the agreement for sale of the Company, which is presently sub-judice in the Hon'ble Bombay High Court and they can get title to the shares of the Company and/or the subject property only upon getting a decree in their favour in the said suit. In order to further substantiate that the Respondent Nos. 4 to 8 have been put in possession of the subject property in their capacity as the Constituted Attorneys is further proved by the Power of Attorney submitted by the Respondent Nos. 1 and 2 on record on the basis of which the Respondent Nos. 4 to 8 have been put into possession of the subject property, the Ld. Counsel added that the prospective buyers i.e. the Respondent Nos. 4 to 8 were required to be put in possession of the subject property since it was in a dilapidated condition and required urgent repairs and maintenance. However, according to the Ld. Counsel, the subject property still stands in the name of the Company, and therefore, there is no merits in the Petitioner's case that the ownership of the subject property has been transferred in favour of the Respondent Nos. 4 to 8 without any valid authority or with a purpose to deprive the Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of Company's shares was not just, proper and adequate. This point is decided accordingly. 27. Now, I proceed to consider other allegations made by the Petitioner against the Contesting Respondents as to the acts of oppression and mismanagement purportedly committed by them in conduct of the affairs of the Company. The next charge relating to alleged act of oppression levelled by the Petitioner is that the Respondent No. 2, whom the Petitioner had entrusted with the task of negotiating and finalization of the sale transaction of the Company, deceitfully conspired with the Respondent Nos. 4 to 8 to illegally expropriate her 8738 shares and not paying her any consideration over Rs. 24,01,942/-, thereby depriving the Petitioner's rightful claim with respect to her shares. In order to substantiate the said allegation, the Ld. Counsel appearing for the Petitioner has invited my attention to the draft agreement of sale of the shares attached to an e-mail dated 8/9/2010 sent by the Advocates of the Respondent Nos. 1 and 2 to the Respondent No. 2, which was subsequently forwarded by the Respondent No. 2 to the Chartered Accountant of the Respondent No. 3, namely, Mr. Biren Dha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration, keeping in view that the other shareholders, who have admitted to have received the full consideration have not transferred any of the shares nor have the Respondent Nos. 4 to 7 insisted on the sellers transferring any of the shares for which the Respondent Nos. 4 to 7 have paid consideration. 30. In addition to the above, it was argued by the Ld. Counsel for the Petitioner is that the Respondent Nos. 2 and 4 to 7 never called upon the Petitioner, whether orally or in writing, to tender her shares and/or execute any share transfer forms. Even otherwise, according to the ld. Counsel, the Petitioner was not in a position to tender her shares as her original share certificates were always in possession of the Respondent No. 2, as is stated in her pleadings. The Ld. Sr. Counsel for the Petitioner submitted that the Respondent No. 2 has not produced 8,738 shares of the Petitioner at the time of the inspection, it gives rise to serious suspicion that the Respondent No. 2 has mutated the original share certificates of the Petitioner and proceeded with their expropriation scheme. 31. The Ld. Counsel appearing on behalf of the Respondent No. 3 has since adopted the arguments adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Petitioner the balance amount for and in respect of her balance shares at the agreed rate of Rs. 1178/- per share provided she deposits her balance shares for the purpose of sale in their favour. It was, therefore, argued that the allegation of the Petitioner of expropriation of her shares is misconceived and unsustainable in law. According to the Ld. Counsel, in any event, the Respondents have never expropriated the shares of the Petitioner as she continues to be the shareholder of the Company till date. 35. Based on the above, it was argued by the Ld. Counsel for the Respondent Nos. 1 and 2 that the Petitioner's allegations against the Contesting Respondents are not proved and she is, therefore, not entitled for the reliefs sought in the Petition. 36. Replying to the Petitioner's allegation, it was argued on behalf of the Respondent Nos. 4 to 8 that the Company was defunct for last several years and no activity was being carried out by the Company, and therefore, all the shareholders had agreed to sell their respective shareholding in the company at the common agreed price at Rs. 1178/- per share. The Ld. Counsel submitted that there is no oppression qua any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd injunction of this Hon'ble Court from in any way dealing with the Kurla Property, more particularly described in the Exh. B hereto by way of transfer, mortgage, lien, lease, charge, etc. to any other person/s. ix. The Defendant Nos. 1 to 5 be ordered to hold their shares in Defendant No. 6 company in trust and for the benefit of the Plaintiffs. c) In the alternative to prayers (a) and (b) above, the Defendants be ordered and decreed to pay to the Plaintiffs as under: (i) The Defendant No. 1 be ordered and decreed to refund to the Plaintiff No. 2 a sum of Rs. 24,01,942/- (Rupees Twenty Four lakhs One Thousand Nine Hundred forty Two only) together with the interest @ 21% p.a. from the date of payment till realization as stated in the Exhibit C hereto. (ii) The Defendant No. 2 be ordered and decreed to refund to the Plaintiff No. 2 a sum of Rs. 3,15,71,578/- (Rupees Three Crores Fifteen Lakhs Seventy One Thousand Five Hundred Seventy Fight only) together with the interest @ 21% p.a. from the date of payment till realization as stated in the Exhibit C hereto. (iii) The Defendant No. 3 be Offered and decreed to refund to the Plaintiffs a sum of Rs. 3,06,89,256/- (Rupees Three Cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -quo in respect of the suit shares until further orders. S.O. to 14th January 2013. This order is passed without prejudice to the proceedings pending before this Court or before any other forum. 