TMI Blog2000 (8) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... , by both the sides. 2. The case of the appellants in O.J. Appeal No. 6 of 1995 (hereinafter referred to as the petitioners) was that the respondent No. 6 company Gaekwad Investments Corpn. (P.) Ltd. ("the company") which was initially incorporated as a Public Ltd. company in the year 1958 was converted into a Private Limited Company around the year 1971 and its registered office is situate at " Indumati Mahal , Jawaharal Nahru Marg, Baroda 390 001". The company was established with the objective of carrying on business of an investment trust company and to transact the activities which are referred to in the memorandum of association of the company and its articles of association at Annexure "A" to the petition. 2.1 According to the petitioners, the said company was closely held by family members and family friends who were its shareholders. Since its incorporation and until his demise on 1-9-1988, Shrimant Fatehsinh Gaekwad was the Chairman of the company and in his absence, his mother the petitioner No. 1 Smt. Shantadevi Pratapsinh Gaekwad used to function as the Chairman. Shrimant Fateshinhrao Gaekwad was holding about 75 per cent of the equity shares of the company. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21-3-1988 to Mr. N.K.K. Mohammed with a request to approve the same, both the said note bearing endorsement of Mr. N.K.K. Mohammed and the draft minute forwarded under the note dated 29-3-1988 of the Company Secretary Mr. M.N. Khade, reflected the agreed basis for allotment of 15,000 shares as stated in the petition. According to the petitioners, on the death of Shrimant Fatehsinhrao Gaekwad the right in respect of the 8,000 equity shares which were decided to be allotted as per the draft minutes to Shrimant Fatehsinhrao Gaekwad vested in his mother the petitioner No., who was his sole heir. The respondent No. 1 as a member of Shrimant Fatehsinhrao Gaekwad family had been managing the affairs of the company for sometime and after the death of Shrimant Fatehsinhrao Gaekwad, he continued to manage the same. According to them, they had reposed trust and faith in him believing that he would be managing the affairs fairly and honestly and will discharge his obligations to his mother, sisters and other members of the family and close friends. Therefore, no accounts were checked nor any questions asked by the petitioners to the respondent No. 1. 2.3 It is alleged that in or about Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een clear days as required. The Board meeting at which annual accounts were approved, was held at Bombay on 10-12-1990 and therefore, according to the petitioners, it was physically impossible for the annual accounts to be sent thereafter on that day itself, i.e., 10-12-1990 to the auditors of the company at Baroda for their examination and report and for the auditors to have examined and made the report on that very day at Baroda, and to send it back to Bombay. The fact that all this could not have been done in a single day shows the mala fide conduct of the respondent Nos. 1, 2, 9, 10 and 11. It is further alleged that several shareholders including the petitioners had objected to the validity of the AGM as its very commencement on 20-12-1990. At that meeting which was held in the registered office of the company at Baroda, the respondent No. 1 had taken the Chair and 15 shareholders who are named in paragraph 10 of the petition attended in person or through their proxies. Besides these persons, Shri H.A. Shinde, Shri V.K. Raichand and Shri P.U. Rana also attended the meeting as the directors of the company. The objecting members agreed to participate at the meeting under pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re counted, the resolution for the appointment of auditors was unanimously passed. However, the resolutions on all other items on the agenda, including the resolution regarding re-appointment or appointment of the respondent Nos. 1, 2, 9, 10 and 11 as directors of the company were, defeated by a majority of 1122 votes against and 66 for the resolutions. The respondent Nos. 1 to 5 had voted in favour of the resolutions while all others had voted against them. When the respondent found that these resolutions were lost, it is alleged, he took physical possession of the ballot papers, the registers of members, the proxy register, the attendance register and other records and in a fit of rage threatened in presence of the petitioner No. 1 and other lady members that he would be taking them away to Bombay. It is stated that many members attempted to persuade the respondent No. 1 to prevent him from taking away the registers, ballot papers and other documents, but he threatened them by saying that a Police complaint had already been lodged on his behalf and those obstructing him from leaving the meeting with the record of the company would face dire consequences. The members of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent Nos. 1 and 2 took away the register of members and other documents and records of the company with them on 20-12-1990. It is contended that if the transfer of shares in favour of Indreni had already been rescinded in the Board meeting of 9-8-1990, the respondents would not have waited till 20-12-1990 to file a reply in the Suits at Baroda and Rajkot, for stating that the said transfers were rescinded on 9-8-1990. It is also stated that the plaintiffs in the Baroda suit had on 21-12-1990 asked for copies of the minutes of the Board meeting allegedly held on 13-7-1990 and 9-8-1990, but these respondents have not supplied the same till the filing of this petition. The petitioners had made enquiries from the Company Secretary Mr. M.N. Khade, who was present at the meeting of 13-7-1990 and were informed that in the said meeting there were no discussion at all on the fact that the transfer notices were not sent to the shareholders and there was also no discussion about any legal opinion concerning the validity of such transfers to Indreni. Mr. M.N. Khade had informed the petitioners that the alleged meeting of 9-8-1990 had not at all been held and that the transfers to Indre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice, an intimation was given for removing Shri P.U. Rana and Shri H.A. Shinde, who had been directors of the company for last several years. The notice for their removal was moved by the respondent No. 4 Shri P.S. Gaekwad, who is the son of respondent Nos. 1 and 2. Furthermore, the registered office of the company which had ever since its inception been situated at Indumati Mahal at Baroda was sought to be shifted to Surat and the respondent No. 1 was sought to be made a permanent director and Chairman of the company. The restrictions on the transfer of shares were sought to be diluted to facilitate the transfer of shares of the company in favour of concerns in which these respondents had an interest. According to the petitioners, all these changes were sought to be effected in haste to defeat the legitimate claims and rights of the petitioners and to perpetrate the power and authority of these respondents to use the company to their own personal benefit. The power to call such meeting was questioned by several shareholders including Shri P.U. Rana and Shri H.A. Shinde and telegrams dated 13-1-1991 were addressed stating that since the respondent Nos. 1 and 2 ceased to be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es out of their holdings of 9481 equity shares to Indreni and had raised "palpably false story" that the transfer in favour of Indreni was rescinded on 9-8-1990. It is also alleged that respondent Nos. 1, 2, 9, 10 and 11 had purported to relieve long standing employees of the company including its Company Secretary Shri M.N. Khade. On these allegations it was contended that the affairs of the