TMI Blog1997 (9) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... clare that there were no Annual General Meetings held on 18-12-1985 or 18-10-1986 and the Board Meeting held on 9-11-1985, 11-11-1985 and 20-8-1986, 20-9-1986, if there were any such meeting or meetings and that each of the said meetings are illegal and the resolutions if any passed thereat are void and inoperative. ( iii ) Declare that the purported allotment of further/fresh shares in the year 1985 or 1986 if any, by the Board of the respondent No. 1 is void, illegal and to injunct the respondent Nos. 2 and 3 as Secretary and Managing Director from permitting any rights of such allottee shareholders under such further/fresh allotment including the voting right in respect of such further/fresh allotted shares. ( iv ) Declare that the respondent No. 3 is not the Managing Director of the Company and/or in the alternate to terminate his appointment as Managing Director on the ground that he has shown himself to be unfit to be entrusted with the management of the company. ( v )Declare that the respondent No. 2 is not the Secretary of the Company and in alternate to terminate his appointment as the Secretary on the ground that he has shown himself to be unfit to be entrusted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner No. 2 possessed 11,320 of shares and thus they held more than 1/10th share under the 1st Respondent Company. The 7th Respondent Shri S.G. Jalan (for short R-7) was sought to be inducted to the Board of Directors of the 1st Respondent Company in January, 1987 and the validity of such appointment is being questioned. P-1 and the 9th Respondent Shri R.N. Jalan (for short R-9) conceived the idea of setting-up of a personal business for himself and R-9 as a partnership in recognition of their close and cordial relations with a view to provide opportunity to the children of two families namely Khemka and Jalan families. During 1965 the son of P-1 and R-9 were students and they intended to hand over the business after they completed their studies. Therefore, the company was promoted in April, 1966 as a Private Limited Company, but in fact it is a partnership concern inter alia for manufacturing of rubber rings. Since its inception the P-1, R-9 were the Directors. Respondent No. 3 Shri O.P. Jalan (for short R-3) was brought on Board for looking after the affairs of the Company as P-1 and R-9 were already pre-occupied with the employment in the management of the large public lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -3 was the General Manager of ARIL in 1977. Accordingly, P-3 shifted the residence to Saudi Arabia for supervising construction and commission of the project till 1982. After P-3 returned in 1982 from Saudi Arabia, he was expecting that he would be associated with the management of the R-1 company as Executive Director, when the Company was in a very prosperous and sound state of affairs. However, the P-3 was not inducted on the Board on his return from Saudi Arabia. Thus, the disproportionate management took its seeds in the administration of the company. In March, 1985 in furtherance of the idea of J group to oust K group from the joint venture company informed the K group not to deal with any longer with P-3 on behalf of the R-1 Company. Thus the humiliation and harassment was being caused to P-3. It is the case of the petitioners that from about 1983, R-3 of J group unilaterally stopped sending the monthly reports, statement of affairs, notices, minutes of the meetings or AGM. They did not receive any such notices or the audited annual accounts from 1983 and thus the K group was completely kept in dark and it was being surreptitiously excluded from the management and participat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were sent to him. But, it was not disclosed as to when the balance sheet was placed before the Annual General Meeting and how the notices of the meetings were sent to all the shareholders. None of the K group shareholders received the notices. However, after a lapse of 18 months for the first time, notices for two board meetings scheduled to be held on 27-6-1985 and 8-7-1985 were sent. For 1984-85 Annual General Meeting no notices were received and there has been statutory violation of holding minimum four meetings of the Board for the year 1984-85. On account of the differences between R-3 and R-9, R-2 and R-3 started excluding R-9 of J group from the participation in the affairs of the company and thus R-9 and his wife and children isolated. R-9 also did not receive the notice of any Board in the year 1984-85 or Annual General Meeting. This was brought to the notice of the R-2 and R-3 by R-9 by letters dated 21-10-1985 and 29-10-1985. The petitioner also by letter dated 17-12-1985 hinted R-3 not to attempt to alter the pattern of shareholding. The petitioner also by letters dated 9-2-1986 and 22-10-1986 brought to the notice of R-1 company the violations of the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. In the balance sheet for 1983-84 it was shown as if the company had incurred a loss of Rs. 13 lakhs and it was not real and accounts were manipulated. The Company has been lending money to other concerns where R-3 had substantial interest. There was a systematic channeling out of funds by way of lending to related concerns. The income-tax arrears made the authorities to initiate compulsory recovery proceedings. Any further control in the hands of R-2 and R-3 would cripple the company and cause severe loss to the petitioners and other shareholders of both K group and R-9 group. There was a deliberate oppression of the petitioners. Therefore, the petitioners sought various reliefs referred to above. 3. In this regard, it is necessary to note the names of respective parties and relationship which is as detailed below: P-1. R. Khemka P-2 Mrs. Radha Devi Khemka (wife of P-1) P-3 Mr. Mahesh Khemka (son of P-1) R-1 Company R-2 Mr. V.K. Chemariya, Company Secretary. R-3 Mr. O.P. Jalan R-4 Mrs. Sudha Jalan (wife of R-3) R-5 Mr. Vikas Jalan (son of R-3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. The decision of raising share capital was always taken by the board of directors. All other decisions regarding the financial arrangements, marketing were taken in accordance with the settled procedure. R-3 established his name and status in the business circle very soon. He was elected as Chairman of the Chemicals Allied Products Export Promotion Council in 1984-85. He was the President of All India Rubber Industries Association in 1983-84. He was appointed to the Rubber Board by the Government of India in 1984. It was denied that there was an allotment of shares in the ratio of 1/3rd and 2/3rd to K and J group. There was no such practice with regard to the increase of share capital. It was stated that the petitioners did not subscribe to the further issues. P-3 was never inducted in furtherance of the concept of joint and equal participation in the management. He was inducted to the Board on 1-2-1970 and on 10-3-1973 he was appointed as Executive Director and he resigned the same on 2-4-1977. This was only made to appease the P-1 and P-3 never involved himself in the management of the company. It was denied that the P-1 was guiding the affairs of the Company and that he wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trained for a short period, and R-3 also made frequent visits in this regard. After return of P-3 from abroad he was in Board of the Foreign company for some time and there was no understanding that the P-3 will be the Executive Director of R-1 company after his return. It was denied that J group tried to ease out the K group by taking advantage of absence of P-3. In fact P-1 was very much in India. There was no understanding of any proportionate management. The alleged harassment by the R-3 was absolutely incorrect. The P-1 filed a suit in Calcutta High Court and could not succeeded in getting the interim orders. In fact after the return of P-3 to India, the family of the P-1 started two separate business concerns namely M/s Andhra Polymers Private Limited and M/s Ramak Enterprises Private Limited and they were designed to carry on the business as Competitors to R-1 Company despite the prohibition contained in Articles of Association of R-1 Company that no shareholder directly or indirectly concerned or interested in or associ-ated with shall carry on the business in competition with the company. On the other hand, P-1 and P-3 have been committing various acts causing damage and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilarly during 1985, four meetings were held. Notices were sent in respect of meetings dated 5-1-1985 and 28-2-1985 under Certificate of Posting and in respect of the meetings dated 25-6-1985 and dated 26-7-1985 notices were sent under Registered Post as desired in his letter dated 25-3-1985 to send the letters by Registered Post. From March, 1983 to July, 1985 P-1 never protested in any manner about the conduct and affairs of the company. By letter dated 25-3-1985 for the first time, P-1 complained of the non-receipt of the notices etc. This itself showed that the P-1 was not interested in the affairs of the company. He could not have kept quite for such a long time. By letter dated 30-4-1985 it was made clear that all the notices of the Board meetings and Annual General Meeting were duly sent to all the shareholders. The Company did not violate any provisions of law. It was admitted that some differences arose between R-3 and R-9, but it was only a family dispute. There was no exclusion of R-9 at any point of time. It was also denied that the notices were not sent to R-9. When R-9 sent a letter dated 21-10-1985 the same was replied by the Company Secretary on 13-11-1985. So also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated matters in the covers sent by R-1 Company were denied. It is only to evade the receipt of the several communications sent by the R-1 company under Registered post. The Board meeting was held on 15-1- 1987 and R-7 was validly appointed as Additional Director. Even though the P-1 indicated dissent, the majority resolution was carried out. The allegation of systematic oppression was denied. The R-3 with his wife and children have been holding 63,934 shares in the company which is 63.93 per cent. The allegations of mismanagement of the company was denied. The allegations of manipulation of books and records were also denied. The reasons for decrease in the profits during 1983-84 was on account of reduction of sales. The reason for reduction of sales was on account of unfair competition by the company put-up by the Petitioners and the worldwide recession in the Export Market. In 1984-85 and 1985-86 the Company incurred losses on account of increase in cost of production and unfair competition. The lending by the Company as on 31-3-1984 was about Rs. 63 lakhs. But, it was denied that the loans were given to the concerned in which R-3 had substantial interest. In fact Rs. 50 lakhs we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The P-1 with the assistance of R-9 are claiming the credit for profits of the R-1 company upto 1983. The losses for 1983 onwards were only book manipulations. The P-1 reiterated that K group did not receive any notices for the Board meetings and that the Certificate of Postings were fabricat- ed. The allegation of disinterestedness of the P-1 was denied. Though a lengthy reply was filed, the sum and substance of the reply which is relevant for the purpose of this case is that the petitioners never received any notices for the Board meetings and Annual General Meetings that the companies established by them have no rival business and that the petitioners were subjected to oppression in the hands of R-3, that the withdrawal of the son of P-1 namely P-3 was illegal that the losses alleged to have taken place from 1984 onwards are only mere book entries. 9. A further additional counter affidavit has been filed on behalf of R-1 and R-3 in effect reiterating same contentions raised in the counter except further elaborating the points referred to in the reply of the Petitioners. 10. There was exchange of affidavits and counter affidavits between the rival parties denying the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull time to revive Nucon, which was not relished by R-3, differences arose between R-3 and R-9 and the relation-ship started straining. It is the case of R-9 that 12 Board meetings were held by R-1 company between March, 1983 to July, 1985 out of which he chaired all the meetings except the meeting dated 21-8-1984. The Minutes of the said meetings were duly prepared and signed by him as Chairman. One Mr. P.V. Subba Rao was the Secretary for some time and in the meeting held on 21-2-1985 R-2 was appointed as Secretary. It is his case that in July, 1985 one Mr. S.C. Kedia, General Manager of R-1 Company informed him that R-3 was planning to issue allotment of unissued capital of Rs. 5 lakhs in the company and to allot the shares to himself and his nominees converting the Petitioners from majority into minority. To ascertain the factual information, he requested R-2 to send the true copies of the Board meetings of the company and accordingly Minutes of 12 Board meetings were sent. But, they were unsigned. Therefore, on 16-8-1985, a letter was sent to R-2 stating that he had sent only unsigned copies of the Minutes Board Meetings from 28-7-1983 to 8-7-1985 and the same were not certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 1984-85. The notice dated 11-11-1985 for Annual General Meeting was to be held on 18-12-1985 was not received. The minutes of meeting dated 8-11-1985 and 11-11-1985 were manipulated. The reply to his letter dated 30-10-1985 was sent only on 13-11-1985 after the alleged meetings of 8-11-1985 and 11-11-1985. After Board meeting dated 8-7-1985, for the first time, he received notices of board meetings. He did not receive the notices of Board meeting for 19-9-1986 and 20-9-1986. He states that he received the Annual General Meetings notice to be held on 31-10-1987 along with the final accounts for the year 1986-87 and for the first time he came to know that the share capital of the company was increased from Rs. 5 lakhs to Rs. 10 lakhs. He states that the resolutions passed in the Board meetings dated 8-11-1985, 11-11-1985, 19-8-1986 and 20-9-1986 and Annual General Meeting dated 18-12-1985, 18-10-1986 and 31-10-1987 wherein the accounts for the years 1984-85, 1985-86 and 1986-87 were passed were illegal and invalid. The purported issue was in violation of the understanding. 12. Affidavit was filed on behalf of the Respondents No. 1 and 3 in reply to the counter affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and Respondent No. 9 and members of their family and associates have been excluded from the joint management and participation and enjoyment of the benefit of the 1st respondent Company and of the foreign joint venture company from and by about 1983? 2 . Whether the allegations of oppression of the petitioner's and Respondent No. 9, their family members and associates, sharehold-ers and of mismanagement of 1st Respondent Company, by Respond-ent No. 3 and his family members and associates, prejudicial to the interests of the company, are made out? 3 . Whether the alleged issue of additional shares of Rs. 5 lakhs in the year 1985 of the 1st respondent Company, is valid, legal and binding on and/or is in the interests of, the said company or were they issued solely for the benefit of respondent Nos. 3-6, 7 and 10? 4. Whether the Board and/or the Annual General Meetings of the 1st Respondent Company in respect of the years 1984-85, 1985-86 and 1986-87 are validly held and the Annual Accounts and Balance Sheet of the said years are validly approved and passed by the Board and/ or the General Body of the 1st Respondent Company? 