38. Referring the aforesaid reliefs sought in the said suit and the interim order passed therein, it was argued that there is no substantive suit filed by the Respondent Nos. 4 to 7 in the Hon'ble High Court, and an injunction order is operating against the shareholders of the Company, and therefore, this Bench has no jurisdiction to pass any order in respect of the claim of the Petitioner in the present petition against the Respondent Nos. 4 to 8 or affecting their rights to the shares in the Company. 39. Taking me through the Petition, the Ld. Counsel submitted that the petition indicates the disputes between the shareholder of the Company on one hand and the Directors of the Company i.e. the Respondent No. 2 and his family members on the other hand, and hence the Respondent Nos. 4 to 8 have nothing to do with the said internal disputes. It was, therefore, argued that the present petition filed on the alleged oppression and mismanagement under Section 397/398 of the Act ought to be di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Members, which is deposited with the Hon'ble High Court pursuant to the order passed by it in the pending civil suit seeking specific performance of the alleged agreement for sale in dispute with respect to these shares. In view of the statement made above, the Petitioner's grievances as to alleged expropriate of 8738 shares held by her comes to an end. With respect to 2039 shares held by her which is the subject matter of the civil suit, I have held that the Petitioner has already received the consideration. For these reasons, I am therefore of the opinion, that these complaints do not amounts to acts of oppression and mismanagement as defined in Section 397/398 of the Act. This point is decided accordingly. 42. Now, coming to the next complaint made by the Petitioner that the Respondent No. 2, along with the Respondent Nos. 9 and 10, are acting in collusion with the Respondent Nos. 4 to 8 to cover up the Illegalities and irregularities committed by them in the deal, and therefore, the transaction can never be termed as bona fide. In this connection, it was argued on behalf of the Respondent Nos. 1 and 2 that the transaction for purchase of the subject property, albeit und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered her entire shares. According to the Ld. Counsel, apart from the above, the Respondent Nos. 4 to 8 though claim to have paid full consideration to all the shareholders of the Company, except the Petitioner, they never Insisted for transfer of share certificates of these shareholders in their favour at any point of time from 2010 till filing of the present petition. 43. The Ld. Sr. Counsel for the Petitioner then submitted that on 14/01/2010 the Respondent No. 7 paid the said Ms. Meena and Ms. Bindu Rs. 75,00,000/- and Rs. 25,00,000/-, respectively, in anticipation of sale of shares since the said Ms. Meena and Ms. Bindu were allegedly to receive the shares as gift from the Petitioner and Respondent No. 10. According to the Ld. Sr. Counsel, further on 27/07/2010, the Respondent No. 4 paid an additional aggregate payment of Rs. 1,75,69,870/- through seven cheques to said Ms. Meena. According to the Ld. Sr. Counsel, the Respondent No. 7 claims that since no shares were gifted, the said Meena and Bindu returned the respective amounts received by them on 29/07/2010, but this statement is belied from the fact that the said Ms. Meena had actually received a sum of Rs. 2,50,69,870/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and written submissions has clearly stated that the gift in favour of Ms. Meena Khetani and Ms. Bindu Khetani as per the alleged family arrangement could not take place owing to the pre-emption clause of the Articles of Association of the Company and as such the payments made to Ms. Meena Khetani and Ms. Bindu Khetani have been reversed as stated in the Affidavit of the Respondent No. 2 dated 17/07/2013. In view of the above, the entire complaint made by the Petitioner as to the alleged gifting of shares and making payment thereof to them. As indicated hereinabove, any agreement with respect to sale of shares does not require to be reduced in writing under law. Apart from this, the Petitioner and the Respondent No. 3 while accepting the amount of consideration raised any abjection to this effect. Therefore, now challenging the sale transaction at the subsequent stage on the ground of non-existence of written agreement, in my opinion, is without force and untenable. The contention of the Respondent No. 2's Counsel that the part payments were made in between January to July, 2010 and the agreement came to be negotiated in July, 2010 makes the document doubtful, is also meaningl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Respondent No. 10 to the Board of directors of the company