company were being carried on in a manner prejudicial to the interest of the company and to the public interest. It was also pointed out that the respondent Nos. 1 and 6 have filed Civil Suit No. 63 of 1991 in the Court of learned Civil Judge (Senior Division) at Surat against the petitioners and others claiming themselves to be the directors of the company and seeking various reliefs it is also alleged that in order to grab control and properties of Alaukik Trading Investments (P.) Ltd. the respondent Nos. 1 and 2 acting as the board of directors of the respondent-company filed Special Civil Suit No. 675 of 1990 in the name of the company, in the civil Court (Senior Division) at Baroda. According to the petitioners in view of various acts and omissions on the part of the respondent Nos. 1 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief, which need not be referred to here. 3. In response to the petition, the respondent No. 1 filed his affidavit-in-reply dated 21-3-1991, denying the allegations and raising a preliminary ground that the petition ought not be entertained in view of the fact that the allegations and grievance set out in the petition were urged in some form or the other in the related proceedings pending before the civil Courts, namely - three Suits at Baroda, one Suit at Rajkot and one Suit at Surat, as per the list Annexure-I to the affidavit-in-reply. It was contended that the provisions of sections 397 and 398 were not attracted and that there was no oppression of minority as contemplated by these provisions. According to the respondent No. 1, the petition was calculated by the petitioners and their supporters to wrest control and management of the well-known and prosperous Public company, namely - Baroda Rayon Corpn. Ltd. It is alleged that the petitioners had made false statements that the respondent No. 6 company and various other business entities were meant to be the personal property of late Shrimant Fatehsinhrao Gaekwad and that they passed by inheretence. Moreover they had made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g into account all the circumstances, the board of directors resolved that 15,000 equity shares of Rs. 100 each be issued at par to the members of the company. The resolution which was passed at Board meeting, which has been reproduced in the affidavit-in-reply, reads as under: "RESOLVED that out of 25,000 equity shares of Rs. 100 each, 15,000 equity shares of Rs. 100 covering Rs. 15,00,000 be issued at par to the members of the company at present and the balance as and when required. FURTHER RESOLVED that the management Committee of the company be and is hereby authorised to issue equity shares to members in such proportion as it deems fit. FURTHER RESOLVED that the Management Committee be and is hereby authorised to do all such acts, deeds and things necessary for the purpose." Pursuant to the above resolution, the Company Secretary Mr. M.N. Khade issued a circular letter dated 12-2-1988 to all the existing share-holders requesting them to subscribe for the equity shares at par. It was stated therein that if no reply was received by 10-3-1988, it would be presumed that the shareholders concerned were not interested in the offer. That letter is at Annexure "16" of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for allotment. It was contended that the suggestion in the petition that the petitioner No. 1 had as long back as in November 1988 deposited an amount of Rs. 15 lakhs to subscribe for shares of the company and that by letter dated 29-11-1990 sought retrospective entitlement to 8,000 shares on the ground of being the sole heir of the beneficial interest/right of Shrimant Fatehsinhrao P. Gaekwad was false and incorrect. According to the respondent No. 1, an amount of Rs. 15 lakhs was paid as a loan to the company and that she had no right to apply for 8,000 shares. It was contended that in any event, the right to the said issue was renounced by Shrimant Fatehsinhrao Gaekwad in favour of the respondent No. 1 and his children. 3.2 It was further stated in the said reply that the respondent Nos. 1 to 5 had floated their own investment company, namely Indreni Holdings (P.) Ltd., in which the respondent Nos. 1, 2, 3 and 4 had 50 equity shares each and the other holder Prasang Holdings (P.) Ltd. had 800 equity shares in the company. It was stated that in Prasang Holdings (P.) Ltd., the respondent Nos. 1, 2, 3 and 4 had 250 equity shares each and under the circumstances, Indreni was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was stated that it was felt that keeping in mind the closely held nature of Indreni which was merely respondent Nos. 1 to 5 in a corporate form, none of the other members would get hyper-technical but would readily consent in the transfer to Indreni, as any reasonable and fair-minded person would have done and hence, there was no real danger of having to disinvest in favour of other members. It is further stated that even though he had prepared a letter dated 15-11-1989 to all the shareholders, he did not deliver them to any of them and falsely informed the respondent Nos. 1 to 5 that there was no response to the proposed transfer it is stated that this was recorded in the minutes of the Board meeting held on 27-12-1989 "in usual course". It was stated that in view of the conduct of Mr. Khade, he was removed from service of the company from 5-1-1991. 3.3 In paragraph 6( t )(2) of the affidavit in reply it is stated that in Suit No. 305 of 1990 filed on 28-11-1990 at Rajkot by Smt. Pramilaraje Kachar of Jasdan for similar reliefs an interim order was obtained in respect of these shares on the same day. The date of hearing was fixed on 11-12-1990, but on that day the injunction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any event, implied consent was obtained prior to the meeting. It is contended that the reference to the appointment of Dr. G.M. Oza was entirely irrelevant to the present proceedings and cannot assist the petitioner in their case of oppression by the majority shareholders within the meaning of section 397 it is further stated that having regard to the conduct of Mr. P.U. Rana and Mr. H.A. Shinde it was decided at the AGM of 20-12-1990 that it was in the interest of the company that they should not continue on the board of directors of the respondent No. 6 company. In the meanwhile, the respondent No. 4 Mr. P.S. Gaekwad had issued notices under section 190 and section 284 of the Act, proposing resolutions for their removal. These were placed before the board of director on 5-1-1991, when it was decided to convene an Extraordinary General Meeting of the company at a short notice on 14-1-1991. The Extraordinary General Meeting had on its agenda, also a resolution for appointment of respondent No. 1 Shri Sangramsinh Gaekwad as the permanent director and Chairman of the company, a resolution for shifting the registered office of the company to Surat, and a resolution for amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1988 were totally fabricated and were under the signatures of the respondent No. 1. They, therefore, requested Shri P.U. Rana to give xerox copies of the register of members, register of transfers the last recorded minutes of the meeting of the board of directors and minutes of the committee meetings of 21-3-1988 and 10-12-1988 duly certified by a Notary Public. It is further stated that Shri Rana took the documents and got the same xeroxed and thereafter Shri M.C. Vaidya, Notary was called to the office, who then verified the said copies and after comparing the same with the originals, certified the same to be true copies. These copies were handed over to the petitioner No. 1 and the certified copies of the minutes of board of directors of 30-3-1990 and the minutes of the Committee meetings held on 21-3-1988 and 10-12-1988 are produced at Annexures A/1, A/2 