5. Whether there has been any violation by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enough to bring into its fold all questions as to maintainability of an action under section 397 of the Companies Act on the ground of oppression as well as any issues suggestive of the presence of any act of oppression leading to the instant petition - Company Petition No. 27 of 1987." Thus, it is not necessary for this Court to decide all the issues which are framed earlier, but the relevant issues which are required now to be proceeded with are as follows: ( a ).Whether there are any acts of oppression of the minority sharehold- ers of the company by any other group of shareholders or majority shareholders? ( b ).Whether petitioner - R. Khemka and 9th Respondent - or any other person on their behalf, as alleged by the 3rd respondent, consented to the allotment of additional shares to the several other persons and if they have not consented to the above, whether allotment of shares as alleged by the petitioners, is an act of oppression attracting action under section 397 and/or 398 of the Companies Act? 17. Enormous oral evidence and voluminous documentary evidence was pressed into service by the parties. However, the evidence which is relevant only for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently increased to Rs. 10 lakhs in the year 1979. It is also on record that initially issued capital was Rs. 50,000 divided into 500 shares of Rs. 10 each. However, the issued capital was increased in February, 1970, March, 1974, March, 1976 and March, 1982 by which time, the issued capital became Rs. 5 lakhs. It is the case of the petitioners and R-9 that there was no further increase of issued capital at any point of time after March, 1982 and no Board Meetings took place for consideration of the increase of the issued capital and no such resolutions were passed. However, it is the case of the R-9 that only 12 board meetings were held for the period from June, 1983 to July, 1985 and that no decision was taken with regard to the increase of the issued capital at any point of time. On the other hand, it is the case of R-3 that the board meetings were being held in accordance with the procedure prescribed under the articles of associ-ation and the notices were sent to the board of directors in case of board meetings and in case of Annual General Meetings to all the shareholders. The resolutions were passed in the Board meetings to increase the share capital to Rs. 10 lakhs and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of competition. In the cross examination in respect of Ex. B-70, he stated that he admitted the signature, but denied contents. But, I feel that it is not relevant for the purpose of this case as discussed below. He also referred to mediation by Mr. Khaitan which was already spoken to him by P-1 and R-9. He stated that he did not pay anything to R-9 from APPL funds. Not because it was in loss, but because he did not want to deal with Jalans in any way after his experience with them. He has come to this conclusion since about 1984. 21. It is in the evidence of P-1 Mr. R. Khemka as P. W-2 that a resolution dated 21-8-1984 was passed by the Board of R-1 company withdrawing the membership of P-3 on the Board of foreign joint Venture company. Though he made efforts with R-9, but there is no meeting point. Therefore, he immediately wrote a letter to R-9, on 25-3-1985 regretting for the unfortunate development. On the very same day, he also wrote a letter to R-1 company and R-3 and sought for copies of the Board meetings and the Annual General Meetings since 1983. He also requested Annual Report for the year ended 31-3-1984. He also requested that future notices should be sent by R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f more funds. Increase in the share capital is only to gain the control and majority in the R-1 company. If there had been a proper notice, they must have contributed to the additional shares to the extent of 33 per cent. He did not have any interest with Andhra Polymers either direct or indirect. It is his case that there is no necessity for purchase of machinery in 1984-85 for any diversification and there is no financial stringency and that the machinery was already available with R-1 company. There was several other assets in the company which could have been sold if real necessity arose. In effect he says that there was no necessity and the issue relating to additional share capital is nothing but a ruse to gain the majority in the company. He also said the sale of shares of HIL was illegal and contrary to the statutory provisions. He also narrated certain events subsequent to the filing of the company application inasmuch as the issues are very specific it would be a futile exercise to refer to the events which would not be relevant for the purpose of deciding the matters in dispute. He also states that R-3 had established other companies Deccan Indus-trial Products Private L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re received under Ex. B-89. He cannot identify the signature of the person, who signed Ex. B-90. He did not receive Ex. B-91 relating to the year 31-3-1986. He says that from 1984 Khemkas were excluded from the affairs of R-1 company. The information that R-9 was also excluded from the affairs was passed on to him by R-9 himself some time in August, 1985. Between 1982 and 1985 himself and R-9 did not take any action on R-3 and from 1985 to 1987 also no action was taken. He denied the suggestion that the nomination of his son was withdrawn as they started APPL. He states that he did not see Ex. B-70 and the contents are false. The signature appeared to be that of Mr. Mahesh and he has no authority to sign on behalf of Khemkas. R-3 and R-9 had partitioned their house. He had received the notice for the Board Meeting on 28-6-1985 and 17-6-1985 and the Acknowledgement is Ex. B-92. He also received the notice of board meeting dated 27-6-1985 and acknowledgement is Ex. B-93. But, he took leave of absence. He had received the notice of Board meeting on 18-7-1985 and the acknowledge-ment was signed by his daughter-in-law under Ex. B-95. Ex. A-28 was addressed in connection with item No. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the nomination of P-3 on the Board of ARIL should be withdrawn. Accordingly, the resolution was passed in the Board meeting of the Directors on 21-8-1984. As the Nucon was running in losses and in order to improve its state of affairs he resigned from HIL in February, 1985 and started devoting full time to the Nucon. This was not relished by R-3. Therefore, differences arose between R-3 and R-9 and relations started straining. Between July, 1981 and June, 1983 ten Board meetings were held, out of which he chaired 7 Board meetings and between 20-7-1983, and 8-7-1985, twelve Board meetings were held and he chaired all the Board meetings except one held on 21-8-1984. In the Board meeting held on 20th February, 1984, R-2 was appointed as Secretary. In July, 1985 one Mr. S.C. Kedia, the then General Manager of R-1 company informed him that R-3 was planning to issue and allot unissued capital of Rs. 5 lakhs and distribute the same to himself and his nominees with a view to convert the Petitioners and R-9 into minority. It is his case that no resolution was passed for issue of additional shares. When he requested for copies of minutes, the Secretary R-2 sent the Minutes of 12 Board me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was also not real, and the documents were fabricated. Notice of Board meeting of 5-1-1985 was not given. The notice dated 18-2-1985 for convening the Board meeting on 28-2-1985 was not given to R-9. But, however, he attended the meeting on 28-2-1985 and minutes as disclosed by him were only drafted. No decision was taken to allot any additional shares. No resolution was passed to that effect. It was only with a view to convert the shareholding of R-3 to majority. There was no practice of sending the notices for Board meetings. It was started only in June, 1985 when a specific request was made to send the notices by Registered Post. There was no discussion with regard to family settlement in August/September, 1984 and no decision was taken in pursuance of the settlement. From July to November, 1985 he exchanged some correspondence relating to the fraudulent issue of unissued capital. On 8-11-1985 R-3 wrote a letter stating that the father would have to mediate and resolve the dispute. However, certain tentative proposals were made with regard to family settlement in 1985 with the assistance of the father. In 1986, R-3 approached him for partition and separate purchase of shares wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is the settlement of the disputes between the brothers. The blank signed papers were given to his father for income-tax proceedings and this practice was prevailing in the family and he also possessed certain blank papers signed by R-3. Ex. B-71 is not a genuine document. He did not receive the notices for Board meetings of 8-11-1985 and 11-11-1985 and he did not attend the same. He received Ex. R-11 cover by postal receipt No. 2688 dated 11-11-1985 and he denied the suggestion that he received Ex. B-125 under postal receipt No. 2466. He received Exs. R-11 and R-12 under postal receipt No. 2466. He denied the suggestion that he received the statement of accounts for the year 1984-85 of D.E.P.L. He did not write any letter to R-1 company that he has not received the accounts for the year 1984-85. But, he states that he called for a meeting of the Board of Directors to be held on 18-11-1985 to discuss the affairs of the company. He did not attend Board meeting dated 6-3-1986. He received notice for the Board meeting to be held on 15-3-1986. All Minutes in Ex. R-2 are correct. He admits that the contents in para 6 of the Minutes dated 8-7-1985 were approved. He did not receive Ex-B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any Secretary of R-1 Company. According to him, he joined the company around 1978. He was looking after the Company Law matters, Taxation. He stated that the notices for General Body and Board of Directors were being regularly sent by post. Upto 1981 Govindas was the Company Secretary and till 1984, one Mr. Subba Rao was the Secretary. The Secretary was consulting him in all the company matters. According to him, for the Board meeting took place on 10-5-1982, Notice for the Board meeting was dated 3-5-1982, Ex. B-275. It was sent under Certificate of Posting Ex. B-274. Agenda for the meeting is Ex. B-275-a. Similarly for the Board Meeting held on 4-8-1982, Notice was issued on 26-7-1982. Certifi-cate of Posting is Ex, B-276 while the Notice is Ex. B-165, Agenda is Ex. B-165-a. For the next Board meeting held on 24-8-1982, the Notice was issued on 16-8-1982 Ex. B-166 and the Certificate of Posting is Ex. B-276 and Agenda is Ex. B-166-a. For Board meeting dated 27-8-1982, the Notice dated 23-8-1982 was issued and Certificate of Posting is Ex. B-278, Agenda is Ex. B-167-a. For the Board meeting held on 21-11-1982, Notice was issued dated 18-11-1982 were posted under Ex. B-279. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the Board meeting dated 5-1-1985, the Notice was sent under Certificate of Posting on 28-12-1984 under Ex. B-133. For the Board meeting held on 28-2-1985, the Notice was sent under Certificate of Posting dated 18-2-1985 under Ex. B-128, Notice dated 18-2-1985 is Ex. B-87, Agenda for the Board meeting is Ex. B-87-a. Till March, 1985, no Director complained about the non-receipt of the Notice for the Board meeting or General Meetings.. He states that at the end of March, 1985, P-1 wrote a letter complaining of the non-receipt of the Notice for the Board meeting and general meetings and requested to send the future notices by Registered Post Acknowledgement Due. He says that after incorporation of A.P.P.L. the substantial orders of R-1 company were diverted. The witness further stated that after March, 1985 all the Notices of the Board meetings and general meetings of the R-1 company were sent to P-1 by Registered Post Acknowledgement Due. The postal receipt under Registered Post of Notice dated 30-6-1985 is Ex. B-343. The acknowledgement is Ex. B-92. Notice dated 13-6-1985 is Ex. B-344 and Agenda is Ex. B-344-a. The meeting scheduled under Ex. B-344 was adjourned to 27-6-1985. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . By letter dated 13-10-1985 Ex. R-11 he replied to R-9 (R-9's letter dated 21-10-1985). No reply was received from R-9 to the letter dated 13-10-1985. R-9 did not ask for any inspection of the records of R-1. He received letter dated 27-10-1985 Ex. R-5 from R-9 asking him to send all the letters, Notices of Board meetings and shareholders to his address at Nucon factory by Registered Post Acknowledgement Due. He also received similar letters from Smt. Satyabhama Jalan, Mr. Hemanth Jalan. He received telegram dated 3-10-1985 issued by R-9 proposing to call the Board meeting of R-1 company on 18-11-1985. He stated that the relationship between the directors was very much strained. Two groups were formed, 1st group consisted of R-9 and P-1 and the 2nd group consisted of R-3. As a company Secretary he was being put to harassment by various letters and phone calls from the Directors particularly from R-9. He informed the telegram dated 30-10-1985 to R-3 by that time Notice was already sent calling for the Board meeting on 8-11-1985 and 11-11-1985. As the director is not entitled to call for the Board meeting under the Article 48 of articles of association, he was asked by R-3 to reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tating that while going through the correspondence, he found the copies of the settlement of accounts of Mahesh Trading Company received by him in November, 1985. A similar letter dated 12-2-1986 was received from Mahesh Trading Company under Ex. A-43. He did not send any letter to P-1 pertaining to accounts of Mahesh Trading Company. On 5-3-1986 under Ex. A-3 he sent letter to P-1 denying sending of any such statement of Mahesh Trading Company and copy of the said letter was also sent to Mahesh Trading Company under Ex. A-46. In respect of the Board meetings held on 6-3-1986, the Notices were sent under Ex. B-362. In respect of P-1 its Registered Post Receipt is Ex. B-363 and Acknowledgement is Ex. B-98. In respect of R-9 it is Ex. B-364 and B-365. R-9 and P-1 did not attend the meeting. Similarly in respect of the Board meetings held on 15-3-1986, the P-1 sought for leave of absence, R-9 did not attend. For Board meeting dated 19-9-1986 and 20-9-1986 even though the Notices were acknowledged, P-1 and R-9 did not attend. The draft Annual Accounts of R-1 company for the year 1985-86 were approved in the meeting held on 18-9-1986 and in the meeting held on 20-9-1986 the Audited Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diversification of the production after the installation of the new machinery in 1985. He further stated that apart from the machinery purchased from D.E.P.L. some more machinery for over more than Rs. 14 lakhs was purchased from other companies. He denied the suggestion that Ex. B-340 was obtained by influencing the then Branch Manager. He also denied the suggestion that capital brought by R-3 and his family was only a paper transaction. He also denied the suggestion that the sole purpose of issue of additional share capital was gained in majority and the reasons assigned were not genuine. He also denied the suggestion that the Notices for 20th Annual General Meeting were not sent at all. The witness stated that in the meeting held on 3-11-1984 R-9 expressed his inability to continue as Chairman. Therefore, R-3 was appointed as Chairman. There was no written letters from R-9. The company issued Notice and Agenda for the meetings dated 3-11-1984 and 26-11-1984. But, they were not filed by him. The minutes of the meeting dated 3-11-1984 were signed by R-3. He did not file the Notice and Agenda in respect of the meeting dated 26-11-1984. In the said meeting the decision was taken to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69 and it was established only for his benefit and none-else. He was also Chairman of the Board from November, 1984. He was responsible for efficient management of the company and the company was developed by his efforts only with his contacts with various business circles. He also developed Export Market and narrated various events. He also held various posts as the President of All India Rubber Industries Association, Chairman of CAPACIL, Member of Rubber Board etc. He was also responsible for establishment of a Joint Venture Company ARIL in Saudi Arabia. He stated that the P-3 borrowed technical information from ARIL. P-3 returned to India in 1982 and intended to start a small plastic manufacturing company, but however it is his case that they started manufacturing rubber rings etc. From 1983 onwards P-1 also stopped attending the Board meetings in spite of Notices. R-1 was successful in getting Tenders in International Airport Authority, but APPL also submit-ted offer as competitor and 50 per cent orders were got diverted to APPL. The R-1 was set-up as an ancillary to HIL for supply of rubber rings which is an essential component for manufacture of A.C. Pressure Pipes. In the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notices