recommending Anant Khetani as a permanent director does not find any reference or mention in the minutes. This is significant considering the fact that it was solely on the basis of this written recommendation that the said Anant Khetani was appointed as a permanent director of the Company in the Annual General Meeting held on 30/09/2010. (b) Because, the Respondent Nos. 1 and 2 have sought to reply upon the minutes that the said Anant Khetani was appointed as an additional director of the Company in the meeting purportedly dated 10/04/2010. It can therefore, be assumed that the written recommendation of the said Anant Khetani for appointment as permanent director of the company has been given by the Respondent No. 10 prior to the appointment of the said Anant Khetani as an additional director of the Company. (c) Because, the Respondent No. 2 in his second affidavit in Sur-rejoinder dated 17/07/2013 has sought to undermine the need to place the said letter dated 9/04/2010 addressed by the Respondent No. 10 before the Board of directors of the Company and has indicated that the said letter was not placed before the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stify this exclusion of the name of the said Anant Khetani by stating that since the draft of the said agreement was drawn up prior to the appointment of the said Anant Khetani, subsequent amendments were not carried out to the draft. According to the Ld. Counsel for the Petitioner, this stand of the Respondent Nos. 1 and 2 is a complete hogwash considering the fact that the annexure to the said agreement explicitly list out the dates and numbers of the cheques paid to various shareholders till as late as August 2010. If payment details as late as August 2010 could be included in the said agreement, there can be no justification for exclusion of a crucial detail such as a third director, if at all there ever was one appointed in April-May 2010, as claimed by the Respondent Nos. 1 and 2. 51. Referring to the aforestated reasons, it was argued by the Ld. Sr. Counsel appearing on behalf of the Petitioner that the appointment of Mr. Anant Khetani as a Director of the Company is invalid and void and it is nothing but an afterthought, and that the Respondents have fabricated all the documents to mask their illegal acts. 52. The Ld. Counsel appearing for the Respondent No. 3 has supported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is not a party to the petition. No relief whatsoever has been sought qua Mr. Anant Khetani. It is a fundamental law, that the provisions of Section 397/398 of the Act are preventive in nature. The CLB, in exercise of its rights and powers by virtue of Section 402 of the Act, is entitled to pass such orders as it deems fit in the facts of a given case to bring an end to the acts of oppression and mismanagement which are continuing in nature, Keeping in view the said settled proposition of the law and considering the fact that Mr. Anant Khetani is no more a director, on the Board of the Company, in my opinion, the validity of his appointment assailed by the Petitioner on the grounds referred to hereinabove, is of no consequence now, and therefore, no finding is required on this issue. 55. In addition to the above, I have examined the minutes of the meeting dated 10/04/2010 wherein, a reference of letter dated 9/04/2010 is not made. I have also considered the name of Mr. Anant Khetani being not mentioned in the notice for AGM to be held on 30/09/2010. In this regard, I am inclined to accept the explanation offered by the Respondents that in absence of any legal requirement, any adve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... she for the first time challenged the validity of the appointment of Mr. Anant Khetani as a Director of the Company and claimed these resolutions as got-up documents allegedly manufactured by the Respondent No. 2. It is to be noted here, the Respondent Nos. 2 and 3 are admittedly closely related. They stay in the same building. The Respondent No. 3 cannot deny that being a Director she owed a duty towards the affairs of the Company. There is nothing on record to suggest that she ever raised her voice being Director in respect of the alleged non-holding of the Board Meetings and AGMs since her appointment. In my view, she is equally responsible and guilty in failing to perform her fiduciary duty as a Director of the Company. It is unfair on her part now to put entire blame on the Respondent No. 2 for mismanaging the affairs of the Company, Further, on one side she wants to impugn the sale transaction on various grounds including the ground of inadequacy of the sale consideration, on the other side, she kept on receiving the amounts in installments from January, 2010 onwards running into crores of rupees towards the sale of shares held by her in the Company, which, she admittedly is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the Circular Resolution dated 12/06/2011, on the basis of which the purported POA is executed in favour of the Respondent No. 7, stands Invalid, and hence, such purported POA is not binding on the Company. In order to substantiate the allegation that the Circular Resolution dated 12/07/2011 was bad in law, the Ld. Counsel pointed out that the Respondent No. 3 has not signed the said Resolution either in favour or against thereto indicating that the Circular Resolution was never served on the Respondent No. 3. Referring to the pleadings of the Respondent No. 3, it was submitted that the Respondent No. 3 has confirmed that she was never served with the Circular Resolution. The Ld. sr. Counsel for the Petitioner submitted that the Ld. Counsel for the Respondent Nos. 1 and 2 in the course of arguments has admitted that the Respondent No. 3 was not available at the time of service and yet these respondents proceeded with passing the resolution. Based on the above, the Ld. Sr. Counsel for the Petitioner submitted that the said Circular Resolution fails to satisfy the requirements of Section 289 of the Companies Act, and therefore, it is void ab initio. 