and A/3 of the affidavit-in-rejoinder. It is indicated in the minutes of the meeting of the Managing Committee held on 21-3-1988, which is at Annexure A/2 to the rejoinder that only two persons, i.e., the respondent No. 1 and one Shri P.H. Chinoy were present at the meeting, while the respondent No. 1 in his affidavit-in-rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffidavit of Mr. Khade at Annexure "A/4" to the rejoinder in support of her version. She has stated that she had advanced more than 15 lakhs free of interest to respondent No. 6 and Smt. Mrunalinidevi Puar had also advanced Rs. 15 lakhs free of interest, and that no interest has been paid to her. 4.3 As regards the meeting of 20-12-1990, she has stated that the minutes produced by the respondent No. 1 are fabricated and has annexed at Annexure "5" collectively, affidavits of other persons who had attended the meeting to show as to what transpired at that meeting. It is further pointed out in paragraph 22 of the rejoinder that the affidavit in the Baroda Court which is said to have been filed on behalf of these respondents as well as the purshis were filed only after the general meeting of 20-12-1990. It is stated that they were filed after the respondent No. 1 and his wife took physical control of the register of members and other documents and papers and spirited them away. It is also stated that after the respondent Nos. 1, 2, 9 and 11 ceased to be directors, remaining board of directors filed their annual return and form 32 to the Registrar of Companies and had also written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vit has stated that she was allotted 1,000 shares in the company and was not aware from whose alleged quota of shares she was being allotted the shares. According to her, she was intimated by the respondent No. 1 that certain funds were required for the respondent No. 6 company and she had sent him two separate cheques dated 23-3-1988 and 19-5-1988 for Rs. 20,000 and Rs. 80,000 respectively under the forwarding letter dated 19-5-1988 and the share certificates were issued to her by the respondent No. 1 on or about 30-5-1988. She has denied that she was given 500 equity shares from 8000 shares kept apart and allotted to her late brother Shrimant Fatehsinhrao Gaekwad. She has stated that she had made no application for any of these 1000 shares. As regards the AGM of 20-12-1990, she has stated that at the said meeting all the resolutions except the resolution for appointment of the auditors, were defeated by majority of 1122 to 66. She has stated that she gone through the affidavits made by Shri P.U. Rana and others in this regard and that what is stated therein as regards what transpired at the said meeting was true and nothing said to the contrary by the respondent No. 1 was true. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held on 20-12-1990, 9415 shares of the company were held by the Indreni. It is also denied that any shareholder or proxy holder had seen the register. As regards the appointment of Dr. G.M. Oza as the director, he has produced at Annexure D to the sur-rejoinder letter dated 11-3-1991 written by Dr. Oza to the respondent No. 2, who was the executive director, in reply to her letter dated 28-2-1991, which was delivered to him in person by Shri Khoth, stating that he was surprised that the respondent No. 2 had not received his original letter dated 17-12-1990 and the copies addressed to other directors, which were left by him on the table of Mr. M.N. Khade Company Secretary of the respondent No. 6. It is stated in the said letter by Dr. Oza that he still confirmed and maintained that he had already resigned on 17-12-1990 from the Directorship of the respondent-company and that he had no intention to be re-elected as a director. He has annexed copies of his letter dated 17-12-1990 which was addressed to the respondent-company. He has stated that he had not offered for re-election nor did he wish to be re-elected as a director of the said company. This was his response to the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of his say, the respondent No. 1 also relied upon the affidavits of Mr. Bipin Babubhai Shah, who is said to have been appointed as a scrutiniser at the said meeting and the affidavits of Capt. V.K. Raichand, who is respondent No. 11 in this appeal, Mr. Pirojshah Hiraji Chinoy, who was one of the directors of the company, and, Mr. K.V. Khoth, who is said to have written the letter dated 11-6-1988 under the directions of Shrimant Fatehsinhrao P. Gaekwad, renouncing the additional shares offered to him in favour of the respondent No. 1 and his children. 7. In the background of the above broad contours of the controversy between the rival groups, the learned single Judge by his judgment and order dated 17-4-1995, came to a finding that there was a mandate of the Extraordinary General Meeting which was held on 17-12-1987 for issuance of 25,000 equity shares of the company. It was also found that the board of directors at its meeting held on 8-1-1988 decided to issue only 15,000 shares in the first instance, leaving its managing committee to carry out the mandate. It was further held that so far as the allotment of 6475 shares to the respondent group in concerned, the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge held that while dealing with a matter under sections 397 and 398, the question of oppression with or without mis-management, if any, is required to be considered and in his opinion, such oppression should be subjectively felt and objectively established and according to the learned Judge the oppression, if any, related to the control that had slipped into the hands of respondent No. 1 and nothing else. His Lordship took note of the fact that there were prayers found in the present petition as well as other two proceedings before the CLB that the shares transferred to Indreni be offered to other shareholders except the respondents group and that the transfer to Indreni were invalid. It was held that the additional issue of 15,000 shares was to be dealt with after keeping apart 8,000 shares for Shrimant Fateshsinhrao P. Gaekwad and the rest were to be issued in different names. It was observed that 51 per cent of shares referred to in the minutes of the meeting dated 21-3-1988 will work out to 7650, but the difference of about 350 shares on the basis of 51 per cent on one side and the round figure of 8,000 on the other was in the opinion of His Lordships, of no consequence. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors of GIC is concerned and allowing the directors thus removed to complete their tenure as per the articles of association. This having taken place in the month of January 1991 and more than 4 years having passed and more particularly because the fate of BRC is inextricably linked up with that of GIC, in larger public interest, keeping in mind BRC, I would not give any relief to the petitioners. If reliefs were to be given it would have been to strike down the said EGM and its entire proceedings and declared the directors removed thereat to be continuing as directors from that order onwards till the remaining time of the tenure." It was finally held that the petitioners had failed to make out a case of oppression. It was held that as regards mis-management, if at all, the case of the petitioners was only an apprehension that the respondents group coming in majority will mis-manage the company, but this apprehension was belied. It was held in paragraph 167 of the judgment that there was no question of aggrandisement on the part of the petitioners and "Except for getting 9481 shares for themselves, they had done nothing". The learned single Judge therefore, dismissed the petition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an and only two directors were present at that meeting, namely the respondent No. 1 and