were being sent under Certificate of Posting instead of ordinary post. Notices for Board meeting dated 4-6-1984 along with Agenda for approval of accounts for the year 1983-84 was sent to P-1. He did not attend, but R-9 attended. Ex. B-227-AA are the original minutes held on 4-6-1984. The office copy of the Annual Report of R-1 for the year 1983-84 made upto 28-9-1984 was filed with the Registrar of Companies under Ex. B-488. In July, 1982, another company was set up by him in the name of Nucon. The request of P-1 for investment in shares was accepted by Jalan family. Son of R-9 was appointed as Manager and in subsequent family settlement in 1989, Nucon was taken over by R-9. DPPL was incorporated as Public Limited Company and P-1 was not allotted any shares from the Promoters quota, they applied for shares in Public subscription and were allotted 1130 equity shares. He also incorporated Golconda Investments Company, a Public Limited Company. Petitioners applied for shares in Public Issue and they were not granted in Promoters shares. He stated that there was an understanding between the family of Jalans in or around August/September, 1984. In the said understanding DEPL we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disinterested and he did not attend the meeting on 26-11-1984. Ex. B-227- D is the minutes of the Meeting and item No. 4 related to the increase of the share capital. On 26-11-1984 itself Notices were sent to the sharehold-ers asking them to send applications along with the application money before 15-12-1984. Ex. B-130 is the Office copy of the Notice. Ex. B-131 is the Certificate of Posting. Against the said Notice, applications were received only from R-3, Mrs. Sudha Jalan, Ms. Kavitha Mittal and Mr. Vikas Jalan and cheques were also sent by them, and they were credited to DEPL share application money account on 30-11-1984, subsequently transferred to share capital account on 4-3-1985. This was also certified by the Chartered Accountants. The Board meeting was again held on 5-1-1985 and the Notice was sent by Certificate of Posting on 28-12-1984 Ex. B-133. P-1 and R-9 did not attend Ex. B-227 is the minutes of it. In the Board meeting held on 5-1-1985 it was decided to extend the date for receipt of the applications for additional shares upto 15-2-1985. Ex. B-132 is the copy of Notice. Ex. B-133 is the Certificate of Posting. To the Notice dated 5-1-1985 Mr. S.N. Jalan and his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k and Ex. B-335 is the office copy in the files of the company. The provisional balance sheet as on 31-3-1985 was filed with the Bank on 16-7-1985, Ex. B-302 is the Certified copy. They have also filed certain other documents with the Bank. R-9 wrote a letter on 23-7-1985 asking for the latest balance sheet of R-1 company vide Ex.B-503 and the same was sent. Thereafter on 27-10-1985 he sent a note in respect of certain provisions in the balance sheet, Ex. B-160 is the note. R-9 wrote a letter dated 29-10-1985 as a counter-blast and the same was suitably replied on 8-11-1985. Thereafter certain incidents took place between R-9 and R-3, wherein some criminal cases appear to have been initiated which were not concerned. He did not give any copies of the minutes of 12 Board meetings held between 20-7-1983 to 28-8-1985 to his father Mr. S.K. Jalan. He also did not give copies to R-9. He did not see the letter dated 16-8-1985 addressed to R-3. In the Board meeting held on 3-11-1984, R-3 resigned from the Chairmanship and thereafter he has been functioning as Chairman and there was no objection from any quarters. R-9 valued the shares of DEPL in the wealth-tax returns. P-1 showed the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yan Jalan, elder brother was required to make payments. By that time he came back from Amarnath pilgrimage, the settlement was backed out by P-1. It was around in July, 1986. He also denied that he had misused the blank signed letter-heads of P-3. He denied the suggestion that R-1 company did not issue any Notices to P-1 from July, 1983 to June, 1985. With regard to Ex. A-203, witness stated that it bore his signature and explained that some times P-1 and R-9 used to say that they would sign the Attendance Registers at the end of the meeting, but after the meeting they used to leave suddenly, in such cases, the Attendance Register was sent to the residence of the Directors for signature. In this context, he signed Ex. A-203. This was done whenever R-9 and P-1 were attended, but failed to sign the Attendance Register. Similarly Ex. A-193 was written in the same circumstances as Ex. A-203. Ex. B-330-A, Ex. B-330-B, and Ex. B-330-C are the minutes of the Board meetings held on 2-6-1983, 20-7-1983 and 27-7-1983. As per the instructions of R-9, Chairman of the meetings directed the Company Secretary to remove the name of P-1 shown as present as he refused to sign the Attendance Register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctice of sending the Notices and that the meetings were held informally as P-1 and R-9 were being neighbours. He also denied the suggestion that there was no decision to send the Notices by certificate of posting in 1982. He added that it was his personal decision as Managing Director of R-1 company. He denied that all the Certificate of Postings were bogus. Except that Ex. B-157 is a draft proposal and denies that it was not acted upon. He stated that whatever the amounts were invested by Khemkas were withdrawn by 31-3-1982. Discussions and findings 27. It would be convenient to decide the Issue No. 2 as to whether there was any consent by the P-1 and his group and R-9 and his group for additional share issue. As already stated the P-1 is only representing the group of Khemkas family while the Jalan family is being represented by two persons namely R-9 representing by himself and his family members while R-3 representing himself, his family members and other Respon-dents. 28. Let us now consider the procedure in general relating to issue of Notices and the conduct of the Board of Directors and Annual General Meetings. It is the case of the P-1 and R-9 that the meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l meetings since June, 1983 may be despatched to him. To the said letter a reply was sent on 1-11-1985 Ex. A-31 by R-3 sending the Minutes of various General meetings held since June, 1983 while reiterating the contents of letter dated 30-4-1985 and Ex. A-32 dated 1-11-1985 is also to the same effect while reiterating the contents of letter dated 2-5-1985. To a letter dated 30-10-1985 of R-9 it was informed by the Secretary R-2 of R-1 company vide Ex. A-33 and all meetings of the Board were held upon proper Notice and under Article 48 of the Articles of Association and R-9 cannot convene the meetings of the board of directors. This letter was endorsed to P-1. Hence, the request of R-9 for holding the meeting was not accepted. To the said letter another letter was sent by P-1 dated 17-12-1985 Ex. A-34 stating that the Minutes of the meetings dated 27-6-1985 and 8-7-1985 were not sent apart from the papers requested in letter dated 16-8-1985. He expressed certain apprehensions that the Jalan group was attempting to change the pattern of shareholding of the Company viz. issue of un-subscribed capital and allotting to the nominees of the Jalan group. On the same day another letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies Act and that the P-1 had not been attending any Board meeting since 31-3-1983 including the meetings which were held on 16-10-1986. To this a detailed letter was written by P-1 to R-3 vide Ex. A-60. In the subsequent events there was exchange of various Notices and letters between R-3 and P-1, but they are not relevant for the purpose of this case as we are only on the issue as to what was the practice with regard to sending the Notices. 29. As far as the R-9 is concerned, who was examined as R.W-1 it is in evidence that he has been attending all the Board meetings. But, there was no practice of sending the Notices by post or under Certificate of Posting. The Directors were being informed either orally or on telephone and the meetings were taking place. He also says that the Certificate of Posting are not genuine and they are fabricated for the purpose of establishing that the Notices were sent under Certificate of Posting. The board of directors passed resolutions in 1982 to the effect that Minutes of the Board of Directors should be maintained in Loose Leaf Papers and subsequently it appears that they were got bound for safe custody in view of the pendency of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-1-1985 O.P. Jalan (R-3) Smt. Sudha Jalan (R-4) Leave of absence was granted to S.K. Jalan (R-8) and R.N. Jalan (R-9) B-227-E 28-2-1985 O.P. Jalan (R-3) Smt. Sudha Jalan (R-4) Leave of absence was granted to S.K. Jalan (R-8) and R.N. Jalan (R-9) B-227F 19-9-1986 O.P. Jalan (R-3) Smt. Sudha Jalan (R-4) B-332-A 20-9-1986 O.P. Jalan (R-3) Smt. Sudha Jalan (R-4) B-332-B 16-10-1986 O.P. Jalan (R-3) Smt. Sudha Jalan (R-4) Leave of absence was granted to R. Khemka (P-1) and S.K. Jalan (R-8) B-332-C 4-11-1986 S.K. Jalan (R-8) O.P. Jalan (R-3) Leave of absence was granted to Smt. Sudha Jalan (R-4) B-332-D 15-1-1987 S.K. Jalan (R-8) O.P. Jalan (R-3) Sudha Jalan (R-4) S.N. Jalan (R-7) on invitation. Leave of absence was granted to R. Khemka (P-1) B-332-E 6-6-1987 S.K. Jalan (R-8) O.P. Jalan (R-3) S.N. Jalan (R-7) Leave of absence was granted to R. Khemka (P-1) and Smt. Sudha Jalan (R-4) B-333 21-9-1987 S.K. Jalan (R-8) O.P. Jalan (R-3) S.N. Jalan (R-7) Leave of absence was granted to Smt. Sudha Jalan (R-4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of R-1 company stating that in response to his letter, he has received Minutes of 12 Board meetings but they were not certified by the Secretary. Therefore, the Minutes initialled by R-9 and photocopies were sent for the records. The Minutes of 12 Board meetings stating to have been received by him were 20-7-1983, 27- 7-1983, 1-11-1983, 13-1-1984, 3-3-1984, 4-6-1984, 21-8-1984, 3-9-1984, 3-11-1984, 28-2-1985, 27-6-1985 and 8-7-1985. It has to be noted in this regard that according to the R-1, R-2 and R-3 apart from these meetings two more meetings were also held on 26-11-1984 and 5-1-1985. Vide Ex. R-4 letter dated 21-10-1985, R-9 wrote letter to the Secretary stating that he had sent on 16-8-1985, the photocopies of the Minutes from 20-7-1983 to 8-7-1985 after initialling and thereafter no Board meeting was held. In the same letter he has also stated that on 16-8-1985 he sent another registered letter requesting the Secretary to give him 10 days Notice for holding the Board meetings. Therefore, he requested for necessary action. On 27-10-1985 Ex. R-5 he again wrote to the Secretary requesting to send all communications by Registered Post Acknowledgement Due to the addressees c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the settlement R-9 took over Nucon and his wife was also taken on Board of Nucon as Additional Director. It is the case of R-9 that the Notices were never sent under Post at any time. Yet, it is the case of P-1 and P-3 that Notices were not sent at all from 1983 till 1985, and only when a specific request was made in March, 1985 to send them under Registered Post, they are being sent. The Secretary R-2 had filed various Notices right from 1982 and also the Certificate of Postings to say that they were sent under Certificate of Posting. It was also stated that under the provisions of the Companies Act and also the Articles of Association, the Notice of meeting required to be sent to the Directors in writing and a presumption has to be drawn as stated in the statute, if the Notices were sent under post and if the same Notice is exhibited it is sufficient compliance of the requirement under Articles of Association. For this purpose, it has to be considered whether the Notice in writing is necessary or oral Notice among the directors is sufficient and whether any such practice is in vogue and if so such practice is in accordance with the statutory provisions or in conformity with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons by or under these Articles for the time being vested in or exercisable by the Board. 54. The board may, subject to the provisions of the Act, from time to time and at any time delegate any of its power to a Committee consisting of such Director or Directors as it thinks fit and may from time to time revoke such delegation. Any Committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed upon it by the Board. 55. The meetings and proceedings of any such Committee consisting of two or more members shall be governed by the provisions herein contained for regulating the meetings and proceedings of the Board as far as the same are applicable thereto, and are not superseded by any regulations made by the board under the last preceding Article. 56. Acts done by a person as a Director shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provisions contained in the Act or in these Articles. Provided that nothing in this Article shall be deemed to give validity to acts done by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can also be made to sections 53 and 286 of Companies Act, with regard to service of documents on members by the Company. The said provisions are extracted below: " 53. Service of documents on members by company (1) A document may be served by a company on any member thereof either personally, or by sending it by post to him to his registered address, or if he has no registered address in India, to the address, if any, within India supplied by him to the company for the giving of notices to him. (2) Where a document is sent by post, ( a )service thereof shall be deemed to be effected by properly address-ing, prepaying and posting a letter containing the document, provid-ed that where a member has intimated to the company in advance that documents should be sent to him under a Certificate of posting or by registered post with or without acknowledgement due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the document shall not be deemed to be effected unless it is sent in the manner intimated by the member; and ( b )such service shall be deemed to have been effected: ( i )in the case of a notice of a meeting, at the expira ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correspondence from P-1 was concerned, it is only in March, 1985, P-1 for the first time wrote a letter to R-1 company i.e., on 25-3-1985 vide Ex. A-21 stating that for the last 18 months, he did not receive any Notices or Agendas or invitations for any of the meetings. On the very same day he also addressed a letter to R-9 Ex. A-118 stating that he came to know that the Board resolution withdrawing Mr. Mahesh Khemka (P-3) nomination to ARIL Board. In the said letter there is no mention about the non-receipt of any Notices for the last 18 months as mentioned in Ex. A-21. The relevant letters are extracted below. Ex. A-21 reads thus: "The Managing Director, M/s Deccan Enterprises Pvt. Ltd. I am surprised to learn that various board meetings and general meetings of the Company have been held for the last 18 months whereas during this period I have received no notices, agenda or invitation for any of these meetings. I have also not received, as yet, the annual report and balance sheet for the year ending 31-3-1984 for my signature and records. Since last year I have also not been receiving the monthly reports of the company as was our usual practice. I would, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balance Sheet for the year ending 31-3-1984. However, you have failed to obtain my signature as the Director on the Annual report and Balance Sheet for this year as it has always been the practice hitherto. As you are aware this practice has been justifiedly in vogue having regard to our joint interest and management. I find that you have not forwarded to me copies of the Minutes of various General Meetings since June, 1983 despite my specific request in my last letter. Please comply. In view of the common interest and understanding of the joint management. I was being kept informed through these monthly reports of the working of the company, I was not aware that these reports are not being received by me pursuant to unwarranted decision solely of your own. Please, therefore, send me copies of earlier reports of past months since the discontinuance thereof and also ensure such information in future also regularly and without fail. Sd/-R. Khemka." In pursuance of the letter dated 16-8-1985, P-1 was furnished with the Minutes of various