58. In addition to the above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent Nos. 2 and 7 to gain possession of the subject property, which shows that the purported POA was executed a month after the purported Circular Resolution. Further, this lapse of time between the purported Circular Resolution and execution of the purported POA completely vanishes the contention of the Respondent Nos. 1 and 2 that the subject property was in need of urgent repairs, and therefore the Company could not wait until holding of the Meeting of the Board of Directors to execute the POA, but it was compelled to do so through the Circular Resolution. The Ld. Sr. Counsel submits that from the aforesaid facts and circumstances it can be gathered that the sole purpose of executing the purported POA was to surreptitiously part with the legal possession of the subject property and not for any alleged urgent repairs and maintenance thereof as sought to be claimed by the Respondent Nos. 1 and 2. 60. Replying to the above submissions advanced on behalf of the Petitioner, it was argued by the Ld. Counsel for the Respondents that the Circular Resolution dated 12/06/2011 was required to be executed since the Directors of the Company were not in a position to meet for an ur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Rejoinder of the Petitioner (Vol-1), it is noted that the signature of the Respondent No. 3 does not exist thereon. However, out of the three directors, the two directors namely the Respondent No. 2 and former director Mr. Anant Khetani have signed it. Furthermore, whether this Circular Resolution was attempted to be served on the Respondent No. 3 or not in my view is not material and does not make the said resolution as void and illegal. It is also not material that the said Circular Resolution was signed by the Respondent No. 2 on Sunday i.e. 12/07/2011, in view of the reason that a proper Board Resolution, filed at Page No. 107 of the said Compilation, was passed subsequently on 14/06/2011. Further, the absence of the minutes of the meeting dated 14/06/2011, in my opinion is not fatal to declare the said Resolution as invalid. It is pertinent to mention here, that according to the own case of the Petitioner, the Respondent No. 2 who exclusively was dealing with the entire affairs of the Respondent No. 1 Company, was authorized to hold negotiations for the purpose of sale of the subject property of the Company with the prospective purchasers. He only major grievances are that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have already held hereinabove that the appointment of Mr. Anant Khetani by the Company cannot be held as illegal. Consequently, the appointment of Respondent Nos. 9 and 10 as additional director made on 11/05/2013 and 26/05/2013 also cannot be held as illegal. This point is answered accordingly. 65. Lastly, having examined the nature of reliefs sought for by the Petitioner in the petition it is noted that the Petitioner seems inclined to approve the impugned sale transaction subject to determination of fair value of the property shares. It therefore appears that the Petitioner has filed the instant petition for ulterior motive and mala fide objective to exert pressure on the Respondent Nos. 4 to 8 in connivance with the Respondent No. 3. It has been held time and again that a Company Petition filed under Section 397/389 of the Act to achieve collateral purpose is not maintainable. I may like to cite a decision in the case of Re Ballador Silk Ltd. Ch. D 671. The relevant part of the said decisions is as under:- A petition which is launched not with the genuine object of obtaining the relief claimed, but with the object of excreting pressure in order to achieve a collateral purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case in hand. In the present case, all the shareholders of the company have already accepted either full payment or part payment of their shares that Indicates that they were consenting parties to the impugned sale transaction. Therefore, the said decision does not assist the Petitioner. 69. In so far as the decision cited by the Petitioner in Palak Kumar Mondal Ors. v. Cine Supply Corporation (P) Ltd. (2002) 46 CLA 156 (CLB), is concerned, there is no dispute as to the principle of proposition of law. However, the fact of the said case are different from the fact of the case in hand. The appointment of the Additional Director is valid and is in accordance with the Articles of Association and it cannot be said that the appointment of the additional director was made to gain majority control of the board of the directors. 70. Similarly, the decisions in the cases of Dipak G. Mehta Ors. v. Anupar Chemicals (India) Pvt. Ltd. Ors. [1999] 98 Comp Cas 575 and Kshounish Chwdhury Ors. v. Kero Rajendra Monolithics Ltd. Ors. (2002) 1 comp L.J. 552 (CLB) are based on different facts and it has no application having regard to the facts of the case in hand. 71. Before concluding the judgment, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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