Shri P.H. Chinoy, as stated in these minutes while in the draft minutes at Annexure "C" collectively to the petition, even the name of Shrimant Fatehsinhrao Gaekwad was mentioned as the Chairman present in the meeting. It was also submitted that this conflicting version put under cloud the entire process of allotment of shares to the members of the company by the Managing Committee. It was also submitted that since the Managing Committee admittedly consisted of three persons, namely Shrimant Fatehsinhrao P. Gaekwad, the respondent No. 1 and Shri P.H. Chinoy, the decision taken by two of the three numbers of the Managing Committee was not a decision of the Managing Committee. It was further contended that since Rs. 15 lakhs, were already standing to the credit of the petitioner No. 1 in the books of account of the company, there was no fear of not being able to recover from her the face value at which the shares were to be allotment to the members. It was submitted that there was, under the law, no time limit for getting entitlement transferred to the name of the heir and therefore, even when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 by the director of the company on 10-12-1990 clearly indicated that uptil that date, the shares were not transferred back from Indreni to the respondent Nos. 1 to 5. It was also argued that the respondent Nos. 1 and 2 had removed the registers and other documents of the company and shifted the office of the company from Baroda to Surat and also removed the longstanding directors of the company by convening an extraordinary meeting on 14-1-1991 and thereby they gained a complete control over the company. It was submitted that the course of conduct of the respondent Nos. 1 and 2 clearly indicated that they acted in self-interest, with a view to enhance power and control to the detriment of the interest of the company and its other shareholders and in breach of the fiduciary duties of the directors. 8.1 In support of his above submissions, the learned counsel relied upon the following decisions: 1. Decision in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. AIR 1981 SC 1298 was cited for its prosecution that if the conduct of the directors lacks in probity and is unfair and causes prejudice to the exercise of shareholders legal and propri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition. 5. The decision in Jadabpore Tea Co. Ltd. v. Bengal Dooars National Tea Co. Ltd. [1984] 55 Comp. Cas. 160 was cited to point out that the Calcutta High Court had held mala fide allotment to reduce a majority shareholder to minority would be void for mis-management. 6. The decision of the Supreme Court in John Tinson Co. (P.) Ltd. v. Mrs. Surjeet Malhan AIR 1997 SC 1411 was referred to for the proposition that it was well settled that articles of association of a private company was a contract between the parties. This was cited in context of the minors being allotted the shares of the company at the instance of the respondent Nos. 1 and 2, who were their parents. 7. The decision in Life Insurance Corpn. of India v. Escorts Ltd. AIR 1986 SC 1370 was cited for the proposition that while a transfer of shares may be effective between the transferor and transferee from the date of transfer, the transfer is truly complete and the transferee becomes a shareholder in the true and full sense of the term, with all the rights of a shareholder, only when the transfer is registered in the company s register. 9. The learned Senior Counsel appearing for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that everybody knew about these allotments including the allotment of 3,000 shares. The learned counsel argued that the whole problem started because of the filing of the Suit by the other company Alaukik Trading and Investments (P.) Ltd. ("Alaukik"). It was submitted that by letter dated 17-5-1990, the respondent No. 6 was suddenly informed that Alaukik was no more its subsidiary and since this was done behind the back of the respondents group, the Suit was filed against the petitioners group. It was submitted that nobody in fact had any objection to issuance of 9481 shares to the respondent Nos. 1 to 5 and it was only because the said was Suit filed that the petitioners retaliated by a flurry of Suits and this petition in which they had not questioned the allotment of 9481 shares, but questioned only 3000 out of them, though by an amendment in the petition they had thereafter questioned everything. It was also submitted that petition under sections 397 and 398 should not be entertained by the Court where civil proceedings were filed and pending, and which covered the reliefs claimed in the petition or a part of them. It was submitted that since the reliefs in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces at the meeting. It was also submitted that since Indreni was not an outsider was it as completely controlled by the respondent Nos. 1 to 5, there was no need to give any transfer notice when the shares were transferred by the respondent Nos. 1 to 5 to Indreni. It was argued that Mr. M.N. Khade who was supposed to circulate the notice in respect of the transfer had misinformed the respondent Nos. 1 to 5 as a result of which the transfer to Indreni was later on rescinded. It was submitted that the real object of the petition was to exert pressure for restoration of power, which shows the mind-set of the petitioner. Since the petition is filed for a collateral purpose, it constitutes an abuse of the process of the Court. He submitted that since the respondent Nos. 1 to 5 were in majority, they were entitled to take the decisions in the board of directors in respect of the affairs of the company and such decisions cannot be assailed on the ground that they were oppressive to the minority. 9.1 In support of his submissions, the learned Senior Counsel referred to the relevant material on record and also the following citations: 1. He referred to Pennington s Company Law, Seve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricted in the manner and to the extent provided in articles 7 to 15, article 7 provided for the pre-emption right of members of the company by restricting the transfer of shares first to a member selected by the transferor emphasising that no share shall be transferred to a person who is not a member so long as any member was willing to purchase the same at the fair value. The purpose of such restriction, common in the articles of a private company, is to preserve the proportionality of the other members shareholding as between themselves. A member cannot evade such provision for pre-emption by contracting to sell his shares to an outsider. It was therefore, incumbent on a proposing transferor to give a transfer notice in writing to the company that he desires to transfer the share. Such notice shall specify the fair value and shall constitute the company as agent for the sale to any member of the company. A transfer notice could not be revoked without the sanction of the directors as provided by article 8 of the articles of association. The company was required, within 28 days after being served with the transfer notice to find out the purchasing member to whom the proposing tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as authorised to issue 25,000 shares to any members they deem fit. Thereafter, in the Board meeting of 8-1-1988 it was resolved that out of 25,000 equity shares, 15,000 be issued to the members of the company at present and the balance as and when required. The Managing Committee was authorised to issue these shares to members in such proportion as it deemed fit. As per the admitted break-up of the original 425 shares held by the members, before 15,000 equity shares were offered to the members at par by letter dated 12-2-1988 out of 425 total number of equity shares, 301 stood in the name of Shrimant Fatehsinhrao