general meetings held since June, 1983 vide letter Ex. A-31 R-1 company also addressed one more letter Ex. A-33 (same is marked as Ex. R-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nual General Meeting dated 29-9-1983 and 28-9-1984. I invite your kind attention once again to my two letters both dated 16-8-1985 of which several other requests remain still to be attended to and complied with. I am particularly concerned that I have not still received Minutes of the Board meetings since June, 1983 including those of recent meetings and also copies of monthly performance reports, despite my repeated requests. This practice I reiterate has been justifiedly in vogue having regard to our joint interest in management. Please, therefore, adhere to the same. Your contentions and claims in your letter dated 30-4-1985 are again denied as being incorrect and untenable. I reiterate my letter dated 16-8-1985. You would please appreciate my anxiety in view of the unsatisfactory operating results reflected in the Audited Balance Sheet for the year ending 31-3-1984. You are also aware that these results of the year 1983-84 were got approved at the Annual General Meeting at which no member of the Khemka group including myself was present as no notice was received for such meeting. I am also unable to understand why no Annual General Meeting of the company has been calle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-operation in this matter. Sd/- O.P. Jalan." In the letter dated 6-2-1986 vide Ex. A-41 P-1 had stated that he had not received any Notice of board of directors meeting or Annual General Meetings after 8-7-1985. It is in evidence of R-2 that the Notice dated 31-10-1985 Ex. B-96 for Board meetings dated 8-11-1985 and 11-11-1985 were sent under Registered Acknowledgement Due. Ex. B-96 is the office copy of the Notice dated 31-10-1985 and Ex. B-96-A and Ex. B-96-B are the Agendas for the Board meeting held on 8-11-1985 and 11-11-1985. Ex. B-97 is the Registered postal receipt No. 3236 dated 31-10-1985. Ex. B-95 is the Acknowledgement for Ex. B-96. It is the case of P-1 that letter Ex. A-31 dated 1-11-1985 was sent under Ex. B-97 which is denied by R-2. As can be seen from Ex. A-31, it was not sent under Registered Post, whereas the Notice Ex. B-96 was sent under Registered Post Acknow-ledgement Due. With regard to 19th Annual General Meeting to be held on 18-12-1985, it is in evidence that Notice dated 11-11-1985 Ex. B-125 for Annual General Meeting to be held on 18-12-1985 were sent to all shareholders. Ex. B-355 is the Registered Postal receipt No. 1874, dated 11-11-1985 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initialled these minutes. A photocopy of these minutes is being sent to you for your records. Sd/- R.N. Jalan." The reverse of Ex. R-2 is as follows: " Deccan Enterprises Private Limited Annexure to Letter dated 16th August, 1985 (1) Board Minutes of Meeting held on: ( a )20th July, 1983 ( b )27th July, 1983 ( c )1st November, 1983 ( d )13th January, 1984 ( e )3rd March, 1984. ( f ) 4th June, 1984 ( g )21st August, 1984 ( h ) 3rd September, 1984 ( i )3rd November, 1984 ( j )28th February, 1985 ( k )27th June, 1985 ( l )8th July, 1985." He did not also inform R-3 about letter Ex. A-118 dated 25-3-1985 written to him by P-1 and it reads thus: "My dear Jalan Ji, I am surprised to learn that Deccan Enterprises has submitted a Board resolution to Amiantit Rubber Industries Ltd. withdrawing Mahesh's nomination to ARIL's Board. It is all the more regretable that this issue was not discussed with me at any time during the last several months, even though I am sure you are fully aware of its implications. When we decided that we would do further business independently, I had suggested to you that we should request a mutual friend to act as an arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. It was incumbent on him to have expressed his views when his close associate had brought the issues before him. But he kept quiet for some time and started writing letters to R-1 and R-3. R-9 did not refer to Ex. A-118, in the Counters. It is also noted that on 25-3-1985, P-1 had written two separate letters. One to R-1 company (Ex. A-21) and another letter to R-9 (Ex. A-118), with regard to the affairs of the R-1 company. It is not understood why he had sent separate letters to R-1 and R-9 separately. He should have made known his correspondence to R-3 and R-9 as well since it is of common interest. At least P-1 could have endorsed the copy of Ex. A-21 to R-9 and similarly copy of Ex. A-118 could have been endorsed to R-3. Obviously it appears that P-1 wanted to keep them in dark and had been expecting some clues from them independently as R-3 and R-9 were admittedly not in a position to exchange all views on the business ventures. The tenor of letter dated 25-3-1985 Ex. A-118 speaks for itself. On 29-10-1985 again he wrote another letter under Ex. R-6 which is extracted below: "To The Secretary, Company Law Deccan Enterprises Pvt. Ltd. I have already sent you a let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses towards such postage/delivery. I regret to inform you that the Secretary Company Law refused to receive the above mentioned letter dated 29-10-1985. I have therefore sent the same by Registered Post and also sent a telegram and am writing again to him in the matter. Sd/- (R.N. Jalan) Chairman Board of Directors, Deccan Enterprises (P.) Ltd." The said letter was replied by R-3 vide Ex. R-10 dated 8-11-1985 which is as follows: "My Dear R.N. Bhaiya, I am in receipt of photocopy of your letter dated 29-10-1985 by Registered post. Your letters to the Secretary will be attended by him. As I do not wish to enter into any controversy with you at this stage in view of the efforts being made by respected Kakoji to resolve our differences, I am not dealing with your letter in detail. I am sorry, however, for the scandalous and untrue insinuation made against me and my wife involving the Secretary. For the rest I would depend upon the records of the Company. Sd/- O.P. Jalan. Sri R.N. Jalan, Managing Director, C/o Nucon Industries Pvt. Ltd. 88, Cooperative Industrial Estate Extension Scheme, Balanagar, Hyderabad 500037." R-2 also wrote a letter under Ex. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es also are not explained in the evidence by R-9. Moreover, R-9 being a Director, it could have been open for him to seek inspection of the records instead of indulging in correspondence. It is in his counter that in July, 1985 Mr. S.C. Kedia, the then General Manager has informed him that the R-3 was planning to issue and allot the unissued capital to himself and his nominees and thereby convert him and the Petitioners from majority to minority. Therefore, he requested R-1 to send the certified true copies of the Minutes of the Board meetings of the company in pursuance of his request, the R-2 sent him the unsigned Minutes of the copies of the 12 Board meetings of the company held between 20-7-1983 to 8-7-1985 and that by letter dated 16-8-1985 he drew the attention of R-2 that these Minutes were not certified by him and he sent photostat copies of the Minutes duly initialled by him. Para 's' of his counter is extracted below: "( s ) In July, 1985 Mr. S.C. Kedia the then General Manager of Respondent No. 1 informed me that respondent No. 3 was planning to issue and allot the unissued capital of Rs. 5 lakhs in the company and to distribute the newly issued and allot shares to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said letter dated 16-8-1985 together with all the enclosures thereto i.e., to say Board Minutes from 20th July, 1983 to 8th July, 1985 and postal receipt No. 5805 dated 16-8-1985 and are hereby annexed and marked Exhibit "R-9 Ex. 2, R-9 Ex. 3". The copies of the minutes sent by me under the cover of my letter dated 16th August, 1985 are all true and correct and any contrary and/or inconsistent recording in the purported directors minutes books of the company, are wholly untrue and false. The said minutes show that the affairs of the company upto July, 1985 was being conducted in usual course of business and no further shares whatsoever had been issued by the company during the said period." In the cross examination he stated that these Minutes were handed over to him by Mr. S.K. Jalan (R-8) and he further added that they were handed over personally. He did not know how his father obtained these Minutes under Ex. R-2. He added that Mr. S.K. Jalan (R-8) was Director in the company and he was at Hyderabad in July/August, 1985. But, however, R-8 was not examined on this issue. The following is the relevant extract from his cross examination: "The request to send certified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed copies of the Board meeting, but that crucial letter referred in Ex. R-2 is not forthcoming. Even the office copy covering letter dated 16-8-1985 alleged to have been sent to R-1 has not been filed by R-9 and only a true copy was filed. When he said that he had sent two letters on 16-8-1985 he should have office copies of such letters. None of the office copies of these letters were filed by R-9. He also did not file the office copy of letter dated 16-8-1985 requesting for sending Notices 10 days in advance. The witness admittedly is highly educated person and was in a top Executive position in HIL. When he stated that he received Minutes of 12 meetings in response to his letter, it is not understood why that letter was not filed. On the other hand, it is the evidence of R-2 that they received the letter dated 16-8-1985 to the effect that the Notices should be sent much in advance. Though the learned counsel for R-9 submits that this was referred to in letter dated 21-10-1985 and the said letter of dated 21-10-1985 was received by the Secretary, no objection was raised as to non-receipt of the alleged initialled minutes, but at the same time, it has to be seen that the non-menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forts of R-9 to salvage the document to his advantage went in vain. Consequently, his evidence is not worth consideration being incredible. Accordingly, I hold that Ex. R-2 is not a genuine document. 36. Let us now consider the action taken by P-1 in respect of the alleged non-receipt of the Notices and Agendas. As already stated supra, he initiated the proceedings only in March, 1985 after having waited for 18 long months. 37. The learned counsel for the petitioner submits that P-1 could have definitely attended all the meetings had notices been given to him more so when the decision was taken to increase the capital and the shares were allotted. He was very much interested as the company was in very prosperous state and its reserves were 15 times more than its share capital. He relies on the judgment of the Calcutta High Court in Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd AIR 1966 Cal. 512 Para 50 is extracted below: "( 50 ) If the case was such that it could be suggested that the petitioners had some motive in abstaining from attending the extraordinary general meeting one might have hesitated to come to a definite conclusion that the petitioners had not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e postal certificate cannot be construed as a conclusive proof as it is not difficult to get such a postal seals at any point of time. Para 6 is extracted below: "We have not felt safe to decide the controversy at hand on the basis of the certificates produced before us, as it is not difficult to get such postal seals at any point of time. To assure our mind that the notices had really been sent out to the workmen concerned, we perused the application which had been filed by the management seeking permission. We did so because Rule 76A(2) requires that the application shall be made in triplicate and copies of the same shall be served by the employer on the workmen concerned and 'proof to that effect shall also be submitted by the employer along with the application.' But the application (Annexure A) has not mentioned anything about 'proof of service to the workmen concerned. The statement in the counter-affidavit that proof of service had been submitted to the specified authority has not satisfied our mind in this regard." The matter arose under Industrial Disputes Act. The Workmen sought to be retrenched were required to be served with Notice and proof of service ought to be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on must be drawn in favour of the company. In Smt. Kanak Lata Ghose v. Amal Kumar Ghose AIR 1970 Cal. 328, the Division Bench of the Calcutta High Court observed as follows: "As to the posting of the letter written by Kalipada there cannot be any question of discrepancy, because the wife has said nothing about that letter. It is difficult to believe that all the three certificates of posting, Exts. F, F(1) and H dated respectively 16-7-1962, 22-1-1963 and 22-7-1963 were obtained from the Post Office without actually posting the letters mentioned therein. The certificates having been given by the postal authorities in the ordinary course of business must be presumed to be genuine unless the presumption is rebutted by cogent proof. The contents of the certificates must be presumed to be true unless they are proved to be false. No evidence has been adduced on behalf of the husband that the certificates are forged or spurious. Therefore, it must be taken that the three letters, copies whereof have been marked as Exts. E, E(1) and G, were duly posted according to the tenor of the certificates Exts. F, F(1) and H. Under section 114 illustration ( f ) of the Evidence Act it must fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed to be effected if the four conditions are fulfilled namely, sending the letter by registered post, it being properly addressed, prepaid and the letter contains the document; the contrary that is required to be proved to take away the presumption is with reference to the four requirements referred to above. It appears to me that this contention is not without force. It is only to meet the contingency of a person who is to be served with the notice trying to evade it, that the service shall be deemed to have been effected if the four conditions are fulfilled. If the contrary to be proved has reference to the actual service, then provision of section 27 could be rendered useless by the addressee avoiding to receive the letter or even refusing the registered letter. Therefore, it appears to me that in this case the notice having been sent by registered post complying with the four requirements referred to earlier, in law, it must be deemed that there is due service of the notice of termination of the tenancy." (p. 80) Again he takes the assistance from Paramanand Choudhary v. Smt. Shukla Devi Mishra [1990] 67 Comp. Cas. 45 (MP), wherein it was held that "sending of Notice by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view the statutory provision. Even though, R-9 and P-1 categorically stated that no Notices were sent and the Certificate of Postings were fabricated, but at the same time, it has to be tested from the angle of statutory provision. Inasmuch as the Notices have been sent, and the Certificate of Postings have been marked on behalf of the company, the presumption under section 53 comes into play and the said presumption is rebuttable. The onus thereafter falls on the P-1 and R-9 to establish that the Notices were never posted and that the Certificate of Postings were procured. Except stating that they did not receive any Notices no other evidence is forthcoming from P-1 and his supporters, R-9 and his family members. It is also in the evidence that when the P-1 and R-9 gave specific instructions to send the Notices under Registered Post, they were complied with and R-1 company has filed number of docu- ments marking the postal registrations and other documents. 