P. Gaekwad, 7 in the name of his mother the petitioner No. 1 Smt. Shantadevi Gaekwad, 10 in the name of his brother Shri Ranjitsinh Gaekwad the petitioner Nos. 4, 1 in the name of Smt. Devyanidevi Chandrasen Gaekwad - the petitioner No. 2, 10 in the name of the petitioner No. 3 Capt. V.S. Hazare, 5 in the name of the petitioner No. 5 - Smt. Lalitadevi Kirdatt, 10 in the name of the supporting respondent No. 12 Dr. (Mrs.) Mrunalinidevi Puar and 5 in the name of the supporting respondent No. 13 Smt. Shubanginidevi Raje Gaekwad. The respondent No. 1 Shri Sangramsinh P. Gaek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d himself or to transfer the share and if the notice is not complied with within ninety days, the Board may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the share, until the requirements of the notice have been complied with as laid down in regulation 28. In the present case, therefore when Shrimant Fatehsinhrao P. Gaekwad died intestate on 1-9-1988, his mother, i.e., petitioner No. 1 who was the only class one heir succeeded to the shares which were already held by him and became entitled under regulation 28 to the same dividends and other advantages to which she would be entitled if she were the registered holder of the shares of Shrimant Fatehsinhrao P. Gaekwad. This statutory entitlement did not depend upon the mercy of the board of directors which could have, at the best, given a notice as required by the proviso to regulation 28. There is no time limit provided in regulation 28 for exercising the option given to such successor to get registered as holder of the share or to make transfer of the share as the deceased could have made. In other words, there is no contingency provided by which the rights which devolved on the heir w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chairman of the company. 12. This brings us to the stand taken up by the contesting respondents that Shrimant Fatehsinhrao P. Gaekwad had before his demise renounced his entitlement to 8,000 shares which were decided to be allotted to him, in favour of the respondent No. 1 and his children. This story has surfaced in the affidavit-in-reply of the respondent No. 1. According to the respondent No. 1, after the company resolved in its Extraordinary General Meeting held on 17-12-1987 to increase the share capital, it was resolved in the Board meeting of 8-1-1988 that 15,000 equity shares of Rs. 100 each be issued at par to the members of the company and that the Managing Committee of the company be authorised to issue equity to members in such proportion that it may deem fit. The Secretary of the company Mr. M.K. Khade thereupon issued letter dated 12-2-1988 as per Annexure 16 to the affidavit-in-reply of the respondent No. 1, communicating the decision to increase the equity share capital of the company by issuing to its member 15,000 equity shares at Rs. 100 each at par and requesting them to convey their acceptance for the number of shares the member would like to subscribe, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ph 31( b )( vi ) of his affidavit-in-reply dated 1-4-1992 in Company Petition No. 7 of 1992 (CLB) that subsequently, i.e., between March and 9-6-1988, Shrimant Fatehsinhrao P. Gaekwad was reminded to subscribe to 8,000 shares which were offered to him but he indicated that he would not subscribe to these 8,000 shares and renounced the offer in favour of the respondent No. 1 and his children. In para II(2)( viii ) of the affidavit-in-reply filed in this company petition it is stated by the respondent No. 1 that ultimately on 11-6-1988 addressed a letter to him through his personal Secretary renouncing the offer made to him "in my favour and in favour of my children". A copy of the letter dated 11-6-1988 said to have been addressed to the respondent No. 1 by the Secretary to Shrimant Fatehsinhrao P. Gaekwad, Mr. K.V. Khoth is annexed at Annexure 10 of the said affidavit-in-reply. Much reliance is placed on this letter on behalf of the contesting respondents to contend that the entitlement to get 8,000 shares which were kept apart for Shrimant Fatehsinhrao P. Gaekwad could not have been inherited by his mother the petitioner No. 1 on his demise, because, it was already renounced in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity shares. It was recorded in the minutes that the Committee decided to allot 7500 shares, in the above proportions to them. Out of the remaining 7500 shares it was decided to offer 3,000 equity shares of Rs. 100 each between Shri Pratapsinh Gaekwad and Miss Priyadarshini Gaekwad in the proportion as they liked and as soon as the application money of Rs. 3 lakhs for 3000 equity shares was received, the subscription of additional shares be closed at 10,500 equity shares. Shrimant Fatehsinhrao P. Gaekwad had passed away on 1-9-1988 and a meeting of board of directors was held on 26-10-1988 where the respondent No. 1 and Mr. P.H. Chinoy were present for a condolence resolution. The decision was taken therein for sale of Manav Mandir property of the company for not less than Rs. 50 lakhs and the respondent No. 1 was authorised to finalise the agreement. Similarly, for Kamalja property, it was decided to sell it for not less than Rs. 20 lakhs and it was left to the respondent No. 1 to finalise the agreement. Other important decisions were also taken in the said meeting, but there was no mention made at all to the letter dated 11-6-1988 by which Shrimant Fatehsinhrao P. Gaekwad was said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in paragraph 6.6 of the petition was that there was a family meeting on 23-3-1988, wherein it was decided to broaden the capital base of the company by issuing 15,000 shares of Rs. 100 each. It was decided therein and also subsequently at a meeting of the company s board of directors that out of the 15,000 equity shares, 8,000 equity shares would be allotted to Shrimant Fatehsinhrao P. Gaekwad, 500 equity shares to Smt. Mrunalinidevi, 25 equity shares to Smt. Shubhanginidevi and 6475 equity shares to respondent No. 1 Shri Sangramsinh Gaekwad. It will be seen that these averments were based on a note of Shri N.K.K. Mohammed, Personal Secretary of the respondent No. 1 and the letter dated 29-3-1988 of Shri M.N. Khade forwarding draft minutes of the meeting of 21-3-1988 on the basis of that note, which were annexed at Annexures B and C to the petition. In the type written draft minutes attached to letter Annexure C , the words and others are added in hand after the name of the respondent No. 1. On the basis of these words, the respondent No. 1 seeks to derive authority to get shares for his family members also. Here however, it becomes important to see what were the final minu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing three were present ( 1 ) Shrimant Fatehsinhrao Gaekwad Chairman, ( 2 ) Shrimant Sangramsinh Gaekwad, and ( 3 ) Mr. P.H. Chinoy; while in the final minutes signed by the respondent No. 1, it is stated that ( 1 ) Shrimant Sangramsinh Gaekwad, and ( 2 ) Shri P.H. Chinoy were present. Thus, the name of Shrimant Fatehsinhrao Gaekwad who was shown present as the Chairman of the meeting in the draft minutes, said to have been forwarded under the signature of Shri M.N. Khade, the Company Secretary, on 29-3-1988 to N.K.K. Mohammed, Bombay who was the Secretary to the respondent No. 1, is conspicuously absent in the final minutes. ( b )The final minutes of the Committee held on 21-3-1988 show that the respondent No. 1 was in the Chair and the minutes were signed by the respondent No. 1 as the Chairman of the meeting while in the draft minutes Shrimant Fatehsinhrao Gaekwad was shown to be the Chairman of the meeting. ( c )In the draft minutes there was no specific reference made to the resolution passed at the Board meeting on 8-1-1988 for issuance of 15,000 equity shares and about the offer