42. It is curious to observe that P-1 being a person in a highly placed position could have kept quite if really he had not received the Notices for Board meetings. It is more so when he is sailing with R-9 in the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een brought on record. The conduct of the parties and the status held by them is also very relevant for the purpose of ascertaining whether they have acted in a bona fide manner or with an ulterior motive. The version of R-9 relating to Ex. R-2 was not accepted and as regards P-1, even though he had stated that he did not receive any Notices for General meetings and the Board of Directors meetings, it cannot be believed for the simple reason that out of two Directors who are to participate in the meetings one Mr. R.N. Jalan (R-9) had already attended number of meetings. If the Notices had not been sent at all, then R-9 could not have also attended any meetings and chaired the meetings and it is also not possible to perceive that R-9 might not have brought to the Notice of P-1 about these meetings. More over the trouble started not on account of non-receipt of the Notices and Minutes, but due to other reason. According To R-9 the dispute began as narrated in the counter in para 'o' which reads thus: "( o ) The beginning of disputes In or about 1982, on return of Mahesh Khemka, the son of Petitioner No. 1 who was looking after the business of ARIL in Saudi Arabia as General Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard of the Joint Venture Company, based on which the foreign company resolved and removed respondent No. 11 (now P-3) from its Board in middle 1985. 34. All hopes were totally belied, when the alleged resolution dated 21-8-1984 came to light in March, 1985. It also happened that almost simultaneously the 9th respondent left his employment in the public limited company. The Petitioner No. 1 realised that during the prior few years the J-group has been merely gaining time to facilitate the total ouster of K-group. In this situation the Petitioner No. 1 besides expressing his anguish to the respondent No. 9 under his letter dated 25-3-1985 is also forced to take recourse to legal proceedings before the High Court of Calcutta for setting aside the alleged resolution dated 21-8-1984. These proceedings are pending." Therefore, the silence on the part of P-1 for such a long time without making any objection with regard to the Notices of various meetings from 1983 till 1985, only establishes that he had Notice of the meetings and that he deliberately did not attend the meetings for the reason that his son was not properly accommodated in R-1 company. He only initiated the corresponde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o note that statutory provision requires that the Notice should be sent in writing either personally or by post. There is no provision for intimating on telephone. Therefore, the stand of the R-9 that he used to attend the meetings on telephonic information cannot stand. When the statute requires certain thing to be done in certain manner, it has to be presumed that the acts were done in furtherance of that statutory provision, unless it is proved to the contrary. More over, there is ample evidence before this Court that Notices were sent to the parties under Certificate of Posting right from 1983 onwards. 45. Under these circumstances, I have to necessarily hold that Notices were issued to the Directors in the case of Board meetings and the Shareholders in case of Annual General Meetings in accordance with the statutory provisions. Accordingly, I hold that P-1 and R-9 had received the Notices for Board and General meetings. 46. The consequential crucial question that arises for consideration is whether any offer was made to P-1, R-9 or any other persons on their behalf and as alleged by R-3 whether they consented to the allotment of additional shares to other persons and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .P. Jalan took the Chair, 2. Leave of absence was granted to Mr. S.K. Jalan and Mr. R.N. Jalan. 3. Minutes of the Previous Meeting of the Board of Directors held on 3rd November, 1984 were read, confirmed, initialled and signed by the Chairman. 4. The Managing Director informed the Board that presently Company is having recession for the products presently being manufactured by the company. It is therefore envisaged to diversify and start producing new range of products for which additional capital equipments etc. are required. The financial position of the Company is very tight. It was therefore suggested to the Board to increase the paid up capital of the Company by creation and issue of new shares and accordingly it was "Resolved that in accordance with Article 6 of the Articles of Association of the Company and other applicable provisions of the Companies Act, 1956 if any, the issued share capital of the company be increased from Rs. 5.00 lakhs to Rs. 10.00 lakhs by the issue and allot Rs. 10.00 lakhs by the issue and allotment of 50,000 equity shares of Rs. 10 each for subscription for cash at par." Further Resolved that the amount of Rs. 10 each per share shall be pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sire. The last date of the receipt of the application along with application money is 15th December, 1984. You are holding Shares of the Company as on date. You are requested to send your application along with application money for as many shares as you wish to apply and your application should reach our office by 15th December, 1984. for Deccan Enterprises Pvt. Ltd. Sd/- Managing Director. S.No. Name No. of Shares 1. Sri Ramniranjan Jalan 7,030 2. Sri Rajkumar Khemka 11,370 3. Sri Om Prakash Jalan 7,080 4. Sri Shubhkaran Jalan 5,730 5. Sri Mahesh Kumar Khemka 370 6. Smt. Satyabhama Jalan 4,690 7. Smt. Sudha Jalan 5,154 8. Smt. Kamala Devi Khemka 4,966 9. Sri Shree Gopal Jalan 50 10. Smt. Bimla Devi Jalan 50 11. Miss. Kavita Jalan 1,650 12. Master Vikas Jalan 50 13. Miss. Bela Jalan 50 14. Master Pramod Jalan 50 15. Master Bimal Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited held on Saturday the 5th January, 1985 at 11.00 A.M. at the Registered Office of the Company at 5-2-175/1, Rashtrapathi Road, Secunderabad - 500003, Andhra Pradesh. Present: Mr. O.P. Jalan. Mrs. Sudha Jalan. 1. Mr. O.P. Jalan took the Chair. 2. Leave of absence was granted to Mr. S.K. Jalan and Mr. R.N. Jalan. 3. Minutes of the Previous Meeting of the Board of Directors held on 26th November, 1984 were read, confirmed, initialled and signed by the Chairman. 4. Extension of last date for recall of application for further issue of share capital: The Board reviewed the position regarding further issue of shares capital and noted that the last date fixed for the receipt of application for shares offered to them has expired on 15th December, 1984. To provide some more time to the shareholders to enable them to make necessary remittances, it is hereby decided that the last date fixed for the receipt of applications be extended from 15th December, 1984 to 15th February, 1985. After general discussions the Meeting terminated with vote of thanks to the Chair. Sd/- Chairman." For the Board Meeting held on 28-2-1985 Notices were sent under Certificate of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect. Mr. O.P. Jalan further informed the Board that he has selected Mr. V.K. Chamariya, B. Sc (Hons.) ACA, Finance Manager of the Company as Secretary of the Company also. The Board considered and continued the appointment of Mr. V.K Chamariya as Finance Manager and Secretary of the Company. 5. The Secretary produced before the Board a statement showing the details of the Shares applied by the Shareholders for further issue of the share capital of Rs. 5 lakhs (Rupees five lakhs only). The Board considered the same and decided that in case if the applications for further shares have not been received from any of the shareholders, the same may be allotted by the Board in its discretion to any of the shareholders who applied for more than the shares offered to them. Accordingly, the following resolutions have been passed. "Resolved that 50,000 Equity Shares of Rs. 10 each (Distinctive Nos. from 50001 to 100, 000) be and are hereby allotted to the persons as per list placed before the Board and reproduced below and as shown against their respective name. S. No. Name No. of shares allotted Distinctive Nos. From To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.Sri Shree Gopal Jalan 10.Smt. Bimla Devi Jalan 11.Miss. Kavita Jalan 12.Master Vikas Jalan 13.Miss Bela Jalan 14.Master Pramod Jalan 15.Master Bimal Kumar Ghuwalewala 16.Mr. Hemant Jalan 17.Smt. Manju Jalan 18.Sri Shree Narayan Jalan 19.Smt. Manju Jalan 20.Miss Ritu Jalan 21.Mr. Sanjay Jalan 22.Miss Sumita Jalan 23.Master Ajay Kumar Ghulwalewala 24.Smt. Premlata Ghuwalewala 25.Smt. Hemlata Khemka 26.Smt. Radha Devi Khemka 27.M/s Kohinoor Trading Company Private Limited. It is thus the case of R-1 Company that meeting of the Board of Directors was held on 26-11-1984 wherein the decision was taken to subscribe the additional share capital of Rs. 5 lakhs and consequent on the said decision, offer was made to the Shareholders to send their offers on or before 15-12-1984. However, again the same was extended upto 15-2-1985. It is also the case of the Company that only few Shareholders responded namely Mr. O.P. Jalan (R-3), Smt. Sudha Jalan (R-4), Mr. Vikas Jalan (R-5), and Miss. Kavita Jalan (R-6). It is also the case of R-1 that they have also sent cheques. Further, it is also in evidence that some Shareholders sent intimations Exs. B-317, B-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Notices were sent for each and every meeting. In fact P-3 had already incorporated a Company in 1982 and commenced the production in end of 1984. The products are identical with the products of R-1 Company. After February, 1985 when R-9 resigned from HIL P-1 was promoted as President of HIL and using the said capacity, he had diverted the orders from R-1 Company to APPL Company. Thus, the Company was made to suffer heavy losses on account of non-purchase of its products by HIL P-1 used his influence and diverted the orders and therefore the sales which were to the tune of Rs. 70 to 80 lakhs in 1981-82 slowly came down and by 1986-87 it became to nil. It is also his case that the Company was required to diversify its products for various reasons including the competition put-up by P-3 and for that purpose it required machineries and finances for purchase of machineries. It is also his case that the financing bank has been insisting for increase of share capital from Rs. 5 lakhs to Rs. 10 lakhs so as to increase the credit limits. It is also his case that there was a family partition in August/September, 1984 and in the said family partition, R-1 Company fell to the share of R-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey. Thus it was submitted on behalf of R-3 that when the Notices were in accordance with the Articles of Association and when there is no response from the Shareholders, it has to be treated that they did not wish to contribute to the additional share capital and that it shall be presumed that they did not consent for additional share capital. In this regard, it has to be observed that there was no definite and specific pleading by P-1 in the Company Application to the effect that additional shares were issued without his knowledge and if any shares were issued that should be treated as illegal and invalid. Thus, the P-1 was not at all sure of additional share capital and he has been taking shelter by making general pleading that no Notices were being sent and therefore he was not in a position to attend any meetings. Enormous evidence was let in by P-1 and R-9 on the issue relating to the additional share capital saying that there was no requirement of additional capital at all and that all the Certificate of Postings, registered postal receipts and the Minutes were fabricated and that the letter written by Mr. Kedia, former General Manager, intimating the Bank that they had incre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m various institutions. 49. I have given my serious and anxious consideration to the issue which is contested tooth and nail by all the parties. But, the question remains is whether the P-1 and R-9 consented for the additional share capital. In the instant case, the question of consent cannot be directly established and only the circumstantial evidence has to be scrutinised meticulously. The main contention of P-1 was that he never received any Notices, while the stand of R-9 was that he attended the meeting on 28-2-1985 and that he had no Notice of Board meetings of 26-11-1984 and 5-1-1985. I have already discussed the matter relating to the issue of Notices by R-1 Company in preceding paragraphs and after considering the evidence with reference to the clauses in the Articles of Association and also the statutory provisions in section 53 and section 286 and also the evidence adduced, held that the Company did issue the Notices for various meet- ings. Therefore, it has to be necessarily held that the Notices for the meetings dated: 26-11-1984, 5-1-1985 and 28-2-1985 were issued to the Directors. With regard to the offer made by R-1 Company to the Shareholders, it is in evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide his letter dated 16-8-1985 Ex. R-2 were only the correct Minutes cannot be accepted. It is also to be noted in this regard that R-3 was examined himself as R. W-5. When he was offered for examination, it is for P-1 and R-9 to have elicited the relevant information from him. When he was offered for cross examination even though he was subjected to lengthy cross examination, the relevant points touching the issue in question were never raised. The burden lies on P-1 to establish that he did not receive the Notices at all, except making a bold statement to that effect. Equally the burden lies on R-9 to establish that the Notices were not sent for the Board meeting on 26-11-1984 and 5-1-1985 and that he attended the meeting on 28-2-1985 and that the Minutes were not properly recorded on 28-2-1985. It is curious to note that in the letter dated 16-8-1985 Ex. R-2, he only referred to various Board meetings as having attended them including 28-2-1985, but however, there was no mention about 26-11-1984 and 5-1-1985. In the said two meetings crucial decision was taken to subscribe to the additional share capital and now R-9 is coming out with his version that there was no meeting on 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for P-1 and R-9 contended that the burden placed on P-1 and R-9 was discharged by stating that they did not receive any Notices and the burden shifted to R-3 to establish that Notices were sent. In this regard it has to be noted that proof of burden on the respective parties pales into insignificance when they adduced the evidence at length. Yet, if they failed to elicit the necessary information, then it has to be taken note of. I am for the purpose of this issue not considering the circumstances to establish that P-1 and R-9 was disinterested to contrib- ute for additional share capital for various reasons as set out by R-3 nor am I inclined to consider that P-1 and R-9 was very much interested to contribute the additional share capital as the company was in a prosper- ous state. Suffice it to say that if the Notices were issued properly and they failed to attend the meetings, the consequential resolutions passed in the said meetings cannot be challenged nor can it be said that the minutes are manipulated. It is duty cast on the party to put his case in the cross-examination of the witnesses of the opposite party. This rule is of essential justice, not merely a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show that these documents were maintained during the course of the company's business. 