letters dated 12-2-1988 having been sent to the shareholders, while in the final minutes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... request and the remaining be put in the names of myself and my family. The only two persons who responded to these were Mrs. Mrunalinidevi Puar for 500 shares and Mrs. Shubanginidevi Gaekwad for 25 shares and so automatically whatsoever was remaining was put down in my and my family s name by Mr. Khade, which amounted to 6475 shares". In contrast to this version, the respondent No. 1 has stated in para 11(2)( vi ) of his affidavit in reply in the present petition that: "despite his ( i.e., Shrimant Fatehsinhrao Gaekwad s) reluctance, 8000 shares were kept apart for him if he chose to subscribe for the same. It is for this reason that the committee meeting of 21st March, 1988 (draft minutes whereof are annexed at page 102 of the petition) specifically recorded that the shares would be allotted as and when amounts are received. At the said meeting it was further decided that 6475 shares would be kept apart for myself and others . Since I was basically handling Baroda Rayon Corpn. and in this company, I was given liberty to either subscribe in my own name or through others including family members, whereas as far as others were concerned they, could be considered only if they thems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y an unallotted quantum of 4,500 shares. These 4,500 shares remained unallotted and in any event are not available for allotment after the issue was closed on 10-12-1988." 13.2 In the background of the above discrepancies in the version of the respondent No. 1 about his having been allotted 6475 shares for himself and his family, we may now refer to the minutes of the meeting of the Managing Committee said to have convened on 10-12-1988. A notarised true xerox copy of these minutes is produced at Annexure "A/3" of the affidavit-in-rejoinder of the petitioner No. 1, read with para 14 thereof. Heavy reliance was placed on behalf of the respondent Nos. 1 to 5 on these minutes in context of letter dated 11-6-1988 written by the Secretary to Shrimant Fatehsinhrao P. Gaekwad, which is referred to therein, by which Shrimant Fatehsinhrao P. Gaekwad is said to have declined to accept the offer of shares contained in the letter dated 12-2-1988, as well as, in respect of allotment of 3,000 shares to the respondent Nos. 4 and 5. These hand-written minutes bear the signature of the respondent No. 1 as the Chairman of the meeting at which the same two directors, namely the respondent No. 1 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said minutes are genuine, but, in para 31( g ) of his affidavit-in-reply filed in Company Petition No. 7 of 1992 on 11-4-1992, he has stated, in response to paragraph 6(9) of that petition in which a xerox copy of these very minutes was placed at Annexure "F" with an allegation that these were fraudulent and fabricated and brought about by Shri Sangramsinh P. Gaekwad (who is respondent No. 2 therein) with the sole object of gaining control of the company, that: Although the shares were to be allotted as and when the money came these minutes were written on 10-12-1988". He has denied in para 31( g )( i ) of the said reply the allegation that these minutes of 10-12-1988 were fraudulent or fabricated. In para 31( g )( ix ) the respondent No. 1 in response to the allegation that the alleged decision of the Managing Committee of 10-12-1988 was not placed before the Board meeting held on 14-3-1989 and that it was not ratified by the Board has stated thus: "I submit that as the very power of allotment of shares was given to the Managing Committee the question of ratification by the board of directors did not arise. The decision was, therefore, not required to be placed before the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute raised over the fact that both the notarised minutes of the Committee dated 21-3-1988 and 10-12-1988 produced at Annexures A/2 and A/3 of the affidavit in rejoinder of the petitioner No. 1 with the particulars of such notarisation stated in para 11 thereof, contained the signature of the respondent No. 1 put as Chairman of these meetings and on our own perusing these signatures and keeping in view his other signatures on record it is clear that these are rightly not disputed. In fact as noted above the minutes dated 10-12-1988 have been admitted by the respondent No. 1 to be true in his affidavit-in-reply filed on 11-4-1992 in the company Petition No. 7 of 1992 before the CLB. It is obvious that being confronted by the notarised xerox copy of these minutes the respondent No. 1 has tried to avert his embarrassment that they caused as much as possible in the said affidavit-in-reply dated 11-4-1992 after having taken a different stand in the affidavit-in-reply dated 21-3-1991 and his sur-rejoinder dated 22-4-1991 filed in the petition before this Court. 13.3 It will be noted that in the minutes of 10-12-1988, there is no reference to the type of allotment referred in the dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hsinhrao Gaekwad even being present at that meeting. Only the respondent No. 1 and Mr. P.H. Shinoy were shown as present. Therefore, the story of 6475 shares being requisitioned by the respondent No. 1 and allotted to him which is reflected from the note of requisitions which bears the endorsement made by the Secretary of the respondent No. 1 on 23-3-1988 to the effect that the minutes of the Committee meeting be prepared on this basis and that the Chairman of the meeting ( i.e., the respondent No. 1) had okayed this, has clearly emanated for the first time from the respondent No. 1 through his Secretary who caused the draft minutes being prepared on the basis of that note. Therefore, while in the final minutes of the meeting on 21-3-1988 there was no decision recorded for allotting any shares to the respondent No. 1 or that shares will be allotted in the names as stated in any such requisition note, it appears that by sending the requisition note with a direction issued by an endorsement made thereon by his Secretary at his own instance the respondent No. 1 got the minutes prepared by the Company Secretary Mr. Khade, which were forwarded under a note (Annexure "C" to the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavit-in-rejoinder of the petitioner No. 1 that she had along with her daughter inspected on 10-12-1990 the Register of members, Register of transfer, minute books of the board of directors and the minutes book of the committee meetings and saw the minutes dated 21-3-1988 and 10-12-1988 which were under the signature of respondent No. 1 as stated by her and obtained xerox copies thereof from the director Shri P.U. Rana which were verified by Shri M.C. Vaidya after comparing the same with the original and certified by him as true copies, is a version which deserves to be accepted in view of the notarised copies not only of these minutes but also of the register of members and other documents duly notarised on 10-12-1990 having been produced on the record of this petition. It is clear that on that day all these registers and minute books including the minutes book of the Managing Committee were lying in the Registered office of the company at Baroda even though they may have been sent earlier to the Secretary of the respondent No. 1 on 20-11-1990. The director of the company Mr. P.U. Rana in his affidavit produced at Annexure "5" collectively with the rejoinder of the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Shrimant Fatehsinhrao P. Gaekwad had okayed the allotment as Chairman. Only the respondent No. 1 was interested in bringing about such a situation on record because Shrimant Fatehsinhrao P. Gaekwad s allotment of 51 per cent share was firmly mentioned as reflected in the minutes of 21-3-1988 was that would have gone to