54. For all these reasons, it must be held that proper Notices were issued for the meetings dated 26-11-1984, 5-1-1985 and 28-2-1985 and the Minutes were recorded in those meetings cannot be said to be irregular or manipulated. When once it is found that the offers were made to all the shareholders if they did not respond to the offers it has to be necessarily held that they did not consent for subscribing to the additional shares. In this regard, it has to be noted that convening of meetings and taking decisions in the Board meetings and sending intimations to the Shareholders is a purely a in-house procedure regulated by the Articles of Association of the Company and it would not be proper for the Courts to interfere with the internal administration of the company, unless the contrary is established including the contravention of the Articles of Association or the statutory provisions as contained in the Companies Act. So long as the Company functions in accordance with the statutory provisions, its activities need not be probed further. Therefore, when R- 9 and P-1 with their respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "The learned Judge held that this matter had already been definitely settled and in addition gave reasons why he adhered to his former opinion. This was, in fact, superfluous. The question as to the perpetuity had been definitely and properly before him on the former hearing, and, was, in fact, decided without any reservation, as is made plain by the terms of the judgment itself, which show that the determination of the disputes as to the perpetuity was the foundation of the whole judgment and that the questions left over were those to which attention has been directed and which themselves are abundant to explain the meaning of the passage in the decree on which reliance is placed. It is not, and indeed it cannot be, disputed that, if that be the case, the matter has been finally settled between the parties, for the mere fact that the decision was given in an administration suit does not affect its finality ( See : Peareth v. Marriott [1882] 22 Ch. D. 182. The Court of Appeal, however, took a different view, and regarding the question as still open decided it against the appellant, but the error in their judgment is due to the fact that they regarded the question as complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court must in any future litigation proceed on the basis that the previous decision was correct. (8) The principle of res judicata applies also as between two stages in the same litigation to this extent that a Court, whether the trial court or a higher court having at an earlier stage decided a matter in one way will not allow the parties to re-agitate the matter again at a subsequent stage of the same proceedings. Does this however mean that because at an earlier stage of the litigation a Court has decided an interlocutory matter in one way and no appeal has been taken therefrom or no appeal did lie, a higher court cannot at a later stage of the same litigation consider the matter again?" (p. 943) In this case, in an earlier proceedings the High Court on the basis of amendment to Calcutta Thika Tenancy Act, held that the respondent was Thika tenant and holding the Section 28 was applicable to pending proceedings, remanded the matter for fresh disposal. After the remand, the Munsiff rescinded the decree. Land Lord was unsuccessful before the High Court. The Land Lord tried to raise the question of applicability of Section 28 which was rejected as barred by res judicata. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assistant Commissioner and Deputy Commis-sioner recorded question of Appellants being strangers qua, the law in dispute took a very restricted view of section 79 of the Act, dealing with the Revision. This contention was repelled. The Supreme Court observed "that the High Court at the time of the decision of the earlier Writ Petition, of the 18-12-1964, recorded a finding and gave directions to the Tribunal not to reopen the questions of fact in Revision. The Tribunal, while passing the order dated 12-9-1967 compared with those directions of the High Court. The Appellants are bound by the judgment of the High Court and it is not open to them to go behind that judgment in this appeal. No appeal was filed against that judgment and it has become final. In that context, the Supreme Court held that the principles of res judicata can be invoked not only in subsequent proceedings, but also they get attracted at the stage of subsequent proceedings." Therefore, the earlier order of the High Court become final and that could not be re-agitated in the subsequent proceed-ings. But, in the instant case, there is no such final order. Hence, this decision is not applicable to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded by the learned single Judge in the interlocutory application, cannot be treated as res judicata in subsequent proceedings. In fact the learned Judge himself proceeded with the matter for ascertaining the existence of a prima facie case and balance of convenience. Therefore, I have to necessarily reject the contention of the learned counsel on this issue. 57. The learned counsel for P-1 and P-2 Mr. Srinivasa Murthy submits that the documents which are sought to be inducted by R-3 cannot be given any credence and no presumptions can be drawn under section 114 of the Evidence Act. Taking assistance from the decisions in Madugula Jermiah, In re AIR 1957 AP 611, Bahadur Singh v. MCD 1973 Punjab LR (D) 145 the learned counsel submits that when the documents were not proved they could not be relied upon and arguments could not have been advanced based upon other presumptions, which is not permissible under any statute or decisions rendered by the Courts. He submits that Ex. B-64 and B-201 were dated 16-1-1985 and 21-11-1985 and they were only produced in 1993 by R-3 and they were never referred to in any counter filed by him. Even R-8 when he filed appeal against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 1242, observed thus: "6. The question which falls for consideration is whether the respondents in their written statement have raised the necessary pleadings that the license was irrevocable as contemplated by section 60( b ) of the Act and, if so, is there any evidence on record to support that plea. It is well settled that in the absence of pleading, evidence, if any, produced by the parties cannot be considered. It is also equally settled that no party should be permitted to travel beyond its pleading and that all necessary and material facts should be pleaded by the party in support of the case set up by it. The object and purpose of pleading is to enable the adversary party to know the case it has to meet. In order to have a fair trial it is imperative that the party should state the essential material facts so that other party may not be taken by surprise. The pleadings however should receive a liberal construction, no pedantic approach should be adopted to defeat justice on hair splitting technicalities. Sometimes, pleadings are expressed in words which may not expressly make out a case in accordance with strict interpretation of law, in such a case is the duty of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayudu AIR 1954 AP 25 which is to the following effect: "3. The first question raised is that the surrender of the suit lands by Purnachandramma, the widow of Sadasivalingamurthi, was invalid as the plaintiffs were not the next reversioners to the estate of her husband. This argument is based upon the contention, that in regard to unenfranchised inams, the rule of succession is different from that which obtains in the case of other property and that in regard to the said property, neither the widow nor the divided brothers of Sadasivalingamurthi were heirs to his estate. The learned Judge rightly pointed out that this case was not set up in the pleadings, and on that ground rejected the contention. In our view, the learned Judge was right in not allowing the defendants to raise a plea at the time of arguments, which was not specifically raised in the pleadings." (p. 26) Further, the learned counsel relied on paras 5 and 6 of the case in Manchineni Venkayya v. Manchineni Seshayya AIR 1954 AP 29 which are extracted below: " It is well settled that parties ought not to be permitted to raise new points not covered by the pleadings or the issues. In Eshan Chunder Singh v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this connection to remember what Lord Westbury had to say in this connection, in Eshanchunder Singh v. Shamachurn Bhutto (1866-67) 11 Moo Ind. App. 7 (PC). 'This case is one of considerable importance, and their Lordships desire to take advantage of it, for the purpose of pointing out the absolute necessity that the determination in a cause should be founded upon a case either to be found in the pleadings or involved in or consistent with the case thereby made... It will introduce the greatest amount of uncertainty into judicial proceedings if the final determination of causes is to be founded upon inferences at variance with the case that the plaintiff has pleaded, and, by joining issue in the cause, has undertaken to prove... They desire to have the rule observed, that the state of facts and the equities and ground of relief originally alleged pleaded by the plaintiff shall not be departed from'." (p. 294) 58. The principles as enunciated in the above cases cannot be disputed. The entire gamut of exercise is to find out the truth or otherwise of the allegations made in the company petition and that should come only in the first blush and the parties cannot be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tensibly, but in fact R-9 was the actual person who lead the litigation by joining the hands with P-1. The learned counsel also submits that there are no bona fides in the petition and the same should be dismissed. 61. It is to be noted that P-1 and R-9 are sailing together in this Company Petition. The P-1 throughout his case in the Company Petition contended that Jalan group has been acting to the detriment of the interest of the Khemka family, but in later stages of averments in the Petition, it is brought out that R-9 also been subjected to similar treatment as the relations between R-3 and R-9 were strained and thus the P-1 tried to make out a case that R-3 has been acting oppressively to the interest of the other Shareholders. 62. The learned counsel for P-1 and R-9 submit that the Company in fact is a partnership and it is only incorporated under the Companies Act for the purpose of various benefits. It is also contended that Khemka family and Jalan family have always been maintaining 1/3rd and 2/3rd share in all the ventures undertaken by both these families. Therefore, there was an implied understanding to run the business on partnership lines and that in effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfully. Hence, the same principle can also be invoked in the Company Law as contained in Section 433. Since the oppression is writ at large, it is necessary that appropriate directions should be passed by this Court. Whether the Company is in substance a partnership? 63. As can be seen from the Company Petition, the case is sought to be made out that R-3 has been conducting in oppressive manner to the interest of other Shareholders which will be sufficient ground for winding up of the R-1 company under just and equitable clause on the analogous provisions contained in the Partnership Act. It is necessary to consider whether the case on hand in effect is a partnership firm or a Company incorporated under the Companies Act. The Counsel for P-1 relied on the judgment of House of Lords in Ebrahimi v. Westbourne Galleries Ltd. [1972] 2 All. ER 492 and Yenidje Tobacco Co. Ltd. In re [1916] 2 CL 426 (CA). The said judgments were referred by the Supreme Court in Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwala AIR 1976 SC 565. In Hind Overseas (P.) Ltd.'s case ( supra ), there was a petition filed for winding-up under section 433( f ) of the Act. The learned com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were directors sharing the profits equally as remuneration and no dividends were declared. (3) One of the shareholder's son acquired shares from his father and from the second shareholder, Ebrahimi, and joined the company as the third shareholder-director with two hundred shares (one hundred from each). (4) After that, there was a complete ouster of Ebrahimi from the management by the votes of the other two directors, father and son. (5) Although Ebrahimi was a partner, Nazar had made it perfectly clear that he did not regard Ebrahimi as a partner but regarded him as an employee in repudiation of Ebrahimi's status as well as of the relationship. (6) Ebrahimi though ceasing to be a director lost his right to share in the profits through directors' remuneration relating only the chance of receiving dividends as a minority shareholder. Bearing in mind the above features in the case, the House of Lords allowed the petition for winding-up by reversing the judgment of the court of appeal and restoring the order of Plowman, J. (p. 571) The Supreme Court in Hind Overseas (P.) Ltd.'s case ( supra ) observed thus: "31. Although the Indian Companies Act is modelled on the En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t company." (p. 574) In Ebrahimi's case ( supra ) , the House of Lords after reviewing all the earlier cases held: "The foundation of it all lies in the words 'just and equitable' and, if there is any respect in which some of the cases may be open to criticism, it is that the Courts may sometimes have been too timorous in giving them full force. The words are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own; that there is a room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The 'just and equitable' provision does not as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the Court to dispense him from it. It does, as equity always d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the two shareholders declined to give effect. It was proved in that case that the two directors were not on speaking terms, that the so-called meetings of the board of directors had been almost a farce or comedy, the directors would not speak to each other on the board, and some third person had to convey communications between them which ought to go directly from one to the other. Under the above situation it was observed by the learned Master of the Rolls as follows: 'It is possible to say that it is not just and equitable that this stage of things should not be allowed to continue, and that the court should not intervene and say this is not what the parties contemplated by the arrangement into which they entered?' Certainly, having regard to the fact that the only two ****** directors will not speak to each other, and no business which deserves the name of business in the affairs of the company can be carried on, I think the company should not be allowed to continue. I have treated it as a partnership and under the Partnership Act of course the application for a dissolution would take the form of an action; but this is not a partnership strictly, it is not a case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a 'just and equitable' cause. But I think I may say this. A shareholder puts his money into a company on certain conditions. The first of them is that the business in which he invests shall be limited to certain definite objects. The second is that it shall be carried on by certain persons elected in a specified way. And the third is that the business shall be conducted in accordance with certain principles of commercial administration defined in the statute, which provide some guarantee of commercial probity and efficiency. If shareholders find that these conditions or some of them are deliberately and consistently violated and set aside by the action of a member and official of the company who wields an overwhelming voting power, and if the result of that is that, for the extrication of their rights as shareholders, they are deprived of the ordinary facilities which compliance with the Companies Acts would provide them with, then there does arise, in my opinion, a situation in which it may be just and equitable for the court to wind-up the company'." (p. 572) The Supreme Court also referred to another decision of the Privy Council in D. Davis Co. Ltd. v. Brunswick (Aus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 'Primarily the circumstances existing at the date of the petition must be taken into consideration for determining whether a case is made out for holding that it is just and equitable that the company should be wound- up.'" (p. 573) In Mrs. Bacha F. Guzdar v. CIT AIR 1955 SC 74, the position of a shareholder with respect to company assets was considered and it was held thus: "That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. A shareholder has not got a right in the property of the company. There is nothing in the Indian Law to warrant the assumption that a shareholder who buys shares buys any interest in the property of the company which is a juristic person entirely distinct from the shareholders. The true position of a shareholder is that on buying shares an investor becomes entitled to participate in the profits of the company in which he holds the shares if and when the company declares, subject to the articles of association, that the profits or any portion thereof should be distributed by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supportable neither on authority nor in principle. Further, to compare the roles of Mr. Armstrong and Mr. Nin with that of consultants to a partnership is most unrealistic. Each of them was intended and expected to play a central and regular part in the affairs of the company, and that is exactly what they both did." The Supreme Court in Hind Overseas (P.) Ltd. case ( supra ), made it clear that it is not always necessary to follow the decisions of the English Courts, even though the Indian Companies Act is modelled on English Companies Act. The similar question was considered by the Division Bench of Madras High Court in G. Kasturi v. N. Murali [1992] 74 Comp. Cas. 661. Speaking for the Bench P.S. Mishra J. (as he then was) after surveying all the cases both English and Indian cases on the subject observed that "the members of quasi-partnership was founded on a personal relationship involving mu- tual confidence as between the members." It was also observed by the Division Bench that "the absence of an essential ingredients in the relationship of member and the character of the company to qualify it to answer the discretion of a quasi-partnership company was enough to hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere sufficient grounds to wind up the company. There was, therefore, to be an order for purchase by the respondents of the petitioner's shares." (p. 2) Held that in substance it was a partnership." After holding that the affairs of the company were conducted by the majority shareholders in a manner oppressive to the interest of the petitioner and that there was sufficient ground to wind up the company, directed purchase of shares by the Respondents (majority shareholders). 65. It is well within the competence of the Court to determine the real structure of the company. It is open for the court to pierce the veil for such determination. If it is found that the apparent structure of the company is not real structure and it is in substance a partnership the principle of dissolution of the partnership may be applied in adjudicating the petition for winding up. 66. However, on consideration of both English and Indian cases, in order to determine whether the Company though incorporated under the Companies Act, yet in substance it is a partnership, the following norms may create a possible inferential circumstances: ( a )There should have been pre-existing business of partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Altogether it is a new business, not undertaken by any of the members previously. It was only established for the purpose of supply of rubber rings to HIL which is the main principal component for manufacture of AC Pressure Pipes. There is also no agreement which is forthcoming between the parties to the effect that the business shall be conducted on the lines of the partnership and no such understanding could be culled out from the facts of this case. The Memorandum of Articles of Association of the Company did not contain any clauses suggestive inference of partner-ship. Even the Directors are not elected on the basis of shareholdings. Initially there were five directors out of which only one Director was from Khemkas. Even in 1987 when there were six, P-1 was only the Director on behalf of Khemkas. All that can be said is that the members of two families formed the private limited company. There is also no stipulation with regard to the representation of the Directors from each family. Even in the Articles of Association, no such understanding is contained nor can it be inferred from the reading of the various clauses of the Articles of Association. Clause 9 of the Articles o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the holding in the present Company. Moreover, the evidence adduced on behalf of P-1 and R-9 do not indicate that there was an understanding or agreement to the effect that the shareholding of Khemkas should always be 1/3rd at the level of incorporation and also at the points when the shareholdings were increased from time to time. Even assuming that the shareholding of the Khemka family and Jalan family is 30 per cent above and 60 per cent above respectively, that situation by itself is not a conclusive proof that it is a partnership concern. The Supreme Court also held in Kilpest (P.) Ltd.'s case ( supra ) , that limited company should not be easily treated as a quasi-partnership. The Supreme Court observed "the promoters of a company, whether or not they were hitherto partners, elect to avail of the advantages of forming a limited company. They voluntarily and knowingly bind themselves by the provisions of the Companies Act. The submission that a limited company should be treated as a quasi-partnership should, therefore, not be easily accepted. Having regard to the wide powers under section 402, very rarely would it be necessary to wind up any company in a petition filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or control of the firm or body corporate acting as its managing agent or secretaries and treasurers, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company; may apply to the Court for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1), the Court is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the Court may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit." 70. The aforesaid sections are in Chapter-VI of the Act which deal with prevention of oppression and mismanagement and also the remedial measures that can be imposed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to help the members who were oppressed. The relief under section 398 of the Act is geared to save the company and it is in the interest of the company alone and not to any particular member/members. 72. The right of members to apply under sections 397 and 398 of the Act is hedged in with certain restrictive conditions. This is to avoid frivolous applications from dis-satisfied members approaching the court (now the Company Law Board). The provision regarding member/members having one-tenth share capital of the company alone can file applications under sections 397 and 398 of the Act is intended to avoid frivolous petitions. Of course, under section 399(4), it is provided that the Central Government may authorise any member or members of the Company to apply to the Company Law Board for relief, if in its opinion circumstances exist which make it just and equitable to do so. 73. The expression "oppression" and "mismanagement" which are the basic and foundational concepts in the section are left by the Parliament without defining them. When once it is left without definition, the task of the Court is difficult and more responsible. The word 'oppression' is a Chamelionic wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es within the scope of the section." (p. 55) Lord Keith in his judgment stated: "But, apart from this, the question of absence of mutual confidence per se between partners, or between two sets of shareholders, however relevant to a winding up, seems to me to have no direct relevance to the remedy granted by section 210. It is oppression of some part of the shareholders by the manner in which the affairs of the company are being conducted that must be averred and proved. Mere loss of confidence or pure deadlock does not, I think, come within section 210. It is not lack of confidence between shareholders per se that brings section 210 into play, but lack of confidence springing from oppression of a minority by a majority in the management of the company's affairs, and oppression involves, I think, at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder." (p. 59) Among the important considerations, which have to be kept in view in determining the section 402, the following matters were stressed in Elder's case ( supra ) as summarised at page 394 in George Meyer v. Scottish Co-operative Wholesale Socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive conduct of the affairs of the Company within section 210 and the court answered in affirmative, holding that the affairs of the Company were conducted in oppressive manner. 77. As to the meaning of oppression, Viscount Simmonds. J observed: ". . . it appears to me incontrovertible that the society have behaved to the minority shareholders of the company in a manner which can justly be described as oppressive. It had the majority power and exercised its authority in a manner 'burdensome, harsh and wrongful' - I take the dictionary meaning of the word. But, it is said, let it be assumed that the society acted in an oppressive manner; yet it did not conduct the affairs of the company in an oppressive manner. My Lords, it may be that the acts of the society of which complaint is made could not be regarded as conduct of the affairs of the company if the society and the company were bodies wholly independent of each other, competitors in the rayon market, and using against each other such methods of trade warfare as custom permitted. But this is to pursue a false analogy. It is not possible to separate the transactions of the society from those of the company. Every step taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares." (p. 9) Lord Denning pointed out that, in such a situation, the most useful order is to order the oppressor to buy the shares of the oppressed at a fair price. Lord Denning observed: "... The object of the remedy is to bring 'to an end the matters complained of that is the oppression, and this can be done even though the business of the company has been brought to a standstill. If a remedy is available when the oppression is so moderate that it only inflicts wounds on the company, whilst leaving it active, so also it should be available when the oppression is so great as to put the company out of action altogether. Even though the oppressor by his oppression brings down the whole edifice - destroying the value of his own shares with those of every one else - the injured shareholders have, I think a remedy under section 210. One of the most useful orders mentioned in the section - which will enable the court to do justice to the inured shareholders - is to order the oppressor to buy their shares at a fair price: and a fair price would be, I think, the value which the shares would have had at the date of the petition, if there had been no oppression. Once the oppresso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section does not purport to apply to every case in which the facts would justify the making of a winding up order under the 'just and equitable' rule, but only to those cases of that character which have in them the requisite element of oppression. Thirdly, the phrase 'the affairs of the company are being conducted' suggests, prima facie, a continuing process and is wide enough to cover oppression by anyone who is taking part in the conduct of the affairs of the company, whether de facto or de jure. Fourthly, the section gives no guidance as to the meaning of the word 'oppressive', although it does, as already mentioned, indicate that the victim or victims of the oppressive conduct must be a member or members of the company as such. Prima facie, therefore, the word 'oppressive' must be given its ordinary sense and the question must be whether in that sense the conduct complained of is oppressive to a member or members as such. Inasmuch as in the present case it is not in dispute that the facts would justify a winding up order under the 'just and equitable' rule and it is recognised that such an order would unfairly prejudice the complaining members, this would appear to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding up the company, though that must be shown as preliminary to the application of section 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing upto the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder. . . ." (p. 1543) 81. In Bellador Silk Ltd., In re [1965] (1) All E.R. 667 it was held that the presentation of the petition under section 210 in order to bring the pressure to bear to achieve the collateral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company is a running concern, and it is sought to interfere with its affairs as a running concern. But when an application is presented to wind up a company, its very object is to put an end to its existence, and for that purpose to terminate its management in accordance with the Articles of Association and to vest it in the Court. In that situation, there is no scope for the rule that the Court should not interfere in matters of internal management. . . ." (p. 213) 83. Under section 397, the Court has to be satisfied that the affairs of the company are being conducted in a manner oppressive to any member or members. Therefore, the acts of oppression have not only to be alleged with sufficient precision, but they must be proved to the satisfaction of the Court. This was reiterated by the Division Bench of Calcutta High Court in Maharani Lalita Rajya Lakshmi v. Indian Motor Co. (Hazaribagh) Ltd. AIR 1962 Cal. 127. It was also observed in the said case that failure to give details as required by section 173(2) makes the case ipso-facto oppressive in conducting the affairs of the company. It was observed in para 5 as follows: "5. It is also necessary to emphasis that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not look at other evidence with regard to events that might have happened subsequent to the petition. Full particulars must be given by a petition in such an application of the alleged acts of oppression or mismanagement. Vague and uncertain allegations of oppression or mismanagement, although they may constitute grounds for suspicion, do not entitle a petitioner to ask the Court to embark upon an investigation into the affairs of a company in the hope that, in consequence of such investigation, something will turn up which will enable the Court to grant relief to the petitioner. The inability on the part of shareholders, who have no access to the books of the company, to furnish full particulars, is not a ground for directing an investigation into the affairs of a company or for giving any other relief. The petitioner must prove, prima facie, at any rate, that an investigation is called for. Negligence and inefficiency, even if they are proved, do not amount to mismanagement or oppression as contemplated by the Act. It is easy for a shareholder to allege that the company has hidden assets and that the directors are manipulating the profits and dividends, etc., but such vague, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the court to wind up the company.' 27. We may also refer to an other decision of the Privy Council in D. Davis Co. Ltd v. Brunswick (Australia) Ltd. AIR 1936 (PC) 114 which was from the decision of the Full Court of the Supreme Court of New South Wales. Section 84( e ) of the New South Wales Companies Act (1899) also provides for winding up, inter alia, on just and equitable ground. In dealing with that clause, the Privy Council observed as follows: 'The position of the Court in determining whether it is just and equitable to wind up the company requires a fair consideration of all the circumstances connected with the formation and the carrying on of the company during the short period which had elapsed since 12th May, 1930; and the common misfortune which had befallen the two shareholders in the company does not, in their Lordships' view, involve the consequence that the ultimate desires and hopes of the ordinary shareholders should be disregarded merely because there is a strong interest in favour of liquidation naturally felt by the holders of the preference shares.' ****** 'Nor on the other hand can any general rule be laid down as to the nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the board meeting was an act of illegality. 