his heir on his demise. Thus, though there was no decision for allotment of 6475 shares to respondent No. 1 as per the minutes of the meeting of the Managing Committee dated 21-3-1988 signed as chairman by him the respondent No. 1 who was the director of the company brought about the allotment of such shares to himself and his family members, which were later transferred by the respondent Nos. 1 to 5 to Indreni. Such issuance of shares coupled with blocking of 51 per cent equity shares from devolving on the sole heir of Shrimant Fatehsinhrao P. Gaekwad was obviously intended by the respondent No. 1 to enhance his power and position by allotting shares to himself and his family members. The exercise was obviously intended for destroying the existing majority and creating a new majority of his group. The transfer of the new shares in the Register and issuance of shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it would be unconstitutional for the directors to use their fiduciary powers over the shares in the company purely for the purpose of destroying an existing majority, or creating a new majority. If there is added to this immediate purpose an ulterior motive to enable an offer for shares to proceed which the existing majority was in a position to block, the departure from the legitimate use of the fiduciary power will be considered to be greater. This precisely was done by the respondent Nos. 1 and 2 who were the directors of the company for their self-aggrandisement and in breach of their fiduciary duty to the company and the shareholders. 14. In the meeting held on 27-12-1989, the respondent No. 1 who chaired it and the other director Mr. P.H. Chinoy took some interesting decisions as reflected from the minutes. The Chairman informed in the meeting where these two alone were present that it was necessary to expand the Board by appointing additional directors "so that the company can get the benefit of their guidance and experience". The chairman, i.e., the respondent No. 1 was authorised to invite his wife - the respondent No. 2 Mrs. Ashra Raje, Mr. Dilipbhai Thakker, Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be transmitted to the name of Smt. Shantadevi Gaekwad. Even here it was not mentioned that the entitlement of Shrimant Fatehsinhrao Gaekwad to 8,000 shares was not available to her because he had renounced the shares in favour of the respondent No. 1 and his children. The Board then took a decision on the basis of the transfer documents placed before the meeting by the respondent No. 1 and resolved that the transfer of 9415 equity shares of the company be approved. By this resolution the transfers of, 1495 shares of respondent No. 2 Smt. Asha Raje, of 2740 shares of the respondent No. 4 Mr. Pratapsinh, 1975 shares of the respondent No. 1 Shri Sangramsinh Gaekwad, 1465 shares of his HUF and 1740 shares of his daughter the respondent No. 5 Priyadarshini were approved and necessary entries in the transfer register and issuance of certificates was authorised to be made by the respondent No. 2 the executive director. These 9415 shares were transferred to a company named Indreni Holdings Pvt. Ltd. (Indreni for short) by the respondent Nos. 1 to 5. 14.2 The minutes of the meeting held on 30-3-1990 are said to have been confirmed at the meeting held on 29-6-1990. At that meeting it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer. In the minutes of the meeting of board of directors held on 27-12-1989, there is reference to a report from the secretary of the company about the procedure followed in response to the transfer notice received from the shareholders of the company but no such report is forthcoming Mr. Khade who was the company Secretary has stated in his affidavit at Annexure "5" collectively to the rejoinder of the petitioner No. 1 that there was no talk about transfer of shares to Indreni in the Board meeting of 13-7-1990 and that there was no Board meeting held on 9-8-1990. He states that he had taken the minute book of the Board meetings to the auditors in or about October/November 1990 and till that time the last minutes written were of the Board meeting held on 3-3-1990 and that no minutes were written in the minutes book of the Board meetings after 30-3-1990 till he went on leave on or about 5-12-1990. He has categorically denied that there was any talk about transfer notices to the shareholders on 13-7-1990. He has denied the allegation of wilful default made by the respondent No. 1 against him and has stated in para 7 of his affidavit that the minutes as now produced were neither tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to respondent Nos. 1 to 5 by executing appropriate retransfer documents. It is abundantly clear that the title in 9415 shares that had passed on to Indreni was not conveyed back in this manner. Such retransfer would again have required transfer notice as per clause 8 of the articles of association, because, Indreni s name had already been entered in the Register of members and the other members again had pre-emption right if Indreni were to transfer the shares back. All these hurdles were conveniently crossed by resorting to the device of so-called rescission retrospectively recorded in the minutes of 9-8-1990 which is not borne out from the entries in the Register of members even up to 10-12-1990 as is clear from the certified copies taken out on that day of the register of members. Even if Indreni was a company controlled by the respondent No. 1 and his family, in the eye of law it was a separate legal entity and not an existing member of the respondent No. 6 company to whom the shares could have been transferred or by whom they could have retransferred back without a transfer notice. Therefore, transfer of shares to Indreni by the respondent Nos. 1 to 5 was not a transfer to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ) and ( y ), it was alleged that Mr. Khade was asked to make entries in the register of members since it was only a clerical job but Mr. Khade did not record rescission of transfer in the register which took place on 9-8-1990, while in the minutes of the meeting said to have been held on 9-8-1990, it is recorded that it was resolved to authorise the executive director, i.e., the respondent No. 2, to make the required endorsements in the Register of members and the share certificates for this purpose on behalf of the company. There was no mention made in the minutes about any instruction to Mr. Khade to make any entries in the register. The version of Mr. Khade is that no such meeting was held on 9-8-1990 and the true copies of register shows that when it was inspected on 10-12-1990, there were no entries of rescission made therein and the shares which were transferred in favour of Indreni by the respondent Nos. 1 to 5 stood in the name of that company which was also paid dividend. In paragraph 9( y ) of the affidavit- in-reply of the respondent No. 1 in company petition No. 7 of 1992, it was stated that the register of the members was rectified with retrospective effect from 9- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of 9415 equity shares. Similar injunction orders dated 28-11-1990 was served in respect of these shares on the defendants of Suit No. 305/1990 filed by the shareholder Smt. Premila Raje at Rajkot. Thus, the net position which obtained just prior to the AGM of 20-12-1990 was that 9415 shares continued to be held by Indreni in the Register of the company and that there were Court injunctions preventing exercise of voting rights in respect of 9415 shares transferred to that company by the respondent Nos. 1 to 5. It is obvious from the facts on the record that the story of rescission on 9-8-1990 is thought out with a view to meet with this situation which had reduced the voting power of the respondent Nos. 1 to 5 to only 66 shares at the AGM scheduled to be held on 20-12-1990. 