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 transaction, of which the object is to cause or commit the oppression of persons against whom those acts are directed. This may usefully be illustrated by reference to a familiar jurisdiction in which a litigant asks for the transfer of his case from one judge to another. An isolated order passed by a Judge which is contrary to law will not normally support the inference that he is biased; but a series of wrong or illegal orders to the prejudice of a party are generally accepted as supporting the inference of a reasonable apprehension that the judge is biased and that the party complaining of the orders will not get justice at his hands." (p. 780) The Supreme Court has then said: "It is clear from these various decisions that on a true construction of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of application. The object of section 397 is not 'to rake up the past but to redeem the future'. The quote in the above observation of Teck Chand, J. is from H.R. Harmer Ltd.'s case ( supra ), wherein Roxburgh, J. said: 'The purpose of this section (section 210) is not so much to rake up the past as to redeem the future.' " 90. It was further held in Thakur Hotel (Simla) Co. (P.) Ltd.'s case ( supra ) that merely on the conduct of Directors in misappropriating the funds of the company the order for winding up would not be just and equitable; it requires further clause that, in addition to such misconduct, circum-stances exist which render it desirable in the interest of the shareholders that the company should be wound up. 91. In G. Kasturi's case ( supra ) which came up before the Division Bench by way of appeal against the interlocutory order passed by the learned Company Judge while referring to the scope of sections 397 and 398 read with section 402 of Companies Act, P.S. Mishra, J. speaking for the Bench held thus: "The Court has power to make such orders under section 397, read with section 402 of the Companies Act, 1956, as it thinks fit, if it co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to case, but certain principles are universally accepted and applied. In no case does a Court grant an interlocutory injunction as a matter of course. In all cases of interlocutory injunction, the Court usually has to consider whether the case is so clear and free from objection on equitable grounds that it ought to interfere to preserve the property without waiting for the rights to be finally established. Section 397(1) of the Companies Act, 1956, talks of a complaint that the affairs of the company 'are being conducted in a manner prejudicial to public interest'. The words 'are being conducted' must mean several acts in continuity and not one isolated act. The expression 'interest' in this context also must receive a meaning different from interest of a reader of a news item who, as a member of the public, may have one or other opinion. Public interest cannot be allowed to be confused with public opinion. The expression 'a matter of public or general interest' does not mean that which is interesting or gratifies curiosity or love of information or amusement; but that in which a class of the community have a pecuniary interest, or some interest by which their legal rights or liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue is a sham transaction and there was no proper notice and the certificate of posting and minutes are fabricat-ed. ( c )There was no bona fide requirement of additional share allotment and even otherwise there were other various measures which could have been taken. ( d )The so called capital brought by R-3 and his family members is only a paper transaction and the company did not get any real benefit. ( e )Withdrawal of P-3 from ARIL Board is illegal. 95. Before going into the above contentions, it may be stated that as far as withdrawal of P-3 from the Board of Joint-venture company is concerned the matter is seized of by the Calcutta High Court in suit O.S. No. 228/85. Admittedly, the suit was filed by P-1 and P-3 challenging the resolution dated 21-8-1984. Therefore, I am not inclined to express any opinion on the resolution passed by the Board of Directors in this regard and also with regard to the withdrawal of P-3 from the Board of ARIL. 96. With regard to the alleged oppression on the ground of ( a ) above, it is the case of R-3 that there was total dis-interestedness on the part of P-1 and R-9 in the management of R-1 company. P-1 never attended the meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rease in the share capital, the only intention of R-3 was to gain the majority shareholding and nothing else. On the other hand, it is in the evidence that from 1981 itself, the State Bank has been insisting for enhancement of share capital upto Rs. 10 lakhs, that a commitment was given to the Bank to enhance the share capital. That in the year 1984, the position of the company became very precarious and there was immedi- ate necessity for diverting the products, to save the company from further losses. Therefore, a decision was taken to enhance the capital. It is also the case of R-3 that he had obtained loan of Rs. 5 lakhs from Poddar Company and paid towards the share capital to R-1 company, R-1 company pur-chased the machinery such as Extruder, Generator etc., for Rs. 4,45,000 and the balance was paid to the bank towards the liquidation of overdraft amount. It is also the case of R-3 that not only the machinery from DPPL for Rs. 4,55,000 was purchased, but also other machinery valued more than Rs. 20 lakhs was also purchased during the said period from other companies throughout the country. As can be seen from the corre-spondence of the Bank, in the year 1981 (Exs. 29 30) Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to subscribe to the additional share capital upto 15-12-1984 was only imaginary as by 1-12-1984 R-3 and his family members have already sent the cheques for Rs. 5 lakhs for additional shares and the amount was brought into the accounts of R-1 company and the amount was also paid to DPPL for purchase of machinery and part of amount was also sent to the Bank towards the liquidation of the overdraft amount. It is not in dispute that R-3 and his family members had paid the amount of Rs. 5 lakhs which he obtained from Poddar Company and it came to the records of R-1 company on 30th November and again on 1st/2nd December, cheques were issued to R-3 and his family members on the directions of DPPL. It is also in evidence that R.M. Trading Company wanted to advance the amount to R-3 and since they have no account in Hyderabad, it requested DPPL to advance the money as DPPL has to receive the amounts from R-1 company, it directed the R-1 company to issue cheques in favour of R-3 and his family members and finally it is in evidence that the amount was also paid by R.M. Trading Company to DPPL Company and R-3 and his family members also paid to R.M. Trading Company (Ref. Ex. B.300, B.305, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espective family members, then the value of the shares that would have been purchased by P-1 and R-9 could have been returned to R-3. The other contention was also raised to the effect that the alleged family settlement is a farce and no such family settlement has taken place and the documents were introduced by R-3 in a most suspicious circumstances and that R-3 had manipulated these documents to suit his convenience. It is true that number of documents were introduced by R-3 stating that there was a family settlement and that P-3 also had written to P-1 for settlement of the accounts and that there was private agreement between P-3 and R-9 to the effect that Khemka family will support R-9 in their efforts to fight against R-3 (Ex. B. 157, 157-A, 157-B). I am not inclined to refer to any of these documents as their source is very much doubtful. Apart from that, I do not find it relevant to decide the issue as to whether there was any family settlement. But one thing is clear that P-1 had reconciled to settle his accounts and P-1 and Jalan family submitted to the mediation and arbitration of Mr. Khaitan. It is also evident from the letter of Khaitan Ex. A-52 that a settlement was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady found by me, the genesis took place when P-3 was not properly accommodated in 1982 when he returned back from Saudi Arabia and the crisis which was brewing from 1982 took its deep route in 1985 when P- 3 was withdrawn from the Board of ARIL. Saudi Arabia. This lead to the filing of the suit by P-1 and exchange of letters between P-1 and R-3 and simultaneously the correspondence was started by R-9 with R-3. Even though the additional issue was never focal issue, yet it was made the basic issue in this Company Petition, for sustaining the alleged acts of oppress-sion. Even otherwise what is sought to be established was that P-1 and R-9 in their capacities as Directors and not as shareholders were subject- ed to oppression. That is not the requirement of law. 100. For the foregoing reasons, I find that the grounds urged by the counsel for P-1 and R-9 for establishing oppression on the part of R-3 have not been made out. 101. The learned Counsel for P-1 and R-9 also relied on the judgment of Calcutta High Court in Tea Brokers (P.) Ltd. v. Hemendra Prosad Barooah [Company Appeal No. 186 of 1971]. The Company Case was brought by Mr. Barooah alleging oppression. Two issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company was conducted unfairly prejudicial to the interests of the members and not to some part of the members. 103. This case also does not help the P-1 and R-9 inasmuch as there is no failure to hold that the General meetings or Annual General Meetings. It is also not established that the R-3 has acted himself in a unfit manner to control the Company. Whether the affairs of the company are conducted in a manner prejudicial to the interest of the company? 104. After holding that the oppression as alleged by the P-1 and supported by R-9, was not established, the next question that arises for consideration is whether the circumstances exist for forming an opinion that the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interest of the Company or any material change was brought about and by reason of such change it is likely that the affairs of the Company will be conducted in a manner prejudicial to the public interest or to the interest of the Company. But in this case, the Company being a private limited company, public interest may not fall for consideration. If it is found that the affairs o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e affairs of the company. Similarly, R-9 cannot be said to evince any interest as he has been devoting full time in Nucon, after his resignation from the HIL in February, 1985. 106. It is also clear case of P-1 and R-9 that R-1 company was conceived by them for benefit of their sons namely P-3 and Mr. Hemanth Jalan after their education. The case of P-1 was that his son was not properly fixed after 1982 in R-1 company and that son of R-9 was suitably accommodat-ed in Nucon and therefore P-3 had to eke out his livelihood and hence P-3 established APPL and also Ramak Enterprises. It is also in evidence that APPL has been producing rubber rings and supplying to HIL, which was hither to being supplied by R-1 company. P-1 is also holding a very highest position in the HIL as President. Therefore, under these circum-stances, can it be said that P-3 and R-9 can function themselves in the interest of the company. It is also in evidence that criminal cases erupted between R-3 and R-9. This Court also found that the wholesale allegations that there was no notices, for meetings that the Minutes were manipulated and fabricated, that the Certificate of Postings were not genuine, postal regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention appears to have prolong litigation". This manifests that P-1 was interested for settlement of his accounts with Jalan family and Mr. Khaitan was mediating the matter between both the families. While the mediation was in progress, P-1 and R-3 appears to have entered into an unending correspondence, yet created further vacuum in their relations. By letter dated 6-3-1986, R-3 again wrote letter to P-1 wherein among other things he stated thus: "I am unwilling to enter into any controversy or correspondence with you at this stage in view of the negotiations for settlement now going on, but would depend on the records of the Company. I assure that I have no intention of involving you being involved in any litigation. I sincerely request you to resolve the various pending matters amicably. I hope to receive your kind cooperation." To this letter there was no reply from P-1. Further as can be seen from Ex. A-52 dated 3-7-1986 letter written by Pradeep Kumar Khaitan, Advocate, Calcutta to R-3 with a copy to P-3. That the entire matter appears to have been settled and payment was directed to be made by June, 1986. The letter of Mr. Khaitan is reproduced below: "My dear O.P., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties that it did not come through. Moreover, the very person from whom P-1 wanted to have proper position in R-1 company is also not interested in any association with R-1 company. The very purpose for accommodating P-3 and the beneficiary himself declares that he declined to associate any further with R-9, R-3 and Jalan family, it is his categorical assertions that he has decided not to have connection with the Jalan families. Thus, it is apparent that he is no more interested in the R-1 company. 107. Coming to the participation of R-9, as already stated earlier that he was not taking much interest and that he tried to introduce document Ex. R-2 which is found to be not genuine by this Court. He was also silent spectator to the enormous correspondence exchanged between P-1 and R-3 and that he also did not respond to the letter written by P-1 to him Ex. A-118 wherein allegations were levelled that the Jalan family has been attempting to exclude Khemka family. Even in the counter, he never denied that Jalan family did not exclude Khemka family. But, on the other hand, in no uncertain terms ated that he is supporting P-1. It is also in his evidence that he was agreeable for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n making themselves answerable to the shareholders and the company. Therefore they are not only expected to exhibit trust and transparency as Directors while man-aging the company, but also it is all the more necessary to maintain the same position among the Directors themselves. Developing suspicion on one director(s) or counter suspicions are not conducive in the general interest of the company, which ultimately leads to allegation of oppression and mismanagements. 108. Section 402 has been engrafted with wide discretionary powers to ensure smooth functioning of the companies. The Court is entitled to grant the relief as it thinks fit in the interest of the shareholders and company. That is the reason for both ailments under sections 397 and 398, the treatment is common under section 402. The Court is empowered to pass order both as a curative and preventive measures if it finds that the affairs of the company are being conducted detrimental to the interest of the company, for bringing an end or for preventing the matter complained of or apprehended. 109. This Court is interested in the affairs of the Company as a whole and the personal quarrels are wholly irrelevant. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, it is also open for the Court to pass appropriate orders. The Company has been running throughout by R-3 and after Company Petition has been filed, for some time by the Interim Administrator and now it is again being run by R-3 as Managing Director. Though the P-1 did not ask for direction for selling of shares of R-3 to him, it is only after filing of affidavit by R-3 reply to the counter affidavit of R-9, a further affidavit was filed by P-1 in which he had stated that P-1 was ready and willing to purchase the shares so as to save R-1 company from the clutches of R-3. R-9 also in his counter did not say that he was willing to purchase the shares, but only in his rejoinder to the counter of R-3, he stated that direction may be issued to R-3, and his family members to share their shareholding at a price as may be deter-mined by the Court. Thus, P-1 and R-3 never expressed their readiness to purchase the shares. R-3 has been managing the Company for several years and also presently he is managing the company, it is desirable to offer the management of the Company to R-3 by passing appropriate directions. Relief 110. Keeping in view the above factors, the situation pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvocate, to carry to out the directions. R-3 shall make available neces- sary files/documents and information as may be required by the Special Officers for the purpose. 113. The Special Officers shall first refer the matter regarding the assessment of value of the shares of P-1, R-9 and R-3 and their respective groups as indicated above to the Competent Chartered Accountant before offering to the parties. It is also open for the Special Officers to move this Court for further directions. 114. P-1, R-9 and R-3 shall deposit a sum of Rs. 15,000 each in R-1 Company for meeting the expenses and also the remuneration of Special Officers. Out of the said sum a sum of Rs. 10,000 each shall be paid to the Special Officers towards their remuneration tentatively. The fee of Char-tered Accountants and other expenses including the ministerial assis- tance shall be paid by R-3 from the amount so deposited on intimation by the Special Officers. 115. Before conclusion, I must say that the counsel for the parties not only argued their respective cases but also ably assisted the Court by referring to minutest details supported by catena of case law. This Court places on record the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