16. It will be seen from the minutes of the AGM convened on 20-12-1990 that the petitioner Nos. 1, 4, 5 and their supporting respondent Nos. 12 and 13 were present at the meeting with Mr. Ajit Gaekwad. Two of the directors Shri P.U. Rana and Shri H.A. Shinde, who according to the respondent No. 1 supported them were also present. The proxy holders of other members supporting that group were allowed to exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been recorded in the minutes. No. opposition to voting by ballot was recorded in the minutes. Moreover, as recorded in the minutes "after the process of voting came to an end the scrutiniser were requested to compile the report on poll". This means the group of which Shri Ajitsinh Gaekwad was the spokesman had not walked away before the poll and they were in fact present. It is therefore impossible to believe that his group that had meticulously opposed the resolution Nos. 3 to 10 and whose members had accepted the ballot papers would, for no apparent reason, refrain from voting so as to bring about a resounding victory for the respondents group by enabling that group to get the resolutions passed without any opposition. The affidavits of the directors and shareholders who were present at that meeting state that they had all voted at the meeting and the resolution Nos. 3 to 10 were defeated by 1122 to 66 votes. The minutes however, record that shareholders holding 9481 equity shares had cast their votes in favour and none against which is obviously wrong. This means that despite the Court injunctions preventing participation in respect of 9415 shares which stood in the name of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to the version of Shri P.U. Rana was reflected in his letter dated 30-1-1991, which gains support for the affidavits of the share-holders at Annexure "5 collectively" to the rejoinder of the petitioner No. 1, when the voting was completed, while counting the number of votes each member/proxy holder was entitled to, the register of members was taken out from the cupboard and the number of shares standing against each Member s name who were present personally or by proxy were taken to be the number of his votes, the particulars of which are mentioned therein. It was stated that all the resolutions put to vote, except the resolution in respect of re-appointment of Dr. Oza, which was dropped, were defeated by a majority of 1122 votes. It was further stated that on finding that all these resolutions including re-appointment of various directors including the respondent Nos. 1 and 2 were defeated by majority, the respondent No. 1 took in his possession the register of members proxy register, the appeal papers, proxy forms, attendance register, etc. and threatened others of dire consequences, if he was prevented. It was also stated by Shri P.U. Rana in that letter that he had d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts, operating instructions by authorising respondent Nos. 1 and 2 to operate the Banking accounts of the company. It was also resolved to give consent to the removal of Shri P.U. Rana and Smt. Mrunalinidevi Puar as directors of Alaukik Tradings and to appoint Shri Rohit Amin and Shri S.P. Gaekwad in their place. 16.4 On the basis of the meeting of the board of directors held on 5-1-1991, notice dated 5-1-1991 for convening the Extraordinary General Meeting on 14-1-1991 was issued which proposed the resolutions for ( 1 ) appointment of respondent No. 1 Shri Sangramsinh Gaekwad as a permanent director and Chairman of the company, ( 2 ) shifting the Registered office of the company from Baroda to Surat, ( 3 ) amending article 14 of the articles of association to enable a member of the company to transfer any share to a company owned, managed and controlled by the existing member of the company or by himself together with members of his family, ( 4 ) removal of Shri P.U. Rana as a director of the company, and ( 5 ) removal of Shri H.A. Shinde as a director of the company. At the said Extraordinary General Meeting held on 14-1-1991, the respondent No. 1 was the Chairman and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and its name was entered in the Register as member contrary to the articles of association; ( viii )Though the name of Indreni continued in the Register of members even on 10-12-1990, as per the notarised copies of the Register folios, and shares were not retransferred to the respondent Nos. 1 to 5, minutes of a meeting alleged to have taken place on 9-8-1990 were manipulated by the respondent Nos. 1 and 2 and their group to show as if those shares were transferred back to respondent Nos. 1 to 5 though no such transfer notice was given as per the articles of association nor was it recorded in the Register; ( ix )The right of pre-emption guaranteed by the articles of association to the shareholders was thrown to wins by the group of respondent Nos. 1 to 5 and they effected transfers to Indreni without offering the shares to the members first or even without giving a transfer notice to the company which was a must; ( x )The respondent No. 1 tried to adopt an ingeneous device for nullifying the effect of the decision to issue 51 per cent of the new shares to Shrimant Fatehsinhrao P. Gaekwad, taken at the Managing Committee meeting of 21-3-1988 which decision was also referred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adoption by the company of any such dealing, engagement or arrangement, brought about by unfair or improper means which is illegal, fraudulent or oppressive towards the shareholders who oppose it, cannot be recognised. Power of the directors to issue shares to the members of the company is a fiduciary power to be exercised by them bona fide for the general advantage of the company and the directors are not entitled to use their power of issuing shares merely for the purpose of maintaining their control over the affairs of the company or merely for the purpose of altering a majority shareholding. Breaches of fiduciary duty by the controlling directors would entitle a minority shareholder to bring an action against them and the Court would be justified in redressing the wrong. If the persons in control of the company have acted in their own interest by allotting shares to themselves or to their associates so as to enable themselves to control the voting at the General Meetings or to enhance their power or position, the members who are unfairly prejudiced by such conduct would become entitled to have the affairs of the company properly conducted according to law. The Court s relucta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 are directed to forthwith restore the entire record of the company to its Registered Office at Baroda. 3. All the directors or purported directors of the respondent No. 6 company stand removed forthwith. They will from today, not deal with the affairs of the company in any manner 4. An Extraordinary General Meeting of the shareholders of the company will be convened on 14-10-2000 at 11.00 a.m. at the Registered office of the company at Baroda, for appointing directors of the company on the basis of the existing shareholding of 425 shares of the members of the company, in accordance with the articles of association. 5. The aforesaid meeting scheduled to be held on 14-10-2000 will be conducted under the Chairmanship of the Additional Registrar of the High Court Shri V.B. Gandhi. All the shareholders of 425 shares including the petitioner No. 1 as the sole heir of the deceased Shrimant Fatehsinhrao P. Gaekwad in respect of the shares which stood in his name in the register of the members of the company at the time of his demise out of the said 425 shares in respect of which he had voting rights, will be entitled to vote by themselves or through their proxies at the said m ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
